UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-K/A
Amendment No. 1 to Form 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: August 31, 2012
or
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number: 000-53446
Absolute Life Solutions, Inc.
(Exact Name of Registrant as Specified in its Charter)
Nevada | 71-1013330 | |
(State or Other Jurisdiction of Incorporation) | (I.R.S. Employer Identification No.) |
45 Broadway, 6 th Floor | ||
New York, New York | 10006 | |
(Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number, including area code: (212) 201-4070
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, 0.00001 Par Value
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes £ No S
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes S No £
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes S No £
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes S No £
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. S
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(check one)
Large accelerated filer | £ | Accelerated filer | £ |
Non-accelerated filer | £ (Do not check if a smaller reporting company) | Smaller reporting company | S |
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes £ No S
The aggregate market value of the voting and non-voting common equity of the registrant held by non-affiliates, computed by reference to the average bid and asked price of such stock, as of February 29, 2012 (second quarter prior to the end of our fiscal year) was approximately $36,954,072 (for purposes of determination of the aggregate market value, only directors, executive officers and 10% or greater stockholders have been deemed affiliates.)
The number of shares outstanding of the registrant’s common stock, par value $0.00001 per share, as of December 24, 2012, was 92,229,599 shares.
Explanatory Note –
The purpose of this Amendment No. 1 to Absolute Life Solutions, Inc.’s Annual Report on Form 10-K for the year ended August 31, 2012, filed with the Securities and Exchange Commission on January 3, 2013 (the “Form 10-K”), is solely to furnish Exhibit 101 to the Form 10-K in accordance with Rule 405 of Regulation S-T. Exhibit 101 to this report provides the consolidated financial statements and related notes from the Form 10-K formatted in XBRL (eXtensible Business Reporting Language).
No other changes have been made to the Form 10-K. This Amendment No. 1 to the Form 10-K speaks as of the original filing date of the Form 10-K, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the original Form 10-K.
Pursuant to Rule 406T of Regulation S-T, the interactive data files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
Item 6. Exhibits.
Exhibit Number |
Description | |
31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. * | |
31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. * | |
32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act. * | |
32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act . * | |
101.INS | XBRL Instance Document | |
101.SCH | XBRL Taxonomy Extension Schema Document | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
* These exhibits were previously included or incorporated by reference in Absolute Life Solutions, Inc.’s Annual Report on Form 10-K for the year ended August 31, 2012, filed with the Securities and Exchange Commission on January 3, 2013.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Form 10-K/A to be signed on its behalf by the undersigned, thereunto duly authorized.
ABSOLUTE LIFE SOLUTIONS, INC. | ||
January 4, 2013 | /s/ Joshua Yifat | |
Joshua Yifat Treasurer and Chief Financial Officer (Principal Financial Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature | Capacity in which signed | Date | ||
/s/ Avrohom Oratz | ||||
Avrohom Oratz |
President and Chief Executive Officer (Principal Executive Officer ) |
January 4, 2013 |
COMMITMENTS (Details 2) (Office Equipment [Member], USD $)
|
Jun. 01, 2010
|
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Office Equipment [Member]
|
|
2013 | $ 80,169 |
2014 | 100,652 |
2015 | 102,917 |
2016 | 105,233 |
2017 | 108,456 |
Thereafter | 378,266 |
Operating Leases, Future Minimum Payments Due | $ 875,693 |
INCOME TAXES (Details 2) (USD $)
|
Aug. 31, 2012
|
Aug. 31, 2011
|
---|---|---|
Deferred tax assets: | ||
Equipment | $ 6,648 | $ 2,579 |
Provider fees | 51,750 | 0 |
Premiums paid | 8,355,876 | 3,599,077 |
Capitalized interest expense | 10,911 | 0 |
Deferred rent | 22,201 | 0 |
Stock issuances to officers, directors and consultant | 103,950 | 358,007 |
Start-up expenses | 64,689 | 0 |
Net operating loss carryforward | 1,096,256 | 0 |
Gross deferred tax assets | 9,712,281 | 3,959,663 |
Valuation allowance | (438,254) | 0 |
Net deferred tax assets | 9,274,027 | 3,959,663 |
Deferred tax liabilities: | ||
Prepaid insurance | (6,836) | 0 |
Unrealized gains on life settlement contracts | (13,510,235) | (25,030,823) |
Net deferred tax liabilities | (13,517,071) | (25,030,823) |
Total deferred tax liabilities, net | (4,243,044) | (21,071,160) |
Summary of net deferred tax liabilities: | ||
Current | 0 | 0 |
Non-current | 4,243,044 | 21,071,160 |
Total deferred tax liabilities, net | $ (4,243,044) | $ (21,071,160) |
UNAUDITED PROFORMA FINANCIAL INFORMATION (Tables)
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Aug. 31, 2012
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Unaudited Proforma Financial Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unaudited Proforma Financial Information [Table Text Block] | The Unaudited Pro Forma Consolidated Balance Sheet is presented for informational purposes only. It is not intended to represent or be indicative of the consolidated financial position that would have occurred had the loan satisfaction been completed as of August 31, 2012, nor is it intended to be indicative of future results of operations or financial position.
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UNAUDITED PROFORMA FINANCIAL INFORMATION ( Details Textual ) (USD $)
|
12 Months Ended | 1 Months Ended | 12 Months Ended | 1 Months Ended | 12 Months Ended | 12 Months Ended | 12 Months Ended | |||||||||
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Aug. 31, 2011
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Aug. 31, 2012
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Jul. 31, 2010
Series A Convertible Preferred Stock [Member]
|
Aug. 31, 2012
Series A Convertible Preferred Stock [Member]
|
Aug. 31, 2011
Series A Convertible Preferred Stock [Member]
|
Jul. 22, 2010
Series A Convertible Preferred Stock [Member]
|
Apr. 30, 2011
Series B Convertible Preferred Stock [Member]
|
Aug. 31, 2012
Series B Convertible Preferred Stock [Member]
|
Aug. 31, 2011
Series B Convertible Preferred Stock [Member]
|
Apr. 07, 2011
Series B Convertible Preferred Stock [Member]
|
Aug. 31, 2012
Pro Forma [Member]
|
Aug. 31, 2011
Pro Forma [Member]
|
Aug. 31, 2012
Pro Forma [Member]
Series A Convertible Preferred Stock [Member]
|
Aug. 31, 2011
Pro Forma [Member]
Series A Convertible Preferred Stock [Member]
|
Aug. 31, 2012
Pro Forma [Member]
Series B Convertible Preferred Stock [Member]
|
Aug. 31, 2011
Pro Forma [Member]
Series B Convertible Preferred Stock [Member]
|
|
Preferred stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 | $ 0.00001 | $ 0.00001 | $ 0.00001 | $ 0.00001 | $ 0.00001 | $ 25,000 | $ 0.00001 | |||||||
Preferred stock, shares authorized | 100,000,000 | 100,000,000 | 100,000,000 | |||||||||||||
Preferred stock, shares designated | 60,000 | 60,000 | 60,000 | 25,000 | 25,000 | 0.00001 | 60,000 | 25,000 | ||||||||
Preferred stock, dividend rate, percentage | 12.50% | 12.50% | 12.50% | 12.50% | 12.50% | 12.50% | 12.50% | 12.50% | 12.50% | |||||||
Preferred stock, shares issued | 41,950 | 8,850 | 0 | 41,950 | 0 | 8,850 | ||||||||||
Preferred stock, shares outstanding | 41,950 | 8,850 | 0 | 41,950 | 0 | 8,850 | ||||||||||
Common stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 | $ 0.00001 | |||||||||||||
Common stock, shares authorized | 500,000,000 | 500,000,000 | 500,000,000 | |||||||||||||
Common stock, shares issued | 85,424,597 | 92,544,747 | 92,544,747 | 85,424,597 | ||||||||||||
Common stock, shares outstanding | 85,424,597 | 92,229,599 | 92,229,599 | 85,424,597 | ||||||||||||
Treasury stock | 315,148 | 315,148 | 0 |
FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 1) (USD $)
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Aug. 31, 2012
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Aug. 31, 2011
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Investment in Life Settlement Contracts, at +2% discount rate | $ 71,374,173 | $ 85,215,603 |
Investment in Life Settlement Contracts, at -2% discount rate | $ 62,434,702 | $ 101,271,273 |
COMMITMENTS (Details) (Life Insurance Segment [Member], USD $)
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Aug. 31, 2012
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Life Insurance Segment [Member]
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2013 | $ 15,796,621 |
2014 | 15,685,559 |
2015 | 15,685,559 |
2016 | 15,685,559 |
2017 | 15,685,559 |
Thereafter | 165,026,585 |
Total | $ 243,565,442 |
INCOME TAXES (Details Textual) (USD $)
|
12 Months Ended | |
---|---|---|
Aug. 31, 2012
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Aug. 31, 2011
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Net operating loss carryforward | $ 1,096,256 | $ 0 |
Operating Loss Carryforwards, Expiration Dates | The federal carryforwards expire in fiscal year ending August 31, 2015 | |
Deferred Tax Assets, Valuation Allowance | $ 438,254 | $ 0 |
SIGNIFICANT ACCOUNTING POLICIES
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12 Months Ended |
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Aug. 31, 2012
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Accounting Policies [Abstract] | |
Basis of Presentation and Significant Accounting Policies [Text Block] | 2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements of the Company as of August 31, 2012 and 2011 and for the years then ended have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The consolidated financial statements include the accounts of the Company and our wholly-owned subsidiary. All significant intercompany accounts and transactions are eliminated in the consolidation process.
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 disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company's estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. The most significant estimates with regard to these financial statements relate to deferred income tax amounts and rates and timing of the reversal of income tax differences, the fair value of financial instruments and the determination of the variables used in the calculation of the fair value of life settlement contracts.
Cash and Cash Equivalents
The Company considers all short term investments with an original maturity of three months or less to be cash equivalents. The Company maintains cash balances that may be uninsured or in deposit accounts that exceed Federal Deposit Insurance Corporation limits. The Company maintains its cash deposits with major financial institutions.
Receivable Under Reverse Repurchase Agreement
Transactions involving purchases of life settlement contracts under agreements to resell (reverse repurchase agreements or reverse repos) are accounted for as collateralized financings except where the Company does not have an agreement to sell the same or substantially the same life settlement contracts before maturity at a fixed or determinable price. The Company's policy is to obtain possession of collateral with a fair value equal to or in excess of the principal amount loaned under resale agreements.
At August 31, 2012 and August 31, 2011 the Company held zero and thirteen life settlement contracts as collateral in the amount of $0 and $3,368,593 respectively, which are reflected as a receivable under reverse repurchase agreement on the Balance Sheets. The counterparty did not exercise its rights under the repurchase agreements and upon expiration of the repurchase agreements, the Company recognized these assets as an investment in life settlement contract at investment method in the aggregate amount of $3,503,260.
The Company follows the provisions of ASC 860, Transfers and Servicing which requires an initial transfer of a financial asset and a repurchase financing that was entered into contemporaneously or in contemplation of the initial transfer to be evaluated as a linked transaction unless certain criteria are met, including that the transferred asset must be readily obtainable in the marketplace.
Life Settlement Contracts
ASC 325-30, Investments in Insurance Contracts allows an investor to elect to account for its investments in life settlement contracts using either the investment method or the fair value method. The election shall be made on an instrument-by instrument basis and is irrevocable. Under the investment method, an investor shall recognize the initial investment at the purchase price plus all initial direct costs. Continuing costs (policy premiums and direct external costs, if any) to keep the policy in force shall be capitalized. Under the fair value method, an investor shall recognize the initial investment at the purchase price. In subsequent periods, the investor shall re-measure the investment at fair value in its entirety at each reporting period and shall recognize the change in fair value in the current period net of premiums paid. The Company primarily uses the fair value method to account for life settlement contracts. For those life settlement contracts held as a receivable under reverse repurchase agreement in the prior year, the Company elected to account for them under the investment method upon expiration of the repurchase agreement. The Company purchased these policies under a reverse repurchase agreement as a short-term investment for the purpose of reselling them to other investors.
Life settlement contracts are inherently long term investments. The individuals upon which the life insurance is underwritten are normally healthy with indications of continuing life spans in excess of 5 years. Accounting for the value of these policies using the fair value method provides a more accurate indication of the present value of these policies as it takes into account the net effect of holding the policy over an extended period during which the investment into the asset is increased, by virtue of continuing premium payments. When life settlement contracts are purchased for the purpose of short term gain, typically in a distressed sale, where the life settlement contracts are sold below market, the fair value method would give an inaccurate valuation as it would price in the distressed opportunity as if this was a normal occurrence in the market. Additionally, the concept of holding the policy for a period of less than one year would create a situation where the asset would be best recorded under the investment method.
The fair value of the investment in life settlement contracts is evaluated at the end of each reporting period. Realized and unrealized changes in the fair value of the investment are recognized each reporting period in the statements of operations. The fair value is determined on a discounted cash flow basis that incorporates current life expectancy assumptions. The discount rate incorporates current information about market interest rates, the credit exposure to the insurance company that issued the life insurance policy and our estimate of the risk premium an investor in the policy would require.
For life settlement contracts accounted under the investment method, the Company will recognize the difference between the death benefits and the carrying value of the policy when the Company determines that settlement and ultimate collection is realizable and reasonably assured. Income from a transaction must meet both criteria in order to be recognized. Income is generally considered realized when cash is received for the sale of a product or performance of a service. Income generally becomes realizable when a promise to pay is received in exchange for the sale of a product or performance of a service. The promise to pay could be verbal (account receivable) or written (note receivable). Income is generally earned when a legally enforceable exchange takes place (e.g., consideration has been tendered and the buyer takes possession of the product or benefits from the performance of a service). The Company recognizes gains from these life settlement contracts that the company owns upon one of the two following events:
1) Receipt of death notice or verified obituary of insured. 2) Signed sale agreement and/or filing of change of ownership forms and funds transferred to escrow.
Financial Instruments
The fair value of certain of the Company's financial instruments, consisting of cash and cash equivalents, accounts receivable, receivable under reverse repurchase agreement, accounts payable and accrued expenses, interest payable, loans payable and due to provider are estimated to be equal to their carrying value due to the short-term nature of these instruments. Investments in life settlement contracts are classified as held-for-trading and measured at fair value, with the realized and unrealized changes in fair value recognized each reporting period in the statements of operations.
The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820, Fair Value Measurements and Disclosures which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 — quoted prices in active markets for identical assets or liabilities Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable Level 3 — inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)
It is management's opinion that the Company is not exposed to significant interest, currency and credit risks arising from these financial instruments. (See Note 8).
Equipment
Equipment consists of computer hardware and furniture and is recorded at cost. Computer hardware and furniture are depreciated on a straight-line basis over their estimated lives of five years.
Deferred Rent Liability
The Company’s operating lease provides for minimum annual payments that adjust over the life of the lease. The aggregate minimum annual payments are expensed on the straight-line basis over the minimum lease term. The Company recognizes a deferred rent liability for rent escalations when the amount of straight-line rent exceeds the lease payments, and reduces the deferred rent liability when the lease payments exceed the straight-line rent expense.
Income Taxes
Deferred income taxes are provided for tax effects of temporary differences between the tax basis of asset and liabilities and their reported amounts in the financial statements. The Company uses the liability method to account for income taxes, which requires deferred taxes to be recorded at the statutory rate expected to be in effect when the taxes are paid. Valuation allowances are provided for a deferred tax asset when it is more likely than not that such asset will not be realized.
Management evaluates tax positions taken or expected to be taken in a tax return. The evaluation of a tax position includes a determination of whether a tax position should be recognized in the financial statements, and such a position should only be recognized if the Company determines that it is more likely than not that the tax position will be sustained upon examination by the tax authorities, based upon the technical merits of the position. For those tax positions that should be recognized, the measurement of a tax position is determined as being the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement.
Earnings (Loss) per Share
Basic earnings (loss) per share is calculated using the weighted average number of shares of common stock outstanding during the period. Included in basic loss per share calculations are the effects of 6,000,000 warrants exercisable at $.01. Diluted earnings per share reflect the potential dilution that could occur if potentially dilutive securities were exercised or converted to common stock. The dilutive effect of options and warrants and their equivalent is computed by application of the treasury stock method and the effect of convertible securities by the “if converted” method.
Stock-Based Compensation
The Company accounts for stock based compensation arrangements using a fair value method and records such expense on a straight-line basis over the vesting period.
As of August 31, 2012, the Company has not granted any stock options.
Recent Accounting Pronouncements
The FASB has issued Accounting Standards Update (ASU) No. 2010-15, Financial Services—Insurance (Topic 944): How Investments Held through Separate Accounts Affect an Insurer’s Consolidation Analysis of Those Investments. This ASU codifies the consensus reached in EITF Issue No. 09-B, "Consideration of an Insurer's Accounting for Majority-Owned Investments When the Ownership Is through a Separate Account." The amendments clarify that an insurance entity generally should not consider any separate account interests held for the benefit of policy holders in an investment to be the insurer's interests and should not combine those interests with its general account interest in the same investment when assessing the investment for consolidation. The general guidance does not apply in instances where the separate account interests are held for the benefit of a related party policy holder as defined in the Variable Interest Entities Subsections of Codification Topic 810, Consolidation, Subtopic 810-10, as those Subsections require the consideration of related parties. ASU 2010-15 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2010. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s financial position and results of operations.
Other pronouncements issued by the FASB or other authoritative accounting standards groups with future effective dates are either not applicable or are not expected to be significant to the financial statements of the Company. |