Note 1—Description of Business and Summary of Significant Accounting Policies

Description of Business

Straight Path Communications Inc. (“Straight Path”), a Delaware corporation, was incorporated in April 2013. Straight Path owns 100% of Straight Path Spectrum, Inc. (“Straight Path Spectrum”) and Straight Path Ventures, LLC (“Straight Path Ventures”), and 84.5% of Straight Path IP Group, Inc. (“Straight Path IP Group”). In these financial statements, the “Company” refers to Straight Path, Straight Path Spectrum, Straight Path Ventures, and Straight Path IP Group on a consolidated basis. All material intercompany balances and transactions are eliminated in producing our consolidated financial statements.

The Company was formerly a subsidiary of IDT Corporation (“IDT”). On July 31, 2013, the Company was spun-off by IDT to its stockholders and became an independent public company (the “Spin-Off”). The Company authorized the issuance of two classes of its common stock, Class A (“Class A common stock”) and Class B (“Class B common stock”).

On May 11, 2017, the Company entered into a merger agreement with Verizon Communications, Inc. (“Verizon”) and a Verizon subsidiary. For a further discussion, see Note 2 – Verizon Merger Agreement.

On January 11, 2017, the Company entered into a consent decree with the Federal Communications Commission (the “FCC”) settling the FCC’s investigation regarding Straight Path Spectrum’s spectrum licenses (the “Consent Decree”). The Company agreed to pay an initial civil penalty of $15 million (the “Initial Civil Penalty”). For further discussion, see Note 11 – Regulatory Enforcement.

On March 7, 2017, the Company and lead plaintiff in Zacharia v. Straight Path Communications Inc. et al, No. 2:15-cv-08051-JMV-MF (D.N.J.), entered into a binding memorandum of understanding to settle the putative shareholder class action and dismiss the claims that were filed against the Defendants in that action. Under the agreed terms, the Company will provide for a $2.25 million initial payment (the “Initial Payment”) which will be fully covered by insurance policies maintained by the Company and a $7.2 million additional payment (the “Additional Payment”). For a further discussion, see Note 11 – Shareholder Litigation.

On April 9, 2017, the Company and IDT entered into a binding term sheet (the “IDT Term Sheet”) to settle potential claims related to certain claims under agreements related to the Spin-Off, and to sell the Company’s interest in Straight Path IP Group to IDT. For further discussion, see Note 3 – Settlement of Claims with IDT and Sale of Straight Path IP Group.

The Company’s fiscal year ends on July 31 of each calendar year. Each reference below to a fiscal year refers to the fiscal year ending in the calendar year indicated (e.g., Fiscal 2017 refers to the fiscal year ending July 31, 2017).

Straight Path Spectrum

Straight Path Spectrum’s wholly-owned subsidiary, Straight Path Spectrum, LLC, holds a broad collection of exclusively licensed commercial fixed and mobile wireless spectrum licenses. These licenses, granted by the FCC, include 735 licenses in the 39 gigahertz (“GHz”) band and 133 licenses in the local multipoint distribution service (“LMDS”) band. Straight Path Spectrum offers its customers point-to-point and point-to-multipoint wireless broadband digital telecommunications services. The broad geographical reach of the licenses enables Straight Path Spectrum to provide its services throughout the United States. The Consent Decree with the FCC bars the Company from entering into any new leases of its spectrum, which will limit our ability to increase our leasing revenue in the future. In addition, under the merger agreement with Verizon, we are restricted from taking certain actions that would be inconsistent with the intent of the Verizon Merger Agreement as more fully described in that agreement. Accordingly, we currently are not seeking to expand our leasing or other spectrum business operations.

For further discussion, see Note 11 – Regulatory Enforcement.

In October 2010, Straight Path Spectrum paid an aggregate of $210,000 to renew certain of its 39 GHz spectrum licenses and established a new expiration date of October 18, 2020 for these licenses. The Company included the license renewal costs in other assets, which are being charged to expense on a straight-line basis over the ten-year term of the licenses.

Straight Path Ventures

Straight Path Ventures, a Delaware limited liability company, develops next generation wireless technology for 39 GHz at its Gigabit Mobility Lab in Plano, Texas. On August 22, 2016, Straight Path Ventures filed a provisional patent application with the United States Patent and Trademark Office (“USPTO”) for new 39 GHz transceiver technology. On October 12, 2016, Straight Path Ventures filed a patent application with the USPTO for new millimeter-wave transceiver technologies. On August 31, 2017, Straight Path Ventures demonstrated its prototype 39 GHz Gigarray^®solutions that achieved 800 megabits per second at a distance of 500 meters.

Straight Path IP Group

Straight Path IP Group is a Delaware corporation. The Company believes that many parties are operating by infringing on Straight Path IP Group’s intellectual property, specifically one or more of Straight Path IP Group’s patents related to communications over the Internet. The Company is enforcing its rights and seeking to license its patents in order to generate revenue.

Straight Path IP Group’s patent portfolio consists of the NetSpeak and Droplet portfolios. The NetSpeak portfolio includes U.S. Patents Nos. 6,131,121; 6,701,365; 6,513,066; 6,185,184; 6,829,645; 6,687,738; 6,009,469; 6,226,678; 7,149,208 and 6,178,453, and the foreign counterparts to U.S. Patent No. 6,108,704, which are German Patent No. 852868 and Taiwan Patent No. NI-096566. The Droplet portfolio includes U.S. Patents Nos. 6,847,317; 7,844,122; 7,525,463; 8,279,098; 7,436,329; 7,679,649, 8,947,271, 8,896,717, 8,849,964, 8,896,652 and a number of U.S. and foreign patent applications.

These patents had finite lives, and all of them have expired. Straight Path IP Group may continue to enforce the patents for patent infringement that occurred before expiration, although we do not anticipate filing additional actions. There is no guarantee that the patents will be adequately exploited or commercialized.

We generally pay law firms that represent us in litigation against alleged infringers of our intellectual property rights a percentage of the amounts recovered ranging from 0% to 40% depending on several factors. In addition, beginning on October 2, 2017, Straight Path IP Group will pay one of the law firms $100,000 per month as a non-refundable fee creditable against any contingency payment that may be paid to that firm in the future; there are also other directly related legal expenses, such as expert testimony, travel, filing fees, and others.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

Revenue Recognition

Straight Path Spectrum lease revenues are recognized on a straight-line basis over the contractual lease period, which generally range from one to five years. Revenues from sale of rights in FCC licenses are recognized upon execution of the agreement by both parties, provided that the amounts are fixed or determinable, there are no significant undelivered obligations and collectability is reasonably assured.

Straight Path Spectrum recorded the amounts that the former Chief Executive Officer of Straight Path Spectrum (the “Former SPSI CEO”) was entitled to, related to leases, in “Selling, general and administrative” expense, in the same period the related revenues were recognized.

Straight Path Ventures develops next generation wireless technology and has no revenue at this time.

Straight Path IP Group licensed its portfolio of patents to companies who used these patents in the provision of their product(s) and/or service(s). The contractual terms of the license agreements entered into in prior periods generally provided for payments over an extended period of time. For the licensing agreements with fixed royalty payments, Straight Path IP Group generally recognized revenue on a straight-line basis over the contractual term of the license, once collectability of the amounts was reasonably assured. For the licensing agreements with variable royalty payments which are based on a percentage of sales, Straight Path IP Group earned royalties at the time that the customers’ sales occurred. Straight Path IP Group’s customers, however, did not report and pay royalties owed for sales in any given period until after the conclusion of that period. As Straight Path IP Group was unable to estimate the customers’ sales in any given period to determine the royalties due to Straight Path IP Group, it recognized royalty revenues when sales and royalties were reported by customers and when other revenue recognition criteria were met.

In addition, Straight Path IP Group entered into certain settlements of patent infringement disputes. The amount of consideration received upon any settlement (including but not limited to past royalty payments and future royalty payments) was allocated to each element of the settlement based on the fair value of each element. In addition, revenues related to past royalties were recognized upon execution of the agreement by both parties, provided that the amounts were fixed or determinable, there were no significant undelivered obligations and collectability was reasonably assured. Straight Path IP Group did not recognize any revenues prior to execution of the agreement since there was no reliable basis on which it could estimate the amounts for royalties related to previous periods or assess collectability.

Direct Cost of Revenues

Direct cost of revenues for Straight Path Spectrum consists primarily of network and connectivity costs. Such costs are charged to expense as incurred. Direct cost of revenues for Straight Path IP Group consisted of legal expenses directly related to revenues from litigation settlements.

Cash Equivalents and Concentrations of Credit Risk

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash equivalents consist of money market accounts. The Company maintains principally all cash and cash equivalent balances in various financial institutions, which at times may exceed the amounts insured by the Federal Deposit Insurance Corporation. The exposure to the Company is solely dependent upon daily bank balances and the respective strength of the financial institutions. The Company has not incurred any losses on these accounts.

Inventory

Inventory, consisting solely of finished goods, is valued at the lower of cost or market determined on the first-in, first-out (FIFO) basis. The Company periodically evaluates inventory items and establishes reserves for obsolescence accordingly. The Company also reserves for excess quantities, slow-moving goods, and for other impairment of value based upon assumptions of future demand and market conditions. No reserve for obsolescence was recorded as of July 31, 2017.

Intangible Assets

Intangible assets consist primarily of the cost of the wireless spectrum licenses that were transferred to the Company by an entity controlled by the Former SPSI CEO in connection with the June 2013 settlement of all outstanding claims and disputes with the Former SPSI CEO and parties related to the Former SPSI CEO (see Note 11 – Other Commitments and Contingencies – Former SPSI CEO). The wireless spectrum licenses are not amortized since they are deemed to have an indefinite life. These assets are reviewed annually or more frequently under certain conditions for impairment using a fair value approach. On August 1, 2013, the Company adopted the accounting standard update that reduced the complexity of performing an impairment test for indefinite-lived intangible assets by simplifying how an entity tests those assets for impairment and improved consistency in impairment testing guidance among long-lived asset categories. The Company may first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test. Prior to the adoption of this update, the Company was required to test indefinite-lived intangible assets for impairment by comparing the fair value of the asset with its carrying amount. The adoption of this standard update did not impact the Company’s financial position, results of operations or cash flows.

No impairment was recorded as of July 31, 2017 and 2016.

Income Taxes

The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the period in which related temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in its assessment of a valuation allowance. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date of such change.

The Company uses a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return. The Company determines whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, the Company presumes that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information. Tax positions that meet the more-likely-than-not recognition threshold are measured to determine the amount of tax benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Differences between tax positions taken in a tax return and amounts recognized in the financial statements will generally result in one or more of the following: an increase in a liability for income taxes payable, a reduction of an income tax refund receivable, a reduction in a deferred tax asset, or an increase in a deferred tax liability.

The Company classifies interest and penalties on income taxes as a component of income tax expense.

Contingencies

The Company accrues for loss contingencies when both (a) information available prior to issuance of the financial statements indicates that it is probable that a liability had been incurred at the date of the financial statements and (b) the amount of loss can reasonably be estimated. When the Company accrues for loss contingencies and the reasonable estimate of the loss is within a range, the Company records its best estimate within the range. When no amount within the range is a better estimate than any other amount, the Company accrues the minimum amount in the range. The Company discloses an estimated possible loss or a range of loss when it is at least reasonably possible that a loss may have been incurred.

Loss per Share

Basic loss per share is computed by dividing net income attributable to all classes of common stockholders of the Company by the weighted average number of shares of all classes of common stock outstanding during the applicable period. Diluted loss per share is computed in the same manner as basic loss per share, except that the number of shares is increased to include restricted stock still subject to risk of forfeiture and to assume exercise of potentially dilutive stock options and warrants using the treasury stock method, unless the effect of such increase is anti-dilutive.

The following table sets forth the number of Class B shares of common stock issuable upon the exercise of stock options and warrants which were excluded from the diluted per share calculation even though the exercise price was less than the average market price of the Class B common shares and non-vested restricted Class B common stock because the effect of including these potential shares was anti-dilutive due to the net loss incurred during that period:

	Years Ended
	July 31,
	2017		2016		2015
	(in thousands)

Stock options		29		3		4
Warrants		65		—		—
Non-vested restricted Class B common stock		251		196		331

Shares excluded from the calculations of diluted loss per share		345		199		335

The following table sets forth the number of stock options to purchase Class B common stock which were excluded from the diluted per share calculation because the exercise price was greater than the average market price of the Class B common shares:

	Years Ended
	July 31,
	2017		2016		2015
	(in thousands)

Warrants		7		—		—
Stock options		—		88		—
Non-vested restricted Class B common stock		—		—		—

Shares excluded from the calculations of diluted loss per share		7		88		—

For the years ended July 31, 2017, 2016 and 2015, the diluted loss per share equals basic loss per share because the Company had a net loss and the impact of the assumed exercise of stock options and assumed vesting of restricted stock would have been anti-dilutive.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with FASB ASC 718, “Compensation - Stock Compensation.” The Company recognizes compensation expense for all of its grants of stock-based awards based on the estimated fair value on the grant date. Compensation cost for awards is recognized using the straight-line method over the vesting period. Stock-based compensation is included in selling, general and administrative expense. See Note 10.

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with FASB ASC 505, “Equity.” Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services as defined by ASC 505.

Allowance for Doubtful Accounts

The allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in the accounts receivable balance. The allowance is determined based on known troubled accounts, historical experience and other currently available evidence. Doubtful accounts are written-off upon final determination that the trade accounts will not be collected. The change in the allowance for doubtful accounts is as follows:

Year ended July 31, (in thousands)	Balance at beginning of year		Additions charged to costs and expenses		Deductions		Balance at end of year
2017
Reserves deducted from accounts receivable:
Allowance for doubtful accounts	$	—	$	19	$	—	$	19
2016
Reserves deducted from accounts receivable:
Allowance for doubtful accounts	$	—	$	—	$	—	$	—

Inventory

Inventory, consisting solely of finished goods, is valued at the lower of cost or market.

Recently Issued Accounting Pronouncements

In May 2014, ASU No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”) was issued. The comprehensive new standard will supersede existing revenue recognition guidance and require revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the Company expects to be entitled in exchange for those goods or services. The guidance will also require that certain contract costs incurred to obtain or fulfill a contract, such as sales commissions, be capitalized as an asset and amortized as revenue is recognized. Adoption of the new rules could affect the timing of both revenue recognition and the incurrence of contract costs for certain transactions. The guidance permits two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years and one requiring prospective application of the new standard with disclosure of results under old standards.

ASU 2014-09 was scheduled to be effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. In August 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date” (“ASU 2015-04”) which defers the effective date of ASU 2014-09 by one year. ASU 2014-09 is now effective for annual reporting periods after December 15, 2017 including interim periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company will adopt the new standard effective August 1, 2018. The Company is currently evaluating the impact of adoption and the implementation approach to be used but the adoption is not expected to have a significant impact on the Company’s consolidated financial statements as of the date of the filing of this report.

Effective January 1, 2016, the Company adopted ASU 2014-12, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period” (“ASU 2014-12”). ASU 2014-12 requires that a performance target that affects vesting and that could be achieved after the requisite service period is treated as a performance condition. An entity should recognize compensation cost in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the periods for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. ASU 2014-12 became effective for interim and annual periods beginning on or after December 15, 2015. The adoption of ASU 2014-12 did not have a significant impact on the Company’s consolidated financial statements.

Effective August 1, 2016, the Company adopted ASU 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern” (“ASU 2014-15”). Before the issuance of ASU 2014-15, there was no guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern or to provide related footnote disclosures. This guidance is expected to reduce the diversity in the timing and content of footnote disclosures. ASU 2014-15 requires management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards as specified in the guidance. The adoption of ASU 2014-15 did not have a significant impact on the Company’s consolidated financial statements.

Effective January 1, 2016, the Company adopted ASU 2015-01, “Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items” (“ASU 2015-01”). ASU 2015-01 eliminates from GAAP the concept of extraordinary items. ASU 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. The adoption of ASU 2015-01 did not have a significant impact on the Company’s consolidated financial statements.

Effective February 1, 2017, the Company adopted ASU 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”) as part of its initiative to reduce complexity in accounting standards (the Simplification Initiative). The Board received feedback that having different balance sheet presentation requirements for debt issuance costs and debt discount and premium creates unnecessary complexity. Recognizing debt issuance costs as a deferred charge (that is, an asset) also is different from the guidance in International Financial Reporting Standards, which requires that transaction costs be deducted from the carrying value of the financial liability and not recorded as separate assets. Additionally, the requirement to recognize debt issuance costs as deferred charges conflicts with the guidance in FASB Concepts Statement No. 6, “Elements of Financial Statements,” which states that debt issuance costs are similar to debt discounts and in effect reduce the proceeds of borrowing, thereby increasing the effective interest rate. FASB Concepts Statement No. 6 further states that debt issuance costs cannot be an asset because they provide no future economic benefit. To simplify presentation of debt issuance costs, the amendments in this Update require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this Update. The adoption of ASU 2015-03 did not have a material impact on the Company’s consolidated financial statements.

Effective for Fiscal 2016, the Company adopted ASU 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”). ASU 2015-17 requires deferred tax assets and liabilities to be classified as noncurrent in the consolidated balance sheet. The adoption of ASU 2015-17 did not have a material impact on the Company’s consolidated financial statements as the Company continues to provide a full valuation allowance against its net deferred tax assets.

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”). The amendments require all equity investments to be measured at fair value with changes in the fair value recognized through net income (other than those accounted for under the equity method of accounting or those that result in consolidation of the investee). The amendments also require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments. In addition, the amendments eliminate the requirement to disclose the fair value of financial instruments measured at amortized cost for entities that are not public business entities and the requirement to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet for public business entities. This guidance is effective for fiscal years beginning after December 15, 2017 (quarter ending October 31, 2018 for the Company), including interim periods within those fiscal years. The Company will evaluate the effects of adopting ASU 2016-01 if and when it is deemed to be applicable.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” (“ASU 2016-02”) which supersedes existing guidance on accounting for leases in “Leases (Topic 840).” The standard requires lessees to recognize the assets and liabilities that arise from leases on the balance sheet. A lessee should recognize in the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The new guidance is effective for annual reporting periods beginning after December 15, 2018 (quarter ending October 31, 2019 for the Company) and interim periods within those fiscal years. The amendments should be applied at the beginning of the earliest period presented using a modified retrospective approach with earlier application permitted as of the beginning of an interim or annual reporting period. The Company is currently evaluating the effects of adopting ASU 2016-02 on its consolidated financial statements but the adoption is not expected to have a significant impact on the Company’s consolidated financial statements as of the date of the filing of this report.

In March 2016, the FASB issued ASU 2016-09, “Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). ASU 2016-09 affects entities that issue share-based payment awards to their employees. ASU 2016-09 is designed to simplify several aspects of accounting for share-based payment award transactions which include – the income tax consequences, classification of awards as either equity or liabilities, classification on the statement of cash flows and forfeiture rate calculations. This guidance is effective for annual periods beginning after December 15, 2016 (quarter ending October 31, 2017 for the Company), including interim periods within those fiscal years. The Company is currently evaluating the impact of ASU 2016-09 on its consolidated financial statements but the adoption is not expected to have a significant impact on the Company’s consolidated financial statements as of the date of the filing of this report.

In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” (“ASU 2016-10”) related to identifying performance obligations and licensing. ASU 2016-10 is meant to clarify the guidance in FASB ASU 2014-09, “Revenue from Contracts with Customers.” Specifically, ASU 2016-10 addresses an entity’s identification of its performance obligations in a contract, as well as an entity’s evaluation of the nature of its promise to grant a license of intellectual property and whether or not that revenue is recognized over time or at a point in time. The pronouncement has the same effective date as the new revenue standard, which is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017. The Company is currently evaluating the impact of ASU 2016-10 on its consolidated financial statements but the adoption is not expected to have a significant impact on the Company’s consolidated financial statements as of the date of the filing of this report.

In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow Scope Improvements and Practical Expedients” (“ASU 2016-12”). The amendments in ASU 2016-12 affect the guidance in ASU 2014-09 by clarifying certain specific aspects of the guidance, including assessment of collectability, treatment of sales taxes and contract modifications, and providing certain technical corrections. ASU 2016-12 will have the same effective date and transition requirements as the ASU 2014-09. The Company is currently evaluating the impact of ASU 2016-12 on its consolidated financial statements but the adoption is not expected to have a significant impact on the Company’s consolidated financial statements as of the date of the filing of this report.

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 will make eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15, 2017 (quarter ending October 31, 2018 for the Company). The new standard will require adoption on a retrospective basis unless it is impracticable to apply, in which case it would be required to apply the amendments prospectively as of the earliest date practicable. The Company is currently in the process of evaluating the impact of adoption on its consolidated financial statements but the adoption is not expected to have a significant impact on the Company’s consolidated financial statements as of the date of the filing of this report.

In May 2017, the FASB issued ASU 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting,” which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This pronouncement is effective for annual reporting periods beginning after December 15, 2017 (quarter ending October 31, 2018 for the Company). Early adoption is permitted. The Company is currently evaluating the effects of adopting ASU 2017-09 on its consolidated financial statements but the adoption is not expected to have a significant impact as of the filing of this report.

Management does not believe that any other recently issued, but not yet effective, accounting standard if currently adopted would have a material effect on the accompanying financial statements

Subsequent Events

Management has evaluated subsequent events through the date of this filing.