Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

The information provided in this Quarterly Report on Form 10-Q (including, without limitation, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Liquidity and Capital Resources” below) contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 regarding the Company's future plans, objectives, and expected performance. The words “believe,” “may,” “will,” “could,” “should,” “would,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “objective,” “seek,” “strive,” “might,” “likely result,” “build,” “grow,” “plan,” “goal,” “expand,” “position,” or similar words, or the negatives of these words, or similar terminology, identify forward-looking statements. These statements are based on assumptions that the Company believes are reasonable, but are subject to a wide range of risks and uncertainties, and a number of factors could cause the Company's actual results to differ materially from those expressed in the forward-looking statements referred to above. These factors include, without limitation, the risks and uncertainties discussed under “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the uncertainties related to the ability of the Company to sell its existing product and professional service lines, as well as its new products and professional services (due to potential competitive pressure from other companies or other products), as well as the potential for terrorist attacks, changes in fuel costs, airline bankruptcies and consolidations, economic conditions, and other risks detailed in the Company's periodic report filings with the SEC. Other uncertainties which could impact the Company include, without limitation, uncertainties with respect to future changes in governmental regulation and the impact that such changes in regulation will have on the Company’s business. Additional uncertainties include, without limitation, uncertainties relating to: (1) the Company's ability to find and maintain the personnel necessary to sell, manufacture, and service its products; (2) its ability to adequately protect its intellectual property; and (3) its ability to secure future financing. Readers are cautioned not to place undue reliance on these forward-looking statements, which relate only to events as of the date on which the statements are made and which reflect management’s analysis, judgments, belief, or expectation only as of such date. The Company undertakes no obligation to publicly update any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

Description of Business

The Company provides data aggregation and consolidation, information, decision support, predictive analytics, collaborative solutions, and professional services. To enable this unique offering, PASSUR® owns and operates the world’s largest commercial passive radar network, which updates flight tracks every 1 to 4.6 seconds. Our radar network powers a proprietary database that is accessible in real-time and delivers timely, accurate information and solutions via PASSUR’s industry-leading algorithms and business logic.

PASSUR’s information solutions are used by the five largest North American airlines, major airlines in Europe, more than 60 airport customers, including 20 of the top 30 North American airports (with PASSUR solutions also used at the remaining 10 airports by one or more airline customers), over 100 business aviation organizations, as well as the U.S. government.

Our core business addresses some of aviation industry’s most intractable and costly challenges, including, but not limited to, the underutilization of airspace and airport capacity, delays, cancellations, and diversions, among others. Several independent studies have estimated the annual direct costs of such inefficiencies to airlines in the United States at over $8 billion annually, and worldwide direct cost at over $30 billion annually.

Solutions offered by PASSUR help to ensure flight completion. They cover the entire flight life cycle, from gate to gate, and result in reductions in overall costs and carbon emissions, help to maximize revenue opportunities, improve operational efficiency, and enhance the passenger experience.

The Company’s business plan is to continue to focus on increasing subscription-based revenues from its suite of software applications, and to develop new applications and professional services designed to address the needs of the aviation industry and the U.S. government. The Company’s goal is to help solve problems faced by its customers based on the following product development objectives:

For the three months ended July 31, 2019, total revenue increased 2% to $3,798,000, compared with $3,716,000 for the same period in fiscal year 2018. Loss from operations for the three months ended July 31, 2019 was $894,000, compared to $2,599,000 for the same period in fiscal year 2018. For the three months ended July 31, 2019, net loss was $1,074,000, or $0.14 per diluted share, compared to a net loss of $2,677,000, or $0.35 per diluted share, in the same period in fiscal year 2018.

For the nine months ended July 31, 2019, total revenue increased 3% to $11,088,000, compared with $10,731,000 for the same period in fiscal year 2018. Loss from operations for the nine months ended July 31, 2019 was $2,624,000, compared to $4,650,000 for the same period in fiscal year 2018. For the nine months ended July 31, 2019, net loss was $3,140,000, or $0.41 per diluted share, compared to a net loss of $4,868,000, or $0.63 per diluted share, in the same period in fiscal year 2018.

Results of Operations

Revenues

Management concentrates its efforts on the sale of business intelligence, predictive analytics, and decision support product applications, utilizing data enhanced by the PASSUR Network. Such efforts include the continued development of existing products, new product offerings and to a lesser extent, professional services.

For the three months ended July 31, 2019, total revenues increased by $82,000, or 2%, to $3,798,000, as compared with $3,716,000 for the same period in 2018. The increase in total revenues was primarily due to an increase in subscription revenue   of $84,000, as compared with the same period in the prior year.  The increase in subscription revenue was offset by a decrease in consulting and other revenue of $2,000, as compared with the same period in the prior year.

For the nine months ended July 31, 2019, total revenues increased by $357,000, or 3%, to $11,088,000, as compared with $10,731,000 for the same period in 2018. The increase in total revenues was primarily due to an increase in subscription revenue of $366,000, or 4%, as compared with the same period in the prior year. This increase in subscription revenue was offset by a decrease in consulting and other revenue of $9,000, as compared with the same period in the prior year.

The change in subscription revenue for both the three and nine months ended July 31, 2019 was primarily due to (i) new contracts for subscription services closed during fiscal year 2019, and (ii) net incremental revenue recognized during the periods in fiscal year 2019 related to new contracts closed during fiscal year 2018, partially offset by expired contracts during the three and nine months ended July 31, 2019, respectively.

The Company continues to enhance its wide selection of products and develop and deploy new software applications and solutions to better address customers’ needs, all of which are easily delivered through web-based applications or as stand-alone professional services.

Cost of Revenues

Costs associated with subscription and maintenance revenues consist primarily of direct labor, depreciation of PASSUR and SMLAT Network Systems, amortization of capitalized software development costs, communication costs, data feeds, travel and entertainment, and consulting fees. Also included in cost of revenues are costs associated with upgrades to PASSUR and SMLAT Systems necessary to make such systems compatible with new software applications, as well as the ordinary repair and maintenance of existing PASSUR and SMLAT Systems. Additionally, cost of revenues in each reporting period is impacted by: (1) the number of PASSUR and SMLAT System units added to the PASSUR Network, which includes the production, shipment, and installation of these assets (currently largely installed by unaffiliated outside contractors), which are capitalized to the PASSUR Network; and (2) capitalized costs associated with software development and data center projects, (all referred to as “Capitalized Assets”). The labor and fringe benefit costs of Company employees involved in creating Capitalized Assets are capitalized, rather than expensed, and amortized, usually over five or seven years, as determined by their projected useful life. The Company does not break down its costs by product.

For the three months ended July 31, 2019, cost of revenues decreased $1,771,000, or 45%, to $2,138,000, as compared with $3,908,000 for the same period in fiscal year 2018. The decrease in cost of revenues for the three months ended July 31, 2019, as compared to the prior year, was primarily attributable to an asset write-off and impairment charges during the third quarter of 2018 totaling approximately $1,476,000, which was comprised of (i) an increase in the PASSUR Network parts and supplies reserve of approximately $230,000; (ii) an impairment charge and write-off of certain PASSUR Network assets of approximately $510,000, which assets were determined to no longer be likely to generate future revenue as a result of a change in a customer’s requirements at a specific location; and (iii) an impairment charge and write-off of a capitalized software product of approximately $736,000, which the Company determined it would no longer market for subscription sales as currently developed.  Excluding the prior year charges detailed above, cost of revenues decreased $295,000 compared with the same period in 2018, which was primarily attributable to a net decrease in personnel related costs of $263,000, due to the outsourcing of some of our software development activities.

For the nine months ended July 31, 2019, cost of revenues decreased $1,967,000, or 24%, to $6,206,000, as compared with $8,174,000 for the same period in fiscal year 2018. The decrease in cost of revenues for the nine months ended July 31, 2019, as compared to the prior year, was primarily attributable to an asset write-off and impairment charges taken in the third quarter of 2018 of $1,476,000, as described above, and a net decrease in personnel related cost of $514,000, due to the outsourcing of some of our software development activities.

Finally, as we continue to release product enhancements/new versions to our existing product offerings, and new product offerings, our amortization expenses associated with the historical software capitalization is anticipated to increase. As a result, we anticipate that our software capitalization and amortization expense, when netted, will not have a significant impact on our financial results.

Research and Development

For the three months ended July 31, 2019, research and development expenses decreased $8,000, or 5%, to $143,000, as compared to $151,000 for the same period in fiscal year 2018. The decrease in research and development expenses was primarily attributable to an increase in personnel related costs allocated to cost of revenues from research and development, as compared to prior year.

For the nine months ended July 31, 2019, research and development expenses decreased $29,000, or 6%, to $426,000, as compared to $455,000 for the same period in fiscal year 2018. The decrease in research and development expenses was primarily attributable to an increase in personnel related costs allocated to cost of revenues from research and development, as compared to prior year.

The Company’s research and development efforts include activities associated with new product development, as well as the enhancement and improvement of the Company's existing software and information products. The Company anticipates that it will continue to invest in its software portfolio to develop, maintain, and support existing and newly developed applications for its customers.

Selling, General, and Administrative

For the three months ended July 31, 2019, selling, general, and administrative expenses increased $156,000, or 7%, to $2,411,000, as compared to $2,255,000 for the same period in fiscal year 2018. The increase in selling, general, and administrative expense for the three months ended July 31, 2019 was primarily due to an increase in professional and consulting expenses of $92,000, and marketing expenses of $84,000, as compared to the same period in fiscal year 2018. These increases were offset by a net decrease in various other accounts within selling, general and administrative expenses, as compared to the same period in fiscal year 2018.

For the nine months ended July 31, 2019, selling, general and administrative expenses increased $327,000, or 5%, to $7,079,000, as compared to $6,752,000 for the same period in fiscal year 2018. The increase in selling, general, and administrative expense for the nine months ended July 31, 2019, was primarily due to an increase in professional and consulting expenses of $317,000 and marketing expenses of $74,000. This increase was partially offset by a decrease in depreciation expense and a net decrease in various other accounts within selling, general and administrative expenses, as compared to the same period in fiscal year 2018.

Loss from Operations

For the three months ended July 31, 2019, loss from operations decreased $1,705,000 to $894,000, as compared with $2,599,000 for the same period in fiscal year 2018.  The improvement was primarily due to a decrease in operating expenses of $1,623,000, or 26%, as well as an increase in revenue of $82,000, or 2%, as compared to the same period in fiscal year 2018. For the nine months ended July 31, 2019, loss from operations decreased $2,026,000 to $2,624,000, as compared with $4,650,000 for the same period in fiscal year 2018. The improvement was primarily due to a decrease in operating expenses of $1,669,000, or 11%, as well as an increase in revenue of $357,000, or 3%, as compared to the same period in fiscal year 2018.  Included in the operating expenses for the three and nine months ended July 31, 2018, was $1,476,000 of costs attributable to the asset write-off and impairment charges taken in the third quarter of 2018, as described above.

Interest Expense – Related Party

Interest expense – related party increased $102,000, or 130%, and $302,000, or 141%, for the three and nine months ended July 31, 2019, respectively, as compared to the same periods in fiscal year 2018, due to the higher principal balance outstanding on the note in fiscal year 2019 and the interest rate increase on the outstanding note, as compared to the same period in fiscal year 2018.

Net Loss

The Company had a net loss of $1,074,000, or $0.14 loss per diluted share, for the three months ended July 31, 2019, as compared to a net loss of $2,677,000, or $0.35 loss per diluted share, for the same period in 2018. The Company had a net loss of $3,140,000, or $0.41 loss per diluted share, for the nine months ended July 31, 2019, as compared to a net loss of $4,868,000, or $0.63 loss per diluted share, for the same period in 2018.

Liquidity and Capital Resources

The Company’s current liabilities exceeded its current assets, excluding deferred revenue, by $502,000 as of July 31, 2019. The Company’s stockholders’ equity was $1,010,000 as of July 31, 2019.

On January 28, 2019, the Company entered into a Fifth Debt Extension Agreement with G.S. Beckwith Gilbert, the Company’s Chairman and significant stockholder, effective January 28, 2019, pursuant to which the Company and Mr. Gilbert agreed to modify certain terms and conditions of the debt agreement with Mr. Gilbert (the “Past Gilbert Note”). The maturity date of the Past Gilbert Note was November 1, 2019. The outstanding principal amount under the Past Gilbert Note was $6,050,000 as of October 31, 2018, and the total amount of principal and interest due and owing as of January 28, 2019 under the Past Gilbert Note was $7,122,000. Pursuant to the Fifth Debt Extension Agreement, the Company issued to Mr. Gilbert a new debt agreement, which has a principal amount of $6,960,000 (the “Gilbert Note”), in exchange for the Past Gilbert Note, and agreed to pay Mr. Gilbert $162,000 of interest which accrued under the Past Gilbert Note during the first quarter of fiscal year 2019, at the time and on the terms set forth in the Past Gilbert Note. The Gilbert Note bears a maturity date of November 1, 2020, with an annual interest rate of 9 3/4%. Interest payments are due on October 31st of each fiscal year. The Gilbert Note is secured by the Company’s assets.

During the nine months ended July 31, 2019, the Company paid interest incurred on the Gilbert Note totaling $516,000.  During the nine months ended July 31, 2019, and prior to January 28, 2019, Mr. Gilbert loaned the Company an additional $1,650,000 (which amount is included in the outstanding principal amount of $7,700,000 under the Gilbert Note).  Additionally, subsequent to July 31, 2019, Mr. Gilbert loaned the Company an additional $325,000. As of September 11, 2019, the principal amount of the loan outstanding to Mr. Gilbert was $8,025,000.

Management is addressing the Company’s working capital deficiency by aggressively marketing the Company’s PASSUR Network information capabilities in its existing product and professional service lines, as well as in new products and professional services which are continually being developed and deployed. Management believes that the continued development of its existing suite of software products and professional services, which address the wide array of needs of the aviation industry, will continue to lead to increased growth in the Company’s customer-base and subscription-based revenues. However, there are no assurances that such growth will be achieved.

If the Company’s business does not generate sufficient cash flows from operations to meet its operating cash requirements, the Company will attempt to obtain external financing on commercially reasonable terms. However, the Company has received a commitment from Mr. Gilbert, dated September 11, 2019, that, if the Company, at any time, is unable to meet its obligations through September 11, 2020, Mr. Gilbert will provide the Company with the necessary continuing financial support to meet such obligations. Such commitment for financial support may be in the form of additional advances or loans to the Company, and/or, if deemed necessary, the deferral of principal and/or interest payments due on the existing loans.

Net cash provided by operating activities was $348,000 for the nine months ended July 31, 2019, and consisted of a net loss of $3,140,000, depreciation and amortization of $2,659,000, stock-based compensation expense of $469,000, and deferred revenue of $673,000, with the balance consisting of a decrease in accounts receivables and other assets and a net decrease in accounts payable, accrued expense, and operating liabilities, as compared to the same period in fiscal year 2018. Net cash provided by operating activities increased by $190,000 for the nine months ended July 31, 2019, as compared to $157,000 for the same period in 2018. Net cash used in investing activities was $2,095,000 for the nine months ended July 31, 2019, which was expended for software development costs and additions to the PASSUR Network. Net cash provided by financing activities was $1,650,000 for the nine months ended July 31, 2019, and consisted of proceeds from note payable – related party.

The Company actively monitors the costs associated with supporting the business, and continually seeks to identify and reduce any unnecessary costs as part of its cost reduction initiatives, while strategically reinvesting back into the business as part of its long-term plans. Additionally, the aviation market has been impacted by budgetary constraints, airline bankruptcies and consolidations, current economic conditions, the continued war on terrorism, and fluctuations in fuel costs. The aviation market is extensively regulated by government agencies, particularly the FAA and the National Transportation Safety Board, and management anticipates that new regulations relating to air travel may continue to be issued. Substantially all of the Company’s revenues are derived from airlines, airports, and organizations that serve, or are served by, the aviation industry. Any new regulations or changes in the economic situation of the aviation industry could have an impact on the future operations of the Company, either positively or negatively.

Interest by potential customers in the Company’s information and decision support software products obtained from the PASSUR Network Systems and other sources and its professional services remains strong. As a result, the Company believes that future revenues will increase on an annualized basis. However, there are no guarantees that such annualized future revenue increases will occur. If revenues do not increase and the Company’s cost-structure is not adjusted accordingly, losses may occur. The extent of such profits or losses will be dependent on sales volume achieved and the Company’s ability to optimize its cost structures.

Off-Balance Sheet Arrangements

None.

Critical Accounting Policies and Estimates

The Company’s discussion and analysis of its financial condition and results of operations are based upon its consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses, and related disclosures of contingent assets and liabilities based upon accounting policies management has implemented. These significant accounting policies are disclosed in Note 1 to the Company’s Annual Report on Form 10-K for the fiscal year ended October 31, 2018. The Company had a change to its Revenue Recognition policy, as described below. These policies and estimates are critical to the Company’s business operations and the understanding of its results of operations. The impact and any associated risks related to these policies on the Company’s business operations are discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the fiscal year ended October 31, 2018, as such policies affect its reported financial results. The actual impact of these factors may differ under different assumptions or conditions.

Revenue Recognition

The Company recognizes revenue in accordance with Topic 606. The Company accounts for a customer contract when both parties have approved the contract, both parties are committed to perform their respective obligations, each party’s rights can be identified, payment terms can be identified, the contract has commercial substance, and it is probable the Company will collect substantially all of the consideration to which it is entitled.

The Company derives revenue primarily from subscription-based, real-time decision and solution information and professional services. Revenues are recognized when control of these services is transferred to the customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for such services.

The Company determines revenue recognition through the following steps:

The Company recognized revenue during the three and nine months ended July 31, 2019, of $3,798,000 and $11,088,000, respectively, under Topic 606, which was not materially different from what would have been recognized under Topic 605. The Company recorded an addition to opening accumulated deficit and a reduction to deferred revenue of approximately $66,000, respectively, as of November 1, 2018, due to the impact of adopting Topic 606.

Subscription services revenue

Subscription services revenue is comprised of cloud-based subscription fees that provide the customer the right to access the Company’s software and receive support and updates, if any, for a period of time. The Company has determined such access represents a stand-ready service provided continually throughout the contract term. As such, control and satisfaction of this stand-ready performance obligation is deemed to occur over time. The Company’s subscription contracts include a fixed amount of consideration that is recognized ratably over the non-cancellable contract term, beginning on the date that access is made available to the customer. The passage of time is deemed to be the most faithful depiction of the transfer of control of the services as the customer simultaneously receives and consumes the benefit provided by the Company’s performance. Subscription contracts are generally one to three years in length, billed either, monthly, quarterly or annually, typically in advance, which coincides with the terms of the agreement. The Company’s subscription contracts do not have a significant financing component and customer invoices are typically due within 30 days. There is no significant variable consideration related to these arrangements. Amounts that have been invoiced are recorded in accounts receivable and in deferred revenue or revenue, depending on whether transfer of control to customers has occurred.

Professional services revenue

Professional services primarily consist of value assessments and customer training services. Payment for professional services is generally a fixed fee or a fee based on time and materials The obligation to provide professional services is generally satisfied over time, with the customer simultaneously receiving and consuming the benefits as the Company satisfies its performance obligations. For professional services, revenue is recognized by measuring progress toward the complete satisfaction of the Company’s obligation. Progress for services that are contracted for a fixed price is generally measured based on hours incurred as a portion of total estimated hours, and as a practical expedient, progress for services that are contracted for time and materials is generally based on the amount the Company has the right to invoice. Professional services contracts are generally one year or less in length, billed either in advance, upon pre-defined milestones or as services are rendered. which coincides with the terms of agreement. The Company’s professional service contracts do not have a significant financing component and customer invoices are typically due within 30 days.

Material rights

Contracts with customers may include material rights which are also performance obligations. Material rights primarily arise when the contract gives the customer the right to renew subscription services at a discounted price in the future. This may occur from time to time when the Company’s contracts provide an implicit discount as the customer pays a nonrefundable up-front fee in connection with the initial services contract that it does not have to pay again in order to renew the service. These non-refundable up-front fees are not related to any promised service that the customer benefits other than providing access to the subscription service.  Revenue allocated to material rights is recognized when the customer exercises the right over the estimated renewal period of five years or when the right expires. If exercised by the customer, the amount previously deferred for the material right is included in the transaction price of the renewal contract and allocated to the services included in that contract. If expired, revenue is recognized as subscription services revenue in the period the right expired. If the up-front fees do not provide the customer with a material right, then the amount is included in the transaction price of the initial services contract and allocated to the performance obligations in that contract.

Contracts with Multiple Performance Obligations

Some Company contracts with customers contain multiple distinct performance obligations. For these contracts, the transaction price is allocated to the separate performance obligations on a relative standalone selling price basis.  The standalone selling price reflects the price the Company would charge for a specific service if it was sold separately in similar circumstances and to similar customers. The Company maximizes the use of directly observable transactions to determine the standalone selling prices for its performance obligations. For subscription services, the Company separately determines the standalone selling prices by type of solution and customer demographics. For professional services, the Company separately determines standalone selling price by type of service.

Other policies and judgments

The commissions that the Company pays for obtaining a contract with a customer are conditional on future service provided by the employee. Therefore, since these costs are not incremental solely based on obtaining a contract, the Company does not defer any commission costs.

Recent Accounting Pronouncements

In May 2014, the FASB issued Topic 606. Topic 606 supersedes the revenue recognition requirements in Topic 605, and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the considerations to which the entity expects to be entitled to in exchange for those goods or services. Topic 606 also includes Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, which requires the deferral of incremental costs of obtaining a contract with a customer.

On November 1, 2018, the Company adopted Topic 606 using the modified retrospective transition method which resulted in an adjustment to retained earnings for the cumulative effect of applying the standard to all contracts not completed as of the adoption date. The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods. Revenue recognition remained substantially unchanged following adoption of Topic 606 and therefore the adoption of Topic 606 did not have a material impact on revenues. The primary impact of adopting Topic 606 relates to the accounting for nonrefundable up-front fees. The Company recognized revenue during the three and nine months ended July 31, 2019, of $3,798,000 and $11,088,000, respectively, under Topic 606, which was not materially different from what would have been recognized under Topic 605. The Company recorded an addition to opening accumulated deficit and a reduction to deferred revenue of approximately $66,000, respectively, as of November 1, 2018, due to the impact of adopting Topic 606.

In May 2017, the FASB issued ASU 2017-09, “Compensation—Stock Compensation: Topic 718” — Scope of Modification Accounting (“ASU 2017-09”), to clarify when to account for a change in the terms or conditions of a share-based payment award as a modification. Under the new standard, modification is required only if the fair value, the vesting conditions, or the classification of an award as equity or liability changes as a result of the change in terms or conditions. The Company adopted this guidance during the quarter ended January 31, 2019, using the prospective method, with no material impact to its consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU 2016-02, which amends the ASC and creates Topic 842, Leases (“Topic 842”). Topic 842 will require lessees to recognize lease assets and lease liabilities for those leases classified as operating leases under previous GAAP on the balance sheet with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement.  This guidance is effective for annual periods beginning after December 15, 2018. The Company will adopt the new lease accounting standard for annual periods beginning November 1, 2019, and has elected to apply the provisions of the standard on the date of adoption. Accordingly, the Company will not restate prior year comparative periods to report the impact of the new lease accounting standard for those periods. The Company anticipates that the adoption of the new lease accounting standard will result in the recognition of right-of-use assets and lease liabilities on its balance sheet at November 1, 2019, consisting primarily of the Company’s operating lease covering its corporate office and other facilities that expires through various dates through June 2023. The Company does not anticipate that the new lease accounting standard will materially impact its statement of operations or statement of cash flows in periods subsequent to adoption. The aforementioned impact related to the adoption of the new lease accounting standard are based on the Company’s assessment to date which is still ongoing.