Document

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



☑	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the Quarterly Period Ended	March 31, 2020

	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: 0-261

ALICO, INC.

(Exact name of registrant as specified in its charter)



Florida			59-0906081
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
10070 Daniels Interstate Court
10070 Daniels Interstate Court
Suite 100	Fort Myers	FL	33913
(Address of principal executive offices)			(Zip Code)



(239)	226-2000
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	ALCO	Nasdaq Global Select Market

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 ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☑Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):



Large Accelerated Filer	☐	Accelerated Filer	☑
Non-accelerated filer	☐	Smaller Reporting Company	☐
Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

There were 7,486,108 shares of common stock outstanding at May 8, 2020.

ALICO, INC.

FORM 10-Q

For the three and six months ended March 31, 2020 and 2019

Table of Contents



Part I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements	1
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3. Quantitative and Qualitative Disclosures About Market Risk	36
Item 4. Controls and Procedures	36
Part II - OTHER INFORMATION
Item 1. Legal Proceedings	37
Item 1A. Risk Factors	37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3. Defaults Upon Senior Securities	38
Item 4. Mine Safety Disclosures	38
Item 5. Other Information	39
Item 6. Exhibits	39
Signatures	40

PART I

Item 1. Condensed Consolidated Financial Statements

Index to Condensed Consolidated Financial Statements



	Page
Condensed Consolidated Balance Sheets as of March 31, 2020 (Unaudited) and September 30, 2019	1
Condensed Consolidated Statements of Operations for the three and six months ended March 31, 2020 and 2019 (Unaudited)	2
Condensed Consolidated Statements of Changes in Equity for the three and six months ended March 31, 2020 and 2019 (Unaudited)	3
Condensed Consolidated Statements of Cash Flows for the six months ended March 31, 2020 and 2019 (Unaudited)	5
Notes to Condensed Consolidated Financial Statements (Unaudited)	6



ALICO, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share amounts)


	March 31,			September 30,
	2020			2019
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	80,407		$	18,630
Accounts receivable, net	4,385			713
Inventories	28,503			40,143
Assets held for sale	1,366			1,442
Prepaid expenses and other current assets	1,521			1,049
Total current assets	116,182			61,977

Restricted cash	3,671			5,208
Property and equipment, net	347,816			345,648
Goodwill	2,246			2,246
Other non-current assets	2,369			2,309
Total assets	$	472,284		$	417,388

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	5,154		$	4,163
Accrued liabilities	4,943			7,769
Long-term debt, current portion	5,130			5,338
Deferred retirement obligations	5,226			5,226
Income taxes payable	2,660			5,536
Other current liabilities	554			919
Total current liabilities	23,667			28,951

Long-term debt:
Principal amount, net of current portion	148,499			158,111
Less: deferred financing costs, net	(1,240		)	(1,369		)
Long-term debt less current portion and deferred financing costs, net	147,259			156,742
Lines of credit	66,714			—
Deferred income tax liabilities, net	31,298			32,125
Other liabilities	278			172
Total liabilities	269,216			217,990
Commitments and Contingencies (Note 12)
Stockholders' equity:
Preferred stock, no par value, 1,000,000 shares authorized; none issued	—			—
Common stock, $1.00 par value, 15,000,000 shares authorized; 8,416,145 shares issued and 7,479,671 and 7,476,513 shares outstanding at March 31, 2020 and September 30, 2019, respectively	8,416			8,416
Additional paid in capital	20,174			19,781
Treasury stock, at cost, 936,474 and 939,632 shares held at March 31, 2020 and September 30, 2019, respectively	(31,784		)	(31,943		)
Retained earnings	201,065			198,049
Total Alico stockholders' equity	197,871			194,303
Noncontrolling interest	5,197			5,095
Total stockholders' equity	203,068			199,398
Total liabilities and stockholders' equity	$	472,284		$	417,388

See accompanying notes to the condensed consolidated financial statements.



ALICO, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share amounts)

	Three Months Ended March 31,						Six Months Ended March 31,
	2020			2019			2020			2019
Operating revenues:
Alico Citrus	$	49,801		$	47,823		$	59,976		$	61,720
Water Resources and Other Operations	714			698			1,544			1,580
Total operating revenues	50,515			48,521			61,520			63,300
Operating expenses:
Alico Citrus	43,518			31,582			48,358			42,456
Water Resources and Other Operations	380			625			931			1,348
Total operating expenses	43,898			32,207			49,289			43,804
Gross profit	6,617			16,314			12,231			19,496
General and administrative expenses	2,953			4,654			5,713			8,104
Income from operations	3,664			11,660			6,518			11,392
Other income (expense), net:
Interest expense	(1,452		)	(1,963		)	(2,996		)	(3,880		)
Gain on sale of real estate, property and equipment and assets held for sale	2,838			1			2,863			23
Change in fair value of derivatives	—			(33		)	—			(989		)
Other income (expense)	12			23			(64		)	10
Total other income (expense), net	1,398			(1,972		)	(197		)	(4,836		)
Income before income taxes	5,062			9,688			6,321			6,556
Income tax provision	1,496			2,228			1,857			1,599
Net income	3,566			7,460			4,464			4,957
Net loss (income) attributable to noncontrolling interests	5			87			(102		)	123
Net income attributable to Alico, Inc. common stockholders	$	3,571		$	7,547		$	4,362		$	5,080
Per share information attributable to Alico, Inc. common stockholders:
Earnings per common share:
Basic	$	0.48		$	1.01		$	0.58		$	0.68
Diluted	$	0.48		$	1.01		$	0.58		$	0.68
Weighted-average number of common shares outstanding:
Basic	7,480			7,463			7,478			7,471
Diluted	7,496			7,469			7,494			7,506

Cash dividends declared per common share	$	0.09		$	0.06		$	0.18		$	0.12

See accompanying notes to the condensed consolidated financial statements.



ALICO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
(in thousands)

For the Three Months Ended March 31, 2020

				Additional									Total			Non-
	Common stock			Paid In			Treasury			Retained			Alico, Inc.			controlling			Total
	Shares	Amount		Capital			Stock			Earnings			Equity			Interest			Equity
Balance at December 31, 2019	8,416	$	8,416	$	19,857		$	(31,956	)	$	198,169		$	194,486		$	5,202		$	199,688
Net income (loss)	—	—		—			—			3,571			3,571			(5		)	3,566
Dividends ($0.09/share)	—	—		—			—			(675		)	(675		)	—			(675		)
Stock-based compensation:
Directors	—	—		(10		)	172			—			162			—			162
Executives	—	—		327			—			—			327			—			327
Balance at March 31, 2020	8,416	$	8,416	$	20,174		$	(31,784	)	$	201,065		$	197,871		$	5,197		$	203,068



For the Six Months Ended March 31, 2020

				Additional									Total			Non-
	Common stock			Paid In			Treasury			Retained			Alico, Inc.			controlling			Total
	Shares	Amount		Capital			Stock			Earnings			Equity			Interest			Equity
Balance at September 30, 2019	8,416	$	8,416	$	19,781		$	(31,943	)	$	198,049		$	194,303		$	5,095		$	199,398
Net income	—	—		—			—			4,362			4,362			102			4,464
Dividends ($0.18/share)	—	—		—			—			(1,346		)	(1,346		)	—			(1,346		)
Treasury stock purchases	—	—		—			(238		)	—			(238		)	—			(238		)
Stock-based compensation:
Directors	—	—		(42		)	397			—			355			—			355
Executives	—	—		435			—			—			435			—			435
Balance at March 31, 2020	8,416	$	8,416	$	20,174		$	(31,784	)	$	201,065		$	197,871		$	5,197		$	203,068



ALICO, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
(in thousands)

For the Three Months Ended March 31, 2019

				Additional									Total			Non-
	Common stock			Paid In			Treasury			Retained			Alico, Inc.			controlling			Total
	Shares	Amount		Capital			Stock			Earnings			Equity			Interest			Equity
Balance at December 31, 2018	8,416	$	8,416	$	20,384		$	(32,817	)	$	159,094		$	155,077		$	5,442		$	160,519
Net income (loss)	—	—		—			—			7,547			7,547			(87		)	7,460
Dividends ($0.06/share)	—	—		—			—			(448		)	(448		)	—			(448		)
Stock-based compensation:																			—
Directors	—	—		(83		)	321			—			238			—			238
Executives	—	—		255			—			—			255			—			255
Executive forfeiture	—	—		(823		)	—			—			(823		)	—			(823		)
Balance at March 31, 2019	8,416	$	8,416	$	19,733		$	(32,496	)	$	166,193		$	161,846		$	5,355		$	167,201



For the Six Months Ended March 31, 2019

				Additional									Total			Non-
	Common stock			Paid In			Treasury			Retained			Alico, Inc.			controlling			Total
	Shares	Amount		Capital			Stock			Earnings			Equity			Interest			Equity
Balance at September 30, 2018	8,416	$	8,416	$	20,126		$	(7,536	)	$	151,111		$	172,117		$	5,478		$	177,595
Net income (loss)	—	—		—			—			5,080			5,080			(123		)	4,957
Dividends ($0.12/share)	—	—		—			—			(895		)	(895		)	—			(895		)
Treasury stock purchases	—	—		—			(25,576		)	—			(25,576		)	—			(25,576		)
ASC 610-20 adoption	—	—		—			—			10,897			10,897			—			10,897
Stock-based compensation:
Directors	—	—		(140		)	616			—			476			—			476
Executives	—	—		570			—			—			570			—			570
Executive forfeiture	—	—		(823		)	—			—			(823		)	—			(823		)
Balance at March 31, 2019	8,416	$	8,416	$	19,733		$	(32,496	)	$	166,193		$	161,846		$	5,355		$	167,201

See accompanying notes to the condensed consolidated financial statements.



ALICO, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands)

	Six Months Ended March 31,
	2020			2019
Net cash provided by operating activities:
Net income	$	4,464		$	4,957
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	7,199			6,951
Deferred income tax (benefit) expense	(827		)	73
Gain on sale of real estate, property and equipment and assets held for sale	(2,863		)	(23		)
Change in fair value of derivatives	—			989
Impairment of long-lived assets	723			—
Impairment of right-of-use asset	87			—
Stock-based compensation expense	790			223
Other	(36		)	(51		)
Changes in operating assets and liabilities:
Accounts receivable	(3,672		)	(11,453		)
Inventories	11,640			4,922
Prepaid expenses	(234		)	92
Other assets	(387		)	—
Accounts payable and accrued liabilities	(2,061		)	370
Income tax payable	(2,876		)	(852		)
Other liabilities	(259		)	(130		)
Net cash provided by operating activities	11,688			6,068

Cash flows from investing activities:
Purchases of property and equipment	(9,960		)	(9,524		)
Net proceeds from sale of property and equipment and assets held for sale	2,994			202
Change in deposits on purchase of citrus trees	(57		)	(515		)
Deposit on purchase of citrus grove	(25		)	—
Advances on notes receivables, net	87			50
Net cash used in investing activities	(6,961		)	(9,787		)

Cash flows from financing activities:
Repayments on revolving lines of credit	(18,805		)	(41,360		)
Borrowings on revolving lines of credit	85,519			63,637
Principal payments on term loans	(9,820		)	(5,437		)
Treasury stock purchases	(238		)	(25,576		)
Payment on termination of sugarcane agreement	—			(11,300		)
Dividends paid	(1,120		)	(895		)
Deferred financing costs	(23		)	—
Net cash provided by (used in) financing activities	55,513			(20,931		)

Net increase (decrease) in cash and cash equivalents and restricted cash	60,240			(24,650		)
Cash and cash equivalents and restricted cash at beginning of the period	23,838			32,260

Cash and cash equivalents and restricted cash at end of the period	$	84,078		$	7,610

See accompanying notes to the condensed consolidated financial statements.

ALICO, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1. Description of Business and Basis of Presentation

Description of Business

Alico, Inc., together with its subsidiaries (collectively, “Alico”, the “Company", "we", "us" or "our”), is a Florida agribusiness and land management company owning approximately 110,000 acres of land throughout Florida, including approximately 90,000 acres of mineral rights. The Company manages its land based upon its primary usage, and reviews its performance based upon two primary classifications: (i) Alico Citrus and (ii) Water Resources and Other Operations. Financial results are presented based upon these two business segments.

Basis of Presentation

The Company has prepared the accompanying financial statements on a condensed consolidated basis. These accompanying unaudited condensed consolidated interim financial statements, which are referred to herein as the “Financial Statements", have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to Article 10-01 of Regulation S-X of the U.S. Securities and Exchange Commission ("SEC") for interim financial information. These Financial Statements do not include all of the disclosures required for complete annual financial statements and, accordingly, certain information, footnotes and disclosures normally included in annual financial statements, prepared in accordance with U.S. GAAP, have been condensed or omitted in accordance with SEC rules and regulations. Accordingly, the Financial Statements should be read in conjunction with the Company's audited Consolidated Financial Statements and Notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019, as filed with the SEC on December 5, 2019.

The Financial Statements presented in this Quarterly Report on Form 10-Q are unaudited. However, in the opinion of management, such Financial Statements include all adjustments, consisting solely of normal recurring adjustments, necessary to present fairly the financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP applicable to interim periods.

Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the current fiscal year ending September 30, 2020. All intercompany transactions and account balances between the consolidated businesses have been eliminated.

Segments

Operating segments are defined in the criteria established under the Financial Accounting Standards Board - Accounting Standards Codification (“FASB ASC”) Topic 280 as components of public entities that engage in business activities from which they may earn revenues and incur expenses for which separate financial information is available and which is evaluated regularly by the Company’s chief operating decision maker (“CODM”) in deciding how to assess performance and allocate resources. The Company’s CODM assesses performance and allocates resources based on two operating segments: (i) Alico Citrus and (ii) Water Resources and Other Operations.

Principles of Consolidation

The Financial Statements include the accounts of Alico and the accounts of all the subsidiaries in which a controlling interest is held by the Company. Under U.S. GAAP, consolidation is generally required for investments of more than 50% of the outstanding voting stock of an investee, except when control is not held by the majority owner. The Company’s subsidiaries include: Alico Land Development, Inc., Alico-Agri, Ltd., Alico Plant World, LLC, Alico Fruit Company, LLC, Alico Citrus Nursery, LLC, Alico Chemical Sales, LLC, 734 Citrus Holdings, LLC and subsidiaries, Alico Skink Mitigation, LLC and Citree Holdings 1, LLC (“Citree”). The Company considers the criteria established under FASB ASC Topic 810, “Consolidations” in its consolidation process. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities as of the date of the accompanying Financial Statements, the disclosure of contingent assets and liabilities in the Financial Statements and the accompanying Notes, and the reported amounts

of revenues and expenses and cash flows during the periods presented. Actual results could differ from those estimates. The Company evaluates estimates on an ongoing basis. The estimates are based on current and expected economic conditions, historical experience, the experience and judgment of the Company’s management and various other specific assumptions that the Company believes to be reasonable.

Restricted Cash

Restricted cash is comprised of cash received from the sale of certain assets in which the use of funds is restricted and certain cash receipts from the sale of property which was being held specifically for the purpose of deferring a tax impact on the gain on sale of the property.

For certain sales transactions, the Company sells property which serves as collateral for specific debt obligations. As a result, the sale proceeds are only permitted to be used to purchase like-kind citrus groves acceptable to the debt holder or to pay down existing debt obligations and thus are included in restricted cash. During the fiscal year ended September 30, 2019, the Company utilized restricted cash of $1,800,000 towards the purchase of citrus groves. Such purchases are included as part of the collateral under certain debt obligations. Additionally, in November 2019, the Company utilized restricted cash to pay down existing debt, including outstanding interest on such debt, $4,489,000. If the remaining restricted cash is not otherwise used as of September 30, 2020, it will need to be used to pay down principal on Company debt.

In March 2020, the Company sold certain sections of the East Ranch, from which the Company received net cash proceeds (through its qualified intermediary) of approximately $2,952,000. The Company used substantially all of the net cash proceeds to purchase a like-kind asset in May 2020 (See Note 14.” Subsequent Events”), which will allow the Company to defer substantially all of the tax impact of the gain on sale of the ranch land.

Revenue Recognition

Revenues are derived from the sale of processed fruit, fresh fruit, other citrus revenue, leasing revenue and other water and resource revenues. The majority of the revenue is generated from the sale of citrus fruit to processing facilities and fresh fruit sales. The Company recognizes revenue at the amount it expects to be entitled to be paid, determined when control of the products or services is transferred to its customers, which occurs upon delivery of and acceptance of the fruit by the customer and when the Company has a right to payment.

The Company has identified one performance obligation as the delivery of fruit to the processing facility of the customer (or harvesting of the citrus in the case of fresh fruit) for each separate variety of fruit identified in the contract. The Company initially recognizes revenue in an amount which is estimated based on contractual and market prices, including if such market price falls within the range (known as “floor” and “ceiling” prices) identified in the specific contracts. Additionally, the Company also has a contractual agreement whereby revenue is determined based on applying a cost-plus structure methodology. As such, since these contracts contain elements of variable consideration, the Company recognizes this variable consideration by using the expected value method. On a quarterly basis, management reviews the reasonableness of the revenues accrued based on buyers’ and processors’ advances to growers, cash and futures markets and experience in the industry. Adjustments are made throughout the year to these estimates as more current relevant industry information becomes available. Differences between the estimates and the final realization of revenues at the close of the harvesting season can result in either an increase or decrease to reported revenues. During the periods presented, no material adjustments were made to the reported citrus revenues.

Receivables under contracts, whereby pricing is based on contractual and market prices, are primarily paid at the floor amount and are collected within seven days after the harvest week. Any adjustments to pricing as a result of changes in market prices are collected or paid thirty to sixty days after final market pricing is published. Receivables under contracts, whereby pricing is based off a cost-plus structure methodology, are paid at the final prior year rate. Any adjustments to pricing as a result of the cost-plus calculation are collected or paid upon finalization of the calculation and agreement by both parties. As of March 31, 2020, and September 30, 2019, the Company had total receivables relating to sales of citrus of approximately $4,183,000 and $160,000, respectively, recorded in Accounts Receivable, net, in the Condensed Consolidated Balance Sheets.

Disaggregated Revenue

Revenues disaggregated by significant products and services for the three and six months ended March 31, 2020 and 2019 are as follows:



(in thousands)
	Three Months Ended March 31,				Six Months Ended March 31,
	2020		2019		2020		2019
Alico Citrus
Early and Mid-Season	$	22,237	$	27,929	$	31,303	$	39,574
Valencias	25,810		18,746		25,810		18,746
Fresh Fruit	802		671		1,537		2,577
Other	952		477		1,326		823
Total	$	49,801	$	47,823	$	59,976	$	61,720

Water Resources and Other Operations
Land and other leasing	$	679	$	658	$	1,342	$	1,392
Other	35		40		202		188
Total	$	714	$	698	$	1,544	$	1,580

Total Revenues	$	50,515	$	48,521	$	61,520	$	63,300

Noncontrolling Interest in Consolidated Subsidiary

The Financial Statements include all assets and liabilities of the less-than-100%-owned subsidiary the Company controls, Citree. Accordingly, the Company has recorded a noncontrolling interest in the equity of such entity. Citree had a net loss of approximately $11,000 and $177,000 for the three months ended March 31, 2020 and 2019, respectively, and had a net income of approximately $208,000 and a net loss of $251,000 for the six months ended March 31, 2020 and 2019, respectively, of which 51% is attributable to the Company. The shift to net income for the six months ended March 31, 2020 was the result of reimbursements received under the federal relief program relating to Hurricane Irma aggregating approximately $493,000.

Recent Accounting Pronouncements

In January 2017, the FASB issued Accounting Standards Update (“ASU”) 2017-04, “Intangibles-Goodwill and Other” (Topic 350), which simplifies the accounting for goodwill impairment. The updated guidance eliminates Step 2 of the impairment test, which requires entities to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value, determined in Step 1. This guidance will become effective for us in the fiscal years beginning after December 15, 2019, including interim periods within those reporting periods. We will adopt this guidance using a prospective approach. The Company does not expect the adoption of ASU 2017-04 will have a material impact on its consolidated financial statements and will adopt the standard effective October 1, 2020.

In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurements” (“ASU 2018-13”), which aims to improve the overall usefulness of disclosures to financial statement users and reduce unnecessary costs to companies when preparing fair value measurement disclosures. ASU 2018-13 is effective for annual and interim periods in the fiscal years beginning after December 15, 2019. Retrospective adoption is required, except for certain disclosures, which will be required to be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. The Company does not expect the adoption of ASU 2018-13 will have a material impact on its consolidated financial statements and will adopt the standard effective October 1, 2020.

In November 2018, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses.” ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of Subtopic 326-20. Instead,

impairment of receivables arising from operating leases should be accounted for in accordance with Leases (Topic 842). The standard is effective for us on October 1, 2020, with early adoption permitted. The Company does not expect the adoption of ASU 2018-19 to have a material impact on its consolidated financial statements of the Company.

The Company has reviewed other recently issued accounting standards which have not yet been adopted in order to determine their potential effect, if any, on the results of operations or financial condition. Based on the review of these other recently issued standards, the Company does not currently believe that any of those accounting pronouncements will have a significant effect on its current or future financial position, results of operations, cash flows or disclosures.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842).” This guidance requires entities that sign leases as a lessee to recognize right-of-use assets and lease liabilities for those leases classified as operating leases under previous U.S. GAAP. The accounting applied by a lessor is largely unchanged from that applied under previous U.S. GAAP. The Company adopted ASU 2016-02 on October 1, 2019.

The Company determines whether an arrangement is a lease at inception. The Company’s leases consist of operating lease arrangements for certain office space and IT facilities. When these lease arrangements include lease and non-lease components, the Company accounts for lease components and non-lease components (e.g. common area maintenance) separately based on their relative standalone prices.

Any lease arrangements with an initial term of 12 months or less are not recorded on the Company’s Condensed Consolidated Balance Sheet, and it recognizes lease cost for these lease arrangements on a straight-line basis over the lease term. Many lease arrangements provide the options to exercise one or more renewal terms or to terminate the lease arrangement. The Company includes these options when it will be reasonably certain to exercise them in the lease term used to establish the right of use assets and lease liabilities. Generally, lease agreements do not include an option to purchase the leased asset, residual value guarantees or material restrictive covenants.

As most of our lease arrangements do not provide an implicit interest rate, the Company applies an incremental borrowing rate based on the information available at the commencement date of the lease arrangement to determine the present value of lease payments.

No lease costs associated with finance leases and sale-leaseback transactions occurred and our lease income associated with lessor and sublease arrangements are not material to our Condensed Consolidated Financial Statements.

Our operating leases are reported in our Condensed Consolidated Balance Sheet as follows:



(in thousands)

Operating lease components	Classification	March 31, 2020
Right-of-use assets	Other non-current assets	$	329
Current lease liabilities	Other current liabilities	$	167
Non-current lease liabilities	Other liabilities	$	252

Our operating leases cost components are reported in our Condensed Consolidated Statement of Operations as follows:



(in thousands)
		Three Months Ended		Six Months Ended
Operating lease components	Classification	March 31, 2020		March 31, 2020
Operating lease costs	General and administrative expenses	$	52	$	104
Operating lease right-of-use asset impairment	Other expense	$	—	$	87

Future maturities of our operating lease obligations as of March 31, 2020 by fiscal year are as follows:



(in thousands)

2020	$	82
2021	169
2022	175
2023	15
Total noncancelable future lease obligations	$	441
Less: Interest	(22		)
Present value of lease obligations	$	419

The weighted-average remaining lease term and weighted-average discount rate for our operating leases are as follows:



	March 31, 2020
Weighted-average remaining lease term	2.58	years
Weighted-average discount rate	3.89	%



Cash flow information related to leases consists of the following:
(in thousands)	Six Months Ended
	March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	101

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$