RELT Reliant Holdings Inc (QB)

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

Introduction

You should read the matters described and incorporated by reference in “Risk Factors” and the other cautionary statements made in this Report, and incorporated by reference herein, as being applicable to all related forward-looking statements wherever they appear in this Report. We cannot assure you that the forward-looking statements in this Report will prove to be accurate and therefore prospective investors are encouraged not to place undue reliance on forward-looking statements. Other than as required by law, we undertake no obligation to update or revise these forward-looking statements, even though our situation may change in the future.

This information should be read in conjunction with the interim unaudited financial statements and the notes thereto included in this Quarterly Report on Form 10-Q, and the audited financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission on March 31, 2021 (the “Annual Report”).

Certain capitalized terms used below and otherwise defined below, have the meanings given to such terms in the footnotes to our consolidated financial statements included above under “Part I - Financial Information” – “Item 1. Financial Statements”.

In this Quarterly Report on Form 10-Q, we may rely on and refer to information regarding the industries in which we operate in general from market research reports, analyst reports and other publicly available information. Although we believe that this information is reliable, we cannot guarantee the accuracy and completeness of this information, and we have not independently verified any of it.

Unless the context requires otherwise, references to the “Company,” “we,” “us,” “our,” “Reliant”, “Reliant Holdings” and “Reliant Holdings, Inc.” refer specifically to Reliant Holdings, Inc. and its consolidated subsidiaries.

In addition, unless the context otherwise requires and for the purposes of this Report only:

Where You Can Find Other Information

We file annual, quarterly, and current reports, proxy statements and other information with the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC like us at http://www.sec.gov (our filings can be found at https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001682265). Copies of documents filed by us with the SEC are also available from us without charge, upon oral or written request to our Secretary, who can be contacted at the address and telephone number set forth on the cover page of this Report. Our website address is www.reliantholdingsinc.com. The information on, or that may be accessed through, our website is not incorporated by reference into this Report and should not be considered a part of this Report.

Summary of The Information Contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is provided in addition to the accompanying consolidated financial statements and notes to assist readers in understanding our results of operations, financial condition, and cash flows. MD&A is organized as follows:

Overview

Corporate Information

Our principal executive offices are located at 12343 Hymeadow Drive, Suite 3-A, Austin, Texas 78750, and our telephone number is (512) 407-2623.

Summary Description of Business Operations

Residential Pools

We, through our wholly-owned subsidiary Reliant Pools (which has been in operation since September 2013), are an award winning, custom, swimming pool construction company located in the greater Austin, Texas market. We assist customers with the design of, and then construct, recreational pools which blend in with the surroundings, geometric pools which complement the home’s architecture and water features (e.g., waterfalls and negative edge pools) which provide the relaxing sounds of moving water. We won four Association of Pool & Spa Professionals (ARSP) Region 3 Design Awards for our designs in 2016 and one award in 2017. Moving forward, we plan on expanding our operations through an accretive business model in which we plan to acquire competitors in both the custom pool construction and pool maintenance/service industries locally, regionally, and nationally, funding permitting.

To date, the majority of our growth has been through referral business. We offer a wide variety of pool projects based upon price and the desires of the client. When our sales personnel meet with a prospective customer, we provide them with an array of projects from the basic pool building to more high-end projects that may include waterfalls, mason work, backyard lighting and in-ground spas to highlight the outdoor living experience.

Custom Homes

On October 10, 2018, the Company incorporated a new wholly-owned subsidiary in Texas, Reliant Custom Homes, Inc. The Company is exploring opportunities to expand operations in the Austin, Texas area as a custom home builder. To date, the Company has engaged a consultant in connection with custom home builder services, and has purchased land located in Lago Vista, Texas, in the Texas Hill Country, outside of Austin, Texas, on which it intends to construct a custom home which it then plans to sell. Current plans are for the custom home to be approximately 2,300 square feet. In April 2020, the Company obtained a construction loan for $221,000 for the construction costs associated with the build. As of the date of this Report, the Company has cleared the lot where the home will be built and has recently received permits, however the Company has not yet drawn any proceeds on the loan or began construction. The loan renewed and has been extended through October 28, 2021.

The construction of our planned custom home is anticipated to be conducted under the supervision of an on-site construction manager. Substantially all of our construction work is planned to be performed by independent subcontractors under contracts that establish a specific scope of work at an agreed-upon price. In addition, we anticipate that our construction field manager will interact with homebuyers throughout the construction process and instruct homebuyers on post-closing home maintenance.

We plan to maintain efficient construction operations and use industry and company-specific construction practices.

Generally, we anticipate the construction materials to be used in our home builder operations will be readily available from numerous sources. However, the cost of certain building materials, especially lumber, steel, concrete, copper, and petroleum-based materials, is influenced by changes in global commodity prices, national tariffs, and other foreign trade factors. Additionally, the ability to consistently source qualified labor at reasonable prices may be challenging and we cannot determine the extent to which necessary building materials and labor will be available at reasonable prices in the future.

We currently anticipate building custom homes on a build-to-order basis where we do not begin construction of the home until we have a signed contract with a customer. However, we may in the future also build speculative (“spec”) homes, which would allow us to compete with existing homes available in the market, especially for homebuyers that require a home within a short time frame.

We plan to market our custom home services around the end of the third quarter of fiscal 2021. The Company is working to have easements released on the property and anticipates pouring the foundation within the next 30 days.

Novel Coronavirus (COVID-19)

In December 2019, a novel strain of coronavirus, which causes the infectious disease known as COVID-19, was reported in Wuhan, China. The World Health Organization declared COVID-19 a “Public Health Emergency of International Concern” on January 30, 2020 and a global pandemic on March 11, 2020. In March and April 2020, many U.S. states and local jurisdictions, including Travis, County, Texas, where the Company has its operations, began issuing ‘stay-at-home’ orders, which have mostly expired to date. Notwithstanding such ‘stay-at-home’ and similar orders, the Company has actually seen an increase in demand for new pools during the pandemic. The Company believes that this is because homeowners are spending more time at home and possibly because they have more disposable income due to the unavailability of other entertainment choices and travel requirements. However, the full extent of the impact of COVID-19 on our business and operations currently cannot be estimated and will depend on a number of factors including the scope and duration of the global pandemic. For example, it is possible that the current outbreak or continued spread of COVID-19, will cause a global recession, which will result in a decrease in the demand for our services, or future ‘stay-at-home’ orders will prevent us from engaging new clients or completing pool builds then in progress. Additionally, the Company has had issues with sub-contractors coming down with COVID-19 which has caused construction delays and has further seen delays in permitting caused by COVID-19 issues. Furthermore, there is a risk related to permitting taking longer and risk related to labor and equipment shortages. Notwithstanding the above, the demand for pools remains high in Austin and surrounding areas.

Future impacts of the coronavirus and the government’s response to such virus, including declines in spending of disposable income and potential future recessions, cannot be predicted at this time and may result in negative impacts on our operating results, cash flow and prospects, all of which may cause the value of our securities to decline in value.

Currently we believe that we have sufficient cash on hand and will generate sufficient cash through operations to support our operations for the foreseeable future, however, we will continue to evaluate our business operations based on new information as it becomes available and will make changes that we consider necessary in light of any new developments regarding the pandemic.

The pandemic is developing rapidly and the full extent to which COVID-19 will ultimately impact us depends on future developments, including the duration and spread of the virus, virus mutations, and the number of persons who are willing to get vaccinated, as well as potential seasonality of new outbreaks.

Plan of Operations

We had a working capital deficit of $76,341 as of June 30, 2021. With our current cash on hand, expected revenues, and based on our current average monthly expenses, we don’t currently anticipate the need for additional funding in order to continue our operations at their current levels and to pay the costs associated with being a public company for the next 12 months. We may however require additional funding in the future to expand or complete acquisitions. Our plan for the next twelve months is to continue using the same marketing and management strategies and continue providing a quality product with excellent customer service while also seeking to expand our operations organically or through acquisitions as funding and opportunities arise, and, as discussed above, we have also purchased a homesite which we intend to construct a custom home on which we then plan to sell. As our business continues to grow, customer feedback will be integral in making small adjustments to improve the product and overall customer experience. We plan to raise additional required funding when required through the sale of debt or equity, which may not be available on favorable terms, if at all, and may, if sold, cause significant dilution to existing stockholders. If we are unable to access additional capital moving forward, it may hurt our ability to grow and to generate future revenues.

Since the COVID-19 pandemic began we have seen a sharp increase in demand for pools, which we attribute to more people working from home, and sheltering in place. We currently have a backlog which continues into February 2022. We are unclear whether the current demand for pools will continue, if and when, individuals begin working from their offices again. Notwithstanding that, we are currently experiencing delays in obtaining required equipment to start up all the pools we have finished, as equipment is currently being rationed by sellers due to increased demand as a result of the need to replace equipment which was damaged due to the unprecedented 2021 winter storms which affected the Austin area, and the overall increase in new pool builds, which is also being negatively affected by manufacturing and shipping delays due to COVID-19. We are also experiencing delays as subcontractors come down with COVID-19. Overall, demand for trade workers is extremely high, which has resulted in higher prices for pools, which we attempt to pass on to customers as much as possible.

Results of Operations

For the Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30, 2020

We had revenue of $807,463 for the three months ended June 30, 2021, compared to revenue of $333,671 for the three months ended June 30, 2020, an increase of $473,792 or 142% from the prior period. We recognize revenue based on the percentage that a job is complete rather than upon completion. As such, total revenue recognized for each period may be different than the product of total completed pools during each period multiplied by the average pool contract price of each pool during such period, as the construction of certain pools may have started in one period and ended in another. Revenue increased during the current period due to an increase in pool count during the comparable periods and general timing of contracts as well as the higher priced pools being completed in the current period. As discussed above, we have seen an increase in the demand for pools since March 2020, which we believe is due to more people working from home due to the COVID-19 pandemic.

We had cost of goods sold of $498,860 for the three months ended June 30, 2021, compared to cost of goods sold of $231,816 for the three months ended June 30, 2020, an increase of $267,044 or 115% from the prior period.

Cost of goods sold increased mainly due to an increase in pool equipment, gunite and labor costs, due to the increased demand we are seeing for such items due to the overall increase in demand for pools in the Austin, Texas area, as well as shortages of labor and increases in labor costs (due to COVID-19 and the overall increase in demand) and both shortages in, and increases in the cost of, equipment, as discussed in greater detail above. The timing of our cost of goods sold is materially impacted based on the overall scope and timing of the projects we are working on. In general, costs of goods sold for the three months ended June 30, 2021 were higher than for the three months ended June 30, 2020, due to an increase in the number of pools we are building. The expenses which attributed to the increase in cost of goods sold for the three months ended June 30, 2021, compared to the three months ended June 30, 2020, included:

Cost of goods sold represents our pool construction costs, including raw materials, outsourced labor, installed equipment, tile and coping expenses, excavation costs and permit expenses. We anticipate our cost of goods sold increasing in approximate proportion to increases in revenue and decreasing in approximate proportion to decreases in revenue, moving forward, as our cost of goods sold are factored into the price we charge for our pools and represent the cost of pool construction, the majority of which is not fixed and varies depending on the total number of pools and construction projects we complete during each period and the size and complexity of such projects.

We had a gross margin of $308,603 for the three months ended June 30, 2021, compared to a gross margin of $101,855 for the three months ended June 30, 2020, an increase of $206,748 or 203% from the prior period due to the reasons described above. Gross margin as a percentage of revenue was 38.2% and 30.5% for the three months ended June 30, 2021 and 2020, respectively. Gross margin as a percentage of revenue increased due to the recent completion of larger more profitable pools.

We had operating expenses consisting solely of general and administrative expenses of $217,890 for the three months ended June 30, 2021 (including $12,333 of stock-based expenses described below under “Liquidity and Capital Resources”), compared to operating expenses consisting solely of general and administrative expenses of $148,484 for the three months ended June 30, 2020. Operating expenses increased by $69,406 or 47% from the prior period mainly due to the increase in the size of the business. General and administrative expenses include the salaries of our employees, commissions and the fees paid to contract employees.

We had interest income of $6 for the three months ended June 30, 2021, compared to interest income of $0 for the three months ended June 30, 2020. Interest income was in connection with interest generated by funds the Company maintained in its savings account.

We had interest expense of $90 and $423, for the three months ended June 30, 2021 and 2020, respectively, due to interest paid in connection with the purchase of a car used by our Chief Executive Officer, as described in greater detail under “Liquidity and Capital Resources” below.

We had a gain on forgiveness of debt of $51,577 for the three months ended June 30, 2021, compared to no gain or loss on the forgiveness of debt for the three months ended June 30, 2020. The gain on forgiveness of debt for the three months ended June 30, 2021, was in connection with the forgiveness of the PPP Note as discussed below under “Liquidity and Capital Resources”.

We had net income of $142,206 for the three months ended June 30, 2021, compared to a net loss of $47,052 for the three months ended June 30, 2020, an increase in net income of $189,258 or 402%, mainly due to the $473,792 or 142% increase in revenue, and the $51,577 non-cash gain on forgiveness of debt, offset by the $267,044 or 115% increase in cost of goods sold, each as described above.

For the Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020

We had revenue of $1,390,524 for the six months ended June 30, 2021, compared to revenue of $825,978 for the six months ended June 30, 2020, an increase of $564,546 or 68% from the prior period. We recognize revenue based on the percentage that a job is complete rather than upon completion. As such, total revenue recognized for each period may be different than the product of total completed pools during each period multiplied by the average pool contract price of each pool during such period, as the construction of certain pools may have started in one period and ended in another. Revenue increased during the current period due to an increase in pool count during the comparable periods and general timing of contracts as well as the higher priced pools being completed in the current period. As discussed above, we have seen an increase in the demand for pools since March 2020, which we believe is due to more people working from home due to the COVID-19 pandemic. We have also seen an increase in pool costs of approximately 20% compared to last year, due to increases in the costs of materials (described in greater detail below), which increases we have passed on to our customers to the extent possible.

We had cost of goods sold of $971,365 for the six months ended June 30, 2021, compared to cost of goods sold of $566,999 for the six months ended June 30, 2020, an increase of $404,366 or 71% from the prior period.

Cost of goods sold increased mainly due to an increase in pool equipment, excavation costs and labor due to the increased demand we are seeing for such items due to the overall increase in demand for pools in the Austin, Texas area, as well as shortages of labor and increases in labor costs (due to COVID-19 and the overall increase in demand) and both shortages in, and increases in the cost of, equipment, as discussed in greater detail above. The timing of our cost of goods sold is materially impacted based on the overall scope and timing of the projects we are working on. The expenses which attributed to the increase in cost of goods sold for the six months ended June 30, 2021, compared to the six months ended June 30, 2020, included:

Cost of goods sold represents our pool construction costs, including raw materials, outsourced labor, installed equipment, tile and coping expenses, excavation costs and permit expenses. We anticipate our cost of goods sold increasing in approximate proportion to increases in revenue and decreasing in approximate proportion to decreases in revenue, moving forward, as our cost of goods sold are factored into the price we charge for our pools and represent the cost of pool construction, the majority of which is not fixed and varies depending on the total number of pools and construction projects we complete during each period and the size and complexity of such projects.

We had a gross margin of $419,159 for the six months ended June 30, 2021, compared to a gross margin of $258,979 for the six months ended June 30, 2020, a decrease of $160,180 or 62% from the prior period due to the reasons described above. Gross margin as a percentage of revenue was 30.1% and 31.4% for the six months ended June 30, 2021 and 2020, respectively.

We had operating expenses consisting solely of general and administrative expenses of $733,735 for the six months ended June 30, 2021 (including $349,333 of stock-based expenses described below under “Liquidity and Capital Resources”), compared to operating expenses consisting solely of general and administrative expenses of $637,349 for the six months ended June 30, 2020. Operating expenses increased by $96,386 or 15% from the prior period mainly due to an increase in stock-based compensation, payroll expense and professional fees offset with a decrease in lawsuit settlement expense. General and administrative expenses include the salaries of our employees, commissions and the fees paid to contract employees.

We had interest income of $6 for the six months ended June 30, 2021, compared to interest income of $22 for the six months ended June 30, 2020. Interest income was in connection with interest generated by funds the Company maintained in its savings account.

We had interest expense of $493 and $542, for the six months ended June 30, 2021 and 2020, respectively, due to interest paid in connection with the purchase of a car used by our Chief Executive Officer, as described in greater detail under “Liquidity and Capital Resources” below.

We had a gain on forgiveness of debt of $51,577 for the six months ended June 30, 2021, compared to no gain or loss on the forgiveness of debt for the six months ended June 30, 2020. The gain on forgiveness of debt for the six months ended June 30, 2021, was in connection with the forgiveness of the PPP Note as discussed below under “Liquidity and Capital Resources”.

We had net loss of $263,486 for the six months ended June 30, 2021, compared to a net loss of $378,890 for the six months ended June 30, 2020, an increase in net loss of $115,404 or 30%, mainly due to the increase in cost of goods sold and increase in general and administrative expenses, offset by the increase in revenues and the non-cash gain on forgiveness of debt, each as described above.

Liquidity and Capital Resources

We had total assets of $418,496 as of June 30, 2021, consisting of total current assets of $384,954, which included cash of $317,339, house and real estate inventory of $45,471, federal income tax receivable of $416, contract assets of $18,728, and accounts receivable of $3,000 and equipment, net of accumulated depreciation, of $33,542. Federal income tax receivable relates to a payment made by the Company to the United States Treasury in March 2016, in anticipation of Federal income tax the Company estimated would be owed at the end of the 2016 calendar year. There was no tax due for the years ended December 31, 2016, 2017, 2018, 2019 or 2020, due to the utilization of a net loss carryforward and application of prepaid taxes. Included in house and real estate inventory as of June 30, 2021 is the value of the land which the Company acquired in the third quarter of 2019, which it plans to build a custom home on. Equipment relates to the vehicle discussed below. Contract assets include estimated earnings in excess of billings on uncompleted contracts. The Company is working to have easements released on the property and anticipates pouring the foundation within the next 30 days.

We had total liabilities of $478,655 as of June 30, 2021, which included current liabilities of $461,295, including accounts payable and accrued liabilities of $100,458 (which included accrued lawsuit settlements of $35,000), contract liabilities, relating to billings in excess of costs and estimated earnings on uncompleted jobs of $353,763, and current portion of note payable of $7,074, and long-term liabilities consisting of a long-term note payable, net of current portion of $17,360 relating to a vehicle (discussed below) and the PPP Note discussed below. The $35,000 of accrued lawsuit settlements represents amounts accrued in connection with the lawsuits described in greater detail under “Note 6. Commitments and Contingencies” in the Notes to Consolidated Financial Statements included above. Long term note payable, net of current portion, decreased by $55,948 from December 31, 2020, mainly due to the forgiveness of the Note, as discussed below.

On February 11, 2020, we purchased a Hyundai Genesis G80 for use by Mr. Elijah May, our Chief Executive Officer. The Vehicle had a total purchase price of $50,616, including $11,000 which was paid as a down payment in cash. We entered into a term note, secured by the vehicle, for the remaining amount of the purchase price, which amount accrues interest at the rate of 3.99% per annum and is payable at the rate of $660 per month through maturity on February 27, 2025.

On April 28, 2020, the Company secured a construction loan from First United Bank and Trust Company to be used to develop the land purchased in the third quarter of 2019. The loan is in the amount of $221,000, bears interest at the rate of 6.25% per annum and is repayable on April 28, 2021. As of June 30, 2021, and through the date of this filing, no amount had been advanced on the loan. The loan renewed and has been extended through October 28, 2021.

On May 11, 2020, we (through Reliant Pools) received a loan (the “Loan”) from Wells Fargo Bank N.A. (the “Lender”) in the principal amount of $51,113, pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020. The Loan was evidenced by a promissory note (the “Note”), dated effective May 4, 2020, issued by the Company to the Lender. The Note was unsecured, was to mature on May 4, 2022 and accrued interest at a rate of 1.00% per annum, payable monthly commencing on November 2, 2020, following an initial deferral period as specified under the PPP. Proceeds from the Loan were available to the Company to fund designated expenses, including certain payroll costs, rent, utilities and other permitted expenses, in accordance with the PPP. Under the terms of the PPP, up to the entire amount of principal and accrued interest could be forgiven to the extent Loan proceeds were used for qualifying expenses as described in the CARES Act and applicable implementing guidance issued by the U.S. Small Business Administration under the PPP (including that up to 60% of such Loan funds were used for payroll). The Company used the entire Loan amount for designated qualifying expenses and applied for forgiveness of the respective Loan in accordance with the terms of the PPP. On April 27, 2021, the Company was notified that the outstanding principal and accrued interest for the PPP Loan was forgiven in full by the SBA.

We had a working capital deficit of $76,341 as of June 30, 2021, compared to a working capital deficit of $110,920 as of December 31, 2020.

We had $129,408 of net cash provided by operating activities for the six months ended June 30, 2021, which was mainly due to an increase of 86,607 in contract liabilities and $349,333 of stock-based compensation, offset by $263,486 of net loss and $51,577 of gain on forgiveness of debt in connection with the forgiveness of the PPP Note. We had $22,379 of net cash used in operating activities for the six months ended June 30, 2020, due mainly to net loss of $378,890 and an increase of $57,000 in accounts receivable, offset by $339,306 of increase in accounts payable and accrued expenses. Stock based compensation includes the issuance, on January 27, 2021, of 700,000 shares of restricted common stock to Elijah May, its sole officer and director, 200,000 shares of restricted common stock to Joel Hefner, the Vice President of Reliant Pools, a non-executive officer position, and 700,000 shares of restricted common stock to Michael Chavez, a consultant to the Company, each in consideration for services rendered. The shares were valued at $0.20 per share, the closing price of the Company’s stock on January 27, 2021. Also, on December 4, 2020, the Company entered into an investor relations agreement and issued a total of 200,000 shares of restricted common stock in exchange for a six-month service period. The stock was valued at $34,000 at the date of grant and will be recognized over the service period. The Company also issued Mr. May in June 2021, 1,000 shares of Series A Preferred Stock, in consideration for services rendered (which shares, voting as a class, but together will all other voting shares of the Company, vote 51% of the total shareholder vote on all shareholder matters), which were valued at $1,000. During the six months ended June 30, 2021, the Company recognized $1,000 of stock-based expense related to these shares.

We had $11,000 of net cash used in investing activities for the six months ended June 30, 2020, which was solely due to the down payment on the vehicle purchase described above.

We had $4,636 of net cash used in financing activities for the six months ended June 30, 2021, which was due to payments on our vehicle loan. We had $48,238 of cash provided by financing activities for the six months ended June 30, 2020, which was due to the PPP Note proceeds, less payments on our vehicle loan.

We do not currently have any additional commitments or identified sources of additional capital from third parties or from our officers, directors or majority stockholders. Additional financing may not be available on favorable terms, if at all.

In the future, we may be required to seek additional capital by selling additional debt or equity securities, or otherwise be required to bring cash flows in balance when we approach a condition of cash insufficiency. The sale of additional equity or debt securities, if accomplished, may result in dilution to our then stockholders. Financing may not be available in amounts or on terms acceptable to us, or at all. In the event we are unable to raise additional funding and/or obtain revenues sufficient to support our expenses, we may be forced to curtail or abandon our business operations, and any investment in the Company could become worthless.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and the Company’s discussion and analysis of its financial condition and operating results require the Company’s management to make judgments, assumptions and estimates that affect the amounts reported. Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates, and such differences may be material.

“Note 1. The Company and Summary of Significant Accounting Policies” in Part I, Item 1 of this Form 10-Q and “Note 1. The Company, Summary of Significant Accounting Policies and Going Concern” in the Notes to Consolidated Financial Statements in Part II, Item 8, of the 2020 Annual Report, describe the significant accounting policies and methods used in the preparation of the Company’s consolidated financial statements.