1.	Organization, Basis of Presentation, and Summary of Significant Accounting Policies

Organization

Landec Corporation and its subsidiaries (“Landec” or the “Company”) design, develop, manufacture, and sell differentiated products for food and biomaterials markets, and license technology applications to partners. The Company has

two

proprietary polymer technology platforms:

Intelimer® polymers, and

hyaluronan (“HA”) biopolymers. The Company sells specialty packaged branded Eat Smart® and GreenLine® and private label fresh - cut vegetables and whole produce to retailers, club stores, and foodservice operators, primarily in the United States, Canada, and Asia through its Apio, Inc. (“Apio”) subsidiary, and sells HA - based and non - HA biomaterials through its Lifecore Biomedical, Inc. (“Lifecore”) subsidiary. The Company

’s HA biopolymers and non - HA materials are proprietary in that they are specially formulated for specific customers to meet strict regulatory requirements. The Company’s technologies, along with its customer relationships and tradenames, are the foundation, and a key differentiating advantage upon which Landec has built its business.

Basis of Presentation

The accompanying unaudited consolidated financial statements of Landec have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information and with the instructions for Form

- Q and Article

of Regulation S - X. In the opinion of management, all adjustments (consisting of normal recurring accruals) have been made which are necessary to present fairly the financial position at

November

27,

2016

and the results of operations and cash flows for all periods presented. Although Landec believes that the disclosures in these financial statements are adequate to make the information presented not misleading, certain information normally included in financial statements and related footnotes prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been condensed or omitted in accordance with the rules and regulations of the Securities and Exchange Commission. The accompanying financial data should be reviewed in conjunction with the audited financial statements and accompanying notes included in Landec's Annual Report on Form

- K for the fiscal year ended

May

29,

2016.

The results of operations for the

six

months ended

November

27,

2016

are not necessarily indicative of the results that

may

be expected for an entire fiscal year because there is some seasonality in Apio

’s food business, particularly, Apio’s export business, and the order patterns of Lifecore’s customers which

may

lead to significant fluctuations in Landec’s quarterly results of operations.

Basis of Consolidation

The consolidated financial statements are presented on the accrual basis of accounting in accordance with GAAP and include the accounts of Landec Corporation and its subsidiaries, Apio and Lifecore. All intercompany transactions and balances have been eliminated.

Arrangements that are not controlled through voting or similar rights are reviewed under the guidance for variable interest entities (“VIEs”). A company is required to consolidate the assets, liabilities, and operations of a VIE if it is determined to be the primary beneficiary of the VIE.

An entity is a VIE and subject to consolidation, if by design: a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support provided by any party, including equity holders, or b) as a group the holders of the equity investment at risk lack any

one

of the following

three

characteristics: (i)

the power, through voting rights or similar rights to direct the activities of an entity that most significantly impact the entity’s economic performance, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity. The Company reviewed the consolidation guidance and concluded that its partnership interest in Apio Cooling, LP (see below) and its equity investment in the non - public company (see Note

are not VIEs.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and judgments that affect the amounts reported in the financial statements and accompanying notes. The accounting estimates that require management

’s most significant and subjective judgments include revenue recognition; loss contingencies; sales returns and allowances; self - insurance liabilities; recognition and measurement of current and deferred income tax assets and liabilities; the assessment of recoverability of long - lived assets; the valuation of intangible assets and inventory; the valuation of investments; and the valuation and recognition of stock - based compensation.

These estimates involve the consideration of complex factors and require management to make judgments. The analysis of historical and future trends can require extended periods of time to resolve and are subject to change from period to period. The actual results

may

differ from management

’s estimates.

Cash and Cash Equivalents

The Company records all highly liquid securities with

three

months or less from date of purchase to maturity as cash equivalents. Cash equivalents consist mainly of money market funds. The market value of cash equivalents approximates their historical cost given their short - term nature.

Debt Issuance Costs

The Company records its line of credit debt issuance costs as an asset, and as such,

$120,000

and

$459,000

was recorded as prepaid expenses and other current assets and other assets, respectively, as of

November

27,

2016.

The Company records its term debt issuance costs as a contra - liability, and as such,

$60,000

and

$229,000

was recorded as current portion of long - term debt and long - term debt, respectively, as of

November

27,

2016

(see Note

7).

Financial Instruments

The Company

’s financial instruments are primarily composed of commercial - term trade payables, grower advances, notes receivable, and debt instruments. For short - term instruments, the historical carrying amount approximates the fair value of the instrument. The fair value of long - term debt approximates its carrying value.

Cash Flow Hedges

The Company entered into an interest rate swap agreement to manage interest rate risk. This derivative instrument

may

offset a portion of the changes in interest expense. The Company designates this derivative instrument as a cash flow hedge. The Company accounts for its derivative instrument as either an asset or a liability and carries it at fair value in Other assets or Other non - current liabilities. The accounting for changes in the fair value of the derivative instrument depends on the intended use of the derivative instrument and the resulting designation.

For derivative instruments that hedge the exposure to variability in expected future cash flows that are designated as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of Accumulated Other Comprehensive Income in Stockholders

’ Equity and reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. The ineffective portion of the gain or loss on the derivative instrument, if any, is recognized in earnings in the current period. To receive hedge accounting treatment, cash flow hedges must be highly effective in offsetting changes to expected future cash flows on hedged transactions.

For additional information refer to Note

– Comprehensive Income.

Investment in Non - Public Company

February

15,

2011,

Apio purchased

150,000

senior preferred shares for

$15

million and

201

common shares for

$201

that were issued by Windset Holdings

2010

Ltd., a Canadian corporation

(“Windset”). On

July

15,

2014,

Apio increased its investment in Windset by purchasing an additional

shares of common stock and

51,211

shares of junior preferred stock of Windset for

$11

million. On

October

29,

2014,

Apio purchased an additional

70,000

senior preferred shares of Windset for

million. These investments are reported as an investment in non - public company, fair value, in the accompanying Consolidated Balance Sheets as of

November

27,

2016

and

May

29,

2016.

The Company has elected to account for its investment in Windset under the fair value option (see Note

2).

Intangible Assets

The Company

’s intangible assets are comprised of customer relationships with a finite estimated useful life of

twelve

thirteen

years, and trademarks, tradenames and goodwill with indefinite lives.

Finite - lived intangible assets are reviewed for possible impairment whenever events or changes in circumstances occur that indicate that the carrying amount of an asset (or asset group)

may

not be recoverable. Indefinite lived intangible assets are reviewed for impairment at least annually. For goodwill and other indefinite - lived intangible assets, the Company performs a qualitative impairment analysis in accordance with Accounting Standards Codification (“ASC”)

350

35.

Partial Self - Insurance on Employee Health and Workers Compensation Plans

The Company

provides health insurance benefits to eligible employees under self - insured plans whereby the Company pays actual medical claims subject to certain stop loss limits and self - insures its workers compensation claims. The Company records self - insurance liabilities based on actual claims filed and an estimate of those claims incurred but not reported. Any projection of losses concerning the Company's liability is subject to a high degree of variability. Among the causes of this variability are unpredictable external factors such as inflation rates, changes in severity, benefit level changes, medical costs, and claims settlement patterns. This self - insurance liability is included in accrued liabilities and represents management's best estimate of the amounts that have been incurred but not yet been paid as of

November

27,

2016

and

May

29,

2016.

It is reasonably possible that the expense the Company ultimately incurs could differ from these estimates and adjustments to future reserves

may

be necessary.

Fair Value Measurements

The Company uses fair value measurement accounting for financial assets and liabilities and for financial instruments and certain other items measured at fair value. The Company has elected the fair value option for its investment in a non - public company (see Note

2).

The Company has not elected the fair value option for any of its other eligible financial assets or liabilities.

The accounting guidance established a

three

- tier hierarchy for fair value measurements, which prioritizes the inputs used in measuring fair value as follows:

Level

– observable inputs such as quoted prices for identical instruments in active markets.

Level

– inputs other than quoted prices in active markets that are observable either directly or indirectly through corroboration with observable market data.

Level

– unobservable inputs in which there is little or no market data, which would require the Company to develop its own assumptions.

As of

November

27,

2016

and

May

29,

2016,

the Company held certain assets that are required to be measured at fair value on a recurring basis, including its interest rate swap and its minority interest investment in Windset.

The fair value of the Company

’s interest rate swap is determined based on model inputs that can be observed in a liquid market, including yield curves, and is categorized as a Level

measurement and is recorded as other assets in the Consolidated Balance Sheet.

The Company has elected the fair value option of accounting for its investment in Windset. The calculation of fair value utilizes significant unobservable inputs, including projected cash flows, growth rates, and discount rates. As a result, the Company

’s investment in Windset is considered to be a Level

measurement investment. The fair value of the Company’s investment in Windset did not change for the

six

months ended

November

27,

2016.

In determining the fair value of the investment in Windset, the Company utilizes the following significant unobservable inputs in the discounted cash flow models:

	November 27, 2016		May 29, 2016
Revenue growth rates		4%		4%
Expense growth rates		4%		4%
Income tax rates		15%		15%
Discount rates		12%		12.5%

The revenue growth, expense growth, and income tax rate assumptions are considered the Company's best estimate of the trends in those items over the discount period. The discount rate assumption takes into account the risk - free rate of return, the market equity risk premium, and the company

’s specific risk premium and then applies an additional discount for lack of liquidity of the underlying securities. The discounted cash flow valuation model used by the Company has the following sensitivity to changes in inputs and assumptions (in thousands):

	Impact on value of investment in Windset as of November 27, 2016
10% increase in revenue growth rates	$	400
10% increase in expense growth rates	$	(400	)
10% increase in income tax rates	$	—
10% increase in discount rates	$	(200	)

Imprecision in estimating unobservable market inputs can affect the amount of gain or loss recorded for a particular position. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

The following table summarizes the fair value of the Company

’s assets and liabilities that are measured at fair value on a recurring basis (in thousands):

	Fair Value at November 27, 2016						Fair Value at May 29, 2016
	Level 1		Level 2		Level 3		Level 1		Level 2		Level 3
Assets:
Interest rate swap (1)	$	—	$	519	$	—	$	—	$	—	$	—
Investment in non-public company		—		—		62,700		—		—		62,700
Total	$	—	$	519	$	62,700	$	—	$	—	$	62,700

(1)

Recorded in Other assets.

Revenue Recognition

See Note

– Business Segment Reporting, for a discussion about the Company’s

four

business segments; namely, Packaged Fresh Vegetables, Food Export, Biomaterials, and Corporate.

Revenue from product sales is recognized when there is persuasive evidence that an arrangement exists, title has transferred, the price is fixed and determinable, and collectability is reasonably assured. Allowances are established for estimated uncollectible amounts, product returns, and discounts based on specific identification and historical losses.

Apio

’s Packaged Fresh Vegetables revenues generally consist of revenues generated from the sale of specialty packaged fresh - cut and whole value - added vegetable products that are generally washed and packaged in Apio’s proprietary packaging and sold under Apio’s Eat Smart and GreenLine brands and various private labels. Revenue is generally recognized upon shipment of these products to customers. The Company takes title to all produce it trades and/or packages, and therefore, records revenues and cost of sales at gross amounts in the Consolidated Statements of Comprehensive Income.

In addition, Packaged Fresh Vegetables revenues include the revenues generated from Apio Cooling, LP, a vegetable cooling operation in which Apio is the general partner with a

60%

ownership position, and from the sale of BreatheWay® packaging to license partners. Revenue is recognized on the vegetable cooling operations as cooling and storage services are provided to Apio

’s customers. Sales of BreatheWay packaging are recognized when shipped to Apio’s customers.

Apio

’s Food Export revenues consist of revenues generated from the purchase and sale of primarily whole commodity fruit and vegetable products to Asia through its subsidiary, Cal - Ex Trading Company (“Cal - Ex”). As most Cal - Ex customers are in countries outside of the U.S., title transfers and revenue is generally recognized upon arrival of the shipment in the foreign port. Apio records revenue equal to the sale price to

third

parties because it takes title to the product while in transit.

Lifecore

’s Biomaterials business principally generates revenue through the sale of products containing HA. Lifecore primarily sells products to customers in

three

medical areas:

(1)

Ophthalmic, which represented approximately

55%

of Lifecore’s revenues in fiscal year

2016,

(2)

Orthopedic, which represented approximately

20%

of Lifecore’s revenues in fiscal year

2016,

and

(3)

Other/Non - HA products, which represented approximately

25%

of Lifecore’s revenues in fiscal year

2016.

The vast majority of Lifecore’s revenues are recognized upon shipment.

Lifecore

’s business development revenues, a portion of which are included in all

three

medical areas, are related to contract research and development (“R&D”) services and multiple element arrangement services with customers where the Company provides products and/or services in a bundled arrangement.

Contract R&D revenue is recorded as earned, based on the performance requirements of the contract. Non - refundable contract fees for which no further performance obligations exist, and there is no continuing involvement by the Company, are recognized on the earlier of when the payment is received or collection is assured.

For sales arrangements that contain multiple elements, the Company splits the arrangement into separate units of accounting if the individually delivered elements have value to the customer on a standalone basis. The Company also evaluates whether multiple transactions with the same customer or related party should be considered part of a multiple element arrangement, whereby the Company assesses, among other factors, whether the contracts or agreements are negotiated or executed within a short time frame of each other or if there are indicators that the contracts are negotiated in contemplation of each other. The Company then allocates revenue to each element based on a selling price hierarchy. The relative selling price for a deliverable is based on its vendor - specific objective evidence (“VSOE”), if available,

third

- party evidence (“TPE”), if VSOE is not available, or estimated selling price, if neither VSOE nor TPE is available. The Company then recognizes revenue on each deliverable in accordance with its policies for product and service revenue recognition. The Company is not typically able to determine VSOE or TPE, and therefore, uses the estimated selling price to allocate revenue between the elements of an arrangement.

The Company limits the amount of revenue recognition for delivered elements to the amount that is not contingent on the future delivery of products or services or future performance obligations or subject to customer - specific cancellation rights. The Company evaluates each deliverable in an arrangement to determine whether it represents a separate unit of accounting. A deliverable constitutes a separate unit of accounting when it has stand - alone value, and for an arrangement that includes a general right of return relative to the delivered products or services, delivery or performance of the undelivered product or service is considered probable and is substantially controlled by the Company. The Company considers a deliverable to have stand - alone value if the product or service is sold separately by the Company or another vendor or could be resold by the customer. Further, the revenue arrangements generally do not include a general right of return relative to delivered products. Where the aforementioned criteria for a separate unit of accounting are not met, the deliverable is combined with the undelivered element(s) and treated as a single unit of accounting for the purposes of allocation of the arrangement consideration and revenue recognition. The Company allocates the total arrangement consideration to each separable element of an arrangement based upon the relative selling price of each element. Allocation of the consideration is determined at arrangement inception on the basis of each unit

’s relative selling price. In instances where the Company has not established fair value for any undelivered element, revenue for all elements is deferred until delivery of the final element is completed and all recognition criteria are met.

For licensing revenue, the initial license fees are deferred and amortized to revenue over the period of the agreement when a contract exists, the fee is fixed and determinable, and collectability is reasonably assured. Noncancellable, nonrefundable license fees are recognized over the period of the agreement, including those governing research and development activities and any related supply agreement entered into concurrently with the license when the risk associated with commercialization of a product is non - substantive at the outset of the arrangement.

From time to time, the Company offers customers sales incentives, which include volume rebates and discounts. These amounts are estimated on a quarterly basis and recorded as a reduction of revenue.

A summary of revenues by type of arrangement as described above is as follows (in thousands):

	Three Months Ended				Six Months Ended
	November 27, 2016		November 29, 2015		November 27, 2016		November 29, 2015
Recorded upon shipment	$	107,987	$	112,709	$	214,152	$	223,125
Recorded upon acceptance in foreign port		25,701		22,140		49,040		44,484
Revenue from multiple element arrangements		1,683		4,058		3,268		5,647
Revenue from license fees, R&D contracts and royalties/profit sharing		494		1,534		1,799		2,540
Total	$	135,865	$	140,441	$	268,259	$	275,796

Legal Contingencies

In the ordinary course of business, the Company is involved in various legal proceedings and claims related to matters such as wage and hour claims.

The Company makes a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. These provisions are reviewed at least each fiscal quarter and adjusted to reflect the impacts of negotiations, estimated settlements, legal rulings, advice of legal counsel, and other information and events pertaining to a particular matter. In management

’s opinion, resolution of all current matters is not expected to have a material adverse impact on the Company’s consolidated financial statements. However, depending on the nature and timing of any such dispute, an unfavorable resolution of a matter could materially affect the Company’s results of operations or cash flows, or both, in a particular quarter.

During the

six

months ended

November

27,

2016,

the Company recorded a charge to income in the amount of

$500,000,

$0.01

per diluted share after taxes, which combined with amounts previously accrued is the Company

’s best estimate of settlement charges for all legal matters currently underway.

Recently Adopted Accounting Guidance

Debt Extinguishment Costs

August

2016,

the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2016

15,

Statement of Cash Flows (Topic

230)

– Classification of Certain Cash Receipts and Cash Payments

(“ASU

2016

15”).

ASU

2016

clarifies how entities should classify certain cash receipts and cash payments in the statement of cash flows and amends certain disclosure requirements of ASC

230.

ASU

2016

is intended to reduce diversity in practice with respect to

eight

types of cash flows including debt prepayment or debt extinguishment costs; proceeds from settlement of insurance claims; classification of cash receipts and payments that have aspects of more than

one

class of cash; and contingent consideration payments made after a business combination. The guidance is effective for fiscal years beginning after

December

2017,

and interim periods within those years. Early adoption is permitted, including adoption in an interim period. The Company elected to early adopt ASU

2016

effective

November

27,

2016.

The adoption had no impact on our consolidated financial statements or related disclosures. The Company paid

$233,000

of early debt extinguishment penalties during the fiscal quarter ended

November

27,

2016.

Debt Issuance Costs

April

2015,

the FASB issued ASU

2015

03,

Interest - Imputation of Interest (Subtopic

835

30):

Simplifying the Presentation of Debt Issuance Costs

(“ASU

2015

03”).

The new guidance requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts, rather than as an asset, except in instances where proceeds from the related debt agreement have not been received.

August

2015,

the FASB issued ASU

2015

15,

Presentation and Subsequent Measurement of Debt Issuance Costs Associated With Line - of - Credit Arrangements

(“ASU

2015

15”).

ASU

2015

amends Subtopic

835

to clarify that the Securities and Exchange Commission would not object to the deferral and presentation of debt issuance costs as an asset and subsequent amortization of the deferred costs ratably over the term of the line of credit arrangement, regardless of whether there are any outstanding borrowings on the arrangement.

The Company adopted ASU

2015

and ASU

2015

during its

first

fiscal quarter ended

August

28,

2016

with retrospective application to its

May

29,

2016

consolidated balance sheet. The effect of the adoption of ASU

2015

was to reclassify total debt issuance costs of

$817,000

as of

May

29,

2016

as a deduction from the related debt liabilities. Accordingly, the

May

29,

2016

consolidated balance sheet was adjusted as follows:

(1)

prepaid expenses and other current assets and total current assets were reduced by

$175,000

and current portion of long - term debt and total current liabilities were reduced by the same;

(2)

other assets were reduced by

$642,000

and long - term debt was reduced by the same; and

(3)

total assets were reduced by

$817,000

and total liabilities were reduced by the same. There was no effect related to the adoption of ASU

2015

given the Company has historically presented line of credit debt issuance costs as an asset, and as such,

$120,00

and

$459,000

remain as prepaid expenses and other current assets and other assets, respectively, as of

November

27,

2016.

ASU

2015

and ASU

2015

do not impact the income statement accounting for debt issuance costs; therefore, these costs will continue to be amortized to interest expense over the term of the related debt instruments. There was no effect on net income.

Stock - Based Compensation

March

2016,

the FASB issued ASU

2016

09,

Compensation - Stock Compensation (Topic

718):

Improvements to Employee Share - Based Payment Accounting

(“ASU

2016

09”).

The new guidance changes the accounting for certain aspects of stock - based payments to employees and requires excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled. In addition, cash flows related to excess tax benefits will no longer be separately classified as a financing activity apart from other income tax cash flows. The standard also clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity in the Company’s consolidated statements of cash flows and provides an accounting policy election to account for forfeitures as they occur. Finally, the new guidance eliminates the requirement to delay the recognition of excess tax benefits until it reduces current taxes payable. The new standard is effective for the Company beginning

May

29,

2017,

with early adoption permitted.

The Company elected to early adopt the new guidance in for the quarter beginning

May

30,

2016.

Accordingly, the primary effects of the adoption are as follows:

(1)

using a modified retrospective application, the Company recorded unrecognized excess tax benefits of

$549,000

as a cumulative - effect adjustment, which increased retained earnings, and reduced deferred taxes by the same,

(2)

using a modified retrospective application, the Company has elected to recognize forfeitures as they occur and recorded a

$200,000

increase to additional paid - in capital, a

$126,000

reduction to retained earnings, and a

$74,000

reduction to deferred taxes to reflect the incremental stock - based compensation expense, net of the related tax impacts, that would have been recognized in prior years under the modified guidance, and

(3)

$90,000

in excess tax benefits from stock - based compensation was reclassified from cash flows from financing activities to cash flows from operating activities for the

six

months ended

November

29,

2015

in the consolidated statement of cash flows. See Note

– Income Taxes for further information regarding additional effects related to the prospective application of excess tax benefits and tax deficiencies related to stock - based compensation on the Company’s financial statements.

Recent Accounting Guidance Not Yet Adopted

Leases

February

2016,

the FASB issued ASU

2016

02,

Leases (Topic

842)

(“ASU

2016

02”),

which requires companies to generally recognize on the balance sheet operating and financing lease liabilities and corresponding right - of - use - assets. ASU

2016

also requires improved disclosures to help users of financial statements better understand the amount, timing and uncertainty of cash flows arising from leases. The new guidance is effective for the Company beginning in the

first

quarter of fiscal year

2020

on a modified retrospective basis, with early adoption permitted. Management is currently evaluating the timing of its adoption and the effect ASU

2016

will have on the Company's Consolidated Financial Statements and disclosures.

Revenue Recognition

May

2014,

the FASB issued ASU

2014

09,

which creates FASB ASC Topic

606

, Revenue from Contracts with Customers

and supersedes ASC Topic

605,

Revenue Recognition

(“ASU

2014

09”).

The guidance replaces industry - specific guidance and establishes a single

five

- step model to identify and recognize revenue. The core principle of the guidance is that an entity should recognize revenue upon transfer of control of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Additionally, the guidance requires the entity to disclose further quantitative and qualitative information regarding the nature and amount of revenues arising from contracts with customers, as well as other information about the significant judgments and estimates used in recognizing revenues from contracts with customers. The effective date of ASU

2014

was deferred by the issuance of ASU

2015

14,

Revenue from Contracts with Customers: Deferral of the Effective Date

(Topic

606)

one

year to make the guidance of ASU

2014

effective for annual reporting periods beginning after

December

15,

2017,

including interim periods therein. Early adoption is permitted, but not prior to the original effective date, which was for annual reporting periods beginning after

December

15,

2016.

March

2016,

the FASB issued ASU

2016

08,

Revenue from Contracts with Customers

(Topic

606)

Principal versus Agent Considerations (Reporting Revenue Gross versus Net

), which clarifies how to apply the implementation guidance on principal versus agent considerations related to the sale of goods or services to a customer as updated by ASU

2014

09.

April

2016,

the FASB issued ASU

2016

10,

Revenue from Contracts with Customers

(

Topic

606

)

Identifying Performance Obligations and Licensing,

which clarifies

two

aspects of Topic

606:

identifying performance obligations and the licensing implementation guidance, while retaining the related principles for those areas, as updated by ASU

2014

09.

May

2016,

the FASB issued ASU

2016

12,

Revenue from Contracts with Customers (Topic

606):

Narrow - Scope Improvements and Practical Expedients

, which makes narrow scope amendments to Topic

606

including implementation issues on collectability, non - cash consideration and completed contracts at transition. The Company is currently assessing the future impact of this guidance on its consolidated financial statements and related disclosures and expects to adopt these updates beginning with the

first

quarter of its fiscal year

2019.