What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-05-09 compared with 2021-11-08 · 72 added, 100 removed, 153 unchanged (53% of the section changed)

27 unchanged sentences

fluctuations in the number of Company shares outstanding and the price of such shares;

collection of receivables;

interest rates;

collection of receivables;

factors affecting the Company’s deferred tax assets and ability to value and utilize them;

5 unchanged sentences

Asure assumes no obligation and does not intend to update these forward-looking statements, except as required by law.

The following review of Asure’s financial position as of September 30, 2021 and December 31, 2020, and results of operations for the three and nine months ended September 30, 2021 and 2020 should be read in conjunction with our 2020 Annual Report on Form 10-K filed with the SEC on March 11, 2021.

The following review of Asure’s financial position as of March 31, 2022 and December 31, 2021, and results of operations for the three months ended March 31, 2022 and 2021 should be read in conjunction with our 2021 Annual Report on Form 10-K filed with the SEC on March 14, 2022.

Asure’s internet website address is www.asuresoftware.com.

2 unchanged sentences

Asure is a leading provider of cloud-based Human Capital Management (“HCM”) software and services.

We help small and medium-sized businesses grow by offering the HR tools necessary to build a better workforce, providing the resources to stay compliant with ever changing federal, state, and local tax jurisdictions and labor laws, ultimately freeing their cash flows so they can spend their financial capital on growing their business rather than back-office overhead that impedes growth.

We help small and medium-sized businesses (“SMBs”) grow by offering the HR tools necessary to build a better workforce, providing the resources to stay compliant with ever changing federal, state, and local tax jurisdictions and labor laws, ultimately freeing their cash flows so they can spend their financial capital on growing their business rather than back-office overhead that impedes growth.

Asure’s HCM suite, named AsureHCM, includes cloud-based Payroll & Tax, HR, and Time & Attendance software as well as HR Services ranging from HR projects to completely outsourcing payroll and HR staff.

We also offer these products and services through our network of Reseller Partners.

We are a leading provider of cloud-based HCM solutions, delivered as a software-as-a-service (“SaaS”) for small and medium-sized businesses (“SMBs”).

We are a leading provider of cloud-based HCM solutions, delivered as a software-as-a-service (“SaaS”) for SMBs.

From recruitment to retirement, our solutions help more than 80,000 SMBs across the United States grow their businesses.

13 unchanged sentences

We will continue to actively monitor the situation and may take further actions that alter our business operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees and clients.

Beginning in 2020, the COVID-19 pandemic disrupted the operations of our clients and client prospects and may continue to do so for an indefinite period of time.

The COVID-19 pandemic disrupted the operations of our clients and client prospects and may continue to do so for an indefinite period of time.

Across many industries, temporary and permanent business closures as well as business occupancy limitations have resulted in significant layoffs and employee furloughs since late March 2020.

4 unchanged sentences

In 2022, we continued to aggressively invest in sales and marketing and in research and development to drive future growth and expand our market share.

Lower headcount at our clients and the other pandemic-related factors described above, which had and may continue to have a negative impact on recurring revenue, combined with increased sales and marketing and research and development expenses, cumulatively had an adverse impact on our operating results for the year ended December 31, 2020.

We expect net income to be negatively affected by the impact of the pandemic on our recurring revenue and our deliberate, increased level of investment in sales and marketing and research and development to drive the growth of our business.

6 unchanged sentences

As a result, as of September 30, 2021 approximately $10,533 was recognized in Interest (expense) income, net for the ERTC.

For further discussion, see Note 10 — Employee Retention Credit.

We are unable to estimate the full impact the COVID-19 pandemic could have on our business and results of operations in the future due to numerous uncertainties, including the severity of the disease, the occurrence of variant strains, the duration of the outbreak, actions that may be taken by governmental authorities, the impact it may have on the business of our clients and other factors identified in Part I, Item 1A “Risk Factors” in our 2021 Annual Report on Form 10-K.

9 unchanged sentences

The agreement is subject to a future working capital adjustment to the purchase price.

On January 1, 2022, the Company acquired certain assets of a Reseller Partner, which were used to provide payroll processing services.

The Partner is located in the northeastern United States.

The aggregate purchase price that the Company paid for these assets was $2,350, paid as follows:

(i) $1,939 in cash at closing and (ii) the delivery of a promissory note in the amount of $411.

RESULTS OF OPERATIONS (in thousands)

Three and Nine Months Ended September 30, 2021 Compared to Three and Nine Months Ended September 30, 2020

The following table sets forth, for the fiscal periods indicated, the percentage of total revenues represented by certain items in the Company’s Condensed Consolidated Statements of Comprehensive Income (Loss):

Three Months Ended September 30, Nine Months Ended September 30,

2021 2020 2021 2020

Three Months Ended March 31,

Revenues 100 % 100 %

5 unchanged sentences

Total operating expenses 72 % 69 %

Interest income (expense) and other, net (3) % (2) % (2) % (2) %

(Loss) gain on extinguishment of debt (2) % — % 15 % — %

Employee retention tax credit 59 % — % 19 % — %

Gain (loss) from operations before income taxes 31 % (32) % 15 % (21) %

Net income (loss) 30 % (30) % 14 % (21) %

Interest expense and other, net (3) % (1) %

Loss from operations before income taxes (12) % (8) %

Net loss (12) % (8) %

Revenues are comprised of recurring revenues, professional services, hardware, and other revenues.

1 unchanged sentence

As a percentage of total revenues, we expect our mix of recurring revenues, and professional services, hardware and other revenues to remain relatively constant.

While revenue mix varies by product, recurring revenue represented over 91% of total revenue in the third quarter.

While revenue mix varies by product, recurring revenue represented over 94% of total revenue in three months ended March 31, 2022, compared to 97% in three months ended March 31, 2021.

Our revenue was derived from the following sources (in thousands):

Three Months Ended September 30, Variance

2021 2020 $ %

Recurring $ 16,374 $ 15,273 $ 1,101 7 %

Professional services, hardware and other 1,607 742 865 117 %

Total $ 17,981 $ 16,015 $ 1,966 12 %

Nine Months Ended September 30, Variance

Three Months Ended March 31, Variance

2022 2021 $ %

2 unchanged sentences

Total $ 24,333 $ 19,802 $ 4,531 23 %

Revenue for the three months ended September 30, 2021, increased sequentially $813 or 5%, from $17,168 for the three months ended June 30, 2021 primarily due to increased demand of our ERTC service and underlying growth in our core business.

Recurring Revenues

7 unchanged sentences

Recurring revenues include revenues relating to the annual processing of payroll forms, such as Form W-2 and Form 1099, and revenues from processing unscheduled payroll runs (such as bonuses) for our clients.

Because payroll forms are typically processed in the first quarter of the year and many of our clients are subject to form filing requirements mandated by the Affordable Care Act (“ACA”), first quarter revenues and margins are generally higher than in subsequent quarters.

Because payroll forms are typically processed in the first quarter of the year and many of our clients are subject to form filing requirements mandated by the ACA, first quarter revenues and margins are generally higher than in subsequent quarters.

We anticipate our revenues will continue to exhibit this seasonal pattern related to ACA form filings for so long as the ACA (or replacement legislation) includes employer reporting requirements.

6 unchanged sentences

The amount of interest we earn from the investment of client funds is also impacted by changes in interest rates.

Revenue for the three months ended September 30, 2021 was $17,981, an increase of $1,966, or 12%, from $16,015 for the three months ended September 30, 2020.

The 12% growth was split between two-thirds organic and one-third inorgranic growth.

The inorganic growth was driven by an increase in clients from our acquisitions at the beginning of 2021.

Higher account balances in funds held for clients increased interest revenue compared to the prior year.

Revenue for the nine months ended September 30, 2021 was $54,951, an increase of $5,874, or 12%, from $49,077 for the nine months ended September 30, 2020.

Recurring revenue increased primarily due to an increase in clients due to our acquisitions at the beginning of 2021 and higher account balances in funds held for clients and correlated interest revenue.

Revenue for the three months ended March 31, 2022 was $24,333, an increase of $4,531, or 23%, from $19,802 for the three months ended March 31, 2021.

Recurring revenue increased due to organic growth related to an uptick in year-end fees and acquisitions.

Professional Services, Hardware and Other Revenues

Professional Services, Hardware and Other Revenues represents implementation fees, one-time consulting projects, on-premise maintenance, and hardware devices to enhance our software products.

Professional services, hardware and other revenue increased $865, or 117%, for the three months ended September 30, 2021 from the similar period in 2020 due to the continued success of our Employee Retention Tax Credit (“ERTC”) service launch, which we anticipate to have a positive impact on our operating results through 2021.

Professional services, hardware and other revenue increased $1,628, or 100%, for the nine months ended September 30, 2021 from the similar period in 2020, due to the implementation of our ERTC service in 2021.

Although our total customer base is widely spread across industries, our sales are concentrated in small to medium-sized businesses.

We continue to target small and medium-sized businesses across industries as prospective customers.

Professional services, hardware and other revenue increased $769, or 137%, for the three months ended March 31, 2022 from the similar period in 2021, due to the implementation of our ERTC service during 2021.

Although our total customer base is widely spread across industries, our sales are concentrated in SMBs.

We continue to target SMBs across industries as prospective customers.

Geographically, we sell our products primarily in the United States.

1 unchanged sentence

Gross Profit and Gross Margin

Consolidated gross profit for the three months ended September 30, 2021 was $10,868, an increase of $1,795, or 20%, from $9,073 for the three months ended September 30, 2020.

Gross margin as a percentage of revenue was 60% for the three months ended September 30, 2021 as compared to 57% for the three months ended September 30, 2020.

Our increase in gross margin is primarily attributable to the increase in revenue and more efficient operations.

Consolidated gross profit for the nine months ended September 30, 2021 was $33,305, an increase of $5,018, or 18%, from $28,287 for the nine months ended September 30, 2020.

Gross margin as a percentage of revenue was 61% for the nine months ended September 30, 2021 as compared to 58% for the nine months ended September 30, 2020.

Consolidated gross profit for the three months ended March 31, 2022 was $15,464, an increase of $2,972, or 24%, from $12,492 for the three months ended March 31, 2021.

Gross margin as a percentage of revenue was 64% for the three months ended March 31, 2022 as compared to 63% for the three months ended March 31, 2021.

Our increase in gross margin is primarily attributable to the increase in revenue and more efficient operations.

3 unchanged sentences

Sales and marketing expenses primarily consist of salaries and related expenses for sales and marketing staff, including stock-based expenses, commissions, as well as marketing programs, which include events, corporate communications and product marketing activities.

Selling and marketing expenses for the three months ended September 30, 2021 were $3,897, an increase of $324, or 9%, from $3,573 for the three months ended September 30, 2020.

The increase in sales and marketing is primarily due to increased personnel costs offset by lower discretionary marketing spend as we focus on hiring direct sales personnel.

Sales and marketing expenses as a percentage of revenue remained flat at 22% for the three months ended September 30, 2021 from 22% for the same period in 2020.

Selling and marketing expenses for the nine months ended September 30, 2021 were $11,130, an increase of $1,213, or 12%, from $9,917 for the nine months ended September 30, 2020, primarily due to increased personnel costs offset by lower discretionary marketing spending as we focus on hiring direct sales personnel.

Selling and marketing expenses as a percentage of revenue remained flat at 20% for the nine months ended September 30, 2021 from 20% for the same period in 2020.

Selling and marketing expenses for the three months ended March 31, 2022 were $4,897, an increase of $1,286, or 36%, from $3,611 for the three months ended March 31, 2021, primarily due to increased personnel costs offset by lower discretionary marketing spending as we focus on hiring direct sales personnel.

Selling and marketing expenses as a percentage of revenue increased to 20% for the three months ended March 31, 2022 from 18% for the same period in 2021.

We continue to expand and increase selling costs as we focus on hiring direct sales personnel, expanding recognition of our brand, and lead generation.

1 unchanged sentence

General and administrative expenses primarily consist of salaries and related expenses, including stock-based expenses for finance and accounting, legal, internal audit, human resources and management information systems personnel, legal costs, professional fees, and other corporate expenses such as transaction costs for acquisitions.

General and administrative expenses for the three months ended September 30, 2021 were $7,005, an increase of $1,058, or 18%, from $5,947 for the three months ended September 30, 2020, primarily attributable to increased personnel, contracting and placement costs.

General and administrative expenses as a percentage of revenue increased to 39% for the three months ended September 30, 2021 from 37% for the same period in 2020.

General and administrative expenses for the nine months ended September 30, 2021 were $20,324, an increase of $3,840, or 23%, from $16,484 for the nine months ended September 30, 2020, primarily attributable to increased personnel, contracting and placement costs.

General and administrative expenses as a percentage of revenue increased to 37% for the nine months ended September 30, 2021 from 34% for the same period in 2020.

General and administrative expenses for the three months ended March 31, 2022 were $7,485, an increase of $987, or 15%, from $6,498 for the three months ended March 31, 2021, primarily attributable to increased personnel, contracting and placement costs.

General and administrative expenses as a percentage of revenue decreased to 31% for the three months ended March 31, 2022 from 33% for the same period in 2021.

We continue to drive efficiencies within our payroll operations by continually reevaluating our vendor relationships.

1 unchanged sentence

Research and development (“R&D”) expenses consist primarily of salaries and related expenses, including stock-based expenses for employees supporting our R&D activities.

R&D expenses for the three months ended September 30, 2021 were $1,505, a decrease of $300, or 17%, from $1,805 for the three months ended September 30, 2020.

The decrease in R&D expense is primarily attributable to an increase in investment costs offset by an increase in capitalization costs.

R&D expenses as a percentage of revenues decreased to 8% for the three months ended September 30, 2021 from 11% for the same period in 2020.

R&D expenses for the nine months ended September 30, 2021 were $3,972, a decrease of $384, or 9%, from $4,356 for the nine months ended September 30, 2020.

The decrease in R&D expense is primarily attributable to an increase in investment costs offset by an increase in capitalization costs.

R&D expenses as a percentage of revenues decreased to 7% for the nine months ended September 30, 2021 from 9% for the same period in 2020.

R&D expenses for the three months ended March 31, 2022 were $1,821, an increase of $697, or 62%, from $1,124 for the three months ended March 31, 2021.

The increase in R&D expense is primarily attributable to an increase in investment costs.

R&D expenses as a percentage of revenues increased to 7% for the three months ended March 31, 2022 from 6% for the same period in 2021.

We will continue to enhance our products and technologies through expansion of our technological resources by increasing headcount and development partnerships, as well as through organic improvements and acquired intellectual property.

We will continue to expand the breadth of integration between our solutions, allowing direct clients and resellers the ability to easily add and implement components across our entire solution set.

We believe that our expanded investment in product, engineering, SaaS hosting, mobile and hardware technologies lays the groundwork for broader market opportunities and represents a key aspect of our competitive differentiation.

We believe that our expanded investment in product, engineering, SaaS hosting, and mobile and hardware technologies lays the groundwork for broader market opportunities and represents a key aspect of our competitive differentiation.

Native mobile applications, common user interface, expanded web service integration and other technologies are all part of our initiatives.

3 unchanged sentences

Amortization of Intangible Assets

Amortization expense in operating expenses for the three months ended September 30, 2021 was $2,534, an increase of $110, or 5%, from $2,424 for the three months ended September 30, 2020.

Amortization expense as a percentage of revenue was 14% and 15% for the three months ended September 30, 2021 and 2020, respectively.

Amortization expense in operating expenses for the nine months ended September 30, 2021 was $7,590, an increase of $468, or 7%, from $7,122 for the nine months ended September 30, 2020.

Amortization expense as a percentage of revenue was 14% and 15% for the nine months ended September 30, 2021 and 2020, respectively.

Other Income (Expense), Net

Other income (expense), net for the three months ended September 30, 2021 was a gain of $9,661 compared to a loss of $408 for the three months ended September 30, 2020.

The gain is attributed to $10,533 in Employee Retention Credits, discussed earlier in this Management’s Discussion and Analysis of Financial Condition and Results of Operations under Impact of the COVID-19 Pandemic.

Other income (expense), net as a percentage of revenue was income of 54% and an expense of 3% for the three months ended September 30, 2021 and September 30, 2020, respectively.

Interest expenses for the three months ended September 30, 2021 and 2020 are composed primarily of interest expense on notes payable.

Other income (expense), net for the nine months ended September 30, 2021 was a gain of $17,868 compared to a loss of $807 for the nine months ended September 30, 2020.

Other income (expense), net as a percentage of revenue was income of 33% and expense of 2% for the nine months ended September 30, 2021 and September 30, 2020, respectively.

Interest expenses for the nine months ended September 30, 2021 and 2020 is composed primarily of interest expense on notes payable.

For the three months ended September 30, 2021 and 2020, we recorded an income tax expense attributable to continuing operations of $260 and benefit of $325, respectively, an increase of $585 or 180%.

For the nine months ended September 30, 2021 and 2020, we recorded an income tax expense attributable to continuing operations of $663 and $71, respectively, an increase of $592 or 834%.

Income (Loss) From Operations

We generated income from operations of $5,328, or $0.28 per share, during the three months ended September 30, 2021, compared to a loss from operations of $4,759, or $0.30 per share, during the three months ended September 30, 2020.

Income and loss from operations as a percentage of total revenues was 30% and 30% for the three months ended September 30, 2021 and 2020, respectively.

We generated income from operations of $7,494, or $0.39 per share, during the nine months ended September 30, 2021, compared to a loss from operations of $10,470, or $0.66 per share, during the nine months ended September 30, 2020.

Income and loss from operations as a percentage of total revenues was 14% and 21% for the nine months ended September 30, 2021 and 2020, respectively.

We intend to continue to implement our corporate strategy for growing our software and services business by investing in areas that directly generate revenue and positive cash flows for the Company.

However, uncertainties and challenges remain, including the effects of COVID-19, inflation and supply chain disruptions, and there can be no assurance that we can successfully grow our revenues or achieve profitability during the remainder of fiscal year 2021.

Amortization expense in operating expenses for the three months ended March 31, 2022 was $3,432, an increase of $904, or 36%, from $2,528 for the three months ended March 31, 2021.

Amortization expense as a percentage of revenue was 14% and 13% for the three months ended March 31, 2022 and 2021, respectively.

Interest Expense and Other, Net

Interest expense and other, net for the three months ended March 31, 2022 was an expense of $816 compared to an expense of $224 for the three months ended March 31, 2021.

The increase in interest expense and other, net relative to the prior year is attributable to new borrowings under our credit facility with Structural Capital Investments III LP, which were used to fund the acquisitions of two of our payroll resellers in the third quarter of 2021.

Interest expense and other, net as a percentage of revenue was an expense of 3% and 1% for the three months ended March 31, 2022 and March 31, 2021, respectively.

Interest expenses for the three months ended March 31, 2022 and 2021 is composed primarily of interest expense on notes payable.

For the three months ended March 31, 2022 and 2021, we recorded an income tax expense attributable to continuing operations of $30 and $105, respectively, a decrease of $75 or 71%.

Loss From Operations

We incurred a loss from operations of $3,017, or $0.15 per share, during the three months ended March 31, 2022, compared to a loss from operations of $1,598, or $0.08 per share, during the three months ended March 31, 2021.

Loss from operations as a percentage of total revenues was 12% and 8% for the three months ended March 31, 2022 and 2021, respectively.

LIQUIDITY AND CAPITAL RESOURCES (in thousands)

September 30, 2021 December 31, 2020

March 31, 2022 December 31, 2021

Cash and cash equivalents (1)

2 unchanged sentences

Working Capital .

We had working capital of $17,356 at September 30, 2021, an increase of $9,148 from working capital of $8,208 at December 31, 2020.

Working capital as of September 30, 2021 and December 31, 2020 includes $1,501 and $4,416 of short-term deferred revenue, respectively.

We had working capital of $15,832 at March 31, 2022, a decrease of $1,174 from working capital of $17,006 at December 31, 2021.

Working capital as of March 31, 2022 and December 31, 2021 includes $1,626 and $3,750 of short-term deferred revenue, respectively.

Deferred revenue is an obligation to perform future services.

2 unchanged sentences

Operating Activities .

Net cash used in operating activities of $1,144 for the nine months ended September 30, 2021 was primarily driven by non-cash adjustments to our net income of approximately $7,026, primarily due to depreciation and amortization, and net income of $7,494.

This was offset by changes in operating assets and liabilities, which resulted in a use of $15,473 in cash.

Net cash provided by operating activities of $2,296 for the nine months ended September 30, 2020 was driven by non-cash adjustments to our net loss of approximately $14,017, primarily due to depreciation and amortization, offset by our net loss of $10,470.

Changes in operating assets and liabilities resulted in a use of $1,251 in cash.

Net cash provided by operating activities of $2,530 for the three months ended March 31, 2022 was primarily driven by non-cash adjustments to our net loss of approximately $5,967, primarily due to depreciation and amortization.

This was offset by our net loss of $3,017 and changes in operating assets and liabilities, which resulted in a use of $420 in cash.

Net cash used in operating activities of $1,361 for the three months ended March 31, 2021 was driven by non-cash adjustments to our net loss of approximately $4,933, primarily due to depreciation and amortization, offset by our net loss of $1,598.

For the three months ended March 31, 2021, changes in operating assets and liabilities resulted in a use of $4,696 in cash.

Investing Activities .

Net cash used in investing activities of $21,042 for the nine months ended September 30, 2021 is primarily due to our third quarter acquisitions totaling $25,526.

Net cash used in investing activities of $15,312 for the nine months ended September 30, 2020 is primarily due to the purchase and sale of available-for-sale securities.

Net cash used in investing activities of $6,719 for the three months ended March 31, 2022 is primarily due to our first quarter acquisition totaling $1,970 and purchases of available-for-sale securities and maturities of $4,504.

Net cash provided by investing activities of $645 for the three months ended March 31, 2021 is primarily due to the proceeds from sales and maturities of available-for-sale securities of $1,926.

Financing Activities .

Net cash used in financing activities was $133,990 for the nine months ended September 30, 2021, which primarily consisted of a net decrease in client fund obligations of $146,206 and payments of notes payable of $15,073.

These amounts were offset by proceeds from our notes payable of $29,425.

Net cash provided by financing activities was $65,494 for the nine months ended September 30, 2020, which primarily consisted of a net increase in client fund obligations of $68,441.

Net cash provided by financing activities was $21,296 for the three months ended March 31, 2022, which primarily consisted of a net increase in client fund obligations of $21,296 and payments of notes payable of $—.

Net cash used in financing activities was $68,415 for the three months ended March 31, 2021, which primarily consisted of a net decrease in client fund obligations of $66,337.

Sources of Liquidity .

As of September 30, 2021, the Company’s principal sources of liquidity consisted of approximately $11,506 of cash and cash equivalents, cash generated from operations of our business over the next twelve months, and $20,000 available for borrowing under our credit facility with Structural Capital Investments III, LP, which is discussed in Note 5 — Notes Payable, to the Condensed Consolidated Financial Statements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

As of March 31, 2022, the Company’s principal sources of liquidity consisted of approximately $12,054 of cash, cash equivalents and restricted cash, cash generated from operations of our business over the next twelve months, and Structural Capital Investments III, LP have committed to lend us up to $50,000 in term loan financing to support our growth needs (the “Facility”) until March 31, 2022 which was extended to June 30, 2022.

The Facility is discussed in Note 6 — Notes Payable, to the Condensed Consolidated Financial Statements.

We cannot assure that we can grow our cash balances or limit our cash consumption and thus maintain sufficient cash balances for our planned operations or future acquisitions.

Future business demands may lead to cash utilization at levels greater than recently experienced.

We may need to raise additional capital in the future in order to grow our existing software operations and to seek additional strategic acquisitions in the near future.

Further, we cannot assure that we will be able to raise additional capital on acceptable terms, or at all.

CRITICAL ACCOUNTING POLICIES

We have prepared our Condensed Consolidated Financial Statements in accordance with U.S.

generally accepted accounting principles and included the accounts of our wholly owned subsidiaries.

We have eliminated all significant intercompany transactions and balances in the consolidation.

Preparation of the Condensed Consolidated Financial Statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

These estimates are subjective in nature and involve judgments.

The more significant estimates made by management include the valuation allowance for the gross deferred tax assets, useful lives of fixed assets, the determination of the fair value of its long-lived assets, and the fair value of assets acquired and liabilities assumed during acquisitions.

We base our estimates on historical experience and on various other assumptions management believes reasonable under the given circumstances.

generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of the assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

These estimates are subjective in nature and involve judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at fiscal year-end and the reported amounts of revenues and expenses during the fiscal year.

The more significant estimates made by management include the valuation allowance for our gross deferred tax asset, the determination of the fair value of our long-lived assets.

We base our estimates on historical experience and on various other assumptions that management believes are reasonable under the given circumstances.

These estimates could be materially different under different conditions and assumptions.

Additionally, the actual amounts could differ from the estimates made.

Management periodically evaluates estimates used in the preparation of the Condensed Consolidated Financial Statements for continued reasonableness.

We make appropriate adjustments, if any, to the estimates used prospectively based upon such periodic evaluation.

Information regarding recent accounting pronouncements is provided in Note 2, Significant Accounting Policies , to the Condensed Consolidated Financial Statements.

Such information is incorporated by reference herein.

Management periodically evaluates estimates used in the preparation of our financial statements for continued reasonableness.

We prospectively apply appropriate adjustments, if any, to our estimates based upon our periodic evaluation.

For a description of our critical accounting policies, see Management’s Discussion and Analysis in our Annual Report on Form 10-K for the year ended December 31, 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis