Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Notice Regarding Forward-Looking Statements
The following discussion and analysis of our financial condition and results of operations for the years ended June 30, 2022 and 2021 should be read in conjunction with our consolidated financial statements and related notes to those financial statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under “Risk Factors” and elsewhere in this report.
We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. All forward-looking statements included in this report are based on information available to us on the date hereof and, except as required by law, we assume no obligation to update any such forward-looking statements.
Overview
Research Solutions was incorporated in the State of Nevada on November 2, 2006, and is a publicly traded holding company with three wholly owned subsidiaries at June 30, 2022: Reprints Desk, Inc., a Delaware corporation, Reprints Desk Latin America S. de R.L. de C.V, an entity organized under the laws of Mexico, and RESSOL LA, S. DE R.L. DE C.V., an entity organized under the laws of Mexico.
We provide two service offerings to our customers: a cloud-based software-as-a-service (“SaaS”) research platform (“Platforms”) typically sold via annual auto-renewing license agreements and the sale of published scientific, technical, and medical (“STM”) content sold as individual articles (“Transactions”) either stand alone or via the Platform. When customers utilize the Platform to purchase Transactions it is packaged as a single solution that enables life science and other research intensive organizations to accelerate their research and development activities with faster, access and management of STM articles used throughout the intellectual property development lifecycle. The Platform typically delivers a ROI to the customer via more effectively managing Transaction costs and saving researchers time during the research process.
Platforms
Our cloud-based SaaS research Platform consists of proprietary software and Internet-based interfaces sold to customers for an annual subscription fee. Legacy functionality allows customers to initiate orders, route orders for the lowest cost acquisition, manage transactions, obtain spend and usage reporting, automate authentication, and connect seamlessly to in-house and third-party software systems. Customers can also enhance the information resources they already own or license and collaborate around bibliographic information.
Additional functionality has recently been added to our Platform in the form of interactive app-like components. An alternative to manual data filtering, identification and extraction, the apps are designed to gather, augment, and extract data across a variety of formats, including bibliographic citations, tables of contents, RSS feeds, PDF files, XML feeds, and web content. We continue to develop new apps in order to build an ecosystem of apps. Together, these apps will provide researchers with an “all in one” toolkit, delivering efficiencies in core research workflows and knowledge creation processes.
Our Platform is deployed as a single, multi-tenant system across our entire customer base. Customers securely access the Platform through online web interfaces and via web service APIs that enable customers to leverage Platform features and functionality from within in-house and third-party software systems. The Platform can also be configured to satisfy a customer’s individual preferences. We leverage our Platform’s efficiencies in scalability, stability and development costs to fuel rapid innovation and competitive advantage.
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Transactions
Our Platform provides our customers with a single source to the universe of published STM content that includes over 80 million existing STM articles and over one million newly published STM articles each year. STM content is sold to our customers on a transaction basis. Researchers and knowledge workers in life science and other research-intensive organizations generally require single copies of published STM journal articles for use in their research activities. These individuals are our primary users.
Our Platform allows customers to find and download digital versions of STM articles that are critical to their research. Customers submit orders for the articles they need which we source and electronically deliver to them generally in under an hour; in many cases under one minute. This service is generally known in the industry as single article delivery or document delivery. We also obtain the necessary permission licenses from the content publisher or other rights holder so that our customer’s use complies with applicable copyright laws. We have arrangements with hundreds of content publishers that allow us to distribute their content. The majority of these publishers provide us with electronic access to their content, which allows us to electronically deliver single articles to our customers often in a matter of minutes.
COVID-19
We are subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on our business is highly uncertain and difficult to predict, as the responses that we, other businesses and governments are taking continue to evolve. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a local and/or global economic recession. Policymakers around the globe have responded with fiscal policy actions to support the healthcare industry and economy as a whole. The magnitude and overall effectiveness of these actions remain uncertain.
To date, we have not experienced any significant changes in our business that would have a significant negative impact on our consolidated statements of operations or cash flows.
The severity of the impact of the COVID-19 pandemic on our business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on our customers, service providers and suppliers, all of which are uncertain and cannot be predicted. As of the date of issuance of our financial statements, the extent to which the COVID-19 pandemic may in the future materially impact our financial condition, liquidity or results of operations is uncertain.
Inflation Risk
We do not believe that inflation has had a material effect on its operations to date, other than its impact on the general economy. However, there is a risk that our operating costs could become subject to inflationary and interest rate pressures in the future, which would have the effect of increasing our operating costs, and which would put additional stress on our working capital resources.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States, or GAAP, requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. When making these estimates and assumptions, we consider our historical experience, our knowledge of economic and market factors and various other factors that we believe to be reasonable under the circumstances. Actual results may differ under different estimates and assumptions.
The accounting estimates and assumptions discussed in this section are those that we consider to be the most critical to an understanding of our financial statements because they inherently involve significant judgments and uncertainties.
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Revenue Recognition
We account for revenue in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected.
Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. We derive our revenues from two sources: annual licenses that allow customers to access and utilize certain premium features of our cloud-based SaaS research intelligence platform (“Platforms”) and the transactional sale of STM content managed, sourced and delivered through the Platform (“Transactions”).
We apply the following five steps in order to determine the appropriate amount of revenue to be recognized as we fulfill our obligations under each of our agreements:
● identify the contract with a customer;
● identify the performance obligations in the contract;
● determine the transaction price;
● allocate the transaction price to performance obligations in the contract; and
● recognize revenue as the performance obligation is satisfied.
Platforms
We charge a subscription fee that allows customers to access and utilize certain premium features of our Platform. Revenue is recognized ratably over the term of the subscription agreement, which is typically one year, provided all other revenue recognition criteria have been met. Billings or payments received in advance of revenue recognition are recorded as deferred revenue.
Transactions
We charge a transactional service fee for the electronic delivery of single articles, and a corresponding copyright fee for the permitted use of the content. We recognize revenue from single article delivery services upon delivery to the customer provided all other revenue recognition criteria have been met.
Stock-Based Compensation
We periodically issue stock options, warrants and restricted stock to employees and non-employees for services, in capital raising transactions, and for financing costs. We account for share-based payments under the guidance as set
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forth in the Share-Based Payment Topic 718 of the FASB Accounting Standards Codification, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, officers, directors, and consultants, including employee stock options, based on estimated fair values. We estimate the fair value of stock option and warrant awards to employees and directors on the date of grant using an option-pricing model, and the value of the portion of the award that is ultimately expected to vest is recognized as expense over the required service period in our Statements of Operations. We estimate the fair value of restricted stock awards to employees and directors using the market price of our common stock on the date of grant, and the value of the portion of the award that is ultimately expected to vest is recognized as expense over the required service period in our Statements of Operations.
Under ASC 718, Repurchase or Cancellation of equity awards, the amount of cash or other assets transferred (or liabilities incurred) to repurchase an equity award shall be charged to equity, to the extent that the amount paid does not exceed the fair value of the equity instruments repurchased at the repurchase date. Any excess of the repurchase price over the fair value of the instruments repurchased shall be recognized as additional compensation cost.
Allowance for doubtful accounts
We evaluate the collectability of our trade accounts receivable based on a number of factors. In circumstances where we become aware of a specific customer’s inability to meet its financial obligations to us, we estimate and record a specific reserve for bad debts, which reduces the recognized receivable to the estimated amount we believe will ultimately be collected. In addition to specific customer identification of potential bad debts, bad debt charges are recorded based on our historical losses and an overall assessment of past due trade accounts receivable outstanding. We established an allowance for doubtful accounts of $94,144 and $51,495 as of June 30, 2022 and 2021, respectively.
Foreign Currency
The accompanying consolidated financial statements are presented in United States dollars, the functional currency of our company. Capital accounts of foreign subsidiaries are translated into US dollars from foreign currencies at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rate as of the balance sheet date. Income and expenditures are translated at the average exchange rate of the period. Although the majority of our revenue and costs are in US dollars, the costs of Reprints Desk Latin America and ResSol LA are in Mexican Pesos. As a result, currency exchange fluctuations may impact our revenue and the costs of our operations. We currently do not engage in any currency hedging activities.
The following table summarizes the exchange rates used:
Year Ended
June 30,
2022
2021
Period end Euro : US Dollar exchange rate
1.05
1.19
Average period Euro : US Dollar exchange rate
1.13
1.19
Period end GBP : US Dollar exchange rate
1.21
1.38
Average period GBP : US Dollar exchange rate
1.34
1.34
Period end Mexican Peso : US Dollar exchange rate
0.05
0.05
Average period Mexican Peso : US Dollar exchange rate
0.05
0.05
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Quarterly Information (Unaudited)
The following table sets forth unaudited and quarterly financial data for the four quarters of fiscal years 2022 and 2021:
June 30,
Mar. 31,
Dec 31,
Sept. 30,
June 30,
Mar. 31,
Dec. 31,
Sept. 30,
2022
2022
2021
2021
2021
2021
2020
2020
Revenue:
Platforms
$
1,886,845
$
1,786,224
$
1,604,829
$
1,509,874
$
1,429,160
$
1,344,183
$
1,220,535
$
1,141,688
Transactions
6,675,164
6,971,128
6,267,458
6,232,630
6,788,494
6,996,349
6,229,200
6,606,737
Total revenue
8,562,009
8,757,352
7,872,287
7,742,504
8,217,654
8,340,532
7,449,735
7,748,425
Cost of revenue:
Platforms
240,214
219,051
231,668
245,656
257,320
233,696
217,003
203,952
Transactions
5,038,653
5,299,804
4,802,959
4,836,473
5,218,118
5,404,196
4,841,150
5,094,897
Total cost of revenue
5,278,867
5,518,855
5,034,627
5,082,129
5,475,438
5,637,892
5,058,153
5,298,849
Gross profit:
Platforms
1,646,631
1,567,173
1,373,161
1,264,218
1,171,840
1,110,487
1,003,532
937,736
Transactions
1,636,511
1,671,324
1,464,499
1,396,157
1,570,376
1,592,153
1,388,050
1,511,840
Total gross profit
3,283,142
3,238,497
2,837,660
2,660,375
2,742,216
2,702,640
2,391,582
2,449,576
Operating expenses:
Sales and marketing
691,368
543,496
518,357
522,951
521,220
566,713
487,571
498,374
Technology and product dev.
1,049,430
971,959
868,236
821,460
732,371
664,195
624,747
622,961
General and administrative
1,663,671
1,629,371
1,616,135
1,497,223
1,354,244
1,233,603
1,118,750
1,161,061
Depreciation and amortization
5,507
4,988
4,260
2,896
2,694
2,066
3,039
3,723
Stock-based comp. expense
225,501
399,234
300,539
171,110
221,589
179,345
435,949
170,791
Foreign currency transaction loss (gain)
91,279
29,394
11,982
11,243
(890)
6,648
(17,469)
(24,249)
Total operating expenses
3,726,756
3,578,442
3,319,509
3,026,883
2,831,228
2,652,570
2,652,587
2,432,661
Other income (expenses and income taxes)
5,347
(585)
264
(5,494)
136
(322)
399
(2,270)
Net income (loss)
(438,267)
(340,530)
(481,585)
(372,002)
(88,876)
49,748
(260,606)
14,645
Basic income (loss) per common share:
Net income (loss) per share
$
(0.02)
$
(0.01)
$
(0.02)
$
(0.01)
$
—
$
—
$
(0.01)
$
—
Basic weighted average common shares outstanding
26,576,054
26,512,195
26,351,947
26,277,116
26,145,794
26,027,665
25,988,117
25,898,900
Diluted income (loss) per common share:
Net income (loss) per share
$
(0.02)
$
(0.01)
$
(0.02)
$
(0.01)
$
—
$
—
$
(0.01)
$
—
Diluted weighted average common shares outstanding
26,576,054
26,512,195
26,351,947
26,277,116
26,145,794
26,565,892
25,988,117
26,511,180
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Comparison of the Years Ended June 30, 2022 and 2021
Results of Operations
Year Ended June 30,
2022
2021
$ Change
% Change
Revenue:
Platforms
$
6,787,772
$
5,135,565
$
1,652,207
32.2
%
Transactions
26,146,380
26,620,780
(474,400)
(1.8)
%
Total revenue
32,934,152
31,756,345
1,177,807
3.7
%
Cost of revenue:
Platforms
936,589
911,970
24,619
2.7
%
Transactions
19,977,889
20,558,361
(580,472)
(2.8)
%
Total cost of revenue
20,914,478
21,470,331
(555,853)
(2.6)
%
Gross profit:
Platforms
5,851,183
4,223,595
1,627,588
38.5
%
Transactions
6,168,491
6,062,419
106,072
1.7
%
Total gross profit
12,019,674
10,286,014
1,733,660
16.9
%
Operating expenses:
Sales and marketing
2,276,172
2,073,878
202,294
9.8
%
Technology and product development
3,711,085
2,644,274
1,066,811
40.3
%
General and administrative
6,406,400
4,867,659
1,538,741
31.6
%
Depreciation and amortization
17,651
11,522
6,129
53.2
%
Stock-based compensation expense
1,096,384
1,007,673
88,711
8.8
%
Foreign currency transaction loss (gain)
143,898
(35,960)
179,858
500.2
%
Total operating expenses
13,651,590
10,569,046
3,082,544
29.2
%
Loss from operations
(1,631,916)
(283,032)
(1,348,884)
(476.6)
%
Other income
7,154
1,147
6,007
523.7
%
Loss from operations before provision for income taxes
(1,624,762)
(281,885)
(1,342,877)
(476.4)
%
Provision for income taxes
(7,622)
(3,204)
(4,418)
(137.9)
%
Net loss
(1,632,384)
(285,089)
(1,347,295)
(472.6)
%
Revenue
Years Ended June 30,
2022
2021
$ Change
% Change
Revenue:
Platforms
$
6,787,772
$
5,135,565
$
1,652,207
32.2
%
Transactions
26,146,380
26,620,780
(474,400)
(1.8)
%
Total revenue
$
32,934,152
$
31,756,345
$
1,177,807
3.7
%
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Total revenue increased $1,177,807, or 3.7%, for the year ended June 30, 2022 compared to the prior year, due to the following:
Category
Impact
Key Drivers
Platforms
↑
$
1,652,207
Increased due to additional deployments to new and existing customers, and expansion from existing customers. Revenue is recognized ratably over the term of the subscription agreement, which is typically one year, provided all other revenue recognition criteria have been met. Billings or payments received in advance of revenue recognition are recorded as deferred revenue.
Transactions
↓
$
474,400
Decreased primarily due to lower paid order volume.
Cost of Revenue
Years Ended June 30,
2022
2021
$ Change
% Change
Cost of Revenue:
Platforms
$
936,589
$
911,970
$
24,619
2.7
%
Transactions
19,977,889
20,558,361
(580,472)
(2.8)
%
Total cost of revenue
$
20,914,478
$
21,470,331
$
(555,853)
(2.6)
%
Years Ended June 30,
2022
2021
% Change *
As a percentage of revenue:
Platforms
13.8
%
17.8
%
(4.0)
%
Transactions
76.4
%
77.2
%
(0.8)
%
Total
63.5
%
67.6
%
(4.1)
%
*
The difference between current and prior period cost of revenue as a percentage of revenue
Total cost of revenue as a percentage of revenue decreased 4.1%, from 67.6% for the previous year to 63.5%, for the year ended June 30, 2022.
Impact as percentage
Category
of revenue
Key Drivers
Platforms
↓
4.0
%
Decreased primarily due to proportionally lower personnel costs.
Transactions
↓
0.8
%
Decreased primarily due to lower copyright expenses and proportionally lower personnel costs.
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Gross Profit
Years Ended June 30,
2022
2021
$ Change
% Change
Gross Profit:
Platforms
$
5,851,183
$
4,223,595
$
1,627,588
38.5
%
Transactions
6,168,491
6,062,419
106,072
1.7
%
Total gross profit
$
12,019,674
$
10,286,014
$
1,733,660
16.9
%
Years Ended June 30,
2022
2021
% Change*
As a percentage of revenue:
Platforms
86.2
%
82.2
%
4.0
%
Transactions
23.6
%
22.8
%
0.8
%
Total
36.5
%
32.4
%
4.1
%
*
The difference between current and prior period gross profit as a percentage of revenue
Operating Expenses
Years Ended June 30,
2022
2021
$ Change
% Change
Operating Expenses:
Sales and marketing
$
2,276,172
$
2,073,878
$
202,294
9.8
%
Technology and product development
3,711,085
2,644,274
1,066,811
40.3
%
General and administrative
6,406,400
4,867,659
1,538,741
31.6
%
Depreciation and amortization
17,651
11,522
6,129
53.2
%
Stock-based compensation expense
1,096,384
1,007,673
88,711
8.8
%
Foreign currency transaction loss (gain)
143,898
(35,960)
179,858
500.2
%
Total operating expenses
$
13,651,590
$
10,569,046
$
3,082,544
29.2
%
Category
Impact
Key Drivers
Sales and marketing
↑
$
202,294
Increased primarily due to greater consulting expenses, including separation cost paid to a former officer, partially offset by lower marketing spend.
Technology and product development
↑
$
1,066,811
Increased due to greater consulting and recruiting expenses and software development personnel costs.
General and administrative
↑
$
1,538,741
Increased due to greater personnel costs and accounting, consulting and legal expenses. Greater personnel costs include separation costs paid to a former officer and an operations director.
Provision for Income Taxes
During the years ended June 30, 2022 and 2021, we recorded a provision for income taxes of $7,622 and $3,204, respectively, an increase of $4,418.
Net Income (Loss)
Year Ended June 30,
2022
2021
$ Change
% Change
Net Income (Loss):
Net loss:
$
(1,632,384)
$
(285,089)
$
(1,347,295)
(472.6)
%
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Net loss increased $1,347,295 or 472.6%, for the year ended June 30, 2022 compared to the prior year, primarily due to increased operating expenses, partially offset by increased gross profit as described above.
Liquidity and Capital Resources
Year Ended June 30,
2022
2021
Consolidated Statements of Cash Flow Data:
Net cash provided by (used in) operating activities
$
(417,200)
$
1,868,406
Net cash used in investing activities
(44,288)
(19,854)
Net cash provided by (used in) financing activities
63,270
(159,974)
Effect of exchange rate changes
(2,944)
4,203
Net increase (decrease) in cash and cash equivalents
(401,162)
1,692,781
Cash and cash equivalents, beginning of period
11,004,337
9,311,556
Cash and cash equivalents, end of period
$
10,603,175
$
11,004,337
Liquidity
As of June 30, 2022, we had cash and cash equivalents of $10,603,175, compared to $11,004,337 as of June 30, 2021, a decrease of $401,162. This decrease was primarily due to cash used by operating activities.
Operating Activities
Net cash used in operating activities was $417,200 for the year ended June 30, 2022 and resulted primarily from an increase in deferred revenue of $734,175 and a decrease in prepaid royalties of $58,269, partially offset by an increase in accounts receivable of $534,092.
Net cash provided by operating activities was $1,868,406 for the year ended June 30, 2021 and resulted primarily from an increase in deferred revenue of $1,279,844 and an increase in accounts payable and accrued expenses of $337,343, partially offset by an increase in accounts receivable of $268,193.
Investing Activities
Net cash used in investing activities was $44,288 for the year ended June 30, 2022 and resulted from the purchase of property and equipment.
Net cash used in investing activities was $19,854 for the year ended June 30, 2021 and resulted from the purchase of property and equipment.
Financing Activities
Net cash provided by financing activities was $63,270 for the year ended June 30, 2022 and resulted from the proceeds from the exercise of options of $97,688 and the proceeds from the exercise of warrants of $59,500, partially offset by the repurchase of common stock of $93,918.
Net cash used in financing activities was $159,974 for the year ended June 30, 2021 and resulted from the repurchase of stock options and warrants of $308,313 and the repurchase of common stock of $178,012, partially offset by the proceeds from the exercise of warrants of $237,501 and the proceeds from the exercise of stock options of $88,850.
We entered into a Loan and Security Agreement with Silicon Valley Bank (“SVB”) on July 23, 2010, which, as amended, provides for a revolving line of credit for the lesser of $2,500,000, or 80% of eligible accounts receivable. The line of credit matures on February 28, 2024, and is subject to certain financial and performance covenants with which we were in compliance as of June 30, 2022. Financial covenants include maintaining an adjusted quick ratio of unrestricted
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cash and net accounts receivable, divided by current liabilities plus debt less deferred revenue of at least 1.15 to 1.0. The line of credit bears interest at an annual rate equal to the greater of 1% above the prime rate and 5.0%. The interest rate on the line of credit was 5.75% as of June 30, 2022. The line of credit was secured by our consolidated assets.
There were no outstanding borrowings under the line as of June 30, 2022 and June 30, 2021, respectively. As of June 30, 2022, there was approximately $2,500,000 of available credit.
Non-GAAP Measure – Adjusted EBITDA
In addition to our GAAP results, we present Adjusted EBITDA as a supplemental measure of our performance. However, Adjusted EBITDA is not a recognized measurement under GAAP and should not be considered as an alternative to net income, income from operations or any other performance measure derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of liquidity. We define Adjusted EBITDA as net income (loss), plus interest expense, other income (expense), foreign currency transaction loss, provision for income taxes, depreciation and amortization, stock-based compensation, income from discontinued operations and gain on sale of discontinued operations. Management considers our core operating performance to be that which our managers can affect in any particular period through their management of the resources that affect our underlying revenue and profit generating operations that period. Non-GAAP adjustments to our results prepared in accordance with GAAP are itemized below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
Set forth below is a reconciliation of Adjusted EBITDA to net income (loss) for the year ended June 30, 2022 and 2021:
Years Ended June 30,
2022
2021
$ Change
Net income (loss)
$
(1,632,384)
$
(285,089)
$
(1,347,295)
Add (deduct):
Other (income) expense
(7,154)
(1,147)
(6,007)
Foreign currency transaction loss (gain)
143,898
(35,960)
179,858
Provision for income taxes
7,622
3,204
4,418
Depreciation and amortization
17,651
11,522
6,129
Stock-based compensation
1,096,384
1,007,673
88,711
Adjusted EBITDA
$
(373,983)
$
700,203
$
(1,074,186)
We present Adjusted EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Adjusted EBITDA in developing our internal budgets, forecasts and strategic plan; in analyzing the effectiveness of our business strategies in evaluating potential acquisitions; and in making compensation decisions and in communications with our board of directors concerning our financial performance. Adjusted EBITDA has limitations as an analytical tool, which includes, among others, the following:
● Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
● Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
● Adjusted EBITDA does not reflect interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; and
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● although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Recently Issued Accounting Pronouncements
For information about recently issued accounting standards, refer to Note 2 to our Consolidated Financial Statements appearing elsewhere in this report.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not required.
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