Item 7. Management's Discussion and Analysis of Financial Condition and Results of O perations (As Restated).
As described above in the Explanatory Note of this Form 10-K/A, we restated our audited financial statements as of and for the year ended December 31, 2018. The impact of the restatement is reflected in Management’s Discussion and Analysis (“MD&A”) of Financial Condition and Results of Operations below.
The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included in this Form 10-K.
Company Overview
Libsyn
Libsyn was on the forefront of the podcast trend when it was founded in 2004, launching the first Podcast Service Provider (Host), offering storage, bandwidth, and RSS (Really Simple Syndication) creation tools. Today, Libsyn is a worldwide leader of podcast hosting, distribution, and monetization. Hosting over 57,000 podcast shows, Libsyn delivered 5.1 billion industry standard unique podcast downloads to audiences worldwide in 2018. The Libsyn brand has built a reputation for reliable service, world class podcast statistics and exceptional customer service. This has allowed Libsyn to grow into one of the market leaders in the industry.
Podcast Hosting and Distribution
Libsyn is a Podcast Service Provider offering hosting and distribution tools which include storage, bandwidth, RSS creation, distribution, and statistics tracking. Podcast producers can choose from a variety of hosting plan levels based on the requirements for their podcast. Podcast producers’ sign-up online at www.libsyn.com, using their credit card to subscribe to a monthly plan. Libsyn offers a basic, getting started plan for $5 per month and more advanced plans that include more storage, advanced stats, and podcast apps. Plans are designed to provide full-featured podcast tools with generous storage and bandwidth transfer. LibsynPRO service is an enterprise solution for professional media producers and corporate customers that require media network features and dedicated support.
Libsyn supports both audio and video podcasts, allowing producers to upload podcast episodes through the Libsyn interface or via FTP to manage publishing to online directories, web portals, content aggregators, App marketplaces and social media platforms for both download and streaming.
Approximately 70% of the shows that Libsyn distributes reach audiences using Apple’s iTunes platform which includes iTunes on the computer, iPods, iPads, iPhones, iPad, Apple Watch, Apple TV, and Apple’s Podcasts App on iOS devices. Libsyn also enables distribution to destinations like Google Play Music and aggregators such as Spotify and iHeartRadio. The OnPublish feature enables podcast episodes to be posted to social media sites such as Facebook, Twitter, YouTube, Linked-In and blogging platforms like WordPress and Blogger. Libsyn offers a podcast player that can be embedded on websites or shared via social media.
Libsyn’s podcast platform architecture allows for expansion of distribution destinations and OnPublish capabilities. Using the Libsyn service, podcast producers can more broadly distribute and promote their shows to attract larger audiences.
The Libsyn business has also experienced upward trends in the areas of podcast creation, consumption, and audience growth. Podcast shows on the Libsyn platform increased to over 57,000 in 2018 from 44,000 in 2017 from 35,000 in 2016 from 28,000 and in 2015. This resulted in 4,906,636 active episodes in 2018 versus 3,968,275 in 2017 versus 3,193,997 in 2016 and 2,572,295 in 2015. The industry standard unique podcast downloads for 2018 exceeded 5.1 billion. Additionally, the Libsyn network now reaches 111 million audience members monthly as of December 2018, an increase from 92 million in December 2017 and 62 million in December 2016.
In 2017, Libsyn generated 64% of its $10.5 million in revenue from Podcast hosting fees paid by Libsyn4 producers. Advertising revenue is 15% of overall revenues, and LibsynPro, which includes hosting, along with bandwidth charges and other professional level add-ons, makes up 17% of revenues. App subscriptions make up 4% of total Libsyn revenues.
In 2018, Libsyn generated 70% of its $12.6 million in revenue from Podcast hosting fees paid by Libsyn4 producers. Advertising revenue is 10% of overall revenues, and LibsynPro, which includes hosting, along with bandwidth charges and other professional level add-ons, makes up 17% of revenues. App subscriptions make up 3% of total Libsyn revenues.
Mobile Podcast Apps
Each month, more than 2 billion people download apps for the Apps stores versus approximately 100 million who download podcasts. To grow audience for a podcast, producers seek to distribute the show everywhere. After the iTunes podcast directory, the next largest and most readily used marketplaces are App stores. Libsyn provides the ability for producers to have their own customized apps or be included in the Libsyn PodSource app, across most major App Stores. This includes Apple, Amazon, and Windows Phone App Stores. Libsyn recently partnered with Amazon to include podcast apps for the Amazon Echo via Alexa Skills.
Multiple apps destinations allows podcasts to be discovered by those new to podcasts but familiar with Apps and more importantly, enables a simple way to consume podcasts and share them with friends. Additionally, podcast apps open podcast consumption to users who are not Apple-centric and do not require listeners to subscribe or download podcasts. Once the App has been downloaded to a mobile device, the podcast episodes can be played directly from the App.
Advertising
The Libsyn Ad Sales team has ongoing relationships with agencies and advertisers and works directly with podcast producers on advertising and sponsorship opportunities. Producers’ shows earn revenue share from advertising campaigns. Additionally, Campaign Management services, which include automated ad insertion tools, are integrated into the Libsyn platform. The Libsyn Ad Operations team and enterprise customers use these tools to schedule and track ad impressions that are dynamically inserted into podcasts. Libsyn statistics show that over 50% of podcast downloads come from the back catalog of content. With dynamic ad insertion, ads are included only during the campaign which allows the entire show catalog to be available for future campaigns. Host-read ads are permanently included in the episode limiting future advertising opportunities across a show’s entire inventory but benefiting advertisers with episodic lifetime advertising.
Advertisers and agencies run renewal campaigns and add new campaigns based on the ROI performance and working experience with Libsyn’s Ad Operations team. Based on management’s experience, advertisers prefer to deal with a company like Libsyn when it comes to podcast advertising, which has a larger audience reach. We are able to leverage our relationship with our producers and simplify the coordination of advertising buys and campaign tracking. Management believes that the value of targeted audiences will continue to drive higher-value CPMs (cost per million advertising rates) and sponsorship rates based on successful results, positive ROIs, and relationships with the producers.
Premium Podcast Content
Premium podcast content is a monetization strategy for producers to lock down show episodes and offer them to their audience on a paid subscription basis. Through MyLibsyn, podcast shows get a custom App and a podcast website where listeners can access their show, login to purchase a subscription and get access to premium content. Subscriptions are offered on a one month, six month or annual basis and revenue is shared with the show’s producer. With over 50% of podcast downloads coming from the back catalog of content, the Premium offering enables shows to make their most recent episodes available for free in order to continue to build audiences but charge for their back catalog to generate revenue from the subscriptions.
The Premium offering is also available to LibsynPro customers to create private podcasts. Private Premium is ideal for large organizations and companies that want to distribute audio and video information internally through mobile apps. Access to Private Premium content is controlled and managed by an access list through the LibsynPro interface. The organizations pay monthly for the private subscribers, so users are only required to download the App from one of the App stores and login. This provides an easy solution for organization to distribute information to employees, partners, and affiliates by utilizing smartphone apps.
Pair Networks, Inc. (“Pair”)
Pair Networks, founded in 1996, is one of the oldest and most experienced Internet hosting company providing a full range of fast, powerful and reliable Web hosting services. Pair offers a suite of Internet services from shared hosting to virtual private servers to customized solutions with world-class 24x7 on-site customer support. Based in Pittsburgh, Pair serves businesses, bloggers, artists, musicians, educational institutions and non-profit organizations around the world.
Pair offers a variety of hosting plan levels, value add Internet services and domain registration. Through the Pair Account Control Center (ACC), customers can manage their hosting accounts and domains from one place.
Customers can choose from a variety of web hosting plan levels based on their requirements and applications. Pair Hosting offers shared servers, virtual private servers, dedicated servers and optimized WordPress hosting as managed services. With over twenty years of experience in Internet hosting, Pair has the expertise to build and manage reliable and powerful hosting solutions. The managed service and 24x7 support allow customers to focus on their core business without having to worry about hardware, operating systems, network connectivity or uptime.
Share web hosting is a great option for startup or smaller businesses as the website sits on the same server with other websites and shares resources such as memory and Central Processing Unit (CPU). Basic website applications such as email and file sharing are ideal for shared server offerings.
Virtual private servers
Virtual private servers (VPS) is a step up from a shared hosting solution in that specific serve resources are allocated directly for your use, assuring performance levels. This is a more secure and reliable option that separates your site from others and is ideal for storage or database applications for businesses, developers and fast-growing sites.
Dedicated servers
Dedicated servers provide yet another level of security and performance for those who need more processing power or storage. Servers are custom built to customer specification and tuned for performance, reliability and efficiency to meet the demand of more robust applications. Through Pair QuickServe (QS), a powerful hosting solution with tremendous capacity and speed are ready for your use in no time and fully managed to keep them up to date.
Pair hosting also offers self-managed service through server collocation, which delivers the advantages of the powerful infrastructure that was built behind the fully managed offerings. For those customers who want to purchase their own hardware, collocation service in Pair’s data center allows for unmanaged service with the security and reliability of the diverse network, physically secure facilities, backup power and redundant climate control.
Pair offers a managed WP product line that is optimally configured for performance and security. This managed WP service will ensure fast performance, high availability and security by keeping sites up to date with the latest WP core updates and patches and ensuring hardware and network speed and uptime. The WP service offers a range of scalable solutions from several to unlimited WP sites, ideal for single sites through enterprise applications.
Pair Hosting customers sign-up online at www.pair.com , using their credit card to subscribe to a monthly or annual plan. Pair offers a basic, getting started plan with a custom domain for $5.95 per month with a basic drag and drop website builder and more advanced plans that include additional storage, processing power and add-ons like eCommerce and WordPress. Plans are designed to provide full-featured web hosting tools for all levels including backups, Account Control and security and operating system maintenance and upgrades.
Pair Domains offers custom domains for Top Level Domains (TLDs) including dot-com, dot-org, and dot-net that vary in price from $7.00 to $70 per year based on the TLD. Customers can search for available domains and sign-up online at www.pairdomains.com using their credit card for a one to ten years domain purchase or domain transfer. All domain names registered by Pair include enhanced services such as custom and dynamic Domain Name System (DNS) which controls your domain name’s website and email, WHOIS privacy, email forwarding, and a drag and drop website builder.
Critical Accounting Policies
Our discussion and analysis of our financial condition and the results of our operations are based upon our financial statements and the data used to prepare them. Our financial statements have been prepared in accordance with accounting principles generally accepted in the United States. On an ongoing basis, we re-evaluate our judgments and estimates including those related to bad debts, investments, long-lived intangible assets, and income taxes.
We base our estimates and judgments on our historical experience, knowledge of current conditions and our beliefs of what could occur in the future considering available information. Actual results may differ from these estimates under different assumptions or conditions. Our estimates are guided by observing the following critical accounting policies.
Goodwill
In January 2017, the FASB issued ASU 2017-04, Intangibles, Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment , which simplifies the manner in which an entity should perform its annual, or interim, goodwill impairment test.
In accordance with ASC 350, Intangibles-Goodwill and Other, we first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not (a likelihood of more than 50%) that the fair value of our reporting unit is less than its carrying amount. If after assessing the qualitative factors we determine that it is not more likely than not that the fair value of the reporting unit is less than the carrying value, then we conclude that we have no goodwill impairment and no further testing is performed; otherwise, we proceed to the two-step process. The first step under the two-step process is to compare the fair value of the reporting unit to its carrying value. If the fair value exceeds the carrying value, goodwill is not impaired, and no further testing is performed.
Under the new guidance, if a reporting unit’s carrying amount exceeds its fair value, an entity will record an impairment charge based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit. The standard eliminates the previous requirement to calculate a goodwill impairment charge by comparing the implied fair value of goodwill with its carrying amount.
The new standard becomes effective for us on January 1, 2020. We early adopted the proposed guidance under ASU 2017-04 for the year end December 31, 2018 on a prospective basis. The implementation of ASU 2017-04 did not have a material impact on our consolidated financial statements and related disclosures.
Leases
The Company accounts for leases in accordance with Accounting Standards Codification (“ASC”) Topic 840. Leases that meet one or more of the capital lease criteria of standard are recorded as a capital lease, all other leases are operating leases.
Revenue
On January 1, 2018, we adopted the Financial Accounting Standards Board's (FASB) new revenue recognition standard using the modified retrospective method applied to those contracts not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under the new standard, while prior period amounts were not adjusted and continue to be reported in accordance with our historic accounting.
The adoption of the new standard did not have a material impact to our financial statements.
Revenue is recognized when control of the promised services is transferred to our customers, in an amount reflecting the consideration we expect to be entitled to in exchange for those services.
Certain products are generally sold with a right of return within our policy, which are accounted for as variable consideration when estimating the amount of revenue to recognize. Refunds are estimated at contract inception using the expected value method based on historical refund experience and updated each reporting period as additional information becomes available and only to the extent it is probable a significant reversal of any incremental revenue will not occur. Refunds reduce deferred revenue at the time they are granted and resulted in a reduced amount of revenue recognized over the contract term of the applicable service compared to the amount originally expected.
Our revenue is categorized and disaggregated as follows:
Domains - Domains revenue primarily consists of domain registrations and renewals, domain privacy, domain application fees, domain back-orders, aftermarket domain sales and fee surcharges paid to ICANN. Domain registrations provide a customer with the exclusive use of a domain during the applicable contract term. After the contract term expires, unless renewed, the customer can no longer access the domain. Consideration is recorded as deferred revenue when received, which is typically at the time of sale, and revenue, other than for aftermarket domain sales, is recognized over the period in which the performance obligations are satisfied, which is generally over the contract term. Aftermarket domain revenue is recognized when ownership of the domain is transferred to the buyer.
Hosting Services - Hosting services revenue primarily consists of website hosting products, website building products and services, website security products, an online shopping cart and online visibility products and email accounts. Consideration is recorded as deferred revenue when received, which is typically at the time of sale, and revenue is recognized over the period in which the performance obligations are satisfied, which is generally over the contract term.
Podcast Hosting - Podcast hosting publishing services are billed on a month to month basis, with first month’s bill prorated to the end of the month so all performance obligations are satisfied at each month-end. Consideration is recorded as revenue as the services, the underlying performance obligation, are provided and or satisfied and collection is probable which is generally when received.
Media Subscription Services - The Company facilitates the sale of producers’ premium content through the sale of subscriptions. The amount earned per transaction is fixed with the producers determine the price for the sale of each subscription, and the Company earns a percentage of what the customer pays. The performance obligation is providing the subscription hosting medium and billing services. Accordingly, the Company reports premium subscription revenue on a net basis over the subscription service period in which the performance obligation is satisfied.
Equity-Based Compensation
Our equity-based awards are comprised of stock and are accounted for using the fair value method. Stock is measured based on the fair market value of the underlying common stock on the date of grant. Awards vest and compensation is recognized over the requisite service period. The measurement date for performance vesting awards is the date on which the applicable performance criteria are approved by our board of directors.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill is evaluated for impairment annually in the fourth quarter of the Company’s fiscal year, and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. Triggering events that may indicate impairment include, but are not limited to, a significant adverse change in customer demand or business climate that could affect the value of goodwill or a significant decrease in expected cash flows. The company recorded no impairment charge for goodwill, during the years ended December 31, 2018 and 2017.
Results of Operations.
The Libsyn business has experienced upward trends in the areas of podcast creation, consumption, and audience growth. Podcast shows on the Libsyn platform increased to over 57,000 in 2018 from 44,000 in 2017 from 35,000 in 2016 from 28,000 and in 2015. This resulted in 4,906,636 active episodes in 2018 versus 3,968,275 in 2017 versus 3,193,997 in 2016 and 2,572,295 in 2015. The industry standard unique podcast downloads for 2018 exceeded 5.1 billion. Additionally, the Libsyn network reached 111 million audience members monthly in December 2018, an increase from 92 million in December 2017 and 62 million in December 2016.
The Libsyn4 product offering is a podcast hosting and distribution service which includes storage, bandwidth, RSS creation, distribution, and statistics tracking. Podcast producers can choose from a variety of hosting plan levels based on the requirements for their podcast. Podcast producers’ sign-up online at www.libsyn.com, using their credit card to subscribe to a monthly plan. Libsyn’s standard plans range for $5 to $75 per month. LibsynPRO service is an enterprise solution for professional media producers and corporate customers that require media network features and dedicated support. LibsynPro revenue consists primarily of monthly hosting fees and bandwidth usage charges. Other professional level add-ons, such as set-up fees and custom features, represent a small portion of LibsynPro revenue.
Trends in the number of podcast shows on the Libsyn network and podcast consumption affect our revenue and financial results as they are directly related to cash flow and cost of revenue. Management believes that over the next 12 months growth in the podcasting industry and Libsyn’s market leadership will continue to fuel expansion of the Libsyn network and revenue. The company expects to see year-over-year cost of revenue continue to grow in 2019. With the level of bandwidth usage currently incurred, the company has Content Delivery Network (CDN) and storage solution contracts that leverage economies of scale over the next 12 months to continue to help manage cost of revenue.
In 2017, Libsyn generated 64% of its $10.5 million in revenue from Podcast hosting fees paid by Libsyn4 producers. Advertising revenue is 15% of overall revenues, and LibsynPro, which includes hosting, along with bandwidth charges and other professional level add-ons, makes up 17% of revenues. App subscriptions make up 4% of total Libsyn revenues.
In 2018, Libsyn generated 70% of its $12.6 million in revenue from Podcast hosting fees paid by Libsyn4 producers. Advertising revenue is 10% of overall revenues, and LibsynPro, which includes hosting, along with bandwidth charges and other professional level add-ons, makes up 17% of revenues. App subscriptions make up 3% of total Libsyn revenues.
Pair offers a variety of hosting plan levels, value add Internet services and domain registration. Through the Pair Account Control Center (ACC), customers can manage their hosting accounts and domains from one place. Pair’s hosting subscriptions provided as a service as of December 2018 totaled over 26,000.
Customers can choose from a variety of web hosting plan levels based on their requirements and applications. Pair Hosting offers shared servers, virtual private servers, dedicated servers and optimized WordPress hosting as managed services. Pair Hosting customers sign-up online at www.pair.com , using their credit card to subscribe to a monthly or annual plan. Pair offers a basic, getting started plan with a custom domain for $5.95 per month with a basic drag and drop website builder and more advanced plans that include additional storage, processing power and add-ons like eCommerce and WordPress. Plans are designed to provide full-featured web hosting tools for all levels including backups, Account Control and security and operating system maintenance and upgrades.
Pair Domains offers custom domains for Top Level Domains (TLDs) including dot-com, dot-org, and dot-net that vary in price from $7.00 to $70 per year based on the TLD. Customers can search for available domains and sign-up online at www.pairdomains.com using their credit card for a one to ten-year domain name purchase or domain transfer. Pair’s Domain name registrations totaled over 92,000 as of December 2018.
Fiscal year ended December 31, 2018 compared to fiscal year ended December 31, 2017
In 2018 the Company recorded revenues of $ 22,010,132, a 108% increase over revenues of $10,584,219 for the same period in 2017. The increase for 2018 reflects an increase in Libsyn4 hosting revenue as well as LibsynPro and Premium Subscription, offset by a decrease in Advertising revenue. Pair contributed $9,379,826 of revenue during 2018, and $47,563 during 2017. Libsyn4 hosting revenue increased 30% due to the growth in the number of podcasts on the network when comparing to 2017. LibsynPro revenue increased as a result of additional LibsynPro networks using our platform in 2018 with increased bandwidth usage fees for delivery of podcasts contributing to the majority of the revenue gain. Advertising revenue decreased 22% during 2018 versus 2017. The decrease resulted from decrease in the dollars being spent on ad campaigns during 2018 with existing advertisers. Premium subscription revenue increased $ 26,169.
The Company recorded total costs and operating expenses of $17,930,512 during 2018, a 30% increase as compared to operating expenses of $13,766,647 in the same period of 2017. Pair contributed $10,815,662 to total costs and operating expenses during 2018, and $0 during 2017 due to the acquisition in December 2017.
During 2018, cost of revenue totaled $3,331,876, a 40% increase as compared to $2,379,151 for the same period in 2017. Pair contributed $815,667 to cost of revenue during 2018. There was also an increase in bandwidth costs, credit card processing fees, and colocation fees, offset by a decrease in ad sharing that is being paid to producers in 2018 versus 2017, driven by a decrease in ad revenue. Cost of revenue as a percentage of revenue for Libsyn decreased to 20% in 2018 from 23% in 2017. This is a reflection of the increase in bandwidth usage during 2018 due to the growth in the number of podcasts and increased podcast consumption on the Libsyn Platform off-set by a reduction in the bandwidth rate to deliver the podcasts.
General and administrative expenses totaled $6,065,661 in 2018 versus $10,263,775 in 2017, a decrease of 41%. The decrease was driven primarily due to the decrease in non-cash compensation expense in 2018 versus 2017. In 2017, the Company incurred $7,274,000 of non-cash compensation expense due to the issuance of common stock to officers, directors and employees. Excluding non-cash compensation, General and administrative expenses increased by $3,075,886. This is due to the Pair acquisition. General and administrative for Pair of $2,875,120 consisted primarily of wages, rent, utilities, and health insurance costs. Technology expenses represented $1,842,020 in 2018 versus $610,794 in 2017, driven by an increase in wages from the addition of Pair during 2018. Selling expenses in 2018 were $846,434 versus $299,074 in 2017 driven by the addition of the selling team for Pair. Customer support expenses in 2018 were $2,830,789 versus $191,820 in 2017 driven by the addition of 24/7 support provided by Pair.
Depreciation and amortization expenses consist of charges relating to the depreciation of the property and equipment used in our operations and the amortization of intangible assets. Depreciation and amortization expense for 2018 was $3,013,732 in 2018 and $22,033 in 2017. During 2018, Pair contributed $2,968,022 to depreciation and amortization expense.
Interest expense for 2018 was $387,064, which represents interest on the loan facility obtained in connection with the acquisition of Pair. Interest income for 2018 totaled $84,992 from investments in Money Market accounts made during the year.
Income tax benefit for 2018 was $585,548, which represents the deferred tax asset from the 2018 tax provision and the expected federal balance due for 2018. The income tax payable will be payable with the amended return in 2020.
The Company’s net income was $4,373,345 for 2018. This represents a $7,555,740 increase from the net loss of $3,182,395 during 2017.
Inflation and seasonality:
The Company does not believe that inflation or seasonality will significantly affect its results of operation.
Liquidity and Capital Resources
2018 compared to 2017
Cash on hand was $11,079,941 at December 31, 2018, an increase of $5,868,096 over the $5,211,845 on hand at December 31, 2017. Cash provided by operations for 2018, was $7,998,526, as compared to cash provided by operations of $3,587,404 for 2017. This is a result of increased net income during 2018 offset by an increase in expenses.
During 2018, cash used in investing activities was $378,687 which was for the purchase of equipment and capitalization of software development costs. During 2017, cash used for investing was $13,130,017 of which $13,060,953 was for the purchase of Pair Networks Inc.
In 2018, net cash used in financing activities was $1,751,743. During 2018, we made principal loan payments totaling $1,600,000, as well as $69,243 of payments on our capital lease. Additionally, the Company repurchased 55,000 shares of common stock for $82,500. In 2017, net cash provided by financing activities was $9,879,000. The decrease in net cash provided by financing activities was driven by the two credit facilities totaling $10,000,000 in 2017.
Debt and Contractual Obligations
On December 27, 2017, the Company entered into a loan agreement (the “Loan Agreement”) among the Company, Webmayhem, Inc., a Pennsylvania corporation and a wholly-owned subsidiary of the Company (“Libsyn”), and Pair Networks (Pair Networks, together with Libsyn and the “Company”), and First Commonwealth Bank, a Pennsylvania bank and trust company (the “Bank”).
The Loan Agreement provides for: (i) a revolving credit facility pursuant to which the Company may borrow up an aggregate principal amount not to exceed $2,000,000 (the “Revolving Credit Facility”); and (ii) a term loan in a principal amount equal to $8,000,000 (the “Term Loan” and, together with the Revolving Credit Facility, the “Facility”). A portion of the Revolving Credit Facility, up to $500,000, may be used for standby letters of credit for the account of the Company.
The Term Loan is repayable in quarterly installments of $400,000 payable on the last day of each March, June, September, December and March thereafter, through and including September 30, 2022. Accrued interest is payable in arrears not less frequently than quarterly. The remaining unpaid principal balance of the Term Loan, together with accrued interest thereon, is due and payable in full on December 27, 2022. The Term Loan also calls for additional payment equal to the following: 1)100% of the proceeds from the sale of any common shares 2) 100% of the proceeds from the sale of assets not immediately replaced 3) excess liquidity in any given year up to $1,066,667 and no more than $3,200,000 over the life of the term loan.
Off-Balance Sheet Arrangements
We have operating leases for certain facilities, but otherwise do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, results of operations, liquidity, or capital resources.
