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TITAN ENERGY WORLDWIDE, INC. - 10-Q - Management's Discussion and Analysis or Plan of Operation.
(Edgar Glimpses Via Acquire Media NewsEdge) Statements included in this Management's Discussion and Analysis of Financial
Condition and Results of Operations, and in future filings by us with the
Securities and Exchange Commission (the "SEC"), in our press releases and in
oral statements made with the approval of an authorized executive officer which
are not historical or current facts are "forward-looking statements" and are
subject to certain risks and uncertainties that could cause actual results to
differ materially from historical earnings and those presently anticipated or
projected. We wish to caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made. The following
important factors, among others, in some cases have affected and in the future
could affect our actual results and could cause our actual financial performance
to differ materially from that expressed in any forward-looking statement: (i)
the extremely competitive conditions that currently exist in the market for
companies similar to us, and (ii) the lack of resources to maintain our good
standing status and requisite filings with the SEC. The foregoing list should
not be construed as exhaustive and we disclaim any obligation subsequently to
revise any forward-looking statements to reflect events or circumstances after
the date of such statements or to reflect the occurrence of anticipated or
unanticipated events.
OUR BUSINESS
We specialize in the sales and management of onsite power generation for
industrial and commercial customers. By utilizing advanced communication
technologies, automated data collection, reporting systems and remote monitoring
capabilities, we believe we are creating a new standard for power asset
management and are leading the way for critical energy programs such as demand
response and distributed generation. In fact, we believe we are one of the first
companies to combine expertise in power generation asset management with real
time information processing to create a more reliable and effective Smart Grid
approach to onsite power management.
In 2006, we acquired Stellar Energy, a Minneapolis-based provider of power
generation equipment and service. Stellar Energy is now called Titan Energy
Systems ('TES") and has expanded its number of sales and service offices to
include Nebraska, Iowa, North and South Dakota, New York, New Jersey and
Connecticut. TES provides our company and its satellite offices with accounting
and administrative support.
In 2009, we acquired the Industrial and Service Division of RB Grove, a 52-year
old power generation provider located in Miami, Florida. This company is now
called Grove Power Inc. ("GPI") and it is responsible for our long term goal to
expansion throughout the Southeastern United States.
In 2009, we acquired a power generation business in New Jersey that provide us
with purchase orders, backlog and extensive customer and marketing relationships
in New York, Connecticut and New Jersey. This business has been merged into TES.
In 2010, we acquired Sustainable Solutions, Inc. ("SSI"), which is engaged in
providing energy audits, energy consulting and energy management services in the
Midwest region.
In 2010, Titan Energy Development, Inc. ("TEDI") purchased certain assets and
assumed certain liabilities of Stanza Systems, which provide us with a software
development company experienced in smart grid and utility operations. The
company operates this business as Stanza Technologies ("Stanza")' Stanza has
developed network communications software that we plan to utilize in our
generator service business.
27
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RESULTS OF OPERATIONS
Three Months Ended September 30, 2012 Compared to the Three Months Ended
September 30 2011
Sales
Sales for the three months ended September 30, 2012 were $5,850,960 compared to
$3,659,862 for the three months ended September 30, 2011. The following table
summarizes sales by business segment:
Power Energy
Distribution Services
2012 $ 4,004,960 $ 1,845,952
2011 2,344,206 1,315,656
Increase $ 1,660,754 $ 530,296
Percent Increase 71 % 40 %
The increased sales in the Power Distribution segment is primarily attributable
to a $1.2 million project for a national energy company. Without this sale, the
Power Distribution sales would have increased by approximately $450,000 over the
sales for the three months ended September30, 2011. This increase was
attributable to the completion of jobs from the relatively higher backlog in our
New York office. Overall our backlog for Power Distribution at October 31, 2012
was $6.1 million compared to $4.7 million at the same period as last year. In
the third quarter we discontinued Grove's Power Distribution department as this
was not a profitable portion of our business. The backlog in 2011 included $1.0
million of Grove equipment orders.
The increase in our Energy Services segment sales is attributable to increased
sales in our national account program which was $450,000 higher than the third
quarter of 2011. In addition, service sales in New York were at their highest
quarterly level. These sales were offset due to lower service sales in the
Florida operations.
Cost of Sales
Cost of sales was $4,626,963 for the three months ended September 30, 2012
compared to $2,573,872 for the three months ended September 30, 2011:
Power Energy
Distribution Services
2012 $ 3,584,272 $ 1,042,691
2011 $ 1,934,771 $ 639,101
Increase $ 1,649,501 $ 403,590
Percent of Sales
972012 89.5 % 56.5 %
2011 82.5 % 48.6 %
The increase in cost of sales in the Power Distribution segment is attributable
to the higher sales volume. The reason for the increase in the percent of sales
is attributable to a large low margin project for New York office. The cost of
sales for this job was 96%. The reason we took this low margin job was that we
hope this job would allow us to sell additional equipment at higher margins and
also give us the opportunity to provide monitoring and service contracts with a
prominent national energy company that has more than 200 locations. Without
this sale the Power Distribution percent of sales would have been 86.4%. The
Midwest region percentage cost of sales has historically been in the range of 82
to 86 percent.
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The higher percent cost of sales in the Energy Services segment is attributable
to the increases sales to national accounts, which has lower margin than our
traditional service business. In the third quarter of 2012 sales to national
accounts represented 34% of our total sales compared to 15% in the third quarter
of 2011. The cost of sales related to national account for the three months
ended September 30, 2012 was 68.9%.
Selling and Service Expenses
Sales and services expenses include all sales and service personnel, benefits
related to these personnel and other costs in support of these functions. The
Selling and Service expenses were $772,066 for the three months ended September
30, 2012, compared to $639,051 for the three months ended September 30, 2011.
The following table summarizes the area of costs in this category:
Power Energy
2012 Distribution Services
Payroll related costs $ 304,076 $ 327,909
Shared based compensation 6,252 12,896
Other 49,888 71,045
Total $ 360,216 $ 411,850
2011
Payroll related cost $ 253,448 $ 276,607
Shared based compensation 10,098 13,845
Other 18,042 67,011
Total 588 $ 357,463
Increase $ 78,628 $ 54,387
Percent of Sales
2012 9 % 22 %
2011 12 % 27 %
The higher costs in Power Distribution payroll related costs are attributable to
the accrual of severance pay for terminated employees at Grove and New York
offices. The higher costs in the Product Distribution Other category is
partially attributable to an increase in our inventory reserve for equipment
that might not be salable as result of our decision to discontinue equipment
sales in Florida. The higher costs in the Energy Service payroll related costs
category are primarily due to the addition of support personnel to handle the
rapid growth in sales and higher commission due to the higher sales volume.
29
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General and Administrative Expenses
The general and administrative expense category reflects the cost of each
subsidiary's management, accounting, facilities and office functions which we
allocate to our segments. General and administrative expenses were $384,519 for
the three months ended September 30, 2012, compared to $430,747 for the three
months ended September 30, 2011. The following table summarizes the areas of
costs in this category:
Power Energy
2012 Distribution Services
Payroll related costs $ 30,326 $ 62,150
Shared based compensation 5,753 11,681
Facilities 62,245 70,637
Other 59,613 82,114
Total $ 157,937 $ 226,582
2011
Payroll related cost $ 19,543 $ 110,205
Shared based compensation 2,806 16,934
Facilities 61,393 83,653
Other 57,351 78,862
Total $ 141,093 $ 289,654
Increase (Decrease) $ 16,844 $ (63,072 )
The major cause for the increase in the Power Distribution Segment Costs is the
addition of accounting personnel. The lower cost in the Energy Service segment
is attributable to reduction in administration costs for Stanza/ Stanza
administration costs of approximately $44,000 for the three months ended
September 30, 2012 compared to $151,000 for the period ended September 30, 2011.
This reduction was partially offset by higher travel and the addition of
administration personnel to support the growth in national accounts.
Corporate Overhead
Included in corporate overhead expenses are the salaries and travel expenses of
our officers, legal fees, audit fees, investor relations and other costs
associated with being a SEC registrant. Corporate overhead for the three months
ended September 30, 2012 was $117,799 as compared to $302,248 for the three
months ended September 30, 2011. The following table shows the costs related to
corporate activities:
2012 2011
Payroll related activates $ 71,082 $ 181,362
Stock Compensation 22,319 24,636
Professional Fees 500 63,299
Shared based payments for professional services 10,441 -
Travel 570 12,521
Other 12,887 20,430
Total $ 117,799 $ 302,248
30--------------------------------------------------------------------------------
Our payroll is lower due to right sizing the number of executive officers.
Currently there are two executive officers, the CEO and the CFO. In 2011 we had
two additional executive officers, a President and Vice President of Business
Development. These latter positions have been eliminated. The payroll and
related activates in 2011 include the severance pay accrual for the former Chief
Operating Officer of $42,000.The lower professional fees in the three months
ended September 30, 2012 was due to our decision not to have audited financial
statements for the year ended December 31, 2011 and not performing an audited
review on the quarterly reports in 2012. The decrease in business travel in the
three months ended September 30, 2012 is attributable to reducing executive
travel by moving our corporate office to Minnesota in 2012. In 2012, the Company
issued stock to members of our Advisory Board, which will be recognized over
their term of service. This cost is non-cash charge and is based on the actual
stock price at the time of payment.
Depreciation and Amortization
The amounts in this category include depreciation on our fixed assets and
amortization of our intangibles, represented by our customer lists. The expense
for the three months ended September 30, 2012 was $86,660compared to $89,256 in
the three months ended September 30, 2011. We have limited our capital
expenditures and sold certain fixed assets resulting in a small decrease in
depreciation expense.
Other Expenses
The following table below summarizes the items in this category for the three
months ended September 30:
2012 2011
Interest expense, net $ 119,909 $ 111,393
Factoring Fees 91,773 70,943
Loss on modification of debt - 253,181
Loss related to lease obligation 110,639 -
Amortization of debt discount 19,457 195,118
Amortization of deferred financing costs 8,105 29,637
Change in fair value of embedded conversion feature (19,623 ) -
Fair value of warrants (111 ) (21,557 )
Total $ 330,149 $ 638,715
The higher interest expense is attributable to debt issued in 2012 and higher
average balance on the Company's factoring obligation. The company has
reclassified the factoring fees from general and administrative to other
expense, as we believe that the factor fee is similar to interest expense. The
factoring fees are higher in the third quarter of 2012 because we had greater
collections than in the third quarter of 2011. We pay our factoring fees upon
collection of the receivable. The average balance of the factoring obligation
was approximately $1,350,000. Combining the interest expense and the factoring
fees for the quarter, the effective interest rate is 35%.
The loss related to lease obligation is the amount we accrued for the full
balance of the judgment received by the Landlord's lawsuit against the Company
to collect unpaid and future lease payments. The total lease obligation of
$302,277 has been accrued as a long -term obligation. The Company will seek a
long range payment plan for this obligation.
Our convertible debt has warrants and beneficial conversion features which are
accounted for in accordance with ASC 470, whereas we must determine the fair
value of the warrants and the beneficial conversion feature and treat that
amount as a debt discount to be amortized over the life of the debt. At
September 30, 2012, the full amount of debt discounts has been expensed in 2012.
The embedded conversion feature and the warrants are treated as a liability and
are re-measured with each reporting period. The gain in the embedded conversion
feature reflects a stock price at September 30, 2012 of $0.005 compared to a
price of $0.03 at March 31, 2012.
In 2011, we recorded a loss on the modification of convertible debt. The
transaction extended the maturity, reduced the warrant exercise price and the
beneficial conversion options. In accordance with ASC 815 carry value of the
debt must be consistent with the risk. When the amounts were determined the
additional interest rate of the carry value of the debt was 59%. We believe that
the debt rate should be 20% resulting in a loss of $253,181.
31
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RESULTS OF OPERATIONS
Nine Months Ended September 30, 2012 Compared to the Nine Months Ended September
30 2011
Sales
Sales for the nine months ended September 30, 2012 were $14,463,725 compared to
$10,677,497 for the nine months ended September 30, 2011. The following table
summarizes our sales by their segments:
Power Energy
Distribution Services
2012 $ 9,782,061 $ 4,681,664
2011 7,076,401 3,601,096
Increase $ 2,705,660 $ 1,080,568
Percent Increase 38 % 30 %
The increased sales in the Power Distribution and the Energy Services segments
is primarily attributable to the large project as explained above under the
three months ended September. We also had an increase of 53% in Power
Distribution sales in the second quarter attributable to record shipments out of
our Midwest operations. The increased sales in the Energy Service segment are
attributable to the improvements in our national account program. Sales to
national accounts for the nine months ended September 30, 2012 totaled 1.4
million compared to 304,000 in the nine months ended September 30, 2011.
Cost of Sales
Cost of sales was $10,818,394 for the nine months ended September 30, 2012
compared to $7,703,277 for the nine months ended September 30, 2011:
Power Energy
Distribution Services
2012 $ 8,432,784 $ 2,385,610
2011 5,824,345 1,878,932
Increase $ 2,608,439 $ 506,678
Percent of Sales
2012 86.2 % 51.0 %
2011 82.3 % 52.2 %
The increase in cost of sales in the Power Distribution and the Energy Services
segments is attributable to higher sales volume. The high cost of sales for the
$1.2 million project from the New York project increased the Power distribution
cost of sales percentage by 1.5% The Midwest region percentage of sales has
historically been in the range of 82 to 86 percent of sales.
The Energy Service segment improvement in the percentage of sales is
attributable to lower costs due to right sizing the operations at Groves and
Stanza. Also, the traditional service program in the Midwest has improved
slightly to offset the lower margins in the national account program.
32
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Selling and Service Expenses
Sales and Services expenses include all sales and service personnel, benefits
related to these personnel and other costs in support of these functions.
Selling and Service expenses were $2,103,108 for the nine months ended September
30, 2012, compared to $1,886,236 for the nine months ended September 30, 2011.
The following table summarizes the area of costs in this category:
Power Energy
2012 Distribution Services
Payroll related costs $ 896,378 $ 894,734
Shared based compensation 18,893 38,315
Other 61,892 192,896
Total $ 977,163 $ 1,125,945
2011
Payroll related cost $ 813,073 $ 752,305
Shared based compensation 31,048 42,536
Other 65,102 181,571
Total 909,223 $ 976,412
Increase $ 67,940 149,533
Percent of Sales
2012 10 % 24 %
2011 13 % 27 %
The higher costs in Power Distribution payroll related costs are attributable to
higher sales commission and the accrual of severance pay for terminated
employees. The higher costs in the Energy Services payroll related costs was
primarily due the addition of support personnel to handle the rapid growth in
sales and higher commissions due to the higher sales volume.
General and Administrative Expenses
The general and administrative expense category reflects the cost of each
subsidiary's management, accounting, facilities and office functions which we
can allocate to our segments. General and administrative expenses were
$1,099,696 for the nine months ended September 30, 2012, compared to $1,257,619
for the nine months ended September 30, 2011. The following table summarizes the
areas of costs in this category:
Power Energy
2012 Distribution Services
Payroll related costs $ 82,299 $ 209,973
Shared based compensation 19,373 35,978
Facilities 169,301 184,809
Other 180,036 217,927
Total $ 451,009 $ 648,687
2011
Payroll related cost $ 66,010 356,657
Shared based compensation 8,405 22,003
Facilities 176,238 239,219
Other 162,507 226,581
Total $ 413,160 $ 844,460
Increase (Decrease) $ 37,849 $ (195,773 )
33--------------------------------------------------------------------------------
The major cause for the increase in the Power Distribution Segment Costs is
attributable to additional personnel in Midwest and New York offices. The lower
costs in Energy Service segment are attributable to reduction in administration
costs for Stanza of approximately $136,314 for the nine months ended September
30, 2012 compared to $412,188 for the nine months ended September 30, 2011. This
reduction was partially offset by the addition of administration personnel to
support the growth in national accounts and legal and consulting services for
the Midwest operations.
Research and Development
We entered into a contract in September 2010 with a third party to design and
develop a remote monitoring system dedicated to onsite power generation
equipment. We believe that there are few alternatives available in the market
place that support the management of onsite power generators in the manner that
is required by peak shaving, demand response and energy efficiency programs, and
so to better serve these marketplaces, Titan needed to develop its own
monitoring program. The Company has completed this software package and has
begun to market it to customers. Therefore, there are no Research and
Development costs recorded in the nine months ended September 30, 2012
Corporate Overhead
Included in corporate overhead expenses are the salaries and travel expenses of
our officers, legal fees, audit fees, investor relations and other costs
associated with being a SEC registrant. Corporate overhead for the nine months
ended September 30, 2012 was $433,993 as compared to $1,027,651 for the nine
months ended September 30, 2011. The following table shows the costs related to
corporate activities:
2012 2011
Payroll related activates $ 240,412 $ 521,441
Stock Compensation 69,446 73,955
Professional Fees 21,500 237,962
Shared based payments for professional services 32,882 -
Travel 17,443 126,865
Other 52,309 67,418
Total $ 433,993 $ 1,027,641
Our payroll is lower due to right sizing the number of the executive officers.
Currently there are two executive officers, the CEO and the CFO. In 2011 we had
in addition to the current executive officers, a President and Vice President of
Business Development. These latter positions have been eliminated. The payroll
and related activates in 2011 include the severance pay accrual for the former
Chief Operating Officer of $42,000.The lower professional fees in the nine
months ended September 30, 2012 was due to our decision not to have audited
financial statements for the year ended December 31, 2011 and no independent
review of our quarterly financial statements in 2012. The decrease in business
travel in the nine months ended September 30, 2012 is associated with our
limited fund raising activities and moving our corporate office to Minnesota in
2012. In 2012, the Company issued stock to members of our Advisory Board, which
will be recognized over their service term. We also issued stock to our investor
relation professional to improve communications with shareholders and investors.
These stock payments are non-cash charge and are based on actual stock price at
the time of payment.
Depreciation and Amortization
The amounts in this category include depreciation on our fixed assets and
amortization of our intangibles, represented by our customer lists. The expense
for the nine months ended September 30, 2012 was $262,530 compared to $260,557
in the nine months ended September 30, 2011. We have limited our capital
expenditures and sold certain fixed assets therefore incurred only a small
increase in depreciation expense.
34
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Other Expenses
The following table below summarizes the items in this category for the nine
months ended September 30:
2012 2011
Interest expense, net $ 433,104 $ 310,744
Factoring fees 260,456 77,462
Loss related to lease obligation 162,278 -
Loss on modification of debt - 253,181
Amortization of debt discount 105,625 834,565
Amortization of deferred financing costs 17,401 114,271
Fair value of embedded conversion feature (69,392 )
-
Fair value of warrants (9,054 ) (294,605 )
Total $ 900,418 $ 1,295,618
The higher interest expense is attributable to a higher interest rate, as most
of our loans were in default, raising the interest rate from 10% to 12%
resulting in $53,000 of additional interest expense. The Company issued $267,700
in new loans at 8% in the first quarter of 2012. The interest expense from our
factoring obligation for the nine months ended September 30, 2012 was $80,600.
In 2011 our financing consisted of bank credit line for the first five months of
the year and was replaced by the factoring obligation for the four months
remaining in the nine months ended September 30, 2011. The interest expense for
the nine months ended September 30, 2011 was $58,600.
The higher factoring fees for the nine months ended September 2011 is because
the factoring obligation was outstanding for full period. In the nine months
ended 2011 the factor fee was only outstanding from June17, 2011 to September
30, 2011.
The loss lease obligation is the accrued amount for the full balance of the
judgment received by the Landlord's lawsuit against the Company to collect
unpaid and future lease payments. The total lease obligation of $302,277 has
been accrued as a long -term obligation. The Company will seek a long range
payment plan for this obligation.
Our convertible debt has warrants and beneficial conversion features which are
accounted for in accordance with ASC 470, whereas we must determine the fair
value of the warrants and the beneficial conversion feature and treat that
amount as a debt discount to be amortized over the life of the debt. At
September 30, 2012, the full amount of debt discounts has been expensed in
2012.The embedded conversion feature and the warrants are treated as a liability
and are re-measured with each reporting period. . The gain in the embedded
conversion feature reflect a stock price at September 30.2012 of $0.005 compared
to a price of $0.03 at March 31 2012.
In 2011, we recorded a loss on the modification of convertible debt. The
transaction extended the maturity date and reduced the warrant exercise price
and the beneficial conversion options. In accordance with ASC 815 the carry
value of the debt must be consistent with the risk. When the amounts were
determined the additional interest rate of the carry value of the debt was 59%.
We believe that the debt rate should be 20% resulting in a loss of $253,181.
35
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LIQUIDITY AND CAPITAL RESOURCES
The Company incurred a net loss for the nine months ended September 30, 2012 of
$1,156,970. At September 30, 2012 we had an accumulated deficit of $34,521,705.
In addition, we are currently in default on notes payable of $703,333 of
principal. These conditions raise substantial doubt as to the Company's ability
to continue as a going concern.
The Company's ability to maintain its operations is supported by a number of
activities. The Company has raised $200,000 in convertible debt and $67,700 in a
promissory note the first quarter of 2012. We were able to retire $110,000 of
Stanza related debt through a Security Transfer Settlement Agreement. The
Company's improvement in cash flow is allowing us stay current with our critical
vendors. The debt holders that are in default have not indicated that they plan
any adverse action against the Company. In fact several of these debt holders
have verbally indicated they plan to extend their notes.
For the nine months ended September 30, 2012, the company reported the lowest
net loss since 2006 in the first year of the Company's history. The Adjusted
EBITDA for the nine months ended September 30, 2012 was a positive $223,464 and
for the three months ended September 30, 2012 we have a positive Adjusted EBITDA
of $15,502.
This is the second consecutive quarter that we had positive Adjusted EBITDA.
Adjusted EBITDA is a non- GAAP Financial Measure defined in detail under the
Additional Information section below. In the second quarter of 2012, we were
successful in amending our factoring agreement by reducing the factoring fee
from 1.7% to 1.45%. We have estimated that this will result in approximately
$50,000 of annual savings over the next year. We are currently seeking a lower
priced financing instrument with other providers which would further reduce our
interest and related expenses.
We have also reached agreement with various state agencies to pay our past due
sales tax on an installment basis. We have an installment plan for the payment
of the Control Crew lawsuit, which we have paid $37,000 as November 2, 2012 and
are paying down the balance in $4,000 monthly payments.
We received a judgment from a lawsuit for nonpayment of lease obligation ion the
total of $302,277 which has been accrued on balance sheet as a long -term
liability. Titan Energy Development, Inc. (Stanza) has been subpoenaed to
provide certain financial information. The company believes that an installment
plan can be reached to pay this obligation.
Our continue improvement in operating the business and the opportunities that
have been generated through our Energy Service segment will provide the cash
needed to fund current operations. At September30, 2012, we had $610,168 in cash
and short-term investments.
36
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Additional Information
Non-GAAP Financial Measures
To supplement our consolidated financial statements presented on a GAAP basis,
we believe disclosing certain non- GAAP measures are useful information to our
investors, we use an Adjusted EBTDA to provide this additional information.
These non-GAAP measures are not in accordance with, or alternative for,
generally accepted accounting principles in the United States.
The GAAP measure most comparable to Adjusted EBITDA is GAAP net income (loss):
reconciliation for Adjusted EBITDA to GAAP net income (loss) is provided below.
Management uses this Adjusted EBITDA as measure of operating performance and for
internal planning and forecasting. Management believes that such measures help
to indicate underlying trends in our business, are important in comparing our
current results with prior period results and our useful to investors and
financial analysts in assessing our operating performance. Management considers
Adjusted EBITDA to be an important indicator of our operational strength and
performance of our business and good measure of our historical operating trend.
The following is an explanation of non-GAAP, Adjusted EBITDA that we utilize,
including the adjustments that management excludes as part of the Adjusted
EBITDA measures for the three and nine months ended September 30 2012 and 2011,
respectively, as well as reasons for excluding individual items.
Management defines Adjusted EBITDA as net income (loss), excluding
depreciation, amortization, stock based compensation and payments, interest
(including factoring fees), income taxes (benefit) and other income and
expenses. Adjusted EBITDA also eliminates items that do not require cash
outlays, such as warrants and beneficial conversion features from issuing
convertible securities which are treated as debt discounts and amortized to
expenses; fair value adjustment for warrants and embedded conversion
features, which is dependent on current stock price, volatility, term and
interest rate which are factors that are not easily controlled; and
amortization expense related to acquisition-related assets, which is based
on our estimate of the useful life of tangible and intangible assets. These
estimates could vary from the actual performance of the asset, are based on
the value determined on acquisition date and may not be indicative of
current or future capital expenditures. We also will eliminate from our net
loss from the lease obligation as this is a settlement of a lawsuit which is
not consider part of our continuing operations.
Adjusted EBITDA may have limitations as an analytical tool. The Adjusted
EBITDA financial information presented here should be considered in
conjunction with, and not as a substitute for or superior to, financial
information presented in accordance with GAAP and should not be considered
as a measure of our liquidity. Further, Adjusted EBITDA as a measure may
differ from other companies and therefore should not be used to compare our
performance to that of other companies.
37--------------------------------------------------------------------------------
Adjusted EBITDA was positive $15,502 and negative $213,561 for the three months
ended September30, 2012 and 2011, respectively. The reconciliation of adjusted
EBITDA to net loss is set forth below:
Three Months Ended
September 30,
2012 2010
Net loss $ (470,649 ) $ (1,009,851 )
Add back:
Depreciation and amortization 86,660 89,256
Stock based compensation and payments 69,342 68,319
Interest and factoring fees 211,682 182,336
Amortization of debt discount 27,562 224,755
Loss on modification of convertible debt - 253,181
Loss related to lease obligation 110,639 -
Fair value adjustments (19,734 ) (21,557 )
Adjusted EBITDA $ 15,502 $ (213,561 )
Adjusted EBITDA was positive $223,464 and negative $1,079,335 for the nine
months ended September 30, 2012 and 2011, respectively. The reconciliation of
adjusted EBITDA to net loss is set forth below:
Nine Months Ended
September 30,
2011 2011
Net loss $ (1,156,970 ) $ (2,942,913 )
Add back:
Depreciation and amortization 262,630 260,557
Stock based compensation and payments 217,386 207,403
Interest and factoring fees 693,560 388,206
Amortization of debt discount 123,026 948,836
Loss on modification of convertible debt - 253,181
Loss related to lease obligation 162,278 -
Fair value adjustments (78,446 ) (294,605 )
Adjusted EBITDA $ 223,464 $ (1,179,335 )
OFF-BALANCE SHEET ARRANGEMENTS
None.
38
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