RESEARCH: Discussion and analysis of the financial and earnings position by management (Form 10-K)

0

Cautionary Note Regarding Forward-Looking Statements

The following discussion and analysis of our financial condition and results of
operations for the years ended June 30, 2021 and 2020 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 two wholly owned subsidiaries at
June 30, 2021: Reprints Desk, Inc., a Delaware corporation and Reprints Desk
Latin America 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 70 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 seen any material changes in our business that would have a materially negative impact on our consolidated income statement 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.

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.

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. We adopted the guidance of ASC 606 on
July 1, 2018.

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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").

                           [[Image Removed: Graphic]]

We use the following five steps to determine the reasonable amount of revenue to recognize in fulfilling our obligations under each of our agreements:

? identify the contract with a customer;

? identify the performance obligations in the contract;

? determine the transaction price;

? assign the transaction price to the performance obligations in the contract; and

? Recognize revenue when the performance obligation is met.

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 individual items and a corresponding copyright fee for the permitted use of the content. We record sales from single item delivery services when they are delivered to the customer, provided that all other sales recognition criteria are 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
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

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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 $51,495 and $88,485 as of June 30, 2021 and 2020, 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 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,
                                                         2021    2020
Period end Euro : US Dollar exchange rate                1.19    1.12
Average period Euro : US Dollar exchange rate            1.19    1.11

End of period Mexican peso: exchange rate US dollar 0.05 0.04 Average period Mexican peso: exchange rate US dollar 0.05 0.05



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Quarterly information (unaudited)

The following table shows unaudited and quarterly financial data for the four quarters of fiscal years 2021 and 2020:




                                     June 30,        Mar. 31,        Dec. 31,       Sept. 30,        June 30,        Mar. 31,        Dec. 31,       Sept. 30,
                                       2021            2021            2020            2020            2020            2020            2019            2019
Revenue:
Platforms                          $  1,429,160    $  1,344,183    $  1,220,535    $  1,141,688    $  1,066,630    $  1,017,789    $    949,825    $    856,445
Transactions                          6,788,494       6,996,349       6,229,200       6,606,737       6,819,150       7,029,617       6,580,613       6,738,668
Total revenue                         8,217,654       8,340,532       7,449,735       7,748,425       7,885,780       8,047,406       7,530,438       7,595,113

Cost of revenue:
Platforms                               257,320         233,696         217,003         203,952         153,241         177,919         162,508         150,470
Transactions                          5,218,118       5,404,196       4,841,150       5,094,897       5,224,006       5,330,473       5,094,130       5,128,108
Total cost of revenue                 5,475,438       5,637,892       5,058,153       5,298,849       5,377,247       5,508,392       5,256,638       5,278,578

Gross profit:
Platforms                             1,171,840       1,110,487       1,003,532         937,736         913,389         839,870         787,317         705,975
Transactions                          1,570,376       1,592,153       1,388,050       1,511,840       1,595,144       1,699,144       1,486,483       1,610,560
Total gross profit                    2,742,216       2,702,640       2,391,582       2,449,576       2,508,533       2,539,014       2,273,800       2,316,535

Operating expenses:
Sales and marketing                     521,220         566,713         487,571         498,374         692,096         626,956         638,837         550,349
Technology and product dev.             732,371         664,195         624,747         622,961         537,830         536,238         548,719         499,191
General and administrative            1,354,244       1,233,603       1,118,750       1,161,061       1,132,483       1,230,580       1,270,375       1,231,345
Depreciation and amortization             2,694           2,066           3,039           3,723           3,746           5,510           6,840           7,558
Stock-based comp. expense               221,589         179,345         435,949         170,791         143,054         142,237         523,632         142,672
Foreign currency transaction
loss (gain)                               (890)           6,648        (17,469)        (24,249)           4,214           8,648         (5,456)          12,123
Total operating expenses              2,831,228       2,652,570       2,652,587       2,432,661       2,513,423       2,550,169       2,982,947       2,443,238
Other income (expenses and
income taxes)                               136           (322)             399         (2,270)           4,331          23,101          25,721          19,055
Income (loss) from continuing
operations                             (88,876)          49,748       (260,606)          14,645           (559)          11,946       (683,426)  

(107,648)

Gain on sale of discontinued
operations                                    -               -               -               -               -               -          91,254          26,191
Net income (loss)                      (88,876)          49,748       (260,606)          14,645           (559)          11,946       (592,172)        (81,457)

Basic income (loss) per common
share:
Income (loss) per share from
continuing operations              $          -    $          -    $     (0.01)    $          -    $          -    $          -    $     (0.03)    $          -
Income per share from
discontinued operations            $          -    $          -    $          -    $          -    $          -    $          -    $          -    $          -

Net Earn (Loss) Per Share $ – $ – $ (0.01) $ – $ – $ – $ (0.03) $

Basic weighted average common
shares outstanding                   26,145,794      26,027,665      25,988,117      25,898,900      25,815,163      24,960,394      24,185,966      24,095,266

Diluted income (loss) per
common share:
Income (loss) per share from
continuing operations              $          -    $          -    $     (0.01)    $          -    $          -    $          -    $     (0.03)    $          -
Income per share from
discontinued operations            $          -    $          -    $          -    $          -    $          -    $          -    $          -    $          -

Net Earn (Loss) Per Share $ – $ – $ (0.01) $ – $ – $ – $ (0.03) $

Diluted weighted average common
shares outstanding                   26,145,794      26,565,892      25,988,117      26,511,180      25,815,163      25,717,403      24,185,966      24,095,266




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Comparison of the past years June 30, 2021 and 2020

Results of Operations




                                                            Year Ended June 30,
                                               2021            2020         $ Change      % Change

Revenue:
Platforms                                  $  5,135,565    $  3,890,689    $ 1,244,876        32.0 %
Transactions                                 26,620,780      27,168,048      (547,268)       (2.0) %
Total revenue                                31,756,345      31,058,737        697,608         2.2 %

Cost of revenue:
Platforms                                       911,970         644,138        267,832        41.6 %
Transactions                                 20,558,361      20,776,717      (218,356)       (1.1) %
Total cost of revenue                        21,470,331      21,420,855         49,476         0.2 %

Gross profit:
Platforms                                     4,223,595       3,246,551        977,044        30.1 %
Transactions                                  6,062,419       6,391,331      (328,912)       (5.1) %
Total gross profit                           10,286,014       9,637,882        648,132         6.7 %

Operating expenses:
Sales and marketing                           2,073,878       2,508,238      (434,360)      (17.3) %
Technology and product development            2,644,274       2,121,978    
   522,296        24.6 %
General and administrative                    4,867,659       4,864,783          2,876         0.1 %
Depreciation and amortization                    11,522          23,654       (12,132)      (51.3) %
Stock-based compensation expense              1,007,673         951,595         56,078         5.9 %
Foreign currency transaction loss (gain)       (35,960)          19,529    
  (55,489)     (284.1) %
Total operating expenses                     10,569,046      10,489,777         79,269         0.8 %

Loss from operations                          (283,032)       (851,895)        568,863        66.8 %

Other income                                      1,147          80,044       (78,897)      (98.6) %

Loss from operations before provision
for income taxes                              (281,885)       (771,851)        489,966        63.5 %
Provision for income taxes                      (3,204)         (7,836)          4,632        59.1 %
Loss from continuing operations               (285,089)       (779,687)    

494,598 63.4%

Gain from sale of discontinued
operations                                            -         117,445      (117,445)     (100.0) %

Net loss                                   $  (285,089)    $  (662,242)    $   377,153        57.0 %




Revenue




                                 Years Ended June 30,
                    2021            2020         $ Change      % Change
Revenue:
Platforms       $  5,135,565    $  3,890,689    $ 1,244,876        32.0 %
Transactions      26,620,780      27,168,048      (547,268)       (2.0) %
Total revenue   $ 31,756,345    $ 31,058,737    $   697,608         2.2 %




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Total sales increased $ 697,608, or 2.2%, for the past year June 30, 2021
compared to the previous year for the following reasons:



Category             Impact                               Key Drivers
Platforms        ?    $ 1,244,876     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     ?    $   547,268     Decreased primarily due to lower order volume.




Cost of Revenue




                                         Years Ended June 30,
                            2021            2020         $ Change      % Change
Cost of Revenue:
Platforms               $    911,970    $    644,138    $   267,832        41.6 %
Transactions              20,558,361      20,776,717      (218,356)       (1.1) %
Total cost of revenue   $ 21,470,331    $ 21,420,855    $    49,476         0.2 %






                                Years Ended June 30,
                              2021    2020    % Change *
As a percentage of revenue:
Platforms                     17.8 %  16.6 %         1.2 %
Transactions                  77.2 %  76.5 %         0.7 %
Total                         67.6 %  69.0 %       (1.4) %

* The difference between the cost of sales for the current and the previous period in percent

of receipts

The total cost of sales as a percentage of sales fell by 1.4% from 69.0% in the previous year to 67.6% in the past year June 30, 2021.



                 Impact as percentage
Category              of revenue                            Key Drivers
Platforms        ?             1.2 %    Increased primarily due to proportionally higher
                                        personnel costs.
Transactions     ?             0.7 %    Increased primarily due to proportionally higher
                                        copyright and personnel costs.




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Gross Profit




                                     Years Ended June 30,
                         2021           2020         $ Change      % Change
Gross Profit:
Platforms            $  4,223,595    $ 3,246,551    $   977,044        30.1 %
Transactions            6,062,419      6,391,331      (328,912)       (5.1) %
Total gross profit   $ 10,286,014    $ 9,637,882    $   648,132         6.7 %






                                Years Ended June 30,
                              2021    2020    % Change*
As a percentage of revenue:
Platforms                     82.2 %  83.4 %      (1.2) %
Transactions                  22.8 %  23.5 %      (0.7) %
Total                         32.4 %  31.0 %        1.4 %


* The difference between current and prior period gross profit as a percentage of
  revenue


Operating Expenses




                                                              Years Ended June 30,
                                                 2021            2020         $ Change      % Change
Operating Expenses:
Sales and marketing                          $  2,073,878    $  2,508,238    $ (434,360)      (17.3) %
Technology and product development              2,644,274       2,121,978  
     522,296        24.6 %
General and administrative                      4,867,659       4,864,783          2,876         0.1 %
Depreciation and amortization                      11,522          23,654       (12,132)      (51.3) %
Stock-based compensation expense                1,007,673         951,595         56,078         5.9 %
Foreign currency transaction loss (gain)         (35,960)          19,529       (55,489)     (284.1) %
Total operating expenses                     $ 10,569,046    $ 10,489,777    $    79,269         0.8 %




Category                   Impact                          Key Drivers
Sales and marketing     ?    $ 434,360     Decreased primarily due to lower
                                           advertising media spend and consulting
                                           expenses partially offset by greater
                                           personnel costs.
Technology and          ?    $ 522,296     Increased due to greater consulting
product development                        expenses and personnel costs.



Provision for income taxes

In the years ended June 30, 2021 and in 2020 we have a provision for income taxes of $ 3,204 and $ 7,836, or a decrease of $ 4,632.

Net Income (Loss)




                                                               Year Ended June 30,
                                                  2021           2020         $ Change      % Change
Net Income (Loss):
Loss from continuing operations                $ (285,089)    $ (779,687)    $   494,598        63.4 %
Income from discontinued operations                      -        117,445  
   (117,445)     (100.0) %
Total net loss                                 $ (285,089)    $ (662,242)    $   377,153        57.0 %




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Loss from continuing operations decreased $ 494,598 or 63.4% for the past year
June 30, 2021 compared to last year, mainly due to increased gross profit, which was partially offset by increased operating expenses as described above.

Liquidity and capital resources



                                                         Year Ended June 30,
                                                          2021           2020
Consolidated Statements of Cash Flow Data:
Net cash provided by operating activities             $  1,868,406    $ 

2,418,465

Net cash used in investing activities                     (19,854)         

Cash flow from financing activities (159,974) 1,553,399

Effect of exchange rate changes                              4,203       

(13,398)

Net increase in cash and cash equivalents                1,692,781      

3,958,466

Cash and cash equivalents, beginning of period           9,311,556      

5,353,090

Cash and cash equivalents, end of period              $ 11,004,337    $ 9,311,556




Liquidity

As of June 30, 2021, we had cash and cash equivalents of $11,004,337, compared
to $9,311,556 as of June 30, 2020, an increase of $1,692,781. This increase was
primarily due to cash provided by operating activities.

Operational activities

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.

The inflow of funds from operating activities amounted to $ 2,418,465 for the past year
June 30, 2020 and results mainly from an increase in trade payables and provisions of $ 1,486,950 and an increase in prepaid expenses by
$ 1,214,301, partially offset by an increase in prepaid license fees of $ 720,367.

Investment activity

The outflow of funds from investing activities was $ 19,854 for the past year June 30, 2021 and result from the acquisition of property, plant and equipment.

No means of payment were used or provided for investing activities in the past year
June 30, 2020.

Financing activity

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.

The inflow of funds from financing activities was $ 1,553,399 for the past year
June 30, 2020 and results from the proceeds from the exercise of warrants of
$ 1,875,000, partially offset by the repurchase of common stock from $ 321,601.

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 14, 2022, and is subject to certain financial and
performance covenants with which we were in compliance as of June 30, 2021.
Financial covenants include maintaining an adjusted quick ratio of unrestricted
cash and net accounts receivable, divided by current liabilities plus debt less
deferred revenue of at least 1.15 to 1.0, and maintaining tangible net worth of
$1,500,000, plus 50% of net income for the fiscal quarter ended from and after

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December 31, 2017, plus 50% of the dollar value of the stock issues after
October 1, 2017 and the nominal amount of the subordinated debt. The credit line bears an annual interest rate of 1% above the base rate and 5.5%. The interest rate on the credit line was 5.5% on the reporting date
June 30, 2021. The credit line was secured by our consolidated assets.

There were no outstanding loans under the line at June 30, 2021 and
June 30, 2020, or Ab June 30, 2021, there was about
$ 1,489,000 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.

The following is a reconciliation of adjusted EBITDA to net profit (loss) for the past year June 30, 2021 and 2020:



                                                    Years Ended June 30,
                                              2021           2020         $ Change
Net loss                                   $ (285,089)    $ (662,242)    $  377,153
Add (deduct):
Other (income) expense                         (1,147)       (80,044)        78,897
Foreign currency transaction loss (gain)      (35,960)         19,529      (55,489)
Provision for income taxes                       3,204          7,836       (4,632)
Depreciation and amortization                   11,522         23,654      (12,132)
Stock-based compensation                     1,007,673        951,595        56,078
Gain on sale of discontinued operations              -      (117,445)      
117,445
Adjusted EBITDA                            $   700,203    $   142,883    $  557,320




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 investments or contractual obligations;

? Adjusted EBITDA does not reflect changes or cash requirements for ours

Working capital requirements;

? Adjusted EBITDA does not reflect interest expense or cash requirements

   necessary to service interest or principal payments, on our debts; and


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  Table of Contents

While depreciation is non-cash, the assets are

? the depreciated and amortized must be replaced frequently in the future and

Adjusted EBITDA does not reflect any cash requirement for such replacements.

Off-balance sheet agreements

We do not have any off-balance sheet agreements.

Recently published accounting statements

For information on recently released accounting standards, see Note 2 to our Consolidated Financial Statements, which appears elsewhere in this report.

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