UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: December 31, 2017September 30, 2023
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File No. 000-53501001-39256
RESEARCH SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
Nevada | 11-3797644 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
Address not applicable1 | N/A | |
(Address of principal executive offices) | (Zip Code) |
(310) (310) 477-0354
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)Securities registered pursuant to Section 12(b) of the Act:
| | | | |
Title of each Class | Trading Symbol(s) | Name of each Exchange on which registered | ||
Common stock, $0.001 par value | | RSSS | | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YesþNo¨◻
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þNo ¨◻
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | Accelerated filer |
Non-accelerated filer | Smaller reporting company þ |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨☐Noþ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.
Title of Class | Number of Shares Outstanding on | |
Common Stock, $0.001 par value | 29,624,085 |
TABLE OF CONTENTS
2
PART 1 — FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Research Solutions, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
December 31, | June 30, | |||||||
2017 | 2017 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 4,924,620 | $ | 5,773,950 | ||||
Accounts receivable, net of allowance of $119,462 and $119,536, respectively | 3,739,099 | 5,465,299 | ||||||
Prepaid expenses and other current assets | 315,906 | 196,820 | ||||||
Prepaid royalties | 736,145 | 566,282 | ||||||
Total current assets | 9,715,770 | 12,002,351 | ||||||
Other assets: | ||||||||
Property and equipment, net of accumulated depreciation of $728,271 and $699,421, respectively | 81,340 | 85,737 | ||||||
Intangible assets, net of accumulated amortization of $679,836 and $623,714, respectively | - | 41,870 | ||||||
Deposits and other assets | 14,383 | 14,466 | ||||||
Right of use asset, net of accumulated amortization of $99,864 and $45,105, respectively | 363,158 | 417,917 | ||||||
Total assets | $ | 10,174,651 | $ | 12,562,341 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 5,053,770 | $ | 6,443,056 | ||||
Deferred revenue | 1,306,429 | 1,335,475 | ||||||
Lease liability, current portion | 115,263 | 110,888 | ||||||
Total current liabilities | 6,475,462 | 7,889,419 | ||||||
Long-term liabilities: | ||||||||
Lease liability, long-term portion | 269,924 | 328,299 | ||||||
Total liabilities | 6,745,386 | 8,217,718 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock; $0.001 par value; 20,000,000 shares authorized; no shares issued and outstanding | - | - | ||||||
Common stock; $0.001 par value; 100,000,000 shares authorized; 24,147,582 and 23,883,145 shares issued and outstanding, respectively | 24,148 | 23,883 | ||||||
Additional paid-in capital | 22,764,915 | 22,267,327 | ||||||
Accumulated deficit | (19,273,403 | ) | (17,875,858 | ) | ||||
Accumulated other comprehensive loss | (86,395 | ) | (70,729 | ) | ||||
Total stockholders’ equity | 3,429,265 | 4,344,623 | ||||||
Total liabilities and stockholders’ equity | $ | 10,174,651 | $ | 12,562,341 |
| | | | | | | |
|
| September 30, |
| | | | |
|
| 2023 |
| June 30, | | ||
| | (unaudited) | | 2023 | | ||
Assets | |
| | |
| | |
Current assets: |
| |
|
| |
| |
Cash and cash equivalents | | $ | 9,882,064 | | $ | 13,545,333 | |
Accounts receivable, net of allowance of $82,392 and $85,015, respectively | |
| 6,460,188 | |
| 6,153,063 | |
Prepaid expenses and other current assets | |
| 314,052 | |
| 400,340 | |
Prepaid royalties | |
| 1,167,538 | |
| 1,202,678 | |
Total current assets | |
| 17,823,842 | |
| 21,301,414 | |
| | | | | | | |
Goodwill (provisional) | | | 3,238,794 | | | — | |
| |
|
| |
|
| |
Other assets: | |
|
| |
|
| |
Property and equipment, net of accumulated depreciation of $891,299 and $881,908, respectively | |
| 91,326 | |
| 70,193 | |
Intangible assets, net of accumulated amortization of $795,915 and $747,355, respectively ($2,064,706 provisional) | | | 2,528,259 | | | 462,068 | |
Deposits and other assets | |
| 1,033 | |
| 1,052 | |
Total assets | | $ | 23,683,254 | | $ | 21,834,727 | |
| |
|
| |
|
| |
Liabilities and Stockholders’ Equity | |
|
| |
|
| |
Current liabilities: | |
| | |
| | |
Accounts payable and accrued expenses | | $ | 8,541,564 | | $ | 8,079,516 | |
Deferred revenue | |
| 6,387,470 | |
| 6,424,724 | |
Total current liabilities | |
| 14,929,034 | |
| 14,504,240 | |
| | | | | | | |
Long-term liabilities: | |
|
| |
|
| |
Contingent earnout liability | |
| 1,867,043 | |
| — | |
Total liabilities | |
| 16,796,077 | |
| 14,504,240 | |
| |
|
| |
|
| |
Commitments and contingencies | |
|
| |
|
| |
| |
|
| |
|
| |
Stockholders’ equity: | |
|
| |
|
| |
Preferred stock; $0.001 par value; 20,000,000 shares authorized; no shares issued and outstanding | |
| — | |
| — | |
Common stock; $0.001 par value; 100,000,000 shares authorized; 29,624,085 and 29,487,508 shares issued and outstanding, respectively | |
| 29,624 | |
| 29,487 | |
Additional paid-in capital | |
| 30,487,415 | |
| 29,941,873 | |
Accumulated deficit | |
| (23,510,692) | |
| (22,522,649) | |
Accumulated other comprehensive loss | |
| (119,170) | |
| (118,224) | |
Total stockholders’ equity | |
| 6,887,177 | |
| 7,330,487 | |
Total liabilities and stockholders’ equity | | $ | 23,683,254 | | $ | 21,834,727 | |
See notes to condensed consolidated financial statements
3
Research Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Other Comprehensive LossIncome (Loss)
(Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Revenue: | ||||||||||||||||
Platforms | $ | 413,404 | $ | 219,137 | $ | 801,349 | $ | 391,209 | ||||||||
Transactions | 6,409,816 | 5,866,562 | 12,769,711 | 11,872,961 | ||||||||||||
Total revenue | 6,823,220 | 6,085,699 | 13,571,060 | 12,264,170 | ||||||||||||
Cost of revenue: | ||||||||||||||||
Platforms | 90,362 | 45,623 | 174,349 | 75,587 | ||||||||||||
Transactions | 4,996,988 | 4,664,690 | 9,911,402 | 9,379,689 | ||||||||||||
Total cost of revenue | 5,087,350 | 4,710,313 | 10,085,751 | 9,455,276 | ||||||||||||
Gross profit | 1,735,870 | 1,375,386 | 3,485,309 | 2,808,894 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative | 2,391,969 | 2,401,633 | 4,929,005 | 4,299,332 | ||||||||||||
Depreciation and amortization | 46,330 | 32,426 | 86,898 | 62,895 | ||||||||||||
Total operating expenses | 2,438,299 | 2,434,059 | 5,015,903 | 4,362,227 | ||||||||||||
Loss from operations | (702,429 | ) | (1,058,673 | ) | (1,530,594 | ) | (1,553,333 | ) | ||||||||
Other income (expenses): | ||||||||||||||||
Interest expense | (3,000 | ) | (3,000 | ) | (6,000 | ) | (6,000 | ) | ||||||||
Other income | 11,312 | 5,424 | 24,114 | 10,134 | ||||||||||||
Total other income | 8,312 | 2,424 | 18,114 | 4,134 | ||||||||||||
Loss from operations before provision for income taxes | (694,117 | ) | (1,056,249 | ) | (1,512,480 | ) | (1,549,199 | ) | ||||||||
Provision for income taxes | (9,816 | ) | (9,337 | ) | (21,567 | ) | (22,942 | ) | ||||||||
Loss from continuing operations | (703,933 | ) | (1,065,586 | ) | (1,534,047 | ) | (1,572,141 | ) | ||||||||
Discontinued operations: | ||||||||||||||||
Income from discontinued operations | - | 222,626 | - | 318,515 | ||||||||||||
Gain from sale of discontinued operations | 79,353 | - | 136,502 | - | ||||||||||||
Income from discontinued operations | 79,353 | 222,626 | 136,502 | 318,515 | ||||||||||||
Net loss | (624,580 | ) | (842,960 | ) | (1,397,545 | ) | (1,253,626 | ) | ||||||||
Other comprehensive income (loss): | ||||||||||||||||
Foreign currency translation | (6,715 | ) | 5,195 | (15,666 | ) | 1.912 | ||||||||||
Comprehensive loss | $ | (631,295 | ) | $ | (837,765 | ) | $ | (1,413,211 | ) | $ | (1,251,714 | ) | ||||
Loss per common share: | ||||||||||||||||
Loss per share from continuing operations, basic and diluted | $ | (0.03 | ) | $ | (0.05 | ) | $ | (0.07 | ) | $ | (0.06 | ) | ||||
Income per share from discontinued operations, basic and diluted | $ | - | $ | 0.01 | $ | 0.01 | $ | 0.01 | ||||||||
Net loss per share, basic and diluted | $ | (0.03 | ) | $ | (0.04 | ) | $ | (0.06 | ) | $ | (0.05 | ) | ||||
Weighted average common shares outstanding, basic and diluted | 23,455,654 | 23,200,975 | 23,418,046 | 23,166,272 |
| | | | | | | |
| | Three Months Ended | | ||||
| | September 30, | | ||||
|
| 2023 |
| 2022 | | ||
| | | | | | | |
Revenue: | | |
|
| |
| |
Platforms | | $ | 2,600,192 | | $ | 2,019,967 | |
Transactions | |
| 7,460,779 | |
| 6,664,676 | |
Total revenue | |
| 10,060,971 | |
| 8,684,643 | |
| |
|
| |
|
| |
Cost of revenue: | |
|
| |
|
| |
Platforms | |
| 382,615 | |
| 230,473 | |
Transactions | |
| 5,646,791 | |
| 5,104,922 | |
Total cost of revenue | |
| 6,029,406 | |
| 5,335,395 | |
Gross profit | |
| 4,031,565 | |
| 3,349,248 | |
| |
|
| |
|
| |
Operating expenses: | |
|
| |
|
| |
Selling, general and administrative | |
| 5,070,897 | |
| 3,163,807 | |
Depreciation and amortization | |
| 59,620 | |
| 5,812 | |
Total operating expenses | |
| 5,130,517 | |
| 3,169,619 | |
| | | | | | | |
Income (loss) from operations | |
| (1,098,952) | |
| 179,629 | |
| |
|
| |
|
| |
Other income | |
| 140,311 | |
| 39,069 | |
| |
|
| |
|
| |
Income (loss) from operations before provision for income taxes | |
| (958,641) | |
| 218,698 | |
Provision for income taxes | |
| (29,402) | |
| (4,133) | |
| |
|
| |
|
| |
Net income (loss) | |
| (988,043) | |
| 214,565 | |
| |
|
| |
|
| |
Other comprehensive income (loss): | |
| | |
| | |
Foreign currency translation | |
| (946) | |
| (5,176) | |
Comprehensive income (loss) | | $ | (988,989) | | $ | 209,389 | |
| | | | | | | |
Basic income (loss) per common share: | | | | | | | |
Net income (loss) per share | | $ | (0.04) | | $ | 0.01 | |
Weighted average common shares outstanding | | | 27,052,445 | | | 26,718,171 | |
| |
|
| |
|
| |
Diluted income (loss) per common share: | | | | | | | |
Net income (loss) per share | | $ | (0.04) | | $ | 0.01 | |
Weighted average common shares outstanding | | | 27,052,445 | | | 27,779,841 | |
See notes to condensed consolidated financial statements
4
Research Solutions, Inc. and Subsidiaries
Condensed Consolidated StatementStatements of Stockholders'Changes in Stockholders’ Equity
For the SixThree Months Ended December 31, 2017September 30, 2023
(Unaudited)
Common Stock | Additional Paid-in | Accumulated | Other Comprehensive | Total Stockholders' | ||||||||||||||||||||
Shares | Amount | Capital | Deficit | Loss | Equity | |||||||||||||||||||
Balance, July 1, 2017 | 23,883,145 | $ | 23,883 | $ | 22,267,327 | $ | (17,875,858 | ) | $ | (70,729 | ) | $ | 4,344,623 | |||||||||||
Fair value of vested stock options | - | - | 389,236 | - | - | 389,236 | ||||||||||||||||||
Fair value of vested restricted common stock | 338,302 | 339 | 205,000 | - | - | 205,339 | ||||||||||||||||||
Repurchase of common stock | (87,100 | ) | (87 | ) | (102,868 | ) | - | - | (102,955 | ) | ||||||||||||||
Modification cost of stock options | - | - | 6,233 | - | - | 6,233 | ||||||||||||||||||
Common stock issued upon exercise of stock options | 13,235 | 13 | (13 | ) | - | - | - | |||||||||||||||||
Net loss for the period | - | - | - | (1,397,545 | ) | - | (1,397,545 | ) | ||||||||||||||||
Foreign currency translation | - | - | - | - | (15,666 | ) | (15,666 | ) | ||||||||||||||||
Balance, December 31, 2017 | 24,147,582 | $ | 24,148 | $ | 22,764,915 | $ | (19,273,403 | ) | $ | (86,395 | ) | $ | 3,429,265 |
| | | | | | | | | | | | | | | | | |
| | | | | | | Additional | | | | | Other | | Total | |||
| | Common Stock | | Paid-in | | Accumulated | | Comprehensive | | Stockholders’ | |||||||
|
| Shares |
| Amount |
| Capital |
| Deficit |
| Loss |
| Equity | |||||
| | | | | | | | | | | | | | | | | |
Balance, July 1, 2023 |
| 29,487,508 | | $ | 29,487 | | $ | 29,941,873 | | $ | (22,522,649) | | $ | (118,224) | | $ | 7,330,487 |
|
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
Fair value of vested stock options |
| — |
| | — |
| | 17,471 |
| | — |
| | — |
| | 17,471 |
|
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
Fair value of vested restricted common stock |
| 105,000 |
| | 105 |
| | 574,238 |
| | — |
| | — |
| | 574,343 |
|
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
Repurchase of common stock |
| (18,603) |
| | (19) |
| | (46,116) |
| | — |
| | — |
| | (46,135) |
| | | | | | | | | | | | | | | | | |
Common stock issued upon exercise of stock options |
| 50,180 |
| | 51 | | | (51) |
| | — |
| | — |
| | — |
|
| |
| | |
| | |
| | |
| | |
| |
|
Net income for the period |
| — |
| | — | | | — |
| | (988,043) |
| | — |
| | (988,043) |
|
| |
| | |
| | |
| | |
| | |
| |
|
Foreign currency translation |
| — |
| | — |
| | — |
| | — |
| | (946) |
| | (946) |
| | | | | | | | | | | | | | | | | |
Balance, September 30, 2023 |
| 29,624,085 | | $ | 29,624 | | $ | 30,487,415 | | $ | (23,510,692) | | $ | (119,170) | | $ | 6,887,177 |
See notes to condensed consolidated financial statements
5
Research Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash FlowsChanges in Stockholders’ Equity
(Unaudited)For the Three Months Ended September 30, 2022
(Unaudited)
Six Months Ended | ||||||||
December 31, | ||||||||
2017 | 2016 | |||||||
Cash flow from operating activities: | ||||||||
Net loss | $ | (1,397,545 | ) | $ | (1,253,626 | ) | ||
Adjustment to reconcile net loss to net cash provided by (used in) operating activities of operations: | ||||||||
Gain from sale of discontinued operations | (136,502 | ) | - | |||||
Depreciation and amortization | 86,898 | 62,895 | ||||||
Amortization of lease right | 54,759 | - | ||||||
Fair value of vested stock options | 389,236 | 228,491 | ||||||
Fair value of vested restricted common stock | 205,339 | 177,194 | ||||||
Modification cost of stock options | 6,233 | - | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 1,726,200 | 696,302 | ||||||
Prepaid expenses and other current assets | 17,416 | (56,140 | ) | |||||
Prepaid royalties | (169,863 | ) | (1,044,250 | ) | ||||
Deposits and other assets | - | (11,374 | ) | |||||
Accounts payable and accrued expenses | (1,389,286 | ) | 1,449,375 | |||||
Deferred revenue | (29,046 | ) | 527,695 | |||||
Lease liability | (54,000 | ) | - | |||||
Net cash provided by (used in) operating activities | (690,161 | ) | 776,562 | |||||
Cash flow from investing activities: | ||||||||
Purchase of property and equipment | (29,284 | ) | (16,091 | ) | ||||
Purchase of intangible assets | (14,252 | ) | (9,751 | ) | ||||
Net cash used in investing activities | (43,536 | ) | (25,842 | ) | ||||
Cash flow from financing activities: | ||||||||
Common stock repurchase and retirement | (102,955 | ) | (82,354 | ) | ||||
Net cash used in financing activities | (102,955 | ) | (82,354 | ) | ||||
Effect of exchange rate changes | (12,678 | ) | 3,386 | |||||
Net increase (decrease) in cash and cash equivalents | (849,330 | ) | 671,752 | |||||
Cash and cash equivalents, beginning of period | 5,773,950 | 6,076,875 | ||||||
Cash and cash equivalents, end of period | $ | 4,924,620 | $ | 6,748,627 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid for income taxes | $ | 21,567 | $ | 22,942 | ||||
Cash paid for interest | $ | 6,000 | $ | 6,000 |
| | | | | | | | | | | | | | | | | |
| | | | | | | Additional | | | | | Other | | Total | |||
| | Common Stock | | Paid-in | | Accumulated | | Comprehensive | | Stockholders’ | |||||||
|
| Shares |
| Amount |
| Capital |
| Deficit |
| Loss |
| Equity | |||||
| | | | | | | | | | | | | | | | | |
Balance, July 1, 2022 |
| 27,075,648 | | $ | 27,076 |
| $ | 28,072,855 |
| $ | (23,094,272) |
| $ | (121,941) |
| $ | 4,883,718 |
|
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
Fair value of vested stock options |
| — |
| | — |
| | 40,706 |
| | — |
| | — |
| | 40,706 |
|
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
Fair value of vested restricted common stock |
| 222,334 |
| | 222 |
| | 134,433 |
| | — |
| | — |
| | 134,655 |
|
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
Fair value of vested unrestricted common stock |
| 36,509 |
| | 36 |
| | 68,236 |
| | — |
| | — |
| | 68,272 |
|
| | | | | | |
| | |
| | |
|
| |
|
Repurchase of common stock |
| (9,659) |
| | (9) |
| | (18,053) |
| | — |
| | — |
| | (18,062) |
| | |
| | |
| | |
| | |
| | | | | |
Common stock issued upon exercise of stock options | | 6,046 |
| | 6 | | | (6) | | | — | | | — | | | — |
|
| | | | | | | | | | | | | |
| |
|
Net loss for the period |
| — |
| | — |
| | — |
| | 214,565 |
| | — |
| | 214,565 |
|
|
|
| |
|
| |
|
| |
|
| | |
| |
|
Foreign currency translation |
| — |
| | — |
| | — |
| | — |
| | (5,176) |
| | (5,176) |
| | | | | | | | | | | | | | | | | |
Balance, September 30, 2022 |
| 27,330,878 | | $ | 27,331 | | $ | 28,298,171 | | $ | (22,879,707) | | $ | (127,117) | | $ | 5,318,678 |
See notes to condensed consolidated financial statements
6
Research Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | | | | | | |
| | Three Months Ended | | ||||
| | September 30, | | ||||
|
| 2023 |
| 2022 | | ||
| | | | | | | |
Cash flow from operating activities: |
| |
|
| |
| |
Net income (loss) | | $ | (988,043) | | $ | 214,565 | |
Adjustment to reconcile net income (loss) to net cash provided by (used in) operating activities: | |
|
| |
|
| |
Depreciation and amortization | |
| 59,620 | |
| 5,812 | |
Fair value of vested stock options | |
| 17,471 | |
| 40,706 | |
Fair value of vested restricted common stock | |
| 574,343 | |
| 134,655 | |
Fair value of vested unrestricted common stock | | | — | | | 68,272 | |
Changes in operating assets and liabilities: | |
|
| |
|
| |
Accounts receivable | |
| (112,965) | |
| 81,756 | |
Prepaid expenses and other current assets | |
| 109,946 | |
| 70,908 | |
Prepaid royalties | |
| 35,140 | |
| 710,640 | |
Accounts payable and accrued expenses | |
| 195,747 | |
| (1,037,057) | |
Deferred revenue | |
| (646,830) | |
| (181,378) | |
Net cash provided by (used in) operating activities | |
| (755,571) | |
| 108,879 | |
| |
|
| |
|
| |
Cash flow from investing activities: | |
|
| |
|
| |
Purchase of property and equipment | |
| (33,825) | |
| (3,681) | |
Payment for acquisition, net of cash acquired | | | (2,718,253) | | | — | |
Payment for non-refundable deposit for asset acquisition | | | — | | | (297,450) | |
Net cash used in investing activities | |
| (2,752,078) | |
| (301,131) | |
| |
|
| |
|
| |
Cash flow from financing activities: | |
| | | | | |
Common stock repurchase | | | (46,135) | | | (18,062) | |
Payment of contingent acquisition consideration | | | (110,190) | | | — | |
Net cash used in financing activities | |
| (156,325) | |
| (18,062) | |
| |
|
| |
|
| |
Effect of exchange rate changes | |
| 705 | |
| (5,172) | |
Net decrease in cash and cash equivalents | |
| (3,663,269) | |
| (215,486) | |
Cash and cash equivalents, beginning of period | |
| 13,545,333 | |
| 10,603,175 | |
Cash and cash equivalents, end of period | | $ | 9,882,064 | | $ | 10,387,689 | |
| |
|
| |
|
| |
Supplemental disclosures of cash flow information: | |
|
| |
|
| |
Cash paid for income taxes | | $ | 29,402 | | $ | 4,133 | |
| |
|
| |
|
| |
Non-cash investing and financing activities: | |
|
| |
|
| |
Contingent consideration accrual on asset acquisition | | $ | 42,989 | | $ | — | |
See notes to condensed consolidated financial statements
7
RESEARCH SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SixThree Months Ended December 31, 2017September 30, 2023 and 20162022 (Unaudited)
Note 1. Organization, Nature of Business and Basis of Presentation
Organization
Research Solutions, Inc. (the “Company,” “Research Solutions,” “we,” “us” or “our”) was incorporated in the State of Nevada on November 2, 2006, and is a publicly traded holding company with twofour wholly owned subsidiaries: Reprints Desk, Inc., (“Reprints Desk”) a Delaware corporation, andincluding its wholly owned subsidiary Resolute Innovation, Inc., a Delaware corporation, Reprints Desk Latin America S. de R.L. de C.V, an entity organized under the laws of Mexico, and RESSOL LA, S. DE R.L. DE C.V., an entity organized under the laws of Mexico.
Nature of Business
We provide two service offerings to our customers: annual licenses that allow customers to access and utilize certain premium features of our cloud basedcloud-based software-as-a-service (“SaaS”) research intelligence platformplatforms (“Platforms”) typically sold via annual auto-renewing license agreements and the transactional sale of published scientific, technical, and medical (“STM”) content managed, sourced and delivered throughsold as individual articles (“Transactions”) either stand alone or via the core research Platform. When customers utilize the core research Platform (“Transactions”). Platforms andto purchase Transactions areit is packaged as a single solution that enableenables life science and other research-intensive organizations to speed upaccelerate their research and development activities with faster, single sourced access and management of content and dataSTM articles used throughout the intellectual property development lifecycle. The Platforms typically deliver 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 intelligence platform consistsPlatforms consist of proprietary software and Internet-based interfaces.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 PlatformPlatforms in the form of interactive app-like gadgets.components. An alternative to manual data filtering, identification and extraction, gadgetsthe 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 are rapidly developingcontinue to develop new gadgetsapps in order to build an ecosystem of gadgets.apps. Together, these gadgetsapps will provide researchers with an “all in one” toolkit, delivering efficiencies in core research workflows and knowledge creation processes.
Our Platform isPlatforms are deployed as a single, multi-tenant system across our entire customer base. Customers securely access the PlatformPlatforms 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 PlatformPlatforms can also be configured to satisfy a customer’s individual preferences. We leverage our Platform’sPlatforms’ efficiencies in scalability, stability and development costs to fuel rapid innovation and competitive advantage.
Transactions
Transactions
Our core research Platform provides our customers with a single source to the universe of published STM content that includes over 80 million existing STM articles and over one million newly published STM articles each year. STM content is sold to our customers on a transaction basis. Researchers and knowledge workers in life science and other research-intensive organizations generally require single copies of published STM journal articles for use in their research activities. These individuals are our primary users. Our Platform 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.
Our core research 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
8
deliver to them generally in under an hour.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.
Principles of Consolidation
The accompanying financial statements are consolidated and include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.
Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 20172023 filed with the SEC. The condensed consolidated balance sheet as of June 30, 20172023 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including notes, required by GAAP.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company'sCompany’s financial position and results of operations for the interim periods reflected. Except as noted, all adjustments contained herein are of a normal recurring nature. Results of operations for the fiscal periods presented herein are not necessarily indicative of fiscal year-end results.
Note 2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates.
These estimates and assumptions include estimates for reserves of uncollectible accounts, analysis of impairments of recorded intangibles, accruals for potential liabilities, assumptions made in valuing equity instruments issued for services or acquisitions, impairment related to intangible assets, useful lives of finite-lived intangible assets, and realization of deferred tax assets.
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of cash and cash equivalents and accounts receivable. The Company places its cash with high quality financial institutions and at times may exceed the FDIC $250,000 insurance limit. The Company does not anticipate incurring any losses related to these credit risks. The Company extends credit based on an evaluation of the customer'scustomer’s financial condition, generally without collateral. Exposure to losses on receivables is principally dependent on each customer'scustomer’s financial condition. The Company monitors its exposure for credit losses and intends to maintain allowances for anticipated losses, as required.
Cash denominated in Euros and British Pounds with aan aggregate US Dollar equivalent of $63,669$1,269,071 and $93,359$1,760,323 at December 31, 2017September 30, 2023 and June 30, 2017,2023, respectively, was held by Reprints Desk in accounts at financial institutions located in Europe.
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The Company has no customers that represent 10% of revenue or more for the three and six months ended December 31, 2017September 30, 2023 and 2016.
2022.
The Company has no customers that accounted for greater than 10% of accounts receivable at December 31, 2017September 30, 2023 and June 30, 2017.
2023.
The following table summarizes vendor concentrations:
Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||
| | | | | | | | ||||||||||||||||
| | Three Months Ended |
| | |||||||||||||||||||
| | September 30, |
| | |||||||||||||||||||
| | 2023 |
|
| 2022 | | | ||||||||||||||||
Vendor A | 15 | % | 18 | % | 15 | % | 18 | % | | 24 | % | | 21 | % | | ||||||||
Vendor B | 12 | % | * | 12 | % | * | | 11 | % | | 12 | % | | ||||||||||
Vendor C | 12 | % | * | 12 | % | * |
* Less than 10%
Revenue Recognition
The Company’s policyCompany accounts for revenue in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected.
Revenues are recognized when control of the promised goods or services have been performed, risk of loss and titleare transferred to a customer, in an amount that reflects the product transfersconsideration that the Company expects to the customer, the selling price is fixedreceive in exchange for those goods or determinable, and collectability is reasonably assured. We generate revenue by providingservices. The Company derives its revenues from two service offerings to our customers:sources: annual licenses that allow customers to access and utilize certain premium features of our cloud basedcloud-based SaaS research intelligence platformplatforms (Platforms) and the transactiontransactional sale of STM content managed, sourced and delivered through the Platform (Transactions).
The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:
identify the contract with a customer; |
● | identify the performance obligations in the contract; |
● | determine the transaction price; |
● | allocate the transaction price to performance obligations in the contract; and |
● | recognize revenue as the performance obligation is satisfied. |
Platforms
We charge a subscription fee that allows customers to access and utilize certain premium features of our Platform.Platforms. 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.
10
Transactions
We charge a transactional service fee for the electronic delivery of single articles, and a corresponding copyright fee for the permitted use of the content. We recognize revenue from single article delivery services upon delivery to the customer onlyprovided all other revenue recognition criteria have been met.
Revenue by Geographical Region
The following table summarizes revenue by geographical region:
| | | | | | | | | | | | |
| | Three Months Ended |
| |||||||||
| | September 30, |
| |||||||||
| | 2023 |
| | 2022 | | ||||||
United States | | $ | 5,861,032 |
| 58.3 | % | | $ | 5,043,083 | | 58.1 | % |
Europe | |
| 3,155,709 |
| 31.4 | % | |
| 3,009,521 |
| 34.6 | % |
Rest of World | |
| 1,044,230 |
| 10.4 | % | |
| 632,039 |
| 7.3 | % |
Total | | $ | 10,060,971 |
| 100 | % | | $ | 8,684,643 |
| 100 | % |
Accounts Receivable by Geographical Region
The following table summarizes accounts receivable by geographical region:
| | | | | | | | | | | | |
| | As of September 30, 2023 |
| | As of June 30, 2023 | | ||||||
United States |
| $ | 3,690,748 |
| 57.1 | % | | $ | 3,727,977 | | 60.6 | % |
Europe | |
| 1,975,110 |
| 30.6 | % | |
| 1,763,044 |
| 28.7 | % |
Rest of World | |
| 794,330 |
| 12.3 | % | |
| 662,042 |
| 10.8 | % |
Total | | $ | 6,460,188 |
| 100 | % | | $ | 6,153,063 |
| 100 | % |
Business Combinations
The Company accounts for its business combinations using the acquisition method of accounting where the purchase consideration is allocated to the tangible and intangible assets acquired, and liabilities assumed, based on their respective fair values as of the acquisition date. The excess of the fair value of the purchase consideration over the estimated fair values of the net assets acquired is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing intangible assets include, but are not limited to, expected future cash flows, which includes consideration of future growth and margins, future changes in technology, brand awareness and discount rates. Fair value estimates are based on the assumptions that management believes a market participant would use in pricing the asset or liability.
Intangible Assets
Amortizable finite-lived identifiable intangible assets consist of a developed technology and customer relationships acquired in the acquisition of ResoluteAI effective July 28,2023 (See Note 5), and are stated at cost less accumulated amortization. The developed technology and customer relationships are being amortized over the estimated average useful lives of 8 to 10 years. The Company follows ASC 360 in accounting for finite-lived intangible assets, which requires impairment losses to be recorded when indicators of impairment are present and the undiscounted cash flows estimated to be generated by the assets are less than the assets’ carrying amounts. As of September 30, 2023, the Company determined there were no indicators of impairment of its intangible assets.
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Goodwill
Goodwill consists of the excess of the cost of ResoluteAI (see Note 5) over the fair value of amounts assigned to assets acquired and liabilities assumed. Under the guidance of ASC 350, goodwill is not amortized, rather it is tested for impairment annually, and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. An impairment loss generally would be recognized when the selling pricecarrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit and would be measured as the excess carrying value of goodwill over the derived fair value of goodwill. The Company’s policy is fixedto perform an annual impairment testing for its reporting units on June 30 of each fiscal year.
Deferred Revenue
Contract liabilities, such as deferred revenue, exist where the Company has the obligation to transfer services to a customer for which the entity has received consideration, or determinable, and collectabilitywhen the consideration is reasonably assured.due, from the customer.
Deferred Revenue
Customer deposits and billings orCash payments received or due in advance of revenue recognitionperformance are recorded as deferred revenue. Deferred revenue is primarily comprised of cloud-based software subscriptions which are generally billed in advance. The deferred revenue balance is presented as a current liability on the Company's consolidated balance sheets.
Cost of Revenue
Platforms
Cost of Platform revenue consists primarily of personnel costs of our operations team, and to a lesser extent managed hosting providers and other third-party service and data providers.
Transactions
Cost of Transaction revenue consists primarily of the respective copyright fee for the permitted use of the content, less a discount in most cases, and to a much lesser extent, personnel costs of our operations team and third-party service providers.
Stock-Based Compensation
The Company periodically issues stock options warrants and restricted stock to employees and non-employees for services, in capital raising transactions, and for financing costs. The Company accounts for share-based payments under the guidance as set forth in the Share-Based Payment Topic 718 of the Financial Accounting Standards Board (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. The Company estimates 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 the Company's Statements of Operations. The Company estimates the fair value of restricted stock awards to employees and directors usingnon-employees for services. The Company accounts for such grants issued and vesting based on ASC 718, whereby the market pricevalue of the Company’s common stockaward is measured on the date of grant and recognized as compensation expense on the straight-line basis over the vesting period. The Company recognizes the fair value of stock-based compensation within its Statements of Operations with classification depending on the nature of the services rendered.
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 portionequity instruments repurchased at the repurchase date. Any excess of the award that is ultimately expected to vest is recognized as expenserepurchase price over the required service period in the Company's Statements of Operations. The Company accounts for share-based payments to non-employees in accordance with Topic 505 of the FASB Accounting Standards Codification, whereby thefair value of the stockinstruments repurchased shall be recognized as additional compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) the date at which the necessary performance to earn the equity instruments is complete. Stock-based compensation is based on awards ultimately expected to vest and is reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, as necessary, in subsequent periods if actual forfeitures differ from those estimates. cost.
Foreign Currency
The accompanying condensed consolidated financial statements are presented in United States dollars, the functional currency of the Company. Capital accounts of foreign subsidiaries are translated into US Dollars from foreign currency at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rate as of the balance sheet date. Income and expenditures are translated at the average exchange rate of the period. Although the majority of our revenue and costs are in US dollars, the costs of Reprints Desk Latin America and ResSoL LA are in Mexican Pesos. As a result, currency exchange fluctuations may impact our revenue and the costs of our operations. We currently do not engage in any currency hedging activities.
12
Gains and losses from foreign currency transactions, which result from a change in exchange rates between the functional currency and the currency in which a foreign currency transaction is denominated, are included in selling, general and administrative expenses and amounted to a gainloss of $485$6,620 and $12,872,$72,516 for the three and six months ended December 31, 2017, respectivelySeptember 30, 2023 and a loss of $17,631 and 20,955, for the three and six months ended December 31, 2016,2022, respectively. Cash denominated in Euros and British Pounds with aan aggregate US Dollar equivalent of $63,669$1,269,071 and $93,359$1,760,323 at December 31, 2017September 30, 2023 and June 30, 2017,2023, respectively, was held in accounts at financial institutions located in Europe.
The following table summarizes the exchange rates used:
Six Months Ended December 31, | Year Ended June 30, | |||||||||||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||||||||||
| | | | | | | | | ||||||||||||||||
| | Three Months Ended |
| Year Ended | ||||||||||||||||||||
| | September 30, |
| June 30, | ||||||||||||||||||||
|
| 2023 |
| 2022 |
| 2023 |
| 2022 | ||||||||||||||||
Period end Euro : US Dollar exchange rate | 1.20 | 1.09 | 1.09 | 1.11 | | 1.06 | | 0.98 | | 1.09 | | 1.05 | ||||||||||||
Average period Euro : US Dollar exchange rate | 1.17 | 1.11 | 1.09 | 1.11 |
| 1.10 |
| 1.01 | | 1.05 |
| 1.13 | ||||||||||||
| | | | | | | | | ||||||||||||||||
Period end GBP : US Dollar exchange rate | | 1.22 | | 1.11 | | 1.27 | | 1.21 | ||||||||||||||||
Average period GBP : US Dollar exchange rate |
| 1.28 |
| 1.19 | | 1.20 |
| 1.34 | ||||||||||||||||
|
| |
| | | |
| | ||||||||||||||||
Period end Mexican Peso : US Dollar exchange rate | 0.05 | 0.05 | 0.05 | 0.05 |
| 0.06 |
| 0.05 | | 0.06 |
| 0.05 | ||||||||||||
Average period Mexican Peso : US Dollar exchange rate | 0.05 | 0.05 | 0.05 | 0.06 |
| 0.06 |
| 0.05 | | 0.05 |
| 0.05 |
Net Income (Loss) Per Share
Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period, excluding shares of unvested restricted common stock. Shares of restricted stock are included in the basic weighted average number of common shares outstanding from the time they vest. Diluted earnings per share is computed by dividing the net income applicable to common stock holdersstockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. Shares of restricted stock are included in the diluted weighted average number of common shares outstanding from the date they are granted. Potential common shares are excluded from the computation when their effect is antidilutive. At December 31, 2017September 30, 2023 potentially dilutive securities include options to acquire 3,185,4352,590,024 shares of common stock and warrants to acquire 1,985,000 sharesunvested restricted common stock of common stock.2,436,605. At December 31, 2016September 30, 2022 potentially dilutive securities include options to acquire 3,122,2773,125,372 shares of common stock and warrants to acquire 1,985,000 sharesunvested restricted common stock of common stock.568,240. The dilutive effect of potentially dilutive securities is reflected in diluted net income per share if the exercise prices were lower than the average fair market value of common shares during the reporting period.
Basic and diluted net loss per common share is the same for the three and six months ended December 31, 2017 and 2016September 30, 2023 because all stock options, warrants, and unvested restricted common stock are anti-dilutive. For the three months ended September 30, 2022, the calculation of diluted earnings per share includes unvested restricted common stock, stock options and warrants, calculated under the treasury stock method.
Recently Issued Accounting Pronouncements
In May 2014,June 2016, the FASB issued Accounting Standards Update (ASU) No. 2014-09,Revenue from Contracts with Customers. ASU 2014-09 will eliminate transaction- and industry-specific revenue recognition guidance under current U.S. GAAP and replace it with2016-13, Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires entities to use a principle basedforward-looking approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the valuecurrent expected credit losses (“CECL”) to estimate credit losses on certain types of transferred goods or services as they occurfinancial instruments, including trade receivables. This may result in the contract. Theearlier recognition of allowances for losses. ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-092016-13 is effective for interimthe Company beginning July 1, 2023, and annual periods beginning after December 15, 2017. Earlyearly adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. Entities can transition topermitted. The Company does not believe the standard either retrospectively or as a cumulative-effect adjustment aspotential impact of the datenew guidance and related codification improvements will be material to its financial position, results of adoption. Management is currently assessing the impact the adoption of ASU 2014-09operations and has not determined the effect of the standard on our ongoing financial reporting.
cash flows.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company'sCompany’s present or future consolidated financial statements.
13
Note 3. Line of Credit
The Company 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 December 31, 2019,February 28, 2024, and is subject to certain financial and performance covenants with which we were in compliance as of December 31, 2017.September 30, 2023. 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 December 31, 2017, plus 50% of the dollar value of equity issuances after October 1, 2017 and the principal amount of subordinated debt.1.0. The line of credit bears interest at an annual rate equal to the greater of 1% above the prime rate plus 2.25% for periods in which we maintain an adjusted quick ratio of 1.3 to 1.0 (the “Streamline Period”), and at the prime rate plus 5.25% when a Streamline Period is not in effect.5.0%. The interest rate on the line of credit was 6.75%9.5% as of December 31, 2017.September 30, 2023. The line of credit is secured by the Company’s consolidated assets.
Pursuant to the Amended and Restated Loan and Security Agreement dated October 31, 2017 among the Company, Reprints Desk, Inc. and SVB (the “SVB LSA”), the Company was required to direct account debtors to deliver or transmit all proceeds of accounts remitted to the Company and its subsidiaries into a lockbox account as specified by SVB, and to maintain its and its subsidiaries’ primary operating and other deposit accounts with SVB.
There were no outstanding borrowings under the line as of December 31, 2017September 30, 2023 and June 30, 2017,2023, respectively. As of December 31, 2017,September 30, 2023, there was approximately $2,490,000$2,355,000 of available credit. On March 27, 2023, First Citizens BancShares, Inc. (“FCB”) entered into an agreement with the Federal Deposit Insurance Corporation (FDIC) to purchase all of the assets and liabilities of SVB. The Company has confirmed that the Loan and Security Agreement remains in effect post this transaction and that, it continues to have access to the revolving line of credit.
Note 4. Lease Obligations
During the period ended March 31, 2017,SVB Bridge Bank agreed that the Company can lower its cash balance threshold requirement associated with the SVB LSA, reducing the required balances of its and its subsidiaries’ primary operating and other accounts with SVB, and the Company continues to evaluate the SVB LSA. The Company has established additional banking relationships with Bank of America, N.A. and PNC Bank, N.A. At September 30, 2023, the Company held cash at Bank of America, N.A. of $1,516,191 and at PNC Bank, N.A. of $3,496,791.
Subsequent to September 30, 2023, FCB informed the Company of certain defaults under the SVB LSA resulting from the Company’s violation of certain covenants regarding retaining operating cash with SVB, obtaining deposit account control agreements with respect to such accounts and failing to maintain the required adjusted quick ratio. The Company became aware of additional technical defaults following FCB’s outreach, and such defaults substantially related to the Company’s moves to promptly diversify its cash position following the collapse of Silicon Valley Bank in March of 2023. On November 14, 2023, the Company, Reprints Desk and FCB entered into a 48 month non-cancellable lease forFifth Amendment to Amended and Restated Loan and Security Agreement, Consent and Forbearance Agreement (the “Fifth Amendment”) pursuant to which, among other matters, FCB agreed to forbear from exercising its office facilities that will require monthly payments ranging from $10,350remedies under the SVB LSA in connection with the existing events of default, and agreed to $11,475 through January 2021. In accounting forwaive the lease,existing events of default provided the Company adopted ASU 2016-02, Leases which requires a lessee to record a right-of-use assetregains compliance with the adjusted quick ratio covenant and a corresponding lease liability at the inceptionoperating accounts covenants by January 30, 2024, no other events of the lease initially measured at the present value of the lease payments. The Company classified the lease as an operating leasedefaults have occurred and determined that the fair value of the lease liability at the inception of the lease was $463,000 using a discount rate of 3.75%. During the six months ended December 31, 2017, the Company made payments of $54,000 towards the lease liability. As of December 31, 2017 and June 30, 2017, lease liability amounted to $385,187 and $439,187, respectively.
ASU 2016-02 requires recognitionno forbearance termination events (as listed in the statement of operations of a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. Rent expense, including real estate taxes, for the six months ended December 31, 2017 and 2016 was $62,881 and $32,564, respectively. During the six months ended December 31, 2017, the Company reflected amortization of right of use asset of $54,759 related to this lease.Fifth Amendment) have occurred.
Note 5.4. Stockholders’ Equity
Stock Options
In December 2007, we established the 2007 Equity Compensation Plan (the “2007 Plan”) and in November 2017 we established the 2017 Omnibus Incentive Plan (the “2017 Plan”), collectively (the “Plans”). The Plans were approved by our board of directors and stockholders. The purpose of the Plans is to grant stock and options to purchase our common stock, and other incentive awards, to our employees, directors and key consultants. On November 10, 2016, the maximum number of shares of common stock that may be issued pursuant to awards granted under the 2007 Plan increased from 5,000,000 to 7,000,000. On November 21, 2017, the Company’s stockholders approved the adoption of the 2017 Plan (previously adopted by our board of directors on September 14, 2017), which authorized a maximum of 1,874,513 shares of common stock that may be issued pursuant to awards granted under the 2017 Plan. On November 17, 2020, the Company's stockholders approved an increase in the maximum number of shares of common stock that may be issued pursuant to awards granted under the 2017 Omnibus Incentive Plan from 2,374,513 to 3,374,513. On November 17, 2021,
14
the Company's stockholders approved an increase in the maximum number of shares of common stock that may be issued pursuant to awards granted under the 2017 Omnibus Incentive Plan from 3,374,513 to 6,874,513. Upon adoption of the 2017 Plan we ceased granting incentive awards under the 2007 Plan and commenced granting incentive awards under the 2017 Plan. The shares of our common stock underlying cancelled and forfeited awards issued under the 2017 Plan may again become available for grant under the 2017 Plan. Cancelled and forfeited awards issued under the 2007 Plan that were cancelled or forfeited prior to November 21, 2017 became available for grant under the 2007 Plan. As of December 31, 2017,September 30, 2023, there were 1,592,1301,390,927 shares available for grant under the 2017 Plan, and no shares were available for grant under the 2007 Plan. All incentive stock award grants prior to the adoption of the 2017 Plan on November 21, 2017 were made under the 2007 Plan, and all incentive stock award grants after the adoption of the 2017 Plan on November 21, 2017 were made under the 2017 Plan.
The majority of awards issued under the PlansPlan vest immediately or over three years, with a one year cliff vesting period, and have a term of ten years. Stock-based compensation cost is measured at the grant date, based on the fair value of the awards that are ultimately expected to vest, and recognized on a straight-line basis over the requisite service period, which is generally the vesting period.
The following table summarizes vested and unvested stock option activity:
All Options | Vested Options | Unvested Options | |||||||||||||||||||||||||||||||||||||
Shares | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | ||||||||||||||||||||||||||||||||||
Outstanding at June 30, 2017 | 3,130,310 | 1.15 | 2,994,851 | 1.15 | 135,459 | 1.07 | |||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | ||||||||||||||||||||||||
| | All Options | | Vested Options | | Unvested Options | |||||||||||||||||||||||||||||||||
|
| |
| Weighted |
| |
| Weighted |
| |
| Weighted | |||||||||||||||||||||||||||
| | | | Average | | | | Average | | | | Average | |||||||||||||||||||||||||||
| | | | Exercise | | | | Exercise | | | | Exercise | |||||||||||||||||||||||||||
| | Shares | | Price | | Shares | | Price | | Shares | | Price | |||||||||||||||||||||||||||
Outstanding at June 30, 2023 |
| 2,909,574 |
| $ | 1.87 |
| 2,865,593 |
| $ | 1.86 |
| 43,981 |
| $ | 2.47 | ||||||||||||||||||||||||
Granted | 707,000 | 1.31 | 685,000 | 1.31 | 22,000 | 1.20 |
| — |
| | — |
| — |
| | — |
| — |
| | — | ||||||||||||||||||
Options vesting | - | - | 48,250 | 1.06 | (48,250 | ) | 1.06 |
| — |
| | — |
| 13,765 |
| | 2.43 |
| (13,765) |
| | 2.43 | |||||||||||||||||
Exercised | (175,000 | ) | 1.10 | (175,000 | ) | 1.10 | - | - |
| (319,550) |
| | 2.03 |
| (319,550) |
| | 2.03 |
| — |
| | — | ||||||||||||||||
Forfeited/Cancelled | (476,875 | ) | 1.31 | (471,042 | ) | 1.32 | (5,833 | ) | 1.09 | ||||||||||||||||||||||||||||||
Outstanding at December 31, 2017 | 3,185,435 | $ | 1.16 | 3,082,059 | $ | 1.16 | 103,376 | $ | 1.07 | ||||||||||||||||||||||||||||||
Forfeited |
| — |
| | — |
| — |
| | — |
| — |
| | — | ||||||||||||||||||||||||
Outstanding at September 30, 2023 |
| 2,590,024 | | $ | 1.85 |
| 2,559,808 | | $ | 1.84 |
| 30,216 | | $ | 2.48 |
The following table presents the assumptions used to estimate the fair values based upon a Black-Scholes option pricing model of the stock options granted during the six months ended December 31, 2017 and 2016.
Six Months Ended December 31, | ||||||||
2017 | 2016 | |||||||
Expected dividend yield | 0 | % | 0 | % | ||||
Risk-free interest rate | 1.45% - 2.23 | % | 1.27% - 1.76 | % | ||||
Expected life (in years) | 2.60 - 6.0 | 5 - 6 | ||||||
Expected volatility | 75% - 76 | % | 79.2% - 81.4 | % |
The weighted average remaining contractual life of all options outstanding as of December 31, 2017September 30, 2023 was 6.045.34 years. The remaining contractual life for options vested and exercisable at December 31, 2017September 30, 2023 was 5.985.31 years. Furthermore, the aggregate intrinsic value of options outstanding as of December 31,September 30, 2017 was $434,042,$1,845,909, and the aggregate intrinsic value of options vested and exercisable at December 31, 2017as of September 30, 2023 was $421,343,$1,842,925, in each case based on the fair value of the Company’s common stock on December 31, 2017.
September 30, 2023.
During the sixthree months ended December 31, 2017,September 30, 2023, the Company granted 707,000did not grant any options to employees with a fair value of $383,890.employees. The total fair value of options that vested during the sixthree months ended December 31, 2017September 30, 2023 was $389,236$17,471 and is included in selling, general and administrative expenses in the accompanying statement of operations. During the six months ended December 31, 2017, the Company granted 13,235 sharesAs of common stock upon the exercise of 175,000 options on a cashless basis. In addition, on September 30, 2017, options originally issued to an employee to purchase an aggregate of 17,600 shares of the Company’s common stock were modified to extend the exercise period from three months to approximately five years. Stock-based compensation cost of $6,233 was recorded during the six months ended December 31, 2017 as a result of the modification.
As of December 31, 2017,2023, the amount of unvested compensation related to stock options was $68,175$39,105 which will be recorded as an expense in future periods as the options vest. During the three months ended September 30, 2023, the Company issued 50,180 net shares of common stock upon the exercise of options underlying 319,550 shares of common stock.
15
AdditionalTable of Contents
The following table presents the information regarding stock options outstanding and exercisable as of December 31, 2017 is as follows:September 30, 2023:
Option Exercise Price | Options Outstanding | Remaining Contractual Life (in years) | Options Exercisable | ||||||||||||||||||
| | | | | | | | ||||||||||||||
| Option |
| |
| Remaining |
| | ||||||||||||||
| Exercise | | Options | | Contractual | | Options | ||||||||||||||
| Price | | Outstanding | | Life (in years) | | Exercisable | ||||||||||||||
$ | 0.59 | 8,150 | 4.50 | 8,150 | 0.70 |
| 225,000 |
| 2.18 |
| 225,000 | ||||||||||
0.60 | 5,000 | 4.50 | 5,000 | ||||||||||||||||||
0.65 | 6,150 | 4.50 | 6,150 | ||||||||||||||||||
0.70 | 225,000 | 7.93 | 225,000 | ||||||||||||||||||
0.77 | 59,500 | 5.76 | 59,500 | ||||||||||||||||||
0.80 | 16,000 | 7.64 | 16,000 | ||||||||||||||||||
0.90 | 25,667 | 6.31 | 25,667 | ||||||||||||||||||
0.97 | 6,000 | 4.50 | 6,000 | ||||||||||||||||||
1.00 | 300,249 | 2.60 | 300,247 | ||||||||||||||||||
1.02 | 247,000 | 2.90 | 247,000 | ||||||||||||||||||
1.05 | 457,529 | 8.63 | 415,530 | ||||||||||||||||||
1.07 | 53,898 | 4.79 | 53,898 | ||||||||||||||||||
1.09 | 156,165 | 7.95 | 116,790 | ||||||||||||||||||
1.10 | 105,000 | 7.50 | 105,000 | ||||||||||||||||||
1.14 | 3,674 | 4.50 | 3,674 | ||||||||||||||||||
1.15 | 293,000 | 3.07 | 293,000 | ||||||||||||||||||
1.20 | 353,414 | 9.57 | 331,414 | ||||||||||||||||||
1.25 | 32,000 | 5.12 | 32,000 | ||||||||||||||||||
1.30 | 263,000 | 4.18 | 263,000 | ||||||||||||||||||
1.50 | 380,000 | 1.00 | 380,000 | ||||||||||||||||||
1.75 | 1,067 | 4.50 | 1,067 | ||||||||||||||||||
1.80 | 162,550 | 5.45 | 162,550 | ||||||||||||||||||
1.85 | 24,000 | 5.09 | 24,000 | ||||||||||||||||||
1.97 | 1,422 | 4.50 | 1,422 | ||||||||||||||||||
Total | 3,185,435 | 3,082,059 | |||||||||||||||||||
| 0.77 |
| 25,000 |
| 0.88 |
| 25,000 | ||||||||||||||
| 0.80 |
| 16,000 |
| 1.89 |
| 16,000 | ||||||||||||||
| 0.90 |
| 15,000 |
| 1.85 |
| 15,000 | ||||||||||||||
| 1.00 |
| 15,000 |
| 1.44 |
| 15,000 | ||||||||||||||
| 1.05 |
| 305,000 |
| 2.90 |
| 305,000 | ||||||||||||||
| 1.09 |
| 40,000 |
| 2.65 |
| 40,000 | ||||||||||||||
| 1.10 |
| 105,000 |
| 1.75 |
| 105,000 | ||||||||||||||
| 1.20 |
| 274,000 |
| 3.80 |
| 274,000 | ||||||||||||||
| 1.59 |
| 25,000 |
| 4.61 |
| 25,000 | ||||||||||||||
| 2.10 | | 238,767 | | 8.36 | | 238,767 | ||||||||||||||
| 2.13 | | 216,708 | | 7.14 | | 216,708 | ||||||||||||||
| 2.15 | | 200,000 | | 9.20 | | 200,000 | ||||||||||||||
| 2.17 | | 35,955 | | 7.62 | | 29,962 | ||||||||||||||
| 2.19 | | 5,000 | | 8.31 | | 2,916 | ||||||||||||||
| 2.40 |
| 302,833 |
| 5.13 |
| 302,833 | ||||||||||||||
| 2.43 | | 61,250 | | 7.68 | | 56,250 | ||||||||||||||
| 2.45 | | 98,000 | | 6.85 | | 98,000 | ||||||||||||||
| 2.49 | | 78,435 | | 6.67 | | 77,314 | ||||||||||||||
| 2.50 | | 20,000 | | 5.63 | | 20,000 | ||||||||||||||
| 2.64 | | 30,882 | | 7.85 | | 23,162 | ||||||||||||||
| 2.67 | | 33,194 | | 7.97 | | 24,896 | ||||||||||||||
| 2.99 | | 8,000 | | 6.62 | | 8,000 | ||||||||||||||
| 3.13 | | 208,000 | | 6.12 | | 208,000 | ||||||||||||||
| 3.50 | | 8,000 | | 6.37 | | 8,000 | ||||||||||||||
| Total | | 2,590,024 | | | | 2,559,808 |
Warrants
The following table summarizes warrant activity:
Number of Warrants | Weighted Average Exercise Price | |||||||
Outstanding, June 30, 2017 | 1,985,000 | 1.25 | ||||||
Granted | - | - | ||||||
Exercised | - | - | ||||||
Expired/Cancelled | - | - | ||||||
Outstanding, December 31, 2017 | 1,985,000 | $ | 1.25 | |||||
Exercisable, June 30, 2017 | 1,985,000 | $ | 1.25 | |||||
Exercisable, December 31, 2017 | 1,985,000 | $ | 1.25 |
There was no intrinsic value for all warrants outstanding as of December 31, 2017, based on the fair value of the Company’s common stock on December 31, 2017.
Additional information regarding warrants outstanding and exercisable as of December 31, 2017 is as follows:
Warrant Exercise Price | Warrants Outstanding | Remaining Contractual Life (in years) | Warrants Exercisable | |||||||||||
$ | 1.19 | 100,000 | 3.98 | 100,000 | ||||||||||
1.25 | 1,885,000 | 3.45 | 1,885,000 | |||||||||||
Total | 1,985,000 | 1,985,000 |
Restricted Common Stock
Prior to July 1, 2017,2023, the Company issued 1,573,1975,184,592 shares of restricted common stock to employees valued at $1,563,074,$7,503,186, of which $1,150,136 had2,427,309 shares have vested, 279,489 shares with fair value of $312,156 have been forfeited, and $4,479,369 has been recognized as an expense. The balance of the non-vested shares of restricted common stock was 2,477,794 at June 30, 2023, with an aggregate fair value of $2,711,661.
16
During the sixthree months ended December 31, 2017,September 30, 2023, the Company issued an additional 338,302105,000 shares of restricted stock to employees. Theseemployees with an aggregate fair value of $185,800. Of this amount, 5,000 shares vest over a three year period, with a one year cliff vesting period, and remain subject to forfeiture if vesting conditions are not met. The aggregate fair value of thethese stock awards was $354,366$11,200 based on the market price of our common stock ranging from $1.02 to $1.20price of $2.24 per share on the date of grant, which will be amortized over the three-yearrange of a three year vesting period. RestrictedThe remaining 100,000 shares were granted, under the 2017 Plan, as restricted stock awards to key management in accordance with its long-term equity bonus program (the “LTEBP”). The LTEBP replaces the previous restricted stock compensation program for executives. It spans 5 years and is designed to better serve stockholder interests by aligning key executive compensation with stockholder value. Awards under the LTEBP will vest as follows, upon the 30-day volume weighted average price (VWAP) of our common stock grants have been madereaching the following targets:
•20% at a 30-day VWAP of $3.00 per share;
•20% at a 30-day VWAP of $3.75 per share;
•20% at a 30-day VWAP of $4.50 per share;
•20% at a 30-day VWAP of $5.25 per share; and
•20% at a 30-day VWAP of $6.00 per share.
Upon a change of control vesting will accelerate with respect to that portion of the award that would vest if the target 30-day VWAP was achieved at the level above the per share price in such change of control transaction. For example, if we granted an award of 100,000 shares under the 2007LTEBP, 20,000 shares would vest upon our stock price achieving a 30-day VWAP of $3.00 per share, and 2017 Equity Compensation Plans.20,000 shares would vest upon our stock price achieving a 30-day VWAP of $3.75 per share. If the per share price in a change of control transaction was $5.00 per share, vesting would accelerate for 40,000 shares under the same award (i.e. the number of shares that would vest for our stock price achieving a 30-day VWAP of $5.25 per share, pursuant to a tier round up provision in the Plan effective upon a change in control). As a condition to receiving awards under the LTEBP, recipients will be required to hold at least 75% of all vested shares during the term of their employment. Applicable target 30-day VWAPs must be achieved within 5 years following the grant of awards under the LTEBP, and all unvested awards under the LTEBP will be forfeited upon expiration of such 5-year period. Recipients will also forfeit unvested awards in the event their service with our company terminates for any reason.
As the vesting of the 100,000 shares of restricted common stock under the LTEBP is subject to certain market conditions, pursuant to current accounting guidelines, the Company determined the fair value to be $174,600, computed using the Monte Carlo simulations on a binomial model with the assistance of a valuation specialist with a derived service period ranging from 1.19 to 2.51 years. The total fair value of restricted common stock vesting and expenses related to amortization of the fair value of the LTEBP program during the sixthree months ended December 31, 2017September 30, 2023 was $205,339$574,343 and is included in selling, general and administrative expenses in the accompanying statements of operations. As of December 31, 2017,September 30, 2023, the amount of unvested compensation related to issuances of restricted common stock was $561,965,$2,323,118, which will be recognized as an expense in future periods as the shares vest. When calculating basic net income (loss) per share, these shares are included in weighted average common shares outstanding from the time they vest. When calculating diluted net income per share, these shares are included in weighted average common shares outstanding as of their grant date.
When calculating net loss per share, the 2,436,605 shares are considered antidilutive and are excluded from that calculation.
The following table summarizes restricted common stock activity:
Number of Shares | Fair Value | Weighted Average Grant Date Fair Value | ||||||||||||||||||
Non-vested, June 30, 2017 | 513,194 | 412,938 | 0.92 | |||||||||||||||||
| | | | | | | | | ||||||||||||
|
| |
| | |
| Weighted | |||||||||||||
| | | | | | | Average | |||||||||||||
| | Number of | | | | | Grant Date | |||||||||||||
| | Shares | | Fair Value | | Fair Value | ||||||||||||||
Non-vested, June 30, 2023 |
| 2,477,794 | | $ | 2,711,661 | | $ | 1.52 | ||||||||||||
Granted | 338,302 | 354,366 | 1.05 |
| 105,000 | |
| 185,800 | |
| 1.77 | |||||||||
Vested | (193,336 | ) | (205,339 | ) | 0.90 |
| (146,189) | |
| (574,343) | |
| 2.06 | |||||||
Forfeited | - | - | - |
| — | |
| — | |
| — | |||||||||
Non-vested, December 31, 2017 | 658,160 | $ | 561,965 | $ | 0.99 | |||||||||||||||
Non-vested, September 30, 2023 |
| 2,436,605 | | $ | 2,323,118 | | $ | 1.50 |
17
Common Stock RepurchaseRepurchases
Effective as of February 9, 2021, the Compensation Committee of our Board of Directors authorized the repurchase, during calendar year 2021 on the last day of each trading window and Retirement
otherwise in accordance with our insider trading policies, of up to $400,000 of outstanding common stock (at prices no greater than $4.00 per share) from our employees to satisfy their tax obligations in connection with the vesting of stock incentive awards. The Compensation Committee of our Board of Directors subsequently approved the extension of the repurchases under the same terms through the end of fiscal year 2024. The actual number of shares repurchased will be determined by applicable employees in their discretion, and will depend on their evaluation of market conditions and other factors. As of June 30, 2023, $151,095 remained under the current authorization to repurchase our outstanding common stock from our employees.
During the sixthree months ended December 31, 2017,September 30, 2023, the Company repurchased 87,10018,603 shares of our common stock from employees at an average market price of approximately $1.18$2.48 per share for an aggregate amount of $102,955. The shares$46,135. As of September 30, 2023, $104,960 remains under the current authorization to repurchase our outstanding common stock were surrendered by employees to cover tax withholding obligations with respect to the vesting of restricted stock. from our employees.
Shares repurchased are retired and deducted from common stock for par value and from additional paid in capital for the excess over par value. Direct costs incurred to acquire the shares are included in the total cost of the shares.
Note 5. Acquisitions
FIZ
On September 28, 2022, Reprints Desk entered into an asset purchase agreement with FIZ Karlsruhe – Leibniz-Institut für Informationsinfrastruktur GmbH (“FIZ”). FIZ delivers STM content pursuant to various contracts with its customers through its AutoDoc platform. FIZ agreed to assign and transfer to Reprints Desk certain of these contracts effective January 1, 2023 (the “Sold Contracts”).
On September 30, 2022, Reprints Desk made a non-refundable payment of $297,450 (€300,000) (the “Base Amount”) as initial consideration for the asset purchase. As of September 30, 2023, Reprints Desk has paid $64,578 in contingent consideration for customers that have their Sold Contracts assumed by Reprints Desk in comparison to the trailing twelve months of revenue of all Sold Contracts (the “Base Amount Plus”). On September 30, 2023, $42,989 in contingent consideration was recorded for customers that placed an order and have consented to have their contract assumed by Reprints Desk (the “Bonus Amount”). As of September 30, 2023, $96,121 of Bonus Amount payments were made for the 2023 fiscal year. The Bonus Amount is based upon the collectable service fee that FIZ would have received from these customers. Contingent consideration for the Bonus Amount will continue to be paid in arrears through the quarter ending December 31, 2025.
The current contingent consideration for the Base Amount Plus and the Bonus Amount is recorded as a short-term liability on the balance sheet. At September 30, 2023, the Base Amount, the Base Amount Plus and the Bonus Amount were recorded as intangible assets on the balance sheet with an estimated average useful life of 10 years.
ResoluteAI
On July 28, 2023, the Company acquired 100% of the outstanding stock of Resolute Innovation, Inc. (“ResoluteAI”), a Delaware corporation, an advanced search platform that equips organizations with search, discovery and knowledge management tools that are powered by artificial intelligence (“AI”) and neuro-linguistic programming (“NLP”) technologies.
The Company utilized the acquisition method of accounting for the acquisition in accordance with ASC 805, Business Combinations. The Company allocated the purchase price to ResoluteAI’s tangible assets, identifiable intangible assets, and assumed liabilities at their estimated fair values as of the date of acquisition. The excess of the purchase price paid by the Company over the estimated fair value of identified tangible and intangible assets has been recorded as goodwill.
18
The total purchase consideration for ResoluteAI, net of cash acquired, was approximately $4.6 million. The consideration includes an initial payment of $2.7 million and a contingent earnout that has a fair value of $1.9 million as of September 30, 2023. The contingent earnout payment will be based upon the product of three and one half multiplied by ending annual recurring revenue as of January 31, 2025 less the agreed upon Enterprise Value of $3.4 million.
The Company’s allocation of the purchase price at September 30, 2023 included $0.2 million of receivables, $0.1 million of other assets, $2.1 million of intangible assets and $3.2 million of goodwill. The intangible assets acquired are developed technology and customer relationships with estimated average useful lives of 8 to 10 years. The Company also assumed $0.2 million of payables, $0.6 million of deferred revenue and $0.2 million of other liabilities as part of the acquisition.
The preliminary allocation of purchase price to the assets acquired was based upon the estimated fair values at the date of acquisition. As of September 30, 2023, the Company has not completed its analysis for estimating the fair value of the assets acquired.
Note 6. GainContingencies
Inflation Risk
The Company does not believe that inflation has had a material effect on its operations to date, other than its impact on the general economy. However, there is a risk that the Company’s operating costs could become subject to inflationary and interest rate pressures in the future, which would have the effect of increasing the Company’s operating costs, and which would put additional stress on the Company’s working capital resources.
Note 7. Subsequent Events
Subsequent to September 30, 2023, FCB informed the Company of certain defaults under the SVB LSA resulting from Salethe Company’s violation of Discontinued Operations (Reprintscertain covenants regarding retaining operating cash with SVB, obtaining deposit account control agreements with respect to such accounts and ePrints business line)
failing to maintain the required adjusted quick ratio. The Company became aware of additional technical defaults following FCB’s outreach, and such defaults substantially related to the Company’s moves to promptly diversify its cash position following the collapse of Silicon Valley Bank in March of 2023. On June 30, 2017, we soldNovember 14, 2023, the intangible assets of ourCompany, Reprints Desk and ePrints businessFCB entered into a Fifth Amendment to Amended and Restated Loan and Security Agreement, Consent and Forbearance Agreement (the “Fifth Amendment”) pursuant to an Asset Purchase Agreement dated June 20, 2017. The aggregate net consideration forwhich, among other matters, FCB agreed to forbear from exercising its remedies under the sale included earn-out paymentsSVB LSA in connection with the existing events of 45%default, and agreed to waive the existing events of gross margin overdefault provided the 30-month period subsequent toCompany regains compliance with the closing date. We have made a policy election to record the contingent consideration when the consideration is determined to be realizable (each 6-month period ending subsequent to the closing date). Contingent consideration determined to be realizable amounted to $136,502 for the six months ended December 31, 2017adjusted quick ratio covenant and the corresponding receivable is includedoperating accounts covenants by January 30, 2024, no other events of defaults have occurred and no forbearance termination events (as listed in prepaid expenses and other current assets and as a gain from the sale of discontinued operations.Fifth Amendment) have occurred.
19
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Notice Regarding Forward-Looking Statements
The following discussion and analysis of our financial condition and results of operations for the three months ended September 30, 20172023 and 20162022 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” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2017.2023.
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 twofour wholly owned subsidiaries:subsidiaries as of September 30, 2023: Reprints Desk, Inc., a Delaware corporation, andincluding its wholly owned subsidiary Resolute Innovation, Inc., a Delaware corporation, Reprints Desk Latin America S. de R.L. de C.V, an entity organized under the laws of Mexico, and RESSOL LA, S. DE R.L. DE C.V., an entity organized under the laws of Mexico.
We provide two service offerings to our customers: annual licenses that allow customers to access and utilize certain premium features of our cloud basedcloud-based software-as-a-service (“SaaS”) research intelligence platformplatforms (“Platforms”) typically sold via annual auto-renewing license agreements and the transactional sale of published scientific, technical, and medical (“STM”) content managed, sourced and delivered throughsold as individual articles (“Transactions”) either stand alone or via our core research Platform. When customers utilize the core research Platform (“Transactions”). Platforms andto purchase Transactions areit is packaged as a single solution that enableenables life science and other research-intensive organizations to speed upaccelerate their research and development activities with faster, single sourced access and management of content and dataSTM articles used throughout the intellectual property development lifecycle. The Platforms typically deliver 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 intelligence platform consistsPlatforms consist of proprietary software and Internet-based interfaces.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 PlatformPlatforms in the form of interactive app-like gadgets.components. An alternative to manual data filtering, identification and extraction, gadgetsthe 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 are rapidly developingcontinue to develop new gadgetsapps in order to build an ecosystem of gadgets.apps. Together, these gadgetsapps will provide researchers with an “all in one” toolkit, delivering efficiencies in core research workflows and knowledge creation processes.
Our Platform isPlatforms are deployed as a single, multi-tenant system across our entire customer base. Customers securely access the PlatformPlatforms 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 PlatformPlatforms can also be configured to satisfy a customer’s individual preferences. We leverage our Platform’sPlatforms’ efficiencies in scalability, stability and development costs to fuel rapid innovation and competitive advantage.
20
Transactions
Transactions
Our core research Platform provides our customers with a single source to the universe of published STM content that includes over 80 million existing STM articles and over one million newly published STM articles each year. STM content is sold to our customers on a transaction basis. Researchers and knowledge workers in life science and other research-intensive organizations generally require single copies of published STM journal articles for use in their research activities. These individuals are our primary users. Our Platform 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.
Our core research 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.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.
Inflation Risk
We do not believe that inflation has had a material effect on its operations to date, other than its impact on the general economy. However, there is a risk that our operating costs could become subject to inflationary and interest rate pressures in the future, which would have the effect of increasing our operating costs, and which would put additional stress on our working capital resources.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States, or GAAP, requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. When making these estimates and assumptions, we consider our historical experience, our knowledge of economic and market factors and various other factors that we believe to be reasonable under the circumstances. Actual results may differ under different estimates and assumptions.
The accounting estimates and assumptions discussed in this section are those that we consider to be the most critical to an understanding of our financial statements because they inherently involve significant judgments and uncertainties.
Revenue Recognition
Our policyWe account for revenue in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected.
Revenues are recognized when control of the promised goods or services have been performed, risk of loss and titleare transferred to a customer, in an amount that reflects the product transfersconsideration that we expect to the customer, the selling price is fixedreceive in exchange for those goods or determinable, and collectability is reasonably assured.services. We generate revenue by providingderive our revenues from two service offerings to our customers:sources: annual licenses that allow customers to access and utilize certain premium features of our cloud basedcloud-based SaaS research intelligence platformplatforms (Platforms) and the transactiontransactional sale of STM content managed, sourced and delivered through the Platform (Transactions).
21
We apply the following five steps in order to determine the appropriate amount of revenue to be recognized as we fulfill our obligations under each of our agreements:
● | identify the contract with a customer; |
● | identify the performance obligations in the contract; |
● | determine the transaction price; |
● | allocate the transaction price to performance obligations in the contract; and |
● | recognize revenue as the performance obligation is satisfied. |
Platforms
We charge a subscription fee that allows customers to access and utilize certain premium features of our Platform.Platforms. Revenue is recognized ratably over the term of the subscription agreement, which is typically one year, provided all other revenue recognition criteria have been met. Billings or payments received in advance of revenue recognition are recorded as deferred revenue.
Transactions
We charge a transactional service fee for the electronic delivery of single articles, and a corresponding copyright fee for the permitted use of the content. We recognize revenue from single article delivery services upon delivery to the customer only when the selling price is fixed or determinable, and collectability is reasonably assured.provided all other revenue recognition criteria have been met.
Stock-Based Compensation
We periodically issue stock options, warrants and restricted stock to employees and non-employees for services, in capital raising transactions, and for financing costs. We account for share-based payments under the guidance as set 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 theThe fair value of our 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 thatoptions 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 directorsestimated using the market price of our common stock on the date of grant, and the value of the portion of the award that is ultimatelyBlack-Scholes-Merton Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected to vest is recognized as expense over the required service period in our Statements of Operations. We account for share-based payments to non-employees in accordance with Topic 505 of the FASB Accounting Standards Codification, whereby the valuevolatility, expected life of the stock compensationoptions or restricted stock, and future dividends. Compensation expense is recorded based upon the measurement date as determined at either a)value derived from the date at which a performance commitment is reached, or b) the date at which the necessary performance to earn the equity instruments is complete. Stock-based compensation isBlack-Scholes-Merton Option Pricing model and based on awards ultimately expected to vest and is reduced for estimated forfeitures. Forfeitures are estimated atactual experience. The assumptions used in the time of grant and revised, as necessary,Black-Scholes-Merton Option Pricing model could materially affect compensation expense recorded in subsequent periods if actual forfeitures differ from those estimates. future periods.
Recent Accounting Pronouncements
Please refer to footnote 2 to the condensed consolidated financial statements contained elsewhere in this Form 10-Q for a discussion of Recent Accounting Pronouncements.
22
Quarterly Information (Unaudited)
The following table sets forth unaudited and quarterly financial data for the most recent eight quarters:
Dec. 31, | Sept. 30, | June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | Mar. 31, | |||||||||||||||||||||||||||||||||||||||||||||||||
2017 | 2017 | 2017 | 2017 | 2016 | 2016 | 2016 | 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||
|
| Sept. 30, | | June 30, |
| Mar. 31, | | Dec. 31, |
| Sept. 30, |
| June 30, |
| Mar. 31, |
| Dec 31, | ||||||||||||||||||||||||||||||||||||||||
| | 2023 |
| 2023 |
| 2023 |
| 2022 |
| 2022 |
| 2022 |
| 2022 |
| 2021 | ||||||||||||||||||||||||||||||||||||||||
Revenue: |
| |
| | |
|
| |
| | |
|
| |
|
| |
|
| |
|
| |
| ||||||||||||||||||||||||||||||||
Platforms | $ | 413,404 | $ | 387,945 | $ | 318,194 | $ | 270,920 | $ | 219,137 | $ | 172,072 | $ | 129,963 | $ | 121,034 | | $ | 2,600,192 | | $ | 2,303,375 | | $ | 2,249,632 | | $ | 2,110,272 | | $ | 2,019,967 | | $ | 1,886,845 | | $ | 1,786,224 | | $ | 1,604,829 | ||||||||||||||||
Transactions | 6,409,816 | 6,359,895 | 6,521,313 | 6,372,679 | 5,866,562 | 6,006,399 | 6,025,972 | 6,394,127 | |
| 7,460,779 | |
| 7,656,342 | |
| 8,092,794 | |
| 6,606,394 | |
| 6,664,676 | |
| 6,675,164 | |
| 6,971,128 | |
| 6,267,458 | ||||||||||||||||||||||||
Total revenue | 6,823,220 | 6,747,840 | 6,839,507 | 6,643,599 | 6,085,699 | 6,178,471 | 6,155,935 | 6,515,161 | |
| 10,060,971 | |
| 9,959,717 | |
| 10,342,426 | |
| 8,716,666 | |
| 8,684,643 | |
| 8,562,009 | |
| 8,757,352 | |
| 7,872,287 | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||
Cost of revenue: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| ||||||||||||||||||||||||||||||||
Platforms | 90,362 | 83,987 | 71,097 | 58,367 | 45,623 | 29,964 | 23,426 | 21,557 | |
| 382,615 | |
| 275,110 | |
| 268,630 | |
| 253,073 | |
| 230,473 | |
| 240,214 | |
| 219,051 | |
| 231,668 | ||||||||||||||||||||||||
Transactions | 4,996,988 | 4,914,414 | 5,060,500 | 4,997,842 | 4,664,690 | 4,714,999 | 4,702,892 | 4,918,679 | |
| 5,646,791 | |
| 5,764,064 | |
| 6,046,523 | |
| 5,059,766 | |
| 5,104,922 | |
| 5,038,653 | |
| 5,299,804 | |
| 4,802,959 | ||||||||||||||||||||||||
Total cost of revenue | 5,087,350 | 4,998,401 | 5,131,597 | 5,056,209 | 4,710,313 | 4,744,963 | 4,726,318 | 4,940,236 | |
| 6,029,406 | |
| 6,039,174 | |
| 6,315,153 | |
| 5,312,839 | |
| 5,335,395 | |
| 5,278,867 | |
| 5,518,855 | |
| 5,034,627 | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||
Gross profit: | |
| | |
| | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| ||||||||||||||||||||||||||||||||
Platforms | 323,042 | 303,958 | 247,097 | 212,553 | 173,514 | 142,108 | 106,537 | 99,477 | |
| 2,217,577 | |
| 2,028,265 | |
| 1,981,002 | |
| 1,857,199 | |
| 1,789,494 | |
| 1,646,631 | |
| 1,567,173 | |
| 1,373,161 | ||||||||||||||||||||||||
Transactions | 1,412,828 | 1,445,481 | 1,460,813 | 1,374,837 | 1,201,872 | 1,291,400 | 1,323,080 | 1,475,448 | |
| 1,813,988 | |
| 1,892,278 | |
| 2,046,271 | |
| 1,546,628 | |
| 1,559,754 | |
| 1,636,511 | |
| 1,671,324 | |
| 1,464,499 | ||||||||||||||||||||||||
Total gross profit | 1,735,870 | 1,749,439 | 1,707,910 | 1,587,390 | 1,375,386 | 1,433,508 | 1,429,617 | 1,574,925 | |
| 4,031,565 | |
| 3,920,543 | |
| 4,027,273 | |
| 3,403,827 | |
| 3,349,248 | |
| 3,283,142 | |
| 3,238,497 | |
| 2,837,660 | ||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||
Operating expenses: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| ||||||||||||||||||||||||||||||||
Sales and marketing | 769,406 | 899,695 | 988,962 | 963,784 | 854,724 | 580,778 | 520,402 | 525,681 | |
| 685,016 | |
| 455,030 | |
| 642,624 | |
| 666,608 | |
| 521,216 | |
| 691,368 | |
| 543,496 | |
| 518,357 | ||||||||||||||||||||||||
Technology and product dev. | |
| 1,244,579 | |
| 991,093 | |
| 953,677 | |
| 922,132 | |
| 875,290 | |
| 1,049,430 | |
| 971,959 | |
| 868,236 | ||||||||||||||||||||||||||||||||
General and administrative | 1,308,483 | 1,363,486 | 1,326,798 | 1,251,807 | 1,226,181 | 1,211,008 | 902,667 | 1,011,670 | |
| 2,542,868 | |
| 1,649,333 | |
| 1,871,590 | |
| 1,613,664 | |
| 1,519,424 | |
| 1,663,671 | |
| 1,629,371 | |
| 1,616,135 | ||||||||||||||||||||||||
Depreciation and amortization | 46,330 | 40,568 | 36,893 | 33,906 | 32,426 | 30,469 | 29,702 | 30,310 | |
| 59,620 | |
| 22,163 | |
| 18,332 | |
| 6,342 | |
| 5,812 | |
| 5,507 | |
| 4,988 | |
| 4,260 | ||||||||||||||||||||||||
Stock-based compensation expense | 314,565 | 286,242 | 112,151 | 112,326 | 303,097 | 102,589 | 162,192 | 130,568 | ||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based comp. expense | |
| 591,814 | |
| 585,384 | |
| 480,458 | |
| 608,703 | |
| 175,361 | |
| 225,501 | |
| 399,234 | |
| 300,539 | ||||||||||||||||||||||||||||||||
Foreign currency transaction loss (gain) | (485 | ) | (12,387 | ) | (6,362 | ) | 6,272 | 17,631 | 3,324 | 994 | (2,829 | ) | |
| 6,620 | |
| (37,743) | |
| (72,547) | |
| (84,179) | |
| 72,516 | |
| 91,279 | |
| 29,394 | |
| 11,982 | ||||||||||||||||||||
Total operating expenses | 2,438,299 | 2,577,604 | 2,458,442 | 2,368,095 | 2,434,059 | 1,928,168 | 1,615,957 | 1,695,400 | |
| 5,130,517 | |
| 3,665,260 | |
| 3,894,134 | |
| 3,733,270 | |
| 3,169,619 | |
| 3,726,756 | |
| 3,578,442 | |
| 3,319,509 | ||||||||||||||||||||||||
Other income (expenses and income taxes) | (1,504 | ) | (1,949 | ) | (6,425 | ) | 1,599 | (6,913 | ) | (11,895 | ) | (22,034 | ) | (37,238 | ) | |
| 110,909 | |
| 120,463 | |
| 103,703 | |
| 73,913 | |
| 34,936 | |
| 5,347 | |
| (585) | |
| 264 | |||||||||||||||||
Loss from continuing operations | (703,933 | ) | (830,114 | ) | (756,957 | ) | (779,106 | ) | (1,065,586 | ) | (506,555 | ) | (208,374 | ) | (157,713 | ) | ||||||||||||||||||||||||||||||||||||||||
Income from discontinued operations | - | - | 113,314 | 141,616 | 222,626 | 95,889 | 155,385 | 190,089 | ||||||||||||||||||||||||||||||||||||||||||||||||
Gain on sale of discontinued operations | 79,353 | 57,149 | 241,196 | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | (624,580 | ) | (772,965 | ) | (402,447 | ) | (637,490 | ) | (842,960 | ) | (410,666 | ) | (52,989 | ) | 32,376 | |
| (988,043) | |
| 375,746 | |
| 236,842 | |
| (255,530) | |
| 214,565 | |
| (438,267) | |
| (340,530) | |
| (481,585) | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||
Basic income (loss) per common share: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| ||||||||||||||||||||||||||||||||
Net income (loss) per share | | $ | (0.04) | | $ | 0.01 | | $ | 0.01 | | $ | (0.01) | | $ | 0.01 | | $ | (0.02) | | $ | (0.01) | | $ | (0.02) | ||||||||||||||||||||||||||||||||
Basic weighted average common shares outstanding | |
| 27,052,445 | |
| 26,981,813 | |
| 26,929,314 | |
| 26,816,550 | |
| 26,718,171 | |
| 26,576,054 | |
| 26,512,195 | |
| 26,351,947 | ||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||||
Diluted income (loss) per common share: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| ||||||||||||||||||||||||||||||||
Net income (loss) per share | | $ | (0.04) | | $ | 0.01 | | $ | 0.01 | | $ | (0.01) | | $ | 0.01 | | $ | (0.02) | | $ | (0.01) | | $ | (0.02) | ||||||||||||||||||||||||||||||||
Diluted weighted average common shares outstanding | |
| 27,052,445 | |
| 30,058,791 | |
| 29,791,719 | |
| 26,815,550 | |
| 27,779,841 | |
| 26,576,054 | |
| 26,512,195 | |
| 26,351,947 |
Dec. 31, | Sept. 30, | June 30, | Mar. 31, | Dec. 31, | Sept. 30, | June 30, | Mar. 31, | |||||||||||||||||||||||||
2017 | 2017 | 2017 | 2017 | 2016 | 2016 | 2016 | 2016 | |||||||||||||||||||||||||
Net income (loss): | ||||||||||||||||||||||||||||||||
Loss from continuing operations | $ | (703,933 | ) | $ | (830,114 | ) | $ | (756,957 | ) | $ | (779,106 | ) | $ | (1,065,586 | ) | $ | (506,555 | ) | $ | (208,374 | ) | $ | (157,713 | ) | ||||||||
Income from discontinued operations | 79,353 | 57,149 | 354,510 | 141,616 | 222,626 | 95,889 | 155,385 | 190,089 | ||||||||||||||||||||||||
Net income (loss) | $ | (624,580 | ) | $ | (772,965 | ) | $ | (402,447 | ) | $ | (637,490 | ) | $ | (842,960 | ) | $ | (410,666 | ) | $ | (52,989 | ) | $ | 32,376 | |||||||||
Basic income (loss) per common share: | ||||||||||||||||||||||||||||||||
Loss per share from continuing operations | $ | (0.03 | ) | $ | (0.04 | ) | $ | (0.03 | ) | $ | (0.03 | ) | $ | (0.05 | ) | $ | (0.02 | ) | $ | (0.01 | ) | $ | - | |||||||||
Income per share from discontinued operations | $ | - | $ | - | $ | 0.01 | $ | - | $ | 0.01 | $ | - | $ | - | $ | - | ||||||||||||||||
Net income (loss) per share | $ | (0.03 | ) | $ | (0.04 | ) | $ | (0.02 | ) | $ | (0.03 | ) | $ | (0.04 | ) | $ | (0.02 | ) | $ | (0.01 | ) | $ | - | |||||||||
Basic weighted average common shares outstanding | 23,455,654 | 23,380,437 | 23,369,727 | 23,265,939 | 23,200,975 | 23,131,570 | 18,154,762 | 17,707,900 | ||||||||||||||||||||||||
Diluted income (loss) per common share: | ||||||||||||||||||||||||||||||||
Loss per share from continuing operations | $ | (0.03 | ) | $ | (0.04 | ) | $ | (0.03 | ) | $ | (0.03 | ) | $ | (0.05 | ) | $ | (0.02 | ) | $ | (0.01 | ) | $ | - | |||||||||
Income per share from discontinued operations | $ | - | $ | - | $ | 0.01 | $ | - | $ | 0.01 | $ | - | $ | - | $ | - | ||||||||||||||||
Net income (loss) per share | $ | (0.03 | ) | $ | (0.04 | ) | $ | (0.02 | ) | $ | (0.03 | ) | $ | (0.04 | ) | $ | (0.02 | ) | $ | (0.01 | ) | $ | - | |||||||||
Diluted weighted average common shares outstanding | 23,455,654 | 23,380,437 | 23,369,727 | 23,265,939 | 23,200,975 | 23,131,570 | 18,154,762 | 18,464,000 |
23
Comparison of the Three and Six Months Ended December 31, 2017September 30, 2023 and 20162022
Results of Operations
Three Months Ended December 31, | ||||||||||||||||||||||||||||
2017 | 2016 | 2017-2016 $ Change | 2017-2016 % Change | |||||||||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||
| | Three Months Ended September 30, |
| |||||||||||||||||||||||||
|
| 2023 |
| 2022 |
| $ Change |
| % Change |
| |||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||
Revenue: |
| |
|
| |
|
| |
|
|
| | ||||||||||||||||
Platforms | $ | 413,404 | $ | 219,137 | $ | 194,267 | 88.7 | % | | $ | 2,600,192 | | $ | 2,019,967 | | $ | 580,225 |
| 28.7 | % | ||||||||
Transactions | 6,409,816 | 5,866,562 | 543,254 | 9.3 | % | |
| 7,460,779 | |
| 6,664,676 | |
| 796,103 |
| 11.9 | % | |||||||||||
Total revenue | 6,823,220 | 6,085,699 | 737,521 | 12.1 | % | |
| 10,060,971 | |
| 8,684,643 | |
| 1,376,328 |
| 15.8 | % | |||||||||||
| | | | | | | | | | | | | ||||||||||||||||
Cost of revenue: | |
|
| |
|
| |
|
|
|
| | ||||||||||||||||
Platforms | 90,362 | 45,623 | 44,739 | 98.1 | % | |
| 382,615 | |
| 230,473 | |
| 152,142 |
| 66.0 | % | |||||||||||
Transactions | 4,996,988 | 4,664,690 | 332,298 | 7.1 | % | |
| 5,646,791 | |
| 5,104,922 | |
| 541,869 |
| 10.6 | % | |||||||||||
Total cost of revenue | 5,087,350 | 4,710,313 | 377,037 | 8.0 | % | |
| 6,029,406 | |
| 5,335,395 | |
| 694,011 |
| 13.0 | % | |||||||||||
Gross profit | 1,735,870 | 1,375,386 | 360,484 | 26.2 | % | |||||||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||
Gross profit: | |
|
| |
|
| |
|
|
|
| | ||||||||||||||||
Platforms | |
| 2,217,577 | |
| 1,789,494 | |
| 428,083 |
| 23.9 | % | ||||||||||||||||
Transactions | |
| 1,813,988 | |
| 1,559,754 | |
| 254,234 |
| 16.3 | % | ||||||||||||||||
Total gross profit | |
| 4,031,565 | |
| 3,349,248 | |
| 682,317 |
| 20.4 | % | ||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||
Operating expenses: | |
|
| |
|
| |
|
|
|
| | ||||||||||||||||
Sales and marketing | 769,406 | 854,724 | (85,318 | ) | (10.0 | )% | |
| 685,016 | |
| 521,216 | |
| 163,800 |
| 31.4 | % | ||||||||||
Technology and product development | |
| 1,244,579 | |
| 875,290 | |
| 369,289 |
| 42.2 | % | ||||||||||||||||
General and administrative | 1,308,483 | 1,226,181 | 82,302 | 6.7 | % | |
| 2,542,868 | |
| 1,519,424 | |
| 1,023,444 |
| 67.4 | % | |||||||||||
Depreciation and amortization | 46,330 | 32,426 | 13,904 | 42.9 | % | |
| 59,620 | |
| 5,812 | |
| 53,808 |
| 925.8 | % | |||||||||||
Stock-based compensation expense | 314,565 | 303,097 | 11,468 | 3.8 | % | |
| 591,814 | |
| 175,361 | |
| 416,453 |
| 237.5 | % | |||||||||||
Foreign currency transaction loss (gain) | (485 | ) | 17,631 | (18,116 | ) | (102.8 | )% | |
| 6,620 | |
| 72,516 | |
| (65,896) |
| (90.9) | % | |||||||||
Total operating expenses | 2,438,299 | 2,434,059 | 4,240 | 0.2 | % | |
| 5,130,517 | |
| 3,169,619 | |
| 1,960,898 |
| 61.9 | % | |||||||||||
Loss from operations | (702,429 | ) | (1,058,673 | ) | (356,244 | ) | (33.7 | )% | ||||||||||||||||||||
Other income (expenses): | ||||||||||||||||||||||||||||
Interest expense | (3,000 | ) | (3,000 | ) | - | - | % | |||||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||
Income (loss) from operations | |
| (1,098,952) | |
| 179,629 | |
| (1,278,581) |
| (711.8) | % | ||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||
Other income | 11,312 | 5,424 | 5,888 | 108.6 | % | |
| 140,311 | |
| 39,069 | |
| 101,242 |
| 259.1 | % | |||||||||||
Total other income | 8,312 | 2,424 | 5,888 | 242.9 | % | |||||||||||||||||||||||
Loss from operations before provision for income taxes | (694,117 | ) | (1,056,249 | ) | 362,132 | 34.3 | % | |||||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||
Income (loss) from operations before provision for income taxes | |
| (958,641) | |
| 218,698 | |
| (1,177,339) |
| (538.3) | % | ||||||||||||||||
Provision for income taxes | (9,816 | ) | (9,337 | ) | (479 | ) | (5.1 | )% | |
| (29,402) | |
| (4,133) | |
| (25,269) |
| (611.4) | % | ||||||||
Loss from continuing operations | (703,933 | ) | (1,065,586 | ) | 361,653 | 33.9 | % | |||||||||||||||||||||
Discontinued operations: | ||||||||||||||||||||||||||||
Income from discontinued operations | - | 222,626 | (222,626 | ) | (100.0 | )% | ||||||||||||||||||||||
Gain from sale of discontinued operations | 79,353 | - | 79,353 | - | % | |||||||||||||||||||||||
Income from discontinued operations | 79,353 | 222,626 | (143,273 | ) | (64.4 | )% | ||||||||||||||||||||||
Net loss | $ | (624,580 | ) | $ | (842,960 | ) | $ | 218,380 | 25.9 | % | ||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||
Net income (loss) | | $ | (988,043) | | $ | 214,565 | |
| (1,202,608) |
| (560.5) | % |
24
Six Months Ended December 31, | ||||||||||||||||
2017 | 2016 | 2017-2016 $ Change | 2017-2016 % Change | |||||||||||||
Revenue: | ||||||||||||||||
Platforms | $ | 801,349 | $ | 391,209 | $ | 410,140 | 104.8 | % | ||||||||
Transactions | 12,769,711 | 11,872,961 | 896,750 | 7.6 | % | |||||||||||
Total revenue | 13,571,060 | 12,264,170 | 1,306,890 | 10.7 | % | |||||||||||
Cost of revenue: | ||||||||||||||||
Platforms | 174,349 | 75,587 | 98,762 | 130.7 | % | |||||||||||
Transactions | 9,911,402 | 9,379,689 | 531,713 | 5.7 | % | |||||||||||
Total cost of revenue | 10,085,751 | 9,455,276 | 630,475 | 6.7 | % | |||||||||||
Gross profit | 3,485,309 | 2,808,894 | 676,415 | 24.1 | % | |||||||||||
Operating expenses: | ||||||||||||||||
Sales and marketing | 1,669,101 | 1,435,502 | 233,599 | 16.3 | % | |||||||||||
General and administrative | 2,671,969 | 2,437,189 | 234,780 | 9.6 | % | |||||||||||
Depreciation and amortization | 86,898 | 62,895 | 24,003 | 38.2 | % | |||||||||||
Stock-based compensation expense | 600,807 | 405,686 | 195,121 | 48.1 | % | |||||||||||
Foreign currency transaction loss (gain) | (12,872 | ) | 20,955 | (33,827 | ) | (161.4 | )% | |||||||||
Total operating expenses | 5,015,903 | 4,362,227 | 653,676 | 15.0 | % | |||||||||||
Loss from operations | (1,530,594 | ) | (1,553,333 | ) | 22,739 | 1.5 | % | |||||||||
Other income (expenses): | ||||||||||||||||
Interest expense | (6,000 | ) | (6,000 | ) | - | - | % | |||||||||
Other income | 24,114 | 10,134 | 13,980 | 138.0 | % | |||||||||||
Total other income | 18,114 | 4,134 | 13,980 | 338.2 | % | |||||||||||
Loss from operations before provision for income taxes | (1,512,480 | ) | (1,549,199 | ) | 36,719 | 2.4 | % | |||||||||
Provision for income taxes | (21,567 | ) | (22,942 | ) | 1,375 | 6.0 | % | |||||||||
Loss from continuing operations | (1,534,047 | ) | (1,572,141 | ) | 38,094 | 2.4 | % | |||||||||
Discontinued operations: | ||||||||||||||||
Income from discontinued operations | - | 318,515 | (318,515 | ) | (100.0 | )% | ||||||||||
Gain from sale of discontinued operations | 136,502 | - | 136,502 | - | % | |||||||||||
Income from discontinued operations | 136,502 | 318,515 | (182,013 | ) | (57.1 | )% | ||||||||||
Net loss | $ | (1,397,545 | ) | $ | (1,253,626 | ) | $ | (143,919 | ) | (11.5 | )% |
Revenue
Revenue
| | | | | | | �� | | | | | |
| | Three Months Ended September 30, |
| |||||||||
|
| 2023 |
| 2022 |
| $ Change |
| % Change |
| |||
Revenue: |
| |
|
| |
|
| |
|
|
| |
Platforms | | $ | 2,600,192 | | $ | 2,019,967 | | $ | 580,225 |
| 28.7 | % |
Transactions | |
| 7,460,779 | |
| 6,664,676 | |
| 796,103 |
| 11.9 | % |
Total revenue | | $ | 10,060,971 | | $ | 8,684,643 | | $ | 1,376,328 |
| 15.8 | % |
Three Months Ended December 31, | ||||||||||||||||
2017 | 2016 | 2017-2016 $ Change | 2017-2016 % Change | |||||||||||||
Revenue: | ||||||||||||||||
Platforms | $ | 413,404 | $ | 219,137 | $ | 194,267 | 88.7 | % | ||||||||
Transactions | 6,409,816 | 5,866,562 | 543,254 | 9.3 | % | |||||||||||
Total revenue | $ | 6,823,220 | $ | 6,085,699 | $ | 737,521 | 12.1 | % |
Total revenue increased $737,521,$1,376,328, or 12.1%15.8%, for the three months ended December 31, 2017September 30, 2023 compared to the prior year, due to the following:
| | | | | | | ||||||
Category | Impact | Key Drivers |
| Impact | Key Drivers | |||||||
Platforms | $ | 194,267 | Increased due to additional deployments to new and 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. |
| ↑ | | $ | 580,225 | Increased due to additional deployments to new and existing customers, expansion from existing customers and additional sales from the ResoluteAI transaction. 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 | $ | 543,254 | Increased primarily due to orders from new customers. |
| ↑ | | $ | 796,103 | Increased primarily due to organic higher paid order volume, including additional paid order volume due to the FIZ asset acquisition. |
Six Months Ended December 31, | ||||||||||||||||
2017 | 2016 | 2017-2016 $ Change | 2017-2016 % Change | |||||||||||||
Revenue: | ||||||||||||||||
Platforms | $ | 801,349 | $ | 391,209 | $ | 410,140 | 104.8 | % | ||||||||
Transactions | 12,769,711 | 11,872,961 | 896,750 | 7.6 | % | |||||||||||
Total revenue | $ | 13,571,060 | $ | 12,264,170 | $ | 1,306,890 | 10.7 | % |
Total revenue increased $1,306,890, or 10.7%, for the six months ended December 31, 2017 compared to the prior year, due to the following:
Category | Impact | Key Drivers | ||||
Platforms | $ | 410,140 | Increased due to additional deployments to new and 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 | $ | 896,750 | Increased primarily due to orders from new customers. |
Cost of Revenue
Three Months Ended December 31, | ||||||||||||||||||||||||||||
2017 | 2016 | 2017-2016 $ Change | 2017-2016 % Change | |||||||||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||||
| | Three Months Ended September 30, |
| |||||||||||||||||||||||||
|
| 2023 |
| 2022 |
| $ Change |
| % Change |
| |||||||||||||||||||
Cost of Revenue: |
| |
|
| |
|
| |
|
|
| | ||||||||||||||||
Platforms | $ | 90,362 | $ | 45,623 | $ | 44,739 | 98.1 | % | | $ | 382,615 | | $ | 230,473 | | $ | 152,142 |
| 66.0 | % | ||||||||
Transactions | 4,996,988 | 4,664,690 | 332,298 | 7.1 | % | |
| 5,646,791 | |
| 5,104,922 | |
| 541,869 |
| 10.6 | % | |||||||||||
Total cost of revenue | $ | 5,087,350 | $ | 4,710,313 | $ | 377,037 | 8.0 | % | | $ | 6,029,406 | | $ | 5,335,395 | | $ | 694,011 |
| 13.0 | % |
Three Months Ended December 31, | ||||||||||||
2017 | 2016 | 2017-2016 Change * | ||||||||||
As a percentage of revenue: | ||||||||||||
Platforms | 21.9 | % | 20.8 | % | 1.1 | % | ||||||
Transactions | 78.0 | % | 79.5 | % | (1.5 | )% | ||||||
Total | 74.6 | % | 77.4 | % | (2.8 | )% |
| | | | | | | |
| | Three Months Ended |
| ||||
| | September 30, | | ||||
|
| 2023 |
| 2022 |
| % Change * |
|
As a percentage of revenue: |
|
|
|
|
|
| |
Platforms |
| 14.7 | % | 11.4 | % | 3.3 | % |
Transactions |
| 75.7 | % | 76.6 | % | (0.9) | % |
Total |
| 59.9 | % | 61.4 | % | (1.5) | % |
* | The difference between current and prior period cost of revenue as a percentage of revenue |
Total cost of revenue as a percentage of revenue decreased 2.8%1.5%, from 77.4%61.4% for the previous year to 74.6%59.9%, for the three months ended December 31, 2017.September 30, 2023.
| | | | | | | |
| Impact as percentage | | |||||
Category | |
| | Key Drivers | |||
Platforms | ↑ | 3.3 | % | Increased primarily due to | |||
Transactions | ↓ | 0.9 | % | Decreased primarily due to |
Six Months Ended December 31, | ||||||||||||||||
2017 | 2016 | 2017-2016 $ Change | 2017-2016 % Change | |||||||||||||
Cost of Revenue: | ||||||||||||||||
Platforms | $ | 174,349 | $ | 75,587 | $ | 98,762 | 130.7 | % | ||||||||
Transactions | 9,911,402 | 9,379,689 | 531,713 | 5.7 | % | |||||||||||
Total cost of revenue | $ | 10,085,751 | $ | 9,455,276 | $ | 630,475 | 6.7 | % |
Six Months Ended December 31, | ||||||||||||
2017 | 2016 | 2017-2016 Change * | ||||||||||
As a percentage of revenue: | ||||||||||||
Platforms | 21.8 | % | 19.3 | % | 2.5 | % | ||||||
Transactions | 77.6 | % | 79.0 | % | (1.4 | )% | ||||||
Total | 74.3 | % | 77.1 | % | (2.8 | )% |
* The difference between current and prior period cost
25
Gross Profit
| | | | | | | | | | | | |
| | Three Months Ended September 30, |
| |||||||||
|
| 2023 |
| 2022 |
| $ Change |
| % Change |
| |||
Gross Profit: |
| |
|
| |
|
| |
|
|
| |
Platforms | | $ | 2,217,577 | | $ | 1,789,494 | | $ | 428,083 |
| 23.9 | % |
Transactions | |
| 1,813,988 | |
| 1,559,754 | |
| 254,234 |
| 16.3 | % |
Total gross profit | | $ | 4,031,565 | | $ | 3,349,248 | | $ | 682,317 |
| 20.4 | % |
| | | | | | | |
| | Three Months Ended |
| ||||
| | September 30, | | ||||
|
| 2023 |
| 2022 |
| % Change* |
|
As a percentage of revenue: |
|
|
|
|
|
| |
Platforms |
| 85.3 | % | 88.6 | % | (3.3) | % |
Transactions |
| 24.3 | % | 23.4 | % | 0.9 | % |
Total |
| 40.1 | % | 38.6 | % | 1.5 | % |
* | The difference between current and prior period gross profit as a percentage of revenue
Operating Expenses
Net Income (Loss)
26
Liquidity and Capital Resources
Liquidity As of Operating Activities Net cash used in operating activities was Net cash provided by operating activities was $108,879 for the three months ended September 30, 2022 and resulted primarily from a decrease in prepaid royalties of $710,640, a net
Investing Activities Net cash used in investing activities was $2,718,253. Net cash used in investing activities was Financing Activities Net cash used in financing activities was Net cash used in financing activities was 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 27 There were no outstanding borrowings under the line as of SVB Bridge Bank agreed that we can lower our cash balance threshold requirement associated with the SVB LSA, reducing the required balances of its and its subsidiaries’ primary operating and other accounts with SVB, and we continue to evaluate the SVB LSA. We have established additional banking relationships with Bank of America, N.A. and PNC Bank, N.A. At September 30, 2023, we held cash at Bank of America, N.A. of $1,516,191 and at PNC Bank, N.A. of $3,496,791. Subsequent to September 30, 2023, FCB informed us of certain defaults under the SVB LSA resulting from our violation of certain covenants regarding retaining operating cash with SVB, obtaining deposit account control agreements with respect to such accounts and failing to maintain the required adjusted quick ratio. We became aware of additional technical defaults following FCB’s outreach, and such defaults substantially related to our moves to promptly diversify its cash position following the collapse of Silicon Valley Bank in March of 2023. On November 14, 2023, we entered into a Fifth Amendment to Amended and Restated Loan and Security Agreement, Consent and Forbearance Agreement (the “Fifth Amendment”) with FCB, pursuant to which, among other matters, FCB agreed to forbear from exercising its remedies under the SVB LSA in connection with the existing events of default, and agreed to waive the existing events of default provided we regain compliance with the adjusted quick ratio covenant and the operating accounts covenants by January 30, 2024, no other events of defaults have occurred and no forbearance termination events (as listed in the Fifth Amendment) have occurred. Non-GAAP Measure – Adjusted EBITDA In addition to our GAAP results, we present Adjusted EBITDA as a supplemental measure of our performance. However, Adjusted EBITDA is not a recognized measurement under GAAP and should not be considered as an alternative to net income, income from operations or any other performance measure derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of liquidity. We define Adjusted EBITDA as net income (loss), plus interest expense, other income (expense), foreign currency transaction loss, provision for income taxes, depreciation and amortization, stock-based compensation, income from discontinued operations and gain on sale of discontinued operations. Management considers our core operating performance to be that which our managers can affect in any particular period through their management of the resources that affect our underlying revenue and profit generating operations that period. Non-GAAP adjustments to our results prepared in accordance with GAAP are itemized below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items. Set forth below is a reconciliation of Adjusted EBITDA to net income (loss) for the three
28
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:
Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements. Item 3. Quantitative and Qualitative Disclosures About Market Risk Not required. Item 4. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. For purposes of this section, the termdisclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of Inherent Limitations on the Effectiveness of Controls Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered 29 relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Changes in Internal Control Over Financial Reporting In addition, our management with the participation of our principal executive officer and principal financial officer have determined that no change in our internal control over financial reporting (as that term is defined in Rules 13(a)-15(f) and 15(d)-15(f) of the Exchange Act) occurred during the quarter ended Item 1A. Risk Factors. There have been no material changes from the risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended June 30, 2023. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
As of June 30, 2023, $151,095 remained under the current authorization to repurchase our outstanding common stock from our employees. During the three months ended Shares repurchased are retired and deducted from common stock for par value and from additional paid in capital for the excess over par value. Direct costs incurred to acquire the shares are included in the total cost of the shares. 30 The following table summarizes repurchases of our common stock on a monthly basis:
1 Consists of shares of common stock purchased from an employee to satisfy tax obligations in connection with the vesting of stock incentive awards. EXHIBIT INDEX
* Furnished herewith 31 Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
32
|