| Significant Accounting Policies | Note 2
- Significant Accounting Policies Basis
of Presentation The
condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United
States of America (“GAAP”) and considering the requirements of the United States Securities and Exchange Commission (“SEC”).
The Company has a fiscal year with a June 30 year end. In
the opinion of management, the condensed financial statements of the Company as of March 31, 2023 and 2022 and for the nine months ended
March 31, 2023 and 2022 include all adjustments and accruals, consisting only of normal, recurring accrual adjustments, which are necessary
for a fair presentation of the results for the interim periods. These interim results are not necessarily indicative of results for a
full year. Certain
information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed in
or omitted from this report pursuant to the rules and regulations of the SEC. These financial statements should be read together with
the condensed financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June
30, 2022. Use
of Estimates The
preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. Actual results could differ from those estimates. Fair
Value Measurements Accounting
standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing
that fair value. The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques
used to measure fair value. Fair
values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities that the Company has the
ability to access. Fair
values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include
quoted prices for similar assets and liabilities in active markets and other inputs such as interest rates and yield curves that are
observable at commonly quoted intervals. Level
3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for
the related asset. These Level 3 fair value measurements are based primarily on management’s own estimates using pricing models,
discounted cash flow methodologies, or similar techniques. In
instances wherein inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements
in their entirety are categorized based on the lowest level input that is significant to the valuation. The Company’s assessment
of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset
or liability. Cash
and Cash Equivalents The Company considers all investments with an original maturity of
three months or less when purchased to be cash equivalents. The total amount of bank deposits (checking and savings accounts) insured
by the FDIC at year end was $250,000. Income
Taxes A
current tax liability or asset is recognized for the estimated taxes payable or refundable on tax returns for the year. Deferred tax
liabilities or assets are recognized for the estimated future tax effects of temporary differences between financial reporting and tax
accounting. Deferred
tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not
be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in the statement of operations in the period that includes the enactment date. Technology
and Content Development Technology
and content development expenditures consist primarily of personnel and personnel-related expense and contracted services associated
with the maintenance of our platform as well as hosting and licensing costs and are charged to expense as incurred. It also includes
amortization of capitalized software costs and research and development costs related to improving our platform and creating content
that are charged to expense as incurred. Property
and Equipment Property
and equipment are recorded at cost. The straight-line method is used for computing depreciation and amortization. Assets are depreciated
over their estimated useful lives. The cost of leasehold improvements is depreciated (amortized) over the lesser of the length of the
related leases or the estimated useful lives of the assets. Costs of maintenance and repairs are charged to expense when incurred.
Depreciable
Life - Years
Leasehold improvements Shorter of estimated lease term or 10 years
Furniture and fixtures 7 years
Computer equipment and software 5 years Capitalized
Software Costs The Company capitalizes costs incurred in the development of software
for internal use, including the costs of the software, materials, consultants, and payroll and payroll related costs for employees incurred
in developing internal use computer software. Planning costs incurred prior to the development of software and costs not qualifying for
capitalization are charged to expense. The Company amortizes capitalized software over a period of three years, which is the expected
useful life of the software. The Company recognized amortization expense of approximately $507,000 and $658,000 for the nine months ended
March 31, 2023 and 2022, respectively. The Company recognized amortization expense of approximately $157,000 and $234,000 for the three
months ended March 31, 2023 and 2022, respectively. Accumulated amortization on March 31, 2023 and 2022 was $2,690,000 and $1,996,000,
respectively. Revenue
Recognition We generate substantially all of our revenue from contractual arrangements
with businesses, colleges and universities to provide a comprehensive platform of integrated technology and technology enabled services
related to product offerings. During the nine months ended March 31, 2023 and 2022, we recognized revenue from contracts with customers
of approximately $722,000 and $539,000, respectively, of which $125,000 and $49,400, respectively, related to services transferred
at a point in time and the remainder related to services provided over time. Performance
Obligations and Timing of Recognition A
performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction
price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. We
derive revenue from annual licensing arrangements, including maintenance fees, setup fees and other variable fees for course development
and miscellaneous items. Our contracts with partners generally have two-year terms and have a single performance obligation. The promises
to set up and provide a hosted platform of tightly integrated technology and services partners needed to attract, enroll, educate, and
support students are not distinct within the context of the contracts. This performance obligation is satisfied as the partners receive
and consume benefits, which occurs ratably over the contract term. Occasionally,
we will provide professional services, such as custom development, non-complex implementation activities, training, and other various
professional services. We evaluate these services to determine if they are distinct and separately identifiable in the context of the
contract. In our contracts with customers that contain multiple performance obligations as a result of this assessment, we allocate the
transaction price to each separate performance obligation on a relative standalone selling price basis. Standalone selling prices of
our solutions and services are typically estimated based on observable transactions when the solutions or services are sold on a standalone
basis. When standalone selling prices are not observable, we utilize a cost-plus margin approach to allocate the transaction price. We do not disclose the value of unsatisfied performance obligations
because the variable consideration is allocated entirely to a wholly unsatisfied promise to transfer a service that forms part of a single
performance obligation (i.e., consideration received is based on the level of product offerings, which is unknown in advance). For the
nine months ended March 31, 2023 and 2022, all of the revenue recognized has been recognized over the related contract periods. Additionally,
for the nine months ended March 31, 2023, three customers comprised approximately 70% of total revenue. During the nine months ended March
31, 2023, one customer comprised approximately 34% of total revenue. We
also receive fees that are fixed in nature, such as annual license and maintenance charges, in place of or in conjunction with variable
consideration. The fees are independent of the number of students that are enrolled in courses with our customers and are allocated to
and recognized ratably over the service period of the contract that the Company’s platform is made available to the customer (i.e., the customer simultaneously receives and consumes the benefit of
the software over the contract service period). The
following factors affect the nature, amount, timing, and uncertainty of our revenue and cash flows:
● The majority of our customers
are private and public learning institutions across various domestic regions
● The majority of our customers
have annual payment terms Accounts
Receivable, Contract Assets and Liabilities Balance
sheet items related to contracts consist of accounts receivable (net) and contract liabilities on our condensed balance sheets. Accounts
receivable (net) is stated at net realizable value, and we utilize the allowance method to provide for doubtful accounts based on management’s
evaluation of the collectability of the amounts due. Our estimates are reviewed and revised periodically based on historical collection
experience and a review of the current status of accounts receivable. Historically, actual write-offs for uncollectible accounts have
not significantly differed from prior estimates. There was no allowance for doubtful accounts on accounts receivable balances as of
March 31, 2023 or June 30, 2022. We may recognize revenue prior to billing a customer when we have satisfied
or partially satisfied our performance obligations as billings to our customers may not be made until after the service period has commenced.
As of March 31, 2023 and June 30, 2022, we do not have any such contract assets. Contract
liabilities as of each balance sheet date represent the excess of amounts billed or received as compared to amounts recognized in revenue
on our condensed statements of operations as of the end of the reporting period, and such amounts are reflected as a current liability
on our condensed balance sheets as deferred revenue. We generally receive payments prior to completion of the service period and our
performance obligations. These payments are recorded as deferred revenue until the services are delivered or until our obligations are
otherwise met, at which time revenue is recognized. Some
contracts also involve annual license fees, for which upfront amounts are received from customers. In these contracts, the license fees
received in advance of the platform’s launch are recorded as contract liabilities. The
following table provides information on the changes in the balance of contract liabilities for the nine months ended March 31:
2023 2022
Opening balance $ 342,672 $ 333,200
Billings 487,564 425,445
Less revenue recognized (net of cancellations): (724,256 ) (539,455 )
Closing balance $ 105,980 $ 219,190 Revenue recognized during the nine months ended March 31, 2023 and
2022 that was included in the deferred revenue balance that existed in the opening balance of each year was approximately $264,043 and
$539,455, respectively. The
deferred revenue balance as of March 31, 2023 is expected to be recognized over the next 12 months. Net
Loss per Share Basic
net loss per share is calculated by dividing the net loss for the period by the weighted-average number of common shares outstanding
during the period. Diluted loss per share includes potentially dilutive securities such as outstanding options and warrants, using various
methods such as the treasury stock or modified treasury stock method in the determination of dilutive shares outstanding during each
reporting period. At
March 31, 2023 and June 30, 2022, the Company had 379,545 and 382,077 potentially dilutive shares of common stock related to
common stock options and warrants, respectively, as determined using the if-converted method. For the nine months ended March 31, 2023
and 2022, the dilutive effect of common stock options and common stock warrants has not been included in the average shares outstanding
for the calculation of net loss per share as the effect would be anti-dilutive as a result of our net losses in these periods. Stock-Based
Compensation We
have issued three types of stock-based awards under our stock plans: stock options, restricted stock units and stock warrants. All stock-based
awards granted to employees, directors and independent contractors are measured at fair value at each grant date. We rely on the Black-Scholes
option pricing model for estimating the fair value of stock-based awards granted, and expected volatility is based on the historical
volatility of the Company’s stock prices. Stock options generally vest over two years from the grant date and generally have ten-year
contractual terms. Restricted stock units generally have a term of 12 months from the closing date of the agreement. Stock warrants issued
have a term of five years. Information about the assumptions used in the calculation of stock-based compensation expense is set forth
in Note 3 in the Notes to Financial Statements. Risks
and Uncertainties The
Company operates in an industry subject to rapid change. The Company’s operations will be subject to significant risk and uncertainties
including financial, operational, technological, and other risks associated with an early-stage company, including the potential risk
of business failure. On
March 11, 2020, the World Health Organization declared the outbreak of a respiratory disease caused by a novel coronavirus as a “pandemic.”
First identified in late 2019 and known now as COVID-19, the outbreak has impacted thousands of individuals worldwide. In response, many
countries, including the United States, have implemented measures to combat the outbreak which have impacted global business operations.
While management believes the Company’s operations have not been significantly impacted, the Company continues to monitor the situation.
In addition, while the Company’s results of operations, cash flows and financial condition could be negatively impacted, the extent
of the impact cannot be reasonably estimated at this time. |
