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: ~~March 31,~~September 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. 001-39256

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) 477-0354

(Registrant’s telephone number, including area code)

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. Yes þ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes þ No ◻

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 þ	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 ☐ No þ

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 ~~May 5,~~November 3, 2023
Common Stock, $0.001 par value		~~29,500,764~~29,624,085

¹ In November 2019, we became a fully remote company. Accordingly, we do not currently have principal executive offices.

Table of Contents

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION	3
Item 1. Condensed Consolidated Financial Statements (unaudited)	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3. Quantitative and Qualitative Disclosures About Market Risk	3229
Item 4. Controls and Procedures	3229

PART II — OTHER INFORMATION	3330
Item 1A. Risk Factors	3330
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3330
Item 6. Exhibits	3431

SIGNATURES	3532

Table of Contents

PART 1 — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Research Solutions, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

March 31,



2023

June 30,

(unaudited)

2022

Assets





Current assets:





Cash and cash equivalents

$
12,132,899

$
10,603,175

Accounts receivable, net of allowance of $49,670 and $94,144, respectively

6,797,240

5,251,545

Prepaid expenses and other current assets

398,726

276,026

Prepaid royalties

798,892

846,652

Total current assets

20,127,757

16,977,398





Other assets:





Property and equipment, net of accumulated depreciation of $868,324 and $840,996, respectively

53,766

47,985

Intangible assets, net of accumulated amortization of $11,046 and $0, respectively

430,788

—

Deposits and other assets

997

893

Total assets

$
20,613,308

$
17,026,276





Liabilities and Stockholders’ Equity





Current liabilities:

Accounts payable and accrued expenses

$
7,696,205

$
6,604,032

Deferred revenue

6,524,570

5,538,526

Total current liabilities

14,220,775

12,142,558





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; 29,500,764 and 27,075,648 shares issued and outstanding, respectively

29,501

27,076

Additional paid-in capital

29,386,169

28,072,855

Accumulated deficit

(22,898,395)

(23,094,272)

Accumulated other comprehensive loss

(124,742)

(121,941)

Total stockholders’ equity

6,392,533

4,883,718

Total liabilities and stockholders’ equity

$
20,613,308

$
17,026,276


	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

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Research Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss)

(Unaudited)


	Three Months Ended				Nine Months Ended				Three Months Ended
	March 31,				March 31,				September 30,
	2023		2022		2023		2022		2023		2022

Revenue:
Platforms	$	2,249,632	$	1,786,224	$	6,379,871	$	4,900,927	$	2,600,192	$	2,019,967
Transactions		8,092,794		6,971,128		21,363,864		19,471,216		7,460,779		6,664,676
Total revenue		10,342,426		8,757,352		27,743,735		24,372,143		10,060,971		8,684,643

Cost of revenue:
Platforms		268,630		219,051		752,176		696,375		382,615		230,473
Transactions		6,046,523		5,299,804		16,211,211		14,939,236		5,646,791		5,104,922
Total cost of revenue		6,315,153		5,518,855		16,963,387		15,635,611		6,029,406		5,335,395
Gross profit		4,027,273		3,238,497		10,780,348		8,736,532		4,031,565		3,349,248

Operating expenses:
Selling, general and administrative		3,875,802		3,573,454		10,766,537		9,912,690		5,070,897		3,163,807
Depreciation and amortization		18,332		4,988		30,486		12,144		59,620		5,812
Total operating expenses		3,894,134		3,578,442		10,797,023		9,924,834		5,130,517		3,169,619

Income (loss) from operations		133,139		(339,945)		(16,675)		(1,188,302)		(1,098,952)		179,629

Other income		104,331		237		218,095		777		140,311		39,069

Income (loss) from operations before provision for income taxes		237,470		(339,708)		201,420		(1,187,525)		(958,641)		218,698
Provision for income taxes		(628)		(822)		(5,543)		(6,592)		(29,402)		(4,133)

Net income (loss)		236,842		(340,530)		195,877		(1,194,117)		(988,043)		214,565

Other comprehensive income (loss):
Foreign currency translation		(4,149)		1,609		(2,801)		(1,181)		(946)		(5,176)
Comprehensive income (loss)	$	232,693	$	(338,921)	$	193,076	$	(1,195,298)	$	(988,989)	$	209,389

Basic income (loss) per common share:
Net income (loss) per share	$	0.01	$	(0.01)	$	0.01	$	(0.05)	$	(0.04)	$	0.01
Weighted average common shares outstanding		26,929,314		26,512,195		26,820,557		26,392,949		27,052,445		26,718,171

Diluted income (loss) per common share:
Net income (loss) per share	$	0.01	$	(0.01)	$	0.01	$	(0.05)	$	(0.04)	$	0.01
Weighted average common shares outstanding		29,791,719		26,512,195		28,837,774		26,392,949		27,052,445		27,779,841

See notes to condensed consolidated financial statements

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Research Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the Three ~~and Nine~~ Months Ended ~~March 31,~~September 30, 2023

(Unaudited)


				Additional				Other		Total					Additional				Other		Total
	Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders’		Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Loss		Equity		Shares	Amount		Capital		Deficit		Loss		Equity

Balance, December 31, 2022	29,154,737	$	29,155	$	28,874,383	$	(23,135,237)	$	(120,593)	$	5,647,708
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	—		—		37,236		—		—		37,236	—		—		17,471		—		—		17,471

Fair value of vested restricted common stock	332,500		333		442,890		—		—		443,223	105,000		105		574,238		—		—		574,343

Forfeited restricted common stock	(65,165)		(65)		65		—		—		—

Repurchase of common stock	(12,785)		(13)		(25,814)		—		—		(25,827)	(18,603)		(19)		(46,116)		—		—		(46,135)

Common stock issued upon exercise of stock options	91,477		91		57,409		—		—		57,500	50,180		51		(51)		—		—		—

Net income for the period	—		—		—		236,842		—		236,842	—		—		—		(988,043)		—		(988,043)

Foreign currency translation	—		—		—		—		(4,149)		(4,149)	—		—		—		—		(946)		(946)

Balance, March 31, 2023	29,500,764	$	29,501	$	29,386,169	$	(22,898,395)	$	(124,742)	$	6,392,533

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	—		—		338,973		—		—		338,973

Fair value of vested restricted common stock	2,354,834		2,355		923,195		—		—		925,550

Forfeited restricted common stock	(65,165)		(65)		65		—		—		—

Fair value of vested unrestricted common stock	36,509		36		68,236		—		—		68,272

Repurchase of common stock	(38,585)		(38)		(74,518)		—		—		(74,556)

Common stock issued upon exercise of stock options	137,523		137		57,363		—		—		57,500

Net income for the period	—		—		—		195,877		—		195,877

Foreign currency translation	—		—		—		—		(2,801)		(2,801)

Balance, March 31, 2023	29,500,764	$	29,501	$	29,386,169	$	(22,898,395)	$	(124,742)	$	6,392,533
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

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Research Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity

For the Three ~~and Nine~~ Months Ended ~~March 31,~~September 30, 2022

(Unaudited)


				Additional				Other		Total					Additional				Other		Total
	Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders’		Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Loss		Equity		Shares	Amount		Capital		Deficit		Loss		Equity

Balance, December 31, 2021	26,817,056	$	26,817	$	27,475,741	$	(22,315,475)	$	(122,367)	$	5,064,716
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	—		—		296,782		—		—		296,782	—		—		40,706		—		—		40,706

Fair value of vested restricted common stock	42,214		42		102,410		—		—		102,452	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	(6,086)		(6)		(14,235)		—		—		(14,241)	(9,659)		(9)		(18,053)		—		—		(18,062)

Common stock issued upon exercise of stock options	147,660		148		66,869		—		—		67,017	6,046		6		(6)		—		—		—

Net loss for the period	—		—		—		(340,530)		—		(340,530)	—		—		—		214,565		—		214,565

Foreign currency translation	—		—		—		—		1,609		1,609	—		—		—		—		(5,176)		(5,176)

Balance, March 31, 2022	27,000,844	$	27,001	$	27,927,567	$	(22,656,005)	$	(120,758)	$	5,177,805

Balance, July 1, 2021	26,498,215	$	26,498	$	26,982,052	$	(21,461,888)	$	(119,577)	$	5,427,085

Fair value of vested stock options	—		—		424,450		—		—		424,450

Fair value of vested restricted common stock	293,211		293		446,140		—		—		446,433

Repurchase of common stock	(33,402)		(34)		(82,019)		—		—		(82,053)

Common stock issued upon exercise of stock options	192,820		194		97,494		—		—		97,688

Common stock issued upon exercise of warrants	50,000		50		59,450		—		—		59,500

Net loss for the period	—		—		—		(1,194,117)		—		(1,194,117)

Foreign currency translation	—		—		—		—		(1,181)		(1,181)

Balance, March 31, 2022	27,000,844	$	27,001	$	27,927,567	$	(22,656,005)	$	(120,758)	$	5,177,805
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

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Research Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	Nine Months Ended				Three Months Ended
	March 31,				September 30,
	2023		2022		2023		2022

Cash flow from operating activities:
Net income (loss)	$	195,877	$	(1,194,117)	$	(988,043)	$	214,565
Adjustment to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		30,486		12,144		59,620		5,812
Fair value of vested stock options		338,973		424,450		17,471		40,706
Fair value of vested restricted common stock		925,550		446,433		574,343		134,655
Fair value of vested unrestricted common stock		68,272		—		—		68,272
Changes in operating assets and liabilities:
Accounts receivable		(1,545,695)		(904,915)		(112,965)		81,756
Prepaid expenses and other current assets		(122,700)		(67,984)		109,946		70,908
Prepaid royalties		47,760		(54,287)		35,140		710,640
Accounts payable and accrued expenses		947,789		397,088		195,747		(1,037,057)
Deferred revenue		986,044		538,477		(646,830)		(181,378)
Net cash provided by (used in) operating activities		1,872,356		(402,711)		(755,571)		108,879

Cash flow from investing activities:
Purchase of property and equipment		(29,976)		(34,251)		(33,825)		(3,681)
Payment for acquisition, net of cash acquired						(2,718,253)		—
Payment for non-refundable deposit for asset acquisition		(297,450)		—		—		(297,450)
Net cash used in investing activities		(327,426)		(34,251)		(2,752,078)		(301,131)

Cash flow from financing activities:
Proceeds from the exercise of stock options		57,500		97,688
Proceeds from the exercise of warrants		—		59,500
Common stock repurchase		(74,556)		(82,053)		(46,135)		(18,062)
Net cash provided by (used in) financing activities		(17,056)		75,135
Payment of contingent acquisition consideration						(110,190)		—
Net cash used in financing activities						(156,325)		(18,062)

Effect of exchange rate changes		1,850		(1,989)		705		(5,172)
Net increase (decrease) in cash and cash equivalents		1,529,724		(363,816)
Net decrease in cash and cash equivalents						(3,663,269)		(215,486)
Cash and cash equivalents, beginning of period		10,603,175		11,004,337		13,545,333		10,603,175
Cash and cash equivalents, end of period	$	12,132,899	$	10,640,521	$	9,882,064	$	10,387,689

Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	5,543	$	6,592	$	29,402	$	4,133

Non-cash investing and financing activities:
Contingent consideration accrual on asset acquisition	$	144,384	$	—	$	42,989	$	—

See notes to condensed consolidated financial statements

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RESEARCH SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~Nine~~Three Months Ended ~~March 31,~~September 30, 2023 and 2022 (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 ~~three~~four wholly owned subsidiaries: Reprints Desk, Inc., (“Reprints Desk”) a Delaware corporation, including 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: a cloud-based software-as-a-service (“SaaS”) research ~~platform~~platforms (“Platforms”) typically sold via annual auto-renewing license agreements and the sale of published scientific, technical, and medical (“STM”) content sold as individual articles (“Transactions”) either stand alone or via the core research Platform. When customers utilize the core research Platform to purchase Transactions it is packaged as a single solution that enables life science and other ~~research intensive~~research-intensive organizations to accelerate their research and development activities with faster, access and management of STM articles used throughout the intellectual property development lifecycle. The ~~Platform~~Platforms typically ~~delivers~~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 ~~Platform consists~~Platforms consist of proprietary software and Internet-based interfaces sold to customers for an annual subscription fee. Legacy functionality allows customers to initiate orders, route orders for the lowest cost acquisition, manage transactions, obtain spend and usage reporting, automate authentication, and connect seamlessly to in-house and third-party software systems. Customers can also enhance the information resources they already own or license and collaborate around bibliographic information.

Additional functionality has recently been added to our ~~Platform~~Platforms in the form of interactive app-like components. An alternative to manual data filtering, identification and extraction, the apps are designed to gather, augment, and extract data across a variety of formats, including bibliographic citations, tables of contents, RSS feeds, PDF files, XML feeds, and web content. We continue to develop new apps in order to build an ecosystem of apps. Together, these apps will provide researchers with an “all in one” toolkit, delivering efficiencies in core research workflows and knowledge creation processes.

Our ~~Platform is~~Platforms are deployed as a single, multi-tenant system across our entire customer base. Customers securely access the ~~Platform~~Platforms through online web interfaces and via web service APIs that enable customers to leverage Platform features and functionality from within in-house and third-party software systems. The ~~Platform~~Platforms can also be configured to satisfy a customer’s individual preferences. We leverage our ~~Platform’s~~Platforms’ efficiencies in scalability, stability and development costs to fuel rapid innovation and competitive advantage.

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.

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deliver to them generally in under an hour; in many cases under one minute. This service is generally known in the industry

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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, ~~2022~~2023 filed with the SEC. The condensed consolidated balance sheet as of June 30, ~~2022~~2023 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’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, 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’s financial condition, generally without collateral. Exposure to losses on receivables is principally dependent on each customer’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 an aggregate US Dollar equivalent of ~~$2,256,895~~$1,269,071 and ~~$483,232~~$1,760,323 at ~~March 31,~~September 30, 2023 and June 30, ~~2022,~~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 nine~~ months ended ~~March 31,~~September 30, 2023 and 2022.

The Company has no customers that accounted for greater than 10% of accounts receivable at ~~March 31,~~September 30, 2023 and June 30, ~~2022.~~2023.

The following table summarizes vendor concentrations:


	Three Months Ended				Nine Months Ended				Three Months Ended
	March 31,				March 31,				September 30,
	2023		2022		2023		2022		2023		2022
Vendor A	23	%	22	%	22	%	21	%	24	%	21	%
Vendor B	14	%	13	%	13	%	13	%	11	%	12	%

Revenue Recognition

The Company 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 are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company derives its revenues from two sources: annual licenses that allow customers to access and utilize certain premium features of our cloud-based SaaS research intelligence ~~platform (“Platforms”)~~platforms (Platforms) and the transactional sale of STM content managed, sourced and delivered through the Platform ~~(“Transactions”)~~(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.

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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 provided all other revenue recognition criteria have been met.

Revenue by Geographical Region

The following table summarizes revenue by geographical region:

Three Months Ended

March 31,

2023

2022

United States

$
5,892,424

57.0
%

$
5,027,965

57.4
%
Europe

3,530,469

34.1
%

3,159,984

36.1
%
Rest of World

919,533

8.9
%

569,403

6.5
%
Total

$
10,342,426

100
%

$
8,757,352

100
%


	Nine Months Ended								Three Months Ended
	March 31,								September 30,
	2023				2022				2023				2022
United States	$	15,997,407	57.7	%	$	14,222,605	58.4	%	$	5,861,032	58.3	%	$	5,043,083	58.1	%
Europe		9,503,235	34.3	%		8,488,722	34.8	%		3,155,709	31.4	%		3,009,521	34.6	%
Rest of World		2,243,093	8.1	%		1,660,816	6.8	%		1,044,230	10.4	%		632,039	7.3	%
Total	$	27,743,735	100	%	$	24,372,143	100	%	$	10,060,971	100	%	$	8,684,643	100	%

Accounts Receivable by Geographical Region

The following table summarizes accounts receivable by geographical region:


	As of March 31, 2023				As of June 30, 2022				As of September 30, 2023				As of June 30, 2023
United States	$	4,041,180	59.5	%	$	3,255,976	62.0	%	$	3,690,748	57.1	%	$	3,727,977	60.6	%
Europe		2,020,602	29.7	%		1,665,111	31.7	%		1,975,110	30.6	%		1,763,044	28.7	%
Rest of World		735,458	10.8	%		330,458	6.3	%		794,330	12.3	%		662,042	10.8	%
Total	$	6,797,240	100	%	$	5,251,545	100	%	$	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 carrying 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 to 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 when the consideration is due, from the customer.

Cash payments received or due in advance of performance 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.

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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 and restricted stock awards to employees and non-employees for services. The Company accounts for such grants issued and vesting based on ASC 718, whereby the value of the award 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 equity instruments repurchased at the repurchase date. Any excess of the repurchase price over the fair value of the instruments repurchased shall be recognized as additional compensation cost.

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.

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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 ~~gain~~a loss of ~~$72,547~~$6,620 and ~~$84,210~~$72,516 for the three ~~and nine~~ months ended ~~March 31,~~September 30, 2023 ~~respectively~~ and ~~losses of $29,394 and $52,619 for the three and nine months ended March 31,~~ 2022, respectively. Cash denominated in Euros and British Pounds with an aggregate US Dollar equivalent of ~~$2,256,895~~$1,269,071 and ~~$483,232~~$1,760,323 at ~~March 31,~~September 30, 2023 and June 30, ~~2022,~~2023, respectively, was held in accounts at financial institutions located in Europe.

The following table summarizes the exchange rates used:


	Nine Months Ended		Year Ended		Three Months Ended		Year Ended
	March 31,		June 30,		September 30,		June 30,
	2023	2022	2023	2021	2023	2022	2023	2022
Period end Euro : US Dollar exchange rate	1.09	1.11	1.05	1.19	1.06	0.98	1.09	1.05
Average period Euro : US Dollar exchange rate	1.03	1.15	1.13	1.19	1.10	1.01	1.05	1.13

Period end GBP : US Dollar exchange rate	1.24	1.31	1.21	1.38	1.22	1.11	1.27	1.21
Average period GBP : US Dollar exchange rate	1.19	1.36	1.34	1.34	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	0.05	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

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earnings per share is computed by dividing the net income applicable to common stockholders 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 ~~March 31,~~September 30, 2023 potentially dilutive securities include options to acquire ~~2,925,574~~2,590,024 shares of common stock and unvested restricted common stock of ~~2,528,187.~~2,436,605. At ~~March 31,~~September 30, 2022 potentially dilutive securities include options to acquire ~~3,249,617~~3,125,372 shares of common stock and unvested restricted common stock of ~~364,675.~~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 nine~~ months ended ~~March 31, 2022~~September 30, 2023 because all stock options, warrants, and unvested restricted common stock are anti-dilutive. For the three ~~and nine~~ months ended ~~March 31, 2023,~~September 30, 2022, the calculation of diluted earnings per share ~~include~~includes unvested restricted common stock, stock options and warrants, calculated under the treasury stock method.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. ASU 2016-13 is effective for the Company beginning July 1, 2023, and early adoption is permitted. The Company does not believe the potential impact of the new guidance and related codification improvements will be material to its financial position, results of operations and 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’s present or future consolidated financial statements.

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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 February 28, 2024, and is subject to certain financial and performance covenants with which we were in compliance as of ~~March 31,~~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. The line of credit bears interest at an annual rate equal to the greater of 1% above the prime rate and 5.0%. The interest rate on the line of credit was 9%9.5% as of ~~March 31,~~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. In compliance with the foregoing covenants the Company and its subsidiaries maintained with SVB substantially all of the dollar value of the Company’s and its subsidiaries’ accounts. At February 28, 2023, the Company held cash at SVB of $10,832,880, of which we estimate $9,738,292 was in excess of government insured limits.

On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver and SVB was subsequently transferred into a new entity, Silicon Valley Bridge Bank, N.A. (“SVB Bridge Bank”). On March 12, 2023, the U.S. Treasury Department, the Federal Reserve and the FDIC jointly announced enabling actions that fully protect all SVB depositors’ insured and uninsured deposits, and that such depositors would have access to all of their funds starting March 13, 2023. On March 14, 2023, the Company was able to access its full deposits with SVB Bridge Bank. At March 31, 2023, the

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~~Company held cash at SVB Bridge Bank of $10,474,449, of which we estimate $9,406,136 was in excess of government insured limits.~~

There were no outstanding borrowings under the line as of ~~March 31,~~September 30, 2023 and June 30, ~~2022,~~2023, respectively. As of ~~March 31,~~September 30, 2023, there was approximately ~~$2,500,000~~$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.

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 ~~March 31,~~September 30, 2023, the Company ~~also~~ held cash at Bank of America, N.A. of ~~$750,000~~$1,516,191 and at PNC Bank, N.A. of ~~$905,510.~~$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 ~~continues~~became aware of additional technical defaults following FCB’s outreach, and such defaults substantially related to ~~re-allocate~~the Company’s moves to promptly diversify its cash position ~~across all three banks~~following the collapse of Silicon Valley Bank in March of 2023. On November 14, 2023, the Company, Reprints Desk and ~~explore an overall banking diversification strategy as well as additional access~~FCB entered into a Fifth Amendment to ~~lending facilities.~~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 remedies under the SVB LSA in connection with the existing events of default, and agreed to waive the existing events of default provided the Company regains 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.

Note 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,

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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 ~~March 31,~~September 30, 2023, there were ~~1,495,927~~1,390,927 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 Plan 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
		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	—		—	—		—	—		—
Options vesting	—		—	13,765		2.43	(13,765)		2.43
Exercised	(319,550)		2.03	(319,550)		2.03	—		—
Forfeited	—		—	—		—	—		—
Outstanding at September 30, 2023	2,590,024	$	1.85	2,559,808	$	1.84	30,216	$	2.48

The weighted average remaining contractual life of all options outstanding as of September 30, 2023 was 5.34 years. The remaining contractual life for options vested and exercisable at September 30, 2023 was 5.31 years. Furthermore, the aggregate intrinsic value of options outstanding as of September 30, 2017 was $1,845,909, and the aggregate intrinsic value of options vested and exercisable as of September 30, 2023 was $1,842,925, in each case based on the fair value of the Company’s common stock on September 30, 2023.

During the three months ended September 30, 2023, the Company did not grant any options to employees. The total fair value of options that vested during the three months ended September 30, 2023 was $17,471 and is included in selling, general and administrative expenses in the accompanying statement of operations. As of September 30, 2023, the amount of unvested compensation related to stock options was $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.

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The following table presents the information regarding stock options outstanding and exercisable as of September 30, 2023:


	Option		Remaining
	Exercise	Options	Contractual	Options
	Price	Outstanding	Life (in years)	Exercisable
$	0.70	225,000	2.18	225,000
	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

Restricted Common Stock

Prior to July 1, 2023, the Company issued 5,184,592 shares of restricted common stock to employees valued at $7,503,186, of which 2,427,309 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.

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~~The following table summarizes vested and unvested stock option activity:~~

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, 2022

3,182,872

$
1.79

2,999,974

$
1.75

182,898

$
2.49
Granted

200,000

2.15

—

—

200,000

2.15
Options vesting

—

—

309,486

2.27

(309,486)

2.27
Exercised

(307,298)

1.31

(307,298)

1.31

—

—
Forfeited

(150,000)

1.81

(147,917)

1.78

(2,083)

3.92
Repurchased

—

—

—

—

—

—
Outstanding at March 31, 2023

2,925,574

$
1.87

2,854,245

$
1.85

71,329

$
2.46

The weighted average remaining contractual life of all options outstanding as of March 31, 2023 was 5.71 years. The remaining contractual life for options vested and exercisable at March 31, 2023 was 5.65 years. Furthermore, the aggregate intrinsic value of options outstanding and of options vested and exercisable as of March 31, 2023 was $1,060,516, in each case based on the fair value of the Company’s common stock on March 31, 2023.

During the ~~nine~~three months ended March 31, 2023, the Company granted 200,000 options to directors with a fair value of $222,000 which, due to immediate vesting, were fully expensed at the time of grant. The total fair value of options that vested during the nine months ended March 31, 2023 was $338,973 and is included in selling, general and administrative expenses in the accompanying statement of operations. As of March 31, 2023, the amount of unvested compensation related to stock options was $92,793 which will be recorded as an expense in future periods as the options vest. During the nine months ended March 31, 2023, the Company issued 137,523 net shares of common stock upon the exercise of options underlying 307,298 shares of common stock, resulting in net cash proceeds of $57,500.

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 nine months ended March 31, 2023 and 2022.

Nine Months Ended

March 31,


2023

2022

Expected dividend yield

—
%
—
%

Risk-free interest rate

3.76
%
0.92 - 1.81
%

Expected life (in years)

5

5 - 6

Expected volatility

56
%
56
%

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~~Additional information regarding stock options outstanding and exercisable as of March 31, 2023 is as follows:~~

Option



Remaining


Exercise

Options

Contractual

Options

Price

Outstanding

Life (in years)

Exercisable
$
0.70

225,000

2.68

225,000

0.77

25,000

1.39

25,000

0.80

16,000

2.39

16,000

0.90

15,000

2.35

15,000

1.00

15,000

1.95

15,000

1.05

305,000

3.40

305,000

1.09

40,000

3.15

40,000

1.10

105,000

2.25

105,000

1.20

274,000

4.30

274,000

1.59

25,000

5.12

25,000

1.80

54,550

0.48

54,550

1.85

16,000

0.14

16,000

1.95

200,000

5.26

200,000

2.10

238,767

8.87

238,767

2.13

216,708

7.64

213,922

2.15

200,000

9.70

200,000

2.17

35,955

8.12

23,970

2.19

5,000

8.81

2,083

2.40

302,833

5.63

302,833

2.43

61,250

8.18

51,250

2.45

163,000

7.35

149,416

2.49

78,435

7.17

75,076

2.50

20,000

6.13

20,000

2.64

30,882

8.35

18,015

2.67

33,194

8.47

19,363

2.99

8,000

7.12

8,000

3.13

208,000

6.62

208,000

3.50

8,000

6.87

8,000

Total

2,925,574

2,854,245

~~Restricted Common Stock~~

Prior to July 1, 2022, the Company issued 2,829,758 shares of restricted common stock to employees valued at $4,024,308, of which 2,215,342 shares have vested, 214,324 shares with fair value of $188,203 have been forfeited, and $3,060,652 has been recognized as an expense. The balance of the non-vested shares of restricted common stock was 400,092 at JuneSeptember 30, ~~2022, with an aggregate fair value of $775,453.~~

~~Table of Contents~~

~~During the nine months ended March 31,~~ 2023, the Company issued an additional ~~2,354,834~~105,000 shares of restricted stock to employees with an aggregate fair value of ~~$3,478,878.~~$185,800. Of this amount, ~~229,834~~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 and 25,000 shares vest over a four 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 these stock awards was ~~$503,478~~$11,200 based on the market price of our common stock price ~~ranging from $1.94 to $2.22~~of $2.24 per share on the date of grant, which will be amortized over the range of a three ~~and four-year~~ year vesting ~~periods.~~period. The remaining ~~2,100,000~~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 reaching 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 LTEBP, 20,000 shares would vest upon our stock price achieving a 30-day VWAP of $3.00 per share, and 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 ~~2,100,000~~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 ~~$2,975,400,~~$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 ~~1.36~~1.19 to ~~2.59~~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 ~~nine~~three months ended ~~March 31,~~September 30, 2023 was ~~$925,549~~$574,343 and is included in selling, general and administrative expenses in the accompanying statements of operations. As of ~~March 31,~~September 30, 2023, the amount of unvested compensation related to issuances of restricted common stock was ~~$3,204,829,~~$2,323,118, which will be recognized as an expense in future periods as the shares vest. When calculating basic net income 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 ~~2,528,187~~2,436,605 shares are considered antidilutive and are excluded from that calculation.

The following table summarizes restricted common stock activity:


				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	105,000		185,800		1.77
Vested	(146,189)		(574,343)		2.06
Forfeited	—		—		—
Non-vested, September 30, 2023	2,436,605	$	2,323,118	$	1.50

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~~The following table summarizes restricted common stock activity:~~

Weighted

Average

Number of

Grant Date

Shares

Fair Value

Fair Value
Non-vested, June 30, 2022

400,092

$
775,453

$
2.38
Granted

2,354,834

3,478,878

1.48
Vested

(161,574)

(925,549)

2.49
Forfeited

(65,165)

(123,953)

2.15
Non-vested, March 31, 2023

2,528,187

$
3,204,829

$
1.54

Common Stock Repurchases

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 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 ~~2023.~~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, ~~2022, $255,345~~2023, $151,095 remained under the current authorization to repurchase our outstanding common stock from our employees.

During the ~~nine~~three months ended ~~March 31,~~September 30, 2023, the Company repurchased ~~38,585~~18,603 shares of our common stock from employees at an average market price of approximately ~~$1.93~~$2.48 per share for an aggregate amount of ~~$74,556.~~$46,135. As of ~~March 31,~~September 30, 2023, ~~$180,789~~$104,960 remains under the current authorization to repurchase our outstanding common 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. ~~Acquisition~~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 ~~has~~ 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. ~~On March 31,~~As of September 30, 2023, Reprints Desk ~~recorded $95,689~~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 ~~March 31,~~September 30, 2023, ~~$48,695~~$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 ~~are~~is recorded as a short-term liability on the balance sheet. At ~~March 31,~~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.

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~~Note 6. Contingencies~~

~~COVID-19~~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 is subject to risks and uncertainties as a result~~Company’s allocation of the ~~COVID-19 pandemic.~~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 ~~extent~~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 impact of the COVID-19 pandemic on the Company’s business is highly uncertain and difficult to predict, as the responses that the Company, other businesses and governments are taking continue to evolve. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a local and/or global economic recession. Policymakers around the globe have responded with fiscal policy actions to support the healthcare industry and economy as a whole. The magnitude and overall effectiveness of these actions remain uncertain.

~~To date, we have not experienced any significant changes in our business that would have a significant negative impact on our consolidated statements of operations or cash flows.~~acquisition.

The ~~severity~~preliminary allocation of ~~the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including, but not limited~~purchase price to the ~~duration and severity of~~assets acquired was based upon the ~~pandemic and the extent and severity of the impact on the Company’s customers, service providers and suppliers, all of which are uncertain and cannot be predicted. As of~~estimated fair values at the date of ~~issuance~~acquisition. As of ~~Company’s financial statements,~~September 30, 2023, the ~~extent to which~~Company has not completed its analysis for estimating the ~~COVID-19 pandemic may in~~fair value of the ~~future materially impact the Company’s financial condition, liquidity or results of operations is uncertain.~~assets acquired.

Note 6. Contingencies

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 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 Fifth 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 remedies under the SVB LSA in connection with the existing events of default, and agreed to waive the existing events of default provided the Company regains 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.

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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 ~~and nine~~ months ended ~~March 31,~~September 30, 2023 and 2022 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, ~~2022.~~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 ~~three~~four wholly owned subsidiaries ~~at June~~as of September 30, ~~2022:~~2023: Reprints Desk, Inc., a Delaware corporation, including 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: a cloud-based software-as-a-service (“SaaS”) research ~~platform~~platforms (“Platforms”) typically sold via annual auto-renewing license agreements and the sale of published scientific, technical, and medical (“STM”) content sold as individual articles (“Transactions”) either stand alone or via ~~the~~our core research Platform. When customers utilize the core research Platform to purchase Transactions it is packaged as a single solution that enables life science and other ~~research intensive~~research-intensive organizations to accelerate their research and development activities with faster, access and management of STM articles used throughout the intellectual property development lifecycle. The ~~Platform~~Platforms typically ~~delivers~~deliver a ROI to the customer via more effectively managing Transaction costs and saving researchers time during the research process.

Platforms

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Transactions

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; in many cases under one minute. This service is generally known in the industry as single article delivery or document delivery. We also obtain the necessary permission licenses from the content publisher or other rights holder so that our customer’s use complies with applicable copyright laws. We have arrangements with hundreds of content publishers that allow us to distribute their content. The majority of these publishers provide us with electronic access to their content, which allows us to electronically deliver single articles to our customers often in a matter of minutes.

~~COVID-19~~

We are subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on our business is highly uncertain and difficult to predict, as the responses that we, other businesses and governments are taking continue to evolve. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a local and/or global economic recession. Policymakers around the globe have responded with fiscal policy actions to support the healthcare industry and economy as a whole. The magnitude and overall effectiveness of these actions remain uncertain.

~~To date, we have not experienced any significant changes in our business that would have a significant negative impact on our consolidated statements of operations or cash flows.~~

The severity of the impact of the COVID-19 pandemic on our business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on our customers, service providers and suppliers, all of which are uncertain and cannot be predicted. As of the date of issuance of our financial statements, the extent to which the COVID-19 pandemic may in the future materially impact our financial condition, liquidity or results of operations is uncertain.

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.

~~Table of Contents~~

Revenue Recognition

We account for revenue in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected.

Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. We derive our revenues from two sources: annual licenses that allow customers to access and utilize certain premium features of our cloud-based SaaS research intelligence ~~platform (“Platforms”)~~platforms (Platforms) and the transactional sale of STM content managed, sourced and delivered through the Platform ~~(“Transactions”)~~(Transactions).

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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

Transactions

Stock-Based Compensation

The fair value of our stock options is estimated using the Black-Scholes-Merton Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or restricted

~~Table of Contents~~

stock, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model and based on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense recorded in 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.

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Quarterly Information (Unaudited)

The following table sets forth unaudited and quarterly financial data for the most recent eight quarters:


	Mar. 31,		Dec. 31,		Sept. 30,		June 30,		Mar. 31,		Dec 31,		Sept. 30,		June 30,		Sept. 30,		June 30,		Mar. 31,		Dec. 31,		Sept. 30,		June 30,		Mar. 31,		Dec 31,
	2023		2022		2022		2022		2022		2021		2021		2021		2023		2023		2023		2022		2022		2022		2022		2021
Revenue:
Platforms	$	2,249,632	$	2,110,272	$	2,019,967	$	1,886,845	$	1,786,224	$	1,604,829	$	1,509,874	$	1,429,160	$	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		8,092,794		6,606,394		6,664,676		6,675,164		6,971,128		6,267,458		6,232,630		6,788,494		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		10,342,426		8,716,666		8,684,643		8,562,009		8,757,352		7,872,287		7,742,504		8,217,654		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		268,630		253,073		230,473		240,214		219,051		231,668		245,656		257,320		382,615		275,110		268,630		253,073		230,473		240,214		219,051		231,668
Transactions		6,046,523		5,059,766		5,104,922		5,038,653		5,299,804		4,802,959		4,836,473		5,218,118		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		6,315,153		5,312,839		5,335,395		5,278,867		5,518,855		5,034,627		5,082,129		5,475,438		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		1,981,022		1,857,199		1,789,494		1,646,631		1,567,173		1,373,161		1,264,218		1,171,840		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		2,046,271		1,546,628		1,559,754		1,636,511		1,671,324		1,464,499		1,396,157		1,570,376		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		4,027,273		3,403,827		3,349,248		3,283,142		3,238,497		2,837,660		2,660,375		2,742,216		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		642,624		666,608		521,216		691,368		543,496		518,357		522,951		521,220		685,016		455,030		642,624		666,608		521,216		691,368		543,496		518,357
Technology and product dev.		953,677		922,132		875,290		1,049,430		971,959		868,236		821,460		732,371		1,244,579		991,093		953,677		922,132		875,290		1,049,430		971,959		868,236
General and administrative		1,871,590		1,613,664		1,519,424		1,663,671		1,629,371		1,616,135		1,497,223		1,354,244		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		18,332		6,342		5,812		5,507		4,988		4,260		2,896		2,694		59,620		22,163		18,332		6,342		5,812		5,507		4,988		4,260
Stock-based comp. expense		480,458		608,703		175,361		225,501		399,234		300,539		171,110		221,589		591,814		585,384		480,458		608,703		175,361		225,501		399,234		300,539
Foreign currency transaction loss (gain)		(72,547)		(84,179)		72,516		91,279		29,394		11,982		11,243		(890)		6,620		(37,743)		(72,547)		(84,179)		72,516		91,279		29,394		11,982
Total operating expenses		3,894,134		3,733,270		3,169,619		3,726,756		3,578,442		3,319,509		3,026,883		2,831,228		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)		103,703		73,913		34,936		5,347		(585)		264		(5,494)		136		110,909		120,463		103,703		73,913		34,936		5,347		(585)		264
Net income (loss)		236,842		(255,530)		214,565		(438,267)		(340,530)		(481,585)		(372,002)		(88,876)		(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	$	0.01	$	(0.01)	$	0.01	$	(0.02)	$	(0.01)	$	(0.02)	$	(0.01)	$	—	$	(0.04)	$	0.01	$	0.01	$	(0.01)	$	0.01	$	(0.02)	$	(0.01)	$	(0.02)
Basic weighted average common shares outstanding		26,929,314		26,816,550		26,718,171		26,576,054		26,512,195		26,351,947		26,277,116		26,145,794		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	$	0.01	$	(0.01)	$	0.01	$	(0.02)	$	(0.01)	$	(0.02)	$	(0.01)	$	—	$	(0.04)	$	0.01	$	0.01	$	(0.01)	$	0.01	$	(0.02)	$	(0.01)	$	(0.02)
Diluted weighted average common shares outstanding		29,791,719		26,815,550		27,779,841		26,576,054		26,512,195		26,351,947		26,277,116		26,145,794		27,052,445		30,058,791		29,791,719		26,815,550		27,779,841		26,576,054		26,512,195		26,351,947

Table of Contents

Comparison of the Three ~~and Nine~~ Months Ended ~~March 31,~~September 30, 2023 and 2022

Results of Operations


	Three Months Ended March 31,								Three Months Ended September 30,
	2023		2022		$ Change		% Change		2023		2022		$ Change		% Change

Revenue:
Platforms	$	2,249,632	$	1,786,224	$	463,408	25.9	%	$	2,600,192	$	2,019,967	$	580,225	28.7	%
Transactions		8,092,794		6,971,128		1,121,666	16.1	%		7,460,779		6,664,676		796,103	11.9	%
Total revenue		10,342,426		8,757,352		1,585,074	18.1	%		10,060,971		8,684,643		1,376,328	15.8	%

Cost of revenue:
Platforms		268,630		219,051		49,579	22.6	%		382,615		230,473		152,142	66.0	%
Transactions		6,046,523		5,299,804		746,719	14.1	%		5,646,791		5,104,922		541,869	10.6	%
Total cost of revenue		6,315,153		5,518,855		796,298	14.4	%		6,029,406		5,335,395		694,011	13.0	%

Gross profit:
Platforms		1,981,002		1,567,173		413,829	26.4	%		2,217,577		1,789,494		428,083	23.9	%
Transactions		2,046,271		1,671,324		374,947	22.4	%		1,813,988		1,559,754		254,234	16.3	%
Total gross profit		4,027,273		3,238,497		788,776	24.4	%		4,031,565		3,349,248		682,317	20.4	%

Operating expenses:
Sales and marketing		642,624		543,496		99,128	18.2	%		685,016		521,216		163,800	31.4	%
Technology and product development		953,677		971,959		(18,282)	(1.9)	%		1,244,579		875,290		369,289	42.2	%
General and administrative		1,871,590		1,629,371		242,219	14.9	%		2,542,868		1,519,424		1,023,444	67.4	%
Depreciation and amortization		18,332		4,988		13,344	267.5	%		59,620		5,812		53,808	925.8	%
Stock-based compensation expense		480,458		399,234		81,224	20.3	%		591,814		175,361		416,453	237.5	%
Foreign currency transaction loss (gain)		(72,547)		29,394		(101,941)	(346.8)	%		6,620		72,516		(65,896)	(90.9)	%
Total operating expenses		3,894,134		3,578,442		315,692	8.8	%		5,130,517		3,169,619		1,960,898	61.9	%

Income (loss) from operations		133,139		(339,945)		473,084	139.2	%		(1,098,952)		179,629		(1,278,581)	(711.8)	%

Other income		104,331		237		104,094	43,921.5	%		140,311		39,069		101,242	259.1	%

Income (loss) from operations before provision for income taxes		237,470		(339,708)		577,178	169.9	%		(958,641)		218,698		(1,177,339)	(538.3)	%
Provision for income taxes		(628)		(822)		194	23.6	%		(29,402)		(4,133)		(25,269)	(611.4)	%

Net income (loss)	$	236,842	$	(340,530)		577,372	169.6	%	$	(988,043)	$	214,565		(1,202,608)	(560.5)	%

~~Table of Contents~~

Nine Months Ended March 31,


2023

2022

$ Change

% Change

Revenue:









Platforms

$
6,379,871

$
4,900,927

$
1,478,944

30.2
%

Transactions

21,363,864

19,471,216

1,892,648

9.7
%

Total revenue

27,743,735

24,372,143

3,371,592

13.8
%

Cost of revenue:









Platforms

752,176

696,375

55,801

8.0
%

Transactions

16,211,211

14,939,236

1,271,975

8.5
%

Total cost of revenue

16,963,387

15,635,611

1,327,776

8.5
%

Gross profit:









Platforms

5,627,695

4,204,552

1,423,143

33.8
%

Transactions

5,152,653

4,531,980

620,673

13.7
%

Total gross profit

10,780,348

8,736,532

2,043,816

23.4
%

Operating expenses:









Sales and marketing

1,830,448

1,584,804

245,644

15.5
%

Technology and product development

2,751,099

2,661,655

89,444

3.4
%

General and administrative

5,004,678

4,742,729

261,949

5.5
%

Depreciation and amortization

30,486

12,144

18,342

151.0
%

Stock-based compensation expense

1,264,522

870,883

393,639

45.2
%

Foreign currency transaction loss (gain)

(84,210)

52,619

(136,829)

(260.0)
%

Total operating expenses

10,797,023

9,924,834

872,189

8.8
%

Income (loss) from operations

(16,675)

(1,188,302)

1,171,627

98.6
%

Other income

218,095

777

217,318

27,968.9
%

Income (loss) from operations before provision for income taxes

201,420

(1,187,525)

1,388,945

117.0
%

Provision for income taxes

(5,543)

(6,592)

1,049

15.9
%

Net income (loss)

$
195,877

$
(1,194,117)

$
1,389,994

116.4
%

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Table of Contents

Revenue


	Three Months Ended March 31,								Three Months Ended September 30,
	2023		2022		$ Change		% Change		2023		2022		$ Change		% Change
Revenue:
Platforms	$	2,249,632	$	1,786,224	$	463,408	25.9	%	$	2,600,192	$	2,019,967	$	580,225	28.7	%
Transactions		8,092,794		6,971,128		1,121,666	16.1	%		7,460,779		6,664,676		796,103	11.9	%
Total revenue	$	10,342,426	$	8,757,352	$	1,585,074	18.1	%	$	10,060,971	$	8,684,643	$	1,376,328	15.8	%

Total revenue increased ~~$1,585,074,~~$1,376,328, or ~~18.1%~~15.8%, for the three months ended ~~March 31,~~September 30, 2023 compared to the prior year, due to the following:

Category

Impact
Key Drivers
Platforms

↑

$
436,408
Increased due to additional deployments to new and existing customers, and expansion from existing customers. Revenue is recognized ratably over the term of the subscription agreement, which is typically one year, provided all other revenue recognition criteria have been met. Billings or payments received in advance of revenue recognition are recorded as deferred revenue.
Transactions

↑

$
1,121,666
Increased primarily due to higher paid order volume, including additional paid order volume due to the FIZ asset acquisition.

Nine Months Ended March 31,


2023

2022

$ Change

% Change

Revenue:









Platforms

$
6,379,871

$
4,900,927

$
1,478,944

30.2
%

Transactions

21,363,864

19,471,216

1,892,648

9.7
%

Total revenue

$
27,743,735

$
24,372,143

$
3,371,592

13.8
%

~~Total revenue increased $3,371,592, or 13.8%, for the nine months ended March 31, 2023 compared to the prior year, due to the following:~~

Category

Impact

Key Drivers

Impact

Key Drivers

Platforms

↑

1,478,944

Increased due to additional deployments to new and existing customers, and expansion from existing customers. Revenue is recognized ratably over the term of the subscription agreement, which is typically one year, provided all other revenue recognition criteria have been met. Billings or payments received in advance of revenue recognition are recorded as deferred revenue.

↑

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

↑

1,892,648

Increased due to higher paid order volume and pricing initiatives, including additional paid order volume due to the FIZ asset acquisition.

↑

796,103

Increased primarily due to organic higher paid order volume, including additional paid order volume due to the FIZ asset acquisition.

Cost of Revenue


	Three Months Ended March 31,								Three Months Ended September 30,
	2023		2022		$ Change		% Change		2023		2022		$ Change		% Change
Cost of Revenue:
Platforms	$	268,630	$	219,051	$	49,579	22.6	%	$	382,615	$	230,473	$	152,142	66.0	%
Transactions		6,046,523		5,299,804		746,719	14.1	%		5,646,791		5,104,922		541,869	10.6	%
Total cost of revenue	$	6,315,153	$	5,518,855	$	796,298	14.4	%	$	6,029,406	$	5,335,395	$	694,011	13.0	%

~~Table of Contents~~


	Three Months Ended						Three Months Ended
	March 31,						September 30,
	2023		2022		% Change *		2023		2022		% Change *
As a percentage of revenue:
Platforms	11.9	%	12.3	%	(0.4)	%	14.7	%	11.4	%	3.3	%
Transactions	74.7	%	76.0	%	(1.3)	%	75.7	%	76.6	%	(0.9)	%
Total	61.1	%	63.0	%	(1.9)	%	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 ~~1.9%~~1.5%, from ~~63%~~61.4% for the previous year to ~~61.1%~~59.9%, for the three months ended ~~March 31,~~September 30, 2023.


	Impact as percentage
Category	of revenue			Key Drivers
Platforms	↓↑	~~0.4~~3.3	%	~~Decreased~~Increased primarily due to proportionally ~~lower software expense and lower personnel costs.~~greater hosting costs from ResoluteAI.
Transactions	↓	~~1.3~~	%	~~Decreased primarily due to proportionally lower personnel costs.~~

Nine Months Ended March 31,


2023

2022

$ Change

% Change

Cost of Revenue:









Platforms

$
752,176

$
696,375

$
55,801

8.0
%

Transactions

16,211,211

14,939,236

1,271,975

8.5
%

Total cost of revenue

$
16,963,387

$
15,635,611

$
1,327,776

8.5
%

Nine Months Ended

March 31,


2023

2022

% Change *

As a percentage of revenue:







Platforms

11.8
%
14.2
%
(2.4)
%

Transactions

75.9
%
76.7
%
(0.8)
%

Total

61.1
%
64.2
%
(3.1)
%

*	~~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 3.1%, from 64.2% for the previous year to 61.1%, for the nine months ended March 31, 2023.~~


	~~Impact as percentage~~
~~Category~~	~~of revenue~~			~~Key Drivers~~
~~Platforms~~	↓	~~2.4~~	%	~~Decreased primarily due to lower software expense and proportionally lower personnel costs.~~
~~Transactions~~	↓	~~0.8~~0.9	%	Decreased primarily due to proportionally lower personnel costs.

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Gross Profit


	Three Months Ended March 31,								Three Months Ended September 30,
	2023		2022		$ Change		% Change		2023		2022		$ Change		% Change
Gross Profit:
Platforms	$	1,981,002	$	1,567,173	$	413,829	26.4	%	$	2,217,577	$	1,789,494	$	428,083	23.9	%
Transactions		2,046,271		1,671,324		374,947	22.4	%		1,813,988		1,559,754		254,234	16.3	%
Total gross profit	$	4,027,273	$	3,238,497	$	788,776	24.4	%	$	4,031,565	$	3,349,248	$	682,317	20.4	%


	Three Months Ended						Three Months Ended
	March 31,						September 30,
	2023		2022		% Change*		2023		2022		% Change*
As a percentage of revenue:
Platforms	88.1	%	87.7	%	0.4	%	85.3	%	88.6	%	(3.3)	%
Transactions	25.3	%	24.0	%	1.3	%	24.3	%	23.4	%	0.9	%
Total	38.9	%	37.0	%	1.9	%	40.1	%	38.6	%	1.5	%

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

Nine Months Ended March 31,


2023

2022

$ Change

% Change

Gross Profit:









Platforms

$
5,627,695

$
4,204,552

$
1,423,143

33.8
%

Transactions

5,152,653

4,531,980

620,673

13.7
%

Total gross profit

$
10,780,348

$
8,736,532

$
2,043,816

23.4
%

Nine Months Ended

March 31,


2023

2022

% Change*

As a percentage of revenue:







Platforms

88.2
%
85.8
%
2.4
%

Transactions

24.1
%
23.3
%
0.8
%

Total

38.9
%
35.8
%
3.1
%

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

Operating Expenses


	Three Months Ended March 31,								Three Months Ended September 30,
	2023		2022		$ Change		% Change		2023		2022		$ Change		% Change
Operating Expenses:
Sales and marketing	$	642,624	$	543,496	$	99,128	18.2	%	$	685,016	$	521,216	$	163,800	31.4	%
Technology and product development		953,677		971,959		(18,282)	(1.9)	%		1,244,579		875,290		369,289	42.2	%
General and administrative		1,871,590		1,629,371		242,219	14.9	%		2,542,868		1,519,424		1,023,444	67.4	%
Depreciation and amortization		18,332		4,988		13,344	267.5	%		59,620		5,812		53,808	925.8	%
Stock-based compensation expense		480,458		399,234		81,224	20.3	%		591,814		175,361		416,453	237.5	%
Foreign currency transaction loss		(72,547)		29,394		(101,941)	(346.8)	%		6,620		72,516		(65,896)	(90.9)	%
Total operating expenses	$	3,894,134	$	3,578,442	$	315,692	8.8	%	$	5,130,517	$	3,169,619	$	1,960,898	61.9	%


Category	Impact			Key Drivers
Sales and marketing	↑	$	163,800	Increased primarily due to greater personnel costs and marketing discretionary spend partially offset by lower consulting expenses.
Technology and product development	↑	$	369,289	Increased due to greater software development personnel costs, primarily from the onboarding personnel from ResoluteAI, partially offset by lower consulting expenses.
General and administrative	↑	$	1,023,444	Increased due to greater legal expenses and personnel costs partially offset by lower consulting expenses. Greater legal expenses include proxy-related and acquisition-related costs. Greater personnel costs include separation costs paid to a former officer as result of the resolution of the proxy matter.

Net Income (Loss)


	Three Months Ended September 30,
	2023		2022		$ Change		% Change
Net Income (Loss):
Net income (loss):	$	(988,043)	$	214,565	$	(1,202,608)	(560.5)	%

Net income decreased $1,202,608 or 560.5%, for the three months ended September 30, 2023 compared to the prior year, primarily due to increased operating expenses, partially offset by increased gross profit as described above.

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Table of Contents

Category

Impact
Key Drivers
Sales and marketing

↑

$
99,128
Increased primarily due to greater personnel costs and marketing discretionary spend partially offset by lower consulting expenses.
Technology and product development

↓

$
(18,282)
Decreased due to lower consulting and recruiting expenses partially offset by greater software development personnel costs.
General and administrative

↑

$
242,219
Increased due to greater recruiting expenses and personnel costs partially offset by lower accounting, legal and consulting expenses.

Nine Months Ended March 31,


2023

2022

$ Change

% Change

Operating Expenses:









Sales and marketing

$
1,830,448

$
1,584,804

$
245,644

15.5
%

Technology and product development

2,751,099

2,661,655

89,444

3.4
%

General and administrative

5,004,678

4,742,729

261,949

5.5
%

Depreciation and amortization

30,486

12,144

18,342

151.0
%

Stock-based compensation expense

1,264,522

870,883

393,639

45.2
%

Foreign currency transaction loss

(84,210)

52,619

(136,829)

(260.0)
%

Total operating expenses

$
10,797,023

$
9,924,834

$
872,189

8.8
%

Category

Impact
Key Drivers
Sales and marketing

↑

$
245,644
Increased primarily due to greater personnel costs and marketing discretionary spend partially offset by lower consulting expenses.
Technology and product development

↑

$
89,444
Increased due to greater software development personnel costs partially offset by lower consulting and recruiting expenses.
General and administrative

↑

$
261,949
Increased due to greater recruiting expenses and personnel costs partially offset by lower accounting, legal and consulting expenses.

~~Net Income (Loss)~~

Three Months Ended March 31,


2023

2022

$ Change

% Change

Net Income (Loss):









Net income (loss):

$
236,842

$
(340,530)

$
577,372

169.6
%

Net loss decreased $577,372 or 169.6%, for the three months ended March 31, 2023 compared to the prior year, primarily due to increased gross profit, partially offset by increased operating expenses as described above.

Nine Months Ended March 31,


2023

2022

$ Change

% Change

Net Income (Loss):









Net income (loss):

$
195,877

$
(1,194,117)

$
1,389,994

116.4
%

Net loss decreased $1,389,994 or 116.4%, for the nine months ended March 31, 2023 compared to the prior year, primarily due to increased gross profit, partially offset by increased operating expenses as described above.

~~Table of Contents~~

Liquidity and Capital Resources


	Nine Months Ended March 31,				Three Months Ended September 30,
	2023		2022		2023		2022
Consolidated Statements of Cash Flow Data:
Net cash provided by (used in) operating activities	$	1,872,356	$	(402,711)	$	(755,571)	$	108,879
Net cash used in investing activities		(327,426)		(34,251)		(2,752,078)		(301,131)
Net cash provided by (used in) financing activities		(17,056)		75,135		(156,325)		(18,062)

Effect of exchange rate changes		1,850		(1,989)		705		(5,172)
Net increase (decrease) in cash and cash equivalents		1,529,724		(363,816)
Net decrease in cash and cash equivalents						(3,663,269)		(215,486)
Cash and cash equivalents, beginning of period		10,603,175		11,004,337		13,545,333		10,603,175
Cash and cash equivalents, end of period	$	12,132,899	$	10,640,521	$	9,882,064	$	10,387,689

Liquidity

As of ~~March 31,~~September 30, 2023, we had cash and cash equivalents of ~~$12,132,899,~~$9,882,064, compared to ~~$10,603,175~~$13,545,333 as of June 30, ~~2022, an increase~~2023, a decrease of ~~$1,529,724.~~$3,663,269. This ~~increase~~decrease was primarily due to cash ~~provided by operating~~used in investing activities.

Operating Activities

Net cash used in operating activities was $755,571 for the three months ended September 30, 2023 and resulted primarily from a decrease in deferred revenue of $646,830 and an increase in accounts receivable of $112,965.

Net cash provided by operating activities was ~~$1,872,356~~$108,879 for the ~~nine~~three months ended ~~March 31, 2023~~September 30, 2022 and resulted primarily from ~~an increase~~a decrease in ~~deferred revenue~~prepaid royalties of ~~$986,044, an increase~~$710,640, a net income of $214,565, a decrease of accounts receivable of $81,756 and a decrease of prepaid expenses and other current assets of $70,908, partially offset by a decrease in accounts payable and accrued expenses of ~~$947,789 and an increase in fair value of vested restricted common stock of $925,550, partially offset by an increase in accounts receivable of $1,545,695.~~

Net cash used in operating activities was $402,711 for the nine months ended March 31, 2022 and resulted primarily from an increase in accounts receivable of $904,915, partially offset by an increase in deferred revenue of $538,477 and an increase in accounts payable and accrued expenses of $397,088.$1,037,057.

Investing Activities

Net cash used in investing activities was ~~$327,426~~$2,752,078 for the ~~nine~~three months ended ~~March 31,~~September 30, 2023 and resulted primarily from the payment for the ResoulteAI acquisition of $2,718,253.

Net cash used in investing activities was $301,131 for the three months ended September 30, 2022 and resulted primarily from the payment for non-refundable deposit for the FIZ asset acquisition of $297,450.

~~Net cash used in investing activities was $34,251 for the nine months ended March 31, 2022 and resulted from the purchase of property and equipment.~~

Financing Activities

Net cash used in financing activities was ~~$17,056~~$156,325 for the ~~nine~~three months ended ~~March 31,~~September 30, 2023 and resulted from the payment of contingent acquisition consideration of $110,190 and the repurchase of common stock of $74,556.

Net cash used in financing activities was $18,062 for the three months ended September 30, 2022 and resulted from the repurchase of common stock of ~~$74,556, partially offset by the proceeds from the exercise of options of $57,500.~~

Net cash provided by financing activities was $75,135 for the nine months ended March 31, 2022 and resulted from the proceeds from the exercise of options of $97,688 and the proceeds from the exercise of warrants of $59,500, partially offset by the repurchase of common stock of $82,053.$18,062.

We entered into a Loan and Security Agreement with Silicon Valley Bank (“SVB”) on July 23, 2010, which, as amended, provides for a revolving line of credit for the lesser of $2,500,000, or 80% of eligible accounts receivable. The line of credit matures on February 28, 2024, and is subject to certain financial and performance covenants with which we were in compliance as of ~~March 31,~~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. The line of credit bears interest at an annual rate equal to the greater of 1% above the prime rate and 5.0%. The interest rate on the line of credit was 9%9.5% as of ~~March 31,~~September 30, 2023. The line of credit was secured by our consolidated assets.

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Table of Contents

There were no outstanding borrowings under the line as of ~~March 31,~~September 30, 2023 and June 30, ~~2022,~~2023, respectively. As of ~~March 31,~~September 30, 2023, there was approximately ~~$2,500,000~~$2,355,000 of available credit. On March 27, 2023, First Citizens BancShares, ~~Inc~~Inc. (“FCB”) entered into an agreement with the Federal Deposit Insurance Corporation (FDIC) to purchase all of the assets and liabilities of SVB. We have confirmed that the Loan and Security Agreement remains in effect post this transaction and that, ~~in addition to having access to all of our deposits with SVB,~~ we continue to have access to the revolving line of credit.

~~On March 28,~~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 ~~announced that~~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 ~~are continuing~~entered into a Fifth Amendment to ~~evaluate the~~Amended and Restated Loan and Security Agreement, Consent and ~~relationship~~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 ~~that~~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 ~~opened accounts with two additional banks as part of exploring an overall banking diversification strategy as well as additional access to lending facilities.~~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 ~~and nine~~ months ended ~~March 31,~~September 30, 2023 and 2022:


	Three Months Ended						Three Months Ended
	March 31,						September 30,
	2023		2022		$ Change		2023		2022		$ Change
Net income (loss)	$	236,842	$	(340,530)	$	577,372	$	(988,043)	$	214,565	$	(1,202,608)
Add (deduct):
Other (income) expense		(104,331)		(237)		(104,094)		(140,311)		(39,069)		(101,242)
Foreign currency transaction loss (gain)		(72,547)		29,394		(101,941)		6,620		72,516		(65,896)
Provision for income taxes		628		822		(194)		29,402		4,133		25,269
Depreciation and amortization		18,332		4,988		13,344		59,620		5,812		53,808
Stock-based compensation		480,458		399,234		81,224		591,814		175,361		416,453
Adjusted EBITDA	$	559,382	$	93,671	$	465,711	$	(440,898)	$	433,318	$	(874,216)

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Nine Months Ended


March 31,

2023

2022

$ Change

Net income (loss)

$
195,877

$
(1,194,117)

$
1,389,994

Add (deduct):



Other (income) expense

(218,095)

(777)

(217,318)

Foreign currency transaction loss (gain)

(84,210)

52,619

(136,829)

Provision for income taxes

5,543

6,592

(1,049)

Depreciation and amortization

30,486

12,144

18,342

Stock-based compensation

1,264,522

870,883

393,639

Adjusted EBITDA

$
1,194,123

$
(252,656)

$
1,446,779

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

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performance. In addition, we use Adjusted EBITDA in developing our internal budgets, forecasts and strategic plan; in analyzing the effectiveness of our business strategies in evaluating potential acquisitions; and in making compensation decisions and in communications with our board of directors concerning our financial performance. Adjusted EBITDA has limitations as an analytical tool, which includes, among others, the following:

●

Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;

●

Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

●

Adjusted EBITDA does not reflect interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; and

●

Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.

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 term disclosure 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 issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of ~~March 31,~~September 30, 2023, the end of the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level.

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

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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.

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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 ~~March 31,~~September 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1A. Risk Factors.

~~The COVID-19 pandemic may reduce~~There have been no material changes from the ~~number of articles ordered by our transactional customers, or may reduce~~risk factors disclosed in the ~~number of platform subscriptions, either of which could have a material adverse impact~~Company's Annual Report on ~~our business and financial performance.~~

To date, we have not experienced any significant changes in our business that would have a significant negative impact on our consolidated statements of operations or cash flows. However, the COVID-19 pandemic’s continued impact on the economy and our customers may reduce the number of articles ordered by our transactional customers, or may reduce the number of platform subscriptions, either of which could have a material adverse impact on our business and financial performance.

The severity of the impact of the COVID-19 pandemic on our business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on our customers, service providers and suppliers, all of which are uncertain and cannot be predicted. As of the date of issuance of our financial statementsForm 10-K for the ~~fiscal quarter~~year ended ~~March 31, 2023, the extent to which the COVID-19 pandemic may in the future materially impact our financial condition, liquidity or results of operations is uncertain.~~June 30, 2023.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

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During the three months ended ~~March 31,~~September 30, 2023, we repurchased ~~12,785~~18,603 shares of our common stock from employees at an average market price of approximately ~~$2.02~~$2.48 per share for an aggregate amount of ~~$25,827.~~$46,135. As of ~~March 31,~~September 30, 2023, ~~$180,790~~$104,960 remains under the current authorization to repurchase our outstanding common stock from our employees.

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The following table summarizes repurchases of our common stock on a monthly basis:


				Total Number of Shares	Approximate Dollar Value					Total Number of Shares	Approximate Dollar Value
	Total Number	Average		Purchased as Part of	of Shares that May Yet Be		Total Number	Average		Purchased as Part of	of Shares that May Yet Be
	of Shares	Price Paid		Publicly Announced	Purchased Under the		of Shares	Price Paid		Publicly Announced	Purchased Under the
Period	Purchased¹	per Share		Plans or Programs	Plans or Programs		Purchased¹	per Share		Plans or Programs	Plans or Programs
January 1-31, 2023	—		—	—	$	206,616
February 1-28, 2023	—		—	—	$	206,616
March 1-31, 2023	12,785	$	2.02	—	$	180,789
July 1-31, 2023							—		—	—	$	151,095
August 1-31, 2023							—		—	—	$	151,095
September 1-30, 2023							18,603	$	2.48	—	$	104,960
Total	12,785	$	2.02	—		—	18,603	$	2.48	—		—

¹ Consists of shares of common stock purchased from an employee to satisfy tax obligations in connection with the vesting of stock incentive awards.

Item 6. Exhibits

EXHIBIT INDEX

Exhibit Number	Description
2.1	Agreement and Plan of Merger by and among Reprints Desk, Inc., Research Solutions Acquisition Corp 1, Research Solutions, Inc., as Parent Guarantor, Resolute Innovation, Inc. and Shareholder Representative Services LLC dated as of July 28, 2023. (Incorporated by reference to Exhibit 2.1 to the registrant’s Current Report on Form 8-K filed on July 31, 2023.)
3.1.1	Articles of Incorporation. (Incorporated by reference to Exhibit 3.1 to the registrant’s Registration Statement on Form SB-2 filed on December 28, 2007.)
3.1.2	Articles of Merger Effective March 4, 2013. (Incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed on March 6, 2013.)
3.2	Amended and Restated Bylaws. (Incorporated by reference to Exhibit 3.2 to the registrant’s Current Report on Form 8-K filed on October 17, 2012.)
10.1	Cooperation Agreement, dated as of September 15, 2023, by and among Research Solutions, Inc., Peter Derycz, Bristol Investment Fund, Ltd., Bristol Capital Advisors, LLC and Paul Kessler. (Incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed on September 20, 2023.)
31.1	Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1	Section 1350 Certification of Chief Executive Officer *
32.2	Section 1350 Certification of Chief Financial Officer *
101.INS	INLINE XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase
104	Cover Page Interactive Data File – The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

* Furnished herewith

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SIGNATURES

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.


	RESEARCH SOLUTIONS, INC.

	By:	/s/ Roy W. Olivier
		Roy W. Olivier
Date: ~~May 12,~~November 14, 2023		Chief Executive Officer and President (Principal Executive Officer)

	By:	/s/ William Nurthen
		William Nurthen
Date: ~~May 12,~~November 14, 2023		Chief Financial Officer (Principal Financial and Accounting Officer)

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