Research Solutions, Inc. [RSSS] Filings

10-Q 1 rsss-20240331x10q.htm 10-Q

Table of Contents

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, 2024

☐ 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 3, 2024
Common Stock, $0.001 par value		32,282,039

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	22
Item 3. Quantitative and Qualitative Disclosures About Market Risk	34
Item 4. Controls and Procedures	34

PART II — OTHER INFORMATION	35
Item 1A. Risk Factors	35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 6. Exhibits	36

SIGNATURES	37

Table of Contents

PART 1 — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Research Solutions, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets


	March 31,
	2024		June 30,
	(unaudited)		2023
Assets
Current assets:
Cash and cash equivalents	$	4,221,424	$	13,545,333
Accounts receivable, net of allowance of $103,319 and $85,015, respectively		7,323,379		6,153,063
Prepaid expenses and other current assets		635,000		400,340
Prepaid royalties		1,004,790		1,202,678
Total current assets		13,184,593		21,301,414

Non-current assets:
Property and equipment, net of accumulated depreciation of $920,918 and $881,908, respectively		94,078		70,193
Intangible assets, net of accumulated amortization of $1,237,311 and $747,355, respectively ($10,527,713 provisional)		11,029,679		462,068
Goodwill (provisional)		16,493,763		—
Deposits and other assets		1,086		1,052
Total assets	$	40,803,199	$	21,834,727

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	9,011,868	$	8,079,516
Deferred revenue		8,870,316		6,424,724
Total current liabilities		17,882,184		14,504,240

Non-current liabilities:
Contingent earnout liability		8,792,756		—
Total liabilities		26,674,940		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; 32,281,424 and 29,487,508 shares issued and outstanding, respectively		32,281		29,487
Additional paid-in capital		37,695,960		29,941,873
Accumulated deficit		(23,488,019)		(22,522,649)
Accumulated other comprehensive loss		(111,963)		(118,224)
Total stockholders’ equity		14,128,259		7,330,487
Total liabilities and stockholders’ equity	$	40,803,199	$	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
	March 31,				March 31,
	2024		2023		2024		2023

Revenue:
Platforms	$	3,953,403	$	2,249,632	$	9,679,179	$	6,379,871
Transactions		8,162,269		8,092,794		22,811,206		21,363,864
Total revenue		12,115,672		10,342,426		32,490,385		27,743,735

Cost of revenue:
Platforms		571,352		268,630		1,440,151		752,176
Transactions		6,062,388		6,046,523		17,052,934		16,211,211
Total cost of revenue		6,633,740		6,315,153		18,493,085		16,963,387
Gross profit		5,481,932		4,027,273		13,997,300		10,780,348

Operating expenses:
Selling, general and administrative		5,084,371		3,875,802		14,903,319		10,766,537
Depreciation and amortization		309,898		18,332		525,267		30,486
Total operating expenses		5,394,269		3,894,134		15,428,586		10,797,023

Income (loss) from operations		87,663		133,139		(1,431,286)		(16,675)

Other income		31,228		104,331		547,965		218,095

Income (loss) from operations before provision for income taxes		118,891		237,470		(883,321)		201,420
Provision for income taxes		(42,590)		(628)		(82,049)		(5,543)

Net income (loss)		76,301		236,842		(965,370)		195,877

Other comprehensive income (loss):
Foreign currency translation		858		(4,149)		6,261		(2,801)
Comprehensive income (loss)	$	77,159	$	232,693	$	(959,109)	$	193,076

Basic income (loss) per common share:
Net income (loss) per share	$	-	$	0.01	$	(0.03)	$	0.01
Weighted average common shares outstanding		30,020,652		26,929,314		28,377,199		26,820,557

Diluted income (loss) per common share:
Net income (loss) per share	$	-	$	0.01	$	(0.03)	$	0.01
Weighted average common shares outstanding		33,511,242		29,791,719		28,377,199		28,837,774

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, 2024

(Unaudited)


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

Balance, December 31, 2023	32,619,598	$	32,620	$	37,607,895	$	(23,564,320)	$	(112,821)	$	13,963,374

Fair value of vested stock options	—		—		42,788		—		—		42,788

Fair value of vested restricted common stock	—		—		498,214		—		—		498,214

Forfeited restricted common stock	(200,000)		(200)		200		—		—		—

Repurchase of common stock	(159,044)		(159)		(453,117)		—		—		(453,276)

Common stock issued upon exercise of stock options	20,870		20		(20)		—		—		—

Net income for the period	—		—		—		76,301		—		76,301

Foreign currency translation	—		—		—		—		858		858

Balance, March 31, 2024	32,281,424	$	32,281	$	37,695,960	$	(23,488,019)	$	(111,963)	$	14,128,259

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	—		—		104,502		—		—		104,502

Fair value of vested restricted common stock	380,000		380		1,603,440		—		—		1,603,820

Forfeited restricted common stock	(200,000)		(200)		200		—		—		—

Repurchase of common stock	(186,148)		(186)		(521,838)		—		—		(522,024)

Common stock issued upon exercise of stock options	71,050		71		(71)		—		—		—

Common stock issued for acquisition of Scite	2,729,014		2,729		6,546,905		—		—		6,549,634

Modification cost of accelerated vesting of restricted common stock	—		—		20,949		—		—		20,949

Net loss for the period	—		—		—		(965,370)		—		(965,370)

Foreign currency translation	—		—		—		—		6,261		6,261

Balance, March 31, 2024	32,281,424	$	32,281	$	37,695,960	$	(23,488,019)	$	(111,963)	$	14,128,259

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, 2023

(Unaudited)


				Additional				Other		Total
	Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders’
	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

Fair value of vested stock options	—		—		37,236		—		—		37,236

Fair value of vested restricted common stock	332,500		333		442,890		—		—		443,223

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

Repurchase of common stock	(12,785)		(13)		(25,814)		—		—		(25,827)

Common stock issued upon exercise of stock options	91,477		91		57,409		—		—		57,500

Net income for the period	—		—		—		236,842		—		236,842

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

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

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
	March 31,
	2024		2023

Cash flow from operating activities:
Net income (loss)	$	(965,370)	$	195,877
Adjustment to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		525,267		30,486
Fair value of vested stock options		104,502		338,973
Fair value of vested restricted common stock		1,603,820		925,550
Fair value of vested unrestricted common stock		—		68,272
Modification cost of accelerated vesting of restricted common stock		20,949		—
Adjustment to contingent earnout liability		(268,287)		—
Changes in operating assets and liabilities:
Accounts receivable		(739,883)		(1,545,695)
Prepaid expenses and other current assets		(156,026)		(122,700)
Prepaid royalties		197,888		47,760
Accounts payable and accrued expenses		498,584		947,789
Deferred revenue		768,347		986,044
Net cash provided by operating activities		1,589,791		1,872,356

Cash flow from investing activities:
Purchase of property and equipment		(57,761)		(29,976)
Payment for acquisition of Resolute, net of cash acquired		(2,718,253)		—
Payment for acquisition of Scite, net of cash acquired		(7,305,493)		—
Payment for non-refundable deposit for asset acquisition		—		(297,450)
Net cash used in investing activities		(10,081,507)		(327,426)

Cash flow from financing activities:
Proceeds from the exercise of stock options		—		57,500
Common stock repurchase		(522,024)		(74,556)
Payment of contingent acquisition consideration		(314,960)		—
Net cash used in financing activities		(836,984)		(17,056)

Effect of exchange rate changes		4,791		1,850
Net increase (decrease) in cash and cash equivalents		(9,323,909)		1,529,724
Cash and cash equivalents, beginning of period		13,545,333		10,603,175
Cash and cash equivalents, end of period	$	4,221,424	$	12,132,899

Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	82,049	$	5,543

Non-cash investing and financing activities:
Contingent consideration accrual on asset acquisition	$	36,130	$	144,384

See notes to condensed consolidated financial statements

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RESEARCH SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Nine Months Ended March 31, 2024 and 2023 (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 five wholly owned subsidiaries: Reprints Desk, Inc., (“Reprints Desk”) a Delaware corporation, including its wholly owned subsidiary Resolute Innovation, Inc., a Delaware corporation, Scite, LLC., a Delaware Limited Liability Company, 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 software and related services to help research intensive organizations save time and money. We offer various software platforms (“Platform” or “Platforms”) that are typically sold to corporate, academic, government and individual researchers as cloud-based software-as-a-service (“SaaS”) via auto-renewing license agreements. Corporate, academic, and government customers typically sign up under annual agreements. Individual researchers can sign up under an annual or a month-to-month agreement and are typically billed monthly. Our Platforms also facilitate the sale of published scientific, technical, and medical (“STM”) content sold as individual articles (“Transactions”) either stand alone or via one or more of the research Platform solutions we provide. When one or more of the Platform solutions are used to purchase Transactions, customers pay for those transactions through monthly billing or via credit card for individual researchers. Our Platforms enable life science and other research-intensive organizations to accelerate their research and development activities through our advanced discovery tools (i.e. search), tools to access and buy STM articles required to support their research (i.e. acquire), as well as tools that manage that content across the enterprise and on an individual basis (i.e. manage). The Platforms typically deliver an ROI to the customer by reducing the amount of time it takes a research organization to find, acquire and manage content, in addition to also driving down the ultimate cost per article over time.

Platforms

Our cloud-based SaaS Platforms consist of proprietary software and Internet-based interfaces sold to customers through an annual or monthly subscription fee. Legacy functionality falls into three areas.

Discover – These solutions facilitate search (discovery) across virtually all STM articles available. The solutions we offer include free (basic) search solutions and advanced search tools like the Resolute.ai and scite.ai products. These tools allow for searching and identifying relevant research and then purchasing that research through one of our other solutions. In addition, these tools increasingly enable users to find insights in other datasets adjacent to STM content, such as Clinical Trial, Patent, Life Science & MedTech Regulatory information, Competitor and Technology landscape insights in addition to searching the customer’s internal datasets. The advanced search solutions are sold through a seat, enterprise, or individual license.

Acquire – Our Article Galaxy (AG) solution allows for research organizations to load their entitlements (subscriptions, discount or token packages, and their existing library of articles) and AG manages those entitlements in the background enabling the researchers to focus on acquiring articles they need quickly and efficiently at the lowest possible cost. When used in conjunction with our discovery Platforms, customers can initiate orders, route orders based on the lowest cost to acquire, obtain spend and usage reporting, automate authentication, and connect seamlessly to in-house and third-party software systems.

Manage – Our References solution allows users to access the article inside the Platform including setting up personal folders or team folders and allows researchers to markup and take notes on the articles in a supported browser on a desktop or tablet.

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We use Artificial Intelligence (“AI”) in several parts of the research workflow today and will continually add capability as we move forward. Today we offer an AI based recommendation engine in our Discover, Acquire, and Manage Platform solutions. We also offer an AI based “assistant” in some of our solutions to allow the researcher to ask questions about articles, groups of articles (folders), and more. We also have the capability to provide full text search on STM content in the scite.ai Platform where the publisher gives us the rights to do so.

Using Resolute.ai and scite.ai technology, we plan to release several new Platform solutions to enhance the research workflows described above and add new solutions to support the analysis functions that exist in our typical customer base.

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

Transactions

We provide our researchers with a single source to the universe of published STM content that includes over 100 million existing STM articles and over 2 to 4 million newly published STM articles each year. STM content is sold to our customers on a per 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 and while they typically purchase the articles via one of our Platform solutions, we do have some customers that just order articles from us on behalf of end-users in their organizations.

Core to many of our Platform solutions is providing our customers with ways 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 most 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. While a vast majority of the articles are available in electronic form, the Company also has workflows to deliver older paper-based articles through relationships we have built with libraries around the world.

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, 2023 filed with the SEC. The condensed consolidated balance sheet as of June 30, 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.

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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, realization of deferred tax assets and fair values of assets acquired and liabilities assumed in acquisitions including the resulting intangible 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 $445,605 and $1,760,323 at March 31, 2024 and June 30, 2023, respectively, was held by Reprints Desk in accounts at financial institutions located in Europe.

The Company has no customers that represent 10% of revenue or more for the three and nine months ended March 31, 2024 and 2023.

The Company has no customers that accounted for greater than 10% of accounts receivable at March 31, 2024 and June 30, 2023.

The following table summarizes vendor concentrations:

Research Solutions, Inc. [RSSS] Filings
10-Q	[2024-05-13]
10-Q	[2024-02-12]
10-Q	[2023-11-14]
10-K	[2023-09-15]
10-Q	[2023-05-12]
10-Q	[2023-02-10]
10-Q	[2022-11-14]
10-K	[2022-09-23]
10-Q	[2022-05-13]
10-Q	[2022-02-14]
10-Q	[2021-11-12]
10-K	[2021-09-23]
10-Q	[2021-05-13]
10-Q	[2021-02-11]
10-Q	[2020-11-12]
10-K	[2020-09-24]
10-Q	[2020-05-14]
10-Q	[2020-02-13]
10-Q	[2019-11-14]
10-K	[2019-09-19]
10-Q	[2019-05-15]
10-Q	[2019-02-14]
10-Q	[2018-11-14]
10-K	[2018-09-20]
10-Q	[2018-05-15]
10-Q	[2018-02-14]
10-Q	[2017-11-14]
10-K	[2017-09-18]
10-Q	[2017-05-15]
10-Q	[2017-02-14]
10-Q	[2016-11-14]
10-K	[2016-09-20]
S-1	[2016-07-22]
10-Q	[2016-05-16]
10-Q	[2016-02-16]
10-Q	[2015-11-16]
10-K	[2015-09-08]
10-Q	[2015-05-11]
10-Q	[2015-02-17]
10-Q	[2014-11-05]
10-K	[2014-09-29]
10-Q	[2014-05-15]
S-1	[2014-04-04]
10-Q	[2014-02-07]
10-Q	[2013-11-19]
S-1	[2013-10-21]
10-K	[2013-09-30]
10-Q	[2013-05-15]
10-Q	[2013-02-14]
10-Q	[2012-11-13]
10-K	[2012-09-28]
10-Q	[2012-05-15]
10-Q	[2012-02-14]