Company Quick10K Filing
Research Solutions
Price2.40 EPS-0
Shares24 P/E-68
MCap59 P/FCF65
Net Debt-6 EBIT-1
TEV53 TEV/EBIT-63
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-12-31 Filed 2021-02-11
10-Q 2020-09-30 Filed 2020-11-12
10-K 2020-06-30 Filed 2020-09-24
10-Q 2020-03-31 Filed 2020-05-14
10-Q 2019-12-31 Filed 2020-02-13
10-Q 2019-09-30 Filed 2019-11-14
10-K 2019-06-30 Filed 2019-09-19
10-Q 2019-03-31 Filed 2019-05-15
10-Q 2018-12-31 Filed 2019-02-14
10-Q 2018-09-30 Filed 2018-11-14
10-K 2018-06-30 Filed 2018-09-20
10-Q 2018-03-31 Filed 2018-05-15
10-Q 2017-12-31 Filed 2018-02-14
10-Q 2017-09-30 Filed 2017-11-14
10-K 2017-06-30 Filed 2017-09-18
10-Q 2017-03-31 Filed 2017-05-15
10-Q 2016-12-31 Filed 2017-02-14
10-Q 2016-09-30 Filed 2016-11-14
10-K 2016-06-30 Filed 2016-09-20
10-Q 2016-03-31 Filed 2016-05-16
10-Q 2015-12-31 Filed 2016-02-16
10-Q 2015-09-30 Filed 2015-11-16
10-K 2015-06-30 Filed 2015-09-08
10-Q 2015-03-31 Filed 2015-05-11
10-Q 2014-12-31 Filed 2015-02-17
10-Q 2014-09-30 Filed 2014-11-05
10-K 2014-06-30 Filed 2014-09-29
10-Q 2014-03-31 Filed 2014-05-15
10-Q 2013-12-31 Filed 2014-02-07
10-Q 2013-09-30 Filed 2013-11-19
10-K 2013-06-30 Filed 2013-09-30
10-Q 2013-03-31 Filed 2013-05-15
10-Q 2012-12-31 Filed 2013-02-14
10-Q 2012-09-30 Filed 2012-11-13
10-K 2012-06-30 Filed 2012-09-28
10-Q 2012-03-31 Filed 2012-05-15
10-Q 2011-09-30 Filed 2011-11-14
10-K 2011-06-30 Filed 2011-09-28
10-Q 2011-03-31 Filed 2011-05-16
10-Q 2010-12-31 Filed 2011-02-14
10-Q 2010-09-30 Filed 2010-11-15
10-K 2010-06-30 Filed 2010-09-28
10-Q 2010-03-31 Filed 2010-05-13
10-Q 2009-12-31 Filed 2010-02-12
8-K 2020-11-17
8-K 2020-08-27
8-K 2020-08-26
8-K 2020-03-19
8-K 2020-02-14
8-K 2019-11-12
8-K 2019-08-01
8-K 2018-11-13
8-K 2018-01-08
8-K 2017-12-28

RSSS 10Q Quarterly Report

Part 1 &Mdash; Financial Information
Item 1. Condensed Consolidated Financial Statements
Note 1. Organization, Nature of Business and Basis of Presentation
Note 2. Summary of Significant Accounting Policies
Note 3. Line of Credit
Note 4. Lease Obligations
Note 5. Stockholders' Equity
Note 6. Contingencies
Note 7. Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II &Mdash; Other Information
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 tm214610d1_ex31-1.htm
EX-31.2 tm214610d1_ex31-2.htm
EX-32.1 tm214610d1_ex32-1.htm
EX-32.2 tm214610d1_ex32-2.htm

Research Solutions Earnings 2020-12-31

Balance SheetIncome StatementCash Flow
2015117302012201420172020
Assets, Equity
151185202012201420172020
Rev, G Profit, Net Income
4.83.52.31.0-0.2-1.52012201420172020
Ops, Inv, Fin

10-Q 1 tm214610d1_10q.htm FORM 10-Q

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)
   
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended: December 31, 2020

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _____________ to _____________

 

Commission File No. 000-53501

 

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.)
   
10624 S. Eastern Ave., Ste. A-614, Henderson, NV 89052
(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.     o

 

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 February 5, 2021
Common Stock, $0.001 par value   26,277,679

 

 

 

 

 

 

TABLE OF CONTENTS

 

 

2

 

 

PART 1 — FINANCIAL INFORMATION

 

Item 1. Condensed Consolidated Financial Statements

 

Research Solutions, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

 

   December 31,     
   2020   June 30, 
   (unaudited)   2020 
Assets          
Current assets:          
Cash and cash equivalents  $10,163,504   $9,311,556 
Accounts receivable, net of allowance of $47,830 and $88,485, respectively   4,227,603    4,449,260 
Prepaid expenses and other current assets   297,280    241,747 
Prepaid royalties   673,864    720,367 
Total current assets   15,362,251    14,722,930 
           
Other assets:          
Property and equipment, net of accumulated depreciation of $819,263 and $804,999, respectively   11,677    11,276 
Deposits and other assets   6,280    6,155 
Right of use asset, net of accumulated amortization of $452,577 and $390,691, respectively   10,445    72,331 
Total assets  $15,390,653   $14,812,692 
           
Liabilities and Stockholders’ Equity          
Current liabilities:          
Accounts payable and accrued expenses  $5,799,152   $6,349,845 
Deferred revenue   4,385,507    3,524,507 
Lease liability, current portion   11,444    79,326 
Total current liabilities   10,196,103    9,953,678 
           
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; 26,266,008 and 26,032,263  shares issued and outstanding, respectively   26,266    26,032 
Additional paid-in capital   26,709,401    26,134,819 
Accumulated deficit   (21,422,760)   (21,176,799)
Accumulated other comprehensive loss   (118,357)   (125,038)
Total stockholders’ equity   5,194,550    4,859,014 
Total liabilities and stockholders’ equity  $15,390,653   $14,812,692 

 

See notes to condensed consolidated financial statements

 

3

 

 

Research Solutions, Inc. and Subsidiaries

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

(Unaudited)

 

   Three Months Ended   Six Months Ended 
   December 31,   December 31, 
   2020   2019   2020   2019 
Revenue:                    
Platforms  $1,220,535   $949,825   $2,362,223   $1,806,270 
Transactions   6,229,200    6,580,613    12,835,937    13,319,281 
Total revenue   7,449,735    7,530,438    15,198,160    15,125,551 
                     
Cost of revenue:                    
Platforms   217,003    162,508    420,955    312,978 
Transactions   4,841,150    5,094,130    9,936,047    10,222,238 
Total cost of revenue   5,058,153    5,256,638    10,357,002    10,535,216 
Gross profit   2,391,582    2,273,800    4,841,158    4,590,335 
                     
Operating expenses:                    
Selling, general and administrative   2,649,548    2,976,107    5,078,486    5,411,787 
Depreciation and amortization   3,039    6,840    6,762    14,398 
Total operating expenses   2,652,587    2,982,947    5,085,248    5,426,185 
Loss from operations   (261,005)   (709,147)   (244,090)   (835,850)
                     
Other income   399    26,527    634    52,076 
                     
Loss from operations before provision for income taxes   (260,606)   (682,620)   (243,456)   (783,774)
Provision for income taxes   -    (806)   (2,505)   (7,300)
                     
Loss from continuing operations   (260,606)   (683,426)   (245,961)   (791,074)
                     
Gain from sale of discontinued operations   -    91,254    -    117,445 
                     
Net loss   (260,606)   (592,172)   (245,961)   (673,629)
                     
Other comprehensive income (loss):                    

Foreign currency translation

   5,516    1,543    6,681    (2,025)
Comprehensive loss  $(255,090)  $(590,629)  $(239,280)  $(675,654)
                     
Loss per common share:                    
Loss per share from continuing operations, basic and diluted  $(0.01)  $(0.03)  $(0.01)  $(0.03)
Income per share from discontinued operations, basic and diluted  $-   $-   $-   $- 
Net loss per share, basic and diluted  $(0.01)  $(0.03)  $(0.01)  $(0.03)
Weighted average common shares outstanding, basic and diluted   25,988,117    24,185,966    25,943,509    24,140,616 

 

See notes to condensed consolidated financial statements

 

4

 

 

Research Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders' Equity
For the Six Months Ended December 31, 2020
(Unaudited)

 

   Common Stock   Additional
Paid-in
   Accumulated   Other
Comprehensive
   Total
Stockholders'
 
   Shares   Amount   Capital   Deficit   Loss   Equity 
Balance, July 1, 2020   26,032,263   $26,032   $26,134,819   $(21,176,799)  $(125,038)  $4,859,014 
                               
Fair value of vested stock options   -    -    77,627    -    -    77,627 
                               
Fair value of vested restricted common stock   120,000    120    93,044    -    -    93,164 
                               
Repurchase of common stock   (25,500)   (25)   (58,370)   -    -    (58,395)
                               
Common stock issued upon exercise of stock options   63,950    64    14,036    -    -    14,100 
                               
Net income for the period   -    -    -    14,645    -    14,645 
                               
Foreign currency translation   -    -    -    -    1,165    1,165 
                               
Balance, September 30, 2020   26,190,713    26,191    26,261,156    (21,162,154)   (123,873)   5,001,320 
                               
Fair value of vested stock options   -    -    342,158    -    -    342,158 
                               
Fair value of vested restricted common stock   23,474    23    93,767    -    -    93,790 
                               
Repurchase of common stock   (31,167)   (31)   (68,848)   -    -    (68,879)
                               
Common stock issued upon exercise of stock options   17,988    18    (18)   -    -    - 
                               
Common stock issued upon exercise of warrants   65,000    65    81,186              81,251 
                               
Net loss for the period   -    -    -    (260,606)   -    (260,606)
                               
Foreign currency translation   -    -    -    -    5,516    5,516 
                               
Balance, December 31, 2020   26,266,008   $26,266   $26,709,401   $(21,422,760)  $(118,357)  $5,194,550 

 

See notes to condensed consolidated financial statements

 

5

 

 

Research Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders' Equity
For the Six Months Ended December 31, 2019
(Unaudited)

 

   Common Stock   Additional
Paid-in
   Accumulated   Other
Comprehensive
   Total
Stockholders'
 
   Shares   Amount   Capital   Deficit   Loss   Equity 
Balance, July 1, 2019   24,375,948   $24,376   $23,631,481   $(20,514,557)  $(109,585)  $3,031,715 
                               
Fair value of vested stock options   -    -    58,198    -    -    58,198 
                               
Fair value of vested restricted common stock   70,000    70    84,404    -    -    84,474 
                               
Repurchase of common stock   (28,750)   (28)   (71,847)   -    -    (71,875)
                               
Common stock issued upon exercise of stock options   24,307    24    (24)   -    -    - 
                               
Net loss for the period   -    -    -    (81,457)   -    (81,457)
                               
Foreign currency translation   -    -    -    -    (3,568)   (3,568)
                               
Balance, September 30, 2019   24,441,505    24,442    23,702,212    (20,596,014)   (113,153)   3,017,487 
                               
Fair value of vested stock options   -    -    437,992    -    -    437,992 
                               
Fair value of vested restricted common stock   13,978    14    85,626    -    -    85,640 
                               
Repurchase of common stock   (42,500)   (42)   (127,457)   -    -    (127,499)
                               
Common stock issued upon exercise of stock options   62,573    62    (62)   -    -    - 
                               
Net loss for the period   -    -    -    (592,172)   -    (592,172)
                               
Foreign currency translation   -    -    -    -    1,543    1,543 
                               
Balance, December 31, 2019   24,475,556   $24,476   $24,098,311   $(21,188,186)  $(111,610)  $2,822,991 

 

See notes to condensed consolidated financial statements

 

6

 

 

Research Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

   Six Months Ended 
   December 31, 
   2020   2019 
Cash flow from operating activities:          
Net loss  $(245,961)  $(673,629)
Adjustment to reconcile net loss to net cash provided by operating activities:          
Gain from sale of discontinued operations   -    (117,445)
Depreciation and amortization   6,762    14,398 
Amortization of lease right   61,886    59,332 
Fair value of vested stock options   419,785    496,190 
Fair value of vested restricted common stock   186,954    170,114 
Changes in operating assets and liabilities:          
Accounts receivable   221,657    342,389 
Prepaid expenses and other current assets   (55,533)   125,262 
Prepaid royalties   46,503    (301,110)
Deposits and other assets   -    8,094 
Accounts payable and accrued expenses   (550,693)   993,845 
Deferred revenue   861,000    563,209 
Lease liability   (67,882)   (62,998)
Net cash provided by operating activities   884,478    1,617,651 
           
Cash flow from investing activities:          
Purchase of property and equipment   (6,134)   - 
Net cash used in investing activities   (6,134)   - 
           
Cash flow from financing activities:          
Proceeds from the exercise of stock options   14,100    - 
Proceeds from the exercise of warrants   81,251    - 
Common stock repurchase and retirement   (127,274)   (199,374)
Net cash used in financing activities   (31,923)   (199,374)
           
Effect of exchange rate changes   5,527    (2,239)
Net increase in cash and cash equivalents   851,948    1,416,038 
Cash and cash equivalents, beginning of period   9,311,556    5,353,090 
Cash and cash equivalents, end of period  $10,163,504   $6,769,128 
           
Supplemental disclosures of cash flow information:          
Cash paid for income taxes  $2,505   $7,300 

 

See notes to condensed consolidated financial statements

 

7

 

 

RESEARCH SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six Months Ended December 31, 2020 and 2019 (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 two wholly owned subsidiaries: Reprints Desk, Inc., a Delaware corporation and Reprints Desk Latin America S. de R.L. de C.V, an entity organized under the laws of Mexico.

 

Nature of Business

 

We provide two service offerings to our customers: annual licenses that allow customers to access and utilize certain premium features of our cloud based software-as-a-service (“SaaS”) research intelligence platform (“Platforms”) and the transactional sale of published scientific, technical, and medical (“STM”) content managed, sourced and delivered through the Platform (“Transactions”). Platforms and Transactions are packaged as a single solution that enable life science and other research intensive organizations to speed up research and development activities with faster, single sourced access and management of content and data used throughout the intellectual property development lifecycle.

 

Platforms

 

Our cloud-based SaaS research intelligence platform consists of proprietary software and Internet-based interfaces sold to customers for an annual subscription fee. Legacy functionality allows customers to initiate orders, route orders for the lowest cost acquisition, manage transactions, obtain spend and usage reporting, automate authentication, and connect seamlessly to in-house and third-party software systems. Customers can also enhance the information resources they already own or license and collaborate around bibliographic information.

 

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

 

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

 

Transactions

 

Our Platform provides our customers with a single source to the universe of published STM content that includes over 70 million existing STM articles and over one million newly published STM articles each year. STM content is sold to our customers on a transaction basis. Researchers and knowledge workers in life science and other research-intensive organizations generally require single copies of published STM journal articles for use in their research activities. These individuals are our primary users.

 

Our Platform allows customers to find and download digital versions of STM articles that are critical to their research. Customers submit orders for the articles they need which we source and electronically deliver to them generally in under an hour. 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.

 

8

 

 

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, 2020 filed with the SEC. The condensed consolidated balance sheet as of June 30, 2020 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, 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 with a US Dollar equivalent of $93,925 and $134,175 at December 31, 2020 and June 30, 2020, 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 six months ended December 31, 2020 and 2019.

 

The following table summarizes accounts receivable concentrations:

 

   As of 
   December 31,   June 30, 
   2020   2020 
Customer A   11%   * 

 

* Less than 10%

 

The following table summarizes vendor concentrations:

 

  

Three Months Ended

December 31,

  

Six Months Ended

December 31,

 
   2020   2019   2020   2019 
Vendor A   18%   22%   18%   21%
Vendor B   13%   12%   13%   12%
Vendor C   *    11%   *     * 

 

* Less than 10%

 

9

 

 

Revenue Recognition

 

The Company accounts for revenue in accordance 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. The Company adopted the guidance of ASC 606 on July 1, 2018.

 

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”) and the transactional sale of STM content managed, sourced and delivered through the Platform (“Transactions”).

 

 

 

The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:

 

·            identify the contract with a customer;

 

·            identify the performance obligations in the contract;

 

·            determine the transaction price;

 

·            allocate the transaction price to performance obligations in the contract; and

 

·            recognize revenue as the performance obligation is satisfied.

 

Platforms

 

We charge a subscription fee that allows customers to access and utilize certain premium features of our Platform. Revenue is recognized ratably over the term of the subscription agreement, which is typically one year, provided all other revenue recognition criteria have been met. Billings or payments received in advance of revenue recognition are recorded as deferred revenue.

 

Transactions

 

We charge a transactional service fee for the electronic delivery of single articles, and a corresponding copyright fee for the permitted use of the content. We recognize revenue from single article delivery services upon delivery to the customer provided all other revenue recognition criteria have been met.

 

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.

 

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.

 

10

 

 

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 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.

 

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 of $17,469 and $5,456 for the three months ended December 31, 2020 and 2019, respectively and a gain of $41,718 and a loss of $6,667 for the six months ended December 31, 2020 and 2019, respectively. Cash denominated in Euros with a US Dollar equivalent of $93,925 and $134,175 at December 31, 2020 and June 30, 2020, respectively, was held in accounts at financial institutions located in Europe.

 

The following table summarizes the exchange rates used:

 

   Six Months Ended
December 31,
   Year Ended
June 30,
 
   2020   2019   2020   2019 
Period end Euro : US Dollar exchange rate   1.23    1.12    1.12    1.14 
Average period Euro : US Dollar exchange rate   1.17    1.11    1.14    1.14 
                     
Period end Mexican Peso : US Dollar exchange rate   0.05    0.05    0.04    0.05 
Average period Mexican Peso : US Dollar exchange rate   0.05    0.05    0.05    0.05 

 

Net Income (Loss) Per Share

 

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period, excluding shares of unvested restricted common stock. Shares of restricted stock are included in the basic weighted average number of common shares outstanding from the time they vest. Diluted earnings per share is computed by dividing the net income applicable to common 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 December 31, 2020 potentially dilutive securities include options to acquire 3,564,018 shares of common stock, warrants to acquire 320,000 shares of common stock and unvested restricted common stock of 250,553. At December 31, 2019 potentially dilutive securities include options to acquire 3,416,580 shares of common stock, warrants to acquire 1,885,000 shares of common stock and unvested restricted common stock of 254,283. The dilutive effect of potentially dilutive securities is reflected in diluted net income per share if the exercise prices were lower than the average fair market value of common shares during the reporting period.

 

Basic and diluted net loss per common share is the same for the three and six months ended December 31, 2020 and 2019 because all stock options, warrants, and unvested restricted common stock are anti-dilutive.

 

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 January 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.

 

11

 

 

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 14, 2022, and is subject to certain financial and performance covenants with which we were in compliance as of December 31, 2020. Financial covenants include maintaining an adjusted quick ratio of unrestricted cash and net accounts receivable, divided by current liabilities plus debt less deferred revenue of at least 1.15 to 1.0, and maintaining tangible net worth of $1,500,000, plus 50% of net income for the fiscal quarter ended from and after December 31, 2017, plus 50% of the dollar value of equity issuances after October 1, 2017 and the principal amount of subordinated debt. The line of credit bears interest at an annual rate equal to the greater of 1% above the prime rate and 5.5%. The interest rate on the line of credit was 5.5% as of December 31, 2020. The line of credit is secured by the Company’s consolidated assets.

 

There were no outstanding borrowings under the line as of December 31, 2020 and June 30, 2020, respectively.  As of December 31, 2020, there was approximately $1,722,000 of available credit.

 

Note 4. Lease Obligations

 

On December 30, 2016, the Company entered into a 48 month non-cancellable lease for its office facilities that will require monthly payments ranging from $10,350 to $11,475 through January 2021. In accounting for the lease, the Company adopted ASU 2016-02, Leases which requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease initially measured at the present value of the lease payments. The Company classified the lease as an operating lease and determined that the value of the lease assets and liability at the inception of the lease was $463,000 using a discount rate of 3.75%. During the six months ended December 31, 2020, the Company made payments of $67,882 towards the lease liability. As of December 31, 2020 and June 30, 2020, lease liability amounted to $11,444 and $79,326, respectively. ASU 2016-02 requires recognition in the statement of operations of a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. Rent expense, including real estate taxes, for the six months ended December 31, 2020 and 2019 was $25,986 and $83,324, respectively. The right of use asset at June 30, 2020 was $72,331. During the six months ended December 31, 2020, the Company reflected amortization of right of use asset of $61,886 related to this lease, resulting in a net asset balance of $10,445 as of December 31, 2020.

 

On October 8, 2019, the Company entered into an agreement to sublease its office facilities from November 1, 2019 through January 31, 2021, the end of the lease term, for $8,094 per month with one month of abated rent. The Company recorded rent income of $48,564 during the six months ended December 31, 2020. This amount is reflected as an offset to rent expense that is included in general and administrative expenses in the accompanying statements of operations.

 

Note 5. 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. Upon adoption of the 2017 Plan we ceased granting incentive awards under the 2007 Plan and commenced granting incentive awards under the 2017 Plan. The shares of our common stock underlying cancelled and forfeited awards issued under the 2017 Plan may again become available for grant under the 2017 Plan. Cancelled and forfeited awards issued under the 2007 Plan that were cancelled or forfeited prior to November 21, 2017 became available for grant under the 2007 Plan. As of December 31, 2020, there were 1,059,664 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  
    Shares     Weighted
Average
Exercise
Price
    Shares     Weighted
Average
Exercise
Price
    Shares     Weighted
Average
Exercise
Price
 
Outstanding at June 30, 2020     3,327,580   $ 1.56       3,081,745   $ 1.50       245,835   $ 2.34  
Granted     439,708       2.26       250,000       2.13       189,708       2.42  
Options vesting     -       -       97,165       2.22       (97,165 )     2.22  
Exercised     (182,853 )     1.38       (182,853 )     1.38       -       -  
Forfeited/Cancelled     (20,417 )     1.92       -       -       (20,417 )     1.92  
Outstanding at December 31, 2020     3,564,018   $ 1.65       3,246,057   $ 1.58       317,961   $ 2.44  

 

12

 

 

The weighted average remaining contractual life of all options outstanding as of December 31, 2020 was 5.92 years. The remaining contractual life for options vested and exercisable at December 31, 2020 was 5.72 years. Furthermore, the aggregate intrinsic value of options outstanding as of December 31, 2020 was $2,697,071, and the aggregate intrinsic value of options vested and exercisable at December 31, 2020 was $2,687,396, in each case based on the fair value of the Company’s common stock on December 31, 2020.

 

During the six months ended December 31, 2020, the Company granted 439,708 options to employees with a fair value of $522,954 which amount will be amortized over the vesting period.  The total fair value of options that vested during the six months ended December 31, 2020 was $419,785 and is included in selling, general and administrative expenses in the accompanying statement of operations.  As of December 31, 2020, the amount of unvested compensation related to stock options was $392,185 which will be recorded as an expense in future periods as the options vest. During the six months ended December 31, 2020, the Company issued 81,938 net shares of common stock upon the exercise of options underlying 182,853 shares of common stock, resulting in net cash proceeds of $14,000.

 

The following table presents the assumptions used to estimate the fair values based upon a Black-Scholes option pricing model of the stock options granted during the six months ended December 31, 2020 and 2019.

 

  

Six Months Ended

December 31,

 
   2020   2019 
Expected dividend yield   0%   0%
Risk-free interest rate   0.37% – 0.51 %   1.61% - 1.69 %
Expected life (in years)   5 - 6     5 - 6 
Expected volatility   60 - 63%     64%

 

 

Additional information regarding stock options outstanding and exercisable as of December 31, 2020 is as follows:

 

Option
Exercise
Price
   Options
Outstanding
  

Remaining

Contractual

Life (in years)

   Options
Exercisable
 
$0.59    8,150    1.50    8,150 
 0.60    5,000    1.50    5,000 
 0.65    6,150    1.50    6,150 
 0.70    225,000    4.93    225,000 
 0.77    49,500    2.58    49,500 
 0.80    16,000    4.64    16,000 
 0.90    25,667    3.31    25,667 
 0.97    6,000    1.50    6,000 
 1.00    28,249    2.93    28,249 
 1.02    2,000    1.50    2,000 
 1.05    400,529    5.59    400,529 
 1.07    33,898    1.79    33,898 
 1.09    121,250    4.91    121,250 
 1.10    105,000    4.50    105,000 
 1.15    193,400    3.78    193,400 
 1.20    349,000    6.62    349,000 
 1.25    32,000    2.12    32,000 
 1.30    243,000    1.18    243,000 
 1.50    195,000    1.88    195,000 
 1.59    25,000    7.36    22,915 
 1.80    94,050    2.63    94,050 
 1.85    17,800    2.29    17,800 
 1.95    200,000    7.51    166,666 
 2.13    266,708    9.88    250,000 
 2.40    398,667    7.87    359,833 
 2.45    173,000    9.59    - 
 2.49    50,000    8.74    25,000 
 2.50    20,000    8.38    11,667 
 2.99    8,000    9.37    - 
 3.13    258,000    8.87    253,333 
 3.50    8,000    9.12    - 
Total    3,564,018         3,246,057 

 

13

 

 

Warrants

 

The following table summarizes warrant activity:

 

  

Number of

Warrants

  

Weighted

Average

Exercise

Price

 
Outstanding, June 30, 2020   385,000   $1.24 
Granted   -    - 
Exercised   (65,000)   1.25 
Expired/Cancelled   -    - 
Outstanding, December 31, 2020   320,000   $1.24 
Exercisable, June 30, 2020   385,000   $1.24 
Exercisable, December 31, 2020   320,000   $1.24 

 

The intrinsic value for all warrants outstanding as of December 31, 2020 was $348,600, based on the fair value of the Company’s common stock on December 31, 2020.

 

During the six months ended December 31, 2020, certain holders of warrants to purchase shares of the Company’s common stock at a per share exercise price of $1.25 exercised those warrants to purchase 65,000 shares of common stock, generating gross proceeds to the Company of $81,251.

 

Additional information regarding warrants outstanding and exercisable as of December 31, 2020 is as follows:

 

Warrant
Exercise Price
  

Warrants

Outstanding

  

Remaining

Contractual

Life (in years)

   Warrants
Exercisable
 
$1.19    50,000    0.97    50,000 
 1.25    270,000    0.48    270,000 
Total    320,000         320,000 

 

Restricted Common Stock

 

Prior to July 1, 2020, the Company issued 2,277,366 shares of restricted common stock to employees valued at $2,709,318, of which 1,871,187 shares have vested, 214,324 shares with fair value of $188,203 have been forfeited, and $1,785,857 has been recognized as an expense. The balance of the non-vested shares of restricted common stock was 191,855 at June 30, 2020.

 

During the six months ended December 31, 2020, the Company issued an additional 143,474 shares of restricted stock to employees. These shares vest over a three year period, with a one year cliff vesting period, and remain subject to forfeiture if vesting conditions are not met. The aggregate fair value of the stock awards was $344,000 based on the market price of our common stock price of $2.40 per share on the date of grant, which will be amortized over the three-year vesting period.

 

The total fair value of restricted common stock vesting during the three months ended December 31, 2020 was $186,954 and is included in selling, general and administrative expenses in the accompanying statements of operations. As of December 31, 2020, the amount of unvested compensation related to issuances of restricted common stock was $551,343, which will be recognized as an expense in future periods as the shares vest. When calculating basic net income (loss) per share, these shares are included in weighted average common shares outstanding from the time they vest. When calculating diluted net income per share, these shares are included in weighted average common shares outstanding as of their grant date.

 

14

 

 

 

The following table summarizes restricted common stock activity:

 

  

Number of

Shares

   Fair Value  

Weighted

Average

Grant Date

Fair Value

 
Non-vested, June 30, 2020   191,855   $394,297   $2.51 
Granted   143,474    344,000    2.40 
Vested   (84,776)   (186,954)   2.29 
Forfeited   -    -    - 
Non-vested, December 31, 2020   250,553   $551,343   $2.52 

 

Common Stock Repurchase and Retirement

 

Effective as of February 11, 2020, the Compensation Committee of our Board of Directors authorized the repurchase, during calendar year 2020 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 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.

 

During the six months ended December 31, 2020, the Company repurchased 56,667 shares of our common stock from employees at an average market price of approximately $2.25 per share for an aggregate amount of $127,274.

 

As of December 31, 2020, the 2020 plan has expired. The shares of common stock were surrendered by employees to cover tax withholding obligations with respect to the vesting of restricted stock. Shares repurchased are retired and deducted from common stock for par value and from additional paid in capital for the excess over par value.

 

Note 6.  Contingencies

 

COVID-19

 

The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent 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.

 

The severity of the impact of the COVID-19 pandemic on the Company’s 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 the Company’s customers, service providers and suppliers, all of which are uncertain and cannot be predicted. As of the date of issuance of Company’s financial statements, the extent to which the COVID-19 pandemic may in the future materially impact the Company’s financial condition, liquidity or results of operations is uncertain.

 

Note 7.  Subsequent Events

 

On January 14, 2021, the Company issued 11,671 net shares of common stock upon the cashless exercise of stock options underlying 26,667 shares of common stock.

 

15

 

 

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 six months ended December 31, 2020 and 2019 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, 2020.

 

We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. All forward-looking statements included in this report are based on information available to us on the date hereof and, except as required by law, we assume no obligation to update any such forward-looking statements.

 

Overview

 

Research Solutions was incorporated in the State of Nevada on November 2, 2006, and is a publicly traded holding company with two wholly owned subsidiaries at June 30, 2020: Reprints Desk, Inc., a Delaware corporation and Reprints Desk Latin America S. de R.L. de C.V, an entity organized under the laws of Mexico.

 

We provide two service offerings to our customers: annual licenses that allow customers to access and utilize certain premium features of our cloud based software-as-a-service (“SaaS”) research intelligence platform (“Platforms”) and the transactional sale of published scientific, technical, and medical (“STM”) content managed, sourced and delivered through the Platform (“Transactions”). Platforms and Transactions are packaged as a single solution that enable life science and other research intensive organizations to speed up research and development activities with faster, single sourced access and management of content and data used throughout the intellectual property development lifecycle.

 

Platforms

 

Our cloud-based SaaS research intelligence platform consists of proprietary software and Internet-based interfaces sold to customers for an annual subscription fee. Legacy functionality allows customers to initiate orders, route orders for the lowest cost acquisition, manage transactions, obtain spend and usage reporting, automate authentication, and connect seamlessly to in-house and third-party software systems. Customers can also enhance the information resources they already own or license and collaborate around bibliographic information.

 

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

 

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

 

Transactions

 

Our Platform provides our customers with a single source to the universe of published STM content that includes over 70 million existing STM articles and over one million newly published STM articles each year. STM content is sold to our customers on a transaction basis. Researchers and knowledge workers in life science and other research-intensive organizations generally require single copies of published STM journal articles for use in their research activities. These individuals are our primary users.

 

Our Platform allows customers to find and download digital versions of STM articles that are critical to their research. Customers submit orders for the articles they need which we source and electronically deliver to them generally in under an hour. 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.

 

16

 

 

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.

 

Critical Accounting Policies and Estimates

 

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States, or GAAP, requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. When making these estimates and assumptions, we consider our historical experience, our knowledge of economic and market factors and various other factors that we believe to be reasonable under the circumstances. Actual results may differ under different estimates and assumptions.

 

The accounting estimates and assumptions discussed in this section are those that we consider to be the most critical to an understanding of our financial statements because they inherently involve significant judgments and uncertainties.

 

Revenue Recognition

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), ("ASC 606"). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. We adopted the guidance of ASC 606 on July 1, 2018. The implementation of ASC 606 had no impact on the condensed consolidated financial statements and no cumulative effect adjustment was recognized.

 

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

 

 

 

We apply the following five steps in order to determine the appropriate amount of revenue to be recognized as we fulfill our obligations under each of our agreements:

 

•            identify the contract with a customer; 

 

•            identify the performance obligations in the contract; 

 

•            determine the transaction price; 

 

•            allocate the transaction price to performance obligations in the contract; and 

 

•            recognize revenue as the performance obligation is satisfied.

 

Platforms

 

We charge a subscription fee that allows customers to access and utilize certain premium features of our Platform. 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.

 

17

 

 

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.

 

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 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.

 

Quarterly Information (Unaudited)

 

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

 

   Dec. 31,   Sept. 30,   June 30,   Mar. 31,   Dec. 31,   Sept. 30,   June 30,   Mar. 31, 
   2020   2020   2020   2020   2019   2019   2019   2019 
Revenue:                                        
Platforms  $1,220,535   $1,141,688   $1,066,630   $1,017,789   $949,825   $856,445   $803,917   $748,726 
Transactions   6,229,200    6,606,737    6,819,150    7,029,617    6,580,613    6,738,668    6,670,685    6,629,231 
Total revenue   7,449,735    7,748,425    7,885,780    8,047,406    7,530,438    7,595,113    7,474,602    7,377,957 
                                         
Cost of revenue:                                        
Platforms   217,003    203,952    153,241    177,919    162,508    150,470    142,368    134,672 
Transactions   4,841,150    5,094,897    5,224,006    5,330,473    5,094,130    5,128,108    5,104,629    5,063,624 
Total cost of revenue   5,058,153    5,298,849    5,377,247    5,508,392    5,256,638    5,278,578    5,246,997    5,198,296 
                                         
Gross profit:                                        
Platforms   1,003,532    937,736    913,389    839,870    787,317    705,975    661,549    614,054 
Transactions   1,388,050    1,511,840    1,595,144    1,699,144    1,486,483    1,610,560    1,566,056    1,565,607 
Total gross profit   2,391,582    2,449,576    2,508,533    2,539,014    2,273,800    2,316,535    2,227,605    2,179,661 
                                         
Operating expenses:                                        
Sales and marketing   487,571    498,374    692,096    626,956    638,837    550,349    659,108    542,641 
Technology and product dev.   624,747    622,961    537,830    536,238    548,719    499,191    549,198    537,685 
General and administrative   1,118,750    1,161,061    1,132,483    1,230,580    1,270,375    1,231,345    1,060,269    1,129,461 
Depreciation and amortization   3,039    3,723    3,746    5,510    6,840    7,558    8,351    9,617 
Stock-based comp. expense   435,949    170,791    143,054    142,237    523,632    142,672    126,903    131,072 
Foreign currency transaction loss (gain)   (17,469)   (24,249)   4,214    8,648    (5,456)   12,123    7,193    2,302 
Total operating expenses   2,652,587    2,432,661    2,513,423    2,550,169    2,982,947    2,443,238    2,411,022    2,352,778 
Other income (expenses and income taxes)   399    (2,270)   4,331    23,101    25,721    19,055    27,289    22,393 
Income (loss) from continuing operations   (260,606)   14,645    (559)   11,946    (683,426)   (107,648)   (156,128)   (150,724)
Gain on sale of discontinued operations   -    -    -    -    91,254    26,191    84,275    33,044 
Net income (loss)   (260,606)   14,645    (559)   11,946    (592,172)   (81,457)   (71,853)   (117,680)
                                         
Basic income (loss) per common share:                                        
Income (loss) per share from continuing operations  $(0.01)  $-   $-   $-   $(0.03)  $-   $-   $- 
Income per share from discontinued operations  $-   $-   $-   $-   $-   $-   $-   $- 
Net income (loss) per share  $(0.01)  $-   $-   $-   $(0.03)  $-   $-   $- 
Basic weighted average common shares outstanding   25,988,117    25,898,900    25,815,163    24,960,394    24,185,966    24,095,266    23,987,137    23,845,798 
                                         
Diluted income (loss) per common share:                                        
Income (loss) per share from continuing operations  $(0.01)  $-   $-   $-   $(0.03)  $-   $-   $- 
Income per share from discontinued operations  $-   $-   $-   $-   $-   $-   $-   $- 
Net income (loss) per share  $(0.01)  $-   $-   $-   $(0.03)  $-   $-   $- 
Diluted weighted average common shares outstanding   25,988,117    26,511,180    25,815,163    25,717,403    24,185,966    24,095,266    23,987,137    23,845,798 

 

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Comparison of the Three and Six Months Ended December 31, 2020 and 2019

 

Results of Operations

 

   Three Months Ended December 31, 
    2020    2019    $ Change    % Change 
Revenue:                    
Platforms  $1,220,535   $949,825   $270,710    28.5%
Transactions   6,229,200    6,580,613    (351,413)   (5.3)%
Total revenue   7,449,735    7,530,438    (80,703)   (1.1)%
                     
Cost of revenue:                    
Platforms   217,003    162,508    54,495    33.5%
Transactions   4,841,150    5,094,130    (252,980)   (5.0)%
Total cost of revenue   5,058,153    5,256,638    (198,485)   (3.8)%
                     
Gross profit:                    
Platforms   1,003,532    787,317    216,215    27.5%
Transactions   1,388,050    1,486,483    (98,433)   (6.6)%
Total gross profit   2,391,582    2,273,800    117,782    5.2%
                     
Operating expenses:                    
Sales and marketing   487,571    638,837    (151,266)   (23.7)%
Technology and product development   624,747    548,719    76,028    13.9%
General and administrative   1,118,750    1,270,375    (151,625)   (11.9)%
Depreciation and amortization   3,039    6,840    (3,801)   (55.6)%
Stock-based compensation expense   435,949    523,632    (87,683)   (16.7)%
Foreign currency transaction loss (gain)   (17,469)   (5,456)   (12,013)   220.2%
Total operating expenses   2,652,587    2,982,947    (330,360)   (11.1)%
Loss from operations   (261,005)   (709,147)   448,142    63.2%
                     
Other income   399    26,527    (26,128)   (98.5)%
                     
Loss from operations before provision for income taxes   (260,606)   (682,620)   442,014    61.8%
Provision for income taxes   -    (806)   806    100.0%
                     
Loss from continuing operations   (260,606)   (683,426)   422,820    61.9%
                     
Gain from sale of discontinued operations   -    91,254    (91,254)   (100.0)%
                     
Net loss  $(260,606)  $(592,172)  $331,566    56.0%

 

19

 

 

   Six Months Ended December 31, 
   2020   2019   $ Change   % Change 
Revenue:                    
Platforms  $2,362,223   $1,806,270   $555,953    30.8%
Transactions   12,835,937    13,319,281    (483,344)   (3.6)%
Total revenue   15,198,160    15,125,551    72,609    0.5%
                     
Cost of revenue:                    
Platforms   420,955    312,978    107,977    34.5%
Transactions   9,936,047    10,222,238    (286,191)   (2.8)%
Total cost of revenue   10,357,002    10,535,216    (178,214)   (1.7)%
                     
Gross profit:                    
Platforms   1,941,268    1,493,292    447,976    30.0%
Transactions   2,899,890    3,097,043    (197,153)   (6.4)%
Total gross profit   4,841,158    4,590,335    250,823    5.5%
                     
Operating expenses:                    
Sales and marketing   985,945    1,189,186    (203,241)   (17.1)%
Technology and product development   1,247,708    1,047,910    199,798    19.1%
General and administrative   2,279,812    2,501,720    (221,908)   (8.9)%
Depreciation and amortization   6,762    14,398    (7,636)   (53.0)%
Stock-based compensation expense   606,739    666,304    (59,565)   (8.9)%
Foreign currency transaction loss (gain)   (41,718)   6,667    (48,385)   (725.7)%
Total operating expenses   5,085,248    5,426,185    (340,937)   (6.3)%
Loss from operations   (244,090)   (835,850)   591,760    70.8%
                     
Other income   634    52,076    (51,442)   (98.8)%
                     
Loss from operations before provision for income taxes   (243,456)   (783,774)   540,318    68.9%
Provision for income taxes   (2,505)   (7,300)   4,795    65.7%
                     
Loss from continuing operations   (245,961)   (791,074)   545,113    68.9%
                     
Gain from sale of discontinued operations   -    117,445    (117,455)   (100.0)%
                     
Net loss  $(245,961)  $(673,629)  $427,668    63.5%

 

Revenue

 

   Three Months Ended December 31, 
   2020   2019   $ Change   % Change 
Revenue:                    
Platforms  $1,220,535   $949,825   $270,710    28.5%
Transactions   6,229,200    6,580,613    (351,413)   (5.3)%
Total revenue  $7,449,735   $7,530,438   $(80,703)   (1.1)%

 

Total revenue decreased $80,703, or 1.1%, for the three months ended December 31, 2020 compared to the prior year, due to the following:

 

Category   Impact   Key Drivers
Platforms   $ 270,710   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   $ 351,413   Decreased primarily due to lower order volume.

 

   Six Months Ended December 31, 
   2020   2019   $ Change   % Change 
Revenue:                    
Platforms  $2,362,223   $1,806,270   $555,953    30.8%
Transactions   12,835,937    13,319,281    (483,344)   (3.6)%
Total revenue  $15,198,160   $15,125,551   $72,609    0.5%

 

Total revenue increased $72,609, or 0.5%, for the six months ended December 31, 2020 compared to the prior year, due to the following:

 

Category   Impact   Key Drivers
Platforms   $ 555,953   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   $ 483,344   Decreased primarily due to lower order volume.

 

20

 

 

Cost of Revenue

 

   Three Months Ended December 31, 
   2020   2019   $ Change   % Change 
Cost of Revenue:                    
Platforms  $217,003   $162,508   $54,495    33.5%
Transactions   4,841,150    5,094,130    (252,980)   (5.0)%
Total cost of revenue  $5,058,153   $5,256,638   $(198,485)   (3.8)%

 

   Three Months Ended December 31, 
   2020   2019   % Change * 
As a percentage of revenue:               
Platforms   17.8%   17.1%   0.7%
Transactions   77.7%   77.4%   0.3%
Total   67.9%   69.8%   (1.9)%

 

* 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%, from 69.8% for the previous year to 67.9%, for the three months ended December 31, 2020.

 

  Category   Impact as percentage
of revenue
  Key Drivers
 Platforms        0.7%  Increased primarily due to proportionally higher personnel costs.
 Transactions         0.3%  Increased primarily due to proportionally higher copyright and personnel costs.

 

   Six Months Ended December 31, 
   2020   2019   $ Change   % Change 
Cost of Revenue:                    
Platforms  $420,955   $312,978   $107,977    34.5%
Transactions   9,936,047    10,222,238    (286,191)   (2.8)%
Total cost of revenue  $10,357,002   $10,535,216   $(178,214)   (1.7)%

 

   Six Months Ended December 31, 
   2020   2019   % Change * 
As a percentage of revenue:               
Platforms   17.8%   17.3%   0.5%
Transactions   77.4%   76.7%   0.7%
Total   68.1%   69.7%   (1.6)%

 

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

 

21

 

 

Total cost of revenue as a percentage of revenue decreased 1.6%, from 69.7% for the previous year to 68.1%, for the six months ended December 31, 2020.

 

  Category   Impact as percentage
of revenue
  Key Drivers
 Platforms        0.5%  Increased primarily due to proportionally higher personnel costs.
 Transactions         0.7%  Increased primarily due to proportionally higher copyright and personnel costs.

 

Gross Profit

 

   Three Months Ended December 31, 
   2020   2019   $ Change   % Change 
Gross Profit:                    
Platforms  $1,003,532   $787,317   $216,215    27.5%
Transactions   1,388,050    1,486,483    (98,433)   (6.6)%
Total gross profit  $2,391,582   $2,273,800   $117,782    5.2%

 

   Three Months Ended December 31, 
   2020   2019   % Change * 
As a percentage of revenue:               
Platforms   82.2%   82.9%   (0.7)%
Transactions   22.3%   22.6%   (0.3)%
Total   32.1%   30.2%   1.9%

 

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

 

   Six Months Ended December 31, 
   2020   2019   $ Change   % Change 
Gross Profit:                    
Platforms  $1,941,268   $1,493,292   $447,976    30.0%
Transactions   2,899,890    3,097,043    (197,153)   (6.4)%
Total gross profit  $4,841,158   $4,590,335   $250,823    5.5%

 

   Six Months Ended December 31, 
   2020   2019   % Change * 
As a percentage of revenue:               
Platforms   82.2%   82.7%   (0.5)%
Transactions   22.6%   23.3%   (0.7)%
Total   31.9%   30.3%   1.6%

 

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

 

Operating Expenses

 

   Three Months Ended December 31, 
   2020   2019   $ Change   % Change 
Operating Expenses:                    
Sales and marketing  $487,571   $638,837   $(151,266)   (23.7)%
Technology and product development   624,747    548,719    76,028    13.9%
General and administrative   1,118,750    1,270,375    (151,625)   (11.9)%
Depreciation and amortization   3,039    6,840    (3,801)   (55.6)%
Stock-based compensation expense   435,949    523,632    (87,683)   (16.7)%
Foreign currency transaction loss (gain)   (17,469)   (5,456)   (12,013)   220.2%
Total operating expenses  $2,652,587   $2,982,947   $(330,360)   (11.1)%

 

Category  Impact   Key Drivers
Sales and marketing      $151,266   Decreased primarily due to lower advertising media spend and consulting expenses partially offset by greater personnel costs.
Technology and product development      $76,028   Increased due to greater personnel costs.
General and administrative      $151,625   Decreased primarily due to lower consulting, rent and travel expenses.

 

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   Six Months Ended December 31, 
   2020   2019   $ Change   % Change 
Operating Expenses:                    
Sales and marketing  $985,945   $1,189,186   $(203,241)   (17.1)%
Technology and product development   1,247,708    1,047,910    199,798    19.1%
General and administrative   2,279,812    2,501,720    (221,908)   (8.9)%
Depreciation and amortization   6,762    14,398    (7,636)   (53.0)%
Stock-based compensation expense   606,739    666,304    (59,565)   (8.9)%
Foreign currency transaction loss (gain)   (41,718)   6,667    (48,385)   (725.7)%
Total operating expenses  $5,085,248