# Research Solutions, Inc.: Form 10-Q for the period ended Sep 30, 2021

- Company: [Research Solutions, Inc.](/companies/rsss.md) (CIK 1386301)
- Form: 10-Q
- Filed: 2021-11-12
- Accepted by EDGAR: Nov 12, 2021, 13:00 ET
- Period: 2021-09-30
- Accession: 0001558370-21-015657
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1386301/000155837021015657/rsss-20210930x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1386301/000155837021015657/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2021-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2021-07-01 to 2021-09-30 | $7.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2021-07-01 to 2021-09-30 | $5.1m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2021-07-01 to 2021-09-30 | $2.7m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2021-07-01 to 2021-09-30 | $3.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2021-07-01 to 2021-09-30 | −$366.5k | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2021-07-01 to 2021-09-30 | $5.8k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2021-07-01 to 2021-09-30 | −$372.0k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2021-07-01 to 2021-09-30 | −$0.01 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2021-07-01 to 2021-09-30 | −$0.01 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2021-07-01 to 2021-09-30 | 26,277,116 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2021-07-01 to 2021-09-30 | −$72.2k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2021-07-01 to 2021-09-30 | $3.6k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 3 months, 2021-07-01 to 2021-09-30 | $54.5k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2021-09-30 | $10.9m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2021-09-30 | $16.0m | us-gaap:AssetsCurrent |
| Total assets | at 2021-09-30 | $16.1m | us-gaap:Assets |
| Current liabilities | at 2021-09-30 | $10.9m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2021-09-30 | $5.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 31,068 characters.

### Cautionary Notice Regarding Forward-Looking Statements

*The following discussion and analysis of our financial condition and results of operations for the three months ended September 30, 2021 and 2020 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, 2021.*

*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, 2021: 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: a cloud-based software-as-a-service (“SaaS”) research platform (“Platforms”) typically sold via annual auto-renewing license agreements and the sale of published scientific, technical, and medical (“STM”) content sold as individual articles (“Transactions”) either stand alone or via the Platform. When customers utilize the Platform to purchase Transactions it is packaged as a single solution that enables life science and other research intensive organizations to accelerate their research and development activities with faster, access and management of STM articles used throughout the intellectual property development lifecycle. The Platform typically delivers a ROI to the customer via more effectively managing Transaction costs and saving researchers time during the research process.

### Platforms

Our cloud-based SaaS research Platform consists 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 components. An alternative to manual data filtering, identification and extraction, the apps are designed to gather, augment, and extract data across a variety of formats, including bibliographic citations, tables of contents, RSS feeds, PDF files, XML feeds, and web content. We continue to develop new apps in order to build an ecosystem of apps. Together, these apps will provide researchers with an “all in one” toolkit, delivering efficiencies in core research workflows and knowledge creation processes.

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

### COVID-19

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

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

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

### 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

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

### 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:

| ​ ​ ​ Revenue: | ​ ​ | ​ ​ Sept. 30, 2021 ​ | ​ ​ ​ | ​ ​ June 30, 2021 ​ | ​ | ​ ​ Mar. 31, 2021 ​ | ​ ​ ​ | ​ ​ Dec. 31, 2020 ​ | ​ | ​ ​ Sept. 30, 2020 ​ | ​ | ​ ​ June 30, 2020 ​ | ​ | ​ ​ Mar. 31, 2020 ​ | ​ | ​ ​ Dec. 31, 2019 ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Platforms | ​ | $1,509,874 | ​ | $1,429,160 | ​ | $1,344,183 | ​ | $1,220,535 | ​ | $1,141,688 | ​ | $1,066,630 | ​ | $1,017,789 | ​ | $949,825 |
| Transactions | ​ | 6,232,630 | ​ | 6,788,494 | ​ | 6,996,349 | ​ | 6,229,200 | ​ | 6,606,737 | ​ | 6,819,150 | ​ | 7,029,617 | ​ | 6,580,613 |
| Total revenue | ​ | 7,742,504 | ​ | 8,217,654 | ​ | 8,340,532 | ​ | 7,449,735 | ​ | 7,748,425 | ​ | 7,885,780 | ​ | 8,047,406 | ​ | 7,530,438 |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Cost of revenue: | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  |
| Platforms | ​ | 245,656 | ​ | 257,320 | ​ | 233,696 | ​ | 217,003 | ​ | 203,952 | ​ | 153,241 | ​ | 177,919 | ​ | 162,508 |
| Transactions | ​ | 4,836,473 | ​ | 5,218,118 | ​ | 5,404,196 | ​ | 4,841,150 | ​ | 5,094,897 | ​ | 5,224,006 | ​ | 5,330,473 | ​ | 5,094,130 |
| Total cost of revenue | ​ | 5,082,129 | ​ | 5,475,438 | ​ | 5,637,892 | ​ | 5,058,153 | ​ | 5,298,849 | ​ | 5,377,247 | ​ | 5,508,392 | ​ | 5,256,638 |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Gross profit: | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  |
| Platforms | ​ | 1,264,218 | ​ | 1,171,840 | ​ | 1,110,487 | ​ | 1,003,532 | ​ | 937,736 | ​ | 913,389 | ​ | 839,870 | ​ | 787,317 |
| Transactions | ​ | 1,396,157 | ​ | 1,570,376 | ​ | 1,592,153 | ​ | 1,388,050 | ​ | 1,511,840 | ​ | 1,595,144 | ​ | 1,699,144 | ​ | 1,486,483 |
| Total gross profit | ​ | 2,660,375 | ​ | 2,742,216 | ​ | 2,702,640 | ​ | 2,391,582 | ​ | 2,449,576 | ​ | 2,508,533 | ​ | 2,539,014 | ​ | 2,273,800 |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Operating expenses: | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  |
| Sales and marketing | ​ | 522,951 | ​ | 521,220 | ​ | 566,713 | ​ | 487,571 | ​ | 498,374 | ​ | 692,096 | ​ | 626,956 | ​ | 638,837 |
| Technology and product dev. | ​ | 821,460 | ​ | 732,371 | ​ | 664,195 | ​ | 624,747 | ​ | 622,961 | ​ | 537,830 | ​ | 536,238 | ​ | 548,719 |
| General and administrative | ​ | 1,497,223 | ​ | 1,354,244 | ​ | 1,233,603 | ​ | 1,118,750 | ​ | 1,161,061 | ​ | 1,132,483 | ​ | 1,230,580 | ​ | 1,270,375 |
| Depreciation and amortization | ​ | 2,896 | ​ | 2,694 | ​ | 2,066 | ​ | 3,039 | ​ | 3,723 | ​ | 3,746 | ​ | 5,510 | ​ | 6,840 |
| Stock-based comp. expense | ​ | 171,110 | ​ | 221,589 | ​ | 179,345 | ​ | 435,949 | ​ | 170,791 | ​ | 143,054 | ​ | 142,237 | ​ | 523,632 |
| Foreign currency transaction loss (gain) | ​ | 11,243 | ​ | (890) | ​ | 6,648 | ​ | (17,469) | ​ | (24,249) | ​ | 4,214 | ​ | 8,648 | ​ | (5,456) |
| Total operating expenses | ​ | 3,026,883 | ​ | 2,831,228 | ​ | 2,652,570 | ​ | 2,652,587 | ​ | 2,432,661 | ​ | 2,513,423 | ​ | 2,550,169 | ​ | 2,982,947 |
| Other income (expenses and income taxes) | ​ | (5,494) | ​ | 136 | ​ | (322) | ​ | 399 | ​ | (2,270) | ​ | 4,331 | ​ | 23,101 | ​ | 25,721 |
| Income (loss) from continuing operations | ​ | (372,002) | ​ | (88,876) | ​ | 49,748 | ​ | (260,606) | ​ | 14,645 | ​ | (559) | ​ | 11,946 | ​ | (683,426) |
| Gain on sale of discontinued operations | ​ | — | ​ | — | ​ | — | ​ | — | ​ | — | ​ | — | ​ | — | ​ | 91,254 |
| Net income (loss) | ​ | (372,002) | ​ | (88,876) | ​ | 49,748 | ​ | (260,606) | ​ | 14,645 | ​ | (559) | ​ | 11,946 | ​ | (592,172) |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Basic income (loss) per common share: | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  |
| Income (loss) per share from continuing operations | ​ | $(0.01) | ​ | $— | ​ | $— | ​ | $(0.01) | ​ | $— | ​ | $— | ​ | $— | ​ | $(0.03) |
| Income per share from discontinued operations | ​ | $— | ​ | $— | ​ | $— | ​ | $— | ​ | $— | ​ | $— | ​ | $— | ​ | $— |
| Net income (loss) per share | ​ | $(0.01) | ​ | $— | ​ | $— | ​ | $(0.01) | ​ | $— | ​ | $— | ​ | $— | ​ | $(0.03) |
| Basic weighted average common shares outstanding | ​ | 26,277,116 | ​ | 26,145,794 | ​ | 26,027,665 | ​ | 25,988,117 | ​ | 25,898,900 | ​ | 25,815,163 | ​ | 24,960,394 | ​ | 24,185,966 |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Diluted income (loss) per common share: | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  | ​ |  |
| Income (loss) per share from continuing operations | ​ | $(0.01) | ​ | $— | ​ | $— | ​ | $(0.01) | ​ | $— | ​ | $— | ​ | $— | ​ | $(0.03) |
| Income per share from discontinued operations | ​ | $— | ​ | $— | ​ | $— | ​ | $— | ​ | $— | ​ | $— | ​ | $— | ​ | $— |
| Net income (loss) per share | ​ | $(0.01) | ​ | $— | ​ | $— | ​ | $(0.01) | ​ | $— | ​ | $— | ​ | $— | ​ | $(0.03) |
| Diluted weighted average common shares outstanding | ​ | 26,277,116 | ​ | 26,145,794 | ​ | 26,565,892 | ​ | 25,988,117 | ​ | 26,511,180 | ​ | 25,815,163 | ​ | 25,717,403 | ​ | 24,185,966 |

### Comparison of the Three Months Ended September 30, 2021 and 2020

### Results of Operations

| ​ ​ ​ ​ Revenue: | ​ ​ ​ | ​ ​ Three Months Ended September 30, 2021 ​ ​ ​ | ​ ​ | ​ ​ 2020 ​ ​ ​ | ​ ​ | ​ ​ $ Change ​ ​ ​ | ​ ​ | ​ ​ % Change ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | --- | ---: |
| Platforms | ​ | $1,509,874 | ​ | $1,141,688 | ​ | $368,186 |  | 32.2% |
| Transactions | ​ | 6,232,630 | ​ | 6,606,737 | ​ | (374,107) |  | (5.7)% |
| Total revenue | ​ | 7,742,504 | ​ | 7,748,425 | ​ | (5,921) |  | (0.1)% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Cost of revenue: | ​ |  | ​ |  | ​ |  |  | ​ |
| Platforms | ​ | 245,656 | ​ | 203,952 | ​ | 41,704 |  | 20.4% |
| Transactions | ​ | 4,836,473 | ​ | 5,094,897 | ​ | (258,424) |  | (5.1)% |
| Total cost of revenue | ​ | 5,082,129 | ​ | 5,298,849 | ​ | (216,720) |  | (4.1)% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Gross profit: | ​ |  | ​ |  | ​ |  |  | ​ |
| Platforms | ​ | 1,264,218 | ​ | 937,736 | ​ | 326,482 |  | 34.8% |
| Transactions | ​ | 1,396,157 | ​ | 1,511,840 | ​ | (115,683) |  | (7.7)% |
| Total gross profit | ​ | 2,660,375 | ​ | 2,449,576 | ​ | 210,799 |  | 8.6% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| **Operating expenses:** | ​ |  | ​ |  | ​ |  |  | ​ |
| Sales and marketing | ​ | 522,951 | ​ | 498,374 | ​ | 24,577 |  | 4.9% |
| Technology and product development | ​ | 821,460 | ​ | 622,961 | ​ | 198,499 |  | 31.9% |
| General and administrative | ​ | 1,497,223 | ​ | 1,161,061 | ​ | 336,162 |  | 29.0% |
| Depreciation and amortization | ​ | 2,896 | ​ | 3,723 | ​ | (827) |  | (22.2)% |
| Stock-based compensation expense | ​ | 171,110 | ​ | 170,791 | ​ | 319 |  | 0.2% |
| Foreign currency transaction loss (gain) | ​ | 11,243 | ​ | (24,249) | ​ | 35,492 |  | 146.4% |
| Total operating expenses | ​ | 3,026,883 | ​ | 2,432,661 | ​ | 594,222 |  | 24.4% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Income (loss) from operations | ​ | (366,508) | ​ | 16,915 | ​ | (383,423) |  | (2,266.8)% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Other income | ​ | 276 | ​ | 235 | ​ | 41 |  | 17.4% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Income (loss) from operations before provision for income taxes | ​ | (366,232) | ​ | 17,150 | ​ | (383,382) |  | (2,235.5)% |
| Provision for income taxes | ​ | (5,770) | ​ | (2,505) | ​ | (3,265) |  | (130.3)% |
| ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ | ​ | ​ ​ |
| Net income (loss) | ​ | $(372,002) | ​ | $14,645 | ​ | (386,647) |  | (2,640.1)% |

### Revenue

| ​ ​ ​ Revenue: | ​ ​ | ​ ​ Three Months Ended September 30, 2021 ​ | ​ | ​ ​ 2020 ​ | ​ | ​ ​ $ Change ​ | ​ ​ ​ % Change ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | ---: |
| Platforms | ​ | $1,509,874 | ​ | $1,141,688 | ​ | $368,186 | 32.2% |
| Transactions | ​ | 6,232,630 | ​ | 6,606,737 | ​ | (374,107) | (5.7)% |
| Total revenue | ​ | $7,742,504 | ​ | $7,748,425 | ​ | $(5,921) | (0.1)% |

Total revenue decreased $5,921, or 0.1%, for the three months ended September 30, 2021 compared to the prior year, due to the following:

| ​ ​ Category | ​ Impact | ​ | ​ ​ | ​ Key Drivers |
| --- | --- | --- | ---: | --- |
| Platforms | ↑ | ​ | $368,186 | 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 | ↓ | ​ | $(374,107) | Decreased primarily due to lower order volume. |

### Cost of Revenue

| ​ ​ ​ Cost of Revenue: | ​ ​ | ​ ​ Three Months Ended September 30, 2021 ​ | ​ | ​ ​ 2020 ​ | ​ | ​ ​ $ Change ​ | ​ ​ ​ % Change ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | ---: |
| Platforms | ​ | $245,656 | ​ | $203,952 | ​ | $41,704 | 20.4% |
| Transactions | ​ | 4,836,473 | ​ | 5,094,897 | ​ | (258,424) | (5.1)% |
| Total cost of revenue | ​ | $5,082,129 | ​ | $5,298,849 | ​ | $(216,720) | (4.1)% |

| ​ ​ ​ ​ ​ ​ ​ As a percentage of revenue: | ​ ​ Three Months Ended September 30, 2021 | ​ ​ 2020 | ​ ​ ​ % Change \* ​ |
| --- | ---: | ---: | ---: |
| Platforms | 16.3% | 17.9% | (1.6)% |
| Transactions | 77.6% | 77.1% | 0.5% |
| Total | 65.6% | 68.4% | (2.8)% |

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

Total cost of revenue as a percentage of revenue decreased 2.8%, from 68.4% for the previous year to 65.6%, for the three months ended September 30, 2021.

| ​ ​ ​ Category ​ | ​ ​ Impact as percentage of revenue | ​ ​ ​ | ​ ​ Key Drivers |
| --- | --- | ---: | --- |
| Platforms | ↓ | 1.6% | Decreased primarily due to proportionally lower personnel costs. |
| Transactions | **↑** | 0.5% | Increased primarily due to proportionally higher personnel costs. |

### Gross Profit

| ​ ​ ​ Gross Profit: | ​ ​ | ​ ​ Three Months Ended September 30, 2021 ​ | ​ | ​ ​ 2020 ​ | ​ | ​ ​ $ Change ​ | ​ ​ ​ % Change ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | ---: |
| Platforms | ​ | $1,264,218 | ​ | $937,736 | ​ | $326,482 | 34.8% |
| Transactions | ​ | 1,396,157 | ​ | 1,511,840 | ​ | (115,683) | (7.7)% |
| Total gross profit | ​ | $2,660,375 | ​ | $2,449,576 | ​ | $210,799 | 8.6% |

| ​ ​ ​ ​ ​ ​ ​ As a percentage of revenue: | ​ ​ Three Months Ended September 30, 2021 | ​ ​ 2020 | ​ ​ ​ % Change\* ​ |
| --- | ---: | ---: | ---: |
| Platforms | 83.7% | 82.1% | 1.6% |
| Transactions | 22.4% | 22.9% | (0.5)% |
| Total | 34.4% | 31.6% | 2.8% |

24

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

### Operating Expenses

| ​ ​ ​ Operating Expenses: | ​ ​ | ​ ​ Three Months Ended September 30, 2021 ​ | ​ | ​ ​ 2020 ​ | ​ | ​ ​ $ Change ​ | ​ ​ ​ % Change ​ | ​ ​ ​ ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | ---: | --- |
| Sales and marketing | ​ | $522,951 | ​ | $498,374 | ​ | $24,577 | 4.9% | ​ |
| Technology and product development | ​ | 821,460 | ​ | 622,961 | ​ | 198,499 | 31.9% | ​ |
| General and administrative | ​ | 1,497,223 | ​ | 1,161,061 | ​ | 336,162 | 29.0% | ​ |
| Depreciation and amortization | ​ | 2,896 | ​ | 3,723 | ​ | (827) | (22.2)% | ​ |
| Stock-based compensation expense | ​ | 171,110 | ​ | 170,791 | ​ | 319 | 0.2% | ​ |
| Foreign currency transaction loss (gain) | ​ | 11,243 | ​ | (24,249) | ​ | 35,492 | 146.4% | ​ |
| Total operating expenses | ​ | $3,026,883 | ​ | $2,432,661 | ​ | $594,222 | 24.4% | ​ |

| ​ ​ Category | ​ Impact | ​ | ​ ​ | ​ Key Drivers |
| --- | --- | --- | ---: | --- |
| Sales and marketing | **↑** | ​ | $24,577 | Increased primarily due to greater consulting expenses partially offset by lower advertising media spend and personnel costs. |
| Technology and product development | **↑** | ​ | $198,499 | Increased due to greater consulting and recruiting expenses and personnel costs. |
| General and administrative | **↑** | ​ | $336,162 | Increased due to greater consulting and legal expenses and personnel costs. |

### Net Income (Loss)

| ​ ​ ​ Net Income (Loss): | ​ ​ | ​ ​ Three Months Ended September 30, 2021 ​ | ​ | ​ ​ 2020 ​ | ​ | ​ ​ $ Change ​ | ​ ​ ​ % Change ​ |
| --- | --- | ---: | --- | ---: | --- | ---: | ---: |
| Income (loss) | ​ | $(372,002) | ​ | $14,645 | ​ | $(386,647) | (2,640.1)% |

Net loss increased $386,647 or 2,640.1%, for the three months ended September 30, 2021 compared to the prior year, primarily due to increased operating expenses, partially offset by increased gross profit as described above.

### Liquidity and Capital Resources

| ​ ​ ​ Consolidated Statements of Cash Flow Data: | ​ ​ ​ ​ | ​ ​ Three Months Ended September 30, 2021 ​ ​ | ​ ​ | ​ ​ 2020 ​ ​ |
| --- | --- | ---: | --- | ---: |
| Net cash provided by (used in) operating activities | ​ | $(72,247) | ​ | $923,473 |
| Net cash used in investing activities | ​ | (3,643) | ​ | (4,304) |
| Net cash used in financing activities | ​ | (54,481) | ​ | (44,295) |
| ​ | ​ | ​ ​ | ​ | ​ ​ |
| Effect of exchange rate changes | ​ | (2,630) | ​ | 903 |
| Net increase (decrease) in cash and cash equivalents | ​ | (133,001) | ​ | 875,777 |
| Cash and cash equivalents, beginning of period | ​ | 11,004,337 | ​ | 9,311,556 |
| Cash and cash equivalents, end of period | ​ | $10,871,336 | ​ | $10,187,333 |

### Liquidity

As of September 30, 2021, we had cash and cash equivalents of $10,871,336, compared to $11,004,337 as of June 30, 2021, a decrease of $133,001. This decrease was primarily due to cash used in operating activities.

### Operating Activities

Net cash used in operating activities was $72,247 for the three months ended September 30, 2021 and resulted primarily from a net loss of $372,002, a decrease in accounts payable and accrued expenses of $225,462 and a decrease in deferred revenue of $365,760, partially offset by a decrease in prepaid royalties of $639,765 and a decrease in prepaid expenses and other current assets of $62,439.

Net cash provided by operating activities was $923,473 for the three months ended September 30, 2020 and resulted primarily from an increase in accounts payable and accrued expenses of $1,032,896, partially offset by an increase in prepaid royalties of $322,191.

### Investing Activities

Net cash used in investing activities was $3,643 for the three months ended September 30, 2021 and resulted from the purchase of property and equipment.

Net cash used in investing activities was $4,304 for the three months ended September 30, 2020 and resulted from the purchase of property and equipment.

### Financing Activities

Net cash used in financing activities was $54,481 for the three months ended September 30, 2021 and resulted from the repurchase of common stock of $54,481.

Net cash used in financing activities was $44,295 for the three months ended September 30, 2020 and resulted from the repurchase of common stock of $58,395, partially offset by the proceeds from the exercise of stock options of $14,100.

We entered into a Loan and Security Agreement with Silicon Valley Bank (“SVB”) on July 23, 2010, which, as amended, provides for a revolving line of credit for the lesser of $2,500,000, or 80% of eligible accounts receivable. The line of credit matures on February 14, 2022, and is subject to certain financial and performance covenants with which we were in compliance as of September 30, 2021. 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 September 30, 2021. The line of credit was secured by our consolidated assets.

There were no outstanding borrowings under the line as of September 30, 2021 and June 30, 2021, respectively. As of September 30, 2021, there was approximately $1,890,000 of available credit.

### Non-GAAP Measure – Adjusted EBITDA

In addition to our GAAP results, we present Adjusted EBITDA as a supplemental measure of our performance. However, Adjusted EBITDA is not a recognized measurement under GAAP and should not be considered as an alternative to net income, income from operations or any other performance measure derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of liquidity. We define Adjusted EBITDA as net income (loss), plus interest expense, other income (expense), foreign currency transaction loss, provision for income taxes, depreciation and amortization, stock-based compensation, income from discontinued operations and gain on sale of discontinued operations. Management considers our core operating performance to be that which our managers can affect in any particular period through their management of the resources that affect our underlying revenue and profit generating operations that period. Non-GAAP adjustments to our results prepared in accordance with GAAP are itemized below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

Set forth below is a reconciliation of Adjusted EBITDA to net income (loss) for the three months ended September 30, 2021 and 2020:

| ​ ​ ​ ​ | ​ ​ | ​ ​ Three Months Ended September 30, 2021 | ​ | ​ ​ 2020 | ​ | ​ ​ $ Change |
| --- | --- | ---: | --- | ---: | --- | ---: |
| Net income (loss) | ​ | $(372,002) | ​ | $14,645 | ​ | $(386,647) |
| Add (deduct): | ​ | ​ | ​ | ​ | ​ |  |
| Other (income) expense | ​ | (276) | ​ | (235) | ​ | (41) |
| Foreign currency transaction loss (gain) | ​ | 11,243 | ​ | (24,249) | ​ | 35,492 |
| Provision for income taxes | ​ | 5,770 | ​ | 2,505 | ​ | 3,265 |
| Depreciation and amortization | ​ | 2,896 | ​ | 3,723 | ​ | (827) |
| Stock-based compensation | ​ | 171,110 | ​ | 170,791 | ​ | 319 |
| Adjusted EBITDA | ​ | $(181,259) | ​ | $167,180 | ​ | $(348,439) |

We present Adjusted EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Adjusted EBITDA in developing our internal budgets, forecasts and strategic plan; in analyzing the effectiveness of our business strategies in evaluating potential acquisitions; and in making compensation decisions and in communications with our board of directors concerning our financial performance. Adjusted EBITDA has limitations as an analytical tool, which includes, among others, the following:

- Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
- Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
- Adjusted EBITDA does not reflect interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; and
- Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements.

### Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

## Controls and procedures

As filed, 3,659 characters.

### Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on

Form 10-Q. For purposes of this section, the term *disclosure controls and procedures* means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of September 30, 2021, the end of the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level.

### Inherent Limitations on the Effectiveness of Controls

Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

### Changes in Internal Control Over Financial Reporting

In addition, our management with the participation of our principal executive officer and principal financial officer have determined that no change in our internal control over financial reporting (as that term is defined in Rules 13(a)-15(f) and 15(d)-15(f) of the Exchange Act) occurred during the quarter ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 1,997 characters.

***The COVID-19 pandemic may reduce the number of articles ordered by our transactional customers, or may reduce the number of platform subscriptions, either of which could have a material adverse impact on our business and financial performance.***

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. However, the COVID-19 pandemic’s continued impact on the economy and our customers may reduce the number of articles ordered by our transactional customers, or may reduce the number of platform subscriptions, either of which could have a material adverse impact on our business and financial performance.

The severity of the impact of the COVID-19 pandemic on our business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on our customers, service providers and suppliers, all of which are uncertain and cannot be predicted. As of the date of issuance of our financial statements for the fiscal quarter ended September 30, 2021, the extent to which the COVID-19 pandemic may in the future materially impact our financial condition, liquidity or results of operations is uncertain.

Filed Nov 12, 2021.
Source: SEC EDGAR, the filing index for accession 0001558370-21-015657. Last ingested by Listed: Oct 24, 2026, 15:12 ET. No prices; not investment advice.