Amesite(AMST) - 2022 Q3 - Quarterly Report

FORM 10-Q Header This section provides key filing details, registrant status, and outstanding common stock information - Filing Type: Quarterly Report on Form 10-Q for the period ended March 31, 2022[3] - Registrant Status: Non-accelerated filer, Smaller reporting company, Emerging growth company[4] - Common Stock Outstanding (as of May 13, 2022): 25,743,484 shares[5] TABLE OF CONTENTS This section outlines the structure and contents of the quarterly report CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS This statement outlines the inherent risks and uncertainties associated with forward-looking projections - Forward-looking statements are based on expectations, assumptions, estimates, and projections, and involve substantial risks and uncertainties[8] - Key risks include the AI platform's capabilities, ability to continue as a going concern, intellectual property protection, reliance on third parties, attracting and retaining personnel, financial performance, and regulatory/industry developments[8] - The company does not undertake to update or revise forward-looking statements unless required by law[9] PART I - FINANCIAL INFORMATION This part presents the unaudited condensed financial statements and management's analysis for the period ITEM 1. FINANCIAL STATEMENTS This item presents the unaudited condensed financial statements and accompanying notes for the period Condensed Balance Sheets (unaudited) This section details the company's assets, liabilities, and stockholders' equity at the end of the period Condensed Balance Sheet Highlights | Metric | March 31, 2022 | June 30, 2021 | | :----- | :------------- | :------------ | | Cash and cash equivalents | $8,905,431 | $10,713,091 | | Total current assets | $9,480,910 | $11,063,600 | | Total assets | $10,776,001 | $12,476,833 | | Total current liabilities | $838,813 | $741,743 | | Total stockholders' equity | $9,937,188 | $11,735,090 | Condensed Statements of Operations (unaudited) This section reports the company's revenues, expenses, and net loss over the reporting period Condensed Statements of Operations Highlights | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Nine Months Ended March 31, 2022 | Nine Months Ended March 31, 2021 | | :----- | :-------------------------------- | :-------------------------------- | :------------------------------- | :------------------------------- | | Net Revenue | $209,518 | $201,394 | $539,383 | $418,315 | | Total Operating Expenses | $2,421,787 | $2,524,847 | $7,457,921 | $6,502,395 | | Net Loss | $(2,216,111) | $(2,322,750) | $(6,916,507) | $(9,696,588) | | Basic Loss per Share | $(0.09) | $(0.11) | $(0.32) | $(0.51) | - Net loss for the nine months ended March 31, 2022, was substantially lower than the prior year, primarily due to significantly reduced interest expense[88] Condensed Statements of Stockholders' Equity (unaudited) This section details the changes in stockholders' equity during the reporting period Stockholders' Equity Changes (July 1, 2021 to March 31, 2022) | Item | Amount | | :--- | :----- | | Balance - July 1, 2021 | $11,735,090 | | Net loss | $(2,378,157) | | Issuance of common stock – net of offering costs | $1,360,000 | | Stock-based compensation expense | $389,085 | | Net loss (Q2) | $(2,322,239) | | Issuance of common stock for consulting services | $22,698 | | Stock-based compensation expense (Q2) | $422,526 | | Net loss (Q3) | $(2,216,111) | | Issuance of common stock – net of offering costs | $2,509,550 | | Stock-based compensation expense (Q3) | $414,746 | | Balance - March 31, 2022 | $9,937,188 | Condensed Statements of Cash Flows (unaudited) This section summarizes cash movements from operating, investing, and financing activities Condensed Statements of Cash Flows Highlights (Nine Months Ended March 31) | Cash Flow Activity | 2022 | 2021 | | :----------------- | :----------- | :----------- | | Net cash used in operating activities | $(5,088,820) | $(4,093,910) | | Net cash used in investing activities | $(588,390) | $(674,502) | | Net cash from financing activities | $3,869,550 | $12,796,230 | | Net (Decrease) Increase in Cash | $(1,807,660) | $8,027,818 | | Cash and Cash Equivalents - End of period | $8,905,431 | $12,121,692 | - Significant noncash transactions include acquisition of capitalized software ($70,924 in 2022) and issuance of common stock for consulting services ($22,698 in 2022)[20] Notes to Condensed Financial Statements Note 1 - Nature of Business and Liquidity This note describes the company's business and highlights substantial doubt about its going concern status - Amesite Inc provides customized, high-performance, and scalable AI-driven online learning platforms and course design for businesses, universities, and K-12 schools[21] - The company does not have sufficient cash or liquidity to maintain operations for at least twelve months, raising substantial doubt about its ability to continue as a going concern[24] - Management plans to raise capital through equity financing or stock sales, but these plans are subject to market conditions and cannot be deemed probable[25] Note 2 - Significant Accounting Policies This note outlines the key accounting principles used, including software capitalization and revenue recognition - Financial statements are prepared in accordance with GAAP and SEC requirements, with a fiscal year ending June 30[27] - Costs for internally developed software are capitalized during the application development stage and amortized over three years; amortization expense was $658,357 for the nine months ended March 31, 2022[29] - Revenue is primarily generated from contractual arrangements for integrated technology and services, recognized ratably over the contract term, typically two years, as performance obligations are satisfied[30][31] Contract Liabilities Movement (Nine Months Ended March 31) | Item | 2022 | 2021 | | :--- | :----------- | :----------- | | Opening balance | $333,200 | $380,000 | | Billings | $425,445 | $582,930 | | Less revenue recognized | $(539,455) | $(418,315) | | Closing balance | $219,190 | $544,615 | Note 3 - Stock-Based Compensation This note details the company's equity incentive plan and related compensation expenses - The Equity Incentive Plan allows grants of stock options and restricted stock to align interests of employees, directors, and consultants with stockholders[46] Stock-Based Compensation Expense | Period | 2022 | 2021 | | :----- | :----------- | :----------- | | Three months ended March 31 | $414,746 | $221,168 | | Nine months ended March 31 | $1,226,357 | $650,656 | - As of March 31, 2022, approximately $610,011 of total unrecognized compensation cost for nonvested options is expected to be recognized through March 2026[54] Note 4 - Income Taxes This note explains the company's tax position, including net operating loss carryforwards and valuation allowance - The company has not generated taxable income or tax liabilities since inception[55] - Net operating loss carryforwards total approximately $20,881,000, with $17,000 expiring in 2037[55] - A full valuation allowance is recorded against deferred tax assets due to limited operating history and ongoing losses[55] Note 5 - Common Stock This note describes major common stock transactions, including the IPO and subsequent offerings - Completed an IPO on September 25, 2020, issuing 3,000,000 shares at $5.00/share, generating approximately $12.8 million net proceeds[56] - Entered a purchase agreement with Lincoln Park Capital Fund, LLC on August 2, 2021, allowing the sale of up to $16.5 million worth of common stock, with an initial purchase yielding $1.36 million net proceeds[58][60] - Closed a public offering on February 16, 2022, selling 3,750,000 shares at $0.80/share, resulting in approximately $2.51 million net proceeds[62] Note 6 - Convertible Notes Payable This note details the issuance and conversion of convertible notes into common stock - Issued $2,182,500 in unsecured, 8% convertible notes in April and May 2020[63] - Notes, including accrued interest, totaling $2,255,815, were converted into 1,127,872 shares of common stock at $2.00 per share during the IPO[64] - Recognized an expense of $3,383,546 due to the discount provided to note holders upon conversion, recorded as interest expense[64] Note 7 - Subsequent Events This note confirms the absence of material events after the balance sheet date - No material subsequent events were identified through the filing date of the Quarterly Report on Form 10-Q[65] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on financial condition, operational results, and liquidity Overview This section describes the company's AI-driven learning platform business and its current lack of profitability - Amesite Inc is an AI-driven platform and course designer providing customized, scalable online learning environments for businesses, nonprofits, and universities[67] - The company is not currently profitable, with a net loss of $2,216,111 for the three months ended March 31, 2022, and a cumulative net loss of $27,133,600 since incorporation[69] - Substantial doubt exists about the company's ability to continue as a going concern due to insufficient cash and liquidity to maintain operations for at least twelve months[69] Basis of Presentation This section confirms the financial statements adhere to U.S. GAAP and SEC requirements - Financial statements are prepared in accordance with U.S. GAAP and SEC requirements[71] Critical Accounting Policies and Significant Judgments and Estimates This section details key accounting policies requiring significant judgment, such as software and revenue Internally-Developed Capitalized Software - Costs for internal-use software, primarily direct labor and third-party vendor costs, are capitalized during the application development stage[73] - Capitalized software costs are amortized on a straight-line basis over an estimated useful life of three years[73] Revenue Recognition - Revenue is generated from contractual arrangements with businesses, colleges, universities, and K-12 schools for an integrated technology platform and services[74] - Contracts generally have two-year terms with a single performance obligation, satisfied ratably as partners receive and consume benefits[75] - Fixed fees, such as annual license and maintenance charges, are recognized ratably over the service period[78] - The majority of customers are private and public learning institutions with annual payment terms[79] Results of Operations This section analyzes the company's operational performance by comparing key financial metrics year-over-year Revenue Revenue Performance | Period | March 31, 2022 | March 31, 2021 | YoY Change | | :----- | :------------- | :------------- | :--------- | | Three months | $209,518 | $201,394 | +4.04% | | Nine months | $539,383 | $418,315 | +28.94% | - Revenue growth for the nine months was primarily driven by increased sales of annual license fees and related implementation/customization services[82] General and Administrative General and Administrative Expenses | Period | March 31, 2022 | March 31, 2021 | YoY Change | | :----- | :------------- | :------------- | :--------- | | Three months | $1,239,153 | $1,049,128 | +18.11% | | Nine months | $3,926,901 | $3,523,259 | +11.46% | - Increase primarily attributed to stock-based compensation related to stock awards and options issued to employees and board members in fiscal year 2022[83] Technology and Content Development Technology and Content Development Expenses | Period | March 31, 2022 | March 31, 2021 | YoY Change | | :----- | :------------- | :------------- | :--------- | | Three months | $899,951 | $615,157 | +46.29% | | Nine months | $2,377,077 | $1,593,934 | +49.14% | - Increase driven by a $335,756 settlement obligation for early vendor agreement termination, higher payments to contract services, and overall payroll increases[85] Sales and Marketing Sales and Marketing Expenses | Period | March 31, 2022 | March 31, 2021 | YoY Change | | :----- | :------------- | :------------- | :--------- | | Three months | $282,684 | $860,562 | -67.15% | | Nine months | $1,153,943 | $1,385,202 | -16.69% | - Decrease due to significantly increased expenditures in fiscal year 2021 for digital presence, lead generation, and value-added content creation that were not repeated in 2022[86] Interest Income Interest Income | Period | March 31, 2022 | March 31, 2021 | YoY Change | | :----- | :------------- | :------------- | :--------- | | Three months | $1,207 | $703 | +71.69% | | Nine months | $8,742 | $1,323 | +560.77% | Net Loss Net Loss | Period | March 31, 2022 | March 31, 2021 | YoY Change | | :----- | :------------- | :------------- | :--------- | | Three months | $(2,216,111) | $(2,322,750) | -4.60% | | Nine months | $(6,916,507) | $(9,696,588) | -28.67% | - The substantial decrease in net loss for the nine months ended March 31, 2022, was primarily a result of significantly lower interest expense from the prior fiscal year's offering[88] Financial Position, Liquidity, and Capital Resources This section discusses the company's financial health, cash position, and capital-raising activities - The company is not profitable and has substantial doubt about its ability to continue as a going concern due to insufficient cash and liquidity for the next twelve months[92] - Raised approximately $12.8 million net proceeds from an IPO on September 25, 2020[90] - Entered a purchase agreement with Lincoln Park Capital Fund, LLC on August 2, 2021, for up to $16.5 million in common stock sales, with an initial purchase of $1.5 million[91] - Received approximately $2.51 million in net cash proceeds from a common stock offering closed on February 16, 2022[92] - Cash balance as of March 31, 2022, was $8,905,431[92] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure This section confirms no changes in or disagreements with the company's accountants - No changes in or disagreements with accountants on accounting and financial disclosure[93] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company is not required to provide information on market risk as it qualifies as a smaller reporting company - The company is exempt from providing market risk disclosures as a "smaller reporting company"[94] ITEM 4. CONTROLS AND PROCEDURES Management confirms the effectiveness of disclosure controls and procedures as of the reporting date Evaluation of Disclosure Controls and Procedures - Disclosure controls and procedures were evaluated and deemed effective as of March 31, 2022[94] Changes in Internal Controls Over Financial Reporting - No material changes in internal control over financial reporting during the period[95] PART II – OTHER INFORMATION This part contains other required disclosures, including legal proceedings, risk factors, and exhibits ITEM 1. LEGAL PROCEEDINGS There are no legal proceedings to report - No legal proceedings to report[96] ITEM 1A. RISK FACTORS This section updates key risks, including going concern uncertainty and potential Nasdaq delisting - Substantial doubt exists about the company's ability to continue as a going concern, as evidenced by net losses of $2,216,111 and $6,916,507 for the three and nine months ended March 31, 2022, respectively[97] - The company received a Nasdaq notification for failing to maintain a minimum bid price of $1 per share, risking delisting if compliance is not regained by September 5, 2022, or a potential second compliance period[99] - Delisting from Nasdaq could adversely affect the value and liquidity of common stock, ability to obtain financing, and investor confidence[100] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS There were no unregistered sales of equity securities or use of proceeds to report - No unregistered sales of equity securities or use of proceeds to report[101] ITEM 3. DEFAULTS UPON SENIOR SECURITIES There were no defaults upon senior securities to report - No defaults upon senior securities to report[102] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to the company - Mine safety disclosures are not applicable to the company[102] ITEM 5. OTHER INFORMATION There is no other information to report under this item - No other information to report[102] ITEM 6. EXHIBITS This section lists all exhibits filed with the quarterly report, including certifications and XBRL documents - Includes certifications from the Chief Executive Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2)[103] - Contains Inline XBRL Instance Document, Taxonomy Extension Schema Document, Calculation Linkbase Document, Definition Linkbase Document, Label Linkbase Document, and Presentation Linkbase Document[103] SIGNATURES This section contains the official signatures of the company's certifying officers - Report signed by Ann Marie Sastry, Ph.D., CEO, and Mark Corrao, CFO, on May 13, 2022[105]