Amesite(AMST) - 2023 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION This section covers unaudited financial statements, MD&A, market risk, and internal controls for the interim period ITEM 1. FINANCIAL STATEMENTS Amesite Inc.'s unaudited condensed financial statements, including balance sheets, operations, equity, and cash flows, with notes Condensed Balance Sheets (unaudited) This table presents the unaudited condensed balance sheets for Amesite Inc. as of September 30, 2022, and June 30, 2022 | Metric | Sep 30, 2022 | Jun 30, 2022 | | :-------------------------------- | :----------- | :----------- | | Cash and cash equivalents | $8,083,704 | $7,155,367 | | Total current assets | $8,310,583 | $7,729,996 | | Total assets | $9,389,809 | $8,883,860 | | Total current liabilities | $743,865 | $748,108 | | Total stockholders' equity | $8,645,944 | $8,135,752 | | Accumulated deficit | $(30,854,354) | $(29,277,016) | Condensed Statements of Operations (unaudited) This table presents unaudited condensed statements of operations for the three months ended September 30, 2022, and 2021 | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Change (YoY) | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------- | | Net Revenue | $280,282 | $140,691 | +99.2% | | Total operating expenses | $1,862,540 | $2,519,110 | -26.1% | | Net Loss | $(1,577,338) | $(2,378,157) | -33.7% | | Basic and diluted loss per share | $(0.06) | $(0.11) | -45.5% | Condensed Statements of Stockholders' Equity (unaudited) This table presents unaudited condensed statements of stockholders' equity from July 1, 2022, to September 30, 2022 | Metric | July 1, 2022 | Sep 30, 2022 | | :-------------------------------- | :----------- | :----------- | | Common Shares Outstanding | 25,993,484 | 30,300,305 | | Additional Paid-In Capital | $37,410,209 | $39,497,308 | | Accumulated Deficit | $(29,277,016) | $(30,854,354) | | Total Stockholders' Equity | $8,135,752 | $8,645,944 | Condensed Statements of Cash Flows (unaudited) This table presents unaudited condensed statements of cash flows for the three months ended September 30, 2022, and 2021 | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | | :-------------------------------- | :------------------------------ | :------------------------------ | | Net cash used in operating activities | $(809,766) | $(1,209,372) | | Net cash used in investing activities | $(112,398) | $(273,147) | | Net cash provided by financing activity | $1,850,501 | $1,360,000 | | Net Increase (Decrease) in Cash | $928,337 | $(122,519) | | Cash and Cash Equivalents - End of period | $8,083,704 | $10,590,572 | Notes to Condensed Financial Statements Detailed notes accompanying financial statements, explaining accounting policies and significant disclosures - The financial statements are unaudited and prepared in accordance with GAAP, reflecting the company's financial position and performance for the interim period[28] Note 1 - Nature of Business and Liquidity Describes Amesite Inc.'s business operations, liquidity challenges, and going concern status - Amesite Inc. is an artificial intelligence-driven platform and course designer providing customized online products for businesses, universities, colleges, and K-12 schools[20] - The Company has a history of net losses and negative cash flows from operating activities, raising substantial doubt about its ability to continue as a going concern[23][25] - The Company received a Nasdaq notice for failing to maintain a minimum bid price of $1 per share, with a compliance deadline of March 6, 2023, or face delisting[24] - Management plans to generate cash through financing transactions, such as common stock offerings, but these plans are subject to market conditions and are not deemed probable[26] Note 2 - Significant Accounting Policies Details key accounting policies applied, including revenue recognition, software, and customer concentration - The financial statements are prepared in accordance with GAAP and SEC requirements, with a fiscal year ending June 30[28] - Costs for internally-developed software are capitalized during the application development stage and amortized over three years. Amortization expense was $180,659 for Q3 2022, down from $208,000 in Q3 2021[30] - Revenue is primarily generated from contractual arrangements with businesses, colleges, universities, and K-12 schools for integrated technology and services, recognized ratably over the contract term (typically two years)[31][32] - Four customers comprised approximately 73% of total revenue for the three months ended September 30, 2022, compared to three customers comprising 86% in the prior year[34] | Customer Type | Sep 30, 2022 | Sep 30, 2021 | | :------------ | :----------- | :----------- | | Enterprise | $198,893 | $105,666 | | University | $81,389 | $30,025 | | K-12 | $0 | $5,000 | | Total | $280,282 | $140,691 | | Metric | Sep 30, 2022 | Sep 30, 2021 | | :------------------------------------ | :----------- | :----------- | | Opening balance (Deferred Revenue) | $342,672 | $333,200 | | Billings | $216,500 | $216,806 | | Less revenue recognized | $(217,502) | $(140,691) | | Closing balance (Deferred Revenue) | $341,670 | $409,314 | - The deferred revenue balance of $341,670 as of September 30, 2022, is expected to be recognized over the next 12 months[43] - Potentially dilutive securities increased to 8,928,174 for Q3 2022 from 4,421,364 for Q3 2021[44] Note 3 - Stock-Based Compensation Outlines the Company's equity incentive plan and accounting for stock-based compensation expenses - The Company's Equity Incentive Plan allows grants of stock options, restricted stock, etc., with 4,600,000 shares reserved[48] - Stock-based compensation expense decreased to $175,779 for Q3 2022 from $389,085 for Q3 2021[52] - As of September 30, 2022, there was approximately $171,964 of total unrecognized compensation cost for nonvested options, expected to be recognized through March 2026[55] Note 4 - Common Stock Describes transactions related to common stock, including financing agreements and warrant issuances - The Company has a purchase agreement with Lincoln Park Capital Fund, LLC, allowing sales of up to $16.5 million worth of common stock until August 2, 2023[56] - On September 1, 2022, the Company sold 4,181,821 shares of common stock for approximately $1.85 million (net) and issued warrants to purchase an aggregate of 4,181,821 shares[63] - Warrants issued in connection with the September 2022 offering had a fair value of approximately $953,460 (for private placement) and $42,454 (for underwriter), estimated using the Black-Scholes Model[63][64] Note 5 - Income Taxes Explains the Company's income tax position, including NOL carryforwards and valuation allowances - The Company has not generated taxable income and has not recognized an income tax benefit[65] - The Company has approximately $30.8 million in federal and state net operating loss (NOL) carryforwards, with a full valuation allowance recorded against deferred tax assets[66] Note 6 - Subsequent Events Confirms no material subsequent events occurred through the filing date of the Quarterly Report - No material subsequent events were identified through the filing date of the Quarterly Report[67] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's perspective on financial condition, operations, liquidity, and capital resources for Q3 2022, highlighting growth and concerns - The Company is not currently profitable, reporting a net loss of $1,577,338 for the three months ended September 30, 2022, and a cumulative net loss of $30,854,354 since inception[71] - Management believes it will have sufficient cash for the next twelve months, but substantial doubt about the Company's ability to continue as a going concern remains due to uncertainties in its forecast and reliance on future financing[72][73] Overview High-level summary of the Company's financial performance and going concern status for the reporting period - The Company is not currently profitable and incurred a net loss of $1,577,338 for the three months ended September 30, 2022[71] - Substantial doubt exists about the Company's ability to continue as a going concern, despite management's belief in sufficient cash for the next twelve months, due to forecast uncertainty and reliance on future financing[72][73] Basis of Presentation Outlines accounting principles and standards used in preparing the financial statements - Financial statements are prepared in accordance with GAAP and SEC requirements[75] Critical Accounting Policies and Significant Judgments and Estimates Details key accounting policies and significant management judgments and estimates impacting financial statements - The preparation of financial statements requires significant estimates and assumptions, particularly for internally-developed capitalized software and revenue recognition[76] Internally-Developed Capitalized Software Details accounting policy for capitalizing and amortizing costs of internally-developed software - Costs for internal-use software development are capitalized during the application development stage and amortized over an estimated useful life of three years[77] Revenue Recognition Describes the Company's policy for recognizing revenue from contractual arrangements and services - Revenue is primarily derived from annual licensing arrangements, including maintenance and setup fees, recognized ratably over the typical two-year contract term[78][79] - Professional services are evaluated for distinctness, and transaction prices are allocated based on standalone selling prices or a cost-plus margin approach[81] - Four customers accounted for approximately 73% of total revenue for the three months ended September 30, 2022[82] Accounts Receivable, Contract Assets and Liabilities Explains accounting for accounts receivable, contract assets, and contract liabilities like deferred revenue - Accounts receivable are stated at net realizable value, with no allowance for doubtful accounts as of September 30, 2022, or June 30, 2022[83] - Contract liabilities (deferred revenue) represent amounts billed or received in excess of recognized revenue, typically from upfront payments for annual license fees[84][85] Results of Operations Analyzes the Company's financial performance, including revenue, expenses, and net loss, for the reporting period - The Company experienced a significantly lower net loss in Q3 2022 compared to Q3 2021, primarily due to decreased operating expenses[90] Revenue Analyzes the Company's revenue performance, highlighting growth drivers for the reporting period | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Change (YoY) | | :------ | :------------------------------ | :------------------------------ | :----------- | | Revenue | $280,282 | $140,691 | +99.2% | - Revenue growth was driven by higher recognition of deferred revenues and new annual license fees with associated services[86] General and Administrative Details changes in general and administrative expenses and their primary drivers | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Change (YoY) | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------- | | G&A Expenses | $976,320 | $1,235,770 | -21.0% | - The decrease in G&A expenses was primarily due to lower professional fees and stock-based compensation[87] Technology and Content Development Examines trends and factors influencing technology and content development expenses | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Change (YoY) | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------- | | Tech & Content Dev Expenses | $480,775 | $796,108 | -39.6% | - The decrease was mainly due to reduced development of technology platforms and lower amortization of capitalized software[88] Sales and Marketing Analyzes sales and marketing expenses, identifying key factors contributing to changes | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Change (YoY) | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------- | | Sales & Marketing Expenses | $405,445 | $487,232 | -16.8% | - The decrease was primarily due to decreased payroll costs allocated to fewer sales and marketing personnel[89] Interest Income Reports the Company's interest income for the period, noting significant changes year-over-year | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Change (YoY) | | :------------- | :------------------------------ | :------------------------------ | :----------- | | Interest Income | $5,451 | $262 | +1972.1% | Net Loss Details the Company's net loss for the period and primary reasons for its change | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Change (YoY) | | :------- | :------------------------------ | :------------------------------ | :----------- | | Net Loss | $(1,577,338) | $(2,378,157) | -33.7% | - The net loss decreased significantly due to lower operating expenses[90] Financial Position, Liquidity, and Capital Resources Discusses financial health, cash management, and funding strategies, including going concern considerations - The Company is not profitable and has a history of net losses and negative operating cash flows[91][94] - As of September 30, 2022, the cash balance was $8,083,704[94] - The Company has engaged in various financing activities, including a purchase agreement with Lincoln Park for up to $16.5 million in common stock and a September 2022 offering that raised approximately $1.85 million net[92][94] - Substantial doubt about the Company's ability to continue as a going concern persists, despite management's forecast of sufficient cash for the next twelve months, due to uncertainties and reliance on future financing[96][97] - The Company faces potential delisting from Nasdaq due to non-compliance with the minimum bid price rule[95] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Confirms absence of changes in or disagreements with accountants regarding financial disclosure - There were no changes in or disagreements with accountants on accounting and financial disclosure[98] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As a smaller reporting company, Amesite Inc. is exempt from detailed market risk disclosures - The Company is a "smaller reporting company" and is not required to provide detailed market risk disclosures[99] ITEM 4. CONTROLS AND PROCEDURES Management concluded disclosure controls were ineffective due to material weaknesses in internal control over financial reporting - Management concluded that disclosure controls and procedures were not effective as of September 30, 2022[99] - Material weaknesses were identified in three components of the COSO framework: risk assessment, control activities, and monitoring activities[99][100][101] Evaluation of Disclosure Controls and Procedures Disclosure controls deemed ineffective due to material weaknesses in internal control over financial reporting - Disclosure controls and procedures were deemed ineffective due to material weaknesses in internal control over financial reporting[99] - Specific material weaknesses include deficiencies in identifying and assessing business changes (risk assessment), developing and deploying control activities, and performing ongoing evaluation and timely communication of deficiencies (monitoring activities)[100][101] Remediation Efforts to Address the Material Weaknesses Remediation plans include formalizing risk assessment, documenting control activities, and monitoring internal controls - Remediation plans include formalizing the risk assessment process, documenting control activities for transactions and financial reporting, and formalizing the process for monitoring internal control over financial reporting[101][102] - The Company will utilize a third-party finance and accounting service provider to assist with implementing revised control activities and monitoring[101] Changes in Internal Controls Over Financial Reporting No material changes in internal control over financial reporting occurred during the quarter - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[104] PART II – OTHER INFORMATION This section details legal proceedings, risk factors, equity sales, and other required disclosures ITEM 1. LEGAL PROCEEDINGS Amesite Inc. reported no material legal proceedings for the period - There are no legal proceedings to report[106] ITEM 1A. RISK FACTORS Substantial doubt about going concern due to net losses, financing reliance, and potential Nasdaq delisting - Substantial doubt exists about the Company's ability to continue as a going concern due to a history of net losses and the need for additional financing[107] - The Company's long-term growth and success are dependent on its ability to raise additional capital and implement its business plan, with no assurance of success[107] - The Company's common stock could be delisted from Nasdaq if it fails to regain compliance with the minimum bid price rule, which could negatively impact financing and stock trading[95][107] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Warrants issued for common stock in a private placement during September 2022 offering, exempt under Securities Act - In connection with the September 2022 public offering, the Company issued warrants to purchase 4,181,821 shares of common stock in a concurrent private placement[108] - These warrants were issued under an exemption provided by Section 4(a)(2) and Rule 506(b) of the Securities Act[108] ITEM 3. DEFAULTS UPON SENIOR SECURITIES Amesite Inc. reported no defaults upon senior securities - There were no defaults upon senior securities[108] ITEM 4. MINE SAFETY DISCLOSURES This item is not applicable to Amesite Inc - This item is not applicable to the Company[108] ITEM 5. OTHER INFORMATION Amesite Inc. reported no other information required under this item - There is no other information to report[108] ITEM 6. EXHIBITS Lists exhibits filed as part of the Quarterly Report on Form 10-Q, including certifications and XBRL documents - The report includes various exhibits such as certifications (31.1, 31.2, 32.1, 32.2), Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE), and the Cover Page Interactive Data File (104)[110] SIGNATURES This section contains official signatures of the CEO and CFO, certifying report accuracy - The report was signed by Ann Marie Sastry, Ph.D., Chief Executive Officer, and Mark Corrao, Chief Financial Officer, on November 10, 2022[111]