Research Solutions(RSSS) - 2021 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Condensed Consolidated Financial Statements (unaudited) This section presents Research Solutions, Inc.'s unaudited condensed consolidated financial statements as of December 31, 2020, including balance sheets, statements of operations, cash flows, and related notes Condensed Consolidated Balance Sheets Balance Sheet Highlights (as of Dec 31, 2020 vs. June 30, 2020) | Metric | Dec 31, 2020 | June 30, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $10,163,504 | $9,311,556 | | Total current assets | $15,362,251 | $14,722,930 | | Total assets | $15,390,653 | $14,812,692 | | Deferred revenue | $4,385,507 | $3,524,507 | | Total current liabilities | $10,196,103 | $9,953,678 | | Total stockholders' equity | $5,194,550 | $4,859,014 | Condensed Consolidated Statements of Operations Three Months Ended December 31, 2020 vs 2019 | Metric | Q2 2021 (ended 12/31/20) | Q2 2020 (ended 12/31/19) | Change | | :--- | :--- | :--- | :--- | | Platform Revenue | $1,220,535 | $949,825 | +28.5% | | Transactions Revenue | $6,229,200 | $6,580,613 | -5.3% | | Total Revenue | $7,449,735 | $7,530,438 | -1.1% | | Gross Profit | $2,391,582 | $2,273,800 | +5.2% | | Loss from Operations | ($261,005) | ($709,147) | +63.2% | | Net Loss | ($260,606) | ($592,172) | +56.0% | | Net Loss Per Share | ($0.01) | ($0.03) | N/A | Six Months Ended December 31, 2020 vs 2019 | Metric | H1 2021 (ended 12/31/20) | H1 2020 (ended 12/31/19) | Change | | :--- | :--- | :--- | :--- | | Platform Revenue | $2,362,223 | $1,806,270 | +30.8% | | Transactions Revenue | $12,835,937 | $13,319,281 | -3.6% | | Total Revenue | $15,198,160 | $15,125,551 | +0.5% | | Gross Profit | $4,841,158 | $4,590,335 | +5.5% | | Loss from Operations | ($244,090) | ($835,850) | +70.8% | | Net Loss | ($245,961) | ($673,629) | +63.5% | Condensed Consolidated Statements of Cash Flows Cash Flow Summary (Six Months Ended Dec 31) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $884,478 | $1,617,651 | | Net cash used in investing activities | ($6,134) | $0 | | Net cash used in financing activities | ($31,923) | ($199,374) | | Net increase in cash | $851,948 | $1,416,038 | | Cash at end of period | $10,163,504 | $6,769,128 | Notes to Condensed Consolidated Financial Statements - The company provides two main service offerings: annual licenses for its SaaS research intelligence platform ("Platforms") and transactional sales of scientific, technical, and medical (STM) content ("Transactions")[21] - Platform revenue from subscription fees is recognized ratably over the subscription term (typically one year), while Transaction revenue from single article delivery is recognized upon delivery to the customer[38][39] - The company has a revolving line of credit for the lesser of $2.5 million or 80% of eligible accounts receivable, maturing in February 2022. As of December 31, 2020, there were no outstanding borrowings and approximately $1.72 million was available[54][55] - During the six months ended December 31, 2020, the company repurchased 56,667 shares of common stock from employees for an aggregate amount of $127,274 to cover tax withholding obligations related to vesting of restricted stock[76] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial results for the three and six months ended December 31, 2020, highlighting strong Platform segment growth, a slight Transactions segment decline, improved gross profit, reduced operating expenses, and a significant narrowing of net loss, alongside liquidity, capital resources, and Adjusted EBITDA reconciliation Results of Operations Revenue Analysis (Three Months Ended Dec 31, 2020 vs 2019) | Category | 2020 | 2019 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | 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% | - For the three months ended Dec 31, 2020, Platform revenue grew 28.5% due to new and existing customer deployments, while Transaction revenue decreased 5.3% due to lower order volume[109] - Total operating expenses for the quarter decreased by 11.1% YoY to $2.65 million, driven primarily by lower sales and marketing spend (-23.7%) and general and administrative costs (-11.9%)[107][115] - For the six months ended Dec 31, 2020, total revenue increased 0.5% YoY, driven by a 30.8% increase in Platform revenue, which offset a 3.6% decrease in Transaction revenue[108][110] Liquidity and Capital Resources - As of December 31, 2020, the company had cash and cash equivalents of $10.2 million, an increase of $0.85 million from June 30, 2020, primarily due to cash provided by operating activities[120] - Net cash provided by operating activities was $884,478 for the six months ended December 31, 2020, mainly resulting from an increase in deferred revenue and a decrease in accounts receivable, partially offset by a decrease in accounts payable[121] - Net cash used in financing activities was $31,923 for the six-month period, resulting from common stock repurchases of $127,274, partially offset by proceeds from the exercise of warrants of $81,251[126] Non-GAAP Measure – Adjusted EBITDA Reconciliation of Net Loss to Adjusted EBITDA | Period | Net Loss | Adjusted EBITDA | Change in Adj. EBITDA | | :--- | :--- | :--- | :--- | | Three Months Ended Dec 31, 2020 | ($260,606) | $160,514 | +$344,645 | | Three Months Ended Dec 31, 2019 | ($592,172) | ($184,131) | N/A | | Six Months Ended Dec 31, 2020 | ($245,961) | $327,693 | +$476,174 | | Six Months Ended Dec 31, 2019 | ($673,629) | ($148,481) | N/A | - The company uses Adjusted EBITDA, a non-GAAP measure, to supplement its performance analysis. Adjusted EBITDA is defined as net income (loss) adjusted for interest, taxes, depreciation, amortization, stock-based compensation, and other specific items[129] Quantitative and Qualitative Disclosures About Market Risk The company, as a smaller reporting entity, is not required to provide disclosures in this section - Disclosure is not required for the registrant[133] Controls and Procedures Management, including the CEO and CFO, concluded the company's disclosure controls and procedures were effective as of December 31, 2020, with no material changes to internal control over financial reporting during the quarter - Based on their evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of December 31, 2020[135] - No changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, such controls were identified during the quarter ended December 31, 2020[138] PART II — OTHER INFORMATION Risk Factors This section addresses the potential adverse impact of the COVID-19 pandemic on the company's business, acknowledging the risk of reduced customer demand for transactional articles and platform subscriptions despite no significant negative effects observed to date - The company identifies the COVID-19 pandemic as a significant risk factor, with potential to reduce orders from transactional customers or decrease platform subscriptions, which could materially impact business and financial performance[139] - To date, the company has not experienced any significant changes in its business that would have a significant negative impact on its financial statements or cash flows due to the pandemic[141] Unregistered Sales of Equity Securities and Use of Proceeds The company's stock repurchase program, authorized to satisfy employee tax obligations from vesting stock awards, resulted in the repurchase of 31,167 shares for $68,879 during the three months ended December 31, 2020, before its expiration at year-end - A stock repurchase program was authorized in February 2020 for up to $400,000 of common stock to satisfy employee tax obligations from vesting stock awards[143] Stock Repurchases (Q2 2021) | Period | Total Shares Purchased | Average Price Paid per Share | Aggregate Amount | | :--- | :--- | :--- | :--- | | Three Months Ended Dec 31, 2020 | 31,167 | ~$2.21 | $68,879 | Exhibits This section indexes all exhibits filed with the Form 10-Q report, including CEO and CFO certifications and interactive data files in XBRL format - The report includes certifications from the Chief Executive Officer and Chief Financial Officer under Rule 13a-14(a)/15d-14(a) and Section 1350[148] - Interactive Data Files (XBRL documents) are also included as exhibits[148]