Research Solutions(RSSS) - 2021 Q3 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements Unaudited condensed consolidated financial statements for the period ended March 31, 2021, show increased total assets to $17.3 million, improved net income for the quarter, and a narrowed net loss for the nine-month period Note 1: Business Overview Research Solutions operates through two primary service offerings: Platforms, a cloud-based SaaS research intelligence platform, and Transactions, involving the sale and delivery of scientific, technical, and medical content - The company's business is divided into two primary service offerings: Platforms and Transactions[19] - Platforms consist of a cloud-based SaaS research intelligence platform with features for order management, reporting, and data extraction, sold on an annual subscription basis[20][21] - Transactions involve the on-demand sale and electronic delivery of single articles of STM content to researchers, ensuring copyright compliance[23][24] Note 5: Stockholders' Equity This note details changes in stockholders' equity, including activity related to stock options, warrants, and restricted common stock, alongside repurchases - As of March 31, 2021, there were 3,261,203 stock options outstanding with a weighted average exercise price of $1.70[62] - The company repurchased options for 243,750 shares from a former director for $213,312.50 and warrants for 100,000 shares for $95,000 on March 31, 2021[65][70] - During the nine months ended March 31, 2021, the company issued 163,553 shares of restricted stock and recognized $281,148 in expense for vested restricted stock[72][73] - A common stock repurchase program was authorized in February 2021 to satisfy employee tax obligations, with 67,417 shares repurchased for $150,386 during the nine-month period[75][76] Note 6: Contingencies (COVID-19) The company acknowledges COVID-19 risks, noting no significant negative impact to date, but future effects remain uncertain and difficult to predict - The company is subject to risks from the COVID-19 pandemic, but the extent of the impact is highly uncertain[78] - 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[79] - The future impact of the pandemic on the company's financial condition, liquidity, or results of operations remains uncertain[80] Condensed Consolidated Balance Sheet Highlights (unaudited) | Account | March 31, 2021 | June 30, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $11,233,562 | $9,311,556 | | Accounts receivable, net | $5,013,089 | $4,449,260 | | Total current assets | $17,307,384 | $14,722,930 | | Total assets | $17,323,427 | $14,812,692 | | Liabilities & Equity | | | | Accounts payable and accrued expenses | $7,558,319 | $6,349,845 | | Deferred revenue | $4,601,473 | $3,524,507 | | Total current liabilities | $12,159,792 | $9,953,678 | | Total stockholders' equity | $5,163,635 | $4,859,014 | Condensed Consolidated Statements of Operations Highlights (unaudited) | Metric | Three Months Ended Mar 31, 2021 | Three Months Ended Mar 31, 2020 | Nine Months Ended Mar 31, 2021 | Nine Months Ended Mar 31, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $8,340,532 | $8,047,406 | $23,538,692 | $23,172,957 | | Gross profit | $2,702,640 | $2,539,014 | $7,543,798 | $7,129,349 | | Income (loss) from operations | $50,070 | $(11,155) | $(194,020) | $(847,005) | | Net income (loss) | $49,748 | $11,946 | $(196,213) | $(661,683) | | Net income (loss) per share (basic) | $0.00 | $0.00 | $(0.01) | $(0.03) | Condensed Consolidated Statements of Cash Flows Highlights (unaudited) | Cash Flow Activity | Nine Months Ended Mar 31, 2021 | Nine Months Ended Mar 31, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,220,056 | $1,304,131 | | Net cash used in investing activities | $(11,853) | $0 | | Net cash provided by (used in) financing activities | $(288,598) | $1,606,463 | | Net increase in cash and cash equivalents | $1,922,006 | $2,896,170 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management reports a 3.6% increase in total revenue for Q3 FY2021, driven by Platform growth, improved gross profit, and a strengthened liquidity position Results of Operations For Q3 FY2021, total revenue grew 3.6% year-over-year to $8.3 million, with Platform revenue up 32.1%, and the nine-month net loss significantly narrowed Revenue Comparison (YoY) | Revenue Source | Three Months Ended Mar 31, 2021 | % Change | Nine Months Ended Mar 31, 2021 | % Change | | :--- | :--- | :--- | :--- | :--- | | Platforms | $1,344,183 | 32.1% | $3,706,406 | 31.2% | | Transactions | $6,996,349 | (0.5)% | $19,832,286 | (2.5)% | | Total Revenue | $8,340,532 | 3.6% | $23,538,692 | 1.6% | - Platform revenue growth was driven by additional deployments to new and existing customers and expansion from existing customers[107] - Transaction revenue decreased primarily due to lower order volume[107] Profitability Comparison (YoY) | Metric | Three Months Ended Mar 31, 2021 | Three Months Ended Mar 31, 2020 | Nine Months Ended Mar 31, 2021 | Nine Months Ended Mar 31, 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Gross Profit | $2,702,640 | $2,539,014 | $7,543,798 | $7,129,349 | | Gross Margin | 32.4% | 31.6% | 32.0% | 30.8% | | Income (Loss) from Operations | $50,070 | $(11,155) | $(194,020) | $(847,005) | | Net Income (Loss) | $49,748 | $11,946 | $(196,213) | $(661,683) | Liquidity and Capital Resources The company's liquidity improved with cash and cash equivalents increasing to $11.2 million, driven by operating cash flow, and maintains an available revolving line of credit - Cash and cash equivalents increased to $11,233,562 as of March 31, 2021, up from $9,311,556 at June 30, 2020[121] - Net cash provided by operating activities for the nine months ended March 31, 2021, was $2,220,056, an increase from $1,304,131 in the prior-year period[120][123] - Net cash used in financing activities was $288,598, resulting from stock and warrant repurchases partially offset by proceeds from option and warrant exercises[126] - The company has a revolving line of credit with no outstanding borrowings and approximately $1,888,000 of available credit as of March 31, 2021[129] Non-GAAP Measure – Adjusted EBITDA Adjusted EBITDA significantly increased to $238,129 for the three months ended March 31, 2021, and improved to $565,822 for the nine-month period Reconciliation of Net Income (Loss) to Adjusted EBITDA | Metric | Three Months Ended Mar 31, 2021 | Three Months Ended Mar 31, 2020 | Nine Months Ended Mar 31, 2021 | Nine Months Ended Mar 31, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $49,748 | $11,946 | $(196,213) | $(661,683) | | Adjustments | $188,381 | $133,294 | $762,035 | $658,442 | | Adjusted EBITDA | $238,129 | $145,240 | $565,822 | $(3,241) | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not required for smaller reporting companies - No disclosure is required under this item[135] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal control over financial reporting - Management concluded that as of March 31, 2021, the company's disclosure controls and procedures were effective at a reasonable assurance level[137] - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2021, that have materially affected, or are reasonably likely to materially affect, internal controls[140] PART II — OTHER INFORMATION Item 1A. Risk Factors The primary risk factor is the COVID-19 pandemic, which could reduce demand for services, though no significant negative impact has been experienced to date - The company identifies the COVID-19 pandemic as a significant risk factor that could reduce demand for its services[142] - To date, the company has not experienced any significant negative impact on its consolidated statements of operations or cash flows[143] - The future extent to which the pandemic may materially impact the company's financial condition, liquidity, or results of operations is uncertain[144] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds A stock repurchase program of up to $400,000 was authorized in February 2021 to satisfy employee tax obligations, with 10,750 shares repurchased in March - A stock repurchase program of up to $400,000 was authorized effective February 9, 2021, for employees to cover tax obligations on vesting awards[145] Common Stock Repurchases (Q3 FY2021) | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 2021 | — | — | | February 2021 | — | — | | March 2021 | 10,750 | $2.15 | | Total | 10,750 | $2.15 | Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including employment agreements, CEO/CFO certifications, and XBRL data files - Exhibits filed include amended employment agreements for Peter Derycz and Roy W. Olivier, CEO and CFO certifications under Sarbanes-Oxley Sections 302 and 906, and XBRL interactive data files[153]