What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-09-23 compared with 2021-09-23 · 35 added, 36 removed, 222 unchanged (24% of the section changed)

6 unchanged sentences

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.

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.

Research Solutions was incorporated in the State of Nevada on November 2, 2006, and is a publicly traded holding company with three wholly owned subsidiaries at June 30, 2022:

Reprints Desk, Inc., a Delaware corporation, Reprints Desk Latin America S.

de C.V, an entity organized under the laws of Mexico, and RESSOL LA, S.

DE C.V., an entity organized under the laws of Mexico.

33 unchanged sentences

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.

Inflation Risk

We do not believe that inflation has had a material effect on its operations to date, other than its impact on the general economy.

However, there is a risk that our operating costs could become subject to inflationary and interest rate pressures in the future, which would have the effect of increasing our operating costs, and which would put additional stress on our working capital resources.

Critical Accounting Policies and Estimates

4 unchanged sentences

Revenue Recognition

We account for revenue in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606), ("ASC 606").

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.

14 unchanged sentences

We periodically issue stock options, warrants and restricted stock to employees and non-employees for services, in capital raising transactions, and for financing costs.

We account for share-based payments under the guidance as set forth in the Share-Based Payment Topic 718 of the FASB Accounting Standards Codification, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, officers, directors, and consultants, including employee stock options, based on estimated fair values.

We account for share-based payments under the guidance as set

forth in the Share-Based Payment Topic 718 of the FASB Accounting Standards Codification, which requires the measurement and recognition of compensation expense for all share-based payment awards made to employees, officers, directors, and consultants, including employee stock options, based on estimated fair values.

We estimate the fair value of stock option and warrant awards to employees and directors on the date of grant using an option-pricing model, and the value of the portion of the award that is ultimately expected to vest is recognized as expense over the required service period in our Statements of Operations.

We estimate the fair value of restricted stock awards to employees and directors

using the market price of our common stock on the date of grant, and the value of the portion of the award that is ultimately expected to vest is recognized as expense over the required service period in our Statements of Operations.

We estimate the fair value of restricted stock awards to employees and directors using the market price of our common stock on the date of grant, and the value of the portion of the award that is ultimately expected to vest is recognized as expense over the required service period in our Statements of Operations.

Under ASC 718, Repurchase or Cancellation of equity awards, the amount of cash or other assets transferred (or liabilities incurred) to repurchase an equity award shall be charged to equity, to the extent that the amount paid does not exceed the fair value of the equity instruments repurchased at the repurchase date.

10 unchanged sentences

Income and expenditures are translated at the average exchange rate of the period.

Although the majority of our revenue and costs are in US dollars, the costs of Reprints Desk Latin America are in Mexican Pesos.

Although the majority of our revenue and costs are in US dollars, the costs of Reprints Desk Latin America and ResSol LA are in Mexican Pesos.

As a result, currency exchange fluctuations may impact our revenue and the costs of our operations.

5 unchanged sentences

US Dollar exchange rate

Period end GBP :

US Dollar exchange rate

Average period GBP :

US Dollar exchange rate

Period end Mexican Peso :

18 unchanged sentences

Other income (expenses and income taxes)

Income (loss) from continuing operations

Gain on sale of discontinued operations

Net income (loss)

Basic income (loss) per common share:

Income (loss) per share from continuing operations

Income per share from discontinued operations

Net income (loss) per share

1 unchanged sentence

Diluted income (loss) per common share:

Income (loss) per share from continuing operations

Income per share from discontinued operations

Net income (loss) per share

19 unchanged sentences

Provision for income taxes

Loss from continuing operations

Gain from sale of discontinued operations

Years Ended June 30,

4 unchanged sentences

Billings or payments received in advance of revenue recognition are recorded as deferred revenue.

Decreased primarily due to lower order volume.

Decreased primarily due to lower paid order volume.

Cost of Revenue

7 unchanged sentences

Impact as percentage

Increased primarily due to proportionally higher personnel costs.

Increased primarily due to proportionally higher copyright and personnel costs.

Decreased primarily due to proportionally lower personnel costs.

Decreased primarily due to lower copyright expenses and proportionally lower personnel costs.

Years Ended June 30,

15 unchanged sentences

Sales and marketing

Decreased primarily due to lower advertising media spend and consulting expenses partially offset by greater personnel costs.

Increased primarily due to greater consulting expenses, including separation cost paid to a former officer, partially offset by lower marketing spend.

Technology and product development

Increased due to greater consulting expenses and personnel costs.

Increased due to greater consulting and recruiting expenses and software development personnel costs.

General and administrative

Increased due to greater personnel costs and accounting, consulting and legal expenses.

Greater personnel costs include separation costs paid to a former officer and an operations director.

Provision for Income Taxes

During the years ended June 30, 2021 and 2020, we recorded a provision for income taxes of $3,204 and $7,836, respectively, a decrease of $4,632.

During the years ended June 30, 2022 and 2021, we recorded a provision for income taxes of $7,622 and $3,204, respectively, an increase of $4,418.

Net Income (Loss)

1 unchanged sentence

Net Income (Loss):

Loss from continuing operations

Income from discontinued operations

Total net loss

Loss from continuing operations decreased $494,598 or 63.4%, for the year ended June 30, 2021 compared to the prior year, primarily due to increased gross profit, partially offset by increased operating expenses as described above.

Net loss increased $1,347,295 or 472.6%, for the year ended June 30, 2022 compared to the prior year, primarily due to increased operating expenses, partially offset by increased gross profit as described above.

Liquidity and Capital Resources

1 unchanged sentence

Consolidated Statements of Cash Flow Data:

Net cash provided by operating activities

Net cash provided by (used in) operating activities

Net cash used in investing activities

1 unchanged sentence

Effect of exchange rate changes

Net increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

As of June 30, 2021, we had cash and cash equivalents of $11,004,337, compared to $9,311,556 as of June 30, 2020, an increase of $1,692,781.

This increase was primarily due to cash provided by operating activities.

As of June 30, 2022, we had cash and cash equivalents of $10,603,175, compared to $11,004,337 as of June 30, 2021, a decrease of $401,162.

This decrease was primarily due to cash used by operating activities.

Operating Activities

Net cash used in operating activities was $417,200 for the year ended June 30, 2022 and resulted primarily from an increase in deferred revenue of $734,175 and a decrease in prepaid royalties of $58,269, partially offset by an increase in accounts receivable of $534,092.

Net cash provided by operating activities was $1,868,406 for the year ended June 30, 2021 and resulted primarily from an increase in deferred revenue of $1,279,844 and an increase in accounts payable and accrued expenses of $337,343, partially offset by an increase in accounts receivable of $268,193.

Net cash provided by operating activities was $2,418,465 for the year ended June 30, 2020 and resulted primarily from an increase in accounts payable and accrued expenses of $1,486,950 and an increase in deferred revenue of $1,214,301, partially offset by an increase in prepaid royalties of $720,367.

Investing Activities

Net cash used in investing activities was $44,288 for the year ended June 30, 2022 and resulted from the purchase of property and equipment.

No cash was used in or provided by investing activities for the year ended June 30, 2020.

Net cash used in investing activities was $19,854 for the year ended June 30, 2021 and resulted from the purchase of property and equipment.

Financing Activities

Net cash provided by financing activities was $63,270 for the year ended June 30, 2022 and resulted from the proceeds from the exercise of options of $97,688 and the proceeds from the exercise of warrants of $59,500, partially offset by the repurchase of common stock of $93,918.

Net cash used in financing activities was $159,974 for the year ended June 30, 2021 and resulted from the repurchase of stock options and warrants of $308,313 and the repurchase of common stock of $178,012, partially offset by the proceeds from the exercise of warrants of $237,501 and the proceeds from the exercise of stock options of $88,850.

Net cash provided by financing activities was $1,553,399 for the year ended June 30, 2020 and resulted from the proceeds from the exercise of warrants of $1,875,000, partially offset by the repurchase of common stock of $321,601.

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 28, 2024, and is subject to certain financial and performance covenants with which we were in compliance as of June 30, 2022.

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.

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.

The line of credit bears interest at an annual rate equal to the greater of 1% above the prime rate and 5.0%.

14 unchanged sentences

Years Ended June 30,

Net income (loss)

Add (deduct):

4 unchanged sentences

Stock-based compensation

Gain on sale of discontinued operations

Adjusted EBITDA

15 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis