What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-09-23 compared with 2021-09-23 · 58 added, 79 removed, 455 unchanged (23% of the section changed)

7 unchanged sentences

We have audited the accompanying consolidated balance sheets of Research Solutions, Inc.

(the “Company”) and Subsidiaries as of June 30, 2021 and 2020, the related statements of operations and other comprehensive loss, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).

and Subsidiaries (the “Company”) as of June 30, 2022 and 2021, the related consolidated statements of operations and other comprehensive loss, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of June 30, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

7 unchanged sentences

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

5 unchanged sentences

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Revenue recognition – Recognition of Single Article Transactions Revenue

30 unchanged sentences

Deposits and other assets

Right of use asset, net of accumulated amortization of $ 463,022 and $ 390,691 , respectively

Liabilities and Stockholders’ Equity

2 unchanged sentences

Deferred revenue

Lease liability, current portion

Total current liabilities

28 unchanged sentences

Loss from operations

( 1,631,916 )

Loss from operations before provision for income taxes

( 1,624,762 )

Provision for income taxes

Loss from continuing operations

Gain from sale of discontinued operations

( 1,632,384 )

Other comprehensive income (loss):

1 unchanged sentence

Comprehensive loss

( 1,634,748 )

Loss per common share:

Loss per share from continuing operations, basic and diluted

Income per share from discontinued operations, basic and diluted

Net loss per share, basic and diluted

Loss per share, basic and diluted

Weighted average common shares outstanding, basic and diluted

2 unchanged sentences

and Subsidiaries

Consolidated Statement of Stockholders’ Equity

Consolidated Statements of Changes in Stockholders’ Equity

For the Years Ended June 30, 2022 and 2021

6 unchanged sentences

Repurchase of common stock

Repurchase of stock options and warrants

Common stock issued upon exercise of stock options

6 unchanged sentences

Repurchase of common stock

Repurchase of stock options and warrants

Common stock issued upon exercise of stock options

Common stock issued upon exercise of warrants

( 1,632,384 )

Foreign currency translation

6 unchanged sentences

Cash flow from operating activities:

Gain from sale of discontinued operations

Loss from continuing operations

Adjustment to reconcile net loss to net cash provided by operating activities:

( 1,632,384 )

Adjustment to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization

10 unchanged sentences

Lease liability

Net cash provided by operating activities

Net cash provided by (used in) operating activities

Cash flow from investing activities:

4 unchanged sentences

Proceeds from the exercise of warrants

Common stock repurchase and retirement

Common stock repurchase

Repurchase of stock options and warrants

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

9 unchanged sentences

Research Solutions, Inc.

(the “Company,” “Research Solutions,” “we,” “us” or “our”) 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.

(the “Company,” “Research Solutions,” “we,” “us” or “our”) 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.

62 unchanged sentences

The Company monitors its exposure for credit losses and intends to maintain allowances for anticipated losses, as required.

Cash denominated in Euros with a US Dollar equivalent of $ 88,807 and $ 134,175 at June 30, 2021 and 2020, respectively, was held in accounts at financial institutions located in Europe.

Cash denominated in Euros and British Pounds with an aggregate US Dollar equivalent of $ 483,232 and $ 138,488 at June 30, 2022 and 2021, respectively, was held in accounts at financial institutions located in Europe.

The Company has no customers that represent 10 % of revenue or more for the years ended June 30, 2022 and 2021.

2 unchanged sentences

The following table summarizes our content costs from our vendors:

* Less than 10%

Property and equipment

8 unchanged sentences

Revenue Recognition

The Company accounts 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.

The Company adopted the guidance of ASC 606 on July 1, 2018.

The Company accounts 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.

Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services.

The Company derives its revenues from two sources:

Company derives its revenues from two sources:

annual licenses that allow customers to access and utilize certain premium features of our cloud-based SaaS research intelligence platform (“Platforms”) and the transactional sale of STM content managed, sourced and delivered through the Platform (“Transactions”).

33 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.

We currently do not engage in any currency hedging activities.

Gains and losses from foreign currency transactions, which result from a change in exchange rates between the functional currency and the currency in which a foreign currency transaction is denominated, are included in selling, general and administrative expenses and amounted to a gain of $ 35,960 and a loss of $ 19,529 for the years ended June 30, 2021 and 2020, respectively.

Cash denominated in Euros with a US Dollar equivalent of $ 88,807 and $ 134,175 at June 30, 2021 and 2020, respectively, was held in accounts at financial institutions located in Europe.

Gains and losses from foreign currency transactions, which result from a change in exchange rates between the functional currency and the currency in which a foreign currency transaction is denominated, are included in selling, general and administrative expenses and amounted to a loss of $ 143,898 and a gain of $ 35,960 for the years ended June 30, 2022 and 2021, respectively.

The following table summarizes the exchange rates used:

3 unchanged sentences

US Dollar exchange rate

Period end GBP :

US Dollar exchange rate

Average period GBP :

US Dollar exchange rate

Period end Mexican Peso :

8 unchanged sentences

Potential common shares are excluded from the computation when their effect is antidilutive.

At June 30, 2021 potentially dilutive securities include options to acquire 3,258,408 shares of common stock, warrants to acquire 50,000 shares of common stock and unvested restricted common stock of 245,252 .

At June 30, 2022 potentially dilutive securities include options to acquire 3,182,872 shares of common stock and unvested restricted common stock of 400,092 .

7 unchanged sentences

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments.

ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses ("CECL") to estimate credit losses on certain types of financial instruments, including trade receivables.

ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables.

This may result in the earlier recognition of allowances for losses.

ASU 2016-13 is effective for the Company beginning January 1, 2023, and early adoption is permitted.

ASU 2016-13 is effective for the Company beginning July 1, 2023, and early adoption is

The Company does not believe the potential impact of the new guidance and related codification improvements will be material to its financial position, results of operations and cash flows.

10 unchanged sentences

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.

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

3 unchanged sentences

As of June 30, 2022, there was approximately $ 2,500,000 of available credit.

Lease Obligations

On December 30, 2016, the Company entered into a 48 month non-cancellable lease for its office facilities that will require monthly payments ranging from $ 10,350 to $ 11,475 through January 2021.

In accounting for the lease, the Company adopted ASU 2016-02, Leases which requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease initially measured at the present value of the lease payments.

The Company classified the lease as an operating lease and determined that the value of the lease assets and liability at the inception of the lease was $ 463,000 using a discount rate of 3.75 %.

During the twelve months ended June 30, 2021, the Company made payments of $ 79,326 towards the lease liability.

As of June 30, 2021 and 2020, lease liability amounted to $ 0 and $ 79,326 , respectively.

ASU 2016-02 requires recognition in the statement of operations of a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis.

Rent expense, including real estate

taxes, for the years ended June 30, 2021 and 2020 was $ 39,658 and $ 111,746 , respectively.

The right of use asset at June 30, 2020 was $ 72,331 .

During the years ended June 30, 2021 and 2020, the Company reflected amortization of right of use asset of $ 72,331 and $ 119,914 related to this lease, respectively, resulting in a net asset balance of $ 0 as of June 30, 2021.

Stockholders’ Equity

5 unchanged sentences

On November 21, 2017, the Company’s stockholders approved the adoption of the 2017 Plan (previously adopted by our board of directors on September 14, 2017), which authorized a maximum of 1,874,513 shares of common stock that may be issued pursuant to awards granted under the 2017 Plan.

On November 17, 2020, the Company’s stockholders approved an increase in the maximum number of shares of common stock that may be issued pursuant to awards granted under the 2017 Omnibus Incentive Plan from 2,374,513 to 3,374,513 .

On November 17, 2021, the Company's stockholders approved an increase in the maximum number of shares of common stock that may be issued pursuant to awards granted under the 2017 Omnibus Incentive Plan from 3,374,513 to 6,874,513 .

Upon adoption of the 2017 Plan we ceased granting incentive awards under the 2007 Plan and commenced granting incentive awards under the 2017 Plan.

The shares of our common stock underlying cancelled and forfeited awards issued under the 2017 Plan may again become available for grant under the 2017 Plan.

Cancelled and forfeited awards issued under the 2007 Plan that were cancelled or forfeited prior to November 21, 2017 became available for grant under the 2007 Plan.

On November 12, 2019, the maximum number of shares of common stock that may be issued pursuant to awards granted under the 2017 Plan increased from 1,874,513 to 2,374,513 .

On November 17, 2020, the Company's stockholders approved an increase in the maximum number of shares of common stock that may be issued pursuant to awards granted under the 2017 Omnibus Incentive Plan from 2,374,513 to 3,374,513 .

Cancelled and forfeited awards issued under the 2007 Plan that

were cancelled or forfeited prior to November 21, 2017 became available for grant under the 2007 Plan.

As of June 30, 2022, there were 3,935,596 shares available for grant under the 2017 Plan, and no shares were available for grant under the 2007 Plan.

7 unchanged sentences

Options vesting

Forfeited/Cancelled

Outstanding at June 30, 2021

8 unchanged sentences

The remaining contractual life for options vested and exercisable at June 30, 2022 was 5.28 years.

Furthermore, the aggregate intrinsic value of options outstanding as of June 30, 2021 was $ 3,897,018 , and the aggregate intrinsic value of options vested and exercisable at June 30, 2021 was $ 3,752,794 , in each case based on the fair value of the Company’s common stock on June 30, 2021.

Furthermore, the aggregate intrinsic value of options outstanding and of options vested and exercisable at June 30, 2022 was $ 966,550 , in each case based on the fair value of the Company’s common stock on June 30, 2022.

During the year ended June 30, 2022, the Company granted 307,843 options to employees with a fair value of $ 342,566 which amount will be amortized over the vesting period.

2 unchanged sentences

During the year ended June 30, 2022, the Company issued 211,072 net shares of common stock upon the exercise of options underlying 357,079 shares of common stock, resulting in net cash proceeds of $ 97,688 .

On March 31, 2021 the Company repurchased options underlying 243,750 shares of stock from a former director for $ 213,313 .

The entire amount was charged to equity.

During the year ended June 30, 2020, the Company granted 324,000 options to employees and directors with a fair value of $ 488,080 which amount will be amortized over the vesting period.

During the year ended June 30, 2021, the Company granted 575,348 options to employees with a fair value of $ 686,461 which amount will be amortized over the vesting period.

The total fair value of options that vested during the year ended June 30, 2021 was $ 631,335 and was included in selling, general and administrative expenses in the accompanying statement of operations.

As of June 30, 2021, the amount of unvested compensation related to the unvested options was $ 340,692 which will be recorded as an expense in future periods as the options vest.

During the year ended June 30, 2020, the Company issued 161,698 net shares of common stock upon the exercise of 263,755 options on a cashless basis.

During the year ended June 30, 2021, the Company issued 158,609 net shares of common stock upon the exercise of options underlying 274,520 shares of common stock, resulting in net cash proceeds of $ 88,850 .

On March 31, 2021 the Company repurchased options underlying 243,750 shares of stock from a former director for $ 213,313 .

The entire amount was charged to equity.

Additional information regarding stock options outstanding and exercisable as of June 30, 2022 is as follows:

2 unchanged sentences

Outstanding, June 30, 2020

( 1,500,000 )

Expired/Cancelled

4 unchanged sentences

Exercisable, June 30, 2022

The intrinsic value for all warrants outstanding as of June 30, 2021 was $ 83,500 , based on the fair value of the Company’s common stock on June 30, 2021.

During the year ended June 30, 2022, certain holders of warrants to purchase shares of the Company’s common stock at a per share exercise price of $ 1.19 exercised those warrants to purchase 50,000 shares, generating gross proceeds to the Company of $ 59,500 .

During the year ended June 30, 2021, certain holders of warrants to purchase shares of the Company’s common stock at a per share exercise price of $1.25 exercised those warrants to purchase 190,000 shares, generating gross proceeds to the Company of $237,501.

On March 31, 2021 the Company repurchased warrants underlying 100,000 shares of stock from a former director for $95,000.

The entire amount was charged to equity.

During the year ended June 30, 2020, certain holders of warrants to purchase shares of the Company’s common stock at a per share exercise price of $ 1.25 exercised those warrants to purchase 1,500,000 shares, generating gross proceeds to the Company of $ 1,875,000 .

Additional information regarding warrants outstanding and exercisable as of June 30, 2021 is as follows:

Exercise Price

Life (in years)

Restricted Common Stock

5 unchanged sentences

During the year ended June 30, 2022, the Company issued an additional 356,582 shares of restricted stock to employees.

These shares vest over a three year period, with a one year cliff vesting period, and remain subject to forfeiture if vesting conditions are not met.

The aggregate fair value of the stock awards was $ 463,994 based on the market price of our common stock ranging from $ 2.13 to $ 2.49 per share on the date of grant, which will be amortized over the three-year vesting period.

Of this amount, 256,582 shares vest over a three year period, with a one year cliff vesting period, and remain subject to forfeiture if vesting conditions are not met.

The remaining 100,000 shares vest over a four year period, with a one year cliff vesting period, and remain subject to forfeiture if vesting conditions are not met.

The aggregate fair value of the stock awards was $850,996 based on the market price of our common stock ranging from $1.87 to $2.64 per share on the date of grant, which will be amortized over the vesting period.

The total fair value of restricted common stock vested during the year ended June 30, 2022 and 2021 was $ 557,496 and $ 376,338 , respectively, and is included in selling, general and administrative expenses in the accompanying statements of operations.

As of June 30, 2022, the amount of unvested compensation related to issuances of restricted common stock was $ 775,453 , which will be recognized as an expense in future periods as the shares vest.

When calculating basic net income (loss) per share, these shares are included in weighted average common shares outstanding from the time they vest.

When calculating

basic net income (loss) per share, these shares are included in weighted average common shares outstanding from the time they vest.

When calculating diluted net income per share, these shares are included in weighted average common shares outstanding as of their grant date.

5 unchanged sentences

Effective as of February 9, 2021, the Compensation Committee of our Board of Directors authorized the repurchase, during calendar year 2021 on the last day of each trading window and otherwise in accordance with our insider trading policies, of up to $ 400,000 of outstanding common stock (at prices no greater than $ 4.00 per share) from our employees to satisfy their tax obligations in connection with the vesting of stock incentive awards.

The actual number of shares repurchased will be determined by applicable employees in their discretion, and will depend on their evaluation of market conditions and other factors.

The Compensation Committee of our Board of Directors subsequently approved the extension of the repurchases under the same terms through the end of fiscal year 2023.

The actual number of shares repurchased will be determined by applicable employees in their discretion, and will depend on their evaluation of market conditions and other factors.

During the years ended June 30, 2021 and 2020, we repurchased approximately 78,467 and 116,200 shares of our common stock under the repurchase plan at an average price of approximately $ 2.27 and $ 2.77 per share, respectively, for an aggregate amount of $ 178,012 and $ 321,601 , respectively.

As of June 30, 2021, $349,263 remained under the current authorization to repurchase our outstanding common stock from our employees.

During the years ended June 30, 2022 and 2021, we repurchased 40,221 and 78,467 shares of our common stock under the repurchase plan at an average price of approximately $ 2.34 and $ 2.27 per share, respectively, for an aggregate amount of $ 93,918 and $ 178,012 , respectively.

As of June 30, 2022, $ 255,345 remains under the current authorization to repurchase our outstanding common stock from our employees.

56 unchanged sentences

Management will review this valuation allowance requirement periodically and make adjustments as warranted.

The net change in the valuation allowance for the year ended June 30, 2021 was a decrease of $ 11,103 .

The net change in the valuation allowance for the year ended June 30, 2022 was an increase of $ 379,223 .

At June 30, 2022 and 2021, the Company had federal net operating loss (“NOL”) carryforwards of approximately $ 15,040,000 and $ 15,030,000 , respectively, and state NOL carryforwards of approximately $ 6,420,000 and $ 6,410,000 , respectively.

Federal NOLs generated in 2018, 2019 and 2020 can be carried forward indefinitely with some limitations, NOLs generated prior to 2018 could, if unused, completely expire in 2038 .

Federal NOLs generated prior to and after 2018 can be carried forward indefinitely with some limitations.

State NOLs, if unused, completely expire in 2040 .

8 unchanged sentences

The Company is subject to United States federal or state income tax examinations by tax authorities for fiscal years after 2017.

Gain from Sale of Discontinued Operations (Reprints and ePrints business line)

On June 30, 2017, we sold the intangible assets of our Reprints and ePrints business line, but specifically excluding billed accounts receivable and respective liabilities, pursuant to an Asset Purchase Agreement dated June 20, 2017.

The aggregate net consideration for the sale is comprised of $ 450,000 paid on the closing date, and earn-out payments of 45 % of gross margin over the 30 month period subsequent to the closing date.

We have made a policy election to record the contingent consideration when the consideration is determined to be realizable, which amounted to $ 117,445 and $ 214,737 for the years ended June 30, 2020 and 2019, respectively.

As of June 30, 2020, no further consideration will be due.

Subsequent Events

Stock Options

On August 5, 2021, the Company granted stock options underlying 30,882 shares of common stock to employees with a fair value of approximately $ 40,000 .

The options vest over a three-year period, and have a term of ten years .

On September 16, 2021 the Company granted stock options underlying 33,195 shares of common stock to employees with a fair value of approximately $ 46,000 .

The options vest over a three-year period, and have a term of ten years .

Restricted Common Stock

On July 30, 2022, the Company issued 36,509 shares of unrestricted stock to a former officer for services rendered prior to their termination date.

These shares vest immediately.

The aggregate value of the stock award was $68,273 based on the market price of our common stock of $1.87 per share on the date of grant, which was expensed in the year ended June 30, 2022.

On August 19, 2022, the Company issued 222,334 shares of restricted stock to employees.

4 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 8. Financial Statements and Supplementary Data