What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-09-20 compared with 2023-09-15 · 227 added, 147 removed, 443 unchanged (46% of the section changed)

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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

As described in Note 2 to the consolidated financial statements, the Company records transaction service fee revenue for the electronic delivery of published scientific, technical, and medical content sold as single individual articles, and records a corresponding copyright fee expense for the permitted use of the content.

The Company is typically the principal in sales of these single article transactions.

Sales are recognized on a gross basis with the selling price to the customer

recorded as sales and the copyright fee recognized as cost of sales.

The Company recognizes revenue from these sales upon delivery to the customer provided all other revenue recognition criteria have been met.

We identified the Company’s recording of the revenue for single articles as a critical audit matter because there was significant judgment applied by management in its determination of gross or net revenue recognition, including assessing the indicators that the Company controls the promised service before it was transferred to the customer, such as assessing whether the Company was primarily responsible for fulfilling the promised service and whether the Company had full discretion in establishing the prices for the promised service.

In turn, this led to a high degree of auditor judgment, subjectivity and effort in performing audit procedures and evaluating the results of those procedures.

Valuation of Developed Technology Asset Acquired and Contingent Earnout Liability Related to Acquisitions of ResoluteAI and Scite

As described in Note 9 to the consolidated financial statements, in July 2023 and December 2023, the Company completed the acquisitions of ResoluteAI and Scite, respectively, for total consideration of $25.9 million, including contingent consideration of $9 million.

In connection with the acquisitions, the Company acquired $10.9 million of intangible assets, including $10.8 million for developed technology assets.

The developed technology assets were valued using the multi-

period excess earnings method under the income approach.

The present value of projected future cash flows included significant judgment and assumptions regarding projected future revenues, projected expenses, and the discount rate for the technology asset.

The fair value of the contingent earnout liability is calculated using Monte Carlo simulation based on corresponding projected recurring revenue, as defined in the acquisition agreements.

We identified the valuation of the acquired developed technology assets and the contingent earnout liabilities in connection with the acquisitions of ResoluteAI and Scite as a critical audit matter because of the significant judgement by management when developing the fair value estimate of the developed technology assets acquired and the contingent earnout liability.

This required a high degree of auditor judgment and an increased extent of effort, when performing procedures to evaluate the reasonableness of management’s assumptions related to projected future revenues, projected expenses, and the discount rate for the technology asset.

The primary procedures we performed to address this critical audit matter included:

We obtained and evaluated documentation prepared by management which outlines the Company’s process to determine gross versus net including evaluating the reasonableness of management’s judgments on whether the Company is acting as a principal or agent, after considering whether the Company is the primary obligation provider, and the discretion in establishing the prices by reviewing agreements with publishers and understanding the business substance

• We evaluated whether the Company’s conclusion is consistent with relevant accounting standards

• We selected a sample of revenue transactions and performed the following for each selection:

o Obtained evidence of a contract with the customer;

Compared the amounts recognized and time of revenue recognition to underlying source documents such as invoices, form of payments, and executed contracts and related modifications, if any;

Evaluated the Company’s application of their accounting policies to determine the timing and amount recognized;

Tested the presentation of revenue as gross or net by comparing the Company’s gross or net presentation to the attributes of the underlying support and the Company’s accounting policy.

• We evaluated the appropriateness of the valuation methods used to determine the respective fair values.

We assessed the reasonableness of forecasted revenue and costs including comparing the forecasts prepared by management to historical revenue and costs.

• We performed procedures to verify the mathematical accuracy of the calculations used by management.

• We examined the acquisition agreements to identify relevant terms of the acquisitions.

We assessed the appropriateness of the presentation and disclosure of these accounting elements in the financial statements.

We have served as the Company’s auditor since 2006.

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Total current assets

Other assets:

Non-current assets:

Property and equipment, net of accumulated depreciation of $ 922,558 and $ 881,908 , respectively

Intangible assets, net of accumulated amortization of $ 747,355 and $ 723,036 , respectively

Intangible assets, net of accumulated amortization of $ 1,535,310 and $ 747,355 , respectively ($ 8,343,056 provisional)

Goodwill ($ 13,171,486 provisional)

Deposits and other assets

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Total current liabilities

Non-current liabilities:

Contingent earnout liability

Total liabilities

Commitments and contingencies

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Income (loss) from operations

Change in fair value of contingent earnout liability

( 3,237,071 )

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Fair value of vested restricted common stock

Forfeited restricted common stock

Fair value of vested unrestricted common stock

Repurchase of common stock

Common stock issued upon exercise of stock options

Common stock issued upon exercise of warrants

( 1,632,384 )

Modification cost of stock options

Net income for the period

Foreign currency translation

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Forfeited restricted common stock

Fair value of vested unrestricted common stock

Repurchase of common stock

Common stock issued upon exercise of stock options

Modification cost of stock options

Common stock issued for acquisition of Scite

Modification cost of accelerated vesting of restricted common stock

Net loss for the period

( 3,786,597 )

Foreign currency translation

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( 3,786,597 )

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

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

Depreciation and amortization

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Fair value of vested unrestricted common stock

Modification cost of stock options

Modification cost of accelerated vesting of restricted common stock

Adjustment to contingent earnout liability

Changes in operating assets and liabilities:

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Deferred revenue

Net cash provided by (used in) operating activities

Net cash provided by operating activities

Cash flow from investing activities:

Purchase of property and equipment

Payment for acquisition of Resolute, net of cash acquired

( 2,718,253 )

Payment for acquisition of Scite, net of cash acquired

( 7,305,493 )

Payment for non-refundable deposit for asset acquisition

Net cash used in investing activities

( 10,095,256 )

Cash flow from financing activities:

Proceeds from the exercise of stock options

Proceeds from the exercise of warrants

Common stock repurchase

Payment of contingent acquisition consideration

Net cash provided by (used in) financing activities

Net cash used in financing activities

Effect of exchange rate changes

Net increase (decrease) in cash and cash equivalents

( 7,445,302 )

Cash and cash equivalents, beginning of period

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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 three wholly owned subsidiaries as of June 30, 2023:

Reprints Desk, Inc., a Delaware corporation, 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 five wholly owned subsidiaries as of June 30, 2024:

Reprints Desk, Inc., a Delaware corporation, including its wholly owned subsidiary Resolute Innovation, Inc., a Delaware corporation, Scite, LLC, a Delaware limited liability company, Reprints Desk Latin America S.

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

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Nature of Business

We provide two service offerings to our customers:

a cloud-based software-as-a-service (“SaaS”) research platform (“Platforms”) typically sold via annual auto-renewing license agreements and the sale of published scientific, technical, and medical (“STM”) content sold as individual articles (“Transactions”) either stand alone or via the Platform.

When customers utilize the Platform to purchase Transactions it is packaged as a single solution that enables life science and other research-intensive organizations to accelerate their research and development activities with faster, access and management of STM articles used throughout the intellectual property development lifecycle.

The Platform typically delivers a ROI to the customer via more effectively managing Transaction costs and saving researchers time during the research process.

Our cloud-based SaaS research Platform consists of proprietary software and Internet-based interfaces sold to customers for an annual subscription fee.

Legacy functionality allows customers to initiate orders, route orders for the lowest cost acquisition, manage transactions, obtain spend and usage reporting, automate authentication, and connect seamlessly to in-house and third-party software systems.

Customers can also enhance the information resources they already own or license and collaborate around bibliographic information.

Additional functionality has recently been added to our Platform in the form of interactive app-like components.

An alternative to manual data filtering, identification and extraction, the apps are designed to gather, augment, and extract data across a variety of formats, including bibliographic citations, tables of contents, RSS feeds, PDF files, XML feeds, and web content.

We continue to develop new apps in order to build an ecosystem of apps.

Together, these apps will provide researchers with an “all in one” toolkit, delivering efficiencies in core research workflows and knowledge creation processes.

We provide software and related services to help research intensive organizations save time and money.

We offer various software platforms (“Platform” or “Platforms”) that are typically sold to corporate, academic, government and individual researchers as cloud-based software-as-a-service (“SaaS”) via auto-renewing license agreements.

Corporate, academic, and government customers typically sign up under annual agreements.

Individual researchers can sign up under an annual or a month-to-month agreement and are typically billed monthly.

Our Platforms also facilitate the sale of published scientific, technical, and medical (“STM”) content sold as individual articles (“Transactions”) either stand alone or via one or more of the research Platform solutions we provide.

When one or more of the Platform solutions are used to purchase Transactions, customers pay for those transactions through monthly billing or via credit card for individual researchers.

Our Platforms enable life science and other research-intensive organizations to accelerate their research and development activities through our advanced discovery tools (i.e.

search), tools to access and buy STM articles required to support their research (i.e.

acquire), as well as tools that manage that content across the enterprise and on an individual basis (i.e.

The Platforms typically deliver an ROI to the customer by reducing the amount of time it takes a research organization to find, acquire and manage content, in addition to also driving down the ultimate cost per article over time.

Our cloud-based SaaS Platforms consist of proprietary software and Internet-based interfaces sold to customers through an annual or monthly subscription fee.

Legacy functionality falls into three areas.

Discover – These solutions facilitate search (discovery) across virtually all STM articles available.

The solutions we offer include free (basic) search solutions and advanced search tools like the Resolute.ai and scite.ai products.

These tools allow for searching and identifying relevant research and then purchasing that research through one of our other solutions.

In addition, these tools increasingly enable users to find insights in other datasets adjacent to STM content, such as Clinical Trial, Patent, Life Science & MedTech Regulatory information, Competitor and Technology landscape insights in addition to searching the customer’s internal datasets.

The advanced search solutions are sold through a seat, enterprise, or individual license.

Our Platform is deployed as a single, multi-tenant system across our entire customer base.

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We leverage our Platform’s efficiencies in scalability, stability and development costs to fuel rapid innovation and competitive advantage.

Our Platform provides our customers with a single source to the universe of published STM content that includes over 80 million existing STM articles and over one million newly published STM articles each year.

STM content is sold to our customers on a transaction basis.

Acquire – Our Article Galaxy® (“AG”) solution allows for research organizations to load their entitlements (subscriptions, discount or token packages, and their existing library of articles) and AG manages those entitlements in the background enabling the researchers to focus on acquiring articles they need quickly and efficiently at the lowest possible cost.

When used in conjunction with our discovery Platforms, customers can initiate orders, route orders based on the lowest cost to acquire, obtain spend and usage reporting, automate authentication, and connect seamlessly to in-house and third-party software systems.

Manage – Our References solution allows users to access the article inside the Platform including setting up personal folders or team folders and allows researchers to markup and take notes on the articles in a supported browser on a desktop or tablet.

We use Artificial Intelligence (“AI”) in several parts of the research workflow today and will continually add capability as we move forward.

Today we offer an AI based recommendation engine in our Discover, Acquire, and Manage Platform solutions.

We also offer an AI based “assistant” in some of our solutions to allow the researcher to ask questions about articles, groups of articles (folders), and more.

We also have the capability to provide full text search on STM content in the scite.ai Platform where the publisher gives us the rights to do so.

Using Resolute.ai and scite.ai technology, we plan to release several new Platform solutions to enhance the research workflows described above and add new solutions to support the analysis functions that exist in our typical customer base.

Our Platforms are deployed as a single, multi-tenant system across our entire customer base.

Customers securely access the Platform through online web interfaces and via web service APIs that enable customers to leverage Platform features and functionality from within in-house and third-party software systems.

The Platform can also be configured to satisfy a customer’s individual preferences.

We leverage our Platform efficiencies in scalability, stability and development costs to fuel rapid innovation and to gain a competitive advantage.

We provide our researchers with a single source to the universe of published STM content that includes over 100 million existing STM articles and over 2 to 4 million newly published STM articles each year.

STM content is sold to our customers on a per transaction basis.

Researchers and knowledge workers in life science and other research-intensive organizations generally require single copies of published STM journal articles for use in their research activities.

These individuals are our primary users.

Our Platform allows customers to find and download digital versions of STM articles that are critical to their research.

These individuals are our primary users and while they typically purchase the articles via one of our Platform solutions, we do have some customers that just order articles from us on behalf of end-users in their organizations.

Core to many of our Platform solutions is providing our customers with ways to find and download digital versions of STM articles that are critical to their research.

Customers submit orders for the articles they need which we source and electronically deliver to them generally in under an hour;

in many cases under one minute.

This service is generally known in the industry

as single article delivery or document delivery.

in most cases under one minute.

This service is generally known in the industry as single article delivery or document delivery.

We also obtain the necessary permission licenses from the content publisher or other rights holder so that our customer’s use complies with applicable copyright laws.

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The majority of these publishers provide us with electronic access to their content, which allows us to electronically deliver single articles to our customers often in a matter of minutes.

While a vast majority of the articles are available in electronic form, the Company also has workflows to deliver older paper-based articles through relationships we have built with libraries around the world.

Principles of Consolidation

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The Company is required to use observable market data if such data is available without undue cost and effort.

The Company has no fair value items required to be disclosed as of June 30, 2023 or 2022 under these requirements.

The Company has no fair value items required to be disclosed as of June 30, 2023 under these requirements.

The following table sets forth by level, within the fair value hierarchy, the Company’s assets and liabilities at fair value as of June 30, 2024:

Year ended June 30, 2024

Contingent earnout liability

Total liabilities

Our contingent earnout liability related to acquisitions, which are further discussed in Note 9 to the consolidated financial statements, are in the “Level 3” category for valuation purposes.

The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable and accounts payable, approximate their fair values because of the short maturity of these instruments.

Allowance for Doubtful Accounts

Allowance for Credit Losses

The Company’s trade accounts receivable are recorded at amounts billed to customers and presented on the balance sheet net of the allowance for estimated credit losses.

The Company evaluates the collectability of its trade accounts receivable based on a number of factors.

In circumstances where the Company becomes aware of a specific customer’s inability to meet its financial obligations to the Company, a specific reserve for bad debts is estimated and recorded, which reduces the recognized receivable to the estimated amount the Company believes will ultimately be collected.

In addition to specific customer identification of potential bad debts, bad debt charges are recorded based on the Company’s historical losses and an overall assessment of

past due trade accounts receivable outstanding.

In addition to specific customer identification of potential bad debts, bad debt charges are recorded based on the Company’s historical losses and an overall assessment of past due trade accounts receivable outstanding.

The Company established an allowance for doubtful accounts of $ 68,579 and $ 85,015 as of June 30, 2024 and 2023, respectively.

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The 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”).

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

The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:

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Rest of World

Deferred Revenue

Contract liabilities, such as deferred revenue, exist where the Company has the obligation to transfer services to a customer for which the entity has received consideration, or when the consideration is due, from the customer.

Cash payments received or due in advance of performance are recorded as deferred revenue.

Deferred revenue is primarily comprised of cloud-based software subscriptions which are generally billed in advance.

The deferred revenue balance is presented as a current liability on the Company's consolidated balance sheets.

Cost of Revenue

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Cost of Transaction revenue consists primarily of the respective copyright fee for the permitted use of the content, less a discount in most cases, and to a much lesser extent, personnel costs of our operations team and third-party service providers.

Segment reporting

The Company operates in a single segment based on how the chief operating decision maker (“CODM”) views and evaluates the Company’s operations in making operational and strategic decisions and assessments of financial performance.

The Company’s President has been identified as the CODM.

Business Combinations

The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and separately identified intangible assets acquired based on their estimated fair values.

The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill.

Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets.

Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired technology, and customer relationships, useful lives, and discount rates.

Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.

During the measurement period, which can be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill.

Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the consolidated statements of operations.

Intangible Assets

The Company has certain intangible assets that were initially recorded at their fair value at the time of acquisition.

The finite-lived intangible assets consist of customer relationships, and developed technology.

Intangible assets with finite useful lives are amortized using the straight-line method over their estimated useful life of three to ten years .

The Company reviews all finite-lived intangible assets for impairment when circumstances indicate that their carrying values may not be recoverable.

If the carrying value of an asset group is not recoverable, the Company recognizes an impairment loss for the excess carrying value over the fair value in our consolidated statements of operations.

Goodwill represents the excess of purchase price and related costs over the value assigned to the net tangible and identifiable intangible assets of the business acquired.

As of June 30, 2024, goodwill that arose from acquisitions of ResoluteAI and Scite (see Note 9) was $ 16,315,888 .

Under ASC 350 Intangibles-Goodwill and Other, goodwill and other intangible assets with indefinite lives are not amortized, but instead are tested for impairment annually, or whenever events or circumstances indicate a potential impairment.

The Company’s impairment testing is performed annually at June 30.

Impairment of goodwill and indefinite lived intangible assets is determined by comparing the fair value of the Company’s reporting unit to the carrying value of the underlying net assets in the reporting unit.

If the fair value of the reporting unit is determined to be less than the carrying value of its net assets, goodwill is deemed impaired and an impairment loss is recognized to the extent that the carrying value of goodwill exceeds the difference between the fair value of the reporting unit and the fair value of its other assets and liabilities.

Stock-Based Compensation

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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 $ 121,953 and a loss of $ 143,898 for the years ended June 30, 2023 and 2022, respectively.

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 $ 21,395 and a gain of $ 121,953 for the years ended June 30, 2024 and 2023, respectively.

Cash denominated in Euros and British Pounds with an aggregate US Dollar equivalent of $ 294,145 and $ 1,760,323 at June 30, 2024 and 2023, respectively, was held in accounts at financial institutions located in Europe.

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Shares of restricted stock are included in the basic weighted average number of common shares outstanding from the time they vest.

Diluted earnings per share is computed by dividing the net income applicable to common stock holders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method.

Diluted earnings per share is computed by dividing the net income applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method.

Shares of restricted stock are included in the diluted weighted average number of common shares outstanding from the date they are granted.

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For the year ended June 30, 2023, the calculation of diluted earnings per share include unvested restricted common stock, stock options and warrants, calculated under the treasury stock method.

The Company accounts for income taxes using the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences.

Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.

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Recently Issued Accounting Pronouncements

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.

This may result in the earlier recognition

of allowances for losses.

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

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.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

In March 2023, FASB issued ASU 2024-01 to amend the guidance in ASC 718 Compensation—Stock Compensation (Topic 718).

Some entities compensate employees or other service providers by granting profits interest awards, which generally give the grantee an opportunity to participate in future profits and/or equity appreciation of the entity but do not give them rights to existing net assets of the entity.

ASU 2024-01 adds an example showing how to apply the scope guidance in ASC 718 to determine whether profits interests and similar awards should be accounted for as share-based payment arrangements.

The ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted.

The Company does not currently anticipate that the guidance will have a material impact on its financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosure, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense categories that are regularly provided to the chief operating decision maker and included in each reported measure of a segment’s profit or loss.

The update also requires all annual disclosures about a reportable segment’s profit or loss and assets to be provided in interim periods and for entities with a single reportable segment to provide all the disclosures required by ASC 280, Segment Reporting, including the significant segment expense disclosures.

This standard will be effective for the Company on July 1, 2024 and interim periods beginning in fiscal year 2025, with early adoption permitted.

The updates required by this standard should be applied retrospectively to all periods presented in the financial statements.

The Company does not expect this standard to have a material impact on its results of operations, financial position or cash flows.

Property and Equipment

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Intangible Assets

Intangible assets consist of customer lists, which are amortized over an estimated useful life of ten years .

Intangible assets consist of developed technology and customer relationships acquired in the acquisition of ResoluteAI effective July 28, 2023 and Scite effective December 1, 2023, and are stated at cost less accumulated amortization.

The developed technology and customer relationships are being amortized over the estimated average useful lives of 3 to 10 years .

The Company does not have any intangible assets deemed to have indefinite lives.

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Intangible assets consist of the following as of June 30, 2024 and 2023:

Developed technology

Customer relationships

Customer lists

1 unchanged sentence

Less accumulated amortization

( 1,535,310 )

Net, Intangible assets

Line of Credit

On April 15, 2024, the Company entered into a Loan Agreement (the “PNC Loan Agreement”) with PNC Bank, National Association (“PNC”), as lender.

Pursuant to the PNC Loan Agreement, the Company entered into a Revolving Line of Credit Note (the “PNC Note”) with PNC, which provides for a $ 500,000 secured revolving line of credit that matures on April 15, 2025 and bears interest annually at the daily SOFR rate plus 2.5 %, with accrued interest due and payable monthly.

The PNC Note contains customary events of default including, among other things, payment defaults, material misrepresentations, breaches of covenants, revocation of guarantee, certain bankruptcy and insolvency events.

There were no outstanding borrowings under the line of credit as of June 30, 2024.

The Company 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, 2023.

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 %.

The interest rate on the line of credit was 9.25 % as of June 30, 2023.

The line of credit is secured by the Company’s consolidated assets.

Pursuant to the Amended and Restated Loan and Security Agreement dated October 31, 2017 among the Company, Reprints Desk, Inc.

and SVB (the “SVB LSA”), the Company was required to direct account debtors to deliver or transmit all proceeds of accounts remitted to the Company and its subsidiaries into a lockbox account as specified by

SVB, and to maintain its and its subsidiaries’ primary operating and other deposit accounts with SVB.

In compliance with the foregoing covenants the Company and its subsidiaries maintained with SVB substantially all of the dollar value of the Company’s and its subsidiaries’ accounts.

At February 28, 2023, the Company held cash at SVB of $ 10,832,000 , of which we estimate $ 9,738,000 was in excess of government insured limits.

On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, and the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver and SVB was subsequently transferred into a new entity, Silicon Valley Bridge Bank, N.A.

(“SVB Bridge Bank”).

On March 12, 2023, the U.S.

Treasury Department, the Federal Reserve and the FDIC jointly announced enabling actions that fully protect all SVB depositors’ insured and uninsured deposits, and that such depositors would have access to all of their funds starting March 13, 2023.

On March 14, 2023, the Company was able to access its full deposits with SVB Bridge Bank.

At June 30, 2023, the Company held cash at SVB Bridge Bank of $ 7,580,000 , of which we estimate $ 6,443,000 was in excess of government insured limits.

There were no outstanding borrowings under the line as of June 30, 2023 and June 30, 2022, respectively.

As of June 30, 2023, there was approximately $ 2,264,000 of available credit.

On March 27, 2023, First Citizens BancShares, Inc entered into an agreement with the Federal Deposit Insurance Corporation (FDIC) to purchase all of the assets and liabilities of SVB.

The Company has confirmed that the Loan and Security Agreement remains in effect post this transaction and that, in addition to having access to all of its deposits with SVB, it continues to have access to the revolving line of credit.

SVB Bridge Bank agreed that the Company can lower its cash balance threshold requirement associated with the SVB LSA, reducing the required balances of its and its subsidiaries’ primary operating and other accounts with SVB, and the Company continues to evaluate the SVB LSA.

At June 30, 2023, the Company also held cash at Bank of America, N.A.

of $ 1,500,000 and at PNC Bank, N.A.

of $ 4,448,000 .

The Company continues to re-allocate its cash position across all three banks and explore an overall banking diversification strategy as well as additional access to lending facilities.

The line of credit matured on February 28, 2024 and was not renewed.

There were no outstanding borrowings on the line of credit at maturity and all security interests and liens related to the Loan and Security Agreement have been released.

Stockholders’ Equity

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The majority of awards issued under the Plan vest immediately or over three years , with a one year cliff vesting period, and have a term of ten years .

Stock-based compensation cost is measured at the grant date, based on the fair value

of the awards that are ultimately expected to vest, and recognized on a straight-line basis over the requisite service period, which is generally the vesting period.

Stock-based compensation cost is measured at the grant date, based on the fair value of the awards that are ultimately expected to vest, and recognized on a straight-line basis over the requisite service period, which is generally the vesting period.

The following table summarizes vested and unvested stock option activity:

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The remaining contractual life for options vested and exercisable at June 30, 2024 was 4.63 years.

Furthermore, the aggregate intrinsic value of options outstanding and of options vested and exercisable at June 30, 2023 was $ 1,096,942 , in each case based on the fair value of the Company’s common stock on June 30, 2023.

During the year ended June 30, 2023, the Company granted 200,000 options to directors with a fair value of $ 222,000 which, due to immediate vesting, were fully expensed at the time of grant.

Furthermore, the aggregate intrinsic value of options outstanding as of June 30, 2024 was $ 1,920,882 , and the aggregate intrinsic value of options vested and exercisable as of June 30, 2024 was $ 1,920,582 , in each case based on the fair value of the Company’s common stock on June 30, 2024.

During the year ended June 30, 2024, the Company granted 257,934 options to directors with a fair value of $ 340,473 which amount will be amortized over the vesting period.

The total fair value of options that vested during the year ended June 30, 2024 was $ 140,150 and was included in selling, general and administrative expenses in the accompanying statement of operations.

As of June 30, 2024, the amount of unvested compensation related to the unvested options was $ 256,321 which will be recorded as an expense in future periods as the options vest.

During the year ended June 30, 2023, the Company issued 137,523 net shares of common stock upon the exercise of options underlying 307,298 shares of common stock, resulting in net cash proceeds of $ 57,500 .

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.

During the year ended June 30, 2024, the Company issued 72,234 net shares of common stock upon the exercise of options underlying 373,883 shares of common stock.

During the year ended June 30, 2023, the Company granted 200,000 options to directors with a fair value of $ 222,000 which, due to immediate vesting, were fully expensed at the time of grant.

The total fair value of options that vested during the year ended June 30, 2023 was $ 375,189 and was included in selling, general and administrative expenses in the accompanying statement of operations.

As of June 30, 2023, the amount of unvested compensation related to the unvested options was $ 56,577 which will be recorded as an expense in future periods as the options vest.

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 .

During the year

ended June 30, 2023, the Company issued 137,523 net shares of common stock upon the exercise of options underlying 307,298 shares of common stock, resulting in net cash proceeds of $ 57,500 .

Additional information regarding stock options outstanding and exercisable as of June 30, 2024 is as follows:

Life (in years)

The following table summarizes warrant activity:

Outstanding, June 30, 2021

Expired/Cancelled

Outstanding, June 30, 2022

Expired/Cancelled

Outstanding, June 30, 2023

Exercisable, June 30, 2022

Exercisable, June 30, 2023

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 .

Restricted Common Stock

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As of June 30, 2022, 400,092 of these shares with a grant date fair value of $ 775,453 had not yet vested.

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

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.

During the year ended June 30, 2023, the Company issued an additional 2,354,834 shares of restricted stock to employees with an aggregate fair value of $ 3,478,878 .

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The remaining 2,100,000 shares were granted, under the 2017 Plan, as restricted stock awards to key management in accordance with its long-term equity bonus program (the “LTEBP”).

The LTEBP replaces the previous restricted stock compensation program for executives.

During the year ended June 30, 2024, the Company issued an additional 405,000 shares of restricted stock to employees with an aggregate fair value of $ 925,900 .

Of this amount, 155,000 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 these stock awards was $ 417,700 based on the market price of our common stock ranging from $ 2.24 to $ 2.73 per share on the date of grant, which will be amortized over the range of a three-year vesting period.

The remaining 250,000 shares were granted, under the 2017 Plan, as restricted stock awards to key management in accordance with the LTEBP.

The LTEBP replaced the previous restricted stock compensation program for executives.

It spans 5 years and is designed to better serve stockholder interests by aligning key executive compensation with stockholder value.

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As the vesting of the 250,000 shares of restricted common stock under the LTEBP is subject to certain market conditions, pursuant to current accounting guidelines, the Company determined the fair value to be $ 508,200 , computed using the Monte Carlo simulations on a binomial model with the assistance of a valuation specialist with a derived service period ranging from 0.68 to 2.51 years.

The total fair value of restricted common stock vesting and expenses related to amortization of the fair value of the LTEBP program during the year ended June 30, 2023 was $ 1,418,717 and is included in selling, general and administrative expenses in the accompanying statements of operations.

The total fair value of restricted common stock vesting and expenses related to amortization of the fair value of the LTEBP during the year ended June 30, 2024 was $ 1,994,362 and is included in selling, general and administrative expenses in the accompanying statements of operations.

As of June 30, 2024, the amount of unvested compensation related to issuances of restricted common stock was $ 1,375,199 , which will be recognized as an expense in future periods as the shares vest.

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Non-vested, June 30, 2022

( 1,418,717 )

Non-vested, June 30, 2023

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Common Stock Repurchase and Retirement

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 Compensation Committee of our Board of Directors subsequently approved the extension of the repurchases under the same terms through the end of fiscal year 2024.

Effective as of March 19, 2024, the Compensation Committee of our Board of Directors authorized the repurchase, on the last day of each trading window during which the outstanding awards remain outstanding and otherwise in accordance with our insider trading policies, of an aggregate value not exceeding $ 750,000 , in addition to the prior remaining balance of outstanding common stock of $ 82,347 (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 through the end of fiscal year 2025.

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.

As of June 30, 2023, $ 151,095 remained under the current authorization to repurchase our outstanding common stock from our employees.

During the years ended June 30, 2023 and 2022, we repurchased 51,841 and 40,221 shares of our common stock under the repurchase plan at an average price of approximately $ 2.01 and $ 2.34 per share, respectively, for an aggregate amount of $ 104,250 and $ 93,918 , respectively.

During the years ended June 30, 2024 and 2023, the Company repurchased 198,383 and 51,841 shares of our common stock under the repurchase plan at an average price of approximately $ 2.79 and $ 2.01 per share, respectively, for an aggregate amount of $ 554,202 and $ 104,250 , respectively.

As of June 30, 2024, $ 346,893 remains under the current authorization to repurchase our outstanding common stock from our employees.

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Year ended June 30, 2024

1 Consists of shares of common stock purchased from employees to satisfy tax obligations in connection with the vesting of stock incentive awards .

Contingencies and Commitments

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Fixed asset depreciation

( 2,386,241 )

Net deferred tax assets

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

State NOLs, if unused, completely expire in 2039 .

State NOLs will begin to expire in 2026.

Effective January 1, 2007, the Company adopted FASB guidelines that address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.

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

Current Year Business Combinations

On July 28, 2023, the Company acquired 100 % of the outstanding stock of Resolute Innovation, Inc.

(“ResoluteAI”), a Delaware corporation, an advanced search platform that equips organizations with search, discovery and knowledge management tools that are powered by artificial intelligence (“AI”) and neuro-linguistic programming (“NLP”) technologies.

The total purchase consideration for ResoluteAI, net of cash acquired, was approximately $4.7 million.

consideration included an initial payment of $ 2.8 million, a holdback of $ 0.1 million and a contingent earnout that had an initial fair value of $ 1.8 million.

The Company’s revaluation of the earnout resulted in a fair value of $ 0 as of June 30, 2024.

The contingent earnout payment will be based upon the product of three and one half multiplied by ending annual recurring revenue as of January 31, 2025 less the agreed upon Enterprise Value of $ 3.4 million.

On December 1, 2023, the Company acquired 100 % of the outstanding stock of Scite, Inc.

a Delaware corporation (“Scite”), a platform for discovering and evaluating scientific articles via Smart Citations.

Smart Citations allow users to see how a publication has been cited by providing the context of the citation and a classification describing whether it allows for supporting or contrasting evidence for the cited claim.

The total purchase consideration for Scite, net of cash acquired, was approximately $ 21.1 million.

The consideration included an initial payment of $ 7.2 million in cash, $ 6.5 million in stock, a holdback of $ 0.2 million and a contingent earnout that had an initial fair value of $ 7.2 million.

The Company’s revaluation of the earnout resulted in a fair value of $ 12.2 million as of June 30, 2024.

The Company utilized the acquisition method of accounting for the acquisition in accordance with ASC 805, Business Combinations, and allocated the purchase price to ResoluteAI’s and Scite’s tangible assets, identifiable intangible assets, and assumed liabilities at their estimated fair values as of the date of acquisition.

The fair value assigned to the developed technology and customer relationships were determined using the multi-period excess earnings method, which estimates the direct cash flow expected to be generated from the existing customers acquired.

The cash flows were based on estimates used to value the acquisition, and the discount rates applied were benchmarked with reference to the implied rate of return from the transaction model, as well as the weighted average cost of capital.

The valuation assumptions took into consideration the Company’s estimates of customer attrition and revenue growth projections.

The excess of the purchase price paid by the Company over the estimated fair value of identified tangible and intangible assets has been recorded as goodwill.

Goodwill also represents the future benefits as a result of the acquisitions that the Company believes will enhance the Company’s product offerings and lineup available to both new and existing customers and generate future synergies within the software and related services business.

At the date of the acquisition and as of this Annual Report on Form 10-K, management has not yet finalized its valuation analysis related to Scite acquisition.

The fair values of the assets acquired, as set forth below, are considered provisional and subject to adjustment as additional information is obtained through the purchase price measurement period (a period of up to one year from the closing date).

Any prospective adjustments through the purchase price measurement period would change the fair value allocation as of the acquisition date.

The Company is still in the process of reviewing underlying models, assumptions and discount rates used in the valuation of provisional goodwill and intangible assets.

The following table represents the Company’s allocation of the total purchase consideration to the fair value of tangible assets, identifiable intangible assets, and assumed liabilities of ResoluteAI and Scite on the date of acquisition:

Fair value of consideration

Holdback cash paid

Common Stock ( 2,729,014 shares at $ 2.40 per share)

Contingent earn-out

Total purchase price

Allocation of the consideration to the fair value of assets acquired and liabilities assumed:

Cash and cash equivalents

Accounts receivable

Prepaid expenses

Accounts payable and accrued expenses

Deferred revenue

Other current liabilities

Net tangible assets

Intangible assets:

Developed technology

Customer relationships

Net identifiable intangible assets

Fair value of net assets acquired

Prior Year Asset Acquisition

On September 28, 2022, Reprints Desk entered into an asset purchase agreement with FIZ Karlsruhe – Leibniz-Institut für Informationsinfrastruktur GmbH (“FIZ”).

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On September 30, 2022, Reprints Desk made a non-refundable payment of $ 297,450 (€ 300,000 ) (the “Base Amount”) as initial consideration for the asset purchase.

As of June 30, 2023, Reprints Desk has recorded $ 95,689 in contingent consideration for customers that have their Sold Contracts assumed by Reprints Desk in comparison to the trailing twelve months of revenue of all Sold Contracts (the “Base Amount Plus”).

On June 30, 2023, $ 44,553 in contingent consideration was recorded for customers that placed an order and have consented to have their contract assumed by Reprints Desk (the “Bonus Amount”).

As of the June 30, 2023, $ 50,509 of Bonus Amount payments were made for the 2023 fiscal year.

As of June 30, 2024, Reprints Desk has paid $ 64,578 in contingent consideration for customers that have their Sold Contracts assumed by Reprints Desk in comparison to the trailing twelve months of revenue of all Sold Contracts (the “Base Amount Plus”).

As of June 30, 2024, $ 161,976 in contingent consideration was recorded for customers that placed an order and have consented to have their contract assumed by Reprints Desk (the “Bonus Amount”).

As of June 30, 2024, $ 96,121 and $ 116,364 of Bonus Amount payments were made for the 2023 fiscal year and 2024 fiscal year, respectively.

The Bonus Amount is based upon the collectable service fee that FIZ would have received from these customers.

Contingent consideration for the Bonus Amount will continue to be paid in arrears through the quarter ending December 31, 2025.

The current contingent consideration for the Base Amount Plus and the Bonus Amount are recorded as a short-term liability on the balance sheet.

The current contingent consideration for the Base Amount Plus and the Bonus Amount is recorded as a short-term liability on the balance sheet.

At June 30, 2024, the Base Amount, the Base Amount Plus and the Bonus Amount were recorded as intangible assets on the balance sheet with an estimated average useful life of 10 years .

The following sets out the unaudited pro forma operating results for the year ended June 30, 2024 and 2023 for the Company had the acquisitions occurred as of July 1, 2022.

These amounts include amortization of intangible assets:

Pro Forma (Unaudited)

Year ended June 30,

Cost of revenue

Total operating expenses

Loss from operations

Other income (expense)

( 2,902,981 )

Income (loss) from operations before provision for income taxes

( 3,484,203 )

Provision for income taxes

Pro Forma Net income (loss)

( 3,597,274 )

Pro Forma Net income (loss) per weighted average share, basic

Pro Forma Net income (loss) per weighted average share, diluted

Subsequent Events

On July 28, 2023, the Company acquired 100 % of the outstanding stock of Resolute Innovation, Inc.

(“Resolute Innovation”), a Delaware corporation, an advanced search platform that equips organizations with search, discovery and knowledge management tools that are powered by artificial intelligence (“AI”) and neuro-linguistic programming (“NLP”) technologies.

The initial purchase consideration, net of cash acquired, was approximately $ 2.9 million.

In addition, the acquisition agreement includes an earnout that will be based upon the product of three and one half multiplied by ending annual recurring revenue as of January 31, 2025 less the agreed upon Enterprise Value of $ 3.4 million.

The Resolute Innovation acquisition will be accounted for under the purchase method, and accordingly, the results of operations will be included in the Company's financial statements from the date of acquisition.

The acquisition is not expected to have a material impact on the Company's consolidated financial statements and notes thereto.

Stock Options

On September 1, 2023, the Company issued 3,578 shares of common stock upon the exercise of stock options underlying 17,000 shares of common stock on a cashless basis.

Restricted Common Stock

On August 25, 2023, the Company issued 5,000 shares of restricted stock to an employee.

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 value of the stock award was $ 11,200 based on the market price of our common stock of $ 2.24 per share on the date of grant, which will be amortized over the three-year vesting period.

On August 25, 2023, the Company granted, under the 2017 Plan, restricted stock awards in the amount 100,000 shares to key employees in accordance with its long-term equity bonus program (the “LTEBP”).

The LTEBP spans 5 years

and is designed to better serve stockholder interests by aligning key executive compensation with stockholder value.

Awards under the LTEBP will vest as follows, upon the 30-day volume weighted average price (VWAP) of our common stock reaching the following targets:

• 20 % at a 30-day VWAP of $ 3.00 per share;

• 20 % at a 30-day VWAP of $ 3.75 per share;

• 20 % at a 30-day VWAP of $ 4.50 per share;

• 20 % at a 30-day VWAP of $ 5.25 per share;

• 20 % at a 30-day VWAP of $ 6.00 per share.

Upon a change of control vesting will accelerate with respect to that portion of the award that would vest if the target 30-day VWAP was achieved at the level above the per share price in such change of control transaction.

For example, if we granted an award of 100,000 shares under the LTEBP, 20,000 shares would vest upon our stock price achieving a 30-day VWAP of $ 3.00 per share, and 20,000 shares would vest upon our stock price achieving a 30-day VWAP of $ 3.75 per share.

If the per share price in a change of control transaction was $ 5.00 per share, vesting would accelerate for 40,000 shares under the same award (i.e.

the number of shares that would vest for our stock price achieving a 30-day VWAP of $ 5.25 per share).

As a condition to receiving awards under the LTEBP, recipients will be required to hold at least 75 % of all vested shares during the term of their employment.

Applicable target 30-day VWAPs must be achieved within 5 years following the grant of awards under the LTEBP, and all unvested awards under the LTEBP will be forfeited upon expiration of such 5-year period.

Recipients will also forfeit unvested awards in the event their service with our company terminates for any reason.

On August 6, 2024, the Company issued 250,000 shares of restricted common stock under the long-term equity bonus plan, or LTEBP.

On August 9, 2024, the Company issued 7,105 shares of common stock upon the exercise of stock options underlying 10,000 shares of common stock on a cashless basis.

On August 13, 2024, the Company issued 10,674 shares of common stock upon the exercise of stock options underlying 15,000 shares of common stock on a cashless basis.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

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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