Research Solutions, Inc 10-K for FY2022
Research Solutions, Inc. (RSSS)
About this 10-K
Research Solutions, Inc filed this 10-K on September 23, 2022, covering the fiscal year ended June 30, 2022 (FY2022).
Headline figures
Fiscal year ended June 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $32.93M
- up 3.7% from $31.76M a year earlier
- Net loss
- $1.63M
- compared with a net loss of $285.09K a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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For the fiscal year ended: | |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
For the transition period from _____________ to _____________
Commission File No.
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ◻
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ◻
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ◻ |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ◻ No
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of December 31, 2021, the last business day of the registrant’s most recently completed second fiscal quarter, was $
Indicate the number of shares outstanding of each of the registrant's classes of common stock as of the latest practicable date.
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Common Stock, $0.001 par value | |
1 In November 2019, we became a fully remote company. Accordingly, we do not currently have principal executive offices.
TABLE OF CONTENTS
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Cautionary Notice Regarding Forward-Looking Statements
Unless otherwise indicated, (i) the terms “Research Solutions,” “we,” “us” and “our” refer to Research Solutions, Inc., a Nevada corporation, and our two wholly-owned subsidiaries Reprints Desk, Inc., a Delaware corporation (“Reprints Desk”), Reprints Desk Latin America S. de R.L. de C.V, an entity organized under the laws of Mexico (“Reprints Desk Latin America”), and RESSOL LA, S. DE R.L. DE C.V., an entity organized under the laws of Mexico (“ResSol LA”), and (ii) the term “common stock” refers to the common stock, par value $0.001 per share, of Research Solutions. The financial information included herein is presented in United States dollars (“US Dollars”), the functional currency of our company. 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.
All statements included or incorporated by reference in this Annual Report on Form 10-K, other than statements or characterizations of historical fact, are forward-looking statements. Examples of forward-looking statements include, but are not limited to, statements concerning our accounting estimates; assumptions and judgments; the demand for our products; the competitive nature of and anticipated growth in our industry; and our prospective needs for additional capital. These forward-looking statements are based on our current expectations, estimates, approximations and projections about our industry and business, management’s beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as “anticipates,” “expects,” “intends,” “plans,” “predicts,” “believes,” “seeks,” “estimates,” “may,” “will,” “should,” “would,” “could,” “potential,” “continue,” “ongoing,” and similar expressions, and variations or negatives of these words. These statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, our actual results could differ materially and adversely from those expressed in any forward-looking statements as a result of various factors, some of which are listed under “Risk Factors” in Item 1A of this report. These forward-looking statements speak only as of the date of this report. We undertake no obligation to revise or update publicly any forward-looking statement for any reason, except as otherwise required by law.
This Annual Report on Form 10-K also contains estimates and other information concerning our industry, including market size and customer satisfaction ratings, that we obtained from industry publications, surveys and forecasts. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to these estimates. Although we believe the information in these industry publications, surveys and forecasts is reliable, we have not independently verified the accuracy or completeness of the information. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors.
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PART I
Item 1. Business
Company Overview
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 R.L. de C.V, an entity organized under the laws of Mexico, and RESSOL LA, S. DE R.L. DE C.V., an entity organized under the laws of Mexico.
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.
Platforms
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.
Our Platform is 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’s efficiencies in scalability, stability and development costs to fuel rapid innovation and competitive advantage.
Transactions
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. 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. 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. 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. We have
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arrangements with hundreds of content publishers that allow us to distribute their content. 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.
Competitive Strengths
We believe that we possess the following competitive strengths:
Services and Technology
We have developed proprietary software, a sophisticated information logistics technology backbone, and Internet-based interfaces that allow customers to initiate orders for STM content, manage these transactions, obtain reporting, automate authentication, improve seamless connectivity to in-house and third-party software systems, and maximize the information resources they already own or license, as well as organize workgroups to collaborate around bibliographic information. We are focused on rapidly developing an ecosystem of new interactive app-like components for researchers that will deliver time saving efficiencies in core research workflows and knowledge creation processes. We continually enhance the performance of our existing proprietary software and systems and develop and implement new technologies that expand the available methods of discovering, obtaining and managing content.
Our services are highly configurable to meet customers’ needs and provide a personalized yet turnkey solution that covers the full spectrum of customer requirements; from identifying and locating articles, to facilitating copyright compliance, maximizing information resources already owned, monitoring usage, and automating end-user authentication. Our services alleviate the need for our customers to develop internal systems or contact multiple content publishers in order to obtain the content that is critical to their research.
Experienced Management Team
Our management team has well over 100 years of experience satisfying customers across the information services and STM publishing and technology industries. Our management team includes our Executive Chairman Peter Derycz, our founder and an innovator in the space for many decades who has earned many accolades, including being nominated to the Pharma Voice 100 list of most inspiring people in the Pharmaceutical industry.
Customer Loyalty
The majority of our revenue comes from our loyal base of customers, indicative of our focus on customer satisfaction and quality. In Document Delivery Buyer Surveys conducted by industry research and advisory firm Outsell, Inc., we have ranked first overall and in every category for customer satisfaction (depth and breadth of coverage, fair pricing, and ease of doing business) and loyalty (intention to renew or continue service, and willingness to recommend the service to others). This is reflected by our gross churn rate in the low single digit range, and a net churn rate in the high single digit range, each as a percentage of revenue.
Industry Presence and Established Relationships
We have a well-established presence and a network of contacts with our customers (life science companies, academic institutions, and other research-intensive organizations), STM publishing partners, and others in the information services space. We have existing arrangements with hundreds of content publishers that allow us to distribute their content. Although we do not have exclusive relationships with these content publishers, the aggregate number of in place agreements are essential to our value proposition, market presence, and our ability to satisfy the requirements of our customers.
Promotion
We employ a segment-focused marketing approach that focuses on traditional buyers such as corporate libraries as well as new types of non-library buyers across a variety of business functions, including those within research and
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development. In pursuit of growth, we invest in vertical integration and channel relationships to increase the value we provide to customers, extend our promotional reach, and decrease customer acquisition costs. We anticipate growth coming from cross-selling into our existing customer base, penetrating new market verticals, and generating market demand and preference from both existing and new customers. While we place emphasis on the life science market, with a focus on pharmaceutical, biotechnology and medical device customers, we are also penetrating the following markets: academic, aerospace, automotive, electronics, chemicals and food and agriculture.
Growth Strategy
Organic Growth
We seek to grow our customer base through targeted direct and channel promotions of our Platform to potential customers. This strategy for sales and marketing is supported by inbound marketing driven by educational content, innovative technological systems, competitive pricing and best in class service. We are also positioning our sales force to be able to better serve small and medium sized businesses that we consider to be largely underserved today. We also seek to grow existing customer revenue by year over year increases, and through value-based add-ons.
In addition, we submit proposals to potential customers in response to requests for proposals, or “Request for Proposals” (RFPs). We are continually improving our operations and technology to ensure that they are capable of delivering proposed solutions and supporting future growth.
Product Development
We seek to grow revenue through product differentiation, and the development of new products that are attractive to new and existing customers. Our focus on product development leads us to continually explore options to strengthen and broaden our service offering portfolio.
Acquisitions and Combinations
From time to time, and as opportunities arise, we may explore strategic acquisitions and combinations, including the acquisition of customer lists, that bring revenue, profitability, growth potential, cross-selling opportunities and additional technology, products, services, operations and/or geographic capabilities to our company.
International Expansion
We have expanded internationally through increased sales to companies located abroad, particularly in Europe and Japan. From time to time, and as opportunities arise, we may further expand internationally through partnerships or acquisitions.
Publisher Agreements
We have arrangements with all of the major STM content publishers and most of the smaller STM publishers that allow us to distribute their content, and we regularly advance new business opportunities such as rentals through amendments to existing agreements. In addition, we regularly contact publishers to negotiate additional publisher agreements. A typical publisher agreement would allow us to distribute the publisher’s content according to a negotiated price list, thereby eliminating the need to contact the publisher and obtain the rights for each individual order. The majority of these publishers provide us with electronic access to their content, which allows us to further expedite the delivery of single articles to our customers. In addition, we rely on a small number of content publishers for the majority of our content costs.
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Company Services
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.
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. We derive our 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”).
We apply the following five steps in order to determine the appropriate amount of revenue to be recognized as we fulfill our obligations under each of our agreements:
| ● | identify the contract with a customer; |
| ● | identify the performance obligations in the contract; |
| ● | determine the transaction price; |
| ● | allocate the transaction price to performance obligations in the contract; and |
| ● | recognize revenue as the performance obligation is satisfied. |
Platforms
We charge a subscription fee that allows customers to access and utilize certain premium features of our Platform. Revenue is recognized ratably over the term of the subscription agreement, which is typically one year, provided all other revenue recognition criteria have been met. Billings or payments received in advance of revenue recognition are recorded as deferred revenue.
Transactions
We charge a transactional service fee for the electronic delivery of single articles, and a corresponding copyright fee for the permitted use of the content. We recognize revenue from single article delivery services upon delivery to the customer provided all other revenue recognition criteria have been met.
Customers and Suppliers
There were no customers that accounted for greater than 10% of our revenue for the years ended June 30, 2022 and 2021.
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Approximately 42% and 41% of our content cost for the years ended June 30, 2022 and 2021, respectively, was derived from our three largest suppliers of content. Loss of any or all of these suppliers of content would significantly reduce our revenue, which would have a material adverse effect on our results of operations. We can provide no assurance that these suppliers of content will continue to supply us with content in the future.
Sales and Marketing
To efficiently acquire customers, we rely on marketing in close cooperation with value-based selling to acquire new small, medium and large geographically-dispersed enterprises. The promotional mix of tactics we utilize includes: search engine optimization and digital marketing, educational content, advertising, events, direct response and integrated marketing campaigns, public relations and content publicity, thought leadership programs, channel alliances training, and analyst relations. In addition, we focus on account expansion, upselling add-ons, and customer retention, which, we believe, increases total lifetime customer value and generates referrals for new business.
Competition
The markets in which we compete are highly competitive. The primary methods of competition in our industry are price, service, technology and niche focus. Competition based on price is often successful in the short-term, but can limit the ability of a supplier to provide adequate service levels. Competition based on service and/or technology requires significant investment in systems and that investment requires time to produce results. Niche operators focus on narrow activities, but cannot aggregate sufficient content, technology and services to satisfy broad customer needs. We believe that many customers and potential customers are less price sensitive if the service levels are high and the technology creates efficiency and/or management information that has not been available previously.
Our competition includes:
| ● | App –Like Toolkit Providers – We consider the rapidly increasing number of companies that are focused on specialized toolkits for researchers as competition. These include: Accelrys, Benchling, ChemAxon, Comsol Multiphysics, Genomenom, Main GCl, Workbench, Molsoft, and SnapGene. |
| ● | Reference Management Applications – We expect to increasingly compete with tools that exist in the marketplace that are used to aid in organizing references, storing personal content assets, and prepare scholarly papers for submission to congresses and journals. |
| ● | Piracy – Perhaps, our most serious competitor. Many entities use content for commercial purposes without complying with applicable copyright laws, and paying the required copyright to the content publisher. As information becomes more readily available, the opportunity for piracy increases. |
| ● | STM Single Article Delivery Vendors and Content Aggregators – Our primary competitors for global, full-service single article delivery services are Copyright Clearance Center, regional interlibrary loan networks throughout the world such as those owned and operated by OCLC, and numerous national libraries located outside of the United States. |
| ● | Customer In-House Services – While single article delivery services and software development are challenging for our customers to provide in-house, many existing and potential customers manage these capabilities internally. |
| ● | Publisher In-House Capabilities – Some large publishers have developed in-house capabilities to service the content re-use market, however, many of them neglect other content repurposing opportunities and may not be able to aggregate content from other publishers nor create value added software-based solutions. |
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Corporate History and Structure
Research Solutions was incorporated in the State of Nevada on November 2, 2006, and in November 2006 entered into a Share Exchange Agreement with Reprints Desk. At the closing of the transaction contemplated by the Share Exchange Agreement, Research Solutions acquired all of the outstanding shares of Reprints Desk from its stockholders and issued 8,000,003 shares of common stock to the former stockholders of Reprints Desk. Following completion of the exchange transaction, Reprints Desk became a wholly-owned subsidiary of Research Solutions.
On July 24, 2012, we formed Reprints Desk Latin America to provide operational and administrative support services to Reprints Desk.
On March 4, 2013, we consummated a merger with DYSC Subsidiary Corporation, our wholly-owned subsidiary, pursuant to which we, in connection with such merger, amended our Articles of Incorporation to change our name to Research Solutions, Inc. (formerly Derycz Scientific, Inc.).
On June 9, 2022, we formed ResSol LA to provide operational and administrative support services to Reprints Desk.
Employees
As of September 16, 2022, we had 131 full time employees.
Item 1A. Risk Factors
Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information in this report, including our consolidated financial statements and related notes, before investing in our common stock. The following summarizes material risks that investors should carefully consider before deciding to buy or maintain an investment in our common stock. Any of the following risks, if they actually occur, would likely harm our business, financial condition and results of operations. As a result, the trading price of our common stock could decline, and investors could lose the money they paid to buy our common stock.
Risks Related to Our Business and Our Industry
We have historically incurred significant losses, and may be unable to maintain profitability. If we continue to incur significant losses, we may have to curtail our operations, which may prevent us from successfully operating and expanding our business.
Historically, we have relied upon cash from financing activities to fund substantially all of the cash requirements of our activities and have incurred significant losses and experienced negative cash flow. For our fiscal years ended June 30, 2022 and 2021, we incurred a net loss of $1,632,384 and $285,089, respectively. As of June 30, 2022, we had an accumulated deficit of $23,094,272. We cannot predict if we will be profitable. We may continue to incur losses for an indeterminate period of time and may be unable to sustain profitability. An extended period of losses and negative cash flow may prevent us from successfully operating and expanding our business. We may be unable to sustain or increase our profitability on a quarterly or annual basis.
The loss of our largest customers would significantly reduce our revenue and adversely affect our results of operations.
There were no customers that accounted for greater than 10% of our revenue for the years ended June 30, 2022 and 2021. The loss of our largest customers would significantly reduce our revenue, which would have a material adverse effect on our results of operations. We can provide no assurance that these customers will continue to place orders in the future.
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The loss of our largest suppliers of content would significantly reduce our revenue and adversely affect our results of operations.
Approximately 42% and 41% of our content cost for the years ended June 30, 2022 and 2021, respectively, was derived from our three largest suppliers of content. Loss of any or all of these suppliers of content would significantly reduce the attractiveness of our services and our revenue, which would have a material adverse effect on our results of operations. We can provide no assurance that these suppliers of content will continue to supply us with content in the future. Moreover, our arrangements with content providers are non-exclusive. As a result, our content providers can provide the same content to our competitors.
We are exposed to credit risk on our accounts receivable and prepayments to suppliers of content. This risk is heightened during periods when economic conditions worsen.
There were no customers that accounted for greater than 10% of our accounts receivable as of June 30, 2022. There was one customer that accounted for 14% of our accounts receivable as of June 30, 2021. In addition, we have made prepayments to suppliers of content. While we have procedures to monitor and limit exposure to credit risk on our trade receivables as well as long-term prepayments, there can be no assurance such procedures will effectively limit our credit risk and avoid losses, which could have a material adverse effect on our results of operations.
Our services, technology and industry relationships are key assets and competitive advantages of our company and our business may be affected by how we are perceived in the marketplace.
Our services, technology and industry relationships are key assets that enable us to effectively compete in our industry. Our ability to attract and retain customers is highly dependent upon external perceptions of the quality, efficacy, responsiveness and ease-of-use of our services and business practices, and overall financial condition. Negative perceptions or publicity regarding these matters could damage our reputation with customers and the public, which could make it difficult for us to attract and maintain customers. Adverse developments with respect to our industry may also, by association, negatively impact our reputation. Negative perceptions or publicity could have a material adverse effect on our business and financial results.
Our business performance is dependent upon the effectiveness of our technology investments, the failure of which could materially impact our business and financial results.
We have and will continue to undertake significant investments in our technology infrastructure to continually strengthen our position in research and marketing solutions and improve our existing technology platform. We may fail to effectively invest such amounts, or we may invest significant amounts in technologies that do not ultimately assist us in achieving our strategic goals. We may also fail to maintain our technology infrastructure in a manner that allows us to readily meet our customers’ needs. If we experience any of these or similar failures related to our technology investments, we will not achieve our expected revenue growth, or desired cost savings, and we could experience a significant competitive disadvantage in the marketplace, which could have a material adverse effect on our business and financial results.
In addition, the failure to continue to invest in our business could result in a material adverse effect on our future financial results. Such investments may include: executing on, and mitigating risks associated with, new product offerings and entrance into new geographic markets; and ensuring continued compatibility of our new platforms and technologies with our customers’ networks and systems.
We may be subject to intellectual property rights claims by third parties, which are extremely costly to defend, could require us to pay significant damages and could limit our ability to use certain technologies.
Third parties, including our content providers, may assert claims of infringement of intellectual property rights against us or our customers for which we may be liable or have an indemnification obligation. Any claim of infringement by a third party, even those without merit, could cause us to incur substantial costs defending against the claim and could distract our management from our business. Although third parties may offer a license to their content, the terms of any
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offered license may not be acceptable and the failure to obtain a license or the costs associated with any license could cause our business, results of operations or financial condition to be materially and adversely affected. In addition, our licenses are generally non-exclusive, and therefore our competitors may have access to the same content licensed to us. Furthermore, a successful claimant could secure a judgment or we may agree to a settlement that prevents us from providing certain content or that requires us to pay substantial damages, including treble damages if we are found to have willfully infringed the claimant’s copyrights, royalties or other fees. Any of these events could seriously harm our business, operating results and financial condition.
Our industry is subject to intense competition and rapid technological change, which may result in products or new solutions that are superior to our products or solutions under development. If we are unable to anticipate or keep pace with changes in the marketplace and the direction of technological innovation and customer demands, our products or solutions may become less useful or obsolete and our operating results will suffer.
The industry in which we operate in general is subject to intense and increasing competition and rapidly evolving technologies. Because our products are expected to have long development cycles, we must anticipate changes in the marketplace and the direction of technological innovation and customer demands. To compete successfully, we will need to demonstrate the advantages of our products and solutions.
Our future success will depend in large part on our ability to establish and maintain a competitive position in current and future technologies. Rapid technological development may render our products under development, or any future solutions we may have, and related technologies obsolete. Many of our competitors have or may have greater corporate, financial, operational, sales and marketing resources, and more experience in research and development than we have. We cannot assure you that our competitors will not succeed in developing or marketing technologies or products that are more effective or commercially attractive than our products or that would render our solutions and related technologies obsolete. We may not have or be able to raise or develop the financial resources, technical expertise, or support capabilities to compete successfully in the future. Our success will depend in large part on our ability to maintain a competitive position with our products and solutions.
Increased accessibility of free or relatively inexpensive information sources may reduce demand for our products and services.
In recent years, more public sources of free or relatively inexpensive information have become available, particularly through the Internet, and this trend is expected to continue. For example, some governmental and regulatory agencies have increased the amount of information they make publicly available at no cost. Public sources of free or relatively inexpensive information may reduce demand for our products and services. Our financial results may be adversely affected if our customers choose to use these public sources as a substitute for our products or services.
We depend on the services of key personnel, and may not be able to operate and grow our business effectively if we lose their services or are unable to attract qualified personnel in the future.
We rely heavily on our senior management team because they have substantial experience with our diverse service offerings and business strategies. In addition, we rely on our senior management team to identify internal expansion and external growth opportunities. Our ability to retain senior management and other key personnel is therefore very important to our future success. We have employment agreements with our senior management, but these employment agreements do not ensure that they will not voluntarily terminate their employment with us. In addition, our key personnel are subject to non-solicitation and confidential information restrictions. We do not have key man insurance for any of our current management or other key personnel. The loss of any key personnel would require the remaining key personnel to divert immediate attention to seeking a replacement. Competition for senior management personnel is intense, and fit is important to us. Our inability to find a suitable replacement for any departing executive officer or key employee on a timely basis could adversely affect our ability to operate and grow our business.
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We rely on our proprietary software systems, and our websites and online networks, and a disruption, failure or security compromise of these systems would disrupt our business, damage our reputation and adversely affect our revenue and profitability.
Our proprietary software systems are critical to our business because they enable the efficient and timely service of a large number of customer orders. Similarly, we rely on our websites, online networks, and email systems to obtain content and deliver customer orders, and provide timely, relevant and dependable business information to our customers. Therefore, network or system shutdowns caused by events such as computer hacking, sabotage, dissemination of computer viruses, worms and other destructive or disruptive software, denial of service attacks and other malicious activity, as well as loss of service from third parties, power outages, natural disasters and similar events, could affect our ability to store, handle and deliver data and services to our customers. Any such interruption of our operations could negatively impact customer satisfaction and revenue.
Breaches of our data security systems or unintended disclosure of our customer data could result in large expenditures to repair or replace such systems, to remedy any security breaches and to protect us from similar events in the future.
Our infrastructure may be vulnerable to physical or electronic break-ins, computer viruses, or similar disruptive problems. In addition to shutdowns, our systems are subject to risks caused by misappropriation, misuse, leakage, falsification and accidental release or loss of information. We process, store, and transmit data, including personally identifiable information and payment card industry data of our customers, and it is critical that this data remains secure and is perceived by the marketplace to be secure.
Personal data is increasingly subject to legal and regulatory protections around the world, which vary widely in approach and which possibly conflict with one another. In recent years, for example, U.S. legislators and regulatory agencies, such as the Federal Trade Commission, as well as U.S. states, have increased their focus on protecting personal data by law and regulation, and have increased enforcement actions for violations of privacy and data protection requirements. In May 2018, The European Commission approved and adopted the General Data Protection Regulation (“GDPR”) in the European Union, a new data protection law. These data protection laws and regulations are intended to protect the privacy and security of personal data, including credit card information that is collected, processed and transmitted in or from the relevant jurisdiction. Implementation of and compliance with these laws and regulations may be more costly or take longer than we anticipate, or could otherwise adversely affect our business operations, which could negatively impact our financial position or cash flows. Our business could be materially adversely affected by our inability, or the inability of our vendors who receive personal data from us, to comply with legal obligations regarding the use of personal data, new data handling requirements that conflict with or negatively impact our business practices. In addition, our agreements with customers may also require that we indemnify the customer for liability arising from data breaches under the terms of our agreements with these customers.
Disruptions or security compromises of our systems could result in large expenditures to repair or replace such systems, to remedy any security breaches and protect us from similar events in the future. We also could be exposed to negligence claims or other legal proceedings brought by our customers or their clients, and we could incur significant legal expenses and our management’s attention may be diverted from our operations in defending ourselves against and resolving lawsuits or claims. In addition, if we were to suffer damage to our reputation as a result of any system failure or security compromise, our revenue and profitability could be adversely affected.
We are exposed to risks associated with PCI compliance.
The PCI Data Security Standard (“PCI DSS”) is a specific set of comprehensive security standards required by credit card brands for enhancing payment account data security, including but not limited to requirements for security management, policies, procedures, network architecture, and software design. PCI DSS compliance is required in order to maintain credit card processing services. Compliance does not guarantee a completely secure environment and notwithstanding the results of this assessment there can be no assurance that payment card brands will not request further compliance assessments or set forth additional requirements to maintain access to credit card processing services. Compliance is an ongoing effort and the requirements evolve as new threats are identified. In the event that we were to
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lose PCI DSS compliance status (or fail to renew compliance under a future version of the PCI DSS), we could be exposed to increased operating costs, fines and penalties and, in extreme circumstances, may have our credit card processing privileges revoked, which would have a material adverse effect on our business.
Our failure to comply with the covenants contained in our loan agreement could result in an event of default that could adversely affect our financial condition and ability to operate our business as planned.
We currently have a line of credit with Silicon Valley Bank, maturing on February 28, 2024, under which there were no outstanding borrowings as of June 30, 2022. Our loan agreement contains, and any agreements to refinance our debt likely will contain, financial and restrictive covenants. We were in compliance with these covenants as of June 30, 2022, however, our failure to comply with these covenants in the future may result in an event of default, which if not cured or waived, could result in the bank preventing us from accessing availability under our line of credit and requiring us to repay any outstanding borrowings. There can be no assurance that we will be able to obtain waivers of future covenant violations or that such waivers will be available on commercially acceptable terms.
In addition, the indebtedness under our loan agreement is secured by a security interest in substantially all of our tangible and intangible assets, and therefore, if we are unable to repay such indebtedness the bank could foreclose on these assets and sell the pledged equity interests, which would adversely affect our ability to operate our business. If any of these were to occur, we may not be able to continue operations as planned, implement our planned growth strategy or react to opportunities for or downturns in our business.
Government regulations related to the Internet could increase our cost of doing business, affect our ability to grow or may otherwise negatively affect our business.
Governmental agencies and federal and state legislatures have adopted, and may continue to adopt, new laws and regulatory practices in response to the increasing use of the Internet and other online services. These new laws may be related to issues such as online privacy and data protection requirements, copyrights, trademarks and service mark, sales taxes, fair business practices, domain name ownership and the requirement that our operating units register to do business as foreign entities or otherwise be licensed to do business in jurisdictions where they have no physical location or other presence. In addition, these new laws, regulations or interpretations relating to doing business through the Internet could increase our costs materially and adversely affect our revenue and results of operations.
We may be adversely affected by changes in legislation and regulation.
Laws relating to communications, data protection, e-commerce, direct marketing and digital advertising and the use of public records have become more prevalent in recent years. Existing and proposed legislation and regulations, including changes in the manner in which such legislation and regulations are interpreted by courts in the United States, Europe and other jurisdictions, may impose limits on our collection and use of certain kinds of information and our ability to communicate such information effectively to our customers. It is difficult to predict in what form laws and regulations will be adopted or how they will be construed by the relevant courts, or the extent to which nay changes might adversely affect us.
Our growth strategy may require significant additional resources, and such additional resources might not be available on terms acceptable to us, if at all, which may in turn hamper our growth and adversely affect our business.
Our growth strategy will require us to significantly expand the capabilities of our administrative and operational resources. We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new technology, improve our operating infrastructure or acquire complementary businesses and technologies. Accordingly, we may need to undertake equity, equity-linked or debt financings to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing that we secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, including the ability to pay dividends. This may make it more difficult for us to obtain additional capital and to
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pursue business opportunities. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and respond to business challenges could be significantly impaired, and our business may be adversely affected. In addition, our failure to successfully manage our growth could result in our sales not increasing commensurately with our capital investments. If we are unable to successfully manage our growth, we may be unable to achieve our goals.
Acquisitions, joint ventures or similar strategic relationships may disrupt or otherwise have a material adverse effect on our business and financial results.
As part of our strategy, we may explore strategic acquisitions and combinations, including the acquisition of customer lists, or enter into joint ventures or similar strategic relationships. These transactions are subject to the following risks:
| ● | Acquisitions, joint ventures or similar relationships may cause a disruption in our ongoing business, distract our management and make it difficult to maintain our standards, controls and procedures; |
| ● | We may not be able to integrate successfully the services, content, products and personnel of any such transaction into our operations; |
| ● | We may not derive the revenue improvements, cost savings and other intended benefits of any such transaction; and |
| ● | There may be risks, exposures and liabilities of acquired entities or other third parties with whom we undertake a transaction, that may arise from such third parties’ activities prior to undertaking a transaction with us. |
Our prior acquisitions have resulted in significant impairment charges and have operated at losses. We can provide no assurance that future acquisitions, joint ventures or strategic relationships will be accretive to our business overall or will result in profitable operations.
We are subject to risks related to our foreign operations which could adversely affect our operations and financial performance.
We have an operational and administrative support organization in Mexico, and sell our services worldwide. Foreign operations are subject to various risks which could have a material adverse effect on those operations, the costs of those operations, and our business as a whole, including: exposure to local economic and employment conditions; exposure to local taxes and employment regulations, political conditions; currency exchange rate fluctuations; reliance of local management; and additional potential costs of complying with rules and regulations, and potential changes to those rule and regulations, of foreign jurisdictions. Any adverse consequence resulting from the materialization of the foregoing risks would adversely affect our financial performance and results of operations.
Unfavorable general economic conditions in the United States, Europe, or in other major markets could negatively impact our financial performance.
Unfavorable general economic conditions, such as a recession or economic slowdown in the United States, Europe, Japan, or in one or more of our other major markets, could negatively affect demand for our services and our results of operations. Under difficult economic conditions, businesses may seek to reduce spending on our services, or shift away from our services to in-house alternatives.
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The COVID-19 pandemic could negatively impact our future operations and results.
We are subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on our business is highly uncertain and difficult to predict, as the responses that we, other businesses and governments are taking continue to evolve. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a local and/or global economic recession. Policymakers around the globe have responded with fiscal policy actions to support the healthcare industry and economy as a whole. The magnitude and overall effectiveness of these actions remain uncertain.
To date, we have not experienced any significant changes in our business that would have a significant negative impact on our consolidated statements of operations or cash flows.
The severity of the impact of the COVID-19 pandemic on our business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on our customers, service providers and suppliers, all of which are uncertain and cannot be predicted. 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.
Risks Relating to Ownership of Our Common Stock
We cannot predict the extent to which an active public trading market for our common stock will develop or be sustained. If an active public trading market does not develop or cannot be sustained, you may be unable to liquidate your investment in our common stock.
We cannot predict the extent to which an active public market for our common stock will develop or be sustained due to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors, and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares of common stock until such time as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that an active public trading market for our common stock will develop or be sustained. If such a market cannot be sustained, you may be unable to liquidate your investment in our common stock.
Our common stock may be subject to significant price volatility which may have an adverse effect on your ability to liquidate your investment in our common stock.
The market for our common stock may be characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will be more volatile than a seasoned issuer for the indefinite future. The potential volatility in our share price is attributable to a number of factors. First, our common shares may be sporadically and/or thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our stockholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer that could better absorb those sales without adverse impact on its share price. Secondly, an investment in us is a speculative or “risky” investment due to our lack of meaningful profits to date and uncertainty of future profits. As a consequence of this enhanced risk, more risk-adverse investors may, under
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the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a seasoned issuer.
We have not paid cash dividends in the past and do not expect to pay cash dividends in the foreseeable future. Any return on your investment may be limited to increases in the market price of our common stock.
We have never paid cash dividends on our common stock and do not anticipate paying cash dividends on our common stock in the foreseeable future. In addition, our Loan and Security Agreement with Silicon Valley Bank prohibits us from paying cash dividends. The payment of dividends on our common stock will depend on our earnings, financial condition and other business and economic factors affecting us at such time as the board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your investment might only occur if the market price of our common stock appreciates.
Voting power of a significant percentage of our common stock is held by our Executive Chairman, and his brother-in-law, who together are able to exert significant influence over the outcome of matters to be voted on by our stockholders.
As of September 16, 2022, Peter Victor Derycz, our Executive Chairman, had voting power equal to approximately 12% of votes eligible to be cast at a meeting of our stockholders. Paul Kessler, the brother-in-law of Mr. Derycz, exercises investment and voting control over the shares held by Bristol Investment Fund, Ltd., and had, as of September 17, 2022, voting power equal to approximately 9% of votes eligible to be cast at a meeting of our stockholders. As a result of their significant ownership interests, Mr. Derycz and Mr. Kessler together currently have the ability to exert significant influence over the election of directors, and other matters submitted to a vote of all of our stockholders. They may also have interests that differ from yours and may vote in a manner that is adverse to your interests. This concentration of ownership may have the effect of deterring, delaying or preventing a change of control of our company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market price of our common stock.
The exercise of outstanding options and warrants to purchase our common stock could substantially dilute your investment.
Under the terms of our outstanding options and warrants to purchase our common stock issued to employees and others, the holders are given an opportunity to profit from a rise in the market price of our common stock that, upon the exercise of the options and/or warrants, could result in dilution in the interests of our other stockholders.
The market price of our common stock and the value of your investment could substantially decline if our warrants or options are exercised and our common stock is issued and resold into the market, or if a perception exists that a substantial number of shares will be issued upon exercise of our warrants and option and then resold into the market.
If the exercise prices of our warrants or options are lower than the price at which you made your investment, immediate dilution of the value of your investment will occur. In addition, sales of a substantial number of shares of common stock issued upon exercise of our warrants and options, or even the perception that such sales could occur, could adversely affect the market price of our common stock. You could, therefore, experience a substantial decline in the value of your investment as a result of both the actual and potential exercise of our warrants or options.
Failure to achieve and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 could result in a restatement of our financial statements, cause investors to lose confidence in our financial statements and our company and have a material adverse effect on our business and stock price.
We produce our financial statements in accordance with accounting principles generally accepted in the United States, or GAAP. Effective internal controls are necessary for us to provide reliable financial reports to help mitigate the risk of fraud and to operate successfully as a publicly traded company. As a public company, we are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of
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2002, or Section 404. Further, Section 404 requires annual management assessments of the effectiveness of our internal controls over financial reporting.
Testing and maintaining internal controls can divert our management’s attention from other matters that are important to our business. We may not be able to conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404. If we are unable to conclude that we have effective internal controls over financial reporting, investors could lose confidence in our reported financial information and our company, which could result in a decline in the market price of our common stock, and cause us to fail to meet our reporting obligations in the future, which in turn could impact our ability to raise additional financing if needed in the future.
Our board of directors has broad discretion to issue additional securities.
We are entitled under our certificate of incorporation to issue up to 100,000,000 shares of common stock and 20,000,000 shares of “blank check” preferred stock, although these amounts may change in the future subject to stockholder approval. Shares of our blank check preferred stock provide our board of directors’ broad authority to determine voting, dividend, conversion, and other rights. As of June 30, 2022 we had issued and outstanding 27,075,648 shares of common stock and we had 7,118,468 shares of common stock reserved for future grants under our equity compensation plans and for issuances upon the exercise or conversion of currently outstanding options, warrants and convertible securities. As of June 30, 2022, we had no shares of preferred stock issued and outstanding. Accordingly, as of June 30, 2022, we could issue up to 65,805,884 additional shares of common stock and 20,000,000 additional shares of “blank check” preferred stock. Any additional stock issuances could be made at a price that reflects a discount or premium to the then-current market price of our common stock. In addition, in order to raise capital, we may need to issue securities that are convertible into or exchangeable for a significant amount of our common stock. Our board may generally issue those common and preferred shares, or convertible securities to purchase those shares, without further approval by our stockholders. Any preferred shares we may issue could have such rights, preferences, privileges and restrictions as may be designated from time-to-time by our board, including preferential dividend rights, voting rights, conversion rights, redemption rights and liquidation provisions. We may also issue additional securities to our directors, officers, employees and consultants as compensatory grants in connection with their services, both in the form of stand-alone grants or under our stock incentive plans. The issuance of additional securities may cause substantial dilution to our stockholders.
Our articles of incorporation, bylaws and Nevada law have anti-takeover provisions that could discourage, delay or prevent a change in control, which may cause our stock price to decline.
Our articles of incorporation, bylaws and Nevada law contain provisions which could make it more difficult for a third party to acquire us, even if closing such a transaction would be beneficial to our stockholders. We are currently authorized to issue up to 20,000,000 shares of “blank check” preferred stock. This preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by our board of directors without further action by stockholders. The terms of any series of preferred stock may include voting rights (including the right to vote as a series on particular matters), preferences as to dividend, liquidation, conversion and redemption rights and sinking fund provisions. No shares of our preferred stock are currently outstanding. The issuance of any preferred stock could materially adversely affect the rights of the holders of our common stock, and therefore, reduce the value of our common stock. In particular, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with, or sell our assets to, a third party and thereby preserve control by current management.
Provisions of our articles of incorporation, bylaws and Nevada law also could have the effect of discouraging potential acquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder might consider favorable. Such provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. In particular, our articles of incorporation, our bylaws and Nevada law, as applicable, among other things, provide our board of directors with the ability to alter our bylaws without stockholder approval, and provide that vacancies on our board of directors may be filled by a majority of directors in office, although less than a quorum.
We may become subject to Nevada’s control share acquisition laws (Nevada Revised Statutes 78.378 -78.3793), which prohibit an acquirer, under certain circumstances, from voting shares of a corporation’s stock after crossing specific
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threshold ownership percentages, unless the acquirer obtains the approval of the issuing corporation’s stockholders. We are also subject to Nevada’s Combination with Interested Stockholders Statute (Nevada Revised Statutes 78.411 -78.444) which prohibits an interested stockholder from entering into a “combination” with the corporation, unless certain conditions are met. These provisions are expected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of our company to first negotiate with our board of directors. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of our common stock to decline.
Item 1B. Unresolved Staff Comments
Not applicable.
Item 2. Properties
We operate in a virtual environment and do not have a physical office space or headquarters.
Item 3. Legal Proceedings
We are involved in legal proceedings in the ordinary course of our business. Although our management cannot predict the ultimate outcome of these legal proceedings with certainty, it believes that the ultimate resolution of our legal proceedings, including any amounts we may be required to pay, will not have a material effect on our consolidated financial statements.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information and Approximate Number of Holders of Common Stock
Our common stock is quoted on The Nasdaq Stock Market LLC’s Nasdaq Capital Market (the “Nasdaq”) under the symbol “RSSS.”
As of September 16, 2022, according to the records of our transfer agent, we had 33 record holders of our common stock. Because brokers and other institutions hold shares on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
Dividends
We have never declared or paid dividends on our common stock. In addition, our Loan and Security Agreement with Silicon Valley Bank prohibits us from paying cash dividends. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our common stock in the foreseeable future, if at all. Any future determination to declare dividends will be made at the discretion of our board of directors and will depend on our financial condition, operating results, capital requirements, general business conditions and other factors that our board of directors may deem relevant.
Recent Sales of Unregistered Securities
None.
Use of Proceeds
None.
Common Stock Repurchases
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 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. 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.
Shares repurchased are retired and deducted from common stock for par value and from additional paid in capital for the excess over par value. Direct costs incurred to acquire the shares are included in the total cost of the shares.
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The following table summarizes repurchases of our common stock on a monthly basis:
|
| |
| | |
| Total Number of Shares |
| Approximate Dollar Value | |
| | Total Number | | Average | | Purchased as Part of | | of Shares that May Yet Be | ||
| | of Shares | | Price Paid | | Publicly Announced | | Purchased Under the | ||
Period | | Purchased1 | | per Share | | Plans or Programs | | Plans or Programs | ||
April 1-30, 2022 |
| — |
| | — |
| — | | $ | 267,210 |
May 1-31, 2022 |
| — |
| | — |
| — | | $ | 267,210 |
June 1-30, 2022 |
| 6,819 | | $ | 1.74 |
| — | | $ | 255,345 |
Total |
| 6,819 | | $ | 1.74 |
| — | |
| — |
| 1 | Consists of shares of common stock purchased from employees to satisfy tax obligations in connection with the vesting of stock incentive awards. |
Equity Compensation Plan Information
Information relating to compensation plans under which our equity securities are authorized for issuance is set forth in Item 12 of this report under “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.”
Item 6. [Reserved]
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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Cautionary Notice Regarding Forward-Looking Statements
The following discussion and analysis of our financial condition and results of operations for the years ended June 30, 2022 and 2021 should be read in conjunction with our consolidated financial statements and related notes to those financial statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under “Risk Factors” and elsewhere in this report.
We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. 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.
Overview
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 R.L. de C.V, an entity organized under the laws of Mexico, and RESSOL LA, S. DE R.L. DE C.V., an entity organized under the laws of Mexico.
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.
Platforms
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.
Our Platform is 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’s efficiencies in scalability, stability and development costs to fuel rapid innovation and competitive advantage.
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Transactions
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. 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. 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. 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. We have arrangements with hundreds of content publishers that allow us to distribute their content. 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.
COVID-19
We are subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on our business is highly uncertain and difficult to predict, as the responses that we, other businesses and governments are taking continue to evolve. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a local and/or global economic recession. Policymakers around the globe have responded with fiscal policy actions to support the healthcare industry and economy as a whole. The magnitude and overall effectiveness of these actions remain uncertain.
To date, we have not experienced any significant changes in our business that would have a significant negative impact on our consolidated statements of operations or cash flows.
The severity of the impact of the COVID-19 pandemic on our business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on our customers, service providers and suppliers, all of which are uncertain and cannot be predicted. 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
The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States, or GAAP, requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. When making these estimates and assumptions, we consider our historical experience, our knowledge of economic and market factors and various other factors that we believe to be reasonable under the circumstances. Actual results may differ under different estimates and assumptions.
The accounting estimates and assumptions discussed in this section are those that we consider to be the most critical to an understanding of our financial statements because they inherently involve significant judgments and uncertainties.
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Revenue Recognition
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.
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. We derive our 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”).
We apply the following five steps in order to determine the appropriate amount of revenue to be recognized as we fulfill our obligations under each of our agreements:
| ● | identify the contract with a customer; |
| ● | identify the performance obligations in the contract; |
| ● | determine the transaction price; |
| ● | allocate the transaction price to performance obligations in the contract; and |
| ● | recognize revenue as the performance obligation is satisfied. |
Platforms
We charge a subscription fee that allows customers to access and utilize certain premium features of our Platform. Revenue is recognized ratably over the term of the subscription agreement, which is typically one year, provided all other revenue recognition criteria have been met. Billings or payments received in advance of revenue recognition are recorded as deferred revenue.
Transactions
We charge a transactional service fee for the electronic delivery of single articles, and a corresponding copyright fee for the permitted use of the content. We recognize revenue from single article delivery services upon delivery to the customer provided all other revenue recognition criteria have been met.
Stock-Based Compensation
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
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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.
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. Any excess of the repurchase price over the fair value of the instruments repurchased shall be recognized as additional compensation cost.
Allowance for doubtful accounts
We evaluate the collectability of our trade accounts receivable based on a number of factors. In circumstances where we become aware of a specific customer’s inability to meet its financial obligations to us, we estimate and record a specific reserve for bad debts, which reduces the recognized receivable to the estimated amount we believe will ultimately be collected. In addition to specific customer identification of potential bad debts, bad debt charges are recorded based on our historical losses and an overall assessment of past due trade accounts receivable outstanding. We established an allowance for doubtful accounts of $94,144 and $51,495 as of June 30, 2022 and 2021, respectively.
Foreign Currency
The accompanying consolidated financial statements are presented in United States dollars, the functional currency of our company. Capital accounts of foreign subsidiaries are translated into US dollars from foreign currencies at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rate as of the balance sheet date. 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 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.
The following table summarizes the exchange rates used:
| | Year Ended | ||
| | June 30, | ||
|
| 2022 |
| 2021 |
Period end Euro : US Dollar exchange rate |
| 1.05 | | 1.19 |
Average period Euro : US Dollar exchange rate |
| 1.13 |
| 1.19 |
| | | | |
Period end GBP : US Dollar exchange rate | | 1.21 | | 1.38 |
Average period GBP : US Dollar exchange rate | | 1.34 |
| 1.34 |
| | |
| |
Period end Mexican Peso : US Dollar exchange rate |
| 0.05 |
| 0.05 |
Average period Mexican Peso : US Dollar exchange rate |
| 0.05 |
| 0.05 |
24
Quarterly Information (Unaudited)
The following table sets forth unaudited and quarterly financial data for the four quarters of fiscal years 2022 and 2021:
|
| June 30, | | Mar. 31, |
| Dec 31, | | Sept. 30, |
| June 30, |
| Mar. 31, |
| Dec. 31, |
| Sept. 30, | ||||||||
| | 2022 |
| 2022 |
| 2021 |
| 2021 |
| 2021 |
| 2021 |
| 2020 |
| 2020 | ||||||||
Revenue: |
| |
| | |
|
| |
| | |
|
| |
|
| |
|
| |
|
| |
|
Platforms | | $ | 1,886,845 | | $ | 1,786,224 | | $ | 1,604,829 | | $ | 1,509,874 | | $ | 1,429,160 | | $ | 1,344,183 | | $ | 1,220,535 | | $ | 1,141,688 |
Transactions | |
| 6,675,164 | |
| 6,971,128 | |
| 6,267,458 | |
| 6,232,630 | |
| 6,788,494 | |
| 6,996,349 | |
| 6,229,200 | |
| 6,606,737 |
Total revenue | |
| 8,562,009 | |
| 8,757,352 | |
| 7,872,287 | |
| 7,742,504 | |
| 8,217,654 | |
| 8,340,532 | |
| 7,449,735 | |
| 7,748,425 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Cost of revenue: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Platforms | |
| 240,214 | |
| 219,051 | |
| 231,668 | |
| 245,656 | |
| 257,320 | |
| 233,696 | |
| 217,003 | |
| 203,952 |
Transactions | |
| 5,038,653 | |
| 5,299,804 | |
| 4,802,959 | |
| 4,836,473 | |
| 5,218,118 | |
| 5,404,196 | |
| 4,841,150 | |
| 5,094,897 |
Total cost of revenue | |
| 5,278,867 | |
| 5,518,855 | |
| 5,034,627 | |
| 5,082,129 | |
| 5,475,438 | |
| 5,637,892 | |
| 5,058,153 | |
| 5,298,849 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Gross profit: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Platforms | |
| 1,646,631 | |
| 1,567,173 | |
| 1,373,161 | |
| 1,264,218 | |
| 1,171,840 | |
| 1,110,487 | |
| 1,003,532 | |
| 937,736 |
Transactions | |
| 1,636,511 | |
| 1,671,324 | |
| 1,464,499 | |
| 1,396,157 | |
| 1,570,376 | |
| 1,592,153 | |
| 1,388,050 | |
| 1,511,840 |
Total gross profit | |
| 3,283,142 | |
| 3,238,497 | |
| 2,837,660 | |
| 2,660,375 | |
| 2,742,216 | |
| 2,702,640 | |
| 2,391,582 | |
| 2,449,576 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Operating expenses: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Sales and marketing | |
| 691,368 | |
| 543,496 | |
| 518,357 | |
| 522,951 | |
| 521,220 | |
| 566,713 | |
| 487,571 | |
| 498,374 |
Technology and product dev. | |
| 1,049,430 | |
| 971,959 | |
| 868,236 | |
| 821,460 | |
| 732,371 | |
| 664,195 | |
| 624,747 | |
| 622,961 |
General and administrative | |
| 1,663,671 | |
| 1,629,371 | |
| 1,616,135 | |
| 1,497,223 | |
| 1,354,244 | |
| 1,233,603 | |
| 1,118,750 | |
| 1,161,061 |
Depreciation and amortization | |
| 5,507 | |
| 4,988 | |
| 4,260 | |
| 2,896 | |
| 2,694 | |
| 2,066 | |
| 3,039 | |
| 3,723 |
Stock-based comp. expense | |
| 225,501 | |
| 399,234 | |
| 300,539 | |
| 171,110 | |
| 221,589 | |
| 179,345 | |
| 435,949 | |
| 170,791 |
Foreign currency transaction loss (gain) | |
| 91,279 | |
| 29,394 | |
| 11,982 | |
| 11,243 | |
| (890) | |
| 6,648 | |
| (17,469) | |
| (24,249) |
Total operating expenses | |
| 3,726,756 | |
| 3,578,442 | |
| 3,319,509 | |
| 3,026,883 | |
| 2,831,228 | |
| 2,652,570 | |
| 2,652,587 | |
| 2,432,661 |
Other income (expenses and income taxes) | |
| 5,347 | |
| (585) | |
| 264 | |
| (5,494) | |
| 136 | |
| (322) | |
| 399 | |
| (2,270) |
Net income (loss) | |
| (438,267) | |
| (340,530) | |
| (481,585) | |
| (372,002) | |
| (88,876) | |
| 49,748 | |
| (260,606) | |
| 14,645 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Basic income (loss) per common share: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Net income (loss) per share | | $ | (0.02) | | $ | (0.01) | | $ | (0.02) | | $ | (0.01) | | $ | — | | $ | — | | $ | (0.01) | | $ | — |
Basic weighted average common shares outstanding | |
| 26,576,054 | |
| 26,512,195 | |
| 26,351,947 | |
| 26,277,116 | |
| 26,145,794 | |
| 26,027,665 | |
| 25,988,117 | |
| 25,898,900 |
| | | | | | | | | | | | | | | | | | | | | | | | |
Diluted income (loss) per common share: | |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Net income (loss) per share | | $ | (0.02) | | $ | (0.01) | | $ | (0.02) | | $ | (0.01) | | $ | — | | $ | — | | $ | (0.01) | | $ | — |
Diluted weighted average common shares outstanding | |
| 26,576,054 | |
| 26,512,195 | |
| 26,351,947 | |
| 26,277,116 | |
| 26,145,794 | |
| 26,565,892 | |
| 25,988,117 | |
| 26,511,180 |
25
Comparison of the Years Ended June 30, 2022 and 2021
Results of Operations
| | Year Ended June 30, |
| |||||||||
| | 2022 |
| 2021 |
| $ Change |
| % Change |
| |||
| | | | | | | | | | | | |
Revenue: | | |
|
| |
|
| |
|
|
| |
Platforms | | $ | 6,787,772 | | $ | 5,135,565 | | $ | 1,652,207 |
| 32.2 | % |
Transactions | |
| 26,146,380 | |
| 26,620,780 | |
| (474,400) |
| (1.8) | % |
Total revenue | |
| 32,934,152 | |
| 31,756,345 | |
| 1,177,807 |
| 3.7 | % |
| | | | | | | | | | | | |
Cost of revenue: | |
|
| |
|
| |
|
|
|
| |
Platforms | |
| 936,589 | |
| 911,970 | |
| 24,619 |
| 2.7 | % |
Transactions | |
| 19,977,889 | |
| 20,558,361 | |
| (580,472) |
| (2.8) | % |
Total cost of revenue | |
| 20,914,478 | |
| 21,470,331 | |
| (555,853) |
| (2.6) | % |
| | | | | | | | | | | | |
Gross profit: | |
|
| |
|
| |
|
|
|
| |
Platforms | |
| 5,851,183 | |
| 4,223,595 | |
| 1,627,588 |
| 38.5 | % |
Transactions | |
| 6,168,491 | |
| 6,062,419 | |
| 106,072 |
| 1.7 | % |
Total gross profit | |
| 12,019,674 | |
| 10,286,014 | |
| 1,733,660 |
| 16.9 | % |
| | | | | | | | | | | | |
Operating expenses: | |
|
| |
|
| |
|
|
|
| |
Sales and marketing | |
| 2,276,172 | |
| 2,073,878 | |
| 202,294 |
| 9.8 | % |
Technology and product development | |
| 3,711,085 | |
| 2,644,274 | |
| 1,066,811 |
| 40.3 | % |
General and administrative | |
| 6,406,400 | |
| 4,867,659 | |
| 1,538,741 |
| 31.6 | % |
Depreciation and amortization | |
| 17,651 | |
| 11,522 | |
| 6,129 |
| 53.2 | % |
Stock-based compensation expense | |
| 1,096,384 | |
| 1,007,673 | |
| 88,711 |
| 8.8 | % |
Foreign currency transaction loss (gain) | |
| 143,898 | |
| (35,960) | |
| 179,858 |
| 500.2 | % |
Total operating expenses | |
| 13,651,590 | |
| 10,569,046 | |
| 3,082,544 |
| 29.2 | % |
| | | | | | | | | | | | |
Loss from operations | |
| (1,631,916) | |
| (283,032) | |
| (1,348,884) |
| (476.6) | % |
| | | | | | | | | | | | |
Other income | |
| 7,154 | |
| 1,147 | |
| 6,007 |
| 523.7 | % |
| | | | | | | | | | | | |
Loss from operations before provision for income taxes | |
| (1,624,762) | |
| (281,885) | |
| (1,342,877) |
| (476.4) | % |
Provision for income taxes | |
| (7,622) | |
| (3,204) | |
| (4,418) |
| (137.9) | % |
| | | | | | | | | | | | |
Net loss | |
| (1,632,384) | |
| (285,089) | |
| (1,347,295) |
| (472.6) | % |
Revenue
| | Years Ended June 30, |
| |||||||||
| | 2022 |
| 2021 |
| $ Change |
| % Change |
| |||
Revenue: | | |
|
| |
|
| |
|
|
| |
Platforms | | $ | 6,787,772 | | $ | 5,135,565 | | $ | 1,652,207 |
| 32.2 | % |
Transactions | |
| 26,146,380 | |
| 26,620,780 | |
| (474,400) |
| (1.8) | % |
Total revenue | | $ | 32,934,152 | | $ | 31,756,345 | | $ | 1,177,807 |
| 3.7 | % |
26
Total revenue increased $1,177,807, or 3.7%, for the year ended June 30, 2022 compared to the prior year, due to the following:
Category |
| Impact | Key Drivers | |||
Platforms |
| ↑ | | $ | 1,652,207 | Increased due to additional deployments to new and existing customers, and expansion from existing customers. Revenue is recognized ratably over the term of the subscription agreement, which is typically one year, provided all other revenue recognition criteria have been met. Billings or payments received in advance of revenue recognition are recorded as deferred revenue. |
Transactions |
| ↓ | | $ | 474,400 | Decreased primarily due to lower paid order volume. |
Cost of Revenue
| | Years Ended June 30, |
| |||||||||
| | 2022 |
| 2021 |
| $ Change |
| % Change |
| |||
Cost of Revenue: | | |
|
| |
|
| |
|
|
| |
Platforms | | $ | 936,589 | | $ | 911,970 | | $ | 24,619 |
| 2.7 | % |
Transactions | |
| 19,977,889 | |
| 20,558,361 | |
| (580,472) |
| (2.8) | % |
Total cost of revenue | | $ | 20,914,478 | | $ | 21,470,331 | | $ | (555,853) |
| (2.6) | % |
| | |
| ||||
| | Years Ended June 30, |
| ||||
| | 2022 |
| 2021 |
| % Change * |
|
As a percentage of revenue: | |
|
|
|
|
| |
Platforms | | 13.8 | % | 17.8 | % | (4.0) | % |
Transactions | | 76.4 | % | 77.2 | % | (0.8) | % |
Total | | 63.5 | % | 67.6 | % | (4.1) | % |
* | The difference between current and prior period cost of revenue as a percentage of revenue |
Total cost of revenue as a percentage of revenue decreased 4.1%, from 67.6% for the previous year to 63.5%, for the year ended June 30, 2022.
|
| Impact as percentage |
| | ||
Category | | of revenue | | Key Drivers | ||
Platforms |
| ↓ |
| 4.0 | % | Decreased primarily due to proportionally lower personnel costs. |
Transactions |
| ↓ |
| 0.8 | % | Decreased primarily due to lower copyright expenses and proportionally lower personnel costs. |
27
Gross Profit
| | Years Ended June 30, |
| |||||||||
| | 2022 |
| 2021 |
| $ Change |
| % Change |
| |||
Gross Profit: | | |
|
| |
|
| |
|
|
| |
Platforms | | $ | 5,851,183 | | $ | 4,223,595 | | $ | 1,627,588 |
| 38.5 | % |
Transactions | |
| 6,168,491 | |
| 6,062,419 | |
| 106,072 |
| 1.7 | % |
Total gross profit | | $ | 12,019,674 | | $ | 10,286,014 | | $ | 1,733,660 |
| 16.9 | % |
| | | | | | |
|
| | Years Ended June 30, |
| ||||
| | 2022 |
| 2021 |
| % Change* |
|
As a percentage of revenue: | |
|
|
|
|
| |
Platforms | | 86.2 | % | 82.2 | % | 4.0 | % |
Transactions | | 23.6 | % | 22.8 | % | 0.8 | % |
Total | | 36.5 | % | 32.4 | % | 4.1 | % |
* | The difference between current and prior period gross profit as a percentage of revenue |
Operating Expenses
| | Years Ended June 30, |
| |||||||||
| | 2022 |
| 2021 |
| $ Change |
| % Change |
| |||
Operating Expenses: | | |
|
| |
|
| |
|
|
| |
Sales and marketing | | $ | 2,276,172 | | $ | 2,073,878 | | $ | 202,294 |
| 9.8 | % |
Technology and product development | |
| 3,711,085 | |
| 2,644,274 | |
| 1,066,811 |
| 40.3 | % |
General and administrative | |
| 6,406,400 | |
| 4,867,659 | |
| 1,538,741 |
| 31.6 | % |
Depreciation and amortization | |
| 17,651 | |
| 11,522 | |
| 6,129 |
| 53.2 | % |
Stock-based compensation expense | |
| 1,096,384 | |
| 1,007,673 | |
| 88,711 |
| 8.8 | % |
Foreign currency transaction loss (gain) | |
| 143,898 | |
| (35,960) | |
| 179,858 |
| 500.2 | % |
Total operating expenses | | $ | 13,651,590 | | $ | 10,569,046 | | $ | 3,082,544 |
| 29.2 | % |
Category |
| Impact | Key Drivers | |||
Sales and marketing |
| ↑ | | $ | 202,294 | 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 |
| ↑ | | $ | 1,066,811 | Increased due to greater consulting and recruiting expenses and software development personnel costs. |
General and administrative |
| ↑ | | $ | 1,538,741 | 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, 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)
| | Year Ended June 30, |
| |||||||||
| | 2022 |
| 2021 |
| $ Change |
| % Change |
| |||
Net Income (Loss): | | |
|
| |
|
| |
|
|
| |
Net loss: | | $ | (1,632,384) | | $ | (285,089) | | $ | (1,347,295) |
| (472.6) | % |
28
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
| | Year Ended June 30, | ||||
| | 2022 | | 2021 | ||
Consolidated Statements of Cash Flow Data: | | | |
| | |
Net cash provided by (used in) operating activities | | $ | (417,200) | | $ | 1,868,406 |
Net cash used in investing activities | |
| (44,288) | |
| (19,854) |
Net cash provided by (used in) financing activities | |
| 63,270 | |
| (159,974) |
| | | | | | |
Effect of exchange rate changes | |
| (2,944) | |
| 4,203 |
Net increase (decrease) in cash and cash equivalents | |
| (401,162) | |
| 1,692,781 |
Cash and cash equivalents, beginning of period | |
| 11,004,337 | |
| 9,311,556 |
Cash and cash equivalents, end of period | | $ | 10,603,175 | | $ | 11,004,337 |
Liquidity
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.
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.
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.
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
29
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 5.75% as of June 30, 2022. The line of credit was secured by our consolidated assets.
There were no outstanding borrowings under the line as of June 30, 2022 and June 30, 2021, respectively. As of June 30, 2022, there was approximately $2,500,000 of available credit.
Non-GAAP Measure – Adjusted EBITDA
In addition to our GAAP results, we present Adjusted EBITDA as a supplemental measure of our performance. However, Adjusted EBITDA is not a recognized measurement under GAAP and should not be considered as an alternative to net income, income from operations or any other performance measure derived in accordance with GAAP or as an alternative to cash flow from operating activities as a measure of liquidity. We define Adjusted EBITDA as net income (loss), plus interest expense, other income (expense), foreign currency transaction loss, provision for income taxes, depreciation and amortization, stock-based compensation, income from discontinued operations and gain on sale of discontinued operations. Management considers our core operating performance to be that which our managers can affect in any particular period through their management of the resources that affect our underlying revenue and profit generating operations that period. Non-GAAP adjustments to our results prepared in accordance with GAAP are itemized below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.
Set forth below is a reconciliation of Adjusted EBITDA to net income (loss) for the year ended June 30, 2022 and 2021:
| | | | | | | | | |
| | Years Ended June 30, | |||||||
| | 2022 |
| 2021 |
| $ Change | |||
Net income (loss) | | $ | (1,632,384) | | $ | (285,089) | | $ | (1,347,295) |
Add (deduct): | |
| | |
|
| |
|
|
Other (income) expense | |
| (7,154) | |
| (1,147) | |
| (6,007) |
Foreign currency transaction loss (gain) | |
| 143,898 | |
| (35,960) | |
| 179,858 |
Provision for income taxes | |
| 7,622 | |
| 3,204 | |
| 4,418 |
Depreciation and amortization | |
| 17,651 | |
| 11,522 | |
| 6,129 |
Stock-based compensation | |
| 1,096,384 | |
| 1,007,673 | |
| 88,711 |
Adjusted EBITDA | | $ | (373,983) | | $ | 700,203 | | $ | (1,074,186) |
We present Adjusted EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Adjusted EBITDA in developing our internal budgets, forecasts and strategic plan; in analyzing the effectiveness of our business strategies in evaluating potential acquisitions; and in making compensation decisions and in communications with our board of directors concerning our financial performance. Adjusted EBITDA has limitations as an analytical tool, which includes, among others, the following:
| ● | Adjusted EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments; |
| ● | Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; |
| ● | Adjusted EBITDA does not reflect interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; and |
30
| ● | although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements. |
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Recently Issued Accounting Pronouncements
For information about recently issued accounting standards, refer to Note 2 to our Consolidated Financial Statements appearing elsewhere in this report.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not required.
31
Item 8. Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors
Research Solutions, Inc. and Subsidiaries
Henderson, Nevada
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Research Solutions, Inc. 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.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. 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 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
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 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
32
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.
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:
oObtained evidence of a contract with the customer;
o | 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; |
o | Evaluated the Company’s application of their accounting policies to determine the timing and amount recognized; and |
o | 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 have served as the Company’s auditor since 2006.
/s/
September 23, 2022
33
Research Solutions, Inc. and Subsidiaries
Consolidated Balance Sheets
| | | | | | |
| | June 30, |
| June 30, | ||
| | 2022 | | 2021 | ||
Assets | |
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Current assets: | | |
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Cash and cash equivalents | | $ | | | $ | |
Accounts receivable, net of allowance of $ | |
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Prepaid expenses and other current assets | |
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Prepaid royalties | |
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Total current assets | |
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Other assets: | |
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Property and equipment, net of accumulated depreciation of $ | |
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Deposits and other assets | |
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Total assets | | $ | | | $ | |
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Liabilities and Stockholders’ Equity | |
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Current liabilities: | |
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Accounts payable and accrued expenses | | $ | | | $ | |
Deferred revenue | |
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Total current liabilities | |
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Commitments and contingencies | |
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Stockholders’ equity: | |
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Preferred stock; $ | |
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Common stock; $ | |
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Additional paid-in capital | |
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Accumulated deficit | |
| ( | |
| ( |
Accumulated other comprehensive loss | |
| ( | |
| ( |
Total stockholders’ equity | |
| | |
| |
Total liabilities and stockholders’ equity | | $ | | | $ | |
See notes to consolidated financial statements
34
Research Solutions, Inc. and Subsidiaries
Consolidated Statements of Operations and Other Comprehensive Loss
| | Years Ended | ||||
| | June 30, | ||||
| | 2022 |
| 2021 | ||
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Revenue: | | |
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Platforms | | $ | | | $ | |
Transactions | |
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Total revenue | |
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Cost of revenue: | |
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Platforms | |
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Transactions | |
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Total cost of revenue | |
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Gross profit | |
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Operating expenses: | |
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Selling, general and administrative | |
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Depreciation and amortization | |
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Total operating expenses | |
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Loss from operations | |
| ( | |
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Other income | |
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Loss from operations before provision for income taxes | |
| ( | |
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Provision for income taxes | |
| ( | |
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Net loss | |
| ( | |
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Other comprehensive income (loss): | |
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Foreign currency translation | |
| ( | |
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Comprehensive loss | | $ | ( | | $ | ( |
| | | | | | |
Loss per common share: | | | | | | |
Loss per share, basic and diluted | | $ | (0.06) | | $ | (0.01) |
Weighted average common shares outstanding, basic and diluted | | | 26,422,295 | | | 26,008,368 |
See notes to consolidated financial statements
35
Research Solutions, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
For the Years Ended June 30, 2022 and 2021
| | | | | | | Additional | | | | | Other | | Total | |||
| | Common Stock | | Paid-in | | Accumulated | | Comprehensive | | Stockholders’ | |||||||
|
| Shares |
| Amount |
| Capital |
| Deficit |
| Loss |
| Equity | |||||
| | | | | | | | | | | | | | | | | |
Balance, July 1, 2020 |
| |
| $ | |
| $ | |
| $ | ( |
| $ | ( |
| $ | |
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Fair value of vested stock options |
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Fair value of vested restricted common stock |
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Repurchase of common stock | | ( |
| | ( |
| | ( |
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| | | | | ( |
| | | | | | | | | | | | | | | | | |
Repurchase of stock options and warrants | | — | | | — | | | (308,313) | | | — | | | — | | | (308,313) |
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Common stock issued upon exercise of stock options | | |
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Common stock issued upon exercise of warrants | | | | | | | | | | | | | | | | | |
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Net loss |
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Foreign currency translation |
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Balance, June 30, 2021 |
| |
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Fair value of vested stock options |
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Fair value of vested restricted common stock |
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Repurchase of common stock |
| ( |
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Common stock issued upon exercise of stock options |
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Common stock issued upon exercise of warrants | | | | | | | | | | | | | | | | | |
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Net loss |
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Foreign currency translation |
| |
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| | ( |
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| | | | | | | | | | | | | | | | | |
Balance, June 30, 2022 |
| | | $ | | | $ | | | $ | ( | | $ | ( | | $ | |
See notes to consolidated financial statements
36
Research Solutions, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
| | Years Ended | ||||
| | June 30, | ||||
| | 2022 |
| 2021 | ||
| | | | | | |
Cash flow from operating activities: | | |
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Net loss | | $ | ( | | $ | ( |
Adjustment to reconcile net loss to net cash provided by (used in) operating activities: | |
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Depreciation and amortization | |
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Amortization of lease right | |
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Fair value of vested stock options | |
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Fair value of vested restricted common stock | |
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Changes in operating assets and liabilities: | |
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Accounts receivable | |
| ( | |
| ( |
Prepaid expenses and other current assets | |
| ( | |
| ( |
Prepaid royalties | |
| | |
| ( |
Deposits and other assets | |
| | |
| |
Accounts payable and accrued expenses | |
| ( | |
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Deferred revenue | |
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Lease liability | |
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| ( |
Net cash provided by (used in) operating activities | |
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Cash flow from investing activities: | |
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Purchase of property and equipment | |
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Net cash used in investing activities | |
| ( | |
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Cash flow from financing activities: | |
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Proceeds from the exercise of stock options | | | | | | |
Proceeds from the exercise of warrants | | | | | | |
Common stock repurchase | | | ( | | | ( |
Repurchase of stock options and warrants | | | | | | ( |
Net cash provided by (used in) financing activities | |
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| ( |
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Effect of exchange rate changes | |
| ( | |
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Net increase (decrease) in cash and cash equivalents | |
| ( | |
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Cash and cash equivalents, beginning of period | |
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Cash and cash equivalents, end of period | | $ | | | $ | |
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Supplemental disclosures of cash flow information: | |
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Cash paid for income taxes | | $ | | | $ | |
See notes to consolidated financial statements
37
RESEARCH SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended June 30, 2022 and 2021
Note 1. Organization, Nature of Business and Basis of Presentation
Organization
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
Nature of Business
We provide
Platforms
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.
Our Platform is 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’s efficiencies in scalability, stability and development costs to fuel rapid innovation and competitive advantage.
Transactions
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. 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. 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
38
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. We have arrangements with hundreds of content publishers that allow us to distribute their content. 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.
Principles of Consolidation
The accompanying financial statements are consolidated and include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.
Note 2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with Generally Accepted Accounting Principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from these estimates.
These estimates and assumptions include estimates for reserves of uncollectible accounts, accruals for potential liabilities, assumptions made in valuing equity instruments issued for services or acquisitions, and realization of deferred tax assets.
Cash and cash equivalents
For purposes of the statements of cash flows, the Company defines cash equivalents as all highly liquid debt instruments purchased with an original maturity of three months or less. In all periods presented, cash equivalents consist primarily of money market funds.
Fair value of financial instruments
Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, fair value is defined as the price at which an asset could be exchanged or a liability transferred in a transaction between knowledgeable, willing parties in the principal or most advantageous market for the asset or liability. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or parameters are not available, valuation models are applied. A fair value hierarchy prioritizes the inputs used in measuring fair value into three broad levels as follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs, other than the quoted prices in active markets, are observable either directly or indirectly.
Level 3 – Unobservable inputs based on the Company’s assumptions.
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, 2022 or 2021 under these requirements.
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
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
39
past due trade accounts receivable outstanding. The Company established an allowance for doubtful accounts of $
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist of cash and cash equivalents and accounts receivable. The Company places its cash with high quality financial institutions and at times may exceed the FDIC $
Cash denominated in Euros and British Pounds with an aggregate US Dollar equivalent of $
The Company has
The following table summarizes accounts receivable concentrations:
| | As of |
| |||
| | June 30, | | | June 30, |
|
| | 2022 |
|
| 2021 | |
Customer A | | * | | | | % |
* Less than 10%
The following table summarizes our content costs from our vendors:
| | Year Ended |
| | |||
| | June 30, |
| | |||
| | 2022 |
|
| 2021 | | |
Vendor A | | | % | | | % | |
Vendor B | | | % | | | % | |
Property and equipment
Property and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful lives of
Management assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If there is indication of impairment, management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value. For the years ended June 30, 2022 and 2021, the Company did not recognize any impairments for its property and equipment.
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.
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
40
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”).
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:
| ● | identify the contract with a customer; |
| ● | identify the performance obligations in the contract; |
| ● | determine the transaction price; |
| ● | allocate the transaction price to performance obligations in the contract; and |
| ● | recognize revenue as the performance obligation is satisfied. |
Platforms
We charge a subscription fee that allows customers to access and utilize certain premium features of our Platform. Revenue is recognized ratably over the term of the subscription agreement, which is typically one year, provided all other revenue recognition criteria have been met. Billings or payments received in advance of revenue recognition are recorded as deferred revenue.
Transactions
We charge a transactional service fee for the electronic delivery of single articles, and a corresponding copyright fee for the permitted use of the content. We recognize revenue from single article delivery services upon delivery to the customer provided all other revenue recognition criteria have been met.
Revenue by Geographical Region
The following table summarizes revenue by geographical region:
| | Year Ended | | |||||||||
| | June 30, | | |||||||||
| | 2022 |
| | 2021 | | ||||||
United States | | $ | |
| | % | | $ | | | | % |
Europe | |
| |
| | % | |
| |
| | % |
Rest of World | |
| |
| | % | |
| |
| | % |
Total | | $ | |
| | % | | $ | |
| | % |
41
Accounts Receivable by Geographical Region
The following table summarizes accounts receivable by geographical region:
| | Year Ended |
| |||||||||
| | June 30, |
| |||||||||
| | 2022 |
| | 2021 | | ||||||
United States |
| $ | |
| | % | | $ | | | | % |
Europe | |
| |
| | % | |
| |
| | % |
Rest of World | |
| |
| | % | |
| |
| | % |
Total | | $ | |
| | % | | $ | |
| | % |
Cost of Revenue
Platforms
Cost of Platform revenue consists primarily of personnel costs of our operations team, and to a lesser extent managed hosting providers and other third-party service and data providers.
Transactions
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.
Stock-Based Compensation
The Company periodically issues stock options, warrants and restricted stock to employees and non-employees for services, in capital raising transactions, and for financing costs. The Company accounts 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. The Company estimates 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 the Company’s Statements of Operations. The Company estimates the fair value of restricted stock awards to employees and directors using the market price of the Company’s 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 the Company’s 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. Any excess of the repurchase price over the fair value of the instruments repurchased shall be recognized as additional compensation cost.
Foreign Currency
The accompanying consolidated financial statements are presented in United States dollars, the functional currency of the Company. Capital accounts of foreign subsidiaries are translated into US Dollars from foreign currency at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rate as of the balance sheet date. 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 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.
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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 $
The following table summarizes the exchange rates used:
|
| Year Ended | ||
|
| June 30, | ||
|
| 2022 |
| 2021 |
Period end Euro : US Dollar exchange rate | | | | |
Average period Euro : US Dollar exchange rate | | |
| |
| | | | |
Period end GBP : US Dollar exchange rate | | 1.21 | | 1.38 |
Average period GBP : US Dollar exchange rate | | 1.34 |
| 1.34 |
| | |
| |
Period end Mexican Peso : US Dollar exchange rate | | |
| |
Average period Mexican Peso : US Dollar exchange rate | | |
| |
Net Income (Loss) Per Share
Basic net income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period, excluding shares of unvested restricted common stock. 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. Shares of restricted stock are included in the diluted weighted average number of common shares outstanding from the date they are granted. Potential common shares are excluded from the computation when their effect is antidilutive. At June 30, 2022 potentially dilutive securities include options to acquire
Basic and diluted net loss per common share is the same for the years ended June 30, 2022 and 2021 because all stock options, warrants, and unvested restricted common stock are anti-dilutive.
Income taxes
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. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
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
43
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.
Note 3. Property and Equipment
Property and equipment consists of the following as of June 30, 2022 and 2021:
|
| June 30, |
| June 30, | ||
| | 2022 | | 2021 | ||
Computer equipment | | $ | | | $ | |
Software | |
| | |
| |
Furniture and fixtures | |
| | |
| |
Total | |
| | |
| |
Less accumulated depreciation | |
| ( | |
| ( |
Net, Property and equipment | | $ | | | $ | |
Depreciation expense for the years ended June 30, 2022 and 2021 was $
Note 4. Line of Credit
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 $
There were
Note 5. Stockholders’ Equity
Stock Options
In December 2007, we established the 2007 Equity Compensation Plan (the “2007 Plan”) and in November 2017 we established the 2017 Omnibus Incentive Plan (the “2017 Plan”), collectively (the “Plans”). The Plans were approved by our board of directors and stockholders. The purpose of the Plans is to grant stock and options to purchase our common stock, and other incentive awards, to our employees, directors and key consultants. On November 10, 2016, the maximum number of shares of common stock that may be issued pursuant to awards granted under the 2007 Plan increased from
44
were cancelled or forfeited prior to November 21, 2017 became available for grant under the 2007 Plan. As of June 30, 2022, there were
The majority of awards issued under the Plan vest immediately or over
The following table summarizes vested and unvested stock option activity:
| | All Options | | Vested Options | | Unvested Options | |||||||||
|
| |
| Weighted |
| |
| Weighted |
| |
| Weighted | |||
| | | | Average | | | | Average | | | | Average | |||
| | | | Exercise | | | | Exercise | | | | Exercise | |||
| | Shares | | Price | | Shares | | Price | | Shares | | Price | |||
Outstanding at July 1, 2020 |
| |
| $ | |
| |
| $ | |
| |
| $ | |
Granted |
| |
| | |
| |
| | |
| |
| | |
Options vesting |
| |
| | |
| |
| | |
| ( |
| | |
Exercised |
| ( |
| | |
| ( |
| | |
| |
| | |
Forfeited | | (126,250) |
| | 2.59 |
| (102,500) |
| | 2.72 |
| (23,750) |
| | 1.99 |
Repurchased |
| ( |
| | |
| ( |
| | |
| |
| | |
Outstanding at June 30, 2021 |
| |
| $ | |
| |
| $ | |
| |
| $ | |
Granted |
| |
| | |
| |
| | |
| |
| | |
Options vesting |
| |
| | |
| |
| | |
| ( |
| | |
Exercised |
| ( |
| | |
| ( |
| | |
| |
| | |
Forfeited |
| ( |
| | |
| ( |
| | |
| |
| | |
Repurchased |
| |
| | |
| |
| | |
| |
| | |
Outstanding at June 30, 2022 |
| | | $ | |
| | | $ | |
| | | $ | |
The following table presents the assumptions used to estimate the fair values based upon a Black-Scholes option pricing model of the stock options granted during the years ended June 30, 2022 and 2021.
| | Years Ended |
| ||
| | June 30, | | ||
| | 2022 |
| 2021 | |
Expected dividend yield | | | % | | % |
Risk-free interest rate | | % | % | ||
Expected life (in years) | |
| | ||
Expected volatility | | % | % | ||
The weighted average remaining contractual life of all options outstanding as of June 30, 2022 was
During the year ended June 30, 2022, the Company granted
45
During the year ended June 30, 2021, the Company granted
On March 31, 2021 the Company repurchased options underlying
Additional information regarding stock options outstanding and exercisable as of June 30, 2022 is as follows:
| Option |
| |
| Remaining |
| |
| Exercise | | Options | | Contractual | | Options |
| Price | | Outstanding | | Life (in years) | | Exercisable |
$ | |
| |
|
| | |
| |
| |
|
| | |
| |
| |
|
| | |
| |
| |
|
| | |
| |
| |
|
| | |
| |
| |
|
| | |
| |
| |
|
| | |
| |
| |
|
| | |
| |
| |
|
| | |
| |
| |
|
| | |
| |
| |
|
| | |
| |
| |
|
| | |
| |
| |
|
| | |
| |
| |
|
| | |
| |
| |
|
| | |
| |
| |
|
| | |
| |
| |
|
| | |
| 2.10 | | 238,767 | | 10.00 | | 238,767 |
| | | | | | | |
| | | | | | | |
| 2.19 | | 5,000 | | 10.00 | | — |
| |
| |
|
| | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Total | | | | |
46
Warrants
The following table summarizes warrant activity:
|
| |
| Weighted | |
| | | | Average | |
| | Number of | | Exercise | |
| | Warrants | | Price | |
Outstanding, June 30, 2020 |
| | | $ | |
Granted |
| — | |
| — |
Exercised |
| ( | |
| |
Repurchased | | (100,000) | |
| 1.25 |
Expired/Cancelled |
| ( | |
| |
Outstanding, June 30, 2021 |
| | | $ | |
Granted |
| — | |
| — |
Exercised |
| ( | |
| |
Repurchased |
| — | |
| — |
Expired/Cancelled |
| — | |
| — |
Outstanding, June 30, 2022 |
| — | | $ | — |
Exercisable, June 30, 2021 |
| | | $ | |
Exercisable, June 30, 2022 |
| — | | $ | — |
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 $
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.
Restricted Common Stock
Prior to July 1, 2020, the Company issued
During the year ended June 30, 2021, the Company issued an additional
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.
The total fair value of restricted common stock vested during the year ended June 30, 2022 and 2021 was $
47
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.
The following table summarizes restricted common stock activity:
|
| |
| | |
| Weighted | |
| | | | | | | Average | |
| | Number of | | | | | Grant Date | |
| | Shares | | Fair Value | | Fair Value | ||
Non-vested, June 30, 2020 |
| | | | | | $ | |
Granted |
| | |
| | |
| |
Vested |
| ( | |
| ( | |
| |
Forfeited |
| — | |
| — | |
| — |
Non-vested, June 30, 2021 |
| | | $ | | | $ | |
Granted |
| | |
| | |
| |
Vested |
| ( | |
| ( | |
| |
Forfeited |
| — | |
| — | |
| — |
Non-vested, June 30, 2022 |
| | | $ | | | $ | |
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 $
During the years ended June 30, 2022 and 2021, we repurchased
Shares repurchased are retired and deducted from common stock for par value and from additional paid in capital for the excess over par value. Direct costs incurred to acquire the shares are included in the total cost of the shares.
48
The following table summarizes repurchases of our common stock on a monthly basis:
|
| |
| | |
| Total Number of Shares |
| Approximate Dollar Value | |
| | Total Number | | Average | | Purchased as Part of | | of Shares that May Yet Be | ||
| | of Shares | | Price Paid | | Publicly Announced | | Purchased Under the | ||
Period | | Purchased1 | | per Share | | Plans or Programs | | Plans or Programs | ||
September 2020 |
| | | $ | |
| |
| $ | |
December 2020 |
| | | $ | |
| |
| | |
March 2021 |
| | | $ | |
| |
| | |
June 2021 |
| | | $ | |
| |
| | |
Year ended June 30, 2021 |
| | | $ | |
| |
| $ | |
|
| | |
| |
|
|
| |
|
September 2021 |
| | | $ | |
| |
| $ | |
December 2021 |
| | | $ | |
| |
| | |
March 2022 |
| | | $ | |
| | | | |
June 2022 |
| | | $ | |
| | | | |
Year ended June 30, 2022 |
| | | $ | |
| | | $ | |
| 1 | Consists of shares of common stock purchased from employees to satisfy tax obligations in connection with the vesting of stock incentive awards. |
Note 6. Contingencies and Commitments
COVID-19
The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on the Company’s business is highly uncertain and difficult to predict, as the responses that the Company, other businesses and governments are taking continue to evolve. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a local and/or global economic recession. Policymakers around the globe have responded with fiscal policy actions to support the healthcare industry and economy as a whole. The magnitude and overall effectiveness of these actions remain uncertain.
To date, we have not experienced any significant changes in our business that would have a significant negative impact on our consolidated statements of operations or cash flows.
The severity of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company’s customers, service providers and suppliers, all of which are uncertain and cannot be predicted. As of the date of issuance of Company’s financial statements, the extent to which the COVID-19 pandemic may in the future materially impact the Company’s financial condition, liquidity or results of operations is uncertain.
Legal Proceedings
The Company is involved in legal proceedings in the ordinary course of its business. Although management of the Company cannot predict the ultimate outcome of these legal proceedings with certainty, it believes that the ultimate resolution of the Company’s legal proceedings, including any amounts it may be required to pay, will not have a material effect on the Company’s consolidated financial statements.
49
Note 7. Income Taxes
The provision for income taxes consists of the following for the years ended June 30, 2022 and 2021:
| | Years Ended | ||||
| | June 30, | ||||
|
| 2022 |
| 2021 | ||
Current |
| |
|
| |
|
Federal | | $ | | | $ | |
State | |
| | |
| |
Foreign (Mexico) | |
| | |
| |
Deferred | |
| | |
| |
Federal | |
| | |
| |
Foreign | |
| | |
| |
State | |
| | |
| |
Provision for income tax expense | | $ | | | $ | |
During the year ended June 30, 2022, the Company recorded a provision for income tax expense of $
The reconciliation of the effective income tax rate to the federal statutory rate is as follows:
| | Years Ended |
| ||
| | June 30, | | ||
|
| 2022 |
| 2021 |
|
Federal income tax rate |
| | % | | % |
State tax, net of federal benefit |
| | % | | % |
Permanent differences |
| | % | | % |
Change in valuation allowance |
| ( | % | ( | % |
Effective income tax rate |
| ( | % | ( | % |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities at June 30, 2022 and 2021 are as follows:
|
| June 30, |
| June 30, | ||
| | 2022 | | 2021 | ||
Deferred tax assets: |
| |
|
| |
|
Federal net operating loss carryforward | | $ | | | $ | |
State net operating loss carryforward | |
| | |
| |
Intangibles amortization | |
| | |
| |
Stock based compensation | |
| | |
| |
Other | |
| | |
| |
Total deferred tax assets | |
| | |
| |
Deferred tax liability: | |
| | |
| |
Fixed asset depreciation | |
| |
| ||
Net deferred tax assets | |
| | |
| |
Less valuation allowance | |
| ( | |
| ( |
| | $ | | | $ | |
The Company has provided a valuation allowance on the deferred tax assets at June 30, 2022 and 2021 to reduce such asset to
50
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, 2022 was an increase of $
At June 30, 2022 and 2021, the Company had federal net operating loss (“NOL”) carryforwards of approximately $
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. Under this guidance, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. This guidance also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. At the date of adoption, and as of June 30, 2022 and 2021, the Company did not have a liability for unrecognized tax benefits, and no adjustment was required at adoption.
The Company’s policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of June 30, 2022 and 2021, the Company has
Company is subject to taxation in the United States and various states and Mexico. The Company is subject to United States federal or state income tax examinations by tax authorities for fiscal years after 2017.
Note 8. Subsequent Events
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
51
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
There were no changes in or disagreements with our accountants on accounting and financial disclosure during the last two fiscal years.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K. For purposes of this section, the term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2022, the end of the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:
| (i) | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; |
| (ii) | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and |
| (iii) | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations
52
are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
Management evaluated the effectiveness of our internal control over financial reporting as of June 30, 2022, using the framework set forth in the report of the Treadway Commission’s Committee of Sponsoring Organizations (“COSO”), “2013 Internal Control–- Integrated Framework.” Based upon that evaluation, management believes our internal control over financial reporting was effective as of June 30, 2022.
Inherent Limitations on the Effectiveness of Controls
Management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in a cost-effective control system, no evaluation of internal control over financial reporting can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, have been or will be detected.
These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
Changes in Internal Controls Over Financial Reporting
Management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, whether any changes in our internal control over financial reporting that occurred during our last fiscal year have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on the evaluation we conducted, management has concluded that no such changes have occurred.
Item 9B. Other Information
On August 19, 2022, the Compensation Committee of the Company’s Board of Directors approved the extension of the term of the employment agreements with each of Messrs. Ahlberg and Hunt effective June 30, 2022, for an additional term of one year ending June 30, 2023 for Mr. Ahlberg, and for an indefinite period for Mr. Hunt, subject to the termination provisions of his employment agreement. The Company entered into amendments to the employment agreements and Consulting Agreement, as applicable, for each of the foregoing officers on September 21, 2022 for Mr. Ahlberg and on September 22, 2022 for Mr. Hunt.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
53
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The following table sets forth the name, age, position, and date of appointment of each of our directors and executive officers as of September 16, 2022:
Name |
| Age |
| Position |
| Date of Appointment |
Peter Victor Derycz |
| 60 |
| Executive Chairman |
| March 29, 2021 |
Roy W. Olivier | | 64 | | President and Chief Executive Officer, and Director | | March 29, 2021 |
William Nurthen |
| 49 |
| Chief Financial Officer and Secretary |
| October 4, 2021 |
Scott Ahlberg |
| 59 |
| Chief Operating Officer |
| July 1, 2007 |
Shane Hunt (5) |
| 45 |
| Chief Revenue Officer |
| May 18, 2022 |
John Regazzi (1)(3) | | 73 | | Lead Independent Director | | June 22, 2015 |
Barbara J. Cooperman (1) |
| 67 |
| Director |
| February 8, 2022 |
Gen. Merrill McPeak (1)(4) |
| 86 |
| Director |
| November 5, 2010 |
Eugene Robin (1)(2) |
| 39 |
| Director |
| March 31, 2021 |
| (1) | Member of Audit Committee, Compensation Committee, and Nominating and Governance Committee |
| (2) | Chairman of the Compensation Committee |
| (3) | Chairman of the Audit Committee |
| (4) | Chairman of the Nominating and Governance Committee |
| (5) | Previously served as Chief Customer Success Officer appointed July 1, 2018 |
Peter Victor Derycz – Executive Chairman
Mr. Derycz founded Reprints Desk and was named Executive Chairman on March 29, 2021. Mr. Derycz served as Chief Executive Officer and President from January 6, 2006 through March 28, 2021, and as a member of the Company's Board of Directors since January 6, 2016, including Chairman of the Board from January 6, 2006 through August 19, 2015. Mr. Derycz was a founder of Infotrieve, Inc. in 1989 and served as its President from February 2003 until September 2003. He served as the Chief Executive Officer of Puerto Luperon, Ltd. (Bahamas), a real estate development company, from January 2004 until December 2005. He served on the International Advisory Board of the San Jose State University School of Information, and served as a member of the board of directors of Insignia Systems, Inc. (Nasdaq:ISIG), a consumer products advertising company from 2006 to 2014. Mr. Derycz received a B.A. in Psychology from the University of California at Los Angeles. Our board of directors believes that Mr. Derycz’ familiarity with our day-to-day operations, his strategic vision for our business and his past leadership and management experience make him uniquely qualified to serve as a director.
Roy W. Olivier – Chief Executive Officer and President, and Director
Mr. Olivier was named Interim Chief Executive Officer and President on March 29, 2021 and was formally appointed as Chief Executive Officer and President on October 4, 2021. Mr. Olivier has been a member of the Company's Board of Directors since January 2018. Before joining Research Solutions/Reprints Desk, Mr. Olivier served as CEO of ARI Network Services, a leading provider of SaaS tools and marketing services, growing the business from less than 80 employees to over 1,200 and increasing revenues from under $15 million to over $100 million through accelerated organic growth and acquisitions. Earlier in his career, he served as VP of Sales and Marketing for ProQuest Media Solutions (now Snap-on Inc.) and held executive and senior management positions at multiple companies across the telecommunications and computer industries including Multicom Publishing, Tandy Corporation, BusinessLand and PacTel.
54
William Nurthen – Chief Financial Officer and Secretary
Mr. Nurthen was appointed as Chief Financial Officer and Secretary on October 4, 2021. He brings more than twenty years of experience which includes financial leadership roles at both publicly traded and private companies across multiple industries. Prior to joining Research Solutions, Mr. Nurthen served in Chief Financial Officer roles for Endeavor Business Media, a B2B media publisher, and ARI Network Services, Inc. (formerly on the Nasdaq), a SaaS marketing company. Mr. Nurthen has also held prior CFO roles in investment banking, biotechnology, and information technology. He holds a Master of Business Administration from the Kellogg School of Management at Northwestern University and a Bachelor of Business Administration from the University of Notre Dame.
Scott Ahlberg – Chief Operating Officer
Mr. Ahlberg has effectively served as the Chief Operating Officer since July 1, 2007, and has many years of experience in content and startup businesses. Mr. Ahlberg started with Dynamic Information (EbscoDoc) in the 1980s, then went on to lead Sales and Marketing at Infotrieve, Inc. After leaving Infotrieve in 2005 Mr. Ahlberg provided consulting services to ventures in professional networking and medical podcasting. He joined Reprints Desk in 2006. His areas of expertise include strategic planning, operational innovation, copyright and content licensing, and quality management. Mr. Ahlberg has degrees from Stanford University (B.A., 1984) and the University of London (M.A., 1990).
Shane Hunt – Chief Revenue Officer
Mr. Hunt provides leadership resulting in the acquisition and development of healthy long-term relationships with the Company’s cloud-based software customers, and ensures the daily satisfaction of users across R&D-driven organizations in life sciences, technology and academia worldwide. Mr. Hunt has nearly 20 years of industry experience and was co-founder of 4 Research Solutions Inc., a boutique information industry start-up that the Company acquired in 2012. Mr. Hunt attended California State University, Chico for his undergraduate and graduate studies in Psychology.
John Regazzi – Lead Independent Director
Mr. Regazzi was appointed to our board of directors on June 22, 2015, and served as Chairman of the Board from August 20, 2015 through March 29, 2021, when he was designated Lead Independent Director. Mr. Regazzi is an information services and IT industry innovator, with more than four decades of experience. He is currently managing director of Akoya Capital Partners, a sector-focused private investment firm, where for the last few years he has served as its professional information services sector leader. He has also been a professor at the Long Island University’s College of Education, Information and Technology since 2005, and has served as dean of LIU’s College of Information and Computer Science. Before joining Akoya Capital Partners, Mr. Regazzi served for several years as CEO of Elsevier Inc. and managing director of the NYSE-listed Reed Elsevier, the world’s largest publisher and information services company for journal and related scientific, technical and medical content. At Reed Elsevier, he oversaw its expansive electronic publishing portfolio, with a program staff of 3,000 and revenues exceeding $1 billion. He was previously CEO of Engineering Information, which he helped turn around before being acquired by Reed Elsevier. As a recognized industry thought leader, Mr. Regazzi has designed, launched, and managed some of the most innovative and well-known information services in the professional communities, including the Engineering Village, Science Direct, Scirus and Scopus, as well as numerous other electronic information services dating back to the early days of the online and CD-ROM industries. Mr. Regazzi has served on a variety of corporate and industry boards, including the British Standards Institute Group and the American Institute of Physics, and he recently was appointed and serves as chairman of the board of National Technical Information Service, a division of the U.S. Department of Commerce. He currently serves as chairman of DiSTI and Convergered Security Solutions (CSS), both Akoya portfolio companies. Mr. Regazzi earned his B.S. from St. Johns University, M.A. from University of Iowa, M.S. from Columbia University, and Ph.D. in Information Science from Rutgers University. Our board of directors concluded that Mr. Regazzi should serve as a director in light of his extensive experience in the information services industry.
55
Barbara J. Cooperman – Director
Ms. Cooperman was appointed to our board of directors on February 8, 2022. Ms. Cooperman is an accomplished executive with general management background, P&L responsibility, and world-class marketing specialty in both B2B and B2C sectors. She has more than 20 years’ governance experience on boards including early-stage and privately-held companies, nonprofits, industry associations, as well as executive leadership teams. She is known for being strategic and is a highly regarded leader skilled at developing vision and guiding organizations through growth stages and periods of reinvention. With 20+ years in the C-suite, Ms. Cooperman has significant experience advising the board on a wide range of issues such as unlocking brand value, strategic plans, M&A, and corporate social responsibility. Most recently, Ms. Cooperman was the global CMO at Kroll, a leader in cyber security and risk consulting, and Kroll Ontrack, a leader in ediscovery and data recovery. Joining as the firm came out of bankruptcy, she restored worldwide gold standard brand reputations, created go-to-market strategy for the high-growth cyber security practice, and managed corporate and crisis communications through the successful sale of both companies and several high-stakes matters. Kroll Ontrack was sold in 2016 and Kroll in 2018, both at highly attractive valuations. Prior to her role as Chief Marketing Officer at Kroll, Inc., Ms. Cooperman worked for 12 years at Reed Elsevier, where she served as the Global Chief Marketing Officer for LexisNexis and Elsevier.
General Merrill McPeak – Director
Gen. McPeak was appointed to our board of directors on November 5, 2010. He is President of McPeak and Associates, a company he founded in 1995. From 1990 until his retirement from active military service in late-1994, he was chief of staff of the U.S. Air Force. During this period, he was the senior officer responsible for organization, training and equipage of a combined active duty, National Guard, Reserve and civilian work force of over 850,000 people serving at 1,300 locations in the United States and abroad. As a member of the Joint Chiefs of Staff, he and the other service chiefs were military advisors to the Secretary of Defense and the President. Gen. McPeak has served on the board of directors of several publicly traded companies, including long service with Trans World Airlines, Inc. and with the test and measurement company, Tektronix, Inc. He was for many years Chairman of the Board of ECC International Corp., until that company was acquired by Cubic Corporation. Currently, Gen. McPeak is a director of Iovance Biotherapeutics (IOVA, Nasdaq). General McPeak was a founding investor, director and chairman of Ethicspoint, Inc., a software-as-a-service provider of secure, confidential employee reporting systems, that was acquired by private equity at a return making it one of Oregon’s most successful business startups in decades. Our board of directors concluded that Gen. McPeak should serve as a director in light of his demonstrated leadership abilities and years of experience serving on the boards of directors of numerous publicly traded corporations.
Eugene Robin – Director
Mr. Robin was appointed to our board of directors on March 31, 2021. Mr. Robin is currently the Vice President of BKF Capital Group, Inc. and also serves as the Vice President of Strategic Initiatives of Interlink Electronics, Inc. Mr. Robin was previously a principal of Cove Street Capital (“CSC”), a registered investment adviser, until August 2022, where he was employed since its founding in 2011, becoming a principal in 2014, and where he served as the Senior Analyst on both the Small Cap Value and Micro Cap Value strategies of CSC. Our board of directors concluded that Mr. Robin’s investment analysis experience as well as his software and security background make him a valuable addition to the board.
Term of Office
Each director serves until our next annual meeting or until his or her successor is duly elected and qualified. Each executive officer is elected by our board of directors and serves at its discretion.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our officers, directors, and persons who own more than ten percent of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC and to furnish the Company with copies of all Section 16(a) forms they file. Our review of copies of the Section 16(a) reports
56
filed to report transactions occurring during the fiscal year ended June 30, 2022 indicates that all filing requirements applicable to our officers, directors, and greater than ten percent beneficial owners were complied with except as follows: Mr. Derycz failed to timely file two Form 4s reporting two transactions; Mr. Ahlberg failed to timely file two Form 4s reporting three transactions; each of Mr. Hunt and Ms. Cooperman failed to timely file a Form 3 and a Form 4 reporting one transaction; and each of Messrs. Olivier, McPeak and Robin and Alan Urban (our former Chief Financial Officer) failed to timely file a Form 4 reporting one transaction.
Audit Committee Financial Expert
Our board of directors has a separately designated standing Audit Committee, comprised of Messrs. Regazzi (Chairman), McPeak and Robin and Ms. Cooperman, each of whom our board of directors has determined to be an independent director as that term is defined in the applicable rules for companies traded on Nasdaq. Our board of directors has determined that Mr. Regazzi qualifies as an “audit committee financial expert” as defined under SEC rules.
Code of Ethics
Our board of directors has adopted a Code of Ethical Conduct that applies to all of our employees, officers and directors, including our Chief Executive Officer, Chief Financial Officer and other executive and senior financial officers. The code is available in the Corporate Governance – Code of Ethical Conduct section of our website, www.researchsolutions.com.
Item 11. Executive Compensation
Compensation of Executive Officers
The following table summarizes all compensation for the last two fiscal years awarded to, earned by, or paid to our Chief Executive Officer (principal executive officer) and our two most highly compensated executive officers other than our CEO who were serving as executive officers at the end of our last completed fiscal year, whose total compensation exceeded $100,000 during such fiscal year ends.
Compensation of Executive Officers for Fiscal Years Ended June 30, 2022 and 2021
|
| |
| |
| |
| Stock |
| All other |
| |
Name and principle | | Fiscal | | Salary | | Bonus | | awards | | compensation | | Total |
Position | | Year | | ($) | | ($) | | ($) | | ($) | | ($) |
Peter Victor Derycz |
| 2022 |
| 371,760 |
| 124,000 |
| 125,862 | (1) | 18,205 |
| 639,827 |
Executive Chairman |
| 2021 |
| 371,521 |
| 132,060 |
| 143,840 | (2) | 18,240 |
| 665,661 |
| | | | | | | | | | | | |
Roy W. Olivier | | 2022 | | 371,520 | | — | | 142,999 | (3) | 9,520 | | 524,039 |
President and Chief Executive Officer, and Director | | 2021 | | 97,167 | | 25,000 | | 53,000 | (5) | 13,500 | (4) | 188,667 |
| | | | | | | | | | | | |
William Nurthen |
| 2022 |
| 214,092 | | 70,500 | | 284,000 | (6) | 13,460 |
| 582,052 |
Chief Financial Officer and Secretary |
| 2021 |
| — | | — | | — | | — |
| — |
| (1) | Represents the grant date fair value of 30,061 shares of restricted stock granted on August 5, 2021, 7,078 shares of restricted stock granted on December 2, 2021, 7,381 shares of restricted stock granted on February 8, 2022, and 8,289 shares of restricted stock granted on May 10, 2022. The grant date fair value was estimated using the market price of our common stock at the date of grant. The restricted stock vests over a three-year period, with a one year cliff vesting period, and remains subject to forfeiture if vesting conditions are not met. |
| (2) | Represents the grant date fair value of 37,200 shares of restricted stock granted on August 3, 2020, 7,277 shares of restricted stock granted on November 17, 2020, 6,225 shares of restricted stock granted on February 9, 2021, and 10,000 shares of restricted stock granted on May 11, 2021. The grant date fair value was estimated using the |
57
| market price of our common stock at the date of grant. The restricted stock vests over a three-year period, with a one year cliff vesting period, and remains subject to forfeiture if vesting conditions are not met. |
| (3) | Represents the grant date fair value of 18,939 shares of restricted stock granted on August 5, 2021, 14,155 shares of restricted stock granted on December 2, 2021, 14,762 shares of restricted stock granted on February 8, 2022, and 16,578 shares of restricted stock granted on May 10, 2022. The grant date fair value was estimated using the market price of our common stock at the date of grant. The restricted stock vests over a three-year period, with a one year cliff vesting period, and remains subject to forfeiture if vesting conditions are not met. |
(4) | Represents director cash compensation. |
(5) | Represents director stock compensation for the fair value of fully vested options granted on November 17, 2020, to purchase 50,000 shares of common stock at an exercise price of $3.13 per share. |
(6) | Represents the grant date fair value of 100,000 shares of restricted stock granted on October 4, 2021, 5,476 shares of restricted stock granted on February 8, 2022, and 6,150 shares of restricted stock granted on May 10, 2022. The grant date fair value was estimated using the market price of our common stock at the date of grant. Of this amount, 100,000 shares of the restricted stock vests over a four-year period, with a one year cliff vesting period, and remains subject to forfeiture if vesting conditions are not met. The remaining 11,626 shares of the restricted stock vests over a three-year period, with a one year cliff vesting period, and remains subject to forfeiture if vesting conditions are not met. |
Employment Agreements
Peter Victor Derycz
On March 29, 2021, we entered into an amended and restated executive employment agreement with Mr. Derycz. Under the terms of the executive employment agreement, Mr. Derycz has agreed to serve as our Executive Chairman on an at-will basis. The term of the agreement ends on March 28, 2024. The agreement provides for a base salary of $371,520 per year and participation in an executive bonus plan as determined by the Board. No part of Mr. Derycz’s salary is allocated to his duties as a director of our company.
The agreement contains provisions that prohibit Mr. Derycz from soliciting our customers or employees during his employment with us and for one year afterward. The agreement also contains provisions that restrict disclosure by Mr. Derycz of our confidential information and assign ownership to us of inventions related to our business that are created by him during his employment. We may terminate the agreement at any time, with or without cause. Mr. Derycz will be eligible to receive an amount equal to his then-current base salary and bonus payable through the end of the term in the form of salary continuation, and vesting for all of his then-outstanding incentive awards will fully accelerate such that such incentive awards shall become fully vested, if he is terminated without cause. Mr. Derycz may terminate the agreement at any time, with or without reason, upon four weeks’ advance written notice.
Roy W. Olivier
On March 29, 2021, we entered into an executive employment agreement with Mr. Olivier. Under the terms of the executive employment agreement, Mr. Olivier agreed to serve as our Interim Chief Executive Officer and President on an at-will basis. The term of the agreement ended on September 21, 2021, and it was amended and restated on October 4, 2021 to formally appoint Mr. Oliver as Chief Executive Officer and President. The agreement provides for a base salary of $371,520 per year and participation in an executive bonus plan as determined by the Board. No part of Mr. Olivier’s salary is allocated to his duties as a director of our company.
The amended and restated agreement contains provisions that prohibit Mr. Olivier from soliciting our customers or employees during his employment with us and for one year afterward. The agreement also contains provisions that restrict disclosure by Mr. Olivier of our confidential information and assign ownership to us of inventions related to our
58
business that are created by him during his employment. We may terminate the agreement at any time, with or without cause. Mr. Olivier will be eligible to receive an amount equal to his then-current base salary payable and group medical benefits for a period equal to the lesser of (i) eighteen (18) months or (ii) or the end of the term if his amended and restated agreement, if he is terminated without cause. In addition, he is eligible to receive a pro-rata bonus for the fiscal year of termination. Mr. Olivier may terminate the agreement at any time, with or without reason, upon two weeks’ advance written notice.
William Nurthen
On October 4, 2021, we entered into an executive employment agreement with Mr. Nurthen which has an indefinite period. Under the terms of the executive employment agreement, Mr. Nurthen has agreed to serve as our Chief Financial Officer on an at-will basis. The agreement provides for a base salary of $284,000 per year and participation in an executive bonus plan as determined by the Board.
The agreement contains provisions that prohibit Mr. Nurthen from soliciting our customers or employees during his employment with us and for one year afterward for employees and two years afterward for customers. The agreement also contains provisions that restrict disclosure by Mr. Nurthen of our confidential information and assign ownership to us of inventions related to our business that are created by him during his employment. We may terminate the agreement at any time, with or without cause. Mr. Nurthen will be eligible to receive (i) an amount equal to twelve (12) months of his then-current base salary payable in the form of salary continuation, (ii) a pro-rata bonus for the then-current fiscal year, (iii) acceleration of all outstanding unvested options or restricted stock as of the effective date of termination, and (iv) continuation of health and welfare benefits for 12 months if he is terminated without cause. Mr. Nurthen may terminate the agreement at any time, with or without reason, upon thirty (30) days’ advance written notice.
Scott Ahlberg
On July 1, 2010, we entered into an executive employment agreement with Mr. Ahlberg which was subsequently amended on June 30, 2022. Under the terms of the executive employment agreement, Mr. Ahlberg has agreed to serve as Chief Operating Officer on an at-will basis. The term of the agreement ends on June 30, 2023. The agreement provides for a base salary of $240,400 per year and participation in an executive bonus plan as determined by the Board.
The agreement contains provisions that prohibit Mr. Ahlberg from soliciting our customers or employees during his employment with us and for one year afterward. The agreement also contains provisions that restrict disclosure by Mr. Ahlberg of our confidential information and assign ownership to us of inventions related to our business that are created by him during his employment. We may terminate the agreement at any time, with or without cause. Mr. Ahlberg will be eligible to receive an amount equal to six (6) months of his then-current base salary payable in the form of salary continuation if he is terminated without cause. Mr. Ahlberg may terminate the agreement at any time, with or without reason, upon four weeks’ advance written notice.
Shane Hunt
On November 1, 2012, we entered into an executive employment agreement with Mr. Hunt which was subsequently amended on June 30, 2022. Under the terms of the executive employment agreement, as amended, Mr. Hunt has agreed to serve as Chief Revenue Officer on an at-will basis. The term of the agreement is indefinite unless terminated by either party subject to the provisions of the employment agreement. The agreement provides for a base salary of $225,000 per year and participation in a bonus plan based upon company sales and retention, and executive bonus plan as determined by the Board.
The agreement contains provisions that prohibit Mr. Hunt from soliciting our customers or employees during his employment with us and for one year afterward. The agreement also contains provisions that restrict disclosure by Mr. Hunt of our confidential information and assign ownership to us of inventions related to our business that are created by him during his employment. We may terminate the agreement at any time, with or without cause. Mr. Hunt will be eligible to receive an amount equal to six (6) months of his then-current base salary payable in the form of salary continuation if
59
he is terminated without cause. Mr. Hunt may terminate the agreement at any time, with or without reason, upon two weeks’ advance written notice.
Outstanding Equity at Fiscal Year Ended June 30, 2022
The following table sets forth information regarding stock options, warrants and other stock awards (restricted stock) for each named executive officer as of June 30, 2022.
Outstanding Equity Awards at Fiscal Year Ended June 30, 2022
|
| Number of |
| Number of |
| | |
| |
| |
| | |
|
| | securities | | securities | | | | | | | Stock Awards: | | Stock Awards: | | |
| | underlying | | underlying | | Option/ | | Option/ | | Number of | | Market value of | | ||
| | unexercised | | unexercised | | Warrant | | Warrant | | shares of stock | | shares of stock | | ||
| | options/warrants | | options/warrants | | exercise | | expiration | | that have not | | that have not | | ||
Name | | exercisable (#) | | unexercisable (#) | | price ($) | | date (1) | | vested (#) | | vested ($) | | ||
Peter Victor Derycz |
| 32,000 |
| — | | $ | 1.25 |
| 2/13/2023 |
| — |
| | — | |
|
| 16,000 |
| — | | $ | 1.85 |
| 5/20/2023 |
| — |
| | — | |
|
| — |
| — | |
| — |
| — |
| 361 | (2) | $ | 1,130 | (3) |
|
| — |
| — | |
| — |
| — |
| 646 | (4) | $ | 2,260 | (5) |
|
| — |
| — | |
| — |
| — |
| 1,111 | (6) | $ | 3,323 | (7) |
|
| — |
| — | |
| — |
| — |
| 12,400 | (8) | $ | 30,380 | (9) |
|
| — |
| — | |
| — |
| — |
| 3,032 | (10) | $ | 6,458 | (11) |
|
| — |
| — | |
| — |
| — |
| 3,113 | (12) | $ | 7,750 | (13) |
|
| — |
| — | |
| — |
| — |
| 5,833 | (14) | $ | 12,658 | (15) |
|
| — |
| — | |
| — |
| — |
| 30,061 | (16) | $ | 79,361 | (17) |
|
| — |
| — | |
| — |
| — |
| 7,078 | (18) | $ | 15,501 | (19) |
|
| — |
| — | |
| — |
| — |
| 7,381 | (20) | $ | 15,500 | (21) |
|
| — |
| — | |
| — |
| — |
| 8,289 | (22) | $ | 15,500 | (23) |
Roy W. Olivier |
| 50,000 |
| — | | $ | 2.40 |
| 11/13/2028 |
| — | |
| — |
|
|
| 50,000 |
| — | | $ | 3.13 |
| 11/12/2029 |
| — | |
| — | |
|
| 50,000 |
| — | | $ | 2.13 |
| 11/17/2030 |
| — | |
| — | |
|
| — |
| — | |
| — |
| — |
| 18,939 | (16) | $ | 49,999 | (17) |
|
| — |
| — | |
| — |
| — |
| 14,155 | (18) | $ | 30,999 | (19) |
|
| — |
| — | |
| — |
| — |
| 14,762 | (20) | $ | 31,000 | (21) |
|
| — |
| — | |
| — |
| — |
| 16,578 | (22) | $ | 31,001 | (23) |
William Nurthen |
| — |
| — | |
| — |
| — |
| 100,000 | (24) | $ | 261,000 | (25) |
|
| — |
| — | |
| — |
| — |
| 5,476 | (20) | $ | 11,500 | (21) |
|
| — |
| — | |
| — |
| — |
| 6,150 | (22) | $ | 11,501 | (23) |
(1)Stock options expire ten years from the grant date.
(2) | The restricted stock was granted on November 12, 2019 and vest over a three year period, with a one year cliff vesting period. |
(3)Based on a market closing price per share of common stock of $3.13 on November 12, 2019.
(4) | The restricted stock was granted on February 11, 2020 and vest over a three year period, with a one year cliff vesting period. |
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(5)Based on a market closing price per share of common stock of $3.50 on February 11, 2020.
(6) | The restricted stock was granted on May 12, 2020 and vest over a three year period, with a one year cliff vesting period. |
(7)Based on a market closing price per share of common stock of $2.99 on May 12, 2020.
(8) | The restricted stock was granted on August 3, 2020 and vest over a three year period, with a one year cliff vesting period. |
(9)Based on a market closing price per share of common stock of $2.45 on August 3, 2020.
(10) | The restricted stock was granted on November 17, 2020 and vest over a three year period, with a one year cliff vesting period. |
(11)Based on a market closing price per share of common stock of $2.13 on November 17, 2020.
(12) | The restricted stock was granted on February 9, 2021 and vest over a three year period, with a one year cliff vesting period. |
(13)Based on a market closing price per share of common stock of $2.49 on February 9, 2021.
(14) | The restricted stock was granted on May 11, 2021 and vest over a three year period, with a one year cliff vesting period. |
(15)Based on a market closing price per share of common stock of $2.17 on May 11, 2021.
(16) | The restricted stock was granted on August 5, 2021 and vest over a three year period, with a one year cliff vesting period. |
(17)Based on a market closing price per share of common stock of $2.64 on August, 2021.
(18) | The restricted stock was granted on December 2, 2021 and vest over a three year period, with a one year cliff vesting period. |
(19)Based on a market closing price per share of common stock of $2.19 on December 2, 2021.
(20) | The restricted stock was granted on February 8, 2022 and vest over a three year period, with a one year cliff vesting period. |
(21)Based on a market closing price per share of common stock of $2.10 on February 8, 2022.
(22) | The restricted stock was granted on May 10, 2022 and vest over a three year period, with a one year cliff vesting period. |
(23)Based on a market closing price per share of common stock of $1.87 on May 10, 2022.
(24) | The restricted stock was granted on October 4, 2021 and vest over a four year period, with a one year cliff vesting period. |
(25)Based on a market closing price per share of common stock of $2.61 on October 4, 2021.
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Compensation of Directors
The following table sets forth compensation awarded or paid to our directors for the last fiscal year for the services rendered by them to the Company in all capacities.
Director Compensation for the Fiscal Years Ended June 30, 2022 and 2021
|
| |
| Fees |
| Warrant |
| |
| | | | earned | | and | | |
| | | | or paid | | Option | | |
| | Fiscal | | in cash | | Awards | | |
Name | | Year | | ($) | | ($) | | Total ($) |
John Regazzi (1) |
| 2022 |
| 18,000 |
| 104,000 |
| 122,000 |
|
| 2021 |
| 31,500 |
| 106,000 |
| 137,500 |
Gen. Merrill McPeak (2) |
| 2022 |
| 18,000 |
| 52,000 |
| 70,000 |
|
| 2021 |
| 18,000 |
| 53,000 |
| 71,000 |
Eugene Robin (3) |
| 2022 |
| 18,000 |
| 52,000 |
| 70,000 |
| | 2021 | | 4,500 |
| 36,563 |
| 41,063 |
Barbara J. Cooperman (4) |
| 2022 |
| 7,079 |
| 40,318 |
| 47,397 |
| | 2021 | | — |
| — |
| — |
(1)Outstanding equity awards as of June 30, 2022 consists of options to purchase 100,000 shares of common stock at $2.10 per share, 100,000 shares of common stock at $2.13 per share, options to purchase 100,000 shares of common stock at $3.13 per share, options to purchase 100,000 shares of common stock at $2.40 per share, options to purchase 30,000 shares of common stock at $1.10 per share, options to purchase 16,000 shares of common stock at $0.80 per share, options to purchase 150,000 shares of common stock at $0.70 per share, options to purchase 150,000 shares of common stock at an exercise price of $1.05 per share, and options to purchase 150,000 shares of common stock at an exercise price of $1.20 per share.
(2)Outstanding equity awards as of June 30, 2022 consists of options to purchase 50,000 shares of common stock at an exercise price of $2.10 per share, options to purchase 50,000 shares of common stock at an exercise price of $2.13 per share, options to purchase 50,000 shares of common stock at an exercise price of $3.13 per share, options to purchase 50,000 shares of common stock at an exercise price of $2.40 per share, options to purchase 75,000 shares of common stock at an exercise price of $1.20 per share, options to purchase 75,000 shares of common stock at an exercise price of $1.05 per share, options to purchase 75,000 shares of common stock at an exercise price of $0.70 per share, options to purchase 75,000 shares of common stock at an exercise price of $1.10 per share, options to purchase 50,000 shares of common stock at an exercise price of $1.05 per share, and options to purchase 50,000 shares of common stock at an exercise price of $1.15 per share.
(3)Outstanding equity awards as of June 30, 2022 consists of options to purchase 50,000 shares of common stock at an exercise price of $2.10 per share and options to purchase 31,250 shares of common stock at an exercise price of $2.43 per share.
(4)Outstanding equity awards as of June 30, 2022 consists of options to purchase 38,767 shares of common stock at an exercise price of $2.10 per share.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth certain information, as of September 16, 2022, with respect to the holdings of (1) each person who is the beneficial owner of more than five percent of our common stock, (2) each of our directors, (3) each named executive officer, and (4) all of our directors and executive officers as a group.
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Beneficial ownership of the common stock is determined in accordance with the rules of the Securities and Exchange Commission and includes any shares of common stock over which a person exercises sole or shared voting or investment powers, or of which a person has a right to acquire ownership at any time within 60 days of September 16, 2022. Except as otherwise indicated, and subject to applicable community property laws, the persons named in this table have sole voting and investment power with respect to all shares of common stock held by them. The address of each director and officer is c/o Research Solutions, Inc., 10624 S. Eastern Ave., Ste. A-614, Henderson, NV 89052. Applicable percentage ownership in the following table is based on 27,334,491 shares of common stock outstanding as of September 16, 2022 plus, for each person, any securities that person has the right to acquire within 60 days of September 16, 2022.
|
| Shares |
| |
|
| | Beneficially | | Percentage |
|
Name and Address of Beneficial Owner | | Owned | | of Shares |
|
Greater than 5% Shareholder: |
|
|
|
| |
Richard H. Witmer, Jr. |
| 2,608,448 |
| 9.5 | % |
Bristol Investment Fund, Ltd. (1) |
| 2,582,108 |
| 9.4 | % |
Cove Street Capital |
| 2,257,731 |
| 8.3 | % |
Cowan Prime Advisors, a division of Cowan Prime Services, LLC |
| 1,562,200 |
| 5.7 | % |
Directors and Executive Officers: |
|
|
|
| |
Peter Victor Derycz (2) |
| 3,419,349 |
| 12.5 | % |
Roy W. Olivier (3) | | 361,633 | | 1.3 | % |
William Nurthen (4) |
| 136,227 |
| * | % |
Scott Ahlberg (5) |
| 533,106 |
| 1.9 | % |
Shane Hunt (6) |
| 215,915 |
| * | % |
John Regazzi (7) |
| 1,093,500 |
| 3.9 | % |
Gen. Merrill McPeak (8) |
| 834,608 |
| 3.0 | % |
Eugene Robin (9) |
| 83,923 |
| * | % |
Barbara Cooperman (10) |
| 38,767 |
| * | % |
All Directors and Executive Officers as a group (9 persons) (11) |
| 6,715,716 |
| 22.6 | % |
* Less than 1%
(1) | Paul Kessler exercises voting and investment power over the shares held by Bristol Investment Fund, Ltd. and is the brother-in-law of Peter Victor Derycz. Mr. Kessler previously served as a member of our board of directors from August 18, 2014 through November 6, 2015. |
(2) | Includes shares underlying options to purchase 32,000 shares of common stock at an exercise price of $1.25 per share, and options to purchase 16,000 shares of common stock at an exercise price of $1.85 per share, and 79,305 shares of unvested restricted stock. The restricted stock vests over a three year period, with a one year cliff vesting period, and remains subject to forfeiture if vesting conditions are not met. |
(3) | Includes shares underlying options to purchase 50,000 shares of common stock at an exercise price of $3.13 per share, and options to purchase 50,000 shares of common stock at an exercise price of $2.13 per share, options to purchase 50,000 shares of common stock at an exercise price of $2.40 per share, and 64,434 shares of unvested restricted stock. The restricted stock vests over a three year period, with a one year cliff vesting period, and remains subject to forfeiture if vesting conditions are not met. |
63
(4) | Includes 111,626 shares of unvested restricted stock. Of this amount, 100,000 shares of the restricted stock vests over a four-year period, with a one year cliff vesting period, and remains subject to forfeiture if vesting conditions are not met. The remaining 11,626 shares of the restricted stock vests over a three-year period, with a one year cliff vesting period, and remains subject to forfeiture if vesting conditions are not met. |
(5) | Includes shares underlying options to purchase 75,000 shares of common stock at an exercise price of $1.50 per share, options to purchase 25,600 shares of common stock at an exercise price of $1.15 per share, and 58,838 shares of unvested restricted stock. The restricted stock vests over a three year period, with a one year cliff vesting period, and remains subject to forfeiture if vesting conditions are not met. |
(6) | Includes shares underlying options to purchase 7,500 shares of common stock at an exercise price of $1.00 per share, options to purchase 12,000 shares of common stock at an exercise price of $1.20 per share, options to purchase 10,000 shares of common stock at an exercise price of $1.59 per share, options to purchase 20,000 shares of common stock at an exercise price of $2.50 per share, options to purchase 8,000 shares of common stock at an exercise price of $2.49 per share, options to purchase 8,000 shares of common stock at an exercise price of $3.13 per share, options to purchase 7,333 shares of common stock at an exercise price of $3.50 per share, options to purchase 6,667 shares of common stock at an exercise price of $2.99 per share, options to purchase 6,000 shares of common stock at an exercise price of $2.45 per share, options to purchase 5,333 shares of common stock at an exercise price of $2.13 per share, options to purchase 4,667 shares of common stock at an exercise price of $2.49 per share, options to purchase 4,000 shares of common stock at an exercise price of $2.17 per share, and options to purchase 3,064 shares of common stock at an exercise price of $2.64 per share. |
(7) | Includes shares underlying options to purchase 30,000 shares of common stock at $1.10 per share, options to purchase 16,000 shares of common stock at $0.80 per share, options to purchase 150,000 shares of common stock at $0.70 per share, options to purchase 150,000 shares of common stock at an exercise price of $1.05 per share, options to purchase 150,000 shares of common stock at an exercise price of $1.20 per share, options to purchase 100,000 shares of common stock at an exercise price of $2.40 per share, and options to purchase 100,000 shares of common stock at an exercise price of $3.13 per share, options to purchase 100,000 shares of common stock at an exercise price of $2.13 per share, and options to purchase 100,000 shares of common stock at an exercise price of $2.10 per share.. |
(8) | Includes options to purchase50,000 shares of common stock at an exercise price of $1.15 per share, options to purchase 50,000 shares of common stock at an exercise price of $1.05 per share, options to purchase 75,000 shares of common stock at an exercise price of $1.10 per share, options to purchase 75,000 shares of common stock at an exercise price of $0.70 per share, options to purchase 75,000 shares of common stock at an exercise price of $1.05 per share, options to purchase 75,000 shares of common stock at an exercise price of $1.20 per share, options to purchase 50,000 shares of common stock at an exercise price of $2.40 per share, options to purchase 50,000 shares of common stock at an exercise price of $3.13 per share, options to purchase 50,000 shares of common stock at an exercise price of $2.13 per share, and options to purchase 50,000 shares of common stock at an exercise price of $2.10 per share. |
(9) | Includes shares underlying options to purchase 31,250 shares of common stock at an exercise price of $2.43 per share and options to purchase 50,000 shares of common stock at an exercise price of $2.10 per share. |
(10) | Includes shares underlying options to purchase 38,767 shares of common stock at an exercise price of $2.10 per share. |
(11) | Includes shares underlying options to purchase 2,415,154 shares of common stock. |
Equity Compensation Plan Information
In December 2007, we established the 2007 Equity Compensation Plan (the “2007 Plan”) and in November 2017 we established the 2017 Omnibus Incentive Plan (the “2017 Plan”), collectively (the “Plans”). The Plans were approved by our board of directors and stockholders. The purpose of the Plans is to grant stock and options to purchase our common
64
stock, and other incentive awards, to our employees, directors and key consultants. On November 10, 2016, the maximum number of shares of common stock that may be issued pursuant to awards granted under the 2007 Plan increased from 5,000,000 to 7,000,000. 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. 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. All incentive stock award grants prior to the adoption of the 2017 Plan on November 21, 2017 were made under the 2007 Plan, and all incentive stock award grants after the adoption of the 2017 Plan on November 21, 2017 were made under the 2017 Plan. The following table provides information as of June 30, 2022 with respect to the Plans, which are the only compensation plans under which our equity securities are, or have been, authorized for issuance.
|
| |
| |
| Number of securities | |
| | | | | | remaining available | |
| | | | | | for future issuance | |
| | Number of securities to be | | Weighted average | | under equity | |
| | issued upon exercise of | | exercise price of | | compensation plans | |
| | outstanding options, | | outstanding options, |
| (excluding securities | |
Plan category | | warrants and rights | | warrants and rights |
| reflected in column (a)) | |
|
| (a) |
| (b) |
| (c) | |
Equity compensation plans approved by stockholders (2007 Equity Compensation Plan, and 2017 Omnibus Incentive Plan) |
| 3,182,872 | | $ | 1.79 |
| 3,935,596 |
Equity compensation plans not approved by stockholders |
| — | |
| — |
| — |
Total |
| 3,182,872 | |
|
|
| 3,935,596 |
Item 13. Certain Relationships and Related Transactions, and Director Independence
Other than the transactions described herein, since July 1, 2018, there has not been, nor is there currently proposed, any transaction or series of similar transactions to which we were or will be a party in which the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years; and in which any director, executive officer, shareholder who beneficially owns more than 5% of our common stock or any member of their immediate family had or will have a direct or indirect material interest.
Director Independence
Our board of directors currently consists of six members: Messrs. Derycz (Executive Chairman), McPeak, Olivier, Regazzi, Robin and Ms. Cooperman. Our board of directors has determined that Ms. Cooperman, Gen. McPeak, Mr. Regazzi and Mr. Robin are independent directors as that term is defined in the applicable rules for companies traded on Nasdaq. Ms. Cooperman, Gen. McPeak, Mr. Regazzi and Mr. Robin are each members of the Audit Committee, Compensation Committee and Nominating and Governance Committee of our board of directors, and each of them meets Nasdaq’s independence standards for members of such committees.
65
Item 14. Principal Accounting Fees and Services
Summary of Principal Accounting Fees for Professional Services Rendered
Our independent registered public accounting firm is Weinberg & Company, P.A. 1925 Century Park E., Suite 1120, Los Angeles, CA 90067. PCAOB Auditor ID:
|
| Year Ended |
| Year Ended | ||
| | June 30, 2022 | | June 30, 2021 | ||
Audit Fees | | $ | 132,865 | | $ | 125,452 |
Audit-Related Fees | |
| — | |
| — |
Tax Fees | |
| 30,146 | |
| 32,479 |
All Other Fees | |
| — | |
| — |
Total | | $ | 163,011 | | $ | 157,931 |
Audit Fees consist of amounts billed for professional services rendered for the audit of our annual consolidated financial statements included in our Annual Reports on Form 10-K, and reviews of our interim consolidated financial statements included in our Quarterly Reports on Form 10-Q, including amendments thereto.
Audit-Related Fees consist of fees billed for professional services that are reasonably related to the performance of the audit or review of our consolidated financial statements but are not reported under “Audit Fees.”
Tax Fees consist of fees for professional services for tax compliance activities, including the preparation of federal and state tax returns and related compliance matters.
All Other Fees consists of amounts billed for services other than those noted above.
The audit committee of our board of directors has considered whether the provision of the services described above for the fiscal years ended June 30, 2022 and 2021, is compatible with maintaining the auditor’s independence.
All audit and non-audit services that may be provided by our principal accountant to us shall require pre-approval by the audit committee of our board of directors. Further, our auditor shall not provide those services to us specifically prohibited by the SEC, including bookkeeping or other services related to the accounting records or financial statements of the audit client; financial information systems design and implementation; appraisal or valuation services, fairness opinion, or contribution-in-kind reports; actuarial services; internal audit outsourcing services; management functions; human resources; broker-dealer, investment adviser, or investment banking services; legal services and expert services unrelated to the audit; and any other service that the Public Company Accounting Oversight Board determines, by regulation, is impermissible.
66
PART IV
Item 15. Exhibits and Financial Statement Schedules
(a)(1) Financial Statements.
The financial statements of Research Solutions, Inc. and its subsidiaries and the independent registered public accounting firm’s report dated September 23, 2022, are incorporated by reference to Item 8 of this report.
(a)(2) and (c) Financial Statement Schedules
Not required.
(a)(3) and (b) Exhibits
EXHIBIT INDEX
Exhibit |
| Description |
|---|---|---|
| | |
2 |
| |
3.1.1 |
| |
3.1.2 |
| |
3.2 |
| |
4 |
| |
10.1 |
| |
10.2 |
| |
10.3 |
| |
10.4 |
| |
10.5 |
| |
10.6 |
| |
10.7 |
| |
10.8 |
| |
10.9 |
|
67
Exhibit |
| Description |
|---|---|---|
| | |
10.10 |
| |
10.11 |
| |
10.12 |
| |
10.13 |
| |
10.14 |
| |
10.15 |
| |
10.16 |
| |
10.17 | | |
10.18 | | |
10.19 | | |
10.20 | | |
10.21 | | |
10.22 | | |
10.23 | | |
10.24 | | |
10.25 | | |
10.26 | | |
10.27 | | |
21 |
| |
23 |
| |
24 |
| Power of Attorney. (Incorporated by reference to the signature page hereto.) |
31.1 |
| Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer |
68
Exhibit |
| Description |
|---|---|---|
| | |
31.2 |
| Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer |
32.1 |
| |
32.2 |
| |
99.1 |
| |
99.2 |
| |
99.3 |
| |
99.4 |
| |
99.5 |
| |
99.6 |
| |
99.7 | | |
101.INS |
| Inline XBRL Instance Document |
101.SCH |
| Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase |
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase |
101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase |
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase |
104 | | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
*Furnished herewith
++Indicates management contract or compensatory plan.
Item 16. Form 10-K Summary
None.
69
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| RESEARCH SOLUTIONS, INC. | |
|
| |
| By: | /s/ Roy W. Olivier |
|
|
|
|
| Roy W. Olivier |
Date: September 23, 2022 |
| Chief Executive Officer and President (Principal Executive Officer) |
|
|
|
| By: | /s/ William Nurthen |
|
|
|
|
| William Nurthen |
Date: September 23, 2022 |
| Chief Financial Officer |
|
| (Principal Financial and Accounting Officer) |
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Roy W. Olivier and William Nurthen, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution for him or her, and in his or her name in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done therewith, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and any of them or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
70
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature |
| Title |
| Date |
|
|
|
|
|
/s/ Roy W. Olivier |
|
|
|
|
Roy W. Olivier |
| Chief Executive Officer (Principal Executive Officer), President and Director |
| September 23, 2022 |
|
|
|
|
|
/s/ William Nurthen |
|
|
|
|
William Nurthen |
| Chief Financial Officer (Principal Financial |
| September 23, 2022 |
|
| and Accounting Officer) and Secretary |
|
|
|
|
|
|
|
/s/ Peter Victor Derycz |
|
|
|
|
Peter Victor Derycz |
| Executive Chairman |
| September 23, 2022 |
|
|
|
|
|
/s/ Merrill McPeak |
|
|
|
|
Merrill McPeak |
| Director |
| September 23, 2022 |
|
|
|
|
|
/s/ John Regazzi |
|
|
|
|
John Regazzi |
| Director |
| September 23, 2022 |
|
|
|
|
|
/s/ Eugene Robin |
|
|
|
|
Eugene Robin |
| Director |
| September 23, 2022 |
| | | | |
/s/ Barbara J. Cooperman | | | | |
Barbara J. Cooperman | | Director | | September 23, 2022 |
71
Exhibit 4
DESCRIPTION OF REGISTRANT’S COMMON STOCK
The following is a summary of the material rights of our common stock, the sole class of our securities registered under Section 12 of the Exchange Act. This summary does not purport to be complete and is qualified in its entirety by the provisions of our amended and restated certificate of incorporation and amended and restated bylaws, copies of which are filed as exhibits to our Annual Report on Form 10-K.
The holders of our common stock are entitled to one vote per share on each matter submitted to a vote at a meeting of our stockholders, except to the extent that the voting rights of shares of any class or series of our stock are determined and specified as greater or lesser than one vote per share in the manner provided by our articles of incorporation. Our common stock does not entitle holders thereof to pre-emptive rights to acquire additional shares of our common stock or other securities. Our common stock is not subject to redemption rights and carries no subscription or conversion rights. In the event of liquidation of our company, the shares of our common stock are entitled to share equally in corporate assets after satisfaction of all liabilities. All shares of our common stock now outstanding are fully paid and non-assessable. Our bylaws authorize the board of directors to declare dividends on our outstanding shares.
Exhibit 10.19
AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
This Amendment To Executive Employment Agreement (“Amendment”), effective June 30, 2021, hereby amends the Executive Employment Agreement (the “Agreement”) dated July 1, 2010, as amended to date, between Reprints Desk, Inc., a Delaware corporation (the “Company”), Research Solutions, Inc., a Nevada corporation (“Research Solutions”), and Scott Ahlberg (“Executive”).
WHEREAS, the parties have complied with the terms of the Agreement until the date hereof; and
WHEREAS, the parties wish to amend the terms of the Agreement.
NOW THEREFORE, for the mutual promises and other consideration described herein, the parties hereto agree as follows:
1.Section 1(d) Term is amended as follows:
Term. The term of employment of Executive by the Company pursuant to this Employment Agreement shall be for the period commencing on the Commencement Date and ending on June 30, 2022, or such earlier date that Employee’s employment is terminated in accordance with the provisions of this Employment Agreement.
Except as expressly amended or modified herein, all terms and conditions of the Agreement are hereby ratified, confirmed and approved and shall remain in full force and effect. In the event of any conflict or inconsistency between this Amendment and the Agreement, this Amendment shall govern.
This Amendment and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.
This Amendment may be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties have duly executed this Amendment as of the date first written above.
REPRINTS DESK, INC.:
By:
Name and Title: Alan Urban, CFO
RESEARCH SOLUTIONS, INC.:
By:
Name and Title: Alan Urban, CFO
EXECUTIVE:
By:
Name: Scott Ahlberg
Exhibit 10.20
AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
This Amendment To Executive Employment Agreement (“Amendment”), effective June 30, 2022, hereby amends the Executive Employment Agreement (the “Agreement”) dated July 1, 2010, as amended to date, between Reprints Desk, Inc., a Delaware corporation (the “Company”), Research Solutions, Inc., a Nevada corporation (“Research Solutions”), and Scott Ahlberg (“Executive”).
WHEREAS, the parties have complied with the terms of the Agreement until the date hereof; and
WHEREAS, the parties wish to amend the terms of the Agreement.
NOW THEREFORE, for the mutual promises and other consideration described herein, the parties hereto agree as follows:
1.Section 1(d) Term is amended as follows:
Term. The term of employment of Executive by the Company pursuant to this Employment Agreement shall be for the period commencing on the Commencement Date and ending on June 30, 2023 or such earlier date that Employee’s employment is terminated in accordance with the provisions of this Employment Agreement.
Except as expressly amended or modified herein, all terms and conditions of the Agreement are hereby ratified, confirmed and approved and shall remain in full force and effect. In the event of any conflict or inconsistency between this Amendment and the Agreement, this Amendment shall govern.
This Amendment and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.
This Amendment may be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties have duly executed this Amendment as of the date first written above.
REPRINTS DESK, INC.:
By:
Name and Title: William Nurthen, CFO
RESEARCH SOLUTIONS, INC.:
By:
Name and Title: William Nurthen, CFO
EXECUTIVE:
By:
Name: Scott Ahlberg
Exhibit 10.23
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement, dated November 1 2012 (the “Commencement Date”), is between Reprints Desk, Inc., a Delaware corporation (the “Company”) and Shane Hunt, an individual whose mailing address is 3113 Ceanothus Ave., Chico, CA 95973 (“Executive”).
1. Position and Responsibilities
(a) Position. Executive is employed by the Company to render services to the Company in the position of Sales Representative. Executive shall perform such duties and responsibilities as are normally related to such position in accordance with the standards of the industry and any additional duties now or hereafter assigned to Executive by the Company. Executive shall abide by the rules, regulations, and practices as adopted or modified from time to time in the Company’s sole discretion.
(b) Other Activities. Except upon the prior written consent of the Company, Executive will not, during the term of this Agreement, (i) accept any other employment, or (ii) engage, directly or indirectly, in any other business activity (whether or not pursued for pecuniary advantage) that might interfere with Executive’s duties and responsibilities hereunder or create a conflict of interest with the Company. However, Executive shall be allowed to be employed by 4 Research Solutions, Inc. for the sole purpose of winding down and dissolving the entity for a period not to exceed four months after the commencement date.
(c) No Conflict. Executive represents and warrants that Executive’s execution of this Agreement, Executive’s employment with the Company, and the performance of Executive’s proposed duties under this Agreement shall not violate any obligations Executive may have to any other employer, person or entity, including any obligations with respect to proprietary or confidential information of any other person or entity.
(d) Term. The term of employment of Executive by the Company pursuant to this Employment Agreement shall be for the period commencing on the Commencement Date and ending on October 31, 2014, or such earlier date that Employee’s employment is terminated in accordance with the provisions of this Employment Agreement.
2. Compensation and Benefits
(a) Base Salary. In consideration of the services to be rendered under this Agreement, the Company shall pay Executive a salary at the rate of Ninety Three Thousand and Seven Hundred ($93,700) per year (“Base Salary”). The Base Salary shall be paid in accordance with the Company’s regularly established payroll practice. Executive’s Base Salary will be reviewed from time to time in accordance with the established procedures of the Company for adjusting salaries for similarly situated employees and may be adjusted in the sole discretion of the Company, but will not be reduced before November 1, 2014, except with the written consent of Executive.
(b) Not Used
(c) Benefits. Executive shall be eligible to participate in the benefits made generally available by the Company to its employees, in accordance with the benefit plans established by the Company, and as may be amended from time to time in the Company’s sole discretion.
(d) Expenses. The Company shall reimburse Executive for reasonable business expenses incurred in the
performance of Executive’s duties hereunder in accordance with the Company’s expense reimbursement guidelines but in no event later than fifteen days after Executive’s submission of an expense account reimbursement.
3. At-Will Employment; Termination By the Company
(a) At-Will Termination by the Company. The employment of Executive shall be “at-will” at all times. The Company may terminate Executive’s employment with the Company at any time, without any advance notice, for any reason or no reason at all, notwithstanding anything to the contrary contained in or arising from any statements, policies or practices of the Company relating to the employment, discipline or termination of its employees. Upon and after such termination, all obligations of the Company under this Agreement shall cease, unless Executive’s employment is terminated without Cause, in which case the Company shall provide Executive with the severance benefits described in Section 3(b) below.
(b) Severance. Except in situations where the employment of Executive is terminated For Cause, By Death or By Disability (as defined in Section 4 below), in the event that the Company terminates the employment of Executive at any time, Executive will continue to receive Base Salary paid in accordance with the Company’s regularly established payroll practice until the end of the term of employment. Executive’s eligibility for severance is conditioned on Executive having first signed a release agreement in the form attached as Exhibit A. Executive shall not be entitled to any severance payments if Executive’s employment is terminated For Cause, By Death or By Disability (as defined in Section 4 below) or if Executive’s employment is terminated by Executive (in accordance with Section 5 below).
4. Other Terminations By the Company
(a) Termination for Cause. For purposes of this Agreement, “For Cause” shall mean: (i) Executive is charged by a governmental prosecuting agency with a crime involving dishonesty, breach of trust, or physical harm to any person; (ii) Executive willfully engages in conduct that is in bad faith and materially injurious to the Company, including but not limited to, misappropriation of trade secrets, fraud or embezzlement; (iii) Executive commits a material breach of this Agreement, which breach is not cured within thirty (30) days after written notice to Executive from the Company; (iv) Executive willfully refuses to implement or follow a lawful policy or directive of the Company; or (v) Executive engages in misfeasance or malfeasance demonstrated by a pattern of failure to perform job duties diligently and professionally. The Company may terminate Executive’s employment For Cause at any time, without any advance notice. The Company shall pay to Executive all compensation to which Executive is entitled up through the date of termination, subject to any other rights or remedies of Employer under law; and thereafter all obligations of the Company under this Agreement shall cease.
(b) By Death. Executive’s employment shall terminate automatically upon Executive’s death. The Company shall pay to Executive’s beneficiaries or estate, as appropriate, any compensation then due and owing. Thereafter all obligations of the Company under this Agreement shall cease. Nothing in this Section shall affect any entitlement of Executive’s heirs or devisees to the benefits of any life insurance plan or other applicable benefits.
(c) By Disability. If Executive becomes eligible for the Company’s long term disability benefits or if, in the sole opinion of the Company, Executive is unable to carry out the responsibilities and functions of the position held by Executive by reason of any physical or mental impairment for more than ninety (90) consecutive days or more than one hundred and twenty days (120) in any twelve-month period, then, to the extent permitted by law, the Company may terminate Executive’s employment. The Company shall pay to Executive all compensation to which Executive is entitled up through the date of termination, and thereafter all obligations of the Company under this Agreement shall cease. Nothing in this Section shall affect Executive’s rights under any disability plan in which Executive is a participant.
5. At-Will Termination By Executive
Executive may terminate employment with the Company at any time for any reason or no reason at all, upon two weeks’ advance written notice. During such notice period Executive shall continue to diligently perform all of Executive’s duties hereunder. The Company shall have the option, in its sole discretion, to make Executive’s termination effective at any time prior to the end of such notice period as long as the Company pays Executive all compensation to which Executive is entitled up through the last day of the two week notice period. Thereafter all obligations of the Company shall cease.
6. Termination Obligations
(a) Return of Property. Executive agrees that all property (including without limitation all equipment, tangible proprietary information, documents, records, notes, contracts and computer-generated materials) furnished to or created or prepared by Executive incident to Executive’s employment belongs to the Company and shall be promptly returned to the Company upon termination of Executive’s employment.
(b) Resignation and Cooperation. Upon termination of Executive’s employment, Executive shall be deemed to have resigned from all offices and directorships then held with the Company. Following any termination of employment, Executive shall cooperate with the Company in the winding up of pending work on behalf of the Company and the orderly transfer of work to other employees. Executive shall also cooperate with the Company in the defense of any action brought by any third party against the Company that relates to Executive’s employment by the Company. The Company agrees to pay Executive a per diem rate (based upon his base salary as of the last day of employment) for all such post-employment activities plus expenses incurred by Executive. The Company and Executive shall mutually agree upon dates, times and locations of post-employment assistance.
(c) Continuing Obligations. Executive understands and agrees that Executive’s obligations under Sections 6, 7, and 8 herein (including Exhibit B) shall survive the termination of Executive’s employment for any reason and the termination of this Agreement.
7. Inventions and Proprietary Information; Prohibition on Third Party Information
(a) Employment, Confidential Information and Invention Assignment Agreement. Executive agrees to sign and be bound by the terms of the Employment, Confidential Information and Invention Assignment Agreement, which is attached as Exhibit B.
(b) Non-Solicitation. In further consideration of the compensation to be paid to Executive hereunder, Executive acknowledges that in the course of his employment with the Company he will become familiar with the Company's trade secrets and with other confidential information concerning the Company and that his services will be of special, unique and extraordinary value to the Company. Therefore, Executive agrees that:
(c) Non-Disclosure of Third Party Information. Executive represents and warrants and covenants that Executive shall not disclose to the Company, or use, or induce the Company to use, any proprietary information or trade secrets of others at any time, including but not limited to any proprietary information or trade secrets of any former employer, if any; and Executive acknowledges and agrees that any violation of this provision shall be grounds for Executive’s immediate termination For Cause and could subject Executive to substantial civil liabilities and criminal penalties. Executive further specifically and expressly acknowledges that no officer or other employee or representative of the Company has requested or instructed Executive to disclose or use any such third party proprietary information or trade secrets.
8. Arbitration
a. ARBITRATION. EXCEPT AS PROVIDED IN SECTION 8(b) BELOW, EXECUTIVE AGREES THAT ANY DISPUTE OR CONTROVERSY ARISING OUT OF, RELATING TO, OR CONCERNING ANY INTERPRETATION, CONSTRUCTION, PERFORMANCE OR BREACH OF THIS AGREEMENT, SHALL BE SETTLED BY ARBITRATION TO BE HELD IN LOS ANGELES COUNTY, CALIFORNIA, IN ACCORDANCE WITH THE RULES THEN IN EFFECT OF THE AMERICAN ARBITRATION ASSOCIATION. THE ARBITRATOR MAY GRANT INJUNCTIONS OR OTHER RELIEF IN SUCH DISPUTE OR CONTROVERSY. THE DECISION OF THE ARBITRATOR SHALL BE FINAL, CONCLUSIVE AND BINDING ON THE PARTIES TO THE ARBITRATION. JUDGMENT MAY BE ENTERED ON THE ARBITRATOR'S DECISION IN ANY COURT HAVING JURISDICTION. THE COMPANY SHALL PAY ALL OF THE COSTS AND EXPENSES OF SUCH ARBITRATION, AND EACH OF THE COMPANY AND EXECUTIVE SHALL SEPARATELY PAY THEIR COUNSEL FEES AND EXPENSES.
THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF EXECUTIVE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP (EXCEPT AS PROVIDED IN SECTION 8(b) BELOW), INCLUDING, BUT NOT LIMITED TO, THE FOLLOWING CLAIMS:
i. ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT; BREACH OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT OF GOOD FAITH AND FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL MISREPRESENTATION; NEGLIGENT OR INTENTIONAL INTERFERENCE WITH CONTRACT OR PROSPECTIVE ECONOMIC ADVANTAGE; AND DEFAMATION;
ii. ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL, STATE OR MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE FAIR LABOR STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AND LABOR CODE SECTION 201, et seq.;
iii. ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND REGULATIONS RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.
b. EQUITABLE REMEDIES. EXECUTIVE AGREES THAT IT WOULD BE IMPOSSIBLE OR INADEQUATE TO MEASURE AND CALCULATE THE COMPANY'S DAMAGES FROM ANY BREACH OF THE COVENANTS SET FORTH IN SECTIONS 1 AND 7 HEREIN. ACCORDINGLY, EXECUTIVE AGREES THAT IF EXECUTIVE BREACHES ANY OF SUCH SECTIONS, THE COMPANY WILL HAVE AVAILABLE, IN ADDITION TO ANY OTHER RIGHT OR REMEDY AVAILABLE, THE RIGHT TO OBTAIN AN INJUNCTION FROM A COURT OF COMPETENT JURISDICTION RESTRAINING SUCH BREACH OR THREATENED BREACH AND TO SPECIFIC PERFORMANCE OF ANY SUCH PROVISION OF THIS AGREEMENT. I FURTHER AGREE THAT NO BOND OR OTHER SECURITY SHALL BE REQUIRED IN OBTAINING SUCH EQUITABLE RELIEF AND I HEREBY CONSENT TO THE ISSUANCE OF SUCH INJUNCTION AND TO THE ORDERING OF SPECIFIC PERFORMANCE.
c. CONSIDERATION. EXECUTIVE UNDERSTANDS THAT EACH PARTY'S PROMISE TO RESOLVE CLAIMS BY ARBITRATION IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT, RATHER THAN THROUGH THE COURTS, IS CONSIDERATION FOR THE
OTHER PARTY'S LIKE PROMISE. EXECUTIVE FURTHER UNDERSTANDS THAT EXECUTIVE IS OFFERED EMPLOYMENT IN CONSIDERATION OF EXECUTIVE’S PROMISE TO ARBITRATE CLAIMS.
9. Amendments; Waivers; Remedies
This Agreement may not be amended or waived except by a writing approved by the Board of Directors and signed by Executive and by a duly authorized representative of the Company other than Executive. Failure to exercise any right under this Agreement shall not constitute a waiver of such right. Any waiver of any breach of this Agreement shall not operate as a waiver of any subsequent breaches. All rights or remedies specified for a party herein shall be cumulative and in addition to all other rights and remedies of the party hereunder or under applicable law.
10. Assignment; Binding Effect
(a) Assignment. The performance of Executive is personal hereunder, and Executive agrees that Executive shall have no right to assign and shall not assign or purport to assign any rights or obligations under this Agreement. This Agreement may be assigned or transferred by the Company; and nothing in this Agreement shall prevent the consolidation, merger or sale of the Company or a sale of any or all or substantially all of its assets.
(b) Binding Effect. Subject to the foregoing restriction on assignment by Executive, this Agreement shall inure to the benefit of and be binding upon each of the parties; the affiliates, officers, directors, agents, successors and assigns of the Company; and the heirs, devisees, spouses, legal representatives and successors of Executive.
11. Notices
All notices or other communications required or permitted hereunder shall be made in writing and shall be deemed to have been duly given if delivered: (a) by hand; (b) by a nationally recognized overnight courier service; or (c) by United States first class registered or certified mail, return receipt requested, to the principal address of the other party, as set forth below. The date of notice shall be deemed to be the earlier of (i) actual receipt of notice by any permitted means, or (ii) two (2) business days following dispatch by overnight delivery service or five (5) business days following dispatch by the United States Mail. Executive shall be obligated to notify the Company in writing of any change in Executive’s address. Notice of change of address shall be effective only when done in accordance with this paragraph.
Company’s Notice Address:
Reprints Desk, Inc.
5435 Balboa Blvd., Suite 202
Encino, California 91316
Attention: CFO
Executive’s Notice Address:
Shane Hunt
3113 Ceanothus Ave.
Chico, CA 95973
12. Severability
If any provision of this Agreement shall be held by a court or arbitrator to be invalid, unenforceable, or void, such provision shall be enforced to the fullest extent permitted by law, and the remainder of this Agreement
shall remain in full force and effect. In the event that the time period or scope of any provision is declared by a court or arbitrator of competent jurisdiction to exceed the maximum time period or scope that such court or arbitrator deems enforceable, then such court or arbitrator shall reduce the time period or scope to the maximum time period or scope permitted by law.
13. Taxes
All amounts paid under this Agreement (including, without limitation, Base Salary and Severance) shall be paid less all applicable state and federal tax withholdings and any other withholdings required by any applicable jurisdiction.
14. Governing Law
This Agreement shall be governed by and construed in accordance with the laws of the State of California.
15. Interpretation
This Agreement shall be construed as a whole, according to its fair meaning, and not in favor of or against any party. Sections and section headings contained in this Agreement are for reference purposes only, and shall not affect in any manner the meaning or interpretation of this Agreement. Whenever the context requires, references to the singular shall include the plural and the plural the singular.
16. Obligations Survive Termination of Employment
Executive agrees that any and all of Executive’s obligations under this Agreement, including but not limited to Exhibit B, shall survive the termination of employment and the termination of this Agreement.
17. Counterparts
This Agreement may be executed in any number of counterparts, each of which shall be deemed an original of this Agreement, but all of which together shall constitute one and the same instrument.
18. Authority
Each party represents and warrants that such party has the right, power and authority to enter into and execute this Agreement and to perform and discharge all of the obligations hereunder; and that this Agreement constitutes the valid and legally binding agreement and obligation of such party and is enforceable in accordance with its terms.
19. Entire Agreement
This Agreement is intended to be the final, complete, and exclusive statement of the terms of Executive’s employment by the Company and may not be contradicted by evidence of any prior or contemporaneous statements or agreements, except for agreements specifically referenced herein (including the attached Exhibit B). To the extent that the practices, policies or procedures of the Company, now or in the future, apply to Executive and are inconsistent with the terms of this Agreement, the provisions of this Agreement shall control. Any subsequent change in Executive’s duties, position, or compensation will not affect the validity or scope of this Agreement.
20. Executive Acknowledgement
EXECUTIVE ACKNOWLEDGES EXECUTIVE HAS HAD THE OPPORTUNITY TO CONSULT
LEGAL COUNSEL CONCERNING THIS AGREEMENT, THAT EXECUTIVE HAS READ AND UNDERSTANDS THE AGREEMENT, THAT EXECUTIVE IS FULLY AWARE OF ITS LEGAL EFFECT, AND THAT EXECUTIVE HAS ENTERED INTO IT FREELY BASED ON EXECUTIVE’S OWN JUDGMENT AND NOT ON ANY REPRESENTATIONS OR PROMISES OTHER THAN THOSE CONTAINED IN THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first written above.
REPRINTS DESK, INC.:
By: ____________________________________
Name:
Title:
EXECUTIVE:
____________________________________
Name
EXHIBIT A
DERYCZ SCIENTIFIC, INC.
TERMINATION CERTIFICATION
This is to certify that I do not have in my possession, nor have I failed to return, any devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, materials, equipment, other documents or property, or reproductions of any aforementioned items belonging to Derycz Scientific, Inc., its subsidiaries, affiliates, successors or assigns (together, the “Company”).
I further certify that I have complied with all the terms of the Company's Proprietary Information and Inventions Agreement signed by me, including the reporting of any inventions and original works of authorship (as defined therein), conceived or made by me (solely or jointly with others) covered by that agreement.
I further agree that, in compliance with the Proprietary Information and Inventions Agreement, I will preserve as confidential all trade secrets, confidential knowledge, data or other proprietary information relating to products, processes, know-how, designs, formulas, developmental or experimental work, computer programs, data bases, other original works of authorship, customer lists, business plans, financial information or other subject matter pertaining to any business of the Company or any of its employees, clients, consultants or licensees.
I further agree that for twelve (12) months from this date, I will not hire any employees of the Company and I will not solicit, induce, recruit or encourage any of the Company's employees to leave their employment.
Date: ______________________
(Employee's Signature)
(Type/Print Employee's Name)
EXHIBIT B
DERYCZ SCIENTIFIC, INC.
EMPLOYMENT, CONFIDENTIAL INFORMATION AND
INVENTION ASSIGNMENT AGREEMENT
Exhibit 10.24
AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
This Amendment To Executive Employment Agreement (“Amendment”), effective June 30, 2021, hereby amends the Executive Employment Agreement (the “Agreement”) dated November 1, 2012, as amended to date, between Reprints Desk, Inc., a Delaware corporation (the “Company”), Research Solutions, Inc., a Nevada corporation (“Research Solutions”), and Shane Hunt (“Executive”).
WHEREAS, the parties have complied with the terms of the Agreement until the date hereof; and
WHEREAS, the parties wish to amend the terms of the Agreement.
NOW THEREFORE, for the mutual promises and other consideration described herein, the parties hereto agree as follows:
1.Section 1(d) Term is amended as follows:
Term. The term of employment of Executive by the Company pursuant to this Employment Agreement shall be for the period commencing on the Commencement Date and ending on June 30, 2022, or such earlier date that Employee’s employment is terminated in accordance with the provisions of this Employment Agreement.
2.Section 2(a) Base Salary is amended as follows:
Base Salary. In consideration of the services to be rendered under this Agreement, the Company shall pay Executive a salary at the rate of Two Hundred Thousand Five Hundred Seventy Dollars ($201,570) per year (“Base Salary”). The Base Salary shall be paid in accordance with the Company’s regularly established payroll practice. Executive’s Base Salary will be reviewed from time to time in accordance with the established procedures of the Company for adjusting salaries for similarly situated employees and may be adjusted in the sole discretion of the Company.
3.Section 2(b) Bonus Compensation shall be added as follows:
(b) Bonus Compensation. Executive shall receive a cash bonus of $40,000 per year (paid $10,000 per quarter) and a matching equity bonus (of stock options or restricted stock that vest over 3 years) for the same value [$40,000 per year (paid $10,000 per quarter)], for reaching budgeted ARR goals.
3.Section 3(b) Severance is amended as follows:
Severance. Except in situations where the employment of Executive is terminated For Cause, By Death or By Disability (as defined in Section 4 below), in the event that the Company terminates the employment of Executive at any time, Executive will be eligible to receive an amount equal to six (6) months of the then-current Base Salary of the Executive payable in the form of salary continuation. Executive’s eligibility for severance is conditioned on Executive having first signed a release agreement in the form attached as Exhibit A. Executive shall not be
entitled to any severance payments if Executive’s employment is terminated For Cause, By Death or By Disability (as defined in Section 4 below) or if Executive’s employment is terminated by Executive (in accordance with Section 5 below).
Except as expressly amended or modified herein, all terms and conditions of the Agreement are hereby ratified, confirmed and approved and shall remain in full force and effect. In the event of any conflict or inconsistency between this Amendment and the Agreement, this Amendment shall govern.
This Amendment and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.
This Amendment may be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties have duly executed this Amendment as of the date first written above.
REPRINTS DESK, INC.:
By:
Name and Title: Alan Urban, CFO
RESEARCH SOLUTIONS, INC.:
By:
Name and Title: Alan Urban, CFO
EXECUTIVE:
By:
Name: Shane Hunt
Exhibit 10.25
AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT
This Amendment To Executive Employment Agreement (“Amendment”), effective June 30, 2022, hereby amends the Executive Employment Agreement (the “Agreement”) dated November 1, 2012, as amended to date, between Reprints Desk, Inc., a Delaware corporation (the “Company”), Research Solutions, Inc., a Nevada corporation (“Research Solutions”), and Shane Hunt (“Executive”).
WHEREAS, the parties have complied with the terms of the Agreement until the date hereof; and
WHEREAS, the parties wish to amend the terms of the Agreement.
NOW THEREFORE, for the mutual promises and other consideration described herein, the parties hereto agree as follows:
1.Section 1(d) Term is amended as follows:
Term. The term of employment of Executive by the Company pursuant to this Employment Agreement shall be for the period commencing on the Commencement Date and shall continue for an indefinite period until such date that Employee’s employment is terminated in accordance with the provisions of this Employment Agreement.
2.Section 2(a) Base Salary is amended as follows:
Base Salary. In consideration of the services to be rendered under this Agreement, the Company shall pay Executive a salary at the rate of Two Hundred Twenty-Five Thousand Dollars ($225,000) per year (“Base Salary”). The Base Salary shall be paid in accordance with the Company’s regularly established payroll practice. Executive’s Base Salary will be reviewed from time to time in accordance with the established procedures of the Company for adjusting salaries for similarly situated employees and may be adjusted in the sole discretion of the Company.
3.Section 2(b) Bonus Compensation shall be added as follows:
(b) Bonus Compensation. Executive shall receive a cash bonus of $140,000 per year (paid $35,000 per quarter), for reaching budgeted ARR goals, including the opportunity to earn additional accelerator payments and bonus compensation for overperformance. In addition, Executive shall be eligible to participate in the long-term equity bonus plan being implemented by the Company.
Except as expressly amended or modified herein, all terms and conditions of the Agreement are hereby ratified, confirmed and approved and shall remain in full force and effect. In the event of any conflict or inconsistency between this Amendment and the Agreement, this Amendment shall govern.
This Amendment and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.
This Amendment may be executed and delivered by facsimile signature and in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties have duly executed this Amendment as of the date first written above.
REPRINTS DESK, INC.:
By:
Name and Title: William Nurthen, CFO
RESEARCH SOLUTIONS, INC.:
By:
Name and Title: William Nurthen, CFO
EXECUTIVE:
By:
Name: Shane Hunt
Exhibit 21
LIST OF SUBSIDIARIES OF RESEARCH SOLUTIONS, INC.
| 1. | Reprints Desk, Inc. a wholly-owned subsidiary incorporated under the laws of the State of Delaware. |
| 2. | Reprints Desk Latin America S. de R.L. de C.V., a wholly owned subsidiary formed under the laws of Mexico. |
| 3. | RESSOL LA, S. DE R.L. DE C.V., a wholly owned subsidiary formed under the laws of Mexico. |
Exhibit 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the previously filed Registration Statements of Research Solutions, Inc. on Form S-8 (File Nos. 333-169823, 333-185059, 333-200656, 333-214824, 333-221963, 333-235261, 333-250799 and 333-261275) and on Form S-1 (File No. 333-212649) of our report dated September 23, 2022, relating to the consolidated financial statements of Research Solutions, Inc. and Subsidiaries as of June 30, 2022 and 2021 and for the years then ended which appear in Research Solutions, Inc.’s Annual Report on Form 10-K for the fiscal year ended June 30, 2022 filed with the Securities and Exchange Commission on September 23, 2022.
/s/ Weinberg & Company, P.A.
September 23, 2022
Los Angeles, California
Exhibit 31.1
RULE 13a-14(a) CERTIFICATION
I, Roy W. Olivier, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Research Solutions, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: September 23, 2022 | /s/ Roy W. Olivier |
| Roy W. Olivier |
| Chief Executive Officer and President |
| (Principal Executive Officer) |
Exhibit 31.2
RULE 13a-14(a) CERTIFICATION
I, William Nurthen, certify that:
| 1. | I have reviewed this annual report on Form 10-K of Research Solutions, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a–15(f) and 15d–15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: September 23, 2022 | /s/ William Nurthen |
| William Nurthen |
| Chief Financial Officer (Principal Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Research Solutions, Inc. (the “Company”) on Form 10-K for the period ending June 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Roy W. Olivier, Interim President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Roy W. Olivier |
|
Roy W. Olivier |
|
Chief Executive Officer and President |
|
September 23, 2022 |
|
Exhibit 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Research Solutions, Inc. (the “Company”) on Form 10-K for the period ending June 30, 2022, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William Nurthen, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ William Nurthen |
|
William Nurthen |
|
Chief Financial Officer |
|
September 23, 2022 |
|