Research Solutions, Inc 10-Q for FY2020 Q3

Research Solutions, Inc. (RSSS)

10-Q 2020-05-14 For: 2020-03-31

Added on April 06, 2026

About this 10-Q

Research Solutions, Inc filed this 10-Q on May 14, 2020, covering the quarter ended March 31, 2020 (FY2020 Q3).

Headline figures

Quarter ended March 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $8.05M; up 9.1% from $7.38M a year earlier
Net income: $11.95K; compared with a net loss of $117.68K a year earlier
Diluted EPS: $0.00; compared with $0.00 a year earlier

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Nevada	11-3797644
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

16350 Ventura Blvd., Suite D #811, Encino, California	91436
(Address of principal executive offices)	(Zip Code)

Title of each Class	Trading Symbol(s)	Name of each Exchange on which registered
Common stock, $0.001 par value	RSSS	The Nasdaq Stock Market LLC

Large accelerated filer ¨	Accelerated filer ¨
Non-accelerated filer þ	Smaller reporting company þ
	Emerging growth company ¨

Title of Class		Number of Shares Outstanding on May 7, 2020
Common Stock, $0.001 par value		26,034,572

PART I — FINANCIAL INFORMATION		3
Item 1. Condensed Consolidated Financial Statements (unaudited)		3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3. Quantitative and Qualitative Disclosures About Market Risk		29
Item 4. Controls and Procedures		29

PART II — OTHER INFORMATION		30
Item 1A. Risk Factors		30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		30
Item 6. Exhibits		30

SIGNATURES		31

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	March 31,			June 30,
	2020			2019
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	8,249,260		$	5,353,090
Accounts receivable, net of allowance of $88,698 and $100,175, respectively		5,111,493			4,493,169
Prepaid expenses and other current assets		307,165			323,591
Prepaid royalties		566,379			-
Total current assets		14,234,297			10,169,850

Other assets:
Property and equipment, net of accumulated depreciation of $799,935 and $789,788, respectively		14,822			36,828
Deposits and other assets		6,132			14,406
Right of use asset, net of accumulated amortization of $360,239 and $270,777, respectively		102,783			192,245
Total assets	$	14,358,034		$	10,413,329

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	6,174,737		$	4,862,895
Deferred revenue		3,302,187			2,310,206
Lease liability, current portion		112,775			129,187
Total current liabilities		9,589,699			7,302,288

Long-term liabilities:
Lease liability, long-term portion		-			79,326
Total liabilities		9,589,699			7,381,614

Commitments and contingencies

Stockholders’ equity:
Preferred stock; $0.001 par value; 20,000,000 shares authorized; no shares issued and outstanding		-			-
Common stock; $0.001 par value; 100,000,000 shares authorized; 26,034,572 and 24,375,948 shares issued and outstanding, respectively		26,035			24,376
Additional paid-in capital		26,044,827			23,631,481
Accumulated deficit		(21,176,240	)		(20,514,557	)
Accumulated other comprehensive loss		(126,287	)		(109,585	)
Total stockholders’ equity		4,768,335			3,031,715
Total liabilities and stockholders’ equity	$	14,358,034		$	10,413,329

	Three Months Ended						Nine Months Ended
	March 31,						March 31,
	2020			2019			2020			2019

Revenue:
Platforms	$	1,017,789		$	748,726		$	2,824,059		$	2,005,284
Transactions		7,029,617			6,629,231			20,348,898			19,314,036
Total revenue		8,047,406			7,377,957			23,172,957			21,319,320

Cost of revenue:
Platforms		177,919			134,672			490,897			365,007
Transactions		5,330,473			5,063,624			15,552,711			14,838,457
Total cost of revenue		5,508,392			5,198,296			16,043,608			15,203,464
Gross profit		2,539,014			2,179,661			7,129,349			6,115,856

Operating expenses:
Selling, general and administrative		2,544,659			2,343,161			7,956,446			7,156,937
Depreciation and amortization		5,510			9,617			19,908			30,465
Total operating expenses		2,550,169			2,352,778			7,976,354			7,187,402
Loss from operations		(11,155	)		(173,117	)		(847,005	)		(1,071,546	)

Other income		23,662			27,875			75,738			75,124

Income (loss) from operations before provision for income taxes		12,507			(145,242	)		(771,267	)		(996,422	)
Provision for income taxes		(561	)		(5,482	)		(7,861	)		(22,145	)

Income (loss) from continuing operations		11,946			(150,724	)		(779,128	)		(1,018,567	)

Gain from sale of discontinued operations		-			33,044			117,445			130,462

Net income (loss)		11,946			(117,680	)		(661,683	)		(888,105	)

Other comprehensive income (loss):
Foreign currency translation		(14,677	)		(5,216	)		(16,702	)		(11,254	)
Comprehensive loss	$	(2,731	)	$	(122,896	)	$	(678,385	)	$	(899,359	)

Basic income (loss) per common share:
Income (loss) per share from continuing operations	$	-		$	-		$	(0.03	)	$	(0.04	)
Income per share from discontinued operations	$	-		$	-		$	-		$	-
Net income (loss) per share	$	-		$	-		$	(0.03	)	$	(0.04	)
Basic weighted average common shares outstanding		24,960,394			23,845,798			24,411,888			23,758,844

Diluted income (loss) per common share:
Income (loss) per share from continuing operations	$	-		$	-		$	(0.03	)	$	(0.04	)
Income per share from discontinued operations	$	-		$	-		$	-		$	-
Net income (loss) per share	$	-		$	-		$	(0.03	)	$	(0.04	)
Diluted weighted average common shares outstanding		25,717,403			23,845,798			24,411,888			23,758,844

	Common Stock						Additional Paid-in			Accumulated			Other Comprehensive			Total Stockholders'
	Shares			Amount			Capital			Deficit			Loss			Equity

Balance, July 1, 2019		24,375,948		$	24,376		$	23,631,481		$	(20,514,557	)	$	(109,585	)	$	3,031,715

Fair value of vested stock options		-			-			58,198			-			-			58,198

Fair value of vested restricted common stock		70,000			70			84,404			-			-			84,474

Repurchase of common stock		(28,750	)		(28	)		(71,847	)		-			-			(71,875	)

Common stock issued upon exercise of stock options		24,307			24			(24	)		-			-			-

Net loss for the period		-			-			-			(81,457	)		-			(81,457	)

Foreign currency translation		-			-			-			-			(3,568	)		(3,568	)

Balance, September 30, 2019		24,441,505			24,442			23,702,212			(20,596,014	)		(113,153	)		3,017,487

Fair value of vested stock options		-			-			437,992			-			-			437,992

Fair value of vested restricted common stock		13,978			14			85,626			-			-			85,640

Repurchase of common stock		(42,500	)		(42	)		(127,457	)		-			-			(127,499	)

Common stock issued upon exercise of stock options		62,573			62			(62	)		-			-			-

Net loss for the period		-			-			-			(592,172	)		-			(592,172	)

Foreign currency translation		-			-			-			-			1,543			1,543

Balance, December 31, 2019		24,475,556			24,476			24,098,311			(21,188,186	)		(111,610	)		2,822,991

Fair value of vested stock options		-			-			56,712			-			-			56,712

Fair value of vested restricted common stock		12,500			13			85,513			-			-			85,526

Repurchase of common stock		(25,150	)		(25	)		(69,138	)		-			-			(69,163	)

Common stock issued upon exercise of stock options		71,666			71			(71	)		-			-			-

Common stock issued upon exercise of warrants		1,500,000			1,500			1,873,500			-			-			1,875,000

Net income for the period		-			-			-			11,946			-			11,946

Foreign currency translation		-			-			-			-			(14,677	)		(14,677	)

Balance, March 31, 2020		26,034,572		$	26,035		$	26,044,827		$	(21,176,240	)	$	(126,287	)	$	4,768,335

	Three Months Ended March 31,						Nine Months Ended March 31,
	2020			2019			2020			2019
Vendor A		19	%		16	%		21	%		18	%
Vendor B		13	%		12	%		13	%		12	%
Vendor C		*			*			*			11	%

	Nine Months Ended March 31,				Year Ended June 30,
	2020		2019		2019		2018
Period end Euro : US Dollar exchange rate		1.10		1.12		1.14		1.17
Average period Euro : US Dollar exchange rate		1.11		1.15		1.14		1.19

Period end Mexican Peso : US Dollar exchange rate		0.04		0.05		0.05		0.05
Average period Mexican Peso : US Dollar exchange rate		0.05		0.05		0.05		0.05

	All Options					Vested Options					Unvested Options
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding at June 30, 2019		3,287,335		$	1.38		2,827,251		$	1.27		460,084		$	2.09
Granted		316,000			3.04		250,000			3.13		66,000			2.69
Options vesting		-			-		229,582			2.03		(229,582	)		2.03
Exercised		(258,755	)		1.17		(258,755	)		1.17		-			-
Forfeited/Cancelled		(20,000	)		1.95		(10,000	)		1.95		(10,000	)		1.95
Outstanding at March 31, 2020		3,324,580		$	1.56		3,038,078		$	1.49		286,502		$	2.28

Option Exercise Price		Options Outstanding		Remaining Contractual Life (in years)		Options Exercisable
	$0.59		8,150		2.25		8,150
	0.60		5,000		2.25		5,000
	0.65		6,150		2.25		6,150
	0.70		225,000		5.68		225,000
	0.77		49,500		3.33		49,500
	0.80		16,000		5.39		16,000
	0.90		25,667		4.06		25,667
	0.97		6,000		2.25		6,000
	1.00		28,249		3.68		28,249
	1.02		87,000		0.37		87,000
	1.05		400,529		6.34		400,529
	1.07		33,898		2.54		33,898
	1.09		129,165		5.61		129,165
	1.10		105,000		5.25		105,000
	1.14		3,674		2.25		3,674
	1.15		209,400		4.36		209,400
	1.20		352,414		7.33		348,746
	1.25		32,000		2.87		32,000
	1.30		243,000		1.93		243,000
	1.50		195,000		2.63		195,000
	1.59		35,000		8.12		23,333
	1.75		1,067		2.25		1,067
	1.80		94,050		3.38		94,050
	1.85		24,000		2.84		24,000
	1.95		275,000		8.26		166,667
	2.40		398,667		8.63		321,833
	2.49		50,000		9.50		-
	2.50		20,000		9.13		-
	3.13		258,000		9.62		250,000
	3.50		8,000		9.87		-
	Total		3,324,580				3,038,078

	Number of Warrants			Weighted Average Exercise Price
Outstanding, June 30, 2019		1,885,000		$	1.25
Granted		-			-
Exercised		(1,500,000	)		1.25
Expired/Cancelled		-			-
Outstanding, March 31, 2020		385,000		$	1.24
Exercisable, June 30, 2019		1,885,000		$	1.25
Exercisable, March 31, 2020		385,000		$	1.24

Warrant Exercise Price		Warrants Outstanding		Remaining Contractual Life (in years)		Warrants Exercisable
$	1.19		50,000		1.73		50,000
	1.25		335,000		1.14		335,000
	Total		385,000				385,000

	Nine Months Ended March 31,
	2020	2019
Expected dividend yield	0%	0%
Risk-free interest rate	1.37% - 1.69%	2.82% – 3.00%
Expected life (in years)	5 - 6	5 - 6
Expected volatility	62 - 64%	68 - 69%

	Number of Shares			Fair Value			Weighted Average Grant Date Fair Value
Non-vested, June 30, 2019		311,535		$	412,383		$	1.66
Granted		96,478			280,001			2.90
Vested		(188,087	)		(255,640	)		1.57
Forfeited		-			-			-
Non-vested, March 31, 2020		219,926		$	436,744		$	2.29

	Mar. 31,		Dec. 31,			Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,			June 30,
	2020		2019			2019			2019			2019			2018			2018			2018
Revenue:
Platforms	$	1,017,789	$	949,825		$	856,445		$	803,917		$	748,726		$	667,545		$	589,013		$	528,581
Transactions		7,029,617		6,580,613			6,738,668			6,670,685			6,629,231			6,321,297			6,363,508			6,637,292
Total revenue		8,047,406		7,530,438			7,595,113			7,474,602			7,377,957			6,988,842			6,952,521			7,165,873

Cost of revenue:
Platforms		177,919		162,508			150,470			142,368			134,672			122,077			108,259			101,370
Transactions		5,330,473		5,094,130			5,128,108			5,104,629			5,063,624			4,878,526			4,896,307			5,118,851
Total cost of revenue		5,508,392		5,256,638			5,278,578			5,246,997			5,198,296			5,000,603			5,004,566			5,220,221

Gross profit:
Platforms		839,870		787,317			705,975			661,549			614,054			545,468			480,754			427,211
Transactions		1,699,144		1,486,483			1,610,560			1,566,056			1,565,607			1,442,771			1,467,201			1,518,441
Total gross profit		2,539,014		2,273,800			2,316,535			2,227,605			2,179,661			1,988,239			1,947,955			1,945,652

Operating expenses:
Sales and marketing		626,956		638,837			550,349			659,108			542,641			445,879			431,417			455,250
Technology and product dev.		536,238		548,719			499,191			549,198			537,685			553,272			499,795			454,053
General and administrative		1,230,580		1,270,375			1,231,345			1,060,269			1,129,461			1,180,599			1,118,611			1,062,981
Depreciation and amortization		5,510		6,840			7,558			8,351			9,617			9,733			11,115			32,731
Stock-based comp. expense		142,237		523,632			142,672			126,903			131,072			453,288			115,909			75,089
Foreign currency transaction loss (gain)		8,648		(5,456	)		12,123			7,193			2,302			10,025			4,980			14,589
Total operating expenses		2,550,169		2,982,947			2,443,238			2,411,022			2,352,778			2,652,796			2,181,827			2,094,693
Other income (expenses and income taxes)		23,101		25,721			19,055			27,289			22,393			16,322			14,264			12,615
Income (loss) from continuing operations		11,946		(683,426	)		(107,648	)		(156,128	)		(150,724	)		(648,235	)		(219,608	)		(136,426	)
Gain on sale of discontinued operations		-		91,254			26,191			84,275			33,044			55,698			41,720			51,216
Net income (loss)		11,946		(592,172	)		(81,457	)		(71,853	)		(117,680	)		(592,537	)		(177,888	)		(85,210	)

Basic income (loss) per common share:
Income (loss) per share from continuing operations	$	-	$	(0.03	)	$	-		$	-		$	-		$	(0.03	)	$	(0.01	)	$	(0.01	)
Income per share from discontinued operations	$	-	$	-		$	-		$	-		$	-		$	-		$	-		$	-
Net income (loss) per share	$	-	$	(0.03	)	$	-		$	-		$	-		$	(0.03	)	$	(0.01	)	$	(0.01	)
Basic weighted average common shares outstanding		24,960,394		24,185,966			24,095,266			23,987,137			23,845,798			23,787,836			23,644,787			23,560,781

Diluted income (loss) per common share:
Income (loss) per share from continuing operations	$	-	$	(0.03	)	$	-		$	-		$	-		$	(0.03	)	$	(0.01	)	$	(0.01	)
Income per share from discontinued operations	$	-	$	-		$	-		$	-		$	-		$	-		$	-		$	-
Net income (loss) per share	$	-	$	(0.03	)	$	-		$	-		$	-		$	(0.03	)	$	(0.01	)	$	(0.01	)
Diluted weighted average common shares outstanding		25,717,403		24,185,966			24,095,266			23,987,137			23,845,798			23,787,836			23,644,787			23,560,781

	Three Months Ended March 31,
	2020			2019			$ Change			% Change

Revenue:
Platforms	$	1,017,789		$	748,726		$	269,063			35.9	%
Transactions		7,029,617			6,629,231			400,386			6.0	%
Total revenue		8,047,406			7,377,957			669,449			9.1	%

Cost of revenue:
Platforms		177,919			134,672			43,247			32.1	%
Transactions		5,330,473			5,063,624			266,849			5.3	%
Total cost of revenue		5,508,392			5,198,296			310,096			6.0	%

Gross profit:
Platforms		839,870			614,054			225,816			36.8	%
Transactions		1,699,144			1,565,607			133,537			8.5	%
Total gross profit		2,539,014			2,179,661			359,353			16.5	%

Operating expenses:
Sales and marketing		626,956			542,641			84,315			15.5	%
Technology and product development		536,238			537,685			(1,447	)		(0.3	)%
General and administrative		1,230,580			1,129,461			101,119			9.0	%
Depreciation and amortization		5,510			9,617			(4,107	)		(42.7	)%
Stock-based compensation expense		142,237			131,072			11,165			8.5	%
Foreign currency transaction loss (gain)		8,648			2,302			6,346			275.7	%
Total operating expenses		2,550,169			2,352,778			197,391			8.4	%
Loss from operations		(11,155	)		(173,117	)		161,962			93.6	%

Other income		23,662			27,875			(4,213	)		(15.1	)%

Income (loss) from operations before provision for income taxes		12,507			(145,242	)		157,749			108.6	%
Provision for income taxes		(561	)		(5,482	)		4,921			89.8	%

Income (loss) from continuing operations		11,946			(150,724	)		162,670			107.9	%

Gain from sale of discontinued operations		-			33,044			(33,044	)		(100.0	)%

Net income (loss)	$	11,946		$	(117,680	)	$	129,626			110.2	%

	Nine Months Ended March 31,
	2020			2019			$ Change			% Change

Revenue:
Platforms	$	2,824,059		$	2,005,284		$	818,775			40.8	%
Transactions		20,348,898			19,314,036			1,034,862			5.4	%
Total revenue		23,172,957			21,319,320			1,853,637			8.7	%

Cost of revenue:
Platforms		490,897			365,007			125,890			34.5	%
Transactions		15,552,711			14,838,457			714,254			4.8	%
Total cost of revenue		16,043,608			15,203,464			840,144			5.5	%

Gross profit:
Platforms		2,333,162			1,640,277			692,885			42.2	%
Transactions		4,796,187			4,475,579			320,608			7.2	%
Total gross profit		7,129,349			6,115,856			1,013,493			16.6	%

Operating expenses:
Sales and marketing		1,816,142			1,419,937			396,205			27.9	%
Technology and product development		1,584,148			1,590,752			(6,604	)		(0.4	)%
General and administrative		3,732,300			3,428,672			303,628			8.9	%
Depreciation and amortization		19,908			30,465			(10,557	)		(34.7	)%
Stock-based compensation expense		808,541			700,269			108,272			15.5	%
Foreign currency transaction loss (gain)		15,315			17,307			(1,992	)		(11.5	)%
Total operating expenses		7,976,354			7,187,402			788,952			11.0	%
Loss from operations		(847,005	)		(1,071,546	)		224,541			21.0	%

Other income		75,738			75,124			614			0.8	%

Loss from operations before provision for income taxes		(771,267	)		(996,422	)		225,155			22.6	%
Provision for income taxes		(7,861	)		(22,145	)		14,284			64.5	%

Loss from continuing operations		(779,128	)		(1,018,567	)		239,439			23.5	%

Gain from sale of discontinued operations		117,445			130,462			(13,017	)		(10.0	)%

Net loss	$	(661,683	)	$	(888,105	)	$	226,422			25.5	%

Category	Impact			Key Drivers
Platforms	↑	$	269,063	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	↑	$	400,386	Increased primarily due to orders from new customers.

Category	Impact as percentage of revenue		Key Drivers
Platforms	↓	0.5 %	Decreased primarily due to proportionally lower third-party data costs.
Transactions	↓	0.6 %	Decreased primarily due to proportionally lower copyright and personnel costs.

	Nine Months Ended March 31,
Consolidated Statements of Cash Flow Data:	2020			2019
Net cash provided by operating activities	$	1,304,131		$	575,130
Net cash used in investing activities		-			(9,107	)
Net cash provided by (used in) financing activities		1,606,463			(159,198	)

Effect of exchange rate changes		(14,424	)		(11,921	)
Net increase in cash and cash equivalents		2,896,170			394,904
Cash and cash equivalents, beginning of period		5,353,090			4,908,180
Cash and cash equivalents, end of period	$	8,249,260		$	5,303,084

Period	Total Number of Shares Purchased ¹	Average Price Paid per Share	Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
January 2020	-	-	-	$400,000
February 2020	-	-	-	$400,000
March 2020	25,150	$2.75	-	$330,838
Total	25,150	$2.75	-	-

	RESEARCH SOLUTIONS, INC.

	By:	/s/ Peter Victor Derycz

		Peter Victor Derycz
Date: May 14, 2020		Chief Executive Officer (Principal Executive Officer)

	By:	/s/ Alan Louis Urban

		Alan Louis Urban
Date: May 14, 2020		Chief Financial Officer (Principal Financial and Accounting Officer)

Exhibit Number		Description
10.1		Second Amendment to Amended and Restated Loan and Security Agreement dated February 14, 2020, among Silicon Valley Bank, Research Solutions, Inc. and Reprints Desk, Inc.
31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1		Section 1350 Certification of Chief Executive Officer *
32.2		Section 1350 Certification of Chief Financial Officer *
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
101.LAB		XBRL Taxonomy Extension Label Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase

BANK

SILICON VALLEY BANK

By:	/s/ Chris Lee
	Name:	Chris Lee
	Title:	Director


BORROWER

RESEARCH SOLUTIONS, INC.

By:	/s/ Alan Urban
	Name:	Alan Urban
	Title:	CFO

REPRINTS DESK, INC.

By:	/s/ Alan Urban
	Name:	Alan Urban
	Title:	CFO

TO:	SILICON VALLEY BANK	Date:
FROM:	RESEARCH SOLUTIONS, INC. and REPRINTS DESK, INC.

Please indicate compliance status by circling Yes/No under “Complies” column.

Reporting Covenants	Required	Complies

Monthly financial statements with Compliance Certificate	Monthly within 30 days	Yes No
10-Q, 10-K and 8-K	Within 5 days after filing with SEC	Yes No
A/R & A/P Agings	Streamline Period not in effect: Weekly and with each Advance request; Streamline Period in effect: Monthly within 7 days and with each Advance request	Yes No
Borrowing Base Reports	Streamline Period not in effect: Weekly and with each Advance request; Streamline Period in effect: Monthly within 7 days and with each Advance request	Yes No
Board approved projections	FYE within 30 days and as amended/updated	Yes No

Financial Covenant	Required	Actual	Complies

Maintain as indicated:
Minimum Adjusted Quick Ratio	1.15:1.0	_____:1.0	Yes No
Minimum Tangible Net Worth	*$1,500,000______**	$_______	Yes No
* plus (f) fifty percent (50%) of quarterly Net Income (for the quarter ending December 31, 2017 and each fiscal quarter ending thereafter) and (ii) fifty percent (50%) of issuances of equity and Subordinated Debt after October 1, 2017.

Streamline Period		Applies

AQR ≥ 1.30 to 1.0	Streamline Period in Effect	Yes No
AQR < 1.30 to 1.0	Streamline Period not in Effect	Yes No

RESEARCH SOLUTIONS, INC.	BANK USE ONLY



By:	Received by:
Name:		AUTHORIZED SIGNER
Title:
	Date:

REPRINTS DESK, INC.


By:	Verified:
Name:		AUTHORIZED SIGNER
Title:
	Date:

		Compliance Status: Yes No

A.	Aggregate value of the unrestricted and unencumbered cash and cash equivalents of Borrower and its Subsidiaries maintained with Bank	$
B.	Aggregate value of the net billed accounts receivable of Borrower and its Subsidiaries	$
C.	Quick Assets (the sum of lines A and B)	$
D.	Aggregate value of Obligations to Bank	$
E.	Aggregate value of liabilities of Borrower and its Subsidiaries (including all Indebtedness) that matures within one (1) year and current portion of Subordinated Debt permitted by Bank to be paid by Borrower less the current portion of Deferred Revenue and less the current portion of accrued lease liabilities	$
F.	Current Liabilities (the sum of lines D and E)	$
G.	Adjusted Quick Ratio (line C divided by line F)

1.	50% of quarterly Net Income (starting with the fiscal quarter ending December 31, 2017 and continuing with each fiscal quarter ending thereafter	$
2.	50% of issuances of equity and Subordinated Debt after October 1, 2017	$
3.	Total Required Amount ($1,500,000, plus Line 1 plus Line 2)	$

A.	Aggregate value of total assets of Borrower and its Subsidiaries	$
B.	Aggregate value of goodwill of Borrower and its Subsidiaries	$
C.	Aggregate value of intangible assets of Borrower and its Subsidiaries	$
D.	Aggregate value of liabilities that should, under GAAP, be classified as liabilities on Borrower’s consolidated balance sheet, including all Indebtedness	$
E.	Aggregate value of Indebtedness of Borrower subordinated to Borrower’s indebtedness to Bank	$
F.	Tangible Net Worth (line A minus line B minus line C minus line D plus line E)	$