UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: March 31, 2022

☐          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. 001-39256

RESEARCH SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

Nevada	11-3797644
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
Address not applicable1	N/A
(Address of principal executive offices)	(Zip Code)

(310) 477-0354

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

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

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. Yes þ No ◻

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 (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  þ      No  ◻

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.

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

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

Title of Class	Number of Shares Outstanding on May 10, 2022
Common Stock, $0.001 par value	27,064,215

¹ In November 2019, we became a fully remote company. Accordingly, we do not currently have principal executive offices.

TABLE OF CONTENTS

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	19
Item 3. Quantitative and Qualitative Disclosures About Market Risk	30
Item 4. Controls and Procedures	31
PART II — OTHER INFORMATION	32
Item 1A. Risk Factors	32
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 6. Exhibits	33
SIGNATURES	34

2

PART 1 — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Research Solutions, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

	March 31,
	2022		June 30,
	(unaudited)		2021
Assets
Current assets:
Cash and cash equivalents	$	10,640,521	$	11,004,337
Accounts receivable, net of allowance of $80,655 and $51,495, respectively		5,622,368		4,717,453
Prepaid expenses and other current assets		338,236		270,252
Prepaid royalties		959,208		904,921
Total current assets		17,560,333		16,896,963
Other assets:
Property and equipment, net of accumulated depreciation of $836,339 and $824,123, respectively		43,671		20,755
Deposits and other assets		905		906
Total assets	$	17,604,909	$	16,918,624
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	7,084,276	$	6,687,188
Deferred revenue		5,342,828		4,804,351
Total current liabilities		12,427,104		11,491,539
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; 27,000,844 and 26,498,215 shares issued and outstanding, respectively		27,001		26,498
Additional paid-in capital		27,927,567		26,982,052
Accumulated deficit		(22,656,005)		(21,461,888)
Accumulated other comprehensive loss		(120,758)		(119,577)
Total stockholders’ equity		5,177,805		5,427,085
Total liabilities and stockholders’ equity	$	17,604,909	$	16,918,624

See notes to condensed consolidated financial statements

3

Research Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss)

(Unaudited)

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2022		2021		2022		2021
Revenue:
Platforms	$	1,786,224	$	1,344,183	$	4,900,927	$	3,706,406
Transactions		6,971,128		6,996,349		19,471,216		19,832,286
Total revenue		8,757,352		8,340,532		24,372,143		23,538,692
Cost of revenue:
Platforms		219,051		233,696		696,375		654,651
Transactions		5,299,804		5,404,196		14,939,236		15,340,243
Total cost of revenue		5,518,855		5,637,892		15,635,611		15,994,894
Gross profit		3,238,497		2,702,640		8,736,532		7,543,798
Operating expenses:
Selling, general and administrative		3,573,454		2,650,504		9,912,690		7,728,990
Depreciation and amortization		4,988		2,066		12,144		8,828
Total operating expenses		3,578,442		2,652,570		9,924,834		7,737,818
Income (loss) from operations		(339,945)		50,070		(1,188,302)		(194,020)
Other income		237		250		777		884
Income (loss) from operations before provision for income taxes		(339,708)		50,320		(1,187,525)		(193,136)
Provision for income taxes		(822)		(572)		(6,592)		(3,077)
Net income (loss)		(340,530)		49,748		(1,194,117)		(196,213)
Other comprehensive income (loss):
Foreign currency translation		1,609		(3,333)		(1,181)		3,348
Comprehensive income (loss)	$	(338,921)	$	46,415	$	(1,195,298)	$	(192,865)
Basic income (loss) per common share:
Net income (loss) per share	$	(0.01)	$	—	$	(0.05)	$	(0.01)
Weighted average common shares outstanding		26,512,195		26,027,665		26,392,949		25,966,072
Diluted income (loss) per common share:
Net income (loss) per share	$	(0.01)	$	—	$	(0.05)	$	(0.01)
Weighted average common shares outstanding		26,512,195		26,565,892		26,392,949		25,966,072

See notes to condensed consolidated financial statements

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Research Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

For the Three and Nine Months Ended March 31, 2022

(Unaudited)

				Additional				Other		Total
	Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Loss		Equity
Balance, December 31, 2021	26,817,056	$	26,817	$	27,475,741	$	(22,315,475)	$	(122,367)	$	5,064,716
Fair value of vested stock options	—		—		296,782		—		—		296,782
Fair value of vested restricted common stock	42,214		42		102,410		—		—		102,452
Repurchase of common stock	(6,086)		(6)		(14,235)		—		—		(14,241)
Common stock issued upon exercise of stock options	147,660		148		66,869		—		—		67,017
Net loss for the period	—		—		—		(340,530)		—		(340,530)
Foreign currency translation	—		—		—		—		1,609		1,609
Balance, March 31, 2022	27,000,844	$	27,001	$	27,927,567	$	(22,656,005)	$	(120,758)	$	5,177,805
Balance, July 1, 2021	26,498,215	$	26,498	$	26,982,052	$	(21,461,888)	$	(119,577)	$	5,427,085
Fair value of vested stock options	—		—		424,450		—		—		424,450
Fair value of vested restricted common stock	293,211		293		446,140		—		—		446,433
Repurchase of common stock	(33,402)		(34)		(82,019)		—		—		(82,053)
Common stock issued upon exercise of stock options	192,820		194		97,494		—		—		97,688
Common stock issued upon exercise of warrants	50,000		50		59,450		—		—		59,500
Net loss for the period	—		—		—		(1,194,117)		—		(1,194,117)
Foreign currency translation	—		—		—		—		(1,181)		(1,181)
Balance, March 31, 2022	27,000,844	$	27,001	$	27,927,567	$	(22,656,005)	$	(120,758)	$	5,177,805

See notes to condensed consolidated financial statements

5

Research Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity

For the Three and Nine Months Ended March 31, 2021

(Unaudited)

				Additional				Other		Total
	Common Stock			Paid-in		Accumulated		Comprehensive		Stockholders’
	Shares	Amount		Capital		Deficit		Loss		Equity
Balance, December 31, 2020	26,266,008	$	26,266	$	26,709,401	$	(21,422,760)	$	(118,357)	$	5,194,550
Fair value of vested stock options	—		—		85,151		—		—		85,151
Fair value of vested restricted common stock	20,079		20		94,174		—		—		94,194
Repurchase of common stock	(10,750)		(11)		(23,101)		—		—		(23,112)
Repurchase of stock options and warrants	—		—		(308,313)		—		—		(308,313)
Common stock issued upon exercise of stock options	76,671		77		74,673		—		—		74,750
Net income for the period	—		—		—		49,748		—		49,748
Foreign currency translation	—		—		—		—		(3,333)		(3,333)
Balance, March 31, 2021	26,352,008	$	26,352	$	26,631,985	$	(21,373,012)	$	(121,690)	$	5,163,635
Balance, July 1, 2020	26,032,263	$	26,032	$	26,134,819	$	(21,176,799)	$	(125,038)	$	4,859,014
Fair value of vested stock options	—		—		504,936		—		—		504,936
Fair value of vested restricted common stock	163,553		163		280,985		—		—		281,148
Repurchase of common stock	(67,417)		(67)		(150,319)		—		—		(150,386)
Repurchase of stock options and warrants	—		—		(308,313)		—		—		(308,313)
Common stock issued upon exercise of stock options	158,609		159		88,691		—		—		88,850
Common stock issued upon exercise of warrants	65,000		65		81,186		—		—		81,251
Net loss for the period	—		—		—		(196,213)		—		(196,213)
Foreign currency translation	—		—		—		—		3,348		3,348
Balance, March 31, 2021	26,352,008	$	26,352	$	26,631,985	$	(21,373,012)	$	(121,690)	$	5,163,635

See notes to condensed consolidated financial statements

6

Research Solutions, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine Months Ended
	March 31,
	2022		2021
Cash flow from operating activities:
Net loss	$	(1,194,117)	$	(196,213)
Adjustment to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		12,144		8,828
Amortization of lease right		—		72,331
Fair value of vested stock options		424,450		504,936
Fair value of vested restricted common stock		446,433		281,148
Changes in operating assets and liabilities:
Accounts receivable		(904,915)		(563,829)
Prepaid expenses and other current assets		(67,984)		(75,473)
Prepaid royalties		(54,287)		(23,146)
Deposits and other assets		—		5,360
Accounts payable and accrued expenses		397,088		1,208,474
Deferred revenue		538,477		1,076,966
Lease liability		—		(79,326)
Net cash provided by (used in) operating activities		(402,711)		2,220,056
Cash flow from investing activities:
Purchase of property and equipment		(34,251)		(11,853)
Net cash used in investing activities		(34,251)		(11,853)
Cash flow from financing activities:
Proceeds from the exercise of stock options		97,688		88,850
Proceeds from the exercise of warrants		59,500		81,251
Common stock repurchase		(82,053)		(150,386)
Repurchase of stock options and warrants		—		(308,313)
Net cash provided by (used in) financing activities		75,135		(288,598)
Effect of exchange rate changes		(1,989)		2,401
Net increase (decrease) in cash and cash equivalents		(363,816)		1,922,006
Cash and cash equivalents, beginning of period		11,004,337		9,311,556
Cash and cash equivalents, end of period	$	10,640,521	$	11,233,562
Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	6,592	$	3,077

See notes to condensed consolidated financial statements

7

RESEARCH SOLUTIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Nine Months Ended March 31, 2022 and 2021 (Unaudited)

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 two wholly owned subsidiaries: Reprints Desk, Inc., a Delaware corporation and Reprints Desk Latin America S. de R.L. de C.V, an entity organized under the laws of Mexico.

Nature of Business

We provide two service offerings to our customers: a cloud-based software-as-a-service (“SaaS”) research platform (“Platforms”) typically sold via annual auto-renewing license agreements and the sale of published scientific, technical, and medical (“STM”) content sold as individual articles (“Transactions”) either stand alone or via the Platform. When customers utilize the Platform to purchase Transactions it is packaged as a single solution that enables life science and other research intensive organizations to accelerate their research and development activities with faster, access and management of STM articles used throughout the intellectual property development lifecycle. The Platform typically delivers a ROI to the customer via more effectively managing Transaction costs and saving researchers time during the research process.

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 70 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

8

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.

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2021 filed with the SEC. The condensed consolidated balance sheet as of June 30, 2021 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including notes, required by GAAP.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all adjustments contained herein are of a normal recurring nature. Results of operations for the fiscal periods presented herein are not necessarily indicative of fiscal year-end results.

Note 2.   Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with 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.

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 $250,000 insurance limit. The Company does not anticipate incurring any losses related to these credit risks. The Company extends credit based on an evaluation of the customer’s financial condition, generally without collateral. Exposure to losses on receivables is principally dependent on each customer’s financial condition. The Company monitors its exposure for credit losses and intends to maintain allowances for anticipated losses, as required.

Cash denominated in Euros and British Pounds with an aggregate US Dollar equivalent of $963,825 and $138,488 at March 31, 2022 and June 30, 2021, respectively, was held by Reprints Desk in accounts at financial institutions located in Europe.

9

The Company has no customers that represent 10% of revenue or more for the three and nine months ended March 31, 2022 and 2021.

The following table summarizes accounts receivable concentrations:

	As of
	March 31,	June 30,
	2022	2021
Customer A	*	14	%

* Less than 10%

The following table summarizes vendor concentrations:

	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2022		2021		2022		2021
Vendor A	22	%	22	%	21	%	19	%
Vendor B	14	%	13	%	13	%	13	%

Revenue Recognition

The Company accounts for revenue in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606), ("ASC 606"). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. The Company adopted the guidance of ASC 606 on July 1, 2018.

Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company derives its revenues from two sources: 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.

10

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:

	Three Months Ended
	March 31,
	2022				2021
United States	$	5,027,965	57.4	%	$	4,600,913	55.2	%
Europe		3,159,984	36.1	%		3,134,387	37.6	%
Rest of World		569,403	6.5	%		605,232	7.3	%
Total	$	8,757,352	100	%	$	8,340,532	100	%

	Nine Months Ended
	March 31,
	2022				2021
United States	$	14,222,605	58.4	%	$	13,100,900	55.7	%
Europe		8,488,722	34.8	%		8,666,032	36.8	%
Rest of World		1,660,816