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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: June 30, 2023
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
(State or other jurisdiction of incorporation or organization)
11-3797644
(I.R.S. Employer Identification No.)
Address not applicable1
(Address of principal executive offices)
N/A
(Zip Code)
Securities registered pursuant to Section 12(b) of the Act:
(310) 477-0354
(Registrant’s telephone number, including area code)
Title of each Class
Common stock, $0.001 par value
Trading Symbol(s)
RSSS
Name of each Exchange on which registered
The Nasdaq Stock Market LLC
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ⌧
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 ☐ No ⌧
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 ⌧
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 during
the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ 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 ☐
Non-accelerated filer ⌧
Accelerated filer ☐
Smaller reporting company ☒
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 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. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
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, 2022, the last business day of the registrant’s
most recently completed second fiscal quarter, was $44,570,844 based on the closing price of $1.92 per share as reported on the Nasdaq as of that date.
Indicate the number of shares outstanding of each of the registrant's classes of common stock as of the latest practicable date.
Title of Class
Common Stock, $0.001 par value
Number of Shares Outstanding on September 8, 2023
29,596,086
1 In November 2019, we became a fully remote company. Accordingly, we do not currently have principal executive offices.
Table of Contents
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
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Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
[Reserved]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
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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 as of June 30, 2023: 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 years of extensive experience satisfying customers across the information services and
STM publishing and technology industries. In addition, our team has experience growing and scaling SaaS and
subscription business models.
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
development. In pursuit of growth, we invest in vertical integration and channel relationships to increase the value we
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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.
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.
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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, 2023
and 2022.
Approximately 43% and 42% of our content cost for the years ended June 30, 2023 and 2022, 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.
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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:
● 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.
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.
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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.
Human Capital Resources
As of September 8, 2023, we had 145 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, 2023 and 2022, we earned a net income of $571,623 and incurred a net loss of $1,632,384, respectively. As of
June 30, 2023, we had an accumulated deficit of $22,522,649. 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, 2023
and 2022. 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.
The loss of our largest suppliers of content would significantly reduce our revenue and adversely affect our
results of operations.
Approximately 43% and 42% of our content cost for the years ended June 30, 2023 and 2022, 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.
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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, 2023 and
2022, respectively. 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
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.
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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.
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,
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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.
Disruptions and other damages to our information technology and breaches in data security or cybersecurity
attacks could have a negative financial impact and damage our reputation.
Our ability to serve our customers depends in part on the reliability of our technologies and system networks.
Unauthorized parties gaining access to digital technology and networks for the purposes of misappropriating sensitive
financial or business information, corrupting data, causing operational disruptions and other cyber-related risks could
adversely impact our customer relationships, business strategy and our reputation. These potential disruptions and cyber-
attacks could negatively affect revenues, costs, customer demand, system availability and our reputation. In addition, as we
execute our strategy to grow through acquisitions and to pursue newer technologies that improve the efficiency of our
operations, we are also expanding our information technologies, resulting in a greater technological presence and
corresponding vulnerability to cybersecurity risk. Certain new technologies present new and significant cybersecurity
safety risks that must be addressed before implementation. If we fail to identify and address cybersecurity risks associated
with acquisitions and new strategic initiatives, we may become increasingly exposed to such risks.
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
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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 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, 2023. 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,
2023, 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 any 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
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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
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.
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Unfavorable global economic conditions could have a material adverse effect on our business, financial
condition, results of operations, prospects and market price of our common stock.
Financial instability and a general decline in economic conditions in the United States and other countries caused
by political instability and conflict, including the ongoing conflict between Russia and Ukraine, and economic or financial
challenges caused by current and potential future bank failures or by general health crises such as the COVID-19
pandemic, have led to market disruptions, including significant volatility in commodity prices, credit and capital markets
instability, including disruptions in access to bank deposits and lending commitments, supply chain interruptions, rising
interest rates and global inflationary pressures. These macroeconomic factors could materially and adversely affect our
ability to continue to operate as a going concern and could otherwise have a material adverse effect on our business,
operations, operating results and financial condition as well as the price of our common stock. The recent closures of
Silicon Valley Bank, or SVB, Signature Bank and First Republic Bank have resulted in broader financial institution
liquidity risk and concerns. Although we were able to access all of the funds we had in deposit with SVB and have
diversified banking services previously provided solely by SVB to alternative global banking providers, future adverse
developments with respect to specific financial institutions or the broader financial services industry may lead to market-
wide liquidity shortages.
The failure of any bank in which we deposit our funds could reduce the amount of cash we have available for our
operations or delay our ability to access such funds. Any such failure may increase the possibility of a sustained
deterioration of financial market liquidity, or illiquidity at clearing, cash management and/or custodial financial institutions.
In the event we have a commercial relationship with a bank that has failed or is otherwise distressed, we may experience
delays or other issues in meeting our financial obligations. If other banks and financial institutions fail or become insolvent
in the future in response to financial conditions affecting the banking system and financial markets, our ability to access
our cash and cash equivalents and investments may be threatened, which could have a material adverse effect on our
business, operations, operating results and financial condition as well as the price of our common stock.
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
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to date and uncertainty of future profits. As a consequence of this enhanced risk, more risk-adverse investors may, under
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 8, 2023, Peter Victor Derycz, our Executive Chairman, had voting power equal to approximately
11.2% 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 8,
2023, voting power equal to approximately 8.7% of votes eligible to be cast at a meeting of our stockholders. As of
September 8, 2023, Mr. Derycz, Bristol Investment Fund, Ltd. (“Bristol Fund”), Bristol Capital Advisors, LLC, Paul
Kessler, Janice Peterson and Andrew Ritter (collectively, the “Group”) were party to a Joint Filing and Solicitation
Agreement pursuant to which the Group agreed, to the extent required by applicable law, to the joint filing of statements on
Schedule 13D with respect to the securities of the Company, to solicit proxies for the election of nominees nominated by
the Group at the Corporation’s annual meeting of stockholders, not to transact in securities of the Company without the
prior written consent of Bristol Fund and Mr. Derycz, subject to certain exceptions, that any SEC filing, press release,
public shareholder communication or Company communication proposed to be made or issued by the Group or any
member of the Group in connection with the Group’s activities shall be mutually agreeable to Bristol Fund and Mr. Derycz,
and that Mr. Derycz and Bristol Fund agree to jointly pay all out-of-pocket costs and expenses incurred in connection with
the Group’s activities based on Mr. Derycz’s and Bristol Fund’s pro rata share of their aggregate ownership of shares of the
Company’s common stock, which shall be advanced by Bristol Fund and repaid by Mr. Derycz pursuant to the terms of the
Joint Filing and Solicitation Agreement. 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, and have submitted an alternate slate of nominees for consideration at the Company’s
2023 annual meeting of 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.
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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
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, 2023 we had issued and outstanding 29,487,508
shares of common stock and we had 4,405,501 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, 2023, we had no shares of preferred stock issued and outstanding. Accordingly, as of
June 30, 2023, we could issue up to 66,106,991 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
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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
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 (“Nasdaq”) under the
symbol “RSSS.”
As of September 8, 2023, according to the records of our transfer agent, we had 38 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 2024. 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, 2022,
$255,345 remained under the current authorization to repurchase our outstanding common stock from our employees.
During the years ended June 30, 2023 and 2022, we repurchased 51,841 and 40,221 shares of our common stock
under the repurchase plan at an average price of approximately $2.01 and $2.34 per share, respectively, for an aggregate
amount of $104,250 and $93,918, respectively. As of June 30, 2023, $151,095 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:
Period
April 1-30, 2023
May 1-31, 2023
June 1-30, 2023
Total
Total Number
of Shares
Purchased1
—
—
13,256
13,256
Average
Price Paid
per Share
—
—
$ 2.24
$ 2.24
Total Number of Shares Approximate Dollar Value
of Shares that May Yet Be
Purchased Under the
Plans or Programs
Purchased as Part of
Publicly Announced
Plans or Programs
— $
— $
— $
—
180,789
180,789
151,095
—
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, 2023 and 2022 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 as of June 30, 2023: 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.
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.
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
22
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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 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.
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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 $85,015 and $94,144 as of June 30, 2023 and 2022, 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:
Period end Euro : US Dollar exchange rate
Average period Euro : US Dollar exchange rate
Period end GBP : US Dollar exchange rate
Average period GBP : US Dollar exchange rate
Period end Mexican Peso : US Dollar exchange rate
Average period Mexican Peso : US Dollar exchange rate
24
Year Ended
June 30,
2023
2022
1.09
1.05
1.27
1.20
0.06
0.05
1.05
1.13
1.21
1.34
0.05
0.05
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Quarterly Information (Unaudited)
The following table sets forth unaudited and quarterly financial data for the four quarters of fiscal years 2023 and
2022:
Revenue:
Platforms
Transactions
Total revenue
Cost of revenue:
Platforms
Transactions
Total cost of revenue
Gross profit:
Platforms
Transactions
Total gross profit
Operating expenses:
Sales and marketing
Technology and product dev.
General and administrative
Depreciation and amortization
Stock-based comp. expense
Foreign currency transaction loss (gain)
Total operating expenses
Other income (expenses and income taxes)
Net income (loss)
Basic income (loss) per common share:
Net income (loss) per share
Basic weighted average common shares
outstanding
Diluted income (loss) per common share:
Net income (loss) per share
Diluted weighted average common shares
outstanding
June 30,
2023
Mar. 31,
2023
Dec. 31,
2022
Sept. 30,
2022
June 30,
2022
Mar. 31,
Dec 31,
2022
2021
Sept. 30,
2021
$ 2,303,375
7,656,342
9,959,717
$ 2,249,632
8,092,794
10,342,426
$ 2,110,272
6,606,394
8,716,666
$ 2,019,967
6,664,676
8,684,643
$ 1,886,845
6,675,164
8,562,009
$ 1,786,224
6,971,128
8,757,352
$ 1,604,829
6,267,458
7,872,287
$
1,509,874
6,232,630
7,742,504
275,110
5,764,064
6,039,174
268,630
6,046,523
6,315,153
253,073
5,059,766
5,312,839
230,473
5,104,922
5,335,395
240,214
5,038,653
5,278,867
219,051
5,299,804
5,518,855
231,668
4,802,959
5,034,627
245,656
4,836,473
5,082,129
2,028,265
1,892,278
3,920,543
1,981,002
2,046,271
4,027,273
1,857,199
1,546,628
3,403,827
1,789,494
1,559,754
3,349,248
1,646,631
1,636,511
3,283,142
1,567,173
1,671,324
3,238,497
1,373,161
1,464,499
2,837,660
1,264,218
1,396,157
2,660,375
455,030
991,093
1,649,333
22,163
585,384
(37,743)
3,665,260
120,463
375,746
642,624
953,677
1,871,590
18,332
480,458
(72,547)
3,894,134
103,703
236,842
666,608
922,132
1,613,664
6,342
608,703
(84,179)
3,733,270
73,913
(255,530)
521,216
875,290
1,519,424
5,812
175,361
72,516
3,169,619
34,936
214,565
691,368
1,049,430
1,663,671
5,507
225,501
91,279
3,726,756
5,347
(438,267)
543,496
971,959
1,629,371
4,988
399,234
29,394
3,578,442
(585)
(340,530)
518,357
868,236
1,616,135
4,260
300,539
11,982
3,319,509
264
(481,585)
522,951
821,460
1,497,223
2,896
171,110
11,243
3,026,883
(5,494)
(372,002)
$
0.01
$
0.01
$
(0.01)
$
0.01
$
(0.02)
$
(0.01)
$
(0.02)
$
(0.01)
26,981,813
26,929,314
26,816,550
26,718,171
26,576,054
26,512,195
26,351,947
26,277,116
$
0.01
$
0.01
$
(0.01)
$
0.01
$
(0.02)
$
(0.01)
$
(0.02)
$
(0.01)
30,058,791
29,791,719
26,815,550
27,779,841
26,576,054
26,512,195
26,351,947
26,277,116
25
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Comparison of the Years Ended June 30, 2023 and 2022
Results of Operations
Revenue:
Platforms
Transactions
Total revenue
Cost of revenue:
Platforms
Transactions
Total cost of revenue
Gross profit:
Platforms
Transactions
Total gross profit
Operating expenses:
Sales and marketing
Technology and product development
General and administrative
Depreciation and amortization
Stock-based compensation expense
Foreign currency transaction loss (gain)
Total operating expenses
2023
2022
$ Change
% Change
Year Ended June 30,
$ 8,683,246
29,020,206
37,703,452
$ 6,787,772
26,146,380
32,934,152
$ 1,895,474
2,873,826
4,769,300
27.9 %
11.0 %
14.5 %
1,027,286
21,975,275
23,002,561
936,589
19,977,889
20,914,478
90,697
1,997,386
2,088,083
9.7 %
10.0 %
10.0 %
7,655,960
7,044,931
14,700,891
5,851,183
6,168,491
12,019,674
1,804,777
876,440
2,681,217
30.8 %
14.2 %
22.3 %
2,285,478
3,742,192
6,654,011
52,649
1,849,906
(121,953)
14,462,283
2,276,172
3,711,085
6,406,400
17,651
1,096,384
143,898
13,651,590
9,306
31,107
247,611
34,998
753,522
(265,851)
810,693
0.4 %
0.8 %
3.9 %
198.3 %
68.7 %
(184.7)%
5.9 %
Income (loss) from operations
238,608
(1,631,916)
1,870,524
114.6 %
Other income
338,617
7,154
331,463
4,633.3 %
Income (loss) from operations before provision for income
taxes
Provision for income taxes
577,225
(5,602)
(1,624,762)
(7,622)
2,201,987
2,020
135.5 %
26.5 %
571,623
(1,632,384)
2,204,007
135.0 %
Net income (loss)
Revenue
Revenue:
Platforms
Transactions
Total revenue
2023
Years Ended June 30,
2022
$ Change
% Change
$ 8,683,246
29,020,206
$ 37,703,452
$
6,787,772
26,146,380
$ 32,934,152
$
$
1,895,474
2,873,826
4,769,300
27.9 %
11.0 %
14.5 %
26
Table of Contents
Total revenue increased $4,769,300, or 14.5%, for the year ended June 30, 2023 compared to the prior year, due to
the following:
Category
Platforms
Impact
Key Drivers
↑
$ 1,895,474 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
↑
$ 2,873,826 Increased due to higher paid order volume and pricing initiatives,
including additional paid order volume due to the FIZ asset
acquisition which was effective January 1, 2023.
Cost of Revenue
Cost of Revenue:
Platforms
Transactions
Total cost of revenue
As a percentage of revenue:
Platforms
Transactions
Total
2023
Years Ended June 30,
2022
$ Change
% Change
$ 1,027,286
21,975,275
$ 23,002,561
$
936,589
19,977,889
$ 20,914,478
$
90,697
1,997,386
$ 2,088,083
9.7 %
10.0 %
10.0 %
2023
Years Ended June 30,
2022
% Change *
11.8 %
75.7 %
61.0 %
13.8 %
76.4 %
63.5 %
(2.0)%
(0.7)%
(2.5)%
*
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 2.5%, from 63.5% for the previous year to 61.0%, for
the year ended June 30, 2023.
Impact as percentage
of revenue
Category
Platforms
Transactions
Key Drivers
↓
↓
2.0 % Decreased primarily due to lower software expense and proportionally lower personnel costs.
0.7 % Decreased primarily due to lower personnel costs and expansion in copyright margins.
27
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Gross Profit
Gross Profit:
Platforms
Transactions
Total gross profit
As a percentage of revenue:
Platforms
Transactions
Total
2023
Years Ended June 30,
2022
$ Change
% Change
$
7,655,960
7,044,931
$ 14,700,891
$
5,851,183
6,168,491
$ 12,019,674
$
$
1,804,777
876,440
2,681,217
30.8 %
14.2 %
22.3 %
2023
Years Ended June 30,
2022
% Change*
88.2 %
24.3 %
39.0 %
86.2 %
23.6 %
36.5 %
2.0 %
0.7 %
2.5 %
*
The difference between current and prior period gross profit as a percentage of revenue
Operating Expenses
Operating Expenses:
Sales and marketing
Technology and product development
General and administrative
Depreciation and amortization
Stock-based compensation expense
Foreign currency transaction loss (gain)
Total operating expenses
Years Ended June 30,
2023
2022
$ Change
% Change
$ 2,285,478
3,742,192
6,654,011
52,649
1,849,906
(121,953)
$ 14,462,283
$ 2,276,172
3,711,085
6,406,400
17,651
1,096,384
143,898
$ 13,651,590
$
9,306
31,107
247,611
34,998
753,522
(265,851)
$ 810,693
0.4 %
0.8 %
3.9 %
198.3 %
68.7 %
(184.7)%
5.9 %
Category
Sales and marketing
Technology and
product development
General and
administrative
↑
↑
↑
Impact
$
$
Key Drivers
9,306 Increased primarily due to greater personnel costs and marketing
discretionary spend mostly offset by lower consulting expenses.
31,107 Increased due to greater software development personnel costs
partially offset by lower consulting and recruiting expenses.
$ 247,611 Increased due to greater recruiting, legal and travel expenses and
personnel costs partially offset by lower accounting and consulting
expenses.
Provision for Income Taxes
During the years ended June 30, 2023 and 2022 we recorded a provision for income taxes of $5,602 and $7,622,
respectively, a decrease of $2,020.
Net Income (Loss)
Net Income (Loss):
Net income (loss):
2023
Year Ended June 30,
2022
$ Change
% Change
$
571,623
$ (1,632,384)
$ 2,204,007
135.0 %
28
Table of Contents
Net loss decreased $2,204,007 or 135%, for the year ended June 30, 2023 compared to the prior year, primarily
due to increased gross profit, partially offset by increased operating expenses as described above.
Liquidity and Capital Resources
Consolidated Statements of Cash Flow Data:
Net cash provided by (used in) operating activities
Net cash used in investing activities
Net cash provided by (used in) financing activities
Effect of exchange rate changes
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Liquidity
Year Ended June 30,
2023
2022
$
$
3,383,847
(344,659)
(97,259)
229
2,942,158
10,603,175
13,545,333
$
$
(417,200)
(44,288)
63,270
(2,944)
(401,162)
11,004,337
10,603,175
As of June 30, 2023, we had cash and cash equivalents of $13,545,333, compared to $10,603,175 as of June 30,
2022, an increase of $2,942,158. This increase was primarily due to cash provided by operating activities.
Operating Activities
Net cash provided by operating activities was $3,383,847 for the year ended June 30, 2023 and resulted primarily
from an increase in net income, the fair value of vested restricted common stock of $1,418,718, an increase in accounts
payable and accrued expenses of $1,337,056 and an increase in deferred revenue of $886,198, partially offset by an
increase in accounts receivable of $901,518.
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.
Investing Activities
Net cash used in investing activities was $344,659 for the year ended June 30, 2023 and primarily from the
payment for non-refundable deposit for asset acquisition of $297,450.
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.
Financing Activities
Net cash used in financing activities was $97,259 for the year ended June 30, 2023 and resulted from the
repurchase of common stock of $104,250 and the payment of contingent acquisition consideration of $50,509, partially
offset by the proceeds from the exercise of options of $57,500.
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.
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
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were in compliance as of June 30, 2023. Financial covenants include maintaining an adjusted quick ratio of unrestricted
cash and net accounts receivable, divided by current liabilities plus debt less deferred revenue of at least 1.15 to 1.0. The
line of credit bears interest at an annual rate equal to the greater of 1% above the prime rate and 5.0%. The interest rate on
the line of credit was 9.25% as of June 30, 2023. The line of credit was secured by our consolidated assets.
There were no outstanding borrowings under the line as of June 30, 2023 and June 30, 2022, respectively. As of
June 30, 2023, there was approximately $2,264,000 of available credit. On March 27, 2023, First Citizens BancShares, Inc
entered into an agreement with the Federal Deposit Insurance Corporation (FDIC) to purchase all of the assets and
liabilities of SVB. We have confirmed that the Loan and Security Agreement remains in effect post this transaction and
that, in addition to having access to all of our deposits with SVB, we continue to have access to the revolving line of credit.
On March 28, 2023, we announced that we are continuing to evaluate the Loan and Security Agreement and
relationship with SVB and that we have opened accounts with two additional banks as part of exploring an overall banking
diversification strategy as well as additional access to lending facilities.
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, 2023 and
2022:
Net income (loss)
Add (deduct):
Other (income) expense
Foreign currency transaction loss (gain)
Provision for income taxes
Depreciation and amortization
Stock-based compensation
Adjusted EBITDA
2023
$ 571,623
Years Ended June 30,
2022
$ (1,632,384)
$ Change
$ 2,204,007
(338,617)
(121,953)
5,602
52,649
1,849,906
$ 2,019,210
(7,154)
143,898
7,622
17,651
1,096,384
$ (373,983)
(331,463)
(265,851)
(2,020)
34,998
753,522
$ 2,393,193
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
30
Table of Contents
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
● 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.
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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, 2023 and 2022, the related consolidated statements of operations and other comprehensive
income (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, 2023 and 2022, 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
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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:
o
o
Obtained evidence of a contract with the customer;
Compared the amounts recognized and time of revenue recognition to underlying source documents such
as invoices, form of payments, and executed contracts and related modifications, if any;
Evaluated the Company’s application of their accounting policies to determine the timing and amount
recognized; and
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.
o
o
We have served as the Company’s auditor since 2006.
/s/ Weinberg and Company, P.A
Los Angeles, California
September 15, 2023
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Research Solutions, Inc. and Subsidiaries
Consolidated Balance Sheets
Assets
Current assets:
Cash and cash equivalents
Accounts receivable, net of allowance of $85,015 and $94,144, respectively
Prepaid expenses and other current assets
Prepaid royalties
Total current assets
Other assets:
June 30,
2023
June 30,
2022
$ 13,545,333
6,153,063
400,340
1,202,678
21,301,414
$ 10,603,175
5,251,545
276,026
846,652
16,977,398
Property and equipment, net of accumulated depreciation of $881,908 and $840,996,
respectively
Intangible assets, net of accumulated amortization of $747,355 and $723,036,
respectively
Deposits and other assets
Total assets
70,193
47,985
462,068
1,052
$ 21,834,727
—
893
$ 17,026,276
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses
Deferred revenue
Total current liabilities
Commitments and contingencies
Stockholders’ equity:
$
8,079,516
6,424,724
14,504,240
$
6,604,032
5,538,526
12,142,558
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; 29,487,508 and
27,075,648 shares issued and outstanding, respectively
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive loss
Total stockholders’ equity
Total liabilities and stockholders’ equity
—
—
29,487
29,941,873
(22,522,649)
(118,224)
7,330,487
$ 21,834,727
27,076
28,072,855
(23,094,272)
(121,941)
4,883,718
$ 17,026,276
See notes to consolidated financial statements
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Research Solutions, Inc. and Subsidiaries
Consolidated Statements of Operations and Other Comprehensive Income (Loss)
Revenue:
Platforms
Transactions
Total revenue
Cost of revenue:
Platforms
Transactions
Total cost of revenue
Gross profit
Operating expenses:
Selling, general and administrative
Depreciation and amortization
Total operating expenses
Income (loss) from operations
Other income
Income (loss) from operations before provision for income taxes
Provision for income taxes
Net income (loss)
Other comprehensive income (loss):
Foreign currency translation
Comprehensive income (loss)
Basic income (loss) per common share:
Net income (loss) per share
Weighted average common shares outstanding
Diluted income (loss) per common share:
Net income (loss) per share
Weighted average common shares outstanding
Years Ended
June 30,
2023
2022
$
8,683,246
29,020,206
37,703,452
$
6,787,772
26,146,380
32,934,152
1,027,286
21,975,275
23,002,561
14,700,891
936,589
19,977,889
20,914,478
12,019,674
14,409,634
52,649
14,462,283
13,633,939
17,651
13,651,590
238,608
(1,631,916)
338,617
7,154
577,225
(5,602)
(1,624,762)
(7,622)
571,623
(1,632,384)
3,717
575,340
(2,364)
$ (1,634,748)
0.02
26,860,761
0.02
29,139,759
$
$
(0.06)
26,422,295
(0.06)
26,422,295
$
$
$
See notes to consolidated financial statements
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Research Solutions, Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders’ Equity
For the Years Ended June 30, 2023 and 2022
Common Stock
Additional
Paid-in
Amount Capital
Shares
Other
Accumulated Comprehensive
Deficit
Loss
Total
Stockholders’
Equity
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
Fair value of vested restricted common stock
Repurchase of common stock
—
356,582
(40,221)
Common stock issued upon exercise of stock options
211,072
Common stock issued upon exercise of warrants
50,000
Net loss
Foreign currency translation
—
—
—
356
(40)
212
50
—
—
470,615
557,140
(93,878)
97,476
59,450
—
—
—
—
—
—
—
—
—
—
—
—
470,615
557,496
(93,918)
97,688
59,500
(1,632,384)
—
(1,632,384)
—
(2,364)
(2,364)
Balance, June 30, 2022
27,075,648
27,076
28,072,855
(23,094,272)
(121,941)
4,883,718
Fair value of vested stock options
—
—
375,189
Fair value of vested restricted common stock
2,354,834
2,355
1,416,363
Forfeited restricted common stock
Fair value of vested unrestricted common stock
Repurchase of common stock
(65,165)
36,509
(51,841)
Common stock issued upon exercise of stock options
137,523
(65)
36
(52)
137
—
—
—
65
68,236
(104,198)
57,363
56,000
—
—
—
—
—
—
—
—
—
—
—
—
571,623
—
—
—
—
—
—
—
—
375,189
1,418,718
—
68,272
(104,250)
57,500
56,000
571,623
—
3,717
3,717
Modification cost of stock options
Net income
Foreign currency translation
Balance, June 30, 2023
29,487,508
$ 29,487
$ 29,941,873
$ (22,522,649)
$
(118,224)
$
7,330,487
See notes to consolidated financial statements
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Research Solutions, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Cash flow from operating activities:
Net income (loss)
Adjustment to reconcile net income (loss) to net cash provided by (used in) operating
activities:
Depreciation and amortization
Fair value of vested stock options
Fair value of vested restricted common stock
Fair value of vested unrestricted common stock
Modification cost of stock options
Changes in operating assets and liabilities:
Accounts receivable
Prepaid expenses and other current assets
Prepaid royalties
Accounts payable and accrued expenses
Deferred revenue
Net cash provided by (used in) operating activities
Cash flow from investing activities:
Purchase of property and equipment
Payment for non-refundable deposit for asset acquisition
Net cash used in investing activities
Cash flow from financing activities:
Proceeds from the exercise of stock options
Proceeds from the exercise of warrants
Common stock repurchase
Payment of contingent acquisition consideration
Net cash provided by (used in) financing activities
Effect of exchange rate changes
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Supplemental disclosures of cash flow information:
Cash paid for income taxes
Non-cash investing and financing activities:
Contingent consideration accrual on asset acquisition
See notes to consolidated financial statements
37
Years Ended
June 30,
2023
2022
$
571,623
$ (1,632,384)
52,649
375,189
1,418,718
68,272
56,000
(901,518)
(124,314)
(356,026)
1,337,056
886,198
3,383,847
(47,209)
(297,450)
(344,659)
57,500
—
(104,250)
(50,509)
(97,259)
17,651
470,615
557,496
—
—
(534,092)
(5,774)
58,269
(83,156)
734,175
(417,200)
(44,288)
—
(44,288)
97,688
59,500
(93,918)
—
63,270
229
2,942,158
10,603,175
$ 13,545,333
(2,944)
(401,162)
11,004,337
$ 10,603,175
$
$
5,602
$
7,622
138,428
$
—
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RESEARCH SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended June 30, 2023 and 2022
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 three wholly owned subsidiaries as
of June 30, 2023: 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.
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 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
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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, 2023 or 2022 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
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past due trade accounts receivable outstanding. The Company established an allowance for doubtful accounts of $85,015
and $94,144 as of June 30, 2023 and 2022, respectively.
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 $1,760,323 and
$483,232 at June 30, 2023 and 2022, respectively, was held in accounts at financial institutions located in Europe.
The Company has no customers that represent 10% of revenue or more for the years ended June 30, 2023 and
2022.
The Company has no customers that represent 10% of accounts receivable at June 30, 2023 and 2022.
The following table summarizes our content costs from our vendors:
Vendor A
Vendor B
Property and Equipment
Year Ended
June 30,
2023
2022
23 %
13 %
21 %
13 %
Property and equipment are stated at cost and are depreciated using the straight-line method over their estimated
useful lives of 3 to 7 years. Leasehold improvements are amortized over the shorter of the useful lives of the related assets,
or the lease term. Expenditures for maintenance and repairs are charged to operations as incurred while renewals and
betterments are capitalized. Gains and losses on disposals are included in the consolidated statements of operations.
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, 2023 and 2022, 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
Company derives its revenues from two sources: annual licenses that allow customers to access and utilize certain premium
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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:
United States
Europe
Rest of World
Total
Year Ended
June 30,
2023
$ 21,862,582
12,716,650
3,124,220
$ 37,703,452
2022
58.0 %
33.7 %
8.3 %
100 %
$ 19,170,684
11,432,516
2,330,952
$ 32,934,152
58.2 %
34.7 %
7.1 %
100 %
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Accounts Receivable by Geographical Region
The following table summarizes accounts receivable by geographical region:
Year Ended
June 30,
2023
$ 3,727,977
1,763,044
662,042
$ 6,153,063
2022
60.6 % $ 3,255,976
1,665,111
28.7 %
10.8 %
330,458
100 % $ 5,251,545
62.0 %
31.7 %
6.3 %
100 %
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 gain of $121,953 and a loss of $143,898 for the years ended June
30, 2023 and 2022, respectively. Cash denominated in Euros and British Pounds with an aggregate US Dollar equivalent of
$1,760,323 and $483,232 at June 30, 2023 and 2022, respectively, was held in accounts at financial institutions located in
Europe.
The following table summarizes the exchange rates used:
Period end Euro : US Dollar exchange rate
Average period Euro : US Dollar exchange rate
Period end GBP : US Dollar exchange rate
Average period GBP : US Dollar exchange rate
Period end Mexican Peso : US Dollar exchange rate
Average period Mexican Peso : US Dollar exchange rate
Net Income (Loss) Per Share
Year Ended
June 30,
2023
2022
1.09
1.05
1.27
1.20
0.06
0.05
1.05
1.13
1.21
1.34
0.05
0.05
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, 2023 potentially dilutive
securities include options to acquire 2,909,574 shares of common stock and unvested restricted common stock of
2,477,794. At June 30, 2022 potentially dilutive securities include options to acquire 3,182,872 shares of common stock
and unvested restricted common stock of 400,092. The dilutive effect of potentially dilutive securities is reflected in diluted
net income per share if the exercise prices were lower than the average fair market value of common shares during the
reporting period.
Basic and diluted net loss per common share is the same for the year ended June 30, 2022 because all stock
options, warrants, and unvested restricted common stock are anti-dilutive. For the year ended June 30, 2023, the calculation
of diluted earnings per share include unvested restricted common stock, stock options and warrants, calculated under the
treasury stock method.
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
43
Table of Contents
of allowances for losses. ASU 2016-13 is effective for the Company beginning July 1, 2023, and early adoption is
permitted. The Company does not believe the potential impact of the new guidance and related codification improvements
will be material to its financial position, results of operations and cash flows.
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the
American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not
believed by management to have a material impact on the Company’s present or future consolidated financial statements.
Note 3. Property and Equipment
Property and equipment consists of the following as of June 30, 2023 and 2022:
Computer equipment
Software
Furniture and fixtures
Total
Less accumulated depreciation
Net, Property and equipment
June 30,
2023
$ 628,200
282,080
41,821
952,101
(881,908)
70,193
$
June 30,
2022
566,518
282,080
40,383
888,981
(840,996)
47,985
$
$
Depreciation expense for the years ended June 30, 2023 and 2022 was $28,329 and $17,651, respectively.
Note 4. Intangible Assets
Intangible assets consist of customer lists, which are amortized over an estimated useful life of ten years. The
Company does not have any intangible assets deemed to have indefinite lives. Amortization expense for the years ended
June 30, 2023 and 2022 was $24,320 and $0, respectively. Amortization expense expected to be recognized is
approximately $49,000 annually in 2024 through 2028 and approximately $217,000 thereafter.
Intangible assets consist of the following as of June 30, 2023 and 2022:
June 30,
2023
June 30,
2022
Customer lists
Intellectual property licenses
Total
Less accumulated amortization
Net, Intangible assets
Note 5. Line of Credit
$ 1,192,998 $ 706,611
16,425
723,036
(723,036)
—
16,425
1,209,423
(747,355)
462,068 $
$
The Company entered into a Loan and Security Agreement with Silicon Valley Bank (“SVB”) on July 23, 2010,
which, as amended, provides for a revolving line of credit for the lesser of $2,500,000, or 80% of eligible accounts
receivable. The line of credit matures on February 28, 2024, and is subject to certain financial and performance covenants
with which we were in compliance as of June 30, 2023. Financial covenants include maintaining an adjusted quick ratio of
unrestricted cash and net accounts receivable, divided by current liabilities plus debt less deferred revenue of at least 1.15
to 1.0. The line of credit bears interest at an annual rate equal to the greater of 1% above the prime rate and 5.0%. The
interest rate on the line of credit was 9.25% as of June 30, 2023. The line of credit is secured by the Company’s
consolidated assets.
Pursuant to the Amended and Restated Loan and Security Agreement dated October 31, 2017 among the
Company, Reprints Desk, Inc. and SVB (the “SVB LSA”), the Company was required to direct account debtors to deliver
or transmit all proceeds of accounts remitted to the Company and its subsidiaries into a lockbox account as specified by
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SVB, and to maintain its and its subsidiaries’ primary operating and other deposit accounts with SVB. In compliance with
the foregoing covenants the Company and its subsidiaries maintained with SVB substantially all of the dollar value of the
Company’s and its subsidiaries’ accounts. At February 28, 2023, the Company held cash at SVB of $10,832,000, of which
we estimate $9,738,000 was in excess of government insured limits.
On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, and
the Federal Deposit Insurance Corporation (“FDIC”) was appointed as receiver and SVB was subsequently transferred into
a new entity, Silicon Valley Bridge Bank, N.A. (“SVB Bridge Bank”). On March 12, 2023, the U.S. Treasury Department,
the Federal Reserve and the FDIC jointly announced enabling actions that fully protect all SVB depositors’ insured and
uninsured deposits, and that such depositors would have access to all of their funds starting March 13, 2023. On March 14,
2023, the Company was able to access its full deposits with SVB Bridge Bank. At June 30, 2023, the Company held cash at
SVB Bridge Bank of $7,580,000, of which we estimate $6,443,000 was in excess of government insured limits.
There were no outstanding borrowings under the line as of June 30, 2023 and June 30, 2022, respectively. As of
June 30, 2023, there was approximately $2,264,000 of available credit. On March 27, 2023, First Citizens BancShares, Inc
entered into an agreement with the Federal Deposit Insurance Corporation (FDIC) to purchase all of the assets and
liabilities of SVB. The Company has confirmed that the Loan and Security Agreement remains in effect post this
transaction and that, in addition to having access to all of its deposits with SVB, it continues to have access to the revolving
line of credit.
SVB Bridge Bank agreed that the Company can lower its cash balance threshold requirement associated with the
SVB LSA, reducing the required balances of its and its subsidiaries’ primary operating and other accounts with SVB, and
the Company continues to evaluate the SVB LSA. At June 30, 2023, the Company also held cash at Bank of America, N.A.
of $1,500,000 and at PNC Bank, N.A. of $4,448,000. The Company continues to re-allocate its cash position across all
three banks and explore an overall banking diversification strategy as well as additional access to lending facilities.
Note 6. 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
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, 2023,
there were 1,495,927 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 majority of awards issued under the Plan vest immediately or over three years, with a one year cliff vesting
period, and have a term of ten years. Stock-based compensation cost is measured at the grant date, based on the fair value
45
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of the awards that are ultimately expected to vest, and recognized on a straight-line basis over the requisite service period,
which is generally the vesting period.
The following table summarizes vested and unvested stock option activity:
All Options
Vested Options
Unvested Options
Outstanding at July 1, 2021
Granted
Options vesting
Exercised
Forfeited
Outstanding at June 30, 2022
Granted
Options vesting
Exercised
Forfeited
Shares
3,258,408 $
307,843
—
(357,079)
(26,300)
3,182,872 $
200,000
—
(307,298)
(166,000)
Weighted
Average
Exercise
Price
Weighted
Average
Exercise
Price
Shares
Weighted
Average
Exercise
Price
—
452,879
(357,079)
(26,300)
1.68 2,930,474 $
2.22
—
1.20
1.34
1.79 2,999,974 $
2.15
—
1.31
1.81
1.87 2,865,593
—
336,834
(307,298)
(163,917)
$
1.60
—
2.26
1.20
1.34
1.75
—
2.28
1.31
1.79
1.86
Shares
327,934 $
307,843
(452,879)
—
—
182,898 $
200,000
(336,834)
—
(2,083)
43,981
$
2.46
2.22
2.26
—
—
2.49
2.15
2.28
—
3.92
2.47
Outstanding at June 30, 2023
2,909,574
$
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, 2023 and 2022.
Expected dividend yield
Risk-free interest rate
Expected life (in years)
Expected volatility
Years Ended
June 30,
2023
2022
— %
— %
3.76 % 0.92 - 1.81 %
5
56 %
5 - 6
56 %
The weighted average remaining contractual life of all options outstanding as of June 30, 2023 was 5.49 years.
The remaining contractual life for options vested and exercisable at June 30, 2023 was 5.45 years. Furthermore, the
aggregate intrinsic value of options outstanding and of options vested and exercisable at June 30, 2023 was $1,096,942, in
each case based on the fair value of the Company’s common stock on June 30, 2023.
During the year ended June 30, 2023, the Company granted 200,000 options to directors with a fair value of
$222,000 which, due to immediate vesting, were fully expensed at the time of grant. The total fair value of options that
vested during the year ended June 30, 2023 was $375,189 and was included in selling, general and administrative expenses
in the accompanying statement of operations. As of June 30, 2023, the amount of unvested compensation related to the
unvested options was $56,577 which will be recorded as an expense in future periods as the options vest. During the year
ended June 30, 2023, the Company issued 137,523 net shares of common stock upon the exercise of options underlying
307,298 shares of common stock, resulting in net cash proceeds of $57,500.
During the year ended June 30, 2022, the Company granted 307,843 options to employees with a fair value of
$342,566 which amount will be amortized over the vesting period. The total fair value of options that vested during
the year ended June 30, 2022 was $470,615 and was included in selling, general and administrative expenses in the
accompanying statement of operations. As of June 30, 2022, the amount of unvested compensation related to the unvested
options was $212,642 which will be recorded as an expense in future periods as the options vest. During the year ended
June 30, 2022, the Company issued 211,072 net shares of common stock upon the exercise of options underlying 357,079
shares of common stock, resulting in net cash proceeds of $97,688.
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Additional information regarding stock options outstanding and exercisable as of June 30, 2023 is as follows:
Option
Exercise
Price
$
Total
0.70
0.77
0.80
0.90
1.00
1.05
1.09
1.10
1.20
1.59
1.80
1.95
2.10
2.13
2.15
2.17
2.19
2.40
2.43
2.45
2.49
2.50
2.64
2.67
2.99
3.13
3.50
Options
Outstanding
Remaining
Contractual
Life (in years)
Options
Exercisable
2.43
1.14
2.14
2.10
1.70
3.15
2.90
2.00
4.05
4.87
0.23
5.01
8.62
7.39
9.45
7.87
8.56
5.38
7.93
7.10
6.92
5.88
8.10
8.22
6.87
6.38
6.62
225,000
25,000
16,000
15,000
15,000
305,000
40,000
105,000
274,000
25,000
54,550
200,000
238,767
215,316
200,000
26,965
2,500
302,833
53,750
163,000
76,195
20,000
20,588
22,129
8,000
208,000
8,000
2,865,593
225,000
25,000
16,000
15,000
15,000
305,000
40,000
105,000
274,000
25,000
54,550
200,000
238,767
216,708
200,000
35,955
5,000
302,833
61,250
163,000
78,435
20,000
30,882
33,194
8,000
208,000
8,000
2,909,574
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Warrants
The following table summarizes warrant activity:
Outstanding, June 30, 2021
Granted
Exercised
Repurchased
Expired/Cancelled
Outstanding, June 30, 2022
Granted
Exercised
Repurchased
Expired/Cancelled
Outstanding, June 30, 2023
Exercisable, June 30, 2022
Exercisable, June 30, 2023
Weighted
Average
Exercise
Price
Number of
Warrants
50,000
$
—
(50,000)
—
—
— $
—
—
—
—
— $
— $
— $
1.19
—
1.19
—
—
—
—
—
—
—
—
—
—
During the year ended June 30, 2022, certain holders of warrants to purchase shares of the Company’s common
stock at a per share exercise price of $1.19 exercised those warrants to purchase 50,000 shares, generating gross proceeds
to the Company of $59,500.
Restricted Common Stock
Prior to July 1, 2021, the Company issued 2,473,176 shares of restricted common stock to employees valued at
$2,985,198, of which $2,503,245 had been recognized as an expense. As of June 30, 2021, 245,252 of these shares with a
grant date fair value of $481,953 had not yet vested.
During the year ended June 30, 2022, the Company issued an additional 356,582 shares of restricted stock to
employees. Of this amount, 256,582 shares vest over a three year period, with a one year cliff vesting period, and remain
subject to forfeiture if vesting conditions are not met. The remaining 100,000 shares vest over a four year period, with a
one year cliff vesting period, and remain subject to forfeiture if vesting conditions are not met. The aggregate fair value of
the stock awards was $850,996 based on the market price of our common stock ranging from $1.87 to $2.64 per share on
the date of grant, which will be amortized over the vesting period.
During the year ended June 30, 2023, the Company issued an additional 2,354,834 shares of restricted stock to
employees with an aggregate fair value of $3,478,878. Of this amount, 229,834 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 and 25,000 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 these stock awards was $503,478 based on the market price of our common stock price ranging
from $1.94 to $2.22 per share on the date of grant, which will be amortized over the range of three and four-year vesting
periods. The remaining 2,100,000 shares were granted, under the 2017 Plan, as restricted stock awards to key management
in accordance with its long-term equity bonus program (the “LTEBP”). The LTEBP replaces the previous restricted stock
compensation program for executives. It spans 5 years and is designed to better serve stockholder interests by aligning key
executive compensation with stockholder value. Awards under the LTEBP will vest as follows, upon the 30-day volume
weighted average price (VWAP) of our common stock reaching the following targets:
•
•
•
20% at a 30-day VWAP of $3.00 per share;
20% at a 30-day VWAP of $3.75 per share;
20% at a 30-day VWAP of $4.50 per share;
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•
•
20% at a 30-day VWAP of $5.25 per share; and
20% at a 30-day VWAP of $6.00 per share.
Upon a change of control vesting will accelerate with respect to that portion of the award that would vest if the
target 30-day VWAP was achieved at the level above the per share price in such change of control transaction. For
example, if we granted an award of 100,000 shares under the LTEBP, 20,000 shares would vest upon our stock price
achieving a 30-day VWAP of $3.00 per share, and 20,000 shares would vest upon our stock price achieving a 30-day
VWAP of $3.75 per share. If the per share price in a change of control transaction was $5.00 per share, vesting would
accelerate for 40,000 shares under the same award (i.e. the number of shares that would vest for our stock price achieving a
30-day VWAP of $5.25 per share, pursuant to a tier round up provision in the Plan effective upon a change in control). As a
condition to receiving awards under the LTEBP, recipients will be required to hold at least 75% of all vested shares during
the term of their employment. Applicable target 30-day VWAPs must be achieved within 5 years following the grant of
awards under the LTEBP, and all unvested awards under the LTEBP will be forfeited upon expiration of such 5-year period.
Recipients will also forfeit unvested awards in the event their service with our company terminates for any reason.
As the vesting of the 2,100,000 shares of restricted common stock under the LTEBP is subject to certain market
conditions, pursuant to current accounting guidelines, the Company determined the fair value to be $2,975,400, computed
using the Monte Carlo simulations on a binomial model with the assistance of a valuation specialist with a derived service
period ranging from 1.36 to 2.59 years. The total fair value of restricted common stock vesting and expenses related to
amortization of the fair value of the LTEBP program during the year ended June 30, 2023 was $1,418,717 and is included
in selling, general and administrative expenses in the accompanying statements of operations. As of June 30, 2023, the
amount of unvested compensation related to issuances of restricted common stock was $2,711,661, which will be
recognized as an expense in future periods as the shares vest. When calculating basic net income 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. When calculating
net loss per share, the 2,477,794 shares are considered antidilutive and are excluded from that calculation.
The following table summarizes restricted common stock activity:
Non-vested, June 30, 2021
Granted
Vested
Forfeited
Non-vested, June 30, 2022
Granted
Vested
Forfeited
Non-vested, June 30, 2023
Number of
Shares
245,252
356,582
(201,742)
Fair Value
481,953
850,996
(557,496)
—
$
400,092
2,354,834
(211,967)
(65,165)
2,477,794
—
$
775,453
3,478,878
(1,418,717)
(123,953)
$ 2,711,661
Weighted
Average
Grant Date
Fair Value
2.47
$
2.39
2.51
—
2.38
1.48
2.42
2.15
1.52
$
Common Stock Repurchase and Retirement
Effective as of February 9, 2021, the Compensation Committee of our Board of Directors authorized the
repurchase, during calendar year 2021 on the last day of each trading window and otherwise in accordance with our insider
trading policies, of up to $400,000 of outstanding common stock (at prices no greater than $4.00 per share) from our
employees to satisfy their tax obligations in connection with the vesting of stock incentive awards. The Compensation
Committee of our Board of Directors subsequently approved the extension of the repurchases under the same terms
through the end of fiscal year 2024. 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, 2022,
$255,345 remained under the current authorization to repurchase our outstanding common stock from our employees.
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Table of Contents
During the years ended June 30, 2023 and 2022, we repurchased 51,841 and 40,221 shares of our common stock
under the repurchase plan at an average price of approximately $2.01 and $2.34 per share, respectively, for an aggregate
amount of $104,250 and $93,918, respectively. As of June 30, 2023, $151,095 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.
The following table summarizes repurchases of our common stock on a monthly basis:
Period
September 2021
December 2021
March 2022
June 2022
Year ended June 30, 2022
September 2022
December 2022
March 2023
June 2023
Year ended June 30, 2023
Total Number
of Shares
Purchased1
21,365
5,951
6,086
6,819
40,221
Average
Price Paid
per Share
2.55
$
2.24
$
2.34
$
1.74
$
2.34
$
9,659
16,141
12,785
13,256
51,841
$
$
$
$
$
1.87
1.90
2.02
2.24
2.01
Total Number of Shares Approximate Dollar Value
of Shares that May Yet Be
Purchased Under the
Plans or Programs
Purchased as Part of
Publicly Announced
Plans or Programs
— $
—
—
—
— $
— $
—
—
—
— $
294,782
281,451
267,210
255,345
255,345
237,283
206,616
180,789
151,095
151,095
1 Consists of shares of common stock purchased from employees to satisfy tax obligations in connection with the
vesting of stock incentive awards.
Note 7. Contingencies and Commitments
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.
Note 8. Income Taxes
The provision for income taxes consists of the following for the years ended June 30, 2023 and 2022:
Current
Federal
State
Foreign (Mexico)
Deferred
Federal
Foreign
State
Provision for income tax expense
50
Years Ended
June 30,
2023
2022
$
— $
3,806
1,796
—
—
—
$
5,602
$
—
3,820
3,802
—
—
—
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During the year ended June 30, 2023, the Company recorded a provision for income tax expense of $5,602, which
consisted of $3,806 in state income tax payments and $1,796 in foreign (Mexico) income tax payments. During the year
ended June 30, 2022, the Company recorded a provision for income tax expense of $7,622 which consisted of $3,820 in
state income tax payments and $3,802 in foreign (Mexico) income tax payments.
The reconciliation of the effective income tax rate to the federal statutory rate is as follows:
Federal income tax rate
State tax, net of federal benefit
Permanent differences
Change in valuation allowance
Effective income tax rate
Years Ended
June 30,
2023
2022
21.0 %
5.0 %
(3.4)%
(21.8)%
0.8 %
21.0 %
5.0 %
1.2 %
(27.7)%
(0.5)%
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, 2023 and 2022 are as follows:
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
June 30,
2023
June 30,
2022
$ 2,074,080
171,716
148,404
2,250,149
211,219
4,855,568
$ 2,440,870
326,117
156,196
1,993,124
207,901
5,124,208
(73,224)
4,782,344
(4,782,344)
$
— $
(51,094)
5,073,114
(5,073,114)
—
The Company has provided a valuation allowance on the deferred tax assets at June 30, 2023 and 2022 to reduce
such asset to zero, since there is no assurance that the Company will generate future taxable income to utilize such asset.
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, 2023 was a decrease of $290,770.
At June 30, 2023 and 2022, the Company had federal net operating loss (“NOL”) carryforwards of approximately
$15,650,000 and $15,040,000, respectively, and state NOL carryforwards of approximately $6,560,000 and $6,420,000,
respectively. Federal NOLs generated prior to and after 2018 can be carried forward indefinitely with some limitations.
State NOLs, if unused, completely expire in 2039.
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, 2023 and 2022, the Company did not have a liability for
unrecognized tax benefits, and no adjustment was required at adoption.
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Table of Contents
The Company’s policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of
June 30, 2023 and 2022, the Company has no accrued interest or penalties related to uncertain tax positions.
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 9. Acquisition
On September 28, 2022, Reprints Desk entered into an asset purchase agreement with FIZ Karlsruhe – Leibniz-
Institut für Informationsinfrastruktur GmbH (“FIZ”). FIZ delivers STM content pursuant to various contracts with its
customers through its AutoDoc platform. FIZ agreed to assign and transfer to Reprints Desk certain of these contracts
effective January 1, 2023 (the “Sold Contracts”).
On September 30, 2022, Reprints Desk made a non-refundable payment of $297,450 (€300,000) (the “Base
Amount”) as initial consideration for the asset purchase. As of June 30, 2023, Reprints Desk has recorded $95,689 in
contingent consideration for customers that have their Sold Contracts assumed by Reprints Desk in comparison to the
trailing twelve months of revenue of all Sold Contracts (the “Base Amount Plus”). On June 30, 2023, $44,553 in
contingent consideration was recorded for customers that placed an order and have consented to have their contract
assumed by Reprints Desk (the “Bonus Amount”). As of the June 30, 2023, $50,509 of Bonus Amount payments were
made for the 2023 fiscal year. The Bonus Amount is based upon the collectable service fee that FIZ would have received
from these customers. Contingent consideration for the Bonus Amount will continue to be paid in arrears through the
quarter ending December 31, 2025.
The current contingent consideration for the Base Amount Plus and the Bonus Amount are recorded as a short-
term liability on the balance sheet. At June 30, 2023, the Base Amount, the Base Amount Plus and the Bonus Amount
were recorded as intangible assets on the balance sheet with an estimated average useful life of 10 years.
Note 10. Subsequent Events
Acquisition
On July 28, 2023, the Company acquired 100% of the outstanding stock of Resolute Innovation, Inc. (“Resolute
Innovation”), a Delaware corporation, an advanced search platform that equips organizations with search, discovery and
knowledge management tools that are powered by artificial intelligence (“AI”) and neuro-linguistic programming (“NLP”)
technologies. The initial purchase consideration, net of cash acquired, was approximately $2.9 million. In addition, the
acquisition agreement includes an earnout that will be based upon the product of three and one half multiplied by ending
annual recurring revenue as of January 31, 2025 less the agreed upon Enterprise Value of $3.4 million. The Resolute
Innovation acquisition will be accounted for under the purchase method, and accordingly, the results of operations will be
included in the Company's financial statements from the date of acquisition. The acquisition is not expected to have a
material impact on the Company's consolidated financial statements and notes thereto.
Stock Options
On September 1, 2023, the Company issued 3,578 shares of common stock upon the exercise of stock options
underlying 17,000 shares of common stock on a cashless basis.
Restricted Common Stock
On August 25, 2023, the Company issued 5,000 shares of restricted stock to an employee. These shares vest over
a three year period, with a one year cliff vesting period, and remain subject to forfeiture if vesting conditions are not met.
The aggregate value of the stock award was $11,200 based on the market price of our common stock of $2.24 per share on
the date of grant, which will be amortized over the three-year vesting period.
On August 25, 2023, the Company granted, under the 2017 Plan, restricted stock awards in the amount 100,000
shares to key employees in accordance with its long-term equity bonus program (the “LTEBP”). The LTEBP spans 5 years
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and is designed to better serve stockholder interests by aligning key executive compensation with stockholder value.
Awards under the LTEBP will vest as follows, upon the 30-day volume weighted average price (VWAP) of our common
stock reaching the following targets:
•
•
•
•
•
20% at a 30-day VWAP of $3.00 per share;
20% at a 30-day VWAP of $3.75 per share;
20% at a 30-day VWAP of $4.50 per share;
20% at a 30-day VWAP of $5.25 per share; and
20% at a 30-day VWAP of $6.00 per share.
Upon a change of control vesting will accelerate with respect to that portion of the award that would vest if the
target 30-day VWAP was achieved at the level above the per share price in such change of control transaction. For
example, if we granted an award of 100,000 shares under the LTEBP, 20,000 shares would vest upon our stock price
achieving a 30-day VWAP of $3.00 per share, and 20,000 shares would vest upon our stock price achieving a 30-day
VWAP of $3.75 per share. If the per share price in a change of control transaction was $5.00 per share, vesting would
accelerate for 40,000 shares under the same award (i.e. the number of shares that would vest for our stock price achieving a
30-day VWAP of $5.25 per share). As a condition to receiving awards under the LTEBP, recipients will be required to hold
at least 75% of all vested shares during the term of their employment. Applicable target 30-day VWAPs must be achieved
within 5 years following the grant of awards under the LTEBP, and all unvested awards under the LTEBP will be forfeited
upon expiration of such 5-year period. Recipients will also forfeit unvested awards in the event their service with our
company terminates for any reason.
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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, 2023, 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)
(ii)
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of the assets of the company;
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
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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, 2023, 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, 2023.
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 September 5, 2023, the Compensation Committee of the Company’s Board of Directors approved the
extension of the term of the employment agreement with Mr. Ahlberg effective June 30, 2023, for an annual renewing term
unless Reprints Desk provides at least 30 days’ prior notice of non-renewal, subject to the termination provisions of his
employment agreement. The Company entered into an amendment to Mr. Ahlberg’s executive employment agreement
effective June 30, 2023.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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Item 10. Directors, Executive Officers and Corporate Governance
PART III
The following table sets forth the name, age, position, and date of appointment of each of our directors and
executive officers as of September 8, 2023:
Name
Peter Victor Derycz
Roy W. Olivier
William Nurthen
Scott Ahlberg
Shane Hunt (5)
John Regazzi (1) (2)
Barbara J. Cooperman (1)
Gen. Merrill McPeak (1) (3)
(4)
Age
61
65
50
60
46
74
68
87
Position
Executive Chairman
Date of Appointment
March 29, 2021
President and Chief Executive Officer, and Director March 29, 2021
October 4, 2021
July 1, 2007
May 18, 2022
June 22, 2015
February 8, 2022
Chief Financial Officer and Secretary
Chief Operating Officer
Chief Revenue Officer
Lead Independent Director
Director
Director
November 5, 2010
(1) Member of Audit Committee, Compensation Committee, and Nominating and Governance Committee
(2) Chairman of the Audit Committee
(3) Chairman of the Compensation 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 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.
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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 be Executive Vice President 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 served 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.
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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. Our board of directors concluded that Ms. Cooperman should serve as a director in light of her extensive
industry knowledge, marketing and operating expertise, and governance experience.
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
(Nasdaq:IOVA). Gen. 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.
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 filed to
report transactions occurring during the fiscal year ended June 30, 2023 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 one Form 4 reporting one transaction; Gen. McPeak failed to timely file one Form 4 reporting one
transaction; and Mr. Ahlberg failed to timely file three Form 4s reporting six transactions.
Audit Committee Financial Expert
Our board of directors has a separately designated standing Audit Committee, comprised of Mr. Regazzi
(Chairman), Gen. McPeak and Ms. Cooperman, each of whom our board of directors has determined to be an independent
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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
the Corporate Governance – Code of Ethical Conduct section of our website,
in
www.researchsolutions.com.
is available
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 $100,000 during such fiscal year ends.
Compensation of Executive Officers for Fiscal Years Ended June 30, 2023 and 2022
Name and principle
Position
Peter Victor Derycz
Executive Chairman
Fiscal
Year
2023
2022
Salary
($)
371,520
371,760
Bonus
($)
68,220
124,000
Stock
awards
($)
67,200 (1)
125,862 (2)
All other
compensation
($)
8,097
18,205
Total
($)
515,037
639,827
Roy W. Olivier
President and Chief Executive Officer, and
Director
2023
400,000
105,600
857,000 (3) (4)
17,734
1,380,334
2022
371,520
— 142,999 (5)
9,520
524,039
William Nurthen
Chief Financial Officer and Secretary
2023
2022
310,000
214,092
76,000
70,500
468,926 (6) (7)
284,000 (8)
19,058
13,460
873,984
582,052
(1) Represents the grant date fair value of 34,639 shares of restricted stock granted on August 19, 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 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.
(3) Represents the grant date fair value of 79,897 shares of restricted stock granted on August 19, 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 the grant date fair value of 500,000 shares of restricted stock granted on November 1, 2022 under the
2017 Plan, as restricted stock awards to key management in accordance with its long-term equity bonus program
(the “LTEBP”). The grant date fair value was computed using the Monte Carlo simulations on a binomial model
with the assistance of a valuation specialist with a derived service period ranging from 1.43 to 2.59 years.
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(5) 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.
(6) Represents the grant date fair value of 24,601 shares of restricted stock granted on August 19, 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.
(7) Represents the grant date fair value of 300,000 shares of restricted stock granted on November 1, 2022 under the
2017 Plan, as restricted stock awards to key management in accordance with its long-term equity bonus program
(the “LTEBP”). The grant date fair value was computed using the Monte Carlo simulations on a binomial model
with the assistance of a valuation specialist with a derived service period ranging from 1.43 to 2.59 years.
(8) 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.
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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
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, 2013, we entered into an executive employment agreement with Mr. Ahlberg which was subsequently
amended effective June 30, 2023. 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 of each year, subject to
automatic renewal for subsequent one-year periods unless Reprints Desk provides written notice of non-renewal to Mr.
Ahlberg at least thirty (30) days prior to the expiration of the then-current term, and subject to earlier termination in
accordance with the other provisions of Mr. Ahlberg’s executive employment agreement. 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
$225,000 per year and participation in a bonus plan based upon company sales and retention, and executive bonus plan as
determined by the Board.
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The agreement contains provisions that prohibit Mr. Hunt from soliciting our customers or employees during his
employment with us and for one year afterward. The agreement also contains provisions that restrict disclosure by Mr.
Hunt of our confidential information and assign ownership to us of inventions related to our business that are created by
him during his employment. We may terminate the agreement at any time, with or without cause. Mr. Hunt will be eligible
to receive an amount equal to six (6) months of his then-current base salary payable in the form of salary continuation if he
is terminated without cause. Mr. Hunt may terminate the agreement at any time, with or without reason, upon two weeks’
advance written notice.
Outstanding Equity at Fiscal Year Ended June 30, 2023
The following table sets forth information regarding stock options, warrants and other stock awards (restricted
stock) for each named executive officer as of June 30, 2023.
Outstanding Equity Awards at Fiscal Year Ended June 30, 2023
Number of
securities
underlying
unexercised
options/warrants
exercisable (#)
Number of
securities
underlying
unexercised
options/warrants
unexercisable (#)
Option/
Warrant
expiration
date (1)
Stock Awards:
Number of
shares of stock
that have not
vested (#)
Stock Awards:
Market value of
shares of stock
that have not
vested ($)
Name
Peter Victor Derycz
Roy W. Olivier
William Nurthen
—
—
—
—
—
—
—
—
50,000
50,000
50,000
—
—
—
—
—
—
—
—
—
—
—
Option/
Warrant
exercise
price ($)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— $ 2.40 11/13/2028
— $ 3.13 11/12/2029
— $ 2.13 11/17/2030
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
62
606 (2) $
1,038 (4) $
2,500 (6) $
10,020 (8) $
2,949 (10)$
3,691 (12)$
4,835 (14)$
34,639 (18)
—
—
—
6,313 (8) $
5,898 (10)$
7,381 (12)$
9,671 (14)$
79,897 (18)
500,000 (20)
56,250 (16)$
2,738 (12)$
3,588 (14)$
24,601 (18)$
300,000 (20)$
1,292 (3)
2,583 (5)
5,425 (7)
26,454 (9)
6,459 (11)
7,750 (13)
9,042 (15)
67,200 (19)
—
—
—
16,666 (9)
12,916 (11)
15,500 (13)
18,084 (15)
155,000 (19)
702,000 (21)
146,813 (17)
5,750 (13)
6,709 (15)
47,726 (19)
421,200 (21)
Table of Contents
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
Stock options expire ten years from the grant date.
The restricted stock was granted on November 17, 2020 and vest over a three year period, with a one
year cliff vesting period.
Based on a market closing price per share of common stock of $2.13 on November 17, 2020.
The restricted stock was granted on February 9, 2021 and vest over a three year period, with a one year
cliff vesting period.
Based on a market closing price per share of common stock of $2.49 on February 9, 2021.
The restricted stock was granted on May 11, 2021 and vest over a three year period, with a one year cliff
vesting period.
Based on a market closing price per share of common stock of $2.17 on May 11, 2021.
The restricted stock was granted on August 5, 2021 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 $2.64 on August, 2021.
(10)
The restricted stock was granted on December 2, 2021 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 $2.19 on December 2, 2021.
(12)
The restricted stock was granted on February 8, 2022 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 $2.10 on February 8, 2022.
(14)
The restricted stock was granted on May 10, 2022 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 $1.87 on May 10, 2022.
(16)
The restricted stock was granted on October 4, 2021 and vest over a four year period, with a one year
cliff vesting period.
(17)
Based on a market closing price per share of common stock of $2.61 on October 4, 2021.
(18)
The restricted stock was granted on August 19, 2022 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 $1.94 on August 19, 2022.
(20)
(21)
The restricted stock was granted on November 1, 2022 under the 2017 Plan, as restricted stock awards to
key management in accordance with its long-term equity bonus program (the “LTEBP”).
Based on fair value computed using the Monte Carlo simulations on a binomial model with the
assistance of a valuation specialist with a derived service period ranging from 1.43 to 2.59 years.
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Compensation of Directors
The following table sets forth compensation awarded or paid to our directors for the last fiscal year for the
services rendered by them to the Company in all capacities.
Director Compensation for the Fiscal Years Ended June 30, 2023 and 2022
Name
John Regazzi (1)
Gen. Merrill McPeak (2)
Eugene Robin (3)
Barbara J. Cooperman (4)
Fees
earned
or paid
in cash
($)
36,000
18,000
18,000
18,000
18,000
18,000
18,000
7,079
Warrant
and
Option
Awards
($)
55,500
104,000
55,500
52,000
55,500
52,000
55,500
40,318
Total ($)
91,500
122,000
73,500
70,000
73,500
70,000
73,500
47,397
Fiscal
Year
2023
2022
2023
2022
2023
2022
2023
2022
(1) Outstanding equity awards as of June 30, 2023 consists of options to purchase 50,000 shares of common stock
at an exercise price of $2.15 per share, 100,000 shares of common stock at $2.10 per share, 100,000 shares of
common stock at an exercise price of $2.13 per share, 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 $2.40 per share, options to purchase 150,000 shares of common stock at an exercise price of $1.20, 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 $0.70 per share, options to purchase 16,000 shares of
common stock at an exercise price of $0.80 per share and options to purchase 30,000 shares of common stock
at an exercise price of $1.10 per share.
(2) Outstanding equity awards as of June 30, 2023 consists of options to purchase 50,000 shares of common stock
at an exercise price of $2.15 per share, 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, 2023 consists of options to purchase 50,000 shares of common stock
at an exercise price of $2.15, 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, 2023 consists of options to purchase 50,000 shares of common stock
at an exercise price of $2.15, options to purchase 38,767 shares of common stock at an exercise price of $2.10
per share.
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth certain information, as of September 8, 2023, 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.
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 8, 2023.
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 29,596,086 shares of common stock outstanding as of
September 8, 2023 plus, for each person, any securities that person has the right to acquire within 60 days of September 8,
2023.
Name and Address of Beneficial Owner
Greater than 5% Shareholder:
Richard H. Witmer, Jr.
16 Fort Hills Lane
Greenwich, CT 06831
Bristol Capital Advisors, LLC (1)
555 Marin Street, Suite 140
Thousand Oaks, CA 91360
Cove Street Capital, LLC
525 South Douglas Street, Suite 225
El Segundo, CA 90245
Directors and Executive Officers:
Peter Victor Derycz (2)
Roy W. Olivier (3)
William Nurthen (4)
Scott Ahlberg (5)
Shane Hunt (6)
John Regazzi (7)
Gen. Merrill McPeak (8)
Barbara Cooperman (9)
All Directors and Executive Officers as a group (8 persons) (10)
* Less than 1%
Shares
Beneficially
Owned
Percentage
of Shares
2,608,448
8.8 %
2,582,108
8.7 %
2,400,778
8.1 %
3,321,322
856,641
421,068
596,516
528,449
1,143,500
884,608
88,767
7,840,871
11.2 %
2.9 %
1.4 %
2.0 %
1.8 %
3.7 %
2.9 %
* %
24.9 %
(1)
Paul Kessler exercises voting and investment power over the shares held by Bristol Investment Fund, Ltd.
("Bristol Fund") 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. Mr. Kessler, Bristol Fund and Bristol
Capital Advisors, LLC, the investment advisor of Bristol Fund, may be deemed to have formed a group with Peter
Derycz, Janice Peterson (who holds 1,200 shares of common stock as of August 16, 2023) and Andrew Ritter
(who holds no shares of common stock as of August 16, 2023) within the meaning of Section 13(d)(3) of the
Exchange Act and Rule 13d-5(b)(1) thereunder. The shares reported as beneficially owned by Bristol Fund do not
include the shares beneficially owned by Mr. Derycz or Ms. Peterson. Bristol Fund disclaims any beneficial
ownership of any shares of common stock beneficially owned by Mr. Derycz or Ms. Peterson. The foregoing
information regarding the deemed group is based solely on Amendment No. 6 to Schedule 13D, filed by Mr.
Derycz with the SEC on August 18, 2023.
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(2)
(3)
(4)
(5)
(6)
Mr. Derycz may be deemed to have formed a group with Mr. Kessler, Bristol Fund, Bristol Capital Advisors,
LLC, Janice Peterson (who holds 1,200 shares of common stock as of August 16, 2023) and Andrew Ritter (who
holds no shares of common stock as of August 16, 2023) within the meaning of Section 13(d)(3) of the Exchange
Act and Rule 13d-5(b)(1) thereunder. The shares reported as beneficially owned by Mr. Derycz do not include the
shares beneficially owned by Bristol Fund or Ms. Peterson. Mr. Derycz disclaims any beneficial ownership of
any shares of common stock beneficially owned by Bristol Fund or Ms. Peterson. The foregoing information
regarding the deemed group is based solely on Amendment No. 6 to Schedule 13D, filed by Mr. Derycz with the
SEC on August 18, 2023.
Includes shares underlying options to purchase 50,000 shares of common stock at an exercise price of $2.40 per
share, and 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 609,159 shares of unvested
restricted stock. Of this amount, 109,159 shares of the restricted stock vests over a three-year period, with one-
year cliff vesting period and remains subject to forfeiture if vesting conditions are not met. The remaining 500,000
shares of the restricted stock were granted on November 1, 2022 under the 2017 Plan, as restricted stock awards
to key management in accordance with its long-term equity bonus program (the “LTEBP”).
Includes 387,177 shares of unvested restricted stock. Of this amount, 56,250 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. 30,927 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. The remaining 300,000 shares of the
restricted stock were granted on November 1, 2022 under the 2017 Plan, as restricted stock awards to key
management in accordance with its long-term equity bonus program (the “LTEBP”).
Includes 197,479 shares of unvested restricted stock. Of this amount 47,479 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. The remaining 150,000 shares of the restricted stock were granted on November 1, 2022 under the
2017 Plan, as restricted stock awards to key management in accordance with its long-term equity bonus program
(the “LTEBP”).
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 8,000 shares of common stock at an exercise price of $3.50 per share, options
to purchase 8,000 shares of common stock at an exercise price of $2.99 per share, options to purchase 8,000
shares of common stock at an exercise price of $2.45 per share, options to purchase 8,000 shares of common stock
at an exercise price of $2.13 per share, options to purchase 7,333 shares of common stock at an exercise price of
$2.49 per share, options to purchase 6,667 shares of common stock at an exercise price of $2.17 per share, options
to purchase 5,515 shares of common stock at an exercise price of $2.64 per share, and 315,544 shares of unvested
restricted stock. Of this amount, 15,544 shares of the restricted stock vests over a three-year period, with one-year
cliff vesting period and remains subject to forfeiture if vesting conditions are not met. The remaining 300,000
shares of the restricted stock were granted on November 1, 2022 under the 2017 Plan, as restricted stock awards
to key management in accordance with its long-term equity bonus program (the “LTEBP”).
(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
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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, options to purchase 100,000 shares of common stock at an exercise price of
$2.10 per share and options to purchase 50,000 shares of common stock at an exercise price of $2.15 per share.
(8)
Includes options to purchase 50,000 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, options to purchase 50,000 shares of common
stock at an exercise price of $2.10 per share and options to purchase 50,000 shares of common stock at an
exercise price of $2.15.
(9)
Includes shares underlying options to purchase 38,767 shares of common stock at an exercise price of $2.10 per
share and options to purchase 50,000 shares of common stock at an exercise price of $2.15.
(10)
Includes shares underlying options to purchase 1,901,782 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
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, 2023,
there were 1,495,927 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
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made under the 2017 Plan. The following table provides information as of June 30, 2023 with respect to the Plans, which
are the only compensation plans under which our equity securities are, or have been, authorized for issuance.
Plan category
Equity compensation plans approved by stockholders
(2007 Equity Compensation Plan, and 2017 Omnibus
Incentive Plan)
Equity compensation plans not approved by
stockholders
Total
Number of securities to be Weighted average
exercise price of
outstanding options,
warrants and rights
(b)
issued upon exercise of
outstanding options,
warrants and rights
(a)
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
reflected in column (a))
(c)
2,909,574
$
1.87
1,495,927
—
—
2,909,574
—
1,495,927
Item 13. Certain Relationships and Related Transactions, and Director Independence
Other than the transactions described herein, since July 1, 2021, 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 five members: Mr. Derycz (Executive Chairman), Gen. McPeak, Mr.
Olivier, Mr. Regazzi and Ms. Cooperman. Our board of directors has determined that Ms. Cooperman, Gen. McPeak and
Mr. Regazzi are independent directors as that term is defined in the applicable rules for companies traded on Nasdaq. Ms.
Cooperman, Gen. McPeak and Mr. Regazzi 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.
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: 572. The following table presents the aggregate fees for professional
audit services and other services rendered in the fiscal years ended June 30, 2023 and 2022.
Audit Fees
Audit-Related Fees
Tax Fees
All Other Fees
Total
Year Ended
June 30, 2023
130,407
$
—
37,800
—
$
168,207
$
$
Year Ended
June 30, 2022
132,865
—
30,146
—
163,011
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.
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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, 2023 and 2022, 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.
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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 15, 2023, 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
Number
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
Description
Share Exchange Agreement between Research Solutions, Inc. and Reprints Desk Inc. dated November 13,
2006. (Incorporated by reference to Exhibit 2.1 to the Registrant’s Registration Statement on Form SB-2
filed on December 28, 2007.)
Articles of Incorporation. (Incorporated by reference to Exhibit 3.1 to the Registrant’s Registration
Statement on Form SB-2 filed on December 28, 2007.)
Articles of Merger Effective March 4, 2013. (Incorporated by reference to Exhibit 3.1 to the Registrant’s
Current Report on Form 8-K filed on March 6, 2013.)
Amended and Restated Bylaws. (Incorporated by reference to Exhibit 3.2 to the Registrant’s Current
Report on Form 8-K filed on October 17, 2012.)
Description of the registrant’s common stock. (Incorporated by reference to Exhibit 4 to the Registrant’s
Annual Report on Form 10 K filed on September 23, 2022.)
Form of Common Stock Purchase Warrant dated November 5, 2010. (Incorporated by reference to
Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on November 12, 2010.)++
Form of Common Stock Purchase Warrant dated December 19, 2011. (Incorporated by reference to
Exhibit 10.10 to the Registrant’s Registration Statement on Form S-1 filed on July 22, 2016)++
Executive Employment Agreement dated July 1, 2013, between Research Solutions, Inc., Reprints
Desk, Inc. and Scott Ahlberg. (Incorporated by reference to Exhibit 10.12 to the Registrant’s Annual
Report on Form 10-K filed on September 30, 2013.)++
Amendment to Executive Employment Agreement dated June 30, 2015, between Research Solutions, Inc.,
Reprints Desk, Inc. and Scott Ahlberg. (Incorporated by reference to Exhibit 10.25 to the Registrant’s
Annual Report on Form 10-K filed on September 8, 2015.)++
Securities Purchase Agreement dated June 23, 2016, among Research Solutions, Inc. and the Investors
signatory thereto. (Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-
K filed on June 28, 2016.)
Registration Rights Agreement dated June 24, 2016, among Research Solutions, Inc. and the Investors
signatory thereto. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-
K filed on June 28, 2016.)
Form of Common Stock Purchase Warrant dated June 24, 2016. (Incorporated by reference to Exhibit 10.3
to the Registrant’s Current Report on Form 8-K filed on June 28, 2016.)
Amendment to Executive Employment Agreement dated June 30, 2017, between Research Solutions, Inc.,
Reprints Desk, Inc. and Scott Ahlberg. (Incorporated by reference to Exhibit 10.32 to the Registrant’s
Annual Report on Form 10-K filed September 18, 2017.)++
70
Table of Contents
Exhibit
Number
10.9
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
Description
Amended and Restated Loan and Security Agreement dated October 31, 2017, between Silicon Valley
Bank, Research Solutions, Inc. and Reprints Desk, Inc. (Incorporated by reference to Exhibit 10.1 to the
Registrant’s Current Report on Form 10-Q filed February 14, 2018.)
Amendment to Executive Employment Agreement dated June 30, 2019, between Research Solutions, Inc.,
Reprints Desk, Inc. and Scott Ahlberg. (Incorporated by reference to Exhibit 10.3 to the Registrant’s
Current Report on Form 8-K filed August 7, 2019.)++
First Amendment to Amended and Restated Loan and Security Agreement, effective December 31, 2019,
among Silicon Valley Bank, Research Solutions, Inc. and Reprints Desk, Inc. (Incorporated by reference to
Exhibit 10.29 to the Registrant’s Annual Report on Form 10 K filed September 24, 2020.)
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. (Incorporated by reference to
Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed May 14, 2020.)
Amendment to Executive Employment Agreement dated June 30, 2020, between Research Solutions, Inc.,
Reprints Desk, Inc. and Scott Ahlberg. (Incorporated by reference to Exhibit 10.3 to the Registrant’s
Current Report on Form 8-K filed September 2, 2020.)++
Consulting Agreement dated July 1, 2020, between Reprints Desk, Inc. and Michiel van der Heijden BV.
(Incorporated by reference to Exhibit 10.35 to the Registrant’s Annual Report on Form 10-K filed
September 24, 2020.)++
Amended and Restated Executive Employment Agreement dated March 29, 2021, among Research
Solutions, Inc., Reprints Desk, Inc. and Peter Derycz. (Incorporated by reference to Exhibit 10.1 to the
Registrant’s Quarterly Report on Form 10-Q filed May 13, 2021.)++
Executive Employment Agreement dated March 29, 2021, among Research Solutions, Inc., Reprints Desk,
Inc. and Roy W. Olivier. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on
Form 10-Q filed May 13, 2021.)++
Amendment to Executive Employment Agreement dated June 30, 2021, between Research Solutions, Inc.,
Reprints Desk, Inc. and Scott Ahlberg. (Incorporated by reference to Exhibit 10.19 to the Registrant’s
Annual Report on Form 10 K filed on September 23, 2022.)++
Amendment to Executive Employment Agreement dated June 30, 2022, between Research Solutions, Inc.,
Reprints Desk, Inc. and Scott Ahlberg. (Incorporated by reference to Exhibit 10.20 to the Registrant’s
Annual Report on Form 10 K filed on September 23, 2022.)++
Amended and Restated Executive Employment Agreement dated October 4, 2021, among Research
Solutions, Inc., Reprints Desk, Inc. and Roy W. Olivier. (Incorporated by reference to Exhibit 10.1 to the
Registrant’s Quarterly Report on Form 10-Q filed November 12, 2021.)++
Employment Agreement dated October 4, 2021, between Research Solutions, Inc. and William A.
Nurthen. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q
filed November 12, 2021.)++
Executive Employment Agreement dated November 1, 2012, between Research Solutions, Inc., Reprints
Desk, Inc. and Shane Hunt. (Incorporated by reference to Exhibit 10.23 to the Registrant’s Annual Report
on Form 10 K filed on September 23, 2022.)++
Amendment to Executive Employment Agreement dated June 30, 2021, between Research Solutions, Inc.,
Reprints Desk, Inc. and Shane Hunt. (Incorporated by reference to Exhibit 10.24 to the Registrant’s
Annual Report on Form 10 K filed on September 23, 2022.)++
Amendment to Executive Employment Agreement dated June 30, 2022, between Research Solutions, Inc.,
Reprints Desk, Inc. and Shane Hunt. (Incorporated by reference to Exhibit 10.25 to the Registrant’s
Annual Report on Form 10 K filed on September 23, 2022.)++
Third Amendment to Amended and Restated Loan and Security Agreement dated February 15, 2022
among Silicon Valley Bank, Research Solutions, Inc. and Reprints Desk, Inc. (Incorporated by reference to
Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed May 13, 2022.)
Fourth Amendment to Amended and Restated Loan and Security Agreement dated February 28, 2022
among Silicon Valley Bank, Research Solutions, Inc. and Reprints Desk, Inc. (Incorporated by reference to
Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-Q filed May 13, 2022.)
Asset Purchase Agreement dated September 28, 2022, between Reprints Desk, Inc. and FIZ Karlsruhe –
Leibniz-Institut für Informationsinfrastruktur GmbH.
71
Table of Contents
Exhibit
Number
10.27
10.28
21
23
24
31.1
31.2
32.1
32.2
99.1
99.2
99.3
99.4
99.5
99.6
99.7
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
Description
Agreement and Plan of Merger by and among Reprints Desk, Inc., Research Solutions Acquisition Corp 1,
Research Solutions, Inc., as Parent Guarantor, Resolute Innovation, Inc. and Shareholder Representative
Services LLC dated July 28, 2023. (Incorporated by reference to Exhibit 2.1 to the Registrant’s Current
Report on Form 8-K filed July 31, 2023.)##
Amendment to Executive Employment Agreement effective June 30, 2023, between Research Solutions,
Inc., Reprints Desk, Inc. and Scott Ahlberg.++
List of Subsidiaries.
Consent of Independent Registered Pubic Accounting Firm.
Power of Attorney. (Incorporated by reference to the signature page hereto.)
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
Section 1350 Certification of Chief Executive Officer *
Section 1350 Certification of Chief Financial Officer *
2007 Equity Compensation Plan. (Incorporated by reference to Exhibit 10.1 to the registrant’s Registration
Statement on Form SB-2 filed on December 28, 2007.)++
Amendment No. 1 to 2007 Equity Compensation Plan. (Incorporated by reference to Appendix A to the
Registrant’s Definitive Proxy Statement filed on October 29, 2012.)++
Amendment No. 2 to 2007 Equity Compensation Plan. (Incorporated by reference to Appendix A to the
Registrant’s Definitive Proxy Statement filed on October 13, 2014.)++
Amendment No. 3 to 2007 Equity Compensation Plan. (Incorporated by reference to Appendix A to the
Registrant’s Definitive Proxy Statement filed on September 26, 2016.)++
2017 Omnibus Incentive Plan. (Incorporated by reference to Appendix A to the Registrant’s Definitive
Proxy Statement filed on September 26, 2017.)++
Amendment No. 1 to 2017 Omnibus Incentive Plan. (Incorporated by reference to Appendix A to the
Registrant’s Definitive Proxy Statement filed on September 21, 2019.)++
Amendment No. 2 to 2017 Omnibus Incentive Plan. (Incorporated by reference to Appendix A to the
Registrant’s Definitive Proxy Statement filed on September 25, 2020).++
Inline XBRL Instance Document
Inline XBRL Taxonomy Extension Schema Document
Inline XBRL Taxonomy Extension Calculation Linkbase
Inline XBRL Taxonomy Extension Definition Linkbase
Inline XBRL Taxonomy Extension Label Linkbase
Inline XBRL Taxonomy Extension Presentation Linkbase
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)
*
++
##
Furnished herewith
Indicates management contract or compensatory plan.
The Registrant has omitted schedules and exhibits pursuant to Item 6.01(b)(2) of Regulation S-K. The Registrant
agrees to furnish supplementally a copy of the omitted schedules and exhibits to the SEC upon request.
Item 16. Form 10-K Summary
Not applicable.
72
Table of Contents
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.
SIGNATURES
Date: September 15, 2023
Date: September 15, 2023
RESEARCH SOLUTIONS, INC.
By:/s/ Roy W. Olivier
Roy W. Olivier
Chief Executive Officer and President
(Principal Executive Officer)
By:/s/ William Nurthen
William Nurthen
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.
73
Table of Contents
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.
September 15, 2023
Signature
Title
Date
/s/ Roy W. Olivier
Roy W. Olivier
/s/ William Nurthen
William Nurthen
/s/ Peter Victor Derycz
Peter Victor Derycz
/s/ Merrill McPeak
Merrill McPeak
/s/ John Regazzi
John Regazzi
/s/ Barbara J. Cooperman
Barbara J. Cooperman
Chief Executive Officer (Principal Executive
September 15, 2023
Officer), President and Director
Chief Financial Officer (Principal Financial
and Accounting Officer) and Secretary
September 15, 2023
Executive Chairman
September 15, 2023
Director
Director
Director
September 15, 2023
September 15, 2023
September 15, 2023
74
Exhibit 10.26
28 September 2022
Asset Purchase Agreement
by and between
FIZ Karlsruhe – Leibniz-Institut für Informationsinfrastruktur GmbH
as Seller
and
Reprints Desk, Inc.
as Purchaser
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TABLE OF CONTENTS
Preamble
I.
Definitions and Interpretation
1.
Definitions and Interpretation
II.
Sale and Purchase and Assignment of the Sold Contracts
2.
3.
Sale and Purchase of Sold Contracts
Assignment of Sold Contracts
III. Purchase Price
4.
5.
Purchase price
Payments
IV.
Seller’s Representations, Warranties and Protection of Goodwill
6.
7.
8.
Representations and Warranties of Seller
Remedies of the Purchaser
Protection of Goodwill
V.
Limitations of Liability
9.
Limitations of Liability of Seller
VI. Other Provisions
10. Costs and Expenses
11. General Provisions
12. Notices
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3
4
4
4
4
4
6
6
9
10
10
11
13
14
14
15
15
15
17
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Asset Purchase Agreement
between
(1)
FIZ Karlsruhe – Leibniz-Institut für Informationsinfrastruktur GmbH, having its registered
seat in Eggenstein-Leopoldshafen, registered in the commercial register of the local court of
Mannheim under no. HRB 101892, with registered business address at Hermann-von-Helmoltz-
Platz 1, 76344 Eggenstein-Leopoldshafen, Germany, as seller
(the “Seller”);
and
(2) Reprints Desk, Inc., a corporation incorporated under the laws of the State of Delaware USA, with
business address at 10624 S. Eastern Ave., Ste. A-614, Henderson, NV USA 89052, as purchaser
(the “Purchaser”, together with the Seller, the “Parties”).
Preamble
(A)
Seller is an independent important infrastructure institute and member of the non-universitarian
Leibniz Association. Its public mandate is to provide science and research worldwide with scientific
information. Seller significantly contributes with its activities to support information infrastructure, inter
alia, by making accessible large volumes of patent and research information from various sources and
providing AI-based analysis of the data. Furthermore, Seller practises own research and develops and
operates innovative information services as well as e-research solutions.
(B)
Seller provides document procurement and delivery services, in particular regarding journal articles,
patent documents, reports, conference papers, proceedings or other publications, to various customer under
its “AutoDoc”- platform and has, for these purposes, entered into various contracts with its customers.
Purchaser is an independent corporation that provides solutions that simplify, and streamline the
(C)
process research-driven organizations require to obtain, manage and create intellectual property.
(D)
Seller intends to sell, transfer and assign to Purchaser, and Purchaser desires to purchase, acquire and
assume from Seller the aforementioned contracts pertaining to the “AutoDoc” platform subject to the terms
and conditions set forth herein.
Therefore, the Parties agree as follows (the “Agreement“, and the transactions contemplated by this
Agreement the “Transaction”):
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I.
1.
II.
2.
Definitions and Interpretation
Definitions and Interpretation
Certain defined terms and interpretative matters which form an integral part of this Agreement are set
out in Exhibit 1.
Sale and Purchase and Assignment of the Sold Contracts
Sale and Purchase of Sold Contracts
Upon the terms and subject to the conditions of this Agreement and with economic effect as of the
Effective Date, Seller hereby sells (verkauft) and Purchaser hereby purchases (kauft) all rights,
claims, obligations and liabilities under the Sold Contracts subject to Section 3. This sale and
purchase does not include individual document or other transaction made and delivered under the
Sold Contracts and the rights and claims resulting therefrom (“Document Purchases”) before the
Effective Date. For the avoidance of doubt, Seller does not sell and Purchaser does not purchase any
assets or rights other than the Sold Contracts, in particular any assets or rights related to FIZ Autodoc
contracts under which no orders or deliveries have been made since 1 January 2020.
3.
Assignment of Sold Contracts
3.1 Assignment
3.1.1 Upon the terms and subject to the conditions of this Agreement, Seller shall assign and transfer with
effect as of 31 December 2022, 24:00 hours (the “Effective Date”) to Purchaser, and Purchaser shall
assume by way of an assumption of contract with full discharge of Seller (im Wege der
Vertragsübernahme mit befreiender Wirkung), all rights, claims, obligations and liabilities resulting
from the contracts set forth in Exhibit 3.1.1 (the “Sold Contracts”), except for rights, claims,
obligations and liabilities resulting from (i) Sold Contracts for which the consent of the contract
partner pursuant to Section 3.3 has not been obtained prior to the Effective Date and (ii) Document
Purchases made prior to the Effective Date.
3.1.2 Any claims, receivables, obligations and liabilities resulting from Document Purchases accepted by
Seller until the Effective Date shall be allocated to Seller irrespective of the time of performance of
the service. Any claims, receivables, obligations and liabilities resulting from Document Purchases
made to and accepted by Purchaser after the Effective Date shall be allocated to Purchaser. For a
period of two (2) years from the Effective Date, Seller shall not accept Document Purchases from
contract partners of the Sold Contracts and shall refer such contract partners of the Sold Contracts
exclusively to Purchaser for Document Purchases after the Effective Date.
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3.1.3 For the avoidance of doubt, Seller does not assign or transfer any assets other than the Sold
Contracts.
3.2
Payments Received and Payments Made
3.2.1 Payments under Sold Contracts which have been made by third parties to either Purchaser or Seller
(“Receiving Party”) with respect to claims or receivables that are allocated to the respective other
Party pursuant to this Agreement, shall be Notified by the Receiving Party to the other Party within
ten (10) Business Days after the end of the calendar month in which such payments have been
received by the Receiving Party. All such payments received by the Receiving Party within a
calendar month shall be forwarded to the respective other Party within twenty (20) Business Days
following the end of the respective calendar month. If such payments include VAT, the Receiving
Party shall forward the net amount of such payments (i.e. exclusive of VAT) to the other Party only if
the VAT on such payments are owed by the Receiving Party to the Taxing Authorities.
3.2.2 Payments under Sold Contracts which have been made by either Purchaser or Seller (“Paying
Party”) on liabilities allocated to the other Party pursuant to this Agreement, shall be notified by the
Paying Party to the other Party within ten (10) Business Days after the end of the calendar month in
which the payment has been made by the Paying Party. All such payments made by the Paying Party
within a calendar quarter shall be reimbursed by the respective other Party within twenty (20)
Business Days following the end of the respective calendar month. If such payments include VAT,
the other Party shall reimburse to the Paying Party the net amount of such payments (exclusive of
VAT), if and to the extent the Paying Party can claim input VAT with respect to the included VAT
amount.
3.3 Consent of Contract Partners
3.3.1 Unless otherwise agreed between the Parties and notwithstanding a termination pursuant to
Section 3.3.3, from the date of the receipt of the Base Amount by Seller pursuant to Section 4.1 until
the 31 January 2023, Seller and Purchaser shall use commercially reasonable efforts (i) to obtain the
consents of the contract partner of any Sold Contract that are required for an assumption of the Sold
Contracts by Purchaser with effect from the Effective Date, or (ii) to induce the contract partner to
renew the contract with the Purchaser with or without changes, or to enter into a new contract with
Purchaser on terms substantially similar to the terms of the relevant Sold Contract. For the avoidance
of doubt, Seller shall not assign the Sold Contracts to any other third party or to induce contract
partners of Sold Contracts not to consent to the assignment to Purchaser.
3.3.2 In order to transfer the Sold Contracts from Seller to Purchaser, Seller and Purchaser shall request
from the relevant contract partners approval of the intended transfer of the Sold Contracts (including
personal information) by way of a consent letter substantially as set forth in Exhibit 3.3.2 or to take
other measures that are required by applicable laws to transfer the Sold Contracts to Purchaser, e.g.
by offering a novation agreement to the respective contract partner. Purchaser shall only contact
contract partners of Sold Contracts upon such contract partner having approved the
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transfer of its contact data to Purchaser. Seller and Purchaser shall notify each other without undue
delay once either of them has received a consent of a contract partner.
3.3.3 Seller shall be entitled to terminate any Sold Contract subject to the condition precedent that the
relevant contract partner does not consent, prior to the Effective Date, to the transfer of the relevant
Sold Contract from Seller to Purchaser.
3.3.4 For the avoidance of doubt, nothing in this Section 3.3 shall require Seller or Purchaser to make any
payment (except to the extent advanced, assumed or agreed in advance to be reimbursed by
Purchaser), incur any obligation or grant any concession in order to effect any transaction
contemplated by this Section 3.
III. Purchase Price
4.
Purchase price
4.1 Base Amount
4.1.1 Purchaser shall pay to Seller a base purchase price for the Sold Contracts (the “Base Amount”) in
the amount of
EUR 300,000 (in words: three hundred thousand Euro) net.
4.1.2 The Base Amount shall be due five (5) Business Days after the conclusion of this Agreement.
4.1.3 Seller shall be entitled to withdraw (zurücktreten) from this Agreement if it has not received the Base
Amount within the time period set forth in Section 4.1.2.
4.2 Base Amount Plus
4.2.1 Purchaser shall pay to Seller an additional purchase price of up to EUR 250,000 (in words: two
hundred fifty thousand Euro) (the “Base Amount Plus”) for Sold Contracts which are effectively
transferred to Purchaser (“Transferred Contracts”). A Sold Contract shall be considered a
Transferred Contract, if (i) the relevant contract partner has consented to the transfer of the contract
pursuant to Section 3.3.2, the relevant contract partner has renewed the contract with the Purchaser
with or without changes, or the relevant contract partner has entered into a new contract with
Purchaser on terms substantially similar to the terms of the relevant Sold Contract, in each case on or
before 31 January 2023, and (ii) the contract partner has filed at least one Document Purchase with
the Purchaser under the relevant contract on or before 30 June 2023.
4.2.2 The Base Amount Plus shall be calculated based on the proportion of the trailing twelve months’
revenues of the Transferred Contracts compared to the trailing twelve months’ revenues of all Sold
Contracts. “TTMR” shall mean the total net service fees earned by Seller from document
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requests made under a Sold Contract in the time period beginning on 1 August 2021, 0:00 hours and
ending on 31 July 2022, 24:00 hours as set out for each of the Sold Contracts in Exhibit 3.1.1.
4.2.3 The Base Amount Plus shall be (i) the total TTMR of the Transferred Contracts divided by the total
TTMR of all Sold Contracts, (ii) multiplied by EUR 550,000, (iii) minus the Base Amount, provided
that the Base Amount Plus shall not be a negative amount:
Examples:
Proportion of Transferred Revenues
Base Amount Plus
● 100 %
● 90 %
● 81,41 %
● 75 %
● 50 %
● 25 %
250,000 Euro
195,000 Euro
147,755 Euro
112,500 Euro
0,00 Euro
0,00 Euro
4.2.4 Purchaser shall provide Seller with a list of the Transferred Contracts as of 30 June 2023 not later
than 31 July 2023 for Seller’s review. The Base Amount Plus shall be due on 30 September 2023. In
case of a dispute in relation to the list of the Transferred Contracts, the Parties shall seek to settle any
such dispute amicably prior to 30 September 2023. In case the Parties cannot settle any such dispute,
Section 4.3.2 shall apply mutatis mutandis.
4.3 Bonus Amount
4.3.1 For a period of three (3) years following the Effective Date, Purchaser shall provide Seller on a
quarterly basis, at the latest on the last day of the month following the last day of the respective
quarter, with the number of all orders Purchaser has received from customers under the Transferred
Contracts and the transactions resulting from these contracts, including the type of delivery (“direct
download”, “standard” or “rush”) (the “Bonus Information”).
4.3.2 If Seller has reason to believe that the Bonus Information provided by Purchaser pursuant to
Section 4.3.1 is incorrect, Seller may request that the Bonus Information is reviewed by one of the
“big 4” accounting firms to be instructed as neutral expert by Seller (the “Neutral Expert”). Seller
and Purchaser shall jointly instruct the Neutral Expert to determine the Bonus Information in
accordance with the provisions of this Agreement by way of a written expert’s opinion
(Schiedsgutachten) which shall be final and binding on the Parties. The Neutral Expert shall act as an
expert (Schiedsgutachter), not as an arbitrator. The Parties shall provide the Neutral Expert with all
documents and information it reasonably requires for the preparation of its decision. The
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costs and expenses of the Neutral Expert shall be allocated between Seller and Purchaser in the
decision of the Neutral Expert by applying the principles of Sections 91 et seq. of the German Code
of Civil Procedure (Zivilprozessordnung).
4.3.3 In addition to the Base Amount and the Base Amount Plus, Purchaser shall pay to Seller, for the
period set forth in Section 4.3.1 above, a bonus based on the service fee revenues of Purchaser, as
more fully described in Section 4.3.4 below, resulting from the Transferred Contracts (the “Bonus
Amount”; the Bonus Amount together with the Base Amount and the Base Amount Plus, the
“Purchase Price”).
4.3.4 The Bonus Amount shall be the amount of the accumulated and collected net service fees for
Document Purchases which Seller would have charged to the contract partners of the Transferred
Contracts had such Contracts not been transferred to Purchaser and had Seller continued to provide
the services to the contract partners. The net service fees shall not include supplier fees, copyright
fees, and any other fees that normally would not have been retained by Seller, and are set out in detail
in Exhibit 4.3.4-A. For the avoidance of doubt, the Bonus Amount (i) shall not include service fee
payments with which contract partners of the Transferred Contracts are in default and (ii) shall be
independent of the amount of service fees or other fees which are actually charged by Purchaser. In
addition, Seller acknowledges that some of the Transferred Contracts may come from contract
partners that are already existing customers of Purchaser. In Exhibit 4.3.4-B, Purchaser has provided
a list of these customers and Purchasers’ trailing twelve month’s of services fees from those
customers for the period ending 31 July, 2022 (the “Existing Customers”). Seller acknowledges that
for Existing Customers, the Bonus Amount shall only be payable based upon accumulated and
collected net services fees over and above the trailing twelve month’s net services fees from each
Existing Customer.
4.3.5 The Bonus Amount shall be paid by Purchaser in portions on a quarterly basis. Each portion of the
Bonus Amount shall be due twenty-five (25) Business Days after the last day of the respective
quarter.
4.4 VAT, Withholding Tax, Transfer Taxes
4.4.1 The Purchase Price (including, for the avoidance of doubt the Bonus Amount) is meant to be a net
amount that does not include any VAT. To the extent that the execution or consummation of this
Agreement or any of the transactions contemplated by this Agreement is subject to VAT in any
jurisdiction, such VAT shall be paid by Purchaser in addition to the Purchase Price if and to the
extent such VAT is owed by Seller to the Taxing Authorities; the VAT shall also be paid in the
relevant jurisdiction if the Purchase Price (without VAT) is paid to Seller on global level. If such VAT
is owed by Purchaser under applicable laws, Purchaser shall duly and timely remit the VAT to the
competent Taxing Authority.
4.4.2 Within twenty (20) Business Days after the Effective Date, Seller shall issue an invoice to the
Purchaser in accordance with the applicable VAT laws. Purchaser shall pay the VAT amount (if
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any) within three (3) Business Days after receipt of such invoice to Seller (or directly to the
competent Taxing Authority in case of a reverse-charge procedure). If the VAT actually payable as a
consequence of the execution or consummation of this Agreement or any of the transactions
contemplated by this Agreement turns out to be higher or lower than the amount shown on the
relevant invoice (including if no VAT has been invoiced at all), the Parties shall fully cooperate with
each other to reflect a proper VAT treatment. In particular, the Parties shall make appropriate
declarations and filings with the competent Taxing Authorities, amend any invoices (to the extent
required by the applicable laws) and make any required payment with respect to VAT (including
interest and/or penalties assessed thereon) to each other and the competent Taxing Authority,
respectively, in each case without undue delay (unverzüglich). Any interest due on the VAT owed to
the competent Taxing Authority by Seller shall be borne by the Purchaser.
4.4.3 Purchaser shall Notify Seller without undue delay if any of Seller’s claims against customers under
the Sold Contracts acquired by Purchaser under
this Agreement becomes uncollectable
(zahlungsgestört) and provide any information necessary for Seller to conduct the VAT correction
to Section 17 German VAT Act
(e.g. pursuant
according
(Umsatzsteuergesetz)). For purposes of this Agreement a claim under the Sold Contracts shall be
deemed uncollectable if the relevant customer has not settled it within 90 days after the claim has
become due.
to applicable VAT
law
4.4.4 If withholdings of whatever nature are due on payments to be made by Purchaser on any of the
transactions contemplated by this Agreement, Purchaser shall make the necessary gross up payments
to leave Seller after the deduction of the relevant withholding tax with an amount equal to the
payment which would have been due if no withholding Tax deduction had been required.
4.4.5 Any Transfer Tax incurred out of or in connection with the execution or consummation of this
Agreement or any of the transactions contemplated by this Agreement shall be borne by Purchaser.
4.4.6 Claims under this Section 4.4 shall become time-barred upon expiration of six (6) months after the
applicable statutory limitation of the relevant Tax.
5.
Payments
5.1
Seller Account; Purchaser Account; Currency
5.1.1 Any payments to Seller under or in connection with this Agreement shall be made by Purchaser by
wire transfer in immediately available funds free of any bank and other charges to the following bank
account or other bank accounts as Notified to Purchaser by Seller (the “Seller Account”):
Account Holder:
FIZ Karlsruhe – Leibniz-Institut für Informationsinfrastruktur
GmbH
Bank:
Baden-Württembergische Bank/LBBW, Stuttgart, Germany
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BIC:
IBAN:
SOLADEST
DE54 6005 0101 7495 5020 06
5.1.2 Any payments to Purchaser under or in connection with this Agreement shall be made by Seller by
wire transfer in immediately available funds free of any bank and other charges to a bank account
Notified by Purchaser to Seller at the latest ten (10) Business Days prior to the relevant due date
(such Notified account, the “Purchaser Account”).
5.1.3 All payments to be made under this Agreement shall be payable in Euro.
5.2 No Set-off and Right of Retention
Purchaser shall not be entitled to exercise any right to set-off, retention or other right to refuse
performance (Aufrechnung, Zurückbehaltung oder sonstige Leistungsverweigerungsrechte) with
respect to Purchaser’s obligations to pay the Purchase Price, except in case the respective claim of
Purchaser was acknowledged (anerkannt) in writing by Seller or has been awarded to Purchaser in a
legally binding (rechtskräftig) decision in principal proceedings (im Hauptsacheverfahren).
5.3 Default
Any failure by Purchaser to make any payment pursuant to Section 4 when it is due shall result in
Purchaser’s immediate default, without any reminder by Seller being required. The amount of any
payment which is overdue shall be subject to late payment interest in the amount of five (5)% p.a.
Further claims and remedies of Seller in connection with such failure, in particular the right to
withdraw from this Agreement pursuant to Section 4.1.3, shall remain unaffected.
IV.
Seller’s Representations, Warranties and Protection of Goodwill
6.
Representations and Warranties of Seller
6.1 General Rules
6.1.1 Seller represents and warrants to Purchaser by way of an independent promise of guarantee
(selbständiges Garantieversprechen) pursuant to Section 311 BGB, and with the remedies pursuant
to Section 7 below which form an integral part and define the scope of this promise of guarantee that
the statements contained in Section 6.2 are true and correct as of the date of this Agreement
(“Warranties”).
6.1.2 Each of the Warranties shall be construed independently and, except where this Agreement provides
otherwise, shall not be limited by another Warranty or any other provision in this Agreement.
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6.1.3 The Warranties shall not be considered as constituting guarantees as to the quality or durability
(Beschaffenheitsvereinbarung) pursuant to Sections 443 and 444 BGB.
6.2
Individual Warranties
6.2.1 Except as disclosed in Exhibit 6.2.1-A, the terms and conditions of the Sold Contracts listed in
Exhibit 3.1.1 marked as “Premium Contracts” do not substantially or materially deviate from the two
example agreements for “Premium Contracts” attached as Exhibit 6.2.1-B, provided, that a deviation
shall in particular not be considered substantial if a termination period included in a Sold Contract
marked as “Premium Contract” does not deviate from the termination periods mentioned in
Exhibit 6.2.1-A for such Sold Contract. Except as disclosed in Exhibit 6.2.1-A, the standard terms
and conditions (Allgemeine Geschäftsbedingungen) applicable to the Sold Contracts listed in
Exhibit 3.1.1 marked as “T&C Contracts” do not substantially deviate from the standard terms and
conditions (Allgemeine Geschäftsbedingungen) attached as Exhibit 6.2.1-C, provided, that a
deviation shall in particular not be considered substantial if (i) a termination period included in a
Sold Contract marked as “T&C Contracts” deviates from the termination period included in the
standard terms and conditions by not more than six (6) months, or (ii) a deviation included in a Sold
Contract marked as “T&C Contracts” does not adversely impact the turnover that can be generated
with such Sold Contract by more than 20% compared to a Sold Contract subject to the standard terms
and conditions attached as Exhibit 6.2.1-C.
6.2.2 The Terms and Conditions of the Sold Contracts do not restrict Seller in its ability to set copyright
fee pricing for Document Purchases. Notwithstanding the foregoing, Seller makes no representation
or warranty as to whether the laws of a particular country may impose restrictions on copyright
pricing.
6.2.2 Within the last three (3) years prior to the Effective Date, neither the contract partners of Sold
Contracts nor consumer protection agencies have claimed in writing vis-à-vis the Sellers that the
terms and conditions attached as Exhibit 6.2.1-C violate Sections 305 et seq. BGB on general terms
and conditions.
6.2.3 Within three (3) years prior to the Effective Date, no litigation has been pending in relation to the
Sold Contracts, and, to Seller’s best knowledge, no such litigation has been threatened against the
Seller in writing.
6.2.4 To Seller’s best knowledge, no German public licences or permits were required to perform the
obligations of the Seller under the Sold Contracts prior to the Effective Date.
7.
Remedies of the Purchaser
7.1
Scope of Remedies
If a Warranty is not correct or in the event of a breach of any covenant or other obligation of Seller
under or in connection with this Agreement, Seller shall put Purchaser into the position Purchaser
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would have been in if the relevant Warranty had been correct or the covenant or other obligation had
not been breached (restitution in kind; Naturalrestitution). Should restitution in kind not be possible
due to the nature of the breach or should it not have been effected within sixty (60) days after Seller
having been Notified by Purchaser about the incorrectness of the relevant Warranty or the breach of
the covenant or other obligation, Purchaser shall be entitled to request that the necessary sum is paid
to Purchaser to compensate Purchaser for the Losses suffered by it as a result of the incorrectness of
the Warranty or as a result of such breach of a covenant or obligation.
7.2
Purchaser Claim Procedure
7.2.1 If Purchaser becomes aware of any facts or circumstances which result or may result in a claim of
Purchaser pursuant to this Agreement (each such claim, a “Purchaser Claim”), Purchaser shall give
Seller Notice thereof promptly after the discovery of the relevant facts or circumstances, but in no
event later than thirty (30) Business Days thereafter, stating in such Notice in reasonable detail the
nature of the relevant claim, and its factual and legal basis.
7.2.2 Purchaser shall, and shall cause its applicable Affiliates to, give such information and assistance,
including access to the premises and the representatives of Purchaser and its Affiliates and the right
to examine and copy or photograph any assets, accounts, books, records and other documents, as
Seller, Seller’s Affiliates or their respective representatives, as applicable, may request in order to
assess the relevant facts or circumstances alleged to give rise to the relevant Purchaser Claim. Seller
shall reimburse Purchaser for expenses reasonably incurred by Purchaser for such assistance.
7.2.3 Third Party Claim Procedure
If a Third Party, including any public authority, asserts or threatens to assert any claim against
Purchaser or if Purchaser becomes subject to any audit or investigation by any Authority which can
reasonably be expected to give rise to a Purchaser Claim (each a “Third Party Claim”), the
following shall apply:
a) Purchaser shall give Seller Notice of such Third Party Claim promptly after becoming aware that
the relevant claim has been asserted or threatened to be asserted or that the relevant audit or
investigation has been initiated, but in no event later than thirty (30) Business Days thereafter. The
provisions of Section 7.2.2 shall apply mutatis mutandis.
b) Seller shall be given reasonable opportunity to discuss with Purchaser any measures which Seller
proposes to take in connection with the Third Party Claim and its defence. Provided Seller is fully
taking up the defence of such claim at its own cost, no admission of liability with respect to a Third
Party Claim shall be made by Purchaser, and the Third Party Claim shall not be settled, without the
prior consent of Seller. Any settlement of a claim by Seller that serves to restrict Purchaser’s
business activities, causes Purchaser to admit liability, or causes Purchaser to pay any monetary
amounts shall require the consent of Purchaser.
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c) Seller may, at its expense, take over the defence against the Third Party Claim and defend or settle
such Third Party Claim, in the name of and on behalf of Purchaser. Any settlement of a claim by
Seller that serves to restrict Purchaser’s business activities, causes Purchaser to admit liability, or
causes Purchaser to pay any monetary amounts shall require the consent of Purchaser.
7.3 Exclusion of Remedies
Seller shall not be liable, and Purchaser shall not be entitled to bring any claim under or in
connection with this Agreement to the extent that
a)
b)
c)
d)
e)
f)
the amount of the claim has been recovered from a Third Party;
Purchaser, an Affiliate of Purchaser or any of their respective representatives has caused
pursuant to Section 254 para. 1 BGB the facts giving rise to such claim;
Purchaser, an Affiliate of Purchaser or any of their respective representatives has failed to
mitigate damages pursuant to Section 254 para. 2 BGB;
the claim results from or is increased by the passing of, or any change in, any Law or
administrative practice of any Authority, including any increase in the rates of any Taxes or
any imposition of any Taxes or any withdrawal or relief from any Taxes not actually in effect
on the date hereof, provided, however, that Seller acknowledges it remains responsible for its
business activities and any Taxes associated with its business prior to the Effective Date;
the claim results from a measure caused by negligence or wilful misconduct or breach of
contract by Purchaser, any of its Affiliates or any of their respective representatives;
Purchaser or any Affiliate of Purchaser has not duly and timely complied with its obligations
pursuant to Sections 7.2.1 to 7.2.3, and Seller can prove that it has been prejudiced thereby.
8.
Protection of Goodwill
8.1 Agreement Not to Compete
8.1.1 For a period of two (2) years from the Effective Date and subject to Section 8.1.2, Seller hereby
undertakes that Seller will not, and Seller shall ensure that its Affiliates will not,
a)
directly or indirectly carry on, operate or be engaged or (except as the holder of shares in a
listed company which confer not more than five per cent of the votes which can generally be
cast at a general meeting of the company) interested in a business which competes with
services as provided under the Sold Contracts;
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actively refer any of Seller’s customers to document delivery services comparable to
“AutoDoc” which are provided by a competitor of Purchaser.
8.1.2 On its website(s) and in its products, Seller sets certain hyperlinks to publishers and “Open Access”
platforms. The Parties agree that this shall not constitute a violation of Section 8.1.1 nor of
Section 3.1.2, neither currently nor in the future. For the avoidance of doubt, the website will not
have any hyperlinks to any document suppliers previously used by Seller.
8.2
Information and Link
Seller undertakes for a time period of one (1) year from the Effective Date (i) to inform its customers
on the AutoDoc page of Seller’s website (https://autodoc.fiz-karlsruhe.de) about the fact that
Purchaser has taken over the AutoDoc services as of the Effective Date and that Seller no longer
offers AutoDoc services; and (ii) to set and to maintain a hyperlink on the AutoDoc page of Seller’s
website which refers to Purchaser’s website as Notified by Purchaser to Seller from time to time.
V.
9.
Limitations of Liability
Limitations of Liability of Seller
This Section 9 shall apply to any and all claims against Seller under or in connection with this
Agreement, unless expressly otherwise stated in this Section 9.
9.1 Exclusion of Liability; Overall Cap
9.1.1 Seller’s aggregate total liability for any and all claims under this Agreement, except for claims
pursuant to Section 3.2.1, shall be limited to an amount of EUR 150,000 (in words: One hundred
fifty thousand Euro).
9.1.2 Seller shall not be liable for any indirect damages (mittelbare Schäden), consequential damages
(Folgeschäden) or lost profits (entgangene Gewinne).
9.2 Time Limitations
9.2.1 All claims of Purchaser arising under or in connection with this Agreement shall become time-barred
(verjähren) fifteen (15) months after the Effective Date, except for:
a) claims pursuant to Section 4.4 (VAT, Withholding Tax, Transfer Taxes) which shall become time-
barred (verjähren) pursuant to Section 4.4.6;
b) claims of Purchaser resulting from wilful behaviour (Vorsatz) or fraud (Arglist) of Seller which
shall become time-barred (verjähren) within the statutory limitation periods.
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9.2.2 Section 203 sentence 1 BGB shall not apply.
9.3 No additional Rights or Remedies
The Parties agree that the rights and remedies which Purchaser or any of its Affiliates may have
against Seller under or in connection with this Agreement or the Transaction shall be solely governed
by this Agreement, and the rights and remedies expressly provided for by this Agreement shall be the
exclusive remedies available to Purchaser and its Affiliates. All other rights or remedies of any legal
nature which Purchaser may otherwise have against Seller in connection with this Agreement or the
Transaction shall be excluded. In particular, Purchaser shall not have, and hereby waives, any claims
relating to defects in quality (Sachmängel) or title (Rechtsmängel) of the purchased objects and other
representations and warranties provided by law (Sections 434 et seq. BGB), breaches of contractual
and pre-contractual obligations provided by law (Section 280 through Section 282 BGB, Section 311
BGB, Section 241 para. 2 BGB), frustration of contract (Section 313 BGB), and any rights to rescind
(zurücktreten), cancel (kündigen), avoid (anfechten) or otherwise terminate this Agreement or
exercise any right or remedy which would have a similar effect. Furthermore, the applicability of
Section 433 through Section 453 BGB (except for Section 433 paras. 1 and 2 BGB) and Section 377
HGB, including any and all statutory claims thereunder, shall be excluded. For the avoidance of
doubt, the right of Purchaser to demand (and enforce) Seller’s compliance with Section 8 (Protection
of Goodwill) and the right of Purchaser to rely on statutory remedies and make claims for damages
for breaches of Section 8 shall remain unaffected.
9.4 Wilful Behaviour and Fraud
The limitations of liability in this Agreement, including the limitations set forth in this Section 9,
shall not apply to claims of Purchaser against Seller resulting from intentional or wilful misconduct
(Vorsatz) or fraud (Arglist) of Seller, provided, however, that Seller shall not be liable for wilful
misconduct (Vorsatz) or fraud (Arglist) of any auxiliary persons (Erfüllungsgehilfen) within the
meaning of Section 278 BGB.
VI. Other Provisions
10. Costs and Expenses
10.1 Subject to Section 10.2, any and all costs and expenses in connection with the execution and
consummation of this Agreement and the Transaction shall be borne by Purchaser.
10.2 Each Party shall bear the costs and fees of its own advisors.
11. General Provisions
11.1 No Assignment
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11.1.1This Agreement and any rights and obligations hereunder may not be assigned or otherwise
transferred, in whole or in part, without the prior approval of the applicable other Party hereto (to be
granted by way of Notice).
11.1.2Unless expressly provided herein, this Agreement shall not grant any rights to any person or entity
other than the Parties.
11.2 No amendment, supplement, modification or waiver of this Agreement or parts thereof (including
this Section 11.2) shall be binding unless executed in writing by the Parties.
11.3 This Agreement (including its Exhibits) constitutes the full understanding of the Parties and the
complete and exclusive statements of the terms and conditions of the Parties’ agreements relating to
the subject matter hereof and supersedes any and all prior agreements and understandings, whether
written or oral, that may exist between the Parties with respect to the subject matter of this
Agreement or parts thereof. Side agreements to this Agreement do not exist. All Schedules to this
Agreement are integral part of the Agreement.
11.4 This Agreement shall be governed by, and construed in accordance with, the laws of Germany,
excluding the United Nations Convention on Contracts for the International Sale of Goods (CISG).
11.5 All disputes arising in connection with this Agreement or its validity shall be finally settled in
accordance with the Arbitration Rules of the German Institution of Arbitration (DIS) without
recourse to the ordinary courts of law. The place of arbitration shall be Karlsruhe, Germany. The
arbitral tribunal shall consist of three arbitrators. The language of the arbitral proceedings shall be
English. Documents originally existing in the German language may be submitted in the German
language. The Parties shall be entitled to file for interim measures (vorläufigen Rechtsschutz) with
the ordinary courts of law if the final settlement is made by the competent arbitral court. Each Party
shall procure that none of its Affiliates initiates any dispute proceedings in relation to the Transaction
outside of arbitration between the Parties in accordance with this Section 11.5. Each Party hereby
irrevocably agrees that all documents relating to proceedings pursuant to this Section 11.5 may be
submitted between the Parties and the arbitral body in electronic form to the extent permissible under
the applicable arbitration rules.
11.6 Should any provision of this Agreement be or become invalid, ineffective or unenforceable as a
whole or in part, the validity, effectiveness and enforceability of the remaining provisions shall not be
affected thereby. Any such invalid, ineffective or unenforceable provision shall be deemed replaced
by such valid, effective and enforceable provision as comes closest to the economic intent and the
purpose of such invalid, ineffective or unenforceable provision as regards subject-matter, amount,
time, place and extent. The aforesaid shall apply mutatis mutandis to any gap in this Agreement.
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12. Notices
All notices, requests and other communications hereunder (including, for the avoidance of doubt, the
making of any claims under or in connection with this Agreement) shall be made in writing in the
English language and delivered by hand, by courier, by fax or submission of a scan of a signed
message by e-mail to the respective Party at the address set forth below, or such other address as may
be designated by the respective Party to the other Party in the same manner with such change
becoming effective only after receipt of a Notification of such change:
a)
To Seller:
FIZ Karlsruhe – Leibniz-Institut für Informationsinfrastruktur GmbH
Michael O. Müller
Head Legal
Administration
Hermann-von-Helmholtz-Platz 1
76344 Eggenstein-Leopoldshafen
Germany
Phone: +49 7247 808-182
E-Mail: Michael-Olivier.Mueller@fiz-Karlsruhe.de
b)
To Purchaser:
Reprints Desk, Inc.
Attn: CFO, William Nurthen
10624 S. Eastern Ave., Ste. A-614
Henderson, NV USA 89052
Phone: +1 310.477.0354
E-Mail: bnurthen@reprintsdesk.com with cc to legal@reprintsdesk.com
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Signatures
Date: _____________________
FIZ Karlsruhe – Leibniz-Institut für Informationsinfrastruktur GmbH:
__________________________
__________________________
Name:
Position:
Sabine Brünger-Weilandt
President and CEO
Name:
Position:
ppa. Andreas Schwartz
Vice President Administration
Date: _____________________
Reprints Desk, Inc.:
__________________________
Name:
Position:
William Nurthen
Chief Financial Officer
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EXHIBIT 1 (DEFINITIONS AND INTERPRETATION)
1.
Definitions
1.1 Defined Terms
For purposes of this Agreement, the following terms shall have the meanings set out or specified in
the Sections indicated below:
Affiliate
Agreement
Authority
means, with regard to any person or entity, any person or
entity that, at the relevant point in time, controls, is
controlled by, or is under common control with, such
person or entity. As used in this definition, “control”
(including the terms “controlling”, “controlled by” and
“under common control with”) means the possession,
directly or indirectly, of the power to direct, or cause the
direction of, the management and policies of a person or
entity, whether through (i) ownership of voting securities
or other interests, (ii) the ability to appoint a majority of
the board of directors or other management body, or (iii)
contract or otherwise.
as defined in the Preamble
means in any jurisdiction any legislative, executive or
judicial unit of any governmental entity (supranational,
federal, state or local) or any department, commission,
agency, bureau, subdivision, branch, office, council,
official, court or other regulatory, administrative or
judicial authority thereof as well as any governmental or
non-governmental self-regulatory organization, agency or
authority.
Base Amount
as defined in Section 4.1.1
Base Amount Plus
as defined in Section 4.2.1
Bonus Amount
as defined in Section 4.3.1
Bonus Information
as defined in Section 4.3.1
Business Day
means a day that is not a Saturday, a Sunday or a statutory
public holiday in Karlsruhe, Germany.
BGB
means the German Civil Code (Bürgerliches Gesetzbuch).
Document Purchases
as defined in Section 2
Effective Date
as defined in Section 3.1.1
HGB
means
(Handelsgesetzbuch).
the
German
Commercial
Code
Neutral Expert
as defined in Section 4.3.2
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Notice
Parties
Paying Party
Purchase Price
Purchaser
means any notification
Section 12;
accordingly.
the
in
to
term “Notify” shall be construed
the form according
as defined in the Recitals
as defined in Section 3.1.2
as defined in Section 4.3.1
as defined in the Recitals
Purchaser Account
as defined in Section 5.1.2
Receiving Party
as defined in Section 3.1.2
Seller
Seller Account
Sold Contracts
Tax
Taxing Authority
Third Party
as defined in the Recitals
as defined in Section 5.1.1
as defined in Section 3.1.1
the statutory
means any taxes (Steuern) according to Section 3 German
Fiscal Code (Abgabenordnung) as well as equivalent taxes
under
law provisions of any foreign
jurisdiction, in each case including interest, penalties and
other ancillary charges and irrespective of whether owed
as a primary or as a secondary liability, but excluding
deferred taxes.
means any competent public Authority in charge of
imposing or collecting any Tax.
means any person or entity who or which is neither a
Party to this Agreement nor an Affiliate of a Party to this
Agreement.
Third Party Claim
as defined in Section 7.2.3
Transaction
Transfer Tax
as defined in the Preamble
ad valorem,
means all federal, state, local or foreign transfer, sales,
use,
excise, documentary,
receipts,
registration, real property transfer, mortgage recording,
stamp duty or similar Taxes (excluding, for the avoidance
of doubt, VAT), together with any interest, addition or
penalties with respect thereto and any interest in respect of
such additions or penalties.
Transferred Contract
as defined in Section 4.2.1
TTMR
VAT
as defined in Section 4.4.2
means (i) any tax imposed in compliance with the Council
Directive of 28 November 2006 on the common system of
value added tax (EC Directive 2006/112) and (ii) any
other tax of a similar nature, whether imposed in a
member state
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of the European Union in substitution for, or levied in
addition to, such tax referred to in (i) above, or imposed
elsewhere.
Warranties
as defined in Section 6.1.1
2.
Other Definitional and Interpretive Matters
Unless otherwise expressly provided, for purposes of this Agreement, the following rules of
interpretation shall apply:
a) When calculating the period of time before which, within which or following which any act is
to be done or step is to be taken pursuant to this Agreement, the provisions of
Sections 187 BGB et seq. shall apply.
b)
c)
d)
e)
f)
Any reference in this Agreement to gender shall include all genders, and words (including
definitions) imparting the singular number only shall include the plural and vice versa.
The provision of a Table of Contents, the division of this Agreement into Sections and other
subdivisions and the insertion of headings are for convenience of reference only and shall not
affect or be utilized in construing or interpreting this Agreement. All references in this
Agreement to any “Section” are to the corresponding Section of this Agreement unless
otherwise specified.
The words such as “herein”, “hereinafter”, “hereof”, and “hereunder” refer to this Agreement
as a whole and not merely to a subdivision in which such words appear unless the context
otherwise requires.
The word “including” or any variation thereof means “including, without limitation” and shall
not be construed to limit any general statement that it follows to the specific or similar items or
matters immediately following it.
If any Party shall under this Agreement use “commercially reasonable efforts”, such Party
shall be required to make a diligent, reasonable and good faith effort to accomplish the
applicable objective. Such obligation, however, does not require an expenditure of material
funds or the incurrence of a material liability on the part of the obliged Party, nor does it
require that the obliged Party makes any concession or acts in a manner that would be contrary
to normal commercial practices under the given circumstances in order to accom-
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plish the objective. The fact that the objective is or is not actually accomplished is no
indication that the obliged Party did, or did not, in fact use its reasonable commercial efforts in
attempting to accomplish the objective.
g)
The Schedules and Exhibits attached to this Agreement shall be construed with and as an
integral part of this Agreement to the same extent as if the same had been set forth verbatim
herein.
h) Where a German term has been inserted in italics, it alone (and not the English term to which it
relates) shall be authoritative for the purpose of the interpretation of the relevant English term
in this Agreement.
i)
Wherever in this Agreement the term “material” or “materiality” or any variation thereof
appears, no monetary threshold set forth in any provision of this Agreement shall be
considered in connection with the interpretation thereof unless specifically and explicitly tied
thereto.
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Exhibit 10.28
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,
2013, 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 wish to amend the terms of the Agreement as set forth herein.
NOW THEREFORE, for the mutual promises and other consideration described herein, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.
Section 1(d) of the Agreement is hereby amended in its entirety to read as follows:
“Term. The term of employment of Executive by the Company pursuant to this
Executive Employment Agreement shall be for an annual period ending on June 30 of each year,
subject to automatic renewal for subsequent one-year periods unless the Company provides written
notice of non-renewal to Executive at least thirty (30) days prior to the expiration of the then-
current term, and subject to earlier termination in accordance with the other provisions of this
Executive Employment Agreement.”
2.
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.
3.
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.
4.
This Amendment may be executed and delivered by facsimile or electronic
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
4868-5872-5501, v. 1
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 21
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 15, 2023, relating to the consolidated financial statements of Research
Solutions, Inc. and Subsidiaries as of June 30, 2023 and 2022 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, 2023 filed with the Securities and Exchange Commission on
September 15, 2023.
Exhibit 23
/s/ Weinberg & Company, P.A.
September 15, 2023
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 15, 2023
/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 15, 2023
/s/ William Nurthen
William Nurthen
Chief Financial Officer (Principal Financial and Accounting
Officer)
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of Research Solutions, Inc. (the “Company”) on Form 10-K for the period ending June 30, 2023,
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Roy W. Olivier, 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
(Principal Executive Officer)
September 15, 2023
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report of Research Solutions, Inc. (the “Company”) on Form 10-K for the period ending June 30, 2023,
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
(Principal Financial and Accounting Officer)
September 15, 2023