UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended:
or
For the transition period from ___________ to ___________
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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| The |
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large 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
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
There
were
TABLE OF CONTENTS
i
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements. These statements may be identified by such forward-looking terminology as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. Our forward-looking statements are based on a series of expectations, assumptions, estimates and projections about our company, are not guarantees of future results or performance and involve substantial risks and uncertainty. We may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements. Our business and our forward-looking statements involve substantial known and unknown risks and uncertainties, including the risks and uncertainties inherent in our statements regarding:
| ● | our artificial intelligence (AI)-driven learning platform’s ability to enable businesses, universities, and K-12 schools to offer timely, improved popular courses and certification programs, without becoming software tech companies; |
| ● | our planned online machine learning platform’s ability to result in opportunistic incremental revenue for colleges and universities, and improved ability to garner state funds due to increased retention and graduation rates through use of machine learning and natural language processing; |
| ● | our ability to obtain additional funds for our operations; |
| ● | our ability to obtain and maintain intellectual property protection for our technologies and our ability to operate our business without infringing the intellectual property rights of others; |
| ● | our reliance on third parties to conduct our business and studies; |
| ● | our reliance on third party designers, suppliers, and partners to provide and maintain our learning platform; |
| ● | our ability to attract and retain qualified key management and technical personnel; |
| ● | our expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act, or JOBS Act; |
| ● | our financial performance; and |
| ● | the impact of government regulation and developments relating to our competitors or our industry. |
All of our forward-looking statements are as of the date of this Quarterly Report on Form 10-Q only. In each case, actual results may differ materially from such forward-looking information. We can give no assurance that such expectations or forward-looking statements will prove to be correct. An occurrence of, or any material adverse change in, one or more of the risk factors or risks and uncertainties referred to in this Quarterly Report on Form 10-Q or included in our other public disclosures or our other periodic reports or other documents or filings filed with or furnished to the U.S. Securities and Exchange Commission (the “SEC”) could materially and adversely affect our business, prospects, financial condition and results of operations. Except as required by law, we do not undertake or plan to update or revise any such forward-looking statements to reflect actual results, changes in plans, assumptions, estimates or projections or other circumstances affecting such forward-looking statements occurring after the date of this Quarterly Report on Form 10-Q, even if such results, changes or circumstances make it clear that any forward-looking information will not be realized. Any public statements or disclosures by us following this Quarterly Report on Form 10-Q that modify or impact any of the forward-looking statements contained in this Quarterly Report on Form 10-Q will be deemed to modify or supersede such statements in this Quarterly Report on Form 10-Q.
This Quarterly Report on Form 10-Q may include market data and certain industry data and forecasts, which we may obtain from internal company surveys, market research, consultant surveys, publicly available information, reports of governmental agencies and industry publications, articles, and surveys. Industry surveys, publications, consultant surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. While we believe that such studies and publications are reliable, we have not independently verified market and industry data from third-party sources.
ii
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
Amesite Inc.
Condensed Financial Statements
September 30, 2023
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Amesite Inc.
Contents
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Amesite, Inc.
| Balance Sheets (unaudited) |
| September 30, 2023 | June 30, 2023 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Noncurrent Assets | ||||||||
| Property and equipment - net | ||||||||
| Capitalized software - net | ||||||||
| Total noncurrent assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued and other current liabilities: | ||||||||
| Accrued compensation | ||||||||
| Deferred revenue | ||||||||
| Other accrued liabilities | ||||||||
| Total current liabilities | ||||||||
| Stockholders equity | ||||||||
| Common stock, $ | ||||||||
| Preferred stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated earnings deficit | ( | ) | ( | ) | ||||
| Total stockholders equity | ||||||||
| Total liabilities and stockholders equity | $ | $ | ||||||
See accompanying Notes to Financial Statements
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Amesite, Inc.
| Statements of Operations (unaudited) |
| Three Months Ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| Net Revenue | $ | $ | ||||||
| Operating Expenses | ||||||||
| General and administrative expenses | ||||||||
| Technology and content development | ||||||||
| Sales and marketing | ||||||||
| Total operating expenses | ||||||||
| Loss from Operations | ( | ) | ( | ) | ||||
| Other Income (Expense) | ||||||||
| Interest income | ||||||||
| Other expense | - | ( | ) | |||||
| Total other income | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Earnings per Share | ||||||||
| $ | ( | ) | $ | ( | ) | |||
| Weighted average shares outstanding | ||||||||
See accompanying Notes to Financial Statements.
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Amesite, Inc.
| Statement Of Stockholders Equity (unaudited) |
| Additional | ||||||||||||||||||||
| Common Stock | Paid-In | Accumulated | ||||||||||||||||||
| Shares | Amount | Capital | Deficit | Total | ||||||||||||||||
| Balance - July 1, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Issuance of common stock for consulting services | ||||||||||||||||||||
| Issuance of common stock | ||||||||||||||||||||
| Stock-based compensation expense | - | |||||||||||||||||||
| Balance - September 30, 2022 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Balance - July 1, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||||||
| Stock-based compensation expense | - | - | ||||||||||||||||||
| Balance - September 30, 2023 | $ | $ | $ | ( | ) | $ | ||||||||||||||
See accompanying Notes to Financial Statements.
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Amesite, Inc.
| Statements Of Cash Flows (unaudited) |
| Three Months Ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile change in net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation expense | ||||||||
| Value of common stock issued in exchange for consulting services | ||||||||
| Changes in operating assets and liabilities which used cash: | ||||||||
| Accounts Receivable | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued compensation | ||||||||
| Deferred revenue | ( | ) | ( | ) | ||||
| Accrued and other liabilities | ( | ) | ||||||
| Net cash and cash equivalents used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Purchase of property and equipment | ( | ) | ||||||
| Investment in capitalized software | ( | ) | ( | ) | ||||
| Net cash and cash equivalents used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from Financing Activity | ||||||||
| Issuance of common stock - net of issuance costs | ||||||||
| Net cash and cash equivalents provided by financing activity | ||||||||
| Net (decrease) increase in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents - Beginning of period | ||||||||
| Cash and cash equivalents - End of period | $ | $ | ||||||
| Significant Noncash Transactions: | ||||||||
| Issuance of common stock in exchange for consulting services | ||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements
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Amesite Inc.
Notes to Condensed Financial Statements
September 30, 2023 and 2022
Note 1 - Nature of Business
Amesite Inc. (the “Company”) was incorporated in November 2017. The Company is an artificial intelligence driven platform and course designer, that provides customized, high performance and scalable online products for schools and businesses. The Company uses machine learning to provide a novel, mass customized experience to learners. The Company’s Customers are businesses, universities and colleges, and K-12 schools. The Company’s activities are subject to significant risks and uncertainties. The Company’s operations are considered to be in one segment.
Note 2 - Significant Accounting Policies
Basis of Presentation
The condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and considering the requirements of the United States Securities and Exchange Commission (“SEC”). The Company has a fiscal year with a June 30 year end.
In the opinion of management, the condensed financial statements of the Company as of September 30, 2023 and 2022 and for the three months ended September 30, 2023 and 2022 include all adjustments and accruals, consisting only of normal, recurring accrual adjustments, which are necessary for a fair presentation of the results for the interim periods. These interim results are not necessarily indicative of results for a full year.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed in or omitted from this report pursuant to the rules and regulations of the SEC. These financial statements should be read together with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2023.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all investments
with an original maturity of three months or less when purchased to be cash equivalents. The total amount of bank deposits (checking and
savings accounts) insured by the FDIC at year end was $
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Property and Equipment
| Depreciable Life - Years | |||
| Leasehold improvements | |||
| Furniture and fixtures | |||
| Computer equipment and software |
Capitalized Software Costs
The Company capitalizes costs incurred in the development of software for its Customers, including the costs of the software, materials, consultants, and payroll and payroll related costs for employees incurred in developing computer software. Planning costs incurred prior to the development of software and costs not qualifying for capitalization are charged to expense. The Company amortizes capitalized software over a period of three years, which is the expected useful life of the software.
The Company capitalized software of
$
| Three Months Ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| Beginning balance, gross | $ | $ | ||||||
| Additions | ||||||||
| Ending balance, gross | ||||||||
| Accumulated amortization | ( | ) | ( | ) | ||||
| Closing balance, net | $ | $ | ||||||
Revenue Recognition
We generate our revenue from contractual
arrangements with businesses, colleges and universities to provide a comprehensive platform of integrated technology and technology enabled
services related to product offerings. During the three months ended September, 2023 and 2022, we recognized revenue from contracts with
Customers of $
Performance Obligations and Timing of Recognition
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. This performance obligation is satisfied as the partners receive and consume benefits, which occur ratably over the contract term.
Occasionally, we provide professional services, such as custom development, non-complex implementation activities, training, and other various professional services. We evaluate these services to determine if they are distinct and separately identifiable in the context of the contract. In our contracts with Customers that contain multiple performance obligations as a result of this assessment, we allocate the transaction price to each separate performance obligation on a relative standalone selling price basis. Standalone selling prices of our solutions and services are typically estimated based on observable transactions when the solutions or services are sold on a standalone basis. When standalone selling prices are not observable, we utilize a cost-plus margin approach to allocate the transaction price.
We also receive fees that are fixed in nature, such as annual license and maintenance charges, in place of or in conjunction with variable consideration. The fees are recognized ratably over the service period of the contract that the Company’s platform is made available to the customer (i.e., the customer simultaneously receives and consumes the benefit of the software over the contract service period).
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For the three months ended September
30, 2023 and 2022, all revenue recognized has been recognized over the related contract periods. For the three months ended September
30, 2023, one Customer represents
Accounts Receivable, Contract Assets and Liabilities
Balance sheet items related to contracts consist of accounts receivable and deferred revenue liabilities. Accounts receivable is stated at net realizable value, and we utilize the allowance method to provide for doubtful accounts based on management’s evaluation of the collectability of the amounts due. There was no allowance for doubtful accounts on accounts receivable balances as of September 30, 2023 or June 30, 2023.
We may recognize revenue prior to billing a Customer when we have satisfied or partially satisfied our performance obligations as billings to our Customers may not be made until after the service period has commenced. As of September 30, 2023 and June 30, 2023, we do not have any such contract assets.
Deferred revenue as of each balance sheet date represent the excess of amounts billed or received as compared to amounts recognized in revenue on our statements of operations as of the end of the reporting period, and such amounts are reflected as a current liability on our condensed balance sheets. Payments received prior to the completion of the service period for our performance obligations or as annual license fees are recorded as deferred revenue until the services are delivered or until our obligations are otherwise met, at which time revenue is recognized.
| Three Months Ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| Opening balance of deferred revenue | $ | $ | ||||||
| Plus billings | ||||||||
| Less revenue recognized | ( | ) | ( | ) | ||||
| Closing balance of deferred revenue | $ | $ | ||||||
Revenue recognized during the three
months ended September 30, 2023 and 2022 that was included in the deferred revenue balance that existed in the opening balance of each
year was approximately $
The deferred revenue balance as of September 30, 2023 is expected to be recognized over the next 7 months.
Stock-Based Compensation
We have issued four types of stock-based awards under our stock plans: stock options, restricted stock units, deferred stock units, and stock warrants. All stock-based awards granted to employees, directors and independent contractors are measured at fair value at each grant date. We rely on the Black-Scholes option pricing model for estimating the fair value of stock-based awards granted, and expected volatility is based on the historical volatility of the Company’s stock prices. Stock options generally vest over two years from the grant date and generally have ten-year contractual terms. Restricted stock units generally have a term of 12 months from the closing date of the agreement. Stock warrants issued have a term of five years. Information about the assumptions used in the calculation of stock-based compensation expense is set forth in Note 3 in the Notes to Financial Statements.
Technology and Content Development
Technology and content development expenditures consist primarily of personnel and personnel-related expense and contracted services associated with the maintenance of our platform as well as hosting and licensing costs and are charged to expense as incurred. It also includes amortization of capitalized software costs and research and development costs related to improving our platform and creating content that are charged to expense as incurred.
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Fair Value Measurements
Accounting standards require certain assets and liabilities be reported at fair value in the financial statements and provide a framework for establishing that fair value. The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value.
Fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.
Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets and liabilities in active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset. These Level 3 fair value measurements are based primarily on management’s own estimates using pricing models, discounted cash flow methodologies, or similar techniques.
In instances wherein inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Company’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability.
Income Taxes
A current tax liability or asset is recognized for the estimated taxes payable or refundable on tax returns for the year. Deferred tax liabilities or assets are recognized for the estimated future tax effects of temporary differences between financial reporting and tax accounting.
Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of operations in the period that includes the enactment date.
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Net Loss per Share
At September 30, 2023 and June 30, 2023,
the Company had
Subsequent Events
The Company evaluated subsequent events through the date of this Form 10-Q and has determined that no events have occurred that would require recognition or disclosure in the financial statements.
Risks and Uncertainties
The Company operates in an industry subject to rapid change. The Company’s operations will be subject to significant risk and uncertainties including financial, operational, technological, and other risks associated with an early-stage company, including the potential risk of business failure.
Note 3 - Stock-Based Compensation
The Company’s Equity Incentive Plan (the “Plan”) permits the grant of stock options, stock appreciation rights, restricted stock, or restricted stock units to officers, employees, directors, consultants, agents, and independent contractors of the Company. The Company believes that such awards better align the interests of its employees, directors, and consultants with those of its stockholders. Option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant; those option awards generally vest over two years from the grant date and generally have ten-year contractual terms. Certain option awards provide for accelerated vesting (as defined in the Plan).
The Company has reserved
The Company estimates the fair value of each option award using a Black Scholes Model (“BSM”) that uses the weighted average assumptions included in the table below. Expected volatilities are based on historical volatility of comparable companies. The Company uses historical data to estimate option exercise within the valuation model or estimates the expected option exercise when historical data is unavailable. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The Company has not paid any dividends on common stock since its inception and does not anticipate paying dividends on its common stock in the foreseeable future. When calculating the amount of annual compensation expense, the Company has elected not to estimate forfeitures and instead accounts for forfeitures as they occur.
No options were granted for the three months ended September 30, 2023 or 2022.:
| Options | Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | |||||||||
| Outstanding at July 1, 2023 | ||||||||||||
| Terminated | ( | ) | ( | ) | ( | ) | ||||||
| Outstanding and expected to vest at September 30, 2023 | ||||||||||||
For the three months ended September
30, 2023 and 2022, the Company recovered $
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Beginning in January 2022, Board of
Directors compensation at the rate of $
As of September 30, 2023, there was
approximately $
Note 4 - Warrants
As of September 30, 2023 and June 30, 2023, there were
The Company measures the fair value of warrants using Black-Scholes Model.
Note 5 - Income Taxes
For the three months ended September 30, 2023 and prior periods since inception, the Company’s activities have not generated taxable income or tax liabilities. Accordingly, the Company has not recognized an income tax benefit on the Condensed Statements of Operations for the three months ended September 30, 2023 and 2022.
The Company has approximately $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read together with our unaudited financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited financial statements and related notes for the year ended June 30, 2023 included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission, or SEC, on October 6, 2022. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this Quarterly Report on Form 10-Q, including those factors set forth in the section entitled “Cautionary Statement Regarding Forward-Looking Statements” and in the section entitled “Risk Factors” in Part II, Item 1A.
Overview
The following discussion highlights our results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the three months ended September 30, 2023 and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The following discussion and analysis are based on our unaudited financial statements contained in this Quarterly Report on Form 10-Q, which we have prepared in accordance with United States generally accepted accounting principles, or GAAP, and requirements of the SEC. You should read the discussion and analysis together with such financial statements and the related notes thereto.
We are not currently profitable, and we cannot provide any assurance that we will ever be profitable. We incurred a net loss of $890,693 for the three months ended September 30, 2023, and we incurred a net loss of $34.3 million for the period from November 14, 2017 (date of incorporation) to September 30, 2023.
The assessment of the Company’s ability to meet its future obligations is inherently judgmental, subjective, and susceptible to change. Based on their current forecast, management believes that it will have sufficient cash and cash equivalents to maintain the Company’s planned operations for the next twelve months following the issuance of these financial statements.
Reverse Split of Stock
On February 15, 2023, the Company held a special meeting of stockholders (the “Special Meeting”). At the Special Meeting, the stockholders also approved a proposal to amend the Company’s certificate of incorporation to affect a reverse split of the Company’s outstanding shares of common stock, par value $0.0001 at a specific ratio within a range of one-for five (1-for-5) to a maximum of one-for-fifty (1-for-50) to be determined by the Company’s board of directors in its sole discretion.
Following the Special Meeting, the board of directors approved a one-for-twelve (1-for-12) reverse split of the Company’s issued and outstanding shares of common stock (the “Reverse Stock Split”). On February 21, 2023, the Company filed with the Secretary of State of the State of Delaware a certificate of amendment to its certificate of incorporation (the “Certificate of Amendment”) to affect the Reverse Stock Split. The Reverse Stock Split became effective as of 4:01 p.m. Eastern Time on February 21, 2023, and the Company’s common stock began trading on a split-adjusted basis when the Nasdaq Stock Market opens on February 22, 2023.
On March 8, 2023, the Company received a letter from The Nasdaq Stock Market LLC (“Nasdaq”) stating that because the Company’s common stock had a closing bid price at or above $1.00 per share for a minimum of 10 consecutive trading days, the Company had regained compliance with the minimum bid price requirement of $1.00 per share for continued listing on The Nasdaq Capital Market, as set forth in Nasdaq Listing Rule 5550(a)(2).
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Critical Accounting Policies and Significant Judgments and Estimates
This management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported period. In accordance with U.S. GAAP, we base our estimates on historical experience and on various other assumptions we believe to be reasonable under the circumstances. Actual results may differ from these estimates if conditions differ from our assumptions. While our significant accounting policies are more fully described in Note 2 in the “Notes to Condensed Financial Statements,” we believe the following accounting policies are critical to the process of making significant judgments and estimates in preparation of our financial statements.
Cash, Cash Equivalents, including US Treasury Market Fund:
As of September 30, 2023 and June 30, 2023 our cash and cash equivalents totaled $4.6 million and $5.4 million respectively with the majority invested in a short-term US Treasury Fund returning 5%. The Fund is invested in US Treasuries with a 7-day liquidity.
The decision to allocate funds to the short-term US Treasury Fund is based on our investment strategy, which prioritizes liquidity and stability while receiving current rate returns. The returns from the fund for the three months ended September 30 were 5% and in line with our expectations and the broader market trends for similar investment vehicles.
We continuously monitor our investment portfolio, considering market conditions and our liquidity needs, ensuring alignment with our broader financial strategy and risk tolerance.
Internally-Developed Capitalized Software
We capitalize certain costs related to the development of software for our Customers, primarily consisting of direct labor and third-party vendor costs associated with creating the software. Software development projects generally include three stages: the preliminary project stage (all costs are expensed as incurred), the application development stage (certain costs are capitalized and certain costs are expensed as incurred) and the post-implementation/operation stage (all costs are expensed as incurred). Costs capitalized in the application development stage include costs related to the design and implementation of the selected software components, software build and configuration infrastructure, and software interfaces. Capitalization of costs requires judgment in determining when a project has reached the application development stage, the proportion of time spent in the application development stage, and the period over which we expect to benefit from the use of that software. Once the software is placed in service, these costs are amortized on the straight-line method over the estimated useful life of the software, which is generally three years.
The Company capitalized software of $65,200 and $109,775 and recognized amortization expense of $146,021 and $180,659 for the three months ended September 30, 2023 and 2022, respectively.
Revenue Recognition
We generate substantially all our revenue from contractual arrangements with businesses, colleges and universities and K-12 schools to provide a comprehensive platform of tightly integrated technology and technology enabled services related to product offerings. Revenue related to our licensing arrangements is generally recognized ratably over the contract term commencing upon platform delivery. Revenue related to licensing arrangements recognized in a given time period will consist of contracts that went live in the current period or that went live in previous periods and are currently ongoing.
We have recorded accounts receivable of $18,750 and $15,000 as of September 30, 2023 and June 30, 2023 respectively and have set up deferred revenue liabilities at the end of each period to reflect performance obligations to be performed in future periods for our services delivered over time. Future obligations related to deferred revenue totaled $24,375 and $53,958 as of September 30, 2023 and June 30, 2023 respectively.
The majority of our Customers are private and public learning institutions across various domestic regions. For the three months ended September 30, 2023, five Customers comprised approximately 95% of total revenue.
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Results of Operations
Revenue
We generated revenues of $63,333 for the three months ended September 30, 2023 as compared to $280,282 for the three months ended September 30, 2022. The revenue decrease compared to the prior year for the three months ended September, 2023 reflects the completion of the earning cycle for several large multi-year clients in the fiscal year ended June 30, 2023.
Stock-Based Compensation
We issue four types of stock-based awards under our stock plans: stock options, restricted stock units, deferred stock units, and stock warrants. All stock-based awards granted to employees, directors and independent contractors are measured at fair value at each grant date. We rely on the Black-Scholes option pricing model for estimating the fair value of stock-based awards granted, and expected volatility is based on the historical volatility of the Company’s stock prices. Stock options generally vest over two years from the grant date and generally have ten-year contractual terms. Restricted stock units generally have a term of 12 months from the closing date of the agreement. Stock warrants issued have a term of five years. Information about the assumptions used in the calculation of stock-based compensation expense is set forth in Note 3 in the Notes to Financial Statements.
General and Administrative
General and administrative expenses consist primarily of personnel and personnel-related expenses, including executive management, legal, finance, human resources and other departments that do not provide direct operational services. General and administrative expenses also include professional fees and other corporate expenses.
General and administrative expenses for the three months ended September 30, 2023 were $438,262 as compared to $976,320 for the three months ended September 30, 2022, a savings of 55%. The decrease between the three-month periods is primarily due to savings in the areas of personnel and contractor costs; professional fees; insurance premiums; travel, and general office expenses.
Technology and Content Development
Technology and content development expenses consist primarily of personnel and personnel-related expenses and contracted services associated with the ongoing improvement and maintenance of our platform as well as hosting and licensing costs. Technology and content expenses also include the amortization of capitalized software costs.
Technology and content development expenses for the three months ended September 30, 2023 were $333,434 as compared to $480,775 for the three months ended September 30, 2022, a savings of 31%. The decrease between the three-month periods in technology is principally related to reductions in contractor expenses and a reduction in capitalized software amortizations.
Sales and Marketing
Sales and marketing expense consist primarily of activities to attract Customers to our offerings. This includes personnel and personnel-related expenses, various search engine and social media costs as well as the cost of advertising.
Sales and marketing expenses for the three months ended September 30, 2023 were $241,627 as compared to $405,445 for the three months ended September 30, 2022, a savings of 40%. The decrease between the three-month periods in sales and marketing are principally related to savings with outside vendors and more effective lead generation.
Interest Income
For the three months ended September 30, 2023, interest income totaled $59,297 as compared to interest income of $5,451 for the three months ended September 30, 2022 reflecting the implementation of our short-term US Treasury fund investment strategy.
Net Loss
Our net loss for the three months ended September 30, 2023 was $890,693 as compared to a net loss for the three months ended September 30, 2022 of $1,577,338. The loss was substantially lower during the three months ended September 30, 2023 compared to 2022 reflecting the expense savings and investment account earnings discussed above.
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Financial Position, Liquidity, and Capital Resources
Overview
We are not currently profitable, and we cannot provide any assurance that we will ever be profitable, as indicated by our losses noted above.
During the period from November 14, 2017 (date of incorporation) to September 30, 2020, we raised net proceeds of approximately $11,760,000 from private placement financing transactions (stock and debt). On September 25, 2020, we completed the Offering of 250,000 shares of our common stock, $0.0001 par value per share, at an offering price of $60.00 per share (total net proceeds of approximately $12.8 million after underwriting discounts, commissions, and other offering costs).
On August 2, 2021, we entered into a purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), under which, subject to specified terms and conditions, we may sell up to $16.5 million shares of common stock. Our net proceeds under the Purchase Agreement will depend on the frequency of sales and the number of shares sold to Lincoln Park and the prices at which we sell shares to Lincoln Park. On August 2, 2021, we sold 63,260 shares of our common stock to Lincoln Park in an initial purchase under the Purchase Agreement for a total purchase price of $1,500,000. We also issued 12,727 shares of our common stock to Lincoln Park as consideration for its irrevocable commitment to purchase our common stock under the Purchase Agreement.
On February 16, 2022, we closed on a public offering of common stock and received approximately $2.51 million of cash proceeds, net of underwriting discounts, commissions, and other offering costs (Note 6 to the Financial Statements).
On September 1, 2022, we closed on a public offering of common stock and concurrent private placement of warrants and received approximately $1.85 million of cash proceeds, net of underwriting discounts, commissions, and other offering costs (Note 6 to the Financial Statements).
As of September 30, 2023, our cash and cash equivalent balance totaled $4.6 million.
The Company is developing its customer base and has not completed its efforts to establish a stabilized source of revenue sufficient to cover its expenses. The Company has had a history of net losses and negative cash flows from operating activities since inception and expects to continue to incur net losses and use cash in its operations in the foreseeable future.
The assessment of the Company’s ability to meet its future obligations is inherently judgmental, subjective, and susceptible to change. Based on their current forecast, management believes that it will have sufficient cash and cash equivalents to maintain the Company’s planned operations for the next twelve months following the issuance of these financial statements.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
The Company is not required to provide the information required by this Item as it is a “smaller reporting company.”
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation, under the supervision, and with the participation of, our management, including our Chief Executive Officer (also our principal executive officer) and our Chief Financial Officer (also our principal financial and accounting officer), of the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”). Based on that evaluation, our management concluded that our disclosure controls and procedures were effective.
Changes in Internal Controls Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the period ended September 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 1A. Risk Factors.
Our business, financial condition, results of operations, and cash flows may be impacted by a number of factors, many of which are beyond our control, including those set forth in our Annual Report on Form 10-K, the occurrence of any one of which could have a material adverse effect on our actual results. There have been no material changes in our risk factors from those previously disclosed in our Annual Report on Form 10-K.
Item 2. Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits
| * | This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act. |
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SIGNATURES
Pursuant to the requirements 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
| AMESITE INC. | ||
| Date: November 13, 2023 | By: | /s/ Ann Marie Sastry |
| Ann Marie Sastry, Ph.D. | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Date: November 13, 2023 | By: | /s/ Sherlyn W. Farrell |
| Sherlyn W. Farrell | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) | ||
| (Principal Accounting Officer) |
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