Quarterly report pursuant to Section 13 or 15(d)

Significant Accounting Policies

v3.22.1
Significant Accounting Policies
9 Months Ended
Mar. 31, 2022
Accounting Policies [Abstract]  
Significant Accounting Policies

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 March 31, 2022 and 2021 and for the three and nine months ended March 31, 2022 and 2021 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 condensed financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended June 30, 2021.

 

Capitalized Software Costs

 

The Company capitalizes costs incurred in the development of software for internal use, including the costs of the software, materials, consultants, and payroll and payroll related costs for employees incurred in developing internal use 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 recognized amortization expense of approximately $658,357 and $525,000 for the nine months ended March 31, 2022 and 2021, respectively. The Company recognized amortization expense of approximately $234,000 and $192,000 for the three months ended March 31, 2022 and 2021, respectively. Accumulated amortization on March 31, 2022 and 2021 was $1,996,137 and $1,129,186, respectively.

 

Revenue Recognition

 

We generate substantially all of our revenue from contractual arrangements with businesses, colleges and universities, and non-profit organizations to provide a comprehensive platform of integrated technology and technology enabled services related to product offerings.

 

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.

 

We derive revenue from annual licensing arrangements, including maintenance fees, setup fees and other variable fees for course development and miscellaneous items. Our contracts with partners generally have two year terms and have a single performance obligation. The promises to set up and provide a hosted platform of tightly integrated technology and services partners need to attract, enroll, educate and support students are not distinct within the context of the contracts. This performance obligation is satisfied as the partners receive and consume benefits, which occurs ratably over the contract term.

 

Occasionally, we will 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 do not disclose the value of unsatisfied performance obligations because the variable consideration is allocated entirely to a wholly unsatisfied promise to transfer a service that forms part of a single performance obligation (i.e., consideration received is based on the level of product offerings, which is unknown in advance). For the three and nine months ended March 31, 2022 and 2021, all of the revenue recognized has been recognized over the related contract periods. Additionally, for the three and nine months ended March 31, 2022, five customers comprised approximately 86% of total revenue. During the three and nine months ended March 31, 2021, one customer comprised approximately 76% and 54% of total revenue, respectively.

 

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 independent of the number of students that are enrolled in courses with our customers and are allocated to and 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).

 

The following factors affect the nature, amount, timing, and uncertainty of our revenue and cash flows:

 

The majority of our customers are private and public learning institutions across various domestic regions

 

The majority of our customers have annual payment terms

 

Accounts Receivable, Contract Assets and Liabilities

 

Balance sheet items related to contracts consist of accounts receivable (net) and contract liabilities on our condensed balance sheets. Accounts receivable (net) 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. Our estimates are reviewed and revised periodically based on historical collection experience and a review of the current status of accounts receivable. Historically, actual write-offs for uncollectible accounts have not significantly differed from prior estimates. There was no allowance for doubtful accounts on accounts receivable balances as of March 31, 2022 or June 30, 2021.

 

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 March 31, 2022 and June 30, 2021, we do not have any contract assets.

 

Contract liabilities as of each balance sheet date represent the excess of amounts billed or received as compared to amounts recognized in revenue on our condensed 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 as deferred revenue. We generally receive payments prior to completion of the service period and our performance obligations. These payments are recorded as deferred revenue until the services are delivered or until our obligations are otherwise met, at which time revenue is recognized.

 

Some contracts also involve annual license fees, for which upfront amounts are received from customers. In these contracts, the license fees received in advance of the platform’s launch are recorded as contract liabilities.

 

The following table provides information on the changes in the balance of contract liabilities for the nine months ended March 31:

 

    2022     2021  
Opening balance   $ 333,200     $ 380,000  
Billings     425,445       582,930  
Less revenue recognized from continuing operations (net of cancellations):     (539,455 )     (418,315 )
Closing balance   $ 219,190     $ 544,615  

 

Revenue recognized during the nine months ended March 31, 2022 and 2021 that was included in the deferred revenue balance that existed in the opening balance of each year was approximately $539,455 and $417,415, respectively.

 

The deferred revenue balance as of March 31, 2022 is expected to be recognized over the next 12 months.

  

Net Loss per Share

 

Basic net loss per share is calculated by dividing the net loss for the period by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is calculated by dividing the net loss for the period by the weighted-average number of common shares outstanding during the period, increased by potentially dilutive common shares (“dilutive securities”) that were outstanding during the period. Dilutive securities include stock options and warrants granted, convertible debt, and convertible preferred stock. There were 3,208,024 and 2,910,125 potentially dilutive securities for the three and nine months ended March 31, 2022 and 2021, respectively.

 

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.

 

On March 11, 2020, the World Health Organization declared the outbreak of a respiratory disease caused by a novel coronavirus as a “pandemic.” First identified in late 2019 and known now as COVID-19, the outbreak has impacted thousands of individuals worldwide. In response, many countries, including the United States, have implemented measures to combat the outbreak which have impacted global business operations. While management believes the Company’s operations have not been significantly impacted, the Company continues to monitor the situation. In addition, while the Company’s results of operations, cash flows and financial condition could be negatively impacted, the extent of the impact cannot be reasonably estimated at this time.