Edgar Filing: Research Solutions, Inc.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: September 30, 2018

¨	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. 000-53501
RESEARCH SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)

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

15821 Ventura Blvd., Suite 165, Encino, California	91436
(Address of principal executive offices)	(Zip Code)

(310) 477-0354
(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

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

Title of Class		Number of Shares Outstanding on November 9, 2018
Common Stock, $0.001 par value		24,231,991

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION		3
Item 1. Condensed Consolidated Financial Statements (unaudited)		3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
Item 3. Quantitative and Qualitative Disclosures About Market Risk		22
Item 4. Controls and Procedures		22

PART II — OTHER INFORMATION		23
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		23
Item 6. Exhibits		23

SIGNATURES		24

PART 1 — FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

Research Solutions, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets

	September 30,			June 30,
	2018			2018
	(unaudited)
Assets
Current assets:
Cash and cash equivalents	$	4,527,027		$	4,908,180
Accounts receivable, net of allowance of $105,683 and $115,040, respectively		4,051,236			4,251,251
Prepaid expenses and other current assets		262,764			326,887
Prepaid royalties		255,403			93,336
Total current assets		9,096,430			9,579,654

Other assets:
Property and equipment, net of accumulated depreciation of $762,933 and $749,923, respectively		49,328			59,043
Deposits and other assets		14,432			14,372
Right of use asset, net of accumulated amortization of $184,035 and $155,698, respectively		278,986			307,324
Total assets	$	9,439,176		$	9,960,393

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses	$	4,366,542		$	4,686,946
Deferred revenue		1,635,527			1,665,746
Lease liability, current portion		122,087			119,786
Total current liabilities		6,124,156			6,472,478

Long-term liabilities:
Lease liability, long-term portion		177,167			208,513
Total liabilities		6,301,323			6,680,991

Commitments and contingencies

Stockholders’ equity:
Preferred stock; $0.001 par value; 20,000,000 shares authorized; no shares issued and outstanding		-			-
Common stock; $0.001 par value; 100,000,000 shares authorized; 24,155,676 and 24,016,999 shares issued and outstanding, respectively		24,156			24,017
Additional paid-in capital		22,945,261			22,904,691
Accumulated deficit		(19,732,487	)		(19,554,599	)
Accumulated other comprehensive loss		(99,077	)		(94,707	)
Total stockholders’ equity		3,137,853			3,279,402
Total liabilities and stockholders’ equity	$	9,439,176		$	9,960,393

See notes to condensed consolidated financial statements

Research Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Other Comprehensive Loss
(Unaudited)

	Three Months Ended
	September 30,
	2018			2017

Revenue:
Platforms	$	589,013		$	387,945
Transactions		6,363,508			6,359,895
Total revenue		6,952,521			6,747,840

Cost of revenue:
Platforms		108,259			83,987
Transactions		4,896,307			4,914,414
Total cost of revenue		5,004,566			4,998,401
Gross profit		1,947,955			1,749,439

Operating expenses:
Selling, general and administrative		2,170,712			2,537,036
Depreciation and amortization		11,115			40,568
Total operating expenses		2,181,827			2,577,604
Loss from operations		(233,872	)		(828,165	)

Other income (expenses):
Interest expense		-			(3,000	)
Other income		23,485			12,802
Total other income		23,485			9,802

Loss from operations before provision for income taxes		(210,387	)		(818,363	)
Provision for income taxes		(9,221	)		(11,751	)

Loss from continuing operations		(219,608	)		(830,114	)

Gain from sale of discontinued operations		41,720			57,149

Net loss		(177,888	)		(772,965	)

Other comprehensive income (loss): Foreign currency translation		(4,370	)		(8,951	)
Comprehensive loss	$	(182,258	)	$	(781,916	)

Loss per common share:
Loss per share from continuing operations, basic and diluted	$	(0.01	)	$	(0.04	)
Income per share from discontinued operations, basic and diluted	$	-		$	-
Net loss per share, basic and diluted	$	(0.01	)	$	(0.04	)
Weighted average common shares outstanding, basic and diluted		23,644,787			23,380,437

See notes to condensed consolidated financial statements

Research Solutions, Inc. and Subsidiaries
Condensed Consolidated Statement of Stockholders' Equity
For the Three Months Ended September 30, 2018
(Unaudited)

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

Balance, July 1, 2018		24,016,999		$	24,017		$	22,904,691		$	(19,554,599	)	$	(94,707	)	$	3,279,402

Fair value of vested stock options		-			-			39,648			-			-			39,648

Fair value of vested restricted common stock		130,127			130			76,131			-			-			76,261

Repurchase of common stock		(34,200	)		(34	)		(75,166	)		-			-			(75,200	)

Common stock issued upon exercise of stock options		3,750			4			(4	)		-			-			-

Common stock issued upon exercise of warrants		39,000			39			(39	)		-			-			-

Net loss for the period		-			-			-			(177,888	)		-			(177,888	)

Foreign currency translation		-			-			-			-			(4,370	)		(4,370	)

Balance, September 30, 2018		24,155,676		$	24,156		$	22,945,261		$	(19,732,487	)	$	(99,077	)	$	3,137,853

See notes to condensed consolidated financial statements

Research Solutions, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)

	Three Months Ended
	September 30,
	2018			2017

Cash flow from operating activities:
Net loss	$	(177,888	)	$	(772,965	)
Adjustment to reconcile net loss to net cash used in operating activities of operations:
Gain from sale of discontinued operations		(41,720	)		(57,149	)
Depreciation and amortization		11,115			40,568
Amortization of lease right		28,338			27,248
Fair value of vested stock options		39,648			176,983
Fair value of vested restricted common stock		76,261			103,026
Modification cost of stock options		-			6,233
Changes in operating assets and liabilities:
Accounts receivable		200,015			1,157,523
Prepaid expenses and other current assets		105,843			35,076
Prepaid royalties		(162,067	)		(91,152	)
Accounts payable and accrued expenses		(320,404	)		(1,765,757	)
Deferred revenue		(30,219	)		21,475
Lease liability		(29,045	)		(26,869	)
Net cash used in operating activities		(300,123	)		(1,145,760	)

Cash flow from investing activities:
Purchase of property and equipment		-			(23,402	)
Purchase of intangible assets		-			(14,252	)
Net cash used in investing activities		-			(37,654	)

Cash flow from financing activities:
Common stock repurchase and retirement		(75,200	)		(39,672	)
Net cash used in financing activities		(75,200	)		(39,672	)

Effect of exchange rate changes		(5,830	)		(8,379	)
Net decrease in cash and cash equivalents		(381,153	)		(1,231,465	)
Cash and cash equivalents, beginning of period		4,908,180			5,773,950
Cash and cash equivalents, end of period	$	4,527,027		$	4,542,485

Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	9,221		$	11,751
Cash paid for interest	$	-		$	3,000

See notes to condensed consolidated financial statements

RESEARCH SOLUTIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three Months Ended September 30, 2018 and 2017 (Unaudited)

Note 1. Organization, Nature of Business and Basis of Presentation

Organization

Research Solutions, Inc. (the “Company,” “Research Solutions,” “we,” “us” or “our”) was incorporated in the State of Nevada on November 2, 2006, and is a publicly traded holding company with two wholly owned subsidiaries: Reprints Desk, Inc., a Delaware corporation and Reprints Desk Latin America S. de R.L. de C.V, an entity organized under the laws of Mexico.

Nature of Business

We provide two service offerings to our customers: annual licenses that allow customers to access and utilize certain premium features of our cloud based software-as-a-service (“SaaS”) research intelligence platform (“Platforms”) and the transactional sale of published scientific, technical, and medical (“STM”) content managed, sourced and delivered through the Platform (“Transactions”). Platforms and Transactions are packaged as a single solution that enable life science and other research intensive organizations to speed up research and development activities with faster, single sourced access and management of content and data used throughout the intellectual property development lifecycle.

Platforms

Our cloud-based SaaS research intelligence platform consists of proprietary software and Internet-based interfaces. 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 gadgets. An alternative to manual data filtering, identification and extraction, gadgets 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 are rapidly developing new gadgets in order to build an ecosystem of gadgets. Together, these gadgets 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

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 provides our customers with a single source to the universe of published STM content that includes over 70 million existing STM articles and over one million newly published STM articles each year.

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. 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.

Principles of Consolidation

The accompanying financial statements are consolidated and include the accounts of the Company and its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2018 filed with the SEC. The condensed consolidated balance sheet as of June 30, 2018 included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including notes, required by GAAP.

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

Note 2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with 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.

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 with a US Dollar equivalent of $65,618 and $109,585 at September 30, 2018 and June 30, 2018, respectively, was held by Reprints Desk in accounts at financial institutions located in Europe.

The Company has no customers that represent 10% of revenue or more for the three months ended September 30, 2018 and 2017.

The Company has no customers that accounted for greater than 10% of accounts receivable at September 30, 2018 and June 30, 2018.

The following table summarizes vendor concentrations:

	Three Months Ended September 30,
	2018			2017
Vendor A		18	%		15	%
Vendor B		11	%		12	%
Vendor C		11	%		11	%

Revenue Recognition

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), ("ASC 606"). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. The Company adopted the guidance of ASC 606 on July 1, 2018. The implementation of ASC 606 had no impact on the condensed consolidated financial statements and no cumulative effect adjustment was recognized.

Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company derives its revenues from two sources: annual licenses that allow customers to access and utilize certain premium features of our cloud based SaaS research intelligence platform (“Platforms”) and the transactional sale of STM content managed, sourced and delivered through the Platform (“Transactions”).

The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:

identify the contract with a customer;

identify the performance obligations in the contract;

determine the transaction price;

allocate the transaction price to performance obligations in the contract; and

recognize revenue as the performance obligation is satisfied.

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 only when the selling price is fixed or determinable, and collectability is reasonably assured.

Deferred Revenue

Customer deposits and billings or payments received in advance of revenue recognition are recorded as deferred revenue.

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. The Company accounts for share-based payments to non-employees in accordance with Topic 505 of the FASB Accounting Standards Codification, whereby the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) the date at which the necessary performance to earn the equity instruments is complete. Stock-based compensation is based on awards ultimately expected to vest and is reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, as necessary, in subsequent periods if actual forfeitures differ from those estimates.

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 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.

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 loss of $4,980 and a gain of $12,387, for the three months ended September 30, 2018 and 2017, respectively. Cash denominated in Euros with a US Dollar equivalent of $65,618 and $109,585 at September 30, 2018 and June 30, 2018, respectively, was held in accounts at financial institutions located in Europe.

The following table summarizes the exchange rates used:

	Three Months Ended September 30,				Year Ended June 30,
	2018		2017		2018		2017
Period end Euro : US Dollar exchange rate		1.16		1.18		1.17		1.14
Average period Euro : US Dollar exchange rate		1.16		1.18		1.19		1.09

Period end Mexican Peso : US Dollar exchange rate		0.05		0.05		0.05		0.05
Average period Mexican Peso : US Dollar exchange rate		0.05		0.06		0.05		0.05

Net Income (Loss) Per Share

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 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 September 30, 2018 potentially dilutive securities include options to acquire 3,271,835 shares of common stock, warrants to acquire 1,885,000 shares of common stock and unvested restricted common stock of 434,781. At September 30, 2017 potentially dilutive securities include options to acquire 3,120,310 shares of common stock, warrants to acquire 1,985,000 shares of common stock and unvested restricted common stock of 690,057. 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 three months ended September 30, 2018 and 2017 because all stock options, warrants, and unvested restricted common stock are anti-dilutive.

Recently Issued Accounting Pronouncements

In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.” The ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. The ASU also clarifies that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling goods or services to customers as part of a contract accounted for under Revenue from Contracts with Customers (Topic 606). The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. Early adoption is permitted. The Company is currently assessing the effect that the ASU will have on our financial position, results of operations, and disclosures.

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. Line of Credit

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 December 31, 2019, and is subject to certain financial and performance covenants with which we were in compliance as of September 30, 2018. 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, and maintaining tangible net worth of $1,500,000, plus 50% of net income for the fiscal quarter ended from and after December 31, 2017, plus 50% of the dollar value of equity issuances after October 1, 2017 and the principal amount of subordinated debt. The line of credit bears interest at the prime rate plus 2.25% for periods in which we maintain an adjusted quick ratio of 1.3 to 1.0 (the “Streamline Period”), and at the prime rate plus 5.25% when a Streamline Period is not in effect. The interest rate on the line of credit was 6.75% as of September 30, 2018. The line of credit is secured by the Company’s consolidated assets.

There were no outstanding borrowings under the line as of September 30, 2018 and June 30, 2018, respectively. As of September 30, 2018, there was approximately $2,247,000 of available credit.

Note 4. Lease Obligations

On December 30, 2016, the Company entered into a 48 month non-cancellable lease for its office facilities that will require monthly payments ranging from $10,350 to $11,475 through January 2021. In accounting for the lease, the Company adopted ASU 2016-02, Leases which requires a lessee to record a right-of-use asset and a corresponding lease liability at the inception of the lease initially measured at the present value of the lease payments. The Company classified the lease as an operating lease and determined that the fair value of the lease assets and liability at the inception of the lease was $463,000 using a discount rate of 3.75%. During the three months ended September 30, 2018, the Company made payments of $29,045 towards the lease liability. As of September 30, 2018 and June 30, 2018, lease liability amounted to $299,254 and $328,299, respectively. ASU 2016-02 requires recognition in the statement of operations of a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line basis. Rent expense, including real estate taxes, for the three months ended September 30, 2018 and 2017 was $36,212 and $35,301, respectively. The right of use asset at June 30, 2018 was $307,324. During the three months ended September 30, 2018, the Company reflected amortization of right of use asset of $28,337 related to this lease, resulting in a net asset balance of $278,986 as of September 30, 2018.

Note 5. 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. 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 September 30, 2018, there were 993,364 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 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
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding at June 30, 2018		2,991,835			1.16		2,885,376			1.15		106,459			1.27
Granted		295,000			1.95		-			-		295,000			1.95
Options vesting		-			-		13,042			1.07		(13,042	)		1.07
Exercised		(15,000	)		1.80		(15,000	)		1.80		-			-
Forfeited/Cancelled		-			-		-			-		-			-
Outstanding at September 30, 2018		3,271,835		$	1.22		2,883,418		$	1.15		388,417		$	1.79

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 three months ended September 30, 2018 and 2017.

	Three Months Ended September 30,
	2018			2017
Expected dividend yield		0	%		0	%
Risk-free interest rate		2.82	%		1.45	%
Expected life (in years)		6.0			2.60
Expected volatility		67.8	%		76.0	%

The weighted average remaining contractual life of all options outstanding as of September 30, 2018 was 5.76 years. The remaining contractual life for options vested and exercisable at September 30, 2018 was 5.25 years. Furthermore, the aggregate intrinsic value of options outstanding as of September 30, 2018 was $3,847,424, and the aggregate intrinsic value of options vested and exercisable at September 30, 2018 was $3,611,393, in each case based on the fair value of the Company’s common stock on September 30, 2018.

During the three months ended September 30, 2018, the Company granted 295,000 options to employees with a fair value of $324,500. The total fair value of options that vested during the three months ended September 30, 2018 was $39,648 and is included in selling, general and administrative expenses in the accompanying statement of operations. During the three months ended September 30, 2018, the Company issued 3,750 shares of common stock upon the exercise of 15,000 options on a cashless basis.

As of September 30, 2018, the amount of unvested compensation related to stock options was $358,204 which will be recorded as an expense in future periods as the options vest.

Additional information regarding stock options outstanding and exercisable as of September 30, 2018 is as follows:

Option Exercise Price		Options Outstanding		Remaining Contractual Life (in years)		Options Exercisable
$	0.59		8,150		3.75		8,150
	0.60		5,000		3.75		5,000
	0.65		6,150		3.75		6,150
	0.70		225,000		7.18		225,000
	0.77		59,500		5.01		59,500
	0.80		16,000		6.89		16,000
	0.90		25,667		5.56		25,667
	0.97		6,000		3.75		6,000
	1.00		290,249		1.90		290,249
	1.02		227,000		2.18		227,000
	1.05		447,529		7.88		426,863
	1.07		53,898		4.04		53,898
	1.09		156,165		7.20		140,414
	1.10		105,000		6.75		105,000
	1.14		3,674		3.75		3,674
	1.15		209,400		3.07		209,400
	1.20		353,414		8.82		331,414
	1.25		32,000		4.38		32,000
	1.30		243,000		3.43		243,000
	1.50		295,000		4.00		295,000
	1.59		35,000		9.62		-
	1.75		1,067		3.75		1,067
	1.80		147,550		4.67		147,550
	1.85		24,000		4.34		24,000
	1.95		295,000		9.76		-
	1.97		1,422		3.75		1,422
	Total		3,271,835				2,883,418

Warrants

The following table summarizes warrant activity:

	Number of Warrants			Weighted Average Exercise Price
Outstanding, June 30, 2018		1,985,000			1.25
Granted		-			-
Exercised		(100,000	)		1.22
Expired/Cancelled		-			-
Outstanding, September 30, 2018		1,885,000		$	1.25
Exercisable, June 30, 2018		1,985,000		$	1.25
Exercisable, September 30, 2018		1,885,000		$	1.25

The intrinsic value for all warrants outstanding as of September 30, 2018 was $2,170,750, based on the fair value of the Company’s common stock on September 30, 2018. During the three months ended September 30, 2018, the Company issued 39,000 shares of common stock upon the exercise of 100,000 warrants on a cashless basis.

Additional information regarding warrants outstanding and exercisable as of September 30, 2018 is as follows:

Warrant Exercise Price	Warrants Outstanding		Remaining Contractual Life (in years)		Warrants Exercisable
$1.19		50,000		3.23		50,000
1.25		1,835,000		2.71		1,835,000
Total		1,885,000				1,885,000

Restricted Common Stock

Prior to July 1, 2018, the Company issued 1,996,304 shares of restricted common stock to employees valued at $2,031,026, of which 1,365,361 shares have vested, 214,324 shares have been forfeited, and $1,482,663 has been recognized as an expense.

During the three months ended September 30, 2018, the Company issued an additional 130,127 shares of restricted stock to employees. 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 fair value of the stock awards was $258,953 based on the market price of our common stock of $1.99 per share on the date of grant, which will be amortized over the three-year vesting period.

The total fair value of restricted common stock vesting during the three months ended September 30, 2018 was $76,261 and is included in selling, general and administrative expenses in the accompanying statements of operations. As of September 30, 2018, the amount of unvested compensation related to issuances of restricted common stock was $542,852, which will be recognized as an expense in future periods as the shares vest. When calculating basic net income (loss) 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.

The following table summarizes restricted common stock activity:

	Number of Shares			Fair Value			Weighted Average Grant Date Fair Value
Non-vested, June 30, 2018		416,619			360,160			1.08
Granted		130,127			258,953			1.99
Vested		(111,965	)		(76,261	)		0.98
Forfeited		-			-			-
Non-vested, September 30, 2018		434,781		$	542,852		$	1.38

Common Stock Repurchase and Retirement

Effective as of February 8, 2018, the Compensation Committee of our Board of Directors authorized the repurchase, over a 12-month period on the last day of each trading window and otherwise in accordance with our insider trading policies, of up to $300,000 of outstanding common stock (at prices no greater than $3.00 per share) from our employees to satisfy their tax obligations in connection with the vesting of stock incentive awards. 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, 2018, 33,800 shares had been repurchased from the employees for an aggregate amount of $49,785. During the three months ended September 30, 2018, the Company repurchased 34,200 shares of our common stock from employees at an average market price of approximately $2.20 per share for an aggregate amount of $75,240. As of September 30, 2018, $174,975 remains under the 2018 plan to repurchase common stock from its employees. The shares of common stock were surrendered by employees to cover tax withholding obligations with respect to the vesting of restricted stock. Shares repurchased are retired and deducted from common stock for par value and from additional paid in capital for the excess over par value

Note 6. Gain from Sale of Discontinued Operations (Reprints and ePrints business line)

On June 30, 2017, we sold the intangible assets of our Reprints and ePrints business pursuant to an Asset Purchase Agreement dated June 20, 2017. The aggregate net consideration for the sale included earn-out payments of 45% of gross margin over the 30-month period subsequent to the closing date. We have made a policy election to record the contingent consideration when the consideration is determined to be realizable (each 6-month period ending subsequent to the closing date). Realizable contingent consideration amounted to $41,720 for the three months ended September 30, 2018 and is recorded as a gain from the sale of discontinued operations.

Note 7. Subsequent Events

In October 2018, the Company issued 76,315 shares of common stock upon the exercise of 174,000 options on a cashless basis.

Item 2. 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 three months ended September 30, 2018 and 2017 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” in our Annual Report on Form 10-K for the fiscal year ended June 30, 2018.

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

We provide two service offerings to our customers: annual licenses that allow customers to access and utilize certain premium features of our cloud based software-as-a-service (“SaaS”) research intelligence platform (“Platforms”) and the transactional sale of published scientific, technical, and medical (“STM”) content managed, sourced and delivered through the Platform (“Transactions”). Platforms and Transactions are packaged as a single solution that enable life science and other research-intensive organizations to speed up research and development activities with faster, single sourced access and management of content and data used throughout the intellectual property development lifecycle.

Platforms

Transactions

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

In May 2014, the FASB issued 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. We adopted the guidance of ASC 606 on July 1, 2018. The implementation of ASC 606 had no impact on the condensed consolidated financial statements and no cumulative effect adjustment was recognized.

We recognize revenue when control of promised goods or services is transferred to customers, in an amount that reflects the consideration we expect to be entitled to 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

Transactions

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. We account for share-based payments to non-employees in accordance with Topic 505 of the FASB Accounting Standards Codification, whereby the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) the date at which the necessary performance to earn the equity instruments is complete. Stock-based compensation is based on awards ultimately expected to vest and is reduced for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, as necessary, in subsequent periods if actual forfeitures differ from those estimates.

Recent Accounting Pronouncements

Please refer to footnote 2 to the condensed consolidated financial statements contained elsewhere in this Form 10-Q for a discussion of Recent Accounting Pronouncements.

Quarterly Information (Unaudited)

The following table sets forth unaudited and quarterly financial data for the most recent eight quarters:

	Sept. 30,			June 30,			Mar. 31,			Dec. 31,			Sept. 30,			June 30,			Mar. 31,			Dec. 31,
	2018			2018			2018			2017			2017			2017			2017			2016
Revenue:
Platforms	$	589,013		$	528,581		$	489,219		$	413,404		$	387,945		$	318,194		$	270,920		$	219,137
Transactions		6,363,508			6,637,292			6,792,289			6,409,816			6,359,895			6,521,313			6,372,679			5,866,562
Total revenue		6,952,521			7,165,873			7,281,508			6,823,220			6,747,840			6,839,507			6,643,599			6,085,699

Cost of revenue:
Platforms		108,259			101,370			103,185			90,362			83,987			71,097			58,367			45,623
Transactions		4,896,307			5,118,851			5,259,959			4,996,988			4,914,414			5,060,500			4,997,842			4,664,690
Total cost of revenue		5,004,566			5,220,221			5,363,144			5,087,350			4,998,401			5,131,597			5,056,209			4,710,313

Gross profit:
Platforms		480,754			427,211			386,034			323,042			303,958			247,097			212,553			173,514
Transactions		1,467,201			1,518,441			1,532,330			1,412,828			1,445,481			1,460,813			1,374,837			1,201,872
Total gross profit		1,947,955			1,945,652			1,918,364			1,735,870			1,749,439			1,707,910			1,587,390			1,375,386

Operating expenses:
Sales and marketing		431,417			455,250			522,894			524,587			678,963			682,455			698,346			592,254
Technology and product dev.		499,795			454,053			436,672			454,507			452,816			413,249			396,765			379,725
General and administrative		1,118,611			1,062,981			1,091,928			1,098,795			1,131,402			1,220,056			1,120,480			1,108,926
Depreciation and amortization		11,115			32,731			32,768			46,330			40,568			36,893			33,906			32,426
Stock-based comp. expense		115,909			75,089			114,340			314,565			286,242			112,151			112,326			303,097
Foreign currency transaction loss (gain)		4,980			14,589			(9,737	)		(485	)		(12,387	)		(6,362	)		6,272			17,631
Total operating expenses		2,181,827			2,094,693			2,188,865			2,438,299			2,577,604			2,458,442			2,368,095			2,434,059
Other income (expenses and income taxes)		14,264			12,615			5,238			(1,504	)		(1,949	)		(6,425	)		1,599			(6,913	)
Loss from continuing operations		(219,608	)		(136,426	)		(265,263	)		(703,933	)		(830,114	)		(756,957	)		(779,106	)		(1,065,586	)
Income from discontinued operations		-			-			-			-			-			113,314			141,616			222,626
Gain on sale of discontinued operations		41,720			51,216			69,277			79,353			57,149			241,196			-			-
Net income (loss)		(177,888	)		(85,210	)		(195,986	)		(624,580	)		(772,965	)		(402,447	)		(637,490	)		(842,960	)

Basic income (loss) per common share:
Loss per share from continuing operations	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.03	)	$	(0.04	)	$	(0.03	)	$	(0.03	)	$	(0.05	)
Income per share from discontinued operations	$	-		$	-		$	-		$	-		$	-		$	0.01		$	-		$	0.01
Net income (loss) per share	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.03	)	$	(0.04	)	$	(0.02	)	$	(0.03	)	$	(0.04	)
Basic weighted average common shares outstanding		23,644,787			23,560,781			23,498,796			23,455,654			23,380,437			23,369,727			23,265,939			23,200,975

Diluted income (loss) per common share:
Loss per share from continuing operations	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.03	)	$	(0.04	)	$	(0.03	)	$	(0.03	)	$	(0.05	)
Income per share from discontinued operations	$	-		$	-		$	-		$	-		$	-		$	0.01		$	-		$	0.01
Net income (loss) per share	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.03	)	$	(0.04	)	$	(0.02	)	$	(0.03	)	$	(0.04	)
Diluted weighted average common shares outstanding		23,644,787			23,560,781			23,498,796			23,455,654			23,380,437			23,369,727			23,265,939			23,200,975

Comparison of the Three Months Ended September 30, 2018 and 2017

Results of Operations

	Three Months Ended September 30,
	2018			2017			2018-2017 $ Change			2018-2017 % Change

Revenue:
Platforms	$	589,013		$	387,945		$	201,068			51.8	%
Transactions		6,363,508			6,359,895			3,613			0.1	%
Total revenue		6,952,521			6,747,840			204,681			3.0	%

Cost of revenue:
Platforms		108,259			83,987			24,272			28.9	%
Transactions		4,896,307			4,914,414			(18,107	)		(0.4	)%
Total cost of revenue		5,004,566			4,998,401			6,165			0.1	%

Gross profit:
Platforms		480,754			303,958			179,796			58.2	%
Transactions		1,467,201			1,445,481			21,720			1.5	%
Total gross profit		1,947,955			1,749,439			198,516			11.3	%

Operating expenses:
Sales and marketing		431,417			678,963			(247,546	)		(36.5	)%
Technology and product development		499,795			452,816			46,979			10.4	%
General and administrative		1,118,611			1,131,402			(12,791	)		(1.1	)%
Depreciation and amortization		11,115			40,568			(29,453	)		(72.6	)%
Stock-based compensation expense		115,909			286,242			(170,333	)		(59.5	)%
Foreign currency transaction loss (gain)		4,980			(12,387	)		17,367			140.2	%
Total operating expenses		2,181,827			2,577,604			(395,777	)		(15.4	)%
Loss from operations		(233,872	)		(828,165	)		594,293			71.8	%

Other income (expenses):
Interest expense		-			(3,000	)		3,000			100.0	%
Other income		23,485			12,802			10,683			83.4	%
Total other income		23,485			9,802			13,683			139.6	%

Loss from operations before provision for income taxes		(210,387	)		(818,363	)		607,976			74.3	%
Provision for income taxes		(9,221	)		(11,751	)		2,530			21.5	%

Loss from continuing operations		(219,608	)		(830,114	)		610,506			73.5	%

Gain from sale of discontinued operations		41,720			57,149			(15,429	)		(27.0	)%

Net loss	$	(177,888	)	$	(772,965	)	$	595,077			77.0	%

Revenue

	Three Months Ended September 30,
	2018		2017		2018-2017 $ Change		2018-2017 % Change
Revenue:
Platforms	$	589,013	$	387,945	$	201,068		51.8	%
Transactions		6,363,508		6,359,895		3,613		0.1	%
Total revenue	$	6,952,521	$	6,747,840	$	204,681		3.0	%

Total revenue increased $204,681, or 3.0%, for the three months ended September 30, 2018 compared to the prior year, due to the following:

Category	Impact			Key Drivers
Platforms	h	$	201,068	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	h	$	3,613	Increased primarily due to orders from new customers.

Cost of Revenue

	Three Months Ended September 30,
	2018		2017		2018-2017 $ Change			2018-2017 % Change
Cost of Revenue:
Platforms	$	108,259	$	83,987	$	24,272			28.9	%
Transactions		4,896,307		4,914,414		(18,107	)		(0.4	)%
Total cost of revenue	$	5,004,566	$	4,998,401	$	6,165			0.1	%

	Three Months Ended September 30,
	2018			2017			2018-2017 Change *
As a percentage of revenue:
Platforms		18.4	%		21.6	%		(3.2	)%
Transactions		76.9	%		77.3	%		(0.4	)%
Total		72.0	%		74.1	%		(2.1	)%

* 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 2.1%, from 74.1% for the previous year to 72%, for the three months ended September 30, 2018.

Category	Impact as percentage of revenue		Key Drivers
Platforms	i	3.2 %	Decreased primarily due to proportionally lower third-party data costs.
Transactions	i	0.4 %	Decreased primarily due to proportionally lower personnel costs, partially offset by a proportional increase in copyright costs.

Gross Profit

	Three Months Ended September 30,
	2018		2017		2018-2017 $ Change		2018-2017 % Change
Gross Profit:
Platforms	$	480,754	$	303,958	$	176,796		58.2	%
Transactions		1,467,201		1,445,481		21,720		1.5	%
Total gross profit	$	1,947,955	$	1,749,439	$	198,516		11.3	%

	Three Months Ended September 30,
	2018			2017			2018-2017 Change *
As a percentage of revenue:
Platforms		81.6	%		78.4	%		3.2	%
Transactions		23.1	%		22.7	%		0.4	%
Total		28.0	%		25.9	%		2.1	%

* The difference between current and prior period gross profit as a percentage of revenue

Operating Expenses

	Three Months Ended September 30,
	2018		2017			2018-2017 $ Change			2018-2017 % Change
Operating Expenses:
Sales and marketing	$	431,417	$	678,963		$	(247,546	)		(36.5	)%
Technology and product development		499,795		452,816			46,979			10.4	%
General and administrative		1,118,611		1,131,402			(12,791	)		(1.1	)%
Depreciation and amortization		11,115		40,568			(29,453	)		(72.6	)%
Stock-based compensation expense		115,909		286,242			(170,333	)		(59.5	)%
Foreign currency transaction loss (gain)		4,980		(12,387	)		17,367			140.2	%
Total operating expenses	$	2,181,827	$	2,577,604		$	(395,777	)		(15.4	)%

Category	Impact			Key Drivers
Sales and marketing	i	$	247,546	Decreased primarily due to lower personnel costs.
Technology and product development	h	$	46,979	Increased primarily due to greater personnel costs.
General and administrative	i	$	12,791	Decreased primarily due to lower travel expenses.

Net Income (Loss)

	Three Months Ended September 30,
	2018			2017			2018-2017 $ Change			2018-2017 % Change
Net Income (Loss):
Loss from continuing operations	$	(219,608	)	$	(830,114	)	$	610,506			73.5	%
Income from discontinued operations		41,720			57,149			(15,429	)		(27.0	)%
Total net loss	$	(177,888	)	$	(772,965	)	$	595,077			77.0	%

Loss from continuing operations decreased $610,506 or 73.5%, for the three months ended September 30, 2018 compared to the prior year, primarily due to increased gross profit and decreased operating expenses as described above.

Liquidity and Capital Resources

	Three Months Ended September 30,
Consolidated Statements of Cash Flow Data:	2018			2017
Net cash used in operating activities	$	(300,123	)	$	(1,145,760	)
Net cash used in investing activities		-			(37,654	)
Net cash used in financing activities		(75,200	)		(39,672	)

Effect of exchange rate changes		(5,830	)		(8,379	)
Net decrease in cash and cash equivalents		(381,153	)		(1,231,465	)
Cash and cash equivalents, beginning of period		4,908,180			5,773,950
Cash and cash equivalents, end of period	$	4,527,027		$	4,542,485

Liquidity

Since our inception, we have funded our operations primarily through private sales of equity securities and the exercise of warrants, which have provided aggregate net cash proceeds to date of approximately $15,972,000. As of September 30, 2018, we had working capital of $2,972,274 and stockholders’ equity of $3,137,853. For the three months ended September 30, 2018, we recorded a net loss of $177,888, and cash used in operating activities was $300,123. We may incur losses for an indeterminate period and may never sustain profitability. We may be unable to achieve and maintain profitability on a quarterly or annual basis. An extended period of losses and negative cash flow may prevent us from successfully operating and expanding our business.

As of September 30, 2018, we had cash and cash equivalents of $4,527,027, compared to $4,908,180 as of June 30, 2018, a decrease of $381,153. This decrease was primarily due to cash used in operating activities.

Operating Activities

Net cash used in operating activities was $300,123 for the three months ended September 30, 2018 and resulted primarily from a decrease in accounts payable and accrued expenses of $320,404 and an increase in prepaid royalties of $162,067, partially offset by a decrease in accounts receivable of $200,015.

Net cash used in operating activities was $1,145,760 for the three months ended September 30, 2017 and resulted primarily from a net loss of $772,965 and a decrease in accounts payable and accrued expenses of $1,765,757, partially offset by a decrease in accounts receivable of $1,157,523.

Investing Activities

No cash was used in or provided by investing activities for the three months ended September 30, 2018.

Net cash used in investing activities was $37,654 for the three months ended September 30, 2017 and resulted from the purchase of intangible assets and property and equipment.

Financing Activities

Net cash used in financing activities was $75,200 for the three months ended September 30, 2018 and resulted from the repurchase of common stock.

Net cash used in financing activities was $39,672 for the three months ended September 30, 2017 and resulted from the repurchase of common stock.

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 December 31, 2019, and is subject to certain financial and performance covenants with which we were in compliance as of September 30, 2018. 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, and maintaining tangible net worth of $1,500,000, plus 50% of net income for the fiscal quarter ended from and after December 31, 2017, plus 50% of the dollar value of equity issuances after October 1, 2017 and the principal amount of subordinated debt. The line of credit bears interest at the prime rate plus 2.25% for periods in which we maintain an adjusted quick ratio of 1.3 to 1.0 (the “Streamline Period”), and at the prime rate plus 5.25% when a Streamline Period is not in effect. The interest rate on the line of credit was 6.75% as of September 30, 2018. The line of credit was secured by our consolidated assets.

There were no outstanding borrowings under the line as of September 30, 2018 and June 30, 2018, respectively. As of September 30, 2018, there was approximately $2,247,000 of available credit.

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, 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 three months ended September 30, 2018 and 2017:

	Three Months Ended September 30,
	2018			2017			2018-2017 $ Change
Net loss	$	(177,888	)	$	(772,965	)	$	595,077
Add (deduct):
Interest expense		-			3,000			(3,000	)
Other (income) expense		(23,485	)		(12,802	)		(10,683	)
Foreign currency transaction loss (gain)		4,980			(12,387	)		17,367
Provision for income taxes		9,221			11,751			(2,530	)
Depreciation and amortization		11,115			40,568			(29,453	)
Stock-based compensation		115,909			286,242			(170,333	)
Gain on sale of discontinued operations		(41,720	)		(57,149	)		15,429
Adjusted EBITDA	$	(101,868	)	$	(513,742	)	$	411,874

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 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required.

Item 4. 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 Quarterly Report on Form 10-Q. 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 September 30, 2018, the end of the period covered by this report, our disclosure controls and procedures were effective at a reasonable assurance level.

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 Control Over Financial Reporting

In addition, our management with the participation of our principal executive officer and principal financial officer have determined that no change in our internal control over financial reporting (as that term is defined in Rules 13(a)-15(f) and 15(d)-15(f) of the Exchange Act) occurred during the quarter ended September 30, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended September 30, 2018, we repurchased 34,200 shares of our common stock under the repurchase plan at an average market price of approximately $2.20 per share for an aggregate amount of $75,240. As of September 30, 2018, $174,976 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	Total Number of Shares Purchased ¹		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
January 2018		-		-		-		-
February 2018		-		-		-	$	300,000
March 2018		19,750	$	1.29		-	$	274,523
April 2018		-		-		-	$	274,523
May 2018		-		-		-	$	274,523
June 2018		14,050	$	1.73		-	$	250,216
July 2018		-		-		-	$	250,216
August 2018		-		-		-	$	250,216
September 2018		34,200	$	2.20		-	$	174,976
Total		68,000	$	1.84		-		-

¹ Consists of shares of common stock purchased from an employee to satisfy tax obligations in connection with the vesting of stock incentive awards.

Item 6. Exhibits

See “Exhibit Index” on the page immediately following the signature page hereto for a list of exhibits filed as part of this report, which is incorporated herein by reference.

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.

	RESEARCH SOLUTIONS, INC.

	By:	/s/ Peter Victor Derycz

		Peter Victor Derycz
Date: November 14, 2018		Chief Executive Officer (Principal Executive Officer)

	By:	/s/ Alan Louis Urban

		Alan Louis Urban
Date: November 14, 2018		Chief Financial Officer (Principal Financial and Accounting Officer)

EXHIBIT INDEX

Exhibit Number		Description
31.1		Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
31.2		Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
32.1		Section 1350 Certification of Chief Executive Officer *
32.2		Section 1350 Certification of Chief Financial Officer *
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
101.LAB		XBRL Taxonomy Extension Label Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase

Furnished herewith