Note 2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of condensed consolidated 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 condensed consolidated 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, the valuation of goodwill and intangible assets related to the Company’s acquisitions, accruals for contingent earnout 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, British Pounds and Japanese Yen with an aggregate US Dollar equivalent of $645,962 and $426,658 at December 31, 2025 and June 30, 2025, respectively, was held by Reprints Desk in accounts at financial institutions.
The Company has no customers that represent 10% of revenue or more for the three and six months ended December 31, 2025 and 2024.
The Company has no customers that accounted for greater than 10% of accounts receivable at December 31, 2025 and June 30, 2025.
The following table summarizes vendor concentrations for content cost:
Three Months Ended |
| Six Months Ended |
| ||||||||||
December 31, |
| December 31, |
| ||||||||||
| 2025 | | | 2024 | 2025 | | | 2024 | |||||
Vendor A | 27 | % | 27 | % | 27 | % | 26 | % | |||||
Vendor B | 10 | % | 10 | % | 10 | % | 10 | % | |||||
Software Costs
Based on its nature, the Company’s software development costs are expensed as incurred. The finalization of the Company’s project development process precipitates the rapid commercialization and deployment of new products and enhancements. The Company continuously reviews its projects, processes and the nature of its software development costs to determine if there are changes that would meet the requirements for capitalization under Accounting Standards Codification (“ASC”) 350-40, Internal-Use Software.
Revenue Recognition
The Company accounts for revenue in accordance with Financial Accounting Standard Board’s (“FASB”) ASC Topic 606, Revenue from Contracts with Customers (Topic 606), (“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected.
Revenues are recognized when control of the promised goods or services are transferred to a customer, in an amount that reflects the consideration that the Company expects to receive in exchange for those goods or services. The Company derives its revenues from two sources: annual licenses that allow customers to access and utilize certain premium features of our cloud-based SaaS research intelligence platforms and the transactional sale of STM content managed, sourced and delivered through the Platform. In the six months ended December 31, 2025 and 2024, the Company recognized revenue of $5,911,463 and $4,883,268 that was included in the deferred revenue at the beginning of each respective period. This revenue was recorded for the fulfillment of performance obligations related to cloud-based software subscriptions. Deferred revenue and accounts receivable were $10,702,120 and $7,191,234 as of June 30, 2024, respectively.
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 Platforms. Revenue is recognized ratably over the term of the subscription agreement, which is typically one year, provided all other revenue recognition criteria have been met. Billings or payments received in advance of revenue recognition are recorded as deferred revenue.
Transactions
We charge a transactional service fee for the electronic delivery of single articles, and a corresponding copyright fee for the permitted use of the content. We recognize revenue from single article delivery services upon delivery to the customer provided all other revenue recognition criteria have been met.
Revenue by Geographical Region
The following table summarizes revenue by geographical region:
Three Months Ended |
| |||||||||||
December 31, |
| |||||||||||
2025 |
| 2024 | ||||||||||
United States | $ | 6,698,701 | | 56.8 | % | $ | 6,932,120 | 58.2 | % | |||
Europe |
| 3,867,252 |
| 32.8 | % |
| 3,730,368 |
| 31.3 | % | ||
Rest of World |
| 1,226,698 |
| 10.4 | % |
| 1,251,731 |
| 10.5 | % | ||
Total | $ | 11,792,651 |
| 100 | % | $ | 11,914,219 |
| 100 | % | ||
Six Months Ended | ||||||||||||
December 31, | ||||||||||||
2025 |
| 2024 | ||||||||||
United States | $ | 13,590,376 | | 56.3 | % | $ | 14,044,628 | 58.6 | % | |||
Europe |
| 8,017,284 |
| 33.3 | % |
| 7,572,800 |
| 31.6 | % | ||
Rest of World |
| 2,497,176 |
| 10.4 | % |
| 2,341,273 |
| 9.8 | % | ||
Total | $ | 24,104,836 |
| 100 | % | $ | 23,958,701 |
| 100 | % | ||
Accounts Receivable, Net by Geographical Region
The following table summarizes accounts receivable, net by geographical region:
As of December 31, 2025 |
| As of June 30, 2025 | ||||||||||
United States | | $ | 2,985,621 | | 52.7 | % | $ | 4,033,807 | 56.1 | % | ||
Europe |
| 2,054,074 |
| 36.3 | % |
| 2,413,906 |
| 33.6 | % | ||
Rest of World |
| 621,476 |
| 11.0 | % |
| 743,521 |
| 10.3 | % | ||
Total | $ | 5,661,171 |
| 100 | % | $ | 7,191,234 |
| 100 | % | ||
Business Combinations
The Company accounts for its business combinations using the acquisition method of accounting where the purchase consideration is allocated to the tangible and intangible assets acquired, and liabilities assumed, based on their respective fair values as of the acquisition date. The excess of the fair value of the purchase consideration over the estimated fair values of the net assets acquired is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing intangible assets include, but are not limited to, expected future cash flows, which includes consideration of future growth and margins, future changes in technology, brand awareness and discount rates. Fair value estimates are based on the assumptions that management believes a market participant would use in pricing the asset or liability.
Intangible Assets
Amortizable finite-lived identifiable intangible assets consist of developed technology and customer relationships acquired in the acquisition of ResoluteAI effective July 28, 2023 and Scite effective December 1, 2023, and are stated at cost less accumulated amortization. The developed technology and customer relationships are being amortized over the estimated average useful lives of 3 to 10 years. The Company follows ASC 360 in accounting for finite-lived intangible assets, which requires impairment losses to be recorded when indicators of impairment are present and the undiscounted cash flows estimated to be generated by the assets are less than the assets’ carrying amounts. For the three and six months ended December 31, 2025 and 2024, the Company determined there were no indicators of impairment of its intangible assets.
Goodwill
Goodwill consists of the excess of the cost of ResoluteAI and Scite over the fair value of amounts assigned to assets acquired and liabilities assumed. Under the guidance of ASC 350, goodwill is not amortized, rather it is tested for impairment annually, and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. The Company operates in a single reporting unit at the consolidated level. An impairment loss generally would be recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit and would be measured as the excess carrying value of goodwill over the derived fair value of goodwill. The Company’s policy is to perform an annual impairment testing for its reporting unit on June 30 of each fiscal year.
Deferred Revenue
Contract liabilities, such as deferred revenue, exist where the Company has the obligation to transfer services to a customer for which the entity has received consideration, or when the consideration is due, from the customer.
Cash payments received or due in advance of performance are recorded as deferred revenue. Deferred revenue is primarily comprised of cloud-based software subscriptions which are generally billed in advance. The deferred revenue balance is presented as a current liability on the Company's condensed consolidated balance sheets.
Cost of Revenue
Platforms
Cost of Platform revenue consists primarily of personnel costs of our operations team, and 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.
Segment Reporting
The Company operates in a segment which derives its revenue from subscription fees from its cloud-based SaaS Platforms and transactional service fees for the electronic delivery of singles articles, and a corresponding copyright fee for the permitted use of the content and it is based on how the chief operating decision maker (“CODM”) views and evaluates the Company’s operations in making operational and strategic decisions and assessments of financial performance. The Company’s President has been identified as the CODM.
The CODM regularly reviews revenue, certain significant expense categories, net income and select balance sheet items in evaluating segment performance. The significant segment expense categories and other segment items provided to the CODM and included in the measure of segment profit or loss are presented below.
Three Months Ended | Six Months Ended | |||||||||||
December 31, | December 31, | |||||||||||
2025 | | 2024 | 2025 | | 2024 | |||||||
Revenue | $ | 11,792,651 | $ | 11,914,219 | $ | 24,104,836 | $ | 23,958,701 | ||||
Cost of revenue |
| 5,615,701 |
| 6,093,126 |
| 11,702,588 |
| 12,371,732 | ||||
Gross profit |
| 6,176,950 |
| 5,821,093 |
| 12,402,248 |
| 11,586,969 | ||||
Gross profit margin |
| 52.4% |
| 48.9% |
| 51.5% |
| 48.4% | ||||
Selling, general and administrative expenses: |
|
| ||||||||||
Sales and marketing | 1,648,598 | 1,343,087 | 3,315,423 | 2,533,494 | ||||||||
Technology and product development |
| 1,602,421 |
| 1,506,849 |
| 3,012,572 |
| 2,879,607 | ||||
General and administrative |
| 1,620,595 |
| 2,008,201 |
| 3,295,954 |
| 3,938,377 | ||||
Stock-based compensation expense |
| 213,449 |
| 534,322 |
| 425,931 |
| 952,311 | ||||
Foreign currency transaction loss (gain) |
| 36,112 |
| 29,554 |
| 18,856 |
| (74,686) | ||||
Total selling, general and administrative expenses |
| 5,121,175 |
| 5,422,013 |
| 10,068,736 |
| 10,229,103 | ||||
Depreciation and amortization | 316,425 | 306,233 | 632,491 | 618,328 | ||||||||
Net income (loss) | $ | 546,919 | $ | (1,980,234) | $ | 1,296,306 | $ | (1,311,230) | ||||
Segment net income includes other income, change in fair value of contingent earnout liability and income taxes.
The CODM also reviews the following balance sheet items at period-end as part of performance monitoring and resource allocation decisions:
As of December 31, 2025 | | As of June 30, 2025 | ||||
Cash and cash equivalents | $ | 12,262,780 | | $ | 12,227,312 | |
Current assets, excluding cash and cash equivalents |
| 6,411,401 |
| 7,772,416 | ||
Long term assets |
| 25,569,699 |
| 26,120,946 | ||
Total segment assets | $ | 44,243,880 |
| $ | 46,120,674 | |
The Company applied the provisions of ASU 2023-07 retrospectively and has included comparative information for the three and six months ended December 31, 2024. Because the Company operates as a reportable segment, the amounts above reconcile directly to the corresponding condensed consolidated financial statement line items. There was no impact on previously reported consolidated net income (loss), financial position or cash flows.
Stock-Based Compensation
The Company periodically issues stock options and restricted stock awards to employees and non-employees for services. The Company accounts for such grants issued and vesting based on ASC 718, whereby the value of the award is measured on the date of grant and recognized as compensation expense on the straight-line basis over the requisite service period for awards subject to time vesting conditions and the graded tranche basis for awards subject to market vesting conditions. Forfeitures are accounted for as they occur. The Company recognizes the fair value of stock-based compensation within its condensed consolidated statements of operations and comprehensive income with classification depending on the nature of the services rendered.
Under ASC 718, repurchase or cancellation of equity awards, the amount of cash or other assets transferred (or liabilities incurred) to repurchase an equity award shall be charged to equity, to the extent that the amount paid does not exceed the fair value of the equity instruments repurchased at the repurchase date. Any excess of the repurchase price over the fair value of the instruments repurchased shall be recognized as additional compensation cost.
Foreign Currency
The accompanying condensed consolidated financial statements are presented in United States dollars, the functional currency of the Company. Capital accounts of foreign subsidiaries are translated into US Dollars from foreign currency at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rate as of the balance sheet date. Income and expenditures are translated at the average exchange rate of the period. Although the majority of our revenue and costs are in US dollars, the costs of Reprints Desk Latin America and ResSoL LA are in Mexican Pesos. As a result, currency exchange fluctuations may impact our revenue and the costs of our operations. We currently do not engage in any currency hedging activities.
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 losses of $36,112 and $29,554 for the three months ended December 31, 2025 and 2024, respectively and a loss of $18,856 and a gain of $74,686 for the six months ended December 31, 2025 and 2024, respectively. Cash denominated in Euros, British Pounds and Japanese Yen with an aggregate US Dollar equivalent of $645,962, and $426,658 at December 31, 2025 and June 30, 2025, respectively, was held in accounts at financial institutions.
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 shares of unvested restricted common stock. Shares of restricted stock are included in the basic weighted average number of common shares outstanding from the time they vest. Diluted earnings per share is computed by dividing the net income applicable to common stockholders 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.
The following table reconciles the numerators and denominators used in the computations of both basic and diluted earnings per share:
Three Months Ended | Six Months Ended | |||||||||||
December 31, | December 31, | |||||||||||
| | 2025 | | 2024 | | 2025 | | 2024 | ||||
Net income (loss) available to common shareholders | $ | 546,919 | $ | (1,980,234) | $ | 1,296,306 | $ | (1,311,230) | ||||
Weighted average commons shares - basic |
| 31,634,575 |
| 30,421,808 |
| 31,434,725 |
| 30,384,339 | ||||
Dilutive effect of outstanding stock options |
| 672,107 |
| — |
| 661,435 |
| — | ||||
Dilutive effect of unvested restricted common stock |
| 26,975 |
| — |
| 17,248 |
| — | ||||
Weighted average commons shares - diluted |
| 32,333,657 |
| 30,421,808 |
| 32,113,408 |
| 30,384,339 | ||||
Net income (loss) per common share: |
|
| ||||||||||
Basic | $ | 0.02 | $ | (0.07) | $ | 0.04 | $ | (0.04) | ||||
Diluted | $ | 0.02 | $ | (0.07) | $ | 0.04 | $ | (0.04) | ||||
Weighted average stock options excluded due to anti-dilution were 744,000 and 2,815,282 during the three months ended December 31, 2025 and 2024, respectively and 1,001,934 and 2,746,043 during the six months ended December 31, 2025 and 2024. Shares of unvested restricted stock that were considered antidilutive were 894,000 and 1,967,561 during the three months ended December 31, 2025 and 2024, respectively and 1,272,092 and 1,815,711 for the six months ended December 31, 2025 and 2024.
Fair Value of Financial Instruments
Under FASB ASC Topic 820, Fair Value Measurements and Disclosures, fair value is defined as the price at which an asset could be exchanged or a liability transferred in a transaction between knowledgeable, willing parties in the principal or most advantageous market for the asset or liability. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or parameters are not available, valuation models are applied. A fair value hierarchy prioritizes the inputs used in measuring fair value into three broad levels as follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs, other than the quoted prices in active markets, are observable either directly or indirectly.
Level 3 – Unobservable inputs based on the Company’s assumptions.
The Company is required to use observable market data if such data is available without undue cost and effort.
The following table sets forth by level, within the fair value hierarchy, the Company’s assets and liabilities at fair value as of December 31, 2025 and June 30, 2025:
As of December 31, 2025 | As of June 30, 2025 | |||||||||||||||||||||||
| Level 1 | | Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total | |||||||||
| |
| |
| |
| |
| |
| |
| |
| | |||||||||
Assets | ||||||||||||||||||||||||
Total assets | $ | — | $ | — | $ | — |
| $ | — | $ | — | $ | — | $ | — |
| $ | — | ||||||
Liabilities | ||||||||||||||||||||||||
Contingent earnout liability | $ | — | — | $ | 10,700,952 | $ | 10,700,952 | $ | — | — | $ | 14,046,640 | $ | 14,046,640 | ||||||||||
Total liabilities | $ | — | $ | — | $ | 10,700,952 |
| $ | 10,700,952 | $ | — | $ | — | $ | 14,046,640 |
| $ | 14,046,640 | ||||||
On December 1, 2023, the Company acquired 100% of the outstanding stock of Scite, Inc. a Delaware corporation (“Scite”). The total purchase consideration for Scite, net of cash acquired, was approximately $21.1 million. The consideration included an initial payment of $7.2 million in cash, $6.5 million in stock, a holdback of $0.2 million and a contingent earnout that had an initial fair value of $7.2 million. The Company’s revaluations of the earnout resulted in a fair value of $14.0 million at June 30, 2025 and $10.7 million at December 31, 2025.
Our contingent earnout liability related to the Scite acquisition is in the “Level 3” category for valuation purposes. As of December 31, 2025 and June 30, 2025, the contingent earnout liability fair value was estimated using the ending business to consumer annual recurring revenue figures as of June 30, 2025 and a 9% rate less payments made.
On July 2, 2025, the Company finalized the calculation of the earnout for former shareholders of Scite at $15.4 million. The earnout is comprised of a mix of cash and stock, with 62% of the earnout to be paid in cash and 38% in the Company’s common stock. The first of eight quarterly installment payments was disbursed in August 2025, with subsequent payments scheduled to continue quarterly until the final payment in May 2027. The change in fair value after July 2, 2025 represents the accretion expense from the passage of time. Prior to July 2, 2025, the change in fair value was based on the assistance of a valuation specialist, using a Monte Carlo simulation of discounted cash flows based on management's forecast.
During the three months ended December 31, 2025 and 2024, a change in fair value of contingent liability of $278,637 and $2,406,886, respectively, were recognized as losses in the accompanying condensed consolidated statements of operations and comprehensive income (loss). During the six months ended December 31, 2025 and 2024, a change in fair value of contingent liability of $596,603 and $2,406,886, respectively, were recognized as losses in the accompanying condensed consolidated statements of operations and comprehensive income (loss). In addition, the first Scite earnout payment in the amount of $2,031,623 was made in August 2025, which consisted of cash of $1,304,909 and the issuance of 264,924 shares of common stock, which had a fair value of $726,714. The second Scite earnout payment in the amount of $1,910,668 was made in November 2025, which consisted of cash of $1,183,954 and the issuance of 222,072 shares of common stock, which had a fair value of $726,714.
The carrying amounts of financial assets and liabilities, such as cash and cash equivalents, accounts receivable and accounts payable, approximate their fair values because of the short maturity of these instruments.
Recently Issued Accounting Pronouncements
In December 2023, the FASB amended ASC 740, Income Taxes (issued under Accounting Standards Update (ASU) 2023-09, “Improvements to Income Tax Disclosures”). This ASU requires additional disclosures related to the rate reconciliation, income taxes paid and other amendments intended to enhance effectiveness and comparability. The amendment is effective for the Company beginning with its fiscal year 2026 annual disclosures. The Company is currently evaluating the impact of the adoption of ASU 2023-09 on its annual disclosures.
In November 2024, the FASB issued ASU No. 2024-03 “Income Statement - Reporting Comprehensive Income- Expense Disaggregation Disclosures (Subtopic 220-40)” which requires disclosure each reporting period, in the notes to the financial statements, of specified information about certain costs and expenses. The new requirements will be effective for the Company for annual periods beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of ASU 2024-03 on its annual 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.