AMESITE INC. The following discussion and analysis of our financial condition and results of
operations should be read together with our unaudited financial statements and
related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our
audited financial statements and related notes for the year ended
Overview
We were incorporated in the
Our activities are subject to significant risks and uncertainties, including failure to secure additional funding to execute the current business plan.
The following discussion highlights our results of operations and the principal
factors that have affected our financial condition as well as our liquidity and
capital resources for the three months ended
We are not currently profitable, and we cannot provide any assurance that we
will ever be profitable. We incurred a net loss of
Basis of Presentation
The financial statements contained herein have been prepared in accordance with
GAAP and the requirements of the
Critical Accounting Policies and Significant Judgments and Estimates
This management's discussion and analysis of financial condition and results of
operations is based on our financial statements, which have been prepared in
accordance with
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We capitalize certain costs related to internal-use software, primarily consisting of direct labor and third-party vendor costs associated with creating the software. Software development projects generally include three stages: the preliminary project stage (all costs are expensed as incurred), the application development stage (certain costs are capitalized and certain costs are expensed as incurred) and the post-implementation/operation stage (all costs are expensed as incurred). Costs capitalized in the application development stage include costs related to the design and implementation of the selected software components, software build and configuration infrastructure, and software interfaces. Capitalization of costs requires judgment in determining when a project has reached the application development stage, the proportion of time spent in the application development stage, and the period over which we expect to benefit from the use of that software. Once the software is placed in service, these costs are amortized on the straight-line method over the estimated useful life of the software, which is generally three years.
Stock-Based Compensation
We have issued three types of stock-based awards under our stock plans: stock options, restricted stock units and stock warrants. All stock-based awards granted to employees, directors and independent contractors are measured at fair value at each grant date. We rely on the Black-Scholes option pricing model for estimating the fair value of stock-based awards granted, and expected volatility is based on the historical volatilities of peer company's common stock. Stock options generally vest over two years from the grant date and generally have ten-year contractual terms. Restricted stock units generally have a term of 20 months from the closing date of the agreement. Stock warrants issued have a term of five years from the closing date of the respective private placements. Information about the assumptions used in the calculation of stock-based compensation expense is set forth in Notes 4 and 6 in the "Notes to Condensed Financial Statements".
Revenue Recognition
We generate substantially all of our revenue from contractual arrangements with our businesses, colleges and universities and K-12 schools to provide a comprehensive platform of integrated technology and technology enabled services related to product offerings.
Performance Obligations and Timing of Recognition
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. A contract's transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied.
We derive revenue from annual licensing arrangements, including maintenance fees, setup fees and other variable fees for course development and miscellaneous items. Our contracts with partners generally have two to five-year terms and have a single performance obligation. The promises to set up and provide a hosted platform of integrated technology and services that our partners need to attract, enroll, educate and support students are not distinct within the context of the contracts. This performance obligation is satisfied as the partners receive and consume benefits, which occurs ratably over the contract term.
Occasionally, we provide professional services, such as custom development, non-complex implementation activities, training, and other various professional services. We evaluate these services to determine if they are distinct and separately identifiable in the context of the contract. In our contracts with customers that contain multiple performance obligations as a result of this assessment, we allocate the transaction price to each separate performance obligation on a relative standalone selling price basis. Standalone selling prices of our solutions and services are typically estimated based on observable transactions when the solutions or services are sold on a standalone basis. When standalone selling prices are not observable, we utilize a cost plus margin approach to allocate the transaction price.
We do not disclose the value of unsatisfied performance obligations because the variable consideration is allocated entirely to a wholly unsatisfied promise to transfer a service that forms part of a single performance obligation (i.e., consideration received is based on the level of product offerings, which is unknown in advance).
We also receive fees that are fixed in nature, such as annual license and maintenance charges, in place of or in conjunction with variable consideration. The fees are independent of the number of students that are enrolled in courses with our customers and are allocated to and recognized ratably over the service period of the contract that the Company's platform is made available to the customer (i.e. the customer simultaneously receives and consumes the benefit of the software over the contract service period).
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The following factors affect the nature, amount, timing, and uncertainty of our revenue and cash flows:
? The majority of our customers are private and public learning institutions
across various domestic regions, however the majority of our revenue is
derived from enterprise customers
? The majority of our customers have annual payment terms
Contract Fulfilment Costs
We incur certain fulfilment costs related to software design of specific course
offerings for our customers, primarily comprised of software development,
configuration costs, and implementation costs. These costs are capitalized and
recorded on a contract-by-contract basis and amortized using the straight-line
method over the length of the contract (i.e. on a systematic basis that is
consistent with the transfer to the customer of the goods or services to which
the asset relates). There were no costs to fulfill capitalized or amortized as
of
Accounts Receivable, Contract Assets and Liabilities
Balance sheet items related to contracts consist of accounts receivable (net)
and contract liabilities on our condensed balance sheets. Accounts receivable
(net) is stated at net realizable value, and we utilize the allowance method to
provide for doubtful accounts based on management's evaluation of the
collectability of the amounts due. Our estimates are reviewed and revised
periodically based on historical collection experience and a review of the
current status of accounts receivable. Historically, actual write-offs for
uncollectible accounts have not significantly differed from prior estimates.
There was no allowance for doubtful accounts on accounts receivable balances as
of
We may recognize revenue prior to billing a customer when we have satisfied or
partially satisfied our performance obligations as billings to our customers may
not be made until after the service period has commenced. As of
Contract liabilities as of each balance sheet date represent the excess of amounts billed or received as compared to amounts recognized in revenue on our condensed statements of operations as of the end of the reporting period, and such amounts are reflected as a current liability on our condensed balance sheets as deferred revenue. We generally receive payments prior to completion of the service period and our performance obligations. These payments are recorded as deferred revenue until the services are delivered or until our obligations are otherwise met, at which time revenue is recognized.
Some contracts also involve annual license fees, for which upfront amounts are received from customers. In these contracts, the license fees received in advance of the platform's launch are recorded as contract liabilities.
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Results of Operations
Revenue
We generated revenues of
Operating Expenses General and Administrative
General and administrative expenses consist primarily of personnel and personnel-related expenses, including executive management, legal, finance, human resources and other departments that do not provide direct operational services. General and administrative expense also includes professional fees and other corporate expense.
General and administrative expenses for the three months ended
Technology and Content Development
Technology and content development expenses consist primarily of personnel and personnel-related expense and contracted services associated with the ongoing improvement and maintenance of our platform as well as hosting and licensing costs. Technology and content expense also include the amortization of capitalized software costs.
As we worked in third quarter to position
We believe that our continuous investment in our platform technology is a key
factor in our product differentiation. We delivered our third generation (Gen 3)
platform in
We believe that our strong reviews and high learner retention are proof points on our product and will help drive sales. We are targeting maintaining these reviews with larger programs in Q4 2021 and Q1 2022.
We believe the specific, unique features that we have delivered have enabled our partners to launch programs easily and with low overhead. Automated grading and release, tracking of user participation and automation of notifications reduce administrative burdens for our customers, and improve the user experiences. In Q4 2021, we aim to deliver global dashboards, to enable multinational organizations to better plan, launch and track learning. We also aim to deliver expanded user analytics and demonstrate integration with other enterprise solutions in Q4 2021.
Our goal is to improve the way the world learns, specifically by improving the user experience in learning and providing more engaging, customized experiences.
Technology and content development expenses for the three months ended
Sales and Marketing
Sales and marketing expense consist primarily of activities to attract customers to our offerings. This includes personnel and personnel-related expenses, various search engine and social media costs as well as the cost of advertising.
We significantly increased expenditures on sales and marketing in Q3 2021 as we
increased focus on our digital presence to drive lead generation and pipeline
growth in support of our sales team. We also continued our focus on creation of
value-added content and social posts including the release of
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We have the ability to deliver solutions for whole enterprises, including enterprises that offer paid learning opportunities for other enterprises or individuals. We strive to be agile and aggressive in pursuing contracts at larger scales, even as we continue to provide services to companies and universities for specific programs and applications. We believe that the ease of use of our platform enables adoption in these cases, and in Q4 2021, we aim to demonstrate more results of programs.
We plan to pursue selected business opportunities, including joint collaboration and acquisitions that have the potential to build sales more rapidly. We aim to develop and pursue such opportunities on an annual basis to grow the Company.
Sales and marketing expenses for the three months ended
Interest Income
For the three months ended
Net Loss
Our net loss for the three months ended
Financial Position, Liquidity, and Capital Resources
Overview
We are not currently profitable, and we cannot provide any assurance that we will ever be profitable, as indicated by our losses noted above.
As of
At present, we believe that our cash balances should be sufficient to satisfy our anticipated operating and investing needs beyond the next 12 months. However, it is possible that we will choose to accelerate our plan of operations in order to attract and sign more customers or to support current customers, and that we will require more funds than we currently have available to meet those needs. The source, timing and need for any future financing will depend principally upon market conditions, and, more specifically, on the decision to accelerate our plan of operations or alter our strategic growth plans. Funding may not be available when needed, at all, or on terms acceptable to us, and, even if it is available, future equity issuances may result in dilution to its existing stockholders and future debt securities may contain covenants that limit the Company's operations or ability to enter into certain transactions. Lack of necessary funds may require us to, among other things, delay, scale back or eliminate any decision to accelerate our plan of operations or alter our strategic growth plans.
Off-Balance Sheet Arrangements
We did not have during the periods presented, nor do we currently have, any
off-balance sheet arrangements as defined under applicable
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
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