Amesite Inc. — Form 10-Q Summary
Reporting period: Fiscal first quarter ended September 30, 2020; comparative period is the three months ended September 30, 2019. Amesite provides an AI-driven online learning platform and course-design services to businesses, colleges and universities, and K-12 schools.
Financial performance
- Revenue: $110,109, compared with $7,700; 2020 revenue was primarily enterprise ($107,609), with $2,500 from K-12 and none from universities. Revenue is recognized generally over contract terms. Gross profit and gross margin are not separately presented.
- Operating expenses: $1.583 million, up from $963,164. General and administrative expense was $862,908; technology and content development was $467,763; and sales and marketing was $251,884.
- Net loss: $5.086 million, versus $953,097; basic loss per share was $0.31, versus $0.07. The 2020 loss included $3.614 million of interest expense, principally the $3.384 million accounting charge for the conversion discount on convertible notes and $182,900 of previously unamortized debt issuance costs.
- Cash flow: Operating cash used was $312,890, compared with $771,989. Investing cash used was $222,049, including $202,706 for capitalized software. Financing provided $12.796 million from common-stock issuance; cash increased $12.261 million to $16.355 million. Net loss included substantial noncash interest expense associated with the note conversion.
- Liquidity and balance sheet: At September 30, cash was $16.355 million and current assets were $16.777 million. Current liabilities were $1.599 million, including $842,021 of deferred revenue. Notes payable were zero after conversion; total assets were $18.161 million and stockholders’ equity was $16.562 million.
Material changes and unusual items
- The company completed its IPO on September 29, 2020, issuing 3.0 million shares at $5.00 per share and receiving approximately $12.8 million net proceeds. It also issued the underwriter warrants for 150,000 shares at $6.00 per share.
- Convertible notes totaling $2.256 million, including accrued interest, converted into 1,127,872 common shares at $2.00 per share. The offering price was $5.00, producing the substantial conversion-discount charge recorded in interest expense.
- Common shares issued and outstanding increased from 16,231,820 at June 30 to 20,359,692 at September 30. The filing reports 20,419,693 shares outstanding as of November 13, 2020.
- Deferred revenue rose from $380,000 to $842,021, reflecting billings in excess of revenue recognized. Management attributed expense increases to hiring and platform development; G&A also included CEO and CFO IPO-related bonuses.
- Amesite completed a reorganization merger on September 18, 2020, changing the surviving company’s name from Amesite Operating Company to Amesite Inc.
Outlook, risks, and other disclosures
- Management said IPO proceeds would support strategic growth, including additional sales staff and product engineers, and expected available cash to fund anticipated operating and investing needs through June 2022. It cautioned that accelerating operations or changing growth plans could require additional financing, which may not be available on acceptable terms.
- The company was not profitable and reported early-stage business risks, including dependence on financing, technology and execution, third-party providers, intellectual-property protection, and attracting and retaining personnel. It said COVID-19 had not significantly affected operations to date, but future effects could not be estimated.
- No formal revenue or earnings guidance was provided. Management concluded there was no substantial doubt about the company’s ability to continue as a going concern following the IPO.
- Two October 2020 consulting agreements and a November 2020 agreement provide for cash payments and shares for investor-relations services. The filing reported no legal proceedings and no material changes to previously disclosed risk factors. Management reported disclosure controls as effective and no material changes in internal control over financial reporting.
Important facts for investors to verify
- Whether revenue growth converts into recurring customer contracts, collections, and recognized revenue; the filing does not disclose the value of unsatisfied performance obligations.
- Cash burn and the assumptions underlying management’s runway estimate through June 2022, especially if hiring, development, or customer-support spending accelerates.
- The composition and noncash nature of the unusually large interest expense, and the effect of the note conversion and IPO on future share dilution.
- Customer concentration, contract economics, and execution risks; the filing provides customer-type revenue but limited detail on individual customers or contract profitability.
- The potential impact of COVID-19 and the cost and dilution associated with consulting agreements and equity compensation.