Amesite Inc.

Note 1 - Nature of Business

Amesite Inc. (the “Company”) was incorporated in November 2017. Amesite is a pioneering technology company specializing in the development and marketing of B2C and B2B AI-driven solutions, including its higher ed platform and healthcare app. Leveraging its proprietary AI infrastructure, Amesite offers cutting-edge applications that cater to both individual and professional needs. NurseMagic™, the company’s mobile healthcare app, streamlines creation of nursing notes and documentation tasks, enhances patient communication, and offers personalized guidance to nurses on patient care, medications, and handling challenging workplace situations.

Note 2 - Significant Accounting Policies

Basis of Presentation

The condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and considering the requirements of the United States Securities and Exchange Commission (“SEC”). The Company has a June 30 fiscal year.

In the opinion of management, the condensed financial statements of the Company as of March 31, 2025 and for the three and nine months ended March 31, 2025 and 2024 include all adjustments and accruals, consisting only of normal, recurring accrual adjustments, which are necessary for a fair presentation of the results for the interim periods. These interim results are not necessarily indicative of results for a full year.

Certain information and footnote disclosures normally included in condensed financial statements prepared in accordance with GAAP have been condensed in or omitted from this report pursuant to the rules and regulations of the SEC. These condensed financial statements should be read together with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K/A for the year ended June 30, 2024.

Going Concern

The accompanying condensed financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company is developing its customer base and has not completed its efforts to establish a stabilized source of revenue sufficient to cover its expenses. The Company has had a history of net losses and negative cash flows from operating activities since inception and expects to continue to incur net losses and use cash in its operations in the foreseeable future.

The assessment of the Company’s ability to meet its future obligations is inherently judgmental, subjective and susceptible to change. Based on their current forecast, management believes that it may not have sufficient cash and cash equivalents to maintain the Company’s planned operations for the next twelve months following the issuance of these condensed financial statements.

The Company has considered both quantitative and qualitative factors that are known or reasonably known as of the date of these condensed financial statements are issued and concluded that there are conditions present in the aggregate that raise substantial doubt about the Company’s ability to continue as a going concern. In response to the conditions, management plans include generating cash by completing financing transactions, which may include offerings of common stock. However, these plans are subject to market conditions, and are not within the Company’s control, and therefore, cannot be deemed probable. There is no assurance that the Company will be successful in implementing their plans. As a result, the Company has concluded that management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern. The condensed financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

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Use of Estimates

The preparation of condensed financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the condensed financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all investments with an original maturity of three months or less when purchased to be cash equivalents. The total amount of bank deposits (checking and savings accounts) insured by the FDIC at year end was $250,000.

As of June 30, 2024, the Company reclassified a portion of its cash balance to “Restricted Cash” in the balance sheets to reflect amounts pledged as collateral for the Company’s credit card facility. As of March 31, 2025 and June 30, 2024, restricted cash totaled $100,000.

The following is a reconciliation of cash, cash equivalents, and restricted cash reported on the balance sheet and those reported on the statement of cash flows at March 31, 2025 and 2024.

Prepaid Expenses

The Company considers all items incurred for future services to be prepaid expenses. At March 31, 2025 and June 30, 2024, the Company’s prepaid expenses consisted of the following.

Property and Equipment

Property and equipment are recorded at cost. The straight-line method is used for computing depreciation and amortization. Assets are depreciated over their estimated useful lives. The cost of leasehold improvements is depreciated (amortized) over the lesser of the length of the related leases or the estimated useful lives of the assets. Costs of maintenance and repairs are charged to expense when incurred.

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Capitalized Software Costs

The Company capitalizes costs incurred in the development of software for its customers, including the costs of the software, materials, consultants, and payroll and payroll related costs for employees incurred in developing computer 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). 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.

Amortization expense for the nine months ended March 31, 2025 and 2024 was $312,709 and $395,165, respectively and included as part of “Technology and content development” in the Statements of Operations. Amortization expense for the three months ended March 31, 2025 and 2024 was $94,172 and $113,153, respectively and included as part of “Technology and content development” in the Statements of Operations.

Revenue Recognition

We generate our revenue from contractual arrangements with our clients to provide a comprehensive platform of integrated technology and technology enabled services related to product offerings. During the nine months ended March 31, 2025 and 2024, we recognized revenue from contracts with customers of $54,700 and $139,037, respectively, related to services provided over time. During the three months ended March 31, 2025 and 2024, we recognized revenue from contracts with customers of $30,690 and $34,261, respectively, related to services provided over time.

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.

This performance obligation is satisfied as the partners receive and consume benefits, which occur 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 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 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).

For the three and nine months ended March 31, 2025 and 2024, all revenue recognized has been recognized over the related contract periods. For the three and nine months ended March 31, 2025, one customer represents 37% and 62%, respectively, of total revenue. For the three and nine months ended March 31, 2024, three customers represented 99% and 24% each of total revenue.

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Accounts Receivable and Deferred Liabilities

Balance sheet items related to contracts consist of accounts receivable (net), contract assets, and deferred liabilities on our condensed balance sheets. Accounts receivable is stated at net realizable value, and we utilize the allowance method to provide for doubtful accounts based on management’s evaluation of the collectability of the amounts due. Our estimates are reviewed and revised periodically based on historical collection experience and a review of the current status of accounts receivable. Historically, actual write-offs for uncollectible accounts have not significantly differed from prior estimates. There was no allowance for doubtful accounts on accounts receivable balances as of March 31, 2025 or June 30, 2024.

Deferred 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 liability 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 deferred liabilities.

The following table provides information on the changes in the balance of deferred liabilities:

Revenue recognized during the nine months ended March 31, 2025 and year ended June 30, 2024 that was included in the deferred revenue balance that existed in the opening balance of each year was approximately $-0- and $54,000, respectively.

The deferred liability balance as of March 31, 2025 is expected to be recognized over the next 12 months.

Stock-Based Compensation

We have issued four types of stock-based awards under our stock plans: stock options, restricted stock units, deferred 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 volatility of the Company’s stock prices. Stock options generally vest overtwo years from the grant date and generally haveten-year contractual terms. Restricted stock units generally have a term of 12 months from the closing date of the agreement. Deferred stock units originate from directors deferring their quarterly cash compensation and vest (and are issuable) upon their departure. Stock warrants issued have a term offive years. Information about the assumptions used in the calculation of stock-based compensation expense is set forth in Note 3 in the Notes to Condensed Financial Statements.

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Technology and Content Development

Technology and content development expenditures consist primarily of personnel and personnel-related expense and contracted services associated with the maintenance of our platform as well as hosting and licensing costs and are charged to expense as incurred. It also includes amortization of capitalized software costs and research and development costs related to improving our platform and creating content that are charged to expense as incurred.

Fair Value Measurements

Accounting standards require certain assets and liabilities be reported at fair value in the condensed financial statements and provide a framework for establishing that fair value. The framework for determining fair value is based on a hierarchy that prioritizes the inputs and valuation techniques used to measure fair value.

Fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets and liabilities in active markets and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3 inputs are unobservable inputs, including inputs that are available in situations where there is little, if any, market activity for the related asset. These Level 3 fair value measurements are based primarily on management’s own estimates using pricing models, discounted cash flow methodologies, or similar techniques.

In instances wherein inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Company’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability.

Income Taxes

A current tax liability or asset is recognized for the estimated taxes payable or refundable on tax returns for the year. Deferred tax liabilities or assets are recognized for the estimated future tax effects of temporary differences between financial reporting and tax accounting.

Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of operations in the period that includes the enactment date.

Net Earnings (Loss) per Share

At March 31, 2025 and June 30, 2024, the Company had 603,971 and 633,000, respectively, potentially dilutive shares of common stock related to common stock options and warrants as determined using the if-converted method. For the three months and nine months ended March 31, 2025 and 2024, the dilutive effect of common stock options and common stock warrants has not been included in the average shares outstanding for the calculation of net loss per share as the effect would be anti-dilutive as a result of our net losses in these periods.

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Subsequent Events

The Company evaluated subsequent events through the date this Form 10-Q was filed and has determined that no events have occurred that would require recognition or disclosure in the condensed financial statements.

Risks and Uncertainties

The Company operates in an industry subject to rapid change. The Company’s operations will be subject to significant risk and uncertainties including financial, operational, technological, and other risks associated with an early-stage company, including the potential risk of business failure.

Recently issued accounting standards

In November 2023, the Financial Accounting Standard Board (the “FASB”) issued Accounting Standard Updates (“ASU”) No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”),” which requires a public entity to disclose significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), a description of other segment items by reportable segment, and an explanation of any additional measures the CODM uses in deciding how to allocate resources, and extend nearly all annual segment reporting requirements to quarterly reporting requirements. In addition, entities with a single reportable segment must now provide all segment disclosures required in ASC 280, including the new disclosures for reportable segments under the amendments in ASU 2023-07. The new guidance is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, and early adoption is permitted. The guidance will be applied on a retrospective basis, with such disclosures to be made in regard to all prior periods presented in the financial statements.

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09),” which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. This guidance will be effective for the annual periods beginning after December 31, 2024. Early adoption is permitted. Upon adoption, the guidance can be applied prospectively or retrospectively. The Company is currently evaluating the guidance to determine its impact on our condensed financial statements and related 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. For public business entities, the new requirements will be effective for annual periods beginning after December 15, 2026. 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 effect of adopting this ASU.

Note 3 - Stock-Based Compensation

The Company’s Equity Incentive Plan (the “Plan”) permits the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, and deferred stock units to officers, employees, directors, consultants, agents, and independent contractors of the Company. The Company believes that such awards align the interests of its employees, directors, and consultants with those of its stockholders.

Option awards are generally granted with an exercise price equal to the market price of the Company’s stock at the date of grant; those option awards generally vest over two years from the grant date and generally have ten-year contractual terms. Certain option awards provide for accelerated vesting (as defined in the Plan).

The Company estimates the fair value of each option award using a Black Scholes Model (“BSM”). Expected volatilities are based on historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise within the valuation model or estimates the expected option exercise when historical data is unavailable. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The Company has not paid any dividends on common stock since its inception and does not anticipate paying dividends on its common stock in the foreseeable future. When calculating the amount of annual compensation expense, the Company has elected not to estimate forfeitures and instead accounts for forfeitures as they occur.

1,200 and 0 options were granted for the nine months ended March 31, 2025 or 2024, respectively. As of March 31, 2025, there were approximately $27,000 of total unrecognized compensation costs for employees and non-employees related to nonvested options. These costs are expected to be recognized through September 2027.

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A summary of options terminated, as well as those that vested, during the nine months ended March 31, 2025 is presented below:

A summary of options terminated, as well as those that vested, during the three months ended March 31, 2025 is presented below:

On September 29, 2021, the board of directors approved changes to our director compensation program for fiscal year 2022 and beyond. The board instituted an annual cash retainer for directors in the amount of $48,000 per director with an additional retainer for the chair of our Compensation Committee and Audit Committee of $7,500 and $10,000, respectively. Directors can choose to receive deferred stock units in lieu of cash payments. For the nine months ended March 31, 2025, $153,375 in deferred stock units were awarded and $41,625 in cash compensation was paid. For the three months ended March 31, 2025, $52,375 in deferred stock units were awarded.

On December 23, 2024, two directors resigned before their deferred stock units vested on December 31, 2024. Accordingly, a liability was recorded at December 31, 2024 to compensate them for their service for the partial quarter. During the three months ended March 31, 2025,2,185 shares of common stock were issued to each director valued at the closing price of the stock on their resignation date, totaling $10,945 each, or $21,890 in total. This is included in stock-based compensation in the accompanying financial statements.

A summary of deferred stock units terminated/settled, as well as those that vested, during the three and nine months ended March 31, 2025 is presented below:

Note: the weighed average remaining contractual term is not applicable since these do not vest until the director leaves service.

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Note: the weighed average remaining contractual term is not applicable since these do not vest until the director leaves service.

On September 29, 2021, the board of directors approved changes to our director compensation program for fiscal year 2022 and beyond. The board instituted annual restricted stock units (RSU) for directors in the amount of $100,000 per director. These restricted stock units vest on their one year anniversary if the director served the entire year. During the three months ended March 31, 2025, the Company issued the vested RSUs.

A summary of restricted stock units terminated, as well as those that vested, during the three and nine months ended March 31, 2025 is presented below:

On May 3, 2024, the board of directors of the Company approved an amendment to the Company’s 2018 Equity Incentive Plan (the “2018 Plan”) to increase the number of shares available for issuance under the 2018 Plan by 508,488 shares and increase the number of shares that may be issued pursuant to the exercise of incentive stock options by 508,488 shares. The amendment to the 2018 Plan is intended to ensure that the Company can continue to provide an incentive to employees, directors and consultants by enabling them to share in the Company’s future growth. The amendment to the 2018 Plan was approved by the Company’s stockholders at the Company’s special meeting on June 18, 2024.

On July 11, 2024, the Company issued 250,000 shares of common stock to a consultant under an agreement for activities related to potential future financing. The $655,000 market value of those shares is reflected in the Company’s common stock and additional paid in capital accounts was capitalized as deferred issuance costs in current assets until the financing was completed January 8, 2025. At which time, these costs were recognized as an expense against the proceeds of the public offering pursuant to ASC 340-10-S99-1 (see Note 4).

On March 7, 2025, the Board of Directors authorized the issuance of 247,932 common stock shares for the 2023 common stock grant to the non-employee directors totaling $100,000 per director. Accordingly the $600,000 in accrued compensation on the balance sheet at June 30, 2024 was recognized in equity during the quarter ended March 31, 2025. Additionally, the Board of Directors authorized the settlement of deferred stock units to two resigned directors, totaling 96,434 shares of common stock issued.

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During the quarter ended March 31, 2025, the shares due to directors from the 2022 restricted stock unit grant were issued, totaling 87,720 shares of common stock. Additionally, the director restricted stock unit grants for 2024 issued and vested, totaling 146,520 shares of common stock.

Lastly, the Board of Directors approved the issuance of 200,000 shares plus an additional 100,000 shares pursuant to the Company's 2018 Equity Incentive Plan to be issuable at the sole discretion of the Chief Executive Officer.

As of March 31, 2025, the Company has 528,456 shares of common stock available for granting under the Plan.

Note 4 - Warrants

On January 7, 2025, the Company entered into an underwriting agreement with Laidlaw & Company (UK) Ltd. (“Laidlaw”), as representatives of several underwriters to issue and sell 1,201,667 shares of the Company’s common stock at a purchase price of $3.00 per share. As part of the offering, the Company agreed to issue the underwriters, or their designees, warrants to purchase a number of shares of common stock equal to five percent (5%) of the number of shares sold to the public at an at an exercise price equal to 125.0% of the offering price per share of common stock, or $3.75 per share. The fair value of the warrants issued was approximately $96,000 based on the following inputs and assumptions using the BSM: (i) expected stock price volatility of 108%; (ii) risk free rate of 3.65%; and (iii) expected life of the warrants of 5 years. No warrants were issued during the nine months ended March 31, 2024.

A summary of warrant activity during the nine months ended March 31, 2025 is presented below:

Note 5 - Income Taxes

For the nine months ended March 31, 2025 and prior periods since inception, the Company’s activities have not generated taxable income or tax liabilities.

The Company has approximately $29.9 million of net operating loss carryforwards available to reduce future income taxes, of which approximately $17,000 of net operating loss carryforwards expire in 2037. Due to uncertainty as to the realization of the net operating loss carryforwards and other deferred tax assets as a result of the Company’s limited operating history and operating losses since inception, a full valuation allowance has been recorded against the Company’s deferred tax assets. Accordingly, the Company has not recognized an income tax benefit on the Condensed Statements of Operations for the three or nine months ended March 31, 2025 and 2024.

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