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Item 7. Management’s Discussion and Analysis

2025-03-25 compared with 2024-03-07 · 84 added, 138 removed, 146 unchanged (60% of the section changed)

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The following table presents certain amounts included in our consolidated statements of income, the relative percentage that those amounts represent to revenue, and the change in those amounts from fiscal year 2024 compared to 2023.

This information should be read together with the consolidated financial statements and accompanying notes.

The financial results presented below for 2023 have been affected by the acquisition of Newswire in November 2022:

The data below is comprised of results from continuing operations only and does not include results from discontinued operations.

For more information regarding continuing and discontinued operations, see Note 3 to our Consolidated Financial Statements for the year ended December 31, 2024.

Comparison of results of operations for the years ended December 31, 2024 and 2023 (in 000’s):

Percentage of Revenue

Communications revenue

Compliance revenue

Total revenue

Cost of revenue

Communications cost of revenue

Compliance cost of revenue

Total cost of revenue

Gross Margin:

Communications gross margin

Compliance gross margin

Total gross margin

Operating Expenses:

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Depreciation and amortization

Impairment loss on intangible assets

Total operating expenses

Operating income

Operating loss

Interest expense, net

Other expense

Income before income taxes

Income tax provision

Percentage of revenue is calculated as the relevant revenue, expense, income amount divided by total revenue, except for communications and compliance cost of revenue and communications and compliance gross margin, which are divided by the related component of revenue.

Total revenue increased by $9,864,000, or 42%, to $33,378,000 during the year ended December 31, 2023, as compared to $23,514,000 in 2022.

The increase is primarily related to revenue attributed to the acquisition of Newswire on November 1, 2022 and an increase in Compliance revenue.

Communications revenue increased $8,109,000, or 50%, to $24,224,000 for the year ended December 31, 2023, as compared to $16,115,000 during 2022.

The increase is primarily related to additional revenue from our acquisition of Newswire as noted above, which is all included in Communications revenue.

Revenue from our ACCESSWIRE newswire brand increased 10% from the prior year.

These increases were partially offset by a decrease in revenue from our events and webcasting business, primarily due to less virtual events, conferences and annual meetings.

Communications revenue represented 73% of total revenue during the year compared to 69% in the prior year.

Compliance revenue increased $1,755,000, or 24%, to $9,154,000 for the year ended December 31, 2023, as compared to $7,399,000 during 2022.

The increase is primarily related to an increase in revenue from our print and proxy fulfillment services due to a few significant transactions which occurred during the year, as well as an increase in revenue from our transfer agent services due to an increase in corporate actions and directives during the year.

Other income (expense)

Loss before income taxes

Income tax benefit

Net loss from continuing operations

Total revenue decreased by $1,465,000, or 6%, to $23,057,000 during the year ended December 31, 2024, as compared to $24,522,000 in 2023.

The decrease is primarily due to a 15% decrease in revenue from our previously branded Newswire business due to a decrease in volume.

Revenue from our investor relations website subscriptions and webcasting and events business decreased slightly as well.

Deferred Revenue

As of December 31, 2023, our deferred revenue balance was $5,412,000, which we expect to recognize over the next twelve months, compared to $5,405,000 as of December 31, 2022.

Deferred revenue primarily consists of advance billings for packages of our news distribution products as well as advance billings for subscriptions of our cloud-based products and annual service contracts.

As of December 31, 2024, our deferred revenue balance was $4,743,000, which we expect to recognize primarily over the next twelve months, compared to $4,750,000 as of December 31, 2023.

Deferred revenue primarily consists of advance billings for packages of our news distribution products as well as advance billings for subscriptions of our cloud-based products.

Cost of Revenues

Communications cost of revenues consists primarily of direct labor costs, newswire distribution costs, teleconferencing costs and third-party licensing costs.

Compliance cost of revenues consists primarily of direct labor costs, warehousing, logistics, print production materials, postage, and amortization of capitalized software costs related to our disclosure software.

Cost of revenues increased by $2,245,000, or 39%, during the year ended December 31, 2023, as compared to the same period of 2022.

Overall gross margin increased $7,619,000, or 43%, during the year ended December 31, 2023, compared to 2022.

The increase in cost of revenues and gross margin were primarily the result of the acquisition of Newswire in November 2022.

Overall gross margin percentage remained flat at 76% during the year ended December 31, 2023, as compared to the prior year.

Cost of revenues associated with Communications revenues increased $2,066,000, or 55%, as compared to the prior year primarily due to an increase in costs associated with operating the Newswire business as well as an increase in distribution costs associated with ACCESSWIRE as we continue to expand our distribution.

Gross margin percentage associated with our Communications revenues was 76% for the year ended December 31, 2023, compared to 77% for 2022.

Cost of revenues associated with our Compliance revenues increased $179,000, or 9%, as compared to the prior year.

The increase in Compliance cost of revenues is primarily the result of an increase in print and postage costs associated with the increase in revenues from print and proxy fulfillment services.

Gross margin percentage from our Compliance business was 77% for the year ended December 31, 2023, compared to 74% for 2022.

Cost of revenues consists primarily of direct labor costs, newswire distribution costs, teleconferencing costs and third-party licensing costs.

Cost of revenues increased by $10,000 during the year ended December 31, 2024, as compared to the same period of 2023.

Overall gross margin decreased $1,475,000, or 8%, during the year ended December 31, 2024, compared to 2023.

The decrease in gross margin is primarily the result of the decrease in Newswire revenue noted earlier.

Overall gross margin percentage decreased 1% to 76% during the year ended December 31, 2024, as compared to the prior year.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries, stock-based compensation, insurance, fees for professional services, general corporate expenses (including bad debt expense) and facility and equipment expenses.

General and administrative expenses were $8,935,000 for the year ended December 31, 2023, an increase of $1,972,000 or 28%, as compared to the prior year.

The increase is primarily driven by additional expenses associated with costs to operate Newswire, employee-related costs, stock compensation expense, one-time transaction costs and bad debt expense, partially offset by a reduction in executive recruiting fees.

General and administrative expenses were $7,000,000 for the year ended December 31, 2024, a decrease of $1,354,000 or 16%, as compared to the prior year.

The decrease is primarily due to a benefit to stock compensation expense as a result of the resignation of an executive officer, a decrease in corporate headcount, as well as, lower one-time transaction and integration costs, partially offset by an increase in the provision for credit losses.

As a percentage of revenue, General and administrative expenses were 30% for the year ended December 31, 2024, as compared to 34% for 2023.

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Sales and marketing expenses consist primarily of salaries, stock-based compensation, sales commissions, advertising expenses and other marketing expenses.

Sales and marketing expenses were $8,251,000 for the year ended December 31, 2022, an increase of $2,329,000, or 39%, as compared to $5,922,000 in the prior year.

This increase is primarily due to incremental costs associated with operating the Newswire business.

As a percentage of revenue, sales and marketing expenses were 25% for both the year ended December 31, 2023 and 2022.

Sales and marketing expenses were $7,080,000 for the year ended December 31, 2024, a decrease of $948,000, or 12%, as compared to $8,028,000 in the prior year.

This decrease is primarily due to a decrease in employee-related expenses due to lower headcount as well as lower advertising expense.

As a percentage of revenue, sales and marketing expenses were 31% for the year ended December 31, 2024, as compared to 33% for 2023.

Product Development Expenses

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Product development expenses increased $277,000, or 11%, to $2,821,000 during the year ended December 31, 2024, as compared to $2,544,000 in 2023.

This increase is directly attributed to incremental costs associated with operating the Newswire business as well as hiring our new Chief Technology Officer.

During the year ended December 31, 2023, we capitalized $478,000 of costs related to the development of our new artificial intelligence and media database products.

No costs were capitalized during the year ended December 31, 2022.

This increase is primarily due to an increase headcount, as we continue to invest in our products and technology.

During the year ended December 31, 2024, we capitalized $597,000 of costs related to the development our news distribution systems and internal reporting platforms.

During the year-end December 31, 2023, we capitalized costs of $478,000.

As a percentage of revenue, product development expenses increased to 12% for the year ended December 31, 2024, as compared to 10% for 2023.

Depreciation and Amortization Expenses

During the year ended December 31, 2023, depreciation and amortization expenses increased by $1,926,000 or 199%, to $2,896,000, as compared to $970,000 during 2022.

The increase is due to additional amortization of intangible assets related to the Newswire acquisition.

During the year ended December 31, 2024, depreciation and amortization expenses decreased by $20,000 or 1%, to $2,708,000, as compared to $2,728,000 during 2023.

Impairment loss on intangible assets

The Company performed its annual assessment for impairment of intangible assets and determined an impairment charge of $14,150,000 associated with the Newswire trademarks was necessary for the year ended December 31, 2024.

As a result of the Company’s rebranding to ACCESS Newswire, management determined the useful life of the Newswire trademarks to be 5 years as opposed to the original 15 years upon the initial valuation in 2022.

This decrease caused a decrease in the expected cashflows the assets will generate, which resulted in the impairment charge.

There was no impairment loss recorded as of and for the year ended December 31, 2023.

Interest Expense, net

We recognized interest expense of $1,284,000 during the year ended December 31, 2023, related to our new, long-term credit agreement, interest rate swap agreement, as well as our settled $22,000,000 note payable associated with the acquisition of Newswire “Seller Note”.

Interest expense, net was partially offset by interest income of $168,000 for the year ended December 31, 2023, from deposit and money market accounts.

Interest expense, net for the year ended December 31, 2022, represents accrued interest associated with the Seller note offset by interest income associated with deposit and money market accounts.

Other expense

Other expense represents $370,000 paid to extinguish the Seller Note as well as a loss on the change in fair value of our interest rate swap agreement.

There was no other expense during the year ended December 31, 2022.

We recorded income tax expense of $543,000 during the year ended December 31, 2023, compared to $724,000 during the year ended December 31, 2022.

The difference in our effective tax rate of 41.5% and the statutory rate of 21% is primarily attributable to state income taxes, the impact of stock-based compensation as well as additional tax expense associated with the purchase accounting related to the acquisition of Newswire.

For the year ended December 31, 2022, the difference between our effective tax rate of 27% and the federal statutory rate of 21% was primarily attributable to state income taxes, foreign taxes and the impact of stock-based compensation.

We recognized interest expense of $1,167,000 and $1,284,000 during the years ended December 31, 2024 and 2023, respectively, related to our long-term Credit Agreement.

For the year ended December 31, 2023, interest expense is also attributed to the $22,000,000 Seller Note to finance the acquisition of Newswire.

Interest expense, net was partially offset by interest income of $60,000 and $35,000 for the year ended December 31, 2024, and 2023, respectively, from deposit and money market accounts.

Other income (expense)

Other income (expense) represents the change in fair value of our interest rate swap.

For the year ended December 31, 2023, this also includes $370,000 paid to extinguish the Seller Note.

We recorded income tax benefit of $4,064,000 during the year ended December 31, 2024, compared to $938,000 during the year ended December 31, 2023.

The difference in our effective tax rate of 23.0% and the statutory rate of 21% is primarily attributable to state income taxes, partially offset by the impact of stock-based compensation and return to provision adjustments.

Liquidity and Capital Resources

As of December 31, 2024, we had $4,103,000 in cash and cash equivalents and $3,351,000 in net accounts receivable.

Current liabilities as of December 31, 2023, totaled $12,650,000 including the current portion of our long-term debt, accounts payable, deferred revenue, accrued payroll liabilities, income taxes payable, current portion of lease liabilities and other accrued expenses.

As of December 31, 2023, our current liabilities exceeded our current assets by $1,146,000.

On March 20, 2023 (the “Closing Date”), the Company entered into a $25 million credit agreement (the “Credit Agreement”) with Pinnacle Bank (“Pinnacle”).

The Credit Agreement provides for the following:

(i) term loan facility in an aggregate principal amount of $20 million (the “Term Loan”), and (ii) revolving letter of credit in an up to aggregate principal amount of $5 million (the “Revolving LOC”), subject to an 85% limit based on the current eligible accounts receivable (as defined in the Credit Agreement).

Pursuant to the terms of the Credit Agreement, the per annum interest rate of the Term Loan is variable based on the one-month secured overnight financing rate (“SOFR”) plus 2.35%, subject to a minimum SOFR of 2.00%.

However, the Term Loan issued on the Closing Date has a per annum interest rate of 6.217%, which was fixed with respect to the entire principal amount as a result of an interest rate swap agreement entered into between the Company and Pinnacle on the Closing Date in accordance with the terms of the Credit Agreement.

The Company began making monthly interest-only payments on the Term Loan on April 1, 2023.

Beginning on January 1, 2024, the Company will make monthly principal payments of $333,333 plus interest payments on the Term Loan until the maturity date of December 28, 2028.

The proceeds of the Term Loan along with certain cash on hand of the Company were used to repay in its entirety the one-year Secured Promissory Note (the “Secured Note”) issued to Lead Capital, LLC in connection with the Company’s November 1, 2022 acquisition of iNewswire.com LLC for a lump sum payment of $22,880,000.

In order to settle the Secured Note on March 20, 2023, the Company paid $370,000 to the Seller, with the Seller agreeing to forgive $440,000 of interest which would have otherwise been due.

The $370,000 payment is recorded in Other expense, net on the Consolidated statements of operations.

The Company currently has no plans to utilize the Revolving LOC but may do so in the future.

If the Company does utilize any funds under the Revolving LOC, the funds will bear interest at a per annum rate equal to the then current SOFR plus 2.05%.

Pinnacle’s commitment to fund under the Revolving LOC terminates on September 1, 2024, unless terminated earlier pursuant to the terms of the Credit Agreement.

The Company terminated its $3,000,000 unsecured line of credit with Fifth Third Bank immediately prior to the Closing Date.

As of December 31, 2023, there was no outstanding balance under the Revolving LOC and the interest rate was 7.39%.

The Credit Agreement contains the following financial covenants, which commenced with fiscal quarter ended June 30, 2023:

a fixed charge coverage ratio of no less than 1.20:1.00 and a leverage ratio requiring that, for each fiscal quarter of the Company ending after June 30, 2023 through September 30, 2023, the leverage ratio shall not exceed 2.75:1.00 and for each fiscal quarter of the Company ending after December 31, 2023, the leverage ratio shall not exceed 2.50:1.00.

All covenants were successfully achieved as of December 31, 2023.

The Credit Agreement also contains customary affirmative covenants for a transaction of this nature, including among other things, covenants relating to:

maintenance of adequate financial and accounting books and records, delivery of financial statements and other information, preservation of existence of the Company and subsidiaries, payment of taxes and claims, compliance with laws, maintenance of insurance, foreign qualification, use of proceeds, cash management system, maintenance of properties, and conduct of business.

The Credit Agreement also contains customary negative covenants for a transaction of this nature, including, among other things, covenants relating to debt, liens, investments, negative pledges, dividends and other debt payments, restriction on fundamental changes, sale of assets, transactions with affiliates, restrictive agreements, and changes in fiscal year.

The Credit Agreement also contains various Events of Default (subject to certain grace periods, to the extent applicable), including among other things, Events of Default for the nonpayment of principal, interest or fees;

breach of certain covenants;

inaccuracy of the representations or warranties in any material respect;

bankruptcy or insolvency;

dissolution or change of control;

certain unsatisfied judgments;

defaults under material agreements;

certain unfunded liabilities under employee benefit plans;

certain unsatisfied judgments;

certain ERISA violations;

and the invalidity or unenforceability of the Credit Agreement.

If an Event of Default occurs, the Company may be required to repay all amounts outstanding under the Credit Agreement.

The Term Loan and any advances under the Revolving LOC are secured by a first priority lien and security interest to the benefit of Pinnacle in the Event of Default on all of the Company’s current or future assets and each of the Guarantor’s current or future assets.

Current liabilities from continuing operations as of December 31, 2024, totaled $12,814,000 including the current portion of our long-term debt, accounts payable, deferred revenue, accrued payroll liabilities, income taxes payable, current portion of lease liabilities and other accrued expenses.

As of December 31, 2024, our current liabilities from continuing operations exceeded our current assets from continuing operations by $2,788,000.

While our current liabilities from continuing operations exceed current assets from continuing operations, we believe our ability to renegotiate our Credit Agreement and ability to continue to generate cash will benefit us in the future.

See Note 15 (Subsequent Events) to our Consolidated Financial Statements relating to the sale of our Compliance business and the repayment of $12,000,000 of our long-term debt as of February 28, 2025.

As a result of the repayment, the Company expects to no longer have negative working capital for the foreseeable future.

See Note 6 to our financial statements regarding information on our Credit Agreement.

Disclosure about Off-Balance Sheet Arrangements

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Year Ended December 31,

Net cash provided by operating activities (US GAAP)

Net cash provided by (used in) operating activities of continuing operations (US GAAP)

Payments for purchase of fixed assets and capitalized software

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Adjusted free cash flow (Non-GAAP)

For the year ended December 31, 2023, this adjustment gives effect to one-time corporate projects, including acquisition and/or integration related expenses, paid during the period.

For the year ended December 31, 2022, this adjustment relates to payments for representation and warranty insurance of $500,000, payments of $325,000 related to Newswire opening balance sheet costs that were not recouped until Q1 2023 and payments for one-time corporate projects, including acquisition and integration expenses, of $235,000.

For the year ended December 31, 2023, this adjustment gives effect to a one-time payment of $370,000 related to the early payment of the Seller Note.

For the year ended December 31, 2022, this adjustment relates to $49,000 of termination benefits and $60,000 paid for executive recruiting expenses during the period.

This adjustment gives effect to one-time corporate projects, including acquisition and/or integration related expenses, paid during the periods.

For the year ended December 31, 2024, this adjustment gives effect to payments for one-time accounting fees, termination benefits and other non-recurring or unusual expenses.

During the year ended December 31, 2023, this adjustment is primarily related to a one-time payment of $370,000 related to the early termination of the note payable associated with the Newswire acquisition.

Adjusted EBITDA and adjusted net income are non-GAAP financial measures and should not be considered as a substitute for analysis of our results as reported under US GAAP.

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Year Ended December 31,

Net loss from continuing operations:

Impairment loss on intangible assets

Depreciation and amortization

Interest expense, net

Income tax expense

Income tax benefit

Acquisition and/or integration costs (1)

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This adjustment gives effect to one-time corporate projects, including acquisition and integration related expenses, incurred during the periods.

For the year ended December 31, 2023, this adjustment gives effect to a $370,000 payment related to the early extinguishment of our Seller Note, one-time non-recurring expenses of $45,000 and a loss on the change in fair value of our interest rate swap of $21,000.

For the year ended December 31, 2022, this adjustment gives effect to a one-time executive recruiting fee of $90,000 and termination benefits of $49,000.

For the year ended December 31, 2024, this adjustment gives effect to a gain recorded on the change in fair value of our interest rate swap of $81,000, as well as, one-time accounting fees, termination benefits and other non-recurring or unusual expenses of $219,000.

For the year ended December 31, 2023, this adjustment gives effect to $370,000 payment related to early extinguishment of our Seller Note and one-time non-recurring expenses of $45,000 and a loss on the change in fair value of our interest rate swap of $21,000.

The adjustments represent stock-based compensation expense related to awards of stock options, restricted stock units, or common stock in exchange for services.

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Year Ended December 31,

Net loss from continuing operations:

Impairment loss on intangible assets (1)

Amortization of intangible assets (2)

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Weighted average number of common shares outstanding – diluted

This adjustment represents the impairment loss on intangible assets that was recognized for the year ended December 31, 2024.

The adjustments represent the amortization of intangible assets related to acquired assets and companies.

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Although we expect to continue to award stock in exchange for services, the amount of stock-based compensation is excluded as it is subject to change as a result of one-time or non-recurring projects.

For the year ended December 31, 2023, this adjustment gives effect to one-time corporate projects, including acquisition and/or integration related expenses incurred during the period of $546,000 and a $370,000 payment related to the early extinguishment of our Seller Note, $45,000 of one-time, non-recurring expenses as well as a loss on the change in fair value of our interest rate swap of $21,000.

For the year ended December 31, 2022, this adjustment gives effect to one-time corporate projects, including acquisition and integration related expenses, incurred during the period of $263,000, one-time executive recruiting fee of $90,000 and termination benefits paid of $49,000.

For the year ended December 31, 2023, this adjustment gives effect to $370,000 payment related to early extinguishment of our Seller Note and one-time non-recurring expenses, including acquisition and/or integration expenses of $591,000 and a loss on the change in fair value of our interest rate swap of $21,000.

This adjustment gives effect to the tax impact of all non-GAAP adjustments at the current Federal tax rate of 21%.

This adjustment eliminates discrete items impacting income tax expense.

For the year ended December 31, 2022, the discrete items relate to a return to provision adjustment as well as additional tax expense resulting from stock-based compensation recorded in income tax for the period.

For the year ended December 31, 2024 and 2023, discrete items relate to additional income tax expense recorded during the period related to the exercise of stock compensation.

The following statements are forward looking and are subject to factors that could cause actual results to differ materially from those suggested here, including, without limitation, demand for and acceptance of our services, new developments, competition and general economic or market conditions, particularly in the domestic and international capital markets.

Refer also to the Cautionary Statement Concerning Forward Looking Statements included in this report.

Market factors like the current military conflicts in Ukraine and Israel, instability in global energy markets, global inflation and the increase of interest rates have contributed to significant global economic uncertainty, disrupted global trade and supply chains, adversely impacted many industries, and contributed to significant volatility in financial markets.

Overall, despite many uncertainties in the market regarding the economic outlook, the demand for our platforms and services continues to be stable in a majority of the markets we serve.

The success of our Communications offering has been led by our ACCESSWIRE branded newswire, which is now complemented by the Newswire business, and we believe we will continue to see stable to increased demand for our combined newswire business throughout 2024 and beyond.

We believe the transition to a platform subscription model has been and will continue to be key for our long-term sustainable growth.

We will also continue to focus on the following key strategic initiatives during 2024:

Expanding our Communications products and adapting to this changing industry,

Evaluating and completing acquisitions in areas of strategic focus,

Expanding our Communications sales and marketing teams and digital marketing strategy,

Market factors like the current military conflicts in Ukraine, Israel and the Middle East, instability in global energy markets, global inflation and the increase of interest rates have contributed to significant global economic and political uncertainty, disrupted global trade and supply chains, adversely impacted many industries, and contributed to significant volatility in financial markets.

Overall, despite many uncertainties in the market regarding the economic and political outlook, we believe the demand for our platforms and services is stable in a majority of the markets we serve.

We believe there is demand for our products around the world as companies seek to find better platforms and tools to disseminate and communicate their messages in a more efficient and collaborative way.

We also believe the continued transition to a platform subscription model has been and will continue to be key for our long-term sustainable growth.

We will also continue to focus on the following key strategic initiatives during the remainder of 2025:

Expanding our products and adapting to this changing industry,

Expanding customer base,

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Investing in technology advancements and upgrades,

Evaluating acquisitions in areas of strategic focus,

Generating profitable sustainable growth

Generating cash flows from operations.

We believe there is demand for our products around the world, led by our ACCESSWIRE and Newswire brands, as companies seek to find better platforms and tools to disseminate and communicate their messages in a more efficient and collaborative way.

We have invested and will continue to invest in our product sets, platforms and intellectual property development via internal development and acquisitions.

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Significant intercompany accounts and transactions are eliminated in consolidation.

Revenue Recognition

Substantially all the Company’s revenue comes from contracts with customers for subscriptions to its cloud-based products or contracts for Communications and Compliance products and services.

Substantially all the Company’s revenue comes from contracts with customers for its press release distribution and related products, investor relations website hosting or data feeds, events and webcast offerings and subscriptions to its incident hotline.

Customers consist of public corporate issuers and professional firms, such as investor and public relations firms.

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For these bundled contracts, the Company accounts for individual subscriptions and services as separate performance obligations if they are distinct, which is when a product or service is separately identifiable from other items in the bundled package, and a customer can benefit from it on its own or with other resources that are readily available to the customer.

The Company separates revenue from its contracts into two revenue streams:

i) Communications and ii) Compliance.

Performance obligations of Communications contracts include providing subscriptions to certain modules or our entire Communications platform, distributing press releases on a per release basis or conducting webcasts, virtual annual meetings, or other events on a per event basis.

PRO subscription contracts contain two performance obligations of which the first is a series of distinct services that include, but are not limited to, developing specific media plans, and creating content to be distributed and the second performance obligation being access to the PRO platform along with distribution of press releases, ongoing support, and assessment of performance as a stand-ready obligation.

Performance obligations of Compliance contracts include providing subscriptions to certain Compliance modules or other stand-ready obligations to deliver services and annual report printing and distribution.

Additionally, services are provided on a per project basis.

Set up fees for disclosure services are considered a separate performance obligation and are satisfied upfront.

Set up fees for the transfer agent module and investor relations content management module are immaterial.

Performance obligations of include providing subscriptions to certain modules or our entire platform, distributing press releases on a per release basis or conducting webcasts, virtual annual meetings, or other events on a per event basis.

PRO subscription contracts contain two performance obligations:

(i) the first is a series of distinct services that include, but are not limited to, developing specific media plans, and creating content to be distributed and (ii) the second performance obligation being access to the PRO platform along with distribution of press releases, ongoing support, and assessment of performance as a stand-ready obligation.

The Company’s subscription and service contracts are generally for one year, with automatic renewal clauses included in the contract until the contract is cancelled.

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Accounts Receivable and Allowance for Credit Losses

The Company adopted Financial Accounting Standards Codification (“ASC”) Topic 326, Financial Statements – Credit Losses (“Topic 326”) with an adoption date of January 1, 2023.

As a result, the Company changed its accounting policy for its allowance for credit losses using an expected losses model rather than using incurred losses.

The new model is based on the credit losses expected to arise over the life of the asset based on the Company’s expectations as of the balances sheet date through analyzing historical customer data as well as taking into consideration current economic trends.

The Company adopted Topic 326 and determined it did not have a material financial impact.

The Company calculates its allowance for credit losses using an expected losses model rather than using incurred losses.

The model is based on the credit losses expected to arise over the life of the asset based on the Company’s expectations as of the balances sheet date through analyzing historical customer data as well as taking into consideration current economic trends.

The Company generally writes-off accounts receivable against the allowance when it determines a balance is uncollectible and no longer actively pursues its collection.

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If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of an asset group exceeds fair value of the asset group.

Business Combinations, Goodwill, and Intangible Assets

The authoritative guidance for business combinations specifies the criteria for recognizing and reporting intangible assets apart from goodwill.

The Company records the assets acquired and liabilities assumed in business combinations at their respective fair values at the date of acquisition, with any excess purchase price recorded as goodwill.

Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.

Intangible assets consist of client relationships, customer lists, distribution partner relationships, software, technology, non-compete agreements and trademarks that are initially measured at fair value.

At the time of the business combination, trademarks may be considered an indefinite-lived asset and, as such, are not amortized as there may be no foreseeable limit to cash flows generated from them.

For the Newswire acquisition (see Note 4), the Company determined the trademarks acquired were considered a definite lived asset which will be amortized over a period of 15 years.

The goodwill and intangible assets are assessed annually for impairment, or whenever conditions indicate the asset may be impaired, and any such impairment will be recognized in the period identified.

The client relationships (5-10 years), customer lists (3 years), distribution partner relationships (10 years), non-compete agreements (5 years) and software and technology (3-7 years) are amortized over their estimated useful lives.

Lease Accounting

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Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Business Combinations, Goodwill, and Intangible Assets

The authoritative guidance for business combinations specifies the criteria for recognizing and reporting intangible assets apart from goodwill.

Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.

At the time of the business combination, trademarks may be considered an indefinite-lived asset and, as such, are not amortized as there may be no foreseeable limit to cash flows generated from them.

For the Newswire acquisition (see Note 4), the Company originally determined the trademarks acquired were considered a definite lived asset which will be amortized over a period of 15 years, however upon the re-brand of the Company to ACCESS Newswire and subsequent review of the trademarks associated with Newswire, determined the life to be 5 years remaining.

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We do not believe that we face material market risk with respect to our cash or cash equivalents, which totaled $4,103,000 and $5,714,000 at December 31, 2024 and 2023, respectively.

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What changed 10-K

Item 7. Management’s Discussion and Analysis