What changed in this filing

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Item 1. Financial Statements

2022-08-04 compared with 2022-05-05 · 94 added, 69 removed, 267 unchanged (38% of the section changed)

FINANCIAL STATEMENTS

ISSUER DIRECT CORPORATION AND SUBSIDIARIES

I SSUER DIRECT CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

3 unchanged sentences

Accounts receivable (net of allowance for doubtful accounts of $ 802 and $ 675 , respectively)

Income tax receivable

Other current assets

17 unchanged sentences

Stockholders’ equity:

Preferred stock, $ 0.001 par value, 1,000,000 shares authorized, no shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.

Common stock $ 0.001 par value, 20,000,000 shares authorized, 3,794,838 and 3,793,538 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.

Preferred stock, $ 0.001 par value, 1,000,000 shares authorized, no shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively.

Common stock $ 0.001 par value, 20,000,000 shares authorized, 3,646,902 and 3,793,538 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively.

Additional paid-in capital

4 unchanged sentences

The accompanying notes are an integral part of these unaudited financial statements.

ISSUER DIRECT CORPORATION AND SUBSIDIARIES

I SSUER DIRECT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

1 unchanged sentence

For the Three Months Ended

For the Six Months Ended

Cost of revenues

1 unchanged sentence

General and administrative

Sales and marketing

Sales and marketing expenses

Product development

3 unchanged sentences

Interest income

Net income before income taxes

Income before taxes

Income tax expense

4 unchanged sentences

The accompanying notes are an integral part of these unaudited financial statements.

ISSUER DIRECT CORPORATION AND SUBSIDIARIES

I SSUER DIRECT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

1 unchanged sentence

For the Three Months Ended

For the Six Months Ended

Foreign currency translation adjustment

2 unchanged sentences

ISSUER DIRECT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

C ONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share and per share amounts)

Accumulated Other Comprehensive

Stockholders’

Income (Loss)

Additional Paid-in

Other Accumulated Comprehensive

Total Stockholders’

Balance at December 31, 2020

1 unchanged sentence

Exercise of stock awards, net of tax

Stock repurchase and retirement (See Note 3)

Stock repurchase and retirement

Foreign currency translation

Balance at March 31, 2021

Stock-based compensation expense

Exercise of stock awards, net of tax

Foreign currency translation

Balance at June 30, 2021

Balance at December 31, 2021

1 unchanged sentence

Exercise of stock awards, net of tax

Stock repurchase and retirement (See Note 3)

Stock repurchase and retirement

Foreign currency translation

Balance at March 31, 2022

Stock-based compensation expense

Exercise of stock awards, net of tax

Stock repurchase and retirement

Foreign currency translation

Balance at June 30, 2022

The accompanying notes are an integral part of these unaudited financial statements.

ISSUER DIRECT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

C ONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

For the Three Months Ended

For the Six Months Ended

Cash flows from operating activities:

12 unchanged sentences

Cash flows from investing activities:

Capitalized software

Purchase of fixed assets

5 unchanged sentences

Net change in cash and cash equivalents

Cash and cash equivalents – beginning

Cash – beginning

Currency translation adjustment

4 unchanged sentences

ISSUER DIRECT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

N OTES TO CONSOLIDATED FINANCIAL STATEMENTS

Basis of Presentation

The unaudited interim consolidated balance sheet as of March 31, 2022 and consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for the three-month periods ended March 31, 2022 and 2021 included herein, have been prepared in accordance with the instructions for Form 10-Q under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Article 10 of Regulation S-X under the Exchange Act.

The unaudited interim consolidated balance sheet as of June 30, 2022 and consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for the three and six-month periods ended June 30, 2022 and 2021 included herein, have been prepared in accordance with the instructions for Form 10-Q under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Article 10 of Regulation S-X under the Exchange Act.

In the opinion of management, they include all normal recurring adjustments necessary for a fair presentation of the financial statements.

8 unchanged sentences

Diluted net income per share is computed by dividing the net income for the period by the weighted average number of common and dilutive common equivalent shares outstanding during the period.

Shares issuable upon the exercise of stock options totaling 50,250 were excluded in the computation of diluted earnings per common share during the three-month period ended March 31, 2022 because their impact was anti-dilutive.

There were no shares issuable upon the exercise of stock options excluded in the computation of diluted earnings per common share during the three-month period ended March 31, 2021 because their impact was anti-dilutive.

Shares issuable upon the exercise of stock options totaling 50,250 were excluded in the computation of diluted earnings per common share during the three and six-month periods ended June 30, 2022, because their impact was anti-dilutive.

There were no shares issuable upon the exercise of stock options excluded in the computation of diluted earnings per common share during the three and six-month periods ended June 30, 2021, because their impact was anti-dilutive.

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.

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

In the case of news distribution and webcasting offerings, customers also include private companies.

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

In the case of our news distribution and webcasting offerings, our customers also include private companies.

The Company accounts for a contract with a customer when there is an enforceable contract between the Company and the customer, the rights of the parties are identified, the contract has economic substance, and collectability of the contract consideration is probable.

The Company’s revenues are measured based on consideration specified in the contract with each customer.

The Company’s contracts include either a subscription to its entire platform or certain modules within the platform, or an agreement to perform services, or any combination thereof, and often contain multiple subscriptions and services.

The Company’s contracts include either a subscription to our entire platform or certain modules within our platform, or an agreement to perform services, or any combination thereof, and often contain multiple subscriptions and services.

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.

3 unchanged sentences

Communications module, distributing press releases on a per release basis or conducting webcasts, virtual annual meetings or other events on a per event basis.

Performance obligations of Compliance contracts include providing subscriptions to its cloud-based Platform id .

Performance obligations of Compliance contracts include providing subscriptions to our cloud-based Platform id.

Compliance module, Whistleblower module or other stand-ready obligations to deliver services and annual report printing and distribution.

1 unchanged sentence

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.

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

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.

11 unchanged sentences

The Company invoices its customers based on the billing schedules designated in its contracts, typically upfront on either a monthly, quarterly or annual basis or per transaction at the completion of the performance obligation.

Deferred revenue for the periods presented was primarily related to press release packages which have been prepaid, however the releases have not yet been disseminated, as well as, subscription and service contracts, which are billed upfront, quarterly or annually, however the revenue has not yet been recognized.

Deferred revenue for the periods presented was primarily press release packages which have been prepaid, however the releases have not yet been disseminated, as well as, subscription and service contracts, which are billed upfront, quarterly or annually, however the revenue has not yet been recognized.

The associated deferred revenue is generally recognized as releases are disseminated for press release packages and ratably over the billing period for subscriptions.

Deferred revenue as of March 31, 2022 and December 31, 2021, was $ 3,422,000 and $ 3,086,000 , respectively, and is expected to be recognized within one year.

Revenue recognized for the three months ended March 31, 2022 and 2021, that was included in the deferred revenue balance at the beginning of each reporting period, was approximately $ 1,391,000 and $ 1,075,000 , respectively.

Accounts receivable, net of allowance for doubtful accounts, related to contracts with customers was $ 3,950,000 and $ 3,291,000 as of March 31, 2022 and December 31, 2021, respectively.

Deferred revenue as of June 30, 2022, and December 31, 2021, was $ 3,481,000 and $ 3,086,000 , respectively, and is expected to be recognized within one year.

Revenue recognized for the six months ended June 30, 2022, and 2021, that was included in the deferred revenue balance at the beginning of each reporting period, was approximately $ 1,970,000 and $ 1,597,000 , respectively.

Accounts receivable, net of allowance for doubtful accounts, related to contracts with customers was $ 3,484,000 and $ 3,291,000 as of June 30, 2022, and December 31, 2021, respectively.

Since substantially all the contracts have terms of one year or less, the Company has elected to use the practical expedient regarding the existence of a significant financing.

Costs to obtain contracts with customers consist primarily of sales commissions.

As of March 31, 2022 and December 31, 2021, the Company has capitalized $ 53,000 of costs to obtain contracts that are expected to be amortized over more than one year.

As of June 30, 2022 and December 31, 2021, the Company has capitalized $ 63,000 and $ 53,000 , respectively, of costs to obtain contracts that are expected to be amortized over more than one year.

For contract costs expected to be amortized in less than one year, the Company has elected to use the practical expedient allowing the recognition of incremental costs of obtaining a contract as an expense when incurred.

7 unchanged sentences

There is judgment involved with estimating the allowance for doubtful accounts and if the financial condition of the Company’s customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against revenues.

Given the current environment of the COVID-19 pandemic additional attention has been paid to the financial viability of its customers.

Given the ongoing environment of the COVID-19 pandemic and recent economic downturn, additional attention has been paid to the financial viability of our customers.

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

Concentration of Credit Risk

Financial instruments and related items which potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and accounts receivables.

Financial instruments and related items which potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and accounts receivable.

The Company places its cash and temporary cash investments with credit quality institutions.

1 unchanged sentence

To reduce its risk associated with the failure of such financial institutions, each quarter the Company evaluates the rating of the financial institution in which it holds deposits.

As of March 31, 2022, the total amount exceeding such limit was $ 22,307,000 .

The Company also had cash-on-hand of $ 113,000 in Europe and $ 1,640,000 in Canada as of March 31, 2022.

As of June 30, 2022, the total amount exceeding such limit was $ 18,843,000 .

The Company also had cash-on-hand of $ 2,050,000 in Canada and $ 52,000 in Europe as of June 30, 2022.

The Company believes it did not have any financial instruments that could have potentially subjected us to significant concentrations of credit risk for any relevant period.

11 unchanged sentences

Costs related to design or maintenance of the software are expensed as incurred.

The Company did not capitalize any costs for software development during the three-month periods ended March 31, 2022 and 2021.

The Company recorded amortization expense of $ 16,000 and $ 132,000 during the three-month periods ended March 31, 2022 and 2021, respectively, all of which was recorded in Cost of revenues on the Consolidated Statements of Income.

Capitalized costs and amortization for the three and six-month periods ended June 30, 2022 and 2021, are as follows (in thousands):

For the Three Months Ended

For the Six Months Ended

Capitalized software development costs

Amortization included in cost of revenues

Impairment of Long-lived Assets

13 unchanged sentences

Fair Value Measurements

Accounting Standards Codification (“ASC”) Topic 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

ASC Topic 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Assets and liabilities recorded at fair value in the financial statements are categorized based upon the hierarchy of levels of judgment associated with the inputs used to measure their fair value.

2 unchanged sentences

Generally, this includes debt and equity securities that are traded in an active market.

Cash and cash equivalents are quoted at Level 1.

Our cash and cash equivalents are quoted at Level 1.

Level 2 – Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities;

4 unchanged sentences

Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or other valuation techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

As of March 31, 2022 and December 31, 2021, the Company believes the fair value of its financial instruments, such as, accounts receivable, the line of credit, and accounts payable approximate their carrying amounts.

As of June 30, 2022 and December 31, 2021, the Company believes that the fair value of our financial instruments, such as, accounts receivable, our line of credit, and accounts payable approximate their carrying amounts.

Translation of Foreign Financial Statements

14 unchanged sentences

The Company expenses advertising as incurred.

During the three-month periods ended March 31, 2022 and 2021, advertising expense was $ 95,000 and $ 80,000 , respectively.

During the three and six-month periods ended June 30, 2022, advertising expense was $ 114,000 and $ 209,000 , respectively.

During the three and six-month periods ended June 30, 2021, advertising expense was $ 52,000 and $ 132,000 , respectively.

Stock-based Compensation

2 unchanged sentences

2014 Equity Incentive Plan

On May 23, 2014, the shareholders of the Company approved the 2014 Equity Incentive Plan, as amended (the “2014 Plan”).

On May 23, 2014, the shareholders of the Company approved the 2014 Equity Incentive Plan (the “2014 Plan”).

Under the terms of the 2014 Plan, the Company is authorized to issue incentive awards for common stock up to 200,000 shares to employees and other personnel.

2 unchanged sentences

The 2014 Plan is effective through March 31, 2024.

As of March 31, 2022, there are 153,235 shares which remain to be granted under the 2014 Plan.

The following table summarizes information about stock options outstanding and exercisable at March 31, 2022:

As of June 30, 2022, there are 140,995 shares which remain eligible to be granted under the 2014 Plan.

The following table summarizes information about stock options outstanding and exercisable at June 30, 2022:

Options Outstanding

8 unchanged sentences

15.01 - 27.71

As of March 31, 2022, the Company had unrecognized stock compensation related to the options of $ 577,000 , which will be recognized through 2026.

During the three months ended March 31, 2022, the Company granted 20,000 restricted stock units, which do not vest until the third anniversary of the grant date, to an employee with a grant date fair value of $ 26.00 per share.

During the three months ended March 31, 2021, the Company did not grant any restricted stock units.

As of March 31, 2022, there was $ 624,000 of unrecognized compensation cost related to our unvested restricted stock units, which will be recognized through 2025.

As of June 30, 2022, the Company had unrecognized stock compensation related to the options of $ 533,000 , which will be recognized through 2026.

During the three and six months ended June 30, 2022, the Company granted 12,240 and 32,240 restricted stock units, respectively.

An executive officer was granted 20,000 shares which do not vest until the third anniversary of the grant date and have a grant date fair value of $ 26.00 per share.

Non-employee directors were granted 12,240 shares with a grant date fair value of $ 26.92 and vest at the earlier of the 2023 annual meeting of the shareholders or one year.

During the three and six months ended June 30, 2022, 15,265 restricted stock units with an intrinsic value of $ 26.05 per share, vested.

As of June 30, 2022, there was $ 809,000 of unrecognized compensation cost related to our unvested restricted stock units, which will be recognized through 2025.

Stock repurchase and retirement

3 unchanged sentences

Shares Repurchased

Total Number of Shares Repurchased

Average Price Paid Per Share

Total Number of Shares Purchased as Part of Publicly Announced Program

Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program

Total Number of

Average Price

of Shares that

August 7-31, 2019

11 unchanged sentences

On March 1, 2022, the Company’s board of directors authorized a stock repurchase program under which the Company may repurchase up to $ 5,000,000 of its common shares.

The repurchase program does not have a specific expiration date, however, the board of directors may terminate it at any time.

During the three-month period ended March 31, 2022, the Company repurchased 6,200 shares as shown in the table below ($ in 000’s, except share or per share amounts):

The repurchase program does not have a specific expiration date, however, the board of directors may terminate it at any time subject to all applicable securities laws and regulations, including Rule 10b-5 and Rule 10b-18.

During the three and six-month periods ended June 30, 2022, the Company repurchased 163,201 and 169,401 shares, respectively, as shown in the table below ($ in 000’s, except share or per share amounts):

Shares Repurchased

Total Number of Shares Repurchased

Average Price Paid Per Share

Total Number of Shares Purchased as Part of Publicly Announced Program

Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program

Total Number of

Average Price

of Shares that

March 1-31, 2022

The Company recognized income tax expense of $ 174,000 for the three-month period ended March 31, 2022, compared to income tax expense of $ 163,000 during the same period of 2021.

April 1-30, 2022

May 1-31, 2022

June 1-30, 2022

The company recognized income tax expense of $ 327,000 and $ 501,000 for the three and six-month periods ended June 30, 2022, respectively, compared to $ 256,000 and $ 419,000 during the same periods of 2021.

At the end of each interim period, the Company estimates the effective tax rate expected to be applicable for the full fiscal year and this rate is applied to the results for the year-to-date period, and then adjusted for any discrete period items.

For the three-month periods ended March 31, 2022 and 2021, the variance between the Company’s effective tax rate and the U.S.

statutory rate of 21 % is primarily attributable to state income tax, partially offset by a benefit related to the Foreign Derived Intangible Income (“FDII”) deduction as well as foreign rate differentials.

For the three and six-month periods ended June 30, 2022, the variance between the Company’s effective tax rate and the U.S.

statutory rate of 21 % is primarily attributable to state income taxes and expense related to Global Intangible Low-Taxed Income inclusion, partially offset by foreign tax credits.

Leasing activity generally consists of office leases.

1 unchanged sentence

The new lease, which had a lease commencement date of October 2, 2019, expires December 31, 2027 .

Minimum lease payments are $ 2,997,000 , not including a tenant improvement allowance of $ 488,000 , which is included in fixed assets as of March 31, 2022.

Minimum lease payments are $ 2,997,000 , not including a tenant improvement allowance of $ 488,000 , which is included in fixed assets as of June 30, 2022.

The Company recognized a ROU asset and corresponding lease liability of $ 2,596,000 , which represents the present value of minimum lease payments discounted at 3.77%, the Company’s incremental borrowing rate at lease inception.

1 unchanged sentence

As a result, the short-term lease recognition exemption has been elected for this lease, which means, for leases not expected to extend beyond twelve months, a ROU asset or lease liability will not be recognized.

Lease liabilities totaled $ 1,941,000 as of March 31, 2022.

Lease liabilities totaled $ 1,864,000 as of June 30, 2022.

The current portion of this liability of $ 363,000 is included in Accrued expenses on the Consolidated balance sheets and the long-term portion of $ 1,501,000 is included in Lease liabilities on the Consolidated Balance Sheets.

2 unchanged sentences

The components of lease expense were as follows (in 000’s):

Three months ended

For the Three Months Ended

For the Six Months Ended

Lease expense

1 unchanged sentence

Variable lease expense

The weighted-average remaining non-cancelable lease term for our operating leases was 5.8 years as of March 31, 2022.

As of March 31, 2022, the weighted-average discount rate used to determine the lease liability was 3.77 %.

The future minimum lease payments to be made under non-cancelable operating leases on March 31, 2022, are as follows (in 000’s):

Total lease expense

The weighted-average remaining non-cancelable lease term for our operating leases was 5.5 years as of June 30, 2022.

As of June 30, 2022, the weighted-average discount rate used to determine the lease liability was 3.77 %.

The future minimum lease payments to be made under non-cancelable operating leases on June 30, 2022, are as follows (in 000’s):

Year Ended December 31:

5 unchanged sentences

The following tables present revenue disaggregated by revenue stream in (000’s):

Three months ended March 31,

Three months ended June 30,

Revenue Streams

Communications

The Company did not have any customers during the three-month periods ended March 31, 2022 or 2021 that accounted for more than 10% of our revenue.

Six months ended June 30,

Revenue Streams

Communications

The Company did not have any customers during the three and six-month periods ended June 30, 2022 or 2021 that accounted for more than 10% of revenue.

Line of Credit

1 unchanged sentence

The amount of funds available for borrowing remained $ 3,000,000 and the term remained two years.

As of March 31, 2022, the interest rate was 1.91 % and the Company did not owe any amounts on the Line of Credit.

As of June 30, 2022, the interest rate was 2.84 % and the Company did not owe any amounts on the Line of Credit.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements