What changed in this filing

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Item 1. Financial Statements

2022-11-03 compared with 2022-08-04 · 108 added, 48 removed, 313 unchanged (33% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

September 30,

Current assets:

21 unchanged sentences

Stockholders' equity:

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.

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

Common stock $ 0.001 par value, 20,000,000 shares authorized, 3,610,839 and 3,793,538 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively.

Additional paid-in capital

8 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Cost of revenues

18 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Foreign currency translation adjustment

17 unchanged sentences

Balance at June 30, 2021

Stock-based compensation expense

Exercise of stock awards, net of tax

Foreign currency translation

Balance at September 30, 2021

Balance at December 31, 2021

9 unchanged sentences

Balance at June 30, 2022

Stock-based compensation expense

Exercise of stock awards, net of tax

Stock repurchase and retirement

Foreign currency translation

Balance at September 30, 2022

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

2 unchanged sentences

(in thousands)

For the Six Months Ended

For the Nine Months Ended

September 30,

Cash flows from operating activities:

29 unchanged sentences

Basis of Presentation

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.

The unaudited interim consolidated balance sheet as of September 30, 2022 and consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for the three and nine-month periods ended September 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.

1 unchanged sentence

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("US GAAP") have been condensed or omitted pursuant to such rules and regulations relating to interim financial statements.

The interim financial information should be read in conjunction with the 2021 audited financial statements of Issuer Direct Corporation (the “Company”, “We”, or “Our”) filed on Form 10-K.

The interim financial information should be read in conjunction with the 2021 audited financial statements of Issuer Direct Corporation (the “Company”, “We”, or “Our”) filed on our Form 10-K.

Summary of Significant Accounting Policies

4 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 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.

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 nine-month periods ended September 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 nine-month periods ended September 30, 2021, because their impact was anti-dilutive.

Revenue Recognition

30 unchanged sentences

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 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.

Deferred revenue as of September 30, 2022, and December 31, 2021, was $ 3,429,000 and $ 3,086,000 , respectively, and is expected to be recognized within one year.

Revenue recognized for the nine months ended September 30, 2022, and 2021, that was included in the deferred revenue balance at the beginning of each reporting period, was approximately $ 2,763,000 and $ 1,948,000 , respectively.

Accounts receivable, net of allowance for doubtful accounts, related to contracts with customers was $ 3,062,000 and $ 3,291,000 as of September 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 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.

As of September 30, 2022 and December 31, 2021, the Company has capitalized $ 80,000 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.

14 unchanged sentences

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 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.

As of September 30, 2022, the total amount exceeding such limit was $ 19,375,000 .

The Company also had cash-on-hand of $ 2,137,000 in Canada and $ 50,000 in Europe as of September 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.

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

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

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Capitalized software development costs

27 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 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.

As of September 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 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.

During the three and nine-month periods ended September 30, 2022, advertising expense was $ 95,000 and $ 304,000 , respectively.

During the three and nine-month periods ended September 30, 2021, advertising expense was $ 37,000 and $ 169,000 , respectively.

Stock-based Compensation

1 unchanged sentence

The associated cost is recognized over the period during which an employee or director is required to provide service in exchange for the award.

Employee Retention Credit

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law providing numerous tax provisions and other stimulus measures, including an employee retention credit (“ERC”), which is a refundable tax credit against certain employment taxes.

The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and the American Rescue Plan Act of 2021 extended and expanded the availability of the ERC.

We are eligible under the CARES Act ERC as an employer that carried on a trade or business during calendar year 2020 and whose business operations were fully or partially suspended during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19.

ASC 105, Generally Accepted Accounting Principles, describes the decision-making framework when no guidance exists in US GAAP for a particular transaction.

Specifically, ASC 105-10-05-2 instructs companies to look for guidance for a similar transaction within US GAAP and apply that guidance by analogy.

As such, forms of government assistance, such as the ERC, provided to business entities would not be within the scope of ASC 958, but it may be applied by analogy under ASC 105-10-05-2.

We accounted for the ERC as a government grant in accordance with Accounting Standards Update 2013-06, Not-for-Profit Entities (Topic 958) by analogy under ASC 105-10-05-2.

Under this standard, government grants are recognized when the conditions or conditions on which they depend are substantially met.

The conditions for recognition of the ERC include, but are not limited to:

An entity has been adversely affected by the COVID-19 pandemic

We have not used qualifying payroll for both the Paycheck Protection Program and the ERC

We incurred payroll costs to retain employees

During the three and nine months ended September 30, 2021, we recorded an ERC benefit of 366 ,000 in other income in our Consolidated statements of operations and in other current assets in our Consolidated balance sheets as of September 30, 2021.

2014 Equity Incentive Plan

4 unchanged sentences

The 2014 Plan is effective through March 31, 2024.

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:

As of September 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 September 30, 2022:

Options Outstanding

8 unchanged sentences

16.01 - 27.00

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.

27.01 - 27.71

As of September 30, 2022, the Company had unrecognized stock compensation related to the options of $ 489,000 , which will be recognized through 2026.

During the nine months ended September 30, 2022, the Company granted 32,240 restricted stock units.

No restricted stock units were granted during the three months ended September 20, 2022.

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.

During the nine months ended September 30, 2022, 15,265 restricted stock units with an intrinsic value of $ 26.05 per share vested.

No restricted stock units vested during the three months ended September 30, 2022.

As of September 30, 2022, there was $ 666,000 of unrecognized compensation cost related to our unvested restricted stock units, which will be recognized through 2025.

Stock repurchase and retirement

On August 7, 2019, the Company publicly announced a share repurchase program under which the Company is authorized to repurchase up to $ 1,000,000 of its common shares.

On August 7, 2019, the Company publicly announced a share repurchase program under which the Company was authorized to repurchase up to $ 1,000,000 of its common shares.

On March 16, 2020, the Company publicly announced that the Company increased the share repurchase program to repurchase up to $2,000,000 of its common shares.

1 unchanged sentence

Shares Repurchased

Total Number of

Average Price

of Shares that

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

August 7-31, 2019

10 unchanged sentences

March 1-31, 2021

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 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):

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

The Company completed the repurchase program by purchasing 38,563 and 207,964 shares during the three and nine-month periods ended September 30, 2022, respectively, as shown in the table below ($ in 000’s, except share or per share amounts):

Shares Repurchased

Total Number of

Average Price

of Shares that

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

March 1-31, 2022

2 unchanged sentences

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.

July 1-31, 2022

August 1-31, 2022

September 1-30, 2022

The company recognized income tax expense of $ 180,000 and $ 681,000 for the three and nine-month periods ended September 30, 2022, respectively, compared to $ 319,000 and $ 738,000 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 and six-month periods ended June 30, 2022, the variance between the Company’s effective tax rate and the U.S.

For the three and nine-month periods ended September 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.

2 unchanged sentences

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 June 30, 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 September 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 $ 1,864,000 as of June 30, 2022.

Lease liabilities totaled $ 1,787,000 as of September 30, 2022.

The current portion of this liability of $ 365,000 is included in Accrued expenses on the Consolidated balance sheets and the long-term portion of $ 1,422 ,000 is included in Lease liabilities on the Consolidated Balance Sheets.

3 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Lease expense

2 unchanged sentences

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):

The weighted-average remaining non-cancelable lease term for our operating leases was 5.25 years as of September 30, 2022.

As of September 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 September 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 June 30,

Three months ended September 30,

Revenue Streams

Communications

Six months ended June 30,

Nine months ended September 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.

The Company did not have any customers during the three and nine-month periods ended September 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 June 30, 2022, the interest rate was 2.84 % and the Company did not owe any amounts on the Line of Credit.

As of September 30, 2022, the interest rate was 4.22 % and the Company did not owe any amounts on the Line of Credit.

Subsequent Event

Acquisition of iNewsWire.com LLC

On November 1, 2022 (the “Closing Date”), the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Lead Capital, LLC, a Delaware limited liability company (the “Seller”), whereby the Company purchased all of the issued and outstanding membership interests of iNewsWire.com LLC, a Delaware limited liability company (“Newswire”).

Newswire is a leading media and marketing communications technology company that provides press release distribution, media databases, media monitoring, and newsrooms through its Media Advantage Platform.

Under the terms of the Purchase Agreement and on the Closing Date, the Company paid to the Seller aggregate consideration of approximately $ 43.9 million, consisting of the following:

(i) a cash payment of $ 18.0 million subject to a 60-day escrow to secure the payment of any working capital adjustments or any employee bonus obligations of Newswire;

(ii) the issuance of a Secured Promissory Note in the principal amount of $ 22.0 million (the “Secured Note”);

and (iii) the issuance of 180,181 shares of the Company’s common stock, par value $ 0.001 , valued at approximately $ 3.9 million based on the Company’s closing stock price of $ 21.60 on the Closing Date.

The Secured Note is due and payable on November 8, 2023 (the “Maturity Date”) and bears an annual interest rate of 6 %.

The Secured Note is secured by the intellectual property (with certain exceptions) and the domain names acquired by the Company as part of the acquisition.

The Secured Note may be prepaid, however, the 6% interest payment is guaranteed through the Maturity Date even if prepayments are made.

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