3 unchanged sentences
(in thousands, except share and per share amounts)
−Removed: September 30,
Current assets:
14 unchanged sentences
Income taxes payable
+Added: Current portion of long-term debt
Deferred revenue
Total current liabilities
+Added: Long-term debt (net of debt discount of $ 80 and $ 0 , respectively)
Deferred income tax liability
Lease liabilities – long-term
+Added: Other long-term liabilities
Total liabilities
1 unchanged sentence
Stockholders' equity:
−Removed: 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.
−Removed: 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.
+Added: Preferred stock, $ 0.001 par value, 1,000,000 shares authorized, no shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively.
+Added: Common stock $ 0.001 par value, 20,000,000 shares authorized, 3,791,020 shares issued and outstanding as of March 31, 2023 and December 31, 2022.
Additional paid-in capital
4 unchanged sentences
The accompanying notes are an integral part of these unaudited financial statements.
−Removed: I SSUER DIRECT CORPORATION AND SUBSIDIARIES
+Added: ISSUER DIRECT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
1 unchanged sentence
For the Three Months Ended
−Removed: For the Nine Months Ended
−Removed: September 30,
−Removed: September 30,
−Removed: September 30,
−Removed: September 30,
Cost of revenues
1 unchanged sentence
General and administrative
−Removed: Sales and marketing expenses
+Added: Sales and marketing
Product development
2 unchanged sentences
Operating income
−Removed: Interest income
−Removed: Income before taxes
−Removed: Income tax expense
−Removed: Income per share – basic
−Removed: Income per share – fully diluted
+Added: Interest income (expense), net
+Added: Other expense
+Added: (Loss) income before taxes
+Added: Income tax (benefit) expense
+Added: Net (loss) income
+Added: (Loss) income per share – basic
+Added: (Loss) income per share – fully diluted
Weighted average number of common shares outstanding – basic
2 unchanged sentences
I SSUER DIRECT CORPORATION AND SUBSIDIARIES
−Removed: CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
+Added: CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
For the Three Months Ended
−Removed: For the Nine Months Ended
−Removed: September 30,
−Removed: September 30,
−Removed: September 30,
−Removed: September 30,
+Added: Net (loss) income
Foreign currency translation adjustment
−Removed: Comprehensive income
+Added: Comprehensive (loss) income
The accompanying notes are an integral part of these unaudited financial statements.
3 unchanged sentences
Additional Paid-in
−Removed: Other Accumulated Comprehensive
+Added: Accumulated Other Comprehensive
Total Stockholders’
+Added: Income (Loss)
Balance at December 31, 2021
4 unchanged sentences
Balance at March 31, 2022
−Removed: Stock-based compensation expense
−Removed: Exercise of stock awards, net of tax
−Removed: Foreign currency translation
−Removed: Balance at June 30, 2021
−Removed: Stock-based compensation expense
−Removed: Exercise of stock awards, net of tax
−Removed: Foreign currency translation
−Removed: Balance at September 30, 2021
Balance at December 31, 2022
Stock-based compensation expense
−Removed: Exercise of stock awards, net of tax
−Removed: Stock repurchase and retirement
Foreign currency translation
Balance at March 31, 2023
−Removed: Stock-based compensation expense
−Removed: Exercise of stock awards, net of tax
−Removed: Stock repurchase and retirement
−Removed: Foreign currency translation
−Removed: Balance at June 30, 2022
−Removed: Stock-based compensation expense
−Removed: Exercise of stock awards, net of tax
−Removed: Stock repurchase and retirement
−Removed: Foreign currency translation
−Removed: Balance at September 30, 2022
The accompanying notes are an integral part of these unaudited financial statements.
2 unchanged sentences
(in thousands)
−Removed: For the Nine Months Ended
−Removed: September 30,
−Removed: September 30,
+Added: For the Three Months Ended
Cash flows from operating activities:
+Added: Net (loss) income
Adjustments to reconcile net income to net cash provided by operating activities:
7 unchanged sentences
Increase (decrease) in accounts payable
−Removed: Increase (decrease) in accrued expenses
+Added: Increase (decrease) in accrued expenses and other liabilities
Increase (decrease) in deferred revenue
1 unchanged sentence
Cash flows from investing activities:
−Removed: Capitalized software
+Added: Purchase of acquired business, net of cash received (See Note 3)
Purchase of fixed assets
−Removed: Net cash used in investing activities
+Added: Net cash provided by (used in) investing activities
Cash flows from financing activities:
1 unchanged sentence
Payment for stock repurchase and retirement
+Added: Payment of note payable
+Added: Proceeds from issuance of term loan
+Added: Payments for capitalized debt issuance costs
Net cash used in financing activities
Net change in cash and cash equivalents
−Removed: Cash – beginning
+Added: Cash and cash equivalents – beginning
Currency translation adjustment
2 unchanged sentences
Cash paid for income taxes
+Added: Cash paid for interest
The accompanying notes are an integral part of these unaudited financial statements.
2 unchanged sentences
Basis of Presentation
−Removed: 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.
+Added: The unaudited interim consolidated balance sheet as of March 31, 2023 and consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for the three-month periods ended March 31, 2023 and 2022 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.
−Removed: 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.
+Added: The interim financial information should be read in conjunction with the 2022 audited financial statements of Issuer Direct Corporation (the “Company”, “We”, or “Our”) filed on 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.
−Removed: 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.
−Removed: 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.
+Added: Shares issuable upon the exercise of stock options totaling 74,250 were excluded in the computation of diluted earnings per common share during the three-month period ended March 31, 2023 because their impact was anti-dilutive.
+Added: There were 50,250 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, 2022 because their impact was anti-dilutive.
Revenue Recognition
1 unchanged sentence
Customers consist of public corporate issuers and professional firms, such as investor and public relations firms.
−Removed: In the case of our news distribution and webcasting offerings, our customers also include private companies.
+Added: In the case of news distribution and webcasting offerings, 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.
−Removed: 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.
+Added: The Company's contracts include either a subscription to its entire platform, certain modules within the platform or to its Media Advantage Plan (MAP), 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.
1 unchanged sentence
i) Communications and ii) Compliance.
−Removed: Performance obligations of Communications contracts include providing subscriptions to certain modules or the entire Platform id.
−Removed: Communications module, distributing press releases on a per release basis or conducting webcasts, virtual annual meetings or other events on a per event basis.
−Removed: Performance obligations of Compliance contracts include providing subscriptions to our cloud-based Platform id.
−Removed: Compliance module, Whistleblower module or other stand-ready obligations to deliver services and annual report printing and distribution.
+Added: 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.
+Added: MAP 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 MAP platform along with distribution of press releases, ongoing support, and assessment of performance as a stand-ready obligation.
+Added: 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.
−Removed: Set up fees for our transfer agent module and investor relations content management module are immaterial.
+Added: Set up fees for the 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.
−Removed: 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.
+Added: 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.
The associated deferred revenue is generally recognized as releases are disseminated for press release packages and ratably over the billing period for subscriptions.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: Deferred revenue as of March 31, 2023 and December 31, 2022, was $ 5,166,000 and $ 5,405,000 , respectively, and is expected to be recognized within one year.
+Added: Revenue recognized for the three months ended March 31, 2023 and 2022, which was included in the deferred revenue balance at the beginning of each reporting period, was approximately $ 2,557,000 and $ 1,391,000 , respectively.
+Added: Accounts receivable, net of allowance for doubtful accounts, related to contracts with customers was $ 3,546,000 and $ 2,978,000 as of March 31, 2023 and December 31, 2022, 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.
−Removed: 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.
+Added: As of March 31, 2023 and December 31, 2022, the Company has capitalized $ 125,000 and 105,000 , 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.
3 unchanged sentences
Accounts Receivable and Allowance for Doubtful Accounts
−Removed: The Company monitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends, and other information.
−Removed: Credit is granted on an unsecured basis.
−Removed: The allowance for doubtful accounts is estimated based on an assessment of the Company’s ability to collect on customer accounts receivable.
−Removed: 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.
−Removed: 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.
−Removed: The Company generally writes off accounts receivable against the allowance when it determines a balance is uncollectible and no longer actively pursues its collection.
+Added: The Company adopted Financial Accounting Standards Board Accounting Standards Codification (“ASC”) Topic 326, Financial Statements – Credit Losses (“Topic 326”) with an adoption date of January 1, 2023.
+Added: As a result, the Company changed its accounting policy for allowance for doubtful accounts using an expected losses model rather than using incurred losses.
+Added: 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 balance sheet date through analyzing historical customer data as well as taking into consideration current economic trends.
+Added: The Company adopted Topic 326 and determined it did not have a material financial impact.
+Added: The roll forward of the allowance for doubtful accounts for the three-months ended March 31, 2023 was as follows:
+Added: Three months ended
+Added: March 31, 2023
+Added: Beginning balance
+Added: Bad debt expense
+Added: Ending balance
Concentration of Credit Risk
−Removed: Financial instruments and related items which potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and accounts receivable.
+Added: Financial instruments and related items which potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and accounts receivables.
The Company places its cash and temporary cash investments with credit quality institutions.
Such cash balances are currently in excess of the FDIC insurance limit of $ 250,000 .
−Removed: 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.
−Removed: As of September 30, 2022, the total amount exceeding such limit was $ 19,375,000 .
−Removed: The Company also had cash-on-hand of $ 2,137,000 in Canada and $ 50,000 in Europe as of September 30, 2022.
+Added: To reduce its risk associated with the failure of such financial institutions, each quarter the Company evaluates the rating of each financial institution in which it holds deposits.
+Added: As of March 31, 2023, the total amount exceeding such limit was $ 1,074,000 .
+Added: The Company also had cash-on-hand of $ 32,000 in Europe and $ 1,569,000 in Canada as of March 31, 2023.
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.
5 unchanged sentences
Valuation allowances are established, when necessary, to reduce deferred income tax assets to the amounts expected to be realized.
−Removed: For any uncertain tax positions, we recognize the impact of a tax position, only if it is more likely than not of being sustained upon examination, based on the technical merits of the position.
−Removed: Our policy regarding the classification of interest and penalties is to classify them as income tax expense in our financial statements, if applicable.
+Added: For any uncertain tax positions, the Company recognizes the impact of a tax position, only if it is more likely than not of being sustained upon examination, based on the technical merits of the position.
+Added: The Company’s policy regarding the classification of interest and penalties is to classify them as income tax expense in the financial statements, if applicable.
Capitalized Software
−Removed: Costs incurred to develop our cloud-based platform products are capitalized when the preliminary project phase is complete, management commits to fund the project and it is probable the project will be completed and used for its intended purposes.
+Added: Costs incurred to develop the Company’s cloud-based platform products are capitalized when the preliminary project phase is complete, management commits to fund the project and it is probable the project will be completed and used for its intended purposes.
Once the software is substantially complete and ready for its intended use, the software is amortized over its estimated useful life, which is typically four years.
Costs related to design or maintenance of the software are expensed as incurred.
−Removed: Capitalized costs and amortization for the three and nine-month periods ended September 30, 2022 and 2021, are as follows (in thousands):
−Removed: For the Three Months Ended
−Removed: For the Nine Months Ended
−Removed: September 30,
−Removed: September 30,
−Removed: September 30,
−Removed: September 30,
−Removed: Capitalized software development costs
+Added: Amortization for the three-month periods ended March 31, 2023 and 2022, is as follows (in thousands):
Amortization included in cost of revenues
19 unchanged sentences
Generally, this includes debt and equity securities that are traded in an active market.
−Removed: Our cash and cash equivalents are quoted at Level 1.
+Added: 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;
1 unchanged sentence
or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
−Removed: Generally, this includes debt and equity securities that are not traded in an active market.
+Added: The fair value of the Company’s long-term debt and interest rate swap are quoted at Level 2.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
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.
−Removed: 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.
+Added: As of March 31, 2023 and December 31, 2022, the Company believes the fair value of its financial instruments, such as, accounts receivable, long-term debt, interest rate swap, the line of credit, and accounts payable approximate their carrying amounts.
Translation of Foreign Financial Statements
8 unchanged sentences
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.
−Removed: At the time of the business combination, trademarks are considered an indefinite-lived asset and, as such, are not amortized as there is no foreseeable limit to cash flows generated from them.
+Added: 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.
+Added: For the Newswire acquisition 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.
−Removed: Comprehensive Income
−Removed: Comprehensive income consists of net income and other comprehensive income related to changes in the cumulative foreign currency translation adjustment.
+Added: Comprehensive (Loss) Income
+Added: Comprehensive (loss) income consists of net (loss) income and other comprehensive income related to changes in the cumulative foreign currency translation adjustment.
The Company expenses advertising as incurred.
−Removed: During the three and nine-month periods ended September 30, 2022, advertising expense was $ 95,000 and $ 304,000 , respectively.
−Removed: During the three and nine-month periods ended September 30, 2021, advertising expense was $ 37,000 and $ 169,000 , respectively.
+Added: During the three-month periods ended March 31, 2023 and 2022, advertising expense was $ 462,000 and $ 95,000 , respectively.
+Added: Most of the increase is due to additional advertising expense resulting from Newswire, which was acquired in November 2022 (see Note 3).
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.
−Removed: Employee Retention Credit
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: ASC 105, Generally Accepted Accounting Principles, describes the decision-making framework when no guidance exists in US GAAP for a particular transaction.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Under this standard, government grants are recognized when the conditions or conditions on which they depend are substantially met.
−Removed: The conditions for recognition of the ERC include, but are not limited to:
−Removed: An entity has been adversely affected by the COVID-19 pandemic
−Removed: We have not used qualifying payroll for both the Paycheck Protection Program and the ERC
−Removed: We incurred payroll costs to retain employees
−Removed: 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.
+Added: Newly Adopted Accounting Pronouncements
+Added: Topic 326 was effective for the Company beginning on January 1, 2023.
+Added: This update requires a financial asset (or a group of financial assets) measured at amortized cost basis, to be presented at the net amount expected to be collected.
+Added: The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset.
+Added: The Company has evaluated the impact of Topic 326 and has determined it does not have a material financial impact.
+Added: Acquisition of iNewswire LLC
+Added: On November 1, 2022, the Company entered into a Membership Interest Purchase Agreement with Lead Capital, LLC, a Delaware limited liability company (“Seller”), whereby the Company purchased all the issued and outstanding membership interests of iNewswire.com LLC, a Delaware limited liability company (“Newswire”).
+Added: 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.
+Added: In connection with the transaction (the “Acquisition”), the Company paid to the Seller aggregate consideration of $ 43.5 million, consisting of the following:
+Added: (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 $ 3.9 million based on the Company’s closing stock price of $ 21.60 on the Closing Date.
+Added: During the three months ended March 31, 2023, the Seller paid the $ 350,000 net working capital adjustment to the Company.
+Added: The Secured Note was due and payable on November 8, 2023 with an annual interest rate of 6%.
+Added: The Secured Note was secured by the intellectual property (with certain exceptions) and the domain names acquired by the Company as part of the acquisition.
+Added: The Secured Note allowed for prepayment, however, the 6 % interest payment was guaranteed through the Maturity Date even if prepayments were made.
+Added: On March 20, 2023, the Company paid $ 370,000 to pay the Secured Note in full, with the Seller agreeing to forgive $ 440,000 of interest which would have otherwise been due.
+Added: The $ 370,000 payment is recorded in Other expense on the Consolidated statements of operations.
+Added: As a result, there is no longer any obligation to the Seller as of March 31, 2023.
+Added: The Company has determined that the acquisition of Newswire constitutes a business acquisition as defined by ASC 805, Business Combinations .
+Added: Accordingly, the assets acquired, and the liabilities assumed in the transaction were recorded at their acquisition date estimated fair value, while the transaction costs associated with the acquisition, which totaled $ 178,000 , were expensed as incurred pursuant to the purchase method of accounting in accordance with ASC 805.
+Added: The Company’s preliminary purchase price allocation was based on an evaluation of the appropriate fair values and represents management’s best estimate based on available data.
+Added: Any changes within the measurement period resulting from facts and circumstances that existed as of the acquisition date may result in retrospective adjustments to the provisional amounts recorded at the acquisition date.
+Added: The Company employed a third-party valuation firm to assist in determining the purchase price allocation of assets and liabilities acquired from Newswire.
+Added: The income approach was used to determine the value of trademarks/tradename and client relationships.
+Added: The income approach determines the fair value for the asset based on the present value of cash flows projected to be generated by the asset.
+Added: Projected cash flows are discounted at a rate of return that reflects the relative risk of achieving the cash flow and the time value of money.
+Added: Projected cash flows for each asset considered multiple factors, including current revenue from existing customers;
+Added: analysis of expected revenue and attrition trends;
+Added: reasonable contract renewal assumptions from the perspective of a marketplace participant;
+Added: expected profit margins giving consideration to marketplace synergies;
+Added: and required returns to contributory assets.
+Added: The relief from royalty method was used to value the technology.
+Added: This approach applies an industry-based royalty rate to future projected cashflows to express the fair value as the expected after-tax royalty savings of the asset.
+Added: Fair values are determined based on the requirements of ASC 820, Fair Measurements and Disclosure .
+Added: As of March 31, 2023, the calculation and allocation of the purchase price to tangible and intangible assets and liabilities is preliminary, as the Company is still in the process of accumulating all of the required information to finalize the opening balance sheet and calculations of intangible assets.
+Added: A summary of the fair value consideration transferred for the Acquisition and the preliminary allocation to the fair value of the assets and liabilities of Newswire are as follows (in 000's):
+Added: Consideration transferred:
+Added: Secured promissory note
+Added: Shares of Issuer Direct common stock based on closing market price prior to the Acquisition
+Added: Net working capital adjustment and other costs paid on behalf of Seller, net of cash
+Added: Total consideration transferred
+Added: Preliminary allocation of tangible and intangible assets and liabilities:
+Added: Trademarks/Tradename
+Added: Customer relationships
+Added: Net liabilities assumed
+Added: Total amount allocated
+Added: Net liabilities assumed:
+Added: Accounts Receivable
+Added: Other Current Assets
+Added: Accounts Payable
+Added: Accrued Expenses
+Added: Deferred Revenue
+Added: Deferred tax liability
+Added: Supplemental pro forma information
+Added: The following unaudited supplemental pro forma information summarizes the Company’s results of operations for the current reporting period, as if the Company completed the acquisition as of the beginning of the annual reporting period.
+Added: Supplemental pro forma information is as follows:
+Added: in $000’s, except per share amounts
+Added: March 31, 2022
+Added: Basic earnings per share
+Added: Diluted earnings per share
+Added: The unaudited pro forma combined financial information is presented for information purposes only and is not intended to represent or be indicative of the combined results of operations or financial position that we would have reported had the acquisitions been completed as of the date and for the periods presented and should not be taken as representative of our consolidated results of operations or financial condition following the acquisition.
+Added: In addition, the unaudited pro forma combined financial information is not intended to project the future financial position or results of operations of the combined company.
+Added: The unaudited pro forma financial information was prepared using the acquisition method of accounting for the acquisition under existing US GAAP.
+Added: Issuer Direct has been treated as the acquirer.
+Added: The Company did not pay any dividends during the three-month periods ended March 31, 2023 and 2022.
+Added: Preferred stock and common stock
+Added: There were no issuances of preferred stock or common stock during the three-month periods ended March 31, 2023 and 2022, other than stock awarded to employees and the Board of Directors.
+Added: Stock repurchase and retirement
+Added: 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.
+Added: As of August 31, 2022, the Company completed the repurchase program by purchasing a total of 207,964 shares as shown in the table below ($ in 000’s, except share or per share amounts):
+Added: Shares Repurchased
+Added: Total Number of Shares Repurchased
+Added: Average Price Paid Per Share
+Added: Total Number of Shares Purchased as Part of Publicly Announced Program
+Added: Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program
+Added: March 1-31, 2022
+Added: April 1-30, 2022
+Added: May 1-31, 2022
+Added: June 1-30, 2022
+Added: July 1-31, 2022
+Added: August 1-31, 2022
+Added: No shares repurchased between September 2022 and March 2023
2014 Equity Incentive Plan
−Removed: On May 23, 2014, the shareholders of the Company approved the 2014 Equity Incentive Plan (the “2014 Plan”).
+Added: On May 23, 2014, the shareholders of the Company approved the 2014 Equity Incentive Plan, as amended (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.
−Removed: As of September 30, 2022, there are 140,995 shares which remain eligible to be granted under the 2014 Plan.
−Removed: The following table summarizes information about stock options outstanding and exercisable at September 30, 2022:
+Added: As of March 31, 2023, there are 40,495 shares which remain to be granted under the 2014 Plan.
+Added: The following table summarizes information about stock options outstanding and exercisable at March 31, 2023:
Options Outstanding
9 unchanged sentences
$ 11.01 - 16.00
−Removed: As of September 30, 2022, the Company had unrecognized stock compensation related to the options of $ 489,000 , which will be recognized through 2026.
−Removed: During the nine months ended September 30, 2022, the Company granted 32,240 restricted stock units.
−Removed: No restricted stock units were granted during the three months ended September 20, 2022.
−Removed: 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.
−Removed: 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.
−Removed: During the nine months ended September 30, 2022, 15,265 restricted stock units with an intrinsic value of $ 26.05 per share vested.
−Removed: No restricted stock units vested during the three months ended September 30, 2022.
−Removed: 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.
−Removed: Stock repurchase and retirement
−Removed: 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.
−Removed: On March 16, 2020, the Company publicly announced that the Company increased the share repurchase program to repurchase up to $2,000,000 of its common shares.
−Removed: As of March 31, 2021, the Company completed the repurchase program by purchasing 179,845 shares as shown in the table below ($ in 000’s, except share or per share amounts):
−Removed: Shares Repurchased
−Removed: Total Number of Shares Repurchased
−Removed: Average Price Paid Per Share
−Removed: Total Number of Shares Purchased as Part of Publicly Announced Program
−Removed: Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program
−Removed: August 7-31, 2019
−Removed: September 1-30, 2019
−Removed: October 1-31, 2019
−Removed: November 1-30, 2019
−Removed: December 1-31, 2019
−Removed: January 1-31, 2020
−Removed: February 1-29, 2020
−Removed: March 1-31, 2020
−Removed: April 1-30, 2020
−Removed: May 1-31, 2020
−Removed: No shares repurchased between June 2020 and February 2021
−Removed: March 1-31, 2021
−Removed: 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.
−Removed: 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):
−Removed: Shares Repurchased
−Removed: Total Number of Shares Repurchased
−Removed: Average Price Paid Per Share
−Removed: Total Number of Shares Purchased as Part of Publicly Announced Program
−Removed: Maximum Dollar Value of Shares that May Yet Be Purchased Under the Program
−Removed: March 1-31, 2022
−Removed: April 1-30, 2022
−Removed: May 1-31, 2022
−Removed: June 1-30, 2022
−Removed: July 1-31, 2022
−Removed: August 1-31, 2022
−Removed: September 1-30, 2022
−Removed: 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.
+Added: $ 16.01 - 27.00
+Added: $ 27.01 - 27.71
+Added: As of March 31, 2023, the Company had unrecognized stock compensation related to the options of $ 757,000 , which will be recognized through 2027.
+Added: During the three months ended March 31, 2023, the Company granted 60,500 restricted stock units to employees, which vest at various intervals over the next 3 years.
+Added: The average grant date fair value of these grants was $ 27.82 per share.
+Added: During the three months ended March 31, 2022, the Company granted 20,000 restricted stock units with a grant date fair value of $ 26 .00 per share.
+Added: As of March 31, 2023, there was $ 2,231,000 of unrecognized compensation cost related to our unvested restricted stock units, which will be recognized through 2026.
+Added: The Company recognized an income tax benefit of $ 48,000 for the three-month period ended March 31, 2023, compared to income tax expense of $ 174,000 during the same period of 2022.
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.
−Removed: For the three and nine-month periods ended September 30, 2022, the variance between the Company’s effective tax rate and the U.S.
−Removed: 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.
+Added: For the three-month periods ended March 31, 2023 and 2022, the variance between the Company’s effective tax rate and the U.S.
+Added: statutory rate of 21 % is primarily attributable to state income tax.
+Added: For the three months ended March 31, 2022, the effective tax rate was also partially impacted by a benefit related to the Foreign Derived Intangible Income (“FDII”) deduction as well as foreign rate differentials.
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 .
−Removed: 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.
+Added: 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, 2023.
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.
−Removed: The Company also has an office in Salt Lake City, Utah, which is on a short-term lease that is month-to-month.
−Removed: 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.
−Removed: Lease liabilities totaled $ 1,787,000 as of September 30, 2022.
+Added: Lease liabilities totaled $ 1,629,000 as of March 31, 2023.
The current portion of this liability of $ 371,000 is included in Accrued expenses on the Consolidated balance sheets and the long-term portion of $ 1,258 ,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):
−Removed: For the Three Months Ended
−Removed: For the Nine Months Ended
−Removed: September 30,
−Removed: September 30,
−Removed: September 30,
−Removed: September 30,
+Added: Three months ended
Lease expense
1 unchanged sentence
Variable lease expense
−Removed: Total lease expense
−Removed: The weighted-average remaining non-cancelable lease term for our operating leases was 5.25 years as of September 30, 2022.
−Removed: As of September 30, 2022, the weighted-average discount rate used to determine the lease liability was 3.77 %.
−Removed: The future minimum lease payments to be made under non-cancelable operating leases on September 30, 2022, are as follows (in 000’s):
+Added: The weighted-average remaining non-cancelable lease term for our operating leases was 4.75 years as of March 31, 2023.
+Added: As of March 31, 2023, the weighted-average discount rate used to determine the lease liability was 3.77 %.
+Added: The future minimum lease payments to be made under non-cancelable operating leases on March 31, 2023, 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):
−Removed: Three months ended September 30,
−Removed: Revenue Streams
−Removed: Communications
−Removed: Nine months ended September 30,
+Added: Three months ended March 31,
Revenue Streams
Communications
−Removed: 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.
−Removed: Line of Credit
−Removed: Effective October 3, 2021, the Company renewed its unsecured Line of Credit, which changed the interest rate from LIBOR plus 1.75 % to SOFR (Secured Overnight Financing Rate) plus 1.75 %.
−Removed: The amount of funds available for borrowing remained $ 3,000,000 and the term remained two years.
−Removed: As of September 30, 2022, the interest rate was 4.22 % and the Company did not owe any amounts on the Line of Credit.
−Removed: Subsequent Event
−Removed: Acquisition of iNewsWire.com LLC
−Removed: 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”).
−Removed: 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.
−Removed: 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:
−Removed: (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;
−Removed: (ii) the issuance of a Secured Promissory Note in the principal amount of $ 22.0 million (the “Secured Note”);
−Removed: 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.
−Removed: The Secured Note is due and payable on November 8, 2023 (the “Maturity Date”) and bears an annual interest rate of 6 %.
−Removed: 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.
−Removed: The Secured Note may be prepaid, however, the 6% interest payment is guaranteed through the Maturity Date even if prepayments are made.
+Added: $ 6,566 76.2 % $ 3,383 64.0 %
+Added: 2,053 23.8 % 1,905 36.0 %
+Added: $ 8,619 100.0 % $ 5,288 100 .0 %
+Added: The Company did not have any customers during the three-month periods ended March 31, 2023 or 2022 that accounted for more than 10% of our revenue.
+Added: Credit Agreement
+Added: On March 20, 2023 (the “Closing Date”), the Company entered into a $ 25 million credit agreement (the “Credit Agreement”) with Pinnacle Bank (“Pinnacle”).
+Added: The Credit Agreement provides for the following:
+Added: (i) term loan facility in an aggregate principal amount of $20 million (the “Term Loan”), and (ii) revolving line 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) .
+Added: 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%.
+Added: 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 .
+Added: The Company will begin making monthly interest only payments on the Term Loan beginning on April 1, 2023.
+Added: Beginning on January 1, 2024, the Company will begin making monthly principal payments of $ 333,333 plus interest payments on the Term Loan until the maturity date of December 20, 2028 .
+Added: 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 .
+Added: In order to settle the Secured Note on March 20, 2023, the Company paid $ 370,000 to Seller, with the Seller agreeing to forgive $ 440,000 of interest which would have otherwise been due.
+Added: The $ 370,000 payment is recorded in Other expense on the Consolidated statements of operations.
+Added: As a result, there is no longer any obligation to the Seller as of March 31, 2023.
+Added: The Company currently has no plans to utilize the Revolving LOC but may do so in the future.
+Added: 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%.
+Added: 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.
+Added: The Company terminated its existing $ 3,000,000 unsecured line of credit with Fifth Third Bank immediately prior to the Closing Date.
+Added: As of March 31, 2023, there was no outstanding balance under the Revolving LOC and the interest rate was 6.68%
+Added: The Credit Agreement contains the following financial covenants, which commence with fiscal quarter ending June 30, 2023:
+Added: 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 on or 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.
+Added: The Credit Agreement also contains customary affirmative covenants for a transaction of this nature, including among other things, covenants relating to:
+Added: 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.
+Added: 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.
+Added: 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;
+Added: breach of certain covenants;
+Added: inaccuracy of the representations or warranties in any material respect;
+Added: bankruptcy or insolvency;
+Added: dissolution or change of control;
+Added: certain unsatisfied judgments;
+Added: defaults under material agreements;
+Added: certain unfunded liabilities under employee benefit plans;
+Added: certain unsatisfied judgments;
+Added: certain ERISA violations;
+Added: and the invalidity or unenforceability of the Credit Agreement.
+Added: If an Event of Default occurs, the Company may be required to repay all amounts outstanding under the Credit Agreement.
+Added: 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.
+Added: Interest Rate Swap
+Added: The Company entered into an interest rate swap agreement to convert its interest rate exposure from variable rate to fixed rate to control cash outflows related to interest on its variable rate debt.
+Added: The Company has $ 20,000,000 of notional amount interest rate swap agreement, which amortizes in-line with its long-term credit agreement.
+Added: Under the swap agreement, the Company pays a fixed rate of interest at 6.217% and receives an average variable rate of SOFR + 2.35% adjusted monthly .
+Added: The carrying amount for the Company’s derivative financial instrument is the estimated fair value of the financial instrument.
+Added: The Company’s derivative is not exchange listed and therefore the fair value is estimated under a mark-to-market approach using an analytics model that is a readily observable market input.
+Added: This model reflects the contractual terms of the derivative, such as notional value and expiration date, as well as market-based observables including interest rates, yield curves, and the credit quality of the counterparty.
+Added: The model also incorporates the Company’s creditworthiness in order to appropriately reflect non-performance risk.
+Added: Inputs to the derivative pricing model are generally observable and do not contain a high level of subjectivity, and accordingly, the Company’s derivative is classified within Level 2 of the fair value hierarchy.
+Added: While the Company believes its estimate results in a reasonable reflection of the fair value of the instrument, the estimated value may not be representative of actual value that could have been realized or that will be realized in the near future.
+Added: In accounting for the interest rate swap, the Company has determined it does not qualify for hedge accounting.
+Added: The fair value of the swap agreement as of March 31, 2023 was a net liability of $ 165,000 and is included in Other Long-Term Liabilities, in the Consolidated Balance Sheets.
+Added: The fair value of the swap agreement excludes accrued interest and takes into consideration current interest rates and current likelihood of the swap counterparty’s compliance with its contractual obligations.
+Added: We have also recognized a loss of $ 165,000 in Other expense in the Consolidated statements of operations, as a result of the interest rate swap.
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.