What changed in this filing

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Item 1. Financial Statements

2023-08-10 compared with 2023-05-11 · 114 added, 92 removed, 363 unchanged (36% of the section changed)

25 unchanged sentences

Lease liabilities – long-term

Other long-term liabilities

Total liabilities

1 unchanged sentence

Stockholders' equity:

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.

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.

Preferred stock, $ 0.001 par value, 1,000,000 shares authorized, no shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively.

Common stock $ 0.001 par value, 20,000,000 shares authorized, 3,809,149 and 3,791,020 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively.

Additional paid-in capital

8 unchanged sentences

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

2 unchanged sentences

Operating income

Interest income (expense), net

Other expense

(Loss) income before taxes

Income tax (benefit) expense

Net (loss) income

(Loss) income per share – basic

(Loss) income per share – fully diluted

Interest (expense) income, net

Other income (expense), net

Income before taxes

Income tax expense

Income per share – basic

Income per share – fully diluted

Weighted average number of common shares outstanding – basic

1 unchanged sentence

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

I SSUER DIRECT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

ISSUER DIRECT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

For the Three Months Ended

Net (loss) income

For the Six Months Ended

Foreign currency translation adjustment

Comprehensive (loss) income

Comprehensive income

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

2 unchanged sentences

(in thousands, except share and per share amounts)

Additional Paid-in

Accumulated Other Comprehensive

7 unchanged sentences

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

Balance at December 31, 2022

2 unchanged sentences

Balance at March 31, 2023

Stock-based compensation expense

Exercise of stock awards, net of tax

Foreign currency translation

Balance at June 30, 2023

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

2 unchanged sentences

(in thousands)

For the Three Months Ended

For the Six Months Ended

Cash flows from operating activities:

Net (loss) income

Adjustments to reconcile net income to net cash provided by operating activities:

2 unchanged sentences

Deferred income taxes

Change in fair value of interest rate swaps

Stock-based compensation expense

Amortization of debt issuance costs

Changes in operating assets and liabilities:

2 unchanged sentences

Increase (decrease) in accounts payable

Increase (decrease) in accrued expenses and other liabilities

Increase (decrease) in accrued expenses

Increase (decrease) in deferred revenue

1 unchanged sentence

Cash flows from investing activities:

Purchase of acquired business, net of cash received (See Note 3)

Capitalized software

Purchase of fixed assets

Purchase of acquired business, net of cash received

Net cash provided by (used in) investing activities

4 unchanged sentences

Proceeds from issuance of term loan

Payments for capitalized debt issuance costs

Payment for capitalized debt issuance costs

Net cash used in financing activities

10 unchanged sentences

Basis of Presentation

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.

The unaudited interim consolidated balance sheet as of June 30, 2023 and consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for the three and six-month periods ended June 30, 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.

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 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.

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.

Shares issuable upon the exercise of stock options totaling 72,750 were excluded in the computation of diluted earnings per common share during the three and six-month periods ended June 30, 2023, because their impact was anti-dilutive.

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 and six-month periods ended June 30, 2022, because their impact was anti-dilutive.

Revenue Recognition

4 unchanged sentences

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, 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.

The Company's contracts include either a subscription to its entire platform, certain modules within the platform or to its Press Release Optimizer Plan (PRO), 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.

2 unchanged sentences

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.

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.

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

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

17 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 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.

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.

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.

Deferred revenue as of June 30, 2023 and December 31, 2022, was $ 5,729,000 and $ 5,405,000 , respectively, and is expected to be recognized within one year.

Revenue recognized for the six months ended June 30, 2023 and 2022, which was included in the deferred revenue balance at the beginning of each reporting period, was approximately $ 4,337,000 and $ 1,970,000 , respectively.

Accounts receivable, net of allowance for doubtful accounts, related to contracts with customers was $ 4,311,000 and $ 2,978,000 as of June 30, 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.

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.

As of June 30, 2023 and December 31, 2022, the Company has capitalized $ 153,000 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

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.

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

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

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

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

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

The roll forward of the allowance for doubtful accounts for the three-months ended March 31, 2023 was as follows:

Three months ended

March 31, 2023

The roll forward of the allowance for doubtful accounts for the three and six-months ended June 30, 2023, was as follows:

Three months ended March 31, 2023

Three months ended June 30, 2023

Beginning balance

6 unchanged sentences

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.

As of March 31, 2023, the total amount exceeding such limit was $ 1,074,000 .

The Company also had cash-on-hand of $ 32,000 in Europe and $ 1,569,000 in Canada as of March 31, 2023.

As of June 30, 2023, the total amount exceeding such limit was $ 2,408,000 .

The Company also had cash-on-hand of $ 41,000 in Europe and $ 1,480,000 in Canada as of June 30, 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.

11 unchanged sentences

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

Amortization for the three-month periods ended March 31, 2023 and 2022, is as follows (in thousands):

Capitalized costs and amortization for the three and six-month periods ended June 30, 2023 and 2022, 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

14 unchanged sentences

Fair Value Measurements

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.

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.

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.

9 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, 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.

As of June 30, 2023 and December 31, 2022, the Company believes the fair value of its financial instruments, such as, accounts receivable, long-term debt, the line of credit, and accounts payable approximate their carrying amounts.

Translation of Foreign Financial Statements

9 unchanged sentences

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

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

For the Newswire acquisition (see Note 3), 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.

Comprehensive (Loss) Income

Comprehensive (loss) income consists of net (loss) income and other comprehensive income related to changes in the cumulative foreign currency translation adjustment.

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income related to changes in the cumulative foreign currency translation adjustment.

The Company expenses advertising as incurred.

During the three-month periods ended March 31, 2023 and 2022, advertising expense was $ 462,000 and $ 95,000 , respectively.

Most of the increase is due to additional advertising expense resulting from Newswire, which was acquired in November 2022 (see Note 3).

During the three and six-month periods ended June 30, 2023, advertising expense was $ 364,000 and $ 826,000 , respectively.

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

Most of the increase is due to additional advertising expense resulting from Newswire, which was acquired in November 2022.

Stock-based Compensation

3 unchanged sentences

Topic 326 was effective for the Company beginning on January 1, 2023.

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.

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.

This update requires a financial asset (or group of financial assets) measured at amortized cost basis, to be presented at the net amount expected to be collected.

This 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 of the amount expected to be collected on the financial asset.

The company has evaluated the impact of Topic 326 and has determined it does not have a material financial impact.

1 unchanged sentence

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”).

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.

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

In connection with the transaction (the “Acquisition”), the Company paid to the Seller aggregate consideration of $ 43.5 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 $ 3.9 million based on the Company’s closing stock price of $ 21.60 on the Closing Date.

During the three months ended March 31, 2023, the Seller paid the $ 350,000 net working capital adjustment to the Company.

During the three months ended March 31, 2023, the Seller paid a $ 350,000 net working capital adjustment to the Company.

The Secured Note was due and payable on November 8, 2023, with an annual interest rate of 6%.

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.

The Secured Note allowed for prepayment, however, the 6 % interest payment was guaranteed through the Maturity Date even if prepayments were made.

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.

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

As a result, there is no longer any obligation to the Seller as of March 31, 2023.

The $ 370,000 payment is recorded in Other income (expense) on the Consolidated statements of operations for the six month-period ended June 30, 2023.

As a result, there is no longer any obligation to the Seller as of June 30, 2023.

The Company has determined that the acquisition of Newswire constitutes a business acquisition as defined by ASC 805, Business Combinations .

14 unchanged sentences

Fair values are determined based on the requirements of ASC 820, Fair Measurements and Disclosure .

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.

As of June 30, 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 the required information to finalize the opening balance sheet and calculations of intangible assets.

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):

5 unchanged sentences

Preliminary allocation of tangible and intangible assets and liabilities:

Trademarks/Tradename

Trademarks/Tradenames

Customer relationships

12 unchanged sentences

in $000’s, except per share amounts

March 31, 2022

Three months ended June 30, 2022

Six months ended June 30, 2022

Basic earnings per share

4 unchanged sentences

Issuer Direct has been treated as the acquirer.

The Company did not pay any dividends during the three-month periods ended March 31, 2023 and 2022.

The Company did not pay any dividends during the three and six-month periods ended June 30, 2023 and 2022.

Preferred stock and common stock

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.

There were no issuances of preferred stock or common stock during the three and six-month periods ended June 30, 2023 and 2022, other than stock awarded to employees and the Board of Directors.

Stock repurchase and retirement

12 unchanged sentences

August 1-31, 2022

No shares repurchased between September 2022 and March 2023

No shares repurchased between September 2022 and June 2023

2014 Equity Incentive Plan

4 unchanged sentences

The 2014 Plan is effective through March 31, 2024.

As of March 31, 2023, there are 40,495 shares which remain to be granted under the 2014 Plan.

The following table summarizes information about stock options outstanding and exercisable at March 31, 2023:

As of June 30, 2023, there are 45,995 shares which remain to be granted under the 2014 Plan, which were assumed by the 2023 Plan described below.

On June 7, 2023, the shareholders of the Company approved the 2023 Equity Incentive Plan (the “2023 Plan”).

Under the terms of the 2023 Plan, the Company is authorized to issue incentive awards for common stock up to 300,000 shares to employees and other personnel.

The awards may be in the form of incentive stock options, nonqualified stock options, restricted stock, restricted stock units and performance awards.

The 2023 Plan is effective through April 1, 2033.

As of June 30, 2023, there are 331,663 shares which remain to be granted under the 2023 Plan, including 45,995 shares assumed under the 2014 Plan described above.

The following table summarizes information about stock options outstanding and exercisable at June 30, 2023:

Options Outstanding

9 unchanged sentences

27.01 - 27.71

$ 16.01 - 27.00

$ 27.01 - 27.71

As of March 31, 2023, the Company had unrecognized stock compensation related to the options of $ 757,000 , which will be recognized through 2027.

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.

The average grant date fair value of these grants was $ 27.82 per share.

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.

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.

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.

As of June 30, 2023, the Company had unrecognized stock compensation related to the options of $ 682,000 , which will be recognized through 2027.

During the three and six-months ended June 30, 2023, the Company granted 14,332 and 74,832 , respectively, of restricted stock units to employees, which vest at various intervals over the next 3 years.

The average grant date fair value of these grants was $ 18.70 and $ 26.08 per share during the three and six-month periods ended June 30, 2023, respectively.

During the three and six-months ended June 30, 2022, the Company granted 12,440 and 32,440 restricted stock units, with a grant date fair value of $ 26.92 and $ 26.35 per share, respectively.

During the three and six-month periods ended June 30, 2023, 18,129 restricted stock units with an average intrinsic value of $ 25.85 per share, vested.

As of June 30, 2023, there was $ 2,117,000 of unrecognized compensation cost related to our unvested restricted stock units, which will be recognized through 2026.

The Company recognized an income tax expense of $ 482,000 and $ 434,000 for the three and six-month period ended June 30, 2023, compared to income tax expense of $ 327,000 and $ 501,000 during the same periods 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.

For the three-month periods ended March 31, 2023 and 2022, the variance between the Company’s effective tax rate and the U.S.

For the three and six-month periods ended June 30, 2023 and 2022, the variance between our effective tax rate and the U.S.

statutory rate of 21 % is primarily attributable to state income tax.

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.

The three and six months ended June 30, 2022, was also impacted by additional expense related to Global Intangible Low-Taxed Income inclusion.

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, 2023.

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, 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.

Lease liabilities totaled $ 1,629,000 as of March 31, 2023.

Lease liabilities totaled $ 1,549,000 as of June 30, 2023.

The current portion of this liability of $ 374,000 is included in Accrued expenses on the Consolidated balance sheets and the long-term portion of $ 1,175 ,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 4.75 years as of March 31, 2023.

As of March 31, 2023, 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, 2023, are as follows (in 000’s):

Total lease expense

The weighted-average remaining non-cancelable lease term for our operating leases was 4.50 years as of June 30, 2023.

As of June 30, 2023, 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, 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):

Three months ended March 31,

Three months ended June 30,

Revenue Streams

Communications

$ 6,566 76.2 % $ 3,383 64.0 %

2,053 23.8 % 1,905 36.0 %

$ 8,619 100.0 % $ 5,288 100 .0 %

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.

Six months ended June 30,

Revenue Streams

Communications

The Company had one customer during the three -month period ended June 30, 2023 that accounted for more than 10 % of our revenue.

There were no customers during the six -month period ended June 30, 2023 or during the three and six -month periods ended June 30, 2022, which were more than 10 % of revenue.

Credit Agreement

1 unchanged sentence

The Credit Agreement provides for the following:

(i) term loan facility in an aggregate principal amount of $20 million (the “Term Loan”), and (ii) revolving 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) .

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

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

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

The Company will begin making monthly interest only payments on the Term Loan beginning on April 1, 2023.

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 .

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

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

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

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

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

As a result, there is no longer any obligation to the Seller as of March 31, 2023.

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

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

As a result, there is no longer any obligation to the Seller as of June 30, 2023.

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

2 unchanged sentences

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

As of March 31, 2023, there was no outstanding balance under the Revolving LOC and the interest rate was 6.68%

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

As of June 30, 2023, there was no outstanding balance under the Revolving LOC and the interest rate was 7.12%.

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

a fixed charge coverage ratio of no less than 1.20:1.00 and a leverage ratio requiring that, for each fiscal quarter of the Company ending 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.

All covenants were successfully exceeded during the three month-period ended June 30, 2023.

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

18 unchanged sentences

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 .

At June 30, 2023, the weighted average rate was 7.42 %.

The carrying amount for the Company’s derivative financial instrument is the estimated fair value of the financial instrument.

5 unchanged sentences

In accounting for the interest rate swap, the Company has determined it does not qualify for hedge accounting.

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.

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.

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.

The fair value of the swap agreement as of June 30, 2023 was a net asset of $ 214,000 and is included in Other long-term assets, in the Consolidated Balance Sheets.

The fair value of the interest rate 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.

As a result of the interest rate swap, we have also recognized a net unrealized gain of $ 379,000 and $ 214,000 , which is included in Other income (expense) in the Consolidated statements of operations during the three and six-month periods ended June 30, 2023, respectively.

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