What changed in this filing

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Item 1. Financial Statements

2023-11-09 compared with 2023-08-10 · 102 added, 67 removed, 410 unchanged (29% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

September 30,

Current assets:

23 unchanged sentences

Stockholders' equity:

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.

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

Common stock $ 0.001 par value, 20,000,000 shares authorized, 3,811,649 and 3,791,020 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively.

Additional paid-in capital

8 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Cost of revenues

7 unchanged sentences

Interest (expense) income, net

Other income (expense), net

Other income, net

Income before taxes

9 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Foreign currency translation adjustment

4 unchanged sentences

(in thousands, except share and per share amounts)

Additional Paid-in

Accumulated Other Comprehensive

12 unchanged sentences

Balance at June 30, 2022

Stock-based compensation expense

Exercise of stock awards, net of tax

Stock repurchase and retirement

Foreign currency translation

Balance at September 30, 2022

Balance at December 31, 2022

6 unchanged sentences

Balance at June 30, 2023

Stock-based compensation expense

Exercise of stock awards, net of tax

Foreign currency translation

Balance at September 30, 2023

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

2 unchanged sentences

(in thousands)

For the Six Months Ended

For the Nine Months Ended

September 30,

Cash flows from operating activities:

5 unchanged sentences

Stock-based compensation expense

Measurement period adjustments

Amortization of debt issuance costs

29 unchanged sentences

Basis of Presentation

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.

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

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 nine-month periods ended September 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 nine-month periods ended September 30, 2022, because their impact was anti-dilutive.

Revenue Recognition

29 unchanged sentences

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

Deferred revenue as of June 30, 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.

Deferred revenue as of September 30, 2023 and December 31, 2022, was $ 5,164,000 and $ 5,405,000 , respectively, and is expected to be recognized within one year.

Revenue recognized for the nine months ended September 30, 2023 and 2022, which was included in the deferred revenue balance at the beginning of each reporting period, was approximately $ 3,659,000 and $ 2,763,000 , respectively.

Accounts receivable, net of allowance for doubtful accounts, related to contracts with customers was $ 4,271,000 and $ 2,978,000 as of September 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 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.

As of September 30, 2023 and December 31, 2022, the Company has capitalized $ 179,000 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.

7 unchanged sentences

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 and six-months ended June 30, 2023, was as follows:

Three months ended March 31, 2023

Three months ended June 30, 2023

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

Three months ended September 30, 2023

Nine months ended September 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 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.

As of September 30, 2023, the total amount exceeding such limit was $ 982,000 .

The Company also had cash-on-hand of $ 69,000 in Europe and $ 1,571,000 in Canada as of September 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.

Capitalized costs and amortization for the three and six-month periods ended June 30, 2023 and 2022, are as follows (in thousands):

Capitalized costs and amortization for the three and nine-month periods ended September 30, 2023 and 2022, are as follows (in thousands):

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Capitalized software development costs

27 unchanged sentences

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

As of June 30, 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.

As of September 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

15 unchanged sentences

The Company expenses advertising as incurred.

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.

During the three and nine-month periods ended September 30, 2023, advertising expense was $ 409,000 and $ 1,235,000 , respectively.

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

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

9 unchanged sentences

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 PRO Plan.

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

In connection with the transaction (the “Acquisition”), the Company paid to the Seller aggregate consideration of $ 43.5 million, consisting of the following:

4 unchanged sentences

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 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 $ 370,000 payment is recorded in Other income, net on the Consolidated statements of operations for the nine month-period ended September 30, 2023.

As a result, there is no longer any obligation to the Seller as of September 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 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):

During the three-month period ended September 30, 2023, the Company obtained the necessary information to determine contract assets and deferred revenue acquired and as such, completed its allocation of the fair value of the assets and liabilities acquired.

The measurement period adjustments below did not have a material impact to the Company’s Consolidated statement of operations from November 1, 2022, to September 30, 2023.

A summary of the fair value consideration transferred for the Acquisition and the allocation to the fair value of the assets and liabilities of Newswire are as follows (in 000's):

Consideration transferred:

3 unchanged sentences

Total consideration transferred

Preliminary allocation of tangible and intangible assets and liabilities:

As Originally Reported

Measurement Period Adjustment

Final allocation of tangible and intangible assets and liabilities:

Trademarks/Tradenames

13 unchanged sentences

in $000’s, except per share amounts

Three months ended June 30, 2022

Six months ended June 30, 2022

Three months ended September 30, 2022

Nine months ended September 30, 2022

Basic earnings per share

Diluted earnings per share

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.

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 acquisition 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.

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.

1 unchanged sentence

Issuer Direct has been treated as the acquirer.

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

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

Preferred stock and common stock

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.

There were no issuances of preferred stock or common stock during the three and nine-month periods ended September 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 June 2023

No shares repurchased between September 2022 and September 2023

2014 Equity Incentive Plan

4 unchanged sentences

The 2014 Plan is effective through March 31, 2024.

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.

As of September 30, 2023, there were 45,995 shares which remained to be granted under the 2014 Plan.

These shares 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”).

2 unchanged sentences

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:

As of September 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 September 30, 2023:

Options Outstanding

9 unchanged sentences

27.01 - 27.71

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.

As of September 30, 2023, the Company had unrecognized stock compensation related to the options of $ 619,000 , which will be recognized through 2027.

During the nine-months ended September 30, 2023, the Company granted 74,832 shares of restricted stock units to employees and the Board of Directors, which vest at various intervals over the next 3 years.

No restricted stock units were granted during the three months ended September 30, 2023.

The average grant date fair value of these grants was $ 26.08 per share during the nine-month period ended September 30, 2023.

During the nine months ended September 30, 2022, the Company granted 32,240 restricted stock units, with an average grant date fair value of $ 26.35 per share.

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

During the nine-month period ended September 30, 2023, 18,129 restricted stock units with an average intrinsic value of $ 25.85 per share, vested.

No restricted stock units vested during the three-month period ended September 30, 2023.

As of September 30, 2023, there was $ 1,821,000 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 $ 187,000 and $ 621,000 for the three and nine-month periods ended September 30, 2023, compared to income tax expense of $ 180,000 and $ 681,000 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 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.

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

For the three and nine-month periods ended September 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 and 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 June 30, 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 September 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 $ 1,549,000 as of June 30, 2023.

Lease liabilities totaled $ 1,469 ,000 as of September 30, 2023.

The current portion of this liability of $ 376,000 is included in Accrued expenses on the Consolidated balance sheets and the long-term portion of $ 1,093 ,000 is included in Lease liabilities on the Consolidated balance sheets.

3 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Lease expense

2 unchanged sentences

Total lease expense

The weighted-average remaining non-cancelable lease term for our operating leases was 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):

The weighted-average remaining non-cancelable lease term for our operating leases was 4.25 years as of September 30, 2023.

As of September 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 September 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 June 30,

Three months ended September 30,

Revenue Streams

Communications

Six months ended June 30,

Nine months ended September 30,

Revenue Streams

Communications

The Company 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.

The Company did not have any customers during the three and nine-month periods ended September 30, 2023 or 2022 that accounted for more than 10 % of our revenue.

Credit Agreement

8 unchanged sentences

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

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

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

1 unchanged sentence

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

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

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

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

As of September 30, 2023, there was no outstanding balance under the Revolving LOC and the interest rate was 7.37%.

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.

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

All covenants were successfully achieved during the three month-period ended September 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 %.

At September 30, 2023, the weighted average rate was 7.67 %.

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 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 swap agreement as of September 30, 2023 was a net asset of $ 379,000 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.

As a result of the interest rate swap, we have also recognized a net unrealized gain of $ 165,000 and $ 379,000 , which is included in Other income, net in the Consolidated statements of operations during the three and nine-month periods ended September 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