What changed in this filing

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Item 1. Financial Statements

2024-08-08 compared with 2024-05-09 · 131 added, 82 removed, 288 unchanged (43% of the section changed)

5 unchanged sentences

Cash and cash equivalents

Accounts receivable (net of allowance for credit losses of $ 1,144 and $ 1,119 , respectively)

Accounts receivable (net of allowance for doubtful accounts of $ 1,156 and $ 1,119 , respectively

Income tax receivable

10 unchanged sentences

Accrued expenses

Income taxes payable

Current portion of long-term debt

8 unchanged sentences

Stockholders' equity:

Preferred stock, $ 0.001 par value, 1,000,000 shares authorized, no shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively.

Common stock $ 0.001 par value, 20,000,000 shares authorized, 3,817,379 and 3,815,212 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

Preferred stock, $ 0.001 par value, 1,000,000 shares authorized, no shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively.

Common stock $ 0.001 par value, 20,000,000 shares authorized, 3,831,711 and 3,815,212 shares issued and outstanding as of June 30, 2024 and December 31, 2023, 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

1 unchanged sentence

Total operating costs and expenses

Operating (loss) income

Operating income

Interest expense, net

Other income (expense)

Loss before taxes

Income tax expense (benefit)

Loss per share – basic

Loss per share – fully diluted

Other income (expense), net

Income (loss) before taxes

Income tax expense

Net income (loss)

Income (loss) per share – basic

Income (loss) per share – fully diluted

Weighted average number of common shares outstanding – basic

2 unchanged sentences

ISSUER DIRECT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

For the Three Months Ended

For the Six Months Ended

Net income (loss)

Foreign currency translation adjustment

Comprehensive loss

Comprehensive (loss) income

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

4 unchanged sentences

Total Stockholders’

Income (Loss)

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

Balance at December 31, 2023

3 unchanged sentences

Balance at March 31, 2024

Stock-based compensation expense

Exercise of stock awards, net of tax

Foreign currency translation

Balance at June 30, 2024

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

Non-cash interest expense

Non-cash interest adjustment on note payable

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

Purchase of fixed assets

Capitalized software

Net cash (used in) provided by investing activities

Purchase of fixed assets

Purchase of acquired business, net of cash received

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Payment of long-term debt

Proceeds from issuance of term loan

Payments for capitalized debt issuance costs

Payment of note payable

Issuance of secured promissory note

Payment for capitalized debt issuance costs

Net cash used in financing activities

4 unchanged sentences

Supplemental disclosures:

Cash paid for income taxes

Cash paid for interest

3 unchanged sentences

Basis of Presentation

The unaudited interim consolidated balance sheet as of March 31, 2024 and consolidated statements of operations, comprehensive loss, stockholders’ equity and cash flows for the three-month periods ended March 31, 2024 and 2023 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, 2024 and consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for the three and six-month periods ended June 30, 2024 and 2023 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 65,750 were excluded in the computation of diluted earnings per common share during the three-month period ended March 31, 2024 because their impact was anti-dilutive.

There were 74,250 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, 2023 because their impact was anti-dilutive.

Shares issuable upon the exercise of stock options totaling 70,750 and 68,750 were excluded in the computation of diluted earnings per common share during the three and six-month periods ended June 30, 2024, respectively, because their impact was anti-dilutive.

There were 72,250 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, 2023, because their impact was anti-dilutive.

Revenue Recognition

9 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.

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.

PRO subscription contracts contain two performance obligations:

(i) 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 (ii) 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 press releases are disseminated for press release packages and ratably over the billing period for subscriptions.

Deferred revenue as of March 31, 2024 and December 31, 2023, was $ 5,584,000 and $ 5,412,000 , respectively, and is expected to be recognized within one year.

Revenue recognized for the three months ended March 31, 2024 and 2023, which was included in the deferred revenue balance at the beginning of each reporting period, was approximately $ 2,793,000 and $ 2,557,000 , respectively.

Accounts receivable, net of allowance for credit losses, related to contracts with customers was $ 4,201,000 and $ 4,368,000 as of March 31, 2024 and December 31, 2023, respectively.

Deferred revenue as of June 30, 2024 and December 31, 2023, was $ 5,476,000 and $ 5,412,000 , respectively, and is expected to be recognized within one year.

Revenue recognized for the six months ended June 30, 2024 and 2023, which was included in the deferred revenue balance at the beginning of each reporting period, was approximately $ 4,934,000 and $ 4,337,000 , respectively.

Accounts receivable, net of allowance for credit losses, related to contracts with customers was $ 4,686,000 and $ 4,368,000 as of June 30, 2024 and December 31, 2023, 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, 2024 and December 31, 2023, the Company has capitalized $ 142,000 and $ 130,000 , respectively, of costs to obtain contracts that are expected to be amortized over more than one year.

As of June 30, 2024 and December 31, 2023, the Company has capitalized $ 118,000 and $ 130,000 , 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 Credit Losses

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.

As a result, the Company changed its accounting policy for allowance for credit losses 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 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 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 credit losses for the three-months ended March 31, 2024 and 2023 was as follows:

The roll forward of the allowance for doubtful accounts for the three and six-months ended June 30, 2024 and 2023, are as follows (in 000’s):

For the Three Months Ended

For the Six Months Ended

Beginning balance

4 unchanged sentences

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 .

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, 2024, the total amount exceeding such limit was $ 62,000 .

The Company also had cash-on-hand of $ 62,000 in Europe and $ 1,095,000 in Canada as of March 31, 2024.

As of June 30, 2024, the Company’s domestic cash balance is spread among different depository institutions such that there is no balance which exceeds the FDIC insurance limit of $ 250,000 .

The Company also had cash-on-hand of $ 64,000 in Europe and $ 1,293,000 in Canada as of June 30, 2024.

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.

1 unchanged sentence

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

Significant estimates include the allowance for doubtful accounts and the valuation of goodwill, intangible assets, deferred tax assets, and stock-based compensation.

Significant estimates include the allowance for credit losses and the valuation of goodwill, intangible assets, deferred tax assets, and stock-based compensation.

Actual results could differ from those estimates.

7 unchanged sentences

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

Amortization for the three-month periods ended March 31, 2024 and 2023, is as follows (in thousands):

Capitalized costs and amortization for the three and six-month periods ended June 30, 2024 and 2023, are as follows (in thousands):

For the Three Months Ended

For the Six Months Ended

Capitalized software development costs

11 unchanged sentences

Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred.

As most leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

As most of the leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

ROU assets include any lease payments due and exclude lease incentives.

1 unchanged sentence

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, 2024 and December 31, 2023, 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, 2024 and December 31, 2023, 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

10 unchanged sentences

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.

Comprehensive Loss

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

As of June 30, 2024, the Company’s market capitalization is less than the carrying value of its equity, plus net debt.

This may be an indicator of impairment of the Company’s long-lived assets, however, at this time, management believes the Company’s stock price is in temporary decline and also considers other factors such as future growth, positive cash flow and other measures the Company is able to control in determining if a quantitative test is necessary.

Should the stock price continue to remain at levels below the Company’s carrying value, a quantitative test may be necessary, which could conclude an impairment exists.

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, 2024 and 2023, advertising expense was $ 439,000 and $ 462,000 , respectively.

During the three and six-month periods ended June 30, 2024, advertising expense was $ 339,000 and $ 778,000 , respectively.

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

Stock-based Compensation

1 unchanged sentence

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

The Company did not pay any dividends during the three-month periods ended March 31, 2024 and 2023.

The Company did not pay any dividends during the three and six-month periods ended June 30, 2024 and 2023.

Preferred stock and common stock

There were no issuances of preferred stock or common stock during the three-month periods ended March 31, 2024 and 2023, other than stock awarded to employees and the Board of Directors.

2014 and 2023 Equity Incentive Plan

There were no issuances of preferred stock or common stock during the three and six-month periods ended June 30, 2024 and 2023, other than stock awarded to employees and the Board of Directors.

2014 Equity Incentive Plan

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

2 unchanged sentences

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

The 2014 Plan is effective through March 31, 2024.

As of March 31, 2024, there are 90,076 shares which remain to be granted under the 2014 Plan.

The 2014 Plan was effective through March 31, 2024.

As of June 30, 2024, there are 105,076 shares which remain to be granted under the 2014 Plan.

These shares were assumed by the 2023 Plan described below.

3 unchanged sentences

The 2023 Plan is effective through April 1, 2033.

As of March 31, 2024, there are 349,244 shares which remain to be granted under the 2023 Plan, including 90,076 shares assumed under the 2014 Plan described above.

The following table summarizes information about stock options outstanding and exercisable at March 31, 2024:

As of June 30, 2024, there are 358,244 shares which remain to be granted under the 2023 Plan, including 105,076 shares assumed under the 2014 Plan described above.

The following table summarizes information about stock options outstanding and exercisable at June 30, 2024:

Options Outstanding

9 unchanged sentences

$ 11.01 - 16.00

As of March 31, 2024, the Company had unrecognized stock compensation related to the options of $ 331,000 , which will be recognized through 2027.

During the three months ended March 31, 2024, the Company granted 26,500 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 $ 14.86 per share.

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 three years.

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

During the three months ended March 31, 2024, 2,167 restricted stock units with an average intrinsic value of $ 28.24 , vested.

As of March 31, 2024, there was $ 1,326,000 of unrecognized compensation cost related to our unvested restricted stock units, which will be recognized through 2026.

The Company recognized income tax expense of $ 16,000 for the three-month period ended March 31, 2024, compared to an income tax benefit of $ 48,000 during the same period of 2023.

$ 16.01 - 27.00

$ 27.01 - 27.71

As of June 30, 2024, the Company had unrecognized stock compensation related to the options of $ 291,000 , which will be recognized through 2027.

During the three and six-months ended June 30, 2024, the Company granted 6,000 and 32,500 , respectively, of restricted stock units to employees and contractors, which vest at various intervals over the next 3 years.

The average grant date fair value of these grants was $ 9.70 and $ 13.91 per share during the three and six-month periods ended June 30, 2024, respectively.

During the three and six-months ended June 30, 2023, the Company granted 14,332 and 74,732 restricted stock units, with a grant date fair value of $ 18.70 and $ 26.08 per share, respectively.

During the three and six-month periods ended June 30, 2024, 14,332 and 16,499 restricted stock units with an average intrinsic value of $ 18.70 and 19.95 per share, respectively, vested.

As of June 30, 2024, there was $ 1,143,000 of unrecognized compensation cost related to our unvested restricted stock units, which will be recognized through 2027.

The Company recognized an income tax expense of $ 47,000 and $ 63,000 for the three and six-month period ended June 30, 2024, compared to income tax expense of $ 482,000 and $ 434,000 during the same periods of 2023.

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, 2024 and 2023, the variance between the Company’s 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, 2024, the effective tax rate was also impacted by additional expense associated with vesting of stock-based compensation.

For the three and six-month periods ended June 30, 2024 and 2023, the variance between our effective tax rate and the U.S.

statutory rate of 21 % is primarily attributable to state income tax and expenses not deductible for tax purposes.

For the three and six-month periods ended June 30, 2024, the effective tax rate was also impacted by additional expense associated with vesting of stock-based compensation.

Leasing activity generally consists of office leases.

In March 2019, a new lease was signed to move the corporate headquarters to Raleigh, North Carolina.

In March 2019, we signed a new lease to move the corporate headquarters to Raleigh, North Carolina.

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, 2024.

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, 2024.

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 $ 1,306 ,000 as of March 31, 2024.

Lease liabilities totaled $ 1,224,000 as of June 30, 2024.

The current portion of this liability of $ 384,000 is included in Accrued expenses on the Consolidated balance sheets and the long-term portion of $ 840,000 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 3.75 years as of March 31, 2024.

As of March 31, 2024, 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, 2024, are as follows (in 000’s):

Total lease expense

The weighted-average remaining non-cancelable lease term for our operating leases was 3.50 years as of June 30, 2024.

As of June 30, 2024, 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, 2024, are as follows (in 000’s):

Year Ended December 31:

5 unchanged sentences

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

Three months ended March 31,

Three months ended June 30,

Revenue Streams

Communications

The Company did not have any customers during the three-month periods ended March 31, 2024 or 2023 that accounted for more than 10 % of our revenue.

Six months ended June 30,

Revenue Streams

Communications

The Company did not have any customers during the three and six-month periods ended June 30, 2024 or the six-month period ended June 30, 2023 that accounted for more than 10 % of our revenue.

There was one customer during the three-month period ended June 30, 2023 that accounted for more than 10 % of revenue.

Credit Agreement

4 unchanged sentences

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 began making monthly interest only payments on the Term Loan beginning on April 1, 2023.

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

On January 1, 2024, the Company began making monthly principal payments of $ 333,333 plus interest payments on the Term Loan until the maturity date of December 20, 2028 .

1 unchanged sentence

In order to settle the Seller 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.

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

Effective June 25, 2024, the aggregate principal amount of the Revolving LOC was reduced to $ 1,500,000 .

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

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%.

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.

Effective June 25, 2024, Pinnacle’s commitment to fund under the Revolving LOC was amended to terminate on June 30, 2025, 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 March 31, 2024, 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 ending 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.

As of June 30, 2024, there was no outstanding balance under the Revolving LOC and the interest rate was 7.39%.

The Credit Agreement originally contained financial covenants, which commenced with fiscal quarter ending June 30, 2023, and were subsequently amended on June 25, 2024, as follows:

Fiscal Quarter

Fixed Charge Coverage Ratio

Each fiscal quarter ending on or after June 30, 2023 through June 30, 2024

Fiscal quarter ending on or after September 30, 2024 through March 31, 2025

Each fiscal quarter ending on or after June 30, 2025

Leverage Ratio

Each fiscal quarter ending on or after June 30, 2023 through September 30, 2023

Fiscal quarter ending December 31, 2023

Fiscal quarter ending March 31, 2024

Each fiscal quarter ending on or after June 30, 2024 through September 30, 2024

Fiscal quarter ending December 31, 2024

Fiscal quarter ending March 31, 2025

Each fiscal quarter ending on or after June 30, 2025

Additionally, as long as the Company maintains a Leverage Ratio greater than 2.75 :

1.0, the Company is required to maintain unrestricted liquidity, as defined in the amendment, of not less than $ 1,500,000 , beginning June 30, 2024.

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 .

As of March 31, 2024, the variable rate was 7.67 %

At June 30, 2024, the weighted average rate was 7.69 %.

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, 2024 and December 31, 2023 was a net asset of $ 184,000 and net liability of $ 21,000 , respectively, and is included in Other long-term assets and Other long-term liabilities, in the Consolidated Balance Sheets.

The fair value of the swap agreement as of June 30, 2024 and December 31, 2023 was a net asset of $ 198,000 and net liability of $ 21,000 , respectively, and is included in Other long-term assets and 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.

During the three months ended March 31, 2024 and 2023, we recognized a gain of $ 205,000 and loss of $ 165,000 , respectively, in Other income (expense) in the Consolidated statements of operations, as a result of the interest rate swap.

During the three and six-month periods ended June 30, 2024, we recognized a gain of $ 14,000 and $ 219,000 , respectively, in Other income (expense) in the Consolidated statements of operations, as a result of the interest rate swap.

During the three and six-month periods ended June 30, 2023, we recognized a gain of $ 379,000 and $ 214,000 , respectively, in Other income (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.

What changed 10-Q

Item 1. Financial Statements