What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-05-09 · 137 added, 118 removed, 222 unchanged (53% of the section changed)

23 unchanged sentences

Set forth below is an infographic depicting the products included in each of these two main categories we provide today:

In the future, we expect the Communications portion of our business to continue to increase, both in terms of overall revenue and as compared to the Compliance portion of our business.

Long term, we expect the Communications portion of our business to continue to increase, both in terms of overall revenue and as compared to the Compliance portion of our business.

Therefore, we plan to continue to invest in offerings we intend to incorporate into and complement our Communications product lineup.

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These products are sold as the leading part of our Communications subscription, as well as individually to customers around the globe and are further described below.

Like other newswires globally, ours are dependent upon several key partners for its news distribution.

Like other newswires, ours are dependent upon several key partners for its news distribution.

Disruption in any of our partnerships could have a materially adverse impact on our overall business.

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Today we continue to operate this brand independently as a stand-alone front-end marketing and news distribution brand option for private companies.

Its distribution was fully integrated into the company’s main newswire brand ACCESSWIRE in early 2023.

Its distribution was fully integrated into ACCESSWIRE’s distribution network in early 2023.

Newswire began in 2016 as an ecommerce news distribution platform, that has evolved over the years to serve thousands of customers globally.

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As part of the iNewswire acquisition, we acquired certain assets that with further development resulted in our ability to release a subscription add-on to our Newswire and ACCESSWIRE brands, which we call Media Suite.

Media Suite includes three new products:

Media Database, Media Pitching, and Media Monitoring, all of which are further described below.

The Media Suite offering provides communication professionals with the opportunity to build their story, incorporate artificial intelligence (AI) if desired, effectively pitch the media, and monitor their internal brand as well as their competitors.

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Media Suite Starter, Media Suite Plus, and Media Suite Enterprise, each providing different combinations of our solutions to help our customers reach their goals.

Media Suite includes three products:

Media Database, Media Pitching, and Media Monitoring, all of which are further described below.

Media Database – Our media database is based on the idea that pitching the media should be a targeted endeavor.

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As such, companies can produce content for public distribution and it is automatically linked to their corporate website, distributed to targeted groups and placed into our data feed partners.

During 2023 we released significant upgrades to our investor relations website, that included ADA Compliance (Americans with Disabilities Act) which ensures that people with disabilities have the same access to all areas of a business's premises.

Specifically, this module addresses electronic information and technology, such as our customers’ websites.

This add-on requires a recurring annual subscription and is delivered fully integrated into and with our investor relations website offering.

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Results of Operations

Comparison of results of operations for the three months ended March 31, 2024 and 2023 (in 000’s):

Three Months Ended

Comparison of results of operations for the three and six-months ended June 30, 2024 and 2023 (in 000’s):

Three Months Ended June 30,

Percentage of Revenue (1)

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Total expenses

Operating (loss) income

Operating income

Interest expense, net

Other income (expense)

Income before income taxes

Income tax expense

Six Months Ended June 30,

Percentage of Revenue (1)

Communications revenue

Compliance revenue

Total revenue

Cost of revenue:

Communications cost of revenue

Compliance cost of revenue

Total cost of revenue

Gross Margin:

Communications gross margin

Compliance gross margin

Total gross margin

Operating Expenses:

General and administrative

Sales and marketing

Product development

Depreciation and amortization

Total expenses

Operating income

Interest expense, net

Other income (expense), net

(Loss) income before income taxes

Income tax (benefit) expense

Income tax expense

Net (loss) income

Percentage of revenue is calculated as the relevant revenue, expense, income amount divided by total revenue, except for communications and compliance cost of revenue and communications and compliance gross margin, which are divided by the related component of revenue.

Total revenue decreased $1,657,000, or 19%, to $6,962,000 during the three months ended March 31, 2024, as compared to $8,619,000 for the same period in 2023.

The decrease is attributable to declines in revenue in both our Communications and Compliance revenue streams.

Communications revenue decreased $1,107,000, or 17%, to $5,459,000 for the three months ended March 31, 2024, as compared to $6,566,000 for the same period of 2023.

The decrease in revenue is due to both a decrease in volume in our Newswire business as well as decrease in pricing mix from our ACCESSWIRE business.

Additionally, revenue from our events and webcasting business was lower due to a large conference that occurred during the three months ended March 31, 2023, but not during the current year.

Communications revenue represented 78% of total revenue during the three months ended March 31, 2024, as compared to 76% for the same period of 2023.

Compliance revenue decreased $550,000, or 27%, to $1,503,000 during the three months ended March 31, 2024, as compared to $2,053,000 during the same period of 2023.

The decrease was primarily related to a decrease in revenue from print and proxy fulfillment services due to fewer and smaller transactions than in the prior year.

Additionally, we had a decrease in revenue from our transfer agent services due to a decrease in corporate actions and directives during the period.

Revenue from these two services tends to fluctuate from quarter to quarter because they are project-based and dependent on market activity.

Total revenue decreased $1,964,000, or 20%, to $7,687,000 during the three months ended June 30, 2024, as compared to $9,651,000 for the same period of 2023.

Total revenue decreased by $3,621,000, also 20%, to $14,649,000 during the six months ended June 30, 2024, as compared to $18,270,000 during the same period of 2023.

For the three months ended June 30, 2024, the decrease is attributable to a decrease in revenue from our Compliance revenue stream, however for the six months ended June 30, 2024, the decrease in revenue is attributable to a decrease in both our Compliance and Communications revenue streams.

Communications revenue increased $8,000 to $5,944,000 for the three months ended June 30, 2024, compared to $5,936,000 for the same period of 2023.

For the six months ended June 30, 2024, Communications revenue decreased $1,099,000, or 9% to $11,403,000 from $12,502,000 for the same period of 2023.

The decrease in revenue for the six months ended June 30, 2024, is primarily attributable to lower volumes from our Newswire brand.

Communications revenue represented 77% and 78% of total revenue during the three and six months ended June 30, 2024, respectively, as compared to 62% and 68%, respectively, for the same periods of 2023.

Compliance revenue decreased $1,972,000, or 53% and $2,522,000, or 44%, during the three and six months ended June 30, 2024, respectively, as compared to the same periods of 2023.

The decrease is primarily related to a decrease in revenue from our print and proxy fulfillment services due to a few one-time, significant transactions which occurred during the three and six months ended June 30, 2023, however, did not occur in the current year.

Additionally, we experienced a decrease in revenue from our transfer agent services due to a decrease in corporate actions and directives during the period.

Revenue Backlog

As of March 31, 2024, our deferred revenue balance was $5,584,000, which we expect to recognize over the next twelve months, compared to $5,412,000 at December 31, 2023, an increase of 3%.

As of June 30, 2024, our deferred revenue balance was $5,476,000, which we expect to recognize over the next twelve months, compared to $5,412,000 as of December 31, 2023, an increase of 1%.

Deferred revenue primarily consists of advance billings for pre-paid packages of our news distribution products as well as advance billings for subscriptions of our cloud-based products and annual service contracts.

Cost of Revenues

Communications cost of revenues consists primarily of direct labor costs, newswire distribution costs, teleconferencing costs, and third-party licensing costs.

Compliance and other costs of revenue consists primarily of direct labor costs, warehousing, logistics, print production materials and postage.

Cost of revenues decreased by $108,000, or 6%, during the three months ended March 31, 2024, as compared to the same period of 2023.

Overall gross margin decreased $1,549,000, or 23%, during the three months ended March 31, 2024, compared to the same period of 2023.

As a result, overall gross margin percentage decreased to 75% during the three months ended March 31, 2024, as compared to 79% during the same period of 2023.

Cost of revenues associated with our Communications revenue decreased $42,000, or 3%, during the three months ended March 31, 2024 as compared to the same period of 2023.

This decrease is primarily due to lower volume noted earlier.

Gross margin percentage associated with our Communications revenue was 75% for the three months ended March 31, 2024 compared to 79% for the same period of 2023.

The decrease in gross margin percentage is due to lower Communications revenue.

Cost of revenues associated with our Compliance revenue decreased $66,000, or 15%, during the three months ended March 31, 2024 as compared to the same period of 2023.

The decrease is primarily the result of lower print and postage costs associated with lower revenue from our print and proxy fulfillment services.

As a result, gross margin percentage associated with our Compliance revenue decreased to 75% for the three months ended March 31, 2024, compared to 78% for the same period of 2023.

Communications cost of revenues consist primarily of direct labor costs, newswire distribution costs, teleconferencing costs, and third-party licensing costs.

Compliance cost of revenues consist primarily of direct labor costs, warehousing, logistics, print production materials and postage.

Cost of revenues decreased $551,000, or 24% and $659,000, or 16%, during the three and six months ended June 30, 2024, respectively, as compared to the same periods of 2023.

Overall gross margin decreased $1,413,000, or 19% and $2,962,000, or 21%, during the three and six months ended June 30, 2024, respectively, as compared to the same periods of 2023.

Overall gross margin percentage increased to 77% for the three months ended June 30, 2024, as compared to 76% during the same period of 2023, however, decreased 1% during the six months ended June 30, 2024, as compared to the same period of 2023.

Cost of revenues associated with our Communications revenue decreased $107,000, or 7% and $149,000, or 5%, during the three and six months ended June 30, 2024, respectively, as compared to the same periods of 2023.

The decreases are primarily due optimization of our editorial staff and lower distribution costs.

Gross margin percentage associated with our Communications revenue was 78% and 77% for the three and six-months ended June 30, 2024, respectively, as compared to 76% and 77% during the same periods of 2023.

Cost of revenues associated with our Compliance revenue decreased $444,000, or 49% and $510,000, or 38%, during the three and six months ended June 30, 2024, respectively, as compared to the same period of 2023.

The decrease is due to lower print and postage costs associated with the decreased revenue from print and proxy fulfillment services during the periods.

As a result, gross margin percentage associated with our Compliance revenue decreased to 74% for the three and six-months ended June 30, 2024, as compared to 76% and 77%, respectively, for the same periods of 2023.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries, bonuses, stock-based compensation, insurance, fees for professional services, general corporate expenses (including bad debt expense) and facility and equipment expenses.

General and administrative expenses were $1,819,000 for the three months ended March 31, 2024, a decrease of $513,000 or 22%, as compared to the same period of 2023.

The decrease is primarily driven by a benefit to stock compensation expense as a result of the resignation of an executive officer as well as lower one-time transaction and integration costs, partially offset by an increase in bad debt expense.

As a percentage of revenue, general and administrative expenses were 26% for the three months ended March 31, 2024, as compared to 27% for the same period of 2023.

General and administrative expenses consist primarily of salaries, bonuses, stock-based compensation, insurance, fees for professional services, general corporate expenses (including provision for credit losses) and facility and equipment expenses.

General and administrative expenses were $2,164,000 during the three months ended June 30, 2024, a decrease of $110,000, or 5%, as compared to the same period of 2023.

General and administrative expenses were $3,983,000 for the six months ended June 30, 2024, a decrease of $623,000, or 14%, as compared to the same period of 2023.

The decreases are primarily driven by a benefit to stock compensation expense as a result of the resignation of an executive officer, a decrease in corporate headcount, as well as, lower one-time transaction and integrations costs, partially offset by an increase in the provision for credit losses.

As a percentage of revenue, general and administrative expenses were 28% and 27% for the three and six-months ended June 30, 2024, respectively, as compared to 24% and 25% for the same periods of 2023.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of salaries, stock-based compensation, sales commissions, advertising expenses, tradeshow expenses and other marketing expenses.

Sales and marketing expenses were $2,096,000 for the three months ended March 31, 2024, a decrease of $285,000, or 12%, as compared to the same period of 2023.

This decrease is primarily due to lower employee-related expenses, including commissions.

As a percentage of revenue, sales and marketing expenses were 30% for the three months ended March 31, 2024, as compared to 28% for the same period of 2023.

Sales and marketing expenses were $1,970,000 for the three months ended June 30, 2024, a decrease of $69,000, or 3%, as compared to the same period of 2023.

Sales and marketing expenses were $4,066,000 for the six months ended June 30, 2024, a decrease of $354,000, or 8% as compared to the same period of 2023.

These decreases are primarily due to lower employee-related expenses, including commissions.

As a percentage of revenue, sales and marketing expenses were 26% and 28% for the three and six months ended June 30, 2024, respectively, as compared to 21% and 24% for the same periods of 2023.

Product Development Expenses

Product development expenses consist primarily of salaries, stock-based compensation, bonuses, and licenses to develop new products and technology to complement and/or enhance our platform.

Product development expenses decreased $120,000, or 16%, to $654,000 during the three months ended March 31, 2024, as compared to 2023.

The decrease is primarily due to the capitalization of $245,000 for our Media Suite product as well as enhancements to our ACCESSWIRE system.

No costs were capitalized during the three months ended March 31, 2023.

As a percentage of revenue, product development expenses were 9% for both the three months ended March 31, 2024 and 2023.

Interest Income (Expense), Net

We recognized interest expense of $308,000 for the three-month period ended March 31, 2024, compared to $337,000 during the same period of 2023.

For the three months ended March 31, 2024, interest expense is related to our long-term credit agreement.

For the three months ended March 31, 2023, interest expense primarily represents interest attributed to the $22,000,000 Seller Note, as well as $47,000 of accrued interest related to our long-term credit agreement.

These amounts are offset by interest income on deposit and money market accounts of $32,000 and $99,000 for the three months ended March 31, 2024 and 2023, respectively.

Other income (expense)

Other income (expense) represents the change in fair value of our interest rate swap.

For the three months ended March 31, 2023, Other income (expense) also includes expense related to $370,000 paid to extinguish the Seller Note.

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

For the three-month periods ended March 31, 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.

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 awards.

Product development expenses increased $187,000, or 35% and $67,000, or 5% to $719,000 and $1,373,000 during the three and six months ended June 30, 2024, respectively, as compared to the same periods of 2023.

These increases are primarily due to an increase in headcount as we continue to invest in our products and technology.

During the three and six months ended June 30, 2024, we capitalized $155,000 and $400,000, respectively, compared to $167,000 during both the three and six months ended June 30, 2023.

As a percentage of revenue, product development expenses were 9% for both the three and six months ended June 30, 2024, respectively, as compared to 6% and 7% for the same periods of 2023.

Interest expense, net

We recognized interest expense of $315,000 and $623,000 for the three and six months ended June 30, 2024, respectively, compared to $375,000 and 712,000 during the same periods of 2023.

Interest expense for these periods is related to our long-term credit agreement.

For the six months ended June 30, 2023, interest expense is also attributed to the $22,000,000 Seller Note.

These amounts are partially offset by interest income of $21,000 and $53,000 for the three and six months ended June 30, 2024, respectively, and $94,000 and $193,000 for the three and six months ended June 30, 2023, from deposit and money market accounts.

Other income (expense), net

Other income (expense), net represents the change in fair value of our interest rate swap.

For the six months ended June 30, 2023, Other income (expense), net also includes expense related to $370,000 paid to extinguish the Seller Note.

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 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.

Liquidity and Capital Resources

As of March 31, 2024, we had $5,399,000 in cash and cash equivalents and $4,201,000 in net accounts receivable.

Current liabilities as of March 31, 2024, totaled $13,215,000 including our accounts payable, deferred revenue, accrued payroll liabilities, income taxes payable, current portion of long-term debt, current portion of lease liabilities and other accrued expenses.

On March 31, 2024, our current liabilities exceeded our current assets by $2,116,000.

On March 20, 2023 (the “Closing Date”), the Company entered into a $25 million credit agreement (the “Credit Agreement”) with Pinnacle Bank (“Pinnacle”).

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).

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 began making monthly interest only payments on the Term Loan beginning 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.

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 “Seller Note”) issued to Lead Capital, LLC (“the Seller”) in connection with the Company’s November 1, 2022 acquisition of iNewswire.com LLC (“Newswire”) for a lump sum payment of $22,880,000.

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 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.

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 commence 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.

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

maintenance of adequate financial and accounting books and records, delivery of financial statements and other information, preservation of existence of the Company and subsidiaries, payment of taxes and claims, compliance with laws, maintenance of insurance, foreign qualification, use of proceeds, cash management system, maintenance of properties, and conduct of business.

The Credit Agreement also contains customary negative covenants for a transaction of this nature, including, among other things, covenants relating to debt, liens, investments, negative pledges, dividends and other debt payments, restriction on fundamental changes, sale of assets, transactions with affiliates, restrictive agreements, and changes in fiscal year.

The Credit Agreement also contains various Events of Default (subject to certain grace periods, to the extent applicable), including among other things, Events of Default for the nonpayment of principal, interest or fees;

breach of certain covenants;

inaccuracy of the representations or warranties in any material respect;

bankruptcy or insolvency;

dissolution or change of control;

certain unsatisfied judgments;

defaults under material agreements;

certain unfunded liabilities under employee benefit plans;

certain unsatisfied judgments;

certain ERISA violations;

and the invalidity or unenforceability of the Credit Agreement.

If an Event of Default occurs, the Company may be required to repay all amounts outstanding under the Credit Agreement.

The Term Loan and any advances under the Revolving LOC are secured by a first priority lien and security interest to the benefit of Pinnacle in the Event of Default on all of the Company’s current or future assets and each of the Guarantor’s current or future assets.

As of June 30, 2024, we had $4,020,000 in cash and cash equivalents and $4,686,000 in net accounts receivable.

Current liabilities as of June 30, 2024, totaled $12,559,000 including our accounts payable, deferred revenue, accrued payroll liabilities, income taxes payable, current portion of long-term debt, current portion of lease liabilities and other accrued expenses.

On June 30, 2024, our current liabilities exceeded our current assets by $2,320,000.

See Note 7 to our financial statements regarding information on our Credit Agreement.

Disclosure about Off-Balance Sheet Arrangements

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Free cash flow and adjusted free cash flow are non-GAAP financial measures.

For the three months ended March 31, 2024 and 2023, free cash flow and adjusted free cash flow were as follows:

Three Months Ended

For the three and six months ended June 30, 2024 and 2023, free cash flow and adjusted free cash flow were as follows:

Three Months Ended June 30,

Net cash (used in) provided by operating activities (US GAAP)

Payments for purchase of fixed assets and capitalized software

Free cash flow (Non-GAAP)

Cash paid for acquisition and/or integration related items (1)

Cash paid for other unusual items (2)

Adjusted free cash flow (Non-GAAP)

Six Months Ended June 30,

Net cash provided by operating activities (US GAAP)

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Free cash flow (Non-GAAP)

Cash paid for acquisition and integration related items (1)

Cash paid for acquisition and/or integration related items (1)

Cash paid for other unusual items (2)

Adjusted free cash flow (Non-GAAP)

This adjustment gives effect to one-time corporate projects, including acquisition and integration related expenses, paid during the periods.

For the three months ended March 31, 2024, this relates to payments for one-time accounting fees during the period.

For the three months ended March 31, 2023, this adjustment is primarily related to a one-time payment of $370,000 related to the early extinguishment of the Seller Note.

This adjustment gives effect to one-time corporate projects, including acquisition and/or integration related expenses, paid during the periods.

For the three and six months ended June 30, 2024, this adjustment gives effect to payments for one-time accounting fees, termination benefits and other non-recurring or unusual expenses.

During the six months ended June 30, 2023, this adjustment is primarily related to a one-time payment of $370,000 related to the early termination of the note payable associated with the Newswire acquisition.

Adjusted EBITDA and adjusted net income are non-GAAP financial measures and should not be considered as a substitute for analysis of our results as reported under US GAAP.

These measures are defined differently by different companies, and accordingly, such measures may not be comparable to similarly titled measures of other companies and have important limitations as an analytical tool.

A reconciliation of net income to adjusted EBITDA for the three months ended March 31, 2024 and 2023 is presented in the following table (in 000’s):

Three Months Ended

A reconciliation of net income to adjusted EBITDA for the three and six months ended June 30, 2024 and 2023, is presented in the following table (in 000’s):

Three Months Ended June 30,

Depreciation and amortization

Interest expense, net

Income tax expense (benefit)

Income tax expense

Acquisition and/or integration costs (1)

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Adjusted EBITDA:

This adjustment gives effect to one-time corporate projects, including acquisition and integration related expenses, incurred during the periods.

For the three months ended March 31, 2024, this adjustment gives effect to the change in fair value of our interest rate swap of $205,000, partially offset by one-time accounting costs of $35,000.

For the three months ended March 31, 2023, this adjustment gives effect to $370,000 payment related to early extinguishment of Seller Note and $165,000 loss due to the change in fair value of our interest rate swap.

Six Months Ended June 30,

Net (loss) income:

Depreciation and amortization

Interest expense, net

Income tax expense

Acquisition and/or integration costs (1)

Other non-recurring expenses (2)

Stock-based compensation expense (3)

Adjusted EBITDA:

This adjustment gives effect to one-time corporate projects, including acquisition and/or integration related expenses, incurred during the periods.

For the three and six months ended June 30, 2024, this adjustment gives effect to a gain recorded on the change in fair value of our interest rate swap of $14,000 and $219,000, respectively, partially offset by one-time accounting fees, termination benefits and other non-recurring or unusual expenses of $52,000 and $87,000, respectively.

For the three months ended June 30, 2023, this adjustment gives effect to a gain recorded on the change in fair value of our interest rate swap of $379,000, partially offset by one-time, non-recurring expenses of $45,000.

For the six months ended June 30, 2023, this adjustment gives effect to $370,000 payment related to early extinguishment of our Seller Note and one-time non-recurring expenses of $45,000, partially offset by a gain recorded on the change in fair value of our interest rate swap of $214,000.

The adjustments represent stock-based compensation expense related to awards of stock options, restricted stock units, or common stock in exchange for services.

Although we expect to continue to award stock in exchange for services, the amount of stock-based compensation is excluded as it is subject to change as a result of one-time or non-recurring projects.

For the three months ended March 31, 2024, this amount includes a benefit as a result of the resignation of an executive officer.

A reconciliation of net income to adjusted net income for the three months ended March 31, 2024 and 2023 is presented in the following table (in 000’s):

Three Months Ended March 31,

A reconciliation of net income to adjusted net income for the three and six months ended June 30, 2024 and 2023 is presented in the following table (in 000’s):

Three Months Ended June 30,

Per diluted share

Amortization of intangible assets (1)

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Weighted average number of common shares outstanding – diluted

Six Months Ended June 30,

Per diluted share

Net (loss) income:

Amortization of intangible assets (1)

Stock-based compensation expense (2)

Other unusual items (3)

Discrete items impacting income tax expense

Tax impact of adjustments (4)

Non-GAAP net income:

Weighted average number of common shares outstanding – diluted

The adjustments represent the amortization of intangible assets related to acquired assets and companies.

1 unchanged sentence

For the three months ended March 31, 2024, this amount includes a benefit as a result of the resignation of an executive officer.

For the three months ended March 31, 2024, this adjustment gives effect to the change in fair value of our interest rate swap of $205,000, partially offset by one-time corporate projects, including acquisition and integration expenses, incurred during the period of $100,000.

For the three months ended March 31, 2023, this adjustment gives effect to one-time corporate projects, including acquisition and integration related expenses, incurred during the period of $234,000, $370,000 related to the early extinguishment of the Seller Note associated with the Newswire acquisition and $165,000 loss related to the change in fair value of our interest rate swap.

This adjustment gives effect to discrete items that impact income tax expense.

For the three months ended March 31, 2024, this relates to additional expense associated with vesting of stock-based compensation awards.

For the six months ended June 30, 2023, this adjustment gives effect to one-time, non-recurring expenses, including acquisition and/or integration expenses of $371,000, $370,000 payment related to early extinguishment of our Seller Note and one-time non-recurring expenses of $45,000, partially offset by a gain recorded on the change in fair value of our interest rate swap of $214,000.

This adjustment gives effect to the tax impact of all non-GAAP adjustments at the current Federal tax rate of 21%.

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Refer also to the Cautionary Statement Concerning Forward Looking Statements included in this report.

Market factors like the current military conflicts in Ukraine and Israel, instability in global energy markets, global inflation and the increase of interest rates have contributed to significant global economic uncertainty, disrupted global trade and supply chains, adversely impacted many industries, and contributed to significant volatility in financial markets.

Overall, despite many uncertainties in the market regarding the economic outlook, we believe the demand for our platforms and services is stable in a majority of the markets we serve.

Market factors like the current military conflicts in Ukraine and Israel, instability in global energy markets, global inflation and the increase of interest rates have contributed to significant global economic and political uncertainty, disrupted global trade and supply chains, adversely impacted many industries, and contributed to significant volatility in financial markets.

Overall, despite many uncertainties in the market regarding the economic and political outlook, we believe the demand for our platforms and services is stable in a majority of the markets we serve.

The historical success of our Communications offering has been led by our ACCESSWIRE branded newswire, which is now complemented by the Newswire business.

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However, under current accounting standards, in the event our stock price continues to decline, or we do not see stable to increased demand for our combined newswire business through 2024 and beyond, it may be possible we will be required to write down goodwill and/or intangible assets, specifically related to the Newswire acquisition, if we determine the assets have been impaired.

If a write-down of goodwill and/or intangible assets were to occur, it would likely have a material negative effect on our consolidated financial statements.

If a write-down of goodwill and/or intangible assets were to occur, it would likely have a short-term material negative effect on our consolidated financial statements.

We believe the continued transition to a platform subscription model has been and will continue to be key for our long-term sustainable growth.

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Evaluating acquisitions in areas of strategic focus,

Expanding our Communications sales and marketing teams and digital marketing strategy,

Aligning our sales and marketing teams to be entirely focused on our Communications offerings,

Expanding customer base,

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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 2. Management’s Discussion and Analysis