What changed in this filing

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Item 1. Financial Statements

2024-11-07 compared with 2024-08-08 · 112 added, 66 removed, 353 unchanged (34% of the section changed)

3 unchanged sentences

(in thousands, except share and per share amounts)

September 30,

Current assets:

Cash and cash equivalents

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

Accounts receivable (net of allowance for credit losses of $ 1,375 and $ 1,119 , respectively

Income tax receivable

21 unchanged sentences

Stockholders' equity:

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.

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

Common stock $ 0.001 par value, 20,000,000 shares authorized, 3,833,977 and 3,815,212 shares issued and outstanding as of September 30, 2024 and December 31, 2023, 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

20 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Net income (loss)

Foreign currency translation adjustment

Comprehensive (loss) income

Comprehensive income (loss)

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

2 unchanged sentences

(in thousands, except share and per share amounts)

Additional Paid-in

Accumulated Other Comprehensive

9 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

Accumulated Other Comprehensive

Total Stockholders’

Income (Loss)

Balance at December 31, 2023

7 unchanged sentences

Balance at June 30, 2024

Stock-based compensation expense

Exercise of stock awards, net of tax

Foreign currency translation

Balance at September 30, 2024

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:

6 unchanged sentences

Stock-based compensation expense

Measurement period adjustments

Non-cash interest adjustment on note payable

12 unchanged sentences

Cash flows from financing activities:

Exercise of stock options

Payment of note payable

13 unchanged sentences

Basis of Presentation

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.

The unaudited interim consolidated balance sheet as of September 30, 2024 and consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for the three and nine-month periods ended September 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.

Results of operations reported for the interim periods are not necessarily indicative of results for the entire year.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("US GAAP") have been condensed or omitted pursuant to such rules and regulations relating to interim financial statements.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("US GAAP" or “GAAP”) have been condensed or omitted pursuant to such rules and regulations relating to interim financial statements.

The interim financial information should be read in conjunction with the 2023 audited financial statements of Issuer Direct Corporation (the “Company”, “We”, or “Our”) filed on Form 10-K for the year ended December 31, 2023.

5 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 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.

Shares issuable upon the exercise of stock options totaling 54,750 and 52,750 were excluded in the computation of diluted earnings per common share during the three and nine-month periods ended September 30, 2024, respectively, because their impact was anti-dilutive.

There were 72,750 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, 2023, because their impact was anti-dilutive.

Revenue Recognition

30 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 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.

Deferred revenue as of September 30, 2024 and December 31, 2023, was $ 5,308,000 and $ 5,412,000 , respectively, and is expected to be recognized within one year.

Revenue recognized for the nine months ended September 30, 2024 and 2023, which was included in the deferred revenue balance at the beginning of each reporting period, was approximately $ 4,699,000 and $ 3,659,000 , respectively.

Accounts receivable, net of allowance for credit losses, related to contracts with customers was $ 4,405,000 and $ 4,368,000 as of September 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 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.

As of September 30, 2024 and December 31, 2023, the Company has capitalized $ 125,000 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.

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, 2024 and 2023, are as follows (in 000’s):

The roll forward of the allowance for credit losses for the three and nine-months ended September 30, 2024 and 2023, are as follows (in thousands):

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Beginning balance

4 unchanged sentences

The Company places its cash and temporary cash investments with credit quality institutions.

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.

As of September 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 $ 69,000 in Europe and $ 1,524,000 in Canada as of September 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.

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, 2024 and 2023, are as follows (in thousands):

Capitalized costs and amortization for the three and nine-month periods ended September 30, 2024 and 2023, 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, 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.

As of September 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

12 unchanged sentences

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.

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.

At times during the nine months ended September 30, 2024, the Company’s market capitalization was less than the Company’s book equity, which may be an indicator of impairment of the Company’s long-lived assets.

Although, at this time, management believes the Company’s stock price is in temporary decline, the Company performed a quantitative test to determine the fair market value of the Company.

This test concluded that the fair market value of the Company’s assets approximates the book value of the Company.

This conclusion was determined using valuations based on the trading price of the Company’s stock, the discounted cash flow method and the guideline public company method.

The test includes several estimations and assumptions of future performance and market conditions, which are subject to change.

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

Comprehensive Income

1 unchanged sentence

The Company expenses advertising as incurred.

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.

During the three and nine-month periods ended September 30, 2024, advertising expense was $ 255,000 and $ 1,033,000 , respectively.

During the three and nine-month periods ended September 30, 2023, advertising expense was $ 409,000 and $ 1,235,000 , 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 and six-month periods ended June 30, 2024 and 2023.

During the three and nine-month period ended September 30, 2024, the Company recorded a loss reserve of $ 115,000 relating to a civil penalty which the Company believes is probable in connection with the settlement of an ongoing regulatory investigation of the Company’s transfer agent business.

This loss reserve is included in general and administrative expenses on the Consolidated statements of operations for the three and nine months ended September 30, 2024, and within accrued expenses on Consolidated balance sheets as of September 30, 2024.

Reclassifications

Certain amounts from prior periods have been reclassified to conform with current period presentation.

Included in general and administrative expenses were $ 94,000 for the three-month period ended March 31, 2024, and $84,000 for the three months ended June 30, 2024, which has been reclassified to cost of revenues for the same periods presented.

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

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, 2024 and 2023, 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, 2024 and 2023, other than stock awarded to the Company’s employees and Board of Directors.

2023 Equity Incentive Plan

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

Under the terms of the 2014 Plan, the Company is authorized to issue incentive awards for common stock up to 200,000 shares to employees and other personnel.

Under the terms of the 2014 Plan, the Company was authorized to issue incentive awards for common stock up to 200,000 shares to employees and other personnel.

On June 10, 2016 and June 17, 2020, the shareholders of the Company approved an additional 200,000 and 200,000 awards, respectively, to be issued under the 2014 Plan, bringing the total number of shares to be awarded to 600,000 .

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

The awards could have been in the form of incentive stock options, nonqualified stock options, restricted stock, restricted stock units and performance awards.

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.

As of September 30, 2024, there are 121,076 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 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:

As of September 30, 2024, there are 364,078 shares which remain to be granted under the 2023 Plan, including 121,076 shares assumed under the 2014 Plan described above.

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

Options Outstanding

11 unchanged sentences

$ 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.

As of September 30, 2024, the Company had unrecognized stock compensation related to the options of $ 250,000 , which will be recognized through 2027.

During the three and nine-months ended September 30, 2024, the Company granted 11,166 and 43,666 , respectively, of restricted stock units to members of the Company’s Board of Directors, employees and contractors, which vest at various intervals over the next 3 years.

The average grant date fair value of these grants was $ 8.06 and $ 12.41 per share during the three and nine-month periods ended September 30, 2024, respectively.

During the nine-months ended September 30, 2023, the Company granted 74,832 restricted stock units, with a grant date fair value of $ 26.08 per share.

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

During the nine-month period ended September 30, 2024, 16,499 restricted stock units with an average intrinsic value of 19.95 per share, vested.

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 periods ending on September 30, 2024 and 2023.

As of September 30, 2024, there was $ 1,027,000 of unrecognized compensation cost related to our unvested restricted stock units, which will be recognized through 2027.

The Company recognized income tax expense of $ 14,000 and $ 77,000 for the three and nine-month periods ended September 30, 2024, compared to $ 187,000 and $ 621,000 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.

For the three and nine-month periods ended September 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.

For the nine-month period ended September 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, 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 June 30, 2024.

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

The 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 September 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 $ 1,224,000 as of June 30, 2024.

Lease liabilities totaled $ 1,142,000 as of September 30, 2024.

The current portion of this liability of $ 387,000 is included in Accrued expenses on the Consolidated balance sheets and the long-term portion of $755,000 is included in Lease liabilities on the Consolidated Balance Sheets.

1 unchanged sentence

common area maintenance) or rent expense associated with short-term leases.

The components of lease expense were as follows (in 000’s):

The components of lease expense were as follows (in thousands):

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 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):

The weighted-average remaining non-cancelable lease term for our operating leases was 3.25 years as of September 30, 2024.

As of September 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 September 30, 2024, are as follows (in thousands):

Year Ended December 31:

4 unchanged sentences

The Company considers itself to be a single reportable segment under the authoritative guidance for segment reporting, specifically a communications and compliance company for publicly traded and private companies.

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

Three months ended June 30,

The following tables present revenue disaggregated by revenue stream (in thousands):

Three months ended Nine 30,

Revenue Streams

Communications

Six months ended June 30,

Nine months ended September 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.

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

Credit Agreement

8 unchanged sentences

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 income (expense), net on the Consolidated statements of operations for the six months ended June 30, 2023.

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

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

3 unchanged sentences

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

As of 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:

As of September 30, 2024, there was no outstanding balance under the Revolving LOC and the interest rate was 7.21 %.

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

Fiscal Quarter

13 unchanged sentences

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.

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 .

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

At September 30, 2024, the weighted average rate was 7.51 %.

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, 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 as of September 30, 2024 and December 31, 2023 was a net liability of $ 145,000 and $ 21,000 , respectively, and is included in Other long-term liabilities, in the Consolidated Balance Sheets.

The fair value of the swap agreement excludes accrued interest and takes into consideration current interest rates and current likelihood of the swap counterparty’s compliance with its contractual obligations.

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.

During the three and nine-month periods ended September 30, 2024, the Company recognized a loss of $ 343,000 and $ 124,000 , respectively, in Other income (expense) in the Consolidated statements of operations, as a result of the interest rate swap.

During the three and nine-month periods ended September 30, 2023, the Company recognized a gain of $ 165,000 and $ 379,000 , 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