Red Violet, Inc. 10-Q

Item 1. Financial Statements. RED VIOLET, INC. CONDENSED CONSOLIDA TED BALANCE SHEETS (Amounts in thousands, except share data) (unaudited) September 30, 2021 December 31, 2020 ASSETS: Current assets: Cash and cash equivalents $ 13,397 $ 12,957 Accounts receivable, net of allowance for doubtful accounts of $ 17 and $ 38 as of September 30, 2021 and December 31, 2020, respectively 4,040 3,201 Prepaid expenses and other current assets 650 581 Total current assets 18,087 16,739 Property and equipment, net 587 558 Intangible assets, net 27,979 27,170 Goodwill 5,227 5,227 Right-of-use assets 1,790 2,161 Other noncurrent assets 137 139 Total assets $ 53,807 $ 51,994 LIABILITIES AND SHAREHOLDERS' EQUITY: Current liabilities: Accounts payable $ 1,366 $ 2,075 Accrued expenses and other current liabilities 746 1,458 Current portion of operating lease liabilities 600 552 Current portion of long-term loan - 449 Deferred revenue 424 504 Total current liabilities 3,136 5,038 Noncurrent operating lease liabilities 1,452 1,908 Long-term loan - 1,703 Total liabilities 4,588 8,649 Shareholders' equity: Preferred stock—$ 0.001 par value, 10,000,000 shares authorized, and 0 shares issued and outstanding, as of September 30, 2021 and December 31, 2020 - - Common stock—$ 0.001 par value, 200,000,000 shares authorized, 12,863,024 and 12,167,327 shares issued and outstanding, as of September 30, 2021 and December 31, 2020 13 13 Additional paid-in capital 69,440 66,005 Accumulated deficit ( 20,234 ) ( 22,673 ) Total shareholders' equity 49,219 43,345 Total liabilities and shareholders' equity $ 53,807 $ 51,994 See notes to condensed consolidated financial statements 1 RED VIOLET, INC. CONDENSED CONSOLIDATED STATEMENTS O F OPERATIONS (Amounts in thousands, except share data) (unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Revenue $ 11,668 $ 9,267 $ 32,764 $ 25,623 Costs and expenses: Cost of revenue (exclusive of depreciation and amortization) 2,787 2,703 8,268 8,582 Sales and marketing expenses 2,154 2,217 6,724 6,139 General and administrative expenses 4,127 4,147 13,567 12,844 Depreciation and amortization 1,345 1,118 3,933 3,020 Total costs and expenses 10,413 10,185 32,492 30,585 Income (loss) from operations 1,255 ( 918 ) 272 ( 4,962 ) Interest income (expense), net 1 ( 7 ) ( 8 ) 24 Gain on extinguishment of debt - - 2,175 - Income (loss) before income taxes 1,256 ( 925 ) 2,439 ( 4,938 ) Income taxes - - - - Net income (loss) $ 1,256 $ ( 925 ) $ 2,439 $ ( 4,938 ) Earnings (loss) per share: Basic $ 0.10 $ ( 0.08 ) $ 0.20 $ ( 0.42 ) Diluted $ 0.09 $ ( 0.08 ) $ 0.19 $ ( 0.42 ) Weighted average number of shares outstanding: Basic 12,741,723 12,072,716 12,408,152 11,758,907 Diluted 13,645,208 12,072,716 13,140,854 11,758,907 See notes to condensed consolidated financial statements 2 RED VIOLET, INC. CONDENSED CONSOLIDATED STATEMENTS O F CHANGES IN SHAREHOLDERS’ EQUITY (Amounts in thousands, except share data) (unaudited) Common stock Treasury stock Additional paid-in Accumulated Shares Amount Shares Amount capital deficit Total Balance at June 30, 2020 11,707,829 $ 12 ( 103,147 ) $ ( 1,255 ) $ 64,806 $ ( 19,873 ) $ 43,690 Vesting of restricted stock units 663,836 1 - - ( 1 ) - - Increase in treasury stock resulting from shares withheld to cover statutory taxes - - ( 121,608 ) ( 1,828 ) - - ( 1,828 ) Share-based compensation - - - - 2,277 - 2,277 Net loss - - - - - ( 925 ) ( 925 ) Balance at September 30, 2020 12,371,665 $ 13 ( 224,755 ) $ ( 3,083 ) $ 67,082 $ ( 20,798 ) $ 43,214 Balance at June 30, 2021 12,248,794 $ 13 - $ - $ 70,911 $ ( 21,490 ) $ 49,434 Vesting of restricted stock units 742,101 - - - - - - Increase in treasury stock resulting from shares withheld to cover statutory taxes - - ( 127,871 ) ( 2,785 ) - - ( 2,785 ) Retirement of treasury stock ( 127,871 ) - 127,871 2,785 ( 2,785 ) - Share-based compensation - - - - 1,314 - 1,314 Net income - - - - - 1,256 1,256 Balance at September 30, 2021 12,863,024 $ 13 - $ - $ 69,440 $ ( 20,234 ) $ 49,219 Common stock Treasury stock Additional paid-in Accumulated Shares Amount Shares Amount capital deficit Total Balance at December 31, 2019 11,657,912 $ 12 ( 103,147 ) $ ( 1,255 ) $ 59,187 $ ( 15,860 ) $ 42,084 Vesting of restricted stock units 713,753 1 - - ( 1 ) - - Increase in treasury stock resulting from shares withheld to cover statutory taxes - - ( 121,608 ) ( 1,828 ) - - ( 1,828 ) Share-based compensation - - - - 7,896 - 7,896 Net loss - - - - - ( 4,938 ) ( 4,938 ) Balance at September 30, 2020 12,371,665 $ 13 ( 224,755 ) $ ( 3,083 ) $ 67,082 $ ( 20,798 ) $ 43,214 Balance at December 31, 2020 12,167,327 $ 13 - $ - $ 66,005 $ ( 22,673 ) $ 43,345 Vesting of restricted stock units 823,568 - - - - - - Increase in treasury stock resulting from shares withheld to cover statutory taxes - - ( 127,871 ) ( 2,785 ) - - ( 2,785 ) Retirement of treasury stock ( 127,871 ) - 127,871 2,785 ( 2,785 ) - Share-based compensation - - - - 6,220 - 6,220 Net income - - - - - 2,439 2,439 Balance at September 30, 2021 12,863,024 $ 13 - $ - $ 69,440 $ ( 20,234 ) $ 49,219 See notes to condensed consolidated financial statements 3 RED VIOLET, INC. CONDENSED CONSOLIDATED S TATEMENTS OF CASH FLOWS (Amounts in thousands) (unaudited) Nine Months Ended September 30, 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 2,439 $ ( 4,938 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 3,933 3,020 Share-based compensation expense 5,197 6,416 Write-off of long-lived assets 24 117 Provision for bad debts 67 360 Noncash lease expenses 371 341 Interest expense 11 7 Gain on extinguishment of debt ( 2,175 ) - Changes in assets and liabilities: Accounts receivable ( 906 ) 263 Prepaid expenses and other current assets ( 69 ) 106 Other noncurrent assets 2 109 Accounts payable ( 709 ) 61 Accrued expenses and other current liabilities ( 700 ) ( 803 ) Deferred revenue ( 80 ) 52 Operating lease liabilities ( 408 ) ( 362 ) Net cash provided by operating activities 6,997 4,749 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment ( 223 ) ( 98 ) Capitalized costs included in intangible assets ( 3,549 ) ( 4,310 ) Net cash used in investing activities ( 3,772 ) ( 4,408 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long-term loan - 2,152 Taxes paid related to net share settlement of vesting of restricted stock units ( 2,785 ) ( 1,828 ) Net cash (used in) provided by financing activities ( 2,785 ) 324 Net increase in cash and cash equivalents $ 440 $ 665 Cash and cash equivalents at beginning of period 12,957 11,776 Cash and cash equivalents at end of period $ 13,397 $ 12,441 SUPPLEMENTAL DISCLOSURE INFORMATION Cash paid for interest $ - $ - Cash paid for income taxes $ - $ - Share-based compensation capitalized in intangible assets $ 1,023 $ 1,480 Retirement of treasury stock $ 2,785 $ - See notes to condensed consolidated financial statements 4 RED VIOLET, INC. NOTES TO CONDENSED CONSOLID ATED FINANCIAL STATEMENTS (Amounts in thousands, except share data) (unaudited) 1. Summary of significant accounting policies (a) Basis of preparation The accompanying unaudited condensed consolidated financial statements of Red Violet, Inc., a Delaware corporation, and its consolidated subsidiaries (collectively, “red violet” or the “Company”) , have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations. The accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for any future interim periods or for the full year ending December 31, 2021. The information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 (“Form 10-K”). The condensed consolidated balance sheet as of December 31, 2020 included herein was derived from the audited financial statements as of that date included in the Form 10-K, but does not include all disclosures required by GAAP. The Company has only one operating segment, as defined by Accounting Standards Codification (“ASC”) 280, “ Segment Reporting .” Principles of consolidation The condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant transactions among the Company and its subsidiaries have been eliminated upon consolidation. (b) Recently issued accounting standards As an emerging growth company, the Company has left open the opportunity to take advantage of the extended transition period provided to emerging growth companies in Section 13(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), however, it is the Company’s present intention to adopt any applicable new accounting standards timely. 2. Earnings (loss) per share Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the periods. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock and is calculated using the treasury stock method for unvested shares. Common equivalent shares are excluded from the calculation in the loss periods as their effects would be anti-dilutive. Three Months Ended September 30, Nine Months Ended September 30, (In thousands, except share data) 2021 2020 2021 2020 Numerator: Net income (loss) $ 1,256 $ ( 925 ) $ 2,439 $ ( 4,938 ) Denominator: Weighted average shares outstanding: Basic 12,741,723 12,072,716 12,408,152 11,758,907 Diluted (1) 13,645,208 12,072,716 13,140,854 11,758,907 Earnings (loss) per share: Basic $ 0.10 $ ( 0.08 ) $ 0.20 $ ( 0.42 ) Diluted $ 0.09 $ ( 0.08 ) $ 0.19 $ ( 0.42 ) (1) A total of 1,529,657 unvested restricted stock units (“RSUs”) have been excluded from the diluted loss per share for the three and nine months ended September 30, 2020, as the impact is anti-dilutive. 5 3. Intangible assets, net Intangible assets other than goodwill consist of the following: September 30, 2021 December 31, 2020 (In thousands) Amortization Period Gross Amount Accumulated Amortization Net Gross Amount Accumulated Amortization Net Software developed for internal use 5 - 10 years $ 41,373 $ ( 13,394 ) $ 27,979 $ 36,804 $ ( 9,634 ) $ 27,170 The gross amount associated with software developed for internal use represents capitalized costs of internally-developed software, including eligible salaries and staff benefits, share-based compensation, travel expenses incurred by relevant employees, and other relevant costs. Amortization expenses of $ 1,288 and $ 1,063 for the three months ended September 30, 2021 and 2020, respectively, and $ 3,763 and $ 2,847 for the nine months ended September 30, 2021 and 2020, respectively, were included in depreciation and amortization expense. As of September 30, 2021, intangible assets of $ 3,202 , included in the gross amounts of software developed for internal use, have not started amortization, as they are not ready for their intended use. The Company capitalized costs of software developed for internal use of $ 1,457 and $ 1,646 during the three months ended September 30, 2021 and 2020, respectively, and $ 4,572 and $ 5,790 during the nine months ended September 30, 2021 and 2020, respectively. As of September 30, 2021, estimated amortization expense related to the Company’s intangible assets for the remainder of 2021 through 2026 and thereafter are as follows: (In thousands) Year September 30, 2021 Remainder of 2021 $ 1,355 2022 5,898 2023 5,978 2024 5,351 2025 4,160 2026 and thereafter 5,237 Total $ 27,979 4. Goodwill Goodwill represents the cost in excess of the fair value of the net assets acquired in a business combination. As of September 30, 2021 and December 31, 2020, the balance of goodwill of $ 5,227 was as a result of the acquisition of Interactive Data, LLC, a wholly-owned subsidiary of red violet, effective on October 2, 2014. In accordance with ASC 350, “Intangibles - Goodwill and Other,” goodwill is tested at least annually for impairment, or when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable, by assessing qualitative factors or performing a quantitative analysis in determining whether it is more likely than not that its fair value exceeds the carrying value. The measurement date of the Company’s annual goodwill impairment test is October 1 . For the periods ended September 30, 2021 and 2020, no goodwill impairment charges were recorded. 5. Revenue recognition The Company recognized revenue in accordance with ASC 606, “Revenue from Contracts with Customers” (“Topic 606”). Under this standard, revenue is recognized when control of goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company’s performance obligation is to provide on demand information and identity intelligence solutions to its customers by leveraging its proprietary technology and applying machine learning and advanced analytics to its massive data repository. The pricing for the customer contracts is based on usage, a monthly fee, or a combination of both. Available within Topic 606, the Company has applied the portfolio approach practical expedient in accounting for customer revenue as one collective group, rather than individual contracts. Based on the Company’s historical knowledge of the contracts contained in this portfolio and the similar nature and characteristics of the customers, the Company has concluded the financial statement effects are not materially different than if accounting for revenue on a contract by contract basis. 6 Revenue is recognized over a period of time since the performance obligation is delivered in a series. The Company’s customers simultaneously receive and consume the benefits provided by the Company’s performance as and when provided. Furthermore, the Company has elected the “right to invoice” practical expedient, available within Topic 606, as its measure of progress, since it has a right to payment from a customer in an amount that corresponds directly with the value of its performance completed-to-date. The Company's revenue arrangements do not contain significant financing components. For the three months ended September 30, 2021 and 2020, 80 % and 68 % of total revenue was attributable to customers with pricing contracts, respectively, versus 20 % and 32 % attributable to transactional customers, respectively. For the nine months ended September 30, 2021 and 2020, 80 % and 71 % of total revenue was attributable to customers with pricing contracts, respectively, versus 20 % and 29 % attributable to transactional customers, respectively. Pricing contracts are generally annual contracts or longer, with auto renewal. If a customer pays consideration before the Company transfers services to the customer, those amounts are classified as deferred revenue. As of September 30, 2021 and December 31, 2020, the balance of deferred revenue was $ 424 and $ 504 , respectively, all of which is expected to be realized in the next 12 months. In relation to the deferred revenue balance as of December 31, 2020, $ 99 and $ 417 was recognized into revenue during the three and nine months ended September 30, 2021, respectively. As of September 30, 2021, $ 3,630 of revenue is expected to be recognized in the future for outstanding performance obligations, primarily related to pricing contracts that have a term of more than 12 months. $ 739 of revenue will be recognized in the remainder of 2021, $ 1,725 in 2022, $ 670 in 2023, and $ 496 in 2024. The actual timing of recognition may vary due to factors outside of the Company’s control. The Company excludes variable consideration related entirely to wholly unsatisfied performance obligations and contracts and recognizes such variable consideration based upon the right to invoice the customer. Sales commissions are incurred and recorded on an ongoing basis over the term of the customer relationship. These costs are recorded in sales and marketing expenses. In addition, the Company elected the practical expedient to not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed. 6. Income taxes The Company is subject to federal and state income taxes in the United States. The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items arising in that quarter. In each quarter, the Company updates its estimate of the annual effective tax rate, and if its estimated annual tax rate changes, the Company makes a cumulative adjustment in that quarter. For the three and nine months ended September 30, 2021 and 2020, the Company’s effective income tax rate was 0 %, differing from the statutory federal income tax rate of 21 %, and the difference is primarily the result of the full valuation allowance applied against the Company’s deferred tax assets. The Company assesses its income tax positions and records tax benefits for all years subject to examination based upon its evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where it is more-likely-than-not that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more-likely-than-not that a tax benefit will be sustained, no tax benefit has been recognized in the Company’s financial statements. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. All of the Company’s income tax filings since 2017 remain open for tax examinations. The Company does no t have any unrecognized tax benefits as of September 30, 2021 and December 31, 2020. 7. Share-based compensation On March 22, 2018, the board of directors of the Company and Cogint, Inc. (“cogint”) (now known as Fluent, Inc.) , in its capacity as sole stockholder of the Company prior to the Company’s spin-off from cogint on March 26, 2018, approved the Red Violet, Inc. 2018 Stock Incentive Plan (the “2018 Plan”), which became effective immediately prior to the spin-off. A total of 3,000,000 shares of common stock were authorized to be issued under the 2018 Plan. On June 3, 2020, the Company’s stockholders approved an amendment to the 2018 Plan to increase the number of shares of common stock authorized for issuance under the 2018 Plan from 3,000,000 shares to 4,500,000 shares. 7 The primary purpose of the 2018 Plan is to attract, retain, reward and motivate certain individuals by providing them with an opportunity to acquire or increase a proprietary interest in the Company and to incentivize them to expend maximum effort for the growth and success of the Company, so as to strengthen the mutuality of the interests between such individuals and the stockholders of the Company. As of September 30, 2021, there were 973,212 shares of common stock available for future issuance under the 2018 Plan, as amended. To date, all stock incentives issued under the 2018 Plan have been in the form of RSUs. RSUs granted under the 2018 Plan vest and settle upon the satisfaction of a time-based condition or with both time- and performance-based conditions. The time-based condition for these awards is generally satisfied over three or four years with annual vesting. Details of unvested RSU activity during the nine months ended September 30, 2021 were as follows: Number of units Weighted average grant-date fair value Unvested as of December 31, 2020 1,764,450 $ 11.43 Granted (1) 334,600 $ 26.58 Vested and delivered (2) ( 695,697 ) $ 8.42 Withheld as treasury stock (3) ( 127,871 ) $ 7.74 Vested not delivered ( 8,417 ) $ 11.25 Forfeited ( 37,399 ) $ 17.25 Unvested as of September 30, 2021 1,229,666 $ 17.46 (1) On July 30, 2021, the Company granted 120,000 RSUs (included in “Granted” above), subject to performance-based requirements, to one non-executive employee, at a grant date fair value of $ 24.14 per share. Such RSU grants shall not vest unless and until the Company has achieved certain revenue for a portion of its business prior to the achievement date deadline for each performance milestone (collectively, the “Performance Milestones”). No amortization of share-based compensation expense has been recognized in relation to such RSUs with Performance Milestones, because, as of September 30, 2021, the Company determined that it is not probable that the Performance Milestones will be met. (2) During the period from August 29, 2019 to September 8, 2020, the Company granted an aggregate of 277,500 RSUs to its employees. Such RSU grants shall not vest unless and until the Company has, for any fiscal quarter in which the RSUs are outstanding, (i) gross revenue determined in accordance with the Company’s reviewed or audited financial statements in excess of $ 10.0 million for such fiscal quarter, (ii) positive adjusted EBITDA of at least $ 1.5 million, as determined based on amounts derived from the Company’s reviewed or audited financial statements for such fiscal quarter, and (iii) the recipient continues to provide services to the Company either as an employee, director or consultant on the last day of the quarter that the performance criteria are met. Provided the performance criteria are met, the RSUs will vest in accordance with the time-based requirements contained in the award agreement over three or four years . In the event of a change of control, all RSUs which have not vested on the date of such change of control shall immediately vest even if the performance criteria have not been met. As of the respective grant dates, the Company determined that it was probable that the performance criteria would be met and therefore, began to record the related amortization expense on the grant dates. The Company determined that the performance criteria were met as of March 31, 2021. (3) In July 2021, 127,871 shares of common stock were withheld to pay withholding taxes upon such vesting, which were reflected in treasury stock at cost of $ 2,785 . In September 2021, 127,871 shares of treasury stock were retired. As of September 30, 2021, unrecognized share-based compensation expense associated with the granted RSUs amounted to $ 10,886 , which is expected to be recognized over a remaining weighted average period of 2.5 years. Share-based compensation was allocated to the following accounts in the condensed consolidated financial statements for the three and nine months ended September 30, 2021 and 2020: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2021 2020 2021 2020 Sales and marketing expenses $ 103 $ 151 $ 417 $ 460 General and administrative expenses 883 1,702 4,780 5,956 Share-based compensation expense 986 1,853 5,197 6,416 Capitalized in intangible assets 328 424 1,023 1,480 Total $ 1,314 $ 2,277 $ 6,220 $ 7,896 8 8 . Related party transactions Services Agreement On August 7, 2018, the Company entered into a services agreement with Mr. Michael Brauser (the “Consultant”), a greater than 10 % stockholder, pursuant to which, the Consultant would be providing recommendations on organizational and capital structure, future financing needs and future acquisitions or strategic transactions (“Services Agreement”), for a term of one year , automatically renewing for additional one-year periods unless either party provided written notice to the other of its intent not to renew not fewer than 30 days prior to the expiration of the then-current term. Under the Services Agreement, the Consultant received cash compensation of $ 30 per month and was entitled to participate in the Company’s incentive compensation plan. On February 16, 2021, the Company entered into a Separation Agreement (the "Separation Agreement") with the Consultant. Pursuant to the Separation Agreement, the parties agreed that the Services Agreement which expired on August 6, 2021 (“Expiration Date”), would not be renewed, but would continue in force and effect until the Expiration Date and that the Consultant would not take any actions on behalf of the Company, including pursuant to the Services Agreement, unless specifically requested in writing by the Company. Pursuant to the Separation Agreement, the Consultant also agreed (i) to certain non-solicitation obligations contained therein, (ii) that he and his affiliates would not disparage or assist or cooperate with any person or entity seeking to publicly disparage or economically harm the Company, and (iii) that the Consultant and his affiliates would not initiate any lawsuit, claim, or proceeding with respect to any claims against the Company, except (with designated exceptions) for any legal proceeding initiated solely to remedy a breach of or to enforce the Separation Agreement. With respect to each annual or special meeting of the Company's stockholders until the Expiration Date of the Separation Agreement, the Consultant agreed to vote the shares of the Company's common stock or any other securities entitled to vote then held by him or his affiliates in accordance with the board of directors' recommendations on director proposals, provided there is a change in no more than 25 % of the current directors (not including changes resulting from a director's death or resignation), and the ratification of the appointment of the Company’s independent registered public accounting firm. The Company agreed (i) that the remaining unvested 166,666 RSUs previously granted to Consultant in accordance with the 2018 RSU agreement would continue to vest on July 1, 2021, in accordance with and subject to all other provisions and conditions of such grant, (ii) to amend the 2020 RSU agreement, previously granting Consultant 30,000 RSUs such that the 30,000 RSUs would continue to vest 33 -1/3% on November 1, 2021, 66 -2/3% on November 1, 2022, and 100 % on November 1, 2023, without certain Company performance criteria, subject to all other provisions and conditions of such grant, (iii) to include shares of the Company's common stock held by the Consultant or his affiliates in any registration statement the Company files for the benefit of selling stockholders at any time when the Consultant or his affiliates beneficially own 10 % or more of the Company's common stock, and (iv) to not initiate any lawsuit, claim, or proceeding with respect to any claims against the Consultant and his affiliates, except (with designated exceptions) for any legal proceeding initiated solely to remedy a breach of or to enforce the Separation Agreement. As a result of the modification to the 2020 RSU agreement, beginning February 16, 2021, the Company recognized an aggregate of $ 723 in share-based compensation expense over the remaining service period which ended on the Expiration Date. The Company recognized consulting service fees relating to the Services Agreement of a total of $ 36 and $ 90 during the three months ended September 30, 2021 and 2020, respectively, and $ 216 and $ 270 during the nine months ended September 30, 2021 and 2020, respectively. In addition, amortization of share-based compensation expense of $ 160 and $ 343 for the three months ended September 30, 2021 and 2020, respectively, and $ 1,432 and $ 1,022 for the nine months ended September 30, 2021 and 2020, respectively, was recognized in relation to the RSUs previously granted to the Consultant. 9. Long-term loan On May 5, 2020, the Company received funding under a promissory note dated May 5, 2020 evidencing an unsecured non-recourse loan in the principal amount of $ 2,152 under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) (the “Loan”). The Loan to the Company was made through Legacy Bank of Florida (the “Lender”). As of December 31, 2020, long-term loan consists of the following: (In thousands) December 31, 2020 Principal amount $ 2,152 Included in consolidated balance sheet: Current portion of long-term loan $ 449 Long-term loan (non-current) 1,703 $ 2,152 9 The Loan had a two-year term and a contractual maturity of May 5, 2022 . The interest rate on the Loan is 1.0 % per annum. On June 16, 2021, the Company received a notice from the Lender that the full principal amount of the Loan of $ 2,152 and the accrued interest of $ 23 had been fully forgiven, and the U.S. Small Business Administration remitted the forgiveness payment to the Lender, resulting in a gain on extinguishment of debt of $ 2,175 during the nine months ended September 30, 2021. 10. Leases The Company leases its corporate headquarters of 21,020 rentable square feet in accordance with a non-cancelable 89 -month operating lease agreement as amended and effective in January 2017, with an option to extend for an additional 60 months. The Company also leases an additional office space of 6,003 rentable square feet in accordance with a non-cancellable 90 -month operating lease agreement entered into in April 2017, with an option to extend for an additional 60 months. The extension option is not included in the determination of the lease term as it is not reasonably certain to be exercised. For the three and nine months ended September 30, 2021 and 2020, a summary of the Company’s lease information is shown below: Three Months Ended September 30, Nine Months Ended September 30, (In thousands) 2021 2020 2021 2020 Lease cost: Operating lease costs $ 168 $ 168 $ 504 $ 504 Other information: Cash paid for operating leases $ 180 $ 175 $ 540 $ 527 As of September 30, 2021, the weighted average remaining operating lease term was 3.1 years. As of September 30, 2021, scheduled future maturities and present value of the operating lease liabilities are as follows: (In thousands) Year September 30, 2021 Remainder of 2021 $ 183 2022 743 2023 765 2024 542 2025 77 Total maturities $ 2,310 Present value included in consolidated balance sheet: Current portion of operating lease liabilities $ 600 Noncurrent operating lease liabilities 1,452 Total operating lease liabilities $ 2,052 Difference between the maturities and the present value of operating lease liabilities $ 258 1 1. Commitments and contingencies (a) Capital commitment The Company incurred data costs of $ 2,107 and $ 2,093 for the three months ended September 30, 2021 and 2020, respectively, and $ 6,337 and $ 6,396 for the nine months ended September 30, 2021 and 2020, respectively, under certain data licensing agreements. As of September 30, 2021, material capital commitments under certain data licensing agreements were $ 34,082 , shown as follows: (In thousands) Year September 30, 2021 Remainder of 2021 $ 2,053 2022 7,536 2023 6,952 2024 6,842 2025 6,936 2026 and thereafter 3,763 Total $ 34,082 10 (b) Contingencies The Company establishes accruals for those contingencies where the incurrence of a loss is probable and can be reasonably estimated, and it discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for its financial statements to not be misleading. To estimate whether a loss contingency should be accrued by a charge to income, the Company evaluates, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of the loss. The Company does not record liabilities when the likelihood that the liability has been incurred is probable, but the amount cannot be reasonably estimated. The Company may be involved in litigation from time to time in the ordinary course of business. The Company does not believe that the ultimate resolution of any such matters will have a material adverse effect on its business, financial condition, results of operations or cash flows. However, the results of such matters cannot be predicted with certainty and the Company cannot assure you that the ultimate resolution of any legal or administrative proceeding or dispute will not have a material adverse effect on its business, financial condition, results of operations and cash flows. (c) Covid-19 update In December 2019, a novel strain of coronavirus, known as Covid-19, was reported in Wuhan, China and has since extensively impacted the global health and economic environment. In March 2020, the World Health Organization characterized Covid-19 as a pandemic. The Company has taken numerous steps, and will continue to take further actions as appropriate, to minimize the impact of the Covid-19 pandemic on the Company’s business, results of operations and financial performance. In accordance with best practices and guidance from the Centers for Disease Control and Prevention, the Company has implemented certain protective safeguards to protect the well-being of its employees, customers, and the communities in which it operates. The Company will continue to assess the need and timing of these protective measures. Starting in the second quarter of 2020, the Company implemented cost containment strategies across all areas of the organization, including continued curtailment of Company travel and partnering with suppliers, landlords and vendors for price concessions and payment deferrals during this interim period. As a result of preventative and protective actions taken by federal, state and local governments, including the implementation of stay-at-home orders and social distancing policies that resulted in significantly reduced commercial activity, and certain temporary government-imposed moratoria on collection customers’ activities, the Company experienced reduced transaction volume in the second and third quarters of 2020. Transaction volume returned to pre-Covid levels by the end of the third quarter of 2020, except for collection customer volume. Collection customer transaction volume returned to pre-Covid levels during the second quarter of 2021, with the exception of the Company’s idiVERIFIED service, which is an ancillary collections market offering that is purely transactional and of a lower margin profile. idiVERIFIED service revenue was down $ 800 for the three months ended September 30, 2021, compared to the three months ended March 31, 2020. The Company expects its idiVERIFIED service volume to return to pre-Covid levels in the first half of 2022. Beginning the second quarter of 2020, the Company took a proactive customer-centric approach working with customers who were impacted by Covid-19. Customers who had minimum contractual commitments and requested concessions because they were temporarily unable to meet their minimum contractual commitments as a result of Covid-19 were granted reductions, or eliminations where applicable, of minimums on a month-to-month basis. The end date of the customer’s agreement was extended by one month for each month of the temporary concession. During the three months ended September 30, 2021 and 2020, we provided concessions to a total of 7 and 22 customers, representing a $ 24 and $ 94 reduction in minimum committed spend, respectively. During the nine months ended September 30, 2021 and 2020, we provided concessions to a total of 15 and 164 customers, representing a $ 50 and $ 436 reduction in minimum committed spend, respectively. The Company continues to work with customers who have been impacted by Covid-19 and considers potential concessions on a case-by-case basis. The Company continues to take precautionary measures intended to minimize the risk of the Covid-19 pandemic to its employees, its customers, and the communities in which it operates. These measures may result in inefficiencies, delays and additional costs to the Company’s business. The Covid-19 pandemic and its impact on the Company and the economy has significantly limited the Company’s ability to forecast its future operating results, including its ability to predict revenue and expense levels, and plan for and model future operating results. The Company will continue to evaluate the nature and extent of the impact of the Covid-19 pandemic to its business. To further support the Company’s liquidity, beginning April 1, 2020, the Company elected, under Section 2302 of the CARES Act, to defer payment of the employer portion of Social Security payroll tax. Under the CARES Act, employers could forgo timely payment of the employer portion of Social Security taxes that would otherwise be due from March 27, 2020 through December 31, 2020, without penalty or interest charges. Employers must pay 50 % of the deferred amount by December 31, 2021, and the remainder by December 31, 2022. On May 5, 2020, the Company received the Loan under the CARES Act, which was fully forgiven in June 2021, as discussed in Note 10 above. The Company will continue to assess the CARES Act and other applicable government legislation aimed at assisting businesses during the Covid-19 pandemic. Given the dynamic nature of this health emergency, the full impact of the Covid-19 pandemic on the Company’s ongoing business, results of operations and overall financial performance cannot be reasonably estimated at this time. 11