What changed in this filing

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Item 1. Financial Statements

2022-05-04 compared with 2021-11-09 · 77 added, 134 removed, 222 unchanged (49% of the section changed)

3 unchanged sentences

(Amounts in thousands, except share data)

September 30, 2021

March 31, 2022

December 31, 2021

2 unchanged sentences

Accounts receivable, net of allowance for doubtful accounts of $ 22 and $ 28 as of

September 30, 2021 and December 31, 2020, respectively

March 31, 2022 and December 31, 2021, respectively

Prepaid expenses and other current assets

9 unchanged sentences

Current portion of operating lease liabilities

Current portion of long-term loan

Deferred revenue

1 unchanged sentence

Noncurrent operating lease liabilities

Long-term loan

Deferred tax liabilities

Total liabilities

1 unchanged sentence

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

issued and outstanding, as of March 31, 2022 and December 31, 2021

Common stock—$ 0.001 par value, 200,000,000 shares authorized, 13,523,067 and

12,167,327 shares issued and outstanding, as of September 30, 2021 and

December 31, 2020

13,488,540 shares issued and outstanding, as of March 31, 2022 and December 31, 2021

Additional paid-in capital

6 unchanged sentences

(Amounts in thousands, except share data)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Costs and expenses:

6 unchanged sentences

Interest income (expense), net

Gain on extinguishment of debt

Income (loss) before income taxes

Income tax expense

Net income (loss)

7 unchanged sentences

Additional paid-in

Balance at June 30, 2020

Vesting of restricted stock units

Increase in treasury stock resulting

from shares withheld to cover

statutory taxes

Share-based compensation

Balance at September 30, 2020

Balance at June 30, 2021

Vesting of restricted stock units

Increase in treasury stock resulting

from shares withheld to cover

statutory taxes

Retirement of treasury stock

Share-based compensation

Balance at September 30, 2021

Treasury stock

Additional paid-in

Balance at December 31, 2020

Vesting of restricted stock units

Increase in treasury stock resulting

from shares withheld to cover

statutory taxes

Share-based compensation

Balance at September 30, 2020

Balance at March 31, 2021

Balance at December 31, 2021

5 unchanged sentences

Share-based compensation

Balance at September 30, 2021

Balance at March 31, 2022

See notes to condensed consolidated financial statements

2 unchanged sentences

(Amounts in thousands)

Nine Months Ended September 30,

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

7 unchanged sentences

Interest expense

Gain on extinguishment of debt

Deferred income tax expense

Changes in assets and liabilities:

12 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from long-term loan

Taxes paid related to net share settlement of vesting of restricted stock units

Net cash (used in) provided by financing activities

Net increase in cash and cash equivalents

Net cash used in financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

12 unchanged sentences

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.

or the “Company”) , have been prepared in accordance with accounting principles generally accepted in the United States (“US 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 US 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, 2022.

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, 2021 (“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 condensed consolidated balance sheet as of December 31, 2021 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 US GAAP.

The Company has only one operating segment, as defined by Accounting Standards Codification (“ASC”) 280, “

9 unchanged sentences

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,

Three Months Ended March 31,

(In thousands, except share data)

2 unchanged sentences

Earnings (loss) per share:

(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.

(1) For the three months ended March 31, 2022, diluted weighted average shares outstanding are calculated by the inclusion of unvested restricted stock units (“RSUs”).

For the three months ended March 31, 2021, a total of 1,686,499 unvested RSUs have been excluded from the diluted loss per share, as the impact is anti-dilutive.

Intangible assets, net

Intangible assets other than goodwill consist of the following:

September 30, 2021

March 31, 2022

December 31, 2021

4 unchanged sentences

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:

Amortization expenses of $ 1,472 and $ 1,203 for the three months ended March 31, 2022 and 2021, respectively, were included in depreciation and amortization expense.

As of March 31, 2022, intangible assets of $ 3,780 , 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 $ 2,095 and $ 1,598 during the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, estimated amortization expense related to the Company’s intangible assets for the remainder of 2022 through 2027 and thereafter are as follows:

(In thousands)

September 30, 2021

March 31, 2022

Remainder of 2022

1 unchanged sentence

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.

As of March 31, 2022 and December 31, 2021, 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,”

1 unchanged sentence

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.

For the periods ended March 31, 2022 and 2021, no goodwill impairment charges were recorded.

Revenue recognition

6 unchanged sentences

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.

Revenue is recognized over a period of time since the performance obligation is delivered in a series.

Revenue is recognized over a period of time.

The Company’s customers simultaneously receive and consume the benefits provided by the Company’s performance as and when provided.

2 unchanged sentences

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.

For the three months ended March 31, 2022 and 2021, 77 % and 80 % of total revenue was attributable to customers with pricing contracts, respectively, versus 23 % and 20 % 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.

As of March 31, 2022 and December 31, 2021, the balance of deferred revenue was $ 713 and $ 841 , 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, 2021, $ 323 was recognized into revenue during the three months ended March 31, 2022.

As of March 31, 2022, $ 9,962 of revenue is expected to be recognized in the future for performance obligations that are unsatisfied or partially unsatisfied , related to pricing contracts that have a term of more than 12 months, of which, $ 4,925 of revenue will be recognized in the remainder of 2022, $ 4,232 in 2023, $ 797 in 2024, and $ 8 in 2025.

The actual timing of recognition may vary due to factors outside of the Company’s control.

4 unchanged sentences

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.

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, unless a reliable estimate of ordinary income or the related tax expense/benefit cannot be made or the Company is in cumulative losses for which the benefit cannot be realized.

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.

For the three months ended March 31, 2022, the Company concluded that it was in a cumulative loss with a full valuation allowance booked against that loss.

For the three months ended March 31, 2022 and 2021, the Company’s effective income tax rate was 62 % and 0 %, respectively, differing from the U.S.

corporate statutory federal income tax rate of 21 %, and the difference is primarily the result of the valuation allowance applied to reduce the Company’s deferred tax assets to the amount that is more likely than not to be realized.

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.

3 unchanged sentences

All of the Company’s income tax filings since 2018 remain open for tax examinations.

The Company does no t have any unrecognized tax benefits as of September 30, 2021 and December 31, 2020.

The Company does no t have any material unrecognized tax benefits as of March 31, 2022 and December 31, 2021.

Share-based compensation

4 unchanged sentences

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.

On April 11, 2022, the board of directors of the Company approved, subject to stockholder approval, an amendment to the 2018 Plan to further increase the number of shares of common stock authorized for issuance under the 2018 Plan from 4,500,000 shares to 6,500,000 shares.

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.

As of March 31, 2022, there were 719,187 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.

1 unchanged sentence

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:

Details of unvested RSU activity during the three months ended March 31, 2022 were as follows:

Number of units

5 unchanged sentences

Vested not delivered (2)

Unvested as of September 30, 2021

(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 .

Unvested as of March 31, 2022 (3)

(1) During the three months ended March 31, 2022, the Company granted an aggregate of 102,500 RSUs to certain employees at grant date fair values ranging from $ 24.42 to $ 28.75 per share, with a vesting period ranging from two to four year s.

(2) The amount included in "Vested not delivered" above represents RSUs that have been vested but the delivery of the common stock underlying such RSUs had not occurred as of March 31, 2022.

During the period from August 29, 2019 to November 20, 2020, the Company granted an aggregate of 455,000 RSUs.

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 $ 12.5 million for such fiscal quarter, and (ii) positive adjusted EBITDA of at least $ 2.0 million, as determined based on amounts derived from the Company’s reviewed or audited financial statements for such fiscal quarter, subject to the recipient continuing 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 respective performance criteria are met, the RSUs will vest in accordance with the time-based requirements contained in the award agreement over three 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.

As of the respective grant dates, the Company determined that it was probable that such 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, 2022.

(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,

As a result, 283,335 RSUs were included in "Vested not delivered" above.

(3) On July 30, 2021, the Company granted 120,000 RSUs, subject to performance-based requirements, to one non-executive employee, which was subsequently modified on February 18, 2022, with a fair value of $ 27.23 per share as of the modification date.

Such RSU grants shall no t 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.

No amortization of share-based compensation expense has been recognized for these RSUs, because, as of March 31, 2022, the Company determined that it is not probable that such performance criteria will be met.

The 120,000 RSUs were included in "Unvested as of March 31, 2022" with a fair value of $27.23 per share.

As of March 31, 2022, unrecognized share-based compensation expense associated with the granted RSUs amounted to $ 17,904 , which is expected to be recognized over a remaining weighted average period of 3 .0 years.

Share-based compensation was allocated to the following accounts in the condensed consolidated financial statements for the three months ended March 31, 2022 and 2021:

Three Months Ended March 31,

(In thousands)

5 unchanged sentences

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 August 7, 2018, the Company entered into a services agreement (the “Services Agreement”) with Mr.

Michael Brauser (the “Consultant”), a greater than 10 % stockholder, pursuant to which, the Consultant received cash compensation of $ 30 per month and was entitled to participate in the Company’s incentive compensation plan.

The Services Agreement terminated on August 6, 2021, as further detailed below.

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.

As part of the Separation Agreement, the Consultant 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, (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, and (iv) 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 (subject to certain board of directors change thresholds), 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.

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

Included in consolidated balance sheet:

Current portion of long-term loan

Long-term loan (non-current)

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.

The Company recognized consulting service fees relating to the Services Agreement of a total of $ 0 and $ 90 during the three months ended March 31, 2022 and 2021, respectively.

In addition, amortization of share-based compensation expense of $ 0 and $ 548 (inclusive of the amortization of share-based compensation expense in relation with the modification of RSUs mentioned above) for the three months ended December 31, 2022 and 2021, respectively, was recognized in relation to the RSUs previously granted to the Consultant.

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.

1 unchanged sentence

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,

For the three months ended March 31, 2022 and 2021, a summary of the Company’s lease information is shown below:

Three Months Ended March 31,

(In thousands)

2 unchanged sentences

Cash paid for operating leases

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:

As of March 31, 2022, the weighted average remaining operating lease term was 2.6 years.

As of March 31, 2022, scheduled future maturities and present value of the operating lease liabilities are as follows:

(In thousands)

September 30, 2021

March 31, 2022

Remainder of 2022

7 unchanged sentences

(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:

The Company incurred data costs of $ 2,248 and $ 2,122 for the three months ended March 31, 2022 and 2021, respectively, under certain data licensing agreements.

As of March 31, 2022, material capital commitments under certain data licensing agreements were $31,634, shown as follows:

(In thousands)

September 30, 2021

March 31, 2022

Remainder of 2022

2026 and thereafter

(b) Contingencies

6 unchanged sentences

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.

During 2020, the Company experienced significantly reduced commercial activity in numerous aspects of its business as a result of the preventative and protective actions taken by federal, state and local governments to combat Covid-19, including the implementation of stay-at-home orders, social distancing policies and certain temporary government-imposed moratoria on collection customers’

During 2021 and the first quarter of 2022, the Company saw ongoing improvement in its results of operations, 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.

The Company expects its idiVERIFIED service volume to return to pre-Covid levels in the first half of 2023.

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.

Given the ongoing uncertainty and the unpredictable nature of the pandemic, including the emergence of new variants and the development, availability, distribution and effectiveness of vaccines, 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.

To further support the Company’s liquidity, beginning April 1, 2020, the Company elected, under Section 2302 of the Coronavirus Aid, Relief, and Economic Security Act (“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 paid 50% of the deferred amount in December 2021.

On May 5, 2020, the Company received funding under a promissory note dated May 5, 2020 evidencing an unsecured non-recourse loan under the CARES Act, which was fully forgiven by Legacy Bank of Florida and the U.S.

Small Business Administration in June 2021, resulting in a gain on extinguishment of debt of $ 2,175 during the year ended December 31, 2021 .

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.

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