What changed in this filing

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Item 1. Financial Statements

2022-11-07 compared with 2022-08-09 · 82 added, 77 removed, 255 unchanged (38% of the section changed)

3 unchanged sentences

(Amounts in thousands, except share data)

June 30, 2022

September 30, 2022

December 31, 2021

2 unchanged sentences

Accounts receivable, net of allowance for doubtful accounts of $ 39 and $ 28 as of

June 30, 2022 and December 31, 2021, respectively

September 30, 2022 and December 31, 2021, respectively

Prepaid expenses and other current assets

16 unchanged sentences

Preferred stock—$ 0.001 par value, 10,000,000 shares authorized, and 0 shares

issued and outstanding, as of June 30, 2022 and December 31, 2021

issued and outstanding, as of September 30, 2022 and December 31, 2021

Common stock—$ 0.001 par value, 200,000,000 shares authorized, 13,874,406 and

13,488,540 shares issued, 13,873,406 and 13,488,540 shares outstanding, as of

June 30, 2022 and December 31, 2021

Treasury stock, at cost, 7,031 and 0 shares as of June 30, 2022 and December 31, 2021

September 30, 2022 and December 31, 2021

Treasury stock, at cost, 1,000 and 0 shares as of September 30, 2022 and

December 31, 2021

Additional paid-in capital

6 unchanged sentences

(Amounts in thousands, except share data)

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Costs and expenses:

4 unchanged sentences

Total costs and expenses

(Loss) income from operations

Interest (expense) income, net

Income from operations

Interest income (expense), net

Gain on extinguishment of debt

(Loss) income before income taxes

Income before income taxes

Income tax expense

Net (loss) income

(Loss) earnings per share:

Earnings per share:

Weighted average number of shares outstanding:

5 unchanged sentences

Additional paid-in

Balance at March 31, 2021

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

Balance at June 30, 2022

Balance at March 31, 2022

Vesting of restricted stock units

5 unchanged sentences

Share-based compensation

Balance at June 30, 2022

Balance at September 30, 2022

Treasury stock

2 unchanged sentences

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 June 30, 2021

Balance at September 30, 2021

Balance at December 31, 2021

6 unchanged sentences

Share-based compensation

Balance at June 30, 2022

Balance at September 30, 2022

See notes to condensed consolidated financial statements

2 unchanged sentences

(Amounts in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

21 unchanged sentences

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

Repurchases of common stock

Net cash used in financing activities

26 unchanged sentences

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.

(Loss) earnings per share

Basic (loss) earnings per share is computed by dividing net (loss) income by the weighted average number of shares of common stock outstanding during the periods.

Diluted (loss) earnings 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.

Earnings per share

Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the periods.

Diluted earnings 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands, except share data)

Net (loss) income

Weighted average shares outstanding:

(Loss) earnings per share:

(1) For the three and six months ended June 30, 2022, a total of 1,070,368 unvested restricted stock units (“RSUs”) have been excluded from the diluted loss per share, as the impact is anti-dilutive.

For the three and six months ended June 30, 2021, diluted weighted average shares outstanding are calculated by the inclusion of unvested RSUs.

Earnings per share:

(1) For the three and nine months ended September 30, 2022 and 2021, diluted weighted average shares outstanding are calculated by the inclusion of unvested restricted stock units ("RSUs").

Intangible assets, net

Intangible assets other than goodwill consist of the following:

June 30, 2022

September 30, 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 $ 1,551 and $ 1,272 for the three months ended June 30, 2022 and 2021, respectively, and $ 3,023 and $ 2,475 for the six months ended June 30, 2022 and 2021, respectively, were included in depreciation and amortization expense.

As of June 30, 2022, intangible assets of $ 4,194 , 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 $ 2,521 and $ 1,517 during the three months ended June 30, 2022 and 2021, respectively, and $ 4,616 and $ 3,115 during the six months ended June 30, 2022 and 2021, respectively.

As of June 30, 2022, estimated amortization expense related to the Company’s intangible assets for the remainder of 2022 through 2027 and thereafter are as follows:

Amortization expenses of $ 1,659 and $ 1,288 for the three months ended September 30, 2022 and 2021, respectively, and $ 4,682 and $ 3,763 for the nine months ended September 30, 2022 and 2021, respectively, were included in depreciation and amortization expense.

As of September 30, 2022, intangible assets of $ 4,629 , 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 $ 2,716 and $ 1,457 during the three months ended September 30, 2022 and 2021, respectively, and $ 7,332 and $ 4,572 during the nine months ended September 30, 2022 and 2021, respectively.

As of September 30, 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)

June 30, 2022

September 30, 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 June 30, 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.

As of September 30, 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 June 30, 2022 and 2021, no goodwill impairment charges were recorded.

For the periods ended September 30, 2022 and 2021, no goodwill impairment charges were recorded.

Revenue recognition

11 unchanged sentences

The Company's revenue arrangements do not contain significant financing components.

For the three months ended June 30, 2022 and 2021, 80 % and 81 % of total revenue was attributable to customers with pricing contracts, respectively, versus 20 % and 19 % attributable to transactional customers, respectively.

For the six months ended June 30, 2022 and 2021, 78 % and 80 % of total revenue was attributable to customers with pricing contracts, respectively, versus 22 % and 20 % attributable to transactional customers, respectively.

For the three months ended September 30, 2022 and 2021, 68 % and 80 % of total revenue was attributable to customers with pricing contracts, respectively, versus 32 % and 20 % attributable to transactional customers, respectively.

For the nine months ended September 30, 2022 and 2021, 74 % and 80 % of total revenue was attributable to customers with pricing contracts, respectively, versus 26 % 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 June 30, 2022 and December 31, 2021, the balance of deferred revenue was $ 622 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, $ 145 and $ 469 was recognized into revenue during the three and six months ended June 30, 2022, respectively.

As of June 30, 2022, $ 9,369 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, $ 3,520 of revenue will be recognized in the remainder of 2022, $ 4,821 in 2023, $ 1,017 in 2024, and $ 11 in 2025.

As of September 30, 2022 and December 31, 2021, the balance of deferred revenue was $ 539 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, $ 115 and $ 583 was recognized into revenue during the three and nine months ended September 30, 2022, respectively.

As of September 30, 2022, $ 8,776 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, $ 1,875 of revenue will be recognized in the remainder of 2022, $ 5,386 in 2023, $ 1,393 in 2024, and $ 122 in 2025.

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

6 unchanged sentences

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 six months ended June 30, 2022 and 2021, the Company concluded that, due to a recent history of operating losses, a valuation allowance should be applied to reduce its deferred tax assets to the amount that is more likely than not to be realized.

The Company’s effective income tax rate was negative 27 % and 0 % for the three months ended June 30, 2022 and 2021, respectively, and 181 % and 0 % for the six months ended June 30, 2022 and 2021, respectively, differing from the U.S.

For the three and nine months ended September 30, 2022 and 2021, the Company concluded that, due to a recent history of operating losses, a valuation allowance should be applied to reduce its deferred tax assets to the amount that is more likely than not to be realized.

The Company’s effective income tax rate was 1 % and 0 % for the three months ended September 30, 2022 and 2021, respectively, and 10 % and 0 % for the nine months ended September 30, 2022 and 2021, respectively, differing from the U.S.

corporate statutory federal income tax rate of 21 %.

The Company’s income tax expense for the three and six months ended June 30, 2022 was primarily a result of the remeasurement of its valuation allowance, which differed from the income tax that would result from applying the U.S.

corporate statutory federal income tax rate of 21% to its (loss) income before income taxes.

The Company’s income tax expense for the three and nine months ended September 30, 2022 was primarily a result of the remeasurement of its valuation allowance, which differed from the income tax that would result from applying the U.S.

corporate statutory federal income tax rate of 21% to its income before income taxes.

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 material unrecognized tax benefits as of June 30, 2022 and December 31, 2021.

As of June 30, 2022 and December 31, 2021, the number of issued shares of common stock was 13,702,796 and 13,488,540 , respectively.

The Company does no t have any material unrecognized tax benefits as of September 30, 2022 and December 31, 2021.

As of September 30, 2022 and December 31, 2021, the number of issued shares of common stock was 13,874,406 and 13,488,540 , respectively.

The change in the number of issued shares of common stock was due to the following factors:

An aggregate of 605,899 shares of common stock issued as a result of the vesting of RSUs, of which, 200,033 shares of common stock were withheld to pay withholding taxes upon such vesting, which were reflected in treasury stock, with a cost of $ 4,310 .

The treasury stock of 106,254 shares was retired during the six months ended June 30, 2022.

The treasury stock of 200,033 shares was then retired during the nine months ended September 30, 2022.

In May 2022, the board of directors of the Company authorized the repurchase of up to $ 5.0 million of the Company's common stock from time to time (the “Stock Repurchase Program”).

The Stock Repurchase Program does not obligate the Company to repurchase any shares and may be modified, suspended or terminated at any time and for any reason at the discretion of the board of directors.

During the six months ended June 30, 2022, the Company repurchased 7,031 shares of common stock under the Stock Repurchase Program at a net average price of $ 19.11 per share, which was reflected in treasury stock, with a cost of $ 134 .

During the nine months ended September 30, 2022, the Company repurchased 21,000 shares of common stock under the Stock Repurchase Program at a net average price of $ 18.22 per share, which was reflected in treasury stock, with a cost of $ 383 .

The treasury stock of 20,000 shares was then retired during the nine months ended September 30, 2022, with the remaining treasury stock cost balance of $ 18 as of September 30, 2022.

Share-based compensation

5 unchanged sentences

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 June 30, 2022, there were 2,722,287 shares of common stock available for future issuance under the 2018 Plan, as amended.

As of September 30, 2022, there were 2,718,037 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 six months ended June 30, 2022 were as follows:

Details of unvested RSU activity during the nine months ended September 30, 2022 were as follows:

Number of units

5 unchanged sentences

Vested not delivered

Unvested as of June 30, 2022 (3)

(1) During the six months ended June 30, 2022, the Company granted an aggregate of 113,000 RSUs to certain employees at grant date fair values ranging from $ 20.50 to $ 28.75 per share, with a vesting period ranging from two to four years .

Unvested as of September 30, 2022 (3)

(1) During the nine months ended September 30, 2022, the Company granted an aggregate of 117,750 RSUs to certain employees at grant date fair values ranging from $ 16.71 to $ 28.75 per share, with a vesting period ranging from two to four years .

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

7 unchanged sentences

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 June 30, 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 June 30, 2022" with a fair value of $27.23 per share.

As of June 30, 2022, unrecognized share-based compensation expense associated with the granted RSUs amounted to $ 15,894 , which is expected to be recognized over a remaining weighted average period of 2.6 years.

Share-based compensation was allocated to the following accounts in the condensed consolidated financial statements for the three and six months ended June 30, 2022 and 2021:

Three Months Ended June 30,

Six Months Ended June 30,

No amortization of share-based compensation expense has been recognized for these RSUs, because, as of September 30, 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 September 30, 2022" with a fair value of $ 27.23 per share.

As of September 30, 2022, unrecognized share-based compensation expense associated with the granted RSUs amounted to $ 14,221 , 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, 2022 and 2021:

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

13 unchanged sentences

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 $ 90 and $ 180 during the three and six months ended June 30, 2021, respectively.

In addition, amortization of share-based compensation expense of $ 724 and $ 1,272 (inclusive of the amortization of share-based compensation expense in relation with the modification of RSUs mentioned above) for the three and six months ended June 30, 2021, respectively, was recognized in relation to the RSUs previously granted to the Consultant.

There were no such expenses recognized during the three and six months ended June 30, 2022.

The Company recognized consulting service fees relating to the Services Agreement of a total of $ 36 and $ 216 during the three and nine months ended September 30, 2021, respectively.

In addition, amortization of share-based compensation expense of $ 160 and $ 1,432 (inclusive of the amortization of share-based compensation expense in relation with the modification of RSUs mentioned above) for the three and nine months ended September 30, 2021, respectively, was recognized in relation to the RSUs previously granted to the Consultant.

There were no such expenses recognized during the three and nine months ended September 30, 2022.

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 six months ended June 30, 2022 and 2021, a summary of the Company’s lease information is shown below:

Three Months Ended June 30,

Six Months Ended June 30,

For the three and nine months ended September 30, 2022 and 2021, a summary of the Company’s lease information is shown below:

Three Months Ended September 30,

Nine Months Ended September 30,

(In thousands)

2 unchanged sentences

Cash paid for operating leases

As of June 30, 2022, the weighted average remaining operating lease term was 2.3 years.

As of June 30, 2022, scheduled future maturities and present value of the operating lease liabilities are as follows:

As of September 30, 2022, the weighted average remaining operating lease term was 2.1 years.

As of September 30, 2022, scheduled future maturities and present value of the operating lease liabilities are as follows:

(In thousands)

June 30, 2022

September 30, 2022

Remainder of 2022

Total maturities

Present value included in consolidated balance sheet:

Present value included in condensed consolidated balance sheet:

Current portion of operating lease liabilities

4 unchanged sentences

(a) Capital commitment

The Company incurred data costs of $ 2,252 and $ 2,108 for the three months ended June 30, 2022 and 2021, respectively, and $ 4,500 and $ 4,230 for the six months ended June 30, 2022 and 2021, respectively, under certain data licensing agreements.

As of June 30, 2022, material capital commitments under certain data licensing agreements were $ 30,605 , shown as follows:

The Company incurred data costs of $ 2,332 and $ 2,107 for the three months ended September 30, 2022 and 2021, respectively, and $ 6,832 and $ 6,337 for the nine months ended September 30, 2022 and 2021, respectively, under certain data licensing agreements.

As of September 30, 2022, material capital commitments under certain data licensing agreements were $ 28,668 , shown as follows:

(In thousands)

June 30, 2022

September 30, 2022

Remainder of 2022

8 unchanged sentences

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 six months ended June 30, 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.

During 2021 and the nine months ended September 30, 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.

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.

3 unchanged sentences

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 three and six months ended June 30, 2021 .

The Company will continue to assess the CARES Act and other applicable government legislation aimed at assisting businesses during the Covid-19 pandemic.

Small Business Administration in June 2021, resulting in a gain on extinguishment of debt of $ 2,175 during the nine months ended September 30, 2021 .

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