What changed in this filing

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Item 1. Financial Statements

2020-08-11 compared with 2020-05-11 · 114 added, 79 removed, 241 unchanged (44% of the section changed)

3 unchanged sentences

(Amounts in thousands, except share data)

March 31, 2020

June 30, 2020

December 31, 2019

2 unchanged sentences

Accounts receivable, net of allowance for doubtful accounts of $ 53 and $ 40

as of March 31, 2020 and December 31, 2019, respectively

as of June 30, 2020 and December 31, 2019, 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

Total liabilities

1 unchanged sentence

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

issued and outstanding, as of March 31, 2020 and December 31, 2019

issued and outstanding, as of June 30, 2020 and December 31, 2019

Common stock—$ 0.001 par value, 200,000,000 shares authorized, 11,707,829 and

11,657,912 shares issued, 11,604,682 and 11,554,765 shares outstanding, as of

March 31, 2020 and December 31, 2019

Treasury stock, at cost, 103,147 shares as of March 31, 2020 and December 31, 2019

June 30, 2020 and December 31, 2019

Treasury stock, at cost, 103,147 shares as of June 30, 2020 and December 31, 2019

Additional paid-in capital

6 unchanged sentences

(Amounts in thousands, except share data)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Costs and expenses:

17 unchanged sentences

Additional paid-in

Balance at December 31, 2018

Balance at March 31, 2019

Vesting of restricted stock units

Share-based compensation

Balance at June 30, 2019

Balance at March 31, 2020

Vesting of restricted stock units

Share-based compensation

Balance at June 30, 2020

Treasury stock

Additional paid-in

Balance at December 31, 2018

1 unchanged sentence

Share-based compensation

Balance at March 31, 2020

Balance at June 30, 2019

Balance at December 31, 2019

Vesting of restricted stock units

Share-based compensation

Balance at June 30, 2020

See notes to condensed consolidated financial statements

2 unchanged sentences

(Amounts in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

18 unchanged sentences

Net cash used in investing activities

Net decrease in cash and cash equivalents

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from long-term loan

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

42 unchanged sentences

Common equivalent shares are excluded from the calculation in the loss periods as their effects would be anti-dilutive.

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands, except share data)

2 unchanged sentences

Basic and diluted:

A total of 2,185,577 and 2,267,500 unvested restricted stock units (“RSUs”) have been excluded from the diluted loss per share for the three months ended March 31, 2020 and 2019, respectively, as the impact is anti-dilutive.

A total of 2,189,910 unvested restricted stock units (“RSUs”) have been excluded from the diluted loss per share for the three and six months ended June 30, 2020, and 2,237,000 RSUs have been excluded for the three and six months ended June 30, 2019, as the impact is anti-dilutive.

Intangible assets, net

Intangible assets other than goodwill consist of the following:

March 31, 2020

June 30, 2020

December 31, 2019

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 $ 850 and $ 554 for the three months ended March 31, 2020 and 2019, respectively, were included in depreciation and amortization expense.

As of March 31, 2020, intangible assets of $ 4,136 , 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 $ 2,126 and $ 1,580 during the three months ended March 31, 2020 and 2019, respectively.

As of March 31, 2020, estimated amortization expense related to the Company’s intangible assets for the remainder of 2020 through 2025 and thereafter are as follows:

Amortization expenses of $ 934 and $ 617 for the three months ended June 30, 2020 and 2019, respectively, and $ 1,784 and $ 1,171 for the six months ended June 30, 2020 and 2019, respectively, were included in depreciation and amortization expense.

As of June 30, 2020, intangible assets of $ 4,322 , 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 $ 2,018 and $ 1,651 during the three months ended June 30, 2020 and 2019, respectively, and $ 4,144 and $ 3,231 during the six months ended June 30, 2020 and 2019, respectively.

As of June 30, 2020, estimated amortization expense related to the Company’s intangible assets for the remainder of 2020 through 2025 and thereafter are as follows:

(In thousands)

March 31, 2020

June 30, 2020

Remainder of 2020

1 unchanged sentence

Goodwill represents the cost in excess of the fair value of the net assets acquired in a business combination.

As of March 31, 2020 and December 31, 2019, 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 June 30, 2020 and December 31, 2019, 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 .

As of March 31, 2020 and December 31, 2019, no goodwill impairment charges were recorded.

As of June 30, 2020 and December 31, 2019, no goodwill impairment charges were recorded.

Revenue recognition

9 unchanged sentences

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

For the three months ended March 31, 2020 and 2019, 69 % and 67 % of total revenue was attributable to customers with pricing contracts, respectively, versus 31 % and 33 % attributable to transactional customers, respectively.

For the three months ended June 30, 2020 and 2019, 79 % and 62 % of total revenue was attributable to customers with pricing contracts, respectively, versus 21 % and 38 % attributable to transactional customers, respectively.

For the six months ended June 30, 2020 and 2019, 73 % and 64 % of total revenue was attributable to customers with pricing contracts, respectively, versus 27 % and 36 % 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 March 31, 2020 and December 31, 2019, the balance of deferred revenue was $ 207 and $ 128 , 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, 2019, $ 91 was recognized into revenue during the three months ended March 31, 2020.

As of March 31, 2020, $ 3,868 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.

As of June 30, 2020 and December 31, 2019, the balance of deferred revenue was $ 151 and $ 128 , 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, 2019, $ 37 and $ 128 was recognized into revenue during the three and six months ended June 30, 2020, respectively.

As of June 30, 2020, $ 3,105 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.

$ 1,204 of revenue will be recognized in the remainder of 2020, $ 1,820 in 2021, $ 65 in 2022, and $ 16 in 2023 and thereafter.

7 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.

The Company’s effective income tax rate differed from the statutory federal income tax rate of 21 % for the three months ended March 31, 2020 and 2019 .

For the three months ended March 31, 2020 and 2019, the effective income tax rate was 0 %, and the difference is primarily the result of the full valuation allowance applied against the Company’s deferred tax assets.

The Company’s effective income tax rate differed from the statutory federal income tax rate of 21 % for the three and six months ended June 30, 2020 and 2019 .

For the three and six months ended June 30, 2020 and 2019, the effective income tax rate was 0 %, 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.

3 unchanged sentences

All of the Company’s income tax filings since 2016 remain open for tax examinations.

The Company does no t have any unrecognized tax benefits as of March 31, 2020 and December 31, 2019.

The Company does no t have any unrecognized tax benefits as of June 30, 2020 and December 31, 2019.

Common stock and treasury stock

As of March 31, 2020 and December 31, 2019, the number of issued shares of common stock was 11,693,162 and 11,657,912 , respectively, which included shares of treasury stock of 103,147 and 103,147 , respectively.

As of June 30, 2020 and December 31, 2019, the number of issued shares of common stock was 11,707,829 and 11,657,912 , respectively, which included shares of treasury stock of 103,147 and 103,147 , respectively.

The change in the number of issued shares of common stock was due to an aggregate of 49,917 shares of common stock issued as a result of the vesting of RSUs.

Treasury stock

As of March 31, 2020 and December 31, 2019, the Company held 103,147 shares of treasury stock, with a cost of $ 1,255 , as a result of the shares withheld to pay withholding taxes upon the vesting of RSUs.

As of June 30, 2020 and December 31, 2019, the Company held 103,147 shares of treasury stock, with a cost of $ 1,255 , as a result of the shares withheld to pay withholding taxes upon the vesting of RSUs.

Share-based compensation

3 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 March 31, 2020, there were 44,624 shares of common stock available for future issuance under the 2018 Plan.

On April 17, 2020, the board of directors of the Company approved, subject to stockholder approval, 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 .

Details of unvested RSU activity during the three months ended March 31, 2020 were as follows:

On June 3, 2020, stockholders of the Company 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 .

As of June 30, 2020, there were 1,533,624 shares of common stock available for future issuance under the 2018 Plan, as amended.

Details of unvested RSU activity during the six months ended June 30, 2020 were as follows:

Number of units

4 unchanged sentences

Vested not delivered

Unvested as of March 31, 2020

Unvested as of June 30, 2020

On September 5, 2018 and January 16, 2019, the Company granted an aggregate of 1,487,500 RSUs and 90,000 RSUs, respectively, subject to both time- and performance-based requirements, to certain of its employees and directors, at a grant date fair value of $ 7.69 per share and $ 7.25 per share, respectively, with a three-year vesting period.

4 unchanged sentences

The remaining shares underlying such awards are expected to vest and be issued in accordance with their time-based vesting requirement.

As a result of meeting the 2018 Performance Criteria as of June 30, 2019, the Company recognized a total of $ 971 of share-based compensation expense relating to RSUs with the 2018 Performance Criteria for the three months ended March 31, 2020.

No share-based compensation expense of such RSUs was recognized during the three months ended March 31, 2019 because the Company determined at that period end that it was not probable that the 2018 Performance Criteria would be met.

As a result of meeting the 2018 Performance Criteria as of June 30, 2019, the Company recognized a total of $ 953 and $ 5,684 of share-based compensation expense relating to RSUs with the 2018 Performance Criteria for the three months ended June 30, 2020 and 2019, respectively, and $ 1,924 and $ 5,684 for the six months ended June 30, 2020 and 2019, respectively.

On August 28, 2019 and October 28, 2019, the Company granted an aggregate of 681,000 RSUs, subject to both time- and performance-based requirements, to certain employees, at a grant date fair value of $ 11.42 per share and $ 16.42 per share, respectively, with time vesting periods of either three or four years.

On April 17, 2020, the Company granted an aggregate of 11,000 RSUs, subject to both time- and performance-based requirements, to certain employees, at a grant date fair value of $ 21.82 per share, with time vesting periods of either three or four years.

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 (a) $ 10.0 million for such fiscal quarter and 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 for 267,000 RSUs, and (b) $ 12.5 million for such fiscal quarter and 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 for 425,000 RSUs, and (ii) 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 is met (collectively, the “2019 Performance Criteria”).

2 unchanged sentences

As of the respective grant dates, the Company determined that it is probable that the 2019 Performance Criteria will be met and therefore, began to record the related amortization expense on the grant dates.

The Company recognized a total of $ 1,389 of share-based compensation expense relating to RSUs with the 2019 Performance Criteria for the three months ended March 31, 2020.

As of March 31, 2020, unrecognized share-based compensation expense associated with the granted RSUs amounted to $ 12,654 , which is expected to be recognized over a remaining weighted average period of 2.0 years.

Share-based compensation was allocated to the following accounts in the condensed consolidated financial statements for the three months ended March 31, 2020 and 2019:

Three Months Ended March 31,

The Company recognized a total of $ 1,411 and $ 2,800 of share-based compensation expense relating to RSUs with the 2019 Performance Criteria for the three and six months ended June 30, 2020, respectively.

As of June 30, 2020, unrecognized share-based compensation expense associated with the granted RSUs amounted to $ 10,086 , which is expected to be recognized over a remaining weighted average period of 1.8 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, 2020 and 2019:

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

5 unchanged sentences

Services Agreement

On August 7, 2018, the Company entered into an executive chairman services agreement with Mr.

Michael Brauser, the then Executive Chairman of the Company, pursuant to which Mr.

Brauser will 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 provides 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.

Brauser continues to provide services as a consultant under the Services Agreement after his resignation as Executive Chairman and as a member of the board of directors effective on September 9, 2018.

Under the Services Agreement, Mr.

Brauser receives cash compensation of $ 30 per month and is entitled to participate in the Company’s incentive compensation plan.

The Company recognized consulting service fees relating to the Services Agreement of a total of $ 90 and $ 90 during the three months ended March 31, 2020 and 2019, respectively.

In addition, amortization of share-based compensation expense of $ 339 in relation to the RSUs with the 2018 Performance Criteria previously granted to Mr.

Brauser was recognized during the three months ended March 31, 2020.

No amortization of share-based compensation expense was recognized during the three months ended March 31, 2019.

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 will 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 provides 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 receives cash compensation of $ 30 per month and is entitled to participate in the Company’s incentive compensation plan.

The Company recognized consulting service fees relating to the Services Agreement of a total of $ 90 during the three months ended June 30, 2020 and 2019, and $ 180 during the six months ended June 30, 2020 and 2019.

In addition, amortization of share-based compensation expense of $ 338 and $ 1,115 in relation to the RSUs with the 2018 Performance Criteria previously granted to the Consultant was recognized during the three months ended June 30, 2020 and 2019, respectively, and $ 679 and $ 1,115 recognized during the six months ended June 30, 2020 and 2019, respectively.

Long-term loan

On May 5, 2020, the Company received funding under a promissory note dated May 5, 2020 (the “Promissory Note”) 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 is being made through Legacy Bank of Florida (the “Lender”).

Long-term loan as of June 30, 2020 consists of the following:

(In thousands)

June 30, 2020

Principal amount

Included in condensed consolidated balance sheet:

Current portion of long-term loan

Long-term loan (non-current)

The Loan has a two-year term and matures on May 5, 2022 .

The interest rate on the Loan is 1.0 % per annum.

Pursuant to the Promissory Note, payments shall be deferred for the first six months of the term of the Loan, followed by 18 approximately equal monthly installments of principal and interest.

The Promissory Note contains customary events of default relating to, among other things, payment defaults, and breach of representations and warranties, or other provisions of the Promissory Note.

As a result of the passage of the Paycheck Protection Program Flexibility Act of 2020 on June 5, 2020, the U.S.

Small Business Administration (“SBA”), provided updated guidance that payments can be deferred until the loan forgiveness is determined, or if the Company does not apply for forgiveness, then 10 months after the Covered Period (as defined below) ends.

The Loan may be forgiven partially or fully if the Loan proceeds are used for covered payroll, rent and utility costs incurred during the 24-week period that commenced on the date of funding (the “Covered Period”), and if at least 60 % of the proceeds are used for covered payroll costs.

Any forgiveness of the Loan will be subject to approval by the SBA and the Lender.

The Company will be required to apply for such forgiveness within 10 months after the Covered Period.

Because the Loan exceeds $ 2,000 , the Company anticipate the U.S.

Department of Treasury will audit the loan.

Although the Company intends to use the proceeds of the Loan for such covered purposes, it can provide no assurance that the Company will obtain forgiveness of the Loan in whole or in part.

Considering the Loan was effective in May 2020, the fair value of the Loan approximates its carrying amount as of June 30, 2020.

On January 1, 2019, the Company adopted Leases (Topic 842) using the modified retrospective method applied to all leases existing at the date of initial application.

3 unchanged sentences

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 months ended March 31, 2020 and 2019, a summary of the Company’s lease information is shown below:

Three Months Ended March 31,

For the three and six months ended June 30, 2020 and 2019, a summary of the Company’s lease information is shown below:

Three Months Ended June 30,

Six Months Ended June 30,

(In thousands)

6 unchanged sentences

The discount rate was calculated on the basis of information available as of January 1, 2019, the application date.

As of March 31, 2020, the weighted average remaining operating lease term was 4.6 years.

As of March 31, 2020, scheduled future maturities and present value of the operating lease liabilities are as follows:

As of June 30, 2020, the weighted average remaining operating lease term was 4.3 years.

As of June 30, 2020, scheduled future maturities and present value of the operating lease liabilities are as follows:

(In thousands)

March 31, 2020

June 30, 2020

Remainder of 2020

1 unchanged sentence

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 $ 2,132 and $ 1,688 for the three months ended March 31, 2020 and 2019, respectively, under certain data licensing agreements.

As of March 31, 2020, material capital commitments under certain data licensing agreements were $ 12,766 , shown as follows:

The Company incurred data costs of $ 2,171 and $ 1,867 for the three months ended June 30, 2020 and 2019, respectively, and $ 4,303 and $ 3,555 for the six months ended June 30, 2020 and 2019, respectively, under certain data licensing agreements.

As of June 30, 2020, material capital commitments under certain data licensing agreements were $ 10,762 , shown as follows:

(In thousands)

March 31, 2020

June 30, 2020

Remainder of 2020

(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 our 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.

4 unchanged sentences

In December 2019, a novel strain of coronavirus, now known as Covid-19 (“Covid-19”), was reported in Wuhan, China and has since extensively impacted the global health and economic environment.

In December 2019, a novel strain of coronavirus, now 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, in its approach to minimizing the impact of the Covid-19 pandemic.

As a result of the Covid-19 pandemic, to ensure the health and well-being of our employees, the Company instructed employees at its offices to work from home on a temporary basis.

The Company has 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.

In the second half of March, as preventative and protective actions were taken by governments, including the implementation of stay-at-home orders, we experienced reduced transactional volume that we believe was a result of customers adjusting to the effects of these stay-at-home orders.

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.

The Company has taken numerous steps, and will continue to take further actions as appropriate, in its approach to minimizing the impact of the Covid-19 pandemic.

To ensure the health and well-being of its employees, beginning in March 2020, the Company instructed employees at its offices to work from home on a temporary basis.

During 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 which resulted in significantly reduced commercial activity, and certain temporary government-imposed moratoria on collection customers’ activities, the Company experienced reduced transactional volume.

In addition, 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 during the second quarter.

The end date of the customer’s agreement was extended by one month for each month of the temporary concession.

In April 2020, the Company provided concessions to a total of 124 customers, representing $ 130 reduction of minimum committed spend.

In May 2020, the Company provided concessions to a total of 123 customers, representing $ 129 reduction of minimum committed spend.

In June 2020, the Company provided concessions to a total of 72 customers, representing $ 83 reduction of minimum committed spend.

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 can 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.

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

On May 5, 2020, the Company received the Loan under the CARES Act 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.

In accordance with best practices and guidance from the Centers for Disease Control and Prevention, the Company implemented protective safeguards, including daily temperature checks, mandatory wearing of masks, social distancing, plexiglass protective barriers, and an entire office HVAC UV-C system.

The Company began its first phase of employees returning to the Boca Raton, Florida office in June 2020.

The Company will continue to assess the need and timing of additional employees returning to the office.

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.

Subsequent events

The Loan to the Company is being made through Legacy Bank of Florida (the “Lender”).

The Loan has a two-year term and matures on May 5, 2022 .

The interest rate on the Loan is 1.00 % per annum.

Payments shall be deferred for the first six months of the term of the Loan.

Small Business Administration has the right to extend the deferment period.

The Promissory Note contains customary events of default relating to, among other things, payment defaults, and breach of representations and warranties, or other provisions of the Promissory Note.

The Loan may be forgiven partially or fully if the Loan proceeds are used for covered payroll costs, rent and utility costs incurred during the eight-week period that commenced on the date of funding, and at least 75 % of the Loan proceeds are used for covered payroll costs.

Any forgiveness of the Loan will be subject to approval by the U.S.

Small Business Administration and the Lender.

The Company will be required to apply for such forgiveness.

Although the Company intends to use the proceeds of the Loan for such covered purposes, it can provide no assurance that the Company will obtain forgiveness of the Loan in whole or in part.

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