0001654954-17-004071.txt : 20170504
0001654954-17-004071.hdr.sgml : 20170504
20170504172639
ACCESSION NUMBER: 0001654954-17-004071
CONFORMED SUBMISSION TYPE: 10-Q
PUBLIC DOCUMENT COUNT: 42
CONFORMED PERIOD OF REPORT: 20170331
FILED AS OF DATE: 20170504
DATE AS OF CHANGE: 20170504
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: ISSUER DIRECT CORP
CENTRAL INDEX KEY: 0000843006
STANDARD INDUSTRIAL CLASSIFICATION: COMMERCIAL PRINTING [2750]
IRS NUMBER: 261331503
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-Q
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-10185
FILM NUMBER: 17815325
BUSINESS ADDRESS:
STREET 1: 500 PERIMETER PARK DRIVE
STREET 2: SUITE D
CITY: MORRISVILLE
STATE: NC
ZIP: 27560
BUSINESS PHONE: 9194611600
MAIL ADDRESS:
STREET 1: 500 PERIMETER PARK DRIVE
STREET 2: SUITE D
CITY: MORRISVILLE
STATE: NC
ZIP: 27560
FORMER COMPANY:
FORMER CONFORMED NAME: DOCUCON INC
DATE OF NAME CHANGE: 20071002
FORMER COMPANY:
FORMER CONFORMED NAME: DOCUCON INCORPORATED
DATE OF NAME CHANGE: 19920703
10-Q
1
isdr_10q.htm
QUARTERLY REPORT
Blueprint
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
———————
FORM 10-Q
———————
☑ QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
quarterly period ended: March 31, 2017
or
☐ TRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
transition period from: _____________ to _____________
ISSUER DIRECT CORPORATION
(Exact
name of registrant as specified in its charter)
———————
Delaware
1-10185
26-1331503
(State or Other Jurisdiction
(Commission
(I.R.S. Employer
of Incorporation)
File Number)
Identification No.)
500 Perimeter Park Drive, Suite D, Morrisville NC
27560
(Address of Principal Executive Office) (Zip Code)
(919) 481-4000
(Registrant’s telephone number, including area
code)
N/A
(Former name, former address and former fiscal year, if changed
since last report)
———————
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes ☑ No ☐
Indicate
by check mark whether the registrant has submitted electronically
and posted on its corporate website, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such
files). Yes ☑ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, smaller reporting
company, or an emerging growth company. See the definitions of
“large accelerated filer,” “accelerated
filer”, “smaller reporting company” and "emerging
growth company" in Rule 12b-2 of the Exchange Act. (Check
one):
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated
filer
☐
(Do not check if a smaller reporting company)
Smaller reporting company
☒
Emerging
growth company
☐
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act.
☐
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Act) Yes ☐ No ☑
Indicate
the number of shares outstanding of each of the issuer’s
classes of common stock, as of the latest practicable date
2,929,614 shares of common stock were issued and outstanding as of
May 4, 2017.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Item 1.
Financial Statements.
2
Consolidated Balance Sheets as of March 31, 2017 (Unaudited) and
December 31, 2016
2
Unaudited Consolidated Statements of Operations for the Three
Months Ended
March
31, 2017 and 2016
3
Unaudited Consolidated Statements of Comprehensive Income for the
Three Months Ended
March
31, 2017 and 2016
4
Unaudited Consolidated Statements of Cash Flows for the Three
Months Ended
March
31, 2017 and 2016
5
Notes to Unaudited Consolidated Financial Statements
6
Item 2.
Management’s Discussion and Analysis of Financial Condition
and Results of Operations.
11
Item 3.
Quantitative and Qualitative Disclosures About Market
Risk.
17
Item 4.
Controls and Procedures.
17
PART II – OTHER INFORMATION
Item 1.
Legal Proceedings.
18
Item 1A.
Risk Factors.
18
Item 2.
Unregistered Sales of Equity Securities and Use of
Proceeds.
18
Item 3.
Defaults Upon Senior Securities.
18
Item 4.
Mine Safety Disclosure.
18
Item 5.
Other Information.
18
Item 6.
Exhibits.
18
Signatures
19
1
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ISSUER DIRECT CORPORATION
CONSOLIDATED BALANCE SHEETS
March 31,
December 31,
2017
2016
ASSETS
(unaudited)
Current
assets:
Cash
and cash equivalents
$5,589,295
$5,338,978
Accounts
receivable (net of allowance for doubtful accounts of $451,625 and
$429,192, respectively)
1,315,499
1,299,698
Other
current assets
259,083
188,584
Total
current assets
7,163,877
6,827,260
Capitalized
software (net of accumulated amortization of $268,901 and $207,438,
respectively)
2,352,783
2,048,273
Fixed
assets (net of accumulated amortization of $338,126 and $318,077,
respectively)
186,734
204,316
Deferred
income tax asset - noncurrent
137,235
140,974
Other
long-term assets
19,215
17,891
Goodwill
2,241,872
2,241,872
Intangible
assets (net of accumulated amortization of $3,407,190 and
$3,323,782, respectively)
1,296,810
1,380,218
Total assets
$13,398,526
$12,860,804
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current
liabilities:
Accounts
payable
$311,881
$343,418
Accrued
expenses
932,304
806,399
Income
taxes payable
117,520
111,961
Deferred
revenue
859,337
842,642
Total
current liabilities
2,221,042
2,104,420
Deferred
income tax liability
61,148
66,332
Other
long-term liabilities
103,491
112,154
Total liabilities
2,385,681
2,282,906
Commitments
and contingencies
Stockholders'
equity:
Preferred
stock, $0.001 par value, 1,000,000 and 30,000,000 shares
authorized, no shares issued and outstanding as of March 31, 2017
and December 31, 2016, respectively.
-
-
Common
stock $0.001 par value, 20,000,000 and 100,000,000 shares
authorized, 2,912,114 and 2,860,944 shares issued and outstanding
as of March 31, 2017 and December 31, 2016,
respectively.
2,912
2,861
Additional
paid-in capital
9,368,433
9,119,610
Other
accumulated comprehensive loss
(29,461)
(35,798)
Retained
earnings
1,670,961
1,491,225
Total stockholders' equity
11,012,845
10,577,898
Total liabilities and stockholders’ equity
13,398,526
$12,860,804
The
accompanying notes are an integral part of these unaudited
financial statements.
2
ISSUER DIRECT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three
Months Ended
March
31,
March
31,
2017
2016
Revenues
$2,856,131
$3,277,339
Cost of
revenues
746,097
770,082
Gross
profit
2,110,034
2,507,257
Operating costs and
expenses:
General and
administrative
911,018
842,161
Sales and marketing
expenses
593,668
623,960
Product
development
124,853
69,160
Depreciation and
amortization
105,675
281,758
Total operating
costs and expenses
1,735,214
1,817,039
Operating
income
374,820
690,218
Other income
(expense)
(9,299)
992
Net income before
income taxes
365,521
691,210
Income tax
expense
40,579
197,922
Net
income
$324,942
$493,288
Income per share
– basic
$0.11
$0.18
Income per share
– fully diluted
$0.11
$0.17
Weighted average
number of common shares outstanding – basic
2,898,418
2,788,308
Weighted average
number of common shares outstanding – fully
diluted
2,980,480
2,887,753
The
accompanying notes are an integral part of these unaudited
financial statements.
3
ISSUER DIRECT CORPORATION
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
For the Three
Months Ended
March 31,
March 31,
2017
2016
Net
income
$324,942
$493,288
Foreign
currency translation adjustment
6,337
10,015
Comprehensive
income
$331,279
$503,303
The
accompanying notes are an integral part of these unaudited
financial statements.
4
ISSUER DIRECT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three Months Ended
March 31,
March 31,
2017
2016
Cash flows from operating activities:
Net
income
$324,942
$493,288
Adjustments
to reconcile net income to net cash provided by operating
activities:
Depreciation
and amortization
164,920
306,928
Bad
debt expense
32,015
35,228
Deferred
income taxes
(656)
56,015
Stock-based
compensation expense
146,248
167,078
Changes
in operating assets and liabilities:
Decrease
(increase) in accounts receivable
(47,159)
(257,614)
Decrease
(increase) in deposits and prepaid assets
(71,734)
(32,324)
Increase
(decrease) in accounts payable
(31,737)
167,617
Increase
(decrease) in accrued expenses
114,242
(484,962)
Increase
(decrease) in deferred revenue
15,691
50,063
Net
cash provided by operating activities
646,772
501,317
Cash flows from investing activities:
Capitalized
software
(290,037)
(347,364)
Purchase
of fixed assets
(2,467)
(30,628)
Net
cash used in investing activities
(292,504)
(377,992)
Cash flows from financing activities:
Proceeds
from exercise of stock options, net of income taxes
26,690
7,094
Payment
of dividend
(145,206)
(83,551)
Net
cash used in financing activities
(118,516)
(76,457)
Net
change in cash
235,752
46,868
Cash
– beginning
5,338,978
4,215,145
Currency
translation adjustment
14,565
14,713
Cash
– ending
$5,589,295
$4,276,726
Supplemental disclosures:
Cash
paid for income taxes
$37,325
$120,250
Non-cash
activities:
Stock-based
compensation - capitalized software
$75,936
$179,200
The
accompanying notes are an integral part of these unaudited
financial statements.
5
ISSUER DIRECT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Presentation
The
unaudited interim consolidated balance sheet as of March 31, 2017
and statements of operations, comprehensive income, and cash flows
for the three-month periods ended March 31, 2017 and 2016 included
herein, have been prepared in accordance with the instructions for
Form 10-Q under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”), and Article 10 of Regulation S-X
under the Exchange Act. In the opinion of management, they include
all normal recurring adjustments necessary for a fair presentation
of the financial statements. Results of operations reported for the
interim periods are not necessarily indicative of results for the
entire year. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
accounting principles generally accepted in the United States ("US
GAAP") have been condensed or omitted pursuant to such rules and
regulations relating to interim financial statements. The interim
financial information should be read in conjunction with the 2016
audited financial statements of Issuer Direct Corporation (the
“Company”, “We”, or “Our”)
filed on Form 10-K and Form 10-K/A.
Note 2. Summary of Significant Accounting Policies
The
consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. Significant intercompany
accounts and transactions are eliminated in
consolidation.
Earnings Per Share (EPS)
We
calculate earnings per share in accordance with Financial
Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) No. 260 – EPS,
which requires that basic net income per common share be computed
by dividing net income for the period by the weighted average
number of common shares outstanding during the period. Diluted net
income per share is computed by dividing the net income for the
period by the weighted average number of common and dilutive common
equivalent shares outstanding during the period. Shares
issuable upon the exercise of stock options and restricted stock
units totaling 70,500 and 289,750 were excluded in the computation
of diluted earnings per common share during the three-month periods
ended March 31, 2017 and 2016, respectively, because their impact
was anti-dilutive.
Revenue Recognition
We
recognize revenue in accordance with US GAAP, including SEC Staff
Accounting Bulletin No. 104, “Revenue
Recognition,” which requires that: (i) persuasive
evidence of an arrangement exists, (ii) delivery has occurred
or services have been rendered, (iii) the sales price is fixed
or determinable, and (iv) collectability is reasonably
assured. We recognize revenue when services are rendered and/or
delivered and where collectability is probable. Deferred revenue
primarily consists of advance billings for annual contracts for our
legacy annual report service and licenses of our cloud-based
platforms.
Allowance for Doubtful Accounts
We
provide an allowance for doubtful accounts, which is based upon a
review of outstanding receivables as well as historical collection
information. Credit is granted on an unsecured basis. In
determining the amount of the allowance, management is required to
make certain estimates and assumptions. The allowance is made up of
specific reserves, as deemed necessary, on client account balances,
and a reserve based on our historical experience.
Use of Estimates
The
preparation of financial statements in conformity with US GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Significant estimates include the allowance
for doubtful accounts and the valuation of goodwill, intangible
assets, deferred tax assets, and stock-based
compensation. Actual results could differ from those
estimates.
6
Income Taxes
We
comply with the FASB ASC No. 740 – Income Taxes which
requires an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and
liabilities are computed for differences between the financial
statement and tax bases of assets and liabilities that will result
in future taxable or deductible amounts based on enacted tax laws
and rates applicable to the periods in which the differences are
expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred income tax assets
to the amounts expected to be realized. For any
uncertain tax positions, we recognize the impact of a tax position,
only if it is more likely than not of being sustained upon
examination, based on the technical merits of the position. Our
policy regarding the classification of interest and penalties is to
classify them as income tax expense in our financial statements, if
applicable. At the end of each interim period, we estimate the
effective tax rate we expect to be applicable for the full year and
this rate is applied to our results for the interim year-to-date
period and then adjusted for any discrete period
items.
Capitalized Software
In
accordance with FASB ASC No. 350 – Intangibles –
Goodwill and Other, costs incurred to develop our cloud-based
platform products and disclosure management system components are
capitalized when the preliminary project phase is complete,
management commits to fund the project and it is probable the
project will be completed and used for its intended purposes. Once
the software is substantially complete and ready for its intended
use, the software is amortized over its estimated useful
life. Costs related to design or maintenance of the
software are expensed as incurred. The Company
capitalized $365,973 and $526,564 during the three-month periods
ended March 31, 2017 and 2016, respectively. Included in
these amounts were $75,936 and $179,200 related to stock-based
compensation during the three-month periods ended March 31, 2017
and 2016, respectively. The Company recorded amortization
expense of $61,463 and $28,672 during the three-month periods ended
March 31, 2017 and 2016, respectively, $59,245 and $25,771 of which
is included in Cost of revenues on the Consolidated Statements of
Operations. For the three-month periods ended March 31, 2017
and 2016, the remaining amortization of $2,218 and $2,901,
respectively, is included in depreciation and amortization, as it
relates to back-office supporting systems.
Fair Value Measurements
As of
March 31, 2017 and December 31, 2016, we do not have any financial
assets or liabilities that are required to be, or that we elected
to measure, at fair value. We believe that the fair value of our
financial instruments, which consist of cash and cash equivalents,
accounts receivable, and accounts payable approximate their
carrying amounts.
Translation of Foreign Financial Statements
The
financial statements of the foreign subsidiaries of the Company
have been translated into U.S. dollars. All assets and
liabilities have been translated at current rates of exchange in
effect at the end of the period. Income and expense
items have been translated at the average exchange rates for the
year or the applicable interim period. The gains or
losses that result from this process are recorded as a separate
component of other accumulated comprehensive loss until the entity
is sold or substantially liquidated.
Business Combinations, Goodwill and Intangible Assets
We
account for business combinations under FASB ASC No. 805 –
Business Combinations and the related acquired intangible assets
and goodwill under FASB ASC No. 350 – Intangibles –
Goodwill and Other. The authoritative guidance for business
combinations specifies the criteria for recognizing and reporting
intangible assets apart from goodwill. We record the assets
acquired and liabilities assumed in business combinations at their
respective fair values at the date of acquisition, with any excess
purchase price recorded as goodwill. Goodwill is an asset
representing the future economic benefits arising from other assets
acquired in a business combination that are not individually
identified and separately recognized. Intangible assets consist of
client relationships, customer lists, software, technology and
trademarks that are initially measured at fair value. At
the time of the business combination trademarks are considered an
indefinite-lived asset and, as such, are not amortized as there is
no foreseeable limit to cash flows generated from them. The
goodwill and intangible assets are assessed annually for
impairment, or whenever conditions indicate the asset may be
impaired, and any such impairment will be recognized in the period
identified. The client relationships, customer lists, software and
technology are amortized over their estimated useful
lives.
Comprehensive Income
Comprehensive
income consists of net income and other comprehensive income
related to changes in the cumulative foreign currency translation
adjustment.
7
Advertising
The
Company expenses advertising costs as incurred, except for
direct-response advertising, which is capitalized and amortized
over its expected period of future benefits.
Stock-based compensation
We
account for stock-based compensation under FASB ASC No. 718 –
Compensation – Stock Compensation. The authoritative guidance
for stock compensation requires that companies estimate the fair
value of share-based payment awards on the date of the grant using
an option-pricing model. The associated cost is recognized over the
period during which an employee is required to provide service in
exchange for the award.
Newly Adopted Pronouncements
The
FASB issued ASU 2016-09, Improvements to Employee Share-Based
Payment Accounting, which simplifies several aspects of the
accounting for share-based payment award transactions including (a)
income tax consequences; (b) classification of awards as either
debt or equity liabilities; and (c) classification on the statement
of cash flows. The amendments are effective for public
business entities for annual periods beginning after December 15,
2016, and interim periods within those annual periods. The
Company has adopted this ASU as of January 1, 2017. The primary
amendment impacting the Company's financial statements is the
requirement for excess tax benefits or shortfalls on the exercise
of stock-based compensation awards to be presented in income tax
expense in the Consolidated Statements of Income during the period
the award is exercised as opposed to being recorded in Additional
paid-in capital on the Consolidated Balance Sheets. The
excess tax benefit or shortfall is calculated as the difference
between the fair value of the award on the date of exercise and the
fair value of the award used to measure the expense to be
recognized over the service period. Changes are required to
be applied prospectively to all excess tax benefits and
deficiencies resulting from the exercise of awards after the date
of adoption. The ASU requires a "modified retrospective" approach
application for excess tax benefits that were not previously
recognized in situations where the tax deduction did not reduce
current taxes payable. For the three-month period ended March 31,
2017, the Company recorded an income tax benefit of $77,272 related
to the excess tax benefit of exercised awards during the period,
that would have been recorded in Additional paid-in capital during
prior years. As the end result is dependent on the future value of
the Company's stock as well as the timing of employee exercises,
the amount of future impact cannot be quantified at this
time.
Recent Accounting Pronouncements
The
FASB's new leases standard ASU 2016-02 Leases (Topic 842) was
issued on February 25, 2016. ASU 2016-02 is intended to improve
financial reporting about leasing transactions. The ASU affects all
companies and other organizations that lease assets such as real
estate, airplanes, and manufacturing equipment. The ASU will
require organizations that lease assets referred to as
“Lessees” to recognize on the balance sheet the assets
and liabilities for the rights and obligations created by those
leases. An organization is to provide disclosures designed to
enable users of financial statements to understand the amount,
timing, and uncertainty of cash flows arising from leases. These
disclosures include qualitative and quantitative requirements
concerning additional information about the amounts recorded in the
financial statements. Under the new guidance, a lessee will be
required to recognize assets and liabilities for leases with lease
terms of more than 12 months. Consistent with current US GAAP, the
recognition, measurement, and presentation of expenses and cash
flows arising from a lease by a lessee primarily will depend on its
classification as a finance or operating lease. However, unlike
current US GAAP which requires only capital leases to be recognized
on the balance sheet the new ASU will require both types of leases
(i.e. operating and capital) to be recognized on the balance sheet.
The FASB lessee accounting model will continue to account for both
types of leases. The capital lease will be accounted for in
substantially the same manner as capital leases are accounted for
under existing US GAAP. The operating lease will be accounted for
in a manner similar to operating leases under existing US GAAP,
except that lessees will recognize a lease liability and a lease
asset for all of those leases. Public companies will be
required to adopt the new leasing standard for fiscal years, and
interim periods within those fiscal years, beginning after December
15, 2018. For calendar year-end public companies, this means
an adoption date of January 1, 2019 and retrospective application
to previously issued annual and interim financial statements for
2018, however, early adoption is permitted. Lessees with a large
portfolio of leases are likely to see a significant increase in
balance sheet assets and liabilities. The Company currently has one
lease on its corporate facilities which ends October 31,
2019. Absent any renewal of the lease or new leases entered
into before January 1, 2019, the Company will be required to record
a right-to-use asset and corresponding lease liability associated
with the remaining lease payments beginning with the first interim
period of 2019. This will increase both balance sheet assets
and liabilities by insignificant amounts and will not have a
significant impact on the income statement or affect any
covenant calculations.
The
FASB has issued ASU 2014-09, Revenue from Contracts with Customers
(Topic 606) and several updates to the ASU. ASU 2014-09 requires
revenue recognition to depict the transfer of goods or services to
customers in an amount that reflects the consideration to which the
entity expects to be entitled in exchange for those goods or
services. ASU 2014-09 sets forth a new revenue recognition model
that requires identifying the contract, identifying the performance
obligations, determining the transaction price, allocating the
transaction price to performance obligations and recognizing the
revenue upon satisfaction of performance obligations.
8
The
amendments in the ASU can be applied either retrospectively to each
prior reporting period presented or retrospectively with the
cumulative effect of initially applying the update recognized at
the date of the initial application along with additional
disclosures. The Company is currently evaluating the impact of ASU
2014-09 as well as the additional updates, however, does not
believe it will have a significant impact on the Company's
financial statements as the Company believes the current manner in
which revenue is recognized will result in the same or similar
timing and amount of revenue recognition as required by ASU 2014-09
and the additional amendments. These ASU's are currently
effective for the Company in our year beginning on January 1,
2018.
Note 3: Stock Options and Restricted Stock Units
2014 Equity Incentive Plan
On May
23, 2014, the shareholders of the Company approved the 2014 Equity
Incentive Plan (the “2014 Plan”). Under the
terms of the 2014 Plan, the Company is authorized to issue
incentive awards for common stock up to 200,000 shares to employees
and other personnel. On June 10, 2016, the shareholders
of the Company approved an additional 200,000 awards to be issued
under the 2014 Plan, bringing the total number of shares to be
awarded to 400,000. The awards may be in the form of
incentive stock options, nonqualified stock options, restricted
stock, restricted stock units and performance awards. The
2014 Plan is effective through March 31, 2024. As of
March 31, 2017, 258,000 awards had been granted under the 2014
Plan.
The
following table summarizes information about stock options
outstanding and exercisable at March 31, 2017:
Options
Outstanding
Options
Exercisable
Exercise Price
Range
Number
Weighted
Average
Remaining
Contractual
Life (in
Years)
Weighted
Average
Exercise
Price
Number
$0.01 - $1.00
7,850
4.81
$0.01
7,850
$1.01 - $4.00
3,000
5.00
$3.33
3,000
$4.01 - $7.00
10,000
8.64
$6.80
3,333
$7.01 - $8.00
78,750
3.45
$7.76
68,750
$8.01 - $10.00
11,000
7.74
$9.26
7,330
$10.01 - $13.49
40,000
1.94
$13.49
30,000
Total
150,600
3.80
$8.83
120,263
As of
March 31, 2017, the Company had unrecognized stock compensation
related to the options of $231,283.
On
January 24, 2017, the Company granted 9,500 restricted stock units
with an intrinsic value of $8.85 to certain employees of the
Company. The restricted stock units vest one-third annually over
three years. As of March 31, 2017, 38,170 restricted stock units
with an intrinsic value of $5.86 vested. As of March 31, 2017,
there was $355,561 of unrecognized compensation cost related to our
unvested restricted stock units, which will be recognized through
2019.
Note 4: Income taxes
We
recognized income tax expense of $40,579 and $197,922 for the
three-month periods ended March 31, 2017 and 2016, respectively. At
the end of each interim period, we estimate the effective tax rate
we expect to be applicable for the full fiscal year and this rate
is applied to our results for the year-to-date period, and then
adjusted for any discrete period items. For the three-month period
ended March 31, 2017, the variance between the Company’s
effective tax rate and the U.S. statutory rate of 34% is primarily
attributable to the excess stock-based compensation tax benefit of
$77,272 recognized in income tax expense during the period, in
connection with the Company’s adoption of ASU 2016-09, as
well as, foreign statutory tax rate differentials and tax
credits.
During
the three-month period ended March 31, 2016, the Company released
$78,400 of its valuation allowance related to federal and state net
operating losses, which resulted in a net benefit of $40,875. The
tax benefits from US net operating losses that were previously
reserved were acquired as part of the acquisition of PrecisionIR
(PIR). At the date of acquisition, management believed it was more
likely than not that the benefits would not be used due to the
uncertainty of future profitability and also due to statutory
limitations on the amount of net operating losses that can be
carried forward in an acquisition. The remaining valuation
allowance on the federal and state net operating losses related to
PIR was released during the fourth quarter of 2016, as such no
valuation allowance remains on those federal and state net
operating losses as March 31, 2017, which is consistent with
projections of future taxable domestic income.
9
Note 5: Operations and Concentrations
For the
three-month periods ended March 31, 2017 and 2016, we earned
revenues (as a percentage of total revenues) in the following
categories:
Three months ended
March 31,
Revenue Streams
2017
2016
Platform
and Technology
49.49%
28.84%
Services
50.51%
71.16%
Total
100.00%
100.00%
No
customers accounted for more than 10% of the operating revenues
during the three-month periods ended March 31, 2017 or 2016. We did
not have any customers that comprised more than 10% of our total
accounts receivable balance at March 31, 2017 or December 31,
2016.
We
believe we did not have any financial instruments that could have
potentially subjected us to significant concentrations of credit
risk. Since a portion of the revenues are paid at the beginning of
the month via credit card or advance by check, the remaining
accounts receivable amounts are generally due within 30 days, none
of which is collateralized.
Note 6: Line of Credit
Effective September
2, 2016, the Company renewed its Line of Credit, which reduced the
interest rate to LIBOR plus 2.50% from LIBOR plus 3.00%. The
amount of funds available for future borrowings remained at
$2,000,000. As of March 31, 2017, the interest rate was 3.48% and
the Company did not owe any amounts on the Line of
Credit.
Note 7: Geographical Information
We
consider ourselves to be in a single reportable segment under the
authoritative guidance for segment reporting, specifically a
shareholder communications and compliance company for publicly
traded companies. Revenue is attributed to a particular geographic
region based on where the services are performed. The following
tables set forth revenues by domestic and international
regions:
Three months
ended
March
31,
2017
2016
Geographic region
North
America
$2,539,210
$2,835,006
Europe
316,921
442,333
Total
revenues
$2,856,131
$3,277,339
Note 8: Authorized Shares
On
March 21, 2017, the Company filed a Certificate of Amendment to its
Certificate of Incorporation reducing the number of authorized
shares of Preferred stock from 30,000,000 to 1,000,000 shares and
the number of Common stock from 100,000,000 to 20,000,000
shares.
Note 9: Subsequent Events
On
April 5, 2017, the Company's Board of Directors approved and
declared a quarterly cash dividend of $0.05 per share. The dividend
is payable on May 12, 2017, to stockholders of record as of the
close of business on April 24, 2017.
10
ITEM
2.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The discussion of the financial condition and results of operations
of the Company set forth below should be read in conjunction with
the consolidated financial statements and related notes thereto
included elsewhere in this Form10-Q. This Form10-Q contains
forward-looking statements that involve risks and uncertainties.
The statements contained in this Form10-Q that are not purely
historical are forward-looking statements within the meaning of
Section 27a of the Securities Act and Section 21e of the Exchange
Act. When used in this Form10-Q, or in the documents incorporated
by reference into this Form10-Q, the words
“anticipate,” “believe,”
“estimate,” “intend” and
“expect” and similar expressions are intended to
identify such forward-looking statements. Such forward-looking
statements include, without limitation, the statements regarding
the Company’s strategy, future sales, future expenses, future
liquidity and capital resources. All forward-looking statements in
this Form10-Q are based upon information available to the Company
on the date of this Form10-Q, and the Company assumes no obligation
to update any such forward-looking statements. The Company’s
actual results could differ materially from those discussed in this
Form10-Q. Factors that could cause or contribute to such
differences (“Cautionary Statements”) include, but are
not limited to, those discussed in Item 1. Business —
“Risk Factors” and elsewhere in the Company’s
Annual Report on Form10-K for the year ended December 31, 2016,
which are incorporated by reference herein and in this report. All
subsequent written and oral forward-looking statements attributable
to the Company, or persons acting on the Company’s behalf,
are expressly qualified in their entirety by the Cautionary
Statements.
Overview
Issuer
Direct™ Corporation (Issuer Direct Corporation and its
subsidiaries are hereinafter collectively referred to as
“Issuer Direct”, the “Company”,
“We” or “Our” unless otherwise noted). We
are a Delaware corporation formed in October 1988 under the
name Docucon Incorporated. In December 2007, we changed our
name to Issuer Direct Corporation. Our corporate offices are
located at 500 Perimeter Park Drive, Suite D, Morrisville, North
Carolina, 27560.
Issuer Direct is an
industry-leading communications and compliance company
focusing on the needs of corporate issuers. Issuer Direct's
principal platform, Platform id.TM,
empowers users by thoughtfully integrating the most relevant tools,
technologies and services, thus eliminating the complexity
associated with producing and distributing financial and business
communications.
We
work with a diverse client base in the financial services industry,
including brokerage firms, banks and mutual funds. We
also sell products and services to corporate issuers, professional
firms, such as investor relations and public relations, and the
accounting and the legal communities. Corporate issuers and their
constituents utilize our cloud-based platforms and related services
from document creation all the way to dissemination to regulatory
bodies, platforms and shareholders.
In
the past, we have reported our revenues in three different streams:
disclosure management, shareholder communications and platform and
technology. To more accurately reflect our business and our focus
on a platform first engagement strategy, we have consolidated our
reporting into the two revenue streams, Platform and Technology,
and Services. For presentation purposes, all revenues for the
three-month period ended March 31, 2016, have been reclassified to
accurately illustrate year over year comparisons.
We
announce material financial information to our investors using our
investor relations website, Securities and Exchange Commission
("SEC") filings, investor events, news and earnings releases,
public conference calls, webcasts and social media. We use
these channels to communicate with our investors and the public
about our company, our products and services and other issues. It
is possible that information we post on some of these channels
could be deemed to be material information. Therefore, we encourage
investors, the media, and others interested in our company to
review the information we post to all of our channels, including
our social media accounts.
Platform and Technology
As
the Company continues its transition to a cloud-based subscription
business, we expect the Platform and Technology portion of our
business to continue to expand over the next several years and
become the majority of the company’s revenues. Leading this
transition are the technology offerings from our ACCESSWIRE news
business and our core historical tools for disclosure management
and shareholder communications.
Additionally, our product road map includes
planned advancements in both our current Platform
id. offering as well as additional offerings in
which we see long term opportunity. These advancements will
leverage our current application technology framework and give us
an opportunity to further expand our customer and user
base.
11
Platform id.
Platform id. is a cloud-based subscription platform that
efficiently and effectively manages the events of a company that
seeks to distribute its messaging to key constituents, investors,
markets and regulatory systems around the globe. Currently,
platform id. consists of nine related but distinct
shareholder communications and disclosure reporting modules. Part
of these capabilities were historically part of our disclosure
management and shareholder communications offerings, but are now
included into our fully integrated platform.
Within most of our target markets, customers
require several individual services or software providers to meet
their investor relations, communications and compliance needs. We
believe platform id. breaks down those barriers and combines all
those needs into a single sign-on platform — one that offers
a company control, increases efficiencies, demonstrates a clear ROI
and, most importantly, delivers consistent and compliant messaging
from one centralized platform.
While the complete platform is available for a
single subscription fee, companies also have the flexibility to
choose one or more of the specific modules that fit their needs
based on the stage of the company’s
development. Set
forth below are the nine modules currently included in
platform id.:
ACCESSWIRE™
Our press release platform is a cost-effective FD
(Fair
Disclosure) news dissemination
and media outreach service. The ACCESSWIRE business focuses on
press release distribution for both private and publicly held
companies globally. ACCESSWIRE is fast becoming a competitive
alternative to the traditionally major newswires, because we have
been able to expand upon our distribution with key partners,
increase our analytics reporting and maintain the simple flat rate
licensing and per release options. As a result, we anticipate we
will continue to add new clients throughout 2017 and beyond. We
will continue to brand our press release offerings under the name
ACCESSWIRE, which we believe will solidify our market position in
the newswire business.
ACCESSWIRE
is dependent upon several key partners for news distribution, some
of which are also partners that we rely on for other investor
outreach offerings. A disruption in any of these partnerships could
have a materially adverse impact on our business.
Classify™
Classify is our buy-side, sell-side and media
targeting database and intelligence analytics platform that
customers can add on to their Platform id. subscription. This subscription-based platform
is centered around both our shareholder communications and news
distribution offerings. We hope the Classify analytics and peer
review application will become the focal point for our
Platform id. dashboard, as customers become increasingly
interested in peer performance and real-time alerts to vital data
points throughout the day. To ensure the adoption of this
subscription feature, we have begun providing select clients with
this dashboard on a trial basis and intend to broaden this offering
to all customers this fiscal year.
We
believe our data-set will be an attractive option for both investor
relations and public relations firms and for customers looking for
an alternative to current products in the market, based on price
and flexibility, as well as data quality and quantity. Further to
our strategy, the Classify dataset will be fully integrated into
our ACCESSWIRE offering this year as a way to expand distribution
via highly focused targeted lists of professionals from our
dataset. We expect this to further drive revenues per release as
well as subscriptions over the year.
Investor Network™
Over
the past year, we have been focused on refining the model of
digital distribution of our customer’s message to the
investment community. This has been accomplished by integrating
Investor Networks analytics into and with our Classify dashboard.
Most of the customers subscribing to this platform today, are
historical Precision IR (“PIR”) – Annual Report
Service (“ARS”) users. We have migrated many of those
customers from the traditional ARS business into this new digital
subscription business. However, there can be no assurances these
customers will continue long term using this digital platform if
market conditions for shareholder interest is not
present.
Earnings Events
There
are over 5,000 companies in North America conducting earnings
events each quarter that include teleconference, webcast or both as
part of their events. Along with webcasting and teleconference, our
platform incorporates each element of the earnings event including
earnings announcement, earnings press release and SEC Form 8-K
filings. There are a handful of our competitors that can offer this
today. However, we believe our real-time event setup and integrated
approach offers a more effective way to manage the process as well
as attract an audience of investors.
12
In
the teleconference and webcasting space, we spent time in the
latter part of 2016 developing and integrating systems and
processes with our platform and partners. The earnings event
business is a highly competitive space with the majority of the
business being driven from practitioners in the investor and
communications firms. Toward the end of 2016, we created an
application protocol interface (“API”) for the webcast
marketplace, and will begin partnering with publishers and other
platforms to license our datasets, which we believe will further
increase our brand awareness. This API license will allow
publishers to query single or multiple companies' current and past
earnings calls and present those webcasts on their platforms.
Additionally, as a commitment to broadening the reach of our
webcast platform, all events will be broadcast live on our Investor
Network platform, which will drive new audiences and give companies
the ability to view their analytics and engagement of each event.
We believe these competitive advantages will increase the demand
for our webcasting platform among the corporate issuer
community.
Investor Relations (“IR”) Websites & Data
Feeds
Inside of Platform id. is our investor relations content network which
is used to create the IR tab of a public company’s website.
This investor relations content network is a robust market data
cloud of news, stock, fundamentals, regulatory filings, corporate
governance, hotlines and many other components that are aggregated
from a majority of the major exchanges and news distribution
outlets around the world. These data feeds are licensed
individually and as a complete platform to pre-IPO, reporting
companies and partners seeking to display our content on their
platforms. The clear benefits to our IR platform is its integration
into and with the entire cloud-based system, meaning companies can
produce content for public distribution and it is automatically
linked to their corporate site, distributed to targeted groups and
placed into and with our data feed partners.
Whistleblower Hotline
Our whistleblower platform is an add-on product
within Platform id. This system delivers secure notifications and
basic incident workflow management processes that align with a
company’s corporate governance whistleblower policy. As a
supported and subsidy bundle product of the New York Stock Exchange
(“NYSE”) offerings, it is our hope we will gain
relationship with new IPO clients and other larger cap clients
listed on the NYSE.
Blueprint™
Blueprint is our cloud-based document conversion,
editing and filing platform, that was designed for reporting
companies and professionals seeking to insource the document
drafting, editing and filing processes to the SEC and SEDAR (System
for Electronic Document Analysis and Retrieval), which is the
Canadian equivalent of EDGAR. Blueprint is available in both a
secure public cloud with the Company’s Platform
id. subscription, as well as in a private cloud for
corporations, mutual funds and the legal community looking to
further enhance their internal document process. Our belief is that
once fully developed and marketed, we will see a negative impact on
our legacy disclosure conversion services business in the future.
However, the margins associated with our subscription business
compared to our services business are higher and align with our
long-term strategy, and as such we hope Blueprint will have a
positive impact on our net income in the
future.
Stock Transfer
A valued subscription in our Platform
id. ecosystem is the ability for our customers to
gain access to real-time information of their shareholders, stock
ledgers, reports, and issue new shares from our cloud-based
platform. Managing the capitalization table of a public company or
pre-IPO company is the cornerstone of corporate governance and
transparency, and as such companies, bond offerings, and community
banks have chosen our transfer agent subsidiary, Direct Transfer,
LLC, to assist with their stock transfer needs. This is an industry
which has experienced declining revenues as it was affected by the
convergence of paper certificates to digital form. However, we have
recently been focused on licensing opportunities of our stock
transfer platform, allowing customers to gain access to our
cloud-based system in order to move shares or query shareholders,
which has significantly changed the long term dynamics for both our
customers and us.
During
the fourth quarter of 2016, we completed a strategic upgrade to our
platform that reaches private companies seeking to raise capital
under Regulation A+, and Regulation D. This cloud-based system was
released during the first quarter of 2017 under the brand
Transferly. Transferly is a subscription platform that gives
companies and broker dealers the ability to assist in the process
of identifying, managing and completing the investment process of
an offering. Once an offering is completed, companies can utilize
our stock transfer system to continue the communication and
compliance issuance work a company is required to
manage.
Proxy – Annual General Meeting (AGM)
Our proxy business is marketed as a fully
integrated, real-time voting platform for our customers and their
shareholders of record. This platform is utilized for every annual meeting and or
special meeting we manage for our client base and offers both
full-set mailing and notice of internet availability
options.
13
Services
As the Company focuses on expanding its
cloud-based subscription business, we expect to see a decrease in
the overall revenues associated with our Services business.
Typically, Services revenues relate to where resources are required
to perform the work for our clients and or hard goods are utilized
as part of the engagement. To date, most of our Services have been
related to converting and editing SEC documents and XBRL tagging,
which has been our core disclosure business over the last 11 years.
Services also include telecommunications services and print,
fulfillment and delivery of stock certificates, proxy materials or
annual reports depending on each customer’s engagement.
Services are not required, but are optional for customers that
utilize our Platform id.
Our
investor outreach and engagement offering, formerly known as the
ARS, now known as the Investor Network, was acquired from PIR. The
ARS business has existed for over 20 years primarily as a physical
hard copy delivery service of annual reports and prospectuses
globally for tens of thousands of customers. We continue to operate
a portion of this legacy system and continue to migrate the install
base over to our subscriptions business of Investor Network, which
is our digital platform and outreach engagement dataset. Portions
of this legacy system are still operational, specifically for those
who opt to take advantage of physical delivery of material. We
believe we will continue to see further attrition of both customers
and revenues in this category as we focus our efforts on our
digital platforms and subscription business.
Results of Operations
Comparison of results of operations for the three months ended
March 31, 2017 and 2016:
Three months ended
March 31,
Revenue Streams
2017
2016
Platform and Technology
Revenue
$1,413,589
$945,219
Gross
margin
$1,168,293
$775,551
Gross
margin %
83%
82%
Services
Revenue
$1,442,542
2,332,120
Gross
margin
$941,741
1,731,706
Gross
margin %
65%
74%
Total
Revenue
$2,856,131
$3,277,339
Gross
margin
$2,110,034
$2,507,257
Gross
margin %
74%
77%
Revenues
Total
revenue decreased by $421,208, or 13%, to $2,856,131 during the
three-month period ended March 31, 2017, as compared to $3,277,339
during the same period of 2016. Included in revenue for the
three-month period ended March 31, 2016, is the benefit of $316,040
related to the reversal of an accrual of unused postage credits
related to ARS clients acquired from PIR. Absent the one-time
benefit related to the reversal of the postage accrual in the three
months ended March 31, 2016, revenues for the three-month period
ended March 31, 2017 would have decreased 4% compared to the same
period in the prior year.
Platform and
Technology revenue increased $468,370, or 50%, to $1,413,589 during
the three-month period ended March 31, 2017, as compared to
$945,219 during the same period of 2016. A majority of the increase
is due to the continued success of our ACCESSWIRE news distribution
platform, which increased $417,024 during the three-month period
ended March 31, 2017, as compared to the same period of the prior
year. The increase is attributable to our investment in increased
sales staff and distribution during the latter part of 2016 as the
Company was able to continue to penetrate the newswire market.
Additionally, we earned increased revenue from the same period of
the prior year from other platforms including our Blueprint,
whistleblower, webcasting, Classify, stock transfer, IR website and
data feeds and proxy platforms. These increases were offset by a
decline in revenue from our Investor Network platform.
Services revenue
decreased $889,578, or 38%, to $1,442,542 during the three-month
period ended March 31, 2017, as compared to $2,332,120 during the
same period of 2016. The decrease is primarily associated with a
decrease in revenue from our ARS services, due in part to a benefit
recorded during the three-month period ended March 31, 2016 related
to the reversal of the accrual for unused postage credits noted
earlier, as well as continued client attrition as customers elect
to leave the service or transition to digital fulfillment.
Additionally, we experienced a decline in revenue from our print
and proxy distribution services as well as stock transfer services,
which are project based services and dependent on the timing of our
customers and corporate directives. A portion of the projects
performed in the prior year were one-time projects and certain
projects that we anticipated performing in the three- month period
ended March 31, 2017, were delayed to the second quarter. We also
experienced a decline in our traditional Edgar and XBRL services
due to continued pricing pressure in those markets.
No customers
accounted for more than 10% of the operating revenues during the
three-month periods ended March 31, 2017 or
2016.
14
Revenue Backlog
At
March 31, 2017, we have recorded deferred revenue of $859,337 that
we expect to recognize over the next twelve months, compared to
$842,642 at December 31, 2016. Deferred revenue primarily consists
of advance billings for annual contracts for legacy ARS services
and licenses of our cloud-based platforms.
Cost of Revenues and Gross Margin
Cost of
revenues consists primarily of direct labor costs, third party
licensing and amortization of capitalized software costs related to
our platforms licensed to customers in our Platform and Technology
stream and direct labor costs, warehousing, logistics, print
production materials, postage, and outside services directly
related to the delivery of services to our customers in our
Services stream. Cost of revenues decreased by $23,985, or 3%,
during the three-month period ended March 31, 2017, as compared to
the same period of 2016. Overall gross margin decreased to 74%, or
$2,110,034, in the three-month period ended March 31, 2017, as
compared to 77%, or $2,507,257 in the same period of 2016.
Excluding the benefit associated with the release of the accrual
related to unused postage credits, gross margin for the three-month
period ended March 31, 2016, would have been 74%.
Gross
margins from Platform and Technology was 83% in the three-month
period ended March 31, 2017, as compared to 82% in the same period
of 2016. The increase in gross margin percentage is primarily due
to increased revenue from our ACCESSWIRE platform partially offset
by increased amortization of capitalized software related to our
platforms.
Gross
margins from our Services revenue decreased to 65% in the
three-month period ended March 31, 2017, as compared to 74% in the
same period of 2016. Excluding the benefit associated with the
release of the unused postage credits, gross margins for the
three-month period ended March 31, 2016 would have been 70%. The
decrease in gross margin percentage during the first quarter of
2017 compared to the same quarter of 2016 is due to lower revenue
associated with fixed costs of delivering ARS, print and proxy and
stock transfer services.
Operating Expenses
General and Administrative Expense
General
and administrative expenses consist primarily of salaries,
stock-based compensation, insurance, fees for professional
services, general corporate expenses and facility and equipment
expenses. General and administrative expenses increased $68,857, or
8%, during the three-month period ended March 31, 2017 as compared
to the same period of 2016. The increase is primarily due to an
increase in professional fees for legal, tax and accounting
services, partially offset by a decrease in bad debt
expense.
As a
percentage of revenue, General and Administrative expenses were 32%
for the three-month period ended March 31, 2017, up from 26% for
the same period of 2016.
Sales and Marketing Expenses
Sales
and marketing expenses consist primarily of salaries, stock-based
compensation, sales commissions, advertising expenses, and
marketing expenses. Sales and marketing expenses for the
three-month period ended March 31, 2017, decreased by $30,292, or
5%, as compared to the same period of 2016. This decrease is due to
a decrease in sales personnel costs as a result of lower headcount
during the quarter.
As a
percentage of revenue, sales and marketing expense were 21% during
the three-month period ended March 31, 2017, compared to 19% for
the same period of 2016.
15
Product Development
Product
Development expenses consist primarily of salaries, stock-based
compensation, bonuses and licenses to develop new products and
technology to complement and/or enhance platform id. Product development costs
increased $55,693, or 81%, during the three-month period ended
March 31, 2017, compared to the same period in 2016. The increase
is the result of higher salaries and less capitalization of costs
as certain projects are completed and pushed into production.
During the three-month periods ended March 31, 2017 and 2016, the
Company capitalized $365,973 and $526,564, respectively, of
software development costs.
Depreciation and Amortization
Depreciation and
amortization expenses during the three-month period ended March 31,
2017, decreased by $176,083, or 62%, as compared to the same period
of 2016. The decrease is due to lower amortization of certain
intangible assets acquired in the PIR acquisition that became fully
amortized during the year ended December 31, 2016.
Other income (expense)
Other
income (expense) for the three-month period ended March 31, 2017,
is primarily the result of the change in fair value of stock
received, in lieu of cash, to settle an outstanding
receivable.
Income tax expense
We
recognized income tax expense of $40,579 and $197,922 for the
three-month periods ended March 31, 2017 and 2016, respectively. At
the end of each interim period, we estimate the effective tax rate
we expect to be applicable for the full fiscal year and this rate
is applied to our results for the year-to-date period, and then
adjusted for any discrete period items. For the three-month period
ended March 31, 2017, the variance between the Company’s
effective tax rate and the U.S. statutory rate of 34% is primarily
attributable to the excess stock-based compensation tax benefit of
$77,272 recognized in income tax expense during the period, in
connection with the Company’s adoption of ASU 2016-09, as
well as, foreign statutory tax rate differentials and tax
credits.
During
the three-month period ended March 31, 2016, the Company released
$78,400 of its valuation allowance related to federal and state net
operating losses, which resulted in a net benefit of $40,875. This,
along with foreign statutory tax rate differentials and tax
credits, is the reason for the variance from the U.S. statutory
rate for the three-months ended March 31, 2016.
Net Income
Net
income for the three-month period ended March 31, 2017, was
$324,942 compared to $493,288 for the same period of
2016.
As
noted earlier, included in net income for the three-month period
ended March 31, 2016 is the benefit of $316,040 before taxes
related to the reversal of an accrual related to unused postage
credits related to ARS clients acquired from PIR. Notwithstanding,
the benefit of this reversal, the Company was able to maintain
gross margin percentage on slightly lower revenue.
Liquidity and Capital Resources
As of
March 31, 2017, we had $5,589,295 in cash and cash equivalents and
$1,315,499 in net accounts receivable. Current liabilities at March
31, 2017, totaled $2,221,042 including our accounts payable,
deferred revenue, accrued liabilities, income taxes payable and
other accrued expenses. At March 31, 2017, our current assets
exceeded our current liabilities by $4,942,835.
Effective September
2, 2016, the Company renewed its Line of Credit, which reduced the
interest rate to LIBOR plus 2.50% from LIBOR plus 3.00%. The
amount of funds available for future borrowings remained at
$2,000,000. As of March 31, 2017, the interest rate was 3.48% and
the Company did not owe any amounts on the Line of
Credit.
We
manage our cash flow carefully with the intent to meet our
obligations from cash generated from operations. However, it is
possible that we will have to raise additional funds through the
issuance of equity in order to meet any future obligations. There
can be no assurance that cash generated from operations will be
sufficient to fund our operating expenses, to allow us to pay
dividends, or meet our other obligations, and there is no assurance
that debt or equity financing will be available, or if available,
that such financing will be upon terms acceptable to
us.
16
2017 Outlook
The following statements and certain statements made elsewhere in
this document are based upon current expectations. These statements
are forward looking and are subject to factors that could cause
actual results to differ materially from those suggested here,
including, without limitation, demand for and acceptance of our
services, new developments, competition and general economic or
market conditions, particularly in the domestic and international
capital markets. Refer also to the Cautionary Statement Concerning
Forward Looking Statements included in this report.
Overall,
the demand for our platforms continues to be stable in the majority
of the segments we serve. In a portion of our business, we will
continue to see demand shift from traditional printed and
service-based engagements to a cloud-based subscription model, as
well as digital distribution offerings. We are positioned well in
this space to be both competitive and agile to deliver these
platforms to the market at the same or higher gross margins than
previous periods. As we have seen over the last several quarters,
the transition to digital platforms has had a negative effect on
our revenue in some areas and this is a trend we expect will
continue over the next few quarters.
One
of our competitive strengths is that we have embraced cloud
computing early on in our strategy. Making the pivot to a
subscription model has and will be key for the long-term
sustainable growth management expects from our new
platforms.
We
will continue to focus on the following key strategic initiatives
during 2017:
●
Strategic
re-alignment of our Platform and Technology sales
team,
●
Expand
customer base,
●
Further
expand our newswire distribution and clients,
●
Significant
technology advancements and upgrades,
●
Profitable
sustainable growth,
●
Generate
cash flows from operations
We
believe there is significant demand for our products among the
middle, small-cap and micro-cap markets that are seeking to find
better platforms and tools to disseminate and communicate their
respective messages and that we have the capacity to meet the
demand.
We
have spent and will continue to spend a considerable amount of time
focused on our product sets, platforms and intellectual property
development through 2017. These developments are key to our overall
offerings in the market and necessary to keep our competitive
advantages and sustain the next round of growth that management
believes it can achieve. If we are successful in this development
effort, we believe we can achieve increases in revenues per user as
well as higher gross margins as we move through 2017 and
beyond.
Off-Balance Sheet Arrangements
We have
no off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital
resources that is material to stockholders.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURESABOUT MARKET
RISK.
Not
applicable
ITEM 4. CONTROLS AND PROCEDURES.
As of
the end of the period covered by this quarterly report on Form10-Q,
the Company’s Chief Executive Officer and Chief Financial
Officer conducted an evaluation of the Company’s disclosure
controls and procedures (as defined in Rules 13a-15 and 15d-15 of
the Securities Exchange Act of 1934). Based upon this evaluation,
the Company’s Chief Executive Officer and Chief Financial
Officer concluded that the Company’s disclosure controls and
procedures are effective and have not changed since its most recent
annual report.
Changes in Internal Control over Financial Reporting
We
regularly review our system of internal control over financial
reporting to ensure we maintain an effective internal control
environment. There were no changes in our internal control over
financial reporting that occurred during the period covered by this
Quarterly Report on Form 10-Q that have materially affected, or are
reasonably likely to materially affect, our internal control over
financial reporting.
17
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From
time to time, we may be involved in litigation that arises through
the normal course of business. As of the date of this filing, we
are neither a party to any litigation nor are we aware of any such
threatened or pending litigation that might result in a material
adverse effect to our business.
ITEM 1A. RISK
FACTORS.
There
have been no material changes to our risk factors as previously
disclosed in our most recent 10-K filing.
ITEM 2. UNREGISTERED SALES
OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR
SECURITIES.
None.
ITEM 4. MINE SAFETY
DISCLOSURE.
Not
applicable.
ITEM 5. OTHER
INFORMATION.
None.
ITEM 6. EXHIBITS.
(a)Exhibits.
Exhibit
Number
Description
31.1
Certification
of Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
31.2
Certification
of Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.*
32.1
Certification
of Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*
32.2
Certification
of Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.*
Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date:
May 4, 2017
ISSUER DIRECT CORPORATION
By:
/s/
Brian R.
Balbirnie
Brian
R. Balbirnie
Chief
Executive Officer
By:
/s/
Steven
Knerr
Steven
Knerr
Chief
Financial Officer
19
EX-31.1
2
isdr_ex311.htm
CERTIFICATION PURSUANT TO RULE 13A-14(A)/15D-14(A) CERTIFICATIONS SECTION 302 OF THE SARBANES-OXLY ACT OF 2002
isdr_ex311.htm
Exhibit 31.1
CERTIFICATION
PURSUANT TO RULE 13a-14(a)/15d-14(a)
UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
(SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002)
I, Brian R.
Balbirnie, certify that:
1. I
have reviewed this quarterly report on Form 10-Q of Issuer
Direct Corporation;
2. Based
on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the
period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
4. The
registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a) Designed such disclosure
controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report
is being prepared;
b) Designed such internal
control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
c) Evaluated the
effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of end
of the period covered by this report based on such evaluation;
and
d) Disclosed in this report
any change in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. The
registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the
equivalent function):
a) All significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
b) Any fraud, whether or not
material, that involves management or other employees who have a
significant role in the registrant's internal control over
financial reporting.
Date: May 4,
2017
/s/ Brian R. Balbirnie
Brian R.
Balbirnie
Chief Executive
Officer
EX-31.2
3
isdr_ex312.htm
CERTIFICATION PURSUANT TO RULE 13A-14(A)/15D-14(A) CERTIFICATIONS SECTION 302 OF THE SARBANES-OXLY ACT OF 2002
isdr_ex312.htm
Exhibit 31.2
CERTIFICATION
PURSUANT TO RULE 13a-14(a)/15d-14(a)UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
(SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002)
I, Steven Knerr,
certify that:
1. I
have reviewed this quarterly report on Form 10-Q of Issuer
Direct Corporation;
2. Based
on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the
period covered by this report;
3. Based
on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in
this report;
4. The
registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
a) Designed such disclosure
controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report
is being prepared;
b) Designed such internal
control over financial reporting, or caused such internal control
over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting
principles;
c) Evaluated the
effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of end
of the period covered by this report based on such evaluation;
and
d) Disclosed in this report
any change in the registrant's internal control over financial
reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant's internal control over
financial reporting; and
5. The
registrant's other certifying officer and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the
equivalent function):
a) All significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record,
process, summarize and report financial information;
and
b) Any fraud, whether or not
material, that involves management or other employees who have a
significant role in the registrant's internal control over
financial reporting.
Date: May 4,
2017
/s/
Steven Knerr
Steven
Knerr
Chief Financial
Officer
EX-32.1
4
isdr_ex321.htm
CERTIFICATE PURSUANT TO SECTION 18 U.S.C. PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
isdr_ex321.htm
Exhibit 32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350 (AS ADOPTED
PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
In connection with
the quarterly report of Issuer Direct Corporation (the
“Company”) on Form 10-Q for the period ending March 31,
2017, as filed with the Securities and Exchange Commission on the
date hereof (the “Report”), I, Brian R.
Balbirnie, Chief Executive Officer, certify to my knowledge
and in my capacity as an officer of the Company, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
1. The Report fully
complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended; and,
2. The information
contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company as
of the dates and for the periods expressed in the
Report.
Date: May 4,
2017
/s/ Brian R. Balbirnie
Brian R.
Balbirnie
Chief Executive
Officer
A certification
furnished pursuant to this Item will not be deemed
“filed” for purposes of section 18 of the Exchange Act
(15 U.S.C. 78r), or otherwise subject to the liability of that
section. Such certification will not be deemed to be incorporated
by reference into any filing under the Securities Act or the
Exchange Act, except to the extent that the small business issuer
specifically incorporates it by reference.
EX-32.2
5
isdr_ex322.htm
CERTIFICATE PURSUANT TO SECTION 18 U.S.C. PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
isdr_ex322.htm
Exhibit 32.2
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350 (AS ADOPTED
PURSUANT
TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002)
In connection with
the quarterly report of Issuer Direct Corporation (the
“Company”) on Form 10-Q for the period ending March 31,
2017 as filed with the Securities and Exchange Commission on the
date hereof (the “Report”), I, Steven Knerr, Chief
Financial Officer, certify to my knowledge and in my capacity as an
officer of the Company, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that:
1. The Report fully
complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended; and,
2. The information
contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the Company as
of the dates and for the periods expressed in the
Report.
Date: May
4, 2017
/s/
Steven Knerr
Steven
Knerr
Chief Financial
Officer
A certification
furnished pursuant to this Item will not be deemed
“filed” for purposes of section 18 of the Exchange Act
(15 U.S.C. 78r), or otherwise subject to the liability of that
section. Such certification will not be deemed to be incorporated
by reference into any filing under the Securities Act or the
Exchange Act, except to the extent that the small business issuer
specifically incorporates it by reference.
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end
EX-101.INS
7
isdr-20170331.xml
XBRL INSTANCE DOCUMENT
00008430062017-01-012017-03-3100008430062017-03-3100008430062016-12-3100008430062016-01-012016-03-310000843006ISDR:StockOption1Member2017-03-310000843006ISDR:StockOption2Member2017-03-310000843006ISDR:StockOption3Member2017-03-310000843006ISDR:StockOption4Member2017-03-310000843006ISDR:StockOption5Member2017-03-310000843006ISDR:StockOption6Member2017-03-310000843006ISDR:TotalMember2017-03-3100008430062015-12-310000843006ISDR:SoftwareLicensingMember2017-01-012017-03-310000843006ISDR:SoftwareLicensingMember2016-01-012016-03-310000843006us-gaap:NorthAmericaMember2017-01-012017-03-310000843006us-gaap:NorthAmericaMember2016-01-012016-03-310000843006us-gaap:EuropeMember2017-01-012017-03-310000843006us-gaap:EuropeMember2016-01-012016-03-310000843006ISDR:StockOption1Member2017-01-012017-03-310000843006ISDR:StockOption2Member2017-01-012017-03-310000843006ISDR:StockOption3Member2017-01-012017-03-310000843006ISDR:StockOption4Member2017-01-012017-03-310000843006ISDR:StockOption5Member2017-01-012017-03-310000843006ISDR:StockOption6Member2017-01-012017-03-310000843006ISDR:TotalMember2017-01-012017-03-3100008430062016-03-310000843006ISDR:ServicesMember2017-01-012017-03-310000843006ISDR:ServicesMember2016-01-012016-03-3100008430062017-05-04iso4217:USDxbrli:sharesiso4217:USDxbrli:sharesxbrli:pureISSUER DIRECT CORP000084300610-Q2017-03-31false--12-31NoNoYesSmaller Reporting CompanyQ120170.0010.0011000000300000000.0010.00120000000100000000<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The unaudited interim consolidated balance sheet
as of March 31, 2017 and statements of operations, comprehensive income, and cash flows for the three-month periods ended March
31, 2017 and 2016 included herein, have been prepared in accordance with the instructions for Form 10-Q under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), and Article 10 of Regulation S-X under the Exchange Act. In the opinion
of management, they include all normal recurring adjustments necessary for a fair presentation of the financial statements. Results
of operations reported for the interim periods are not necessarily indicative of results for the entire year. Certain information
and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally
accepted in the United States ("US GAAP") have been condensed or omitted pursuant to such rules and regulations relating
to interim financial statements. The interim financial information should be read in conjunction with the 2016 audited financial
statements of Issuer Direct Corporation (the “Company”, “We”, or “Our”) filed on Form 10-K
and Form 10-K/A.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries. Significant intercompany accounts and transactions are eliminated
in consolidation.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Earnings Per Share (EPS)</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We calculate earnings per share in accordance
with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 260 –
EPS, which requires that basic net income per common share be computed by dividing net income for the period by the weighted average
number of common shares outstanding during the period. Diluted net income per share is computed by dividing the net income for
the period by the weighted average number of common and dilutive common equivalent shares outstanding during the period.  Shares
issuable upon the exercise of stock options and restricted stock units totaling 70,500 and 289,750 were excluded in the computation
of diluted earnings per common share during the three-month periods ended March 31, 2017 and 2016, respectively, because their
impact was anti-dilutive. </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Revenue Recognition</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We recognize revenue in accordance with US GAAP,
including SEC Staff Accounting Bulletin No. 104, “Revenue Recognition,” which requires that: (i) persuasive
evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the sales price is
fixed or determinable, and (iv) collectability is reasonably assured. We recognize revenue when services are rendered and/or
delivered and where collectability is probable. Deferred revenue primarily consists of advance billings for annual contracts for
our legacy annual report service and licenses of our cloud-based platforms.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Allowance for Doubtful Accounts</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">We provide an allowance
for doubtful accounts, which is based upon a review of outstanding receivables as well as historical collection information. Credit
is granted on an unsecured basis. In determining the amount of the allowance, management is required to make certain estimates
and assumptions. The allowance is made up of specific reserves, as deemed necessary, on client account balances, and a reserve
based on our historical experience.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Use of Estimates</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The preparation of financial statements in conformity
with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Significant estimates include the allowance for doubtful accounts and the valuation of goodwill,
intangible assets, deferred tax assets, and stock-based compensation.  Actual results could differ from those estimates.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Income Taxes</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We comply with the FASB ASC No. 740 – Income
Taxes which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax
assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that
will result in future taxable or deductible amounts based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred income
tax assets to the amounts expected to be realized.  For any uncertain tax positions, we recognize the impact of a tax
position, only if it is more likely than not of being sustained upon examination, based on the technical merits of the position.
Our policy regarding the classification of interest and penalties is to classify them as income tax expense in our financial statements,
if applicable. At the end of each interim period, we estimate the effective tax rate we expect to be applicable for the full
year and this rate is applied to our results for the interim year-to-date period and then adjusted for any discrete period items.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Capitalized Software</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">In accordance with FASB ASC No. 350 – Intangibles
– Goodwill and Other, costs incurred to develop our cloud-based platform products and disclosure management system components
are capitalized when the preliminary project phase is complete, management commits to fund the project and it is probable the project
will be completed and used for its intended purposes. Once the software is substantially complete and ready for its intended use,
the software is amortized over its estimated useful life.  Costs related to design or maintenance of the software are
expensed as incurred.   The Company capitalized $365,973 and $526,564 during the three-month periods ended March 31,
2017 and 2016, respectively.  Included in these amounts were $75,936 and $179,200 related to stock-based compensation during
the three-month periods ended March 31, 2017 and 2016, respectively.  The Company recorded amortization expense of $61,463
and $28,672 during the three-month periods ended March 31, 2017 and 2016, respectively, $59,245 and $25,771 of which is included
in Cost of revenues on the Consolidated Statements of Operations.  For the three-month periods ended March 31, 2017 and 2016,
the remaining amortization of $2,218 and $2,901, respectively, is included in depreciation and amortization, as it relates to back-office
supporting systems.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Fair Value Measurements</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">As of March 31, 2017 and December 31, 2016, we
do not have any financial assets or liabilities that are required to be, or that we elected to measure, at fair value. We believe
that the fair value of our financial instruments, which consist of cash and cash equivalents, accounts receivable, and accounts
payable approximate their carrying amounts.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Translation of Foreign Financial Statements</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The financial statements of the foreign subsidiaries
of the Company have been translated into U.S. dollars.  All assets and liabilities have been translated at current rates
of exchange in effect at the end of the period.  Income and expense items have been translated at the average exchange
rates for the year or the applicable interim period.  The gains or losses that result from this process are recorded
as a separate component of other accumulated comprehensive loss until the entity is sold or substantially liquidated.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Business Combinations, Goodwill and Intangible Assets</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We account for business combinations under FASB
ASC No. 805 – Business Combinations and the related acquired intangible assets and goodwill under FASB ASC No. 350 –
Intangibles – Goodwill and Other. The authoritative guidance for business combinations specifies the criteria for recognizing
and reporting intangible assets apart from goodwill. We record the assets acquired and liabilities assumed in business combinations
at their respective fair values at the date of acquisition, with any excess purchase price recorded as goodwill. Goodwill is an
asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually
identified and separately recognized. Intangible assets consist of client relationships, customer lists, software, technology and
trademarks that are initially measured at fair value.  At the time of the business combination trademarks are considered
an indefinite-lived asset and, as such, are not amortized as there is no foreseeable limit to cash flows generated from them. The
goodwill and intangible assets are assessed annually for impairment, or whenever conditions indicate the asset may be impaired,
and any such impairment will be recognized in the period identified. The client relationships, customer lists, software and technology
are amortized over their estimated useful lives.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Comprehensive Income</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">Comprehensive income consists
of net income and other comprehensive income related to changes in the cumulative foreign currency translation adjustment.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b>Advertising</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Company expenses advertising costs as incurred,
except for direct-response advertising, which is capitalized and amortized over its expected period of future benefits.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Stock-based compensation</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We account for stock-based compensation under
FASB ASC No. 718 – Compensation – Stock Compensation. The authoritative guidance for stock compensation requires that
companies estimate the fair value of share-based payment awards on the date of the grant using an option-pricing model. The associated
cost is recognized over the period during which an employee is required to provide service in exchange for the award.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Newly Adopted Pronouncements</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The FASB issued ASU 2016-09, Improvements to
Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payment award transactions
including (a) income tax consequences; (b) classification of awards as either debt or equity liabilities; and (c) classification
on the statement of cash flows.  The amendments are effective for public business entities for annual periods beginning after
December 15, 2016, and interim periods within those annual periods.  The Company has adopted this ASU as of January 1, 2017.
The primary amendment impacting the Company's financial statements is the requirement for excess tax benefits or shortfalls on
the exercise of stock-based compensation awards to be presented in income tax expense in the Consolidated Statements of Income
during the period the award is exercised as opposed to being recorded in Additional paid-in capital on the Consolidated Balance
Sheets.  The excess tax benefit or shortfall is calculated as the difference between the fair value of the award on the date
of exercise and the fair value of the award used to measure the expense to be recognized over the service period.  Changes
are required to be applied prospectively to all excess tax benefits and deficiencies resulting from the exercise of awards after
the date of adoption. The ASU requires a "modified retrospective" approach application for excess tax benefits that were
not previously recognized in situations where the tax deduction did not reduce current taxes payable. For the three-month period
ended March 31, 2017, the Company recorded an income tax benefit of $77,272 related to the excess tax benefit of exercised awards
during the period, that would have been recorded in Additional paid-in capital during prior years. As the end result is dependent
on the future value of the Company's stock as well as the timing of employee exercises, the amount of future impact cannot be quantified
at this time.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b>Recent Accounting Pronouncements</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The FASB's new leases standard ASU 2016-02 Leases
(Topic 842) was issued on February 25, 2016. ASU 2016-02 is intended to improve financial reporting about leasing transactions.
The ASU affects all companies and other organizations that lease assets such as real estate, airplanes, and manufacturing equipment.
The ASU will require organizations that lease assets referred to as “Lessees” to recognize on the balance sheet the
assets and liabilities for the rights and obligations created by those leases. An organization is to provide disclosures designed
to enable users of financial statements to understand the amount, timing, and uncertainty of cash flows arising from leases. These
disclosures include qualitative and quantitative requirements concerning additional information about the amounts recorded in the
financial statements. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease
terms of more than 12 months. Consistent with current US GAAP, the recognition, measurement, and presentation of expenses and cash
flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike
current US GAAP which requires only capital leases to be recognized on the balance sheet the new ASU will require both types of
leases (i.e. operating and capital) to be recognized on the balance sheet. The FASB lessee accounting model will continue to account
for both types of leases. The capital lease will be accounted for in substantially the same manner as capital leases are accounted
for under existing US GAAP. The operating lease will be accounted for in a manner similar to operating leases under existing US
GAAP, except that lessees will recognize a lease liability and a lease asset for all of those leases.  Public companies will
be required to adopt the new leasing standard for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2018.  For calendar year-end public companies, this means an adoption date of January 1, 2019 and retrospective
application to previously issued annual and interim financial statements for 2018, however, early adoption is permitted. Lessees
with a large portfolio of leases are likely to see a significant increase in balance sheet assets and liabilities. The Company
currently has one lease on its corporate facilities which ends October 31, 2019.  Absent any renewal of the lease or new leases
entered into before January 1, 2019, the Company will be required to record a right-to-use asset and corresponding lease liability
associated with the remaining lease payments beginning with the first interim period of 2019.  This will increase both balance
sheet assets and liabilities by insignificant amounts and will not have a significant impact on the income statement or affect
any covenant calculations.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The FASB has issued ASU 2014-09, Revenue from
Contracts with Customers (Topic 606) and several updates to the ASU. ASU 2014-09 requires revenue recognition to depict the transfer
of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services. ASU 2014-09 sets forth a new revenue recognition model that requires identifying the contract, identifying
the performance obligations, determining the transaction price, allocating the transaction price to performance obligations and
recognizing the revenue upon satisfaction of performance obligations.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The amendments in the ASU can be applied either
retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the
update recognized at the date of the initial application along with additional disclosures. The Company is currently evaluating
the impact of ASU 2014-09 as well as the additional updates, however, does not believe it will have a significant impact on the
Company's financial statements as the Company believes the current manner in which revenue is recognized will result in the same
or similar timing and amount of revenue recognition as required by ASU 2014-09 and the additional amendments.  These ASU's
are currently effective for the Company in our year beginning on January 1, 2018.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0"><b><i>2014 Equity Incentive Plan</i></b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">On May 23, 2014, the shareholders of the Company
approved the 2014 Equity Incentive Plan (the “2014 Plan”).  Under the terms of the 2014 Plan, the Company
is authorized to issue incentive awards for common stock up to 200,000 shares to employees and other personnel.  On June
10, 2016, the shareholders of the Company approved an additional 200,000 awards to be issued under the 2014 Plan, bringing the
total number of shares to be awarded to 400,000.  The awards may be in the form of incentive stock options, nonqualified stock
options, restricted stock, restricted stock units and performance awards.  The 2014 Plan is effective through March 31, 2024.  As
of March 31, 2017, 258,000 awards had been granted under the 2014 Plan.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The following table summarizes information about
stock options outstanding and exercisable at March 31, 2017:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td>
<td colspan="10" style="vertical-align: bottom; border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Options Outstanding</b></font></td>
<td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td>
<td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="vertical-align: bottom; border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Options Exercisable</b></font></td>
<td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td>
<td colspan="3"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Exercise Price Range</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Number</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Weighted Average</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Remaining Contractual</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Life (in Years)</b></p></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Weighted Average</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Exercise Price</b></p></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Number</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">0.01 - $1.00</font></td>
<td> </td>
<td style="width: 1%"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">7,850</font></td>
<td> </td>
<td style="width: 1%"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">4.81</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">0.01</font></td>
<td> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">7,850</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">1.01 - $4.00</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">5.00</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">3.33</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">4.01 - $7.00</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">10,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">8.64</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">6.80</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3,333</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">7.01 - $8.00</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">78,750</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3.45</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">7.76</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">68,750</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">8.01 - $10.00</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">11,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">7.74</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">9.26</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">7,330</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">10.01 - $13.49</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">40,000</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">1.94</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">13.49</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">30,000</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr>
<td style="vertical-align: bottom">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">    </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Total</p></td>
<td style="vertical-align: bottom; padding-bottom: 3pt"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt double"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">150,600</font></td>
<td style="vertical-align: bottom; padding-bottom: 3pt"> </td>
<td style="vertical-align: bottom; padding-bottom: 3pt"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt double"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">3.80</font></td>
<td style="vertical-align: bottom; padding-bottom: 3pt"> </td>
<td style="vertical-align: bottom; padding-bottom: 3pt"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">8.83</font></td>
<td style="vertical-align: bottom; padding-bottom: 3pt"> </td>
<td style="vertical-align: bottom; padding-bottom: 3pt"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt double"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">120,263</font></td>
<td style="vertical-align: bottom; padding-bottom: 3pt"> </td>
<td> </td>
<td> </td>
<td> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">As of March 31, 2017, the Company had unrecognized
stock compensation related to the options of $231,283.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">On January 24, 2017, the Company granted 9,500
restricted stock units with an intrinsic value of $8.85 to certain employees of the Company. The restricted stock units vest one-third
annually over three years. As of March 31, 2017, 38,170 restricted stock units with an intrinsic value of $5.86 vested. As of March
31, 2017, there was $355,561 of unrecognized compensation cost related to our unvested restricted stock units, which will be recognized
through 2019.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We recognized income tax expense of $40,579 and
$197,922 for the three-month periods ended March 31, 2017 and 2016, respectively. At the end of each interim period, we estimate
the effective tax rate we expect to be applicable for the full fiscal year and this rate is applied to our results for the year-to-date
period, and then adjusted for any discrete period items. For the three-month period ended March 31, 2017, the variance between
the Company’s effective tax rate and the U.S. statutory rate of 34% is primarily attributable to the excess stock-based compensation
tax benefit of $77,272 recognized in income tax expense during the period, in connection with the Company’s adoption of ASU
2016-09, as well as, foreign statutory tax rate differentials and tax credits.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">During the three-month period ended March 31,
2016, the Company released $78,400 of its valuation allowance related to federal and state net operating losses, which resulted
in a net benefit of $40,875. The tax benefits from US net operating losses that were previously reserved were acquired as part
of the acquisition of PrecisionIR (PIR). At the date of acquisition, management believed it was more likely than not that the benefits
would not be used due to the uncertainty of future profitability and also due to statutory limitations on the amount of net operating
losses that can be carried forward in an acquisition. The remaining valuation allowance on the federal and state net operating
losses related to PIR was released during the fourth quarter of 2016, as such no valuation allowance remains on those federal and
state net operating losses as March 31, 2017, which is consistent with projections of future taxable domestic income.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">For the three-month periods ended March 31, 2017
and 2016, we earned revenues (as a percentage of total revenues) in the following categories:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>Three months ended</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>March 31,</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"><i>Revenue Streams</i></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 76%"><font style="font-size: 8pt">Platform and Technology</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">49.49</font></td>
<td style="width: 1%"><font style="font-size: 8pt">%</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">28.84</font></td>
<td><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Services</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">50.51</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">%</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">71.16</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">100.00</font></td>
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">%</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">100.00</font></td>
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">%</font></td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">No customers accounted for more than 10% of the
operating revenues during the three-month periods ended March 31, 2017 or 2016. We did not have any customers that comprised more
than 10% of our total accounts receivable balance at March 31, 2017 or December 31, 2016.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We believe we did not have any financial instruments
that could have potentially subjected us to significant concentrations of credit risk. Since a portion of the revenues are paid
at the beginning of the month via credit card or advance by check, the remaining accounts receivable amounts are generally due
within 30 days, none of which is collateralized.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">Effective September 2, 2016, the Company renewed
its Line of Credit, which reduced the interest rate to LIBOR plus 2.50% from LIBOR plus 3.00%.  The amount of funds available
for future borrowings remained at $2,000,000. As of March 31, 2017, the interest rate was 3.48% and the Company did not owe any
amounts on the Line of Credit.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We consider ourselves to be in a single reportable
segment under the authoritative guidance for segment reporting, specifically a shareholder communications and compliance company
for publicly traded companies. Revenue is attributed to a particular geographic region based on where the services are performed.
The following tables set forth revenues by domestic and international regions:</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>Three months ended</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>March 31,</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"><i>Geographic region</i></font></td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 76%"><font style="font-size: 8pt">North America</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">2,539,210</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">2,835,006</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Europe</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">316,921</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">442,333</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Total revenues</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">2,856,131</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">3,277,339</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
</table>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">On March 21, 2017, the Company filed a Certificate
of Amendment to its Certificate of Incorporation reducing the number of authorized shares of Preferred stock from 30,000,000 to
1,000,000 shares and the number of Common stock from 100,000,000 to 20,000,000 shares.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">On April 5, 2017, the Company's Board of Directors
approved and declared a quarterly cash dividend of $0.05 per share. The dividend is payable on May 12, 2017, to stockholders of
record as of the close of business on April 24, 2017.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We calculate earnings per share in accordance
with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 260 –
EPS, which requires that basic net income per common share be computed by dividing net income for the period by the weighted average
number of common shares outstanding during the period. Diluted net income per share is computed by dividing the net income for
the period by the weighted average number of common and dilutive common equivalent shares outstanding during the period.  Shares
issuable upon the exercise of stock options and restricted stock units totaling 70,500 and 289,750 were excluded in the computation
of diluted earnings per common share during the three-month periods ended March 31, 2017 and 2016, respectively, because their
impact was anti-dilutive. </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We recognize revenue in accordance with US GAAP,
including SEC Staff Accounting Bulletin No. 104, “Revenue Recognition,” which requires that: (i) persuasive
evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the sales price is
fixed or determinable, and (iv) collectability is reasonably assured. We recognize revenue when services are rendered and/or
delivered and where collectability is probable. Deferred revenue primarily consists of advance billings for annual contracts for
our legacy annual report service and licenses of our cloud-based platforms.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">We provide an allowance
for doubtful accounts, which is based upon a review of outstanding receivables as well as historical collection information. Credit
is granted on an unsecured basis. In determining the amount of the allowance, management is required to make certain estimates
and assumptions. The allowance is made up of specific reserves, as deemed necessary, on client account balances, and a reserve
based on our historical experience.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The preparation of financial statements in conformity
with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Significant estimates include the allowance for doubtful accounts and the valuation of goodwill,
intangible assets, deferred tax assets, and stock-based compensation.  Actual results could differ from those estimates.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We comply with the FASB ASC No. 740 – Income
Taxes which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax
assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that
will result in future taxable or deductible amounts based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred income
tax assets to the amounts expected to be realized.  For any uncertain tax positions, we recognize the impact of a tax
position, only if it is more likely than not of being sustained upon examination, based on the technical merits of the position.
Our policy regarding the classification of interest and penalties is to classify them as income tax expense in our financial statements,
if applicable. At the end of each interim period, we estimate the effective tax rate we expect to be applicable for the full
year and this rate is applied to our results for the interim year-to-date period and then adjusted for any discrete period items.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">In accordance with FASB ASC No. 350 – Intangibles
– Goodwill and Other, costs incurred to develop our cloud-based platform products and disclosure management system components
are capitalized when the preliminary project phase is complete, management commits to fund the project and it is probable the project
will be completed and used for its intended purposes. Once the software is substantially complete and ready for its intended use,
the software is amortized over its estimated useful life.  Costs related to design or maintenance of the software are
expensed as incurred.   The Company capitalized $365,973 and $526,564 during the three-month periods ended March 31,
2017 and 2016, respectively.  Included in these amounts were $75,936 and $179,200 related to stock-based compensation during
the three-month periods ended March 31, 2017 and 2016, respectively.  The Company recorded amortization expense of $61,463
and $28,672 during the three-month periods ended March 31, 2017 and 2016, respectively, $59,245 and $25,771 of which is included
in Cost of revenues on the Consolidated Statements of Operations.  For the three-month periods ended March 31, 2017 and 2016,
the remaining amortization of $2,218 and $2,901, respectively, is included in depreciation and amortization, as it relates to back-office
supporting systems.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">As of March 31, 2017 and December 31, 2016, we
do not have any financial assets or liabilities that are required to be, or that we elected to measure, at fair value. We believe
that the fair value of our financial instruments, which consist of cash and cash equivalents, accounts receivable, and accounts
payable approximate their carrying amounts.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The financial statements of the foreign subsidiaries
of the Company have been translated into U.S. dollars.  All assets and liabilities have been translated at current rates
of exchange in effect at the end of the period.  Income and expense items have been translated at the average exchange
rates for the year or the applicable interim period.  The gains or losses that result from this process are recorded
as a separate component of other accumulated comprehensive loss until the entity is sold or substantially liquidated.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We account for business combinations under FASB
ASC No. 805 – Business Combinations and the related acquired intangible assets and goodwill under FASB ASC No. 350 –
Intangibles – Goodwill and Other. The authoritative guidance for business combinations specifies the criteria for recognizing
and reporting intangible assets apart from goodwill. We record the assets acquired and liabilities assumed in business combinations
at their respective fair values at the date of acquisition, with any excess purchase price recorded as goodwill. Goodwill is an
asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually
identified and separately recognized. Intangible assets consist of client relationships, customer lists, software, technology and
trademarks that are initially measured at fair value.  At the time of the business combination trademarks are considered
an indefinite-lived asset and, as such, are not amortized as there is no foreseeable limit to cash flows generated from them. The
goodwill and intangible assets are assessed annually for impairment, or whenever conditions indicate the asset may be impaired,
and any such impairment will be recognized in the period identified. The client relationships, customer lists, software and technology
are amortized over their estimated useful lives.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify; text-indent: 0.5in">Comprehensive income consists
of net income and other comprehensive income related to changes in the cumulative foreign currency translation adjustment.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The Company expenses advertising costs as incurred,
except for direct-response advertising, which is capitalized and amortized over its expected period of future benefits.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">We account for stock-based compensation under
FASB ASC No. 718 – Compensation – Stock Compensation. The authoritative guidance for stock compensation requires that
companies estimate the fair value of share-based payment awards on the date of the grant using an option-pricing model. The associated
cost is recognized over the period during which an employee is required to provide service in exchange for the award.</p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The FASB issued ASU 2016-09, Improvements to
Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payment award transactions
including (a) income tax consequences; (b) classification of awards as either debt or equity liabilities; and (c) classification
on the statement of cash flows.  The amendments are effective for public business entities for annual periods beginning after
December 15, 2016, and interim periods within those annual periods.  The Company has adopted this ASU as of January 1, 2017.
The primary amendment impacting the Company's financial statements is the requirement for excess tax benefits or shortfalls on
the exercise of stock-based compensation awards to be presented in income tax expense in the Consolidated Statements of Income
during the period the award is exercised as opposed to being recorded in Additional paid-in capital on the Consolidated Balance
Sheets.  The excess tax benefit or shortfall is calculated as the difference between the fair value of the award on the date
of exercise and the fair value of the award used to measure the expense to be recognized over the service period.  Changes
are required to be applied prospectively to all excess tax benefits and deficiencies resulting from the exercise of awards after
the date of adoption. The ASU requires a "modified retrospective" approach application for excess tax benefits that were
not previously recognized in situations where the tax deduction did not reduce current taxes payable. For the three-month period
ended March 31, 2017, the Company recorded an income tax benefit of $77,272 related to the excess tax benefit of exercised awards
during the period, that would have been recorded in Additional paid-in capital during prior years. As the end result is dependent
on the future value of the Company's stock as well as the timing of employee exercises, the amount of future impact cannot be quantified
at this time.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p><p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The FASB's new leases standard ASU 2016-02 Leases
(Topic 842) was issued on February 25, 2016. ASU 2016-02 is intended to improve financial reporting about leasing transactions.
The ASU affects all companies and other organizations that lease assets such as real estate, airplanes, and manufacturing equipment.
The ASU will require organizations that lease assets referred to as “Lessees” to recognize on the balance sheet the
assets and liabilities for the rights and obligations created by those leases. An organization is to provide disclosures designed
to enable users of financial statements to understand the amount, timing, and uncertainty of cash flows arising from leases. These
disclosures include qualitative and quantitative requirements concerning additional information about the amounts recorded in the
financial statements. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease
terms of more than 12 months. Consistent with current US GAAP, the recognition, measurement, and presentation of expenses and cash
flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike
current US GAAP which requires only capital leases to be recognized on the balance sheet the new ASU will require both types of
leases (i.e. operating and capital) to be recognized on the balance sheet. The FASB lessee accounting model will continue to account
for both types of leases. The capital lease will be accounted for in substantially the same manner as capital leases are accounted
for under existing US GAAP. The operating lease will be accounted for in a manner similar to operating leases under existing US
GAAP, except that lessees will recognize a lease liability and a lease asset for all of those leases.  Public companies will
be required to adopt the new leasing standard for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2018.  For calendar year-end public companies, this means an adoption date of January 1, 2019 and retrospective
application to previously issued annual and interim financial statements for 2018, however, early adoption is permitted. Lessees
with a large portfolio of leases are likely to see a significant increase in balance sheet assets and liabilities. The Company
currently has one lease on its corporate facilities which ends October 31, 2019.  Absent any renewal of the lease or new leases
entered into before January 1, 2019, the Company will be required to record a right-to-use asset and corresponding lease liability
associated with the remaining lease payments beginning with the first interim period of 2019.  This will increase both balance
sheet assets and liabilities by insignificant amounts and will not have a significant impact on the income statement or affect
any covenant calculations.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The FASB has issued ASU 2014-09, Revenue from
Contracts with Customers (Topic 606) and several updates to the ASU. ASU 2014-09 requires revenue recognition to depict the transfer
of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services. ASU 2014-09 sets forth a new revenue recognition model that requires identifying the contract, identifying
the performance obligations, determining the transaction price, allocating the transaction price to performance obligations and
recognizing the revenue upon satisfaction of performance obligations.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-indent: 0.5in">The amendments in the ASU can be applied either
retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the
update recognized at the date of the initial application along with additional disclosures. The Company is currently evaluating
the impact of ASU 2014-09 as well as the additional updates, however, does not believe it will have a significant impact on the
Company's financial statements as the Company believes the current manner in which revenue is recognized will result in the same
or similar timing and amount of revenue recognition as required by ASU 2014-09 and the additional amendments.  These ASU's
are currently effective for the Company in our year beginning on January 1, 2018.</p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p><table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr>
<td style="vertical-align: bottom"> </td>
<td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td>
<td colspan="10" style="vertical-align: bottom; border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Options Outstanding</b></font></td>
<td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td>
<td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="vertical-align: bottom; border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Options Exercisable</b></font></td>
<td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td>
<td colspan="3"> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Exercise Price Range</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Number</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Weighted Average</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Remaining Contractual</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Life (in Years)</b></p></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Weighted Average</b></p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Exercise Price</b></p></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>Number</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">0.01 - $1.00</font></td>
<td> </td>
<td style="width: 1%"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">7,850</font></td>
<td> </td>
<td style="width: 1%"> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">4.81</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">0.01</font></td>
<td> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">7,850</font></td>
<td style="width: 1%"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">1.01 - $4.00</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">5.00</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">3.33</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3,000</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">4.01 - $7.00</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">10,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">8.64</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">6.80</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3,333</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">7.01 - $8.00</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">78,750</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">3.45</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">7.76</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">68,750</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">8.01 - $10.00</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">11,000</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">7.74</font></td>
<td> </td>
<td> </td>
<td><font style="font-size: 8pt">$</font></td>
<td style="text-align: right"><font style="font-size: 8pt">9.26</font></td>
<td> </td>
<td> </td>
<td> </td>
<td style="text-align: right"><font style="font-size: 8pt">7,330</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">10.01 - $13.49</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">40,000</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">1.94</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">13.49</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">30,000</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr>
<td style="vertical-align: bottom">
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">    </p>
<p style="font: 8pt Times New Roman, Times, Serif; margin: 0">Total</p></td>
<td style="vertical-align: bottom; padding-bottom: 3pt"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt double"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">150,600</font></td>
<td style="vertical-align: bottom; padding-bottom: 3pt"> </td>
<td style="vertical-align: bottom; padding-bottom: 3pt"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt double"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">3.80</font></td>
<td style="vertical-align: bottom; padding-bottom: 3pt"> </td>
<td style="vertical-align: bottom; padding-bottom: 3pt"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">8.83</font></td>
<td style="vertical-align: bottom; padding-bottom: 3pt"> </td>
<td style="vertical-align: bottom; padding-bottom: 3pt"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt double"> </td>
<td style="vertical-align: bottom; border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">120,263</font></td>
<td style="vertical-align: bottom; padding-bottom: 3pt"> </td>
<td> </td>
<td> </td>
<td> </td></tr>
</table><table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>Three months ended</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>March 31,</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"><i>Revenue Streams</i></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 76%"><font style="font-size: 8pt">Platform and Technology</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">49.49</font></td>
<td style="width: 1%"><font style="font-size: 8pt">%</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"> </td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">28.84</font></td>
<td><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Services</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">50.51</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">%</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">71.16</font></td>
<td style="padding-bottom: 1.5pt"><font style="font-size: 8pt">%</font></td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Total</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">100.00</font></td>
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">%</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"> </td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">100.00</font></td>
<td style="padding-bottom: 3pt"><font style="font-size: 8pt">%</font></td></tr>
</table><table cellspacing="0" cellpadding="0" style="font: 12pt Times New Roman, Times, Serif; width: 100%">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="6" style="text-align: center"><font style="font-size: 8pt"><b>Three months ended</b></font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>March 31,</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2017</b></font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: black 1pt solid; text-align: center"><font style="font-size: 8pt"><b>2016</b></font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt"><i>Geographic region</i></font></td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td>
<td> </td>
<td colspan="2" style="text-align: center"> </td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td style="width: 76%"><font style="font-size: 8pt">North America</font></td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">2,539,210</font></td>
<td style="width: 1%"> </td>
<td style="width: 1%"> </td>
<td style="width: 0%"><font style="font-size: 8pt">$</font></td>
<td style="width: 9%; text-align: right"><font style="font-size: 8pt">2,835,006</font></td>
<td> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Europe</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">316,921</font></td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: black 1pt solid"> </td>
<td style="border-bottom: black 1pt solid; text-align: right"><font style="font-size: 8pt">442,333</font></td>
<td style="padding-bottom: 1.5pt"> </td></tr>
<tr style="vertical-align: bottom">
<td><font style="font-size: 8pt">Total revenues</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">2,856,131</font></td>
<td style="padding-bottom: 3pt"> </td>
<td style="padding-bottom: 3pt"> </td>
<td style="border-bottom: black 1.5pt double"><font style="font-size: 8pt">$</font></td>
<td style="border-bottom: black 1.5pt double; text-align: right"><font style="font-size: 8pt">3,277,339</font></td>
<td style="padding-bottom: 3pt"> </td></tr>
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ShareBasedCompensationSharesAuthorizedUnderStockOptionPlansByExercisePriceRange [Axis]Option 1Option 2Option 3Option 4Option 5Option 6TotalConcentration Risk Type [Axis]Platform & technologyGeographical [Axis]North AmericaEuropeServicesDocument And Entity InformationEntity Registrant NameEntity Central Index KeyDocument TypeDocument Period End DateAmendment FlagCurrent Fiscal Year End DateIs Entity a Well-known Seasoned Issuer?Is Entity a Voluntary Filer?Is Entity's Reporting Status Current?Entity Filer CategoryEntity Public FloatEntity Common Stock, Shares OutstandingDocument Fiscal Period FocusDocument Fiscal Year FocusStatement of Financial Position [Abstract]ASSETSCurrent assets:Cash and cash equivalentsAccounts receivable (net of allowance for doubtful accounts of $451,625 and $429,192, respectively)Other current assetsTotal current assetsCapitalized software (net of accumulated amortization of $268,901 and $207,438, respectively)Fixed assets (net of accumulated amortization of $338,126 and $318,077, respectively)Deferred income tax asset - noncurrentOther long-term assetsGoodwillIntangible assets (net of accumulated amortization of $3,407,190 and $3,323,782, respectively)Total assetsLIABILITIES AND STOCKHOLDERS' EQUITYCurrent liabilities:Accounts payableAccrued expensesIncome taxes payableDeferred revenueTotal current liabilitiesDeferred income tax liabilityOther long-term liabilitiesTotal liabilitiesCommitments and contingenciesStockholders' equity:Preferred stock, $0.001 par value, 1,000,000 and 30,000,000 shares authorized, no shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively.Common stock $0.001 par value, 20,000,000 and 100,000,000 shares authorized, 2,912,114 and 2,860,944 shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively.Additional paid-in capitalOther accumulated comprehensive lossRetained earningsTotal stockholders' equityTotal liabilities and stockholders' equityAssetsAllowance for Accounts ReceivablesAccumulated Amortization - Capitalized SoftwareAccumulated Depreciation - Fixed AssetsAccumulated Amortization - Intangible AssetsStockholders EquityPreferred Stock shares par valuePreferred Stock shares AuthorizedPreferred Stock shares IssuedPreferred Stock shares OutstandingCommon Stock shares par valueCommon Stock shares AuthorizedCommon Stock shares IssuedCommon Stock shares OutstandingIncome Statement [Abstract]RevenuesCost of servicesGross profitOperating costs and expenses:General and administrativeSales and marketingProduct developmentDepreciation and amortizationTotal operating costs and expensesOperating incomeOther income (expense):Other income (expense), netInterest income (expense), netTotal other income (expense)Net income before income taxesIncome tax benefit (expense)Net incomeIncome per share - basicIncome per share - fully dilutedWeighted average number of common shares outstanding - basicWeighted average number of common shares outstanding - fully dilutedConsolidated Statements Of Comprehensive IncomeNet incomeForeign currency translation adjustmentComprehensive incomeStatement of Cash Flows [Abstract]Cash flows from operating activities:Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortizationBad debt expenseDeferred income taxesStock-based compensation expenseNon-cash interest expenseChanges in operating assets and liabilities:Decrease (increase) in accounts receivableDecrease (increase) in deposits and prepaid assetsDecrease (increase) in other assetsIncrease (decrease) in accounts payableIncrease (decrease) in accrued expensesIncrease (decrease) in deferred revenueNet cash provided by operating activitiesCash flows from investing activities:Capitalized softwarePurchase of fixed assetsAcquisition of intangible assetsNet cash used in investing activitiesCash flows from financing activities:Proceeds from exercise of stock options, net of income taxesPayment of dividendNet cash used in financing activitiesNet change in cashCash - beginningCurrency translation adjustmentCash - endingSupplemental disclosures:Cash paid for interestCash paid for income taxesNon-cash activities:Stock-based compensation - capitalized softwareConversion of note payable to common stockNotes to Financial StatementsBasis of PresentationSummary of Significant Accounting PoliciesStock Options and Restricted Stock UnitsIncome Tax Disclosure [Abstract]Income taxesOperations and ConcentrationsLine of CreditSegment Reporting [Abstract]Geographical InformationNote 8. Authorized SharesAuthorized SharesSubsequent Events [Abstract]Subsequent EventsEarnings per Share (EPS)ReclassificationsRevenue RecognitionDeferred CostsAllowance for Doubtful AccountsUse of EstimatesIncome TaxesCapitalized SoftwareFair Value MeasurementsTranslation of Foreign Financial StatementsGoodwillBusiness Combinations, Goodwill and Intangible AssetsComprehensive IncomeAdvertisingStock-based compensationNewly Adopted PronouncementsRecent Accounting PronouncementsSchedule Of Stock OptionsConcentration of revenue as a percentage of total revenueRevenue based on geographic regionStatement [Table]Statement [Line Items]Antidilutive Securities [Axis]Stock Options and Restricted Stock UnitsConvertible NoteShares issuable included in computation of diluted earnings per shareAntidilutive Securities Excluded from Computation of Earnings Per ShareCapitalized software development costsAmortization expenseExercise Price Range [Axis]Exercise Price RangeNumber of Options OutstandingWeighted Average Remaining Contractual Life (in Years)Weighted Average Exercise PriceNumber of Options ExercisableNote 3. Stock Options And Restricted Stock Units Details NarrativeUnrecognized Compensation Expense, OptionsUnrecognized Compensation Expense, Restricted Stock UnitsRestricted stock units, vestedIntrinsic valueNote 4. Income Taxes Details NarrativeIncome tax benefit (expense)Excess stock-based compensation tax benefitBusiness Combination, Valuation Allowance, Available to Reduce Income Tax ExpenseDeferred tax asset related to the federal and state net operating lossesPercentage of revenue from various revenue streamsLine Of Credit, Maximum Borrowing CapacityLine of Credit Facility, Interest Rate at Period EndLine of Credit, amount outstandingLine Of Credit, Remaining Borrowing CapacityAssets, CurrentAssetsLiabilities, CurrentLiabilitiesStockholders' Equity Attributable to ParentLiabilities and EquityGross ProfitOperating ExpensesOperating Income (Loss)Comprehensive Income (Loss), Net of Tax, Attributable to ParentDepreciation, Depletion and AmortizationIncrease (Decrease) in Accounts ReceivableIncrease (Decrease) in Other Operating AssetsNet Cash Provided by (Used in) Operating ActivitiesPayments to Develop SoftwarePayments to Acquire Property, Plant, and EquipmentPayments to Acquire Intangible AssetsNet Cash Provided by (Used in) Investing ActivitiesPayments of DividendsNet Cash Provided by (Used in) Financing ActivitiesGoodwill and Intangible Assets, Goodwill, Policy [Policy Text Block]StockOptionsAndRSUMemberShare-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, NumberShare-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise PriceShare-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, NumberEX-101.PRE
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isdr-20170331_pre.xml
XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE
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This is focus fiscal period of the document report. For a first quarter 2006 quarterly report, which may also provide financial information from prior periods, the first fiscal quarter should be given as the fiscal period focus. Values: FY, Q1, Q2, Q3, Q4, H1, H2, M9, T1, T2, T3, M8, CY.
This is focus fiscal year of the document report in CCYY format. For a 2006 annual report, which may also provide financial information from prior periods, fiscal 2006 should be given as the fiscal year focus. Example: 2006.
The end date of the period reflected on the cover page if a periodic report. For all other reports and registration statements containing historical data, it is the date up through which that historical data is presented. If there is no historical data in the report, use the filing date. The format of the date is CCYY-MM-DD.
The type of document being provided (such as 10-K, 10-Q, 485BPOS, etc). The document type is limited to the same value as the supporting SEC submission type, or the word "Other".
Indicate number of shares or other units outstanding of each of registrant's classes of capital or common stock or other ownership interests, if and as stated on cover of related periodic report. Where multiple classes or units exist define each class/interest by adding class of stock items such as Common Class A [Member], Common Class B [Member] or Partnership Interest [Member] onto the Instrument [Domain] of the Entity Listings, Instrument.
Indicate "Yes" or "No" whether registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. This information should be based on the registrant's current or most recent filing containing the related disclosure.
Indicate whether the registrant is one of the following: (1) Large Accelerated Filer, (2) Accelerated Filer, (3) Non-accelerated Filer, (4) Smaller Reporting Company (Non-accelerated) or (5) Smaller Reporting Accelerated Filer. Definitions of these categories are stated in Rule 12b-2 of the Exchange Act. This information should be based on the registrant's current or most recent filing containing the related disclosure.
Indicate "Yes" or "No" if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Is used on Form Type: 10-K, 10-Q, 8-K, 20-F, 6-K, 10-K/A, 10-Q/A, 20-F/A, 6-K/A, N-CSR, N-Q, N-1A.
Carrying value as of the balance sheet date of liabilities incurred (and for which invoices have typically been received) and payable to vendors for goods and services received that are used in an entity's business. Used to reflect the current portion of the liabilities (due within one year or within the normal operating cycle if longer).
For an unclassified balance sheet, the amount due from customers or clients for goods or services that have been delivered or sold in the normal course of business, reduced to their estimated net realizable fair value by an allowance established by the entity of the amount it deems uncertain of collection.
Carrying amount as of the balance sheet date of the unpaid sum of the known and estimated amounts payable to satisfy all currently due domestic and foreign income tax obligations.
Carrying value as of the balance sheet date of obligations incurred and payable, pertaining to costs that are statutory in nature, are incurred on contractual obligations, or accumulate over time and for which invoices have not yet been received or will not be rendered. Examples include taxes, interest, rent and utilities. Used to reflect the current portion of the liabilities (due within one year or within the normal operating cycle if longer).
Accumulated change in equity from transactions and other events and circumstances from non-owner sources, net of tax effect, at period end. Excludes Net Income (Loss), and accumulated changes in equity from transactions resulting from investments by owners and distributions to owners. Includes foreign currency translation items, certain pension adjustments, unrealized gains and losses on certain investments in debt and equity securities, other than temporary impairment (OTTI) losses related to factors other than credit losses on available-for-sale and held-to-maturity debt securities that an entity does not intend to sell and it is not more likely than not that the entity will be required to sell before recovery of the amortized cost basis, as well as changes in the fair value of derivatives related to the effective portion of a designated cash flow hedge.
Excess of issue price over par or stated value of the entity's capital stock and amounts received from other transactions involving the entity's stock or stockholders. Includes adjustments to additional paid in capital. Some examples of such adjustments include recording the issuance of debt with a beneficial conversion feature and certain tax consequences of equity instruments awarded to employees. Use this element for the aggregate amount of additional paid-in capital associated with common and preferred stock. For additional paid-in capital associated with only common stock, use the element additional paid in capital, common stock. For additional paid-in capital associated with only preferred stock, use the element additional paid in capital, preferred stock.
Sum of the carrying amounts as of the balance sheet date of all assets that are recognized. Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.
Sum of the carrying amounts as of the balance sheet date of all assets that are expected to be realized in cash, sold, or consumed within one year (or the normal operating cycle, if longer). Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.
Amount of currency on hand as well as demand deposits with banks or financial institutions. Includes other kinds of accounts that have the general characteristics of demand deposits. Also includes short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Excludes cash and cash equivalents within disposal group and discontinued operation.
Represents the caption on the face of the balance sheet to indicate that the entity has entered into (1) purchase or supply arrangements that will require expending a portion of its resources to meet the terms thereof, and (2) is exposed to potential losses or, less frequently, gains, arising from (a) possible claims against a company's resources due to future performance under contract terms, and (b) possible losses or likely gains from uncertainties that will ultimately be resolved when one or more future events that are deemed likely to occur do occur or fail to occur.
Aggregate par or stated value of issued nonredeemable common stock (or common stock redeemable solely at the option of the issuer). This item includes treasury stock repurchased by the entity. Note: elements for number of nonredeemable common shares, par value and other disclosure concepts are in another section within stockholders' equity.
The carrying amount of consideration received or receivable as of the balance sheet date on potential earnings that were not recognized as revenue in conformity with GAAP, and which are expected to be recognized as such within one year or the normal operating cycle, if longer, including sales, license fees, and royalties, but excluding interest income.
Amount after allocation of valuation allowances of deferred tax asset attributable to deductible temporary differences and carryforwards classified as noncurrent.
Amount, after deferred tax asset, of deferred tax liability attributable to taxable differences, with jurisdictional netting and classified as noncurrent.
Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.
Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges.
Sum of the carrying amounts as of the balance sheet date of all liabilities that are recognized. Liabilities are probable future sacrifices of economic benefits arising from present obligations of an entity to transfer assets or provide services to other entities in the future.
Total obligations incurred as part of normal operations that are expected to be paid during the following twelve months or within one business cycle, if longer.
Aggregate par or stated value of issued nonredeemable preferred stock (or preferred stock redeemable solely at the option of the issuer). This item includes treasury stock repurchased by the entity. Note: elements for number of nonredeemable preferred shares, par value and other disclosure concepts are in another section within stockholders' equity.
Amount after accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business to produce goods and services and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures.
Total of all stockholders' equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.
Amount of accumulated depreciation, depletion and amortization for physical assets used in the normal conduct of business to produce goods and services.
A valuation allowance for trade and other receivables due to an Entity within one year (or the normal operating cycle, whichever is longer) that are expected to be uncollectible.
Total number of common shares of an entity that have been sold or granted to shareholders (includes common shares that were issued, repurchased and remain in the treasury). These shares represent capital invested by the firm's shareholders and owners, and may be all or only a portion of the number of shares authorized. Shares issued include shares outstanding and shares held in the treasury.
The maximum number of nonredeemable preferred shares (or preferred stock redeemable solely at the option of the issuer) permitted to be issued by an entity's charter and bylaws.
Total number of nonredeemable preferred shares (or preferred stock redeemable solely at the option of the issuer) issued to shareholders (includes related preferred shares that were issued, repurchased, and remain in the treasury). May be all or portion of the number of preferred shares authorized. Excludes preferred shares that are classified as debt.
Aggregate share number for all nonredeemable preferred stock (or preferred stock redeemable solely at the option of the issuer) held by stockholders. Does not include preferred shares that have been repurchased.
The current period expense charged against earnings on long-lived, physical assets not used in production, and which are not intended for resale, to allocate or recognize the cost of such assets over their useful lives; or to record the reduction in book value of an intangible asset over the benefit period of such asset; or to reflect consumption during the period of an asset that is not used in production.
The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.
The aggregate total of expenses of managing and administering the affairs of an entity, including affiliates of the reporting entity, which are not directly or indirectly associated with the manufacture, sale or creation of a product or product line.
Amount of income (loss) from continuing operations, including income (loss) from equity method investments, before deduction of income tax expense (benefit), and income (loss) attributable to noncontrolling interest.
Generally recurring costs associated with normal operations except for the portion of these expenses which can be clearly related to production and included in cost of sales or services. Includes selling, general and administrative expense.
The aggregate costs incurred (1) in a planned search or critical investigation aimed at discovery of new knowledge with the hope that such knowledge will be useful in developing a new product or service, a new process or technique, or in bringing about a significant improvement to an existing product or process; or (2) to translate research findings or other knowledge into a plan or design for a new product or process or for a significant improvement to an existing product or process whether intended for sale or the entity's use, during the reporting period charged to research and development projects, including the costs of developing computer software up to the point in time of achieving technological feasibility, and costs allocated in accounting for a business combination to in-process projects deemed to have no alternative future use.
Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss).
The average number of shares or units issued and outstanding that are used in calculating diluted EPS or earnings per unit (EPU), determined based on the timing of issuance of shares or units in the period.
Number of [basic] shares or units, after adjustment for contingently issuable shares or units and other shares or units not deemed outstanding, determined by relating the portion of time within a reporting period that common shares or units have been outstanding to the total time in that period.
Amount after tax of increase (decrease) in equity from transactions and other events and circumstances from net income and other comprehensive income, attributable to parent entity. Excludes changes in equity resulting from investments by owners and distributions to owners.
Amount after tax and reclassification adjustments of gain (loss) on foreign currency translation adjustments, foreign currency transactions designated and effective as economic hedges of a net investment in a foreign entity and intra-entity foreign currency transactions that are of a long-term-investment nature, attributable to parent entity.
Amount of currency on hand as well as demand deposits with banks or financial institutions. Includes other kinds of accounts that have the general characteristics of demand deposits. Also includes short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Excludes cash and cash equivalents within disposal group and discontinued operation.
Amount of increase (decrease) in cash and cash equivalents. Cash and cash equivalents are the amount of currency on hand as well as demand deposits with banks or financial institutions. Includes other kinds of accounts that have the general characteristics of demand deposits. Also includes short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Includes effect from exchange rate changes.
The aggregate expense recognized in the current period that allocates the cost of tangible assets, intangible assets, or depleting assets to periods that benefit from use of the assets.
The increase (decrease) during the reporting period in the aggregate amount of liabilities incurred (and for which invoices have typically been received) and payable to vendors for goods and services received that are used in an entity's business.
The increase (decrease) during the reporting period in amount due within one year (or one business cycle) from customers for the credit sale of goods and services.
The increase (decrease) during the reporting period, excluding the portion taken into income, in the liability reflecting revenue yet to be earned for which cash or other forms of consideration was received or recorded as a receivable.
Amount of cash inflow (outflow) from financing activities, including discontinued operations. Financing activity cash flows include obtaining resources from owners and providing them with a return on, and a return of, their investment; borrowing money and repaying amounts borrowed, or settling the obligation; and obtaining and paying for other resources obtained from creditors on long-term credit.
Amount of cash inflow (outflow) from investing activities, including discontinued operations. Investing activity cash flows include making and collecting loans and acquiring and disposing of debt or equity instruments and property, plant, and equipment and other productive assets.
Amount of cash inflow (outflow) from operating activities, including discontinued operations. Operating activity cash flows include transactions, adjustments, and changes in value not defined as investing or financing activities.
The cash outflow associated with the acquisition of long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale; includes cash outflows to pay for construction of self-constructed assets.
The cash outflow associated with the development or modification of software programs or applications for internal use (that is, not to be sold, leased or otherwise marketed to others) that qualify for capitalization.
The cash inflow associated with the amount received from holders exercising their stock options. This item inherently excludes any excess tax benefit, which the entity may have realized and reported separately.
Amount of expense related to write-down of receivables to the amount expected to be collected. Includes, but is not limited to, accounts receivable and notes receivable.
The aggregate amount of noncash, equity-based employee remuneration. This may include the value of stock or unit options, amortization of restricted stock or units, and adjustment for officers' compensation. As noncash, this element is an add back when calculating net cash generated by operating activities using the indirect method.
The unaudited interim consolidated balance sheet
as of March 31, 2017 and statements of operations, comprehensive income, and cash flows for the three-month periods ended March
31, 2017 and 2016 included herein, have been prepared in accordance with the instructions for Form 10-Q under the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), and Article 10 of Regulation S-X under the Exchange Act. In the opinion
of management, they include all normal recurring adjustments necessary for a fair presentation of the financial statements. Results
of operations reported for the interim periods are not necessarily indicative of results for the entire year. Certain information
and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally
accepted in the United States ("US GAAP") have been condensed or omitted pursuant to such rules and regulations relating
to interim financial statements. The interim financial information should be read in conjunction with the 2016 audited financial
statements of Issuer Direct Corporation (the “Company”, “We”, or “Our”) filed on Form 10-K
and Form 10-K/A.
The entire disclosure for the business description and basis of presentation concepts. Business description describes the nature and type of organization including but not limited to organizational structure as may be applicable to holding companies, parent and subsidiary relationships, business divisions, business units, business segments, affiliates and information about significant ownership of the reporting entity. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS).
The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries. Significant intercompany accounts and transactions are eliminated
in consolidation.
Earnings Per Share (EPS)
We calculate earnings per share in accordance
with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 260 –
EPS, which requires that basic net income per common share be computed by dividing net income for the period by the weighted average
number of common shares outstanding during the period. Diluted net income per share is computed by dividing the net income for
the period by the weighted average number of common and dilutive common equivalent shares outstanding during the period. Shares
issuable upon the exercise of stock options and restricted stock units totaling 70,500 and 289,750 were excluded in the computation
of diluted earnings per common share during the three-month periods ended March 31, 2017 and 2016, respectively, because their
impact was anti-dilutive.
Revenue Recognition
We recognize revenue in accordance with US GAAP,
including SEC Staff Accounting Bulletin No. 104, “Revenue Recognition,” which requires that: (i) persuasive
evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the sales price is
fixed or determinable, and (iv) collectability is reasonably assured. We recognize revenue when services are rendered and/or
delivered and where collectability is probable. Deferred revenue primarily consists of advance billings for annual contracts for
our legacy annual report service and licenses of our cloud-based platforms.
Allowance for Doubtful Accounts
We provide an allowance
for doubtful accounts, which is based upon a review of outstanding receivables as well as historical collection information. Credit
is granted on an unsecured basis. In determining the amount of the allowance, management is required to make certain estimates
and assumptions. The allowance is made up of specific reserves, as deemed necessary, on client account balances, and a reserve
based on our historical experience.
Use of Estimates
The preparation of financial statements in conformity
with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Significant estimates include the allowance for doubtful accounts and the valuation of goodwill,
intangible assets, deferred tax assets, and stock-based compensation. Actual results could differ from those estimates.
Income Taxes
We comply with the FASB ASC No. 740 – Income
Taxes which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax
assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that
will result in future taxable or deductible amounts based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred income
tax assets to the amounts expected to be realized. For any uncertain tax positions, we recognize the impact of a tax
position, only if it is more likely than not of being sustained upon examination, based on the technical merits of the position.
Our policy regarding the classification of interest and penalties is to classify them as income tax expense in our financial statements,
if applicable. At the end of each interim period, we estimate the effective tax rate we expect to be applicable for the full
year and this rate is applied to our results for the interim year-to-date period and then adjusted for any discrete period items.
Capitalized Software
In accordance with FASB ASC No. 350 – Intangibles
– Goodwill and Other, costs incurred to develop our cloud-based platform products and disclosure management system components
are capitalized when the preliminary project phase is complete, management commits to fund the project and it is probable the project
will be completed and used for its intended purposes. Once the software is substantially complete and ready for its intended use,
the software is amortized over its estimated useful life. Costs related to design or maintenance of the software are
expensed as incurred. The Company capitalized $365,973 and $526,564 during the three-month periods ended March 31,
2017 and 2016, respectively. Included in these amounts were $75,936 and $179,200 related to stock-based compensation during
the three-month periods ended March 31, 2017 and 2016, respectively. The Company recorded amortization expense of $61,463
and $28,672 during the three-month periods ended March 31, 2017 and 2016, respectively, $59,245 and $25,771 of which is included
in Cost of revenues on the Consolidated Statements of Operations. For the three-month periods ended March 31, 2017 and 2016,
the remaining amortization of $2,218 and $2,901, respectively, is included in depreciation and amortization, as it relates to back-office
supporting systems.
Fair Value Measurements
As of March 31, 2017 and December 31, 2016, we
do not have any financial assets or liabilities that are required to be, or that we elected to measure, at fair value. We believe
that the fair value of our financial instruments, which consist of cash and cash equivalents, accounts receivable, and accounts
payable approximate their carrying amounts.
Translation of Foreign Financial Statements
The financial statements of the foreign subsidiaries
of the Company have been translated into U.S. dollars. All assets and liabilities have been translated at current rates
of exchange in effect at the end of the period. Income and expense items have been translated at the average exchange
rates for the year or the applicable interim period. The gains or losses that result from this process are recorded
as a separate component of other accumulated comprehensive loss until the entity is sold or substantially liquidated.
Business Combinations, Goodwill and Intangible Assets
We account for business combinations under FASB
ASC No. 805 – Business Combinations and the related acquired intangible assets and goodwill under FASB ASC No. 350 –
Intangibles – Goodwill and Other. The authoritative guidance for business combinations specifies the criteria for recognizing
and reporting intangible assets apart from goodwill. We record the assets acquired and liabilities assumed in business combinations
at their respective fair values at the date of acquisition, with any excess purchase price recorded as goodwill. Goodwill is an
asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually
identified and separately recognized. Intangible assets consist of client relationships, customer lists, software, technology and
trademarks that are initially measured at fair value. At the time of the business combination trademarks are considered
an indefinite-lived asset and, as such, are not amortized as there is no foreseeable limit to cash flows generated from them. The
goodwill and intangible assets are assessed annually for impairment, or whenever conditions indicate the asset may be impaired,
and any such impairment will be recognized in the period identified. The client relationships, customer lists, software and technology
are amortized over their estimated useful lives.
Comprehensive Income
Comprehensive income consists
of net income and other comprehensive income related to changes in the cumulative foreign currency translation adjustment.
Advertising
The Company expenses advertising costs as incurred,
except for direct-response advertising, which is capitalized and amortized over its expected period of future benefits.
Stock-based compensation
We account for stock-based compensation under
FASB ASC No. 718 – Compensation – Stock Compensation. The authoritative guidance for stock compensation requires that
companies estimate the fair value of share-based payment awards on the date of the grant using an option-pricing model. The associated
cost is recognized over the period during which an employee is required to provide service in exchange for the award.
Newly Adopted Pronouncements
The FASB issued ASU 2016-09, Improvements to
Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payment award transactions
including (a) income tax consequences; (b) classification of awards as either debt or equity liabilities; and (c) classification
on the statement of cash flows. The amendments are effective for public business entities for annual periods beginning after
December 15, 2016, and interim periods within those annual periods. The Company has adopted this ASU as of January 1, 2017.
The primary amendment impacting the Company's financial statements is the requirement for excess tax benefits or shortfalls on
the exercise of stock-based compensation awards to be presented in income tax expense in the Consolidated Statements of Income
during the period the award is exercised as opposed to being recorded in Additional paid-in capital on the Consolidated Balance
Sheets. The excess tax benefit or shortfall is calculated as the difference between the fair value of the award on the date
of exercise and the fair value of the award used to measure the expense to be recognized over the service period. Changes
are required to be applied prospectively to all excess tax benefits and deficiencies resulting from the exercise of awards after
the date of adoption. The ASU requires a "modified retrospective" approach application for excess tax benefits that were
not previously recognized in situations where the tax deduction did not reduce current taxes payable. For the three-month period
ended March 31, 2017, the Company recorded an income tax benefit of $77,272 related to the excess tax benefit of exercised awards
during the period, that would have been recorded in Additional paid-in capital during prior years. As the end result is dependent
on the future value of the Company's stock as well as the timing of employee exercises, the amount of future impact cannot be quantified
at this time.
Recent Accounting Pronouncements
The FASB's new leases standard ASU 2016-02 Leases
(Topic 842) was issued on February 25, 2016. ASU 2016-02 is intended to improve financial reporting about leasing transactions.
The ASU affects all companies and other organizations that lease assets such as real estate, airplanes, and manufacturing equipment.
The ASU will require organizations that lease assets referred to as “Lessees” to recognize on the balance sheet the
assets and liabilities for the rights and obligations created by those leases. An organization is to provide disclosures designed
to enable users of financial statements to understand the amount, timing, and uncertainty of cash flows arising from leases. These
disclosures include qualitative and quantitative requirements concerning additional information about the amounts recorded in the
financial statements. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease
terms of more than 12 months. Consistent with current US GAAP, the recognition, measurement, and presentation of expenses and cash
flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike
current US GAAP which requires only capital leases to be recognized on the balance sheet the new ASU will require both types of
leases (i.e. operating and capital) to be recognized on the balance sheet. The FASB lessee accounting model will continue to account
for both types of leases. The capital lease will be accounted for in substantially the same manner as capital leases are accounted
for under existing US GAAP. The operating lease will be accounted for in a manner similar to operating leases under existing US
GAAP, except that lessees will recognize a lease liability and a lease asset for all of those leases. Public companies will
be required to adopt the new leasing standard for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2018. For calendar year-end public companies, this means an adoption date of January 1, 2019 and retrospective
application to previously issued annual and interim financial statements for 2018, however, early adoption is permitted. Lessees
with a large portfolio of leases are likely to see a significant increase in balance sheet assets and liabilities. The Company
currently has one lease on its corporate facilities which ends October 31, 2019. Absent any renewal of the lease or new leases
entered into before January 1, 2019, the Company will be required to record a right-to-use asset and corresponding lease liability
associated with the remaining lease payments beginning with the first interim period of 2019. This will increase both balance
sheet assets and liabilities by insignificant amounts and will not have a significant impact on the income statement or affect
any covenant calculations.
The FASB has issued ASU 2014-09, Revenue from
Contracts with Customers (Topic 606) and several updates to the ASU. ASU 2014-09 requires revenue recognition to depict the transfer
of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services. ASU 2014-09 sets forth a new revenue recognition model that requires identifying the contract, identifying
the performance obligations, determining the transaction price, allocating the transaction price to performance obligations and
recognizing the revenue upon satisfaction of performance obligations.
The amendments in the ASU can be applied either
retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the
update recognized at the date of the initial application along with additional disclosures. The Company is currently evaluating
the impact of ASU 2014-09 as well as the additional updates, however, does not believe it will have a significant impact on the
Company's financial statements as the Company believes the current manner in which revenue is recognized will result in the same
or similar timing and amount of revenue recognition as required by ASU 2014-09 and the additional amendments. These ASU's
are currently effective for the Company in our year beginning on January 1, 2018.
On May 23, 2014, the shareholders of the Company
approved the 2014 Equity Incentive Plan (the “2014 Plan”). Under the terms of the 2014 Plan, the Company
is authorized to issue incentive awards for common stock up to 200,000 shares to employees and other personnel. On June
10, 2016, the shareholders of the Company approved an additional 200,000 awards to be issued under the 2014 Plan, bringing the
total number of shares to be awarded to 400,000. The awards may be in the form of incentive stock options, nonqualified stock
options, restricted stock, restricted stock units and performance awards. The 2014 Plan is effective through March 31, 2024. As
of March 31, 2017, 258,000 awards had been granted under the 2014 Plan.
The following table summarizes information about
stock options outstanding and exercisable at March 31, 2017:
Options Outstanding
Options Exercisable
Exercise Price Range
Number
Weighted Average
Remaining Contractual
Life (in Years)
Weighted Average
Exercise Price
Number
$
0.01 - $1.00
7,850
4.81
$
0.01
7,850
$
1.01 - $4.00
3,000
5.00
$
3.33
3,000
$
4.01 - $7.00
10,000
8.64
$
6.80
3,333
$
7.01 - $8.00
78,750
3.45
$
7.76
68,750
$
8.01 - $10.00
11,000
7.74
$
9.26
7,330
$
10.01 - $13.49
40,000
1.94
$
13.49
30,000
Total
150,600
3.80
$
8.83
120,263
As of March 31, 2017, the Company had unrecognized
stock compensation related to the options of $231,283.
On January 24, 2017, the Company granted 9,500
restricted stock units with an intrinsic value of $8.85 to certain employees of the Company. The restricted stock units vest one-third
annually over three years. As of March 31, 2017, 38,170 restricted stock units with an intrinsic value of $5.86 vested. As of March
31, 2017, there was $355,561 of unrecognized compensation cost related to our unvested restricted stock units, which will be recognized
through 2019.
Tabular disclosure of components of a stock option or other award plan under which equity-based compensation is awarded to employees, typically comprised of the amount of unearned compensation (deferred compensation cost), compensation expense, and changes in the quantity and fair value of the shares (or other type of equity) granted, exercised, forfeited, and issued and outstanding pertaining to that plan. Disclosure may also include nature and general terms of such arrangements that existed during the period and potential effects of those arrangements on shareholders, effect of compensation cost arising from equity-based payment arrangements on the income statement, method of estimating the fair value of the goods or services received, or the fair value of the equity instruments granted, during the period, cash flow effects resulting from equity-based payment arrangements and, for registrants that accelerate vesting of out of the money share options, reasons for the decision to accelerate.
We recognized income tax expense of $40,579 and
$197,922 for the three-month periods ended March 31, 2017 and 2016, respectively. At the end of each interim period, we estimate
the effective tax rate we expect to be applicable for the full fiscal year and this rate is applied to our results for the year-to-date
period, and then adjusted for any discrete period items. For the three-month period ended March 31, 2017, the variance between
the Company’s effective tax rate and the U.S. statutory rate of 34% is primarily attributable to the excess stock-based compensation
tax benefit of $77,272 recognized in income tax expense during the period, in connection with the Company’s adoption of ASU
2016-09, as well as, foreign statutory tax rate differentials and tax credits.
During the three-month period ended March 31,
2016, the Company released $78,400 of its valuation allowance related to federal and state net operating losses, which resulted
in a net benefit of $40,875. The tax benefits from US net operating losses that were previously reserved were acquired as part
of the acquisition of PrecisionIR (PIR). At the date of acquisition, management believed it was more likely than not that the benefits
would not be used due to the uncertainty of future profitability and also due to statutory limitations on the amount of net operating
losses that can be carried forward in an acquisition. The remaining valuation allowance on the federal and state net operating
losses related to PIR was released during the fourth quarter of 2016, as such no valuation allowance remains on those federal and
state net operating losses as March 31, 2017, which is consistent with projections of future taxable domestic income.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
For the three-month periods ended March 31, 2017
and 2016, we earned revenues (as a percentage of total revenues) in the following categories:
Three months ended
March 31,
Revenue Streams
2017
2016
Platform and Technology
49.49
%
28.84
%
Services
50.51
%
71.16
%
Total
100.00
%
100.00
%
No customers accounted for more than 10% of the
operating revenues during the three-month periods ended March 31, 2017 or 2016. We did not have any customers that comprised more
than 10% of our total accounts receivable balance at March 31, 2017 or December 31, 2016.
We believe we did not have any financial instruments
that could have potentially subjected us to significant concentrations of credit risk. Since a portion of the revenues are paid
at the beginning of the month via credit card or advance by check, the remaining accounts receivable amounts are generally due
within 30 days, none of which is collateralized.
The entire disclosure for any concentrations existing at the date of the financial statements that make an entity vulnerable to a reasonably possible, near-term, severe impact. This disclosure informs financial statement users about the general nature of the risk associated with the concentration, and may indicate the percentage of concentration risk as of the balance sheet date.
Effective September 2, 2016, the Company renewed
its Line of Credit, which reduced the interest rate to LIBOR plus 2.50% from LIBOR plus 3.00%. The amount of funds available
for future borrowings remained at $2,000,000. As of March 31, 2017, the interest rate was 3.48% and the Company did not owe any
amounts on the Line of Credit.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
We consider ourselves to be in a single reportable
segment under the authoritative guidance for segment reporting, specifically a shareholder communications and compliance company
for publicly traded companies. Revenue is attributed to a particular geographic region based on where the services are performed.
The following tables set forth revenues by domestic and international regions:
The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.
On March 21, 2017, the Company filed a Certificate
of Amendment to its Certificate of Incorporation reducing the number of authorized shares of Preferred stock from 30,000,000 to
1,000,000 shares and the number of Common stock from 100,000,000 to 20,000,000 shares.
The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.
On April 5, 2017, the Company's Board of Directors
approved and declared a quarterly cash dividend of $0.05 per share. The dividend is payable on May 12, 2017, to stockholders of
record as of the close of business on April 24, 2017.
The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business.
We calculate earnings per share in accordance
with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) No. 260 –
EPS, which requires that basic net income per common share be computed by dividing net income for the period by the weighted average
number of common shares outstanding during the period. Diluted net income per share is computed by dividing the net income for
the period by the weighted average number of common and dilutive common equivalent shares outstanding during the period. Shares
issuable upon the exercise of stock options and restricted stock units totaling 70,500 and 289,750 were excluded in the computation
of diluted earnings per common share during the three-month periods ended March 31, 2017 and 2016, respectively, because their
impact was anti-dilutive.
We recognize revenue in accordance with US GAAP,
including SEC Staff Accounting Bulletin No. 104, “Revenue Recognition,” which requires that: (i) persuasive
evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the sales price is
fixed or determinable, and (iv) collectability is reasonably assured. We recognize revenue when services are rendered and/or
delivered and where collectability is probable. Deferred revenue primarily consists of advance billings for annual contracts for
our legacy annual report service and licenses of our cloud-based platforms.
We provide an allowance
for doubtful accounts, which is based upon a review of outstanding receivables as well as historical collection information. Credit
is granted on an unsecured basis. In determining the amount of the allowance, management is required to make certain estimates
and assumptions. The allowance is made up of specific reserves, as deemed necessary, on client account balances, and a reserve
based on our historical experience.
The preparation of financial statements in conformity
with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Significant estimates include the allowance for doubtful accounts and the valuation of goodwill,
intangible assets, deferred tax assets, and stock-based compensation. Actual results could differ from those estimates.
We comply with the FASB ASC No. 740 – Income
Taxes which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax
assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that
will result in future taxable or deductible amounts based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred income
tax assets to the amounts expected to be realized. For any uncertain tax positions, we recognize the impact of a tax
position, only if it is more likely than not of being sustained upon examination, based on the technical merits of the position.
Our policy regarding the classification of interest and penalties is to classify them as income tax expense in our financial statements,
if applicable. At the end of each interim period, we estimate the effective tax rate we expect to be applicable for the full
year and this rate is applied to our results for the interim year-to-date period and then adjusted for any discrete period items.
In accordance with FASB ASC No. 350 – Intangibles
– Goodwill and Other, costs incurred to develop our cloud-based platform products and disclosure management system components
are capitalized when the preliminary project phase is complete, management commits to fund the project and it is probable the project
will be completed and used for its intended purposes. Once the software is substantially complete and ready for its intended use,
the software is amortized over its estimated useful life. Costs related to design or maintenance of the software are
expensed as incurred. The Company capitalized $365,973 and $526,564 during the three-month periods ended March 31,
2017 and 2016, respectively. Included in these amounts were $75,936 and $179,200 related to stock-based compensation during
the three-month periods ended March 31, 2017 and 2016, respectively. The Company recorded amortization expense of $61,463
and $28,672 during the three-month periods ended March 31, 2017 and 2016, respectively, $59,245 and $25,771 of which is included
in Cost of revenues on the Consolidated Statements of Operations. For the three-month periods ended March 31, 2017 and 2016,
the remaining amortization of $2,218 and $2,901, respectively, is included in depreciation and amortization, as it relates to back-office
supporting systems.
As of March 31, 2017 and December 31, 2016, we
do not have any financial assets or liabilities that are required to be, or that we elected to measure, at fair value. We believe
that the fair value of our financial instruments, which consist of cash and cash equivalents, accounts receivable, and accounts
payable approximate their carrying amounts.
The financial statements of the foreign subsidiaries
of the Company have been translated into U.S. dollars. All assets and liabilities have been translated at current rates
of exchange in effect at the end of the period. Income and expense items have been translated at the average exchange
rates for the year or the applicable interim period. The gains or losses that result from this process are recorded
as a separate component of other accumulated comprehensive loss until the entity is sold or substantially liquidated.
We account for business combinations under FASB
ASC No. 805 – Business Combinations and the related acquired intangible assets and goodwill under FASB ASC No. 350 –
Intangibles – Goodwill and Other. The authoritative guidance for business combinations specifies the criteria for recognizing
and reporting intangible assets apart from goodwill. We record the assets acquired and liabilities assumed in business combinations
at their respective fair values at the date of acquisition, with any excess purchase price recorded as goodwill. Goodwill is an
asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually
identified and separately recognized. Intangible assets consist of client relationships, customer lists, software, technology and
trademarks that are initially measured at fair value. At the time of the business combination trademarks are considered
an indefinite-lived asset and, as such, are not amortized as there is no foreseeable limit to cash flows generated from them. The
goodwill and intangible assets are assessed annually for impairment, or whenever conditions indicate the asset may be impaired,
and any such impairment will be recognized in the period identified. The client relationships, customer lists, software and technology
are amortized over their estimated useful lives.
Comprehensive income consists
of net income and other comprehensive income related to changes in the cumulative foreign currency translation adjustment.
The Company expenses advertising costs as incurred,
except for direct-response advertising, which is capitalized and amortized over its expected period of future benefits.
We account for stock-based compensation under
FASB ASC No. 718 – Compensation – Stock Compensation. The authoritative guidance for stock compensation requires that
companies estimate the fair value of share-based payment awards on the date of the grant using an option-pricing model. The associated
cost is recognized over the period during which an employee is required to provide service in exchange for the award.
The FASB issued ASU 2016-09, Improvements to
Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payment award transactions
including (a) income tax consequences; (b) classification of awards as either debt or equity liabilities; and (c) classification
on the statement of cash flows. The amendments are effective for public business entities for annual periods beginning after
December 15, 2016, and interim periods within those annual periods. The Company has adopted this ASU as of January 1, 2017.
The primary amendment impacting the Company's financial statements is the requirement for excess tax benefits or shortfalls on
the exercise of stock-based compensation awards to be presented in income tax expense in the Consolidated Statements of Income
during the period the award is exercised as opposed to being recorded in Additional paid-in capital on the Consolidated Balance
Sheets. The excess tax benefit or shortfall is calculated as the difference between the fair value of the award on the date
of exercise and the fair value of the award used to measure the expense to be recognized over the service period. Changes
are required to be applied prospectively to all excess tax benefits and deficiencies resulting from the exercise of awards after
the date of adoption. The ASU requires a "modified retrospective" approach application for excess tax benefits that were
not previously recognized in situations where the tax deduction did not reduce current taxes payable. For the three-month period
ended March 31, 2017, the Company recorded an income tax benefit of $77,272 related to the excess tax benefit of exercised awards
during the period, that would have been recorded in Additional paid-in capital during prior years. As the end result is dependent
on the future value of the Company's stock as well as the timing of employee exercises, the amount of future impact cannot be quantified
at this time.
The FASB's new leases standard ASU 2016-02 Leases
(Topic 842) was issued on February 25, 2016. ASU 2016-02 is intended to improve financial reporting about leasing transactions.
The ASU affects all companies and other organizations that lease assets such as real estate, airplanes, and manufacturing equipment.
The ASU will require organizations that lease assets referred to as “Lessees” to recognize on the balance sheet the
assets and liabilities for the rights and obligations created by those leases. An organization is to provide disclosures designed
to enable users of financial statements to understand the amount, timing, and uncertainty of cash flows arising from leases. These
disclosures include qualitative and quantitative requirements concerning additional information about the amounts recorded in the
financial statements. Under the new guidance, a lessee will be required to recognize assets and liabilities for leases with lease
terms of more than 12 months. Consistent with current US GAAP, the recognition, measurement, and presentation of expenses and cash
flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease. However, unlike
current US GAAP which requires only capital leases to be recognized on the balance sheet the new ASU will require both types of
leases (i.e. operating and capital) to be recognized on the balance sheet. The FASB lessee accounting model will continue to account
for both types of leases. The capital lease will be accounted for in substantially the same manner as capital leases are accounted
for under existing US GAAP. The operating lease will be accounted for in a manner similar to operating leases under existing US
GAAP, except that lessees will recognize a lease liability and a lease asset for all of those leases. Public companies will
be required to adopt the new leasing standard for fiscal years, and interim periods within those fiscal years, beginning after
December 15, 2018. For calendar year-end public companies, this means an adoption date of January 1, 2019 and retrospective
application to previously issued annual and interim financial statements for 2018, however, early adoption is permitted. Lessees
with a large portfolio of leases are likely to see a significant increase in balance sheet assets and liabilities. The Company
currently has one lease on its corporate facilities which ends October 31, 2019. Absent any renewal of the lease or new leases
entered into before January 1, 2019, the Company will be required to record a right-to-use asset and corresponding lease liability
associated with the remaining lease payments beginning with the first interim period of 2019. This will increase both balance
sheet assets and liabilities by insignificant amounts and will not have a significant impact on the income statement or affect
any covenant calculations.
The FASB has issued ASU 2014-09, Revenue from
Contracts with Customers (Topic 606) and several updates to the ASU. ASU 2014-09 requires revenue recognition to depict the transfer
of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange
for those goods or services. ASU 2014-09 sets forth a new revenue recognition model that requires identifying the contract, identifying
the performance obligations, determining the transaction price, allocating the transaction price to performance obligations and
recognizing the revenue upon satisfaction of performance obligations.
The amendments in the ASU can be applied either
retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the
update recognized at the date of the initial application along with additional disclosures. The Company is currently evaluating
the impact of ASU 2014-09 as well as the additional updates, however, does not believe it will have a significant impact on the
Company's financial statements as the Company believes the current manner in which revenue is recognized will result in the same
or similar timing and amount of revenue recognition as required by ASU 2014-09 and the additional amendments. These ASU's
are currently effective for the Company in our year beginning on January 1, 2018.
Disclosure of accounting policy for advertising costs. For those costs that cannot be capitalized, discloses whether such costs are expensed as incurred or the first period in which the advertising takes place. For direct response advertising costs that are capitalized, describes those assets and the accounting policy used, including a description of the qualifying activity, the types of costs capitalized and the related amortization period. An entity also may disclose its accounting policy for cooperative advertising arrangements.
Disclosure of accounting policy for computing basic and diluted earnings or loss per share for each class of common stock and participating security. Addresses all significant policy factors, including any antidilutive items that have been excluded from the computation and takes into account stock dividends, splits and reverse splits that occur after the balance sheet date of the latest reporting period but before the issuance of the financial statements.
Disclosure of accounting policy for fair value measurements of financial and non-financial assets, liabilities and instruments classified in shareholders' equity. Disclosures include, but are not limited to, how an entity that manages a group of financial assets and liabilities on the basis of its net exposure measures the fair value of those assets and liabilities.
Disclosure of accounting policy for (1) transactions denominated in a currency other than the reporting enterprise's functional currency, (2) translating foreign currency financial statements that are incorporated into the financial statements of the reporting enterprise by consolidation, combination, or the equity method of accounting, and (3) remeasurement of the financial statements of a foreign reporting enterprise in a hyperinflationary economy.
Disclosure of accounting policy for intangible assets. This accounting policy may address both intangible assets subject to amortization and those that are not. The following also may be disclosed: (1) a description of intangible assets (2) the estimated useful lives of those assets (3) the amortization method used (4) how the entity assesses and measures impairment of such assets (5) how future cash flows are estimated (6) how the fair values of such asset are determined.
Disclosure of accounting policy for income taxes, which may include its accounting policies for recognizing and measuring deferred tax assets and liabilities and related valuation allowances, recognizing investment tax credits, operating loss carryforwards, tax credit carryforwards, and other carryforwards, methodologies for determining its effective income tax rate and the characterization of interest and penalties in the financial statements.
Disclosure of accounting policy for costs incurred when both (1) the software is acquired, internally developed, or modified solely to meet the entity's internal needs, and (2) during the software's development or modification, no substantive plan exists or is being developed to market the software externally.
Disclosure of accounting policy pertaining to new accounting pronouncements that may impact the entity's financial reporting. Includes, but is not limited to, quantification of the expected or actual impact.
Disclosure of accounting policy for determining the estimated allowance for doubtful accounts for premium amounts due from policyholders, insureds, and other insurance entities. May include factors that management considered, such as historical loss experience and current economic and competitive conditions.
Disclosure of accounting policy for revenue recognition. If the entity has different policies for different types of revenue transactions, the policy for each material type of transaction is generally disclosed. If a sales transaction has multiple element arrangements (for example, delivery of multiple products, services or the rights to use assets) the disclosure may indicate the accounting policy for each unit of accounting as well as how units of accounting are determined and valued. The disclosure may encompass important judgment as to appropriateness of principles related to recognition of revenue. The disclosure also may indicate the entity's treatment of any unearned or deferred revenue that arises from the transaction.
Disclosure of accounting policy for stock option and stock incentive plans. This disclosure may include (1) the types of stock option or incentive plans sponsored by the entity (2) the groups that participate in (or are covered by) each plan (3) significant plan provisions and (4) how stock compensation is measured, and the methodologies and significant assumptions used to determine that measurement.
Disclosure of accounting policy for the use of estimates in the preparation of financial statements in conformity with generally accepted accounting principles.
Tabular disclosure of option exercise prices, by grouped ranges, including the upper and lower limits of the price range, the number of shares under option, weighted average exercise price and remaining contractual option terms.
Tabular disclosure of the profit or loss and total assets for each reportable segment. An entity discloses certain information on each reportable segment if the amounts (a) are included in the measure of segment profit or loss reviewed by the chief operating decision maker or (b) are otherwise regularly provided to the chief operating decision maker, even if not included in that measure of segment profit or loss.
The number of shares into which fully or partially vested stock options outstanding as of the balance sheet date can be currently converted under the option plan.
The weighted-average price as of the balance sheet date at which grantees can acquire the shares reserved for issuance on vested portions of options outstanding and currently exercisable under the stock option plan.
Weighted average remaining contractual term for option awards outstanding, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days.
Amount of the difference between reported income tax expense (benefit) and expected income tax expense (benefit) computed by applying the domestic federal statutory income tax rates to pretax income (loss) from continuing operations attributable to increase (decrease) in the valuation allowance for deferred tax assets.
The aggregate cash inflow comprised of the amount received from (a) employees to acquire the entity's shares under incentive awards, including stock option exercises and restricted stock arrangements, and (b) the excess tax benefit arising from such transactions.
For an entity that discloses a concentration risk in relation to quantitative amount, which serves as the "benchmark" (or denominator) in the equation, this concept represents the concentration percentage derived from the division.
Maximum borrowing capacity under the credit facility without consideration of any current restrictions on the amount that could be borrowed or the amounts currently outstanding under the facility.
The carrying value as of the balance sheet date of the current portion of long-term obligations drawn from a line of credit, which is a bank's commitment to make loans up to a specific amount. Examples of items that might be included in the application of this element may consist of letters of credit, standby letters of credit, and revolving credit arrangements, under which borrowings can be made up to a maximum amount as of any point in time conditional on satisfaction of specified terms before, as of and after the date of drawdowns on the line. Includes short-term obligations that would normally be classified as current liabilities but for which (a) postbalance sheet date issuance of a long term obligation to refinance the short term obligation on a long term basis, or (b) the enterprise has entered into a financing agreement that clearly permits the enterprise to refinance the short-term obligation on a long term basis and the following conditions are met (1) the agreement does not expire within 1 year and is not cancelable by the lender except for violation of an objectively determinable provision, (2) no violation exists at the BS date, and (3) the lender has entered into the financing agreement is expected to be financially capable of honoring the agreement.
Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss).