Delaware
|
|
1-10185
|
|
26-1331503
|
(State or Other Jurisdiction of Incorporation)
|
|
(Commission File Number)
|
|
(I.R.S. Employer Identification No.)
|
Title of each class
|
|
Name of each exchange on which registered
|
Common
Stock, par value $0.001 per share
|
|
NYSE
American.
|
Large
accelerated filer
|
☐
|
Accelerated
filer
|
☐
|
Non-accelerated
filer
|
☐ (Do not check if a smaller reporting
company)
|
Smaller
reporting company
|
☒
|
|
|
Emerging
growth company
|
☐
|
|
|
|
|
|
4
|
||
|
|
|
|
|
11
|
||
|
|
|
|
|
17
|
||
|
|
|
|
|
17
|
||
|
|
|
|
|
18
|
||
|
|
|
|
|
18
|
||
|
|
|
|
|
|
|
|
|
19
|
||
|
|
|
|
|
21
|
||
|
|
|
|
|
23
|
||
|
|
|
|
|
28
|
||
|
|
|
|
|
28
|
||
|
|
|
|
|
28
|
||
|
|
|
|
|
28
|
||
|
|
|
|
|
29
|
||
|
|
|
|
|
|
|
|
|
30
|
||
|
|
|
|
|
30
|
||
|
|
|
|
|
30
|
||
|
|
|
|
|
30
|
||
|
|
|
|
|
30
|
||
|
|
|
|
|
|
|
|
|
30
|
||
|
|
|
|
|
|
32
|
|
|
|
|
|
EX-21.1
|
Subsidiaries
of the Registrant
|
|
|
|
|
|
|
EX-23.1
|
Consent
of Independent Registered Public Accounting Firm
|
|
|
|
|
|
|
EX-31.1
|
Chief
Financial Officer Certification Pursuant to Section
302
|
|
|
|
|
|
|
EX-31.2
|
Chief
Financial Officer Certification Pursuant to Section
302
|
|
|
|
|
|
|
EX-32.1
|
Chief
Executive Officer Certification Pursuant to Section
906
|
|
|
|
|
|
|
EX-32.2
|
Chief
Financial Officer Certification Pursuant to Section
906
|
|
|
|
|
|
|
EX-101.INS
|
XBRL
INSTANCE DOCUMENT
|
|
|
EX-101.SCH
|
XBRL
TAXONOMY EXTENSION SCHEMA
|
|
|
EX-101.CAL
|
XBRL
TAXONOMY EXTENSION CALCULATION LINKBASE
|
|
|
EX-101.DEF
|
XBRL
TAXONOMY EXTENSION DEFINITION LINKBASE
|
|
|
EX-101.LAB
|
XBRL
TAXONOMY EXTENSION LABEL LINKBASE
|
|
|
EX-101.PRE
|
XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE
|
|
|
|
High
|
Low
|
Year ended December 31, 2020
|
|
|
Quarter Ended March
31, 2020
|
$12.38
|
$8.88
|
Quarter Ended June
30, 2020
|
11.91
|
8.65
|
Quarter Ended
September 30, 2020
|
19.88
|
10.05
|
Quarter Ended
December 31, 2020
|
$23.50
|
$17.51
|
Year ended December 31, 2019
|
|
|
Quarter Ended March
31, 2019
|
$13.85
|
$11.35
|
Quarter Ended June
30, 2019
|
13.27
|
10.25
|
Quarter Ended
September 30, 2019
|
11.39
|
8.90
|
Quarter Ended
December 31, 2019
|
$12.75
|
$10.10
|
|
Shares
Repurchased
|
|||
Period
|
Total Number of
Shares Repurchased
|
Average Price Paid
Per Share
|
Total Number of
Shares Purchased as Part of Publicly Announced
Program
|
Maximum Dollar
Value of Shares that May Yet Be Purchased Under the
Program
|
August 7 -31,
2019
|
22,150
|
$9.34
|
22,150
|
$793
|
September 1-30,
2019
|
2,830
|
$10.00
|
2,830
|
$765
|
October 1-31,
2019
|
39,363
|
$10.44
|
39,363
|
$354
|
November 1-30,
2019
|
11,827
|
$10.43
|
11,827
|
$231
|
December 1-31,
2019
|
—
|
—
|
—
|
$231
|
January 1-31,
2020
|
—
|
—
|
—
|
$231
|
February 1-29,
2020
|
—
|
—
|
—
|
$231
|
March 1-31,
2020
|
21,700
|
$9.33
|
21,700
|
$1,028
|
April 1-30,
2020
|
22,698
|
$9.02
|
22,698
|
$823
|
May 1-31,
2020
|
39,500
|
$9.51
|
39,500
|
$448
|
Total
|
160,068
|
$9.70
|
160,068
|
$448
|
|
12/15
|
12/16
|
12/17
|
12/18
|
12/19
|
12/20
|
|
|
|
|
|
|
|
Issuer Direct Corporation
|
100.00
|
159.14
|
329.98
|
205.85
|
212.02
|
317.58
|
Russell MicroCap
|
100.00
|
120.37
|
136.22
|
118.40
|
144.96
|
175.34
|
Peer Group
|
100.00
|
122.36
|
165.63
|
180.99
|
230.31
|
313.53
|
|
Year Ended December
31,
|
|
|
2020
|
2019
|
Statement of Operations
|
|
|
Revenue
|
$18,526
|
$16,295
|
Cost of
revenues
|
5,415
|
5,080
|
Gross
profit
|
13,111
|
11,215
|
Operating
costs
|
10,417
|
10,741
|
Operating
income
|
2,694
|
474
|
Other income,
net
|
136
|
321
|
Income before
taxes
|
2,830
|
795
|
Income tax
expense
|
724
|
109
|
Net
income
|
$2,106
|
$686
|
|
2020
|
2019
|
Revenue
|
|
|
Communications
|
64.1%
|
56.7%
|
Compliance
|
35.9%
|
43.3%
|
Total
|
100.0%
|
100.0%
|
|
2020
|
2019
|
%
change
|
Revenue
|
|
|
|
Communications
|
$11,870
|
$9,247
|
28.4%
|
Compliance
|
6,656
|
7,048
|
(5.6)%
|
Total
|
$18,526
|
$16,295
|
13.7%
|
Revenue
|
2020
|
2019
|
Communications
|
|
|
Platform and
Technology
|
$10,696
|
$8,265
|
Services
|
1,174
|
982
|
Total
Communications
|
11,870
|
9,247
|
|
|
|
Compliance
|
|
|
Platform and
Technology
|
2,231
|
2,431
|
Services
|
4,425
|
4,617
|
Total
Compliance
|
6,656
|
7,048
|
|
|
|
Total
|
|
|
Platform and
Technology
|
12,927
|
$10,696
|
Services
|
5,599
|
5,599
|
Total
revenue
|
$18,526
|
$16,295
|
Revenue
|
2020
|
2019
|
Communications
|
|
|
Revenue
|
$11,870
|
$9,247
|
Gross
margin
|
$8,718
|
$6,653
|
Gross margin
%
|
73%
|
72%
|
|
|
|
Compliance
|
|
|
Revenue
|
6,656
|
7,048
|
Gross
margin
|
4,393
|
4,562
|
Gross margin
%
|
66%
|
65%
|
|
|
|
Total
|
|
|
Revenue
|
$18,526
|
$16,295
|
Gross
margin
|
$13,111
|
$11,215
|
Gross margin
%
|
71%
|
69%
|
Exhibit Number
|
|
Exhibit Description
|
|
|
|
|
Certificate of Incorporation, as amended (incorporated by reference
to Exhibit 3.1 to the Form S-3 filed on May 10, 2017)
|
|
|
Amended and Restated Bylaws (incorporated by reference to Exhibit
3.1 to the Form 8-K filed on February 12, 2014)
|
|
|
2014 Equity Incentive Plan (incorporated by reference to Annex A to
the Schedule 14A filed on April 2, 2014)
|
|
|
Executive Employment Agreement dated April 30, 2015 with Brian R.
Balbirnie (incorporated by reference to Exhibit 10.1 to the Form
8-K filed on May 5, 2014)
|
|
|
Executive Employment Agreement dated November 19, 2015 with Steven
Knerr (incorporated by reference to Exhibit 10.1 to the Form 8-K
filed on November 19, 2015)
|
|
|
Incentive Stock Option Grant and Agreement dated November 19, 2015
with Steven Knerr (incorporated by reference to Exhibit 10.2 to the
Form 8-K filed on November 19, 2015)
|
|
|
Indemnification Agreement dated November 19, 2015 with Steven Knerr
(incorporated by reference to Exhibit 10.3 to the Form 8-K filed on
November 19, 2015)
|
|
|
First Amendment to 2014 Equity Incentive Plan (incorporated by
reference to Exhibit 10.1 to the Form 8-K filed on June 13,
2016
|
|
Second
Amendment to 2014 Equity Incentive Plan (incorporated by reference
to Exhibit A to the Definitive Proxy Statement filed on April 28,
2020)
|
||
|
First Amendment to Executive Employment Agreement dated May 4, 2017
with Brian R. Balbirnie (incorporated by reference to Exhibit 10.1
to the Form 8-K filed on May 5, 2017)
|
|
|
First Amendment to Executive Employment Agreement dated May 4, 2017
with Steven Knerr (incorporated by reference to Exhibit 10.1 to the
Form 8-K filed on May 5, 2017)
|
|
|
Stock Purchase Agreement dated October 2, 2017 with Kurtis D.
Hughes (incorporated by reference to Exhibit 10.1 to the Form 8-K
filed on October 3, 2017)
|
|
|
Stock Purchase Agreement dated July 3, 2018 with ACCESSWIRE Canada
Ltd. and Fred Gautreau (incorporated by reference to Exhibit 10.1
to the Form 8-K filed on July 5, 2018)
|
|
|
Stock Repurchase Agreement dated November 28, 2018 with EQS Group
AG (incorporated by reference to Exhibit 10.1 to the Form 8-K filed
on December 4, 2018)
|
|
|
Asset Purchase Agreement dated January 3, 2019 with Onstream Media
Corporation (incorporated by reference to Exhibit 10.1 to the Form
8-K filed on January 3, 2019)
|
|
|
Subsidiaries of the Registrant.*
|
|
|
Consent of Independent Registered Public Accounting
Firm.*
|
|
|
Rule 13a-14(a) Certification of Principal Executive
Officer.*
|
|
|
Rule 13a-14(a) Certification of Principal Financial
Officer.*
|
|
|
Section 1350 Certification of Principal Executive
Officer.*
|
|
|
Section 1350 Certification of Principal Financial
Officer.*
|
|
ISSUER DIRECT CORPORATION
|
|
|
|
|
|
|
Date:
March 4, 2021
|
By:
|
/s/
Brian R.
Balbirnie
|
|
|
|
Brian
R. Balbirnie
|
|
|
|
Chief
Executive Officer, Director
|
|
Signature
|
|
Date
|
|
Title
|
|
|
|
|
|
/s/
Brian R. Balbirnie
|
|
March
4, 2021
|
|
Director,
Chief Executive Officer
|
Brian
R. Balbirnie
|
|
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
|
|
|
/s/
Steven Knerr
|
|
March
4, 2021
|
|
Chief
Financial Officer
|
Steven
Knerr
|
|
|
|
(Principal
Accounting Officer)
|
|
|
|
|
|
|
|
|
|
|
/s/
William Everett
|
|
March
4, 2021
|
|
Director,
Chairman of the Board and Member of the
|
William
Everett
|
|
|
|
Audit
Committee and Strategic Advisory Committee
|
|
|
|
|
|
|
|
|
|
|
/s/ J.
Patrick Galleher
|
|
March
4, 2021
|
|
Director,
Chairman of the Compensation Committee
|
J.
Patrick Galleher
|
|
|
|
and
Strategic Advisory Committee
|
|
|
|
|
|
|
|
|
|
|
/s/
Michael Nowlan
|
|
March
4, 2021
|
|
Director,
Chairman of the Audit Committee
|
Michael
Nowlan
|
|
|
|
|
|
|
Page
|
|
|
|
|
F-2
|
|
|
F-4
|
|
|
F-5
|
|
|
F-6
|
|
|
F-7
|
|
|
F-8
|
|
|
F-9
|
|
December
31,
|
|
|
2020
|
2019
|
ASSETS
|
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$19,556
|
$15,766
|
Accounts receivable
(net of allowance for doubtful accounts of $657 and $700,
respectively)
|
2,514
|
2,051
|
Income tax
receivable
|
—
|
48
|
Other current
assets
|
298
|
141
|
Total current
assets
|
22,368
|
18,006
|
Capitalized
software (net of accumulated amortization of $2,761 and $2,153,
respectively)
|
526
|
1,134
|
Fixed assets (net
of accumulated depreciation of $312 and $181,
respectively)
|
795
|
899
|
Right-of-use asset
– leases (See Note 9)
|
1,830
|
2,127
|
Deferred tax
asset
|
—
|
256
|
Other long-term
assets
|
88
|
77
|
Goodwill
|
6,376
|
6,376
|
Intangible assets
(net of accumulated amortization of $5,546 and $4,937,
respectively)
|
2,906
|
3,515
|
Total
assets
|
$34,889
|
$32,390
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$304
|
$266
|
Accrued
expenses
|
1,805
|
1,151
|
Note payable
– short-term (net of discount of $0 and $19, respectively)
(See Note 4)
|
—
|
301
|
Income taxes
payable
|
258
|
310
|
Deferred
revenue
|
2,212
|
1,812
|
Total current
liabilities
|
4,579
|
3,840
|
Deferred income tax
liability
|
197
|
141
|
Lease liabilities
– long-term (See Note 9)
|
1,971
|
2,309
|
Total
liabilities
|
6,747
|
6,290
|
Commitments and
contingencies (see Note 10)
|
|
|
Stockholders'
equity:
|
|
|
Preferred stock,
$0.001 par value, 1,000,000 shares authorized, no shares issued and
outstanding as of December 31, 2020 and 2019,
respectively.
|
—
|
—
|
Common stock $0.001
par value, 20,000,000 shares authorized, 3,770,752 and 3,786,398
shares issued and outstanding as of December 31, 2020 and 2019,
respectively.
|
4
|
4
|
Additional paid-in
capital
|
22,214
|
22,275
|
Other accumulated
comprehensive loss
|
(19)
|
(16)
|
Retained
earnings
|
5,943
|
3,837
|
Total stockholders'
equity
|
28,142
|
26,100
|
Total
liabilities and stockholders’ equity
|
$34,889
|
$32,390
|
|
Years Ended
December 31,
|
|
|
2020
|
2019
|
Revenues
|
$18,526
|
$16,295
|
Cost of
revenues
|
5,415
|
5,080
|
Gross
profit
|
13,111
|
11,215
|
Operating costs and
expenses:
|
|
|
General and
administrative
|
5,029
|
5,086
|
Sales and
marketing
|
3,812
|
3,551
|
Product
development
|
825
|
1,219
|
Depreciation and
amortization
|
751
|
885
|
Total operating
costs and expenses
|
10,417
|
10,741
|
Operating
income
|
2,694
|
474
|
Other
income
|
|
|
Gain on
extinguishment of debt (See Note 2)
|
80
|
—
|
Interest income,
net
|
56
|
321
|
Net income before
income taxes
|
2,830
|
795
|
Income tax
expense
|
724
|
109
|
Net
income
|
$2,106
|
$686
|
Income per share
– basic
|
$0.56
|
$0.18
|
Income per share
– diluted
|
$0.56
|
$0.18
|
Weighted average
number of common shares outstanding – basic
|
3,755
|
3,839
|
Weighted average
number of common shares outstanding – diluted
|
3,784
|
3,861
|
|
Years Ended
December 31,
|
|
|
2020
|
2019
|
Net
income
|
$2,106
|
$686
|
Foreign currency
translation adjustment
|
(3)
|
1
|
Comprehensive
income
|
$2,103
|
$687
|
|
Common
Stock
|
Additional
|
Accumulated
Other
|
|
Total
|
|
|
Shares
|
Amount
|
Paid-in
Capital
|
Comprehensive
Loss
|
Retained
Earnings
|
Stockholders’
Equity
|
Balance
on December 31, 2018
|
3,829,572
|
$4
|
$22,525
|
$(17)
|
$3,151
|
$25,663
|
Stock-based
compensation expense
|
—
|
—
|
523
|
—
|
—
|
523
|
Exercise of stock
awards, net of tax
|
32,996
|
—
|
—
|
—
|
—
|
—
|
Stock repurchase
and retirement (see Note 7)
|
(76,170)
|
—
|
(773)
|
—
|
—
|
(773)
|
Foreign currency
translation
|
—
|
—
|
—
|
1
|
—
|
1
|
Net
income
|
—
|
—
|
—
|
—
|
686
|
686
|
Balance
on December 31, 2019
|
3,786,398
|
$4
|
$22,275
|
$(16)
|
$3,837
|
$26,100
|
Stock-based
compensation expense
|
—
|
—
|
273
|
—
|
—
|
273
|
Exercise of stock
awards, net of tax
|
68,252
|
—
|
451
|
—
|
—
|
451
|
Stock repurchase
and retirement (see Note 7)
|
(83,898)
|
—
|
(785)
|
—
|
—
|
(785)
|
Foreign currency
translation
|
—
|
—
|
—
|
(3)
|
—
|
(3)
|
Net
income
|
—
|
—
|
—
|
—
|
2,106
|
2,106
|
Balance
on December 31, 2020
|
3,770,752
|
$4
|
$22,214
|
$(19)
|
$5,943
|
$28,142
|
|
Years Ended
December 31,
|
|
|
2020
|
2019
|
Cash
flows from operating activities
|
|
|
Net
income
|
$2,106
|
$686
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
Bad debt
expense
|
304
|
753
|
Depreciation and
amortization
|
1,348
|
1,667
|
Deferred income
taxes
|
312
|
(528)
|
Non-cash interest
expense
|
19
|
25
|
Stock-based
compensation expense
|
273
|
523
|
Gain on
extinguishment of debt
|
(80)
|
—
|
Changes in
operating assets and liabilities:
|
|
|
Decrease (increase)
in accounts receivable
|
(761)
|
(1,210)
|
Decrease (increase)
in other assets
|
177
|
362
|
Increase (decrease)
in accounts payable
|
37
|
(117)
|
Increase (decrease)
in deferred revenue
|
391
|
559
|
Increase (decrease)
in accrued expenses and other liabilities
|
260
|
144
|
Net cash provided
by operating activities
|
4,386
|
2,864
|
|
|
|
Cash
flows from investing activities
|
|
|
Purchase of fixed
assets
|
(27)
|
(420)
|
Purchase of
acquired businesses (See Note 4)
|
—
|
(2,788)
|
Capitalized
software
|
—
|
(20)
|
Net cash used in
investing activities
|
(27)
|
(3,228)
|
|
|
|
Cash
flows from financing activities
|
|
|
Payment for stock
repurchase and retirement (see Note 7)
|
(785)
|
(773)
|
Payment on notes
payable
|
(240)
|
(320)
|
Proceeds from
exercise of stock options, net of income taxes
|
451
|
—
|
Net cash used in
financing activities
|
(574)
|
(1,093)
|
|
|
|
Net change in
cash
|
3,785
|
(1,457)
|
Cash-
beginning
|
15,766
|
17,222
|
Currency
translation adjustment
|
5
|
1
|
Cash-
ending
|
$19,556
|
$15,766
|
|
|
|
Supplemental disclosures:
|
|
|
Cash paid for
income taxes
|
$458
|
$340
|
Non-cash
activities:
|
|
|
Right-of-use assets
obtained in exchange for lease liabilities
|
$—
|
$2,856
|
|
Year
Ended
December
31,
2020
|
Year
Ended
December
31,
2019
|
Beginning
balance
|
$700
|
$534
|
Bad debt
expense
|
304
|
753
|
Write-offs
|
(347)
|
(587)
|
Ending
balance
|
$657
|
$700
|
Asset Category
|
Depreciation / Amortization Period
|
Computer
equipment
|
3
years
|
Furniture
& equipment
|
3 to 7
years
|
Leasehold
improvements
|
8 years
or lesser of the lease term
|
in
$000’s
|
December
31,
|
|
|
2020
|
2019
|
Computers
equipment
|
$122
|
$108
|
Furniture &
equipment
|
280
|
267
|
Leasehold
improvements
|
705
|
705
|
Total fixed assets,
gross
|
1,107
|
1,080
|
Less: Accumulated
depreciation
|
(312)
|
(181)
|
Total fixed assets,
net
|
$795
|
$899
|
Customer
relationships
|
$865
|
Technology
|
497
|
Non-compete
agreement
|
69
|
Goodwill
|
1,344
|
|
$2,775
|
|
December 31,
2020
|
||
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net
Carrying
Amount
|
Customer
lists
|
$1,770
|
$(1,770)
|
$—
|
Customer
relationships
|
4,600
|
(2,589)
|
2,011
|
Proprietary
software
|
1,279
|
(948)
|
331
|
Distribution
partner relationships
|
153
|
(38)
|
115
|
Non-compete
agreement
|
69
|
(28)
|
41
|
Trademarks –
definite-lived
|
173
|
(173)
|
—
|
Trademarks –
indefinite-lived
|
408
|
—
|
408
|
Total intangible
assets
|
$8,452
|
$(5,546)
|
$2,906
|
|
December 31,
2019
|
||
|
Gross
Carrying
Amount
|
Accumulated
Amortization
|
Net
Carrying
Amount
|
Customer
lists
|
$1,770
|
$(1,770)
|
$—
|
Customer
relationships
|
4,600
|
(2,100)
|
2,500
|
Proprietary
software
|
1,279
|
(865)
|
414
|
Distribution
partner relationships
|
153
|
(23)
|
130
|
Non-compete
agreement
|
69
|
(14)
|
55
|
Trademarks –
definite-lived
|
173
|
(165)
|
8
|
Trademarks –
indefinite-lived
|
408
|
—
|
408
|
Total intangible
assets
|
$8,452
|
$(4,937)
|
$3,515
|
Years
Ending December 31:
|
|
2021
|
$459
|
2022
|
431
|
2023
|
431
|
2024
|
418
|
2025
|
319
|
Thereafter
|
440
|
Total
|
$2,498
|
|
Shares
Repurchased
|
|||
Period
|
Total Number of
Shares Repurchased
|
Average Price Paid
Per Share
|
Total Number of
Shares Purchased as Part of Publicly Announced
Program
|
Maximum Dollar
Value of Shares that May Yet Be Purchased Under the
Program
|
August 7 -31,
2019
|
22,150
|
$9.34
|
22,150
|
$793
|
September 1-30,
2019
|
2,830
|
$10.00
|
2,830
|
$765
|
October 1-31,
2019
|
39,363
|
$10.44
|
39,363
|
$354
|
November 1-30,
2019
|
11,827
|
$10.43
|
11,827
|
$231
|
December 1-31,
2019
|
—
|
—
|
—
|
$231
|
January 1-31,
2020
|
—
|
—
|
—
|
$231
|
February 1-29,
2020
|
—
|
—
|
—
|
$231
|
March 1-31,
2020
|
21,700
|
$9.33
|
21,700
|
$1,028
|
April 1-30,
2020
|
22,698
|
$9.02
|
22,698
|
$823
|
May 1-31,
2020
|
39,500
|
$9.51
|
39,500
|
$448
|
Total
|
160,068
|
$9.70
|
160,068
|
$448
|
|
Number of
Options
Outstanding
|
Range
of
Exercise
Price
|
Weighted
Average
Exercise
Price
|
Aggregate
Intrinsic
Value
|
Balance on December
31, 2018
|
98,563
|
$6.80 –
17.40
|
$12.56
|
$127,306
|
Options
granted
|
31,500
|
10.75 –
13.21
|
12.90
|
—
|
Options
exercised
|
—
|
—
|
—
|
—
|
Options
forfeited/cancelled
|
(2,500)
|
13.21
|
13.21
|
—
|
Balance on December
31, 2019
|
127,563
|
$6.80 –
17.40
|
$12.63
|
$142,818
|
Options
granted
|
—
|
—
|
—
|
—
|
Options
exercised
|
(36,250)
|
7.76 –
17.40
|
12.47
|
295,921
|
Options
forfeited/cancelled
|
(16,083)
|
9.26 –
17.40
|
15.17
|
22,682
|
Balance on December
31, 2020
|
75,230
|
$6.80 –
17.40
|
$12.16
|
$402,275
|
|
Number of
Options
Outstanding
|
Weighted
Average
Exercise
Price
|
Weighted Average
Grant Date Fair Value
|
Balance on December
31, 2018
|
29,000
|
$12.87
|
$5.47
|
Options
vested
|
—
|
—
|
—
|
Options
forfeited/cancelled
|
—
|
—
|
—
|
Balance on December
31, 2019
|
29,000
|
$12.87
|
$5.47
|
Options
vested
|
(14,500)
|
12.87
|
5.47
|
Options
forfeited/cancelled
|
—
|
—
|
—
|
Balance on December
31, 2020
|
14,500
|
$12.87
|
$5.47
|
|
Options
Outstanding
|
Options
Exercisable
|
||
Exercise Price
Range
|
Number
|
Weighted Average
Remaining Contractual Life (in Years)
|
Weighted Average
Exercise Price
|
Number
|
$0.01 - 7.00
|
10,000
|
4.88
|
$6.80
|
10,000
|
$7.01 - 8.00
|
10,313
|
2.74
|
$7.76
|
10,313
|
$8.01 - 12.00
|
7,167
|
5.87
|
$9.88
|
5,167
|
$12.01 - 15.00
|
31,750
|
7.80
|
$13.16
|
19,250
|
$15.01 - 17.40
|
16,000
|
7.42
|
$17.40
|
16,000
|
Total
|
75,230
|
6.46
|
$12.16
|
60,730
|
|
Year
ended
December
31,
2019
|
Expected dividend
yield
|
1.56%
|
Expected stock
price volatility
|
50%
|
Weighted-average
risk-free interest rate
|
2.45%
|
Weighted-average
expected life of options (in years)
|
5.75
|
|
Number of RSUs
Outstanding
|
Weighted
Average
Fair
Value
|
Aggregate Intrinsic
Value
|
Balance on December
31, 2018
|
36,669
|
$8.76
|
$257,987
|
Units
granted
|
46,000
|
11.57
|
532,220
|
Units
vested/issued
|
(33,000)
|
8.62
|
400,700
|
Units
forfeited
|
(1,667)
|
8.85
|
14,753
|
Balance on December
31, 2019
|
48,002
|
$11.55
|
$554,388
|
Units
granted
|
18,000
|
10.67
|
192,060
|
Units
vested/issued
|
(32,002)
|
11.61
|
353,948
|
Units
forfeited
|
(15,000)
|
11.35
|
156,665
|
Balance on December
31, 2020
|
19,000
|
$10.78
|
$332,690
|
|
Year
ended
December
31,
2020
|
Year
ended
December
31,
2019
|
Lease expense
|
|
|
Operating lease
expense
|
$347
|
$241
|
Variable lease
expense
|
132
|
133
|
Rent
expense
|
$479
|
$374
|
Year
Ended December 31:
|
|
2021
|
$394
|
2022
|
359
|
2023
|
369
|
2024
|
379
|
2025
|
389
|
Thereafter
|
812
|
Total lease
payments
|
$2,702
|
Present value
adjustment
|
(341)
|
Lease
liability
|
2,361
|
|
Year
Ended
December 31,
2020
|
Year
Ended
December 31,
2019
|
||
|
Amount
|
Percentage
|
Amount
|
Percentage
|
Revenue
|
|
|
|
|
Platform and
Technology
|
$12,927
|
69.8%
|
$10,696
|
65.6%
|
Services
|
5,599
|
30.2%
|
5,599
|
34.4%
|
Total
|
$18,526
|
100.0%
|
$16,295
|
100.0%
|
|
2020
|
2019
|
Current:
|
|
|
Federal
|
$307
|
$522
|
State
|
84
|
94
|
Foreign
|
21
|
21
|
Total
Current
|
412
|
637
|
Deferred:
|
|
|
Federal
|
283
|
(434)
|
State
|
50
|
(55)
|
Foreign
|
(21)
|
(39)
|
Total
Deferred
|
312
|
(528)
|
Total expense for
income taxes
|
$724
|
$109
|
|
2020
|
2019
|
||
|
Amount
|
Percentage
|
Amount
|
Percentage
|
Federal statutory
tax rate
|
$594
|
21.0%
|
$165
|
21.0%
|
State tax
rate
|
117
|
4.1%
|
12
|
1.5%
|
Permanent
difference – stock-based compensation
|
29
|
1.1%
|
(13)
|
(1.6)%
|
Permanent
difference – other
|
12
|
0.3%
|
8
|
0.9%
|
Provision to
return
|
4
|
0.2%
|
(37)
|
(4.5)%
|
Foreign tax credit
generated
|
(15)
|
(0.5)%
|
—
|
0.0%
|
Tax on foreign
earnings – tax reform
|
17
|
0.6%
|
24
|
2.9%
|
Foreign rate
differential
|
(2)
|
(0.1)%
|
(11)
|
(1.3)%
|
FDII
Deduction
|
(32)
|
(1.1)%
|
—
|
0.0%
|
Research and
development credit
|
—
|
0.0%
|
(39)
|
(4.7)%
|
Total
|
$724
|
25.6%
|
$109
|
14.2%
|
|
2020
|
2019
|
Change
|
Assets:
|
|
|
|
Deferred
revenue
|
$24
|
$379
|
$(355)
|
Allowance for
doubtful accounts
|
149
|
149
|
—
|
Stock
options
|
108
|
156
|
(48)
|
Transaction
costs
|
46
|
49
|
(3)
|
Other
|
138
|
39
|
99
|
Total deferred tax
asset
|
465
|
772
|
(307)
|
|
|
|
|
Liabilities
|
|
|
|
Prepaid
expenses
|
(15)
|
(23)
|
8
|
Basis difference in
fixed assets
|
(188)
|
(14)
|
(174)
|
Capitalized
software
|
—
|
(94)
|
94
|
Purchase of
intangibles
|
(459)
|
(522)
|
63
|
Other
|
—
|
(4)
|
4
|
Total deferred tax
liability
|
(662)
|
(657)
|
(5)
|
|
|
|
|
Total net deferred
tax asset / (liability)
|
$(197)
|
$115
|
$(312)
|
Name
of Subsidiary
|
|
State
of Organization
|
|
|
|
Direct Transfer,
LLC.
|
|
Delaware
|
PrecisionIR Group
Inc., and its subsidiaries (listed below)
|
|
Delaware
|
PrecisionIR Inc
|
|
North
Carolina
|
Issuer Direct Ltd
|
|
United Kingdom
|
Interwest Transfer
Company, Inc.
|
|
Utah
|
QX Interactive,
LLC.
|
|
North Carolina
|
Accesswire Canada
Ltd.
|
|
Canada
|
Filing Services Canada
Inc.
|
|
Canada
|
|
/s/ Brian R.
Balbirnie
|
|
Brian R.
Balbirnie
|
|
Chief Executive
Officer
|
|
/s/ Steven
Knerr
|
|
Steven
Knerr
|
|
Chief Financial
Officer
|
|
/s/ Brian R.
Balbirnie
|
|
Brian R.
Balbirnie
|
|
Chief Executive
Officer
|
|
/s/ Steven
Knerr
|
|
Steven
Knerr
|
|
Chief Financial
Officer
|
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M]DD"W
Document and Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2020 |
Mar. 04, 2021 |
Jun. 30, 2020 |
|
Cover [Abstract] | |||
Entity Registrant Name | ISSUER DIRECT CORP | ||
Entity Central Index Key | 0000843006 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2020 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Is Entity a Well-known Seasoned Issuer? | No | ||
Is Entity a Voluntary Filer? | No | ||
Is Entity's Reporting Status Current? | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Emerging Growth Company | false | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Interactive Data Current | Yes | ||
Entity Incorporation State Country Code | DE | ||
Entity File Number | 1-10185 | ||
Entity Public Float | $ 38,273,133 | ||
Entity Common Stock, Shares Outstanding | 3,771,002 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2020 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Assets: | ||
Allowance for accounts receivables | $ 657 | $ 700 |
Accumulated amortization - capitalized software | 2,761 | 2,153 |
Accumulated depreciation - fixed assets | 312 | 181 |
Accumulated amortization - intangible assets | 5,546 | 4,937 |
Short-term notes payable discount | $ 0 | $ 19 |
Stockholders' equity: | ||
Preferred stock shares, par value | $ 0.001 | $ 0.001 |
Preferred stock shares, authorized | 1,000,000 | 1,000,000 |
Preferred stock shares, issued | 0 | 0 |
Preferred stock shares, outstanding | 0 | 0 |
Common stock shares, par value | $ 0.001 | $ 0.001 |
Common stock shares, authorized | 20,000,000 | 20,000,000 |
Common stock shares, issued | 3,770,752 | 3,786,398 |
Common stock shares, outstanding | 3,770,752 | 3,786,398 |
Consolidated Statements of Income - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Income Statement [Abstract] | ||
Revenues | $ 18,526 | $ 16,295 |
Cost of services | 5,415 | 5,080 |
Gross profit | 13,111 | 11,215 |
Operating costs and expenses: | ||
General and administrative | 5,029 | 5,086 |
Sales and marketing | 3,812 | 3,551 |
Product development | 825 | 1,219 |
Depreciation and amortization | 751 | 885 |
Total operating costs and expenses | 10,417 | 10,741 |
Operating income | 2,694 | 474 |
Other income: | ||
Gain on extinguishment of debt (See Note 2) | 80 | 0 |
Interest income, net | 56 | 321 |
Net income before income taxes | 2,830 | 795 |
Income tax expense | 724 | 109 |
Net income | $ 2,106 | $ 686 |
Income per share - basic | $ 0.56 | $ 0.18 |
Income per share - diluted | $ 0.56 | $ 0.18 |
Weighted average number of common shares outstanding - basic (in thousands) | 3,755 | 3,839 |
Weighted average number of common shares outstanding - fully diluted (in thousands) | 3,784 | 3,861 |
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Statement of Other Comprehensive Income [Abstract] | ||
Net income | $ 2,106 | $ 686 |
Foreign currency translation adjustment | (3) | 1 |
Comprehensive income | $ 2,103 | $ 687 |
Note 1. Description, Background and Basis of Operations |
12 Months Ended |
---|---|
Dec. 31, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description, Background and Basis of Operations | Nature of Operations
Issuer Direct Corporation (the “Company” or “Issuer Direct”) was incorporated in the State of Delaware in October 1988 under the name Docucon Inc. Subsequent to the December 13, 2007 merger with My EDGAR, Inc., the Company changed its name to Issuer Direct Corporation. Today, Issuer Direct is an industry-leading global communications and compliance company focusing on the needs of corporate issuers. Issuer Direct's principal platform, Platform id.™, empowers users by thoughtfully integrating the most relevant tools, technologies and products, thus eliminating the complexity associated with producing and distributing their business communications and financial information. The Company operates under several brands in the market, including Direct Transfer, PrecisionIR (PIR), Investor Network, Interwest and ACCESSWIRE. The Company leverages its securities compliance and regulatory expertise to provide a comprehensive set of services that enhance a customer’s ability to communicate effectively with its shareholder base while meeting all reporting regulations required.
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Note 2. Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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.
Cash Equivalents
For purposes of the Company’s financial statements, the Company considers all highly liquid investments purchased with an original maturity date of three months or less to be cash equivalents.
Accounts Receivable and Allowance for Doubtful Accounts
The Company monitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends, and other information. Credit is granted on an unsecured basis. The allowance for doubtful accounts is estimated based on an assessment of the Company’s ability to collect on customer accounts receivable. There is judgment involved with estimating the allowance for doubtful accounts and if the financial condition of the Company’s customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against revenues. Given the current environment of the COVID-19 pandemic additional attention has been paid to the financial viability of our customers. The Company generally writes-off accounts receivable against the allowance when it determines a balance is uncollectible and no longer actively pursues its collection.
The following is a summary of our allowance for doubtful accounts during the years ended December 31, 2020 and 2019 (in 000’s):
Concentration of Credit Risk
Financial instruments and related items which potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and accounts receivables. The Company places its cash and temporary cash investments with credit quality institutions. Such cash balances are currently in excess of the FDIC insurance limit of $250,000. To reduce its risk associated with the failure of such financial institutions, each quarter the Company evaluates the rating of the financial institution in which it holds deposits. As of December 31, 2020, the total amount exceeding such limit was $18,397,000. The Company also had cash-on-hand of $45,000 in Europe and $441,000 in Canada as of December 31, 2020.
The Company believes it did not have any financial instruments that could have potentially subjected us to significant concentrations of credit risk for any relevant period.
Revenue Recognition
Substantially all the Company’s revenue comes from contracts with customers for subscriptions to its cloud-based products or contracts for communications and compliance products and services. Customers consist of corporate issuers and professional firms, such as investor relations and public relations firms. In the case of our news distribution and webcasting offerings, our customers also include private companies. The Company accounts for a contract with a customer when there is an enforceable contract between the Company and the customer, the rights of the parties are identified, the contract has economic substance, and collectability of the contract consideration is probable. The Company's revenues are measured based on consideration specified in the contract with each customer.
The Company's contracts include either a subscription to our entire platform or certain modules within our platform, or an agreement to perform services, or any combination thereof, and often contain multiple subscriptions and services. For these bundled contracts, the Company accounts for individual subscriptions and services as separate performance obligations if they are distinct, which is when a product or service is separately identifiable from other items in the bundled package, and a customer can benefit from it on its own or with other resources that are readily available to the customer. The Company separates revenue from its contracts into two revenue streams: i) Platform and Technology and ii) Services. Performance obligations of Platform and Technology contracts include providing subscriptions to certain modules or the entire Platform id. system, distributing press releases on a per release basis or conducting webcasts or virtual annual meetings on a per event basis. Performance obligations of Services contracts include obligations to deliver compliance services and annual report printing and distribution on either a stand ready obligation or on a per project or event basis. Set up fees for compliance services are considered a separate performance obligation and are satisfied upfront. Set up fees for our transfer agent module and investor relations content management module are immaterial. The Company’s subscription and service contracts are generally for one year, with automatic renewal clauses included in the contract until the contract is cancelled. The contracts do not contain any rights of returns, guarantees or warranties. Since contracts are generally for one year, all the revenue is expected to be recognized within one year from the contract start date. As such, the Company has elected the optional exemption that allows the Company not to disclose the transaction price allocated to performance obligations that are unsatisfied or partially satisfied at the end of each reporting period.
The Company recognizes revenue for subscriptions evenly over the contract period, upon distribution for per release contracts and upon event completion for webcasting and virtual annual meeting events. For service contracts that include stand ready obligations, revenue is recognized evenly over the contract period. For all other services delivered on a per project or event basis, the revenue is recognized at the completion of the event. The Company believes recognizing revenue for subscriptions and stand ready obligations using a time-based measure of progress, best reflects the Company’s performance in satisfying the obligations.
For bundled contracts, revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are based on observable prices at which the Company separately sells the subscription or services. If a standalone selling price is not directly observable, the Company uses the residual method to allocate any remaining price to that subscription or service. The Company reviews standalone selling prices, at least annually, and updates these estimates if necessary.
The Company invoices its customers based on the billing schedules designated in its contracts, typically upfront on either a monthly, quarterly or annual basis or per transaction at the completion of the performance obligation. Deferred revenue for the periods presented was primarily related to subscription and service contracts, which are billed upfront, quarterly or annually, however the revenue has not yet been recognized. The associated deferred revenue is generally recognized ratably over the billing period. Additionally, deferred revenue is related to pre-paid packages of press releases for which the releases have not yet been disseminated. Deferred revenue as of December 31, 2020 and December 31, 2019 was $2,212,000 and $1,812,000, respectively, and is expected to be recognized within one year. Revenue recognized for the year ended December 31, 2020 and 2019, that was included in the deferred revenue balance at the beginning of each reporting period, was approximately $1,812,000 and $1,249,000, respectively. Accounts receivable, net of allowance for doubtful accounts, related to contracts with customers was $2,514,000 and $2,051,000 as of December 31, 2020 and December 31, 2019, respectively. Since substantially all the contracts have terms of one year or less, the Company has elected to use the practical expedient regarding the existence of a significant financing.
Costs to obtain contracts with customers consist primarily of sales commissions. As of December 31, 2020 and 2019, the Company has capitalized $44,000 and $21,000, respectively, of costs to obtain contracts that are expected to be amortized over more than one year. For contract costs expected to be amortized in less than one year, the Company has elected to use the practical expedient allowing the recognition of incremental costs of obtaining a contract as an expense when incurred. The Company has considered historical renewal rates, expectations of future renewals and economic factors in making these determinations.
Fixed Assets
Fixed assets are recorded at cost and depreciated over the estimated useful lives of the assets using principally the straight-line method. When items are retired or otherwise disposed of, income is charged or credited for the difference between net book value and proceeds realized thereon. Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized. The range of estimated useful lives used to calculate depreciation for principal items of property and equipment are as follow:
Earnings per Share
Earnings per share accounting guidance 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 totaling 40,000 and 93,000 were excluded in the computation of diluted earnings per common share during the years ended December 31, 2020 and 2019, respectively, because their impact was anti-dilutive.
Use of Estimates
The preparation of financial statements in conformity with United States Generally Accepted Accounting Principles (“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.
Gain on Extinguishment of Debt
On October 2, 2017, the Company entered into a Stock Purchase Agreement (the “Interwest Purchase Agreement’) to purchase all of the outstanding equity securities of Interwest Transfer Company, Inc., a Utah corporation (“Interwest”) a transfer agent business located in Salt Lake City, Utah. Under the terms of the Interwest Purchase Agreement the Company paid $1,935,000 at closing, $288,000 on the first anniversary of the closing, $320,000 on the second anniversary of the closing and called for another $320,000 to be paid upon the third anniversary date of the closing. The Company also issued 25,235 shares of restricted common stock of the Company at closing. Upon final negotiation and settlement of the third anniversary payment, the Company paid $240,000 to the seller. The difference of $80,000 that was not paid is recorded as Gain on Extinguishment of Debt on the Consolidated Statements of Income for the year ended December 31, 2020.
Income Taxes
We comply with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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.
Capitalized Software
Costs incurred to develop our cloud-based platform products 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, which is typically four years. Costs related to design or maintenance of the software are expensed as incurred. The Company did not capitalize any costs for software development during the year ended December 31, 2020 and capitalized $20,000 during the year ended December 31, 2019. The Company recorded amortization expense of $608,000 and $843,000 during the years ended December 31, 2020 and 2019, respectively, $599,000 and $783,000 of which is included in Cost of revenues on the Consolidated Statements of Income. The remaining amount of $9,000 and $60,000 for the years ended December 31, 2020 and 2019, respectively, is included in Depreciation and amortization.
The Company reviews capitalized software for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. One part of the Company’s suite of products was directed toward private companies seeking to raise capital under Regulation A+ and Regulation D. Market acceptance under these regulations is behind what was initially anticipated, resulting in lower-than-expected revenue from this product. As a result, the Company wrote-off the remaining carrying value of this product in the amount of $44,000 as of December 31, 2019. This amount is included in Depreciation and amortization expense on the Consolidated Statements of Income for the year ended December 31, 2019.
Impairment of Long-lived Assets
In accordance with the authoritative guidance for accounting for long-lived assets, assets such as property and equipment, trademarks, and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of asset groups to be held and used is measured by a comparison of the carrying amount of an asset group to estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of an asset group exceeds fair value of the asset group.
Lease Accounting
We determine if an arrangement is a lease at inception. Our operating lease agreements are primarily for office space and are included within lease right-of-use (“ROU”) assets and lease liabilities on the consolidated balance sheets.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Our variable lease payments consist of non-lease services related to the lease and payments under operating leases classified as short-term. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. ROU assets include any lease payments made and exclude lease incentives. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term.
Fair Value Measurements
ASC Topic 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Assets and liabilities recorded at fair value in the financial statements are categorized based upon the hierarchy of levels of judgment associated with the inputs used to measure their fair value. Hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:
As of December 31, 2020 and 2019, we believe that the fair value of our financial instruments other than cash and cash equivalents, such as, accounts receivable, our line of credit, notes payable, and accounts payable approximate their carrying amounts.
Stock-based 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 or director is required to provide service in exchange for the award.
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 income until the entity is sold or substantially liquidated.
Comprehensive Income
Comprehensive income consists of net income and other comprehensive income related to changes in the cumulative foreign currency translation adjustment.
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, distribution partner relationships, software, technology, non-compete agreements 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 (7-10 years), customer lists (3 years), distribution partner relationships (10 years), non-compete agreements (5 years) and software and technology (3-6 years) are amortized over their estimated useful lives (See Note 4).
Advertising
The Company expenses advertising as incurred. Advertising expense totaled $245,000 and $163,000, during the years ended December 31, 2020 and 2019, respectively.
Recently adopted accounting pronouncements
On January 1, 2020, the Company adopted Accounting Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. These amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The Company adopted this amendment as of January 1, 2020 and it has not, nor is it expected to have a significant impact to the financial statements.
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Note 3. Fixed Assets |
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Fixed Assets |
Included in leasehold improvements is $488,000 of tenant improvements allowance associated with a lease signed in March 2019 related to the Company’s new corporate headquarters. Depreciation expense on fixed assets for the years ended December 31, 2020 and 2019 totaled $131,000 and $106,000, respectively. No disposals were made during the year ended December 31, 2020. During the year ended December 31, 2019, the Company disposed of fixed assets totaling $377,000.
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Note 4. Recent Acquisitions |
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Business Combinations [Abstract] | ||||||||||||||||||||||||||
Recent Acquisitions | Acquisition of the VisualWebcaster Platform (“VWP”)
On January 3, 2019 (the “Closing Date”), the Company entered into an Asset Purchase Agreement (the “VWP Agreement”) with Onstream Media Corporation, a Florida corporation (the “Seller”), whereby the Company purchased certain assets related primarily to customer accounts, intellectual property, lease deposits and assumed certain existing contractual obligations related primarily to data processing and storage, bandwidth and facility leases relating to the Seller’s VisualWebcaster Platform. The accounts receivable and the accounts payable related to VWP and existing as of the Closing Date were not included as part of the VWP Agreement.
The acquisition was accounted for under the acquisition method of accounting for business combinations in accordance with FASB ASC 805, Business Combinations, which requires, among other things, that the assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. Acquisition-related costs, which totaled approximately $155,000, are not included as a component of the acquisition accounting, but are recognized as expenses in the periods in which the costs are incurred. The Company employed a third-party valuation firm to assist in determining the purchase price allocation of assets and liabilities acquired from Seller. The valuation resulted in the tangible and intangible assets and liabilities disclosed below. The income approach was used to determine the value of the customer relationships and non-compete agreement. The income approach determines the fair value for the asset based on the present value of cash flows projected to be generated by the asset. Projected cash flows are discounted at a rate of return that reflects the relative risk of achieving the cash flow and the time value of money. Projected cash flows considered multiple factors, including current revenue from existing customers; analysis of expected revenue and attrition trends; reasonable contract renewal assumptions from the perspective of a marketplace participant; probability of executives competing, expected profit margins giving consideration to marketplace synergies; and required returns to contributory assets. The relief from royalty method was used to value the technology. The relief from royalty method determines the fair value by calculating what a typical license fee would be in order to obtain the same or similar license of the technology from market participants. Projected cash flows consider revenue assumptions allocated to the technology.
The transaction consisted of a single cash payment to the Seller in the amount of $2,788,000. In connection with the acquisition, the Company assumed two short-term leases associated with an office and co-location for certain computer equipment in New York City, New York as well as entered into a three-year office lease in Florida. In addition to the intangible assets listed below, the purchase price included lease deposits of $13,000 and a right of use asset and corresponding lease liability for the office lease in Florida in the amount of $125,000.
The identified intangible assets as a result of the acquisition are as follows (in 000’s):
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Note 5. Goodwill and Other Intangible Assets |
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Goodwill and Other Intangible Assets | The components of intangible assets are as follows (in 000’s):
The Company performed its annual assessment for impairment of goodwill and intangible assets and determined there was no impairment as of and for the years ended December 31, 2020 and 2019.
The amortization of intangible assets is a charge to operating expenses and totaled $609,000 and $718,000 in the years ended 2020 and 2019, respectively.
The future amortization of the identifiable intangible assets is as follows (in 000’s):
Our goodwill balance of $6,376,000 on December 31, 2020, was related to our acquisition of Basset Press in July 2007, PIR in 2013, ACCESSWIRE in 2014, Interwest in 2017, FSCwire in 2018 and VWP in 2019. We conducted our annual impairment analyses as of October 1, of 2020 and 2019 and determined that no goodwill was impaired.
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Note 6. Line of Credit |
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Line of Credit Facility [Abstract] | |
Line of Credit | Effective October 3, 2019, the Company renewed its unsecured Line of Credit, which increased the term to two years, with all other provisions remaining the same. The amount of funds available for borrowing are $3,000,000 and the interest rate is LIBOR plus 1.75%. As of December 31, 2020, the interest rate was 1.89% and the Company did not owe any amounts on the Line of Credit.
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Note 7. Equity |
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Equity | Dividends
We did not pay any dividends during the years ended December 31, 2020 and 2019.
Preferred stock and common stock
There were no issuances of preferred stock or common stock during the years ended December 31, 2020 and 2019 other than stock awarded to employees and the Board of Directors.
Stock repurchase and retirement
On August 7, 2019, the Company publicly announced a share repurchase program under which the Company is authorized to repurchase up to $1,000,000 of its common shares. On March 16, 2020, the Company publicly announced that the Company increased the share repurchase program to repurchase up to $2,000,000 of its common shares. As of December 31, 2020, the Company repurchased a total of 160,068 shares at an aggregate cost of $1,552,000 (not including commissions of $6,000) as shown in the table below ($ in 000’s, except share or per share amounts):
There were no shares repurchased during the period of June 1, 2020 through December 31, 2020.
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Note 8. Stock Options and Restricted Stock Units |
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Share-based Payment Arrangement [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Options and Restricted Stock Units | 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 and June 17, 2020, the shareholders of the Company approved an additional 200,000 and 200,000 awards, respectively, to be issued under the 2014 Plan, bringing the total number of shares to be awarded to 600,000. 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 December 31, 2020, there are 236,583 shares which remain to be granted under the 2014 Plan.
The following is a summary of stock options issued during the year ended December 31, 2020 and 2019:
The aggregate intrinsic value in the table above represents the total pretax intrinsic value (i.e. the aggregate difference between the closing price of our common stock on December 31, 2020 and 2019 of $17.51 and $11.69, respectively, and the exercise price for in-the-money options) that would have been received by the holders if all instruments had been exercised on December 31, 2020 and 2019. As of December 31, 2020, there was $15,000 of unrecognized compensation cost related to our unvested stock options, which will be recognized through 2021.
The following is a summary of unvested stock options during the year ended December 31, 2020 and 2019:
The following table summarizes information about stock options outstanding and exercisable on December 31, 2020:
Of the 75,230 stock options outstanding, 29,000 are non-qualified stock options. All options have been registered with the SEC.
There were no common stock options issued during the year ended December 31, 2020. The fair value of common stock options issued during the year ended December 31, 2019 were estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used:
The following is a summary of restricted stock units issued during the year ended December 31, 2020 and 2019:
During the year ended December 31, 2020, the Company granted 18,000 restricted stock units with an intrinsic value of $10.67, to certain members of the Board of Directors of the Company. The vesting period for the restricted stock units is the earlier of the 2021 annual meeting of shareholders or one year depending on whether a director stands for re-election at the 2021 annual meeting. During the year ended December 31, 2020, 32,000 restricted stock units with an intrinsic value of $11.61 vested. As of December 31, 2020, there was $91,000 of unrecognized compensation cost related to our unvested restricted stock units, which will be recognized through 2021. All restricted stock units have been registered with the SEC.
During the year ended December 31, 2020 and 2019, we recorded compensation expense of $273,000 and $523,000, respectively, related to stock options and restricted stock units.
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Note 9. Leases |
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Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases | Generally, our leasing activity consists of office leases. In March 2019, we signed a new lease to move our corporate headquarters to Raleigh, North Carolina. As we continue our transition from a services-based company to a cloud-based platform company, the new lease affords us the ability to separate our warehouse from our corporate office. The new lease, which had a lease commencement date of October 2, 2019, is for 9,766 square feet and expires December 31, 2027. Minimum lease payments are $2,997,000, not including a tenant improvement allowance of $488,000, which is included in fixed assets as of December 31, 2020. We recognized a ROU asset and corresponding lease liability of $2,596,000, which represents the present value of minimum lease payments discounted at 3.77%, the Company’s incremental borrowing rate at lease inception.
Additionally, we have an office in Salt Lake City, Utah, which is on a short-term lease that is less than twelve months. As a result, we have elected the short-term lease recognition exemption for our Utah office lease, which means, for those leases we do not expect to extend beyond twelve months, we will not recognize ROU assets or lease liabilities.
In connection with the Company’s acquisition of VWP (See Note 4), the Company assumed two short-term leases in New York City, NY and entered into a three-year office lease in Florida. We have elected the short-term lease exemption for the two New York leases because we do not expect them to extend beyond twelve months. For the Florida lease, which was signed on January 4, 2019, we recognized a ROU asset and corresponding lease liability of $125,000, which represents the present value of minimum lease payments discounted at 4.25%, the Company’s incremental borrowing rate at lease inception. After year-end, the Company vacated one of the leases in New York.
Lease liabilities totaled $2,361,000 as of December 31, 2020. The current portion of this liability of $390,000 is included in Accrued expenses on the Consolidated balance sheets and the long-term portion of $1,971,000 is included in Lease liabilities on the Consolidated Balance Sheets. Rent expense consists of both operating lease expense from amortization of our ROU assets as well as variable lease expense which consists of non-lease components of office leases (i.e. common area maintenance) or rent expense associated with short- term leases. The components of lease expense were as follows (in 000’s):
The weighted-average remaining non-cancelable lease term for our operating leases was 6.9 years as of December 31, 2020. As of December 31, 2020, the weighted-average discount rate used to determine the lease liability was 3.8%. The future minimum lease payments to be made under non-cancelable operating leases on December 31, 2020, are as follows (in 000’s):
We have performed an evaluation of our other contracts with customers and suppliers in accordance with Topic 842 and have determined that, except for the leases described above, none of our contracts contain a lease.
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Note 10. Commitments and Contingencies |
12 Months Ended |
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Dec. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | From time to time, the Company may be involved in litigation that arises through the normal course of business. The Company is 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.
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Note 11. Revenues |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues | 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 and private companies. The following tables present revenue disaggregated by revenue stream in (000’s):
For the years ended December 31, 2020 and 2019, we generated revenues from the following revenue streams as a percentage of total revenue (in 000’s):
We did not have any customers during the years ended December 31, 2020 or 2019 that accounted for more than 10% of our revenue.
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Note 12. Income Taxes |
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Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | The provision for income taxes consisted of the following components for the years ended December 31 (in 000’s):
Reconciliation between the statutory rate and the effective tax rate is as follows on December 31 (in 000's, except percentages):
Components of net deferred income tax assets are as follows on December 31 (in 000's):
As of each reporting date, the Company’s management considers new evidence, both positive and negative, that could impact management’s view with regard to future realization of deferred tax assets. In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. It has been determined that is more likely than not that the Company's deferred tax assets are able to be realized based on future positive earnings and reversal of existing temporary differences.
The Company had no unrecognized tax benefits as of December 31, 2020 or December 31, 2019. Interest and, if applicable, penalties are recognized related to unrecognized tax benefits in income tax expense. There are no accruals for interest and penalties on December 31, 2020.
Undistributed earnings of the Company are insignificant as of December 31, 2020. With the enactment of the 2017 Act, the Company does not consider any of its foreign earnings as indefinitely reinvested.
The Company is subject to income taxation by both federal and state taxing authorities. Income tax returns for the years ended December 31, 2019, 2018 and 2017 are open to audit by federal and state taxing authorities.
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Note 13. Employee Benefit Plan |
12 Months Ended |
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Dec. 31, 2020 | |
Employee Benefit and Share-based Payment Arrangement, Noncash Expense [Abstract] | |
Employee Benefit Plan | The Company sponsors a defined contribution 401(k) Profit Sharing Plan and allows all employees in the United States to participate. Matching and profit-sharing contributions to the plan are at the discretion of management, but are limited to the amount deductible for federal income tax purposes. The Company made contributions to the plan of $24,000 and $27,000 during the years ended December 31, 2020 and 2019, respectively.
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Note 2. Summary of Significant Accounting Policies (Policies) |
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Cash Equivalents | For purposes of the Company’s financial statements, the Company considers all highly liquid investments purchased with an original maturity date of three months or less to be cash equivalents.
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Accounts Receivable and allowance for Doubtful Accounts | The Company monitors outstanding receivables based on factors surrounding the credit risk of specific customers, historical trends, and other information. Credit is granted on an unsecured basis. The allowance for doubtful accounts is estimated based on an assessment of the Company’s ability to collect on customer accounts receivable. There is judgment involved with estimating the allowance for doubtful accounts and if the financial condition of the Company’s customers were to deteriorate, resulting in their inability to make the required payments, the Company may be required to record additional allowances or charges against revenues. Given the current environment of the COVID-19 pandemic additional attention has been paid to the financial viability of our customers. The Company generally writes-off accounts receivable against the allowance when it determines a balance is uncollectible and no longer actively pursues its collection.
The following is a summary of our allowance for doubtful accounts during the years ended December 31, 2020 and 2019 (in 000’s):
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Concentration of Credit Risk | Financial instruments and related items which potentially subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and accounts receivables. The Company places its cash and temporary cash investments with credit quality institutions. Such cash balances are currently in excess of the FDIC insurance limit of $250,000. To reduce its risk associated with the failure of such financial institutions, each quarter the Company evaluates the rating of the financial institution in which it holds deposits. As of December 31, 2020, the total amount exceeding such limit was $18,397,000. The Company also had cash-on-hand of $45,000 in Europe and $441,000 in Canada as of December 31, 2020.
The Company believes it did not have any financial instruments that could have potentially subjected us to significant concentrations of credit risk for any relevant period.
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Revenue Recognition | Substantially all the Company’s revenue comes from contracts with customers for subscriptions to its cloud-based products or contracts for communications and compliance products and services. Customers consist of corporate issuers and professional firms, such as investor relations and public relations firms. In the case of our news distribution and webcasting offerings, our customers also include private companies. The Company accounts for a contract with a customer when there is an enforceable contract between the Company and the customer, the rights of the parties are identified, the contract has economic substance, and collectability of the contract consideration is probable. The Company's revenues are measured based on consideration specified in the contract with each customer.
The Company's contracts include either a subscription to our entire platform or certain modules within our platform, or an agreement to perform services, or any combination thereof, and often contain multiple subscriptions and services. For these bundled contracts, the Company accounts for individual subscriptions and services as separate performance obligations if they are distinct, which is when a product or service is separately identifiable from other items in the bundled package, and a customer can benefit from it on its own or with other resources that are readily available to the customer. The Company separates revenue from its contracts into two revenue streams: i) Platform and Technology and ii) Services. Performance obligations of Platform and Technology contracts include providing subscriptions to certain modules or the entire Platform id. system, distributing press releases on a per release basis or conducting webcasts or virtual annual meetings on a per event basis. Performance obligations of Services contracts include obligations to deliver compliance services and annual report printing and distribution on either a stand ready obligation or on a per project or event basis. Set up fees for compliance services are considered a separate performance obligation and are satisfied upfront. Set up fees for our transfer agent module and investor relations content management module are immaterial. The Company’s subscription and service contracts are generally for one year, with automatic renewal clauses included in the contract until the contract is cancelled. The contracts do not contain any rights of returns, guarantees or warranties. Since contracts are generally for one year, all the revenue is expected to be recognized within one year from the contract start date. As such, the Company has elected the optional exemption that allows the Company not to disclose the transaction price allocated to performance obligations that are unsatisfied or partially satisfied at the end of each reporting period.
The Company recognizes revenue for subscriptions evenly over the contract period, upon distribution for per release contracts and upon event completion for webcasting and virtual annual meeting events. For service contracts that include stand ready obligations, revenue is recognized evenly over the contract period. For all other services delivered on a per project or event basis, the revenue is recognized at the completion of the event. The Company believes recognizing revenue for subscriptions and stand ready obligations using a time-based measure of progress, best reflects the Company’s performance in satisfying the obligations.
For bundled contracts, revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are based on observable prices at which the Company separately sells the subscription or services. If a standalone selling price is not directly observable, the Company uses the residual method to allocate any remaining price to that subscription or service. The Company reviews standalone selling prices, at least annually, and updates these estimates if necessary.
The Company invoices its customers based on the billing schedules designated in its contracts, typically upfront on either a monthly, quarterly or annual basis or per transaction at the completion of the performance obligation. Deferred revenue for the periods presented was primarily related to subscription and service contracts, which are billed upfront, quarterly or annually, however the revenue has not yet been recognized. The associated deferred revenue is generally recognized ratably over the billing period. Additionally, deferred revenue is related to pre-paid packages of press releases for which the releases have not yet been disseminated. Deferred revenue as of December 31, 2020 and December 31, 2019 was $2,212,000 and $1,812,000, respectively, and is expected to be recognized within one year. Revenue recognized for the year ended December 31, 2020 and 2019, that was included in the deferred revenue balance at the beginning of each reporting period, was approximately $1,812,000 and $1,249,000, respectively. Accounts receivable, net of allowance for doubtful accounts, related to contracts with customers was $2,514,000 and $2,051,000 as of December 31, 2020 and December 31, 2019, respectively. Since substantially all the contracts have terms of one year or less, the Company has elected to use the practical expedient regarding the existence of a significant financing.
Costs to obtain contracts with customers consist primarily of sales commissions. As of December 31, 2020 and 2019, the Company has capitalized $44,000 and $21,000, respectively, of costs to obtain contracts that are expected to be amortized over more than one year. For contract costs expected to be amortized in less than one year, the Company has elected to use the practical expedient allowing the recognition of incremental costs of obtaining a contract as an expense when incurred. The Company has considered historical renewal rates, expectations of future renewals and economic factors in making these determinations.
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Fixed Assets | Fixed assets are recorded at cost and depreciated over the estimated useful lives of the assets using principally the straight-line method. When items are retired or otherwise disposed of, income is charged or credited for the difference between net book value and proceeds realized thereon. Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized. The range of estimated useful lives used to calculate depreciation for principal items of property and equipment are as follow:
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Earnings per Share | Earnings per share accounting guidance 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 totaling 40,000 and 93,000 were excluded in the computation of diluted earnings per common share during the years ended December 31, 2020 and 2019, respectively, because their impact was anti-dilutive.
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Use of Estimates | The preparation of financial statements in conformity with United States Generally Accepted Accounting Principles (“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.
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Gain on Extinguishment of Debt | On October 2, 2017, the Company entered into a Stock Purchase Agreement (the “Interwest Purchase Agreement’) to purchase all of the outstanding equity securities of Interwest Transfer Company, Inc., a Utah corporation (“Interwest”) a transfer agent business located in Salt Lake City, Utah. Under the terms of the Interwest Purchase Agreement the Company paid $1,935,000 at closing, $288,000 on the first anniversary of the closing, $320,000 on the second anniversary of the closing and called for another $320,000 to be paid upon the third anniversary date of the closing. The Company also issued 25,235 shares of restricted common stock of the Company at closing. Upon final negotiation and settlement of the third anniversary payment, the Company paid $240,000 to the seller. The difference of $80,000 that was not paid is recorded as Gain on Extinguishment of Debt on the Consolidated Statements of Income for the year ended December 31, 2020.
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Income Taxes | We comply with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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.
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Capitalized Software | Costs incurred to develop our cloud-based platform products 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, which is typically four years. Costs related to design or maintenance of the software are expensed as incurred. The Company did not capitalize any costs for software development during the year ended December 31, 2020 and capitalized $20,000 during the year ended December 31, 2019. The Company recorded amortization expense of $608,000 and $843,000 during the years ended December 31, 2020 and 2019, respectively, $599,000 and $783,000 of which is included in Cost of revenues on the Consolidated Statements of Income. The remaining amount of $9,000 and $60,000 for the years ended December 31, 2020 and 2019, respectively, is included in Depreciation and amortization.
The Company reviews capitalized software for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. One part of the Company’s suite of products was directed toward private companies seeking to raise capital under Regulation A+ and Regulation D. Market acceptance under these regulations is behind what was initially anticipated, resulting in lower-than-expected revenue from this product. As a result, the Company wrote-off the remaining carrying value of this product in the amount of $44,000 as of December 31, 2019. This amount is included in Depreciation and amortization expense on the Consolidated Statements of Income for the year ended December 31, 2019.
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Impairment of Long-lived Assets | In accordance with the authoritative guidance for accounting for long-lived assets, assets such as property and equipment, trademarks, and intangible assets subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of asset groups to be held and used is measured by a comparison of the carrying amount of an asset group to estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of an asset group exceeds fair value of the asset group.
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Lease Accounting | We determine if an arrangement is a lease at inception. Our operating lease agreements are primarily for office space and are included within lease right-of-use (“ROU”) assets and lease liabilities on the consolidated balance sheets.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Our variable lease payments consist of non-lease services related to the lease and payments under operating leases classified as short-term. Variable lease payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation for those payments is incurred. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. ROU assets include any lease payments made and exclude lease incentives. Rental expense for lease payments related to operating leases is recognized on a straight-line basis over the lease term.
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Fair Value Measurements | ASC Topic 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Assets and liabilities recorded at fair value in the financial statements are categorized based upon the hierarchy of levels of judgment associated with the inputs used to measure their fair value. Hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:
As of December 31, 2020 and 2019, we believe that the fair value of our financial instruments other than cash and cash equivalents, such as, accounts receivable, our line of credit, notes payable, and accounts payable approximate their carrying amounts.
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Stock-based 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 or director is required to provide service in exchange for the award.
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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 income until the entity is sold or substantially liquidated.
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Comprehensive Income | Comprehensive income consists of net income and other comprehensive income related to changes in the cumulative foreign currency translation adjustment.
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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, distribution partner relationships, software, technology, non-compete agreements 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 (7-10 years), customer lists (3 years), distribution partner relationships (10 years), non-compete agreements (5 years) and software and technology (3-6 years) are amortized over their estimated useful lives (See Note 4).
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Advertising | The Company expenses advertising as incurred. Advertising expense totaled $245,000 and $163,000, during the years ended December 31, 2020 and 2019, respectively.
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Recently Adopted Accounting Pronouncements | On January 1, 2020, the Company adopted Accounting Standard Update (“ASU”) 2017-04 Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. These amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The Company adopted this amendment as of January 1, 2020 and it has not, nor is it expected to have a significant impact to the financial statements.
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Note 2. Summary of Significant Accounting Policies (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Summary of allowance for doubtful accounts |
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Schedule of estimated useful lives for fixed assets |
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Note 3. Fixed Assets (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of fixed assets |
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Note 4. Recent Acquisitions (Tables) |
12 Months Ended | |||||||||||||||||||||||||
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Dec. 31, 2020 | ||||||||||||||||||||||||||
VisualWebcaster Platform | ||||||||||||||||||||||||||
Schedule of intangible assets acquired |
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Note 5. Goodwill and Other Intangible Assets (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of amortizable intangible assets |
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Schedule of future amortization of intangible assets |
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Note 7. Equity (Tables) |
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Dec. 31, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of shares repurchased |
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Note 8. Stock Options and Restricted Stock Units (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Share-based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of stock options activity |
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Schedule of unvested stock options |
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Schedule of stock options |
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Schedule of stock options, valuation assumptions |
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Summary of restricted stock units issued |
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Note 9. Leases (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Leases [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of lease expense |
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Schedule of future minimum lease payments |
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Note 11. Revenues (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of revenue |
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Note 12. Income Taxes (Tables) |
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Dec. 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of components of income tax expense |
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Schedule of effective income tax rate reconciliation |
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Schedule of deferred tax assets and liabilities |
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Note 2. Summary of Significant Accounting Policies (Details) - USD ($) $ in Thousands |
12 Months Ended | |
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Dec. 31, 2020 |
Dec. 31, 2019 |
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Accounting Policies [Abstract] | ||
Allowance for doubtful accounts, beginning | $ 700 | $ 534 |
Bad debt expense | 304 | 753 |
Write-offs | (347) | (587) |
Allowance for doubtful accounts, ending | $ 657 | $ 700 |
Note 2. Summary of Significant Accounting Policies (Details 1) |
12 Months Ended |
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Dec. 31, 2020 | |
Computer Equipment | |
Depreciation / amortization period | 3 years |
Furniture & Equipment | |
Depreciation / amortization period | 3 to 7 years |
Leasehold Improvements | |
Depreciation / amortization period | 8 years or lesser of the lease term |
Note 3. Fixed Assets (Details) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Property, Plant and Equipment [Abstract] | ||
Computers equipment | $ 122 | $ 108 |
Furniture & equipment | 280 | 267 |
Leasehold improvements | 705 | 705 |
Total fixed assets, gross | 1,107 | 1,080 |
Less: accumulated depreciation | (312) | (181) |
Total fixed assets, net | $ 795 | $ 899 |
Note 3. Fixed Assets (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
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Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 131 | $ 106 |
Disposal of fixed assets | $ 0 | $ 377 |
Note 4. Recent Acquisitions (Details) - VisualWebcaster Platform $ in Thousands |
Dec. 31, 2020
USD ($)
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Intangible assets | $ 2,775 |
Goodwill | |
Intangible assets | 1,344 |
Customer Relationships | |
Intangible assets | 865 |
Technology | |
Intangible assets | 497 |
Non-compete Agreements | |
Intangible assets | $ 69 |
Note 5. Goodwill and Other Intangible Assets (Details 1) $ in Thousands |
Dec. 31, 2020
USD ($)
|
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Goodwill and Intangible Assets Disclosure [Abstract] | |
2021 | $ 459 |
2022 | 431 |
2023 | 431 |
2024 | 418 |
2025 | 319 |
Thereafter | 440 |
Total | $ 2,498 |
Note 5. Goodwill and Other Intangible Assets (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
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Goodwill and Intangible Assets Disclosure [Abstract] | ||
Amortization of intangible assets | $ 609 | $ 718 |
Goodwill | $ 6,376 | $ 6,376 |
Note 6. Line of Credit (Details Narrative) $ in Thousands |
Dec. 31, 2020
USD ($)
|
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Line of Credit Facility [Abstract] | |
Line of credit, maximum borrowing capacity | $ 3,000 |
Line of credit facility, interest rate at period end | 1.89% |
Line of credit | $ 0 |
Note 7. Equity (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
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Equity [Abstract] | ||
Cash dividends paid | $ 0 | $ 0 |
Shares repurchased | 160,068 | |
Shares repurhased value | $ 1,552 |
Note 8. Stock Options and Restricted Stock Units (Details 1) - $ / shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Share-based Payment Arrangement [Abstract] | ||
Number of unvested options outstanding, beginning | 29,000 | 29,000 |
Number of unvested options vested | (14,500) | 0 |
Number of unvested options forfeited/cancelled | 0 | 0 |
Number of unvested options outstanding, ending | 14,500 | 29,000 |
Weighted average exercise price outstanding, beginning | $ 12.87 | $ 12.87 |
Weighted average exercise price vested | 12.87 | .00 |
Weighted average exercise price forfeited/cancelled | .00 | .00 |
Weighted average exercise price outstanding, ending | 12.87 | 12.87 |
Weighted average grant date fair value, beginning | 5.47 | 5.47 |
Weighted average grant date fair value vested | 5.47 | .00 |
Weighted average grant date fair value forfeited/cancelled | .00 | .00 |
Weighted average grant date fair value, ending | $ 5.47 | $ 5.47 |
Note 8. Stock Options and Restricted Stock Units (Details 3) |
12 Months Ended |
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Dec. 31, 2019 | |
Share-based Payment Arrangement [Abstract] | |
Expected dividend yield | 1.56% |
Expected stock price volatility | 50.00% |
Weighted-average risk-free interest rate | 2.45% |
Weighted-average expected life of options (in years) | 5 years 9 months |
Note 8. Stock Options and Restricted Stock Units (Details Narrative) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Stock closing price | $ 17.51 | $ 11.69 |
Unrecognized compensation expense, options | $ 15 | |
Number of options granted | 0 | 31,500 |
Number of restricted stock units granted | 18,000 | 46,000 |
Number of restricted stock units vested/issued | (32,002) | (33,000) |
Weighted average exercise price vested/issued | $ 11.61 | $ 8.62 |
Unrecognized compensation expense, restricted stock units | $ 91 | |
Stock options and restricted stock units expense | $ 273 | $ 523 |
2014 Plan | ||
Shares available to be issued under plan | 236,583 |
Note 9. Leases (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Leases [Abstract] | ||
Operating lease expense | $ 347 | $ 241 |
Variable lease expense | 132 | 133 |
Rent expense | $ 479 | $ 374 |
Note 9. Leases (Details 1) $ in Thousands |
Dec. 31, 2020
USD ($)
|
---|---|
Leases [Abstract] | |
2021 | $ 394 |
2022 | 359 |
2023 | 369 |
2024 | 379 |
2025 | 389 |
Thereafter | 812 |
Total lease payments | 2,702 |
Present value adjustment | (341) |
Lease liability | $ 2,361 |
Note 9. Leases (Details Narrative) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Leases [Abstract] | ||
Lease liability | $ 2,361 | |
Lease liability, current | 390 | |
Lease liability, noncurrent | $ 1,971 | $ 2,309 |
Weighted-average remaining non-cancelable lease term | 6 years 10 months 24 days | |
Weighted-average discount rate | 3.80% |
Note 11. Revenues (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Revenues | $ 18,526 | $ 16,295 |
Percentage of revenue from revenue streams | 100.00% | 100.00% |
Platform and Technology | ||
Revenues | $ 12,927 | $ 10,696 |
Percentage of revenue from revenue streams | 69.80% | 65.60% |
Services | ||
Revenues | $ 5,599 | $ 5,599 |
Percentage of revenue from revenue streams | 30.20% | 34.40% |
Note 12. Income Taxes (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Current: | ||
Federal | $ 307 | $ 522 |
State | 84 | 94 |
Foreign | 21 | 21 |
Total current | 412 | 637 |
Deferred: | ||
Federal | 283 | (434) |
State | 50 | (55) |
Foreign | (21) | (39) |
Total deferred | 312 | (528) |
Total expense for income taxes | $ 724 | $ 109 |
Note 12. Income Taxes (Details 2) - USD ($) $ in Thousands |
Dec. 31, 2020 |
Dec. 31, 2019 |
---|---|---|
Assets: | ||
Deferred revenue | $ 24 | $ 379 |
Allowance for doubtful accounts | 149 | 149 |
Stock options | 108 | 156 |
Transaction costs | 46 | 49 |
Other | 138 | 39 |
Total deferred tax asset | 465 | 772 |
Liabilities: | ||
Prepaid expenses | (15) | (23) |
Basis difference in fixed assets | (188) | (14) |
Capitalized software | 0 | (94) |
Purchase of intangibles | (459) | (522) |
Other | 0 | (4) |
Total deferred tax liability | (662) | (657) |
Total net deferred tax asset/(liability) | (197) | $ 115 |
Change | ||
Assets: | ||
Deferred revenue | (355) | |
Allowance for doubtful accounts | 0 | |
Stock options | (48) | |
Transaction costs | (3) | |
Other | 99 | |
Total deferred tax asset | (307) | |
Liabilities: | ||
Prepaid expenses | 8 | |
Basis difference in fixed assets | (174) | |
Capitalized software | 94 | |
Purchase of intangibles | 63 | |
Other | 4 | |
Total deferred tax liability | (5) | |
Total net deferred tax asset/(liability) | $ (312) |
Note 13. Employee Benefit Plan (Details Narrative) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2020 |
Dec. 31, 2019 |
|
Employee Benefit and Share-based Payment Arrangement, Noncash Expense [Abstract] | ||
401(k) contribution amount | $ 24 | $ 27 |
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MC.