(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ ☒Yes☐No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ ☒Yes☐No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes☐No☒

As of May ~~7, 2021,~~2, 2022, the registrant had ~~12,241,752~~13,523,067 shares of common stock outstanding.

Unless otherwise indicated or required by the context, all references in this Quarterly Report on Form 10-Q to “we,” “us,” “our,” “red violet,” or the “Company,” refer to Red Violet, Inc. and its consolidated subsidiaries.


	March 31, 2021			December 31, 2020			March 31, 2022			December 31, 2021
ASSETS:
Current assets:
Cash and cash equivalents	$	12,896		$	12,957		$	34,775		$	34,258
Accounts receivable, net of allowance for doubtful accounts of $5 and $38 as of March 31, 2021 and December 31, 2020, respectively		3,582			3,201
Accounts receivable, net of allowance for doubtful accounts of $22 and $28 as of March 31, 2022 and December 31, 2021, respectively								4,561			3,736
Prepaid expenses and other current assets		973			581			1,081			599
Total current assets		17,451			16,739			40,417			38,593
Property and equipment, net		530			558			625			577
Intangible assets, net		27,565			27,170			28,804			28,181
Goodwill		5,227			5,227			5,227			5,227
Right-of-use assets		2,040			2,161			1,529			1,661
Other noncurrent assets		137			139			137			137
Total assets	$	52,950		$	51,994		$	76,739		$	74,376
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable	$	1,974		$	2,075		$	2,233		$	1,605
Accrued expenses and other current liabilities		880			1,458			442			395
Current portion of operating lease liabilities		567			552			636			617
Current portion of long-term loan		806			449
Deferred revenue		453			504			713			841
Total current liabilities		4,680			5,038			4,024			3,458
Noncurrent operating lease liabilities		1,760			1,908			1,124			1,291
Long-term loan		1,346			1,703
Deferred tax liabilities								373			198
Total liabilities		7,786			8,649			5,521			4,947
Shareholders' equity:
Preferred stock—$0.001 par value, 10,000,000 shares authorized, and 0 shares issued and outstanding, as of March 31, 2021 and December 31, 2020		-			-
Common stock—$0.001 par value, 200,000,000 shares authorized, 12,208,077 and 12,167,327 shares issued and outstanding, as of March 31, 2021 and December 31, 2020		13			13
Preferred stock—$0.001 par value, 10,000,000 shares authorized, and 0 shares issued and outstanding, as of March 31, 2022 and December 31, 2021								-			-
Common stock—$0.001 par value, 200,000,000 shares authorized, 13,523,067 and 13,488,540 shares issued and outstanding, as of March 31, 2022 and December 31, 2021								14			13
Additional paid-in capital		68,402			66,005			93,115			91,434
Accumulated deficit		(23,251	)		(22,673	)		(21,911	)		(22,018	)
Total shareholders' equity		45,164			43,345			71,218			69,429
Total liabilities and shareholders' equity	$	52,950		$	51,994		$	76,739		$	74,376


	Three Months Ended March 31,						Three Months Ended March 31,
	2021			2020			2022		2021
Revenue	$	10,217		$	9,300		$	12,729	$	10,217
Costs and expenses:
Cost of revenue (exclusive of depreciation and amortization)		2,761			3,292			3,170		2,761
Sales and marketing expenses		2,221			2,176			2,391		2,221
General and administrative expenses		4,550			4,434			5,353		4,550
Depreciation and amortization		1,258			910			1,534		1,258
Total costs and expenses		10,790			10,812			12,448		10,790
Loss from operations		(573	)		(1,512	)
Interest (expense) income, net		(5	)		31
Loss before income taxes		(578	)		(1,481	)
Income taxes		-			-
Net loss	$	(578	)	$	(1,481	)
Loss per share:
Basic and diluted	$	(0.05	)	$	(0.13	)
Income (loss) from operations								281		(573	)
Interest income (expense), net								1		(5	)
Income (loss) before income taxes								282		(578	)
Income tax expense								175		0
Net income (loss)							$	107	$	(578	)
Earnings (loss) per share:
Basic							$	0.01	$	(0.05	)
Diluted							$	0.01	$	(0.05	)
Weighted average number of shares outstanding:
Basic and diluted		12,207,193			11,583,214
Basic								13,543,607		12,207,193
Diluted								14,047,635		12,207,193

	Common stock				Treasury stock						Additional paid-in		Accumulated
	Shares		Amount		Shares			Amount			capital		deficit			Total			Common stock					Treasury stock						Additional paid-in			Accumulated
Balance at December 31, 2019		11,657,912	$	12		(103,147	)	$	(1,255	)	$	59,187	$	(15,860	)	$	42,084
Vesting of restricted stock units		35,250		-		-			-			-		-			-
Share-based compensation		-		-		-			-			2,809		-			2,809
Net loss		-		-		-			-			-		(1,481	)		(1,481	)
Balance at March 31, 2020		11,693,162	$	12		(103,147	)	$	(1,255	)	$	61,996	$	(17,341	)	$	43,412
																			Shares			Amount		Shares			Amount			capital			deficit			Total
Balance at December 31, 2020		12,167,327	$	13		-		$	-		$	66,005	$	(22,673	)	$	43,345			12,167,327		$	13		-		$	-		$	66,005		$	(22,673	)	$	43,345
Vesting of restricted stock units		40,750		-		-			-			-		-			-			40,750			-		-			-			-			-			-
Share-based compensation		-		-		-			-			2,397		-			2,397			-			-		-			-			2,397			-			2,397
Net loss		-		-		-			-			-		(578	)		(578	)		-			-		-			-			-			(578	)		(578	)
Balance at March 31, 2021		12,208,077	$	13		-		$	-		$	68,402	$	(23,251	)	$	45,164			12,208,077		$	13		-		$	-		$	68,402		$	(23,251	)	$	45,164

Balance at December 31, 2021																				13,488,540		$	13		-		$	-		$	91,434		$	(22,018	)	$	69,429
Vesting of restricted stock units																				34,750			1		-			-			(1	)		-			-
Increase in treasury stock resulting from shares withheld to cover statutory taxes																				-			-		(223	)		(6	)		-			-			(6	)
Retirement of treasury stock																				(223	)		-		223			6			(6	)					-
Share-based compensation																				-			-		-			-			1,688			-			1,688
Net income																				-			-		-			-			-			107			107
Balance at March 31, 2022																				13,523,067		$	14		-		$	-		$	93,115		$	(21,911	)	$	71,218


	Three Months Ended March 31,						Three Months Ended March 31,
	2021			2020			2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(578	)	$	(1,481	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Net income (loss)							$	107		$	(578	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		1,258			910			1,534			1,258
Share-based compensation expense		2,046			2,221			1,387			2,046
Write-off of long-lived assets		19			17			3			19
Provision for bad debts		59			190			37			59
Noncash lease expenses		121			111			132			121
Interest expense		5			-			0			5
Deferred income tax expense								175			0
Changes in assets and liabilities:
Accounts receivable		(440	)		314			(862	)		(440	)
Prepaid expenses and other current assets		(392	)		(394	)		(482	)		(392	)
Other noncurrent assets		2			63			0			2
Accounts payable		(101	)		91			628			(101	)
Accrued expenses and other current liabilities		(583	)		(755	)		47			(583	)
Deferred revenue		(51	)		79			(128	)		(51	)
Operating lease liabilities		(133	)		(117	)		(148	)		(133	)
Net cash provided by operating activities		1,232			1,249			2,430			1,232
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(46	)		(33	)		(113	)		(46	)
Capitalized costs included in intangible assets		(1,247	)		(1,538	)		(1,794	)		(1,247	)
Net cash used in investing activities		(1,293	)		(1,571	)		(1,907	)		(1,293	)
Net decrease in cash and cash equivalents	$	(61	)	$	(322	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Taxes paid related to net share settlement of vesting of restricted stock units								(6	)		0
Net cash used in financing activities								(6	)		0
Net increase (decrease) in cash and cash equivalents							$	517		$	(61	)
Cash and cash equivalents at beginning of period		12,957			11,776			34,258			12,957
Cash and cash equivalents at end of period	$	12,896		$	11,454		$	34,775		$	12,896
SUPPLEMENTAL DISCLOSURE INFORMATION
Cash paid for interest	$	-		$	-		$	0		$	0
Cash paid for income taxes	$	-		$	-		$	0		$	0
Share-based compensation capitalized in intangible assets	$	351		$	588		$	301		$	351
Retirement of treasury stock							$	6		$	0

~~In August 2018, the Financial Accounting Standard Board (the “FASB”) issued Accounting Standard Updates (“ASU”) No. 2018-15 (“ASU 2018-15”),~~ ~~“Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract,”~~ which requires an entity (customer) in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine which implementation costs to capitalize as an asset related to the service contract and which costs to expense. It also requires the entity (customer) to expense the capitalized implementation costs of a hosting arrangement that is a service contract over the term of the hosting arrangement, which includes reasonably certain renewals. This guidance is effective for the Company for annual reporting periods beginning after December 15, 2020, on a retrospective or prospective basis. The Company adopted it on January 1, 2021 on a prospective basis and this guidance had no material impact on the Company’s condensed consolidated financial statements and related disclosures.

~~In December 2019, the FASB issued ASU No. 2019-12 (“ASU 2019-12”),~~ ~~“Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”~~, which is intended to improve consistent application and simplify the accounting for income taxes. This ASU removes certain exceptions to the general principals in Topic 740 and clarifies and amends existing guidance. This standard is effective for the Company for annual reporting periods beginning after December 15, 2020. The Company adopted it on January 1, 2021 and this guidance had no material impact on the Company’s condensed consolidated financial statements and related disclosures.

2. ~~Loss~~Earnings (loss) per share

Basic ~~loss~~earnings (loss) per share is computed by dividing net ~~loss~~income (loss) by the weighted average number of shares of common stock outstanding during the periods. Diluted ~~loss~~earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock and is calculated using the treasury stock method for unvested shares. Common equivalent shares are excluded from the calculation in the loss periods as their effects would be anti-dilutive.


	Three Months Ended March 31,
(In thousands, except share data)	2022		2021
Numerator:
Net income (loss)	$	107	$	(578	)
Denominator:
Weighted average shares outstanding:
Basic		13,543,607		12,207,193
Diluted(1)		14,047,635		12,207,193
Earnings (loss) per share:
Basic	$	0.01	$	(0.05	)
Diluted	$	0.01	$	(0.05	)

Three Months Ended March 31,

(In thousands, except share data)

2021

2020

Numerator:

Net loss

$
(578
)

$
(1,481
)
Denominator:

Weighted average shares outstanding - Basic and diluted⁽¹⁾

12,207,193

11,583,214

Loss per share:

Basic and diluted:

$
(0.05
)

$
(0.13
)
(1)

For the three months ended March 31, 2022, diluted weighted average shares outstanding are calculated by the inclusion of unvested restricted stock units (“RSUs”). For the three months ended March 31, 2021, a total of 1,686,499 unvested RSUs have been excluded from the diluted loss per share, as the impact is anti-dilutive.

The gross amount associated with software developed for internal use represents capitalized costs of internally-developed software, including eligible salaries and staff benefits, share-based compensation, travel expenses incurred by relevant employees, and other relevant costs.

Amortization expenses of ~~$1,203~~$1,472 and ~~$850 were included in depreciation and amortization expense~~$1,203 for the three months ended March 31, 2022 and 2021, respectively, were included in depreciation and ~~2020, respectively.~~amortization expense. As of March 31, ~~2021,~~2022, intangible assets of ~~$2,974,~~$3,780, included in the gross amounts of software developed for internal use, have not started amortization, as they are not ready for their intended use.

The Company capitalized costs of software developed for internal use of ~~$1,598~~$2,095 and ~~$2,126~~$1,598 during the three months ended March 31, 2022 and 2021, ~~and 2020,~~ respectively.

Goodwill represents the cost in excess of the fair value of the net assets acquired in a business combination. As of March 31, ~~2021~~2022 and December 31, ~~2020,~~2021, the balance of goodwill of ~~$5,227~~$5,227 was as a result of the acquisition of Interactive Data, LLC, a wholly-owned subsidiary of red violet, effective on October 2, 2014.

In accordance with ASC 350, “Intangibles - Goodwill and Other,” goodwill is tested at least annually for impairment, or when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable, by assessing qualitative factors or performing a quantitative analysis in determining whether it is more likely than not that its fair value exceeds the carrying value. The measurement date of the Company’s annual goodwill impairment test is October 1.1.

For the periods ended March 31, 2022 and 2021, ~~and 2020,~~ 0 goodwill impairment charges were recorded.

7. ~~Common stock~~

As of March 31, 2021 and December 31, 2020, the number of issued and outstanding shares of common stock was 12,208,077 and 12,167,327, respectively. The change in the number of issued and outstanding shares of common stock was due to an aggregate of 40,750 shares of common stock issued as a result of the vesting of RSUs.

8. Share-based compensation

On March 22, 2018, the board of directors of the Company and Cogint, Inc. (“cogint”) (now known as Fluent, Inc.), in its capacity as sole stockholder of the Company prior to the Company’s spin-off from cogint on March 26, 2018, approved the Red Violet, Inc. 2018 Stock Incentive Plan (the “2018 Plan”), which became effective immediately prior to the spin-off. A total of 3,000,000 shares of common stock were authorized to be issued under the 2018 Plan. On June 3, 2020, the Company’s stockholders approved an amendment to the 2018 Plan to increase the number of shares of common stock authorized for issuance under the 2018 Plan from 3,000,000 shares to 4,500,000 shares. On April 11, 2022, the board of directors of the Company approved, subject to stockholder approval, an amendment to the 2018 Plan to further increase the number of shares of common stock authorized for issuance under the 2018 Plan from 4,500,000 shares to 6,500,000 shares.

The primary purpose of the 2018 Plan is to attract, retain, reward and motivate certain individuals by providing them with an opportunity to acquire or increase a proprietary interest in the Company and to incentivize them to expend maximum effort for the growth and success of the Company, so as to strengthen the mutuality of the interests between such individuals and the stockholders of the Company.

As of March 31, ~~2021,~~2022, there were ~~1,270,415~~719,187 shares of common stock available for future issuance under the 2018 Plan, as amended.

To date, all stock incentives issued under the 2018 Plan have been in the form of RSUs. RSUs granted under the 2018 Plan vest and settle upon the satisfaction of a time-based condition or with both time- and performance-based conditions. The time-based condition for these awards is generally satisfied over three or four years with annual vesting. Details of unvested RSU activity during the three months ended March 31, ~~2021~~2022 were as follows:

Number of units

Weighted average
grant-date fair value

Unvested as of December 31, 2020

1,764,450

$
11.43

Vested and delivered

(40,750
)

$
7.02

Vested not delivered⁽¹⁾

(37,201
)

$
11.00

Unvested as of March 31, 2021

1,686,499

$
11.55


	Number of units			Weighted average grant-date fair value
Unvested as of December 31, 2021		1,306,953		$	18.85
Granted(1)		102,500		$	25.40
Vested and delivered		(34,527	)	$	7.98
Withheld as treasury stock		(223	)	$	7.53
Vested not delivered(2)		(282,585	)	$	14.97
Forfeited		(16,225	)	$	23.36
Unvested as of March 31, 2022(3)		1,075,893		$	21.12

(1)

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

(2)

The amount included in "Vested not delivered" above represents RSUs that have been vested but the delivery of the common stock underlying such RSUs had not occurred as of March 31, 2022. During the period from August 29, 2019 to November 20, 2020, the Company granted an aggregate of 455,000 RSUs. Such RSU grants shall not vest unless and until the Company has, for any fiscal quarter in which the RSUs are outstanding, (i) gross revenue determined in accordance with the Company’s reviewed or audited financial statements in excess of $12.5 million for such fiscal quarter, and (ii) positive adjusted EBITDA of at least $2.0 million, as determined based on amounts derived from the Company’s reviewed or audited financial statements for such fiscal quarter, subject to the recipient continuing to provide services to the Company either as an employee, director or consultant on the last day of the quarter that the performance criteria are met. Provided the respective performance criteria are met, the RSUs will vest in accordance with the time-based requirements contained in the award agreement over three years. In the event of a change of control, all RSUs which have not vested on the date of such change of control shall immediately vest even if the performance criteria have not been met. As of the respective grant dates, the Company determined that it was probable that such performance criteria would be met and therefore, began to record the related amortization expense on the grant dates. The Company determined that the performance criteria were met as of March 31, 2022. As a result, 283,335 RSUs were included in "Vested not delivered" above.

(3)

On July 30, 2021, the Company granted 120,000 RSUs, subject to performance-based requirements, to one non-executive employee, which was subsequently modified on February 18, 2022, with a fair value of $27.23 per share as of the modification date. Such RSU grants shall 0t vest unless and until the Company has achieved certain revenue for a portion of its business prior to the achievement date deadline for each performance milestone. NaN amortization of share-based compensation expense has been recognized for these RSUs, because, as of March 31, 2022, the Company determined that it is not probable that such performance criteria will be met. The 120,000 RSUs were included in "Unvested as of March 31, 2022" with a fair value of $27.23 per share.

~~(1)~~

During the period from August 29, 2019 to September 8, 2020, the Company granted an aggregate of 277,500 RSUs to its employees. Such RSU grants shall not vest unless and until the Company has, for any fiscal quarter in which the RSUs are outstanding, (i) gross revenue determined in accordance with the Company’s reviewed or audited financial statements in excess of $10.0 million for such fiscal quarter, (ii) positive adjusted EBITDA of at least $1.5 million, as determined based on amounts derived from the Company’s reviewed or audited financial statements for such fiscal quarter, and (iii) the recipient continues to provide services to the Company either as an employee, director or consultant on the last day of the quarter that the performance criteria are met. Provided the performance criteria are met, the RSUs will vest in accordance with the time-based requirements contained in the award agreement over three or four years. In the event of a change of control, all RSUs which have not vested on the date of such change of control shall immediately vest even if the performance criteria have not been met. As of the respective grant dates, the Company determined that it was probable that the performance criteria would be met and therefore, began to record the related amortization expense on the grant dates. As of March 31, 2021, the Company determined that the performance criteria were met, and 33,200 shares were included in “Vested not delivered” in the table above. The remaining shares underlying such awards are expected to vest and be issued in accordance with their time-based vesting requirement.

As of March 31, ~~2021,~~2022, unrecognized share-based compensation expense associated with the granted RSUs amounted to ~~$9,446,~~$17,904, which is expected to be recognized over a remaining weighted average period of ~~2.3~~3.0 years.

Share-based compensation was allocated to the following accounts in the condensed consolidated financial statements for the three months ended March 31, ~~2021~~2022 and ~~2020:~~2021:


	Three Months Ended March 31,
(In thousands)	2022		2021
Sales and marketing expenses	$	47	$	156
General and administrative expenses		1,340		1,890
Share-based compensation expense		1,387		2,046
Capitalized in intangible assets		301		351
Total	$	1,688	$	2,397

Three Months Ended March 31,

(In thousands)

2021

2020

Sales and marketing expenses

$
156

$
154

General and administrative expenses

1,890

2,067

Share-based compensation expense

2,046

2,221

Capitalized in intangible assets

351

588

Total

$
2,397

$
2,809

9.8. Related party transactions

Services Agreement

On August 7, 2018, the Company entered into a services agreement (the “Services Agreement”) with Mr. Michael Brauser (the “Consultant”), a greater than ~~10%~~10% stockholder, pursuant to which, the Consultant will be providing recommendations on organizational and capital structure, future financing needs and future acquisitions or strategic transactions (“Services Agreement”), for a term of one year, automatically renewing for additional ~~one-year~~ periods unless either party provides written notice to the other of its intent not to renew not fewer than 30 days prior to the expiration of the then-current term. Under the Services Agreement, the Consultant receivesreceived cash compensation of ~~$30~~$30 per month and iswas entitled to participate in the Company’s incentive compensation plan. The Services Agreement terminated on August 6, 2021, as further detailed below.

On February 16, 2021, the Company entered into a Separation Agreement (the "Separation Agreement") with the Consultant. Pursuant to the Separation Agreement, the parties ~~have~~ agreed that the Services Agreement ~~expiring~~which expired on August 6, 2021 (“Expiration Date”), ~~will~~would not be renewed, but ~~will~~would continue in force and effect until the Expiration ~~Date and that the Consultant will not take any actions on behalf~~Date. As part of ~~the Company, including pursuant to the Services Agreement, unless specifically requested in writing by the Company. Pursuant to~~ the Separation Agreement, the Consultant ~~also~~ agreed (i) to certain non-solicitation obligations contained therein, (ii) that he and his affiliates ~~will~~would not disparage or assist or cooperate with any person or entity seeking to publicly disparage or economically harm the Company, ~~and~~ (iii) that the Consultant and his affiliates ~~will~~would not initiate any lawsuit, claim, or proceeding with respect to any claims against the Company, except (with designated exceptions) for any legal proceeding initiated solely to remedy a breach of or to enforce the Separation ~~Agreement.~~

~~With~~Agreement, and (iv) with respect to each annual or special meeting of the Company's stockholders until the Expiration Date of the Separation Agreement, the Consultant ~~has~~ agreed to vote the shares of the Company's common stock or any other securities entitled to vote then held by him or his affiliates in accordance with the board of directors' recommendations on director proposals ~~provided there is a~~(subject to certain board of directors change ~~in no more than 25% of the current directors (not including changes resulting from a director's death or resignation)~~thresholds), and the ratification of the appointment of the Company’s independent registered public accounting firm.

The Company agreed (i) that the remaining unvested 166,666 RSUs previously granted to Consultant in accordance with the 2018 RSU ~~Agreement will~~agreement would continue to vest on July 1, 2021, in accordance with and subject to all other provisions and conditions of such grant, (ii) to amend the 2020 RSU ~~Agreement,~~agreement, previously granting Consultant 30,000 RSUs such that the 30,000 RSUs ~~will~~would continue to vest ~~33-1/~~33-1/3% on November 1, 2021, ~~66-2/~~66-2/3% on November 1, 2022, and ~~100%~~100% on November 1, 2023, without certain Company performance criteria, subject to all other provisions and conditions of such grant, (iii) to include shares of the Company's common stock held by the Consultant or his affiliates in any registration statement the Company files for the benefit of selling stockholders at any time when the Consultant or his affiliates beneficially own ~~10%~~10% or more of the Company's common stock, and (iv) to not initiate any lawsuit, claim, or proceeding with respect to any claims against the Consultant and his affiliates, except (with designated exceptions) for any legal proceeding initiated solely to remedy a breach of or to enforce the Separation Agreement. As a result of the modification to the 2020 RSU ~~Agreement,~~agreement, beginning February 16, 2021, the Company ~~expects to recognize~~recognized an aggregate of ~~$723~~$723 in share-based compensation expense over the remaining service period which ~~ends~~ended on the Expiration Date.

The Company recognized consulting service fees relating to the Services Agreement of a total of ~~$90~~$0 and $90 during the three months ended March 31, 2022 and 2021, ~~and 2020.~~respectively. In addition, amortization of share-based compensation expense of ~~$548~~$0 and ~~$339~~$548 (inclusive of the amortization of share-based compensation expense in relation with the modification of RSUs mentioned above) for the three months ended ~~March~~December 31, ~~2021~~2022 and ~~2020,~~2021, respectively, was recognized in relation to the RSUs previously granted to the Consultant.

9. Leases

~~10. Long-term loan~~

On May 5, 2020, the Company received funding under a promissory note dated May 5, 2020 (the “Promissory Note”) evidencing an unsecured non-recourse loan in the principal amount of $2,152 under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) (the “Loan”). The Loan to the Company was made through Legacy Bank of Florida (the “Lender”).

~~Long-term loan consists of the following:~~

(In thousands)

March 31, 2021

December 31, 2020

Principal amount

$
2,152

$
2,152

Included in consolidated balance sheet:

Current portion of long-term loan

$
806

$
449

Long-term loan (non-current)

1,346

1,703

$
2,152

$
2,152

~~The Loan has a~~ ~~two-year~~ term and matures on May 5, 2022. The interest rate on the Loan is 1.0% per annum. Pursuant to the Promissory Note, payments shall be deferred for the first six months of the term of the Loan, followed by 18 approximately equal monthly installments of principal and interest. The Promissory Note contains customary events of default relating to, among other things, payment defaults, and breach of representations and warranties, or other provisions of the Promissory Note. As a result of the passage of the Paycheck Protection Program Flexibility Act of 2020 on June 5, 2020, the U.S. Small Business Administration (“SBA”), provided updated guidance that payments can be deferred until the loan forgiveness is determined, or if the Company does not apply for forgiveness, then 10 months after the Covered Period (as defined below) ends.

The Loan may be forgiven partially or fully if the Loan proceeds are used for covered payroll, rent and utility costs incurred during the 24-week period that commenced on the date of funding (the “Covered Period”), and if at least 60% of the proceeds are used for covered payroll costs. Any forgiveness of the Loan will be subject to approval by the SBA and the Lender. The Company applied for forgiveness of the Loan in November 2020. Because the Loan exceeds $2,000, the Company anticipates the U.S. Department of Treasury will audit the loan. Although the Company used the proceeds of the Loan for such covered purposes and applied for forgiveness as required, it can provide no assurance that the Company will obtain forgiveness of the Loan in whole or in part.

~~The fair value of the Loan approximates its carrying amount as of March 31, 2021 as the interest rate approximates market rates for similar loans.~~

~~11. Leases~~

On January 1, 2019, the Company adopted Leases (Topic 842) using the modified retrospective method applied to all leases existing at the date of initial application. The Company elected the practical expedients to not reassess whether any existing contracts are or contain leases, not reassess the lease classification for any existing leases, and not reassess initial direct costs for any existing leases, upon the adoption of Leases (Topic 842).

The Company leases its corporate headquarters of 21,020 rentable square feet in accordance with a non-cancelable ~~89-month~~89-month operating lease agreement as amended and effective in January ~~2017.~~2017, with an option to extend for an additional 60 months. The Company also leases an additional office space of 6,003 rentable square feet in accordance with a non-cancellable ~~90-month~~90-month operating lease agreement entered into in April 2017, with an option to extend for an additional 60 months. The extension option is not included in the determination of the lease term as it is not reasonably certain to be exercised.

For the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, a summary of the Company’s lease information is shown below:


	Three Months Ended March 31,				Three Months Ended March 31,
(In thousands)	2021		2020		2022		2021
Lease cost:
Operating lease costs	$	168	$	168	$	168	$	168
Other information:
Cash paid for operating leases	$	179	$	175	$	184	$	179

As of March 31, ~~2021,~~2022, the weighted average remaining operating lease term was ~~3.6~~2.6 years.

As of March 31, ~~2021,~~2022, scheduled future maturities and present value of the operating lease liabilities are as follows:


(In thousands)
Year	March 31, 2021		March 31, 2022
Remainder of 2021	$	544
2022		743
Remainder of 2022			$	559
2023		765		765
2024		542		542
2025		77		77
Total maturities	$	2,671	$	1,943
Present value included in consolidated balance sheet:
Current portion of operating lease liabilities	$	567	$	636
Noncurrent operating lease liabilities		1,760		1,124
Total operating lease liabilities	$	2,327	$	1,760
Difference between the maturities and the present value of operating lease liabilities	$	344	$	183

(a) Capital commitment

The Company incurred data costs of ~~$2,122~~$2,248 and ~~$2,132~~$2,122 for the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively, under certain data licensing agreements. As of March 31, ~~2021,~~2022, material capital commitments under certain data licensing agreements were ~~$8,688,~~$31,634, shown as follows:


(In thousands)
Year	March 31, 2021		March 31, 2022
Remainder of 2021	$	5,295
2022		2,492
Remainder of 2022				6,066
2023		423		7,315
2024		217		7,166
2025		224		7,267
2026 and thereafter		37
2026				3,820
Total	$	8,688	$	31,634

(b) Contingencies

The Company establishes accruals for those contingencies where the incurrence of a loss is probable and can be reasonably estimated, and it discloses the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for its financial statements to not be misleading. To estimate whether a loss contingency should be accrued by a charge to income, the Company evaluates, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of the loss. The Company does not record liabilities when the likelihood that the liability has been incurred is probable, but the amount cannot be reasonably ~~estimated~~estimated..

The Company may be involved in litigation from time to time in the ordinary course of business. The Company does not believe that the ultimate resolution of any such matters will have a material adverse effect on its business, financial condition, results of operations or cash flows. However, the results of such matters cannot be predicted with certainty and the Company cannot assure you that the ultimate resolution of any legal or administrative proceeding or dispute will not have a material adverse effect on its business, financial condition, results of operations and cash flows.

1210

In December 2019, a novel strain of coronavirus, known as Covid-19, was reported in Wuhan, China and has since extensively impacted the global health and economic environment. In March 2020, the World Health Organization characterized Covid-19 as a pandemic. The Company has taken numerous steps, and will continue to take further actions as appropriate, to minimize the impact of the Covid-19 pandemic on the Company’s business, results of operations and financial performance. To ensure the health and well-being of its employees, beginning in MarchDuring 2020, the Company ~~instructed employees at~~experienced significantly reduced commercial activity in numerous aspects of its offices to work from home on a temporary basis. Starting in the second quarter of 2020, the Company implemented cost containment strategies across all areas of the organization, including continued curtailment of Company travel and partnering with suppliers, landlords and vendors for price concessions and payment deferrals during this interim period. Asbusiness as a result of the preventative and protective actions taken by federal, state and local governments to combat Covid-19, including the implementation of stay-at-home orders, ~~and~~ social distancing policies ~~that resulted in significantly reduced commercial activity,~~ and certain temporary government-imposed moratoria on collection customers’ ~~activities, the Company experienced reduced transaction volume in the second~~activities. During 2021 and third quarters of 2020. Transaction volume returned to pre-Covid levels by the end of the third quarter of 2020, except for collection customer volume. Collection customer transaction volume remained below pre-Covid levels during the first quarter of ~~2021, down $0.7 million, primarily attributable to~~2022, the ~~Company’s~~Company saw ongoing improvement in its results of operations, with the exception of the Company's idiVERIFIED service, which is an ancillary collections market offering that is purely transactional and of a lower margin ~~profile, for the three months ended March 31, 2021, compared to the three months ended March 31, 2020.~~profile. The Company expects ~~collection customer transaction volume, including that of~~ its idiVERIFIED service volume to return to pre-Covid levels in the ~~second~~first half of ~~2021. Beginning~~2023. Given the ~~second quarter of 2020,~~ongoing uncertainty and the Company took a proactive customer-centric approach working with customers who were impacted by Covid-19. Customers who had minimum contractual commitments and requested concessions because they were temporarily unable to meet their minimum contractual commitments as a result of Covid-19 were granted reductions, or eliminations where applicable, of minimums on a month-to-month basis. The end dateunpredictable nature of the ~~customer’s agreement was extended by one month for each month~~pandemic, including the emergence of new variants and the ~~temporary concession. During~~development, availability, distribution and effectiveness of vaccines, the second quarter of 2020, the Company provided concessions to a total of 152 customers, representing a $342 reduction in minimum committed spend. During the third quarter of 2020, the Company provided concessions to a total of 22 customers, representing a $94 reduction in minimum committed spend. During the fourth quarter of 2020, the Company provided concessions to a total of 7 customers, representing a $32 reduction in minimum committed spend. The Company continues to work with customers who have been impacted by Covid-19 and consider potential concessions on a case-by-case basis. The Company continues to take precautionary measures intended to minimize the riskfull impact of the Covid-19 pandemic to its employees, its customers, and the communities in which it operates. These measures may result in inefficiencies, delays and additional costs to the Company’s business. The Covid-19 pandemic and its impact on the ~~Company~~Company's ongoing business, results of operations and the economy has significantly limited the Company’s ability to forecast its future operating results, including its ability to predict revenue and expense levels, and plan for and model future operating results. The Company will continue to evaluate the nature and extent of the impact of the COVID-19 pandemic to its business.overall financial performance cannot be reasonably estimated at this time.

To further support the Company’s liquidity, beginning April 1, 2020, the Company elected, under Section 2302 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES ~~Act,~~Act”), to defer payment of the employer portion of Social Security payroll tax. Under the CARES Act, employers ~~can~~could forgo timely payment of the employer portion of Social Security taxes that would otherwise be due from March 27, 2020 through December 31, 2020, without penalty or interest charges. Employers must pay ~~50%~~50% of the deferred amount by December 31, 2021, and the remainder by December 31, 2022. The Company paid 50% of the deferred amount in December 2021. On May 5, 2020, the Company received ~~the Loan~~funding under a promissory note dated May 5, 2020 evidencing an unsecured non-recourse loan under the CARES Act, ~~as discussed~~which was fully forgiven by Legacy Bank of Florida and the U.S. Small Business Administration in ~~Note 10 above.~~June 2021, resulting in a gain on extinguishment of debt of $2,175 during the year ended December 31, 2021. The Company will continue to assess the CARES Act and other applicable government legislation aimed at assisting businesses during the Covid-19 pandemic. In accordance with best practices and guidance from the Centers for Disease Control and Prevention, the Company implemented protective safeguards, including daily temperature checks, mandatory wearing of masks, social distancing, plexiglass protective barriers, and an entire office HVAC UV-C system. The Company began its first phase of employees returning to the Boca Raton, Florida office in June 2020. By the end of the first quarter of 2021, nearly all of the Boca Raton office employees have returned to an in-office work environment. The Company will continue to assess the need and timing of additional employees returning to an in-office work environment. Given the dynamic nature of this health emergency, the full impact of the Covid-19 pandemic on the Company’s ongoing business, results of operations and overall financial performance cannot be reasonably estimated at this time.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (“Form 10-Q”). This Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), about our expectations, beliefs, or intentions regarding our business, financial condition, results of operations, strategies, or prospects. You can identify forward-looking statements by the fact that these statements do not relate strictly to historical or current matters. Rather, forward-looking statements relate to anticipated or expected events, activities, trends, or results as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially from the activities and results anticipated in forward-looking statements, including the impact of the coronavirus (“Covid-19”) pandemic on our operating results. These factors include those contained in this Quarterly Report on Form 10-Q, as well as the disclosures made in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 filed on March ~~10, 2021~~9, 2022 (“Form 10-K”), and other filings we make with the Securities and Exchange Commission. We do not undertake any obligation to update forward-looking statements, except as required by law. We intend that all forward-looking statements be subject to the safe harbor provisions of PSLRA. These forward-looking statements are only predictions and reflect our views as of the date they are made with respect to future events and financial performance. To the extent that our business is negatively impacted due to a variety of factors, including the impact of Covid-19 on our operating results, we may implement longer-term cost reduction efforts in order to mitigate such impacts.

References in this discussion and analysis to “we,” “us,” “our,” “red violet,” or the “Company,” refer to Red Violet, Inc. and its consolidated subsidiaries.

Red Violet, Inc. (“we,” “us,” “our,” “red violet,” or the “Company”), a Delaware corporation, is dedicated to making the world a safer place and reducing the cost of doing business. We build proprietary technologies and apply analytical capabilities to deliver identity intelligence. Our technology powers critical solutions, which empower organizations to operate with confidence. Our solutions enable the real-time identification and location of people, businesses, assets and their interrelationships. These solutions are used for purposes including risk mitigation, due diligence, fraud detection and prevention, regulatory compliance, and customer acquisition. Our intelligent platform, CORETM, is purpose-built for the enterprise, yet flexible enough for organizations of all sizes, bringing clarity to massive datasets by transforming data into intelligence. We drive ~~wokflow~~workflow efficiency and enable organizations to make better data-driven decisions.

Organizations are challenged by the structure, volume and disparity of data. Our platform and applications transform the way our customers interact with information, presenting connections and relevance of information otherwise unattainable, which drives actionable insights and better outcomes. Leveraging cloud-native proprietary technology and applying machine learning and advanced analytical capabilities, CORE provides essential solutions to public and private sector organizations through intuitive, easy-to-use analytical interfaces. With massive data assets consisting of ~~public-record,~~public record, proprietary and publicly-available data, our differentiated information and innovative platform and solutions deliver identity intelligence ~~relating to all things identity~~ – entities, relationships, affiliations, interactions, and events. Our solutions are used today to enable frictionless commerce, to ensure safety, and to reduce fraud and the concomitant expense borne by ~~society.~~society.

While our platform powers many diverse solutions for our customers, we presently market our solutions primarily through two brands, ~~idiCORE™, our~~IDI™ and FOREWARN®. IDI is a leading-edge, analytics and information solutions provider delivering actionable intelligence to the risk management industry in support of use cases such as the verification and authentication of consumer identities, due diligence, prevention of fraud and abuse, legislative compliance, and debt recovery. idiCORE™ is IDI's flagship ~~product, and FOREWARN~~^®.product. idiCORE is a next-generation, investigative solution used to address a variety of organizational challenges including due diligence, risk mitigation, identity authentication and regulatory compliance, by financial services companies, insurance companies, healthcare companies, law enforcement and government, collections, law firms, retail, telecommunication companies, corporate security and investigative firms. FOREWARN is an app-based solution currently tailored for the real estate industry, providing instant knowledge prior to face-to-face engagement with a consumer, helping professionals identify and mitigate risk. As of March 31, 2022 and 2021, IDI had 6,592 and ~~2020, idiCORE had~~ 5,902 ~~and 5,326~~ billable customers and FOREWARN had ~~58,831~~91,490 and ~~36,506~~58,831 users, respectively. The Company defines a billable customer of ~~idiCORE~~IDI as a single entity that generated revenue during the last three months of the period. Billable customers are typically corporate organizations. In most cases, corporate organizations will have multiple users and/or departments purchasing our solutions, however, the Company counts the entire organization as a discrete customer. The Company defines a user of FOREWARN as a unique person that has a subscription to use the FOREWARN service as of the last day of the period. A unique person can only have one user account.

We generate substantially all of our revenue from licensing our solutions. Customers access our solutions through a hosted environment using an online interface, batch processing, API and custom integrations. We recognize revenue from licensing fees (a) on a transactional basis determined by the customer’s usage, (b) via a monthly fee or (c) from a combination of both. Revenue pursuant to pricing contracts containing a monthly fee is recognized ratably over the contract period. Pricing contracts are generally annual contracts or longer, with auto renewal. ~~Revenue from pricing contracts represented 80% and 69% of total revenue for~~For the three months ended March 31, 2022 and 2021, 77% and ~~2020,~~80% of total revenue was attributable to customers with pricing contracts, respectively, versus 23% and 20% attributable to transactional customers, respectively.

We endeavor to understand our customers’ needs at the moment of first engagement. We continuously engage with our customers and evaluate their usage of our solutions throughout their life cycle, to maximize utilization of our solutions and, hence, their productivity. Our go-to-market strategy leverages (a) an inside sales team that cultivates relationships, and ultimately closes business, with their end-user markets, (b) a strategic sales team that provides a more personal, face-to-face approach for major accounts within certain industries, and (c) distributors, resellers, and strategic partners that have a significant foothold in many of the industries that we have not historically served, as well as to further penetrate those industries that we do serve. We employ a “land and expand” approach. Our sales model generally begins with a free trial followed by an initial purchase on a transactional basis or minimum-committed monthly spend. As organizations derive benefits from our solutions, we are able to expand within organizations as additional use cases are presented across departments, divisions and geographic locations and customers become increasingly reliant on our solutions in their daily workflow.

In order for us to continue to develop new products, grow our existing business and expand into additional markets, we must generate and sustain sufficient operating profits and cash flow in future periods. This will require us to generate additional sales from current products and new products currently under development. We continue to build out our sales organization to drive current products and to introduce new products into the marketplace.

~~In December 2019, a novel strain~~During 2020, we experienced significantly reduced commercial activity in numerous aspects of coronavirus, known as Covid-19, was reported in Wuhan, China and has since extensively impacted the global health and economic environment. In March 2020, the World Health Organization characterized Covid-19our business as a ~~pandemic. We have taken numerous steps, and will continue to take further actions as appropriate, to minimize the impact~~result of the Covid-19 pandemic on our business, results of operations and financial performance. To ensure the health and well-being of our employees, beginning in March 2020, we instructed employees at our offices to work from home on a temporary basis. Starting in the second quarter of 2020, we implemented cost containment strategies across all areas of the organization, including continued curtailment of Company travel and partnering with suppliers, landlords and vendors for price concessions and payment deferrals during this interim period. As a result of preventative and protective actions taken by federal, state and local governments to combat Covid-19, including the implementation of stay-at-home orders, ~~and~~ social distancing policies ~~that resulted in significantly reduced commercial activity,~~ and certain temporary government-imposed moratoria on collection customers’ ~~activities, we experienced reduced transaction volume in the second~~activities. During 2021 and third quarters of 2020. Transaction volume returned to pre-Covid levels by the end of the third quarter 2020, except for collection customer volume. Collection customer transaction volume remained below pre-Covid levels during the first quarter of ~~2021, down $0.7 million, primarily attributable to~~2022, we saw ongoing improvement in our results of operations, with the exception of our idiVERIFIED service, which is an ancillary collections market offering that is purely transactional and of a lower margin ~~profile, for the three months ended March 31, 2021, compared to the three months ended March 31, 2020.~~profile. We expect ~~collection customer transaction volume, including that of~~ our idiVERIFIED service volume to return to pre-Covid levels in the ~~second~~first half of ~~2021. Beginning~~2023. Given the ~~second quarter of 2020, we took a proactive customer-centric approach working with customers who were impacted by Covid-19. Customers who had minimum contractual commitments~~ongoing uncertainty and requested concessions because they were temporarily unable to meet their minimum contractual commitments as a result of Covid-19 were granted reductions, or eliminations where applicable, of minimums on a month-to-month basis. The end datethe unpredictable nature of the ~~customer’s agreement was extended by one month for each month~~pandemic, including the emergence of new variants and the ~~temporary concession. During~~development, availability, distribution and effectiveness of vaccines, the second quarter of 2020, we provided concessions to a total of 152 customers, representing a $342 thousand reduction in minimum committed spend. During the third quarter of 2020, we provided concessions to a total of 22 customers, representing a $94 thousand reduction in minimum committed spend. During the fourth quarter of 2020, we provided concessions to a total of 7 customers, representing a $32 thousand reduction in minimum committed spend. We continue to work with customers who have been impacted by Covid-19 and consider potential concessions on a case-by-case basis. We continue to take precautionary measures intended to minimize the riskfull impact of the Covid-19 pandemic toon our ~~employees, our customers,~~ongoing business, results of operations and ~~the communities in which we operate. These measures may result in inefficiencies, delays and additional costs to our business.~~ The Covid-19 pandemic and its impact on us and the economy has significantly limited our ability to forecast our future operating results, including our ability to predict revenue and expense levels, and plan for and model future operating results. We will continue to evaluate the nature and extent of the impact of the COVID-19 pandemic to our business.overall financial performance cannot be reasonably estimated at this time.

To further support our liquidity, beginning April 1, 2020, we elected, under Section 2302 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), to defer payment of the employer portion of Social Security payroll tax. Under the CARES Act, employers ~~can~~could forgo timely payment of the employer portion of Social Security taxes that would otherwise be due from March 27, 2020 through December 31, 2020, without penalty or interest charges. Employers must pay 50% of the deferred amount by December 31, 2021, and the remainder by December 31, 2022. We paid 50% of the deferred amount in December 2021. On May 5, 2020, we received funding under a promissory note dated May 5, 2020 evidencing an unsecured non-recourse loan in the principal amount of $2.2 million under the CARES Act, ~~(the “Loan”). We submitted an application for forgiveness~~which was fully forgiven by Legacy Bank of Florida and the ~~Loan~~U.S. Small Business Administration in ~~November 2020.~~June 2021, resulting in a gain on extinguishment of debt of $2.2 million during the year ended December 31, 2021. We will continue to assess the CARES Act and other applicable government legislation aimed at assisting businesses during the Covid-19 pandemic. In accordance with best practices and guidance from the Centers for Disease Control and Prevention, we implemented protective safeguards, including daily temperature checks, mandatory wearing of masks, social distancing, plexiglass protective barriers, and an entire office HVAC UV-C system. We began our first phase of employees returning to the Boca Raton, Florida office in June 2020. By the end of the first quarter of 2021, nearly all of the Boca Raton office employees have returned to an in-office work environment. We will continue to assess the need and timing of additional employees returning to an in-office work environment. Given the dynamic nature of this health emergency, the full impact of the Covid-19 pandemic ~~on our ongoing business, results of operations and overall financial performance cannot be reasonably estimated at this time.~~
.

Management’s di~~scussion~~discussion and~~ana~~l~~ysis~~ analysis offinancial conditionandresultsof~~oper~~a~~tions~~ operations arebaseduponour condensed consolidatedfinancial~~statement~~s, statements, whichhavebeenpreparedinaccordancewith~~acc~~ount~~ing~~ accounting principles generallyacce~~pted~~ accepted in the ~~Unit~~edSta~~tes(“G~~A~~AP”~~United States (“US GAAP”). The ~~preparati~~onpreparation ofthesefinancial statementsrequiresustomakeestimates and judgmentsthataffectthereportedamountsof ~~ass~~e~~ts, li~~abiliti~~es,~~assets, liabilities, revenuesandexpenses,andre~~lated~~ related disclosureofcontingent a~~ssets~~assets andliabilities.Onan~~ongo~~ing ongoing basis,weevaluateourestimates, including thoserelated totheallowancefordoubtfulaccounts, usefullivesofintangible~~ass~~e~~ts,~~ assets, recoverability of the carrying amounts of goodwill and intangible assets, share-based compensation and income tax provision. Webaseour es~~timates~~estimates onhistoricalexpe~~rience~~and experience and onvariousother assumptionsthatarebelieved tobe~~reason~~a~~ble~~ reasonable under the circumstances,theresultsofwhichformthebasisfor for making judgments aboutabout the ca~~rrying valu~~escarrying values ofassets assets and li~~abi~~litiest~~hat a~~reliabilities that are not readilyapparentfrom othersources.Actualresultsmaydifferfrom these ~~est~~estimates under different assumptions or conditions.

For additional information, please refer to our Form 10-K. There have been no material changes to Critical Accounting Policies and Estimates disclosed in our Form 10-K.

See Note 1(b), “Recently issued accounting standards,” in “Notes to Condensed Consolidated Financial Statements.”

For the three months ended March 31, ~~2021~~2022 as compared to the three months ended March 31, ~~2020:~~2021:

Platform revenue consists of both contractual and transactional revenue generated from our technology platform, CORE. It includes all revenue generated through our idiCORE and FOREWARN solutions. The cost of platform revenue, which consists primarily of data acquisition costs, remains relatively fixed irrespective of revenue generation. Services revenue consists of revenue generated from our idiVERIFIED service, which is an ancillary collections market offering that is purely transactional and of a lower margin profile. The cost of services revenue, which consists primarily of third-party servicer costs, is variable.

Management evaluates the financial performance of our business on a variety of key indicators, including non-GAAP metrics of adjusted EBITDA, adjusted EBITDA margin, adjusted gross profit and adjusted gross margin. Adjusted EBITDA is a financial measure equal to net ~~loss,~~income (loss), the most directly comparable financial measure based on US GAAP, excluding interest (income) expense, ~~(income),~~ net, depreciation and amortization, share-based compensation expense, litigation costs, and write-off of long-lived assets and others, as noted in the tables below. We define adjusted EBITDA margin as adjusted EBITDA as a percentage of revenue. We define adjusted gross profit as revenue less cost of revenue (exclusive of depreciation and amortization), and adjusted gross margin as adjusted gross profit as a percentage of revenue.


	Three Months Ended March 31,						Three Months Ended March 31,
(In thousands)	2021			2020			2022			2021
Net loss	$	(578	)	$	(1,481	)
Interest expense (income), net		5			(31	)
Net income (loss)							$	107		$	(578	)
Interest (income) expense, net								(1	)		5
Income tax expense								175			-
Depreciation and amortization		1,258			910			1,534			1,258
Share-based compensation expense		2,046			2,221			1,387			2,046
Litigation costs		120			-			15			120
Write-off of long-lived assets and others		20			111			3			20
Adjusted EBITDA	$	2,871		$	1,730		$	3,220		$	2,871
Revenue							$	12,729		$	10,217

Net income (loss) margin								1	%		(6	%)
Adjusted EBITDA margin								25	%		28	%

The following is a reconciliation of gross profit, the most directly comparable US GAAP financial measure, to adjusted gross profit:


	Three Months Ended March 31,						Three Months Ended March 31,
(In thousands)	2021			2020			2022			2021
Revenue	$	10,217		$	9,300		$	12,729		$	10,217
Cost of revenue (exclusive of depreciation and amortization)		(2,761	)		(3,292	)		(3,170	)		(2,761	)
Depreciation and amortization of intangible assets		(1,203	)		(850	)		(1,472	)		(1,203	)
Gross profit		6,253			5,158			8,087			6,253
Depreciation and amortization of intangible assets		1,203			850			1,472			1,203
Adjusted gross profit	$	7,456		$	6,008		$	9,559		$	7,456

Gross margin		61	%		55	%		64	%		61	%
Adjusted gross margin		73	%		65	%		75	%		73	%

In order to assist readers of our condensed consolidated financial statements in understanding the operating results that management uses to evaluate the business and for financial planning purposes, we present non-GAAP measures of adjusted EBITDA, adjusted EBITDA margin, adjusted gross profit and adjusted gross margin as supplemental measures of our operating performance. We believe they provide useful information to our investors as they eliminate the impact of certain items that we do not consider indicative of our cash operations and ongoing operating performance. In addition, we use them as an integral part of our internal reporting to measure the performance and operating strength of our business.

We believe adjusted EBITDA, adjusted EBITDA margin, adjusted gross profit and adjusted gross margin are relevant and provide useful information frequently used by securities analysts, investors and other interested parties in their evaluation of the operating performance of companies similar to ours and are indicators of the operational strength of our business. We believe adjusted EBITDA eliminates the uneven effect of considerable amounts of non-cash depreciation and amortization, share-based compensation expense and the impact of other non-recurring items, providing useful comparisons versus prior periods or forecasts. Adjusted EBITDA margin is calculated as adjusted EBITDA as a percentage of revenue. Our adjusted gross profit is a measure used by management in evaluating the ~~business’s~~business’ current operating performance by excluding the impact of prior historical costs of assets that are expensed systematically and allocated over the estimated useful lives of the assets, which may not be indicative of the current operating activity. Our adjusted gross profit is calculated by using revenue, less cost of revenue (exclusive of depreciation and amortization). We believe adjusted gross profit provides useful information to our investors by eliminating the impact of non-cash depreciation and amortization, and specifically the amortization of software developed for internal use, providing a baseline of our core operating results that allow for analyzing trends in our underlying business consistently over multiple periods. Adjusted gross margin is calculated as adjusted gross profit as a percentage of revenue.

Adjusted EBITDA, adjusted EBITDA margin, adjusted gross profit and adjusted gross margin are not intended to be performance measures that should be regarded as an alternative to, or more meaningful than, financial measures presented in accordance with US GAAP. The way we measure adjusted EBITDA, adjusted EBITDA margin, adjusted gross profit and adjusted gross margin may not be comparable to similarly titled measures presented by other companies, and may not be identical to corresponding measures used in our various agreements.

Three months ended March 31, ~~2021~~2022 compared to three months ended March 31, ~~2020~~2021

Revenue. Revenue increased ~~$0.9~~$2.5 million or ~~10%~~25% to $12.7 million for the three months ended March 31, 2022 from $10.2 million for the three months ended March 31, ~~2021 from $9.3 million for the three months ended March 31, 2020. This increase was driven by strong growth in usage from existing customers, with base~~2021. Base revenue from existing customers ~~increasing $0.7~~increased $2.4 million or ~~11%~~32%, ~~and~~ growth revenue from existing customers ~~increasing $0.6~~increased $0.1 million or ~~51%. This growth was partially offset by a decrease in~~5%, and revenue from new customers ~~of $0.4~~increased $0.05 million or ~~32%~~5%. As a result of certain Covid-19 related government mandated collections moratoria remaining in place during the period, collection customer volume was down $0.7 million for the three months ended March 31, 2021. This was primarily attributable to our idiVERIFIED service, which is an ancillary collections market offering that is purely transactional and of a lower margin profile. We expect collection customer transaction volume, including that of our idiVERIFIED service, to return to pre-Covid levels in the second half of 2021. Our ~~idiCORE~~IDI billable customer base grew from ~~5,326 customers as of March 31, 2020 to~~ 5,902 customers as of March 31, 2021 to 6,592 customers as of March 31, 2022, and our FOREWARN user base grew from ~~36,506~~58,831 users to ~~58,831~~91,490 users during that same period. Revenue from new customers represents the total monthly revenue generated from new customers in a given period. A customer is defined as a new customer during the first six months of revenue generation. Base revenue from existing customers represents the total monthly revenue generated from existing customers in a given period that does not exceed the customers' trailing six-month average revenue. A customer is defined as an existing customer six months after their initial month of revenue. Growth revenue from existing customers represents the total monthly revenue generated from existing customers in a given period in excess of the customers' trailing six-month average revenue.

Cost of revenue (exclusive of depreciation and amortization). Cost of revenue ~~decreased $0.5~~increased $0.4 million or ~~16%~~15% to $3.2 million for the three months ended March 31, 2022 from $2.8 million for the three months ended March 31, ~~2021 from $3.3 million for the three months ended March 31, 2020.~~2021. Our cost of revenue primarily includes data acquisition costs. Data acquisition costs consist primarily of the costs to acquire data either on a transactional basis or through flat-fee data licensing agreements, including unlimited usage agreements. ~~The decrease in cost of revenue was primarily attributable to the decrease in transactional based data acquisition costs associated with the reduction in our idiVERIFIED services revenue.~~ We continue to enhance the breadth and depth of our data through the addition and expansion of relationships with key data suppliers, including our largest data supplier, which accounted for approximately ~~45%~~47% of our total data acquisition costs for the three months ended March 31, ~~2021~~2022 compared to approximately ~~39%~~45% for the three months ended March 31, ~~2020.~~2021. Other cost of revenue items include expenses related to third-party infrastructure fees.

As the construct of our data costs is primarily a flat-fee, unlimited usage model, the cost of revenue as a percentage of revenue decreased to 25% for the three months ended March 31, 2022 from 27% for the three months ended March 31, ~~2021 from 35% for the three months ended March 31, 2020.~~2021. We expect that cost of revenue as a percentage of revenue will continue to decrease over the coming years as our revenue increases. Historically, at scale, the industry business model’s cost of revenue will trend between 15% and 30% as a percentage of revenue.

Sales and marketing expenses. Sales and marketing expenses ~~remained consistent at~~increased $0.2 million or 8% to $2.4 million for the three months ended March 31, 2022 from $2.2 million for the three months ended March 31, ~~2021 and 2020.~~2021. Sales and marketing expenses consist of salaries and benefits, advertising and marketing, travel expenses, and share-based compensation expense, incurred by our sales team, and provision for bad debts. The increase during the three months ended March 31, 2022 was primarily attributable to an increase of $0.2 million in salaries and benefits, and sales commissions resulting from increased revenue.

General and administrative expenses. General and administrative expenses increased ~~$0.2~~$0.8 million or 3%18% to $5.4 million for the three months ended March 31, 2022 from $4.6 million for the three months ended March 31, ~~2021 from $4.4 million for the three months ended March 31, 2020.~~2021. For the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, our general and administrative expenses consisted primarily of employee salaries and benefits of ~~$1.5~~$2.5 million and ~~$1.2~~$1.5 million, share-based compensation expense of ~~$1.9~~$1.3 million and ~~$2.1~~$1.9 million, and professional fees of ~~$0.7~~$1.0 million and ~~$0.6~~$0.7 million, respectively.

Depreciation and amortization. Depreciation and amortization expenses increased ~~$0.4~~$0.2 million or ~~38%~~22% to $1.5 million for the three months ended March 31, 2022 from $1.3 million for the three months ended March 31, ~~2021 from $0.9 million for the three months ended March 31, 2020.~~2021. The increase in depreciation and amortization for the three months ended March 31, ~~2021~~2022 resulted primarily from the amortization of software developed for internal use that became ready for its intended use after March 31, ~~2020.~~2021.

~~Loss~~Income (loss) before income taxes. L~~oss~~Income before income taxes ~~narrowed $0.9~~was $0.3 million ~~or 61%~~for the three months ended March 31, 2022 compared to a loss of $0.6 million for the three months ended March 31, ~~2021 from $1.5 million for the three months ended March 31, 2020.~~2021. The ~~decrease~~significant improvement in ~~loss~~income before income taxes from a loss was primarily attributable to the increase in revenue, decrease in our cost of revenue as a percentage of revenue, and decrease in share-based compensation expense, which was partially offset by the increase in employee salaries and benefits and sales ~~commission~~commissions of ~~$0.5~~$1.2 million, professional fees of $0.3 million, and depreciation and amortization of ~~$0.4~~$0.2 million.

Income taxes. Income tax expense of $0.2 million and $0 was recognized for the three months ended March 31, 2022 and 2021, ~~and 2020.~~respectively. A ~~full~~ valuation allowance on the deferred tax assets was recognized as of March 31, 2022 and 2021, ~~and 2020.~~to reduce the deferred tax assets to the amount that is more likely than not to be realized. See Note 6, “Income Taxes,” included in “Notes to Condensed Consolidated Financial ~~Statements,~~Statements.” ~~for details.~~

Net ~~loss~~income (loss). Net income was $0.1 million for the three months ended March 31, 2022 compared to a net loss ~~narrowed $0.9 million or 61% to~~of $0.6 million for the three months ended March 31, 2021, ~~from $1.5 million for the three months ended March 31, 2020,~~ as a result of the ~~foregoing~~.foregoing.

The rates of inflation experienced in recent years have had no material impact on our financial statements. We attempt to recover increased costs by increasing prices for our services, to the extent permitted by contracts and competition.

Cash flows provided by operating activities. For the three months ended March 31, 2022, net cash provided by operating activities was $2.4 million, primarily the result of the net income of $0.1 million, adjusted for certain non-cash items (consisting primarily of share-based compensation expense, depreciation and amortization, write-off of long-lived assets, provision for bad debts, noncash lease expenses, and deferred income tax expense) totaling $3.3 million, and the cash used as a result of changes in assets and liabilities of $0.9 million, primarily the result of the increase in accounts receivable and prepaid expenses and other current assets, and the decrease in deferred revenue and operating lease liabilities, which was offset by the increase in accounts payable. For the three months ended March 31, 2021, net cash provided by operating activities was $1.2 million, primarily the result of the net loss of $0.6 million, adjusted for certain non-cash items, ~~(consisting of share-based compensation expense, depreciation and amortization, write-off of long-lived assets, provision for bad debts, and noncash lease expenses)~~as mentioned above, totaling $3.5 million, and the cash used as a result of changes in assets and liabilities of $1.7 million, primarily the result of the increase in accounts receivable and prepaid expenses and other current assets, and the decrease in accounts payable, accrued expenses and other current liabilities and operating lease liabilities. For the three months ended March 31, 2020, net cash provided by operating activities was $1.2 million, primarily the result of the net loss of $1.5 million, adjusted for certain non-cash items, as mentioned above, totaling $3.4 million, and the cash used as a result of changes in assets and liabilities of $0.7 million, primarily the result of the increase in prepaid expenses and other current assets, and the decrease in accrued expenses and other current liabilities and operating lease liabilities.

Cash flows used in investing activities. For the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, net cash used in investing activities was ~~$1.3~~$1.9 million and ~~$1.6~~$1.3 million, respectively, primarily as a result of capitalized costs included in intangible assets.

As of March 31, ~~2021,~~2022, we had material commitments under certain data licensing agreements of ~~$8.7~~$31.6 million. We anticipate funding our operations using available cash and cash flow generated from operations within the next twelve months.

We reported net income of $0.1 million and a net loss of $0.6 ~~million and $1.5~~ million for the three months ended March 31, ~~2021~~2022 and ~~2020,~~2021, respectively. As of March 31, ~~2021,~~2022, we had a total shareholders’ equity balance of ~~$45.2~~$71.2 million.

As of March 31, ~~2021,~~2022, we had cash and cash equivalents of approximately ~~$12.9~~$34.8 million. Based on projections of growth in revenue and operating results in the next twelve months, and the available cash and cash equivalents held by us, we believe that we will have sufficient cash resources to finance our operations and expected capital expenditures for the next twelve months.

We further believe that our financial resources will allow us to manage the impact of Covid-19 on the Company's business operations for the foreseeable future. However, subject to revenue growth, our ability to generate positive cash flow, and the potential impact of Covid-19, we may have to raise capital through the issuance of additional equity and/or debt, which, if we are able to obtain, could have the effect of diluting stockholders. Any equity or debt financings, if available at all, may be on terms which are not favorable to us.

As of March 31, ~~2021,~~2022, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

As a smaller reporting company as defined in Rule 12b-2 of the Exchange Act, we are not required to include information required by this item.

Our management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d–15(e) of the Exchange Act) as of March 31, ~~2021.~~2022. We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure.

Based on the evaluation of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act), the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, ~~2021.~~2022.

There were no changes in the Company’s internal control over financial reporting identified in connection with management's evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the fiscal quarter ended March 31, ~~2021~~2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures and Internal Control over Financial Reporting

In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

The Company is not currently a party to any legal proceeding, investigation or claim which, in the opinion of the management, is likely to have a material adverse effect on the business, financial condition, results of operations or cash flows. Legal fees associated with any legal proceedings, are expensed as incurred. We review legal proceedings and claims on an ongoing basis and follow appropriate accounting guidance, including ~~ASC~~Accounting Standards Codification ("ASC") 450, when making accrual and disclosure decisions. We establish accruals for those contingencies where the incurrence of a loss is probable and can be reasonably estimated, and we disclose the amount accrued and the amount of a reasonably possible loss in excess of the amount accrued, if such disclosure is necessary for our financial statements to not be misleading. To estimate whether a loss contingency should be accrued by a charge to income, we evaluate, among other factors, the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of the loss. We do not record liabilities when the likelihood that the liability has been incurred is probable, but the amount cannot be reasonably estimated.

We may be involved in litigation from time to time in the ordinary course of business. We do not believe that the ultimate resolution of any such matters will have a material adverse effect on our business, financial condition, results of operations or cash flows. However, the results of such matters cannot be predicted with certainty and we cannot assure you that the ultimate resolution of any legal or administrative proceeding or dispute will not have a material adverse effect on our business, financial condition, results of operations and cash flows.

There have been no material changes to the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 filed with the ~~Securities and Exchange Commission~~SEC on March ~~10, 2021.~~9, 2022.

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

Incorporated by Reference

Filed
Exhibit No.

Exhibit Description

Form

File No.

Exhibit

Filing Date

Herewith
10.1

Separation Agreement between Red Violet, Inc. and Michael Brauser dated February 16, 2021.

8-K

001-38407

10.1

February 17, 2021

31.1

Certification of Chief Executive Officer filed pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

X
31.2

Certification of Chief Financial Officer filed pursuant to Exchange Act Rules 13a-14(a) and 15d-14(a) of the Securities and Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

X
32.1*

Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

X
32.2*

Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

X
101.INS

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

X
101.SCH

Inline XBRL Taxonomy Extension Schema Document.

X
101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

X
101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document.

X
101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document.

X
101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

X
104

Cover Page Interactive Data File (embedded within the Inline XBRL document).

X

*

This certification is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended (Exchange Act), or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended or the Exchange Act.

22* This certification is deemed not filed for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Delaware		82-2408531
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)


Title of each class	Trading Symbol (s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	RDVT	The NASDAQ Stock Market LLC


		Page
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements (unaudited)
	Condensed consolidated balance sheets as of March 31, ~~2021~~2022 and December 31, ~~2020~~2021	21
	Condensed consolidated statements of operations for the three months ended March 31, ~~2021~~2022 and ~~2020~~2021	32
	Condensed consolidated statements of changes in shareholders' equity for the three months ended March 31, ~~2021~~2022 and ~~2020~~2021	43
	Condensed consolidated statements of cash flows for the three months ended March 31, ~~2021~~2022 and ~~2020~~2021	54
	Notes to condensed consolidated financial statements	65
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	1412
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	1917
Item 4.	Controls and Procedures	2018

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	2119
Item 1A.	Risk Factors	2119
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2119
Item 3.	Defaults Upon Senior Securities	2119
Item 4.	Mine Safety Disclosures	2119
Item 5.	Other Information	2119
Item 6.	Exhibits	2220

SIGNATURES		2321


		March 31, 2021							December 31, 2020								March 31, 2022							December 31, 2021
(In thousands)	Amortization Period	Gross Amount		Accumulated Amortization			Net		Gross Amount		Accumulated Amortization			Net		Amortization Period	Gross Amount		Accumulated Amortization			Net		Gross Amount		Accumulated Amortization			Net
Software developed for internal use	5-10 years	$	38,399	$	(10,834	)	$	27,565	$	36,804	$	(9,634	)	$	27,170	5-10 years	$	45,077	$	(16,273	)	$	28,804	$	42,982	$	(14,801	)	$	28,181


May ~~11, 2021~~4, 2022		Red Violet, Inc.

	By:	/s/ Daniel MacLachlan
		Daniel MacLachlan
		Chief Financial Officer
		(Principal Financial and Accounting Officer)


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

	Number of units			Weighted average grant-date fair value
Unvested as of December 31, 2020		1,764,450		$	11.43
Vested and delivered		(40,750	)	$	7.02
Vested not delivered⁽¹⁾		(37,201	)	$	11.00
Unvested as of March 31, 2021		1,686,499		$	11.55