UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

———————

~~FORM 10-Q~~

———————

☒ FORM 10-Q

——————————————

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: ~~September~~June 30, ~~2022~~2023

☐	☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from: _____________ to _____________

ISSUER DIRECT CORPORATION

(Exact name of registrant as specified in its charter)

——————————————

Delaware	1-10185	26-1331503
(State or Other Jurisdiction	(Commission	(I.R.S. Employer
of Incorporation)	File Number)	Identification No.)

1One Glenwood Avenue, Suite 1001, Raleigh NC 27603

(Address of Principal Executive Office) (Zip Code)

(919) 481-4000

(Registrant’s telephone number, including area code)

N/A

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

——————————————

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated ~~Filer~~filer	☐ ~~(Do not check if a smaller reporting company)~~	Smaller reporting company	☒
	(Do not check if a smaller reporting company)	Emerging growth company	☐

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date ~~3,791,020~~3,809,149 shares of common stock were issued and outstanding as of ~~November 3, 2022.~~August 10, 2023.

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001		ISDR		NYSE American

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements.	3
	Consolidated Balance Sheets as of ~~September~~June 30, ~~2022~~2023 (Unaudited) and December 31, ~~2021~~2022	3
	Unaudited Consolidated Statements of Operations for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022	4
	Unaudited Consolidated Statements of Comprehensive Income for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022	5
	Unaudited Consolidated Statement of Stockholders’ Equity for the Three and ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022	6
	Unaudited Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of ~~Operations.~~Operations	1618
Item 3.	Quantitative and Qualitative Disclosures About Market ~~Risk.~~Risk	2330
Item 4.	Controls and ~~Procedures.~~Procedures	2330

PART II – OTHER INFORMATION

Item 1.	Legal ~~Proceedings.~~Proceedings	2431
Item 1A.	Risk ~~Factors.~~Factors	2431
Item 2.	Unregistered Sales of Equity Securities and Use of ~~Proceeds.~~Proceeds	2431
Item 3.	Defaults Upon Senior ~~Securities.~~Securities	2431
Item 4.	Mine Safety ~~Disclosure.~~Disclosure	2431
Item 5.	Other ~~Information.~~Information	2431
Item 6.	~~Exhibits.~~Exhibits	2532
	Signatures	2633

Table of Contents

~~PART~~PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ISSUER DIRECT CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)

	September 30,			December 31,			June 30,			December 31,
	2022			2021			2023			2022
ASSETS	(unaudited)						(unaudited)
Current assets:
Cash and cash equivalents	$	21,812		$	23,852		$	4,961		$	4,832
Accounts receivable (net of allowance for doubtful accounts of $610 and $675, respectively)		3,062			3,291
Accounts receivable (net of allowance for doubtful accounts of $956 and $745, respectively)								4,311			2,978
Income tax receivable		285			—			—			51
Other current assets		807			750			1,597			1,559
Total current assets		25,966			27,893			10,869			9,420
Capitalized software (net of accumulated amortization of $3,349 and $3,301, respectively)		153			201
Fixed assets (net of accumulated depreciation of $572 and $456, respectively)		649			713
Capitalized software (net of accumulated amortization of $3,392 and $3,364, respectively)								277			138
Fixed assets (net of accumulated depreciation of $683 and $610, respectively)								563			625
Right-of-use asset – leases		1,341			1,533			1,150			1,277
Other long-term assets		110			94			397			136
Goodwill		6,376			6,376			22,498			22,498
Intangible assets (net of accumulated amortization of $6,329 and $6,005, respectively)		2,123			2,447
Intangible assets (net of accumulated amortization of $8,192 and $6,821, respectively)								30,860			32,231
Total assets	$	36,718		$	39,257		$	66,614		$	66,325

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	691		$	695		$	1,286		$	1,374
Accrued expenses		1,638			1,975			2,374			2,255
Income taxes payable		198			46			695			157
Current portion of long-term debt								2,000			22,000
Deferred revenue		3,429			3,086			5,729			5,405
Total current liabilities		5,956			5,802			12,084			31,191
Long-term debt (net of debt discount of $96 and $0, respectively)								17,904			—
Deferred income tax liability		96			176			273			572
Lease liabilities – long-term		1,422			1,659			1,175			1,339
Total liabilities		7,474			7,637			31,436			33,102
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value, 1,000,000 shares authorized, no shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively.		—			—
Common stock $0.001 par value, 20,000,000 shares authorized, 3,610,839 and 3,793,538 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively.		4			4
Preferred stock, $0.001 par value, 1,000,000 shares authorized, no shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively.								—			—	��
Common stock $0.001 par value, 20,000,000 shares authorized, 3,809,149 and 3,791,020 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively.								4			4
Additional paid-in capital		18,051			22,401			22,838			22,147
Other accumulated comprehensive loss		(88	)		(19	)		(51	)		(96	)
Retained earnings		11,277			9,234			12,387			11,168
Total stockholders' equity		29,244			31,620			35,178			33,223
Total liabilities and stockholders’ equity	$	36,718		$	39,257		$	66,614		$	66,325

The accompanying notes are an integral part of these unaudited financial statements.

Table of Contents

I~~SSUER~~ISSUER DIRECT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except share and per share amounts)

	For the Three Months Ended				For the Nine Months Ended				For the Three Months Ended					For the Six Months Ended
	September 30,		September 30,		September 30,		September 30,		June 30,			June 30,		June 30,			June 30,
	2022		2021		2022		2021		2023			2022		2023			2022
Revenues	$	5,280	$	5,465	$	16,375	$	16,165	$	9,651		$	5,807	$	18,270		$	11,095
Cost of revenues		1,212		1,355		3,808		4,229		2,336			1,364		4,165			2,596
Gross profit		4,068		4,110		12,567		11,936		7,315			4,443		14,105			8,499
Operating costs and expenses:
General and administrative		1,657		1,258		4,903		3,923		2,274			1,563		4,606			3,246
Sales and marketing expenses		1,231		1,349		3,866		3,633		2,039			1,371		4,420			2,635
Product development		245		373		734		878		532			214		1,306			489
Depreciation and amortization		146		153		439		457		723			147		1,445			293
Total operating costs and expenses		3,279		3,133		9,942		8,891		5,568			3,295		11,777			6,663
Operating income		789		977		2,625		3,045		1,747			1,148		2,328			1,836
Other income		—		366		—		366
Interest income		77		—		99		2
Interest (expense) income, net										(281	)		20		(519	)		22
Other income (expense), net										379			—		(156	)		—
Income before taxes		866		1,343		2,724		3,413		1,845			1,168		1,653			1,858
Income tax expense		180		319		681		738		482			327		434			501
Net income	$	686	$	1,024	$	2,043	$	2,675	$	1,363		$	841	$	1,219		$	1,357
Income per share – basic	$	0.19	$	0.27	$	0.55	$	0.71	$	0.36		$	0.22	$	0.32		$	0.36
Income per share – fully diluted	$	0.19	$	0.27	$	0.55	$	0.70	$	0.36		$	0.22	$	0.32		$	0.36
Weighted average number of common shares outstanding – basic		3,618		3,788		3,717		3,776		3,795			3,741		3,793			3,767
Weighted average number of common shares outstanding – fully diluted		3,636		3,821		3,738		3,818		3,808			3,772		3,809			3,802

The accompanying notes are an integral part of these unaudited financial statements.

Table of Contents

I~~SSUER~~ISSUER DIRECT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(UNAUDITED)

(in thousands)

	For the Three Months Ended					For the Nine Months Ended					For the Three Months Ended					For the Six Months Ended
	September 30,			September 30,		September 30,			September 30,		June 30,		June 30,			June 30,		June 30,
	2022			2021		2022			2021		2023		2022			2023		2022
Net income	$	686		$	1,024	$	2,043		$	2,675	$	1,363	$	841		$	1,219	$	1,357
Foreign currency translation adjustment		(53	)		7		(69	)		5		44		(23	)		45		(16	)
Comprehensive income	$	633		$	1,031	$	1,974		$	2,680	$	1,407	$	818		$	1,264	$	1,341

The accompanying notes are an integral part of these unaudited financial statements.

Table of Contents

ISSUER DIRECT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(UNAUDITED)

(in thousands, except share and per share amounts)

	Common Stock					Additional Paid-in			Other Accumulated Comprehensive Income			Retained		Total Stockholders’			Common Stock					Additional Paid-in			Accumulated Other Comprehensive			Retained			Total Stockholders’
	Shares			Amount		Capital			(Loss)			Earnings		Equity
Balance at December 31, 2020		3,770,752		$	4	$	22,214		$	(19	)	$	5,943	$	28,142
Stock-based compensation expense		—			—		63			—			—		63
Exercise of stock awards, net of tax		15,000			—		199			—			—		199
Stock repurchase and retirement		(19,777	)		—		(452	)		—			—		(452	)
Foreign currency translation		—			—		—			3			—		3
Net income		—			—		—			—			545		545
Balance at March 31, 2021		3,765,975		$	4	$	22,024		$	(16	)	$	6,488	$	28,500
Stock-based compensation expense		—			—		69			—			—		69
Exercise of stock awards, net of tax		20,550			—		20			—			—		20
Foreign currency translation		—			—		—			(5	)		—		(5	)
Net income		—			—		—			—			1,106		1,106
Balance at June 30, 2021		3,786,525		$	4	$	22,113		$	(21	)	$	7,594	$	29,690
Stock-based compensation expense		—			—		100			—			—		100
Exercise of stock awards, net of tax		4,513			—		55			—			—		55
Foreign currency translation		—			—		—			7			—		7
Net income		—			—		—			—			1,024		1,024
Balance at September 30, 2021		3,791,038		$	4	$	22,268		$	(14	)	$	8,618	$	30,876
																	Shares			Amount		Capital			Income (Loss)			Earnings			Equity
Balance at December 31, 2021		3,793,538		$	4	$	22,401		$	(19	)	$	9,234	$	31,620			3,793,538		$	4	$	22,401		$	(19	)	$	9,234		$	31,620
Stock-based compensation expense		—			—		184			—			—		184			—			—		184			—			—			184
Exercise of stock awards, net of tax		7,500			—		58			—			—		58			7,500			—		58			—			—			58
Stock repurchase and retirement		(6,200	)		—		(182	)		—			—		(182	)		(6,200	)		—		(182	)		—			—			(182	)
Foreign currency translation		—			—		—			7			—		7			—			—		—			7			—			7
Net income		—			—		—			—			516		516			—			—		—			—			516			516
Balance at March 31, 2022		3,794,838		$	4	$	22,461		$	(12	)	$	9,750	$	32,203			3,794,838		$	4	$	22,461		$	(12	)	$	9,750		$	32,203
Stock-based compensation expense		—			—		188			—			—		188			—			—		188			—			—			188
Exercise of stock awards, net of tax		15,265			—		—			—			—		—			15,265			—		—			—			—			—
Stock repurchase and retirement		(163,201	)		—		(3,859	)		—			—		(3,859	)		(163,201	)		—		(3,859	)		—			—			(3,859	)
Foreign currency translation		—			—		—			(23	)		—		(23	)		—			—		—			(23	)		—			(23	)
Net income		—			—		—			—			841		841			—			—		—			—			841			841
Balance at June 30, 2022		3,646,902		$	4	$	18,790		$	(35	)	$	10,591	$	29,350			3,646,902		$	4	$	18,790		$	(35	)	$	10,591		$	29,350

Balance at December 31, 2022																		3,791,020		$	4	$	22,147		$	(96	)	$	11,168		$	33,223
Stock-based compensation expense																		—			—		337			—			—			337
Foreign currency translation																		—			—		—			1			—			1
Net loss																		—			—		—			—			(144	)		(144	)
Balance at March 31, 2023																		3,791,020		$	4	$	22,484		$	(95	)	$	11,024		$	33,417
Stock-based compensation expense		—			—		187			—			—		187			—			—		354			—			—			354
Exercise of stock awards, net of tax		2,500			—		33			—			—		33			18,129			—		—			—			—			—
Stock repurchase and retirement		(38,563	)		—		(959	)		—			—		(959	)
Foreign currency translation		—			—		—			(53	)		—		(53	)		—			—		—			44			—			44
Net income		—			—		—			—			686		686			—			—		—			—			1,363			1,363
Balance at September 30, 2022		3,610,839		$	4	$	18,051		$	(88	)	$	11,277	$	29,244
Balance at June 30, 2023																		3,809,149		$	4	$	22,838		$	(51	)	$	12,387		$	35,178

The accompanying notes are an integral part of these unaudited financial statements.

Table of Contents

ISSUER DIRECT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

	For the Nine Months Ended						For the Six Months Ended
	September 30,			September 30,			June 30,			June 30,
	2022			2021			2023			2022
Cash flows from operating activities:
Net income	$	2,043		$	2,675		$	1,219		$	1,357
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		487			854			1,472			324
Bad debt expense		279			236			260			197
Deferred income taxes		(80	)		(14	)		(299	)		(63	)
Change in fair value of interest rate swaps								(214	)		—
Stock-based compensation expense		559			232			691			372
Amortization of debt issuance costs								4			—
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable		(61	)		(767	)		(1,587	)		(390	)
Decrease (increase) in other assets		(166	)		(273	)		(256	)		(245	)
Increase (decrease) in accounts payable		(2	)		365			(89	)		(111	)
Increase (decrease) in accrued expenses		(409	)		(489	)		488			(194	)
Increase (decrease) in deferred revenue		375			500			314			397
Net cash provided by operating activities		3,025			3,319			2,003			1,644

Cash flows from investing activities:
Capitalized software		—			(215	)		(167	)		—
Purchase of fixed assets		(52	)		(49	)		(11	)		(38	)
Net cash used in investing activities		(52	)		(264	)
Purchase of acquired business, net of cash received								350			—
Net cash provided by (used in) investing activities								172			(38	)

Cash flows from financing activities:
Exercise of stock options		91			274			—			58
Payment for stock repurchase and retirement		(5,000	)		(452	)		—			(4,041	)
Payment of note payable								(22,000	)		—
Proceeds from issuance of term loan								19,988			—
Payment for capitalized debt issuance costs								(88	)		—
Net cash used in financing activities		(4,909	)		(178	)		(2,100	)		(3,983	)

Net change in cash and cash equivalents		(1,936	)		2,877			75			(2,377	)
Cash – beginning		23,852			19,556
Cash and cash equivalents – beginning								4,832			23,852
Currency translation adjustment		(104	)		(18	)		54			(17	)
Cash and cash equivalents – ending	$	21,812		$	22,415		$	4,961		$	21,458

Supplemental disclosures:
Cash paid for income taxes	$	782		$	893		$	158		$	643
Cash paid for interest							$	887		$	—

The accompanying notes are an integral part of these unaudited financial statements.

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ISSUER DIRECT CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Basis of Presentation

The unaudited interim consolidated balance sheet as of ~~September~~June 30, ~~2022~~2023 and consolidated statements of operations, comprehensive income, stockholders’ equity and cash flows for the three and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021~~2022 included herein, have been prepared in accordance with the instructions for Form 10-Q under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Article 10 of Regulation S-X under the Exchange Act. In the opinion of management, they include all normal recurring adjustments necessary for a fair presentation of the financial statements. Results of operations reported for the interim periods are not necessarily indicative of results for the entire year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States ("US GAAP") have been condensed or omitted pursuant to such rules and regulations relating to interim financial statements. The interim financial information should be read in conjunction with the ~~2021~~2022 audited financial statements of Issuer Direct Corporation (the “Company”, “We”, or “Our”) filed on ~~our~~ Form 10-K.

Note 2. Summary of Significant Accounting Policies

The consolidated financial statements include the accounts of the Company and its ~~wholly-owned~~wholly owned subsidiaries. Significant intercompany accounts and transactions are eliminated in consolidation.

Earnings Per Share (EPS)

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 ~~50,250~~72,750 were excluded in the computation of diluted earnings per common share during the three and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2022,~~2023, because their impact was anti-dilutive. There were no50,250 shares issuable upon the exercise of stock options excluded in the computation of diluted earnings per common share during the three and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2021,~~2022, because their impact was anti-dilutive.

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 public corporate issuers and professional firms, such as investor 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~~its entire platform, or certain modules within ~~our~~the platform or to its Press Release Optimizer Plan (PRO), 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) Communications and ii) Compliance. Performance obligations of Communications contracts include providing subscriptions to certain modules or ~~the~~our entire ~~Platform~~ ~~id.~~Communications ~~module,~~platform, distributing press releases on a per release basis or conducting webcasts, virtual annual meetings, or other events on a per event basis. PRO subscription contracts contain two performance obligations of which the first is a series of distinct services that include, but are not limited to, developing specific media plans, and creating content to be distributed and the second performance obligation being access to the PRO platform along with distribution of press releases, ongoing support, and assessment of performance as a stand-ready obligation. Performance obligations of Compliance contracts include providing subscriptions to ~~our cloud-based Platform~~ ~~id.~~certain Compliance ~~module, Whistleblower module~~modules or other stand-ready obligations to deliver services and annual report printing and distribution. Additionally, services are provided on a per project basis. Set up fees for disclosure services are considered a separate performance obligation and are satisfied upfront. Set up fees for ~~our~~the 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.

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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 service. 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 press release packages which have been prepaid, however the releases have not yet been disseminated, as well as, 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 as releases are disseminated for press release packages and ratably over the billing period for subscriptions. Deferred revenue as of ~~September~~June 30, ~~2022,~~2023 and December 31, ~~2021,~~2022, was ~~$3,429,000~~$5,729,000 and ~~$3,086,000,~~$5,405,000, respectively, and is expected to be recognized within one year. Revenue recognized for the ~~nine~~six months ended ~~September~~June 30, 2023 and 2022, ~~and 2021, that~~which was included in the deferred revenue balance at the beginning of each reporting period, was approximately ~~$2,763,000~~$4,337,000 and ~~$1,948,000,~~$1,970,000, respectively. Accounts receivable, net of allowance for doubtful accounts, related to contracts with customers was ~~$3,062,000~~$4,311,000 and ~~$3,291,000~~$2,978,000 as of ~~September~~June 30, ~~2022,~~2023 and December 31, ~~2021,~~2022, 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 ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company has capitalized ~~$80,000~~$153,000 and ~~$53,000,~~$105,000, 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.

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~~adopted Financial Accounting Standards Codification (“ASC”) Topic 326, Financial Statements – Credit Losses (“Topic 326”) with an adoption date of January 1, 2023. As a result, the ~~credit risk of specific customers, historical trends, and other information. Credit is granted on an unsecured basis. The~~Company changed its accounting policy for allowance for doubtful accounts using an expected losses model rather than using incurred losses. The new model is ~~estimated~~ based on ~~an assessment~~the credit losses expected to arise over the life of the asset based on the Company’s ~~ability to collect on~~expectations as of the balances sheet date through analyzing historical customer ~~accounts receivable. There is judgment involved with estimating~~data as well as taking into consideration current economic trends. The Company adopted Topic 326 and determined it did not have a material financial impact.

The roll forward of the allowance for doubtful accounts for the three 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 ongoing environment of the COVID-19 pandemic and recent economic downturn, 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.six-months ended June 30, 2023, was as follows:

Three months ended March 31, 2023

Three months ended June 30, 2023

Beginning balance

$ 745

$ 858

Bad debt expense

151

109

Write-offs

(38 )

(11 )
Ending Balance

$ 858

$ 956

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 ~~receivable.~~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~~each financial institution in which it holds deposits. As of ~~September~~June 30, ~~2022,~~2023, the total amount exceeding such limit was ~~$19,375,000.~~$2,408,000. The Company also had cash-on-hand of ~~$2,137,000~~$41,000 in Europe and $1,480,000 in Canada ~~and $50,000 in Europe~~ as of ~~September~~June 30, ~~2022.~~2023.

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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Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include the allowance for doubtful accounts and the valuation of goodwill, intangible assets, deferred tax assets, and stock-based compensation. Actual results could differ from those estimates.

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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 Company recognizes 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~~The Company’s policy regarding the classification of interest and penalties is to classify them as income tax expense in ~~our~~the financial statements, if applicable.

Capitalized Software

Costs incurred to develop ~~our~~the Company’s 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. Capitalized costs and amortization for the three and ~~nine-month~~six-month periods ended ~~September~~June 30, ~~2022~~2023 and ~~2021,~~2022, are as follows (in thousands):

For the Three Months Ended

For the Nine Months Ended

For the Three Months Ended

For the Six Months Ended

September 30,

September 30,

September 30,

September 30,

June 30,

June 30,

June 30,

June 30,

2022

2021

2022

2021

2023

2022

2023

2022

Capitalized software development costs

$ —

$ 54

$ —

$ 215

$ 167

$ —

$ 167

$ —

Amortization included in cost of revenues

17

137

48

398

13

15

28

31

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

The Company determines if an arrangement is a lease at inception. 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 sheet.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the 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. 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 the leases do not provide an implicit rate, the Company uses its 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 due 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~~Accounting Standards Codification (“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:

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·
Level 1 –- Quoted prices are available in active markets for identical assets or liabilities at the reporting date. Generally, this includes debt and equity securities that are traded in an active market. ~~Our cash~~Cash and cash equivalents are quoted at Level 1.

·
Level 2 –- Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. ~~Generally, this includes~~The fair value of the Company’s long-term debt and ~~equity securities that~~interest rate swap are ~~not traded in an active market.~~quoted at Level 2.

·
Level 3 –- Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or other valuation techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
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~~Table of Contents~~

As of ~~September~~June 30, ~~2022~~2023 and December 31, ~~2021,~~2022, the Company believes ~~that~~ the fair value of ~~our~~its financial instruments, such as, accounts receivable, ~~our~~long-term debt, the line of credit, and accounts payable approximate their carrying amounts.

Translation of Foreign Financial Statements

The financial statements of the foreign subsidiaries of the Company have been translated into U.S. dollars. All assets and liabilities have been translated at current rates of exchange in effect at the end of the period. Income and expense items have been translated at the average exchange rates for the year or the applicable interim period. The gains or losses that result from this process are recorded as a separate component of other accumulated comprehensive income until the entity is sold or substantially liquidated.

Business Combinations, Goodwill, and Intangible Assets

The authoritative guidance for business combinations specifies the criteria for recognizing and reporting intangible assets apart from goodwill. The Company records 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~~may be considered an indefinite-lived asset and, as such, are not amortized as there ismay be no foreseeable limit to cash flows generated from them. For the Newswire acquisition (see Note 3), the Company determined the trademarks acquired were considered a definite lived asset which will be amortized over a period of 15 years. 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~~(5-10 years), customer lists (3 years), distribution partner relationships (10 years), non-compete agreements (5 years) and software and technology ~~(3-6~~(3-7 years) are amortized over their estimated useful lives.

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income related to changes in the cumulative foreign currency translation adjustment.

Advertising

The Company expenses advertising as incurred. During the three and ~~nine-month~~six-month periods ended ~~September~~June 30, 2023, advertising expense was $364,000 and $826,000, respectively. During the three and six-month periods ended June 30, 2022, advertising expense was ~~$95,000~~$114,000 and ~~$304,000,~~$209,000, respectively. ~~During~~Most of the ~~three and nine-month periods ended September 30, 2021,~~increase is due to additional advertising expense resulting from Newswire, which was ~~$37,000 and $169,000, respectively.~~acquired in November 2022.

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.

~~Employee Retention Credit~~Newly Adopted Accounting Pronouncements

~~On March 27, 2020,~~Topic 326 was effective for the ~~Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was signed into law providing numerous tax provisions and other stimulus measures, including an employee retention~~Company beginning on January 1, 2023. This update requires a financial asset (or group of financial assets) measured at amortized cost basis, to be presented at the net amount expected to be collected. This allowance for credit ~~(“ERC”), which~~losses is a ~~refundable tax credit against certain employment taxes. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 and~~valuation account that is deducted from the ~~American Rescue Plan Act of 2021 extended and expanded the availability~~amortized cost basis of the ~~ERC.~~
~~We are eligible under~~financial asset(s) to present the CARES Act ERC as an employer that carried on a trade or business during calendar year 2020 and whose business operations were fully or partially suspended during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19.
ASC 105, Generally Accepted Accounting Principles, describes the decision-making framework when no guidance exists in US GAAP for a particular transaction. Specifically, ASC 105-10-05-2 instructs companies to look for guidance for a similar transaction within US GAAP and apply that guidance by analogy. As such, forms of government assistance, such as the ERC, provided to business entities would not be within the scope of ASC 958, but it may be applied by analogy under ASC 105-10-05-2. We accounted for the ERC as a government grant in accordance with Accounting Standards Update 2013-06, Not-for-Profit Entities (Topic 958) by analogy under ASC 105-10-05-2. Under this standard, government grants are recognized when the conditions or conditions on which they depend are substantially met. The conditions for recognitionnet carrying value of the ~~ERC include, but are~~amount expected to be collected on the financial asset. The company has evaluated the impact of Topic 326 and has determined it does not ~~limited to:~~
·
~~An entity has been adversely affected by the COVID-19 pandemic~~
·
~~We have not used qualifying payroll for both the Paycheck Protection Program and the ERC~~
·
~~We incurred payroll costs to retain employees~~
During the three and nine months ended September 30, 2021, we recorded an ERC benefit of 366,000 in other income in our Consolidated statements of operations and in other current assets in our Consolidated balance sheets as of September 30, 2021.have a material financial impact.

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Table of Contents

Note 3: Acquisition of iNewswire LLC
On November 1, 2022, the Company entered into a Membership Interest Purchase Agreement with Lead Capital, LLC, a Delaware limited liability company (“Seller”), whereby the Company purchased all the issued and outstanding membership interests of iNewswire.com LLC, a Delaware limited liability company (“Newswire”). Newswire is a leading media and marketing communications technology company that provides press release distribution, media databases, media monitoring, and newsrooms through its PRO Plan.
In connection with the transaction (the “Acquisition”), the Company paid to the Seller aggregate consideration of $43.5 million, consisting of the following: (i) a cash payment of $18.0 million subject to a 60-day escrow to secure the payment of any working capital adjustments or any employee bonus obligations of Newswire, (ii) the issuance of a secured promissory note in the principal amount of $22.0 million (the “Secured Note”), and (iii) the issuance of 180,181 shares of the Company’s common stock, par value $0.001, valued at $3.9 million based on the Company’s closing stock price of $21.60 on the Closing Date. During the three months ended March 31, 2023, the Seller paid a $350,000 net working capital adjustment to the Company.
The Secured Note was due and payable on November 8, 2023, with an annual interest rate of 6%. The Secured Note allowed for prepayment, however, the 6% interest payment was guaranteed through the Maturity Date even if prepayments were made. On March 20, 2023, the Company paid $370,000 to pay the Secured Note in full, with the Seller agreeing to forgive $440,000 of interest which would have otherwise been due. The $370,000 payment is recorded in Other income (expense) on the Consolidated statements of operations for the six month-period ended June 30, 2023. As a result, there is no longer any obligation to the Seller as of June 30, 2023.
The Company has determined that the acquisition of Newswire constitutes a business acquisition as defined by ASC 805, Business Combinations. Accordingly, the assets acquired, and the liabilities assumed in the transaction were recorded at their acquisition date estimated fair value, while the transaction costs associated with the acquisition, which totaled $178,000, were expensed as incurred pursuant to the purchase method of accounting in accordance with ASC 805. The Company’s preliminary purchase price allocation was based on an evaluation of the appropriate fair values and represents management’s best estimate based on available data. Any changes within the measurement period resulting from facts and circumstances that existed as of the acquisition date may result in retrospective adjustments to the provisional amounts recorded at the acquisition date. The Company employed a third-party valuation firm to assist in determining the purchase price allocation of assets and liabilities acquired from Newswire. The income approach was used to determine the value of trademarks/tradename and client relationships. 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 for each asset 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; 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. This approach applies an industry-based royalty rate to future projected cashflows to express the fair value as the expected after-tax royalty savings of the asset. Fair values are determined based on the requirements of ASC 820, Fair Measurements and Disclosure. As of June 30, 2023, the calculation and allocation of the purchase price to tangible and intangible assets and liabilities is preliminary, as the Company is still in the process of accumulating all the required information to finalize the opening balance sheet and calculations of intangible assets.
A summary of the fair value consideration transferred for the Acquisition and the preliminary allocation to the fair value of the assets and liabilities of Newswire are as follows (in 000's):
Consideration transferred:

Cash payment

$ 18,000

Secured promissory note

22,000

Shares of Issuer Direct common stock based on closing market price prior to the Acquisition

3,892

Net working capital adjustment and other costs paid on behalf of Seller, net of cash

(350 )
Total consideration transferred

$ 43,542

Preliminary allocation of tangible and intangible assets and liabilities:

Goodwill

$ 16,122

Trademarks/Tradenames

27,500

Technology

2,520

Customer relationships

580

Net liabilities assumed

(3,180 )
Total amount allocated

$ 43,542

Net liabilities assumed:

Cash

$ 37

Accounts Receivable

90

Other Current Assets

14

Accounts Payable

(645 )
Accrued Expenses

(226 )
Deferred Revenue

(1,775 )
Deferred tax liability

(675 )

$ (3,180 )
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Supplemental pro forma information
The following unaudited supplemental pro forma information summarizes the Company’s results of operations for the current reporting period, as if the Company completed the acquisition as of the beginning of the annual reporting period.
Supplemental pro forma information is as follows:
in $000’s, except per share amounts

Three months ended June 30, 2022

Six months ended June 30, 2022

Revenues

$ 8,893

$ 17,643

Net income

437

1,102

Basic earnings per share

0.11

0.28

Diluted earnings per share

0.11

0.28

The unaudited pro forma combined financial information is presented for information purposes only and is not intended to represent or be indicative of the combined results of operations or financial position that we would have reported had the acquisitions been completed as of the date and for the periods presented and should not be taken as representative of our consolidated results of operations or financial condition following the acquisition. In addition, the unaudited pro forma combined financial information is not intended to project the future financial position or results of operations of the combined company.
The unaudited pro forma financial information was prepared using the acquisition method of accounting for the acquisition under existing US GAAP. Issuer Direct has been treated as the acquirer.
Note 4: Equity
Dividends
The Company did not pay any dividends during the three and six-month periods ended June 30, 2023 and 2022.
Preferred stock and common stock
There were no issuances of preferred stock or common stock during the three and six-month periods ended June 30, 2023 and 2022, other than stock awarded to employees and the Board of Directors.
Stock repurchase and retirement
On March 1, 2022, the Company’s board of directors authorized a stock repurchase program under which the Company was authorized to repurchase up to $5,000,000 of its common shares. As of August 31, 2022, the Company completed the repurchase program by purchasing a total of 207,964 shares as shown in the table below ($ in 000’s, except share or per share amounts):

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

March 1-31, 2022

6,200

$ 29.35

6,200

$ 4,818

April 1-30, 2022

8,226

27.76

8,226

4,590

May 1-31, 2022

80,748

22.92

80,748

2,739

June 1-30, 2022

74,227

23.98

74,227

959

July 1-31, 2022

32,392

24.88

32,392

153

August 1-31, 2022

6,171

24.79

6,171

—

No shares repurchased between September 2022 and June 2023

Total

207,964

$ 24.04

207,964

$ —

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2014 Equity Incentive Plan

On May 23, 2014, the shareholders of the Company approved the 2014 Equity Incentive Plan, as amended (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 ~~September~~June 30, ~~2022,~~2023, there are ~~140,995~~45,995 shares which remain ~~eligible~~ to be granted under the 2014 ~~Plan.~~Plan, which were assumed by the 2023 Plan described below.
On June 7, 2023, the shareholders of the Company approved the 2023 Equity Incentive Plan (the “2023 Plan”). Under the terms of the 2023 Plan, the Company is authorized to issue incentive awards for common stock up to 300,000 shares to employees and other personnel. The awards may be in the form of incentive stock options, nonqualified stock options, restricted stock, restricted stock units and performance awards. The 2023 Plan is effective through April 1, 2033. As of June 30, 2023, there are 331,663 shares which remain to be granted under the 2023 Plan, including 45,995 shares assumed under the 2014 Plan described above.

The following table summarizes information about stock options outstanding and exercisable at ~~September~~June 30, ~~2022:~~2023:

Options Outstanding

Options Exercisable

Exercise Price Range

Number

Weighted Average
Remaining Contractual
Life (in Years)

Weighted Average
Exercise Price

Number

$
0.01 - 8.00

7,500

2.42

$
7.12

7,500

8.01 - 11.00

3,500

4.82

10.11

3,500

11.01 - 16.00

18,000

5.78

13.12

18,000

16.01 - 27.00

38,000

8.55

24.19

8,000

$
27.01 - 27.71

20,250

9.30

27.71

1,500

Total

87,250

7.48

$
20.69

38,500

Options Outstanding

Options Exercisable

Exercise Price Range

Number

Weighted Average
Remaining Contractual
Life (in Years)

Weighted Average
Exercise Price

Number

$
0.01 - 8.00

7,500

1.67

$ 7.12

7,500

$
8.01 - 11.00

3,000

4.50

$ 10.25

3,000

$
11.01 - 16.00

18,000

5.04

$ 13.12

18,000

$
16.01 - 27.00

68,000

8.56

$ 25.42

15,500

$
27.01 - 27.71

12,750

8.55

$ 27.71

—

Total

109,250

7.39

$ 21.99

44,000

As of ~~September~~June 30, ~~2022,~~2023, the Company had unrecognized stock compensation related to the options of ~~$489,000,~~$682,000, which will be recognized through ~~2026.~~2027.

During the ~~nine months~~three and six-months ended ~~September~~June 30, 2023, the Company granted 14,332 and 74,832, respectively, of restricted stock units to employees, which vest at various intervals over the next 3 years. The average grant date fair value of these grants was $18.70 and $26.08 per share during the three and six-month periods ended June 30, 2023, respectively. During the three and six-months ended June 30, 2022, the Company granted ~~32,240~~12,440 and 32,440 restricted stock ~~units. No restricted stock~~ units, were granted during the three months ended September 20, 2022. An executive officer was granted 20,000 shares which do not vest until the third anniversary of the grant date and have a grant date fair value of $26.00 per share. Non-employee directors were granted 12,240 shares with a grant date fair value of $26.92 and ~~vest at the earlier of the 2023 annual meeting of the shareholders or one year.~~$26.35 per share, respectively. During the ~~nine months~~three and six-month periods ended ~~September~~June 30, ~~2022, 15,265~~2023, 18,129 restricted stock units with an average intrinsic value of ~~$26.05~~$25.85 per share, vested. ~~No restricted stock units vested during the three months ended September 30, 2022.~~ As of ~~September~~June 30, ~~2022,~~2023, there was ~~$666,000~~$2,117,000 of unrecognized compensation cost related to our unvested restricted stock units, which will be recognized through ~~2025.~~2026.
~~Stock repurchase and retirement~~
On August 7, 2019, the Company publicly announced a share repurchase program under which the Company was 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 $2,000,000 of its common shares. As of March 31, 2021, the Company completed the repurchase program by purchasing 179,845 shares as shown in the table below ($ in 000’s, except share or per share amounts):

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

No shares repurchased between June 2020 and February 2021
March 1-31, 2021

19,777

22.89

19,777

—

Total

179,845

$ 11.15

179,845

$ —

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On March 1, 2022, the Company’s board of directors authorized a stock repurchase program under which the Company was authorized to repurchase up to $5,000,000 of its common shares. The Company completed the repurchase program by purchasing 38,563 and 207,964 shares during the three and nine-month periods ended September 30, 2022, respectively, as shown in the table below ($ in 000’s, except share or per share amounts):

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

March 1-31, 2022

6,200

$ 29.35

6,200

$ 4,818

April 1-30, 2022

8,226

27.76

8,226

4,590

May 1-31, 2022

80,748

22.92

80,748

2,739

June 1-30, 2022

74,227

23.98

74,227

959

July 1-31, 2022

32,392

24.88

32,392

153

August 1-31, 2022

6,171

24.79

6,171

—

September 1-30, 2022

—

—

—

—

Total

207,964

$ 24.04

207,964

$ —

Note 4:5: Income ~~taxes~~Taxes

The ~~company~~Company recognized an income tax expense of ~~$180,000~~$482,000 and ~~$681,000~~$434,000 for the three and ~~nine-month periods~~six-month period ended ~~September~~June 30, ~~2022, respectively,~~2023, compared to ~~$319,000~~income tax expense of $327,000 and ~~$738,000~~$501,000 during the same periods of ~~2021.~~2022. At the end of each interim period, the Company estimates the effective tax rate expected to be applicable for the full fiscal year and this rate is applied to the results for the year-to-date period, and then adjusted for any discrete period items. For the three and ~~nine-month~~six-month periods ended ~~September~~June 30, 2023 and 2022, the variance between ~~the Company’s~~our effective tax rate and the U.S. statutory rate of 21% is primarily attributable to state income ~~taxes~~tax. The three and six months ended June 30, 2022, was also impacted by additional expense related to Global Intangible Low-Taxed Income ~~inclusion, partially offset by foreign tax credits.~~inclusion.
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Note 5:6: Leases

Leasing activity generally consists of office leases. In March 2019, a new lease was signed to move the corporate headquarters to Raleigh, North Carolina. The new lease, which had a lease commencement date of October 2, 2019, 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 ~~September~~June 30, ~~2022.~~2023. The Company 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. The Company also has an office in Salt Lake City, Utah, which is on a short-term lease that is month-to-month. As a result, the short-term lease recognition exemption has been elected for this lease, which means, for leases not expected to extend beyond twelve months, a ROU asset or lease liability will not be recognized.

Lease liabilities totaled ~~$1,787,000~~$1,549,000 as of ~~September~~June 30, ~~2022.~~2023. The current portion of this liability of ~~$365,000~~$374,000 is included in Accrued expenses on the Consolidated balance sheets and the long-term portion of ~~$1,422,000~~$1,175,000 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):

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For the Three Months Ended

For the Nine Months Ended

For the Three Months Ended

For the Six Months Ended

September 30,

September 30,

September 30,

September 30,

June 30,

June 30,

June 30,

June 30,

2022

2021

2022

2021

2023

2022

2023

2022

Lease expense

Operating lease expense

$ 89

$ 87

$ 268

$ 261

$ 76

$ 89

$ 152

$ 178

Variable lease expense

4

29

31

86

15

8

21

26

Total lease expense

$ 93

$ 116

$ 299

$ 347

$ 91

$ 97

$ 173

$ 204

The weighted-average remaining non-cancelable lease term for our operating leases was ~~5.25~~4.50 years as of ~~September~~June 30, ~~2022.~~2023. As of ~~September~~June 30, ~~2022,~~2023, the weighted-average discount rate used to determine the lease liability was 3.77%. The future minimum lease payments to be made under non-cancelable operating leases on ~~September~~June 30, ~~2022,~~2023, are as follows (in 000’s):

Year Ended December 31:

2022

$ 92

2023

369

$ 186

2024

379

379

2025

389

390

2026

400

401

Thereafter

413

2027

412

Total lease payments

2,042

1,768

Present value adjustment

(255 )

(219 )
Lease liability

$ 1,787

$
1,549

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.

Note 6:7: Revenue

The Company considers itself to be a single reportable segment under the authoritative guidance for segment reporting, specifically a communications and compliance company for publicly traded and private companies. The following tables present revenue disaggregated by revenue stream in (000’s):

Three months ended September 30,

Three months ended June 30,

Revenue Streams

2022

2021

2023

2022

Communications

$ 3,487

66.0 %

$ 3,686

67.4 %

$ 5,936

61.5 %

$ 3,691

63.6 %
Compliance

1,793

34.0 %

1,779

32.6 %

3,715

38.5 %

2,116

36.4 %
Total

$ 5,280

100.0 %

$ 5,465

100.0 %

$ 9,651

100.0 %

$ 5,807

100.0 %

Nine months ended September 30,

Six months ended June 30,

Revenue Streams

2022

2021

2023

2022

Communications

$ 10,561

64.5 %

$ 10,383

64.2 %

$ 12,502

68.4 %

$ 7,074

63.8 %
Compliance

5,814

35.5 %

5,782

35.8 %

5,768

31.6 %

4,021

36.2 %
Total

$ 16,375

100.0 %

$ 16,165

100.0 %

$ 18,270

100.0 %

$ 11,095

100.0 %

The Company ~~did not have any customers~~had one customer during the three ~~and nine-month periods~~-month period ended ~~September~~June 30, ~~2022 or 2021~~2023 that accounted for more than 10% of our revenue.
~~Note 7: Line of Credit~~
~~Effective October 3, 2021,~~ There were no customers during the ~~Company renewed its unsecured Line of Credit, which changed~~six -month period ended June 30, 2023 or during the ~~interest rate from LIBOR plus 1.75% to SOFR (Secured Overnight Financing Rate) plus 1.75%. The amount of funds available for borrowing remained $3,000,000~~three and ~~the term remained two years. As of September~~six -month periods ended June 30, 2022, ~~the interest rate was 4.22% and the Company did not owe any amounts on the Line~~which were more than 10% of ~~Credit.~~revenue.

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Note 8: ~~Subsequent Event~~
~~Acquisition of iNewsWire.com LLC~~Credit Agreement

On ~~November 1, 2022~~March 20, 2023 (the “Closing Date”), the Company entered into a ~~Membership Interest Purchase Agreement~~$25 million credit agreement (the ~~“Purchase~~“Credit Agreement”) with ~~Lead Capital, LLC, a Delaware limited liability company~~Pinnacle Bank (“Pinnacle”). The Credit Agreement provides for the following: (i) term loan facility in an aggregate principal amount of $20 million (the ~~“Seller”~~“Term Loan”), ~~whereby~~and (ii) revolving letter of credit in an up to aggregate principal amount of $5 million (the “Revolving LOC”), subject to an 85% limit based on the ~~Company purchased all of~~current eligible accounts receivable (as defined in the ~~issued and outstanding membership interests of iNewsWire.com LLC, a Delaware limited liability company (“Newswire”)~~Credit Agreement). Newswire is a leading media and marketing communications technology company that provides press release distribution, media databases, media monitoring, and newsrooms through its Media Advantage Platform.

~~Under~~Pursuant to the terms of the ~~Purchase~~Credit Agreement, ~~and~~the per annum interest rate of the Term Loan is variable based on the one-month secured overnight financing rate (“SOFR”) plus 2.35%, subject to a minimum SOFR of 2.00%. However, the Term Loan issued on the Closing Date has a per annum interest rate of 6.217%, which was fixed with respect to the entire principal amount as a result of an interest rate swap agreement entered into between the Company paid to the Seller aggregate consideration of approximately $43.9 million, consisting of the following: (i) a cash payment of $18.0 million subject to a 60-day escrow to secure the payment of any working capital adjustments or any employee bonus obligations of Newswire; (ii) the issuance of a Secured Promissory Note in the principal amount of $22.0 million (the “Secured Note”); and ~~(iii) the issuance of 180,181 shares of the Company’s common stock, par value $0.001, valued at approximately $3.9 million based on the Company’s closing stock price of $21.60~~Pinnacle on the Closing ~~Date.~~Date in accordance with the terms of the Credit Agreement.

The Company began making monthly interest-only payments on the Term Loan on April 1, 2023. Beginning on January 1, 2024, the Company will make monthly principal payments of $333,333 plus interest payments on the Term Loan until the maturity date of December 28, 2028.
The proceeds of the Term Loan along with certain cash on hand of the Company were used to repay in its entirety the one-year Secured Promissory Note (the “Secured Note”) issued to Lead Capital, LLC in connection with the Company’s November 1, 2022 acquisition of iNewswire.com LLC for a lump sum payment of $22,880,000. In order to settle the Secured Note on March 20, 2023, the Company paid $370,000 to the Seller, with the Seller agreeing to forgive $440,000 of interest which would have otherwise been due. The $370,000 payment is ~~due~~recorded in Other income (expense) on the Consolidated statements of operations. As a result, there is no longer any obligation to the Seller as of June 30, 2023.
The Company currently has no plans to utilize the Revolving LOC but may do so in the future. If the Company does utilize any funds under the Revolving LOC, the funds will bear interest at a per annum rate equal to the then current SOFR plus 2.05%. Pinnacle’s commitment to fund under the Revolving LOC terminates on September 1, 2024, unless terminated earlier pursuant to the terms of the Credit Agreement. The Company terminated its existing $3,000,000 unsecured line of credit with Fifth Third Bank immediately prior to the Closing Date. As of June 30, 2023, there was no outstanding balance under the Revolving LOC and ~~payable on November 8, 2023 (the “Maturity Date”) and bears an annual~~the interest rate was 7.12%.
The Credit Agreement contains the following financial covenants, which commenced with fiscal quarter ended June 30, 2023: a fixed charge coverage ratio of ~~6%.~~ no less than 1.20:1.00 and a leverage ratio requiring that, for each fiscal quarter of the Company ending on or after June 30, 2023 through September 30, 2023, the leverage ratio shall not exceed 2.75:1.00 and for each fiscal quarter of the Company ending after December 31, 2023, the leverage ratio shall not exceed 2.50:1.00. All covenants were successfully exceeded during the three month-period ended June 30, 2023.
The ~~Secured Note is~~Credit Agreement also contains customary affirmative covenants for a transaction of this nature, including among other things, covenants relating to: maintenance of adequate financial and accounting books and records, delivery of financial statements and other information, preservation of existence of the Company and subsidiaries, payment of taxes and claims, compliance with laws, maintenance of insurance, foreign qualification, use of proceeds, cash management system, maintenance of properties, and conduct of business.
The Credit Agreement also contains customary negative covenants for a transaction of this nature, including, among other things, covenants relating to debt, liens, investments, negative pledges, dividends and other debt payments, restriction on fundamental changes, sale of assets, transactions with affiliates, restrictive agreements, and changes in fiscal year.
The Credit Agreement also contains various Events of Default (subject to certain grace periods, to the extent applicable), including among other things, Events of Default for the nonpayment of principal, interest or fees; breach of certain covenants; inaccuracy of the representations or warranties in any material respect; bankruptcy or insolvency; dissolution or change of control; certain unsatisfied judgments; defaults under material agreements; certain unfunded liabilities under employee benefit plans; certain unsatisfied judgments; certain ERISA violations; and the invalidity or unenforceability of the Credit Agreement. If an Event of Default occurs, the Company may be required to repay all amounts outstanding under the Credit Agreement. The Term Loan and any advances under the Revolving LOC are secured by a first priority lien and security interest to the ~~intellectual property (with certain exceptions) and~~benefit of Pinnacle in the ~~domain names acquired by the Company as part~~Event of Default on all of the ~~acquisition. The Secured Note may be prepaid, however,~~Company’s current or future assets and each of the ~~6% interest payment is guaranteed through the Maturity Date even if prepayments are made.~~Guarantor’s current or future assets.

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Note 9: Interest Rate Swap
The Company entered into an interest rate swap agreement to convert its interest rate exposure from variable rate to fixed rate to control cash outflows related to interest on its variable rate debt. The Company has $20,000,000 of notional amount interest rate swap agreement, which amortizes in-line with its long-term credit agreement. Under the swap agreement, the Company pays a fixed rate of interest at 6.217% and receives an average variable rate of SOFR + 2.35% adjusted monthly. At June 30, 2023, the weighted average rate was 7.42%.
The carrying amount for the Company’s derivative financial instrument is the estimated fair value of the financial instrument. The Company’s derivative is not exchange listed and therefore the fair value is estimated under a mark-to-market approach using an analytics model that is a readily observable market input. This model reflects the contractual terms of the derivative, such as notional value and expiration date, as well as market-based observables including interest rates, yield curves, and the credit quality of the counterparty. The model also incorporates the Company’s creditworthiness in order to appropriately reflect non-performance risk. Inputs to the derivative pricing model are generally observable and do not contain a high level of subjectivity, and accordingly, the Company’s derivative is classified within Level 2 of the fair value hierarchy. While the Company believes its estimate results in a reasonable reflection of the fair value of the instrument, the estimated value may not be representative of actual value that could have been realized or that will be realized in the near future.
In accounting for the interest rate swap, the Company has determined it does not qualify for hedge accounting. The fair value of the swap agreement as of June 30, 2023 was a net asset of $214,000 and is included in Other long-term assets, in the Consolidated Balance Sheets. The fair value of the interest rate swap agreement excludes accrued interest and takes into consideration current interest rates and current likelihood of the swap counterparty’s compliance with its contractual obligations. As a result of the interest rate swap, we have also recognized a net unrealized gain of $379,000 and $214,000, which is included in Other income (expense) in the Consolidated statements of operations during the three and six-month periods ended June 30, 2023, respectively.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The discussion of the financial condition and results of operations of the Company set forth below should be read in conjunction with the consolidated financial statements and related notes thereto included elsewhere in this Form10-Q. This Form10-Q contains forward-looking statements that involve risks and uncertainties. The statements contained in this Form10-Q that are not purely historical are forward-looking statements within the meaning of Section 27a of the Securities Act and Section 21e of the Exchange Act. When used in this Form10-Q, or in the documents incorporated by reference into this Form 10-Q, the words “anticipate,” “believe,” “estimate,” “intend” and “expect” and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements include, without limitation, the statements regarding the Company’s strategy, future sales, future expenses, future liquidity, and capital resources. All forward-looking statements in this Form10-Q are based upon information available to the Company on the date of this Form10-Q, and the Company assumes no obligation to update any such forward-looking statements. The Company’s actual results could differ materially from those discussed in this Form10-Q for many ~~reasons, including the impact of the COVID-19 pandemic.~~reasons. Factors that could cause or contribute to such differences (“Cautionary Statements”) include, but are not limited to, those discussed in Item 1. Business — “Risk Factors” and elsewhere in the Company’s Annual Report on Form10-K for the year ended December 31, ~~2021,~~2022, which are incorporated by reference into this Form 10-Q. All subsequent written and oral forward-looking statements attributable to the Company, or persons acting on the Company’s behalf, are expressly qualified in their entirety by the Cautionary Statements.

Overview

Issuer Direct Corporation and its subsidiaries are hereinafter collectively referred to as “Issuer Direct”, the “Company”, “We” or “Our” unless otherwise noted. Our corporate headquarters are located at One Glenwood Ave., Suite 1001, Raleigh, North Carolina, 27603.

We announce material financial information to our investors using our investor relations website, ~~(www.issuerdirect.com),~~ SEC filings, investor events, news and earnings releases, public conference calls, webcasts, and social media. We use these channels to communicate with our investors and the public about our company, our products and services and other related matters. It is possible that information we post on some of these channels could be deemed to be material information. Therefore, we encourage investors, the media and others interested in Issuer Direct to review the information we post to all our channels, including our social media accounts.

We are a ~~premier provider of~~leading communications and compliance company, providing solutions for both public relations and investor relations professionals. Our comprehensive solutions are used by thousands of customers from emerging startups to multi-billion-dollar global brands, ensuring their most important moments are reaching the right audiences, via our industry leading newswire, IR website solutions, events technology ~~solutions that are designed to help organizations tell their stories globally.~~and compliance solutions. Our ~~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. Platform ~~id.~~ efficiently and effectively helps our customers manage their events when seeking to distribute their messaging to key constituents, investors, markets and regulatory systems around the globe. ~~Platform~~ ~~id.~~
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Our platform consists of several related but distinct Communications and Compliance modules that ~~our~~companies and customers utilize every quarter.
We As such, we disclose our ~~revenues~~revenue in the following two main categories: (i) Communications and (ii) Compliance. Set forth below is an infographic depicting the products included in each of these two main categories we provide today:

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~~Over~~In the ~~next several years,~~future, we expect the Communications portion of our business to continue to increase, both in terms of overall revenue and as compared to the Compliance portion of our ~~business.~~business as it has done in the past. Therefore, we plan to continue to invest in offerings we intend to incorporate into and complement our Communications product lineup. Within most of our target markets, customers require several individual services and/or software providers to meet their investor relations and communications needs. We believe ~~Platform~~ ~~id.~~our platform can address all these needs in a single, secure, cloud-based platform - one that offers a customer control, increases efficiencies, demonstrates clear value and, most importantly, delivers consistent and compliant messaging from one centralized platform.

We work with a diverse customer base, which includes not only corporate issuers and private companies, but also investment banks, professional firms, such as investor relations and public relations firms, as well as the accounting and legal communities. Our customers and their service providers utilize our platform and related solutions from document creation all the way to dissemination to regulatory bodies, news outlets, financial platforms, and our customers’ shareholders. Private companies primarily use our news distribution, newsroom and webcasting products and services to disseminate their message globally.

We also work with several select stock exchanges by making available certain parts of our platform under agreements to integrate our offerings within their products. We believe such partnerships will continue to yield increased exposure to a targeted customer base that could impact our revenue and overall brand in the market.

Communications

Our Communications platform consists of our press release distribution businesses branded as ACCESSWIRE ~~branded newswire,~~and Newswire, our webcasting and events business, professional conference and events software, as well as our investor relations website technology. Our ACCESSWIRE and Newswire news distribution platforms have been integrated into one dissemination platform that will give our customers all the distribution benefits of our global distribution footprint. These products are sold as the leading part of our ~~Platform~~ ~~id.~~Communications subscription, as well as individually to customers around the globe and are further described below.

Acquisition of iNewswire.com LLC

On November 1, 2022, we acquired iNewswire.com LLC (“Newswire”). Newswire is a media technology company that provides customers press release distribution, media databases, media monitoring, and newsrooms for greater brand awareness through earned media, increased online visibility through greater search engine optimization recognition, and more sales inquiries through targeted digital marketing campaigns. Through its PR Optimizer (”PRO”) offering, formally Media Advantage Platform, Newswire automates media and marketing communications for large and small businesses seeking to deliver the right message to the right audience at the right time for the right purpose.

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We believe this transaction strengthens our entire communications portfolio and combined with our ACCESSWIRE business, grows our press release distribution business to now be one of North America’s largest press release distribution platforms. The acquisition almost doubles our press release customer base and combines what we believe are qualified people and strong distribution, technology and brands. Newswire customers will benefit from the global footprint ACCESSWIRE has built over the last eight years, whereas Issuer Direct’s customers will have access to Newswire’s brand-new media database platform, pitching and monitoring capabilities, as well as its PRO offering. Lastly, we believe the acquisition will also result in meaningful operational synergies in the combined company.

Through the PRO offering, we provide content and media communications services that provide customers the opportunity to optimize their content and increase their media visibility, therefore building their brand awareness and engaging a larger audience. With the flexibility of these offerings, customers have the ability to choose between support with content optimization, increased media visibility, or both for optimal results. We believe the Total PRO product offering provides the most effective and efficient integrated media and content communication program available in the market today.

ACCESSWIRE

Our existing press release offering, which is marketed under the brand ACCESSWIRE, is a news dissemination and media outreach service. The ACCESSWIRE product offering focuses on press release distribution for both private and public companies globally. We believe ACCESSWIRE is becoming a competitive alternative in the newswire industry because we have been able to use our technological advancements to allow customers to self-edit releases or use our editorial staff as desired to edit releases. We continue to expand our distribution points, improve our targeting and enhance our analytics reporting. We also offer an e-commerce element to our ACCESSWIRE product, whereby customers can self-select their distribution, register, and then upload their press release for editorial review in minutes. We believe these enhancements have helped ~~lead to an~~ increase in ACCESSWIRE revenues ~~and customers~~ each year compared to the prior year, a trend we expect to continue over the next several years. We have also been able to maintain high gross margins while providing our ~~customers~~customer flexible pricing, with options to pay per release or enter longer-term agreements for a designated package of releases.

Like other newswires globally, ACCESSWIRE isand Newswire are dependent upon several key partners for its news distribution. Disruption in any of our partnerships could have a materially adverse impact on ~~ACCESSWIRE and~~ our overall business.

Newsroom

A natural ~~expansion~~addition to our ACCESSWIRE and investor relations website business is our corporate ~~Newsroom, which we brought to market during the middle of the third quarter of 2021.~~Newsroom. This product offering can be an add-on to any customer’s ACCESSWIRE or ~~Platform~~ ~~id.~~Communications subscription account. The Newsroom suite includes a custom newsroom page builder, a brand asset manager and contact manager.

Our Newsroom suite addresses the needs of our customers looking to build connections with media, journalists, customers and if applicable the investment community. According to a survey from TekGroup, a majority of journalists and media professionals indicated the importance of newsrooms that include digital media, press kits and video. We believe our Newsroom suite accomplishes this by including the following three components:

Newsroom page -– a custom URL, self-publishing system for customers that automatically adds ACCESSWIRE news to their newsroom and allows them the ability to add any other mention, article or post from the ~~internet~~web to their newsroom. Customers can self-manage this platform to customize colors, font, logo, images, social integration, and contact and customer URLs.

Brand Asset Manager -– a customizable library of images, video and press kits, which can be shared both privately and publicly, as well as integrated into the ACCESSWIRE editor for easy access of customers’ high- resolution images. All assets are tagged to give our customers analytics for both views and downloads. Subsequent versions of this feature will allow for greater analytics as engagement occurs with our customers’ assets.

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Contact Manager -– a technology that allows our customers to provide their audiences the ability to quickly subscribe to alerts or notifications of a particular brand. Customers ~~will~~ have the ability to deliver their stories automatically or time based. Engagement and delivery reports ~~will~~are also be available to customers directly from their dashboard.

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Webcasting & Events

Our webcasting and events business is comprised of our earnings call webcasting solutions and our virtual meeting and events software (such as annual meetings, deal/non-deal road shows, analyst days and shareholder days). The demand for these products with a virtual component was at an all-time high for us in 2020, largely due to the COVID-19 pandemic. ~~The~~Since the end of the pandemic, the industry overall has ~~begun to see~~seen a reduction in the number of virtual events, specifically annual meetings and deal/non-deal roadshows, as customers are relying on internal enterprise solutions or are returning to pre-pandemic travel and in-person meetings, reducing the need for a virtual component. This has contributed to a decline in demand for our virtual components since ~~the prior year.~~2020 and 2021.

Traditional earnings calls and webcasts are a highly competitive market with the majority of the business being driven from practitioners in investor relations and communications firms. We estimate there are approximately 5,000 companies in North America conducting earnings events each quarter that include a teleconference, webcast or both as part of their events. ~~Platform~~ ~~id.~~ ~~also~~Our platform incorporates other elements of the earnings event, including earnings date/call announcement, earnings press release and SEC Form 8-K filings. There are a handful of our competitors that can offer this integrated full-service solution today, however, we believe our real-time event setup and integrated approach offers a more effective way to manage the process.

Additionally, as a commitment to broadening the reach of our webcast platform, we broadcast live additional companies’ earnings events, whether they are conducted on our platform or not, within our shareholder outreach module, which helps drive new audiences and give companies the ability to view their analytics and engagement of each event. ~~During the first half of 2021, we released the first version of this real-time engagement and analytics dashboard to our customers subscribing to Platform~~ ~~id.~~

Our VisualWebcaster Platform (“VWP”) is a cloud-based webcast, webinar and virtual meeting platform that delivers live and on-demand streaming of events to audiences of all sizes. VWP allows customers to create, produce and deliver events, which we feel has significantly strengthened our webcasting product and ~~Platform~~ ~~id.~~Communications offering. The VWP technology gives us the ability to host thousands of webcasts each year, expanding and diversifying our webcast business from our historical earnings-based events to include any type of virtual event. As we expand our platform, it is vital for us to have solutions that service both our core public companies but also a growing segment of private customers.

Professional Conference and Events Software

Our professional conference and events software is a subscription offering we currently license to investor conference organizers, which in the aggregate we believe held an estimated 1,000 plus events a year prior to 2020. This number significantly decreased in 2020 and is expected to remain at decreased levels in the near future and possibly long-term as a result of COVID-19.organizers. This software, which is also available as a native mobile app, offers organizers, issuers and investors the ability to register, request and approve one-on-one meetings, manage schedules, perform event promotion and sponsorship, print attendee badges and manage lodging. This cloud-based product can be used in a virtual or in person conference setting and is integrated within ~~Platform~~ ~~id.~~ ~~to enhance~~ our Communications ~~module~~ subscription offerings of newswire, newsrooms, webcasting and shareholder targeting. We believe this integration gives us a unique offering for professional conference organizers that is not available elsewhere in the market. ~~We believe this software helps make Platform~~ ~~id.~~ a platform of choice for investment banks, issuers and investors. However, similar to our virtual events business, the transition of conferences back to in-person events has had an impact on our conference events software subscription business, as in-person events have either been smaller or delayed due to pandemic concerns.

Investor Relations Websites

Our investor relations content network is another component of ~~Platform~~ ~~id.~~,our Communications offering, which is used to create the investor ~~relations~~relations’ tab of a company’s website. This investor relations content network is a robust series of data feeds including news feeds, stock feeds, fundamentals, regulatory filings, corporate governance and many other components which are aggregated from most of the major exchanges and news distribution outlets around the world. Customers can subscribe to one or more of these data feeds or as a component of a fully designed and hosted website for pre-IPO companies, SEC reporting companies and partners seeking to display our content on their corporate sites. The clear benefit to our investor relations content network is its integration ~~into Platform~~ ~~id.~~with our other Communications offerings. As such, companies can produce content for public distribution and it is automatically linked to their corporate website, distributed to targeted groups and placed into our data feed partners.

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Compliance

~~Compliance~~

Our Compliance offerings consist of our disclosure software for financial reporting, stock transfer services, whistleblower hotline and related annual meeting, print and shareholder distribution services. Some of these products are sold as part of a ~~Platform~~ ~~id.~~Compliance subscription as well as individually to customers around the globe.

Disclosure Software and Services

~~Platform~~ ~~id.~~’sOur disclosure reporting module is a document conversion, editing and filing offering which is designed for reporting companies and professionals seeking to insource the document drafting, editing and filing processes to the SEC’s EDGAR system. Our disclosure business also offers companies the ability to use our in-house staff to assist in the conversion, tagging and filing of their documents. We generate revenues in disclosure both from ~~both~~ software and services and, in most cases, customers have both components within their annual agreements, while others pay for services as they are completed.

Our Inline XBRL (Inline Extensible Business Reporting Language or “iXBRL”) product now includes upgrades that meet mandated SEC disclosure requirements which became effective last year. These requirements began impacting most of our customers on June 15, 2021, however, we had a number of customers previously file using our iXBRL product.

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Whistleblower Hotline

Our ~~Whistleblower~~whistleblower hotline is an add-on product within ~~Platform~~ ~~id.~~our platform. This system delivers secure notifications and basic incident workflow management processes that align with a company’s corporate governance whistleblower policy. As a supported and subsidized bundle product of the New York Stock Exchange (“NYSE”) offerings, we are introduced to new IPO customers and other larger cap customers listed on the NYSE. Since 2014, we have been a named NYSE subsidy provider of this Whistleblower solution. In 2020, NYSE renewed and extended the initial subsidy term to four years from two years, whereby the first two years are provided under subsidy and the added two years are at our standard subscription rates. Recently, we have been working on upgrading the incident response and management component of the workflow, which is expected to be completed this year.

Stock Transfer Module

A valued subscription add-on in our ~~Platform~~ ~~id.~~Compliance offering is the ability for our customers to gain access to real-time information about their shareholders, stock ledgers and reports and to issue new shares from our cloud-based stock transfer module. Managing the capitalization table of a public company or pre-IPO company is a cornerstone of corporate governance and transparency, and as such companies and community banks have chosen us to assist with their stock transfer needs, including bond offerings and dividend management. This is an industry which has experienced declining overall revenues as it was affected by the replacement of paper certificates with digital certificates. However, we have been focused on selling subscriptions of the stock transfer component of our platform, allowing customers to gain access to our cloud-based system in order to move shares or query shareholders, which we believe has resulted in a more efficient process for both our customers and us.

Annual Meeting / Proxy Voting Platform

Our proxy module is marketed as a fully integrated, real-time voting platform for our customers and their shareholders of record. This module is utilized for every annual meeting or special meeting we manage for our customers and offers both full-set mailing and notice of internet availability options.

This module has been incorporated within our webcasting offering to enable our customers the ability to conduct their annual meetings in-person or fully ~~virtual, which has often been required since the COVID-19 pandemic.~~virtual. Our solution incorporates shareholder and guest registration, voting integration, real-time statistics on attendance, audio video and presentation features as well as fully managed meeting managers and inspector of elections. Although we believe a virtual component to an annual meeting is both a benefit to all shareholders and a corporate governance advantage, there can be no assurances this product has longevity in the market.

Shareholder Distribution

Over the past few years, we have worked on refining the model of digital distribution of our customers’ message to the investment community and beyond. This was accomplished by integrating our shareholder outreach module, Investor Network, into and with ~~Platform~~ ~~id.~~our Compliance offerings. Most of the customers subscribing to this module today are historical PrecisionIR -(“PIR”) – Annual Report Service (“ARS”) users, as well as new customers purchasing the entire ~~Platform~~ ~~id.~~platform subscription. We migrated some of the customers from the traditional ARS business into this new digital subscription business, however, we continue to operate a portion of this legacy physical hard copy delivery of annual reports and prospectuses for customers who opt to take advantage of it. We continue to see customer attrition for customers who subscribe to both the electronic and physical distribution of reports as a stand-alone product.

Results of Operations

Comparison of results of operations for the three and six-months ended June 30, 2023 and 2022 (in 000’s):

Three Months Ended June 30,

Percentage of Revenue⁽¹⁾

2023

2022

2023

2022

Revenue:

Communications revenue

$ 5,936

$ 3,691

62 %

64 %
Compliance revenue

3,715

2,116

38 %

36 %
Total revenue

9,651

5,807

100 %

100 %
Cost of revenue:

Communications cost of revenue

1,433

747

24 %

20 %
Compliance cost of revenue

903

617

24 %

29 %
Total cost of revenue

2,336

1,364

24 %

23 %
Gross Margin:

Communications gross margin

4,503

2,944

76 %

80 %
Compliance gross margin

2,812

1,499

76 %

71 %
Total gross margin

7,315

4,443

76 %

77 %
Operating Expenses:

General and administrative

2,274

1,563

24 %

27 %
Sales and marketing

2,039

1,371

21 %

24 %
Product development

532

214

6 %

4 %
Depreciation and amortization

723

147

7 %

3 %
Total expenses

5,568

3,295

58 %

57 %
Operating income

1,747

1,148

18 %

20 %
Interest (expense) income, net

(281 )

20

(3 )%

0 %
Other income

379

—

4 %

—
%
Income before income taxes

1,845

1,168

19 %

20 %
Income tax provision

482

327

5 %

6 %
Net income

$ 1,363

$ 841

14 %

14 %

1922
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~~Results of Operations~~

Six Months Ended June 30,

Percentage of Revenue⁽¹⁾

2023

2022

2023

2022

Revenue:

Communications revenue

$ 12,502

$ 7,074

68 %

64 %
Compliance revenue

5,768

4,021

32 %

36 %
Total revenue

18,270

11,095

100 %

100 %
Cost of revenue:

Communications cost of revenue

2,817

1,508

23 %

21 %
Compliance cost of revenue

1,348

1,088

23 %

27 %
Total cost of revenue

4,165

2,596

23 %

23 %
Gross Margin:

Communications gross margin

9,685

5,566

77 %

79 %
Compliance gross margin

4,420

2,933

77 %

73 %
Total gross margin

14,105

8,499

77 %

77 %
Operating Expenses:

General and administrative

4,606

3,246

25 %

29 %
Sales and marketing

4,420

2,635

24 %

24 %
Product development

1,306

489

7 %

4 %
Depreciation and amortization

1,445

293

8 %

3 %
Total expenses

11,777

6,663

64 %

60 %
Operating income

2,328

1,836

13 %

17 %
Interest (expense) income, net

(519 )

22

(3 )%

0 %
Other expense, net

(156 )

—

(1 )%

—
%
Income before income taxes

1,653

1,858

9 %

17 %
Income tax provision

434

501

2 %

5 %
Net income

$ 1,219

$ 1,357

7 %

12 %

~~Comparison of results of operations for the three and nine months ended September 30, 2022 and 2021:~~

Three months ended

Nine months ended

September 30,

September 30,

Revenue Streams

2022

2021

2022

2021

Communications

Revenue

$ 3,487

$ 3,686

$ 10,561

$ 10,383

Gross margin

$ 2,680

$ 2,882

$ 8,246

$ 7,839

Gross margin %

77 %

78 %

78 %

75 %

Compliance

Revenue

$ 1,793

$ 1,779

$ 5,814

$ 5,782

Gross margin

$ 1,388

$ 1,228

$ 4,321

$ 4,097

Gross margin %

77 %

69 %

74 %

71 %

Total

Revenue

$ 5,280

$ 5,465

$ 16,375

$ 16,165

Gross margin

$ 4,068

$ 4,110

$ 12,567

$ 11,936

Gross margin %

77 %

75 %

77 %

74 %
(1)
Percentage of revenue is calculated as the relevant revenue, expense, income amount divided by total revenue, except for communications and compliance cost of revenue and communications and compliance gross margin, which are divided by the related component of revenue.

Revenues

Total revenue ~~decreased by $185,000,~~increased $3,844,000, or 3%66%, to ~~$5,280,000~~$9,651,000 during the ~~three-month period~~three months ended ~~September~~June 30, ~~2022,~~2023, as compared to ~~$5,465,000~~$5,807,000 for the same period of 2022. Total revenue increased by $7,175,000 or 65%, to $18,270,000 during the six months ended June 30, 2023, as compared to $11,095,000 during the same period of ~~2021. Total~~2022. The increases are primarily attributable to the acquisition of Newswire on November 1, 2022, as well as an increase in revenue ~~increased by $210,000, or 1%, to $16,375,000 during the nine-month period ended September 30, 2022, compared to $16,165,000 during the same period of 2021.~~from our Compliance revenue stream.

Communications revenue ~~decreased $199,000,~~increased $2,245,000, or ~~5%,~~61% and ~~increased $178,000,~~$5,428,000, or ~~2%, during~~77% to $5,936,000 and $12,502,000 for the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, as compared to the same periods of ~~2021.~~2022. The ~~decrease~~increase in revenue ~~for~~is primarily related to the ~~three-month period~~acquisition of Newswire, which is all included in Communications revenue. For the six months ended ~~September~~June 30, 2022, is attributed to a decrease in revenue from our webcasting and events revenue stream, partially due to less demand for our virtual products as conferences and meetings began to move back to in-person events, as well as timing of some events being pushed into the fourth quarter of 2022. This decrease was partially offset by an increase in2023, we also generated increased revenue from our ACCESSWIRE ~~news brand. ACCESSWIRE revenue for the three-month period ended September 30, 2022,~~business, which increased ~~approximately 6%,~~10% compared to the same period of the prior ~~year. We also generated increased revenue from our investor relations websites and news feed product lines. The~~year, primarily due to an increase in average revenue ~~for the nine months ended September 30, 2022 is due to a 13% increase in revenue from ACCESSWIRE as well as increased revenue from investor relations websites and news feed product lines.~~per release. These increases were partially offset by a decrease in revenue from our events and webcasting business, primarily due to less virtual events and annual meetings during the ~~aforementioned reasons.~~three and six months ended June 30, 2023, as compared to the prior year. Communications revenue ~~was 66%~~represented 62% and ~~65%~~68% of total revenue during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, as compared to ~~67% and~~ 64% ~~during~~for the same periods of ~~the prior year.~~
Compliance revenue increased $14,000, or 1% and $32,000 or also 1% during the three and nine-month periods ended September 30, 2022, respectively, as compared to the same periods of 2021. The increase in revenue is due primarily to an increase in revenue from print and proxy fulfillment services due to larger transactions during the periods. Revenue from our transfer agent services also increased for the three month-period ended September 30, 2022 due to an increase in subscription fees, however, continues to remain lower on a year-to-date basis. The increase in revenue from proxy fulfillment services was also partially offset by declines in disclosure services and software revenue and our legacy ARS services due to customer attrition.
~~No customers accounted for more than 10% of the revenues during the three and nine-month periods ended September 30, 2022, or 2021.~~
~~Deferred Revenue~~
At September 30, 2022, our deferred revenue balance was $3,429,000, which we expect to recognize over the next twelve months, compared to $3,086,000 at December 31, 2021, an increase of 11%. Deferred revenue primarily consists of advance billings for subscriptions of our cloud-based products and pre-paid packages of our news distribution product, as well as advance billings for annual service contracts.2022.

2023
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Compliance revenue increased $1,599,000, or 76% and $1,747,000, or 43%, during the three and six months ended June 30, 2023, respectively, as compared to the same periods of 2022. The increase was primarily related to an increase in revenue from our print and proxy fulfillment services due to a few significant transactions which occurred during the period as well as an increase in revenue from our transfer agent services due to an increase in corporate actions and directives during the period.
Revenue Backlog
As of June 30, 2023, our deferred revenue balance was $5,729,000, which we expect to recognize over the next twelve months, compared to $5,405,000 as of December 31, 2022, an increase of 6%. Deferred revenue primarily consists of advance billings for packages of our news distribution product as well as advance billings for subscriptions of our cloud-based products and annual service contracts.
Cost of Revenues

Communications cost of revenues ~~consists~~consist primarily of direct labor costs, newswire distribution costs, teleconferencing costs, and third-party licensing costs. Compliance cost of ~~revenue consists~~revenues consist primarily of direct labor costs, warehousing, logistics, print production materials ~~postage,~~ and ~~amortization of capitalized software costs related to our disclosure software. Overall cost~~postage. Cost of revenues ~~decreased by $143,000,~~increased $972,000, or ~~11%,~~71% and ~~$421,000,~~$1,569,000, or ~~10%~~60%, during the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, as compared to the same periods of ~~2021.~~2022. Overall gross margin ~~decreased $42,000,~~increased $2,872,000, or ~~1%,~~65% and ~~increased $631,000,~~$5,606,000, or 5%66%, during the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, as compared to the same periods of ~~the prior year. Overall~~2022. As a result, overall gross margin ~~percentages increased~~percentage decreased to 76% for the three months ended June 30, 2023, as compared to 77% during ~~both~~ the ~~three and nine~~same period of 2022, however, remained flat during the six months ended ~~September~~June 30, ~~2022, respectively,~~2023, as compared to ~~75% and 74% during~~ the same ~~periods~~period of ~~2021.~~2022.

Cost of revenues associated with our Communications revenue ~~remained flat~~increased $686,000, or 92% and $1,309,000, or 87%, during the ~~three-month period ended September 30, 2022,~~three and ~~decreased $229,000, or 9% during the nine~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, as compared to the same periods of ~~2021. The decrease for the nine-month period ended September 30, 2022, is~~2022. These increases are primarily due to ~~lower teleconferencing costs and other~~an increase in costs associated with operations of Newswire as well as an increase in distribution costs associated with ACCESSWIRE as we continue to expand our ~~events and webcasting business.~~distribution. Gross margin ~~percentages from~~percentage associated with our Communications revenue was 76% and 77% ~~and 78% during~~for the three and ~~nine-month periods~~six-months ended ~~September~~June 30, ~~2022,~~2023, respectively, as compared to ~~78%~~80% and ~~75%~~79% during the same periods of 2021. The decrease in gross margin percentage for the three-month period ended September 30, 2022 is due to the decrease in revenue from our webcasting and events business, partially offset by an increase in ACCESSWIRE revenue as a percentage of total Communications revenue. The increase in gross margin percentage during the nine-month period ended September 30, 2022 is associated with the decrease in costs noted above along with an increase in ACCESSWIRE revenue as a percentage of total Communications revenue.2022.

Cost of revenues associated with our Compliance revenue ~~decreased $146,000,~~increased $286,000, or ~~26%~~46% and ~~$192,000,~~$260,000, or ~~11%~~24%, during the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, as compared to the same ~~periods~~period of ~~2021.~~2022. The ~~decrease in Compliance cost of revenues~~increase is due to ~~lower amortization expense associated with our disclosure software offset by an increase in~~higher print and postage costs associated with the ~~increase in~~increased revenue from print and proxy ~~and~~ fulfillment ~~services. Gross margins percentages from~~services during the periods. As a result, gross margin percentage associated with our Compliance revenue ~~were~~increased to 76% and 77% ~~and 74% during~~for the three and ~~nine-month periods~~six-months ended ~~September~~June 30, ~~2022,~~2023, respectively, as compared to ~~69%~~71% and ~~71%~~73% for the same periods of 2021. The increase in gross margin percentage during both periods is primarily due to lower amortization expenses associated with our disclosure software, partially offset by an increase in postage and print and proxy fulfillment costs.2022.

~~Operating Expenses~~
General and Administrative ~~Expense~~Expenses

General and administrative expenses consist primarily of salaries, bonuses, stock-based compensation, insurance, fees for professional services, general corporate expenses ~~(including bad debt expense)~~ and facility and equipment expenses. General and administrative expenses were ~~$1,657,000 and $4,903,000~~$2,274,000 during the three ~~and nine~~ months ended ~~September~~June 30, ~~2022, respectively,~~2023, an increase of ~~$399,000,~~$711,000, or ~~32%~~45%, as compared to the same period of 2022. General and ~~$980,000,~~administrative expenses were $4,606,000 for the six months ended June 30, 2023, an increase of $1,360,000, or ~~25%~~42%, ~~respectively,~~as compared to the same periods of ~~2021.~~2022. The increase is primarily driven by additional expenses associated with costs to operate Newswire, one-time transaction and integration costs, employee-related costs and stock compensation ~~expense, employee-related costs,~~expense. These increases were offset by a reduction in executive recruiting fees ~~and insurance expense associated with investments for future growth.~~during the six months ended June 30, 2023, compared to the same period of 2022.

As a percentage of revenue, general and administrative expenses were ~~31%~~24% and ~~30%~~25% for the three and ~~nine-month periods~~six-months ended ~~September~~June 30, ~~2022,~~2023, respectively, as compared to ~~23%~~27% and ~~24%~~29% for the same periods of ~~2021.~~2022.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of salaries, stock-based compensation, sales commissions, advertising expenses, tradeshow expenses and other marketing expenses. Sales and marketing expenses were ~~$1,231,000 and $3,866,000~~$2,039,000 for the three ~~and nine-month periods~~months ended ~~September~~June 30, ~~2022, respectively, a decrease of $118,000, or 9%, and~~2023, an increase of ~~$233,000,~~$668,000, or 6%49%, as compared to the same ~~periods~~period of 2022. Sales and marketing expenses were $4,420,000 for the six months ended June 30, 2023, an increase of $1,785,000, or 68% as compared to the same period of 2022. These increases are primarily due to the addition of the prior year. The decrease during the three-month period ended September 30, 2022 is due to a decrease in commission expense, partially offset by an increase in advertising and digital marketing spend. The increase during the nine-month period is directly related to our investment in ourNewswire sales ~~and marketing initiatives with an increase in headcount, advertising, digital marketing spend and system enhancements, partially offset by a decrease in commission expense.~~team.

As a percentage of revenue, sales and marketing expenses were ~~23%~~21% and 24% ~~during~~for the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, as compared to ~~25% and 22%~~24% for the same periods of ~~2021.~~ 2022.

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Table of Contents
Product Development Expenses

Product development expenses consist primarily of salaries, stock-based compensation, bonuses, and licenses to develop new products and technology to complement and/or enhance ~~Platform~~ id.our platform. Product development expenses ~~decreased $128,000,~~increased $318,000, or ~~34%,~~149% and ~~$144,000~~$817,000, or ~~16%,~~167% to $532,000 and $1,306,000 during the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, as compared to the same periods ~~in 2021. The decrease is primarily due~~of 2022. These increases are directly attributed to ~~fewer consultants used on development projects during the three and nine-month periods ended September 30, 2022.~~additional costs associated with Newswire as well as hiring our new Chief Technology Officer. During the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2021,~~2023, we capitalized ~~$54,000 and $161,000 of~~$167,000 costs related to the ~~development~~build of our ~~newsroom product, respectively, which launched in July 2021. No costs were capitalized during the three~~new artificial intelligence and ~~nine months ended September 30, 2022.~~media database products.

As a percentage of revenue, product development expenses were 5%6% and 4%7% for the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, as compared to ~~7% and 5% during~~4% for the same periods of ~~2021.~~ 2022.

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~~Table of Contents~~
Depreciation and Amortization Expenses

Depreciation and amortization expenses ~~decreased $7,000,~~increased $576,000, or ~~5%,~~392% and ~~$18,000,~~$1,152,000, or ~~4%,~~393% during the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2022,~~2023, respectively, as compared to the same periods of ~~2021.~~2022. The increase is attributed to increased amortization associated with intangible assets acquired in the Newswire acquisition.

Interest (expense) income, net

We recognized interest expense of $375,000 and $712,000 for the three and six months ended June 30, 2023. Interest ~~income, net,~~expense primarily represents interest attributed to our new, long-term credit agreement as well as interest on our settled $22,000,000 note payable associated with the acquisition of Newswire. There was no interest expense during the three and six months ended June 30, 2022. Interest expense is partially offset by interest income onof $94,000 and $193,000 for the three and six months ended June 30, 2023, respectively, from deposit and money market ~~accounts. The increase~~accounts and interest income from our interest rate swap agreement. During the three and six months ended June 30, 2022, interest income amounted to $20,000 and $22,000, respectively.
Other income (expense), net
During the three months ended June 30, 2023, other income represents the change in fair value of our interest rate swap agreement. During the six months ended June 30, 2023, other expense represents $370,000 paid to extinguish the Seller Note associated with the Newswire transaction, partially offset by other income related to the change in fair value of our interest rate swap agreement. There was no other income or expense during the three and ~~nine~~six months ended ~~September~~June 30, ~~2022, as compared to the same periods of the prior year, is due to a decrease in interest rates associated with the deposit and money market accounts.~~ 2022.

~~Other Income~~
                Other income for the three and nine months ended September 30, 2021, primarily represents a benefit of $366,000 related to the employee retention credit enacted under the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”).
Income ~~tax expense~~Taxes

We recognized income tax expense of ~~$180,000~~$482,000 and ~~$681,000~~$434,000 for the three and ~~nine-month periods~~six months ended ~~September~~June 30, ~~2022, respectively,~~2023, compared to ~~$319,000~~$327,000 and ~~$738,000~~$501,000 during the same periods of ~~2021. The decrease in income tax expense compared to the prior year is primarily related to a decrease in pre-tax income.~~2022, respectively. For the three and ~~nine-month~~six-month periods ended ~~September~~June 30, 2023 and 2022, the variance between ~~the Company’s~~our effective tax rate and the U.S. statutory rate of 21% is primarily attributable to state income ~~taxes~~tax. The three and six months ended June 30, 2022, was also impacted by additional expense related to Global Intangible Low-Taxed Income ~~inclusion, partially offset by foreign tax credits.~~inclusion.

Liquidity and Capital Resources

As of ~~September~~June 30, ~~2022,~~2023, we had ~~$21,812,000~~$4,961,000 in cash and cash equivalents and ~~$3,062,000~~$4,311,000 in net accounts receivable. Current liabilities ~~at September~~as of June 30, ~~2022,~~2023, totaled ~~$5,956,000~~$12,084,000 including our, accounts payable, deferred revenue, accrued payroll liabilities, income taxes payable, current portion of long-term debt, current portion of lease liabilities and other accrued expenses. ~~At September~~On June 30, ~~2022,~~2023, our current liabilities exceeded our current assets ~~exceeded our current liabilities~~ by ~~$20,010,000.~~$1,215,000.

~~Effective October 3, 2021,~~On March 20, 2023 (the “Closing Date”), the Company ~~renewed its unsecured Line~~entered into a $25 million credit agreement (the “Credit Agreement”) with Pinnacle Bank (“Pinnacle”). The Credit Agreement provides for the following: term loan facility in an aggregate principal amount of $20 million (the “Term Loan”), and revolving letter of credit in an up to aggregate principal amount of $5 million (the “Revolving LOC”), subject to an 85% limit based on the current eligible accounts receivable (as defined in the Credit ~~which changed~~Agreement).
Pursuant to the terms of the Credit Agreement, the per annum interest rate ~~from LIBOR~~of the Term Loan is variable based on the one-month secured overnight financing rate (“SOFR”) plus ~~1.75%~~2.35%, subject to a minimum SOFR ~~(Secured Overnight Financing Rate)~~of 2.00%. However, the Term Loan issued on the Closing Date has a per annum interest rate of 6.217%, which was fixed with respect to the entire principal amount as a result of an interest rate swap agreement entered into between the Company and Pinnacle on the Closing Date in accordance with the terms of the Credit Agreement.
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The Company began making monthly interest-only payments on the Term Loan on April 1, 2023. Beginning on January 1, 2024, the Company will make monthly principal payments of $333,333 plus ~~1.75%~~interest payments on the Term Loan until the maturity date of December 28, 2028.
The proceeds of the Term Loan along with certain cash on hand of the Company were used to repay in its entirety the one-year Secured Promissory Note (the “Newswire Note”) issued to Lead Capital, LLC in connection with the Company’s November 1, 2022 acquisition of iNewswire.com LLC for a lump sum payment of $22,880,000. In order to settle the Secured Note on March 20, 2023, the Company paid $370,000 to the Seller, with the Seller agreeing to forgive $440,000 of interest which would have otherwise been due. The $370,000 payment is recorded in Other income (expense) on the Consolidated statements of operations. As a result, there is no longer any obligation to the Seller as of June 30, 2023.
The Company currently has no plans to utilize the Revolving LOC but may do so in the future. If the Company does utilize any funds under the Revolving LOC, the funds will bear interest at a per annum rate equal to the then current SOFR plus 2.05%. Pinnacle’s commitment to fund under the Revolving LOC terminates on September 1, 2024, unless terminated earlier pursuant to the terms of the Credit Agreement. The ~~amount~~Company terminated its existing $3,000,000 unsecured line of ~~funds available for borrowing remained $3,000,000 and~~credit with Fifth Third Bank immediately prior to the ~~term remained two years.~~Closing Date. As of ~~September~~June 30, ~~2022,~~2023, there was no outstanding balance under the Revolving LOC and the interest rate was ~~4.22%~~7.12%.
The Credit Agreement contains the following financial covenants, which commence with fiscal quarter ended June 30, 2023: a fixed charge coverage ratio of no less than 1.20:1.00 and a leverage ratio requiring that, for each fiscal quarter of the Company ending on or after June 30, 2023 through September 30, 2023, the leverage ratio shall not exceed 2.75:1.00 and for each fiscal quarter of the Company ending after December 31, 2023, the leverage ratio shall not exceed 2.50:1.00. All covenants were successfully exceeded during the three month-period ended June 30, 2023.
The Credit Agreement also contains customary affirmative covenants for a transaction of this nature, including among other things, covenants relating to: maintenance of adequate financial and accounting books and records, delivery of financial statements and other information, preservation of existence of the Company and subsidiaries, payment of taxes and claims, compliance with laws, maintenance of insurance, foreign qualification, use of proceeds, cash management system, maintenance of properties, and conduct of business.
The Credit Agreement also contains customary negative covenants for a transaction of this nature, including, among other things, covenants relating to debt, liens, investments, negative pledges, dividends and other debt payments, restriction on fundamental changes, sale of assets, transactions with affiliates, restrictive agreements, and changes in fiscal year.
The Credit Agreement also contains various Events of Default (subject to certain grace periods, to the extent applicable), including among other things, Events of Default for the nonpayment of principal, interest or fees; breach of certain covenants; inaccuracy of the representations or warranties in any material respect; bankruptcy or insolvency; dissolution or change of control; certain unsatisfied judgments; defaults under material agreements; certain unfunded liabilities under employee benefit plans; certain unsatisfied judgments; certain ERISA violations; and the invalidity or unenforceability of the Credit Agreement. If an Event of Default occurs, the Company ~~did not owe~~may be required to repay all amounts outstanding under the Credit Agreement. The Term Loan and any ~~amounts~~advances under the Revolving LOC are secured by a first priority lien and security interest to the benefit of Pinnacle in the Event of Default on all of the ~~Line~~Company’s current or future assets and each of ~~Credit.~~the Guarantor’s current or future assets.

Disclosure about Off-Balance Sheet Arrangements
We do not have any transactions, agreements or other contractual arrangements that constitute off-balance sheet arrangements.
Non-GAAP Measures
Management believes that certain non-GAAP measures, such as non-GAAP free cash flow, non-GAAP adjusted free cash flow, non-GAAP adjusted EBITDA (“adjusted EBITDA”), and non-GAAP adjusted net income (“adjusted net income”) provide useful information about our operating results and enhance the overall ability to assess our financial performance. We use these measures, together with other measures of performance prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), to compare the relative performance of operations in planning, budgeting, and reviewing the performance of our business. Adjusted EBITDA and adjusted net income allow investors to make a more meaningful comparison between our core business operating results over different periods of time. We believe that adjusted EBITDA and adjusted net income, when viewed with our results under US GAAP and the accompanying reconciliations, provide useful information about our business without regard to potential distortions. By eliminating potential differences in results of operations between periods caused by factors such as acquisition-related expenses and other items as described below, we believe adjusted EBITDA and adjusted net income can provide a useful additional basis for comparing the current performance of the underlying operations being evaluated.
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Management uses free cash flow, which is defined as net cash flows provided by operating activities less payments for purchases of fixed assets and capitalized software, in reviewing the financial performance and cash generation by our various business groups and evaluating cash levels. We believe free cash flow is a useful measure for investors because it portrays our ability to grow organically and generate cash from our businesses for purposes such as paying interest on our indebtedness, repaying debt, funding business acquisitions, investing in product development, re-purchasing our common stock, and paying dividends, if it is determined we do so in the future. In addition, securities analysts, investors, and others frequently use free cash flow in their evaluation of companies. Adjusted free cash flow represents a further non-GAAP adjustment to free cash flow to exclude the effect of cash paid for acquisition and integration related activities and unusual or non-recurring transactions. Management believes that by excluding these infrequent or unusual items from free cash flow, it better portrays our ability to generate cash, as such items are not indicative of the Company’s operating performance for the period.
The uses of these non-GAAP financial measures are not intended to be considered in isolation of, or as substitute for, the financial information prepared and presented in accordance with US GAAP. Free cash flow and adjusted free cash flow do not necessarily represent funds available for discretionary use and are not necessarily a measure of our ability to fund our cash needs. Our calculation of free cash flow and adjusted free cash flow may differ from similarly titled measures used by other companies, limiting their usefulness as a comparative measure. Free cash flow and adjusted free cash flow are non-GAAP financial measures.
For the three and six months ended June 30, 2023 and 2022, free cash flow and adjusted free cash flow were as follows:

Three Months Ended June 30,

2023

2022

Net cash provided by operating activities (US GAAP)

$ 1,731

$ 1,096

Payments for purchase of fixed assets and capitalized software

(163 )

(17 )
Free cash flow (Non-GAAP)

1,568

1,079

Cash paid for acquisition and/or integration related items (1)

204

—

Adjusted free cash flow (Non-GAAP)

$ 1,772

$ 1,079

Six Months Ended June 30,

2023

2022

Net cash provided by operating activities (US GAAP)

$ 2,003

$ 1,644

Payments for purchase of fixed assets and capitalized software

(168 )

(38 )
Free cash flow (Non-GAAP)

1,835

1,606

Cash paid for acquisition and/or integration related items (1)

281

16

Cash paid for other unusual items (2)

395

60

Adjusted free cash flow (Non-GAAP)

$ 2,511

$ 1,682

(1)
This adjustment gives effect to one-time corporate projects, including acquisition and/or integration related expenses, paid during the periods.
(2)
For the six months ended June 30, 2023, this adjustment gives effect to a one-time payment of approximately $370,000 related to the early termination of the note payable associated with the Newswire acquisition. For the six months ended June 30, 2022, this adjustment gives effect to payment of a one-time executive recruiting fee payment of $60,000.
Adjusted EBITDA and adjusted net income are non-GAAP financial measures and should not be considered as a substitute for analysis of our results as reported under US GAAP. These measures are defined differently by different companies, and accordingly, such measures may not be comparable to similarly titled measures of other companies and have important limitations as an analytical tool.
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Table of Contents
A reconciliation of net income to adjusted EBITDA for the three and six months ended June 30, 2023 and 2022, is presented in the following table (in 000’s):

Three Months Ended June 30,

2023

2022

Amount

Amount

Net income:

$ 1,363

$ 841

Adjustments:

Depreciation and amortization

736

162

Interest expense (income), net

281

(20 )
Income tax expense

482

327

EBITDA

2,862

1,310

Acquisition and/or integration costs⁽¹⁾

137

—

Other non-recurring items⁽²⁾

(334 )

—

Stock-based compensation expense⁽³⁾

354

188

Adjusted EBITDA:

$ 3,019

$ 1,498

Six Months Ended June 30,

2023

2022

Amount

Amount

Net income:

$ 1,219

$ 1,357

Adjustments:

Depreciation and amortization

1,472

324

Interest expense (income), net

519

(22 )
Income tax expense

434

501

EBITDA

3,644

2,160

Acquisition and/or integration costs⁽¹⁾

371

16

Other non-recurring items⁽²⁾

201

90

Stock-based compensation expense⁽³⁾

691

372

Adjusted EBITDA:

$ 4,907

$ 2,638

(1)
This adjustment gives effect to one-time corporate projects, including acquisition and/or integration related expenses, incurred during the periods.
(2)
For the three months ended June 30, 2023, this adjustment gives effect to a gain recorded on the change in fair value of our interest rate swap of $379,000, partially offset by one-time, non-recurring expenses of $45,000. For the six months ended June 30, 2023, this adjustment gives effect to $370,000 payment related to early extinguishment of our Seller Note and one-time non-recurring expenses of $45,000, partially offset by a gain recorded on the change in fair value of our interest rate swap of $214,000. For the six months ended June 30, 2022, this adjustment gives effect to a one-time executive recruiting fee of $90,000.
(3)
The adjustments represent stock-based compensation expense related to awards of stock options, restricted stock units, or common stock in exchange for services. Although we expect to continue to award stock in exchange for services, the amount of stock-based compensation is excluded as it is subject to change as a result of one-time or non-recurring projects.
A reconciliation of net income to adjusted net income for the three and six months ended June 30, 2023 and 2022 is presented in the following table (in 000’s):

Three Months Ended June 30,

2023

2022

Amount

Per diluted share

Amount

Per diluted share

Net income:

$ 1,363

$ 0.36

$ 841

$ 0.22

Adjustments:

Amortization of intangible assets⁽¹⁾

685

0.18

108

0.03

Stock-based compensation expense⁽²⁾

354

0.09

188

0.05

Other unusual items⁽³⁾

(197 )

(0.05 )

—

—

Tax impact of adjustments⁽⁴⁾

(177 )

(0.05 )

(62 )

(0.01 )
Non-GAAP net income:

$ 2,028

$ 0.53

$ 1,075

$ 0.29

Weighted average number of common shares outstanding – diluted

3,808

3,772

Six Months Ended June 30,

2023

2022

Amount

Per diluted share

Amount

Per diluted share

Net income:

$ 1,219

$ 0.32

$ 1,357

$ 0.36

Adjustments:

Amortization of intangible assets⁽¹⁾

1,370

0.36

216

0.05

Stock-based compensation expense⁽²⁾

691

0.18

372

0.10

Other unusual items⁽³⁾

572

0.15

106

0.03

Tax impact of adjustments⁽⁴⁾

(553 )

(0.14 )

(146 )

(0.04 )
Non-GAAP net income:

$ 3,299

$ 0.87

$ 1,905

$ 0.50

Weighted average number of common shares outstanding – diluted

3,809

3,802

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(1)
The adjustments represent the amortization of intangible assets related to acquired assets and companies.
(2)
The adjustments represent stock-based compensation expense related to awards of stock options, restricted stock units, or common stock in exchange for services. Although we expect to continue to award stock in exchange for services, the amount of stock-based compensation is excluded as it is subject to change as a result of one-time or non-recurring projects.
(3)
For the three months ended June 30, 2023, this adjustment gives effect to a gain recorded on the change in fair value of our interest rate swap of $379,000, partially offset by one-time corporate projects, including acquisition and/or integration related expenses incurred during the period of $137,000 and $45,000 related to one-time, non-recurring expenses. For the six months ended June 30, 2023, this adjustment gives effect to one-time corporate projects, including acquisition and/or integration related expenses incurred during the period of $371,000, $370,000 payment related to early extinguishment of our Seller Note and $45,000 of one-time, non-recurring expenses, partially offset by a gain recorded on the change in fair value of our interest rate swap of $214,000.  For the six months ended June 30, 2022, this adjustment gives effect to one-time corporate projects, including acquisition and/or integration related expenses incurred during the period of $16,000 and a one-time executive recruiting fee of $90,000.
(4)
This adjustment gives effect to the tax impact of all non-GAAP adjustments at the current Federal tax rate of 21%.
Outlook

The following statements and certain statements made elsewhere in this document are based upon current expectations. These statements are forward looking and are subject to factors that could cause actual results to differ materially from those suggested here, including, without limitation, demand for and acceptance of our services, new developments, competition and general economic or market conditions, particularly in the domestic and international capital markets. Refer also to the Cautionary Statement Concerning Forward Looking Statements included in this report.

While it is unknown how long current conditions resulting from the COVID-19 pandemic will last, including whether a worldwide resurgence will occur, variants of the virus will become more impactful or vaccines will be completely effective, we could experience a material disruption of our employees and operations, a decline in revenue, a decline in value of our assets, deterioration of our customer base and the inability of our customers to pay for subscriptions or services provided. To date, we have seen both positive and negative impacts to our business. Physical, in-person conferences have been delayed and in the past, there have been delays in transactions processed by the Depository Trust Company and banks and brokers in our transfer agent business. However, our ability to pivot and enhance our product offering with our virtual products generated increased revenue over the past two years. Despite our ability to pivot and enhance our product offering, the concentrations of our customer base within middle, small and micro-cap customers make it reasonably possible that we are vulnerable to the risk of a near-term negative impact related to the COVID-19 pandemic if a substantial portion of these customers are forced to scale back or cease operations. We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business and are unable at this time to predict the continued impact that COVID-19 will have on our business, financial position, and operating results in future periods due to numerous uncertainties.
22
~~Table of Contents~~
~~COVID-19’s continuing impacts,~~Market factors like the current military conflict in Ukraine, instability in global energy markets, global inflation and ~~rapidly increasing~~the increase of interest rates have contributed to significant global economic uncertainty, disrupted global trade and supply chains, adversely impacted many industries, and contributed to significant ~~declines and~~ volatility in financial markets. Overall, despite many uncertainties in the market regarding the economic outlook, ~~and the future of the COVID-19 pandemic,~~ the demand for our platforms and services continues to be stable in a majority of the markets we serve. The success of our Communications offering has been led by our ACCESSWIRE branded newswire, ~~for~~ which is now complemented by the Newswire business, and we believe we will continue to see stable to increased demand for our combined newswire business throughout ~~2022~~2023 and beyond. Although we experienced a decline in demand for our webcasting and events business since 2020, we believe we are well-positioned in this market with our ability to hold both in-person and virtual events using both our conference software and webcasting products. We believe this allows us to not only deliver attractive solutions to the market but may also lead us into new opportunities during this changing and challenging environment. The COVID-19 pandemic and global economic downturn has caused shifts in demands for these products, and we are uncertain at this time if these shifts will continue and cannot make any assurances at this time that our products will be accepted by customers in the long-term.

The transition to a platform subscription model has been and will continue to be key for our long-term sustainable growth. We will also continue to focus on the following key strategic initiatives during the ~~remainder of 2022 and into 2023:~~year:

·●
Expanding our Communications products and adapting to this changing industry,
·●
Evaluating and completing acquisitions in areas of strategic focus,
·●
Expanding our Communications sales and marketing teams and digital marketing strategy,
·●
Expanding customer base,
·●
Expanding our newswire distribution,
·●
Investing in technology advancements and upgrades,
·●
Generating profitable sustainable growth
·●
Generating cash flows from operations.
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Table of Contents

We believe there is demand for our products around the world, led by our ACCESSWIRE ~~newswire brand,~~and Newswire brands, as companies seek to find better platforms and tools to disseminate and communicate their messages in a more efficient and collaborative way.

We have invested and will continue to invest in our product sets, platforms and intellectual property development via internal development and acquisitions. Acquisitions remain a core part of our strategy and we believe acquisitions are key to enhancing our overall offerings in the market and are necessary to keep our competitive advantages and facilitate the next round of growth that management believes it can achieve. If we are successful in this effort, we believe we can further increase our market share as we move forward.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not ~~applicable~~applicable.

ITEM 4. CONTROLS AND PROCEDURES.

As of the end of the period covered by this quarterly report on ~~Form 10-Q,~~Form10-Q, the Company’s Chief Executive Officer and Chief Financial Officer conducted an evaluation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934). Based upon this evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective and have not materially changed since its most recent annual report.

~~Changes in Internal Control over Financial Reporting~~
We regularly review our system of internal control over financial reporting to ensure we maintain an effective internal control environment. There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) that occurred during the period covered by this quarterly report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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Table of Contents

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we may be involved in litigation that arises through the normal course of business. As of the date of this filing, we are neither a party to any litigation nor are we aware of any such threatened or pending litigation that might result in a material adverse effect to our business.

ITEM 1A. RISK FACTORS.

There have been no material changes to our risk factors as previously disclosed in our most recent Form 10-K filing.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On March 1, 2022, the Company’s board of directors authorized a stock repurchase program under which the Company was authorized to repurchase up to $5,000,000 of its common shares. The Company completed the repurchase program by purchasing 38,563 shares during the three-month period ended September 30, 2022, as shown in the table below ($ in 000’s, except share or per share amounts):None.

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

July 1-31, 2022

32,392

$ 24.88

32,392

$ 153

August 1-31, 2022

6,171

24.79

6,171

—

September 1-30, 2022

—

—

—

—

Total

38,563

$ 24.87

38,563

$ —

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURE.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

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Table of Contents

ITEM 6. EXHIBITS.

(a) Exhibits.

Exhibit

Number

Description
31.1

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

101.INS

XBRL Instance Document.**
101.SCH

XBRL Taxonomy Extension Schema Document.**
101.CAL

XBRL Taxonomy Calculation Linkbase Document.**
101.LAB

XBRL Taxonomy Label Linkbase Document.**
101.PRE

XBRL Taxonomy Presentation Linkbase Document.**
101.DEF

XBRL Taxonomy Extension Definition Linkbase Document. **
*
filed or furnished herewith
**
submitted electronically herewith

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Table of Contents

SIGNATURES

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

Date: ~~November 3, 2022~~August 10, 2023

ISSUER DIRECT CORPORATION

By:
/s/ Brian R. Balbirnie

Brian R. Balbirnie

Chief Executive Officer

By:
/s/ Timothy Pitoniak

Timothy Pitoniak

Chief Financial Officer

26
33

	Three months ended March 31, 2023			Three months ended June 30, 2023
Beginning balance	$	745		$	858
Bad debt expense		151			109
Write-offs		(38	)		(11	)
Ending Balance	$	858		$	956

	·	Level 1 –- Quoted prices are available in active markets for identical assets or liabilities at the reporting date. Generally, this includes debt and equity securities that are traded in an active market. ~~Our cash~~Cash and cash equivalents are quoted at Level 1.

	·	Level 2 –- Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. ~~Generally, this includes~~The fair value of the Company’s long-term debt and ~~equity securities that~~interest rate swap are ~~not traded in an active market.~~quoted at Level 2.

	·	Level 3 –- Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or other valuation techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

	·	~~An entity has been adversely affected by the COVID-19 pandemic~~

	·	~~We have not used qualifying payroll for both the Paycheck Protection Program and the ERC~~

	·	~~We incurred payroll costs to retain employees~~

Consideration transferred:
Cash payment	$	18,000
Secured promissory note		22,000
Shares of Issuer Direct common stock based on closing market price prior to the Acquisition		3,892
Net working capital adjustment and other costs paid on behalf of Seller, net of cash		(350	)
Total consideration transferred	$	43,542

Preliminary allocation of tangible and intangible assets and liabilities:
Goodwill	$	16,122
Trademarks/Tradenames		27,500
Technology		2,520
Customer relationships		580
Net liabilities assumed		(3,180	)
Total amount allocated	$	43,542

Net liabilities assumed:
Cash	$	37
Accounts Receivable		90
Other Current Assets		14
Accounts Payable		(645	)
Accrued Expenses		(226	)
Deferred Revenue		(1,775	)
Deferred tax liability		(675	)
	$	(3,180	)

in $000’s, except per share amounts
	Three months ended June 30, 2022		Six months ended June 30, 2022
Revenues	$	8,893	$	17,643
Net income		437		1,102
Basic earnings per share		0.11		0.28
Diluted earnings per share		0.11		0.28

	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
March 1-31, 2022		6,200	$	29.35		6,200	$	4,818
April 1-30, 2022		8,226		27.76		8,226		4,590
May 1-31, 2022		80,748		22.92		80,748		2,739
June 1-30, 2022		74,227		23.98		74,227		959
July 1-31, 2022		32,392		24.88		32,392		153
August 1-31, 2022		6,171		24.79		6,171		—
No shares repurchased between September 2022 and June 2023

Total		207,964	$	24.04		207,964	$	—

		Options Outstanding						Options Exercisable
Exercise Price Range		Number		Weighted Average Remaining Contractual Life (in Years)		Weighted Average Exercise Price		Number
$	0.01 - 8.00		7,500		2.42	$	7.12		7,500
	8.01 - 11.00		3,500		4.82		10.11		3,500
	11.01 - 16.00		18,000		5.78		13.12		18,000
	16.01 - 27.00		38,000		8.55		24.19		8,000
$	27.01 - 27.71		20,250		9.30		27.71		1,500
	Total		87,250		7.48	$	20.69		38,500

Year Ended December 31:
2022	$	92
2023		369		$	186
2024		379			379
2025		389			390
2026		400			401
Thereafter		413
2027					412
Total lease payments		2,042			1,768
Present value adjustment		(255	)		(219	)
Lease liability	$	1,787		$	1,549

	Three months ended September 30,								Three months ended June 30,
Revenue Streams	2022				2021				2023				2022
Communications	$	3,487	66.0	%	$	3,686	67.4	%	$	5,936	61.5	%	$	3,691	63.6	%
Compliance		1,793	34.0	%		1,779	32.6	%		3,715	38.5	%		2,116	36.4	%
Total	$	5,280	100.0	%	$	5,465	100.0	%	$	9,651	100.0	%	$	5,807	100.0	%

	Nine months ended September 30,								Six months ended June 30,
Revenue Streams	2022				2021				2023				2022
Communications	$	10,561	64.5	%	$	10,383	64.2	%	$	12,502	68.4	%	$	7,074	63.8	%
Compliance		5,814	35.5	%		5,782	35.8	%		5,768	31.6	%		4,021	36.2	%
Total	$	16,375	100.0	%	$	16,165	100.0	%	$	18,270	100.0	%	$	11,095	100.0	%

	Three Months Ended June 30,					Percentage of Revenue⁽¹⁾
	2023			2022		2023			2022
Revenue:
Communications revenue	$	5,936		$	3,691		62	%		64	%
Compliance revenue		3,715			2,116		38	%		36	%
Total revenue		9,651			5,807		100	%		100	%
Cost of revenue:
Communications cost of revenue		1,433			747		24	%		20	%
Compliance cost of revenue		903			617		24	%		29	%
Total cost of revenue		2,336			1,364		24	%		23	%
Gross Margin:
Communications gross margin		4,503			2,944		76	%		80	%
Compliance gross margin		2,812			1,499		76	%		71	%
Total gross margin		7,315			4,443		76	%		77	%
Operating Expenses:
General and administrative		2,274			1,563		24	%		27	%
Sales and marketing		2,039			1,371		21	%		24	%
Product development		532			214		6	%		4	%
Depreciation and amortization		723			147		7	%		3	%
Total expenses		5,568			3,295		58	%		57	%
Operating income		1,747			1,148		18	%		20	%
Interest (expense) income, net		(281	)		20		(3	)%		0	%
Other income		379			—		4	%	—		%
Income before income taxes		1,845			1,168		19	%		20	%
Income tax provision		482			327		5	%		6	%
Net income	$	1,363		$	841		14	%		14	%

	Three months ended						Nine months ended
	September 30,						September 30,
*Revenue Streams*	2022			2021			2022			2021
Communications
Revenue	$	3,487		$	3,686		$	10,561		$	10,383
Gross margin	$	2,680		$	2,882		$	8,246		$	7,839
Gross margin %		77	%		78	%		78	%		75	%

Compliance
Revenue	$	1,793		$	1,779		$	5,814		$	5,782
Gross margin	$	1,388		$	1,228		$	4,321		$	4,097
Gross margin %		77	%		69	%		74	%		71	%

Total
Revenue	$	5,280		$	5,465		$	16,375		$	16,165
Gross margin	$	4,068		$	4,110		$	12,567		$	11,936
Gross margin %		77	%		75	%		77	%		74	%

	(1)	This adjustment gives effect to one-time corporate projects, including acquisition and/or integration related expenses, paid during the periods.
	(2)	For the six months ended June 30, 2023, this adjustment gives effect to a one-time payment of approximately $370,000 related to the early termination of the note payable associated with the Newswire acquisition. For the six months ended June 30, 2022, this adjustment gives effect to payment of a one-time executive recruiting fee payment of $60,000.

	(1)	This adjustment gives effect to one-time corporate projects, including acquisition and/or integration related expenses, incurred during the periods.
	(2)	For the three months ended June 30, 2023, this adjustment gives effect to a gain recorded on the change in fair value of our interest rate swap of $379,000, partially offset by one-time, non-recurring expenses of $45,000. For the six months ended June 30, 2023, this adjustment gives effect to $370,000 payment related to early extinguishment of our Seller Note and one-time non-recurring expenses of $45,000, partially offset by a gain recorded on the change in fair value of our interest rate swap of $214,000. For the six months ended June 30, 2022, this adjustment gives effect to a one-time executive recruiting fee of $90,000.
	(3)	The adjustments represent stock-based compensation expense related to awards of stock options, restricted stock units, or common stock in exchange for services. Although we expect to continue to award stock in exchange for services, the amount of stock-based compensation is excluded as it is subject to change as a result of one-time or non-recurring projects.

	(1)	The adjustments represent the amortization of intangible assets related to acquired assets and companies.
	(2)	The adjustments represent stock-based compensation expense related to awards of stock options, restricted stock units, or common stock in exchange for services. Although we expect to continue to award stock in exchange for services, the amount of stock-based compensation is excluded as it is subject to change as a result of one-time or non-recurring projects.
	(3)	For the three months ended June 30, 2023, this adjustment gives effect to a gain recorded on the change in fair value of our interest rate swap of $379,000, partially offset by one-time corporate projects, including acquisition and/or integration related expenses incurred during the period of $137,000 and $45,000 related to one-time, non-recurring expenses. For the six months ended June 30, 2023, this adjustment gives effect to one-time corporate projects, including acquisition and/or integration related expenses incurred during the period of $371,000, $370,000 payment related to early extinguishment of our Seller Note and $45,000 of one-time, non-recurring expenses, partially offset by a gain recorded on the change in fair value of our interest rate swap of $214,000. For the six months ended June 30, 2022, this adjustment gives effect to one-time corporate projects, including acquisition and/or integration related expenses incurred during the period of $16,000 and a one-time executive recruiting fee of $90,000.
	(4)	This adjustment gives effect to the tax impact of all non-GAAP adjustments at the current Federal tax rate of 21%.


	·●	Evaluating and completing acquisitions in areas of strategic focus,


	·●	Expanding our Communications sales and marketing teams and digital marketing strategy,

Exhibit
Number		Description
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*

101.INS		XBRL Instance Document.**
101.SCH		XBRL Taxonomy Extension Schema Document.**
101.CAL		XBRL Taxonomy Calculation Linkbase Document.**
101.LAB		XBRL Taxonomy Label Linkbase Document.**
101.PRE		XBRL Taxonomy Presentation Linkbase Document.**
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document. **

*	filed or furnished herewith
**	submitted electronically herewith

	ISSUER DIRECT CORPORATION


	By:	/s/ Brian R. Balbirnie
		Brian R. Balbirnie
		Chief Executive Officer

	By:	/s/ Timothy Pitoniak
		Timothy Pitoniak
		Chief Financial Officer