| Notes to Financial Statements | |
| 3 Months Ended
Mar. 31, 2010
|
| Notes to Financial Statements | |
| Note 1. Accounting Policies |
Note 1.
Accounting Policies
Basis of Presentation
The unaudited interim balance sheet as of March31, 2010 and statement of operations and cash flows for the three month periods ended March31, 2010 and 2009 included herein, have been prepared in accordance with the instructions for Form10-Q under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Article 10 of RegulationS-X under the Exchange Act. In the opinion of the 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 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 Issuer Direct Corporation's (the "Company's")2009 audited financial statements filed on Form 10-K. |
| Note 2. Summary of Significant Accounting Policies |
Note 2.
Summary of Significant Accounting Policies
Earnings per Share
We comply with FASB ASC No. 260 - Earnings per Share (formerly Statement of Financial Accounting Standards ("SFAS") No.128, "Earnings per Share") and SEC Staff Accounting Bulletin ("SAB") No. 98 which require that basic net income (loss) per common share be computed by dividing net income/(loss) for the period by the weighted average number of common shares outstanding during the period.Diluted net income/(loss) for the period is computed by dividing the net income/(loss) for the period by the weighted average number of common and common equivalent shares, such as convertible preferred stock, outstanding during the period.Common shares of approximately 258,323 and 41,665 issuable upon the potential conversion of the Company's Series A Convertible Preferred Stock were included in the computation of diluted earnings per common share in the three month periods ended March 31, 2010 and 2009, respectively.
Allowance for Doubtful Accounts
We provide an allowance for doubtful accounts, which is based upon a review of outstanding receivables as well as historical collection information. Credit is granted to most customers on an unsecured basis. In determining the amount of the allowance, management is required to make certain estimates and assumptions. The allowance is made up of specific reserves, as deemed necessary on client account balances, and a reserve based on our historical experience.During the three month periods ending March31, 2010 and 2009, we recorded bad debt expense totaling $32,111 and $10,344, respectively.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 and intangible assets.Actual results could differ from those estimates.
Income Taxes
We comply with FASB ASC No. 740 - Income Taxes (formerly SFAS No.109, "Accounting for Income Taxes") which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred income tax assets to the amounts expected to be realized.For any uncertain tax positions, we recognize the impact of a tax position, only if it is more likely than not of being sustained upon examination, based on the technical merits of the position. Our policy regarding the classification of interest and penalties is to classify them |
| Note 3. Notes payable- related party |
Note 3:
Notes payable - related party
As of December 31, 2009, we had three unsecured related party notes payable outstanding, totaling $73,525 as follows:
March31,
2010
December31,
2009
Note Payable to our Chief Executive Officer in the amount of $25,000 for various obligations the former company was party to, including former legal counsel, former transfer agent and tax obligations with the state of Delaware. The unsecured note carries interest in the amount of 8% per annum and was due on December31, 2008. The note was in default at December 31, 2009.The note and accrued interest was converted into 26 shares of Series A preferred stock during the three month period ended March 31, 2010.
$
--
$
23,525
Unsecured Note Payable to a Director of the Company in the amount of $25,000, with interest of 8%, due on receipt by the Company or its designated escrow agent of an aggregate of $1,000,000 in gross proceeds of the Private Placement.The note and accrued interest was converted into 229,485 shares of common stock during the three month period ended March 31, 2010.
--
25,000
Unsecured Note Payable to a Director of the Company in the amount of $25,000, with interest of 8%, due on receipt by the Company or its designated escrow agent of an aggregate of $1,000,000 in gross proceeds of the Private Placement.The note and accrued interest was converted into 229,485 shares of common stock during the three month period ended March 31, 2010.
--
25,000
Total notes payable - related party
$
--
$
73,525 |
| Note 4. Preferred stock and common stock |
Note 4:Preferred stock and common stock
During the three months ended March31, 2010, we had the following preferred and common stock transactions:
-
On March 25, 2010, we issued 150,000 shares of common stock to our Chief Financial Officer in exchange for services.The fair market value of the shares totaled $27,000, or $0.18 per share, which represents the closing price on the date of issuance.
-
On March 31, 2010, we issued 458,970 shares of commons stock to two Directors of the Company for the conversion of notes payable totaling $50,000 and accrued interest of $9,666.The notes payable and accrued interest were converted at $0.13 per share, which represents the average share price over the prior twelve months.The fair value of common stock on the date of the transaction was $0.18.The difference of $0.05 per share, or $22,949, has been recorded as additional interest expense.
-
On March 31, 2010, we issued 26 shares of Series A preferred stock to our Chief Executive Officer for the conversion of a note payable in the amount of $23,525 and accrued interest of $4,245.The fair value of the preferred stock on the date of the transaction was $39,000, which was determined based upon the number of common shares issuable upon conversion of the preferred shares into common stock, 216,666, and the market price of our common stock on the date of the agreement of $0.18.The difference between the carrying value of the debt and accrued interest and the fair value of the preferred shares of $11,230 has been recorded as additional interest expense.
At March 31, 2010, we had 31 outstanding shares of Series A Preferred Stock.Although the Certificate of Designation of the rights, preferences and limitations of the Preferred Stock provides for dividends equal to elevenpercent (11.0%) per year on the liquidation preference of $25,000 per share, we have not declared or accrued such dividends. Under Delaware law, dividends are an obligation only when declared, and the Board has not declared any dividends payable on the Series A Preferred Stock.Each share of Series A Preferred Stock is convertible into 8,333 shares of common stock. Of the outstanding preferred shares, 5 of these shares were issued by our predecessor company and the original documentation which would validate claims thereto is not available, and we are taking steps to retire those shares. |
| Note 5. Concentrations |
Note 5:Concentrations
For the three-month periods ended March31, 2010 and 2009, we earned revenues (as apercentage of total revenues) in the following categories:
Three months ended
March31,
2010
2009
Revenue Streams
Compliance and reporting services 27.0 % 41.5 %
Printing and financial communication 18.9 % 22.2 %
Fulfillment and distribution 21.1 % 29.6 %
Software licensing 11.2 % 3.7 %
Transfer agent services 21.8 % 3.0 %
Total 100.0 % 100.0 %
One customer accounted for 16.7% of the operating revenues during the three month period ended March31, 2010.One customer accounted for 41.8% of the operating revenues during the three month period ended March31, 2009.At March 31, 2010, two customers accounted for 32.7% (20.4% and 12.3%) of our total accounts receivable.At March31, 2009, three customers accounted for 40.8% (17.4%, 13.0%, and 10.4%) of our total accounts receivable.
We do not believe we had any financial instruments that could have potentially subjected us to significant concentrations of credit risk. A portion of our revenues are paid at the beginning of the month via credit card or in advance by check, the remaining accounts receivable amounts are generally due within 30 days, none of which is collateralized. |
