Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | Mar. 06, 2014 | Jun. 30, 2013 | |
Document And Entity Information | ' | ' | ' |
Entity Registrant Name | 'ISSUER DIRECT CORP | ' | ' |
Entity Central Index Key | '0000843006 | ' | ' |
Document Type | '10-K | ' | ' |
Document Period End Date | 31-Dec-13 | ' | ' |
Amendment Flag | 'false | ' | ' |
Current Fiscal Year End Date | '--12-31 | ' | ' |
Is Entity a Well-known Seasoned Issuer? | 'No | ' | ' |
Is Entity a Voluntary Filer? | 'No | ' | ' |
Is Entity's Reporting Status Current? | 'Yes | ' | ' |
Entity Filer Category | 'Smaller Reporting Company | ' | ' |
Entity Public Float | ' | ' | $13,545,150 |
Entity Common Stock, Shares Outstanding | ' | 2,039,439 | ' |
Document Fiscal Period Focus | 'FY | ' | ' |
Document Fiscal Year Focus | '2013 | ' | ' |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Current assets: | ' | ' |
Cash and cash equivalents | $1,713,479 | $1,250,643 |
Accounts receivable (net of allowance for doubtful accounts of $429,509 and $117,030, respectively) | 1,970,531 | 544,684 |
Deferred income tax asset - current | 25,843 | 49,000 |
Other current assets | 160,756 | 38,710 |
Total current assets | 3,870,609 | 1,883,037 |
Furniture, equipment and improvements, net | 297,577 | 55,611 |
Deferred income tax - noncurrent | 0 | 159,000 |
Other long-term assets | 22,351 | 12,069 |
Goodwill | 1,056,873 | 0 |
Intangible assets (net of accumulated amortization of $582,871 and $187,666, respectively) | 4,013,129 | 431,529 |
Total assets | 9,260,539 | 2,541,246 |
Current liabilities: | ' | ' |
Accounts payable | 267,637 | 62,886 |
Accrued expenses | 1,255,282 | 37,347 |
Income taxes payable | 298,052 | 226,406 |
Deferred revenue | 1,053,401 | 112,906 |
Line of credit | 0 | 150,000 |
Total current liabilities | 2,874,372 | 589,545 |
Note payable - related party (net of debt discount of $2,053,091 and $0, respectively) | 446,909 | 0 |
Deferred income tax liability | 1,650,460 | 0 |
Other long-term liabilities | 83,063 | 105,554 |
Total liabilities | 5,054,804 | 695,099 |
Stockholders' equity: | ' | ' |
Preferred stock, $0.001 par value, 30,000,000 shares authorized, no shares issued and outstanding as of December 31, 2013 and 2012. | 0 | 0 |
Common stock $0.001 par value, 100,000,000 shares authorized, 2,006,689 and 1,937,329 shares issued and outstanding as of December 31, 2013 and 2012, respectively. | 2,007 | 1,937 |
Additional paid-in capital | 3,977,661 | 2,070,369 |
Other accumulated comprehensive loss | -59,065 | 0 |
Retained earnings (accumulated deficit) | 285,132 | -226,159 |
Total stockholders' equity | 4,205,735 | 1,846,147 |
Total liabilities and stockholders' equity | $9,260,539 | $2,541,246 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Assets | ' | ' |
Allowance for Accounts Receivables | $429,509 | $117,030 |
Accumulated Amortization | 582,871 | 187,666 |
Liabilities | ' | ' |
Debt Discount | $2,053,091 | $0 |
Stockholders Equity | ' | ' |
Preferred Stock shares par value | $0.00 | $0.00 |
Preferred Stock shares Authorized | 30,000,000 | 30,000,000 |
Preferred Stock shares Issued | 0 | 0 |
Preferred Stock shares Outstanding | 0 | 0 |
Common Stock shares par value | $0.00 | $0.00 |
Common Stock shares Authorized | 100,000,000 | 100,000,000 |
Common Stock shares Issued | 2,006,689 | 1,937,329 |
Common Stock shares Outstanding | 2,006,689 | 1,937,329 |
Consolidated_Statements_of_Inc
Consolidated Statements of Income (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Income Statement [Abstract] | ' | ' |
Revenues | $8,842,229 | $4,305,566 |
Cost of services | 2,577,891 | 1,501,158 |
Gross profit | 6,264,338 | 2,804,408 |
Operating costs and expenses: | ' | ' |
General and administrative | 2,481,560 | 1,309,166 |
Sales and marketing expenses | 1,588,374 | 799,760 |
Depreciation and amortization | 494,179 | 138,349 |
Total operating costs and expenses | 4,564,113 | 2,247,275 |
Operating income | 1,700,225 | 557,133 |
Net interest expense | -515,648 | -401 |
Net income before taxes | 1,184,577 | 556,732 |
Income tax expense | -556,000 | -251,000 |
Net income | $628,577 | $305,732 |
Income per share - basic | $0.32 | $0.16 |
Income per share - fully diluted | $0.31 | $0.15 |
Weighted average number of common shares outstanding - basic | 1,938,644 | 1,902,921 |
Weighted average number of common shares outstanding - fully diluted | 2,016,476 | 1,978,617 |
Consolidated_Statements_of_Com
Consolidated Statements of Comprehensive Income (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Consolidated Statements Of Comprehensive Income | ' | ' |
Net income | $628,577 | $305,732 |
Foreign currency translation adjustment | -59,065 | 0 |
Comprehensive income | $569,512 | $305,732 |
Consolidated_Statements_of_Sto
Consolidated Statements of Stockholders' Equity (USD $) | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Income Loss | Accumulated Deficit | Total |
Beginning Balance, Amount at Dec. 31, 2011 | $1,752 | $1,741,744 | $0 | ($531,891) | $1,211,605 |
Beginning Balance, Shares at Dec. 31, 2011 | 1,752,175 | ' | ' | ' | ' |
Issuance of shares for acquisition of customer list from SEC Compliance Services, Inc. ("SECCS"), shares | 70,000 | ' | ' | ' | ' |
Issuance of shares for acquisition of customer list from SEC Compliance Services, Inc. ("SECCS"), amount | 70 | 139,930 | ' | ' | 140,000 |
Stock-based compensation expense, shares | 95,000 | ' | ' | ' | ' |
Stock-based compensation expense, amount | 95 | 415,780 | ' | ' | 415,875 |
Exercise of stock options, net of tax, shares | 20,154 | ' | ' | ' | ' |
Exercise of stock options, net of tax, amount | 20 | 43,505 | ' | ' | 43,525 |
Dividends | ' | -270,590 | ' | ' | -270,590 |
Net income | ' | ' | ' | 305,732 | 305,732 |
Ending Balance, Amount at Dec. 31, 2012 | 1,937 | 2,070,369 | 0 | -226,159 | 1,846,147 |
Ending Balance, Shares at Dec. 31, 2012 | 1,937,329 | ' | ' | ' | ' |
Stock-based compensation expense, shares | 5,000 | ' | ' | ' | ' |
Stock-based compensation expense, amount | 5 | 282,702 | ' | ' | 282,707 |
Exercise of stock options, net of tax, shares | 64,360 | ' | ' | ' | ' |
Exercise of stock options, net of tax, amount | 65 | 124,590 | ' | ' | 124,655 |
Dividends | ' | ' | ' | -117,286 | -117,286 |
Value of beneficial conversion feature issued to holder of convertible note payable, net of deferred taxes | ' | 1,500,000 | ' | ' | 1,500,000 |
Foreign currency translation | ' | ' | -59,065 | ' | -59,065 |
Net income | ' | ' | ' | 628,577 | 628,577 |
Ending Balance, Amount at Dec. 31, 2013 | $2,007 | $3,977,661 | ($59,065) | $285,132 | $4,205,735 |
Ending Balance, Shares at Dec. 31, 2013 | 2,006,689 | ' | ' | ' | ' |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Cash flows from operating activities: | ' | ' |
Net income | $628,577 | $305,732 |
Adjustments to reconcile net income to net cash provided by operating activities: | ' | ' |
Bad debt expense | 203,136 | 65,327 |
Depreciation and amortization | 494,179 | 138,349 |
Deferred income taxes | -276,847 | -9,000 |
Non-cash interest expense | 446,909 | 0 |
Excess tax benefit from share based compensation | 0 | -11,000 |
Stock-based compensation expense | 282,707 | 415,875 |
Changes in operating assets and liabilities: | ' | ' |
Decrease (increase) in accounts receivable | -212,591 | -248,820 |
Decrease (increase) in deposits and prepaids | 245,686 | 72,494 |
Increase (decrease) in accounts payable | -89,329 | -40,680 |
Increase (decrease) in deferred revenue | -523,685 | -64,802 |
Increase (decrease) in accrued expenses | 190,899 | 130,696 |
Net cash provided by operating activities | 1,389,641 | 754,171 |
Cash flows from investing activities: | ' | ' |
Purchase of intangible assets | 0 | -281,000 |
Purchase of acquired business, net of cash acquired | -3,178,398 | 0 |
Purchase of furniture, equipment, and improvements | -43,863 | -18,849 |
Net cash used in investing activities | -3,222,261 | -299,849 |
Cash flows from financing activities: | ' | ' |
Proceeds from exercise of stock options, net of income taxes | 124,655 | 43,525 |
Payment of dividend | -117,286 | -270,590 |
Borrowings on long term debt | 2,500,000 | 0 |
Excess tax benefit from share based compensation | 0 | 11,000 |
Advances from line of credit (net) | 500,000 | 275,000 |
Repayment of line of credit | -650,000 | -125,000 |
Net cash provided by financing activities | 2,357,369 | -66,065 |
Effect of exchange rate changes on cash | -61,913 | 0 |
Net change in cash | 524,749 | 388,257 |
Cash - beginning | 1,250,643 | 862,386 |
Cash - ending | 1,713,479 | 1,250,643 |
Supplemental disclosures: | ' | ' |
Cash paid for interest | 77,024 | 12,034 |
Cash paid for income taxes | 699,491 | 22,594 |
Non-cash activities: | ' | ' |
Common stock issued for acquisition of customer list | 0 | 140,000 |
Issuance of beneficial conversion feature to holder of note payable | $2,500,000 | $0 |
Note_1_Description_Background_
Note 1. Description, Background and Basis of Operations | 12 Months Ended |
Dec. 31, 2013 | |
Notes to Financial Statements | ' |
Description, Background and Basis of Operations | ' |
Nature of Operations | |
Issuer Direct Corporation (the “Company” or “Issuer Direct”) was incorporated in the state of Delaware in October 1988 under the name Docucon Inc. Subsequent to the December 13, 2007 merger with My EDGAR, Inc., the Company changed its name to Issuer Direct Corporation.The surviving company was formed for the purposes of helping companies produce and distribute their financial and business communications both online and in print. As an issuer services focused company, Issuer Direct Corporation operates under several brands in the market, including Direct Transfer, PrecisionIR, New York Stock Transfer, iProxy Direct, iFund Direct, iR Direct, QX Interactive, and Issuer Services Group. The Company leverages its securities compliance and regulatory expertise to provide a comprehensive set of services that enhance a client's ability to communicate effectively with its shareholder base while meeting all reporting regulations required. |
Note_2_Summary_of_Significant_
Note 2. Summary of Significant Accounting Policies | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
Summary of Significant Accounting Policies | ' | ||||||||
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Significant intercompany accounts and transactions are eliminated in consolidation. | |||||||||
Cash and Cash Equivalents | |||||||||
We consider all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are carried at cost, which approximates fair value. | |||||||||
The Company places its cash and cash equivalents on deposit with financial institutions in the United States, Canada, and Europe. The Federal Deposit Insurance Corporation (FDIC) covers $250,000 for substantially all depository accounts in the United States. The Company from time to time may have amounts on deposit in excess of the insured limits. As of December 31, 2013, the Company had $607,349 which exceeds the insured amounts in the United States. The Company also had cash of $512,775 in Europe, and $27,684 in Canada on hand at December 31, 2013. | |||||||||
Revenue Recognition | |||||||||
We recognize revenue in accordance with SEC Staff Accounting Bulletin No. 104, “Revenue Recognition,” which requires that: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. We recognize revenue when services are rendered or delivered, where collectability is probable. Deferred revenue primarily consists of upfront payments for annual service contracts, and is recognized throughout the year as the services are performed. | |||||||||
Property and Equipment | |||||||||
Property and equipment is recorded at cost and depreciated over the estimated useful lives of the assets using principally the straight-line method. When items are retired or otherwise disposed of, income is charged or credited for the difference between net book value and proceeds realized thereon. Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized. The range of estimated useful lives used to calculate depreciation for principal items of property and equipment are as follow: | |||||||||
Asset Category | Depreciation / Amortization Period | ||||||||
Furniture, fixtures and equipment | 3 to 5 years | ||||||||
Computer equipment and purchased software | 3 years | ||||||||
Machinery and equipment | 3 to 5 years | ||||||||
Leasehold Improvements | 7 years or lesser of the lease term | ||||||||
Earnings per Share | |||||||||
We calculate earnings per share in accordance with the authoritative guidance for earnings per share, which requires that basic net income per common share be computed by dividing net income for the period by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing the net income for the period by the weighted average number of common and dilutive common equivalent shares outstanding during the period. Shares issuable upon the exercise of stock options totaling 280,836 and 323,500, respectively, were included in the computation of diluted earnings per common share during the years ended December 31, 2013, and 2012. The Company has a convertible note outstanding as of December 31, 2013 that can be converted into 626,566 shares of common stock, which were excluded from the calculation of diluted earnings per share as the impact is anti-dilutive. | |||||||||
Allowance for Doubtful Accounts | |||||||||
We provide an allowance for doubtful accounts, which is based upon a review of outstanding receivables as well as historical collection information. Credit is granted on an unsecured basis. In determining the amount of the allowance, management is required to make certain estimates and assumptions. The allowance is made up of specific reserves, as deemed necessary, on client account balances, and a reserve based on our historical experience. The following is a summary of our allowance for doubtful accounts during the years ended December 31, 2013 and 2012: | |||||||||
Year Ended | Year Ended | ||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Beginning balance | $ | 117,030 | $ | 125,987 | |||||
Acquired from acquisition | 307,274 | - | |||||||
Bad debt expense | 203,136 | 65,327 | |||||||
Write-offs | (197,931 | ) | (74,284 | ) | |||||
Ending balance | $ | 429,509 | $ | 117,030 | |||||
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, deferred tax assets, and stock based compensation. Actual results could differ from those estimates. | |||||||||
Income Taxes | |||||||||
We comply with FASB ASC No. 740 – Income Taxes which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred income tax assets to the amounts expected to be realized. For any uncertain tax positions, we recognize the impact of a tax position, only if it is more likely than not of being sustained upon examination, based on the technical merits of the position. Our policy regarding the classification of interest and penalties is to classify them as income tax expense in our financial statements, if applicable. At the end of each interim period, we estimate the effective tax rate we expect to be applicable for the full fiscal year and this rate is applied to our results for the interim year-to-date period. | |||||||||
Impairment of Long-lived Assets | |||||||||
In accordance with the authoritative guidance for accounting for long-lived assets, such as property and equipment, 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. | |||||||||
Fair Value Measurements | |||||||||
As of December 31, 2013 and 2012, we do not have any financial assets or liabilities that are required to be, or that we elected to measure, at fair value. We believe that the fair value of our financial instruments, which consist of cash and cash equivalents, accounts receivable, our line of credit, notes payable, and accounts payable approximate their carrying amounts. | |||||||||
Stock-based compensation | |||||||||
We account for stock-based compensation under the authoritative guidance for stock compensation. The authoritative guidance for stock compensation requires that companies estimate the fair value of share-based payment awards on the date of the grant using an option-pricing model. The cost is to be recognized over the period during which an employee is required to provide service in exchange for the award. The authoritative guidance for stock compensation also requires the benefit of tax deductions in excess of recognized compensation expense to be reported as a financing cash flow, rather than as an operating cash flow as prescribed under previous accounting rules. This requirement reduces net operating cash flows and increases net financing cash flows in periods subsequent to adoption, only if excess tax benefits exist. | |||||||||
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 fiscal 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 | |||||||||
We account for our business combinations in accordance with the authoritative guidance for business combinations, and the related acquired intangible assets and goodwill in accordance with the authoritative guidance for intangibles - goodwill and other. The authoritative guidance for business combinations specifies the accounting for business combinations and the criteria for recognizing and reporting intangible assets apart from goodwill. | |||||||||
We record the assets acquired and liabilities assumed in business combinations at their respective fair values at the date of acquisition, with any excess purchase price recorded as goodwill. Valuation of intangible assets entails significant estimates and assumptions, including approximating the useful lives of the intangible assets acquired. | |||||||||
The authoritative guidance for intangibles and goodwill requires that intangible assets with an indefinitelife should not be amortized until their life is determined to be finite, and all other intangible assets must be amortized over their useful lives. | |||||||||
Goodwill | |||||||||
Goodwill results from business acquisitions and represents the excess of the purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets. Goodwill is assessed at least annually for impairment, and any such impairment will be recognized in the period identified. | |||||||||
Comprehensive Income (Loss) | |||||||||
Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss) related to changes in the cumulative foreign currency translation adjustment. | |||||||||
Intangible Assets | |||||||||
Intangible assets consist of client relationships, customer lists, software, technology and trademarks that are initially measured at fair value. The trademarks have an indefinite life and are not amortized. The trademarks are assessed annually for impairment, or whenever conditions indicate the asset may be impaired, and any such impairment will be recognized in the period identified. The client relationships, customer lists, software and technology are amortized over their estimated useful lives. | |||||||||
Advertising | |||||||||
The Company expenses the production costs of advertising the first time the advertising takes place, except for direct-response advertising, which is capitalized and amortized over its expected period of future benefits. Advertising expense primarily relates to the operations of PIR which was acquired on August 22, 2013 (see Note 4), and totaled $341,650 during the year ended December 31, 2013. | |||||||||
Recent Accounting Pronouncements | |||||||||
In February 2013, the FASB issued ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income ("ASU 2013-02"), which is intended to improve the reporting of reclassifications out of accumulated other comprehensive income. The ASU requires an entity to report, either on the face of the income statement or in the notes to the financial statements, the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in the income statement if the amount being reclassified is required to be reclassified in its entirety to net income. For other amounts that are not required to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other required disclosures that provide additional detail about those amounts. Effective January 1, 2013, the Company adopted ASU 2013-02. The adoption of the standard did not have an impact on the consolidated financial statements. | |||||||||
In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists ("ASU 2013-11"). ASU 2013-11 is effective for the first interim or annual period beginning on or after December 15, 2013 with early adoption permitted. ASU 2013-11 amends ASC Topic 740, Income Taxes, to provide guidance and reduce diversity in practice on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. Except for the changes, if any, in the Company's presentation, the initial application of the standard is not expected to significantly impact the Company. |
Note_3_Furniture_Equipment_and
Note 3. Furniture, Equipment, and Improvements | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Furniture, Equipment, and Improvements | ' | ||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Computers & equipment | $ | 264,306 | $ | 97,482 | |||||
Furniture | 121,363 | 27,479 | |||||||
Leasehold improvements | 105,613 | 25,358 | |||||||
Total fixed assets, gross | 491,282 | 150,319 | |||||||
Less: Accumulated depreciation | (193,705 | ) | (94,708 | ) | |||||
Total fixed assets, net | $ | 297,577 | $ | 55,611 | |||||
Depreciation expense for the years ended December 31, 2013 and 2012 totaled $98,973 and $29,850, respectively. |
Note_4_Goodwill_and_Other_Inta
Note 4. Goodwill and Other Intangible Assets | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Notes to Financial Statements | ' | ||||||||||||
Goodwill and Other Intangible Assets | ' | ||||||||||||
Acquisition of PrecisionIR Group | |||||||||||||
On August 22, 2013, the Company and PrecisionIR Group Inc., a Delaware corporation (“PIR”) entered into and consummated an Agreement and Plan of Merger (the “Acquisition Agreement”). Under the terms of the Acquisition Agreement, the Company paid $3,450,000 to certain debtors of PIR as full consideration to acquire all of the outstanding shares of PIR. | |||||||||||||
During the year ended December 31, 2013, the Company employed a third party valuation firm to assist in determining the purchase price allocation of assets and liabilities acquired from PIR. The income approach was used to determine the value of PIR’s trademarks 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 cost approach was used to determine the value of PIR’s fixed assets, customer list, and software. The cost approach is based on replacement cost as an indicator of value. It assumes that a prudent investor would pay no more for an asset than the amount for which it could be replaced new. Further, to the extent a particular asset provides less utility than a new one, its value will be less than its replacement cost new. To account for this difference, the replacement cost new is adjusted for losses in value, that is, depreciated. Deferred revenue was recorded at fair value, based on the cost to perform the underlying obligations and a normal profit margin. | |||||||||||||
The transaction resulted in recording intangible assets and goodwill at a fair value of $5,014,030 as follows: | |||||||||||||
Total Consideration | $ | 3,450,000 | |||||||||||
Plus: Liabilities assumed in excess of tangible assets | 1,564,030 | ||||||||||||
Total fair value of PIR intangible assets and goodwill | $ | 5,014,030 | |||||||||||
Allocation of PIR intangible assets and goodwill: | |||||||||||||
Amortizable intangible assets | $ | 3,300,000 | |||||||||||
Trademarks | 720,000 | ||||||||||||
Goodwill | 994,030 | ||||||||||||
Total fair value of PIR intangible assets and goodwill | $ | 5,014,030 | |||||||||||
The tangible assets and liabilities acquired were as follows: | |||||||||||||
Cash | $ | 271,602 | |||||||||||
Accounts receivable | 1,405,208 | ||||||||||||
Prepaid expenses and other assets | 366,876 | ||||||||||||
Furniture, equipment, and improvements | 297,076 | ||||||||||||
Deposits | 10,283 | ||||||||||||
Total assets | 2,351,045 | ||||||||||||
Accounts payable and accrued expenses | (1,352,831 | ) | |||||||||||
Deferred revenue | (1,452,780 | ) | |||||||||||
Net tax liabilities | (1,109,464 | ) | |||||||||||
Total liabilities | (3,915,075 | ) | |||||||||||
Liabilities assumed in excess of tangible assets | $ | -1,564,030 | |||||||||||
The identifiable amortizable intangible assets created as a result of the acquisition will be amortized straight line over their estimated useful life as follows: | |||||||||||||
Asset Amount | Useful Life (years) | ||||||||||||
Client relationships | $ | 1,480,000 | 7 | ||||||||||
Customer list | 1,270,000 | 3 | |||||||||||
Software | 550,000 | 3 | |||||||||||
$ | 3,300,000 | ||||||||||||
Select Pro-Forma Financial Information (Unaudited) | |||||||||||||
The following represents our unaudited condensed pro-forma financial results as if the acquisition with PIR and the Company had occurred as of January 1, 2012. Unaudited condensed pro-forma results are based upon accounting estimates and judgments that we believe are reasonable. The condensed pro-forma results are not necessarily indicative of the actual results of our operations had the acquisitions occurred at the beginning of the periods presented, nor does it purport to represent the results of operations for future periods. | |||||||||||||
Year Ended | |||||||||||||
December 31, | |||||||||||||
2013 | 2012 | ||||||||||||
Revenues | 15,892,000 | 17,987,000 | |||||||||||
Net Income | 776,000 | 833,000 | |||||||||||
Basic earnings per share | 0.4 | 0.44 | |||||||||||
Diluted earnings per share | 0.38 | 0.42 | |||||||||||
Acquisition of SEC Compliance Services | |||||||||||||
The Company acquired rights to all customer contracts of privately held SEC Compliance Services, Inc. (“SECCS”) on January 4, 2012. The purchase price of $425,000 consisted of cash proceeds of $285,000 and 70,000 shares of common stock with a value of $140,000 based on the Company’s stock price of $2.00 per share on the close of business on January 4, 2012. The Company borrowed $275,000 from its line of credit to finance the transaction. The Company is amortizing the purchase price of $425,000 over its estimated useful life of five years. | |||||||||||||
The components of goodwill and intangible assets are as follows: | |||||||||||||
December 31, 2013 | |||||||||||||
Gross Carrying | Accumulated | Net Carrying | |||||||||||
Amount | Amortization | Amount | |||||||||||
Customer lists | $ | 1,770,000 | $ | (373,883 | ) | $ | 1,396,117 | ||||||
Customer relationships-noncontractual | 1,505,000 | (100,690 | ) | 1,404,310 | |||||||||
Proprietary software | 601,000 | (108,298 | ) | 492,702 | |||||||||
Trademarks | 720,000 | — | 720,000 | ||||||||||
Goodwill | 1,056,873 | — | 1,056,873 | ||||||||||
Total intangible assets | $ | 5,652,873 | $ | (582,871 | ) | $ | 5,070,002 | ||||||
December 31, 2012 | |||||||||||||
Gross Carrying | Accumulated | Net Carrying | |||||||||||
Amount | Amortization | Amount | |||||||||||
Customer lists | $ | 500,000 | $ | (128,333 | ) | $ | 371,667 | ||||||
Customer relationships-noncontractual | 25,000 | (25,000 | ) | - | |||||||||
Proprietary software | 51,000 | (34,333 | ) | 16,667 | |||||||||
Goodwill | 43,195 | — | 43,195 | ||||||||||
Total intangible assets | $ | 619,195 | $ | (187,666 | ) | $ | 431,529 | ||||||
At December 31, 2013 and 2012, our goodwill was related to our acquisition of Basset Press in July 2007 and the acquisition of PIR in 2013. We conducted our annual impairment analyses during the third quarters of 2013 and 2012 and determined that no goodwill or intangible assets were impaired. | |||||||||||||
The amortization of intangible assets is a charge to operating expenses and totaled $395,206 and $108,500 in the years ended 2013 and 2012, respectively. | |||||||||||||
The future amortization of the identifiable intangible assets is as follows: | |||||||||||||
Years Ending December 31: | |||||||||||||
2014 | $ | 920,429 | |||||||||||
2015 | 912,095 | ||||||||||||
2016 | 690,248 | ||||||||||||
2017 | 211,762 | ||||||||||||
2018 | 211,429 | ||||||||||||
Thereafter | 347,166 | ||||||||||||
Total | $ | 3,293,129 | |||||||||||
Note_5_Line_of_Credit
Note 5. Line of Credit | 12 Months Ended |
Dec. 31, 2013 | |
Notes to Financial Statements | ' |
Line of Credit | ' |
Effective April 30, 2013, the Company renewed its Line of Credit and increased the amount of funds available to 75% of eligible accounts receivable, as defined in the line of credit agreement, up to a maximum of $2,000,000. The interest rate was also reduced to LIBOR plus 3.5%, and therefore was 3.67% at December 31, 2013. The Company borrowed $500,000 during the year ended December 31, 2013 to partially finance the acquisition of PIR. All borrowings, plus the balance from the prior year, were repaid during the year ended December 31, 2013, and therefore the Company did now owe any amounts on the Line of Credit at December 31, 2013. As of December 31, 2013, the Company had approximately $987,000 remaining for future borrowings under the line of credit based on the calculation of eligible accounts receivable. On November 5, 2012, the Company renewed their working capital line of credit (the “Line of Credit”), and increased the amount available from $450,000 to $500,000. The Line of Credit had an interest rate equal to the 30 day LIBOR rate plus 4.5%. During the year ended December 31, 2012, the Company borrowed $275,000 under the Line of Credit as part of the purchase of the customer list from SECCS, and repaid $125,000 during the year. Therefore, the amount owed on the Line of Credit as of December 31, 2012 was $150,000. |
Note_6_Long_Term_Debt_Related_
Note 6. Long Term Debt (Related Party) | 12 Months Ended |
Dec. 31, 2013 | |
Debt Disclosure [Abstract] | ' |
Long Term Debt | ' |
On August 22, 2013, in connection with and to partially fund the acquisition and simultaneously with the Acquisition of PIR as discussed in Note 4, the Company entered into a Securities Purchase Agreement (the “8% Note Purchase Agreement”) relating to the sale of $2,500,000 aggregate principal amount of the Company’s 8% convertible secured promissory note (“8% Note”) with Red Oak Partners LP (“Red Oak”). The 8% Note will pay interest on each of March 31, June 30, September 30 and December 31, beginning on September 30, 2013, at a rate of 8% per year. The 8% Note will mature on August 22, 2015. If event of default occurs pursuant to the terms of the 8% Note, the interest rate immediately increases to 18%. The 8% Note is secured by all of the assets of the Company and is subordinated to the Company’s obligations to its primary financial institution. Furthermore, in connection with the 8% Note Purchase Agreement, a partner of Red Oak was appointed to the Company’s Board of Directors. | |
Beginning immediately upon the date of issuance, Red Oak or its assignees may convert the 8% Note into shares of the Company’s common stock at a conversion price of $3.99 per share. The conversion price will be adjusted for certain events, such as stock dividends and stock splits. On the date the Company entered into the 8% Note Purchase Agreement, the Company’s stock price was $8.20 per share, and therefore the Company assigned a value of $2,500,000 to the common stock conversion feature and recorded this as debt discount and additional paid in capital. This instrument also created a deferred tax liability of $1,000,000 that reduced the value recorded as additional paid in capital, and therefore the net amount recorded to stockholders' equity was $1,500,000. The debt discount of $2,500,000 will be amortized over the two-year life of the loan as non-cash interest expense. | |
During the year ended December 31, 2013, the Company recorded non-cash interest expense of $446,909 and cash interest expense of $71,739 related to the 8% Note. |
Note_7_Preferred_stock_and_com
Note 7. Preferred stock and common stock | 12 Months Ended |
Dec. 31, 2013 | |
Notes to Financial Statements | ' |
Preferred stock and common stock | ' |
On March 26, 2012, the Company filed a Certificate of Amendment to the Certificate of Designation for the Series A and B Convertible Preferred Stock (the “Amendment”). Under the terms of the Amendment, the Series A and Series B Designations were removed. As a result, at December 31, 2013, the Company has 30,000,000 shares of Preferred Stock authorized, with no shares designated, issued, or outstanding. On June 29, 2012, the shareholders of the Company approved a reduction in the par value of the Preferred Stock from $1.00 per share to $0.001 per share, which became effective on July 16, 2012. | |
The Company paid cash dividends of $117,286 and $270,590, respectively, to holders of shares of common stock during the years ended December 31, 2013 and 2012. | |
During years ended December 31, 2013 and 2012, the Company had the following issuances of common stock in addition to stock issued pursuant to exercises of options to purchase common stock: | |
● On April 2, 2012, the Company issued grants for a total of 95,000 restricted shares of the Company’s common stock (the “Awards”) to its executive officers and certain other employees. The Awards vest over periods up to two years as stated in the Award Agreements, and will accelerate in the event of a Corporate Transaction, as such term is defined in the Award Agreements. In the event a grantee’s relationship with the Company is terminated for any reason, vesting will immediately cease. These Awards are not part of the 2010 Equity Incentive Plan. The Company recognized compensation expense of $107,555 and $169,741 related to these shares during the year ended December 31, 2013 and 2012, respectively. | |
● As discussed in Note 4, the Company issued 70,000 shares of common stock with a value of $140,000 to the former shareholders of SECCS on January 4, 2012 as part of the consideration given for the purchase of assets obtained from SECCS. |
Note_8_Employee_Stock_Options
Note 8. Employee Stock Options | 12 Months Ended | ||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||
Notes to Financial Statements | ' | ||||||||||||||||||
Employee Stock Options | ' | ||||||||||||||||||
On August 9, 2010, the shareholders of the Company approved the 2010 Equity Incentive Plan (the “Plan”). Under the terms of the Plan, 150,000 shares of the Company’s common stock are authorized for the issuance of stock options and restricted stock. The Plan also provides for an automatic annual increase in the number of authorized shares of common stock issuable beginning in fiscal 2011 equal to the lesser of (a) 2% of shares outstanding on the last day of the immediate preceding fiscal year, (b) 50,000 shares, or (c) such lesser number of shares as the Company’s board of directors shall determine, provided, however, in no event shall the maximum number of shares that may be issued under the Plan pursuant to stock awards be greater than 15% of the aggregate shares outstanding on the last day of the immediately preceding fiscal year. With the automatic increases, there were 220,416 shares of common stock on January 1, 2012. On January 20, 2012, the Company’s Board of Directors approved an increase in the number of shares authorized under the Plan from 220,416 to 420,416.This increase was ratified by the shareholders of the Company on June 29, 2012. Therefore, on December 31, 2013, there were 420,416 shares authorized under the Plan. | |||||||||||||||||||
The following is a summary of stock options issued during the year ended December 31, 2013 and 2012: | |||||||||||||||||||
Number of Options Outstanding | Range of Exercise Price | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||||||||
Balance at December 31, 2011 | 127,500 | $ | 1.70 - $2.32 | $ | 2.07 | $ | 24,590 | ||||||||||||
Options granted | 196,000 | $ | 0.01 - $3.33 | $ | 1.37 | $ | 370,750 | ||||||||||||
Options exercised | (25,154 | ) | $ | 1.70 - $2.10 | $ | 2.04 | $ | 35,661 | |||||||||||
Options expired or cancelled | (70,000 | ) | $ | 0.01 | $ | 0.01 | $ | 226,800 | |||||||||||
Options forfeited | (7,750 | ) | $ | 1.70 - $3.33 | $ | 2.45 | $ | 6,438 | |||||||||||
Balance at December 31, 2012 | 220,596 | $ | 0.01 - $3.33 | $ | 2.09 | $ | 257,835 | ||||||||||||
Options granted | 140,000 | $ | 7.76 - $8.25 | $ | 7.9 | $ | - | ||||||||||||
Options exercised | (74,360 | ) | $ | 0.01 - $3.33 | $ | 2.14 | $ | 405,738 | |||||||||||
Options forfeited | (5,400 | ) | $ | 0.01 - $3.33 | $ | 1.39 | $ | 15,256 | |||||||||||
Balance at December 31, 2013 | 280,836 | $ | 0.01 - $8.25 | $ | 4.97 | $ | 1,340,684 | ||||||||||||
The aggregate intrinsic value in the table above represents the total pretax intrinsic value (i.e. the aggregate difference between the closing price of our common stock on December 31, 2013 and 2012 of $9.74 and $3.25, respectively, and the exercise price for in-the-money options) that would have been received by the holders if all instruments had been exercised on December 31, 2013 and 2012. As of December 31, 2013, there was $865,886 of unrecognized compensation cost related to our unvested stock options, which will be recognized through 2017. | |||||||||||||||||||
The following table summarizes information about stock options outstanding and exercisable at December 31, 2013: | |||||||||||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||
Exercise Price | Number | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in Years) | Number | |||||||||||||||
$ | 0.01 - $1.00 | 27,300 | $ | 0.01 | 8.05 | 27,300 | |||||||||||||
$ | 1.01 - $2.00 | 13,650 | $ | 1.73 | 7.4 | 13,650 | |||||||||||||
$ | 2.01 - $3.00 | 80,736 | $ | 2.49 | 6.15 | 48,236 | |||||||||||||
$ | 3.01 - $4.00 | 19,150 | $ | 3.33 | 8.25 | 19,150 | |||||||||||||
$ | 7.01 - $8.00 | 100,000 | $ | 7.76 | 7.34 | 6,251 | |||||||||||||
$ | 8.00 - $8.25 | 40,000 | $ | 8.25 | 4.64 | 5,000 | |||||||||||||
Total | 280,836 | $ | 4.97 | 7.58 | 119,587 | ||||||||||||||
Of the 280,836 stock options outstanding, 183,769 are non-qualified stock options. All of the options have been registered with the SEC. | |||||||||||||||||||
The fair value of common stock options issued during the year ended December 31, 2013 and 2012 were estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used: | |||||||||||||||||||
Year ended | Year ended | ||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||
2013 | 2012 | ||||||||||||||||||
Expected dividend yield | 1.16 | % | 0 | % | |||||||||||||||
Expected stock price volatility | 125 | % | 131 | % | |||||||||||||||
Weighted-average risk-free interest rate | 1.77 | % | 0.98 | % | |||||||||||||||
Weighted-average expected life of options (in years) | 6 | 5.5 | |||||||||||||||||
During the year ended December 31, 2013 and 2012, we recorded expense of $144,002 and $246,134, respectively, related to these stock options. |
Note_9_Commitments_and_Conting
Note 9. Commitments and Contingencies | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||
Commitments and Contingencies | ' | ||||
Office Lease | |||||
In August 2010, we signed a six year and two month lease for 16,059 square feet for our corporate headquarters in Morrisville, NC. At our option, we may terminate the lease anytime after October 31, 2014 in exchange for an early termination fee of $135,000. We also have lease obligations in Richmond Virginia through 2017, and in the United Kingdom ending in 2014. If we do not terminate the lease in Morrisville, NC early, our required minimum lease payments are as follows: | |||||
Year Ended December 31: | |||||
2014 | $ | 282,965 | |||
2015 | 273,095 | ||||
2016 | 254,532 | ||||
2017 | 111,103 | ||||
Thereafter | — | ||||
Total | $ | 921,695 | |||
Rental expenses associated with our office leases totaled $179,229 and $155,822 for the years ended December 31, 2013 and 2012, respectively. |
Note_10_Concentrations
Note 10. Concentrations | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Notes to Financial Statements | ' | ||||||||||||||||
Concentrations | ' | ||||||||||||||||
For the years ended December 31, 2013 and December 31, 2012, we generated revenues from the following revenue streams as a percentage of total revenue: | |||||||||||||||||
2013 | 2012 | ||||||||||||||||
Amount | Percentage | Amount | Percentage | ||||||||||||||
Revenue Streams | |||||||||||||||||
Disclosure management | $ | 3,974,640 | 45 | % | $ | 2,999,562 | 69.7 | % | |||||||||
Shareholder communication | 4,362,404 | 49.3 | % | 1,116,759 | 25.9 | % | |||||||||||
Software licensing | 505,185 | 5.7 | % | 189,245 | 4.4 | % | |||||||||||
Total | $ | 8,842,229 | 100 | % | $ | 4,305,566 | 100 | % | |||||||||
We did not have any customers during the years ended December 31, 2013 or 2012 that accounted for more than 10% of our revenue. We did not have any customers that comprised more than 10% of our total accounts receivable balances at December 31, 2013 or 2012. | |||||||||||||||||
We believe we do not have any financial instruments that could have potentially subjected us to significant concentrations of credit risk. Since a portion of the revenues are paid at the beginning of the month via credit card or advance by check, the remaining accounts receivable amounts are generally due within 30 days, none of which is collateralized. |
Note_11_Geographic_Operating_I
Note 11. Geographic Operating Information | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Segment Reporting [Abstract] | ' | ||||||||
Geographic Operating Information | ' | ||||||||
We consider ourselves to be in a single reportable segment under the authoritative guidance for segment reporting, specifically a disclosure management and targeted communications company for publically traded companies. Revenue is attributed to a particular geographic region based on where the services are earned. The following tables set forth revenues by domestic versus international regions: | |||||||||
Year Ended | |||||||||
2013 | 2012 | ||||||||
Geographic region | |||||||||
North America | $ | 7,700,715 | $ | 4,305,566 | |||||
Europe | 1,141,514 | - | |||||||
Total revenues | $ | 8,842,229 | $ | 4,305,566 |
Note_12_Income_taxes
Note 12. Income taxes | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||||||
Income taxes | ' | ||||||||||||
At December 31, 2012, we had fully utilized our federal net operating loss carryforward. At the date of acquisition, August 22, 2013, PIR had $748,000 of federal net operating losses, all of which are fully reserved. | |||||||||||||
The provision (benefit) for income taxes consisted of the following components for the years ended December 31: | |||||||||||||
2013 | 2012 | ||||||||||||
Current: | |||||||||||||
Federal | $ | 590,000 | $ | 221,000 | |||||||||
State | 103,000 | 39,000 | |||||||||||
Foreign | 73,000 | - | |||||||||||
Total Current | 766,000 | 260,000 | |||||||||||
Deferred: | |||||||||||||
Federal | (213,000 | ) | (8,000 | ) | |||||||||
State | 24,000 | (1,000 | ) | ||||||||||
(21,000 | ) | ||||||||||||
Total Deferred | (210,000 | ) | (9,000 | ) | |||||||||
Total provision for income taxes | $ | 556,000 | $ | 251,000 | |||||||||
Reconciliation between the statutory rate and the effective tax rate is as follows at December 31: | |||||||||||||
2013 | 2012 | ||||||||||||
Federal statutory tax rate | 34 | % | 34 | % | |||||||||
State tax rate | 4.2 | % | 6 | % | |||||||||
Permanent difference - transaction costs | 10.1 | % | - | ||||||||||
Permanent difference - Other | 2.9 | % | 5.6 | % | |||||||||
Other | (4.3 | ) % | (0.5 | ) % | |||||||||
46.9 | % | 45.1 | % | ||||||||||
Change in valuation allowance | - | - | |||||||||||
Total | 46.9 | % | 45.1 | % | |||||||||
Components of net deferred income tax assets, including a valuation allowance, are as follows at December 31: | |||||||||||||
2013 | 2012 | Change | |||||||||||
Assets: | |||||||||||||
Net operating loss | $ | 583,000 | $ | - | $ | 364,000 | |||||||
Deferred revenue | 10,000 | 45,000 | (35,000 | ) | |||||||||
Allowance for doubtful accounts | 140,000 | 47,000 | 93,000 | ||||||||||
Stock options | 154,000 | 107,000 | 47,000 | ||||||||||
Basis difference in intangible assets | 136,000 | 46,000 | 91,000 | ||||||||||
Accrued accounting fees | 15,000 | - | 16,000 | ||||||||||
Rent expense | 26,000 | - | 26,000 | ||||||||||
Foreign tax credits carryforward | 1,181,000 | - | 1,181,000 | ||||||||||
Other | 2,000 | - | 3,000 | ||||||||||
Total deferred tax asset | 2,247,000 | 245,000 | 1,786,000 | ||||||||||
Less: Valuation allowance | (1,762,000 | ) | - | (1,545,000 | ) | ||||||||
Total net deferred tax asset | 485,000 | 245,000 | 241,000 | ||||||||||
Liabilities | |||||||||||||
Prepaid expenses | (16,000 | ) | (15,000 | ) | (1,000 | ) | |||||||
Basis difference in fixed assets | (100,000 | ) | (22,000 | ) | (78,000 | ) | |||||||
Debt discount - convertible note payable | (761,000 | ) | - | (761,000 | ) | ||||||||
Purchase of intangibles | (1,233,000 | ) | - | (1,233,000 | ) | ||||||||
Total deferred tax liability | (2,110,000 | ) | (37,000 | ) | (2,073,000 | ) | |||||||
Total net deferred tax asset / (liability) | $ | (1,625,000 | ) | $ | 208,000 | $ | (1,832,000 | ) | |||||
The Company has $1,545,000 of total valuation allowance for deferred tax assets as of December 31, 2013. The valuation allowance relates to PIR federal net operating losses, state net operating losses, and foreign tax credit carryforwards. In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. It has been determined that it is more likely than not that the deferred tax assets will not be realized, as it has been deemed unlikely that there will be generation of taxable income for the subsidiaries that carry these losses or that sufficient foreign source income would be generated to use the foreign tax credits. | |||||||||||||
The Company is subject to income taxation by both federal and state taxing authorities. Income tax returns for the years ended December 31, 2013, 2012, 2011, 2010, and 2009 are open to audit by federal and state taxing authorities. The Company has reviewed its tax positions and has determined that it has no significant uncertain positions as of December 31, 2013 or 2012. | |||||||||||||
The Company has not recorded deferred income taxes applicable to undistributed earnings of foreign subsidiaries that are indefinitely reinvested in foreign operations. Generally, such earnings become subject to U.S. tax upon the remittance of dividends and under certain other circumstances. It is not practical to estimate the amount of deferred tax liabilities on such undistributed earnings. Undistributed earnings are insignificant as of December 31, 2013 and 2012. |
Note_13_Employee_Benefit_Plan
Note 13. Employee Benefit Plan | 12 Months Ended |
Dec. 31, 2013 | |
Compensation and Retirement Disclosure [Abstract] | ' |
13. Employee Benefit Plan | ' |
During the year ended December 31, 2013, the Company assumed a defined contribution 401(k) Profit Sharing Plan from PIR, and allowed all employees in the United States to participate. Matching and profit sharing contributions to the plan are at the discretion of management, but are limited to the amount deductible for federal income tax purposes. The Company did not make any contributions to the plan during the year ended December 31, 2013. | |
During the year ended December 31, 2013, the Company also assumed a defined contribution plan from PIR which covers substantially all employees in the United Kingdom. Employer contributions to the plan are at the discretion of management. The Company's contribution expense for discretionary contributions were $2,202 for the year ended December 31, 2013. | |
Note_2_Summary_of_Significant_1
Note 2. Summary of Significant Accounting Policies (Policies) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Notes to Financial Statements | ' | ||||||||
Cash and Cash Equivalents | ' | ||||||||
We consider all highly liquid investments with an original maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are carried at cost, which approximates fair value. | |||||||||
The Company places its cash and cash equivalents on deposit with financial institutions in the United States, Canada, and Europe. The Federal Deposit Insurance Corporation (FDIC) covers $250,000 for substantially all depository accounts in the United States. The Company from time to time may have amounts on deposit in excess of the insured limits. As of December 31, 2013, the Company had $607,349 which exceeds the insured amounts in the United States. The Company also had cash of $512,775 in Europe, and $27,684 in Canada on hand at December 31, 2013. | |||||||||
Revenue Recognition | ' | ||||||||
We recognize revenue in accordance with SEC Staff Accounting Bulletin No. 104, “Revenue Recognition,” which requires that: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. We recognize revenue when services are rendered or delivered, where collectability is probable. Deferred revenue primarily consists of upfront payments for annual service contracts, and is recognized throughout the year as the services are performed. | |||||||||
Property and Equipment | ' | ||||||||
Property and equipment is recorded at cost and depreciated over the estimated useful lives of the assets using principally the straight-line method. When items are retired or otherwise disposed of, income is charged or credited for the difference between net book value and proceeds realized thereon. Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized. The range of estimated useful lives used to calculate depreciation for principal items of property and equipment are as follow: | |||||||||
Asset Category | Depreciation / Amortization Period | ||||||||
Furniture, fixtures and equipment | 3 to 5 years | ||||||||
Computer equipment and purchased software | 3 years | ||||||||
Machinery and equipment | 3 to 5 years | ||||||||
Leasehold Improvements | 7 years or lesser of the lease term | ||||||||
Earnings per Share | ' | ||||||||
We calculate earnings per share in accordance with the authoritative guidance for earnings per share, which requires that basic net income per common share be computed by dividing net income for the period by the weighted average number of common shares outstanding during the period. Diluted net income per share is computed by dividing the net income for the period by the weighted average number of common and dilutive common equivalent shares outstanding during the period. Shares issuable upon the exercise of stock options totaling 280,836 and 323,500, respectively, were included in the computation of diluted earnings per common share during the years ended December 31, 2013, and 2012. The Company has a convertible note outstanding as of December 31, 2013 that can be converted into 626,566 shares of common stock, which were excluded from the calculation of diluted earnings per share as the impact is anti-dilutive. | |||||||||
Allowance for Doubtful Accounts | ' | ||||||||
We provide an allowance for doubtful accounts, which is based upon a review of outstanding receivables as well as historical collection information. Credit is granted on an unsecured basis. In determining the amount of the allowance, management is required to make certain estimates and assumptions. The allowance is made up of specific reserves, as deemed necessary, on client account balances, and a reserve based on our historical experience. The following is a summary of our allowance for doubtful accounts during the years ended December 31, 2013 and 2012: | |||||||||
Year Ended | Year Ended | ||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Beginning balance | $ | 117,030 | $ | 125,987 | |||||
Acquired from acquisition | 307,274 | - | |||||||
Bad debt expense | 203,136 | 65,327 | |||||||
Write-offs | (197,931 | ) | (74,284 | ) | |||||
Ending balance | $ | 429,509 | $ | 117,030 | |||||
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, deferred tax assets, and stock based compensation. Actual results could differ from those estimates. | |||||||||
Income Taxes | ' | ||||||||
We comply with FASB ASC No. 740 – Income Taxes which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed for differences between the financial statement and tax bases of assets and liabilities that will result in future taxable or deductible amounts based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred income tax assets to the amounts expected to be realized. For any uncertain tax positions, we recognize the impact of a tax position, only if it is more likely than not of being sustained upon examination, based on the technical merits of the position. Our policy regarding the classification of interest and penalties is to classify them as income tax expense in our financial statements, if applicable. At the end of each interim period, we estimate the effective tax rate we expect to be applicable for the full fiscal year and this rate is applied to our results for the interim year-to-date period. | |||||||||
Impairment of Long-lived Assets | ' | ||||||||
In accordance with the authoritative guidance for accounting for long-lived assets, such as property and equipment, 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. | |||||||||
Fair Value Measurements | ' | ||||||||
As of December 31, 2013 and 2012, we do not have any financial assets or liabilities that are required to be, or that we elected to measure, at fair value. We believe that the fair value of our financial instruments, which consist of cash and cash equivalents, accounts receivable, our line of credit, notes payable, and accounts payable approximate their carrying amounts. | |||||||||
Stock-based compensation | ' | ||||||||
We account for stock-based compensation under the authoritative guidance for stock compensation. The authoritative guidance for stock compensation requires that companies estimate the fair value of share-based payment awards on the date of the grant using an option-pricing model. The cost is to be recognized over the period during which an employee is required to provide service in exchange for the award. The authoritative guidance for stock compensation also requires the benefit of tax deductions in excess of recognized compensation expense to be reported as a financing cash flow, rather than as an operating cash flow as prescribed under previous accounting rules. This requirement reduces net operating cash flows and increases net financing cash flows in periods subsequent to adoption, only if excess tax benefits exist. | |||||||||
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 fiscal 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 | ' | ||||||||
We account for our business combinations in accordance with the authoritative guidance for business combinations, and the related acquired intangible assets and goodwill in accordance with the authoritative guidance for intangibles - goodwill and other. The authoritative guidance for business combinations specifies the accounting for business combinations and the criteria for recognizing and reporting intangible assets apart from goodwill. | |||||||||
We record the assets acquired and liabilities assumed in business combinations at their respective fair values at the date of acquisition, with any excess purchase price recorded as goodwill. Valuation of intangible assets entails significant estimates and assumptions, including approximating the useful lives of the intangible assets acquired. | |||||||||
The authoritative guidance for intangibles and goodwill requires that intangible assets with an indefinitelife should not be amortized until their life is determined to be finite, and all other intangible assets must be amortized over their useful lives. | |||||||||
Goodwill | ' | ||||||||
Goodwill results from business acquisitions and represents the excess of the purchase price over the fair value of acquired tangible assets and liabilities and identifiable intangible assets. Goodwill is assessed at least annually for impairment, and any such impairment will be recognized in the period identified. | |||||||||
Comprehensive Income (Loss) | ' | ||||||||
Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss) related to changes in the cumulative foreign currency translation adjustment. | |||||||||
Intangible Assets | ' | ||||||||
Intangible assets consist of client relationships, customer lists, software, technology and trademarks that are initially measured at fair value. The trademarks have an indefinite life and are not amortized. The trademarks are assessed annually for impairment, or whenever conditions indicate the asset may be impaired, and any such impairment will be recognized in the period identified. The client relationships, customer lists, software and technology are amortized over their estimated useful lives. | |||||||||
Advertising | ' | ||||||||
The Company expenses the production costs of advertising the first time the advertising takes place, except for direct-response advertising, which is capitalized and amortized over its expected period of future benefits. Advertising expense primarily relates to the operations of PIR which was acquired on August 22, 2013 (see Note 4), and totaled $341,650 during the year ended December 31, 2013. | |||||||||
Recent Accounting Pronouncements | ' | ||||||||
In February 2013, the FASB issued ASU 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income ("ASU 2013-02"), which is intended to improve the reporting of reclassifications out of accumulated other comprehensive income. The ASU requires an entity to report, either on the face of the income statement or in the notes to the financial statements, the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in the income statement if the amount being reclassified is required to be reclassified in its entirety to net income. For other amounts that are not required to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other required disclosures that provide additional detail about those amounts. Effective January 1, 2013, the Company adopted ASU 2013-02. The adoption of the standard did not have an impact on the consolidated financial statements. | |||||||||
In July 2013, the FASB issued ASU 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists ("ASU 2013-11"). ASU 2013-11 is effective for the first interim or annual period beginning on or after December 15, 2013 with early adoption permitted. ASU 2013-11 amends ASC Topic 740, Income Taxes, to provide guidance and reduce diversity in practice on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. Except for the changes, if any, in the Company's presentation, the initial application of the standard is not expected to significantly impact the Company. |
Note_2_Summary_of_Significant_2
Note 2. Summary of Significant Accounting Policies (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Note 2. Summary Of Significant Accounting Policies Tables | ' | ||||||||
Schedule of estimated useful lives for property and equipment | ' | ||||||||
Asset Category | Depreciation / Amortization Period | ||||||||
Furniture, fixtures and equipment | 3 to 5 years | ||||||||
Computer equipment and purchased software | 3 years | ||||||||
Machinery and equipment | 3 to 5 years | ||||||||
Leasehold Improvements | 7 years or lesser of the lease term | ||||||||
Summary of allowance for doubtful accounts | ' | ||||||||
Year Ended | Year Ended | ||||||||
December 31, | December 31, | ||||||||
2013 | 2012 | ||||||||
Beginning balance | $ | 117,030 | $ | 125,987 | |||||
Acquired from acquisition | 307,274 | - | |||||||
Bad debt expense | 203,136 | 65,327 | |||||||
Write-offs | (197,931 | ) | (74,284 | ) | |||||
Ending balance | $ | 429,509 | $ | 117,030 |
Note_3_Furniture_Equipment_and1
Note 3. Furniture, Equipment, and Improvements (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Property, Plant and Equipment [Abstract] | ' | ||||||||
Schedule of Furniture, Equipment and Improvements | ' | ||||||||
December 31, | |||||||||
2013 | 2012 | ||||||||
Computers & equipment | $ | 264,306 | $ | 97,482 | |||||
Furniture | 121,363 | 27,479 | |||||||
Leasehold improvements | 105,613 | 25,358 | |||||||
Total fixed assets, gross | 491,282 | 150,319 | |||||||
Less: Accumulated depreciation | (193,705 | ) | (94,708 | ) | |||||
Total fixed assets, net | $ | 297,577 | $ | 55,611 |
Note_4_Goodwill_and_Intangible
Note 4. Goodwill and Intangible Assets (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Note 4. Goodwill And Intangible Assets Tables | ' | ||||||||||||
Fair value of PIR intangible assets and goodwill | ' | ||||||||||||
Total Consideration | $ | 3,450,000 | |||||||||||
Plus: Liabilities assumed in excess of tangible assets | 1,564,030 | ||||||||||||
Total fair value of PIR intangible assets and goodwill | $ | 5,014,030 | |||||||||||
Allocation of PIR intangible assets and goodwill: | |||||||||||||
Amortizable intangible assets | $ | 3,300,000 | |||||||||||
Trademarks | 720,000 | ||||||||||||
Goodwill | 994,030 | ||||||||||||
Total fair value of PIR intangible assets and goodwill | $ | 5,014,030 | |||||||||||
Assets and liabilities acquired | ' | ||||||||||||
Cash | $ | 271,602 | |||||||||||
Accounts receivable | 1,405,208 | ||||||||||||
Prepaid expenses and other assets | 366,876 | ||||||||||||
Furniture, equipment, and improvements | 297,076 | ||||||||||||
Deposits | 10,283 | ||||||||||||
Total assets | 2,351,045 | ||||||||||||
Accounts payable and accrued expenses | (1,352,831 | ) | |||||||||||
Deferred revenue | (1,452,780 | ) | |||||||||||
Net tax liabilities | (1,109,464 | ) | |||||||||||
Total liabilities | (3,915,075 | ) | |||||||||||
Liabilities assumed in excess of tangible assets | $ | -1,564,030 | |||||||||||
Amortizable intangible assets | ' | ||||||||||||
Asset Amount | Useful Life (years) | ||||||||||||
Client relationships | $ | 1,480,000 | 7 | ||||||||||
Customer list | 1,270,000 | 3 | |||||||||||
Software | 550,000 | 3 | |||||||||||
$ | 3,300,000 | ||||||||||||
Unaudited condensed pro-forma financial results | ' | ||||||||||||
Year Ended | |||||||||||||
December 31, | |||||||||||||
2013 | 2012 | ||||||||||||
Revenues | 15,892,000 | 17,987,000 | |||||||||||
Net Income | 776,000 | 833,000 | |||||||||||
Basic earnings per share | 0.4 | 0.44 | |||||||||||
Diluted earnings per share | 0.38 | 0.42 | |||||||||||
Components of goodwill and intangible assets | ' | ||||||||||||
December 31, 2013 | |||||||||||||
Gross Carrying | Accumulated | Net Carrying | |||||||||||
Amount | Amortization | Amount | |||||||||||
Customer lists | $ | 1,770,000 | $ | (373,883 | ) | $ | 1,396,117 | ||||||
Customer relationships-noncontractual | 1,505,000 | (100,690 | ) | 1,404,310 | |||||||||
Proprietary software | 601,000 | (108,298 | ) | 492,702 | |||||||||
Trademarks | 720,000 | — | 720,000 | ||||||||||
Goodwill | 1,056,873 | — | 1,056,873 | ||||||||||
Total intangible assets | $ | 5,652,873 | $ | (582,871 | ) | $ | 5,070,002 | ||||||
December 31, 2012 | |||||||||||||
Gross Carrying | Accumulated | Net Carrying | |||||||||||
Amount | Amortization | Amount | |||||||||||
Customer lists | $ | 500,000 | $ | (128,333 | ) | $ | 371,667 | ||||||
Customer relationships-noncontractual | 25,000 | (25,000 | ) | - | |||||||||
Proprietary software | 51,000 | (34,333 | ) | 16,667 | |||||||||
Goodwill | 43,195 | — | 43,195 | ||||||||||
Total intangible assets | $ | 619,195 | $ | (187,666 | ) | $ | 431,529 | ||||||
Schedule of future amortization of intangible assets | ' | ||||||||||||
Years Ending December 31: | |||||||||||||
2014 | $ | 920,429 | |||||||||||
2015 | 912,095 | ||||||||||||
2016 | 690,248 | ||||||||||||
2017 | 211,762 | ||||||||||||
2018 | 211,429 | ||||||||||||
Thereafter | 347,166 | ||||||||||||
Total | $ | 3,293,129 |
Note_8_Employee_Stock_Options_
Note 8. Employee Stock Options (Tables) | 12 Months Ended | ||||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||||
Notes to Financial Statements | ' | ||||||||||||||||||
Summary of stock options issued | ' | ||||||||||||||||||
Number of Options Outstanding | Range of Exercise Price | Weighted Average Exercise Price | Aggregate Intrinsic Value | ||||||||||||||||
Balance at December 31, 2011 | 127,500 | $ | 1.70 - $2.32 | $ | 2.07 | $ | 24,590 | ||||||||||||
Options granted | 196,000 | $ | 0.01 - $3.33 | $ | 1.37 | $ | 370,750 | ||||||||||||
Options exercised | (25,154 | ) | $ | 1.70 - $2.10 | $ | 2.04 | $ | 35,661 | |||||||||||
Options expired or cancelled | (70,000 | ) | $ | 0.01 | $ | 0.01 | $ | 226,800 | |||||||||||
Options forfeited | (7,750 | ) | $ | 1.70 - $3.33 | $ | 2.45 | $ | 6,438 | |||||||||||
Balance at December 31, 2012 | 220,596 | $ | 0.01 - $3.33 | $ | 2.09 | $ | 257,835 | ||||||||||||
Options granted | 140,000 | $ | 7.76 - $8.25 | $ | 7.9 | $ | - | ||||||||||||
Options exercised | (74,360 | ) | $ | 0.01 - $3.33 | $ | 2.14 | $ | 405,738 | |||||||||||
Options forfeited | (5,400 | ) | $ | 0.01 - $3.33 | $ | 1.39 | $ | 15,256 | |||||||||||
Balance at December 31, 2013 | 280,836 | $ | 0.01 - $8.25 | $ | 4.97 | $ | 1,340,684 | ||||||||||||
Schedule Of Stock Options | ' | ||||||||||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||
Exercise Price | Number | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (in Years) | Number | |||||||||||||||
$ | 0.01 - $1.00 | 27,300 | $ | 0.01 | 8.05 | 27,300 | |||||||||||||
$ | 1.01 - $2.00 | 13,650 | $ | 1.73 | 7.4 | 13,650 | |||||||||||||
$ | 2.01 - $3.00 | 80,736 | $ | 2.49 | 6.15 | 48,236 | |||||||||||||
$ | 3.01 - $4.00 | 19,150 | $ | 3.33 | 8.25 | 19,150 | |||||||||||||
$ | 7.01 - $8.00 | 100,000 | $ | 7.76 | 7.34 | 6,251 | |||||||||||||
$ | 8.00 - $8.25 | 40,000 | $ | 8.25 | 4.64 | 5,000 | |||||||||||||
Total | 280,836 | $ | 4.97 | 7.58 | 119,587 | ||||||||||||||
Schedule of Stock Options, Valuation Assumptions | ' | ||||||||||||||||||
Year ended | Year ended | ||||||||||||||||||
December 31, | December 31, | ||||||||||||||||||
2013 | 2012 | ||||||||||||||||||
Expected dividend yield | 1.16 | % | 0 | % | |||||||||||||||
Expected stock price volatility | 125 | % | 131 | % | |||||||||||||||
Weighted-average risk-free interest rate | 1.77 | % | 0.98 | % | |||||||||||||||
Weighted-average expected life of options (in years) | 6 | 5.5 |
Note_9_Commitments_and_Conting1
Note 9. Commitments and Contingencies (Tables) | 12 Months Ended | ||||
Dec. 31, 2013 | |||||
Commitments and Contingencies Disclosure [Abstract] | ' | ||||
Schedule of Future Minimum Lease Payments | ' | ||||
Year Ended December 31: | |||||
2014 | $ | 282,965 | |||
2015 | 273,095 | ||||
2016 | 254,532 | ||||
2017 | 111,103 | ||||
Thereafter | — | ||||
Total | $ | 921,695 |
Note_10_Concentrations_Tables
Note 10. Concentrations (Tables) | 12 Months Ended | ||||||||||||||||
Dec. 31, 2013 | |||||||||||||||||
Notes to Financial Statements | ' | ||||||||||||||||
Concentration of revenue as a percentage of total revenue | ' | ||||||||||||||||
2013 | 2012 | ||||||||||||||||
Amount | Percentage | Amount | Percentage | ||||||||||||||
Revenue Streams | |||||||||||||||||
Disclosure management | $ | 3,974,640 | 45 | % | $ | 2,999,562 | 69.7 | % | |||||||||
Shareholder communication | 4,362,404 | 49.3 | % | 1,116,759 | 25.9 | % | |||||||||||
Software licensing | 505,185 | 5.7 | % | 189,245 | 4.4 | % | |||||||||||
Total | $ | 8,842,229 | 100 | % | $ | 4,305,566 | 100 | % |
Note_11_Geographic_Operating_I1
Note 11. Geographic Operating Information (Tables) | 12 Months Ended | ||||||||
Dec. 31, 2013 | |||||||||
Segment Reporting [Abstract] | ' | ||||||||
Revenue based on geographic region | ' | ||||||||
Year Ended | |||||||||
2013 | 2012 | ||||||||
Geographic region | |||||||||
North America | $ | 7,700,715 | $ | 4,305,566 | |||||
Europe | 1,141,514 | - | |||||||
Total revenues | $ | 8,842,229 | $ | 4,305,566 |
Note_12_Income_Taxes_Tables
Note 12. Income Taxes (Tables) | 12 Months Ended | ||||||||||||
Dec. 31, 2013 | |||||||||||||
Income Tax Disclosure [Abstract] | ' | ||||||||||||
Schedule of Components of Income Tax Expense (Benefit) | ' | ||||||||||||
2013 | 2012 | ||||||||||||
Current: | |||||||||||||
Federal | $ | 590,000 | $ | 221,000 | |||||||||
State | 103,000 | 39,000 | |||||||||||
Foreign | 73,000 | - | |||||||||||
Total Current | 766,000 | 260,000 | |||||||||||
Deferred: | |||||||||||||
Federal | (213,000 | ) | (8,000 | ) | |||||||||
State | 24,000 | (1,000 | ) | ||||||||||
(21,000 | ) | ||||||||||||
Total Deferred | (210,000 | ) | (9,000 | ) | |||||||||
Total provision for income taxes | $ | 556,000 | $ | 251,000 | |||||||||
Schedule of Effective Income Tax Rate Reconciliation | ' | ||||||||||||
2013 | 2012 | ||||||||||||
Federal statutory tax rate | 34 | % | 34 | % | |||||||||
State tax rate | 4.2 | % | 6 | % | |||||||||
Permanent difference - transaction costs | 10.1 | % | - | ||||||||||
Permanent difference - Other | 2.9 | % | 5.6 | % | |||||||||
Other | (4.3 | ) % | (0.5 | ) % | |||||||||
46.9 | % | 45.1 | % | ||||||||||
Change in valuation allowance | - | - | |||||||||||
Total | 46.9 | % | 45.1 | % | |||||||||
Schedule of Deferred Tax Assets and Liabilities | ' | ||||||||||||
2013 | 2012 | Change | |||||||||||
Assets: | |||||||||||||
Net operating loss | $ | 583,000 | $ | - | $ | 364,000 | |||||||
Deferred revenue | 10,000 | 45,000 | (35,000 | ) | |||||||||
Allowance for doubtful accounts | 140,000 | 47,000 | 93,000 | ||||||||||
Stock options | 154,000 | 107,000 | 47,000 | ||||||||||
Basis difference in intangible assets | 136,000 | 46,000 | 91,000 | ||||||||||
Accrued accounting fees | 15,000 | - | 16,000 | ||||||||||
Rent expense | 26,000 | - | 26,000 | ||||||||||
Foreign tax credits carryforward | 1,181,000 | - | 1,181,000 | ||||||||||
Other | 2,000 | - | 3,000 | ||||||||||
Total deferred tax asset | 2,247,000 | 245,000 | 1,786,000 | ||||||||||
Less: Valuation allowance | (1,762,000 | ) | - | (1,545,000 | ) | ||||||||
Total net deferred tax asset | 485,000 | 245,000 | 241,000 | ||||||||||
Liabilities | |||||||||||||
Prepaid expenses | (16,000 | ) | (15,000 | ) | (1,000 | ) | |||||||
Basis difference in fixed assets | (100,000 | ) | (22,000 | ) | (78,000 | ) | |||||||
Debt discount - convertible note payable | (761,000 | ) | - | (761,000 | ) | ||||||||
Purchase of intangibles | (1,233,000 | ) | - | (1,233,000 | ) | ||||||||
Total deferred tax liability | (2,110,000 | ) | (37,000 | ) | (2,073,000 | ) | |||||||
Total net deferred tax asset / (liability) | $ | (1,625,000 | ) | $ | 208,000 | $ | (1,832,000 | ) |
Note_2_Summary_of_Significant_3
Note 2. Summary of Significant Accounting Policies (Details) | 12 Months Ended |
Dec. 31, 2013 | |
Furniture, fixtures and equipment | ' |
Depreciation / Amortization Period | '3 to 5 years |
Computer equipment and purchased software | ' |
Depreciation / Amortization Period | '3 years |
Machinery and equipment | ' |
Depreciation / Amortization Period | '3 to 5 years |
Leasehold Improvements | ' |
Depreciation / Amortization Period | '7 years or lesser of the lease term |
Note_2_Summary_of_Significant_4
Note 2. Summary of Significant Accounting Policies (Details 1) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Note 2. Summary Of Significant Accounting Policies Tables | ' | ' |
Beginning balance | $117,030 | $125,987 |
Acquired from acquisition | 307,274 | 0 |
Bad Debt Expense | 203,136 | 65,327 |
Write-offs | -197,931 | -74,284 |
Ending Balance | $429,509 | $117,030 |
Note_2_Summary_of_Significant_5
Note 2. Summary of Significant Accounting Policies (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Note 2. Summary Of Significant Accounting Policies Details Narrative | ' | ' |
Cash and cash equivalents in excess of FDIC insured amount | $607,349 | ' |
Stock options included in computation of diluted earnings per share | 280,836 | 323,500 |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Convertible note | 626,566 | ' |
Stock based compensation expense | 282,707 | 415,875 |
Advertising expense | $341,650 | ' |
Note_3_Furniture_Equipment_and2
Note 3. Furniture, Equipment, and Improvements (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Property, Plant and Equipment [Abstract] | ' | ' |
Computers & equipment | $264,306 | $97,482 |
Furniture | 121,363 | 27,479 |
Leasehold improvements | 105,613 | 25,358 |
Total fixed assets, gross | 491,282 | 150,319 |
Less: Accumulated depreciation | -193,705 | -94,708 |
Total fixed assets, net | $297,577 | $55,611 |
Note_3_Furniture_Equipment_and3
Note 3. Furniture, Equipment, and Improvements (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Note 3. Furniture Equipment And Improvements Details Narrative | ' | ' |
Depreciation expense | $98,973 | $29,850 |
Note_4_Goodwill_and_Other_Inta1
Note 4. Goodwill and Other Intangible Assets (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2013 |
PrecisionIR | |||
Total Consideration | ' | ' | $3,450,000 |
Plus: Liabilities assumed in excess of tangible assets | ' | ' | -1,564,030 |
Total fair value of PIR intangible assets and goodwill | ' | ' | 5,014,030 |
Allocation of PIR intangible assets and goodwill: | ' | ' | ' |
Amortizable intangible assets | 3,300,000 | ' | 3,300,000 |
Trademarks | ' | ' | 720,000 |
Goodwill | 1,056,873 | 0 | 994,030 |
Total fair value of PIR intangible assets and goodwill | ' | ' | $5,014,030 |
Note_4_Goodwill_and_Other_Inta2
Note 4. Goodwill and Other Intangible Assets (Details 1) (PrecisionIR, USD $) | Dec. 31, 2013 |
PrecisionIR | ' |
Cash | $271,602 |
Accounts receivable | 1,405,208 |
Prepaid expenses and other assets | 366,876 |
Furniture, equipment, and improvements | 297,076 |
Deposits | 10,283 |
Total assets | 2,351,045 |
Accounts payable and accrued expenses | -1,352,831 |
Deferred revenue | -1,452,780 |
Net tax liabilities | -1,109,464 |
Total liabilities | -3,915,075 |
Liabilities assumed in excess of tangible assets | ($1,564,030) |
Note_4_Goodwill_and_Other_Inta3
Note 4. Goodwill and Other Intangible Assets (Details 2) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Asset Amount | $3,300,000 |
Client relationships | ' |
Asset Amount | 1,480,000 |
Useful Life (years) | '7 years |
Customer list | ' |
Asset Amount | 1,270,000 |
Useful Life (years) | '3 years |
Software | ' |
Asset Amount | $550,000 |
Useful Life (years) | '3 years |
Note_4_Goodwill_and_Other_Inta4
Note 4. Goodwill and Other Intangible Assets (Details 3) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Note 4. Goodwill And Intangible Assets Tables | ' | ' |
Revenues | $15,892,000 | $17,987,000 |
Net Income | $776,000 | $833,000 |
Basic earnings per share | $0.40 | $0.44 |
Diluted earnings per share | $0.38 | $0.42 |
Note_4_Goodwill_and_Other_Inta5
Note 4. Goodwill and Other Intangible Assets (Details 4) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Gross Carrying Amount | $3,300,000 | ' |
Accumulated Amortization | -582,871 | -187,666 |
Customer list | ' | ' |
Gross Carrying Amount | 1,770,000 | 500,000 |
Accumulated Amortization | -373,883 | -128,333 |
Net Carrying Amount | 1,396,117 | 371,667 |
Customer relationships-noncontractual | ' | ' |
Gross Carrying Amount | 1,505,000 | 25,000 |
Accumulated Amortization | -100,690 | -25,000 |
Net Carrying Amount | 1,404,310 | 0 |
Proprietary software | ' | ' |
Gross Carrying Amount | 601,000 | 51,000 |
Accumulated Amortization | -108,298 | -34,333 |
Net Carrying Amount | 492,702 | 16,667 |
Trademarks [Member] | ' | ' |
Gross Carrying Amount | 720,000 | ' |
Accumulated Amortization | 0 | ' |
Net Carrying Amount | 720,000 | ' |
Goodwill | ' | ' |
Gross Carrying Amount | 1,056,873 | 43,195 |
Accumulated Amortization | 0 | 0 |
Net Carrying Amount | 1,056,873 | 43,195 |
Total Intangible Assets | ' | ' |
Gross Carrying Amount | 619,195 | 5,652,873 |
Accumulated Amortization | -187,666 | -582,871 |
Net Carrying Amount | $431,529 | $5,070,002 |
Note_4_Goodwill_and_Other_Inta6
Note 4. Goodwill and Other Intangible Assets (Details 5) (USD $) | Dec. 31, 2013 |
Note 4. Goodwill And Other Intangible Assets Details 5 | ' |
2014 | $920,429 |
2015 | 912,095 |
2016 | 690,248 |
2017 | 211,762 |
2018 | 211,429 |
Thereafter | 347,166 |
Total | $3,293,129 |
Note_4_Goodwill_and_Other_Inta7
Note 4. Goodwill and Other Intangible Assets (Details Narrative) (USD $) | 12 Months Ended | 1 Months Ended | ||
Dec. 31, 2013 | Dec. 31, 2012 | Jan. 31, 2012 | Jan. 04, 2012 | |
SEC Compliance Services | SEC Compliance Services | |||
Purchase price for Customer Contractual Rights | ' | ' | ' | $425,000 |
Payments To Acquire Customer Contractual Rights | ' | ' | 285,000 | ' |
Common Stock Issued For Acquisition Of Customer List | ' | ' | ' | 140,000 |
Shares Issued For Acquisition Of Customer List | ' | ' | 70,000 | ' |
Amortization of intangible assets | $395,206 | $108,500 | ' | ' |
Note_5_Line_of_Credit_Details_
Note 5. Line of Credit (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Notes to Financial Statements | ' | ' |
Line Of Credit, Maximum Borrowing Capacity | $2,000,000 | ' |
Line of Credit, Interest Rate Description | 'LIBOR plus 3.5%. | ' |
Line of Credit Facility, Interest Rate at Period End | 3.67% | ' |
Line of Credit, amount outstanding | 0 | 150,000 |
Line Of Credit, Remaining Borrowing Capacity | $987,000 | ' |
Note_6_Long_Term_Debt_Related_1
Note 6. Long Term Debt (Related Party) (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Note 6. Long Term Debt Related Party Details Narrative | ' | ' |
Non-cash interest expense | $446,909 | $0 |
Interest expense | $71,739 | ' |
Note_7_Preferred_and_Common_St
Note 7. Preferred and Common Stock (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Notes to Financial Statements | ' | ' |
Cash dividends paid | $117,286 | $270,590 |
Note_8_Employee_Stock_Options_1
Note 8. Employee Stock Options (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Notes to Financial Statements | ' | ' |
Number of Options Outstanding, Beginning | 220,596 | 127,500 |
Number of Options Granted | 140,000 | 196,000 |
Number of Options Exercised | -74,360 | -25,154 |
Number of Options expired or cancelled | 0 | -70,000 |
Number of Options Forfeited | -5,400 | -7,750 |
Number of Options Outstanding, Ending | 280,836 | 220,596 |
Range of Exercise Price Options Outstanding, Beginning | '0.01 - $3.33 | '1.70 - $2.32 |
Range of Exercise Price Options Granted | '7.76 - $8.25 | '0.01 - $3.33 |
Range of Exercise Price Options Exercised | '0.01 - $3.33 | '1.70 - $2.10 |
Range of Exercise Price Options expired or cancelled | ' | '0.01 |
Range of Exercise Price Options Forfeited | '0.01 - $3.33 | '1.70 - $3.33 |
Range of Exercise Price Options Outstanding, Ending | '0.01 - $8.25 | '0.01 - $3.33 |
Weighted Average Exercise Price Outstanding, Beginning | $2.09 | $2.07 |
Weighted Average Exercise Price Granted | $7.90 | $1.37 |
Weighted Average Exercise Price Exercised | $2.14 | $2.04 |
Weighted Average Exercise Price expired or Canceled | ' | $0.01 |
Weighted Average Exercise Price Forfeited | $1.39 | $2.45 |
Weighted Average Exercise Price Outstanding, Ending | $4.97 | $2.09 |
Aggregate Intrinsic Value Outstanding, Beginning | $257,835 | $24,590 |
Aggregate Intrinsic Value Granted | $0 | $370,750 |
Aggregate Intrinsic Value Exercised | 405,738 | 35,661 |
Aggregate Intrinsic Value Options expired or cancelled | ' | 226,800 |
Aggregate Intrinsic Value Forfeited | $15,256 | $6,438 |
Aggregate Intrinsic Value Outstanding, Ending | $1,340,684 | $257,835 |
Note_8_Employee_Stock_Options_2
Note 8. Employee Stock Options (Details 1) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 | Dec. 31, 2011 |
Number of Options Outstanding | 280,836 | 220,596 | 127,500 |
Option 1 | ' | ' | ' |
Exercise Price Range | '$0.01 - $1.00 | ' | ' |
Number of Options Outstanding | 27,300 | ' | ' |
Weighted Average Exercise Price | 0.01 | ' | ' |
Weighted Average Remaining Contractual Life (in Years) | '8 years 18 days | ' | ' |
Number of Options Exercisable | 27,300 | ' | ' |
Option 2 | ' | ' | ' |
Exercise Price Range | '$1.01 - $2.00 | ' | ' |
Number of Options Outstanding | 13,650 | ' | ' |
Weighted Average Exercise Price | 1.73 | ' | ' |
Weighted Average Remaining Contractual Life (in Years) | '7 years 4 months 24 days | ' | ' |
Number of Options Exercisable | 13,650 | ' | ' |
Option 3 | ' | ' | ' |
Exercise Price Range | '$2.01 - $3.00 | ' | ' |
Number of Options Outstanding | 80,736 | ' | ' |
Weighted Average Exercise Price | 2.49 | ' | ' |
Weighted Average Remaining Contractual Life (in Years) | '6 years 1 month 24 days | ' | ' |
Number of Options Exercisable | 48,236 | ' | ' |
Option 4 | ' | ' | ' |
Exercise Price Range | '$3.01 - $4.00 | ' | ' |
Number of Options Outstanding | 19,150 | ' | ' |
Weighted Average Exercise Price | 3.33 | ' | ' |
Weighted Average Remaining Contractual Life (in Years) | '8 years 3 months | ' | ' |
Number of Options Exercisable | 19,150 | ' | ' |
Option 5 | ' | ' | ' |
Exercise Price Range | '$7.01 - $8.00 | ' | ' |
Number of Options Outstanding | 100,000 | ' | ' |
Weighted Average Exercise Price | 7.76 | ' | ' |
Weighted Average Remaining Contractual Life (in Years) | '7 years 4 months 2 days | ' | ' |
Number of Options Exercisable | 6,251 | ' | ' |
Option 6 | ' | ' | ' |
Exercise Price Range | '$8.00 - $8.25 | ' | ' |
Number of Options Outstanding | 40,000 | ' | ' |
Weighted Average Exercise Price | 8.25 | ' | ' |
Weighted Average Remaining Contractual Life (in Years) | '4 years 7 months 20 days | ' | ' |
Number of Options Exercisable | 5,000 | ' | ' |
Total | ' | ' | ' |
Number of Options Outstanding | 280,836 | ' | ' |
Weighted Average Exercise Price | 4.97 | ' | ' |
Weighted Average Remaining Contractual Life (in Years) | '7 years 6 months 29 days | ' | ' |
Number of Options Exercisable | 119,587 | ' | ' |
Note_8_Employee_Stock_Options_3
Note 8. Employee Stock Options (Details 2) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Notes to Financial Statements | ' | ' |
Expected dividend yield | 1.16% | 0.00% |
Expected stock price volatility | 125.00% | 131.00% |
Weighted-average risk-free interest rate | 1.77% | 0.98% |
Weighted-average expected life of options (in years) | '6 years | '5 years 6 months |
Note_8_Employee_Stock_Options_4
Note 8. Employee Stock Options (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Note 8. Employee Stock Options Details Narrative | ' | ' |
Unrecognized Compensation Expense | $865,886 | ' |
Stock options expense | $144,002 | $246,134 |
Note_9_Commitments_and_Conting2
Note 9. Commitments and Contingencies (Details) (USD $) | Dec. 31, 2013 |
Commitments and Contingencies Disclosure [Abstract] | ' |
2014 | $282,965 |
2015 | 273,095 |
2016 | 254,532 |
2017 | 111,103 |
Thereafter | 0 |
Total | $921,695 |
Note_9_Commitments_and_Conting3
Note 9. Commitments and Contingencies (Details Narrative) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Note 9. Commitments And Contingencies Details Narrative | ' | ' |
Rent expense | $179,229 | $155,822 |
Note_10_Concentration_of_reven
Note 10. Concentration of revenue as a percentage of total revenue (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Percentage of revenue from various revenue streams | 100.00% | 100.00% |
Amont of revenue from various revenue streams | $8,842,229 | $4,305,566 |
Disclosure management | ' | ' |
Percentage of revenue from various revenue streams | 45.00% | 69.70% |
Amont of revenue from various revenue streams | 3,974,640 | 2,999,562 |
Shareholder communications | ' | ' |
Percentage of revenue from various revenue streams | 49.30% | 25.90% |
Amont of revenue from various revenue streams | 4,362,404 | 1,116,759 |
Software licensing | ' | ' |
Percentage of revenue from various revenue streams | 5.70% | 4.40% |
Amont of revenue from various revenue streams | $505,185 | $189,245 |
Note_11_Geographic_Operating_I2
Note 11. Geographic Operating Information (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Revenues | $8,842,229 | $4,305,566 |
North America | ' | ' |
Revenues | 7,700,715 | 4,305,566 |
Europe | ' | ' |
Revenues | $1,141,514 | $0 |
Note_12_Income_Taxes_Details
Note 12. Income Taxes (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Current: | ' | ' |
Federal tax | $590,000 | $221,000 |
State tax | 103,000 | 39,000 |
Foreign | 73,000 | 0 |
Total Current taxes | 556,000 | 251,000 |
Deferred: | ' | ' |
Federal | -213,000 | -8,000 |
State | 24,000 | -1,000 |
Valuation Allowance | -21,000 | 0 |
Total Deferred | -210,000 | -9,000 |
Total provision (benefit) for income taxes | $556,000 | $251,000 |
Note_12_Income_Taxes_Details_1
Note 12. Income Taxes (Details 1) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Income Tax Disclosure [Abstract] | ' | ' |
Federal statutory tax rate | 34.00% | 34.00% |
State tax rate | 4.20% | 6.00% |
Permanent difference - transaction costs | 10.10% | 0.00% |
Permanent difference | 2.90% | 5.60% |
Other | -4.30% | -0.50% |
Tax rate | 46.90% | 45.10% |
Change in valuation allowance | 0.00% | 0.00% |
Total | 46.90% | 45.10% |
Note_12_Income_Taxes_Details_2
Note 12. Income Taxes (Details 2) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Assets: | ' | ' |
Net operating loss | $364,000 | $0 |
Deferred revenue | 10,000 | 45,000 |
Allowance for doubtful accounts | 140,000 | 47,000 |
Stock options | 154,000 | 107,000 |
Basis difference in intangible assets | 137,000 | 46,000 |
Accrued accounting fees | 16,000 | 0 |
Rent expense | 26,000 | 0 |
Foreign tax credits carryforward | 1,181,000 | 0 |
Other | 3,000 | 0 |
Total deferred tax asset | 2,031,000 | 245,000 |
Less: Valuation allowance | -1,545,000 | 0 |
Total net deferred tax asset | 486,000 | 245,000 |
Liabilities: | ' | ' |
Prepaid expenses | -16,000 | -15,000 |
Basis difference in fixed assets | -100,000 | -22,000 |
Debt discount - convertible note payable | -761,000 | 0 |
Purchase of intangibles | -1,233,000 | 0 |
Total deferred tax liability | -2,110,000 | -37,000 |
Total net deferred tax asset / (liability) | -1,624,000 | 208,000 |
Change | ' | ' |
Assets: | ' | ' |
Net operating loss | 364,000 | ' |
Deferred revenue | -35,000 | ' |
Allowance for doubtful accounts | 93,000 | ' |
Stock options | 47,000 | ' |
Basis difference in intangible assets | 91,000 | ' |
Accrued accounting fees | 16,000 | ' |
Rent expense | 26,000 | ' |
Foreign tax credits carryforward | 1,181,000 | ' |
Other | 3,000 | ' |
Total deferred tax asset | 1,786,000 | ' |
Less: Valuation allowance | -1,545,000 | ' |
Total net deferred tax asset | 241,000 | ' |
Liabilities: | ' | ' |
Prepaid expenses | -1,000 | ' |
Basis difference in fixed assets | -78,000 | ' |
Debt discount - convertible note payable | -761,000 | ' |
Purchase of intangibles | -1,233,000 | ' |
Total deferred tax liability | -2,073,000 | ' |
Total net deferred tax asset / (liability) | ($1,832,000) | ' |
Note_12_Income_Taxes_Details_N
Note 12. Income Taxes (Details Narrative) (USD $) | Dec. 31, 2013 |
Note 12. Income Taxes Details Narrative | ' |
Net operating loss carry forward | $748,000 |
Note_13_Employee_Benefit_Plan_
Note 13. Employee Benefit Plan (Details Narrative) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Note 13. Employee Benefit Plan Details Narrative | ' |
Employer Discretionary Contribution Amount | $2,202 |