Document_and_Entity_Informatio
Document and Entity Information | 6 Months Ended | |
Jun. 30, 2014 | Aug. 07, 2014 | |
Document And Entity Information | ' | ' |
Entity Registrant Name | 'ISSUER DIRECT CORP | ' |
Entity Central Index Key | '0000843006 | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Jun-14 | ' |
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 Common Stock, Shares Outstanding | ' | 2,059,439 |
Document Fiscal Period Focus | 'Q2 | ' |
Document Fiscal Year Focus | '2014 | ' |
Consolidated_Balance_Sheets
Consolidated Balance Sheets (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Current assets: | ' | ' |
Cash and cash equivalents | $2,160,993 | $1,713,479 |
Accounts receivable, (net of allowance for doubtful accounts of $477,088 and $429,509, respectively) | 2,627,879 | 1,970,531 |
Deferred income tax asset - current | 25,843 | 25,843 |
Other current assets | 243,185 | 160,756 |
Total current assets | 5,057,900 | 3,870,609 |
Furniture, equipment and improvements, net | 242,098 | 297,577 |
Goodwill | 1,056,873 | 1,056,873 |
Intangible assets (net of accumulated amortization of $1,043,400 and $582,871, respectively) | 3,552,601 | 4,013,129 |
Other noncurrent assets | 46,022 | 22,351 |
Total assets | 9,955,494 | 9,260,539 |
Current liabilities: | ' | ' |
Accounts payable | 409,371 | 267,637 |
Accrued expenses | 694,393 | 1,553,334 |
Deferred revenue | 1,332,289 | 1,053,401 |
Total current liabilities | 2,436,053 | 2,874,372 |
Note payable (net of debt discount of $1,428,092 and $2,053,091, respectively) | 1,071,908 | 446,909 |
Deferred tax liability | 1,649,692 | 1,650,460 |
Other long-term liabilities | 132,493 | 83,063 |
Total liabilities | 5,290,146 | 5,054,804 |
Commitments and contingencies | ' | ' |
Stockholders' equity: | ' | ' |
Preferred stock, $0.001 par value, 30,000,000 shares authorized, no shares issued and outstanding as of June 30, 2014 and December 31, 2013 | 0 | 0 |
Common stock $0.001 par value, 100,000,000 shares authorized, 2,056,939 and 2,006,689 shares issued and outstanding as of June 30, 2014 and December 31, 2013, respectively | 2,056 | 2,007 |
Additional paid-in capital | 4,416,564 | 3,977,661 |
Other accumulated comprehensive loss | -69,485 | -59,065 |
Retained earnings | 316,213 | 285,132 |
Total stockholders' equity | 4,665,348 | 4,205,735 |
Total liabilities and stockholders' equity | $9,955,494 | $9,260,539 |
Consolidated_Balance_Sheets_Pa
Consolidated Balance Sheets (Parenthetical) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 |
Assets | ' | ' |
Allowance for Accounts Receivables | $477,088 | $429,509 |
Accumulated Amortization | 1,043,400 | 582,871 |
Liabilities | ' | ' |
Debt Discount | $1,428,092 | $2,053,091 |
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 | 2,056,939 | 2,006,689 |
Common Stock shares Outstanding | 2,056,939 | 2,006,689 |
Consolidated_Statements_of_Ope
Consolidated Statements of Operations (Unaudited) (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Income Statement [Abstract] | ' | ' | ' | ' |
Revenues | $3,638,269 | $1,723,785 | $7,132,625 | $3,135,013 |
Cost of services | 1,069,405 | 512,822 | 2,096,996 | 911,712 |
Gross profit | 2,568,864 | 1,210,963 | 5,035,629 | 2,223,301 |
Operating costs and expenses: | ' | ' | ' | ' |
General and administrative | 1,003,611 | 386,666 | 2,289,864 | 795,268 |
Sales and marketing expenses | 905,418 | 178,573 | 1,428,941 | 379,590 |
Depreciation and amortization | 280,767 | 32,588 | 562,633 | 67,523 |
Total operating costs and expenses | 2,189,796 | 597,827 | 4,281,438 | 1,242,381 |
Net Operating income | 379,068 | 613,136 | 754,191 | 980,920 |
Other income (expense): | ' | ' | ' | ' |
Interest income (expense), net | -360,676 | 2,545 | -722,731 | 2,299 |
Total other income (expense) | -360,676 | 2,545 | -722,731 | 2,299 |
Net income before income taxes | 18,392 | 615,681 | 31,460 | 983,219 |
Income tax (expense) benefit | 49,631 | -251,000 | -379 | -403,000 |
Net income | $68,023 | $364,681 | $31,081 | $580,219 |
Income per share - basic | $0.03 | $0.19 | $0.02 | $0.30 |
Income per share - fully diluted | $0.03 | $0.18 | $0.02 | $0.28 |
Weighted average number of common shares outstanding - basic | 2,042,494 | 1,950,092 | 2,039,771 | 1,946,367 |
Weighted average number of common shares outstanding - fully diluted | 2,106,837 | 2,061,718 | 2,111,699 | 2,043,926 |
Consolidated_Statements_of_Com
Consolidated Statements of Comprehensive Income (Unaudited) (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Consolidated Statements Of Comprehensive Income | ' | ' | ' | ' |
Net income (loss) | $68,023 | $364,681 | $31,081 | $580,219 |
Foreign currency translation adjustment | -3,886 | 0 | -10,420 | 0 |
Comprehensive income | $64,137 | $364,681 | $20,661 | $580,219 |
Consolidated_Statements_of_Cas
Consolidated Statements of Cash Flows (Unaudited) (USD $) | 6 Months Ended | |
Jun. 30, 2014 | Jun. 30, 2013 | |
Cash flows from operating activities: | ' | ' |
Net income (loss) | $31,081 | $580,219 |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ' | ' |
Depreciation and amortization | 563,036 | 67,523 |
Bad debt expense | 104,929 | 81,755 |
Deferred income taxes | -768 | 0 |
Stock-based compensation expense | 210,183 | 156,093 |
Non-cash interest expense | 625,000 | 0 |
Changes in operating assets and liabilities: | ' | ' |
Decrease (increase) in accounts receivable | -752,861 | -370,806 |
Decrease (increase) in deposits and other current assets | -106,158 | -24,594 |
Increase (decrease) in accounts payable | 137,505 | 33,088 |
Increase (decrease) in accrued expenses | -817,067 | 13,022 |
Increase (decrease) in deferred revenue | 272,192 | -48,506 |
Net cash provided by operating activities | 267,072 | 487,794 |
Cash flows from investing activities: | ' | ' |
Purchase of property and equipment | -47,029 | -29,928 |
Net cash used in investing activities | -47,029 | -29,928 |
Cash flows from financing activities: | ' | ' |
Proceeds from exercise of stock options | 119,015 | 64 |
Payment of dividend | 0 | -58,418 |
Tax benefit on stock-based compensation awards | 109,755 | 0 |
Repayment of line of credit | 0 | -150,000 |
Net cash provided by (used in) financing activities | 228,770 | -208,354 |
Net change in cash | 448,813 | 249,512 |
Cash - beginning | 1,713,479 | 1,250,643 |
Currency translation adjustment | -1,299 | 0 |
Cash - ending | 2,160,993 | 1,500,155 |
Supplemental disclosures: | ' | ' |
Cash paid for interest | 100,000 | 2,364 |
Cash paid for income taxes | $556,600 | $382,314 |
Note_1_Basis_of_Presentation
Note 1. Basis of Presentation | 6 Months Ended |
Jun. 30, 2014 | |
Notes to Financial Statements | ' |
Basis of Presentation | ' |
The unaudited interim consolidated balance sheet as of June 30, 2014 and statements of operations, of comprehensive income, and of cash flows for the three and six month periods ended June 30, 2014 and 2013 included herein, have been prepared in accordance with the instructions for Form 10-Q under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Article 10 of Regulation S-X under the Exchange Act. In the opinion of management, they include all normal recurring adjustments necessary for a fair presentation of the financial statements. Results of operations reported for the interim periods are not necessarily indicative of results for the entire year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations relating to interim financial statements. The interim financial information should be read in conjunction with Issuer Direct Corporation’s (the “Company’s”) 2013 audited financial statements filed on Form 10-K. |
Note_2_Summary_of_Significant_
Note 2. Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2014 | |
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. | |
Earnings (loss) per Share (EPS) | |
We calculate earnings per share in accordance with FASB ASC No. 260 – 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 180,000 were excluded in the computation of diluted earnings per common share during three and six month periods ended June 30, 2014 because their impact was anti-dilutive. The Company has a convertible note outstanding as of June 30, 2014 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. | |
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. | |
Allowance for Doubtful Accounts | |
We initially record our provision for doubtful accounts based on our historical experience and then adjust this provision at the end of each reporting period based on a detailed assessment of our accounts receivable and allowance for doubtful accounts. | |
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, and then adjusted for any discrete period items. | |
Fair Value Measurements | |
As of June 30, 2014 and December 31, 2013, 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. | |
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. | |
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. | |
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 period. The gains or losses that result from this process are recorded as a separate component of stockholders’ equity. | |
Comprehensive Income | |
Comprehensive income consists of net income and other comprehensive income related to changes in the cumulative foreign currency translation adjustment. | |
Advertising | |
The Company expenses advertising as incurred, except for direct-response advertising, which is capitalized and amortized over its expected period of future benefits. | |
Stock-based compensation | |
We account for stock-based compensation under FASB ASC No. 718 – Compensation – 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. | |
Recent Accounting Pronouncements | |
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 requires revenue recognition to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 sets forth a new revenue recognition model that requires identifying the contract, identifying the performance obligations, determining the transaction price, allocating the transaction price to performance obligations and recognizing the revenue upon satisfaction of performance obligations. The amendments in the ASU can be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the update recognized at the date of the initial application along with additional disclosures. The Company is currently evaluating the impact of ASU 2014-09, which is effective for the Company in our fiscal year beginning on January 1, 2017. |
Note_3_Intangible_Assets_and_G
Note 3. Intangible Assets and Goodwill | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Notes to Financial Statements | ' | ||||||||
Intangible Assets and Goodwill | ' | ||||||||
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 | |||||||
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 remaining purchase price was allocated among the PIR identifiable intangible assets and goodwill acquired based on their estimated fair values determined as discussed above and was as follows: | |||||||||
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 identifiable amortizable intangible assets created as a result of the acquisition will be amortized straight line over it’s 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 for the six-month period ended June 30, 2013 as if the merger with PIR and the Company had occurred as of January 1, 2013. 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. | |||||||||
Six Months Ended | |||||||||
30-Jun-13 | |||||||||
Revenues | $ | 8,780,000 | |||||||
Net Income | $ | 709,000 | |||||||
Basic earnings per share | $ | 0.36 | |||||||
Diluted earnings per share | $ | 0.35 |
Note_4_Stockholders_Equity
Note 4. Stockholders' Equity | 6 Months Ended |
Jun. 30, 2014 | |
Notes to Financial Statements | ' |
Stockholders' Equity | ' |
Restricted 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. As of June 30, 2014, all shares of restricted stock were vested. | |
2014 Equity Incentive Plan | |
On May 23, 2014, the shareholder’s of the Company approved the 2014 Equity Incentive Plan (the “2014 Plan”). Under the terms of the 2014 Plan, the Company is authorized to issue incentive awards for common stock up to 200,000 shares to employees and other personnel. The awards may be in the form of incentive stock options, nonqualified stock options, restricted stock, restricted stock units and performance awards. The 2014 Plan is effective through March 31, 2024. As of June 30, 2014, no awards had been issued under the 2014 Plan. |
Note_5_Stock_Options
Note 5. Stock Options | 6 Months Ended | ||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||
Notes to Financial Statements | ' | ||||||||||||||||||
Stock Options | ' | ||||||||||||||||||
The following table summarizes information about stock options outstanding and exercisable at June 30, 2014: | |||||||||||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||
Exercise Price Range | Number | Weighted Average | Weighted | Number | |||||||||||||||
Remaining | Average | ||||||||||||||||||
Contractual Life | Exercise | ||||||||||||||||||
(in Years) | Price | ||||||||||||||||||
$ | 0.01 - $1.00 | 22,300 | 7.56 | $ | 0.01 | 22,300 | |||||||||||||
$ | 1.01 - $2.00 | 12,050 | 6.9 | $ | 1.74 | 12,050 | |||||||||||||
$ | 2.01 - $3.00 | 43,986 | 4.7 | $ | 2.48 | 23,986 | |||||||||||||
$ | 3.01 - $4.00 | 15,150 | 7.76 | $ | 3.33 | 15,150 | |||||||||||||
$ | 4.01 - $8.00 | 100,000 | 6.85 | $ | 7.76 | 18,751 | |||||||||||||
$ | 8.01 - $10.00 | 40,000 | 4.15 | $ | 8.25 | 10,000 | |||||||||||||
$ | 10.01-$13.49 | 40,000 | 4.7 | $ | 13.49 | 2,500 | |||||||||||||
Total | 273,486 | 5.9 | $ | 6.68 | 104,737 | ||||||||||||||
As of June 30, 2014, the Company had unrecognized stock compensation related to the options of $1,174,777. |
Note_6_Income_taxes
Note 6. Income taxes | 6 Months Ended |
Jun. 30, 2014 | |
Income Tax Disclosure [Abstract] | ' |
Income taxes | ' |
We recognized income tax benefit (expense) of $49,631 and ($379) during the three and six month periods ended June 30, 2014, respectively, based on our projections of future profitability. We recognized income tax (expense) of ($251,000) and ($403,000) during the three and six month periods ended June 30, 2013, respectively, based on our projections of future profitability. The variation between the company’s annual effective rate and the Unites States statutory rate of 34% is primarily due to state income taxes, foreign income taxes, the effects of stock compensation, and disallowed interest expense. |
Note_7_Operations_and_Concentr
Note 7. Operations and Concentrations | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Notes to Financial Statements | ' | ||||||||||||||||
Operations and Concentrations | ' | ||||||||||||||||
For the three and six month periods ended June 30, 2014 and 2013, we earned revenues (as a percentage of total revenues) in the following categories: | |||||||||||||||||
Three months ended | Six months ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
Revenue Streams | 2014 | 2013 | 2014 | 2013 | |||||||||||||
Disclosure Management | 25.1 | % | 67.7 | % | 26.6 | % | 72.6 | % | |||||||||
Shareholder Communications | 68.4 | % | 26.7 | % | 66.8 | % | 22.7 | % | |||||||||
Software licensing | 6.5 | % | 5.6 | % | 6.6 | % | 4.7 | % | |||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % | |||||||||
No customers accounted for more than 10% of the operating revenues during the three and six month periods ended June 30, 2014 or 2013. We did not have any customers that comprised more than 10% of our total accounts receivable balances at June 30, 2014 or December 31, 2013. | |||||||||||||||||
We do not believe we had any financial instruments that could have potentially subjected us to significant concentrations of credit risk. A portion of our revenues are paid at the beginning of the month via credit card or in advance by check, the remaining accounts receivable amounts are generally due within 30 days. |
Note_8_Line_of_Credit
Note 8. Line of Credit | 6 Months Ended |
Jun. 30, 2014 | |
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 80% 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 3.65% at June 30, 2014. The Company did now owe any amounts on the Line of Credit at June 30, 2014 and had approximately $945,000 remaining for future borrowings under the line of credit based on the calculation of eligible accounts receivable. |
Note_9_Long_Term_Debt_Related_
Note 9. Long Term Debt - Related Party | 6 Months Ended |
Jun. 30, 2014 | |
Debt Disclosure [Abstract] | ' |
Long Term Debt - Related Party | ' |
On August 22, 2013, in connection with and to partially fund the acquisition and simultaneously with the Acquisition of PIR as discussed in Note 3, 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”). Interest is payable quarterly beginning on September 30, 2013, at a rate of 8% per year and matures on August 22, 2015. If an 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, the managing 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 three and six month periods ended June 30, 2014, the Company recorded non-cash interest expense of $312,500 and $625,000, respectively, related to the 8% Note described above. During the three and six month periods ended June 30, 2014, the Company recorded cash interest expense of $50,000 and $100,000, respectively, related to the 8% Note. |
Note_10_Geographic_Operating_I
Note 10. Geographic Operating Information | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Segment Reporting [Abstract] | ' | ||||||||||||||||
Note 10. 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 publicly traded companies. Revenue is attributed to a particular geographic region based on where the services are performed. The following tables set forth revenues by domestic versus international regions: | |||||||||||||||||
Three months ended | Six months ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
Geographic Region | 2014 | 2013 | 2014 | 2013 | |||||||||||||
North America | $ | 2,860,789 | $ | 1,723,785 | $ | 5,605,995 | $ | 3,135,013 | |||||||||
Europe | 777,480 | - | 1,526,630 | - | |||||||||||||
Total | $ | 3,638,269 | $ | 1,723,785 | $ | 7,132,625 | $ | 3,135,013 |
Note_2_Summary_of_Significant_1
Note 2. Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2014 | |
Notes to Financial Statements | ' |
Earnings (loss) per Share (EPS) | ' |
We calculate earnings per share in accordance with FASB ASC No. 260 – 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 180,000 were excluded in the computation of diluted earnings per common share during three and six month periods ended June 30, 2014 because their impact was anti-dilutive. The Company has a convertible note outstanding as of June 30, 2014 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. | |
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. | |
Allowance for Doubtful Accounts | ' |
We initially record our provision for doubtful accounts based on our historical experience and then adjust this provision at the end of each reporting period based on a detailed assessment of our accounts receivable and allowance for doubtful accounts. | |
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, and then adjusted for any discrete period items. | |
Fair Value Measurements | ' |
As of June 30, 2014 and December 31, 2013, 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. | |
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. | |
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. | |
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 period. The gains or losses that result from this process are recorded as a separate component of stockholders’ equity. | |
Comprehensive Income | ' |
Comprehensive income consists of net income and other comprehensive income related to changes in the cumulative foreign currency translation adjustment. | |
Advertising | ' |
The Company expenses advertising as incurred, except for direct-response advertising, which is capitalized and amortized over its expected period of future benefits. | |
Stock-based compensation | ' |
We account for stock-based compensation under FASB ASC No. 718 – Compensation – 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. | |
Recent Accounting Pronouncements | ' |
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 requires revenue recognition to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 sets forth a new revenue recognition model that requires identifying the contract, identifying the performance obligations, determining the transaction price, allocating the transaction price to performance obligations and recognizing the revenue upon satisfaction of performance obligations. The amendments in the ASU can be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the update recognized at the date of the initial application along with additional disclosures. The Company is currently evaluating the impact of ASU 2014-09, which is effective for the Company in our fiscal year beginning on January 1, 2017. |
Note_3_Intangible_Assets_and_G1
Note 3. Intangible Assets and Goodwill (Tables) | 6 Months Ended | ||||||||
Jun. 30, 2014 | |||||||||
Note 3. Intangible Assets And Goodwill Tables | ' | ||||||||
Fair value of PIR intangible assets and goodwill | ' | ||||||||
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 | |||||||
The remaining purchase price was allocated among the PIR identifiable intangible assets and goodwill acquired based on their estimated fair values determined as discussed above and was as follows: | |||||||||
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 | ' | ||||||||
Six Months Ended | |||||||||
30-Jun-13 | |||||||||
Revenues | $ | 8,780,000 | |||||||
Net Income | $ | 709,000 | |||||||
Basic earnings per share | $ | 0.36 | |||||||
Diluted earnings per share | $ | 0.35 |
Note_5_Stock_Options_Tables
Note 5. Stock Options (Tables) | 6 Months Ended | ||||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||||
Notes to Financial Statements | ' | ||||||||||||||||||
Schedule Of Stock Options | ' | ||||||||||||||||||
Options Outstanding | Options Exercisable | ||||||||||||||||||
Exercise Price Range | Number | Weighted Average | Weighted | Number | |||||||||||||||
Remaining | Average | ||||||||||||||||||
Contractual Life | Exercise | ||||||||||||||||||
(in Years) | Price | ||||||||||||||||||
$ | 0.01 - $1.00 | 22,300 | 7.56 | $ | 0.01 | 22,300 | |||||||||||||
$ | 1.01 - $2.00 | 12,050 | 6.9 | $ | 1.74 | 12,050 | |||||||||||||
$ | 2.01 - $3.00 | 43,986 | 4.7 | $ | 2.48 | 23,986 | |||||||||||||
$ | 3.01 - $4.00 | 15,150 | 7.76 | $ | 3.33 | 15,150 | |||||||||||||
$ | 4.01 - $8.00 | 100,000 | 6.85 | $ | 7.76 | 18,751 | |||||||||||||
$ | 8.01 - $10.00 | 40,000 | 4.15 | $ | 8.25 | 10,000 | |||||||||||||
$ | 10.01-$13.49 | 40,000 | 4.7 | $ | 13.49 | 2,500 | |||||||||||||
Total | 273,486 | 5.9 | $ | 6.68 | 104,737 | ||||||||||||||
Note_7_Operations_and_Concentr1
Note 7. Operations and Concentrations (Tables) | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Notes to Financial Statements | ' | ||||||||||||||||
Concentration of revenue as a percentage of total revenue | ' | ||||||||||||||||
Three months ended | Six months ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
Revenue Streams | 2014 | 2013 | 2014 | 2013 | |||||||||||||
Disclosure Management | 25.1 | % | 67.7 | % | 26.6 | % | 72.6 | % | |||||||||
Shareholder Communications | 68.4 | % | 26.7 | % | 66.8 | % | 22.7 | % | |||||||||
Software licensing | 6.5 | % | 5.6 | % | 6.6 | % | 4.7 | % | |||||||||
Total | 100 | % | 100 | % | 100 | % | 100 | % |
Note_10_Geographic_Operating_I1
Note 10. Geographic Operating Information (Tables) | 6 Months Ended | ||||||||||||||||
Jun. 30, 2014 | |||||||||||||||||
Segment Reporting [Abstract] | ' | ||||||||||||||||
Revenue based on geographic region | ' | ||||||||||||||||
Three months ended | Six months ended | ||||||||||||||||
June 30, | June 30, | ||||||||||||||||
Geographic Region | 2014 | 2013 | 2014 | 2013 | |||||||||||||
North America | $ | 2,860,789 | $ | 1,723,785 | $ | 5,605,995 | $ | 3,135,013 | |||||||||
Europe | 777,480 | - | 1,526,630 | - | |||||||||||||
Total | $ | 3,638,269 | $ | 1,723,785 | $ | 7,132,625 | $ | 3,135,013 |
Note_2_Summary_of_Significant_2
Note 2. Summary of Significant Accounting Policies (Details Narrative) | 3 Months Ended | 6 Months Ended |
Jun. 30, 2014 | Jun. 30, 2014 | |
Stock Options | ' | ' |
Antidilutive Securities Excluded from Computation of Earnings Per Share | 180,000 | 180,000 |
Convertible Note | ' | ' |
Antidilutive Securities Excluded from Computation of Earnings Per Share | 626,566 | 626,566 |
Note_3_Intangible_Assets_and_G2
Note 3. Intangible Assets and Goodwill (Details) (USD $) | Jun. 30, 2014 | Dec. 31, 2013 | Jun. 30, 2014 |
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 | 1,056,873 | 994,030 |
Total fair value of PIR intangible assets and goodwill | ' | ' | $5,014,030 |
Note_3_Intangible_Assets_and_G3
Note 3. Intangible Assets and Goodwill (Details 1) (PrecisionIR, USD $) | Jun. 30, 2014 |
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_3_Intangible_Assets_and_G4
Note 3. Intangible Assets and Goodwill (Details 2) (USD $) | 6 Months Ended |
Jun. 30, 2014 | |
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_3_Intangible_Assets_and_G5
Note 3. Intangible Assets and Goodwill (Details 3) (USD $) | 6 Months Ended |
Jun. 30, 2013 | |
Note 3. Intangible Assets And Goodwill Tables | ' |
Revenues | $8,780,000 |
Net Income | $709,000 |
Basic earnings per share | $0.36 |
Diluted earnings per share | $0.35 |
Note_5_Stock_Options_Details
Note 5. Stock Options (Details) (USD $) | 6 Months Ended |
Jun. 30, 2014 | |
Option 1 | ' |
Exercise Price Range | '$0.01 - $1.00 |
Number of Options Outstanding | 22,300 |
Weighted Average Remaining Contractual Life (in Years) | '7 years 6 months 22 days |
Weighted Average Exercise Price | $0.01 |
Number of Options Exercisable | 22,300 |
Option 2 | ' |
Exercise Price Range | '$1.01 - $2.00 |
Number of Options Outstanding | 12,050 |
Weighted Average Remaining Contractual Life (in Years) | '6 years 10 months 24 days |
Weighted Average Exercise Price | $1.74 |
Number of Options Exercisable | 12,050 |
Option 3 | ' |
Exercise Price Range | '$2.01 - $3.00 |
Number of Options Outstanding | 43,986 |
Weighted Average Remaining Contractual Life (in Years) | '4 years 8 months 12 days |
Weighted Average Exercise Price | $2.48 |
Number of Options Exercisable | 23,986 |
Option 4 | ' |
Exercise Price Range | '$3.01 - $4.00 |
Number of Options Outstanding | 15,150 |
Weighted Average Remaining Contractual Life (in Years) | '7 years 9 months 4 days |
Weighted Average Exercise Price | $3.33 |
Number of Options Exercisable | 15,150 |
Option 5 | ' |
Exercise Price Range | '$4.01 - $8.00 |
Number of Options Outstanding | 100,000 |
Weighted Average Remaining Contractual Life (in Years) | '6 years 10 months 6 days |
Weighted Average Exercise Price | $7.76 |
Number of Options Exercisable | 18,751 |
Option 6 | ' |
Exercise Price Range | '$8.01 - $10.00 |
Number of Options Outstanding | 40,000 |
Weighted Average Remaining Contractual Life (in Years) | '4 years 1 month 24 days |
Weighted Average Exercise Price | $8.25 |
Number of Options Exercisable | 10,000 |
Option 7 | ' |
Exercise Price Range | '$10.01-$13.49 |
Number of Options Outstanding | 40,000 |
Weighted Average Remaining Contractual Life (in Years) | '4 years 8 months 12 days |
Weighted Average Exercise Price | $13.49 |
Number of Options Exercisable | 2,500 |
Total | ' |
Number of Options Outstanding | 273,486 |
Weighted Average Remaining Contractual Life (in Years) | '5 years 10 months 24 days |
Weighted Average Exercise Price | $6.68 |
Number of Options Exercisable | 104,737 |
Note_5_Stock_Options_Details_N
Note 5. Stock Options (Details Narrative) (USD $) | Jun. 30, 2014 |
Note 5. Stock Options Details Narrative | ' |
Unrecognized Compensation Expense | $1,174,777 |
Note_6_Income_taxes_Details_Na
Note 6. Income taxes (Details Narrative) (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Note 6. Income Taxes Details Narrative | ' | ' | ' | ' |
Income tax (expense) benefit | $49,631 | ($251,000) | ($379) | ($403,000) |
Note_7_Concentration_of_revenu
Note 7. Concentration of revenue as a percentage of total revenue (Details) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Percentage of revenue from various revenue streams | 100.00% | 100.00% | 100.00% | 100.00% |
Disclosure management | ' | ' | ' | ' |
Percentage of revenue from various revenue streams | 25.10% | 67.70% | 26.60% | 72.60% |
Shareholder communications | ' | ' | ' | ' |
Percentage of revenue from various revenue streams | 68.40% | 26.70% | 66.80% | 22.70% |
Software licensing | ' | ' | ' | ' |
Percentage of revenue from various revenue streams | 6.50% | 5.60% | 6.60% | 4.70% |
Note_8_Line_of_Credit_Details_
Note 8. Line of Credit (Details Narrative) (USD $) | 6 Months Ended |
Jun. 30, 2014 | |
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 | 3.65% |
Line Of Credit, Amount Available | $945,000 |
Note_9_Long_Term_Debt_Related_1
Note 9. Long Term Debt - Related Party (Details Narrative) (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Note 9. Long Term Debt - Related Party Details Narrative | ' | ' | ' | ' |
Non-cash interest expense | $312,500 | $0 | $625,000 | $0 |
Interest expense | $50,000 | ' | $50,000 | ' |
Note_10_Geographic_Operating_I2
Note 10. Geographic Operating Information (Details) (USD $) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2014 | Jun. 30, 2013 | Jun. 30, 2014 | Jun. 30, 2013 | |
Revenues | $3,638,269 | $1,723,785 | $7,132,625 | $3,135,013 |
North America | ' | ' | ' | ' |
Revenues | 2,860,789 | 1,723,785 | 5,605,995 | 3,135,013 |
Europe | ' | ' | ' | ' |
Revenues | $777,480 | $0 | $1,526,630 | $0 |