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  • SECURITIES & EXCHANGE COMMISSION EDGAR FILING

    ISSUER DIRECT CORP

    Form: 10-Q

    Date Filed: 2018-08-02

    Corporate Issuer CIK: 843006

    © Copyright 2018, Issuer Direct Corporation. All Right Reserved. Distribution of this document is strictly prohibited, subject to the terms of use.

  • UNITED STATES SECURITIES AND EXCHANGE COMMISSION

    Washington, D.C. 20549

    ——————— FORM 10-Q

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

    For the quarterly period ended: June 30, 2018

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

    For the transition period from: _____________ to _____________

    ISSUER DIRECT CORPORATION

    (Exact name of registrant as specified in its charter) ———————

    Delaware 1-10185 26-1331503

    (State or Other Jurisdiction (Commission (I.R.S. Employer of Incorporation) File Number) Identification No.)

    500 Perimeter Park Drive, Suite D, Morrisville NC 27560

    (Address of Principal Executive Office) (Zip Code)

    (919) 481-4000 (Registrant’s telephone number, including area code)

    N/A

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

    Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☐ (Do not check if a smaller reporting company) Smaller reporting company ☒ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes ☐ No ☑ Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date 3,106,772 shares of common stock were issued and outstanding as of August 2, 2018.

    EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.

  • TABLE OF CONTENTS

    PART I - FINANCIAL INFORMATION Item 1. Financial Statements. 3 Consolidated Balance Sheets as of June 30, 2018 (Unaudited) and December 31, 2017 3 Unaudited Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2018 and 2017 4 Unaudited Consolidated Statements of Comprehensive Income for the Three and Six Months Ended June 30, 2018 and 2017 5 Unaudited Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2018 and 2017 6 Notes to Unaudited Consolidated Financial Statements 7 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 15 Item 3. Quantitative and Qualitative Disclosures About Market Risk. 23 Item 4. Controls and Procedures. 23

    PART II – OTHER INFORMATION Item 1. Legal Proceedings. 24 Item 1A. Risk Factors. 24 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. 24 Item 3. Defaults Upon Senior Securities. 24 Item 4. Mine Safety Disclosure. 24 Item 5. Other Information. 24 Item 6. Exhibits. 24 Signatures 25

    2

    EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.

  • PART I – FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS

    ISSUER DIRECT CORPORATION CONSOLIDATED BALANCE SHEETS

    (in thousands, except share and per share amounts) June 30, December 31, 2018 2017

    ASSETS (unaudited) Current assets:

    Cash and cash equivalents $ 6,834 $ 4,917 Accounts receivable (net of allowance for doubtful accounts of $428 and $425, respectively) 1,642 1,275 Income tax receivable 534 725 Other current assets 189 193

    Total current assets 9,199 7,110 Capitalized software (net of accumulated amortization of $898 and $497, respectively) 2,348 2,749 Fixed assets (net of accumulated amortization of $417 and $388, respectively) 155 145 Other long-term assets 17 18 Goodwill 4,070 4,070 Intangible assets (net of accumulated amortization of $3,949 and $3,699, respectively) 2,608 2,858

    Total assets $ 18,397 $ 16,950

    LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities:

    Accounts payable $ 356 $ 666 Accrued expenses 653 613 Current portion of note payable (See Note 3) 288 288 Income taxes payable 68 65 Deferred revenue 1,273 887

    Total current liabilities 2,638 2,519 Note payable – long-term (net of discount of $57 and $70, respectively) (See Note 3) 583 570 Deferred income tax liability 565 573 Other long-term liabilities 56 77

    Total liabilities 3,842 3,739 Commitments and contingencies Stockholders' equity:

    Preferred stock, $0.001 par value, 1,000,000 shares authorized, no shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively. — —

    Common stock $0.001 par value, 20,000,000 shares authorized, 3,103,370 and 3,014,494 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively. 3 3

    Additional paid-in capital 11,396 10,400 Other accumulated comprehensive income 1 34 Retained earnings 3,155 2,774

    Total stockholders' equity 14,555 13,211 Total liabilities and stockholders’ equity $ 18,397 $ 16,950

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

    3

    EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.

  • ISSUER DIRECT CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS

    (UNAUDITED) (in thousands, except share and per share amounts)

    For the Three Months Ended For the Six Months Ended June 30, June 30, June 30, June 30, 2018 2017 2018 2017 Revenues $ 3,799 $ 3,443 $ 7,329 $ 6,298 Cost of revenues 1,030 909 2,051 1,655 Gross profit 2,769 2,534 5,278 4,643 Operating costs and expenses:

    General and administrative 948 855 1,952 1,767 Sales and marketing expenses 799 714 1,549 1,307 Product development 285 129 583 254 Depreciation and amortization 142 103 284 208

    Total operating costs and expenses 2,174 1,801 4,368 3,536 Operating income 595 733 910 1,107 Other income (expense): Other expense — (17) — (28) Interest income (expense), net (5) 1 (10) 2 Total other expense (5) (16) (10) (26) Net income before income taxes 590 717 900 1,081 Income tax expense 224 224 214 264 Net income $ 366 $ 493 $ 686 $ 817

    Income per share – basic $ 0.12 $ 0.17 $ 0.22 $ 0.28

    Income per share – fully diluted $ 0.12 $ 0.16 $ 0.22 $ 0.27

    Weighted average number of common shares outstanding – basic 3,074 2,940 3,055 2,920 Weighted average number of common shares outstanding – fully diluted 3,137 3,021 3,123 3,002

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

    4

    EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.

  • ISSUER DIRECT CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

    (UNAUDITED) (in thousands)

    For the Three Months Ended For the Six Months Ended June 30, June 30, June 30, June 30, 2018 2017 2018 2017 Net income $ 366 $ 493 $ 686 $ 817

    Foreign currency translation adjustment (76) 27 (33) 34 Comprehensive income $ 290 $ 520 $ 653 $ 851

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

    5

    EDGAR Stream is a copyright of Issuer Direct Corporation, all rights reserved.

  • ISSUER DIRECT CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS

    (UNAUDITED) (in thousands)

    For the Six Months Ended June 30, June 30, 2018 2017 Cash flows from operating activities: Net income $ 686 $ 817 Adjustments to reconcile net income to net cash provided by operating activities:

    Depreciation and amortization 680 350 Bad debt expense 93 87 Deferred income taxes (17) (5) Non-cash interest expense (See Note 3) 13 — Stock-based compensation

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