10-Q 1 rdvt-20220331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

 

(Mark One)

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

For the quarterly period ended March 31, 2022

or

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

For the transition period from to

Commission file number 001-38407

 

RED VIOLET, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

 

82-2408531

(State or Other Jurisdiction of Incorporation or Organization)

 

(I.R.S. Employer Identification No.)

 

2650 North Military Trail, Suite 300, Boca Raton, Florida 33431

(Address of Principal Executive Offices) (Zip Code)

(561) 757-4000

(Registrant’s Telephone Number, Including Area Code)

None

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

 

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

Title of each class

Trading Symbol (s)

Name of each exchange on which registered

Common Stock, $0.001 par value per share

RDVT

The NASDAQ Stock Market LLC

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. ☒ YesNo

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ YesNo

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.

 

Large accelerated filer

 

Accelerated filer

 

Non-accelerated filer

 

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 Exchange Act): Yes No

As of May 2, 2022, the registrant had 13,523,067 shares of common stock outstanding.

 

 

 

 


 

RED VIOLET, INC.

TABLE OF CONTENTS FOR FORM 10-Q

 

 

 

 

 

Page

PART I - FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements (unaudited)

 

 

 

 

Condensed consolidated balance sheets as of March 31, 2022 and December 31, 2021

 

1

 

 

Condensed consolidated statements of operations for the three months ended March 31, 2022 and 2021

 

2

 

 

Condensed consolidated statements of changes in shareholders' equity for the three months ended March 31, 2022 and 2021

 

3

 

 

Condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021

 

4

 

 

Notes to condensed consolidated financial statements

 

5

Item 2.

 

Management's Discussion and Analysis of Financial Condition and Results of Operations

 

12

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

17

Item 4.

 

Controls and Procedures

 

18

 

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

19

Item 1A.

 

Risk Factors

 

19

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

19

Item 3.

 

Defaults Upon Senior Securities

 

19

Item 4.

 

Mine Safety Disclosures

 

19

Item 5.

 

Other Information

 

19

Item 6.

 

Exhibits

 

20

 

 

 

 

 

SIGNATURES

 

21

 

 

 

 


 

PART I - FINANCIAL INFORMATION

Unless otherwise indicated or required by the context, all references in this Quarterly Report on Form 10-Q to “we,” “us,” “our,” “red violet,” or the “Company,” refer to Red Violet, Inc. and its consolidated subsidiaries.

Item 1. Financial Statements.

 

RED VIOLET, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)

(unaudited)

 

 

 

March 31, 2022

 

 

December 31, 2021

 

ASSETS:

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

34,775

 

 

$

34,258

 

Accounts receivable, net of allowance for doubtful accounts of $22 and $28 as of
  March 31, 2022 and December 31, 2021, respectively

 

 

4,561

 

 

 

3,736

 

Prepaid expenses and other current assets

 

 

1,081

 

 

 

599

 

Total current assets

 

 

40,417

 

 

 

38,593

 

Property and equipment, net

 

 

625

 

 

 

577

 

Intangible assets, net

 

 

28,804

 

 

 

28,181

 

Goodwill

 

 

5,227

 

 

 

5,227

 

Right-of-use assets

 

 

1,529

 

 

 

1,661

 

Other noncurrent assets

 

 

137

 

 

 

137

 

Total assets

 

$

76,739

 

 

$

74,376

 

LIABILITIES AND SHAREHOLDERS' EQUITY:

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

2,233

 

 

$

1,605

 

Accrued expenses and other current liabilities

 

 

442

 

 

 

395

 

Current portion of operating lease liabilities

 

 

636

 

 

 

617

 

Deferred revenue

 

 

713

 

 

 

841

 

Total current liabilities

 

 

4,024

 

 

 

3,458

 

Noncurrent operating lease liabilities

 

 

1,124

 

 

 

1,291

 

Deferred tax liabilities

 

 

373

 

 

 

198

 

Total liabilities

 

 

5,521

 

 

 

4,947

 

Shareholders' equity:

 

 

 

 

 

 

Preferred stock—$0.001 par value, 10,000,000 shares authorized, and 0 shares
  issued and outstanding, as of March 31, 2022 and December 31, 2021

 

 

-

 

 

 

-

 

Common stock—$0.001 par value, 200,000,000 shares authorized, 13,523,067 and
  
13,488,540 shares issued and outstanding, as of March 31, 2022 and December 31, 2021

 

 

14

 

 

 

13

 

Additional paid-in capital

 

 

93,115

 

 

 

91,434

 

Accumulated deficit

 

 

(21,911

)

 

 

(22,018

)

Total shareholders' equity

 

 

71,218

 

 

 

69,429

 

Total liabilities and shareholders' equity

 

$

76,739

 

 

$

74,376

 

 

See notes to condensed consolidated financial statements

1


 

RED VIOLET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands, except share data)

(unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

Revenue

 

$

12,729

 

 

$

10,217

 

Costs and expenses:

 

 

 

 

 

 

Cost of revenue (exclusive of depreciation and amortization)

 

 

3,170

 

 

 

2,761

 

Sales and marketing expenses

 

 

2,391

 

 

 

2,221

 

General and administrative expenses

 

 

5,353

 

 

 

4,550

 

Depreciation and amortization

 

 

1,534

 

 

 

1,258

 

Total costs and expenses

 

 

12,448

 

 

 

10,790

 

Income (loss) from operations

 

 

281

 

 

 

(573

)

Interest income (expense), net

 

 

1

 

 

 

(5

)

Income (loss) before income taxes

 

 

282

 

 

 

(578

)

Income tax expense

 

 

175

 

 

 

-

 

Net income (loss)

 

$

107

 

 

$

(578

)

Earnings (loss) per share:

 

 

 

 

 

 

Basic

 

$

0.01

 

 

$

(0.05

)

Diluted

 

$

0.01

 

 

$

(0.05

)

Weighted average number of shares outstanding:

 

 

 

 

 

 

Basic

 

 

13,543,607

 

 

 

12,207,193

 

Diluted

 

 

14,047,635

 

 

 

12,207,193

 

 

See notes to condensed consolidated financial statements

2


 

RED VIOLET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Amounts in thousands, except share data)

(unaudited)

 

 

 

Common stock

 

 

Treasury stock

 

 

Additional paid-in

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

deficit

 

 

Total

 

Balance at December 31, 2020

 

 

12,167,327

 

 

$

13

 

 

 

-

 

 

$

-

 

 

$

66,005

 

 

$

(22,673

)

 

$

43,345

 

Vesting of restricted stock units

 

 

40,750

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,397

 

 

 

-

 

 

 

2,397

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(578

)

 

 

(578

)

Balance at March 31, 2021

 

 

12,208,077

 

 

$

13

 

 

 

-

 

 

$

-

 

 

$

68,402

 

 

$

(23,251

)

 

$

45,164

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2021

 

 

13,488,540

 

 

$

13

 

 

 

-

 

 

$

-

 

 

$

91,434

 

 

$

(22,018

)

 

$

69,429

 

Vesting of restricted stock units

 

 

34,750

 

 

 

1

 

 

 

-

 

 

 

-

 

 

 

(1

)

 

 

-

 

 

 

-

 

Increase in treasury stock resulting
  from shares withheld to cover
  statutory taxes

 

 

-

 

 

 

-

 

 

 

(223

)

 

 

(6

)

 

 

-

 

 

 

-

 

 

 

(6

)

Retirement of treasury stock

 

 

(223

)

 

 

-

 

 

 

223

 

 

 

6

 

 

 

(6

)

 

 

 

 

 

-

 

Share-based compensation

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,688

 

 

 

-

 

 

 

1,688

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

107

 

 

 

107

 

Balance at March 31, 2022

 

 

13,523,067

 

 

$

14

 

 

 

-

 

 

$

-

 

 

$

93,115

 

 

$

(21,911

)

 

$

71,218

 

 

See notes to condensed consolidated financial statements

3


 

RED VIOLET, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

(unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

Net income (loss)

 

$

107

 

 

$

(578

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

1,534

 

 

 

1,258

 

Share-based compensation expense

 

 

1,387

 

 

 

2,046

 

Write-off of long-lived assets

 

 

3

 

 

 

19

 

Provision for bad debts

 

 

37

 

 

 

59

 

Noncash lease expenses

 

 

132

 

 

 

121

 

Interest expense

 

 

-

 

 

 

5

 

Deferred income tax expense

 

 

175

 

 

 

-

 

Changes in assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(862

)

 

 

(440

)

Prepaid expenses and other current assets

 

 

(482

)

 

 

(392

)

Other noncurrent assets

 

 

-

 

 

 

2

 

Accounts payable

 

 

628

 

 

 

(101

)

Accrued expenses and other current liabilities

 

 

47

 

 

 

(583

)

Deferred revenue

 

 

(128

)

 

 

(51

)

Operating lease liabilities

 

 

(148

)

 

 

(133

)

Net cash provided by operating activities

 

 

2,430

 

 

 

1,232

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

Purchase of property and equipment

 

 

(113

)

 

 

(46

)

Capitalized costs included in intangible assets

 

 

(1,794

)

 

 

(1,247

)

Net cash used in investing activities

 

 

(1,907

)

 

 

(1,293

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

Taxes paid related to net share settlement of vesting of restricted stock units

 

 

(6

)

 

 

-

 

Net cash used in financing activities

 

 

(6

)

 

 

-

 

Net increase (decrease) in cash and cash equivalents

 

$

517

 

 

$

(61

)

Cash and cash equivalents at beginning of period

 

 

34,258

 

 

 

12,957

 

Cash and cash equivalents at end of period

 

$

34,775

 

 

$

12,896

 

SUPPLEMENTAL DISCLOSURE INFORMATION

 

 

 

 

 

 

Cash paid for interest

 

$

-

 

 

$

-

 

Cash paid for income taxes

 

$

-

 

 

$

-

 

Share-based compensation capitalized in intangible assets

 

$

301

 

 

$

351

 

Retirement of treasury stock

 

$

6

 

 

$

-

 

 

See notes to condensed consolidated financial statements

4


 

RED VIOLET, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands, except share data)

(unaudited)

1. Summary of significant accounting policies

(a) Basis of preparation

The accompanying unaudited condensed consolidated financial statements of Red Violet, Inc., a Delaware corporation, and its consolidated subsidiaries (collectively, “red violet” or the “Company”), have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in annual financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to those rules and regulations.

The accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for any future interim periods or for the full year ending December 31, 2022.

The information included in this quarterly report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (“Form 10-K”).

The condensed consolidated balance sheet as of December 31, 2021 included herein was derived from the audited financial statements as of that date included in the Form 10-K, but does not include all disclosures required by US GAAP.

The Company has only one operating segment, as defined by Accounting Standards Codification (“ASC”) 280, “Segment Reporting.”

Principles of consolidation

The condensed consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant transactions among the Company and its subsidiaries have been eliminated upon consolidation.

(b) Recently issued accounting standards

As an emerging growth company, the Company has left open the opportunity to take advantage of the extended transition period provided to emerging growth companies in Section 13(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), however, it is the Company’s present intention to adopt any applicable new accounting standards timely.

 

2. Earnings (loss) per share

Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the periods. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock and is calculated using the treasury stock method for unvested shares. Common equivalent shares are excluded from the calculation in the loss periods as their effects would be anti-dilutive.

 

 

 

Three Months Ended March 31,

 

(In thousands, except share data)

 

2022

 

 

2021

 

Numerator:

 

 

 

 

 

 

Net income (loss)

 

$

107

 

 

$

(578

)

Denominator:

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

Basic

 

 

13,543,607

 

 

 

12,207,193

 

Diluted(1)

 

 

14,047,635

 

 

 

12,207,193

 

Earnings (loss) per share:

 

 

 

 

 

 

Basic

 

$

0.01

 

 

$

(0.05

)

Diluted

 

$

0.01

 

 

$

(0.05

)

 

(1)
For the three months ended March 31, 2022, diluted weighted average shares outstanding are calculated by the inclusion of unvested restricted stock units (“RSUs”). For the three months ended March 31, 2021, a total of 1,686,499 unvested RSUs have been excluded from the diluted loss per share, as the impact is anti-dilutive.

5


 

3. Intangible assets, net

Intangible assets other than goodwill consist of the following:

 

 

 

 

 

March 31, 2022

 

 

December 31, 2021

 

(In thousands)

 

Amortization
Period

 

Gross Amount

 

 

Accumulated Amortization

 

 

Net

 

 

Gross Amount

 

 

Accumulated Amortization

 

 

Net

 

Software developed for internal use

 

5-10 years

 

$

45,077

 

 

$

(16,273

)

 

$

28,804

 

 

$

42,982

 

 

$

(14,801

)

 

$

28,181

 

 

The gross amount associated with software developed for internal use represents capitalized costs of internally-developed software, including eligible salaries and staff benefits, share-based compensation, travel expenses incurred by relevant employees, and other relevant costs.

Amortization expenses of $1,472 and $1,203 for the three months ended March 31, 2022 and 2021, respectively, were included in depreciation and amortization expense. As of March 31, 2022, intangible assets of $3,780, included in the gross amounts of software developed for internal use, have not started amortization, as they are not ready for their intended use.

The Company capitalized costs of software developed for internal use of $2,095 and $1,598 during the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022, estimated amortization expense related to the Company’s intangible assets for the remainder of 2022 through 2027 and thereafter are as follows:

 

(In thousands)

 

 

 

Year

 

March 31, 2022

 

Remainder of 2022

 

 

4,746

 

2023

 

 

6,666

 

2024

 

 

6,039

 

2025

 

 

4,835

 

2026

 

 

3,377

 

2027 and thereafter

 

 

3,141

 

Total

 

$

28,804

 

 

4. Goodwill

Goodwill represents the cost in excess of the fair value of the net assets acquired in a business combination. As of March 31, 2022 and December 31, 2021, the balance of goodwill of $5,227 was as a result of the acquisition of Interactive Data, LLC, a wholly-owned subsidiary of red violet, effective on October 2, 2014.

In accordance with ASC 350, “Intangibles - Goodwill and Other,” goodwill is tested at least annually for impairment, or when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable, by assessing qualitative factors or performing a quantitative analysis in determining whether it is more likely than not that its fair value exceeds the carrying value. The measurement date of the Company’s annual goodwill impairment test is October 1.

For the periods ended March 31, 2022 and 2021, no goodwill impairment charges were recorded.

5. Revenue recognition

The Company recognized revenue in accordance with ASC 606, “Revenue from Contracts with Customers” (“Topic 606”). Under this standard, revenue is recognized when control of goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company’s performance obligation is to provide on demand information and identity intelligence solutions to its customers by leveraging its proprietary technology and applying machine learning and advanced analytics to its massive data repository. The pricing for the customer contracts is based on usage, a monthly fee, or a combination of both.

Available within Topic 606, the Company has applied the portfolio approach practical expedient in accounting for customer revenue as one collective group, rather than individual contracts. Based on the Company’s historical knowledge of the contracts contained in this portfolio and the similar nature and characteristics of the customers, the Company has concluded the financial statement effects are not materially different than if accounting for revenue on a contract by contract basis.

6


 

Revenue is recognized over a period of time. The Company’s customers simultaneously receive and consume the benefits provided by the Company’s performance as and when provided. Furthermore, the Company has elected the “right to invoice” practical expedient, available within Topic 606, as its measure of progress, since it has a right to payment from a customer in an amount that corresponds directly with the value of its performance completed-to-date. The Company's revenue arrangements do not contain significant financing components.

For the three months ended March 31, 2022 and 2021, 77% and 80% of total revenue was attributable to customers with pricing contracts, respectively, versus 23% and 20% attributable to transactional customers, respectively. Pricing contracts are generally annual contracts or longer, with auto renewal.

If a customer pays consideration before the Company transfers services to the customer, those amounts are classified as deferred revenue. As of March 31, 2022 and December 31, 2021, the balance of deferred revenue was $713 and $841, respectively, all of which is expected to be realized in the next 12 months. In relation to the deferred revenue balance as of December 31, 2021, $323 was recognized into revenue during the three months ended March 31, 2022.

As of March 31, 2022, $9,962 of revenue is expected to be recognized in the future for performance obligations that are unsatisfied or partially unsatisfied, related to pricing contracts that have a term of more than 12 months, of which, $4,925 of revenue will be recognized in the remainder of 2022, $4,232 in 2023, $797 in 2024, and $8 in 2025. The actual timing of recognition may vary due to factors outside of the Company’s control. The Company excludes variable consideration related entirely to wholly unsatisfied performance obligations and contracts and recognizes such variable consideration based upon the right to invoice the customer.

Sales commissions are incurred and recorded on an ongoing basis over the term of the customer relationship. These costs are recorded in sales and marketing expenses.

In addition, the Company elected the practical expedient to not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which the Company recognizes revenue at the amount to which it has the right to invoice for services performed.

6. Income taxes

The Company is subject to federal and state income taxes in the United States. The Company’s tax provision for interim periods is determined using an estimate of its annual effective tax rate, adjusted for discrete items arising in that quarter, unless a reliable estimate of ordinary income or the related tax expense/benefit cannot be made or the Company is in cumulative losses for which the benefit cannot be realized. In each quarter, the Company updates its estimate of the annual effective tax rate, and if its estimated annual tax rate changes, the Company makes a cumulative adjustment in that quarter. For the three months ended March 31, 2022, the Company concluded that it was in a cumulative loss with a full valuation allowance booked against that loss.

For the three months ended March 31, 2022 and 2021, the Company’s effective income tax rate was 62% and 0%, respectively, differing from the U.S. corporate statutory federal income tax rate of 21%, and the difference is primarily the result of the valuation allowance applied to reduce the Company’s deferred tax assets to the amount that is more likely than not to be realized.

The Company assesses its income tax positions and records tax benefits for all years subject to examination based upon its evaluation of the facts, circumstances and information available at the reporting date. For those tax positions where it is more-likely-than-not that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is not more-likely-than-not that a tax benefit will be sustained, no tax benefit has been recognized in the Company’s financial statements.

The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. All of the Company’s income tax filings since 2018 remain open for tax examinations.

The Company does not have any material unrecognized tax benefits as of March 31, 2022 and December 31, 2021.

7


 

7. Share-based compensation

On March 22, 2018, the board of directors of the Company and Cogint, Inc. (“cogint”) (now known as Fluent, Inc.), in its capacity as sole stockholder of the Company prior to the Company’s spin-off from cogint on March 26, 2018, approved the Red Violet, Inc. 2018 Stock Incentive Plan (the “2018 Plan”), which became effective immediately prior to the spin-off. A total of 3,000,000 shares of common stock were authorized to be issued under the 2018 Plan. On June 3, 2020, the Company’s stockholders approved an amendment to the 2018 Plan to increase the number of shares of common stock authorized for issuance under the 2018 Plan from 3,000,000 shares to 4,500,000 shares. On April 11, 2022, the board of directors of the Company approved, subject to stockholder approval, an amendment to the 2018 Plan to further increase the number of shares of common stock authorized for issuance under the 2018 Plan from 4,500,000 shares to 6,500,000 shares.

The primary purpose of the 2018 Plan is to attract, retain, reward and motivate certain individuals by providing them with an opportunity to acquire or increase a proprietary interest in the Company and to incentivize them to expend maximum effort for the growth and success of the Company, so as to strengthen the mutuality of the interests between such individuals and the stockholders of the Company.

As of March 31, 2022, there were 719,187 shares of common stock available for future issuance under the 2018 Plan, as amended.

To date, all stock incentives issued under the 2018 Plan have been in the form of RSUs. RSUs granted under the 2018 Plan vest and settle upon the satisfaction of a time-based condition or with both time- and performance-based conditions. The time-based condition for these awards is generally satisfied over three or four years with annual vesting. Details of unvested RSU activity during the three months ended March 31, 2022 were as follows:

 

 

Number of units

 

 

Weighted average
grant-date fair value

 

Unvested as of December 31, 2021

 

 

1,306,953

 

 

$

18.85

 

Granted(1)

 

 

102,500

 

 

$

25.40

 

Vested and delivered

 

 

(34,527

)

 

$

7.98

 

Withheld as treasury stock

 

 

(223

)

 

$

7.53

 

Vested not delivered(2)

 

 

(282,585

)

 

$

14.97

 

Forfeited

 

 

(16,225

)

 

$

23.36

 

Unvested as of March 31, 2022(3)

 

 

1,075,893

 

 

$

21.12

 

 

(1)
During the three months ended March 31, 2022, the Company granted an aggregate of 102,500 RSUs to certain employees at grant date fair values ranging from $24.42 to $28.75 per share, with a vesting period ranging from two to four years.
(2)
The amount included in "Vested not delivered" above represents RSUs that have been vested but the delivery of the common stock underlying such RSUs had not occurred as of March 31, 2022. During the period from August 29, 2019 to November 20, 2020, the Company granted an aggregate of 455,000 RSUs. Such RSU grants shall not vest unless and until the Company has, for any fiscal quarter in which the RSUs are outstanding, (i) gross revenue determined in accordance with the Company’s reviewed or audited financial statements in excess of $12.5 million for such fiscal quarter, and (ii) positive adjusted EBITDA of at least $2.0 million, as determined based on amounts derived from the Company’s reviewed or audited financial statements for such fiscal quarter, subject to the recipient continuing to provide services to the Company either as an employee, director or consultant on the last day of the quarter that the performance criteria are met. Provided the respective performance criteria are met, the RSUs will vest in accordance with the time-based requirements contained in the award agreement over three years. In the event of a change of control, all RSUs which have not vested on the date of such change of control shall immediately vest even if the performance criteria have not been met. As of the respective grant dates, the Company determined that it was probable that such performance criteria would be met and therefore, began to record the related amortization expense on the grant dates. The Company determined that the performance criteria were met as of March 31, 2022. As a result, 283,335 RSUs were included in "Vested not delivered" above.
(3)
On July 30, 2021, the Company granted 120,000 RSUs, subject to performance-based requirements, to one non-executive employee, which was subsequently modified on February 18, 2022, with a fair value of $27.23 per share as of the modification date. Such RSU grants shall not vest unless and until the Company has achieved certain revenue for a portion of its business prior to the achievement date deadline for each performance milestone. No amortization of share-based compensation expense has been recognized for these RSUs, because, as of March 31, 2022, the Company determined that it is not probable that such performance criteria will be met. The 120,000 RSUs were included in "Unvested as of March 31, 2022" with a fair value of $27.23 per share.

As of March 31, 2022, unrecognized share-based compensation expense associated with the granted RSUs amounted to $17,904, which is expected to be recognized over a remaining weighted average period of 3.0 years.

8


 

Share-based compensation was allocated to the following accounts in the condensed consolidated financial statements for the three months ended March 31, 2022 and 2021:

 

 

 

Three Months Ended March 31,

 

(In thousands)

 

2022

 

 

2021

 

Sales and marketing expenses

 

$

47

 

 

$

156

 

General and administrative expenses

 

 

1,340

 

 

 

1,890

 

Share-based compensation expense

 

 

1,387

 

 

 

2,046

 

Capitalized in intangible assets

 

 

301

 

 

 

351

 

Total

 

$

1,688

 

 

$

2,397

 

 

8. Related party transactions

Services Agreement

On August 7, 2018, the Company entered into a services agreement (the “Services Agreement”) with Mr. Michael Brauser (the “Consultant”), a greater than 10% stockholder, pursuant to which, the Consultant received cash compensation of $30 per month and was entitled to participate in the Company’s incentive compensation plan. The Services Agreement terminated on August 6, 2021, as further detailed below.

On February 16, 2021, the Company entered into a Separation Agreement (the "Separation Agreement") with the Consultant. Pursuant to the Separation Agreement, the parties agreed that the Services Agreement which expired on August 6, 2021 (“Expiration Date”), would not be renewed, but would continue in force and effect until the Expiration Date. As part of the Separation Agreement, the Consultant agreed (i) to certain non-solicitation obligations contained therein, (ii) that he and his affiliates would not disparage or assist or cooperate with any person or entity seeking to publicly disparage or economically harm the Company, (iii) that the Consultant and his affiliates would not initiate any lawsuit, claim, or proceeding with respect to any claims against the Company, except (with designated exceptions) for any legal proceeding initiated solely to remedy a breach of or to enforce the Separation Agreement, and (iv) with respect to each annual or special meeting of the Company's stockholders until the Expiration Date of the Separation Agreement, the Consultant agreed to vote the shares of the Company's common stock or any other securities entitled to vote then held by him or his affiliates in accordance with the board of directors' recommendations on director proposals (subject to certain board of directors change thresholds), and the ratification of the appointment of the Company’s independent registered public accounting firm.

The Company agreed (i) that the remaining unvested 166,666 RSUs previously granted to Consultant in accordance with the 2018 RSU agreement would continue to vest on July 1, 2021, in accordance with and subject to all other provisions and conditions of such grant, (ii) to amend the 2020 RSU agreement, previously granting Consultant 30,000 RSUs such that the 30,000 RSUs would continue to vest 33-1/3% on November 1, 2021, 66-2/3% on November 1, 2022, and 100% on November 1, 2023, without certain Company performance criteria, subject to all other provisions and conditions of such grant, (iii) to include shares of the Company's common stock held by the Consultant or his affiliates in any registration statement the Company files for the benefit of selling stockholders at any time when the Consultant or his affiliates beneficially own 10% or more of the Company's common stock, and (iv) to not initiate any lawsuit, claim, or proceeding with respect to any claims against the Consultant and his affiliates, except (with designated exceptions) for any legal proceeding initiated solely to remedy a breach of or to enforce the Separation Agreement. As a result of the modification to the 2020 RSU agreement, beginning February 16, 2021, the Company recognized an aggregate of $723 in share-based compensation expense over the remaining service period which ended on the Expiration Date.

The Company recognized consulting service fees relating to the Services Agreement of a total of $0 and $90 during the three months ended March 31, 2022 and 2021, respectively. In addition, amortization of share-based compensation expense of $0 and $548 (inclusive of the amortization of share-based compensation expense in relation with the modification of RSUs mentioned above) for the three months ended December 31, 2022 and 2021, respectively, was recognized in relation to the RSUs previously granted to the Consultant.

9. Leases

The Company leases its corporate headquarters of 21,020 rentable square feet in accordance with a non-cancelable 89-month operating lease agreement as amended and effective in January 2017, with an option to extend for an additional 60 months. The Company also leases an additional office space of 6,003 rentable square feet in accordance with a non-cancellable 90-month operating lease agreement entered into in April 2017, with an option to extend for an additional 60 months. The extension option is not included in the determination of the lease term as it is not reasonably certain to be exercised.

9


 

For the three months ended March 31, 2022 and 2021, a summary of the Company’s lease information is shown below:

 

 

Three Months Ended March 31,

 

(In thousands)

 

2022

 

 

2021

 

Lease cost:

 

 

 

 

 

 

Operating lease costs

 

$

168

 

 

$

168

 

Other information:

 

 

 

 

 

 

Cash paid for operating leases

 

$

184

 

 

$

179

 

 

As of March 31, 2022, the weighted average remaining operating lease term was 2.6 years.

As of March 31, 2022, scheduled future maturities and present value of the operating lease liabilities are as follows:

 

(In thousands)

 

 

 

Year

 

March 31, 2022

 

Remainder of 2022

 

$

559

 

2023

 

 

765

 

2024

 

 

542

 

2025

 

 

77

 

Total maturities

 

$

1,943

 

Present value included in consolidated balance sheet:

 

 

 

Current portion of operating lease liabilities

 

$

636

 

Noncurrent operating lease liabilities

 

 

1,124

 

Total operating lease liabilities

 

$

1,760

 

Difference between the maturities and the present value of operating lease liabilities

 

$

183

 

 

10. Commitments and contingencies

(a) Capital commitment

The Company incurred data costs of $2,248 and $2,122 for the three months ended March 31, 2022 and 2021, respectively, under certain data licensing agreements. As of March 31, 2022, material capital commitments under certain data licensing agreements were $31,634, shown as follows:

 

(In thousands)

 

 

 

Year

 

March 31, 2022

 

Remainder of 2022

 

 

6,066

 

2023

 

 

7,315

 

2024

 

 

7,166

 

2025

 

 

7,267

 

2026

 

 

3,820

 

Total