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SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended
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Mar. 31, 2025
SIGNIFICANT ACCOUNTING POLICIES |
SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Our significant accounting policies are presented in “Note 2 – Significant Accounting Policies” in the 2024 Form 10-K. Users of financial information for interim periods are encouraged to refer to the footnotes to the consolidated financial statements contained in the 2024 Form 10-K when reviewing interim financial results. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the consolidated financial statements and during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to stock-based compensation, allowance for doubtful accounts, intangible assets, and contingent consideration. Actual results may differ from these estimates. Revenue Recognition We derive our revenue primarily from the sale of internally developed software by a software-as-a-service (“SaaS”) delivery model, as well as from professional services, through our direct sales force or through third-party resellers. Our SaaS fees include support and maintenance. We recognize revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of ASC 606 is that an entity recognizes revenue to depict the transfer of promised 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. We determine revenue recognition through the following five steps:
| ● | Identify the contract with the customer;
| ● | Identify the performance obligations in the contract;
| ● | Determine the transaction price;
| ● | Allocate the transaction price to the performance obligations in the contract; and
| ● | Recognize revenue when, or as, the performance obligations are satisfied.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Performance obligations are the unit of accounting for revenue recognition and generally represent the distinct goods or services that are promised to the customer. If we determine that we have not satisfied a performance obligation, we will defer recognition of the revenue until the performance obligation is deemed to be satisfied. SaaS agreements are generally non-cancelable, although clients typically have the right to terminate their contracts for cause if we fail to perform material obligations. Our SaaS revenue is comprised of fixed subscription fees from customer accounts on our platform related to our software products. Our support revenue is comprised of subscription fees for customers for periodic auditing, human-assisted technological remediations, legal support, and other professional support services. SaaS and support (also referred to as “subscription”) revenue is recognized on a ratable basis over the contractual subscription term of the arrangement beginning on the date that our service is made available to the customer. Certain SaaS and support fees are invoiced in advance on an annual, semi-annual, or quarterly basis. Any funds received for services not provided yet are held in deferred revenue and are recorded as revenue when the related performance obligations have been satisfied. Non-subscription revenue consists primarily of PDF remediation and one-time website and mobile application reporting services and is recognized upon delivery. Consideration payable under PDF remediation arrangements is based on usage. Consideration payable under non-subscription website and mobile application reporting services arrangements is based on fixed fees. The following table presents our revenues disaggregated by sales channel: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three months ended March 31, | ​
(in thousands) |  | 2025 |  | 2024 | ​
Partner and Marketplace | ​ | $ | 5,520 |  | $ | 4,734 | ​
Enterprise | ​ |  | 4,213 | ​ | ​ | 3,349 | ​
Total revenues | ​ | $ | 9,733 | ​ | $ | 8,083 | ​
​ The Company records accounts receivable for amounts invoiced to customers for which the Company has an unconditional right to consideration as provided under the contractual arrangement. Deferred revenue includes payments received in advance of performance under the contract and is reported on an individual contract basis at the end of each reporting period. Deferred revenue is classified as current or noncurrent based on the timing of when we expect to recognize revenue. The table below summarizes our deferred revenue as of March 31, 2025 and December 31, 2024: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | March 31, | ​ | December 31, |
(in thousands) |  | 2025 |  | 2024 | ​
Deferred revenue - current | ​ | $ | 7,519 | ​ | $ | 7,502 | ​
Deferred revenue - noncurrent | ​ | ​ | 11 | ​ | ​ | 16 | ​
Total deferred revenue |  | $ | 7,530 |  | $ | 7,518 |
​ In the three-month period ended March 31, 2025, we recognized $3,674,000, or 49%, in revenue from deferred revenue outstanding as of December 31, 2024. We had one customer (including the customer’s affiliates reflecting multiple contracts and a partnership with the Company) which accounted for approximately 14% and 16% of our total revenue in the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, two customers represented 14% and 10%, respectively, of total accounts receivable. As of December 31, 2024, one customer represented 14% of total accounts receivable. ​ NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Deferred Costs (Contract Acquisition Costs) We capitalize initial and renewal sales commissions in the period the commission is earned, which generally occurs when a customer contract is obtained, and amortize deferred commission costs on a straight-line basis over the expected period of benefit, which we have deemed to be the contract term. As a practical expedient, we expense sales commissions as incurred when the amortization period of related deferred commission costs would have been one year or less. The table below summarizes the deferred commission costs as of March 31, 2025 and December 31, 2024, which are included in Prepaid expenses and other current assets on our consolidated balance sheets: ​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | March 31, | ​ | December 31, |
(in thousands) |  | 2025 |  | 2024 | ​
Deferred costs – current | ​ | $ | 32 | ​ | $ | 28 | ​
Deferred costs - noncurrent | ​ |  | 35 | ​ |  | 32 | ​
Total deferred costs | ​ | $ | 67 | ​ | $ | 60 | ​
​ Amortization expense associated with sales commissions was included in Selling and marketing expenses on the consolidated statements of operations and totaled $9,000 and $10,000 for the three-month periods ended March 31, 2025 and 2024, respectively. Business Combinations The assets acquired, liabilities assumed and any contingent consideration in business combinations are recorded at their estimated fair value on the acquisition date with subsequent changes recognized in earnings. These estimates are inherently uncertain and are subject to refinement. Management develops estimates based on assumptions as a part of the purchase price allocation process to value the assets acquired and liabilities assumed as of the business combination date. As a result, the Company may recognize adjustments to provisional amounts of assets acquired or liabilities assumed in earnings in the reporting period in which the adjustments are determined. Acquisition-related expenses primarily consist of legal, accounting, and other advisory fees associated and are recorded in the period in which they are incurred. Intangible Assets Intangible assets include patents, capitalized software development costs, customer relationships and other specifically identifiable assets. Intangible assets with finite lives are amortized on a straight-line basis over their respective estimated useful lives and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Intangible assets determined to have indefinite useful lives are not amortized but are tested for impairment annually and more frequently if events occur or circumstances change that indicate an asset may be impaired. As of March 31, 2025 and December 31, 2024, intangible assets included $7,260,000 and $7,091,000 in customer relationships, respectively, and $3,077,000 and $3,054,000 in capitalized software development costs, respectively, net of accumulated amortization. Debt Discount and Debt Issuance Costs Costs related to the issuance of debt due to the lender (debt discount) or to third parties (debt issuance costs) are capitalized and amortized to interest expense based on the effective interest method over the term of the related debt. Debt discount and debt issuance costs are presented on the Company’s consolidated balance sheets as a direct deduction from the carrying amount of our term loan. NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Employee Stock Purchase Plan In May 2022, the stockholders of the Company approved the Company’s Employee Stock Purchase Plan (the “ESPP”), which provides for the issuance of up to 500,000 shares of common stock. Eligible employees may elect to have a percentage of eligible compensation withheld to purchase shares of our common stock at the end of each purchase period. The Company expects each purchase period to be the six-month periods ending on June 30 or December 31 of each calendar year. Beginning in 2025, the purchase price per share is expected to equal 85% of the fair market value of our common stock on the first trading day or the last trading day of each purchase period, whichever amount is lower. As a result, the fair value of shares of common stock to be issued under the ESPP will be measured on the first day of each offering period using a Black-Scholes option pricing model. Under the ESPP, a participant may not be granted rights to purchase more than $25,000 worth of common stock for each calendar year and no participant may purchase more than 1,500 shares of our common stock (or such other number as the Compensation Committee may designate) on any one purchase date. As of March 31, 2025, 23,611 shares had been issued under the ESPP and 476,389 shares remained available under the plan. Stock-Based Compensation The Company periodically issues options, restricted stock units (“RSUs”), and shares of its common stock as compensation for services received from its employees, directors, and consultants. The fair value of the award is measured on the grant date. The fair value amount is then recognized as expense over the requisite vesting period during which services are required to be provided in exchange for the award. We recognize forfeitures as they occur. Stock-based compensation expense is recorded in the same expense classifications in the consolidated statements of operations as if such amounts were paid in cash. The fair value of options awards is measured on the grant date using a Black-Scholes option pricing model, which includes assumptions that are subjective and are generally derived from external data (such as risk-free rate of interest) and historical data (such as volatility factor and expected term). We estimate the fair value of restricted stock unit awards with time- or performance-based vesting using the value of our common stock on the grant date. We estimate the fair value of market-based restricted stock unit awards as of the grant date using the Monte Carlo simulation model. We expense the compensation cost associated with time-based options and RSUs as the restriction period lapses, which is typically a one- to three-year service period with the Company. Compensation expense related to performance-based RSUs is recognized on a straight-line basis over the requisite service period, provided that it is probable that performance conditions will be achieved, with probability assessed on a quarterly basis and any changes in expectations recognized as an adjustment to earnings in the period of the change. Compensation cost is not recognized for service- and performance-based awards that do not vest because service or performance conditions are not satisfied, and any previously recognized compensation cost is reversed. Compensation costs related to awards with market conditions are recognized on a straight-line basis over the requisite service period regardless of whether the market condition is satisfied and is not reversed provided that the requisite service period derived from the Monte-Carlo simulation has been completed. If vesting occurs prior to the end of the requisite service period, expense is accelerated and fully recognized through the vesting date. NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The following table summarizes the stock-based compensation expense recorded for the three months ended March 31, 2025 and 2024: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | Three months ended March 31,
(in thousands) |  | 2025 |  | 2024
Options | ​ | $ | — | ​ | $ | 4
RSUs | ​ | ​ | 857 | ​ | ​ | 813
Unrestricted shares of common stock | ​ | ​ | 50 | ​ | ​ | 66
Total | ​ | $ | 907 | ​ | $ | 883
​ As of March 31, 2025, the unrecognized stock-based compensation expense related to outstanding RSUs totaled $6,062,000, which may be recognized through February 2028, subject to achievement of service, performance, and market conditions. ​ The following table summarizes the stock option and RSUs activity for the three months ended March 31, 2025: ​
​ | ​ | ​ | ​ | ​
​ |  | Options |  | RSUs
Outstanding at December 31, 2024 |  | 36,467 |  | 1,314,755
Granted |  | — |  | 320,285
Exercised/Settled |  | (8,109) |  | (206,740)
Forfeited/Expired |  | — |  | (202,691)
Outstanding at March 31, 2025 |  | 28,358 |  | 1,225,609
Vested at March 31, 2025 | ​ | 28,358 | ​ | 396,606
Unvested at March 31, 2025 | ​ | — | ​ | 829,003
​ Earnings (Loss) Per Share (“EPS”) Basic EPS is calculated by dividing net income (loss) available to common stockholders by the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted EPS is calculated based on the net income (loss) available to common stockholders and the weighted average number of shares of common stock outstanding during the period, adjusted for the effects of all potential dilutive common stock issuances related to options and restricted stock units. The dilutive effect of our stock-based awards is computed using the treasury stock method, which assumes all stock-based awards are exercised and the hypothetical proceeds from exercise are used to purchase common stock at the average market price during the period. The incremental shares (i.e., the difference between shares assumed to be issued versus purchased), to the extent they would have been dilutive, are included in the denominator of the diluted EPS calculation. However, when a net loss exists, no potential common stock equivalents are included in the computation of the diluted per-share amount because the computation would result in an anti-dilutive per-share amount. Potentially dilutive securities outstanding as of March 31, 2025 and 2024, which were excluded from the computation of basic and diluted net loss per share for the periods then ended, are as follows: ​
​ | ​ | ​ | ​ | ​ | ​
​ | ​ | March 31, | ​
(in thousands) |  | 2025 |  | 2024 | ​
Options |  | 28 |  | 105 | ​
Restricted stock units |  | 1,226 |  | 1,557 |
Total |  | 1,254 |  | 1,662 |
​ ​ ​ NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) ​ Stock Repurchases In January 2025, the Board of Directors adopted a share repurchase program authorizing the repurchase of up to $12.5 million of our common stock through January 24, 2027. The program may be amended, suspended, or discontinued at any time and does not commit the Company to repurchase any shares of its common stock. No repurchases have been made under this program to date. Shares repurchased by the Company are immediately retired. The Company made an accounting policy election to charge the excess of repurchase price over par value entirely to retained earnings. Fair Value of Financial Instruments Fair value is an estimate of the exit price, representing the amount that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants (i.e., the exit price at the measurement date). Fair value measurements are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our view of market participant assumptions in the absence of observable market information. Assets and liabilities required to be measured at fair value are categorized based upon the level of judgment associated with the inputs used to measure their value in one of the following three categories: Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities. Level 2: Inputs other than quoted market prices that are observable, either directly or indirectly, and reasonably available. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the Company. Level 3: Unobservable inputs reflect the assumptions that the Company develops based on available information about what market participants would use in valuing the asset or liability. The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value based on the short-term maturity of these instruments. The table below provides information on our Level 3 liabilities that are measured at fair value on a recurring basis: ​
​ | ​ | ​ | ​
(in thousands) |  | Three Months Ended
Contingent consideration (1) | ​ | March 31, 2025
Balance at December 31, 2024 | ​ | $ | 1,350
Change in fair value of liabilities | ​ | ​ | 50
Balance at March 31, 2025 | ​ | $ | 1,400
| (1) | Contingent consideration is a liability recorded in connection with the acquisition of ADA Site Compliance, LLC (“ADA Site Compliance”) in the third quarter of 2024. The fair value of the contingent consideration was determined by management with the assistance of an independent third-party valuation specialist using the Monte-Carlo simulation. We expect to settle the liability in the second quarter of 2026. Refer to Note 3 – Acquisitions for additional information on the ADA Site Compliance acquisition. In the three months ended March 31, 2025, we recorded a $50,000 expense related to the increase in fair value of this contingent consideration liability, which is included on our consolidated statements of operations within General and administrative expenses.
​ NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) ​ Recent Accounting Pronouncements In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. The ASU is effective for annual periods beginning after December 15, 2024, with early adoption permitted. We plan to adopt ASU 2023-09 in our fiscal year 2025 annual financial statements. The adoption of this ASU will not affect the Company’s consolidated results of operations, financial position or cash flows. ​ In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures to enhance disclosures about significant segment expenses for public entities reporting segment information under ASC Topic 280. The amendments require public entities to disclose significant expense categories for each reportable segment, other segment items, the title and position of the chief operating decision-maker, and interim disclosures of certain segment-related information previously required only on an annual basis. The amendments clarify that entities reporting single segments must disclose both the new and existing segment disclosures under Topic 280, and a public entity is permitted to disclose multiple measures of segment profit or loss if certain criteria are met. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The adoption of ASU 2023-07 did not have a significant impact on the Company's consolidated financial statements. See Note 7, Segment Information, for the required disclosures. ​ In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40) to improve the disclosures about a public entity’s expenses and provide more detailed information about the types of expenses included in certain expense captions in the consolidated financial statements. The amendments in this update are effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and the amendments in this update should be applied either prospectively to financial statements issued for reporting periods after the effective date of this update or retrospectively to any or all prior periods presented in the financial statements. The Company is evaluating the impact of the new standard on the disclosures in our consolidated financial statements.

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