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Prepaid Service Contract | 9 Months Ended
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Sep. 30, 2021
Prepaid Service Contract |
Prepaid Service Contract | 5. Prepaid Service Contract On April 21, 2020, the Company entered into a Master Services Agreement (“MSA”), with InvestCloud, Inc. (“InvestCloud”). Pursuant to the MSA, InvestCloud agreed to provide the Company with the InvestCloud Platform, a new client and back end interface and related functionalities for the Company’s key operations. The Company agreed to pay InvestCloud as consideration therefore during the initial three-year term an annual license fee of $600,000 as well as an upfront professional service fee of $1.0 million for one-time configuration, installation and customization of the software. Following the initial three-year term, the MSA will automatically renew for additional one-year terms unless terminated by the Company upon 120 days’ notice. In connection with the MSA, InvestCloud entered into a side letter agreement with the Company pursuant to which InvestCloud acquired 193,906 shares of the Company’s restricted common stock (the “Shares”) at a per share price of $5.81 (the Company’s share price as of the close of May 12, 2020) for a total of $1.1 million for professional services, which approximates the cost of services to be provided, to integrate the InvestCloud Platform into the Company’s existing systems. The Shares were issued to InvestCloud on May 12, 2020 without registration under the Securities Act of 1933 in reliance upon the exemption provided in Section 4(a)(2) and or Regulation D thereunder. The Company initially recorded a prepaid asset equal to the $2.1 million of the total professional services related to the development work to be performed by InvestCloud, which is within the line item “Prepaid service contract” on the statements of financial condition. The Company amortizes this asset over the 3-year term of the contract, a period during which the arrangement is noncancelable. The license fees related to the Company’s use of the InvestCloud Platform are prepaid three months in advance and are within the line item “Prepaid service contract” on the statements of financial condition. These prepaid license fees are amortized over the three-month term. The amortization for all the prepaid assets related to InvestCloud is within the line item “Technology and Communications” on the statements of income. -10- The expense related to share-based payments to InvestCloud for professional services was $94,000 for both the three months ended September 30, 2021, and 2020. The expense related to share-based payments to InvestCloud for professional services was $282,000 and $125,000 for the nine months ended September 30, 2021, and 2020, respectively. The total cost related to InvestCloud was $178,000 and $327,000 for the three months ended September 30, 2021, and 2020, respectively. The total cost related to InvestCloud was $782,000 and $436,000 for the nine months ended September 30, 2021, and 2020, respectively.

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