ACCS 10-K & 10-Q changes, risk factors and insider trading

Competition across all of our businesses is intense. The speed and accuracy with which we can meet customers’ needs, the price of our servicesservices, and the quality of our products and supporting services are factors in this competition.

With respect to our historical Communications revenue stream, we have experienced an annual revenue growth rate ranging from 13% to 55% between 2016 and 2023, however in 2024 and 2025 it decreased 7%.7% Throughoutand these2%, years,respectively. mostHistorically, the majority of theour growth has been dueattributable to the success of our ACCESSWIRE newswire brand. In 2023 and 2022, we also had additional growth from our acquisition of Newswire. In 2020, much of the growth came from demand for our events products that were upgraded to handle virtual needs in the industry as a result of the COVID-19 pandemic. Additionally, acquisitions of VWP in January 2019 and FSCwire in July 2018 have contributed to the growth. Our historical revenue growth rate of the Communications revenue stream is not indicative of future growth, and we may not achieve similar revenue growth rates in future periods. You should not rely on our revenue or revenue growth for any prior quarterly or annual periods as an indication of our future revenue or revenue growth. If we are unable to maintain consistent revenue or revenue growth, it may be difficult to achieve and maintain profitability and our stock price may be negatively impacted.

Our product solutions are complex, and we often release new features. As such, our solutions could have errors, defects, viruses or security flaws that could result in unanticipated downtime for our customers and harm our reputation and our business. Internet-based software may contain undetected errors or security flaws when first introduced or when new versions or enhancements are released. We might from time to time find such defects in our solutions, the detection and correction of which could be time consumingtime-consuming and costly. Since our customers use our solutions for important aspects of their business, any errors, defects, disruptions in access, security flaws, viruses, data corruption or other performance problems with our solutions could hurt our reputation and may damage our customers’ businesses. If that occurs, customers could elect not to renew, could delay or withhold payment to us or may make claims against us, which could result in an increase in our provision for credit losses, an increase in collection cycles for accounts receivable or the expense and risk of litigation. We could also lose future sales. In addition, a security breach of our solutions could result in our future business prospects being materially adversely impacted.

A substantial portion of our business is derived from our press release distribution business, which is dependent on our technology and key partners.

As noted, our ACCESSWIREACCESS Newswire brand has been vitala major contributor to the increase in revenue associated with our Communications business. ItFor isthe expectedyear thatended December 31, 2025, our press recentrelease acquisitiondistribution business contributed over 80% of Newswireoverall willrevenue. We also addoperate significanttwo revenueleading-brand tosister ourplatforms, CommunicationsNewswire.com and business in the future.PressRelease.com. These two brands, combined into our new brand of ACCESS Newswire, isare dependent upon several key partners for news distribution, some of which are also partners that we rely on for other shareholder communications services. DuringFrom time-to-time distribution changes can impact the secondindustry, quarterby of 2019, one of our keysome partners madeopting an industry-wide decisionnot to no longer accept investor commentary content. A significant portion of our historical ACCESSWIRE revenue was generated from this type ofcertain content, which significantlycan affectedcause significant fluctuations in revenue goingand volumes, forward.for Furthernot disruptiononly inACCESS anyNewswire, ofbut thesethe partnershipsindustry could haveas a material adverse impact on our business and financial results and the inability to procure new key partners could impact the growth of the ACCESS Newswire brand, particularly with respect to public company news distribution.whole. Additionally, ACCESS Newswire is highly dependent on technology and any performance issues with this technology could have a material impact on our ability to serve our customers and thus our ability to generate revenue.

Since 2013, we have experienced overall growth in our business, customer base, employee headcount and operations, and we expect to continue to grow our business over the next several years. This growth places a significant strain on our executive management team and employees and on our operating and financial systems. To manage our future growth, we must continue to scale our business functions, improve our financial and management controls and our reporting systems and procedures and expand and train our work force. In particular, we grew from 24 employees and contractors as of December 31, 2012 to 11391 (including 3233 independent contractors) as of December 31, 2024.2025. We anticipate that additional investments in sales and marketing personnel, infrastructure and research and development spending will be required to:

We cannot assure you that our controls, systems and procedures will be adequate to support our future operations or that we will be able to manage our growth effectively. We also cannot assure you that we will be able to continue to expand our market presence in the United States and other current markets or successfully establish our presence in other markets. Failure to effectively manage growth could result in difficultydifficulties or delays in deploying customers, declines in quality or customer satisfaction, increases in costs, difficulties in introducing new features or other operational difficulties, and any of these difficulties could adversely impact our business performance and results of operations.

Our Compliance business has historically provided strong revenue andrevenue, cash flow at highand gross margins. While we believe our Communications business, which has been our primary focus for approximately the last 10 years, will be a strong stand-alone business, there can be no guaranty that it will be able to replace the revenue and cash flow of the Compliance business, which would result in a material adverse effect on our business, financial condition and results of operations.

Additionally, the sale of our Compliance business required us to separate and allocate specific assets to the business, including some shared assets. We havecould face disputes with the Buyer regarding whether or not certain assets were included in the sale. We also agreed to indemnify the Buyer against certain losses suffered as a result of the certain breaches of our representations, warranties, covenants and agreements in the Purchase Agreement and related documents. Any event that results in a right for the Buyerbuyer to seek indemnity from us could result results in substantial liability to us and could adversely affect our financial position and results of operations. Although the Buyer agreed to assume certain liabilities associated with the Compliance business, it did not assume all such liabilities, which could lead to a dispute.

AnyOn February 26, 2026, the Buyer submitted an indemnification notice to us alleging indemnity claims under the Purchase Agreement in the aggregate amount of $549,000. While we dispute this amount and are in the process of discussing and negotiating the matter with the Buyer, there is no guaranty that we will receive all or a substantial portion of the $500,000 holdback from the Buyer. Moreover, this dispute and any other future disputes with the Buyer related to the sale of our Compliance business could divert the attention of our management or otherwise have a material adverse effect on our business, financial condition and results of operations.

Our ability to grow and our future success will depend to a significant extent on the continued contributions of our key executives, managers and employees. In addition, many of our individual technical and sales personnel have extensive experience in our business operations and/or have valuable customer relationships that would be difficult to replace. Their departure, if unexpected and unplanned, could cause a disruption to our business. Our competition for these individuals is intense in certain areas of our business. We may not succeed in identifying and retaining the appropriate personnel in key positions. Further, competitors and other entities have in the past recruited and may in the future attempt to recruit our employees, particularly our sales personnel. The loss of the services of our key personnel, the inability to identify, attract and retain qualified personnel in the future or delays in hiring qualified personnel, particularly technical and sales personnel, could make it difficult for us to manage our business and meet key objectives, such as the timely introduction of new technology-based products and services, which could harm our business, financial condition and operating results.

The market and demand for our products and services, to a varyingvaried extent, have been characterized by:

Our obligations under the Credit Agreement, as amended, with Pinnacle Bank are secured by a first priority security interest in substantially all of our assets. Additionally, all of our subsidiaries agreed to guarantee our obligations under the Credit Agreement. As of December 31, 2025, the outstanding balance under our credit agreement amounted to $2,608,000. As such, our creditor may enforce its security interests over our assets and/or our subsidiaries which secure the repayment of such obligations,obligations and potentially take control of certain of our assets and operations,operations or force us to seekuse bankruptcya protection,substantial orportion forceof usour current cash-on-hand to repay the amounts due under the Credit Agreement. If that were to happen we may be forced to curtail or abandon our current business plans and operations.operations, Ifwhich thatcould weredecrease tothe happen,value of any investment in the Company could become worthless.our Company.

In connection with the Credit Agreement, we agreed to comply with certain affirmative and negative covenants and agreed to meet certain financial covenants. The Credit Agreement contains customary indemnification requirements, representations and warranties and customary affirmative and negative covenants applicable to the Loan Parties and their subsidiaries, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness, transactions with affiliates, and dividends and other distributions. In addition, the Credit Agreement contains financial covenants, tested quarterly, that require a Fixed Charge Ratio (as defined in the Credit Agreement) and a Leverage Ratio (as defined in the Credit Agreement) to be maintained at certain levels.levels and certain unrestricted liquidity requirements.

A breach of any of the covenants of the Credit Agreement or any future agreements,Agreement, if uncured or unwaived, could lead to an event of default under any such document, which in some circumstances could give our creditors the right to demand that we accelerate repayment of amounts due and/or enforce their security interests over substantially all certain of our assets. This would likely in turn trigger cross-acceleration or cross-default rights in other documents governing our indebtedness. Therefore, in the event of any such breach, we may need to seek covenant waivers or amendments from our creditors or seek alternative or additional sources of financing, and we may not be able to obtain any such waivers or amendments or alternative or additional financing on acceptable terms, if at all.amendments. In addition, any covenant breach or event of default could harm our credit rating and our ability to obtain additional financing on acceptable terms. The occurrence of any of these events could have a material adverse effect on our financial condition and liquidity and/or cause our lenders to enforce their security interestsliquidity, which could ultimately result in the foreclosure of our assets, which would have a material adverse effect on our operations and the value of our securities.

We have not paid dividends in 2012, part of 2013 and from the fourth quarter of 2015 through the third quarter of 2018. In the fourth quarter of since 2018, when we announced that we would no longer be declaring quarterly dividends for the foreseeable future in order to invest such money in our business. The declaration and payment of dividends in the future will be determined by our Board of Directors in light of conditions then existing, including our earnings, financial condition, capital requirements and other factors. There can be no assurances that dividends will be paid in the future in the form of either cash or stock.

As a public company, we incur significant legal, accounting, and other expenses that would not be incurred as a private company. We estimate these costs to be approximately $625,000 per year and are included in General & Administrative expenses in our Consolidated Statements of Income (Loss). For example, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (Exchange Act), and are required to comply with the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank Act, as well as rules and regulations subsequently implemented by the SEC and the New York Stock Exchange, including the establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Compliance with these requirements has increased our legal and financial compliance costs and made some activities more time consuming and costly. Many of these costs recur annually. As a result, management’s attention may be diverted from other business concerns, which could adversely affect our business and operating results.

The following table presents certain amounts included in our consolidated statements of income, the relative percentage that those amounts represent to revenue, and the change in those amounts from fiscal year 20242025 compared to 2023.2024. The data below is comprised of results from continuing operations only and does not include results from discontinued operations. For more information regarding continuing and discontinued operations, see Note 3 to our Consolidated Financial Statements for the yearyears ended December 31, 2025 and 2024.

Comparison of results of operations for the years ended December 31, 20242025 and 20232024 (in 000’sthousands):

Total revenue decreased by $1,465,000, $438,000, or 6%,2%, to $23,057,000$22,619,000 during the year ended December 31, 2024,2025, as compared to $24,522,000$23,057,000 in 2023.2024. The decrease is primarily due related to a 15% decrease in revenue from our previouslyPRO brandedplan Newswire business due to a decrease in volume. Revenue from our investor relations website subscriptionsproducts and webcasting and events business, partially offset by an increase in revenue from our core press release business decreaseddriven slightlyby asincreases well.in subscriptions.

As of December 31, 2024,2025, our deferred revenue balance was $4,743,000,$5,265,000, which we expect to recognize primarily over the next twelve months, compared to $4,750,000$4,743,000 as of December 31, 2023.2024, an increase of 11%. Deferred revenue primarily consists of advance billings for pre-paid packages of our news distribution products as well as advance billings for subscriptions of our cloud-based products.

Cost of RevenuesRevenue

Cost of revenuesrevenue consists primarily of direct labor costs, newswire distribution costs, teleconferencing costs and third-party licensing costs. Cost of revenuesrevenue increased decreased by $10,000$312,000, or 6%, during the year ended December 31, 2024,2025, as compared to the same period of 2023.2024. The decrease was primarily related to a decrease in headcount and optimization of operational teams, partially offset by an increase in distribution costs of our newswire business. Overall gross margin decreased $1,475,000,$126,000, or 8%,1%, during the year ended December 31, 2024,2025, compared to 2023.2024, Theprimarily decreasedue to the decline in grossrevenue. marginAs isa primarilyresult, the result of the decrease in Newswire revenue noted earlier. Overalloverall gross margin percentage decreasedincreased 1% to 76%77% during the year ended December 31, 2024,2025, as compared to the prior year.

General and administrative expenses consist primarily of salaries, stock-based compensation, insurance, fees for professional services, general corporate expenses (including bad debt expense) and facility and equipment expenses. General and administrative expenses were $7,000,000$7,151,000 for the year ended December 31, 2025, an increase of $151,000 or 2%, as compared to the prior year. During the year-ended December 31, 2025, general and administrative were impacted by an increase in one-time costs for the year of $484,000 partially offset by a decrease in employee-related expenses due to a decrease in corporate headcount. During the year ended December 31, 2024, ageneral decreaseand ofadministrative $1,354,000expenses orwere 16%,favorably impacted as compared to the prior year. The decrease is primarily due toby a benefit of $340,000 to stock compensation expense as a result of the resignation of an executive officer, a decrease in corporate headcount, as well as, lower one-time transaction and integration costs, partially offset by an increase in the provision for credit losses.officer.

Sales and marketing expenses consist primarily of salaries, stock-based compensation, sales commissions, advertising expenses and other marketing expenses. Sales and marketing expenses were $7,080,000$6,405,000 for the year ended December 31, 2024,2025, a decrease of $948,000,$675,000, or 12%,10%, as compared to $8,028,000$7,080,000 in the prior year. This decrease is primarily due to a decrease in employee-related expenses and commissions due to lower headcount asand well as lower advertising expense.overall revenues.

Product development expenses consist primarily of salaries, stock-based compensation, bonuses and licenses to develop new products and technology to complement and/or enhance tour platform. Product development expenses increaseddecreased $277,000,$129,000, or 11%,5%, to $2,692,000 during the year ended December 31, 2025, as compared to $2,821,000 during the year ended December 31, 2024, as compared to $2,544,000 in 2023.2024. This increasedecrease is primarily due to ana increase headcount, as we continue to investdecrease in our productsheadcount and consulting technology.expense, partially offset by a decrease in capitalized costs during the periods. During the year ended December 31, 2024,2025, we capitalized $597,000$172,000 of costs related to the development of our news distribution systems and internal reporting platforms.platforms, Duringcompared to $597,000 during the year-endyear-ended December 31, 2023, we capitalized costs of $478,000.2024.

As a percentage of revenue, product development expenses increasedwas toconsistent at 12% for the year ended December 31, 2025 and 2024, as compared to 10% for 2023.respectively.

TheDuring Companythe year ended December 31, 2025, we performed itsour annual assessment for impairment of goodwill and intangible assets and determined there was no impairment charge. During the year ended December 31, 2024, an impairment charge of $14,150,000 associated with the Newswire trademarks was necessary for the year ended December 31, 2024.required. As a result of the Company’sour rebranding to ACCESS Newswire, management determined the useful life of the Newswire trademarks to be 5 years as opposed to the original 15 years upon the initial valuation in 2022. This decrease caused a decrease in the expected cashflows the assets will generate, which resulted in the impairment charge. There was no impairment loss recorded as of and for the year ended December 31, 2023.

We recognized interest expense of $1,167,000$371,000 and $1,284,000$1,167,000 during the years ended December 31, 20242025 and 2023,2024, respectively, related to our long-term Credit Agreement. For the year ended December 31, 2023, interest expense is also attributed to the $22,000,000 Seller Note to finance the acquisition of Newswire. Interest expense, net was partially offset by interest income of $60,000$369,000 and $35,000$60,000 for the year ended December 31, 2024,2025, and 2023,2024, respectively, from deposit and money market accounts.

Other income (expense) represents the change in fair value of our interest rate swap. For the year ended December 31, 2023, this also includes $370,000 paid to extinguish the Seller Note.

We recorded income tax benefit of of$395,000 during the year ended December 31, 2025, compared to $4,064,000 during the year ended December 31, 2024, compared to $938,000 during the year ended December 31, 2023.2024. The difference in our effective tax rate as of 23.0%December 31, 2025 and 2024, and the statutory rate of 21% is primarily attributable to state income taxes,taxes. For the year ended December 31, 2025, this was partially offset by the impact of stock-based compensation and returnforeign to provision adjustments.taxes.

As of December 31, 2024,2025, our current liabilities from continuing operations exceeded our current assets from continuing operations by $2,788,000.$1,116,000. While our current liabilities from continuing operations exceed current assets from continuing operations, we believe our ability to renegotiate our Credit Agreement and ability to continue to generate cash will benefit us in the future. See Note 15 (Subsequent Events) to our Consolidated Financial Statements relating to the sale of our Compliance business and the repayment of $12,000,000 of our long-term debt as of February 28, 2025. As a result of the repayment, the Company expects to no longer have negative working capital for the foreseeable future.

A reconciliation of net income to adjusted EBITDA for the years ended December 31, 20242025 and 20232024 is presented in the following table (in 000’sthousands):

A reconciliation of net income to adjusted net income for the years ended December 31, 20242025 and 20232024 is presented in the following table (in 000’sthousands):

The following statements are forward lookingforward-looking and are subject to factors that could cause actual results to differ materially from those suggested here, including, without limitation, demand for and acceptance of our services, new developments, competition and general economic or market conditions, particularly in the domestic and international capital markets. Refer also to the Cautionary Statement Concerning Forward Looking Statements included in this report.

Market factors like the current military conflicts in Ukraine, Israel and the Middle East, tariff wars, instability in global energy markets, global inflation and the increase offluctuations in interest rates have contributed to significant global economic and political uncertainty, disrupted global trade and supply chains, adversely impacted many industries, and contributed to significant volatility in financial markets. Overall, despite many uncertainties in the market regarding the economic and political outlook, we believe the demand for our platforms and services is stable in a majority of the markets we serve.

The Company's contracts include either a subscription to its entire platform, certain modules within the platform or to its Press Release Optimizer Plan (“PRO”), or an agreement to perform services, or any combination thereof, and often contain multiple subscriptions and services. For these bundled contracts, the Company accounts for individual subscriptions and services as separate performance obligations if they are distinct, which is when a product or service is separately identifiable from other items in the bundled package, and a customer can benefit from it on its own or with other resources that are readily available to the customer. Performance obligations of include providing subscriptions to certain modules or our entire platform, distributing press releases on a per release basis or conducting webcasts, virtual annual meetings, or other events on a per event basis. PRO subscription contracts contain two performance obligations: (i) the first is a series of distinct services that include, but are not limited to, developing specific media plans, and creating content to be distributed and (ii) the second performance obligation being access to the PRO platform along with distribution of press releases, ongoing support, and assessment of performance as a stand-ready obligation. The Company’s subscription and service contracts are generally for one year, with automatic renewal clauses included in the contract until the contract is cancelled. The contracts do not contain any rights of returns, guarantees, or warranties. Since contracts are generally for one year, all the revenue is expected to be recognized within one year from the contract start date. As such, the Company has elected the optional exemption that allows the Company not to disclose the transaction price allocated to performance obligations that are unsatisfied or partially satisfied at the end of each reporting period.

The Company recognizes revenue for subscriptions evenly over the contract period, upon distribution for pay per release contractsor packages of press releases and upon event completion for webcasting and virtual annual meeting events. For service contracts that include stand readystand-ready obligations, revenue is recognized evenly over the contract period. For all other services delivered on a per project or event basis, the revenue is recognized at the completion of the event. The Company believes recognizing revenue for subscriptions and stand ready obligations using a time-based measure of progress, best reflects the Company’s performance in satisfying the obligations.

The authoritative guidance for business combinations specifies the criteria for recognizing and reporting intangible assets apart from goodwill. The Company records the assets acquired and liabilities assumed in business combinations at their respective fair values at the date of acquisition, with any excess purchase price recorded as goodwill. Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Intangible assets consist of client relationships, customer lists, distribution partner relationships, software, technology, non-compete agreements and trademarks that are initially measured at fair value. At the time of the business combination, trademarks may be considered an indefinite-lived asset and, as such, are not amortized as there may be no foreseeable limit to cash flows generated from them. For the Newswire acquisition (see Note 4),acquisition, the Company originally determined the trademarks acquired were considered a definite lived asset which will be amortized over a period of 15 years, however upon the re-brand of the Company to ACCESS Newswire and subsequent review of the trademarks associated with Newswire, determined the life to be 5 years remaining. The goodwill and intangible assets 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 (5-10 years), customer lists (3 years), distribution partner relationships (10 years), non-compete agreements (5 years) and software and technology (3-7 years) are amortized over their estimated useful lives.

ACCESS Newswire Inc. and its subsidiaries are hereinafter collectively referred to as “ACCESSACCESS,”, “ACCESS NewswireNewswire,”, the “CompanyCompany,”, “We” or “Our” unless otherwise noted.

We focus on selling to small and mid-market businesses, which we define as companies that have between 2 and 2,000 employees. In late 2024, we launched our new subscription platform to existing customers only, and at the beginning of 2025, officially released it as part of our rebrand to ACCESS Newswire. As of MarchJune 31,30, 2026, we had 1,0041,162 subscriptions with an annual recurring revenue (“ARR”) of approximately $12.8$13.3 million.

On February 28, 2025, the Company and Direct Transfer, LLC, its wholly owned subsidiary, entered into and closed an Asset Purchase Agreement (the “Purchase Agreement”) with Equiniti Trust Company, LLC (the “Buyer”). Pursuant to, and subject to the terms and conditions of, the Purchase Agreement, the Buyer purchased certain assets related to the Company’s Compliance business (the “Purchased Assets”). The Purchased Assets consisted of certain accounts receivable, prepaid assets, contracts and intellectual property, among other things, related to the Company’s services of providing i) disclosure software and services for financial reporting, ii) stock transfer services, iii) annual meeting, print and shareholder distribution and fulfillment services and iv) virtual annual meeting services (but not the intellectual property relating to the virtual annual meeting services). Revenue related to these services was previously included in the Company’s “compliance revenue” stream as reported with the SEC in previous filings, except revenue related to virtual annual meeting services, which was previously reported in the “communications revenue” stream in previous SEC filings. Additionally, revenue related to providing SEDAR services and revenue related to our whistleblower hotline, which was previously reported as “Compliance revenue” was retained by the Company. The Buyer only assumed certain liabilities related to the Purchased Assets, which included certain accounts payable, accrued liabilities and deferred revenue. As a result, assets associated with our Compliance business, and revenue and expenses associated with the assets, have been categorized as discontinued operations in our financial statements for the years ended December 31, 2025, while the remaining assets associated with our Communications business are included in continuing operations.

Social Monitoring. A new monitoring add-on to our ACCESS PR suite of products is a comprehensive brand intelligence solution integrated directly into all new ACCES ACCESS PR Subscriptions. It provides real-time tracking of brand mentions, competitor activity, and industry trends across eight major social social platforms — X (Twitter), Instagram, Facebook, Bluesky, Reddit, YouTube, Weibo, and Threads (and forthcoming LinkedIn) — all accessible from a single unified dashboard. Core capabilities include sentiment analysis, real-time alerts for activity spikes, and competitive benchmarking, enabling PR and communications teams, brand marketers, and agencies to stay ahead of emerging conversations before they reach mainstream coverage. By consolidating social monitoring alongside press release distribution, media monitoring, media pitching and analytics within one platform, ACCESS Newswire eliminates the need for disconnected point solutions and gives users a seamless, end-to-end view of their earned media impact and social presence.

Comparison of results of operations for the three and six months ended MarchJune 31,30, 2026 and 2025 (in thousands):

Total revenue was decreased$5,618,000 $149,000, orfor 3%,the tothree $5,327,000months ended June 30, 2026, relatively unchanged from $5,621,000 during the three months ended MarchJune 31,30, 2025. Total revenue decreased $152,000, or 1%, to $10,945,000 during the six months ended June 30, 2026, as compared to $5,476,000$11,097,000 for the same period in 2025. The decrease is primarily due to a decrease in revenue from our webcasting products due to lower revenue from resellers and virtual annual meetings and ProPlan products due to customer attrition and webcasting and events business due to lower revenue from resellers.attrition. Revenue from our core press release business wasincreased flat2% and 1% for the three and six months ended June 30, 2026, respectively, as compared to the same quarterperiods of the prior year.

As of March 31,June 30, 2026, our deferred revenue balance was $5,390,000,$5,072,000, which we expect to recognize over the next twelve months, as compared to $5,265,000 at December 31, 2025, an increase of 2%.2025. Deferred revenue primarily consists of advance billings for pre-paid packages of our news distribution products as as well as advance billings for subscriptions of our cloud-based products.

Cost of revenues consistsconsist primarily of direct labor costs, newswire distribution costs, teleconferencing costs, and third-party licensing costs. Cost of revenues increased by $173,000,$170,000, or 13%, and $343,000, or 14%, during the three and six months ended MarchJune 31,30, 2026, respectively, as compared to the same periodperiods of 2025. The increaseincreases waswere primarily due to an increaseincreases in press release distribution costs asdue wellto asa employee-relatedcombination of expenses.new partners, increased prices from current partners and additional usage under variable contracts. Overall gross margin decreased $322,000, $173,000, or 8%,4%, and $494,000, or 6%, during the three and six months ended MarchJune 31,30, 2026, respectively, compared to the same period periods of 2025. As a result, gross margin percentage decreasedwas to73% and 74% during the three and six months ended MarchJune 31,30, 2026, respectively, as compared to 78%76% and 77% during the same periodperiods of 2025. The decrease in gross margin percentage is primarily due to the increase in cost of revenues.

General and administrative expenses consist primarily of salaries, bonuses, stock-based compensation, insurance, fees for professional services,service fees, general corporate expenses (including bad debt expense) and facility and equipment expenses. General and administrative expenses weredecreased $1,781,000$402,000 or for23%, and $574,000, or 15%, during the three and six months ended MarchJune 31,30, 2026, a decrease of $172,000 or 9%,respectively, as compared to the same period of 2025. The decrease is primarily drivendue byto a decreasereduction in non-recurring expenses during the period, as well as lower stock compensation expense inand bad debt expense. Additionally, insurance and office expenses were lower as a result of selling the compliance business and moving to a remote work environment.

As a percentage of revenue, general and administrative expenses were 33%24% and 29% for the three and six months ended MarchJune 31,30, 2026, respectively, as compared to 36%31% and 33% for the same periodperiods of 2025.

Sales and marketing expenses consist primarily of salaries, stock-based compensation, sales commissions, advertising expenses, tradeshow expenses and other marketing expenses. Sales and marketing expenses wereincreased $1,681,000$427,000, or 29%, and $514,000, or 17%, for the three and six months ended MarchJune 31,30, 2026, an increase of $87,000, or 5%,respectively, as compared to the same periodperiods of 2025. This increase is primarily due to higher advertising expenses as weour increased theinvestment in promotiontradeshows ofand our new brands.advertising.

As a percentage of revenue, sales and marketing expenses were 32%34% and 33% for the three and six months ended MarchJune 31,30, 2026, respectively, as compared to 29%26% and 28% for the same periodperiods of 2025.

Product development expenses consist primarily of salaries, stock-based compensation, bonuses, and licenses to develop new products and technology to complement and/or enhance our platform. Product development expenses decreased $173,000,$122,000, or 24%,19%, toand $560,000$295,000, or 21%, during the three and six months ended MarchJune 31,30, 2026, as compared to the same period of 2025. TheThis decrease iswas primarily due to higheran capitalizationincrease ofin capitalized software, as $99,000the wasCompany capitalized duringsoftware in the amounts of $110,000 and $209,000 for the three and six months ended MarchJune 31,30, 20262026, respectively, compared to $0 and $23,000 during the same periodperiods of 2025. Additionally, consulting expenses decreased as compared to the sameprior period of 2025.year.

As a percentage of revenue, both capitalized and non-capitalized product development expenses were 9% and 10% for the three and six months ended MarchJune 30, 31,2026, 2026respectively, compared to 12% and 13% for the same periodperiods of 2025.

Interest expense,Income net(Expense), Net

We recognized interest expense of $43,000 and $85,000 for the three-monththree and six-month period ended MarchJune 31,30, 2026, respectively, as compared to $214,000$54,000 and $268,000 during the same periodperiods of 2025, which is all related to our long-term credit agreement. The decrease in interest expense for the three and six months ended MarchJune 31,30, 2026,2026 is due to the reduction in debt as a result of the pay down from the sale of the compliance business. These amounts are offset by interest income on deposit and money market accounts of $5,000$4,000 and $10,000$8,000 for the three and six months ended MarchJune 31,30, 20262026, compared to $65,000 and 2025,$75,000 respectively.for the same periods of the prior year.

Other income (expense) represents the change in fair value of our interest rate swap. For the three and six months ended MarchJune 31,30, 2026, Other income (expense) also includes rental income from our office sub-lease of $12,000.$38,000 and $50,000 for the three and six months ended June 30, 2026, respectively.

We recognized income tax benefitexpense of $121,000$53,000 for three months ended June 30, 2026 and $185,000an income tax benefit of $68,000 for the three-monthsix periodsmonths ended MarchJune 31,30, 20262026, compared to an income tax benefit of $9,000 and $194,000 for the three and six months ended June 30, 2025. For the three-monththree and six-month periods ended MarchJune 31,30, 2026 and 2025, the variance between our effective tax rate and the U.S. statutory rate of 21% is primarily attributable to state income tax, a benefit related to the Foreign Derived Intangible Income (“"FDII”") deduction and a lower statutory tax rate applied to ourthe Company's Canadian income. This is partially offset by additional expense associated with vesting of stock-based compensation awards. awards

As of MarchJune 31,30, 2026, we had $2,962,000 $3,487,000 in cash and cash equivalents and $3,596,000$3,450,000 in net accounts receivable. Current liabilities as of MarchJune 31,30, 2026, totaled $9,862,000 $9,298,000 including the current portion of our long-term debt, accounts payable, deferred revenue, accrued payroll liabilities, income taxes payable, current portion of lease liabilities and other accrued expenses.

As of MarchJune 31,30, 2026, our current liabilities exceeded our current assets by $1,191,000.$1,681,000. While our current liabilities exceed current assets, we believe our ability to renegotiate our Credit Agreement (as defined insee Note 9 below) and ability to continue to generate cash will benefit us in the future.

As of June March 31,30, 2026, the aggregate principal amount available underof our Revolving LOC was $1,500,000 and is set to expire June 30, 2026.2028. We currently have no plans to utilize the Revolving LOC but may do so in the future. If the Company does utilize any funds under the Revolving LOC, the funds will bear interest at a per annum rate equal to the then current SOFR plus 2.05%. As of MarchJune 31,30, 2026, there was no outstanding balance under the Revolving LOC and the interest rate was 5.72%. See Note 9 to our financial statements for additional information.5.67%.

The non-GAAP adjustments referenced below and herein relate to the exclusion of stock-based compensation, amortization of acquisition-related intangible assets.assets and other expenses the Company believes to be non-recurring. A reconciliation of GAAP to non-GAAP historical financial measures has been provided in the tables below.

Management believes that the use of EBITDA from continuing operations, Adjusted EBITDA from continuing operations, non-GAAP net income (loss) from continuing operations, non-GAAP non-GAAP net income (loss) from continuing operations per share, free cash flow and adjusted free cash flow is helpful to its investors. These measures, which are referred to as non-GAAP financial measures, are not prepared in accordance with generally accepted accounting principles in the United States, or GAAP. Our management uses these non-GAAP financial measures as tools for financial and operational decision making and for evaluating our own operating results over different periods of time.

Non-GAAP net income (loss)from fromcontinuing continuing operations is calculated by excluding stock-based compensation expense and amortization expense for acquisition-related intangible assets assets from loss from continuing operations and certain other adjustments noted in the tables below. Non-GAAP net income (loss) from continuing operations operations per share is calculated by dividing non-GAAP net income (loss) from continuing operations by the weighted-average diluted shares outstanding outstanding as presented in the calculation of GAAP net income (loss) from continuing operations per share. Because of varying available valuation valuation methodologies, subjective assumptions and the variety of equity instruments that can impact a company’s non-cash expenses, management management believes that providing non-GAAP financial measures that exclude stock-based compensation expense allows for more meaningful comparisons comparisons between its operating results from period to period. For business combinations, management generally allocates a portion of the purchase price to intangible assets. The amount of the allocation is based on estimates and assumptions made by management and is subject to amortization. The amount of purchase price allocated to intangible assets and the term of its related amortization can vary significantly and are unique to each acquisition and thus management does not believe they are reflective of ongoing operations.

A reconciliation of net income to adjusted net incomeEBITDA for the three and six months ended MarchJune 31,30, 2026 and 2025 is presented in the following table (in thousands):

ForA reconciliation of net income to adjusted net income for the three months ended March 31,June 30, 2026 and 2025,2025 freeis cashpresented flowin andthe adjustedfollowing free cash flow were as followstable (in thousands):

Market factors like the current military conflicts in Ukraine, IranIsrael and the Middle East overall,East, tariff wars, instability in global energy markets, global inflation and the increase of interest rates have contributed to significant global economic and political uncertainty, disrupted global trade and supply chains, adversely impacted many industries, and contributed to significant volatility in financial markets. Overall, despite many uncertainties in the market regarding the economic and political outlook, we believe the demand for our platforms and services is stable in a majority of the markets we serve.