ACCESS Newswire Inc. (ACCS) Business

Issuer Direct Corporation (Issuer Direct Corporation and its subsidiaries are hereinafter collectively referred to as “Issuer Direct”, the “Company”, “We” or “Our” unless otherwise noted). We are a Delaware corporation formed in October 1988 under the name Docucon Incorporated. In December 2007, we changed our name to Issuer Direct Corporation. Our corporate offices are located at 500 Perimeter Park Drive, Suite D, Morrisville, North Carolina, 27560.

Issuer Direct is a market leader and innovator of Disclosure Management Systems and Cloud–based Compliance Technologies. The Company’s flagship technology platform – the Disclosure Management System (DMS) – is a secure cloud based workflow compliance and communications system for corporate issuers, funds, and compliance professionals.

We work with a diverse client base in the financial services industry, including brokerage firms, banks, mutual funds, corporate issuers, shareholders, investor relations officers, and professional firms such as investor relations, public relations, as well as accountants and the legal community. Corporate issuers utilize our cloud-based platform as a service (PaaS) technology and services component for document creation all the way to dissemination to regulatory bodies, dissemination platforms and interested shareholders.

The Company strives to be a market leader and innovator of disclosure management solutions, shareholder communications tools and cloud–based compliance technologies. With a focus on corporate issuers and mutual funds, the Company alleviates the complexity of maintaining compliance with its integrated portfolio of products and services that enhance companies' ability to efficiently produce and distribute their financial and business communications both online and in print.

In 2013, we consolidated our revenue into three revenue streams: disclosure management, shareholder communications and software licensing. Historically, we had reported our revenues in five streams – compliance and reporting services, printing and financial communications, fulfillment and distribution, software licensing, and transfer agent services. As a result of the acquisition of PrecisionIR Group, Inc. (“PIR” or “PrecisionIR”) on August 22, 2013, we determined the consolidation of revenues from the combined companies was needed to reflect both our core services as well as the newly acquired business of PrecisionIR.

We announce material financial information to our investors using our investor relations website, SEC filings, investor events, news and earnings releases, public conference calls and webcasts. We use these channels as well as social media to communicate with our investors and the public about our company, our products and services, and other issues. It is possible that the information we post on social media could be deemed to be material information. Therefore, we encourage investors, the media, and others interested in our company to review the information we post on the social media channels listed below. This list may be updated from time to time on our investor relations website:

www.issuerdirect.com/shareholder-services

www.facebook.com/issuerdirectcorporation

www.twitter.com/issuerdirect

www.linkedin.com/company/issuer-direct-corporation

www.issuerdirect.com/blog/

The contents of the above websites are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any other report or document we file, and any reference to these websites are intended to be inactive textual references only.

Our core disclosure business consists of our traditional Edgarization, document management, typesetting and pre-press design services, XBRL tagging services, and our stock transfer services. These services represent our disclosure offerings that are regulated by the Securities and Exchange Commission.

We market our financial reporting solutions primarily to public companies and mutual funds that seek a workflow automation platform to prepare various regulatory filings. We developed our financial reporting engine to give customers complete control over the typical CRUD workflow process (Create, Retrieve, Update, Delete).The reporting process with EDGAR (Electronic Data Gathering, Analysis and Retrieval) and SEDAR (System for Electronic Document Analysis and Retrieval) can be complex and does require a trusted, secure platform to execute timely and accurately. With our platform, our customers can create, manage, self-file, request specialist assistance on any form type, including Sections 16, SC-13’s, correspondence, annual reports and quarterly reports in SEC EDGAR format.

A portion of our disclosure business also comes from strategic relationships, where we manage the back office functions for our partner’s clients. Since we do not have the relationship with the end client, it is difficult to predict the growth from this business. We have seen some partner client attrition in the smaller cap space, due to significant pricing pressure. We expect that our reseller business will evolve beyond the core disclosure product offerings into our communications segment.

Our shareholder communications business includes our press release distribution, investor outreach and engagement platform, webcast teleconference services, Whistleblower, investor hotline and our legacy proxy and printing services. Many of these services are marketed and bundled under multi-year agreements. Like our disclosure business, our communications offerings help make up our proprietary cloud-based platform. This platform has become a significant competitive advantage when competing in the corporate issuer marketplace.

Press Release Distribution

Our press release platform, Accesswire, is a cost-effective FD (Fair Disclosure) news dissemination service. We recently acquired the business on October 29, 2014, as discussed herein under Business Acquisition & Recent Developments.

The Accesswire business focuses on press release distribution for both private and publically held companies. We anticipate we will see an increase in revenues from our shareholder communications business as a result of this acquisition. We will continue to brand our press release offerings under the name Accesswire, which we believe will solidify our market position in the newswire business.

Investor Outreach and Engagement

Our Investor Outreach and Engagement offering was formally known as the Annual Report Service from PrecisionIR. We acquired the business on August 22, 2013, as discussed herein under Business Acquisition & Recent Developments.

The Annual Report Service business had existed for 23 years primarily as a physical hard copy delivery of annual report and prospectuses globally for tens of thousands of customers. As part of the integration during 2014, we updated these legacy systems and integrated them into our disclosure management system. We intend to continue to operate a portion of this legacy system as well as migrate the installed base over to our new outreach and engagement offering. This will be marketed as the Investor Network beginning in early 2015. The reality is, corporate information such as annual reports, quarterly reports, fact sheets, tear sheets and investor presentations are being consumed much differently than they were 5 years ago. Over 60% percent of the consumers and investors read information on their mobile phones or tablets first, before their notebook or desktop computers as reported by Pew Research Center. The Investor Network platform and its set of mobile apps address this global shift.

The Investor Network platform is a PaaS (Platform as a Service) – clients will be able reach new audiences from Chartered Financial Analysts, Registered Investment Advisors, brokers, banks and family offices to currently available retail and institutional investors. From our cloud-based analytical platform, issuers and funds will be able to search, engage and analyze these audiences from any connection in the world. We believe this shareholder engagement and surveillance landscape is being under served in the under one billion dollar market cap space globally.

Webcasting – Teleconference

There are almost 4,000 companies in North America conducting earnings events that include teleconference, webcast or both as part of their events. Our platform incorporates each element of the earnings event: earnings announcement, earnings press release, EDGAR Form 8-K filing and the webcast/teleconference. There are a handful of our competitors that can offer this today, however, none of them can attract an audience like our platform. Specifically, we believe our proprietary “Investor Calendar” product offering, same day transcription and auto-posting to an investor relations platform for compliance do not exist in one solution elsewhere in the market. Additionally, all webcasts and teleconferences are broadcast live on our Investor Network properties which allow companies to reach a broader audience. This is a significant competitive advantage for us and has proven to be effective. As of the end of 2014, we manage the calls for almost 7% of the market.

At the end of fourth quarter 2014, we expanded our webcast teleconference offering to service the European market of United Kingdom, Sweden, and Germany. This aligns with the client base we are currently serving in Europe.

Whistleblower

Our whistleblower offering is an approved NYSE partnered product. Over the last 12 months, the majority of the recent IPOs listed on NYSE are currently utilizing this exchange subsidized offering. We are focused on integrating this SaaS (Software as a Service) into our current exchange listed install base; this initiative should be completed during fiscal 2015. As one of the only global offerings to comply with both the US Sarbanes-Oxley and Public Interest Disclosure Act in the United Kingdom, this reporting and real-time complaint platform delivers a trusted and secure incident management system.

Investor Hotline

One of the oldest and most trusted platforms in the financial services industry is our Investor Hotline platform, used by more fortune 500 companies than any other product or service we have. Our clients license our platform to integrate into their corporate investor relations’ platform and or utilize our call center product by including their unique toll-free number into their proxy and annual meeting services.

Proxy – Printing

Our proxy business is marketed under the brand iProxy Direct, which is a fully integrated, real-time voting platform for our corporate issuers and their shareholders of record. This PaaS (Platform as a Service) is utilized for every annual meeting and or special meeting we manage for our client base. The iProxy Direct system offers both full-set mailing and notice of internet availability options, which in some instances drive additional revenues for our print and print-on-demand businesses.

Software Licensing

Revenues from this business still tend to be directly tied to our core businesses, disclosure management and shareholder communications. Specifically, when corporate issuers conduct an annual general meeting, purchase or upgrade their investor relations system, or conduct earnings calls during annual or quarterly periods, we attempt to license our technology platforms for each of these services. Although revenues from this business remain relatively small historically, we expect them to grow significantly over the next fiscal year as we begin to productize some of our shareholder communications and disclosure management system offerings. We believe that the productizing of such offerings will increase our revenue in this area because the industry we serve has tended to manage the individual events of a company’s disclosure and communications process in parallel. Historically, companies have used five or six different vendors to manage their earnings event for the various elements including EDGAR, press releases, IR platform updates, webcasting, etc. Our platform streamlines this process. The old process costs the issuers money and more importantly is incredibility inefficient. Whereas in contrast Issuers can license a Platform-as-a-Service that manages all of the above mentions tasks in one interface, with one partner that intersect at the right points – either disclosure, communication or engagement.

Our market data cloud business has also been embedded into our mobile initiatives, whereby we are producing mobile apps for our clients utilizing our market data cloud technologies. By having our own market data cloud system for our investor relations systems, our products have been able to outperform our expectations in the market compared to our competitors.

We continue to believe there is a significant demand for better quality datasets. During 2014, we continued to build these datasets to include professionals and target audiences for our clients to reach. We will license this platform to our clients as part of their outreach initiatives. These datasets include Chartered Financial Analysts, Registered Investment Advisors, family offices and Banks and Brokers. Additionally, we have also integrated as part of our press release distribution upgrade a full dataset of local, regional publishers, editors and media professionals throughout North America. We believe the development of these datasets is vital to growing our press release business.

During 2015, we will continue to explore how we can further license portions of our dataset business and application programming interfaces (API’s) to other providers and disseminators that are seeking unique content and or a competitive replacement in the market. We are committed to continuing to expand revenue from this business.

Our DMS is a secure cloud-based business process reporting and automation solution that gives users the ability to disclose, manage, and communicate their respective messages from our enterprise Platform as a Service (PaaS). Our unique disclosure process aims to create efficiencies not previously possible in areas of normal regulatory business functions of the public markets, where we can clearly improve processes, streamline complexities, while reducing expenditures, generally associated with reporting and disclosure.

Our DMS is the only secure workflow technology available today that allows officers, directors, compliance and investor/public relations’ professionals the ability to manage the entire back-office functions of their respective companies from one interface.

The industry as a whole has chosen to focus their solutions and platforms on one single business process or in some cases are dependent on a complex ERP or accounting system integration, in hopes of providing a clear ROI over a long-term period. Unfortunately this approach requires companies to invest deeply in enterprise wide systems, for the promise of efficiencies and cost savings. Our approach has been to focus on a collection of business processes that typically overlap service organizations that have either been cumbersome, costly or broken; then, integrate, streamline and improve the flow of information in a more transparent and accurate manner, putting the control back in the hands of our clients, the corporate issuer. The result is better controls, improved processes, efficient disclosure, increased communication and access to analytics.

Today, the platform that makes up our disclosure management system is used by thousands of officers, directors and compliance and communication professionals. The systems include the following:

● Regulatory compliance (Edgar & XBRL)

● Real-time Financial Reviewers Guide

● Investor Relation Content Management (CMS - content management system)

● Webcasting teleconference

● News / earnings distribution

● Shareholder Outreach

● Investor Network

● Annual meeting planning and real-time proxy voting system

● Stock issuances, and shareholder reporting

● Whistleblower compliance

● Print on demand & digital document library

Our Brands & Subsidiaries

● Issuer Direct

● Investor Network

● Accesswire

● PrecisionIR Group, Inc., and its subsidiaries

● Direct Transfer (Wholly owned subsidiary – Direct Transfer, LLC.)

● QX Interactive (Wholly owned subsidiary – QX Interactive, LLC.)

● Issuer Services

● iProxy Direct

● iR Direct

● Annual Report Service (ARS)

● Company Spotlight

● XBRL Check

On October 29, 2014, we purchased certain assets from Baystreet.ca Media Corp. relating to the press release dissemination business called “Accesswire”. Accesswire specializes in press release distribution to both private and publically held companies. The assets acquired consist primarily of intangible assets, including customer relationships, trademarks, software and goodwill. The purchase price of $1,840,000 consisted of cash of $1,700,000 and 15,385 shares of our common stock with a value of $140,000 based on the closing price of our stock on the date of closing.

On August 22, 2013, we consummated an Agreement and Plan of Merger (the “Acquisition Agreement”) with PrecisionIR. Under the terms of the Acquisition Agreement, the Company paid $3,450,000 to certain creditors of PIR as full consideration to acquire all of the outstanding shares of PrecisionIR.

In connection with and to partially fund the PrecisionIR transaction and simultaneously with the closing of the merger, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) relating to the sale of $2,500,000 aggregate principal amount of our 8% convertible secured promissory note (“8% Notes”) with Red Oak Partners LP (“Red Oak”). The 8% Note pays interest on each of March 31, June 30, September 30 and December 31, which began on September 30, 2013, at a rate of 8% per year. The 8% Notes will mature on August 22, 2015. If an event of default occurs pursuant to the terms of the 8% Note, the interest rate immediately increases to 18%. The 8% Notes are secured by all of the assets of the Company and are subordinated to our obligations to our primary financial institution. Furthermore, in connection with the 8% Note Purchase Agreement, a partner of Red Oak was appointed to our Board of Directors. On November 10, 2014, Red Oak assigned the 8% Note between the Red Oak Fund, LP; Pinnacle Opportunities, LP; and the Red Oak Long Fund, LP, all of which are under management by Red Oak.

Beginning immediately upon the date of issuance, Red Oak or its assigns may convert the 8% Notes into shares of our common stock at a conversion price of $3.99 per share. The conversion price will be adjusted for certain events, such as stock dividends and stock splits. On November 12, 2014, Red Oak converted $833,327 of principal and $23,369 of accrued interest payable on the 8% Note into 214,710 shares of our common stock at the conversion price of $3.99.

During the year ended December 31, 2014, we have both expanded and reorganized our direct selling efforts. For 2015, we intend to continue expanding our global sales and marketing teams to capitalize on the opportunities in the market.

We strive to improve the way businesses collect, manage, communicate, report and analyze their data. Our overall strategy includes:

Expand Existing Customers

We expect to continue to see expansion of our products and services within our client bases. Migrating client contracts over to our bundled DMS offerings will naturally account for this expansion and cross selling. Our sales organization account managers are focused on this very thing, expanding the numbers of services to our current installed base. Additionally, part of the client expansion has to do with the number of business units within an organization that do business with us. Typically in our past the finance and compliance teams were our targets to sell our products and services. Today, we are focusing both on those business units but also the communications and corporate secretaries’ office. We feel this approach encompasses the entire C suite (i.e CEO, CFO, COO, etc) of most organizations.

Focus on Organic Growth

Our primary growth strategy is to sell our DMS offerings to new clients under our new bundle agreements, whereas in the past we tended to sell single solutions for long periods before we were afforded the opportunity to compete for other business from our competitors that our clients tended to utilize.

Our sales organization has been built for this type of growth. Subject matter experts are now selling bundled offerings directly to corporate issuers and into the agency / reseller marketplace. Our sales organization will benefit from our brand identity in the market, as industry professionals tend to now know about the DMS and its capabilities.

New Offerings

We will continue to innovate and build new applications into and with our DMS platform with the ultimate objective of developing applications not offered by our competitors. As a company focused on technology offerings, we understand the importance of advancements and keenly appreciate the risk of losing our position as a market leader- a very common mistake many technology companies have made. The pursuit of technological innovation is and has been a part of our overall strategy as an organization over the last several years.

During fiscal 2015 we will bring to market several new products and datasets targeted at both our current install base as well as new clients. Many of these will be evident in our Investor Network brands and platforms – where we strive to be a destination for the professional investor.

Acquisition Strategy

We will continue to evaluate complimentary verticals and systems that we can integrate well into our current platforms. These opportunities need to be accretive and consistent with what the company has done in the past. We value our equity and our cash reserves and have demonstrated a prudent and conservative approach in our acquisition transactions over the past several years.. We will maintain our product and technology focus, so it is highly likely we will look for acquisitions in areas we currently have revenues to find bolt on platforms, technologies, and clients that will further enhance our overall market position.

During fiscal 2015, we will continue to strengthen our brands in the market, by aggressively expanding our new client footprint and continue to cross sell to increase the average revenues per issuer (“ARPI”). Our platform, systems and operations are built to handle growth – so with little capital or operational expense we can leverage this growth to produce further bottom line profits and cash flows..

Sales

Our global sales organization is responsible for generating new customer opportunities and expanding our current customers. We ended 2014 with a reorganized three-tier organization; made up of sales executives; account managers and strategic account managers. We believe this structured approach is the most efficient and highly impactful way to not only reach new clients, but also grow our current installed base. All three levels of our sales organization are heavily compensated with commissions, all of whom have sales quotas. We employed 12 full-time equivalent sales personnel as of December 31, 2014.

We are on track to aggressively expand our sales headcount during fiscal 2015 both in our current markets and also in verticals where we have not typically had a sales presence,. An example of one of these verticals is the press release dissemination and earnings call webcast businesses.

Our key executives play a critical role in our sales process, assisting the organization and clients with new offerings, cross selling opportunities and channel development; because our organization is still relatively small we benefit from this approach and believe this is key to our future success.

Marketing

Our marketing organization has also undergone reorganization between our businesses; our newly created marketing and business development team now manages both business-to-business and business-to-consumer marketing efforts. This alignment was necessary, as we get ready to release the rebranded Annual Report Service and Company Spotlight products into and with the new Investor Network. This organization is also responsible for collaborating with our sales teams on product marketing, outbound digital marketing and all social media efforts of our entire brand.

We also work in partnership with other financial portals; filing agents, transfer agents and compliance and communications professionals to provide both our technologies and services to their target clients under agreements and white label services.

Our technology focus continues to foster developments in our workflow solutions. Authorized users of a corporate issuer or mutual fund/administrator can do the following with our workflow portal:

● Create, monitor and approve regulatory filings

● Create, edit and collaborate on XBRL filings with XBRL Check

● File LIVE ownership documents and other popular EDGAR forms

● Monitor proxy/annual meeting votes in real-time

● Create, edit and publish Investor Relations content

● Create, manage and monitor earnings calls and Webcasts

● Create, manage and distribute news and other corporate information to markets and holders

● Manage and communicate with shareholders

● Monitor share activity and issue stock certificates

● Manage more than one corporate issuer or fund family at the same time

We will continue to make investments in our technology, as we transition our business from a historically service-oriented business to more of a technology enabled product and service company. In all of our offerings, quality, turn-around times, accuracy, and scalability as well as the need to preserve the confidential content of our clients is of utmost importance and part of our core values.

Our industry benefits from increased regulatory requirements and the need for platforms and systems to manage these new regulations. Additionally, the industry along with cloud-based technologies have matured considerably over the past couple years, whereby corporate issuers and communication professionals are seeking platforms and systems to do some if not all the work themselves. We are uniquely positioned in this new opportunity to benefit from software licensing and further advancements of our Disclosure Management System.

The business services industry as it relates to compliance and communications is highly fragmented, with hundreds of independent service companies that provide a range of financial reporting, document management services and with a wide range of printing and technology software providers. The demands for many of our services historically have been cyclical and reliant on capital market activity. During 2014, we continued to spend a considerable amount of time growing several new service offerings beyond our traditional compliance reporting and transaction services business. These new offerings will afford us the ability to reduce our revenue seasonality and provide a new baseline of reoccurring annualized contracts, which are recognized on a quarterly basis as services are performed.

The financial print and reporting industry is highly fragmented and made up of dozens of service providers that provide a limited range of document management, financial reporting, and printing services. Printing services , specifically financial printing services, are competitive and highly commoditized, with a tendency to produce slimmer margins than financial reporting and related shareholder disclosure services. Much of the industry is made up of small “mom and pop” shops that offer basic reporting conversion services. Beyond that, there are the dominant providers that offer a deeper breadth and well-rounded blend of products and services to the capital markets. We are one of the few companies in the industry that are focused on providing a complete solution of disclosure reporting and shareholder communication delivery, including proxy and transfer agency.

Despite some consolidation in recent years, the industry remains both highly fragmented and extremely competitive. The success of our products and services are generally based on price, quality and the ability to service client demands. Management has partially offset the risks relating to competition as well as the seasonality by introducing unique technologies, automation and strategic directives, that have sustained margins, improved its overall market share and successfully been disruptive to its competitors. The success is directly linked to our Disclosure Management System.

We also review our operations on a regular basis to balance growth with opportunities to maximize efficiencies and support our long-term strategic goals. We believe by blending our workflow technologies with our legacy service offerings we are able to offer a comprehensive set of products and solutions to each of our clients that most competitors cannot offer today.

We believe we are positioned to be the disclosure management provider of choice as a cost-effective alternative to both small regional providers and global providers. We also believe we benefit from our location in North Carolina, as we do not experience significant competition for sales, customer service, or production personnel.

As of December 31, 2014, our customers include a wide variety of issuers, mutual funds, law firms, brokerage firms, banks, individuals, and other institutions. We did not have any customers during the year ended December 31, 2014 that accounted for more than 10% of our revenue and no customer represented more than 10% of our year end accounts receivable balance.

As of December 31, 2014, we employed fifty-nine full-time employees as compared to fifty-five full-time employees at December 31, 2013, none of which are represented by a union. As of the date herein, our employee’s work in our corporate offices in North Carolina , remotely in either Virginia or California, and London England.

Our headquarters are located in Morrisville, North Carolina. We occupy 16,059 square feet of office space pursuant to a six- year lease and we additionally occupy a 20,000 square foot warehouse on a month-to-month basis in the same building. We believe we have sufficient space to sustain our growth through 2017. Additionally, as a result of the acquisition of PrecisionIR, we also have 7,500 square feet of office space located at Chesterfield, VA, and shared office facility in London England. During the year ended December 31, 2014, we exercised an early termination clause in our office lease in Chesterfield, VA, and therefore this lease will end in October 31, 2015. Employees who previously worked in the Chesterfield office now work remotely.

We maintain both a general business liability policy and an errors and omissions policy in excess of $5,000,000 specific to our industry and operations. We believe that our insurance policy provides adequate coverage for all reasonable risks associated with operating our business. Additionally, we maintain a Directors and Officers insurance policy, which is standard for our industry and size. We also maintain key man life insurance on our Chief Executive Officer, our Chief Financial Officer, and one other key individual.

The securities and financial services industries generally are subject to regulation in the United States and elsewhere. Regulatory policies in the United States and the rest of the world are tasked with safeguarding the integrity of the securities and financial markets with protecting the interests of both issuers and shareholders.

In the United States, corporate issuers are subject to regulation under both federal and state laws, which often require public disclosure and regulatory filings. At the federal level, the Securities and Exchange Commission (“SEC”) regulates the securities industry, along with the Financial Industry Regulatory Authority, or FINRA, formally known as NASD, and NYSE market regulations, various stock exchanges, and other self-regulatory organizations (“SRO”).

In the Europe Union (EU), the securities and reporting authorities tend to be based on exchanges as well as individual country disclosure requirements. We currently work with our stock exchange partners to deliver our solutions. We believe this is the best approach as this market is highly complex and divided in comparison to our North American markets.

We operate our filing agent business and transfer agent business under the direct supervision and regulations of the SEC.

Our transfer agency business, Direct Transfer, is subject to certain regulations, which are governed, without limitation by the SEC, with respect to registration with the SEC, annual reporting, examination, internal controls, tax reporting, escheatment services. Our transfer agency is approved to handle the securities of NYSE, NASDAQ and the Over the Counter listed securities; as well we select issuers traded on TSX.

Our mission is to assist corporate issuers with these regulations, communication and compliance of rules imposed by regulatory bodies. The majority of our business involves the distribution of content, either electronically or paper, to governing bodies and shareholders alike. We are licensed under these regulations to disseminate, communicate and or solicit on behalf of our clients, the issuers.