NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recently Issued Accounting Standards
The Financial Accounting Standards Board (“FASB”) and the U.S. Securities and Exchange Commission (“SEC”) have issued certain other accounting pronouncements as of December 31, 2025 that will become effective in subsequent periods; however, management does not believe that any of these pronouncements would have significantly affected the Company’s financial accounting measurements or disclosures had they been in effect during the periods for which financial statements are included in this Annual Report, nor does management believe those pronouncements would have a significant effect on the Company’s future financial position or results of operations.
Recently adopted accounting principles
In November 2023, the FASB issued Accounting Standards Update (“ASU”) No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment. All disclosure requirements under ASU 2023-07 are also required for public entities with a single reportable segment. The Company adopted ASU 2023-07 on January 1, 2024 and the adoption of this update did not have a significant impact on the Company’s financial statements (see Note 11).
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), which provides for improvements to income tax disclosures primarily related to rate reconciliation and income taxes paid by jurisdiction. The Company adopted ASU 2023-09 on a prospective basis effective January 1, 2025 and the adoption of this update did not have a significant impact on the Company’s financial statements (see Note 7).
In November 2024, the FASB issued ASU 2024-03, Income Statement–Reporting Comprehensive Income–Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”), to improve disclosures about a public entity’s expenses by requiring disclosure of additional information about the types of expenses commonly presented in the financial statements on an annual and interim basis. This guidance will be effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. The Company is currently evaluating the impact of adoption of this pronouncement on its financial statements.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
Cash and Cash Equivalents
Cash and cash equivalents are comprised of cash in banks and highly liquid instruments with original maturities of three months or less, primarily consisting of investments in institutional money market funds.
Fair Value Measurements
The Company records its financial instruments at fair value in accordance with accounting guidance. The determination of fair value assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The fair value hierarchy is broken down into three levels based on the source of inputs as follows: (a) Level 1 – valuations based on unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; (b) Level 2 – valuations based on quoted prices in markets that are not active, or financial instruments for which all significant inputs are observable; either directly or indirectly; and (c) Level 3 – valuations based on prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable; thus, reflecting assumptions about the market participants.
The Company, in accordance with ASU 2016-01, classifies its debt securities as “held-to-maturity” and are recorded at a premium or a discount. Realized gains on held-to-maturity debt securities are amortized and reported in other income, net until their maturity date.
Marketable Securities
All marketable securities are classified as held-to-maturity and are carried at amortized cost. Realized gains, losses, amortization of premiums and discounts, interest and dividend income are included in interest and other income, net.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is provided on the straight-line method over the estimated useful life of the asset. Estimated useful lives are generally as follows:
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Computer equipment and software − 1 to 5 years
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Furniture and fixtures − 1 to 5 years
Lease Accounting
For all leases, at the lease commencement date, a right-of-use asset and a lease liability are recognized. The right-of-use asset represents the right to use the leased asset for the lease term. The lease liability represents the present value of the remaining lease payments under the lease. The present value of lease payments is determined primarily using the incremental borrowing rate based on the information available as of the lease commencement date. Lease payments included in the measurement of the lease liability comprise the following: the fixed noncancelable lease payments and payments for optional renewal periods where it is reasonably certain the renewal period will be exercised. Lease expense for operating leases consists of the lease payments plus any initial direct costs, and is recognized on a straight-line basis over the lease term.
The Company’s operating lease right-of-use asset and operating lease liability represent the lease of computers for use by the workforce to conduct business.
Goodwill
Goodwill and other indefinite-lived intangible assets are subject to annual impairment testing using the specific guidance and criteria described in the accounting guidance FASB ASU No. 2017-04. The Company performs its goodwill impairment testing at least annually in the fourth quarter of each year. The Company tests for impairment of intangible assets whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. With respect to goodwill, the Company first assesses qualitative factors to determine whether it is more likely than not that the fair value is less than the carrying value. If, based on that assessment, the Company believes it is more likely than not that the fair value is less than the carrying value, a one-step goodwill impairment test is performed. The Company concluded that there was no impairment to goodwill in the 2025 or 2024 fiscal years.
Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with accounting guidance. Recoverability of assets held and used is measured by a comparison of the carrying amount of an asset to undiscounted pre-tax future net cash flows expected to be generated by that asset. An impairment loss is recognized for the amount by which the carrying amount of the assets exceeds the fair value of the assets. As of December 31, 2025 and 2024, management believes no impairment of long-lived assets has occurred.
Income Taxes
The Company provides for deferred income taxes resulting from temporary differences between financial statements and income tax reporting. Temporary differences are differences between the amounts of assets and liabilities reported for financial statement purposes and their tax bases. Deferred tax liabilities are recognized for temporary differences that will be taxable in future years’ tax returns. Deferred tax assets are recognized for temporary differences that will be deductible in future years’ tax returns and for operating loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance if it is deemed more likely than not that some or all of the deferred tax assets will not be realized.
Revenue Recognition and Contract Balances
The Company applies FASB Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (Topic 606) (“ASC 606”), to recognize revenue. ASC 606 requires an entity to apply the following five-step approach: (1) identify the contract(s) with a customer; (2) identify each performance obligation in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation; and (5) recognize revenue when or as each performance obligation is satisfied. The Company’s primary source of revenue is subscription income which is recognized ratably over the subscription term.
Accounts receivable consists of trade accounts receivable for services provided to customers. Accounts receivable is stated at the amount the Company expects to collect. The Company makes estimates of expected credit and collectability trends for the allowance for credit losses and allowance for receivables based upon the Company’s assessment of various factors, including historical experience, the age of the accounts receivable balances, credit quality of customers, current economic conditions, reasonable and supportable forecasts of future economic conditions, and other factors that may affect the Company’s ability to collect from customers. As of January 1, 2024, the balances of the accounts receivable, net of allowance, were $3.9 million.
Contract liabilities consist of amounts collected prior to having satisfied the performance obligation. The Company periodically invoices customers for recurring services in advance. During the year ended December 31, 2025, the Company recognized $10.9 million of revenue that was included in the contract liabilities balance as of December 31, 2024. During the year ended December 31, 2024, the Company recognized $10.3 million of revenue that was included in the contract liabilities balance as of December 31, 2023. As of January 1, 2024, the balance of the contract liabilities was $10.3 million.
The Company has applied the practical expedient to recognize incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that otherwise would have been recognized is one year or less.
Stock-Based Compensation
The Company recognizes the grant-date fair value of all stock-based awards on a ratable basis over the award’s vesting period. The Company records deferred tax assets for awards that will result in deductions on its tax returns, based upon the amount of compensation cost recognized and the statutory tax rate in the jurisdiction in which it will receive a deduction.
Net Income Per Share
Basic net income per share is calculated based on the weighted average number of shares of common stock outstanding during the reporting period. Diluted net income per share is calculated based on the weighted average number of common shares outstanding and the dilutive effect of stock options outstanding during the reporting period. The difference between basic and diluted net income per share is solely attributable to stock options. The Company uses the treasury stock method to calculate the dilutive impact of all outstanding stock options.
Segment Information
An operating segment, in part, is a component of an enterprise whose operating results are regularly reviewed by the CODM to make decisions about resources to be allocated to the segment and assess its performance. Operating segments may be aggregated only to a limited extent. The Company’s CODM is the Chief Executive Officer and President. The CODM reviews the monthly financial results which include disaggregated information about revenues, for the purpose of making operating decisions and assessing performance. The Company has no foreign operations or any assets in foreign locations. The CODM has determined that it has a single operating and reportable segment.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk principally consist of cash, cash equivalents, and accounts receivable. The Company maintains its cash and cash equivalents in bank deposits and other accounts, the balances of which, at times, may exceed federally insured limits. Exposure to credit risk is reduced by placing such deposits in high credit quality financial institutions.
The Company closely monitors the extension of credit to its subscribers. The Company’s accounts receivable balance is net of an allowance for credit losses. The Company does not require collateral or other security to support credit sales but provides an allowance for credit losses of $30,000 as of December 31, 2025 and 2024, based on historical experience and specifically identified risks. Accounts receivable are charged off against the allowance for credit losses when management determines that recovery is unlikely and the Company ceases collection efforts. The Company does not believe that significant credit risk existed as of December 31, 2025 or 2024.
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