The next dialogue needs to be learn at the side of our consolidated
monetary statements and the associated notes thereto included elsewhere on this
report, that are included by reference herein. Along with historic
data, this dialogue contains forward-looking data that entails
dangers and assumptions based mostly upon administration's present expectations. Our precise
outcomes may differ materially from the outcomes referred to in any
forward-looking statements. See "Cautionary Be aware Concerning Ahead-Wanting
Statements" included elsewhere on this report.



                                       27





Correction of Immaterial Errors - Throughout the preparation of the September 30,
2020 condensed consolidated monetary statements, sure historic errors had been
recognized referring to the accounting for capital leases underneath ASC Matters 840
and 842. The lease obligations underneath sure leases weren't recorded at their
current values on the inception of the leases; as well as, the asset buyout
costs weren't reassessed in December 2019 by the Firm, each of which
resulted in an understatement of bills from December 31, 2017 to December 31,
2019 and an overstatement of bills for the 9 months ended September 30,
2020.



The errors weren't materials, both quantitatively or qualitatively, in any of
the reported durations. Nevertheless, the corrections, if recorded within the three-month
interval ended September 30, 2020 would have been materials to such interval.
Accordingly, the prior interval monetary statements had been corrected by revising
such consolidated monetary statements for comparability. For the December 31,
2019 consolidated monetary statements included on this Type 10-Okay, the
corrections are as follows:



A rise within the internet lack of $ 540,000 for the yr ended December 31, 2019.

A rise in expenditure of $ 540,000 for the yr ended December 31, 2019.

A rise in loss per share of $ 0.02 for the yr ended the thirty first of December,

    2019.



  · A rise in liabilities of $528,000 as of December 31, 2019.


A lower in retained earnings of $ 777,000 and $ 237,000 from the thirty first of December,

    2019 and 2018, respectively.



  · A lower in whole belongings of $249,000 as of December 31, 2019.



  · The influence on money flows for the yr ended December 31, 2019 was:


A lower within the internet money move generated by the working actions of $ 573,000.



  · A lower in internet money flows utilized in investing actions of $102,000.




  · A lower in internet money flows utilized in financing actions of $471,000.




Government Overview



We’re a world knowledge engineering firm. We function in three reporting segments: Digital Knowledge Options (DDS), Synodex and Agility.



The next desk units forth sure monetary knowledge for the 2 years ended
December 31, 2020 and 2019:



                                                            ({Dollars} in hundreds of thousands)
                                                          Years Ended December 31,
                                           2020        % of income         2019        % of income
Revenues                                $     58.2             100.0 %   $     55.9             100.0 %
Direct working prices                        38.4              66.0 %         37.3              66.7 %
Promoting and administrative bills           18.7              32.0 %         19.5              34.9 %
Revenue (loss) from operations                  1.1               2.0 %         (0.9 )            (1.6 )%
Different expense                                  0.1                         

0.1

Revenue (loss) earlier than provision for
earnings taxes                                   1.0                             (1.0 )
Provision for earnings taxes                     0.4                              1.1
Internet earnings (loss)                              0.6                             (2.1 )




                                       28





Outcomes of Operations


All percentages have been calculated utilizing rounded quantities.

Finish of yr December 31, 2020 In comparison with the tip yr December 31, 2019


Revenues


Complete revenues had been $ 58.2 million for the yr ended December 31, 2020, an augmentation of $ 2.3 million or 4% of the overall earnings of $ 55.9 million for the yr ended December 31, 2019.

Revenues from the DDS phase had been $42.0 million and $41.3 million for the years
ended December 31, 2020 and 2019, respectively, a rise of $0.7 million or
roughly 2%. The rise was on account of greater quantity from one shopper,
partially offset by decrease quantity from two shoppers of the DDS phase.



Revenues from the Synodex phase had been $4.8 million and $3.9 million for the
years ended December 31, 2020 and 2019, respectively, a rise of $0.9
million or roughly 23%. The rise was primarily on account of greater quantity
from three shoppers, partially offset by decrease quantity from two shoppers.



Revenues from the Agility phase had been $11.4 million and $10.7 million for the
yr ended December 31, 2020 and 2019, respectively, a rise of $ 0.7
million or roughly 7%. The rise was attributable to greater revenues
from subscriptions to our Agility media database.



One shopper within the DDS phase generated roughly 14% and 16% of the
Firm's whole revenues within the fiscal years ended December 31, 2020 and 2019,
respectively. One other shopper within the DDS phase generated 10% of the Firm's
whole revenues for the fiscal yr ended December 31, 2019. No different shopper
accounted for 10% or extra of whole revenues throughout these durations. Additional, in
the years ended December 31, 2020 and 2019, revenues from non-US shoppers
accounted for 54% and 55% of the Firm's revenues respectively.



Direct Working Prices



Direct working prices include direct payroll, occupancy prices, knowledge heart
internet hosting charges, content material acquisition prices, depreciation and amortization, journey,
telecommunications, pc providers and provides, realized acquire (loss) on
ahead contracts, international forex remeasurement acquire (loss), and different direct
bills which might be incurred in offering providers to our shoppers.



Direct working prices had been $38.4 million and $37.3 million for the years ended
December 31, 2020 and 2019, respectively, a rise of $1.1 million or
roughly 3%. This enhance was primarily on account of a rise in labor
associated prices of $2.1 million, and technology-related expenditures in connection
with our BCP in response to the COVID-19 pandemic of $1.1 million. The rise
was offset partially by reductions in occupancy and associated prices of $1.1 million,
content material acquisition prices of $0.2 million, and a lower of $0.8 million on account of
reversal of a one-time cost of $0.4 million made within the second quarter of 2019
for an evaluation of retroactive international social safety contributions that was
efficiently adjudicated. Direct working prices as share of whole revenues
had been 66% and 67% for the years ended December 31, 2020 and 2019, respectively.



Direct working prices for the DDS phase had been $28.5 million and $27.5 million
for the years ended December 31, 2020 and 2019, respectively, a rise of
$1.0 million or roughly 4%. This enhance was primarily on account of a rise
in labor associated prices of $1.8 million, and technology-related expenditures in
reference to our BCP in response to the COVID-19 pandemic of $1.1 million.
The rise was offset partially by reductions in occupancy and associated prices of
$1.0 million and a lower of $0.8 million on account of reversal of a one-time cost
of $0.4 million made within the second quarter of 2019 for an evaluation of
retroactive international social safety contributions that was efficiently
adjudicated. Direct working prices for the DDS phase as a share of DDS
phase revenues had been 68% and 67% for the years ended December 31, 2020 and
2019, respectively.



                                       29







Direct working prices for the Synodex phase had been roughly $3.4 million
and $3.2 million for the years ended December 31, 2020 and 2019, respectively,
a rise of $0.2 million or 6%. The rise was principally on account of labor
associated prices related to the rise in quantity. Direct working prices for
the Synodex phase as a share of phase revenues had been 71% and 82% for the
years ended December 31, 2020 and 2019, respectively. The lower in Direct
working prices as a share of phase revenues in the course of the yr was
primarily on account of greater income.



Direct working prices for the Agility phase had been roughly $6.5 million
and $6.6 million for the years ended December 31, 2020 and 2019, respectively, a
lower of $0.1 million or 2%. This lower was primarily on account of a discount
in content material acquisition prices. Direct working prices for the Agility phase as
a share of Agility phase revenues had been 57% and 62% for the years ended
December 31, 2020 and 2019, respectively. The lower in Direct working prices
as a share of phase revenues in the course of the yr was primarily on account of greater
income from subscriptions to our Agility clever knowledge platform and newswire
merchandise.


Promoting and administration prices



Promoting and administrative bills include administration and administrative
salaries, gross sales and advertising and marketing prices together with commissions, new providers analysis
and associated software program improvement, third-party software program, promoting and commerce
conferences, skilled charges and marketing consultant prices, and different administrative
overhead prices.



Promoting and administrative bills had been $18.7 million for the yr ended
December 31, 2020 in comparison with $19.5 million for the yr ended December 31,
2019, a lower of $0.8 million or 4%. This lower was primarily on account of decrease
advertising and marketing, journey and occupancy bills of $0.3 million {and professional} charges
of $0.5 million. Promoting and administrative bills as a share of whole
revenues had been 32% and 35% for the years ended December 31, 2020 and 2019,
respectively. The lower in promoting and administrative bills as share
of revenues in the course of the yr was primarily on account of greater revenues and decrease
promoting and administrative prices.



Promoting and administrative bills for the DDS phase had been $12.4 million for
the yr ended December 31, 2020 in comparison with $13.1 million for the yr ended
December 31, 2019, a lower of $0.7 million or 5%. This lower was primarily
on account of decrease advertising and marketing, journey and occupancy bills of $0.2 million and
skilled charges of $0.5 million. As a share of DDS revenues, DDS promoting
and administrative bills had been 30% and 32% for the years ended December 31,
2020 and 2019, respectively. The lower in promoting and administrative bills
as a share of revenues was on account of greater revenues and decrease promoting and
administrative bills.



Promoting and administrative bills for the Synodex phase was $0.9 million for
the yr ended December 31, 2020 in comparison with $0.7 million for the yr ended
December 31, 2019, a rise of $0.2 million or 29%. This enhance was
primarily on account of labor associated bills. Promoting and administrative bills for
the Synodex phase as a share of Synodex phase revenues had been 19% and 18%
for the years ended December 31, 2020 and 2019, respectively.



Promoting and administrative bills for the Agility phase had been $5.4 million
and $5.7 million for the years ended December 31, 2020 and 2019, respectively, a
lower of $0.3 million or 5%. This lower was primarily on account of labor associated
bills. Promoting and administrative bills for the Agility phase as a
share of Agility phase revenues had been 47% and 53% for the years ended
December 31, 2020 and 2019, respectively. The lower in promoting and
administrative bills as a share of revenues was on account of greater revenues
and decrease promoting and administrative bills.



                                       30





Goodwill Impairment



On March 31, 2020, we decided that adversarial adjustments in macroeconomic tendencies as
a consequence of the persevering with COVID-19 pandemic constituted a triggering occasion
underneath the Monetary Accounting Requirements Board's (the "FASB") Accounting
Requirements Codification ("ASC") No. 350, "Intangibles - Goodwill and Different" and
ASC No. 360, "Impairment or Disposal of Lengthy-Lived Property"). We accomplished our
impairment evaluation procedures as of March 31, 2020. We decided that there
was no impairment of long-lived belongings in any of the reporting models as of
March
31, 2020.


Certain September 30, 2020, we carried out our annual goodwill evaluation for the Agility phase in accordance with the provisions of the FASB Accounting Requirements Replace (“ASU”) 2017-04, “Intangible Property – Good will et al. (Matter 350) “, utilizing a one-step method that assesses the carrying quantity of goodwill and compares it to the truthful worth of the reporting unit. Our conclusion was per the outcomes of March 31, 2020 impairment take a look at.



Revenue Taxes



We recorded a provision for earnings taxes of roughly $0.4 million and $1.1
million for the years ended December 31, 2020 and 2019, respectively.
Tax-related costs primarily consisted of a provision for international taxes
recorded in accordance with the native tax rules by our international
subsidiaries. Efficient earnings tax charges are disproportionate primarily on account of
the valuation allowance recorded on the deferred taxes on the U.S. and Canadian
entities. See Be aware 4, "Revenue Taxes" of the notes to the consolidated monetary
statements for extra data.



The reconciliation of the U.S. statutory charge with the Firm's efficient tax
charge for the years ended December 31, 2020 and 2019 are summarized within the desk
under:



                                                                2020           2019
Federal earnings tax expense (profit) at statutory charge             21.0 %        (21.0 )%
Impact of:
Change in valuation allowance                                     137.7    

22.4

Improve in unrecognized tax advantages (ASC 740)                    31.5    

55.1

Tax results of international operations                                  57.7    

59.7

Everlasting variations in actions overseas – alternate good points and losses

                                          (1.3 )        (12.2 )
Deemed curiosity                                                    (2.1 )  

State earnings tax internet of federal profit                            (4.3 )  

1.3

Overseas charge differential                                          (8.6 )  

0.8

Impact of share based mostly compensation                                (10.9 )  
         -
Return to provision true up                                       (10.8 )         (2.6 )
Change in charges                                                  (172.7 )            -
Withholding tax                                                     1.5            6.0
Different                                                              (0.3 )         (7.3 )
Efficient tax charge                                                 38.4 %        102.2 %




Regardless of entry to abroad earnings and the ensuing toll cost, we intend to
indefinitely reinvest earnings and earnings in our international subsidiaries on
account of the international jurisdiction withholding taxes that we must
incur on the precise remittances. Unremitted international earnings and earnings
amounted to roughly $47.0 million at December 31, 2020. If such international
earnings and earnings are repatriated sooner or later, or are not deemed to
be indefinitely reinvested, we must accrue the relevant quantity of
international jurisdiction withholding taxes related to such remittances.



                                       31





We now have a valuation allowance on all of our U.S. deferred tax belongings on account
of constant losses incurred by our U.S. entity. As well as, we even have a
valuation allowance on the deferred tax belongings of our Canadian subsidiaries. Our
Canadian subsidiaries even have analysis and improvement credit out there to
cut back taxable earnings in future years, which can be carried ahead
indefinitely. The potential advantages from these balances haven't been
acknowledged for monetary assertion functions.



Tax Assessments



In September 2015, our Indian subsidiary was topic to an inquiry by the
Service Tax Division in India concerning the classification of providers
supplied by this subsidiary, asserting that the providers supplied by this
subsidiary fall underneath the class of on-line data and database entry or
retrieval providers (OID Providers), and never underneath the class of enterprise
help providers (BS Providers) which might be exempt from service tax as traditionally
indicated within the subsidiary's service tax filings. We disagree with the Service
Tax Division's place. In November 2019, the Commissioner of Central Tax,
GST & Central Excise issued an order confirming the Service Tax Division's
place. We're vigorously contesting this order in an enchantment to the Customs,
Excise and Service Tax Appellate Tribunal. Within the occasion the Service Tax
Division is finally profitable in proving that the providers fall underneath the
class of OID Providers, the revenues earned by our Indian subsidiary for the
interval July 2012 by means of November 2016 could be topic to a service tax of
between 12.36% and 15%, and this subsidiary might also be liable to pay curiosity
and penalties. The income of our Indian subsidiary throughout this era was
roughly $64.0 million. In accordance with new guidelines promulgated by the
Service Tax Division, as of December 1, 2016 service tax is not
relevant to OID or BS Providers. Primarily based on our counsel's evaluation, we've got not
recorded any tax legal responsibility for this case.



In a separate motion referring to service tax refunds, in October 2016, our
Indian subsidiary acquired notices from the Indian Service Tax Division in
India searching for to reverse service tax refunds of roughly $160,000
beforehand granted to our Indian subsidiary for 3 quarters in 2014,
asserting that the providers supplied by this subsidiary fall underneath the class
of OID Providers and never BS Providers. The enchantment was decided in favor of the
Service Tax Division. We disagree with the idea of this choice and are
contesting it vigorously. We anticipate delays in our Indian subsidiary receiving
additional service tax refunds till this matter is adjudicated with finality, and
at present have service tax credit of roughly $1.0 million recorded as a
receivable. Primarily based on our counsel's evaluation, we've got not recorded any tax
legal responsibility for this case.



Internet Revenue (Loss)



We had a internet earnings of $0.6 million in the course of the yr ended December 31, 2020,
in comparison with a internet lack of $2.1 million in the course of the yr ended December 31, 2019.
The $2.7 million enchancment was attributable to greater revenues of $2.3
million, and a lower in tax provision of $0.7 million, partially offset by
greater working bills of $0.3 million.



Internet earnings for the DDS phase was $0.3 million for the yr ended December 31,
2020, in comparison with a internet lack of $0.5 million for the yr ended December 31,
2019. The $0.8 million enchancment was attributable to greater revenues of $0.7
million and a lower in tax provisions of $0.4 million, partially offset by
greater working bills of $0.3 million.



Internet earnings for the Synodex phase was $0.5 million for the yr ended December
31, 2020, in comparison with breakeven for the yr ended December 31, 2019. The $0.5
million enhance was primarily attributable to the upper revenues of $0.9
million offset partially by greater working bills of $0.4 million.



Internet loss for the Agility phase was $0.2 million for the yr ended December
31, 2020, in comparison with a internet lack of $1.6 million for the yr ended December 31,
2019. The $1.4 million enchancment was the results of greater revenues of $0.7
million, reductions in working bills of $0.4 million and a tax profit
of
$0.3 million.



                                       32




Liquidity and capital sources



Chosen measures of liquidity and capital sources, expressed in hundreds,
are as follows:



                                                  December 31,
                                                2020         2019
                  Money and money equivalents   $ 17,573$ 10,874
                  Working capital               13,515        8,250



On December 31, 2020, we had money and money equivalents of $17.6 million, of
which $10.2 million was held by our international subsidiaries, and $7.4 million was
held in america. Regardless of the passage of the brand new tax legislation underneath which we
could repatriate funds from abroad after paying the toll cost, it's our
intent, as of December 31, 2020, to completely reinvest the abroad funds in
our international subsidiaries on account of the withholding tax that we must
incur on the precise remittances.



We now have used, and plan to make use of, our money and money equivalents for (i) investments
within the Agility phase; (ii) the growth of our different operations; (iii)
expertise innovation; (iv) product administration and strategic advertising and marketing; (v)
normal company functions, together with working capital; and (vi) potential
enterprise acquisitions. As of December 31, 2020, we had working capital of
roughly $13.5 million, as in comparison with working capital of roughly
$8.3 million as of December 31, 2019.



On Could 4, 2020, we acquired mortgage proceeds of $579,700 underneath the Paycheck
Safety Program (PPP), which was established as a part of the Coronavirus Help,
Reduction and Financial Safety Act. The loans and accrued curiosity are forgivable,
so long as the borrower makes use of the mortgage proceeds for eligible functions, together with
payroll, advantages, lease and utilities, and maintains its payroll ranges. The
unforgiven portion of the mortgage is payable over two years at an rate of interest of
1% per yr, with a deferral of funds till the date that the Small Enterprise
Administration remits the borrower's mortgage forgiveness quantity to the lender. On
January 29, 2021, we filed our mortgage forgiveness software for 100% of the
accredited mortgage underneath the PPP.



Proceeds from the train of inventory choices for the monetary yr ended December 31, 2020 had been
$ 2.6 million.

We had no important commitments for capital expenditures within the December 31, 2020.

We consider that our current money and money equivalents and money move from operations will present adequate sources of liquidity to satisfy our monetary wants over the following 12 months from the date of publication of those monetary statements. . Nevertheless, as we shouldn’t have any financial institution services or traces of credit score, reductions in our money and money equivalents ensuing from working losses, capital expenditures, adversarial authorized selections, acquisitions or the like may have an effect. materials adversarial influence on society.

Internet money supplied by working actions



Money supplied by our working actions for the yr ended December 31, 2020
was $5.7 million and was the results of the web earnings of $0.6 million, the
impact of changes for non-cash gadgets of $3.4 million and sources of working
capital of $1.6 million. Changes for non-cash gadgets primarily consisted of
$2.3 million for depreciation and amortization, stock-based compensation of $0.9
million and $0.2 million for different non-cash gadgets. Working capital actions
primarily consisted of sources from a $1.4 million enhance in accrued salaries,
wages and associated advantages, a $0.8 million enhance in earnings and different taxes,
offset by a $0.6 million enhance in pay as you go bills and different present belongings.
Consult with the Consolidated Statements of Money Flows for additional particulars.



                                       33





Money supplied by our working actions for the yr ended December 31, 2019
was $4.3 million and was the results of the web lack of $2.1 million, the impact
of changes for non-cash gadgets of $3.6 million and sources of working capital
of $2.9 million. Changes for non-cash gadgets primarily consisted of $2.7
million for depreciation and amortization, inventory possibility expense of $0.8 million
and $0.1 million for different non-cash gadgets. Working capital actions primarily
consisted of sources from a $1.2 million lower in our accounts receivable, a
$1.2 million lower in pay as you go and different present belongings, and a $0.9 million
enhance in earnings and different taxes which was offset partially by a use of $0.5
million on account of a rise in different working capital. The discount in accounts
receivable is a results of greater collections in the course of the yr ended December 31,
2019. Consult with the Consolidated Statements of Money Flows for additional particulars.



Our days' gross sales excellent had been 62 days and 66 days December 31, 2020 and 2019,
respectively. We calculate DSO by first dividing the overall revenues for the
interval by common internet accounts receivable, which is the sum of internet accounts
receivable in the beginning of the interval and internet accounts receivable on the finish
of the interval, to yield an quantity we seek advice from because the "accounts receivable
turnover". Then we divide the overall variety of days inside the interval reported by
the accounts receivable turnover to yield DSO expressed in variety of days.

Internet money used in funding actions

Money utilized in our investing actions was $1.4 million and $1.7 million for the
years ended December 31, 2020 and 2019, respectively. These capital expenditures
had been principally for the acquisition of expertise gear together with servers,
community infrastructure and workstations, and expenditures for internally
developed software program. Capital expenditures for the yr ended December 31, 2020
amounting to $1.4 million consisted of $0.6 million for the DDS phase and $0.8
million for the Agility phase.



For the yr 2020, we anticipate capital expenditures for continued upgrades to expertise, gear and infrastructure to approximate $ 2.0 at $ 2.3 million, a part of which we will finance.

Internet money used in fundraising actions

Money supplied by financing actions for the yr ended December 31, 2020 was
from PPP mortgage proceeds of $0.6 million and proceeds from inventory possibility workout routines
of $2.6 million. Funds of long-term obligations had been $0.9 million and $0.6
million for December 31, 2020 and 2019, respectively. Money utilized in financing
actions for 2019 was $1.8 million for the repurchase of 1,503,095 shares of
our widespread inventory at a volume-weighted common worth of $1.23 per share.



Inflation, seasonality and present financial circumstances



Though most of our revenues are denominated in U.S. {dollars}, a big
portion of our revenues is denominated in Canadian {dollars}, Pound Sterling and
Euros. As well as, a good portion of our bills, primarily labor
bills in the Philippines, India, Sri Lanka, Germany, Canada and Israel, are
incurred within the native currencies of the international locations during which we function. For
monetary reporting functions, we translate all non-U.S. denominated transactions
into U.S. {dollars} in accordance with U.S. GAAP. Thus, we're uncovered to the danger
that fluctuations within the worth of those currencies relative to the U.S. greenback
may have a direct influence on our revenues and our outcomes of operations.



The Philippines and India have at occasions skilled excessive charges of inflation as
effectively as main fluctuations within the alternate charge between the Philippine peso and
the U.S. greenback and the Indian rupee and the U.S. greenback. As of December 31,
2020, the mixture notional quantity of our hedges towards the Indian rupee was
roughly $2.9 million, and $4.0 million for the Philippine peso.



                                       34




Fluctuations in alternate charges additionally have an effect on the worth of funds held by our international subsidiaries. We don’t at present intend to hedge these belongings.



Our most important prices are the salaries and associated advantages of our
staff in Asia. We're uncovered to excessive inflation in wage charges within the
international locations during which we function. We usually carry out work for our shoppers underneath
project-specific contracts, requirements-based contracts or long-term contracts.
We should adequately anticipate wage will increase, significantly on our fixed-price
contracts. There will be no assurance that we will recuperate value
will increase by means of will increase within the costs that we cost for our providers to our
shoppers.



Our quarterly working outcomes are topic to sure fluctuations. We
expertise fluctuations in our income and earnings as we exchange and start new
initiatives, which can have some regular start-up delays, or we could also be unable to
exchange a mission solely. These and different components could contribute to
fluctuations in our working outcomes from quarter to quarter. As well as, as
a few of our Asian services are closed throughout holidays within the fourth quarter,
we sometimes incur greater wages, on account of additional time, that cut back our margins.



Our Synodex subsidiary experiences seasonal fluctuations in revenues. Usually,
income is lowest within the third quarter of the calendar yr and highest within the
fourth quarter of the calendar yr. The seasonality is straight linked to the
variety of life insurance coverage functions acquired by the insurance coverage corporations.

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