What changed in this filing

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Item 1. Financial Statements

2023-08-04 compared with 2023-05-15 · 244 added, 159 removed, 958 unchanged (30% of the section changed)

65 unchanged sentences

For the Three Months Ended

For the Six Months Ended

Services and other

9 unchanged sentences

Total operating expenses

Operating loss

Operating income/(loss)

Other income (expenses):

2 unchanged sentences

Change in fair value of equity guarantee

Loss on extinguishment/settlement of obligations

Loss on debt waiver consent

Loss on warrant amendment

Gain/(loss) on settlement of obligations

Other income (expense)

Total other income (expense)

10 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

Operating Activities:

Net (loss) income

$ ( 1,000 )  

$ 2,502  

Adjustments to reconcile net (loss) income to net cash provided by operating activities

2 unchanged sentences

Amortization of stock-based compensation

Employee Retention and other Government Credits

Loss on extinguishment of debt

Loss on debt waiver consent

Loss on warrant amendment

Change on change in fair value of warrants

Bad debt expense

7 unchanged sentences

Accounts payable

( 486 )  

Accrued expenses

( 45 )  

Deferred revenues

Customer deposits

( 1,693 )  

( 40 )  

Net cash provided by operating activities

Net cash provided by (used in) operating activities

Investing activities

1 unchanged sentence

Purchases of property and equipment

( 31 )  

Capitalization of labor for software development

( 1,003 )  

Net cash used in investing activities

( 1,034 )  

Financing activities

4 unchanged sentences

Repayment of Term Loan (2022)

( 250 )  

Repayment of Secured Promissory Note

( 310 )  

Net cash (used in) provided by financing activities

( 562 )  

19,873  

Increase in Cash and Cash Equivalents

Increase (decrease) in Cash and Cash Equivalents

Cash and Cash Equivalents, beginning of period

Cash and Cash Equivalents, end of period

$ 3,905  

$ 5,988  

See accompanying notes to condensed consolidated financial statements.

2 unchanged sentences

(in thousands, except shares)

Three Months Ended June 30, 2023

Balance as of March 31, 2023

7,394,407  

$ 76,417  

$ ( 51,409 )  

$ 25,082  

Stock-based compensation

Stock-based compensation issued to vendors

14,620  

( 1,425 )  

Balance as of June 30, 2023

7,409,027  

$ 76,618  

$ ( 52,834 )  

$ 23,858  

Six Months Ended June 30, 2023

Balance as of December 31, 2022

11 unchanged sentences

( 2,425 )  

Balance as of June 30, 2023

7,409,027  

$ 76,618  

$ ( 52,834 )  

$ 23,858  

Three Months Ended June 30, 2022

Balance as of March 31, 2022

3 unchanged sentences

$ 19,060  

Stock-based compensation

Stock-based compensation issued to vendors

22,943  

Warrant amendment

Balance as of June 30, 2022

7,247,955  

$ 74,886  

$ ( 48,521 )  

$ 26,437  

Six Months Ended June 30, 2022

Balance as of December 31, 2021

4,002,843  

$ 60,943  

$ ( 52,254 )  

$ 8,729  

Stock-based compensation

Shares issued to vendors as compensation

22,943  

Shares issued and warrants exercised in private investment in public entity ("PIPE")

2,388,835  

Shares issued in Reflect Systems, Inc.

833,334  

Warrant repricing events

Balance as of March 31, 2022

( 31 )  

Warrant amendment

Balance as of June 30, 2022

7,247,955  

$ 74,886  

$ ( 48,521 )  

$ 26,437  

See accompanying notes to condensed consolidated financial statements.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts)

(in thousands, except shares and per share amounts)

NATURE OF ORGANIZATION AND OPERATIONS

23 unchanged sentences

No fractional shares were outstanding following the reverse stock split and any fractional shares resulting from the reverse split were rounded up to the nearest whole share of common stock. 

In connection with the reverse stock split, the total number of shares of common stock authorized for issuance was reduced from 200,000,000 shares to 66,666,666 shares in proportion to the reverse stock split.

Effective as of the same time as the reverse stock split, the number of shares of common stock available for issuance under the Company's equity compensation plans were reduced in proportion to the reverse stock split. 

2 unchanged sentences

Liquidity and Financial Condition

The accompanying Condensed Consolidated Financial Statements have been prepared on the basis of the realization of assets and the satisfaction of liabilities and commitments in the normal course of business and do not include any adjustments to the recoverability and classifications of recorded assets and liabilities as a result of uncertainties.

At March 31, 2023, we have an accumulated deficit of $ 51,409 , negative working capital of $ 3,822 and cash of $ 3,905 .

For the three months ended March 31, 2023, we incurred an operating loss of $ 90  and cash inflows from operations of $ 3,868 .

Our history of operating losses and near term cash obligations are indicators of substantial doubt about our ability to continue as a going concern. We obtained a continuing support letter from Slipstream Communications, LLC ("Slipstream") through May 31, 2024, which alleviated the substantial doubt about our ability to continue as a going concern. We can provide no assurance that our ongoing operational efforts will be successful, which could have a material adverse effect on our results of operations and cash flows.

In accordance with Accounting Standards Update (“ASU”) No.

2014 - 15, Disclosure of Uncertainties about an Entity ’

s Ability to Continue as a Going Concern (Subtopic 205 - 40 ) ( “

ASU 205 - 40 ”

) , the Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the Condensed Consolidated Financial Statements are issued.

At June 30, 2023, the Company has an accumulated deficit of $ 52,834 , negative working capital of $ 6,071 , including current debt obligations of $ 4,197 , and cash of $3,264.

For the six months ended June 30, 2023, the Company incurred an operating loss of $ 790 and generated positive net cash flows from operations of $ 6,344 .

In addition, pursuant to the Second Amended and Restated Credit and Security Agreement (the "Credit Agreement") made between the Company and Slipstream Communications ("Slipstream") the Company is required to make monthly repayments of principal on the Consolidation Term Loan beginning on September 1, 2023 and on the first day of each month thereafter until the Maturity Date on February 17, 2025. 

The monthly principal payment beginning on September 1, 2023 

is approximately $ 399 , or total principal repayments for the twelve months subsequent to the reporting date of these Condensed Consolidated Financial Statements of $ 4,389 . As a result of the principal debt service payments required to be paid on account of the Consolidation Term Loan, the Company does not currently have cash on hand or committed available liquidity to repay all of its outstanding debt due within one year after the date that these financial statements are issued. These conditions and events raise substantial doubt about the Company's ability to continue as a going concern under the technical framework within ASU 205 - 40.

In response to these conditions, management plans to either refinance or recapitalize the debt. However, these plans have not been finalized and are not completely within the Company's control, and therefore cannot be deemed probable under ASU 205 - 40.

We have been unable to obtain a continuing support letter from Slipstream beyond the period ending May 31, 2024.

Obtaining a continuing support letter from Slipstream beyond one year of the date our financial statements were issued was a factor that previously alleviated the substantial doubt about our ability to continue as a going concern. As a result, the Company has concluded that management's plans do not alleviate substantial doubt about the Company's ability to continue as a going concern.  

The Condensed Consolidated Financial Statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

49 unchanged sentences

The allowance for credit losses is included in accounts receivable, net in the accompanying Condensed Consolidated Balance Sheets.

The Company had the following activity for its allowance for credit losses from December 31, 2022 to March 31, 2023:

The Company had the following activity for its allowance for credit losses from December 31, 2022 to June 30, 2023:

Balance as of December 31, 2022

1 unchanged sentence

Write-offs charged against the allowance

Balance as of March 31, 2023

Balance as of June 30, 2023

$ 1,114  

6 unchanged sentences

$ 2,267  

The reserve for obsolete inventory at March 31, 2023 and December 31, 2022 was $ 1,777 , of which $ 1,707 related to Safe Space Solutions. 

The reserve for obsolete inventory at June 30, 2023 and December 31, 2022 was $ 1,895 and $ 1,777 , respectively, of which $ 1,707 related to Safe Space Solutions. 

The Company is no longer actively promoting the sale of our Safe Space Solutions or purchasing inventory to support such solutions.

11 unchanged sentences

Diluted weighted average shares outstanding includes outstanding common shares and potential dilutive common shares outstanding in accordance with the treasury stock method.

Shares reserved for outstanding stock options, including stock options with performance restricted vesting, and warrants totaling approximately 7,339,582 and 6,910,962 at March 31, 2023 and 2022, respectively were excluded from the computation of (loss)/earnings per share as the strike price on the options and warrants were higher than the Company's market price and therefore anti-dilutive.

Shares reserved for outstanding stock options, including stock options with performance restricted vesting, and warrants totaling approximately 7,391,651  and 7,490,962  at June 30, 2023 and 2022, respectively, were excluded from the computation of (loss)/earnings per share as the strike price on the options and warrants were higher than the Company's market price and therefore anti-dilutive.

Deferred income taxes are recognized in the financial statements for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates.

2 unchanged sentences

The Company accounts for uncertain tax positions utilizing an established recognition threshold and measurement attributes for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

We had no uncertain tax positions as of March 31, 2023 and December 31, 2022 .

We had no uncertain tax positions as of June 30, 2023 and December 31, 2022 .

Goodwill and Intangible Assets

36 unchanged sentences

The Company applies ASC 606 for revenue recognition.

The following table disaggregates the Company’s revenue by major source for the three months ended March 31, 2023 and 2022 :

The following table disaggregates the Company’s revenue by major source for the three and six months ended June 30, 2023 and 2022 :

(in thousands)

1 unchanged sentence

$ 5,667  

$ 7,759  

$ 12,126  

Installation Services

2 unchanged sentences

Total Services

11,381  

Total Hardware and Services

1 unchanged sentence

$ 10,923  

$ 19,140  

$ 21,680  

System hardware sales

101 unchanged sentences

Company common stock issued in exchange for outstanding shares of Reflect capital stock per Merger Agreement.

Company common stock issued to fund the Retention Bonus Plan per Merger Agreement.

Company common stock issued to fund initial issuances under the Retention Bonus Plan per Merger Agreement.

The Secured Promissory Note accrued interest at 0.59 % (the applicable federal rate at the time of issuance of the Secured Promissory Note) and required the Company and Reflect to collectively pay equal monthly principal installments of $ 104 on the fifteenth ( 15th ) day of each month, commencing on March 15, 2022. 

6 unchanged sentences

Represents the Reflect cash balance acquired at Closing.

The Company incurred $ 391 of direct transaction costs related to the Reflect Merger for the three months ended March 31, 2022.

The Company incurred $ 37 and $ 428 of direct transaction costs for the three and six months ended June 30, 2022, respectively.

These costs are included in deal and transaction expense in the accompanying Condensed Consolidated Statement of Operations.

47 unchanged sentences

SUPPLEMENTAL CASH FLOW STATEMENT INFORMATION

Three Months Ended

Six Months Ended

Supplemental non-cash investing activities

2 unchanged sentences

Right-of-use assets obtained in exchange for new finance lease liabilities

Supplemental non-cash financing activities

Conversion of liability warrant to equity warrants

$ 5,709  

Supplemental disclosure information for cash flow

Cash paid during the period for:

$ 1,040  

Operating leases

3 unchanged sentences

Intangible assets consisted of the following at 

March 31, 2023 and December 31, 2022 :

June 30, 2023 and December 31, 2022 :

Technology platform

19 unchanged sentences

$ 23,752  

For the three months ended March 31, 2023 and 2022 , amortization of intangible assets charged to operations was $ 754 and $ 680 , respectively.

For the three months ended June 30, 2023 and 2022 , amortization of intangible assets charged to operations was $ 755 and $ 431 , respectively.

For the six months ended June 30, 2023 and 2022  amortization of intangible assets charged to operations was $ 1,508 and $ 1,111 , respectively.

Goodwill represents the excess of the purchase price over the fair value of net assets acquired.

7 unchanged sentences

Based on a quantitative assessment of our fair value performed at December 31, 2022, using the same approach as our annual impairment performed at September 30, described above, we concluded that the carrying value of our goodwill did not exceed the reporting unit fair value.

No indicators of impairment were identified as of March 31, 2023.

No indicators of impairment were identified as of June 30, 2023.

The Company recognizes that any differences between our actual and projected future results, or changes in our projected future results, could potentially have a material impact on our assessment of goodwill impairment.

5 unchanged sentences

Further discussion of the debt follows.

As of March 31, 2023

As of June 30, 2023

Interest Rate Information

46 unchanged sentences

10.0 % cash interest per annum through maturity date at February 15, 2025.

Interest was paid-in-kind through October 2021, at which point interest became payable in cash at the stated interest rates through maturity.

12.5 % cash interest per annum through maturity at 

September 1, 2023 .

Secured Promissory Note

19 unchanged sentences

The Company assessed the combination of the pre-existing senior secured term loan and secured convertible loan in accordance with ASC 470 Debt and determined the transaction should be accounted for as an extinguishment, in part as the Consolidation Term Loan eliminated a substantive conversion feature.

In aggregate the Company recorded a loss on extinguishment of $ 295 during the three month period ending March 31, 2022, primarily associated with the write-off of pre-existing debt discounts.

In aggregate the Company recorded a loss on extinguishment of $ 295 during the six month period ending June 30, 2022, primarily associated with the write-off of pre-existing debt discounts.

In addition to refinancing the existing debt with Slipstream, the Company issued to Slipstream a $ 10,000 , 36 -month senior secured term loan (the “Acquisition Term Loan”) resulting in $ 10,000 in gross proceeds, or $ 9,950 in net proceeds.

7 unchanged sentences

In recording the warrant liability, the Company recorded a debt discount associated with each of the Acquisition and Consolidation Term Loans in an amount of $ 2,032 and $ 2,190 , respectively.

These amounts are being amortized straight-line through interest expense over the life of the loans, resulting in incremental interest expense of $ 356 and $ 162 for the three months ended March 31, 2023 and 2022, respectively. The Company has deemed straight-line amortization to be materially consistent with the effective interest method.

These amounts are being amortized straight-line through interest expense over the life of the loans, resulting in incremental interest expense of $ 358 and $ 714 for the three and six  months ended June 30, 2023, respectively. The Company has deemed straight-line amortization to be materially consistent with the effective interest method.

In certain circumstances, upon a fundamental transaction of the Company (e.g., a disposal or sale of all or the greater part of the assets or undertaking of the Company, an amalgamation or merger with another company, or implementation of a scheme of arrangement), the holder of the Lender Warrant will have the right to require the Company to repurchase the Lender Warrant at its fair value using a Black Scholes option pricing formula;

provided that such holder may not require the Company or its successor entity to repurchase the Lender Warrant for the Black Scholes value in connection with a fundamental transaction that is not approved by the Company’s Board of Directors, and therefore not within the Company’s control.

Effective June 30, 2022, the Company amended the terms of the Lender Warrant to remove the holder’s option to exercise such warrant on a cashless basis utilizing the VWAP of the Company’s common stock on the trading day immediately preceding the date of a notice of cashless exercise in certain circumstances, and remove the condition to exercising such warrant that the Company’s shareholders approve the exercise thereof (which has already been obtained).

The amendments to the Lender Warrant also extend the term of such warrants for an additional one year, such that the Lender Warrant will expire on February 17, 2028.

14 unchanged sentences

Based on the history of losses of the Company, there continues to be a full valuation allowance against the net deferred tax assets of the Company with a definite life.

As of March 31, 2023 , we reported tax liability of $ 43 .

As of March 31, 2023 , the net deferred tax liabilities totaled $ 52 after valuation allowance, compared to net tax liabilities of $ 28 at 

For the three and six months ended June 30, 2023, we reported tax liability of $ 45 and $ 88 , respectively.

As of June 30, 2023 , the net deferred tax liabilities totaled $ 75 after valuation allowance, compared to net tax liabilities of $ 28 at 

December 31, 2022 .

5 unchanged sentences

( 68,508 )  

Balance March 31, 2023

Balance June 30, 2023

5,755,519  

1 unchanged sentence

On February 

3, 2022,  the Company, entered into a Securities Purchase Agreement with a purchaser (the “Purchaser”), pursuant to which the Company agreed to issue and sell to the Purchaser, in a private placement priced at-the-market under Nasdaq rules, (i) 438,334 shares (the “Shares”) of the Company’s common stock, par value $ 0.01 per share (the “Common Stock”) and accompanying warrants to purchase an aggregate of 438,334 shares of Common Stock, and (ii) pre-funded warrants to purchase up to an aggregate of 1,950,502 shares of Common Stock (the “Pre-Funded Warrants”) and accompanying warrants to purchase an aggregate of 1,950,502  shares of Common Stock (collectively, the “Private Placement”).

3, 2022,  the Company entered into a Securities Purchase Agreement with a purchaser (the “Purchaser”), pursuant to which the Company agreed to issue and sell to the Purchaser, in a private placement priced at-the-market under Nasdaq rules, (i) 438,334 shares (the “Shares”) of the Company’s common stock, par value $ 0.01 per share (the “Common Stock”) and accompanying warrants to purchase an aggregate of 438,334 shares of Common Stock, and (ii) pre-funded warrants to purchase up to an aggregate of 1,950,502 shares of Common Stock (the “Pre-Funded Warrants”) and accompanying warrants to purchase an aggregate of 1,950,502  shares of Common Stock (collectively, the “Private Placement”).

The accompanying warrants to purchase Common Stock are referred to herein collectively as the “Common Stock Warrants.”

Under the Securities Purchase Agreement, each Share and accompanying warrants to purchase Common Stock were sold together at a combined price of $ 4.605 , and each Pre-Funded Warrant and accompanying warrants to purchase Common Stock were sold together at a combined price of $ 4.6047 , for gross proceeds of approximately $ 11,000 , before deducting placement agent fees and estimated offering expenses payable by the Company. During the three months ended March 

31, 2022, each of the Pre-Funded Warrants were exercised.

The Common Stock Warrants expire 

1 unchanged sentence

equity, with proceeds recorded as common stock and additional paid-in-capital.

The Company evaluated the Common Stock Warrant and concluded they do not meet the criteria to be classified within stockholders’

The Common Stock Warrant include provisions which could result in a different settlement value, for the Common Stock Warrant depending on the registration status of the underlying shares.

The Company evaluated the Common Stock Warrants and concluded they do not meet the criteria to be classified within stockholders’

The Common Stock Warrants include provisions which could result in a different settlement value for the Common Stock Warrants depending on the registration status of the underlying shares.

Because these conditions were 

not an input into the pricing of a fixed-for-fixed option on the Company’s ordinary shares, the Common Stock Warrant is not considered to be indexed to the Company’s own stock.

not an input into the pricing of a fixed-for-fixed option on the Company’s ordinary shares, the Common Stock Warrants are not considered to be indexed to the Company’s own stock.

The Company recorded these warrants as liabilities on the Condensed Consolidated Balance Sheets at fair value, with subsequent changes in their respective fair values recognized in the Condensed Consolidated Statements of Operations at each reporting date.

At the date of issuance, the Company performed a Black-Scholes valuation of the warrants, resulting in a fair value of $ 3.2781 per warrant.

At March 

31, 2022, the Company reassessed the fair value of these warrants via Black Scholes valuation methodology and determined that the fair value of these warrants was $ 1.7445 per warrant, resulting in the Company recording a gain on the fair value of these warrants of $ 3,664  in the Condensed Consolidated Statement of Operations for the three months ended March 

At June 

30, 2022, the Company reassessed the fair value of these warrants via Black Scholes valuation methodology and determined that the fair value of these warrants was $ 1.2057 per warrant, resulting in the Company recording a gain on the fair value of these warrants of $ 1,287 and $ 4,950  in the Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2022.

On February 

10 unchanged sentences

In recording the warrant liability, the Company recorded an increase in debt discount in the Condensed Consolidated Balance Sheet associated with the issuance of the warrants of $ 4,223 , which is being amortized through interest expense in the Condensed Consolidated Statement of Operations over the life of the Acquisition Term Loan and Consolidation Term Loans.

At March 

31, 2022, the Company reassessed the fair value of these warrants via Black Scholes valuation methodology and determined that the fair value of these warrants was $ 1.626 per warrant, resulting in the Company recording a gain on the fair value of these warrants of $ 1,408  in the Condensed Consolidated Statement of Operations for the three months ended March 

At June 30, 2022, the Company reassessed the fair value of these warrants via Black Scholes valuation methodology and determined that the fair value of these warrants was $ 1.1097 per warrant, resulting in the Company recording a gain on the fair value of these warrants of $ 894 and $ 2,302 in the Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2022.

On February 

11 unchanged sentences

In recording the warrant liability, the Company recorded an expense in the Condensed Consolidated Statement of Operations associated with the issuance of the Purchaser Warrant of $ 1,211 .

At March 

31, 2022, the Company reassessed the fair value of the Purchase Warrant via Black Scholes valuation methodology and determined that the fair value of the Purchaser Warrant was $ 1.7445 per warrant, resulting in the Company recording a gain on the fair value of the Purchaser Warrant of $ 397  in the Condensed Consolidated Statement of Operations for the three months ended March 

At June 30, 2022, the Company reassessed the fair value of the Purchase Warrant via Black Scholes valuation methodology and determined that the fair value of the Purchaser Warrant was $ 1.2051 per warrant, resulting in the Company recording a gain on the fair value of the Purchaser Warrant of $ 252 and $ 650 in the Condensed Consolidated Statement of Operations for the three and six months ended June 30, 2022.

Effective June 30, 2022, the Company amended the terms of the Common Stock Warrant ( 2,388,836 warrants), Lender Warrant ( 1,731,499 warrants) and Purchaser Warrant ( 466,667 warrants).

The amendments to such warrants removes the holder’s option to determine the value of such warrants utilizing the VWAP of the Company’s common stock on the trading day immediately preceding the date of a notice in a cashless exercise, and removes the condition to exercising such warrants that the Company’s shareholders approve the exercise thereof (which has already been obtained).

The amendments to the warrants also extend the term of such warrants for an additional one year, such that the Common Stock Warrant will expire on February 3, 2028, and the Lender Warrant and Purchaser Warrant will expire on February 17, 2028.

42 unchanged sentences

Balance, December 31, 2022

633,334  

662,910  

$ 10.02  

240,000  

$ 7.59  

Forfeited or expired

( 112 )  

162.00  

Balance, March 31, 2023

633,334  

662,798  

240,000  

$ 7.59  

The weighted average remaining contractual life for options exercisable is 6.7 years as of March 31, 2023 .

Balance, June 30, 2023

The weighted average remaining contractual life for options exercisable is 6.53 years as of June 30, 2023 .

Valuation Information for Stock-Based Compensation

16 unchanged sentences

The options were issued from the 2014 Stock Incentive Plan.

Issuance of New Options

Issuance of Options

On June 15, 2022, Messrs.

3 unchanged sentences

Mills Shares Vested

16,667  

33,334  

50,000  

66,667  

83,333  

333,334  

Logan Shares Vested

10,000  

20,000  

30,000  

40,000  

50,000  

200,000  

Percentage of Shares Vested

10 unchanged sentences

Dividend yield

At March 

31, 2023, the Company evaluated the probability of achieving the share price targets in each tranche based, in part, on work performed by the Company’s third party valuation specialist in conjunction with evaluating the equity guarantee contingent liability.

As a result of that evaluation of probability, during the three month period ending 

March 31, 2023 the Company recorded $ 3 of compensation expense.

At June 30, 2023, the Company evaluated the probability of achieving the share price targets in each tranche based, in part, on work performed by the Company’s third party valuation specialist in conjunction with evaluating the equity guarantee contingent liability.

As a result of that evaluation of probability, during the three  and six month period ending 

June 30, 2023 the Company recorded $ 4 and $ 7  of compensation expense, respectively.

These awards have not yet vested and are subject to actual share price performance through February 2025.

10 unchanged sentences

Compensation expense recognized for the issuance of stock options to employees for the 

three months ended March 31, 2023 

and 2022  of $ 225 and $ 646 , respectively, was included in general and administrative expense in the Condensed Consolidated Financial Statements.

March 31, 2023 , there was approximately $ 148 and $ 471 of total unrecognized compensation expense related to unvested share-based awards with time vesting and performance vesting criteria for employees, respectively.

Generally, expense related to the time vesting options will be recognized over the next year and will be adjusted for any future forfeitures as they occur.

three and six months ended June 30, 2023 of $ 152  and $ 377 , respectively, was included in general and administrative expense in the Condensed Consolidated Financial Statements.

Compensation expense recognized for the issuance of stock options to employees for the 

three and six months ended June 30, 2022 of $ 398 and $ 948 , respectively, was included in general and administrative expense in the Condensed Consolidated Financial Statements

June 30, 2023 , there was $ 498 of total unrecognized compensation expense related to unvested share-based awards with performance vesting criteria for employees.

Compensation expense related to performance vesting options will be recognized if it becomes probable that the Company will achieve the identified performance metrics.

Non-Employee Awards

Compensation expense recognized for the issuance of stock options, including those options awarded to our Board of Directors, for the three month period ended 

March 31, 2023 and 2022 of $ 43  and $ 82 , respectively, was included in general and administrative expense in the Condensed Consolidated Financial Statements.

At March 31, 2023, there was approximately $ 107 of total unrecognized compensation expense related to unvested share-based awards with time vesting criteria for non-employee directors.

Compensation expense recognized for the issuance of stock options to our Board of Directors, for the three and six month period ended 

June 30, 2023 of $ 43  and $ 86 , was included in general and administrative expense in the Condensed Consolidated Financial Statements.

Compensation expense recognized for the issuance of stock options to our Board of Directors, for the three and six month period ended June 30, 2022 of $ 356 and $ 895 , was included in general and administrative expenses in the Condensed Consolidated Financial Statements.

At June 30, 2023, there was approximately $ 65 of total unrecognized compensation expense related to unvested share-based awards with time vesting criteria for non-employee directors.

Generally, expense related to the time vesting options will be recognized over the next year and will be adjusted for any future forfeitures as they occur.

1 unchanged sentence

Shares issued for services were calculated based on the ten ( 10 ) day VWAP for the last ten ( 10 ) days during the month of service provided.

During the three months ended March 31, 2023  and 2022, the Company issued or accrued shares issuable in exchange for services in the amount of $ 30 and 45 , respectively.

During the three and six months ended June 30, 2023 , the Company issued shares issuable in exchange for services in the amount of $ 30 and $ 55 , respectively. 

During the three and six months ended June 30, 2022, the Company issued shares issuable in exchange for services in the amount of $ 45 and $ 70 , respectively.

SIGNIFICANT CUSTOMERS/VENDORS

Significant Customers

We had two customers that in the aggregate accounted for 39.7 % of accounts receivable at March 31, 2023 

We had two customers that in the aggregate accounted for 28.3 % of accounts receivable at June 30, 2023 

three customers that in the aggregate accounted for 49.2 % of accounts receivable at 

December 31, 2022 .

We had two customers that in the aggregate accounted for 44.5 % of revenue for the three months ended 

March 31, 2023 , compared to three customers that in the aggregate accounted for 70.0 % of revenue for the three months ended March 31, 2022.

We had three customers that in the aggregate accounted for 33.5 % of revenue for the three months ended 

June 30, 2023 , compared to two customers that in the aggregate accounted for 37.5 % of revenue for the three months ended June 30, 2022.

We had two customers that in the aggregate accounted for 29.7 % of revenue for the six months ended 

June 30, 2023 , compared to three customers that in the aggregate accounted for 54.3 % of revenue for the six months ended June 30, 2022.

Significant Vendors

We had two vendors that in the aggregate accounted for 45.6 % of outstanding accounts payable at 

March 31, 2023 , and one vendor that accounted for 30.1 % of outstanding accounts payable at 

We had one vendor that in the aggregate accounted for 36.1 % of outstanding accounts payable at 

June 30, 2023 , and one vendor that accounted for 30.1 % of outstanding accounts payable at 

December 31, 2022 .

Management ’

s Discussion and Analysis of Financial Condition and Results of Operations Forward-Looking Statements

s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion contains various forward-looking statements within the meaning of Section 21E of the Exchange Act.

39 unchanged sentences

Increased customer/guest engagement

Through a combination of organically grown platforms and a series of strategic acquisitions, including our recent acquisition of Reflect in February 2022, the Company assist clients to design, deploy, manage, and monetize their digital signage networks.

Through a combination of organically grown platforms and a series of strategic acquisitions, including our acquisition of Reflect in February 2022, the Company assists clients to design, deploy, manage, and monetize their digital signage networks.

The Company sources leads and opportunities for its solutions through its digital and content marketing initiatives, close relationships with key industry partners, specifically equipment manufacturers, and the direct efforts of its in-house industry sales experts.

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Post-deployment network and field support

Media sales, as a result of our acquisition of Reflect

Recurring subscription licensing and support revenue from our digital signage software platforms, which are generally sold via a SaaS model.

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On May 1, 2023, we received a subsequent unsolicited proposal from Pegasus to acquire all of the outstanding shares of common stock of the Company that are not owned by Pegasus for a purchase price of $2.85 per share in cash.

The Special Committee, in consultation with its financial and legal advisors, is carefully reviewing and considering the updated proposal to pursue the course of action that it believes is in the best interests of the Company’s shareholders.

There can be no assurance that any revised proposal or definitive offer will be made or accepted, that any agreement will be executed, or that any transaction will be consummated.

Please see Note 5 Business Combinations , Note 8 Loans Payable , Note 11 Warrants , and Note 12 Stock-based Compensation to the Company’s Condensed Consolidated Financial Statements contained in this Report for a description of recent developments of the Company that occurred during, and subsequent to, the three months ended March 31, 2023.

The Special Committee has concluded that such proposal undervalues the Company based on the Special Committee’s views of the intrinsic value of the Company’s existing business and current and future prospects, and is not in the best interests of the Company’s existing shareholders.

Consequently, the Special Committee has advised Pegasus that it has rejected the proposal.

Critical Accounting Policies and Estimates

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All dollar amounts reported in Results of Operations are in thousands, except share and per-share information.

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

The tables presented below compare our results of operations and present the results for each period and the change in those results from one period to another in both dollars and percentage change.

For the three months

ended March 31,

ended June 30,

Cost of sales

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Total operating expenses

Operating loss

Operating (loss) income

Other income/(expenses):

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Change in fair value of equity guarantee

Loss on extinguishment of debt

Loss on debt waiver consent

Loss on warrant amendment

Gain on settlement of obligations

Other income/(expense)

Total other income/(expense)

Net (loss) before income taxes

Total other income/(expenses)

Net (loss) income before income taxes

Provision for income taxes

Net (loss) income

Sales were $9,196, representing a decrease of $1,727, or 16%, as compared to the same period in 2022.

Hardware revenues were $4,322 for the three month period ending March 31, 2023, a decrease of $2,137, or 33%, as compared to the prior year which included a hardware refresh for two significant customers in the prior year that did not recur in the current year. Services and other revenues were $5,622 for the three month period ended March 31, 2023, an increase of $1,324, or 31%, driven by growth in managed services revenue. Managed services revenue, which includes both software-as-a-service (“SaaS”) and help desk technical subscription services, were $4,072 in the three months ended March 31, 2023 as compared to $2,703 in the same period in 2022, driven by expansion in the Company's SaaS revenue and the inclusion of Reflect revenue for a full three months in the current year as compared to approximately one and one half months during the three months ended March 31, 2022 as a result of the Merger closing on February 17, 2022.

This represents a year-over-year growth rate of 51% in our higher margin, typically subscription-based, managed services revenue.

Gross profit increased by $1,197, or 31% during the three months ended March 31, 2023 as compared to the same period in 2022 driven by an increase in (1) managed services revenue of $1,369 due to expansion in software subscription revenues and the inclusion of such revenues from Reflect for the full period in the current year as compared to approximately half the period in the prior year following the Merger on February 17, 2022, (2) software development revenue of $340 which has a higher contribution margin than other services, and (3) improvements in hardware gross margins as a result of a significant deployment with gross margin of approximately 25%.

Gross profit margin increased to 51.2% during the three months ended March 31, 2023, from 36.2% in the same period in 2022 driven by more favorable revenue mix during the three months ended March 31, 2023 as managed services, which includes high margin SaaS revenues, increased to 41% of total revenue as compared to 25% of total revenues in the three months ended March 31, 2022.

The increase as a result of margin expansion in hardware and mix associated with increased managed services was partially offset by reduced revenue in the current year.

Hardware revenues were $3,437 for the three month period ended June 30, 2023, a decrease of $2,230, or 39%, as compared to the prior year.

Hardware revenues generated during the three month period ended June 30, 2022 were driven by two customers which refreshed their digital hardware throughout their entire geographic footprint.

These refresh activities are cyclical in nature and no current customer executed a similar large scale refresh during the three months ended June 30, 2023. Those refresh activities represented $2,418 in incremental hardware revenue during the three months ended June 30, 2022. Services and other revenues were $5,759 for the three month period ended June 30, 2023, an increase of $503, or 10%, driven primarily by increases in installation services revenue.

Gross profit decreased by $364, or 8% during the three months ended June 30, 2023 as compared to the same period in 2022 driven by an increase in installation services revenue.

Gross profit margin increased to 47% during the three months ended June 30, 2023, from 43% in the same period in 2022 driven by (1) favorable revenue mix during the three months ended June 30, 2023 as managed services, which includes higher margin SaaS and other services revenues, increased to 42% of total revenue as compared to 35% of total revenues in the three months ended June 30, 2022, and (2) margin expansion in hardware, partially offset by reduced revenue in the current year.

Sales and Marketing Expenses

Sales and marketing expenses generally include the salaries, taxes, and benefits of our sales and marketing personnel, as well as trade show activities, travel, and other related sales and marketing costs.

Sales and marketing expenses increased by $429, or 61%, driven primarily by (i) the acquisition of Reflect via the Merger on February 17, 2022, and (ii) the Company’s enhanced investments into sales and marketing activities post-COVID-19 pandemic.

Immediately following the Merger, the Company integrated the sales and marketing functions and did not disaggregate expenses between the two legacy companies.

Following the Merger and through integration activities between the date of the Merger and March 31, 2023, the Company adopted certain tools, technology, and processes –

Sales and marketing expenses increased by $82, or 7%, driven primarily by the Company’s enhanced investments into sales and marketing activities.

Following the Merger, the Company adopted certain tools, technology, and processes –

particularly with respect to lead generation and brand marketing –

that were undercapitalized historically by the Company.

Additionally, through completion of the Merger, the Company acquired a media sales business unit that sells advertising on behalf of our customers to be displayed on digital advertising networks owned by those customers.

This business utilizes internal and third party sales agents - the salaries and commissions of which are included within Sales and Marketing Expense within the Condensed Consolidated Statement of Operations. As a result, we expect the sales and marketing expenses of the Company for the three months ended March 31, 2023 to adequately reflect the pace for spend in these areas in future reporting periods.

that were historically undercapitalized by the Company and have since accelerated new customer acquisition.

Through completion of the Merger, the Company also acquired a media sales business unit that serves to monetize customer networks via the direct sale of advertising to be displayed on digital advertising networks owned by those customers.

This business utilizes internal and third-party sales agents - the salaries and commissions of which are included within Sales and Marketing Expense within the Condensed Consolidated Statement of Operations. We expect the sales and marketing expenses of the Company for the three months ended June 30, 2023 to adequately reflect normal spend in these areas in future reporting periods.

Research and Development Expenses

Research and development expenses generally include personnel and development tools costs associated with the continued development of the Company’s content management systems and other related application development.

Research and development expenses increased by $125, or 52%, for the three months period ended March 31, 2023 as compared to the same period in 2022 driven primarily by the completion of the Merger on February 17, 2022.

Through the Merger, we acquired a fully staffed, experienced software development team and elected to keep that team in-tact, particularly given current competitive employment market conditions with respect to talented software engineers.

We have integrated the pre-existing CRI development team with the acquired Reflect team and have experienced enhanced speed to market on new feature and functionality development activities from increasing our development team.

We expect a continued elevated level of capitalized activity through the third quarter of 2023 associated with a customer-facing opportunity, followed by a return to spending levels consistent with the Company’s results for the second quarter of 2022, which adequately reflect the pace for spend in these areas in future reporting periods.

The Company capitalizes certain of these expenses and amortizes those costs through the Condensed Consolidated Statement of Operations on a straight-line basis over the economic useful life of the software feature or functionality. Research and development expenses decreased by $41, or 10%, for the three month period ended June 30, 2023 as compared to the same period in 2022 driven primarily by an elevated level of capitalized activity during the current quarter associated with a customer-facing opportunity.

General and Administrative Expenses

General and administrative expenses were effectively flat, increasing $38, or 1%. As compared to the three months ended March 31, 2022, the Company experienced decreases of (1) $283 in stock compensation expense as all expense associated with outstanding performance awards was recorded as of December 31, 2022, and (2) reductions in certain expenses following completion of integration activities/projects completed during 2022 following the Reflect Merger (including but not limited to consolidation of CMS tools, cloud hosting environments, IT tools) that materialized through the balance of 2022.

These decreases were partially offset by increases of (1) $117 in increased personnel costs, (2) $122 in legal expenses associated with the Company's establishment of a Special Committee of the Board of Directors to consider and respond to an unsolicited proposal of a Company shareholder to acquire certain outstanding shares of common stock of the Company and settlement of two open litigation matters during the period, and (3) other operating costs, each primarily associated with the consolidation of Reflect for three months in 2023 as compared to forty three (43) days during the three months ended March 31, 2022 as a result of completion of the Reflect Merger on February 17, 2022.

General and administrative expenses were effectively flat, increasing $33, or 1%. Compared to the three months ended June 30, 2022, the Company experienced decreases of (1) $203 in stock compensation expense as outstanding performance awards were fully expensed as of December 31, 2022, and (2) reductions in certain expenses following completion of integration activities/projects completed during 2022 following the Merger (including but not limited to consolidation of CMS tools, cloud hosting environments, IT tools) that materialized through the balance of 2022.

These decreases were offset by increases of $278 in increased personnel costs as a result of higher headcount following the Merger and scaled up operations in response to an increase in customer acquisitions.

Depreciation and Amortization Expenses

Depreciation and amortization expenses increased $72, or 10%, in the three months ended March 31, 2023 compared to the same period in 2022.

This was driven by the addition of $17,160 in amortizing intangible assets on February 17, 2022, as a result of the Merger.

Depreciation and amortization expenses increased $329, or 70%, in the three months ended June 30, 2023 compared to the same period in 2022, driven by incremental amortization expense generated from the addition of $17,160 in amortizing intangible assets on February 17, 2022, as a result of the Merger, and a measurement period adjustment recorded during the three months ended June 30, 2022 which artificially reduced the total depreciation and amortization expense.

The Company current expects depreciation and amortization expense to be approximately $800 per quarter for the remainder of 2023.

Interest Expense

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Changes in Fair Value of Warrant Liability

During the three month period ended March 31, 2022, the Company recorded a gain of $5,469 as the result of assessing the fair value of warrant liabilities associated with the Company’s issuance of warrants in its debt and equity offerings completed in February 2022 to finance the Merger.

During the three month period ended June 30, 2022, the Company recorded a gain of $2,433 as the result of assessing the fair value of warrant liabilities associated with the Company’s issuance of warrants in its debt and equity offerings completed in February 2022 to finance the Merger.

These warrants were initially assessed at fair value through Black Scholes calculation, with changes in fair value recognized at each period end.

Effective June 30, 2022, the Company amended the terms of certain warrants previously issued to its creditor and an investor, which removed the holder’s option to exercise such warrants on a cashless basis utilizing the VWAP of the Company’s common stock on the trading day immediately preceding the date of a notice of cashless exercise in certain circumstances, and removed the condition to exercising such warrants that the Company’s shareholders approve the exercise thereof (which has already been obtained).

Loss on Warrant Amendment

The amendments to the warrants extended the term of such warrants for an additional one year.

As a result of the extension in term provided in exchange for the amendment (collectively, the "Warrant Amendment").

As a result of the extension in term provided in exchange for the amendment, the Company reassessed the fair value of those warrants, resulting in the Company recording a loss on the fair value of these warrants of $345.

The foregoing amendments to the warrants resulted in such warrants to be accounted for as equity instruments on the Company’s Condensed Consolidated Financial Statements as of June 30, 2022.

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

The tables presented below compare our results of operations and present the results for each period and the change in those results from one period to another in both dollars and percentage change.

For the Six Months

Ended June 30,

Cost of sales

Sales and marketing expenses

Research and development expenses

General and administrative expenses

Depreciation and amortization expense

Deal and transaction expenses

Total operating expenses

Operating loss

Other income/(expenses):

Interest expense

Change in fair value of warrant liability

Change in fair value of equity guarantee

Loss on debt waiver consent

Loss on warrant amendment

Loss on settlement of debt

Total other income/(expenses)

Net (loss) income before income taxes

Provision from income taxes

Net (loss) income

Sales were $19,140, representing a decrease of $2,540, or 12%, as compared to the same period in 2022.

Hardware revenues were $7,759 for the six month period ended June 30, 2023 as compared to $12,126 for the six month period ended June 30, 2022, a decrease of $4,367, or 36%.

Hardware revenues generated during the six month period ended June 30, 2023 were driven by two customers which refreshed their digital hardware throughout their entire geographic footprint .

These refresh activities are cyclical in nature and no current customer executed a similar large scale refresh during the six months ended June 30, 2023. Those refresh activities represented $4,418 in incremental hardware revenue during the six months ended June 30, 2022.

Services and other revenues were $11,381 for the six month period ended June 30, 2023, an increase of $1,827, or 19%, driven by growth in managed services revenue. Managed services revenue, which includes both SaaS and help desk technical subscription services, as well as non-contracted recurring content management services, were $7,907 in the six months ended June 30, 2023 as compared to $6,535 in the same period in 2022, driven by expansion in the Company's SaaS revenue and the inclusion of Reflect revenue for a full six months in the current year as compared to approximately four and one half months during the six months ended June 30, 2022 as a result of the Merger closing on February 17, 2022.

This represents a year-over-year growth rate of 21% in our higher margin, primarily subscription-based, managed services revenue.

Gross profit increased by $833, or 10% during the six months ended June 30, 2023 as compared to the same period in 2022 driven by improvements in hardware gross margins as a result of a significant deployment with gross margin of approximately 25%.

Gross profit margin increased to 49% during the six months ended June 30, 2023, from 39% in the same period in 2022 driven by (1) favorable revenue mix as managed services revenue, which includes higher margin SaaS and other services revenues, increased to 41% of total revenue for the six months ended June 30, 2023 as compared to 30% of total revenues in the six months ended June 30, 2022 and (2) margin expansion in hardware partially offset by reduced revenue in the current year.

Sales and Marketing Expenses

Sales and marketing expenses increased by $511, or 28%, driven primarily by (1) the acquisition of Reflect via the Merger on February 17, 2022, and (2) the Company’s enhanced investments into sales and marketing activities.

Following the Merger, the Company adopted certain tools, technology, and processes –

particularly with respect to lead generation and brand marketing –

that were historically undercapitalized by the Company and have since accelerated new customer acquisition.

Through completion of the Merger, the Company also acquired a media sales business unit that serves to monetize customer networks via the direct sale of advertising to be displayed on digital advertising networks owned by those customers.

This business utilizes internal and third party sales agents - the salaries and commissions of which are included within Sales and Marketing Expense within the Condensed Consolidated Statement of Operations. We expect the sales and marketing expenses of the Company for the six months ended June 30, 2023 to adequately reflect the normal spend in these areas in future reporting periods.

Research and Development Expenses

The Company capitalizes certain of these expenses and amortizes those costs through the Condensed Consolidated Statement of Operations on a straight-line basis over the economic useful life of the software feature or functionality. Research and development expenses increased by $84, or 13%, for the six month period ended June 30, 2023 as compared to the same period in 2022 driven primarily by incremental headcount added via completion of the Merger on February 17, 2022.

We integrated the development teams which has enhanced speed to market on new feature and functionality development activities.

We expect a continued elevated level of expenditure and capitalized activity through the third quarter of 2023 associated with a customer-facing opportunity, followed by a return to spending levels consistent with the Company’s results for the second quarter of 2022, which adequately reflect the pace for spend in these areas in future reporting periods.

General and Administrative Expenses

General and administrative expenses were effectively flat, increasing $71, or 1%. As compared to the six months ended June 30, 2022, the Company experienced decreases of (1) $456 in stock compensation expense as outstanding performance awards were fully expensed as of December 31, 2022, and (2) reductions in certain expenses following completion of integration activities/projects completed during 2022 following the Reflect Merger (including but not limited to consolidation of CMS tools, cloud hosting environments, IT tools) that materialized through the balance of 2022.

These decreases were partially offset by increases of (1) $313 in increased personnel costs as the Company scaled up operations in response to an increase in customer acquisitions, (2) $133 in legal expenses associated with the Company's establishment of a Special Committee of the Board of Directors to consider and respond to an unsolicited proposal of a Company shareholder to acquire certain outstanding shares of common stock of the Company, as well as settlement of two open litigation matters during the period, and (3) other operating costs, each primarily associated with the consolidation of Reflect for six months in 2023, as compared to reporting consolidation of Reflect for only 134 days during the six months ended June 30, 2022 as a result of completion of the Reflect Merger on February 17, 2022.

Depreciation and amortization expenses

Depreciation and amortization expenses increased $401, or 34%, in the six months ended June 30, 2023 compared to the same period in 2022, driven primarily by incremental amortization expense generated from the addition of $17,160 in amortizing intangible assets on February 17, 2022, as a result of the Merger.

Interest expense

See Note 8 Loans Payable to the Condensed Consolidated Financial Statements for a discussion of the Company’s debt and related interest expense obligations.

Changes in fair value of warrant liability;

Loss on warrant amendment

During the six month period ended June 30, 2022, the Company recorded a gain of $7,902 as the result of assessing the fair value of warrant liabilities associated with the Company’s issuance of warrants in its debt and equity offerings completed in February 2022 to finance the Merger.

These warrants were initially assessed at fair value through Black Scholes calculation, with changes in fair value recognized at each period end.

The amendments to the warrants extended the term of such warrants for an additional one year (collectively, the "Warrant Amendment").

The foregoing amendments to the warrants resulted in such warrants to be accounted for as equity instruments in the Company’s Condensed Consolidated Financial Statements.

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Such contingent consideration arrangements are recorded at fair value and are classified as liabilities on the acquisition date and are remeasured at each reporting period in accordance with ASC 805-30-35-1 using a Monte Carlo simulation model.

The change in the period represents the mark-to-market adjustment as of the balance sheet dates.

Loss on extinguishment of debt

During the three months ended March 31, 2022, the Company refinanced its debt facilities with Slipstream.

In aggregate the Company recorded a loss on extinguishment of $295, primarily associated with the write-off of pre-existing debt discounts.

No such transactions occurred in the current period.

The change in the period represents the mark-to-market adjustment as of the balance sheet dates.

Loss on debt waiver consent

During the three months ended March 31, 2022, in connection with obtaining a waiver of certain restrictions in investment documents between an investor and the Company in order to consummate the financing contemplated by the Company's credit agreement with Slipstream Communications, the Company paid consideration to such investor in the form of the Purchaser Warrant to purchase 466,667 shares of Company common stock in an at-the-market offering under Nasdaq rules.

During the six months ended June 30, 2022, in connection with obtaining a waiver of certain restrictions in investment documents between an investor and the Company in order to consummate the financing contemplated by the Company's credit agreement with Slipstream, the Company paid consideration to such investor in the form of the Purchaser Warrant to purchase 466,667 shares of Company common stock in an at-the-market offering under Nasdaq rules.

The number of shares of Company common stock subject to the Purchaser Warrant was equal to the waiver fee ($175) divided by $0.375 per share.

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At the date of issuance, the Company performed a Black-Scholes valuation of the Purchaser Warrant, resulting in a fair value of $2.5968 per warrant.

In recording the warrant liability, the Company recorded an expense in the Condensed Consolidated Statement of Operations associated with the issuance of the Purchaser Warrant of $1,212 for the three months ended March 31, 2022.

No such transactions occurred in the current period.

Loss on extinguishment of debt

During the six months ended June 30, 2022, the Company refinanced its debt facilities with Slipstream.

In aggregate the Company recorded a loss on extinguishment of $295, primarily associated with the write-off of pre-existing debt discounts.

No such transactions occurred in the current period.

Summary Unaudited Quarterly Financial Information

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Gain on fair value of warrant liability

(Gain)/loss on settlement of obligations

Loss on debt waiver consent

Gain on settlement of obligations

Loss on warrant amendment

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Operating Activities

The cash provided by operating activities were $3,868 for the three months ended March 31, 2023 compared to $1,201 for the same period in 2022. Cash provided by operating activities in the three month period ending March 31, 2023, was driven by a reduction in accounts receivable and prepaid assets of $1,177 and $1,015, respectively. 

In addition, deferred revenue increased $2,382, partially offset by a decrease in customer deposits of $1,693.

The net cash provided by operating activities during the six months ended June 30, 2023 was $6,344 compared to net cash used in operating activities of $63 for the same period in 2022. Cash provided by operating activities in the six month period ending June 30, 2023, was driven by a reduction in accounts receivable, inventory and prepaid assets of $1,458, $1,119 and $1,035, respectively. 

In addition, deferred revenue and customer deposits increased $1,604 and $1,507 respectively.

Investing Activities

Net cash used in investing activities during the three months ended March 31, 2023 was $1,034 compared to $17,969 during the same period in 2022.

Net cash used in investing activities during the six months ended June 30, 2023 was $2,203 compared to $19,546 during the same period in 2022.

The use of cash in the prior year was driven by completion of the Merger.

We currently do not have any material commitments for capital expenditures as of March 31, 2023;

We currently do not have any material commitments for capital expenditures as of June 30, 2023;

however, we anticipate continued elevated capital expenditures in excess of historical trends through third quarter of 2023 as we complete the modernization and internationalization of our automotive platform in an effort to capture incremental SaaS-based revenue contracts.

Financing Activities

Net cash used in financing activities during the three months ended March 31, 2023 was ($562) compared to net cash provided by financing activities of $19,873 for the same period in 2022.

Net cash used in financing activities during the six months ended June 30, 2023 was $2,510 compared to net cash provided by financing activities of $19,566 for the same period in 2022.

The change is the result of the Company’s completion of equity and debt financing in the first quarter of 2022 to facilitate the Merger, which provided net cash of $10,109 and $9,868, respectively. 

Net cash used in financing activities during the three month period ended March 31, 2023, primarily represents repayments made on the Secured Promissory Note and Term Loan (2022) of $310 and $250, respectively. 

Net cash used in financing activities during the six month period ended June 30, 2023, primarily represents repayments made on the Secured Promissory Note and Term Loan (2022) of $623 and $1,881, respectively. 

Off-Balance Sheet Arrangements

During the three months ended March 31, 2023, we did not engage in any off-balance sheet arrangements set forth in Item 303(a)(4) of Regulation S-K.

During the three and six months ended June 30, 2023, we did not engage in any off-balance sheet arrangements set forth in Item 303(a)(4) of Regulation S-K.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements