What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-19 compared with 2025-03-31 · 84 added, 47 removed, 77 unchanged (63% of the section changed)

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We are a prominent technology company engaged in developing, integrating and marketing identity verification solutions to address challenges that include commercial retail and banking fraud prevention.

Our products include solutions

for preventing identity fraud across any industry delivered via smartphone, tablet, POS integration or other electronic devices.

Our products include solutions for preventing identity fraud across any industry delivered via smartphone, tablet, POS integration or other electronic devices.

Critical Accounting Policies and the Use of Estimates

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In certain instances, customization services are determined to be essential to the functionality of the delivered software.

Under Accounting Standards Codification (“ASC”) 606, “ Revenue from Contracts with Customers, ” revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration expected to be received in exchange for those goods or services.

Under Accounting Standards Codification (“ASC”) 606,

“ Revenue from Contracts with Customers, ” revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration expected to be received in exchange for those goods or services.

We measure revenue based on the consideration specified in a customer arrangement, and revenue is recognized when the performance obligations in an arrangement are satisfied.

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Reference Note 2, “Significant Accounting Policies,” in the Notes to Financial Statements for additional details on the Company’s recognized and deferred revenue.

The Company also has a revenue model where customers purchase access to the Company's platform that includes a fixed, non-refundable annual access fee associated with a spend commitment that grants the customers stand-ready access to the platform.

Revenue for this access is recognized ratably over the contract term, consistent with the nature of the stand-ready service.

Stock-based Compensation

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We capitalize certain costs related to the development of our platform and other software applications for internal use.

In accordance with authoritative guidance, we begin to capitalize our costs to develop software when preliminary development efforts are successfully completed, management has authorized and committed project funding, and it is probable that the project will be completed and the software will be used as intended.

In accordance with authoritative guidance, we capitalize our costs to develop software when preliminary development efforts are successfully completed, management has authorized and committed project funding, and it is probable that the project will be completed and the software will be used as intended.

We stop capitalizing these costs when the software is substantially complete and ready for its intended use, including the completion of all significant testing.

These costs are amortized on a straight-line basis over the estimated useful life of the related asset.

capitalize costs related to specific upgrades and enhancements when it is probable the expenditure will result in additional functionality and expense costs incurred for maintenance and minor upgrades and enhancements.

We also capitalize costs related to specific upgrades and enhancements when it is probable the expenditure will result in additional functionality and expense costs incurred for maintenance and minor upgrades and enhancements.

Costs incurred prior to meeting these criteria together with costs incurred for training and maintenance are expensed as incurred and recorded within research and development expenses in the statements of operations.

We exercise judgment in determining the point at which various projects may be capitalized, in assessing the ongoing value of the capitalized costs and in determining the estimated useful lives over which the costs are amortized.

Income Taxes and Valuation Allowance

We account for income taxes in accordance with ASC 740, Income Taxes.

Under this standard, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as for net operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

We establish a valuation allowance against deferred tax assets when, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

In making this determination, we consider all available positive and negative evidence, including:

• Our cumulative results for the most recent three-year period, adjusted for permanent differences between book and taxable income;

• The nature, frequency, and magnitude of current and cumulative financial reporting income and losses;

• Our forecasts of future taxable income, considering the predictability and sustainability of recent operating trends;

• The length of time net operating loss and tax credit carryforwards remain available, including the distinction between carryforwards with definite expiration dates and those that carry forward indefinitely;

• The nature and timing of reversals of existing taxable and deductible temporary differences;

• Available tax planning strategies that could be implemented, if necessary, to accelerate taxable income.

As of December 31, 2025, we maintained a full valuation allowance of approximately $6,677 against our net deferred tax assets.

Our three-year cumulative result through December 31, 2025, after adjusting for permanent differences, remained in a loss position, which constitutes significant objective negative evidence under ASC 740.

While we generated pre-tax income of approximately $1,331 during the year ended December 31, 2025, representing a meaningful improvement from prior-year losses of $2,042 in 2023 and $885 in 2024, we have not yet established a sustained pattern of profitability sufficient to overcome this negative evidence.

This assessment requires significant judgment.

Should we continue to generate taxable income in future periods such that the three-year cumulative result transitions to a positive position, and should we conclude that the weight of positive evidence outweighs the negative evidence, we may determine that a partial or full release of the valuation allowance is appropriate.

Any such release would be recorded as a non-cash deferred income tax benefit in the period the determination is made and could be material to our results of operations.

Based on the gross deferred tax assets as of December 31, 2025, a full release of the valuation allowance would result in a tax benefit of approximately $6,677.

Results of Operations

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OPERATING EXPENSES .

Operating expenses, which consist of selling, general and administrative expenses and research and development expenses, decreased by $(473), or (2.4)% to $19,334 for the year ended December 31, 2024 from $19,807 for the year ended December 31, 2023.

Selling, general and administrative expenses increased by $350, or 2%, to $15,477 for the year ended December 31, 2024, compared to $15,127 for the year ended December 31, 2023.

This increase was primarily driven by higher general and administrative costs, specifically headcount-related expenses tied to severance expenses.

Research and development expenses decreased $823, or 18%, to $3,857 for the year ended December 31, 2024, compared to $4,680 for the year ended December 31, 2023.

This decrease was primarily due to the capitalization of certain software development expenses, as well as lower personnel costs and their related stock-compensation expenses.

INTEREST AND OTHER INCOME .

Interest income was $283 for the year ended December 31, 2024, compared to interest income of $234 during the year ended December 31, 2023.

Operating expenses, which consist of selling, general and administrative expenses and research and development expenses, increased by $80, or 0.4% to $19,414 for the year ended December 31, 2025 from $19,334 for the year ended December 31, 2024.

Selling, general and administrative expenses decreased by $(1,377), or 9%, to $14,100 for the year ended December 31, 2025, compared to $15,477 for the year ended December 31, 2024.

This decrease was primarily driven by lower general and administrative costs, specifically headcount-related expenses tied to severance expenses.

Research and development expenses increased $1,457, or 38%, to $5,314 for the year ended December 31, 2025, compared to $3,857 for the year ended December 31, 2024.

This increase was primarily due to less capitalization of certain software development expenses, as well as higher personnel costs and their related stock-compensation expenses.

OTHER INCOME AND EXPENSE .

Interest and other income, net, was $245 for the year ended December 31, 2025, compared to interest income of $283 during the year ended December 31, 2024.

INCOME TAXES .

Our provision for income taxes was $33 for the year ended December 31, 2024, compared to a benefit from income taxes of $(62) during the year ended December 31, 2023.

As a result of the factors noted above, we had net losses of $(918), or $(0.05) per share, for the year ended December 31, 2024 as compared to a net loss of $(1,980), or $(0.10) per share, for the year ended December 31, 2023.

Our provision for income taxes was $58 for the year ended December 31, 2025, compared to $33 during the year ended December 31, 2024.

As a result of the factors noted above, we had net income of $1,273, or $0.07 per share, for the year ended December 31, 2025 as compared to a net loss of $(918), or $(0.05) per share, for the year ended December 31, 2024.

Liquidity and Capital Resources

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For the year ended December 31, 2025, our cash increased by $4,984.

Cash used in operating activities was $(2,694) for the year ended December 31, 2024 as compared to cash used in operating activities of $(647) for the year ended December 31, 2023.

Cash provided by investing activities for the year ended December 31, 2024 was $2,895 as compared to cash used in investing activities of $(414) for the year ended December 31, 2023.

Cash provided by financing activities was $485 for the year ended December 31, 2024 as compared to cash used in financing activities of $(155) for the year ended December 31, 2023.

On February 6, 2019, we entered a revolving credit facility with Citi Personal Wealth Management that allows for borrowings up to the lesser of (i) $2,000 or (ii) the collateralized balance in our existing fixed income investment account with Citi Personal Wealth Management.

The facility bears interest at a rate consistent of Citi Personal Wealth Management’s Base Rate (9.00% and 8.50% at December 31, 2024 and December 31, 2023, respectively) minus 2% subject to certain limitations.

Interest is payable monthly and as of December 31, 2023, there were no amounts outstanding

under this facility and unused availability under this facility was $2,000.

The Company is not subject to any financial covenants related to this revolving line of credit.

This line will remain open as long as the Company keeps a depository relationship with the financial institution.

We currently anticipate that our available cash, expected cash from operations and availability under the revolving credit agreement will be sufficient to meet our anticipated working capital and capital expenditure requirements for at least the next 12 months from the date of filing of these financial statements.

Cash provided by operating activities was $4,541 for the year ended December 31, 2025 as compared to cash used in operating activities of $(2,694) for the year ended December 31, 2024.

Cash used in investing activities for the year ended December 31, 2025 was $(265) as compared to cash provided by investing activities of $2,895 for the year ended December 31, 2024.

Cash provided by financing activities was $708 for the year ended December 31, 2025 as compared to cash provided by financing activities of $485 for the year ended December 31, 2024.

We currently anticipate that our available cash and expected cash from operations will be sufficient to meet our anticipated working capital and capital expenditure requirements for at least the next 12 months from the date of filing of these financial statements.

We keep the option open to raise additional funds to respond to business contingencies which may include the need to fund more rapid expansion, fund additional marketing expenditures, develop new markets for our technology, enhance our operating infrastructure, respond to competitive pressures, or acquire complementary businesses or necessary technologies.

In August 2025, we filed an S-3, also know as a Shelf Registration, that would allow us to sell shares in the market if the need arises.

There can be no assurance that we will be able to secure the additional funds when needed or obtain such on terms satisfactory to us, if at all.

Adjusted EBITDA and Use as a Non-GAAP Measure

Use of Non-GAAP Measures

Adjusted Gross Profit

We use Adjusted Gross Profit as a non-GAAP financial performance measurement.

Adjusted Gross Profit is calculated by adjusting gross profit for the reduction of amortization expense.

Adjusted Gross Profit is provided to investors to supplement the results of operations reported in accordance with GAAP.

We believe Adjusted Gross Profit is important because it focuses on the current operating performance, as amortization expense does not accurately reflect the current costs required to maintain the operational usage of our service.

Rather, amortization expense reflects the allocation of historical software development costs over their estimated useful lives.

As an indicator of our operating performance, Adjusted Gross Profit should not be considered an alternative to, or more meaningful than, gross profit as determined in accordance with GAAP.

Our Adjusted Gross Profit may not be

comparable to a similarly titled measure of another company because other entities may not calculate Adjusted Gross Profit in the same manner.

Year Ended December 31,

Revenues $ 22,666 $ 19,997

Cost of revenues, exclusive of amortization 1,667 1,650

Amortization allocable to cost of revenues 499 181

Gross profit 20,500 18,166

Amortization allocable to cost of revenues 499 181

Adjusted gross profit 20,999 18,347

Gross profit as a percentage of revenues 90.4 % 90.8 %

Adjusted gross profit as a percentage of revenues 92.6 % 91.7 %

Adjusted EBITDA

We use Adjusted EBITDA as a non-GAAP financial performance measurement.

Adjusted EBITDA is calculated by adjusting net loss for certain reductions such as interest and other income (expense) and certain addbacks such as non-restructuring severance expenses, sales tax accrual, provisions for income taxes, depreciation, amortization and stock-based compensation expense.

Adjusted EBITDA is calculated by adjusting net income (loss) for certain reductions such as restructuring severance expenses, interest and other income, provisions for income taxes, depreciation, amortization and stock-based compensation expense.

Adjusted EBITDA is provided to investors to supplement the results of operations reported in accordance with GAAP.

Management believes that Adjusted EBITDA provides an additional tool for investors to use in comparing our financial results with other companies that also use Adjusted EBITDA in their communications to investors.

By excluding non-cash charges such as impairments of long-lived assets and goodwill, sales tax accrual, amortization, depreciation and stock-based compensation, as well as non-operating charges for interest and provisions for income taxes, investors can evaluate our operations and can compare the results on a more consistent basis to the results of other companies.

We have included any severance-related expenses for terminated positions that will not be replaced as "non-restructuring severance expenses" within Adjusted EBITDA.

In addition, Adjusted EBITDA is one of the primary measures management uses to monitor and evaluate financial and operating results.

By excluding non-cash charges such as amortization, depreciation and stock-based compensation, as well as non-operating charges for interest and provisions for income taxes, investors can evaluate our operations and can compare the results on a more consistent basis to the results of other companies.

In addition, Adjusted EBITDA is one of the primary measures that management uses to monitor and evaluate financial and operating results.

We consider Adjusted EBITDA to be an important indicator of our operational strength and performance of our business and a useful measure of our historical operating trends.

However, there are significant limitations to the use of Adjusted EBITDA since it excludes non-restructuring severance expenses, sales tax accrual, provisions for income taxes, interest and other (expense) income, impairments of long-lived assets and goodwill, stock-based compensation expense, all of which impact our profitability, as well as depreciation and amortization related to the use of long-term assets which benefit multiple periods.

We believe that these limitations are compensated by providing Adjusted EBITDA only with GAAP net loss and clearly identifying the difference between the two measures.

Consequently, Adjusted EBITDA should not be considered in isolation or as a substitute for net loss presented in accordance with GAAP.

However, there are significant limitations to the use of Adjusted EBITDA since it excludes restructuring severance expenses, interest and other income, provisions for income taxes, stock-based compensation expense, all of which impact our profitability, as well as depreciation and amortization related to the use of long-term assets which benefit multiple periods.

We believe that these limitations are compensated by providing Adjusted EBITDA only with GAAP net income (loss) and clearly identifying the difference between the two measures.

Consequently, Adjusted EBITDA should not be considered in isolation or as a substitute for net income (loss) presented in accordance with GAAP.

Adjusted EBITDA as defined by us may not be comparable with similarly named measures provided by other companies.

The reconciliation of GAAP net loss to Non-GAAP Adjusted EBITDA is as follows:

The reconciliation of GAAP net income (loss) to Non-GAAP Adjusted EBITDA is as follows:

Year Ended December 31,

Net loss $ (918) $ (1,980)

Net income (loss) $ 1,273 $ (918)

Reconciling items:

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Provision for income taxes 58 33

Sales tax accrual — 227

Interest income

Other income, net (245) (283)

Depreciation and amortization 703 436

Stock-based compensation including liability classified awards 876 1,596

Stock-based compensation

Adjusted EBITDA $ 2,566 $ 520

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Recently Adopted Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures, which enhances reporting requirements under Topic 280.

The enhanced disclosure requirements include:

title and position of the Chief Operating Decision Maker (CODM), significant segment expenses provided to the CODM, extending certain annual disclosures to interim periods, clarifying single reportable segment entities must apply ASC 280 in its entirety, and permitting more than one measure of segment profit or loss to be reported under certain circumstances.

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740), which establishes new income tax disclosure requirements in addition to modifying and eliminating certain existing requirements.

The new guidance requires consistent categorization and greater disaggregation of information in the rate reconciliation, as well as further disaggregation of income taxes paid.

This change is effective for annual periods beginning after December 15, 2024.

The Company adopted this standard effective January 1, 2025 and was applied retrospectively.

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Except as discussed below, we do not expect the impact of the future adoption of recently issued accounting pronouncements to have a material impact on our financial statements.

The new guidance requires consistent categorization and greater disaggregation of information in the rate reconciliation, as well as further disaggregation of income taxes paid.

This change is effective for annual periods beginning after December 15, 2024.

This change will apply on a prospective basis to annual financial statements for periods beginning after the effective date.

However, retrospective application in all prior periods presented is permitted.

The Company is currently evaluating the impact of this ASU on its financial statements.

In November 2024, the FASB issued ASU 2024-03, Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

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The Company is in the process of evaluating the effect that the adoption of these standards will have on its financial statements.

In July 2025, the FASB issued ASU 2025-05, Financial Instruments-Credit Losses (Topic 326):

Measurement of Credit Losses for Accounts Receivable and Contract Assets .

This standard allows entities to apply a practical expedient when estimating expected credit losses for current accounts receivable and current contract assets that arise from transactions accounted for under ASC 606, Revenue from Contracts with Customers.

The standard is effective for all the entities for fiscal years beginning after December 15, 2025, including interim periods within those fiscal years.

Early adoption is permitted, and the standard is to be applied prospectively.

The Company will adopt this ASU in the first quarter of 2026 and adoption is not expected to have a material impact on our consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40):

Targeted Improvements to the Accounting for Internal-Use Software , which modernizes the accounting for internal-use software by replacing the previous stage-based model and aligning the capitalization process with current

development practices, especially agile and iterative methods.

ASU 2025-06 is effective for annual reporting periods beginning after December 15, 2027, and may be applied prospectively, retrospectively, or using a modified transition approach.

The Company is in process of evaluating the impact of the adoption of this ASU on its financial statements.

Off-Balance Sheet Arrangements

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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-K

Item 7. Management’s Discussion and Analysis