What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-06-09 compared with 2022-06-09 · 93 added, 116 removed, 157 unchanged (57% of the section changed)

Discussion and Analysis of Financial Condition and Results of Operations

made in this Quarterly Report on Form 10-Q/A to “we,” “our,” “us,” “Intellicheck,”

or the “Company,” refer to Intellicheck, Inc.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

made in this Quarterly Report on Form 10-Q/A to “we,” “our,” “us,” “Intellicheck,” or

the “Company,” refer to Intellicheck, Inc.

following discussion and analysis of our financial condition and results of operations constitutes management’s review of the factors

that affected our financial and operating performance for the six-month period ended June 30, 2021.

This discussion should be read in

conjunction with the financial statements and notes thereto contained elsewhere in this report and in our Annual Report on Form 10-K

that affected our financial and operating performance for the three-month period ended March 31, 2021.

This discussion should be read

in conjunction with the financial statements and notes thereto contained elsewhere in this report and in our Annual Report on Form 10-K

for the year ended December 31, 2020.

5 unchanged sentences

pending patents.

We also continue to expand our customer base as we completed 18 customer implementations for the six months ended June

We also continue to expand our customer base as we completed four customer implementations for the three months ended

March 31, 2021.

Accounting Policies and the Use of Estimates

4 unchanged sentences

granted under the Company’s equity compensation plans.

Due to the inherent uncertainties involved in making estimates, actual

results reported in future periods may be different from those estimates.

Due to the inherent uncertainties involved in making estimates, actual results

reported in future periods may be different from those estimates.

believe that there are several accounting policies that are critical to understanding our historical and future performance, as these

policies affect the reported amounts of revenue and the more significant areas involving management’s judgments and estimates.

These significant accounting policies relate to revenue recognition, equity compensation, deferred taxes goodwill and intangible

asset valuation and impairment, and commitments and contingencies.

These significant accounting policies relate to revenue recognition, equity compensation, deferred taxes goodwill and intangible asset

valuation and impairment, and commitments and contingencies.

These policies and our procedures related to these policies are described

4 unchanged sentences

We had goodwill of $8,101,661 as

of June 30, 2021.

of March 31, 2021.

This goodwill resulted from the acquisitions of Mobilisa, Inc.

21 unchanged sentences

the goodwill impairment test was not required.

determined that no events occurred or circumstances changed during the six months ended June 30, 2021 that would more likely than not

reduce the fair value of the Company below its carrying amounts.

determined that no events occurred or circumstances changed during the three months ended March 31, 2021 that would more likely than

not reduce the fair value of the Company below its carrying amounts.

We will, however, continue to monitor our stock price and operations

4 unchanged sentences

We determined that no events occurred or circumstances changed during the

six months ended June 30, 2021 that would more likely than not reduce our intangible assets below our carrying amounts.

three months ended March 31, 2021 that would more likely than not reduce our intangible assets below our carrying amounts.

We will, however,

27 unchanged sentences

revenue when we satisfy a performance obligation by transferring control over a product or service to a customer.

for the issuance of equity awards to employees in accordance with ASC Topic 718, which requires that the cost resulting from all

equity payment transactions be recognized in the financial statements.

This pronouncement establishes fair value as the measurement objective

in accounting for equity payment arrangements and requires all companies to apply a fair value based measurement method in accounting

for all equity payment transactions with employees.

account for the issuance of equity awards to employees in accordance with ASC Topic 718, which requires that the cost resulting from

all equity payment transactions be recognized in the financial statements.

This pronouncement establishes fair value as the measurement

objective in accounting for equity payment arrangements and requires all companies to apply a fair value based measurement method in

accounting for all equity payment transactions with employees.

tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial

2 unchanged sentences

to be recovered or settled.

We have recorded a full valuation allowance for our net deferred tax assets as of June 30, 2021, due to the

uncertainty of our ability to realize those assets.

We have recorded a full valuation allowance for our net deferred tax assets as of March 31, 2021, due to

the uncertainty of our ability to realize those assets.

and Contingencies

8 unchanged sentences

of Operations (All figures have been rounded to the nearest $1,000)

of the three months ended June 30, 2021 to the three months ended June 30, 2020

for the three months ended June 30, 2021 increased 160% to $4,797,000 compared to $1,842,000 for the previous year.

The increase in revenues

for the three months ended June 30, 2021 is primarily the result of increased hardware sales totaling approximately $1.4 million.

as a Service (“SaaS”) revenue, which consists of software licensed on a subscription basis, increased $1,563,000 or 94% to

$3,234,000 for the three months ended June 30, 2021 compared to $1,671,000 for the three months ended June 30, 2020.

profit increased by $1,697,000 to $3,329,000 for three months ended June 30, 2021 from $1,632,000 for the three months ended June 30,

Our gross profit, as a percentage of revenues, was 69.4% and 88.6% for the three months ended June 30, 2021 and 2020, respectively.

The decrease in percentage is primarily due to higher hardware sales in the current period which contain lower than usual margins.

hardware sales and related costs, our gross profit as a percentage was 93.3% and 89.8% for the three months ended June 30, 2021 and 2020,

respectively.

The increase in percentage is primarily due to continued growth of our SaaS revenue.

expenses, which consist of selling, general and administrative and research and development expenses, increased $1,763,000 or

73% to $4,165,000 for the three months ended June 30, 2021 compared to $2,402,000 for the three months ended June 30, 2020.

This increase is primarily due to higher equity compensation costs, increased headcount and expanded research and development

Included in this increase is $98,000 of additional equity compensation costs from the restatement disclosed in Note 2 to

the financial statements.

and other income was insignificant in the three-month periods ended June 30, 2021 and 2020.

have paid nominal income taxes for the three months ended June 30, 2021 and 2020.

a result of the factors noted above, the Company had a net loss of $836,000 for the three months ended June 30, 2021 as compared

to a net loss of $760,000 for the three months ended June 30, 2020.

of the six months ended June 30, 2021 to the six months ended June 30, 2020

for the six months ended June 30, 2021 increased 55% to $7,660,000 compared to $4,957,000 for the previous year.

The increase in revenues

in the six months ended June 30, 2021 is primarily the result increased hardware revenues.

SaaS revenue increased $2,099,000 or 54% to

$6,009,000 for the six months ended June 30, 2021 compared to $3,910,000 for the six months ended June 30, 2020.

The increase is primarily

a result of the continued growth we are experiencing in the Financial Services and Retail verticals.

profit increased by $1,915,000 to $5,970,000 for six months ended June 30, 2021 from $4,055,000 for the six months ended June 30, 2020.

Our gross profit, as a percentage of revenues, was 77.9% and 81.8% for the six months ended June 30, 2021 and 2020, respectively.

decrease in percentage is primarily due to an increase in hardware sales which contain lower than usual margins.

Excluding hardware sales

and related costs, our gross profit as a percentage was 93.1% and 91.0% for the six months ended June 30, 2021 and 2020, respectively.

The increase in percentage is primarily due to continued growth of our SaaS revenue.

expenses, which consist of selling, general and administrative and research and development expenses, increased $6,647,000 or

138% to $11,447,000 for the six months ended June 30, 2021 compared to $4,800,000 for the six months ended June 30, 2020.

This increase is primarily due higher equity compensation costs, increased headcount and expanded research and development efforts.

Included in this increase is $3,663,000 of additional equity compensation costs resulting from the restatement discussed in Note 2

to the financial statements.

and other income was insignificant in the six-month periods ended June 30, 2021 and 2020.

have paid nominal income taxes for the six months ended June 30, 2021 and 2020.

a result of the factors noted above, the Company incurred a net loss of $5,461,000 for the six months ended June

30, 2021 compared to a net loss of $734,000 for the six months ended June 30, 2020.

of the three months ended March 31, 2021 to the three months ended March 31, 2020

for the three months ended March 31, 2021 decreased 8% to $2,863,000 compared to $3,115,000 for the previous year.

The decrease in revenues

for the three months ended March 31, 2021 is primarily the result of one-time hardware orders totaling approximately $784,000 in the

Software as a Service (“SaaS”) revenue, which consists of software licensed on a subscription basis, increased

$538,000 or 24% to $2,776,000 for the three months ended March 31, 2021 compared to $2,238,000 for the three months ended March 31, 2020.

profit increased by $220,000 to $2,642,000 for three months ended March 31, 2021 from $2,422,000 for the three months ended March 31,

Our gross profit, as a percentage of revenues, was 92.3% and 77.8% for the three months ended March 31, 2021 and 2020, respectively.

The increase in percentage is primarily due to higher hardware sales in the prior period which contain lower than usual margins.

expenses, which consist of selling, general and administrative and research and development expenses, increased $4,883,000 or 204% to

$7,281,000 for the three months ended March 31, 2021 compared to $2,398,000 for the three months ended March 31, 2020.

This increase

is primarily due to higher equity compensation costs, increased headcount and expanded research and development efforts.

this increase is $3,564,000 of additional equity compensation costs resulting from the restatement discussed in Note 2 to the financial

and other income was insignificant in the three-month periods ended March 31, 2021 and 2020.

have paid nominal income taxes for the three months ended March 31, 2021 and 2020.

a result of the factors noted above, the Company had a net loss of $4,624,000 for the three months ended March 31, 2021 as compared to

net income of $27,000 for the three months ended March 31, 2020.

and Capital Resources (All figures have been rounded to the nearest $1,000)

of June 30, 2021, we had cash of $11,940,000, working capital (defined as current assets minus current liabilities) of $11,335,000,

of March 31, 2021, we had cash of $12,612,000, working capital (defined as current assets minus current liabilities) of $11,550,000,

total assets of $24,168,000 and stockholders’ equity of $20,277,000.

the six months ended June 30, 2021, we used net cash of $1,076,000 in operating activities as compared to net cash used of $262,000 in

the six months ended June 30, 2020.

Cash used in investing activities was $182,000 for the six months ended June 30, 2021 compared to

cash used in investing activities of $110,000 for the six months ended June 30, 2020.

Cash provided by financing activities was $76,000

for the six months ended June 30, 2021 compared to cash provided by financing activities of $11,611,000 for the six months ended June

the three months ended March 31, 2021, we used net cash of $471,000 in operating activities as compared to net cash used of $461,000

in the three months ended March 31, 2020.

Cash used in investing activities was $48,000 for the three months ended March 31, 2021 compared

to cash used in investing activities of $115,000 for the three months ended March 31, 2020.

Cash generated by financing activities was

$10,000 for the three months ended March 31, 2021 as compared to cash provided by financing activities of $235,000 for the three months

ended March 31, 2020.

April 15, 2020 we received an advance of $10,000 from the U.S.

Small Business Administration (“SBA”) as part of the

Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

Small Business Administration (“SBA”) as part of the Coronavirus

Aid, Relief, and Economic Security Act (the “CARES Act”).

We repaid this EIDL advance on December 7, 2020.

did not impute interest on this advance as the rate was determined to be a below-market rate due to the scope exception in ASC 835-30-15-3(e)

for government-mandated interest rates.

On December 27, 2020, Congress passed the Economic Aid to Hard-Hit Small Businesses, Nonprofits

and Venues Act (“the Economic Aid Act”) which relieves companies of their obligations to repay EIDL advances.

of this ruling, the SBA returned this advance, plus interest to the Loan Servicer on February 18, 2021, which was immediately returned

to us and included in Other Income on the Statements of Operations.

We did not impute

interest on this advance as the rate was determined to be a below-market rate due to the scope exception in ASC 835-30-15-3(e) for government-mandated

interest rates.

On December 27, 2020, Congress passed the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (“the

Economic Aid Act”) which relieves companies of their obligations to repay EIDL advances.

As a result of this ruling, the SBA returned

this advance, plus interest to the Loan Servicer on February 18, 2021, which was immediately returned to us and included in Other Income

on the Statements of Operations.

June 23, 2020, we completed a public offering of 1,769,230 shares of our common stock, offered to the public at $6.50 per share.

4 unchanged sentences

or (ii) the collateralized balance in our existing fixed income investment account with Citibank subject to certain limitations.

facility bears interest at a rate consistent of Citibank’s Base Rate (4.75% at June 30, 2021) minus 2%.

facility bears interest at a rate consistent of Citibank’s Base Rate (4.75% at March 31, 2021) minus 2%.

Interest is payable monthly

and as of June 30, 2021, there were no amounts outstanding and unused availability under this facility was $2,000,000.

and as of March 31, 2021, there were no amounts outstanding and unused availability under this facility was $2,000,000.

are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business and including how it may impact our customers,

employees and vendors.

While we have had an increase in SaaS revenues from our customers for the three and six months ended June 30,

2021 compared to the respective three and six months ended June 30, 2020, we are unable to predict the impact that ongoing effects of

the pandemic will have on us going forward, including our financial position, results of operations and cash flows, the impact on our

customers and the related demand for our services due to numerous uncertainties including the effect on the pandemic of variants of the

original COVID-19 strain, such as the Delta variant, coupled with the speed, adoption and effectiveness of the ongoing vaccination roll

Such factors continue to be beyond our control.

We continue to have a decline in revenues from our customers disruptions through March 31, 2021 from COVID-19

and we are unable to predict the impact that this pandemic will have on us going forward, including our financial position, results of

operations and cash flows, the impact on our customers and the related demand for our services due to numerous uncertainties including

the effect on the pandemic of variants of the original COVID-19 strain coupled with the speed, adoption and effectiveness of the ongoing

widespread vaccination roll out.

currently anticipate that our available cash, expected cash from operations and availability under the revolving credit agreement, will

6 unchanged sentences

have filed a universal shelf registration statement on Form S-3 with the Securities and Exchange Commission (“SEC”), which

originally became effective July 19, 2010.

Under the shelf registration statement, we may offer and sell, from time to time in the future

in one or more public offerings, our common stock, preferred stock, warrants, and units.

The aggregate initial offering price of all

securities sold by us will not exceed $25,000,000.

We renewed this registration with the SEC most recently on June 1, 2020 and it was

declared effective June 4, 2020.

became effective July 19, 2010.

Under the shelf registration statement, we may offer and sell, from time to time in the future in one

or more public offerings, our common stock, preferred stock, warrants, and units.

The aggregate initial offering price of all securities

sold by us will not exceed $25,000,000.

We renewed this registration with the SEC on June 1, 2020 and it was declared effective June

specific terms of any future offering, including the prices and use of proceeds, will be determined at the time of any such offering

9 unchanged sentences

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

Adjusted EBITDA is calculated by adjusting net loss for certain

reductions such gains on debt forgiveness and interest and other income and certain addbacks such as income taxes, impairments of long-lived

assets and goodwill, depreciation, amortization and equity 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, amortization, depreciation and equity compensation,

as well as non-operating charges for interest and 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 management uses

to monitor and evaluate financial and operating results.

Adjusted EBITDA is calculated by adjusting net (loss) income for

certain reductions such gains on debt forgiveness and interest and other income and certain addbacks such as income taxes, impairments

of long-lived assets and goodwill, depreciation, amortization and equity 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, amortization, depreciation and equity

compensation, as well as non-operating charges for interest and 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 management

uses to monitor and evaluate financial and operating results.

consider Adjusted EBITDA to be an important indicator of our operational strength and performance of our business and a useful measure

1 unchanged sentence

However, there are significant limitations to the use of Adjusted EBITDA since it excludes gains

on debt forgiveness, interest and other income, impairments of long-lived assets and goodwill, equity compensation, all

of which impact our profitability, as well as depreciation and amortization related to the use of long-term assets which benefit multiple

We believe that these limitations are compensated by providing Adjusted EBITDA only with GAAP net loss and clearly identifying

on debt forgiveness, interest and other income, impairments of long-lived assets and goodwill, equity 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) income 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.

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

by other entities.

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

(loss) income presented in accordance with GAAP.

Adjusted EBITDA as defined by us may not be comparable with similarly named measures

provided by other entities.

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

Three Months Ended

Six Months Ended

Net (loss) income

$ (4,624,000 )

24 unchanged sentences

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/A

Item 2. Management’s Discussion and Analysis