What changed in this filing

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Item 1. Financial Statements

2023-08-14 compared with 2023-05-11 · 151 added, 103 removed, 389 unchanged (40% of the section changed)

6 unchanged sentences

Short-term investments 4,882 4,880

Accounts receivable, net of allowance of $ 30 and $ 20 at March 31, 2023 and December 31, 2022, respectively

Accounts receivable, net of allowance of $ 36 and $ 20 at June 30, 2023 and December 31, 2022, respectively

Other current assets 786 608

21 unchanged sentences

30,000 shares authorized;

Series A Convertible preferred stock, zero shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Series A Convertible preferred stock, zero shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Common stock - $ .001 par value;

40,000,000 shares authorized;

19,215,863 and 18,957,366 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

19,251,920 and 18,957,366 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 150,159 149,233

6 unchanged sentences

(In thousands except shares and per share amounts)

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2023 2022 2023 2022

REVENUES $ 4,716 $ 4,008 $ 8,970 $ 7,403

20 unchanged sentences

(In thousands except number of shares)

Three months ended March 31, 2023

Three months ended June 30, 2023

Common Stock Additional

3 unchanged sentences

Shares Amount

BALANCE, March 31, 2023 19,215,863 $ 19 $ 149,875 $ ( 132,064 ) $ 17,830

Stock-based compensation – – 338 – 338

Issuance of shares for vested restricted stock grants 60,777 – – – –

Shares forfeited in exchange for withholding taxes ( 24,720 ) – ( 54 ) – ( 54 )

Net loss – – – ( 777 ) ( 777 )

BALANCE, June 30, 2023 19,251,920 $ 19 $ 150,159 $ ( 132,841 ) $ 17,337

Three months ended June 30, 2022

Common Stock Additional

Capital Accumulated

Deficit Total

Stockholders’

Shares Amount

BALANCE, March 31, 2022 18,674,980 $ 19 $ 147,284 $ ( 128,365 ) $ 18,938

Stock-based compensation – – 520 – 520

Issuance of shares for vested restricted stock grants 200,600 – – – –

Net loss – – – ( 1,098 ) ( 1,098 )

BALANCE, June 30, 2022 18,875,580 $ 19 $ 147,804 $ ( 129,463 ) $ 18,360

See accompanying notes to unaudited condensed financial statements.

INTELLICHECK, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands except number of shares)

Six months ended June 30, 2023

Common Stock Additional

Capital Accumulated

Deficit Total

Stockholders’

Shares Amount

BALANCE, December 31, 2022 18,957,366 $ 19 $ 149,233 $ ( 130,748 ) $ 18,504

1 unchanged sentence

Issuance of common stock for vested restricted stock units and earned performance stock units 319,274 — — — —

Shares forfeited in exchange for withholding taxes ( 24,720 ) – ( 54 ) — ( 54 )

Net loss — — — ( 2,093 ) ( 2,093 )

BALANCE, March 31, 2023 19,215,863 $ 19 $ 149,875 $ ( 132,064 ) $ 17,830

Three months ended March 31, 2022

BALANCE, June 30, 2023 19,251,920 $ 19 $ 150,159 $ ( 132,841 ) $ 17,337

Six months ended June 30, 2022

Common Stock Additional

7 unchanged sentences

Net loss – – – ( 2,566 ) ( 2,566 )

BALANCE, March 31, 2022 18,674,980 $ 19 $ 147,284 $ ( 128,365 ) $ 18,938

BALANCE, June 30, 2022 18,875,580 $ 19 $ 147,804 $ ( 129,463 ) $ 18,360

See accompanying notes to unaudited condensed financial statements

2 unchanged sentences

(In thousands)

Three months ended March 31,

Six months ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss $ ( 2,093 ) $ ( 2,566 )

Adjustments to reconcile net loss to net cash (used in) provided by

operating activities

Adjustments to reconcile net loss to net cash used in operating activities

Depreciation and amortization 139 139

4 unchanged sentences

(Increase) in accounts receivable ( 133 ) ( 279 )

(Increase) in other current assets and long term assets ( 145 ) ( 49 )

Increase (decrease) in accounts payable and accrued expenses 712 ( 1,149 )

Increase (decrease) in deferred revenue 1,121 ( 236 )

Net cash provided by (used in) provided by operating activities 233 ( 2,397 )

(Increase) decrease in other current assets and long-term assets ( 178 ) 107

(Decrease) in accounts payable and accrued expenses ( 22 ) ( 497 )

Increase in deferred revenue 412 507

Net cash used in operating activities ( 856 ) ( 1,538 )

CASH FLOWS FROM INVESTING ACTIVITIES:

3 unchanged sentences

Proceeds of insurance financing arrangement 49 —

Repayment of insurance financing arrangement ( 106 ) —

Net cash (used in) by financing activities ( 57 ) —

Net increase (decrease) in cash 159 ( 2,528 )

Withholding taxes paid on RSU vesting ( 54 ) —

Repayment of insurance financing arrangements ( 119 ) —

Net cash used in financing activities ( 124 ) —

Net decrease in cash ( 1,011 ) ( 1,694 )

CASH, beginning of period 5,196 13,651

2 unchanged sentences

Cash paid for interest $ 2 $ —

Cash paid for income taxes $ 87 $ —

See accompanying notes to unaudited condensed financial statements.

INTELLICHECK, INC.

NOTES TO FINANCIAL STATEMENTS

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(All dollar amounts are rounded to thousands, except share data)

1 unchanged sentence

Intellicheck, Inc.

(the “Company” or “Intellicheck”) is a prominent technology company that is engaged in developing, integrating and marketing identity verification solutions to address challenges that include commercial retail and banking fraud prevention.

(the “Company” or “Intellicheck”) is a prominent technology company engaged in developing, integrating and marketing identity verification solutions to address challenges that include commercial retail and banking fraud prevention.

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

Intellicheck continues to develop and release innovative products based upon its rich patent portfolio consisting of eighteen (18) U.S.

Intellicheck continues to develop and release innovative products based upon its rich patent portfolio consisting of ten (10) U.S.

and one Canadian patents, as well as three U.S.

patents pending.

For the three months ended March 31, 2023, the Company incurred a net loss of $( 1,316 ) and generated cash from operations of $ 233 .

As of March 31, 2023, the Company had cash and cash equivalents of $ 5,355 , short-term investments of $ 4,881 , working capital (defined as current assets minus current liabilities) of $ 8,752 and an accumulated deficit of $( 132,064 ).

For the six months ended June 30, 2023, the Company incurred a net loss of $( 2,093 ) and used cash in operations of $( 856 ).

As of June 30, 2023, the Company had cash and cash equivalents of $ 4,185 , short-term investments of $ 4,882 , working capital (defined as current assets minus current liabilities) of $ 8,312 and an accumulated deficit of $( 132,841 ).

Based on the Company’s business plan and cash resources, Intellicheck expects its existing and future resources and revenues generated from operations to satisfy its working capital requirements for at least the next 12 months from the date of filing.

1 unchanged sentence

Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X.

Accordingly, they do not include all of the information and notes required by generally accepted accounting principles in the United States of America for complete financial statements.

In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments necessary for a fair presentation of the Company’s financial position at March 31, 2023 and the results of operations, stockholders’ equity and cash flows for the three months ended March 31, 2023 and 2022.

The accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X.

Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements.

In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments necessary for a fair presentation of the Company’s financial position at June 30, 2023, the results of operations, and stockholders’ equity for the three and six months ended June 30, 2023 and 2022 and cash flows for the six months ended June 30, 2023 and 2022.

All such adjustments are of a normal and recurring nature.

Interim financial statements are prepared on a basis consistent with the Company’s annual financial statements.

Results of operations for the three-month period ended March 31, 2023, are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2023.

The balance sheet as of December 31, 2022 has been derived from the audited financial statements at that date but does not include all of the information and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial statements.

References in this Quarterly Report on Form 10-Q to “authoritative guidance” is to the Accounting Standards Codification issued by the Financial Accounting Standards Board (“FASB”).

Results of operations for the three and six-month periods ended June 30, 2023, are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2023.

The balance sheet as of December 31, 2022 has been derived from the audited financial statements at that date but does not include all of the information and notes required by GAAP for complete financial statements.

References in this Quarterly Report on Form 10-Q to “authoritative guidance” is to the Accounting Standards Codification ("ASC") issued by the Financial Accounting Standards Board (“FASB”).

For further information, refer to the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

2 unchanged sentences

2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments to measure credit losses on financial instruments, including trade receivables.

Measurement of Credit Losses on Financial Instruments ("ASU 2016-13") to measure credit losses on financial instruments, including trade receivables.

The guidance eliminates the probable initial recognition threshold that was previously required prior to recognizing a credit loss on financial instruments.

The credit loss estimate can now reflect an entity’s current estimate of all

future expected credit losses.

Under the previous guidance, an entity only considered past events and current conditions.

The credit loss estimate can now reflect an entity’s current estimate of all future expected credit losses.

Under the previous guidance, an entity only considered past

events and current conditions.

The guidance is effective for smaller reporting companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The adoption of certain amendments of this guidance must be applied on a modified retrospective basis and the adoption of the remaining amendments must be applied on a prospective basis.

The Company concluded that the adoption of this standard did not have a material impact on its financial statements because of the short-term nature of it's outstanding accounts receivable and there have been no significant forward-looking economic conditions identified by the company that would impact its short-term investments.

The Company concluded that the adoption of this standard, on January 1, 2023, did not have a material impact on its financial statements because of the short-term nature of its outstanding accounts receivable and there have been no significant forward-looking economic conditions identified by the Company that would impact its short-term investments.

Use of Estimates

The preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the Company’s financial statements and accompanying notes.

The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s financial statements and accompanying notes.

Significant estimates and assumptions that affect amounts reported in the financial statements include impairment consideration and valuation of goodwill and intangible assets, deferred tax valuation allowances, allowance for doubtful accounts, revenue recognition (including breakage revenue) and the fair value of stock options under the Company’s stock-based compensation plan.

8 unchanged sentences

Under the new model, Intellicheck’s allowance for doubtful accounts reflects the Company’s estimate of all expected future losses from its current customer balances.

Under the new guidance we have applied a loss rate method which takes historical data as the basis for calculating the allowance amount, along with accounting for other factors like current and forecasted market conditions, and potential future impacts to the industry.

Under the new guidance, the Company has applied a loss rate method which takes historical data as the basis for calculating the allowance amount, along with accounting for other factors like current and forecasted market conditions, and potential future impacts to the industry.

In estimating whether accounts receivable can be collected, the Company performs evaluations of customers and continuously monitors collections and payments and estimates an allowance for credit losses based on collections experience to date and any specific collection issues that have been identified.

1 unchanged sentence

Cash and Cash Equivalents

We classify as cash equivalents time deposits and other investments that are highly liquid and have maturities of three months or less at the date of purchase.

Our cash and cash equivalents consist primarily of cash on deposits with banks and is maintained with major financial institutions in the United States.

We classify time deposits and other investments that are highly liquid and have maturities of three months or less at the date of purchase as cash equivalents.

Our cash and cash equivalents consist primarily of both cash on deposits with banks, which are maintained with major financial institutions in the United States, and money market funds.

Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000, however amounts may exceed FDIC insured limits.

13 unchanged sentences

The Company performed its annual impairment test of goodwill in the fourth quarter for the year ended December 31, 2022.

For the three months ended March 31, 2023 and 2022, the Company determined no triggering events existed and as such no impairment charge was required.

For the six months ended June 30, 2023 and 2022, the Company determined no triggering events existed and as such no impairment charge was required.

Intangible Assets

3 unchanged sentences

To determine recoverability of its long-lived assets, the Company evaluates the probability that future undiscounted net cash flows will be less than the carrying amount of the assets.

There were no impairment charges recognized during the three months ended March 31, 2023 and 2022.

There were no impairment charges recognized during the three and six months ended June 30, 2023 and 2022.

Advertising Costs

Advertising costs, which are charged to expense as incurred, were $ 199 and $ 149 for the three months ended March 31, 2023 and 2022, respectively.

Advertising costs, which are expensed as incurred, were $ 371 and $ 390 for the six months ended June 30, 2023 and 2022, respectively.

Advertising costs were $ 172 and $ 241 for the three months ended June 30, 2023 and 2022, respectively.

These costs are recorded as a component of selling, general and administrative expenses on the Statements of Operations.

3 unchanged sentences

The Company has elected to contribute a matching contribution equal to 50 % of the first 6 % of an eligible employee’s deferral election.

The Company’s matching contributions were $ 27 and $ 29 for the three months ended March 31, 2023 and 2022, respectively.

The Company’s matching contributions were $ 54 and $ 60 for the six months ended June 30, 2023 and 2022, respectively.

The Company’s matching contributions were $ 27 and $ 31 for the three months ended June 30, 2023 and 2022, respectively.

These costs were recorded as a component of selling, general and administrative expenses on the Statements of Operations.

2 unchanged sentences

All other shipping and handling costs are included as a component of selling, general and administrative expenses on the Statements of Operations.

The Company accounts for income taxes in accordance with ASC 740, “Income Taxes.” 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 and net operating loss carryforwards.

statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

The Company has recorded a full valuation allowance for its net deferred tax assets as of March 31, 2023 and December 31, 2022, as it is more likely than not these assets may not be fully realized due to the uncertainty of the realizability of those assets.

The Company has recorded a full valuation allowance for its net deferred tax assets as of June 30, 2023 and December 31, 2022, as it is more likely than not these assets may not be fully realized due to the uncertainty of the realizability of those assets.

Fair Value of Financial Instruments

1 unchanged sentence

The Company’s financial instruments include cash and cash equivalents, short-term investments, accounts receivable, other current assets, accounts payable and accrued expenses.

At March 31, 2023 and December 31, 2022, the carrying value of the Company’s financial instruments approximated fair value, due to their short-term nature.

Financial Accounting Standards Board (“FASB”) guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable.

At June 30, 2023 and December 31, 2022, the carrying value of the Company’s financial instruments approximated fair value, due to their short-term nature.

FASB guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable.

Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions.

3 unchanged sentences

Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities.

The Company's Level 1 assets consisted primarily of cash and cash equivalents as well as short-term investments totaling $ 10.2 and $ 10.1 million as of March 31, 2023 and December 31, 2022 respectively.

The Company's Level 1 assets consisted primarily of cash and cash equivalents as well as short-term investments totaling $ 9.1 and $ 10.1 million as of June 30, 2023 and December 31, 2022 respectively.

• Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active).

Level 2 includes financial instruments that are valued using models or other valuation methodologies.

The Company had $ 95 and $ 54 of Level 2 liabilities as of March 31, 2023 and December 31, 2022 respectively, for the liability-classified stock options.

The Company had $ 79 and $ 54 of Level 2 liabilities as of June 30, 2023 and December 31, 2022 respectively, for the liability-classified stock options.

The fair value of these awards were determined by utilizing a Black-Scholes option pricing model.

1 unchanged sentence

Financial instruments are considered Level 3 when the fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable.

The Company had no Level 3 assets or liabilities as of March 31, 2023 and December 31, 2022.

The Company had no Level 3 assets or liabilities as of June 30, 2023 and December 31, 2022.

Revenue Recognition and Deferred Revenue

10 unchanged sentences

Revenue for these transactions is recognized on a per transaction basis.

The Company estimates the amount of unused transactions at the end of each contract period and recognizes a portion of that revenue as breakage revenue each reporting period.

The Company estimates the amount of unused transactions at the end of each contract period and recognizes a portion of

that revenue as breakage revenue each reporting period.

If the Company expects the customer to use all transactions in the specified service period, the Company will recognize the transaction price as revenue in the specified service period as the promised units of service are transferred to the customer.

10 unchanged sentences

Accordingly, the revenue should be recognized over time, under the fixed pricing model, based on the usage of the hosted subscription services, which can vary from month to month.

Under the per-scan revenue model, the customer requires access to our hosted subscription service but revenue is recognized each time the customer scans an identity document.

Under the per-scan revenue model, the customer requires access to the Company's hosted subscription service but revenue is recognized each time the customer scans an identity document.

Equipment Revenue

16 unchanged sentences

In the following tables, revenue is disaggregated by product and service and the timing of revenue recognition.

For the Three Months Ended March 31,

For the Three Months Ended June 30,

Products and services

6 unchanged sentences

$ 4,716 $ 4,008

For the Six Months Ended June 30,

Products and services

Software as a Service (SaaS) $ 8,891 $ 7,281

Equipment 46 117

$ 8,970 $ 7,403

Timing of revenue recognition

Products transferred at a point in time $ 79 $ 122

Services transferred over time 8,891 7,281

$ 8,970 $ 7,403

Contract balances

The current portion of deferred revenue at March 31, 2023, December 31, 2022 and December 31, 2021 was $ 2,027 , $ 906 and $ 1,266 , respectively, and primarily consists of revenue that is recognized over time for software license contracts and hosted subscription services.

The current portion of deferred revenue at June 30, 2023, December 31, 2022 and December 31, 2021 was $ 1,319 , $ 906 and $ 1,266 , respectively, and primarily consists of revenue recognized over time for software license contracts and hosted subscription services.

The changes in these balances are related to purchases of a predetermined number of transactions, partially offset by the satisfaction or partial satisfaction of these contracts.

Of the December 31, 2022 balance, $ 342 was recognized as revenue in the three months ended March 31, 2023.

The noncurrent deferred revenue balances were $ 1 , $ 1 and $ 8 as of March 31, 2023, December 31, 2022 and December 31, 2021, respectively.

Of the December 31, 2022 balance, $ 250 and $ 592 were recognized as revenue in the three and six months ended June 30, 2023, respectively.

The noncurrent deferred revenue balances were $ 0 , $ 1 and $ 8 as of June 30, 2023, December 31, 2022 and December 31, 2021, respectively.

Accounts Receivable

Accounts Receivable, net of allowance for doubtful accounts, at March 31, 2023, December 31, 2022 and January 1, 2020 was $ 3,527 , $ 2,637 , and $ 2,192 , respectively.

The allowance for doubtful accounts at March 31, 2023, December 31, 2022 and December 31, 2021 was $ 30 , $ 20 and $ 3 , respectively.

Accounts Receivable, net of allowance for doubtful accounts, at June 30, 2023, December 31, 2022 and January 1, 2022 was $ 2,754 , $ 2,637 , and $ 2,189 , respectively.

The allowance for doubtful accounts at June 30, 2023, December 31, 2022 and December 31, 2021 was $ 36 , $ 20 and $ 3 , respectively.

Transaction price allocated to the remaining performance obligations

12 unchanged sentences

The Company performs ongoing credit evaluations, generally does not require collateral, and establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of customers, historical trends, and other information.

During the three-month period ended March 31, 2023, the Company made sales to three customers that accounted for approximately 39 % of total revenues, 16 %, 13 % and 10 %, respectively.

During the six-month period ended June 30, 2023, the Company made sales to three customers that accounted for approximately 48 % of total revenues, 22 %, 13 % and 13 %, respectively.

The revenue was primarily associated with commercial identity sales customers.

These three customers represented 54 % of total accounts receivable at March 31, 2023, 28 %, 16 % and 10 %, respectively.

During the three-month period ended March 31, 2022, the Company made sales to three customers that accounted for approximately 53 % of total revenues, 23 %, 19 % and 11 %, respectively.

These three customers, in addition to one other customer, represented 63 % of total accounts receivable at March 31, 2022, 33 %, 10 %, 1 % and 19 %, respectively.

These three customers, in addition with one other customer, represented 63 % of total accounts receivable at June 30, 2023, 37 %, 8 %, 1 %, and 17 % respectively.

During the six-month period ended June 30, 2022, the Company made sales to three customers that accounted for approximately 53 % of total revenues, 22 %, 18 % and 13 %, respectively.

These three customers, in addition with one other customer, represented 70 % of total accounts receivable at June 30, 2022, 24 %, 19 %, 9 % and 18 %, respectively.

That revenue was also associated with commercial identity sales customers.

2 unchanged sentences

Diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of shares of common stock and potentially dilutive common stock equivalents outstanding during the period.

The dilutive effect of outstanding options, warrants and restricted stock is reflected in diluted earnings per share by application of the treasury stock method.

The dilutive effect of outstanding options, warrants and restricted stock is reflected in diluted earnings

per share by application of the treasury stock method.

The calculation of diluted net loss per share excludes all anti-dilutive shares.

1 unchanged sentence

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Net Loss $ ( 777 ) $ ( 1,098 ) $ ( 2,093 ) $ ( 2,566 )

5 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Stock options 1,202,044 1,144,335 1,202,044 1,144,335

9 unchanged sentences

The Company has accounted for and disclosed the purchase of its short-term investments in accordance with ASC 320 ("Investments - Debt Securities").

The following table summarizes the fair value of cash and cash equivalents, and short-term investments as well as any gross unrealized holding gains and losses as of March 31, 2023.

The following table summarizes the fair value of cash and cash equivalents, and short-term investments as well as any gross unrealized holding gains and losses as of June 30, 2023.

Due to the nature of these assets and the short-term nature of the U.S.

treasury notes being held to maturity, both these cash and cash equivalents and short-term investments fall under the Level 1 fair value hierarchy as referenced in Note 2.

As of March 31, 2023

As of June 30, 2023

Amortized cost Gross unrealized holding gains Gross unrealized holding losses Estimated fair value

4 unchanged sentences

(1) These U.S.

treasury notes are classified as "held-to-maturity" as they were purchased in December 2022 and mature in July 2023.

Since these securities are intended to be held until maturity and mature in less than a year from its purchase date, any unrealized gains or losses are not realized until its maturity date and the amortized cost of these securities can be found on this Form 10-Q's balance sheet under Current Assets - "Short-term investments".

treasury notes are classified as "held-to-maturity" as they were purchased in December 2022 and mature in

Since these securities are intended to be held until maturity and mature in less than a year from their purchase date, any unrealized gains or losses are not realized until their maturity date and the amortized cost of these securities can be found on this Form 10-Q's balance sheet under Current Assets - "Short-term investments".

Any coupon payments from these short-term investments fall under "Interest and other (expense) income" on the Company's Statement of Operations.

The Company did no t hold any securities that were in an unrealized loss position for more than 12 months as of March 31, 2023 and 2022.

There were no material realized gains or losses on these short-term investments during the quarters ended March 31, 2023 and March 31, 2022.

The Company did no t hold any securities that were in an unrealized loss position for more than 12 months as of June 30, 2023 and 2022.

There were no material realized gains or losses on these short-term investments during the quarters ended June 30, 2023 and June 30, 2022.

PROPERTY AND EQUIPMENT

5 unchanged sentences

Less – Accumulated depreciation ( 1,887 ) ( 1,800 )

Depreciation expense for the three months ended March 31, 2023 and 2022 amounted to $ 43 and $ 42 respectively.

Depreciation expense for the six months ended June 30, 2023 and 2022 amounted to $ 86 respectively.

Depreciation expense for the three months ended June 30, 2023 and 2022 amounted to $ 43 , respectively.

INTANGIBLE ASSETS

The changes in the carrying amount of intangible assets for the three months ended March 31, 2023 were as follows:

The changes in the carrying amount of intangible assets for the six months ended June 30, 2023 were as follows:

Net balance at December 31, 2022 $ 273

Amortization expense ( 53 )

Net balance at March 31, 2023 $ 246

The following tables set forth the components of intangible assets as of March 31, 2023 and December 31, 2022:

As of March 31, 2023

Net balance at June 30, 2023 $ 220

The following tables set forth the components of intangible assets as of June 30, 2023 and December 31, 2022:

As of June 30, 2023

Life Adjusted

15 unchanged sentences

Three Months Ended

June 30, For the Six Months Ended June 30,

2023 2022 2023 2022

Cost of sales $ 23 $ 23 $ 47 $ 47

General and administrative 3 3 6 6

$ 26 $ 26 $ 53 $ 53

Revolving Line of Credit

On February 6, 2019, the Company entered into 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 the Company’s existing fixed income investment account with Citi Personal Wealth Management subject to certain limitations.

The facility bears interest at a rate consistent of Citi Personal Wealth Management’s Base Rate ( 8.00 % and 7.50 % at March 31, 2023 and December 31, 2022, respectively) minus 2 %.

Interest is payable monthly and as of March 31, 2023 and December 31, 2022, there were no amounts outstanding and unused availability under this facility was $ 2,000 .

The facility bears interest at a rate consistent of Citi Personal Wealth Management’s Base Rate ( 8.25 % and 7.50 % at June 30, 2023 and December 31, 2022, respectively) minus 2 %.

Interest is payable monthly and as of June 30, 2023 and December 31, 2022, there were no amounts outstanding 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.

Insurance Financing Arrangement

On June 2022, the Company entered into a financing arrangement related to insurance premiums totaling $ 319 with an interest rate of 4.05 %.

The monthly loan payments of $ 32 were to be paid to HUB International New England over a period of 10 months.

As of March 31, 2023, the Company had no remaining commitments related to this financing arrangement.

On February 2023, the Company entered into a financing arrangement related to insurance premiums totaling $ 49 with an interest rate of 9.47 %.

The monthly loan payments of $ 5 are to be paid to IPFS of New York, LLC over a period of 11 months.

As of March 31, 2023, the Company had $ 42 in remaining commitments related to this financing arrangement which is included in the "Other current liabilities" line on the balance sheet as of March 31, 2023.

As of June 30, 2023, the Company had $ 23 in remaining commitments related to this financing arrangement which is included in the "Accrued expenses" line on the balance sheet as of June 30, 2023.

The Company is not subject to any financial covenants related to this insurance financing arrangement.

7 unchanged sentences

$ 1,980 $ 2,319

Our available net operating loss (“NOL”) as of March 31, 2023 was approximately $ 20.3 million, of which $ 10.9 million expires between 2035 and 2037.

Our available net operating loss (“NOL”) as of December 31, 2022 was approximately $ 20.8 million, of which $ 10.9 million expires between 2035 and 2037.

In accordance with the Tax Cuts and Jobs Act of 2017 (the "Tax Act"), U.S.

NOLs arising in a tax year ending after 2017 will not expire.

ASC 740 requires evaluation of uncertain tax positions and as of March 31, 2023, the Company has no material uncertain tax positions.

ASC 740 requires evaluation of uncertain tax positions and as of June 30, 2023, the Company has no material uncertain tax positions.

The Company’s interim income tax provision consists of U.S.

1 unchanged sentence

Each quarter the Company updates its estimate of the annual effective tax rate and records cumulative adjustments as necessary.

As of March 31, 2023, the Company was in a pre-tax loss position, and is anticipated to remain so throughout the year.

The effective tax rate for the three months ended March 31, 2023 is different from the tax benefit that would result from applying the statutory tax rates primarily due to the recognition of valuation allowances.

As of June 30, 2023, the Company was in a pre-tax loss position, and is anticipated to remain so throughout the year.

The effective tax rate for the three and six months ended June 30, 2023 is different from the tax benefit that would result from applying the statutory tax rates primarily due to the recognition of valuation allowances.

STOCKHOLDERS' EQUITY

10 unchanged sentences

Three Months Ended

June 30, Six Months Ended

2023 2022 2023 2022

Compensation cost recognized:

1 unchanged sentence

Research & development 94 164 181 329

$ 323 $ 446 $ 1,005 $ 1,038

Stock Options

9 unchanged sentences

The fair value of these awards are determined at each reporting period utilizing a Black-Scholes option pricing model, and the associated compensation expense (credit) for the reporting period is recorded.

The Company increased stock-based compensation expense by approximately $ 40 and decreased by approximately $( 237 ) for the three months ended March 31, 2023 and 2022, respectively, as a result of the change in fair value of these awards.

On March 29, 2023, Jeffrey Ishmael, Chief Financial Officer (“CFO”) of the Company, entered into an “Option Cancellation Agreement” with the Company for the purpose of surrendering for cancellation a tranche of “Incentive Stock Options” (ISOs).

These ISOs were tied directly with Mr.

Ishmael’s 2022 Bonus compensation as indicated in Mr.

Ishmael’s original employment agreement as referenced in the Company’s Current Report on Form 8-K, filed with the SEC on May 9, 2022.

The in-the-money ISOs were surrendered for cancellation in exchange for a new equity incentive grant in the form of restricted stock units (RSUs) that were to immediately vest on the same date as the cancelled options on March 31, 2023.

The Company recorded an incremental compensation expense of $ 103 related to the modification of these equity awards for the three months ended March 31, 2023

The Company increased stock-based compensation expense by approximately $ 15 and decreased by approximately $( 25 ) for the three and six months ended June 30, 2023, respectively, as a result of the change in fair value of these awards.

The Company decreased stock-based compensation expense by approximately $( 74 ) and $( 311 ) for the three and six months ended June 30, 2022, respectively, as a result of the change in fair value of these awards.

Stock option activity under the 2015 Plan during the period indicated below is as follows:

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Forfeited, cancelled, or expired ( 420,707 ) 4.06 – –

Outstanding at March 31, 2023 1,500,284 $ 2.72 2.32 years $ 247

Exercisable at March 31, 2023 353,523 $ 5.69 1.65 years $ 247

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had they all exercised their options on March 31, 2023.

Outstanding at June 30, 2023 1,202,044 $ 2.52 3.49 years $ 214

Exercisable at June 30, 2023 475,681 $ 3.90 2.22 years $ 214

This amount changes based upon the fair market value of the Company’s stock.

1 unchanged sentence

The Company issues restricted stock units (“RSUs”) which are equity-based instruments that may be settled in shares of common stock of the Company.

During the three months ended March 31, 2023, the Company issued RSUs to certain directors as compensation.

During the six months ended June 30, 2023, the Company issued RSUs to certain directors as compensation.

RSU agreements can vest immediately or with the passage of time.

The vesting of all RSUs is contingent on continued board and employment services.

The compensation expense incurred by the Company for RSUs is based on the closing market price of the Company’s common stock on the date of grant, is amortized on a straight-line basis over the requisite service period and charged to operating expenses with a corresponding increase to additional paid-in capital, reduced by forfeitures when they occur.

charged to operating expenses with a corresponding increase to additional paid-in capital, reduced by forfeitures when they occur.

Restricted stock unit activity during the period indicate below is as follows:

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Vested and settled in shares ( 230,430 ) 4.30

Outstanding at March 31, 2023 156,347 $ 8.40

Outstanding at June 30, 2023 129,982 $ 8.16

Performance Stock Units

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Both the conditions were to occur over a specified time frame and were contingent on continued employment services.

On November 4, 2021, the Company amended its PSU Plan so that 100 % of the PSUs will vest based on the Company’s market price as the sole vesting criteria.

As a result of this amendment, the Adjusted EBITDA performance metric is no longer a vesting criteria.

On November 4, 2021, the Company amended its PSU Plan so that 100 % of the PSUs vest based on the Company’s market price as the sole vesting criteria.

As a result of this amendment, the Adjusted EBITDA performance metric is no longer a vesting criterion.

The fair value of these awards with a market condition was estimated, at the date of grant, using the Monte Carlo Simulation model with compensation expense being determined on the closing market price of the Company’s common stock on the date of grant and is amortized ratably on a straight-line basis over the requisite service period.

With the amendment mentioned above such that the Company's market price is the sole vesting criteria for these awards, compensation expense is charged to operating expenses with a corresponding increase to additional paid-in capital and is not reversed if the vesting criteria is not met.

As of March 31, 2023, 50 % of the outstanding PSUs as of December 31, 2022 met the vesting criteria and were considered to be earned and are expected to be settled in shares of common stock upon the Compensation Committee's of the Board of the Directors certification of achievement of the market-based performance

The remaining 50 % of the outstanding PSUs did not meet the vesting criteria and were considered to be forfeited as of March 31, 2023.

As of June 30, 2023, there were no outstanding PSUs.

Shares Weighted

2 unchanged sentences

Vested and settled in shares ( 88,844 ) 7.91

Outstanding at March 31, 2023 — $ 7.91

As of March 31, 2023, there was $ 2,573 of total unrecognized compensation costs, related to all unvested stock options, RSUs and PSUs.

Outstanding at June 30, 2023 — $ 7.91

As of June 30, 2023, there was approximately $ 1,484 of total unrecognized compensation costs, related to all unvested stock options and RSUs.

These costs are expected to be recognized as compensation expense over a weighted-average period of approximately 1.90 years.

The Company had 912,410 shares available for future grants under the Company's equity compensation plans at March 31, 2023.

The Company had 1,194,719 shares available for future grants under the Company's equity compensation plans at June 30, 2023.

COMMITMENTS AND CONTINGENCIES

2 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

Item 1. Financial Statements