What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-14 compared with 2023-05-11 · 43 added, 27 removed, 92 unchanged (43% of the section changed)

6 unchanged sentences

References made in this Quarterly Report on Form 10-Q to “we,” “our,” “us,” “Intellicheck,” or the “Company,” refer to Intellicheck, Inc.

The 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 three-month period ended March 31, 2023.

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, 2022.

We are 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.

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

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.

Critical Accounting Policies and the Use of Estimates

17 unchanged sentences

Under authoritative guidance, goodwill is not amortized, but rather it is periodically reviewed for impairment.

We had goodwill of $8,102 as of March 31, 2023.

We had goodwill of $8,102 as of June 30, 2023.

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

2 unchanged sentences

Events or changes in circumstances which could trigger an impairment review include macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, other entity specific events and sustained decrease in share price.

We determined that no events occurred or circumstances changed during the three months ended March 31, 2023 that would more likely than not reduce the fair value of the Company below its carrying amounts.

We determined that no events occurred or circumstances changed during the six months ended June 30, 2023 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 for any potential indicators of impairment.

2 unchanged sentences

Our intangible assets consist of patents and a software license.

We determined that no events occurred, or circumstances changed during the three months ended March 31, 2023 that would more likely than not reduce our intangible assets below our carrying amounts.

We determined that no events occurred, or circumstances changed during the six months ended June 30, 2023 that would more likely than not reduce our intangible assets below our carrying amounts.

We will, however, continue to monitor any potential indicators of impairment.

15 unchanged sentences

Deferred 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 carry forwards.

and net operating loss carry forwards.

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.

We have recorded a full valuation allowance for our net deferred tax assets as of March 31, 2023, 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 June 30, 2023, due to the uncertainty of our ability to realize those assets.

Reference Note 8, “Income Taxes,” in the Notes to Financial Statements for details on the Company’s income taxes.

6 unchanged sentences

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

COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2023

TO THE THREE MONTHS ENDED MARCH 31, 2022

Revenues for the three months ended March 31, 2023 increased $859, or 25%, to $4,254 compared to $3,395 for the same period of 2022.

COMPARISON OF THE THREE MONTHS ENDED JUNE 30, 2023

TO THE THREE MONTHS ENDED JUNE 30, 2022

Revenues for the three months ended June 30, 2023 increased $708, or 18%, to approximately $4,716 compared to $4,008 for the same period of 2022.

The increase in revenues is primarily the result of higher SaaS revenue growth for the current period.

SaaS revenue, which consists of software licensed as a service on a subscription basis, increased $875 or 26% to $4,228 for the three months ended March 31, 2023 compared to $3,353 for the same period of 2022.

Gross profit increased $843, or 27%, to $3,922 for three months ended March 31, 2023 from $3,079 for the same period of 2022.

Our gross profit, as a percentage of revenues, was 92% and 91% for the three months ended March 31, 2023 and 2022, respectively.

SaaS revenue, which consists of software licensed as a service on a subscription basis, increased $735 or 19% to $4,663 for the three months ended June 30, 2023 compared to $3,928 for the same period of 2022.

Gross profit increased $720, or 20%, to $4,364 for three months ended June 30, 2023 from $3,644 for the same period of 2022.

Our gross profit, as a percentage of revenues, was 93% and 91% for the three months ended June 30, 2023 and 2022, respectively.

The increase in gross profit percentage was driven by a higher concentration of SaaS revenues, a nominal decrease in hardware revenue, as well as an improved cloud cost structure.

Operating expenses, which consist of selling, general and administrative and research and development expenses, increased $685, or 15%, to $5,232 for the three months ended March 31, 2023 compared to $4,547 for the same period of 2022.

This increase was primarily driven by higher general and administrative costs, specifically headcount related expenses, as well as higher accounting and professional fees.

As a result of the factors noted above, the Company had a net loss of $(1,316) for the three months ended March 31, 2023 as compared to a net loss of $(1,468) for the three months ended March 31, 2022.

Operating expenses, which consist of selling, general and administrative and research and development expenses, increased $395, or 8%, to $5,137 for the three months ended June 30, 2023 compared to $4,742 for the same period of 2022.

This increase was primarily driven by higher general and administrative costs, specifically headcount-related expenses tied to non-restructuring severance expenses, as well as higher accounting and professional fees.

As a result of the factors noted above, the Company had a net loss of $(777) for the three months ended June 30, 2023 as compared to a net loss of $(1,098) for the three months ended June 30, 2022.

COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 2023

TO THE SIX MONTHS ENDED JUNE 30, 2022

Revenues for the six months ended June 30, 2023 increased $1,567, or 21%, to $8,970 compared to $7,403 for the same period of 2022.

The increase in revenues is primarily the result of higher SaaS revenue growth for the current period.

SaaS revenue, which consists of software licensed as a service on a subscription basis, increased $1,610 or 22% to $8,891 for the six months ended June 30, 2023 compared to $7,281 for the same period of 2022.

Gross profit increased $1,563, or 23%, to $8,286 for three months ended June 30, 2023 from $6,723 for the same period of 2022.

Our gross profit, as a percentage of revenues, was 92% and 91% for the six months ended June 30, 2023 and 2022, respectively.

The increase in gross profit percentage was driven by a higher concentration of SaaS revenues, a nominal decrease in hardware revenue, as well as an improved cloud cost structure.

Operating expenses, which consist of selling, general and administrative and research and development expenses, increased $1,079, or 12%, to $10,368 for the six months ended June 30, 2023 compared to $9,289 for the same period of 2022.

As a result of the factors noted above, the Company had a net loss of $(2,093) for the six months ended June 30, 2023 as compared to a net loss of $(2,566) for the six months ended June 30, 2022.

Liquidity and Capital Resources

As of March 31, 2023, we 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, total assets of $23,595 and stockholders’ equity of $17,830.

During the three months ended March 31, 2023, we generated net cash of $233 from operating activities as compared to net cash used in $(2,397) in the three months ended March 31, 2022.

Cash used in investing activities was $(17) for the three months ended March 31, 2023 compared to cash used in investing activities of $(131) for the three months ended March 31, 2022.

Cash used in financing activities was $(57) for the three months ended March 31, 2023.

As of June 30, 2023, we 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, total assets of $21,632 and stockholders’ equity of $17,337.

During the six months ended June 30, 2023, we used net cash of $(856) in operating activities as compared to net cash of $(1,538) used in the six months ended June 30, 2022.

Cash used in investing activities was $(31) for the six months ended June 30, 2023 compared to cash used in investing activities of $(156) for the six months ended June 30, 2022.

Cash used in financing activities was $(124) for the six months ended June 30, 2023.

We currently anticipate that our available cash, expected cash from operations and availability under the revolving line of credit, 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.

5 unchanged sentences

Net Operating Loss Carry Forwards

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.

2 unchanged sentences

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 provisions for income taxes, depreciation, amortization and stock-based compensation expense.

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, 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 gains on debt forgiveness, impairments of long-lived assets and goodwill, 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.

By excluding non-cash charges such as impairments of long-lived assets and goodwill, 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 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 gains on debt forgiveness, 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.

However, there are significant limitations to the use of Adjusted EBITDA since it excludes non-restructuring severance expenses, 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.

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 companies.

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

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

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

Reconciling items:

Non-restructuring severance expenses 417 — 417 —

Provision for income taxes 4 — 12 —

6 unchanged sentences

We have not guaranteed any debt or commitments of other entities or entered into any options on non-financial assets.

Quantitative and Qualitative Disclosures About Market Risk

Not applicable to smaller reporting companies.

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 2. Management’s Discussion and Analysis