What changed in this filing

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Item 1. Financial Statements

2023-11-14 compared with 2023-08-14 · 127 added, 109 removed, 431 unchanged (35% of the section changed)

2 unchanged sentences

CONDENSED BALANCE SHEETS (in thousands except share amounts)

September 30,

2023 December 31,

2 unchanged sentences

Short-term investments 4,948 4,880

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

Accounts receivable, net of allowance of $ 43 and $ 20 at September 30, 2023 and December 31, 2022, respectively

Other current assets 577 608

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30,000 shares authorized;

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

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

Common stock - $ .001 par value;

40,000,000 shares authorized;

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

19,299,547 and 18,957,366 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively

Additional paid-in capital 150,537 149,233

6 unchanged sentences

(In thousands except shares and per share amounts)

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

Three months ended September 30, Nine months ended September 30,

2023 2022 2023 2022

10 unchanged sentences

Net loss before provision for income taxes ( 636 ) ( 724 ) ( 2,717 ) ( 3,290 )

Provision for income taxes 4 — 12 —

Income tax expense 8 — 20 —

Net loss $ ( 644 ) $ ( 724 ) $ ( 2,737 ) $ ( 3,290 )

8 unchanged sentences

(In thousands except number of shares)

Three months ended June 30, 2023

Three months ended September 30, 2023

Common Stock Additional

3 unchanged sentences

Shares Amount

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

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

Stock-based compensation – – 381 – 381

2 unchanged sentences

Net loss – – – ( 644 ) ( 644 )

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

Three months ended June 30, 2022

BALANCE, September 30, 2023 19,299,547 $ 19 $ 150,537 $ ( 133,485 ) $ 17,071

Three months ended September 30, 2022

Common Stock Additional

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Shares Amount

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

Stock-based compensation – – 696 – 696

1 unchanged sentence

Net loss – – – ( 724 ) ( 724 )

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

BALANCE, September 30, 2022 18,930,512 $ 19 $ 148,500 $ ( 130,187 ) $ 18,332

See accompanying notes to unaudited condensed financial statements.

2 unchanged sentences

(In thousands except number of shares)

Six months ended June 30, 2023

Nine months ended September 30, 2023

Common Stock Additional

8 unchanged sentences

Net loss – – – ( 2,737 ) ( 2,737 )

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

Six months ended June 30, 2022

BALANCE, September 30, 2023 19,299,547 $ 19 $ 150,537 $ ( 133,485 ) $ 17,071

Nine months ended September 30, 2022

Common Stock Additional

7 unchanged sentences

Net loss – – – ( 3,290 ) ( 3,290 )

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

BALANCE, September 30, 2022 18,930,512 $ 19 $ 148,500 $ ( 130,187 ) $ 18,332

See accompanying notes to unaudited condensed financial statements

2 unchanged sentences

(In thousands)

Six months ended June 30,

Nine months ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

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Stock-based compensation 1,347 1,768

Bad debt expense 16 13

Allowance for credit losses 23 6

Change in accrued interest and accretion of discount on short-term investments ( 154 ) —

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Purchases of property and equipment ( 68 ) ( 165 )

Net cash used in investing activities ( 31 ) ( 156 )

Proceeds from maturity of short-term investments 5,000 —

Purchases of short-term investments ( 4,914 ) —

Net cash provided by (used in) investing activities 18 ( 165 )

CASH FLOWS FROM FINANCING ACTIVITIES:

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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 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 ).

and one Canadian patents.

For the nine months ended September 30, 2023, the Company incurred a net loss of $( 2,737 ) and used cash in operations of $( 1,114 ).

As of September 30, 2023, the Company had cash and cash equivalents of $ 3,962 , short-term investments of $ 4,948 , working capital (defined as current assets minus current liabilities) of $ 8,080 and an accumulated deficit of $( 133,485 ).

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.

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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.

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 September 30, 2023, the results of operations, and stockholders’ equity for the three and nine-months ended September 30, 2023 and 2022 and cash flows for the nine months ended September 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 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.

Results of operations for the three and nine-month periods ended September 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”).

An adjustment has been made to the Consolidated Balance Sheet and Consolidated Statements of Cash Flows for fiscal year ended October 31, 2019, to reclassify the Value Added Tax (VAT) receivable.

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.

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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 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.

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.

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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.

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 credit losses, revenue recognition (including breakage revenue) and the fair value of stock options under the Company’s stock-based compensation plan.

Due to the inherent uncertainties involved in making estimates, actual results reported in future periods may be different from those estimates.

ASC 718 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.

Research and Development

Research and development expenses are expensed as incurred and consist primarily of employee-related expenses (such as salaries, taxes, benefits and stock-based compensation), allocated overhead costs and outside services costs related to the development and improvement of the Company's SaaS applications.

Allowance for Doubtful Accounts

Effective January 1, 2023 Intellicheck is required to apply the new standard ASU 2016-13, codified as ASC 326.

This impacts how the allowance for doubtful accounts is being calculated.

Prior to ASC-326, Intellicheck would not recognize a bad debt expense until the loss from customer non-payment was probable of occurring.

Allowance for Credit Losses

Effective January 1, 2023 Intellicheck applied the new standard ASU 2016-13, codified as ASC 326.

This impacts how the allowance for doubtful accounts is calculated.

Prior to ASC-326, Intellicheck would not recognize bad debt expense until the loss from customer non-payment was probable of occurring.

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, 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.

In estimating whether accounts receivable will 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.

The allowance for credit losses is recorded in the period in which revenue is recorded or when collection risk is identified.

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

Pursuant to ASC 350, the Company tests goodwill for impairment on an annual basis in the fourth quarter on December 31st, or between annual tests, in certain circumstances.

Under authoritative guidance, the Company first assessed qualitative factors to determine whether it was necessary to perform step one of the quantitative goodwill impairment test.

Pursuant to ASC 350, Intangibles - Goodwill and Other , the Company tests goodwill for impairment on an annual basis in the fourth quarter on December 31st, or between annual tests, in certain circumstances.

Under authoritative guidance, the Company first assesses qualitative factors to determine whether it is necessary to perform step one of the quantitative goodwill impairment test.

An entity is not required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount.

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.

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

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.

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

Intangible Assets

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The Company amortizes these assets on a straight-line basis over their estimated useful lives, as it represents the pattern of economic benefits consumed.

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be fully recoverable in accordance with ASC 360.

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 and six months ended June 30, 2023 and 2022.

There were no impairment charges recognized during the three and nine-months ended September 30, 2023 and 2022.

Advertising Costs

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.

Advertising costs, which are expensed as incurred, were $ 470 and $ 545 for the nine months ended September 30, 2023 and 2022, respectively.

Advertising costs were $ 99 and $ 155 for the three months ended September 30, 2023 and 2022, respectively.

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

Retirement Plan

2 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 $ 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.

The Company’s matching contributions were $ 85 and $ 90 for the nine months ended September 30, 2023 and 2022, respectively.

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

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

Shipping Costs

The Company’s shipping and handling costs related to sales are included in cost of revenues for all periods presented.

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

All other shipping and handling costs are included as a component of selling, general and administrative expenses within 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

1 unchanged sentence

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 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.

The Company has recorded a full valuation allowance for its net deferred tax assets as of September 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 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.

At September 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.

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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 $ 9.1 and $ 10.1 million as of June 30, 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 $ 8.9 and $ 10.1 million as of September 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 $ 79 and $ 54 of Level 2 liabilities as of June 30, 2023 and December 31, 2022 respectively, for the liability-classified stock options.

The Company had $ 40 and $ 54 of Level 2 liabilities as of September 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.

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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 June 30, 2023 and December 31, 2022.

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

Revenue Recognition and Deferred Revenue

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Substantially all customer contracts provide that the Company is compensated for services performed to date.

During 2021, the Company adopted an additional revenue model where customers purchase a predetermined number of transactions for the term of the contract.

The Company has adopted an additional revenue model where customers purchase a predetermined number of transactions for the term of the contract.

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.

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Software as a Service (SaaS)

Software as a service (SaaS) for hosted subscription services allows customers to access a set of data for a predetermined period of time.

Software as a service (SaaS) for hosted subscription services requires the Company to provide a stand-ready obligation and allows customers to access a set of data for a predetermined period of time.

As the customer obtains access at a point in time but continues to have access for the remainder of the subscription period, the customer is considered to simultaneously receive and consume the benefits provided by the entity’s performance as the entity performs.

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

For the Three Months Ended June 30,

For the Three Months Ended September 30,

Products and services

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$ 4,760 $ 4,012

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Products and services

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Contract balances

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 current portion of deferred revenue at September 30, 2023, December 31, 2022 and December 31, 2021 was $ 2,153 , $ 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, $ 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.

Of the December 31, 2022 balance, $ 224 and $ 816 were recognized as revenue in the three and nine months ended September 30, 2023, respectively.

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

Accounts Receivable

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.

Accounts Receivable, net of allowance for doubtful accounts, at September 30, 2023, December 31, 2022 and December 31, 2021 was $ 3,898 , $ 2,637 , and $ 2,192 , respectively.

The allowance for doubtful accounts at September 30, 2023, December 31, 2022 and December 31, 2021 was $ 43 , $ 20 and $ 3 , respectively.

Transaction price allocated to the remaining performance obligations

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government entities.

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 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.

During the nine-month period ended September 30, 2023, the Company made sales to three customers that accounted for approximately 49 % of total revenues, 21 %, 14 % and 14 %, respectively.

The revenue was primarily associated with commercial identity sales customers.

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.

These three customers, in addition with one other customer, represented 58 % of total accounts receivable at September 30, 2023, 38 %, 3 %, 5 %, and 12 % respectively.

During the nine-month period ended September 30, 2022, the Company made sales to three customers that accounted for approximately 52 % of total revenues, 22 %, 17 % and 13 %, respectively.

These three customers, in addition with two other customers, represented 70 % of total accounts receivable at September 30, 2022, 32 %, 7 %, 1 %, 11 % and 19 %, respectively.

The revenue on those five customers was also associated with commercial identity sales customers.

Net Loss Per Share

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

6 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

3 unchanged sentences

1,304,087 1,545,856 1,304,087 1,545,856

Reclassification of Prior Year Presentation

Certain prior period amounts have been reclassified to conform to the current period presentation.

These reclassifications had no effect on net earnings.

An adjustment has been made to the Condensed Statements of Cash Flows to reclassify the allowance for credit losses.

This change in classification does not affect previously reported cash flows from operating activities in the Condensed Statements of Cash Flows.

CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

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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 June 30, 2023.

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

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 September 30, 2023.

Due to the nature of these assets and the short-term nature of

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 June 30, 2023

As of September 30, 2023

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

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(1) These U.S.

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

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

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 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.

Any coupon payments from these short-term investments fall under "Interest and other (expense) income" within 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 September 30, 2023 and 2022.

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

The Company recognized $ 120 in realized gains on short-term investments that matured within the quarter during the quarter ended September 30, 2023.

PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows:

September 30,

2023 December 31,

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Less – Accumulated depreciation ( 1,932 ) ( 1,800 )

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.

Depreciation expense for the nine months ended September 30, 2023 and 2022 amounted to $ 131 respectively.

Depreciation expense for the three months ended September 30, 2023 and 2022 amounted to $ 45 and $ 44 , respectively.

INTANGIBLE ASSETS

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

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

Net balance at December 31, 2022 $ 273

Amortization expense ( 79 )

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

Net balance at September 30, 2023 $ 194

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

As of September 30, 2023

Life Adjusted

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Three Months Ended

June 30, For the Six Months Ended June 30,

September 30, For the Nine Months Ended September 30,

2023 2022 2023 2022

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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 ( 8.25 % 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 facility bears interest at a rate consistent with Citi Personal Wealth Management’s Base Rate ( 8.50 % and 7.50 % at September 30, 2023 and December 31, 2022, respectively) minus 2 %.

Interest is payable monthly and as of September 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.

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

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.

As of September 30, 2023, the Company had $ 14 in remaining commitments related to this financing arrangement which is included within the "Accrued expenses" line within the balance sheet as of September 30, 2023.

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

1 unchanged sentence

Accrued expenses are comprised of the following:

September 30,

2023 December 31,

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Incentive bonuses 617 846

Other 160 174

$ 2,350 $ 2,319

The Company incurs costs related to employee severance and records a liability for these costs when it is probable that employees will be entitled to termination benefits and the amounts can be reasonably estimated.

The liability related to these actions is included in the "Payroll and related" line item within the accrued expenses line on the Condensed Balance Sheets.

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.

1 unchanged sentence

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

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

ASC 740 requires evaluation of uncertain tax positions and as of September 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 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.

As of September 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 nine months ended September 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

6 unchanged sentences

This Plan also entitles non-employee directors to receive grants of non-qualified stock options as approved by the Board of Directors.

The Company accounts for the issuance of stock-based awards to employees in accordance with ASC Topic 718, which requires that the cost resulting from all stock-based compensation payment transactions be recognized in the financial statements.

This pronouncement establishes fair value as the measurement objective in accounting for stock-based compensation payment arrangements and requires all companies to apply a fair value based measurement method in accounting for all stock-based compensation payment transactions with employees.

The Company accounts for the issuance of stock-based awards to employees in accordance with ASC Topic 718, "Compensation - Stock Compensation" , which requires that the cost resulting from all stock-based compensation payment transactions be recognized in the financial statements.

This pronouncement establishes fair value as the measurement objective in accounting for stock-based compensation payment arrangements and requires all companies to apply a fair

value based measurement method in accounting for all stock-based compensation payment transactions with employees.

All stock-based compensation is included in operating expenses as follows:

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

14 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 $ 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.

The Company decreased stock-based compensation expense by approximately $( 39 ) and decreased by approximately $( 14 ) for the three and nine-months ended September 30, 2023, respectively, as a result of the change in fair value of these awards.

The Company increased and decreased stock-based compensation expense by approximately $ 33 and $( 277 ) for the three and nine-months ended September 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:

6 unchanged sentences

Forfeited, cancelled, or expired ( 516,846 ) 3.89 – –

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

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 June 30, 2023.

Outstanding at September 30, 2023 1,230,905 $ 2.33 3.08 years $ 135

Exercisable at September 30, 2023 593,494 $ 3.69 2.10 years $ 73

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

During the nine months ended September 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.

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:

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.

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

Shares Weighted

3 unchanged sentences

Vested and settled in shares ( 278,057 ) 4.42

Outstanding at June 30, 2023 129,982 $ 8.16

Outstanding at September 30, 2023 73,182 $ 5.11

Performance Stock Units

6 unchanged sentences

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 June 30, 2023, there were no outstanding PSUs.

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

Shares Weighted

2 unchanged sentences

Vested and settled in shares ( 88,844 ) 7.91

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.

Outstanding at September 30, 2023 — $ 7.91

As of September 30, 2023, there was approximately $ 1,028 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 2.01 years.

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

The Company had 1,175,031 shares available for future grants under the Company's equity compensation plans at September 30, 2023.

COMMITMENTS AND CONTINGENCIES

1 unchanged sentence

The Company is not currently involved in any legal or regulatory proceeding, or arbitration, the outcome of which is expected to have a material effect on its business.

As of September 30, 2023, we are reviewing our historical state sales and use tax liabilities.

The Company is subject to sales and use taxes in jurisdictions where it has economic nexus.

These reviews, in addition to our conversations with state taxing authorities, may lead to adjustments to the reporting of transactional taxes.

We are currently assessing the outcomes that may result from these reviews, which may lead to adjustments to our taxes or net operating losses with respect to the years under review, as well as the current period.

We may be subject to additional accruals for the expected outcome of these sales and use tax matters.

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