What changed in this filing

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Item 1. Financial Statements

2024-05-14 compared with 2023-11-14 · 162 added, 218 removed, 340 unchanged (53% of the section changed)

1 unchanged sentence

INTELLICHECK, INC.

CONDENSED BALANCE SHEETS (in thousands except share amounts)

September 30,

CONDENSED BALANCE SHEETS

(in thousands except share and per share amounts)

2024 December 31,

2 unchanged sentences

Short-term investments — 5,000

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

Accounts receivable, net of allowance of $ 85 and $ 69 at March 31, 2024 and December 31, 2023, respectively

Other current assets 654 692

9 unchanged sentences

Accrued expenses 2,657 3,245

Income taxes payable — 90

Equity awards liability — 4

Liability for shares withheld 190 190

Deferred revenue, current portion 2,153 906

Deferred revenue 1,469 2,209

Total current liabilities 5,437 6,532

OTHER LIABILITIES:

Deferred revenue, long-term portion — 1

Total liabilities 5,437 6,532

3 unchanged sentences

30,000 shares authorized;

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

Series A convertible preferred stock, zero shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Common stock - $ 0.001 par value;

40,000,000 shares authorized;

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

19,404,561 and 19,354,335 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

Additional paid-in capital 151,166 150,822

6 unchanged sentences

(In thousands except shares and per share amounts)

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

2023 2022 2023 2022

Three months ended March 31,

REVENUES $ 4,680 $ 4,254

9 unchanged sentences

Net loss before provision for income taxes ( 440 ) ( 1,380 )

Income tax expense 8 — 20 —

Provision for income taxes 2 7

Net loss $ ( 442 ) $ ( 1,387 )

8 unchanged sentences

(In thousands except number of shares)

Three months ended September 30, 2023

Common Stock Additional

Capital Accumulated

Deficit Total

Stockholders’

Shares Amount

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

Stock-based compensation – – 381 – 381

Issuance of shares for vested restricted stock grants 47,627 – – – –

Shares forfeited in exchange for withholding taxes – – ( 3 ) – ( 3 )

Net loss – – – ( 644 ) ( 644 )

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

Three months ended September 30, 2022

Common Stock Additional

Capital Accumulated

Deficit Total

Stockholders’

Shares Amount

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

Stock-based compensation – – 696 – 696

Issuance of shares for vested restricted stock grants 54,932 – – – –

Net loss – – – ( 724 ) ( 724 )

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

See accompanying notes to unaudited condensed financial statements.

INTELLICHECK, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY

(In thousands except number of shares)

Nine months ended September 30, 2023

Three months ended March 31, 2024

Common Stock Additional

5 unchanged sentences

Stock-based compensation – – 344 – 344

Issuance of common stock for vested restricted stock units and earned performance stock units 366,901 – – – –

Shares forfeited in exchange for withholding taxes ( 24,720 ) – ( 57 ) – ( 57 )

Issuance of shares for vested restricted stock grants 50,226 – – – –

Net loss – – – ( 442 ) ( 442 )

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

Nine months ended September 30, 2022

BALANCE, March 31, 2024 19,404,561 $ 19 $ 151,166 $ ( 134,007 ) $ 17,178

Three months ended March 31, 2023

Common Stock Additional

7 unchanged sentences

Net loss – – – ( 1,387 ) ( 1,387 )

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

BALANCE, March 31, 2023 19,215,863 $ 19 $ 149,875 $ ( 132,972 ) $ 16,922

See accompanying notes to unaudited condensed financial statements.

2 unchanged sentences

(In thousands)

Nine months ended September 30,

Three months ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss $ ( 442 ) $ ( 1,387 )

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

Adjustments to reconcile net loss to net cash provided by operating activities

Depreciation and amortization 72 70

3 unchanged sentences

Changes in assets and liabilities:

(Increase) in accounts receivable ( 1,284 ) ( 449 )

(Increase) decrease in other current assets and long-term assets 31 176

(Decrease) in accounts payable and accrued expenses 204 ( 588 )

Increase in deferred revenue 1,246 457

Net cash used in operating activities ( 1,114 ) ( 1,711 )

Decrease (Increase) in accounts receivable 1,944 ( 900 )

Decrease (Increase) in other current assets and long-term assets 38 ( 145 )

(Decrease) Increase in accounts payable and accrued expenses ( 353 ) 783

(Decrease) Increase in deferred revenue ( 740 ) 1,121

Net cash provided by operating activities 869 233

CASH FLOWS FROM INVESTING ACTIVITIES:

1 unchanged sentence

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

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

Software development costs ( 601 ) —

Net cash provided by (used in) investing activities 4,390 ( 17 )

1 unchanged sentence

Proceeds of insurance financing arrangement — 49

Withholding taxes paid on RSU vesting ( 54 ) —

Repayment of insurance financing arrangements — ( 106 )

Net cash used in financing activities ( 138 ) —

Net decrease in cash ( 1,234 ) ( 1,876 )

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

Net increase in cash 5,259 159

CASH, beginning of period 3,980 5,196

2 unchanged sentences

Cash paid for interest $ — $ 1

Cash paid for income taxes $ 78 $ —

See accompanying notes to unaudited condensed financial statements.

1 unchanged sentence

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

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

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

NATURE OF BUSINESS

Intellicheck, Inc.

(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.

(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.

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 ten (10) U.S.

Intellicheck continues to develop and release innovative products based upon its rich patent portfolio consisting of eleven ( 11) U.S.

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 ).

For the three months ended March 31, 2024, the Company incurred a net loss of $( 442 ) and generated cash from operations of $ 869 .

As of March 31, 2024, the Company had cash and cash equivalents of $ 9,239 , working capital (defined as current assets minus current liabilities) of $ 7,200 and an accumulated deficit of $( 134,007 ).

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 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.

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, 2024, the results of operations, and stockholders’ equity for the three months ended March 31, 2024 and 2023 and cash flows for the three months ended March 31, 2024 and 2023.

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 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.

Results of operations for the three-month period ended March 31, 2024, are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2024.

The balance sheet as of December 31, 2023 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, 2023.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No.

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

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 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, 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.

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

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

The enhanced disclosure requirements include:

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

This change is effective for fiscal years beginning after December 15, 2023 and interim periods beginning

after December 15, 2024.

This change will apply retrospectively to all periods presented.

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

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

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

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

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

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

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

Use of Estimates

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 credit losses, 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, capitalization of software development costs, 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.

3 unchanged sentences

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.

This impacts how the allowance for credit losses 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 model, Intellicheck’s allowance for credit losses reflects the Company’s estimate of all expected future credit 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.

5 unchanged sentences

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

The Company has not experienced any losses with regard to its bank accounts and believes it is not exposed to any risk of loss on its cash bank accounts.

Short-term investments

2 unchanged sentences

Debt investments with original maturities at the date of purchase greater than approximately three months but less than a year are classified as short-term investments, as they represent the investment of cash available for current operations.

All short-term investments that the Company holds are classified as "held-to-maturity".

All short-term investments that the Company

holds are classified as "held-to-maturity" as the Company has the intent and ability to hold these investments until maturity.

See Note 3 for more detail and a breakdown of the Company's short-term investments.

7 unchanged sentences

The Company performed its annual impairment test of goodwill in the fourth quarter for the year ended December 31, 2023.

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.

For the three months ended March 31, 2024 and 2023, the Company determined no triggering events existed and as such no impairment charge was required.

Intangible Assets

Intangible assets include patents, copyrights, and developed technology.

Intangible assets include patents, copyrights, developed technology and capitalized software development costs.

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, Property, Plant and Equipment .

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 nine-months ended September 30, 2023 and 2022.

There were no impairment charges recognized during the three-months ended March 31, 2024 and 2023.

We capitalize internal-use software costs which includes costs incurred in connection with the development of new software solutions and enhancements to existing software solutions that are expected to result in increased functionality.

The costs incurred in the preliminary stages of development are expensed as incurred.

Once the software has reached the application development stage, internal and external costs, if direct and incremental, are capitalized until the software is complete and available for its intended use.

We evaluate the useful lives of these assets and test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.

There were no impairments of capitalized software development costs for the three months ended March 31, 2024 and 2023.

Advertising Costs

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.

Advertising costs, which are expensed as incurred, were $ 78 and $ 199 for the three months ended March 31, 2024 and 2023, respectively.

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

The Company’s matching contributions were $ 0 and $ 27 for the three months ended March 31, 2024 and 2023, respectively.

During the three months ended March 31, 2024, funds from the plan's forfeiture account were used to fund the matching contributions in accordance with the terms of the plan and as such, the Company took no expense during the current period related to its retirement plans.

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

2 unchanged sentences

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

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 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.

Loss Contingencies and Legal Costs

The Company accrues loss contingencies that are believed to be probable and can be reasonably estimated.

As events evolve during the administration and litigation process and additional information becomes known, the Company reassesses its estimates related to loss contingencies.

Legal costs are expensed in the period in which the costs are incurred.

Sales and other taxes collected from customers and remitted to governmental authorities are presented on a net basis and thus excluded from revenues.

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.

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

Deferred tax assets are recognized subject to management’s judgment that realization is more likely than not.

The Company has recorded a full valuation allowance for its net deferred tax assets as of March 31, 2024 and December 31, 2023, 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 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.

At March 31, 2024 and December 31, 2023, 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.

4 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 $ 8.9 and $ 10.1 million as of September 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 $ 9,239 and $ 8,980 as of March 31, 2024 and December 31, 2023, 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 $ 40 and $ 54 of Level 2 liabilities as of September 30, 2023 and December 31, 2022 respectively, for the liability-classified stock options.

The Company had $ 0 and $ 4 of Level 2 liabilities as of March 31, 2024 and December 31, 2023, 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 September 30, 2023 and December 31, 2022.

The Company had no Level 3 assets or liabilities as of March 31, 2024 and December 31, 2023.

Revenue Recognition and Deferred Revenue

7 unchanged sentences

Customers typically receive the benefit of the Company’s services as they are performed.

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

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's performance obligations are satisfied over time, and as a result, we may follow the right to invoice practical expedient meaning we may recognize revenue monthly as invoiced based on its contract terms.

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

Customers are charged a fixed monthly fee for a set number of scans (fixed consideration), with any overages charged on a per scan basis (variable consideration).

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.

1 unchanged sentence

Alternatively, if the Company expects that the customer cannot or will not use all transactions in the specified service period (referred to as “breakage”), the Company will recognize the estimated breakage amount as revenue ratably over the service period in proportion to the revenue that the Company will recognize for actual transactions used by the customer in the service period.

Actual results could differ from estimates and as such differences may be material to the financial statements.

We do not estimate the variable consideration at any point;

rather we calculate and recognize the variable portion at the end of the contract term since these contracts are considered monthly due to the termination clauses included within them.

The fixed and variable performance obligations are recognized monthly based on the contract terms.

Invoicing is based on schedules established in customer contracts.

Payment terms are generally established from 30 to 60 days from the invoice date.

Accordingly, the Company has determined that its contracts do not include a significant financing component.

Product returns are estimated and recorded as a reduction to revenue, however, such amounts have been immaterial.

The Company has not capitalized any costs to obtain a contract as the period of amortization for these associated costs would have been recognized over a period that is one year or less and the Company elected the practical expedient to expense those costs as incurred.

Nature of goods and services

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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 the Company's 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 over time as the customer scans an identity document.

Equipment Revenue

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Depending on the contract terms, that could either be at the time the equipment is shipped or at the time the equipment is received.

When sales of equipment occur, we recognize shipping and handling costs with the sales of equipment that are recognized as revenue.

Other Revenue

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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 Company’s performance as the Company performs.

Accordingly, the revenue should be recognized over time based on usage, which can vary from month to month.

Accordingly, the revenue is recognized over time based on usage, which can vary from month to month.

The revenue is typically based on a formula such as number of locations in a given month multiplied by a fee per location.

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The related revenue is recognized ratably over the specified term of the warranty period.

The extended warranty is separate to the Company’s standard warranty of usually one year that it receives from its vendor.

The extended warranty is separate from the Company’s standard warranty that it receives from its vendor, which is typically one year.

Disaggregation of revenue

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

For the Three Months Ended September 30,

Products and services

Software as a Service (SaaS) $ 4,635 $ 3,970

Equipment 106 39

$ 4,760 $ 4,012

Timing of revenue recognition

Products transferred at a point in time $ 125 $ 42

Services transferred over time 4,635 3,970

$ 4,760 $ 4,012

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Products and services

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Contract balances

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 current portion of deferred revenue at March 31, 2024, December 31, 2023 and December 31, 2022 was $ 1,469 , $ 2,209 and $ 906 , 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, $ 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.

Of the December 31, 2023 balance, $ 555 was recognized as revenue in the three months ended March 31, 2024.

The noncurrent deferred revenue balances were $ 0 and $ 0 as of March 31, 2024 and December 31, 2023, respectively.

Accounts Receivable

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.

Accounts receivable, net of allowance for credit losses, at March 31, 2024, December 31, 2023 was $ 2,744 , and $ 4,703 , respectively.

The allowance for credit losses at March 31, 2024 and December 31, 2023 was $ 85 and $ 69 , 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 market and economic information.

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

During the three-month period ended March 31, 2024, the Company made sales to three customers that accounted for approximately 44 % of total revenues, 19 %, 13 % and 12 %, respectively for each customer.

The revenue was primarily 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.

These three customers, in addition with one other customer, represented 56 % of total accounts receivable at March 31, 2024, 36 %, 1 %, 7 %, and 12 % respectively for each customer.

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

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

Net Loss Per Share

1 unchanged sentence

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

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Net Loss $ ( 442 ) $ ( 1,387 )

5 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Stock options 1,487,882 1,500,284

Restricted stock 155,418 156,347

Performance stock units — 177,688 — 177,688

1,643,300 1,656,631

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.

Segment Information

The Company adheres to the provisions of ASC 280, Segment Reporting , which establishes standards for the way public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in financial statements issued to shareholders.

The Company’s Chief Operating Decision Maker, its Chief Executive Officer (“CEO”), reviews the financial information presented for purposes of allocating resources and evaluating its financial performance.

Accordingly, the Company has determined that it operates in a single reportable segment.

All of the Company’s long-lived assets are located in the United States.

Since the Company operates in one operating segment, all required financial segment information can be found in the financial statements.

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 September 30, 2023.

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

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, 2024 and December 31, 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 September 30, 2023

As of March 31, 2024

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

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treasury notes — — — —

Total cash, cash equivalents and short-term investments $ 9,239 $ — $ — $ 9,239

As of December 31, 2023

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

Cash and cash equivalents $ 3,980 $ — $ — $ 3,980

treasury notes (1)

5,000 — — 5,000

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(1) These U.S.

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" 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.

treasury notes are classified as "held-to-maturity" as they were purchased in August 2023 and matured in January 2024.

The Company did no t hold any securities that were in an unrealized loss position for more than 12 months as of March 31, 2024.

There were no material realized gains or losses on these specific short-term investments during the three months ended March 31, 2024.

PROPERTY AND EQUIPMENT

Property and equipment is summarized as follows:

September 30,

Property and equipment, net is summarized as follows:

2024 December 31,

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Less – Accumulated depreciation ( 2,023 ) ( 1,977 )

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.

Depreciation expense for the three months ended March 31, 2024 and 2023 amounted to $ 45 and $ 43 , respectively.

INTANGIBLE ASSETS

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

The changes in the carrying amount of intangible assets, net for the three months ended March 31, 2024 were as follows:

Net balance at December 31, 2023 $ 575

Capitalized software costs 609

Amortization expense ( 27 )

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

Net balance at March 31, 2024 $ 1,157

The following tables set forth the components of intangible assets as of March 31, 2024 and December 31, 2023:

As of March 31, 2024

Life Adjusted

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Developed technology 5 years 400 ( 327 ) 73

Software development — $ 1,016 $ — $ 1,016

$ 1,791 $ ( 634 ) $ 1,157

The Company has capitalized $ 1,016 in software development costs as of March 31, 2024.

The projects are still in development and not yet ready for their intended use and therefore no estimated useful life has been determined and these costs are not being amortized as of March 31, 2024.

As of December 31, 2023

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Developed technology 5 years 400 ( 307 ) 93

Software development — $ 407 $ — 407

$ 1,182 $ ( 607 ) $ 575

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Three Months Ended

September 30, For the Nine Months Ended September 30,

2023 2022 2023 2022

Cost of sales $ 24 $ 23 $ 71 $ 71

Cost of revenues $ 24 $ 24

General and administrative 3 3

$ 27 $ 26 $ 79 $ 79

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 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 facility bears interest at a rate consistent with Citi Personal Wealth Management’s Base Rate ( 8.50 % and 8.50 % at March 31, 2024 and December 31, 2023, respectively) minus 2 %.

Interest is payable monthly and as of March 31, 2024 and December 31, 2023, 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 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 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.

ACCRUED EXPENSES

Accrued expenses are comprised of the following:

September 30,

2024 December 31,

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Incentive bonuses 1,275 824

Sales tax accrual 727 1,064

$ 2,657 $ 3,245

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.

Our available net operating loss (“NOL”) as of December 31, 2023 was approximately $ 26,300 , of which $ 10,900 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 September 30, 2023, the Company has no material uncertain tax positions.

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

federal and state income taxes based on the estimated annual effective tax rate that the Company expects for the full year together with the tax effect of discrete items.

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

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.

NOLs arising in a tax year ending after 2017 in the amount of $ 15,400 will not expire, but are subject to 80% limitation on utilization.

In addition to the NOLs, the Company has approximately $ 708 of research and development credits.

ASC 740 requires evaluation of uncertain tax positions and as of March 31, 2024, the Company has no material uncertain tax positions.

STOCKHOLDERS' EQUITY

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All the equity compensation plans prior to Company’s 2015 Omnibus Incentive Plan have been closed.

The Compensation Committee of the Board of Directors administers this Plan and determines the terms and conditions of stock options granted, including the exercise price.

The Compensation Committee of the Board of Directors administers this Plan and

determines the terms and conditions of stock options granted, including the exercise price.

This Plan generally provides that all stock options will expire within ten years of the date of grant.

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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.

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

September 30, Nine Months Ended

September 30,

2023 2022 2023 2022

Compensation cost recognized:

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Research & development 10 87

$ 342 $ 729 $ 1,347 $ 1,768

Stock Options

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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 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.

The Company decreased stock-based compensation expense by approximately $( 4 ) for the three-months ended March 31, 2024, as a result of the change in fair value of these awards.

The Company increased stock-based compensation expense by approximately $ 40 for the three-months ended March 31, 2023, 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 ( 184,582 ) 2.68 – –

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

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 September 30, 2023.

Outstanding at March 31, 2024 1,487,882 $ 2.05 2.28 years $ 883

Exercisable at March 31, 2024 484,004 $ 3.66 3.28 years $ 471

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

Restricted Stock Units

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 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 Company periodically issues Restricted Stock Units (“RSUs”) which are equity-based instruments that may be settled in shares of common stock of the Company.

The Company issues RSUs to certain directors as compensation which vest with the passage of time.

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

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Granted 145,144 2.04

Forfeited or surrendered ( 70,959 ) 10.04

Vested and settled in shares ( 50,226 ) 3.45

Outstanding at September 30, 2023 73,182 $ 5.11

Performance Stock Units

On August 7, 2020, the Company issued 265,942 performance stock units (PSUs) to its officers and certain employees as compensation ("PSU Plan").

50 % of the PSUs were to vest based on the Company’s market price and 50 % were to vest based on the Company’s Adjusted EBITDA.

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 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 September 30, 2023, there were no outstanding PSUs.

Shares Weighted

Outstanding at December 31, 2022 177,688 $ 7.91

Forfeited ( 88,844 ) 7.91

Vested and settled in shares ( 88,844 ) 7.91

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.

Outstanding at March 31, 2024 155,418 $ 2.41

As of March 31, 2024, there was approximately $ 1,399 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 2.42 years.

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

The Company had 658,613 shares available for future grants under the Company's equity compensation plans at March 31, 2024.

COMMITMENTS AND CONTINGENCIES

The Company is not aware of any infringement by the Company’s products or technology on the proprietary rights of others.

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.

The Company leases an office in Melville, New York.

Rent expense, which includes utilities, was $ 4 and $ 21 for the three months ended March 31, 2024 and 2023, respectively and is included in Selling, general and administrative expenses on the Statements of Operations.

The Company determines if an arrangement is a lease at lease inception.

The arrangement is a lease if it conveys the right to the Company to control the use of identified property, plant, or equipment for a period of time in exchange for consideration.

The Company did no t have an Operating Lease ROU or Operating Lease Liability as of March 31, 2024, as its office lease is on a month-to-month term and allows for either party to terminate the lease without a significant penalty.

Legal Proceedings

The Company is not aware of any infringement by our products or technology on the proprietary rights of others.

From time to time, the Company may be involved in lawsuits, claims, investigations and proceedings, consisting of intellectual property, commercial, employment and other matters, which arise in the ordinary course of business.

In accordance with GAAP, the Company records a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated.

These provisions are reviewed at least quarterly and adjusted to reflect the impact of negotiations, settlements, ruling, advice of legal counsel and other information and events pertaining to a particular case.

Litigation is inherently unpredictable.

If any unfavorable ruling was to occur in any specific period or if a loss becomes probable and estimable, there exists the possibility of a material adverse impact on the Company’s results of operations, financial position or cash flows.

As of March 31, 2024, no material amounts are recorded related to legal proceedings on the balance sheets.

The Company recently received a class action complaint in March 2024, and while we are unable to fully assess the probability and outcome of the matter due to recency of the filing, the Company does not currently believe that a material loss is probable.

As such, the Company has not recognized a liability and intends to fully defend the matter.

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