What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-14 compared with 2024-05-14 · 38 added, 26 removed, 102 unchanged (39% of the section changed)

6 unchanged sentences

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

The following discussion and analysis of our financial condition and results of operations constitutes management’s review of the factors that affected our financial and operating performance for the three months ended March 31, 2024.

This discussion should be read in conjunction with the financial statements and notes thereto contained elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2023.

3 unchanged sentences

The preparation of our financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in our 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 our stock-based compensation plans.

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, capitalization of software development costs, revenue recognition (including breakage revenue), allowance for credit losses, 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.

18 unchanged sentences

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

We had goodwill of $8,102 as of March 31, 2024.

We had goodwill of $8,102 as of June 30, 2024.

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

2 unchanged sentences

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

We determined that no events occurred or circumstances changed during the three months ended March 31, 2024 that would more likely than not reduce the fair value of the Company below its carrying amounts.

We determined that no events occurred or circumstances changed during the three and six-months ended June 30, 2024 that would more likely than not reduce the fair value of the Company below its carrying amounts.

We will, however, continue to monitor our stock price and operations for any potential indicators of impairment.

1 unchanged sentence

Intangible Assets

Our intangible assets consist of patents and a software license.

We determined that no events occurred, or circumstances changed during the three months ended March 31, 2024 that would more likely than not reduce our intangible assets below our carrying amounts.

Our intangible assets consist of patents, a software license, and capitalized software development costs.

We determined that no events occurred, or circumstances changed during the three months ended June 30, 2024 that would more likely than not reduce our intangible assets below our carrying amounts.

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

13 unchanged sentences

We account for the issuance of stock-based compensation awards to employees in accordance with ASC 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.

Reference Note 9, “Stockholders' Equity,” in the Notes to Financial Statements for details on the Company’s stock-based compensation plans.

2 unchanged sentences

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

We have recorded a full valuation allowance for our net deferred tax assets as of March 31, 2024, due to the uncertainty of our ability to realize those assets.

We have recorded a full valuation allowance for our net deferred tax assets as of June 30, 2024, due to the uncertainty of our ability to realize those assets.

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

5 unchanged sentences

Results of Operations

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

COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2024

TO THE THREE MONTHS ENDED MARCH 31, 2023

Revenues for the three months ended March 31, 2024 increased $426, or 10%, to approximately $4,680 compared to $4,254 for the same period of 2023.

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

SaaS revenue, which consists of software licensed as a service on a subscription basis, increased $381 or 9% to $4,609 for the three months ended March 31, 2024 compared to $4,228 for the same period of 2023.

Gross profit increased $323, or 8%, to $4,245 for three months ended March 31, 2024 from $3,922 for the same period of 2023.

Our gross profit, as a percentage of revenues, was 91% and 92% for the three months ended March 31, 2024 and 2023, respectively.

Operating expenses, which consist of selling, general and administrative and research and development expenses, decreased $535, or 10%, to $4,768 for the three months ended March 31, 2024 compared to $5,303 for the same period of 2023.

This decrease was primarily driven by lower research and development costs specifically headcount-related expenses.

As a result of the factors noted above, the Company had a net loss of $(442) for the three months ended March 31, 2024 as compared to a net loss of $(1,387) for the three months ended March 31, 2023.

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

COMPARISON OF THE THREE MONTHS ENDED June 30, 2024

TO THE THREE MONTHS ENDED June 30, 2023

Revenues for the three months ended June 30, 2024 decreased $44, or 1%, to approximately $4,672 compared to $4,716 for the same period of 2023.

The decrease in revenues is primarily the result of lower transaction volumes for SaaS for the current period.

SaaS revenue, which consists of software licensed as a service on a subscription basis, decreased $36 or 1% to $4,627 for the three months ended June 30, 2024 compared to $4,663 for the same period of 2023.

Gross profit decreased $136, or 3%, to $4,228 for three months ended June 30, 2024 from $4,364 for the same period of 2023.

Our gross profit, as a percentage of revenues, was 91% and 93% for the three months ended June 30, 2024 and 2023, respectively.

Operating expenses, which consist of selling, general and administrative and research and development expenses, decreased $770, or 15%, to $4,443 for the three months ended June 30, 2024 compared to $5,213 for the same period of 2023.

This decrease was primarily driven by lower research and development costs, and more specifically headcount-related expenses.

As a result of the factors noted above, the Company had a net loss of $(127) for the three months ended June 30, 2024 as compared to a net loss of $(853) for the three months ended June 30, 2023.

COMPARISON OF THE SIX MONTHS ENDED June 30, 2024

TO THE SIX MONTHS ENDED June 30, 2023

Revenues for the six months ended June 30, 2024 increased $382, or 4%, to approximately $9,352 compared to $8,970 for the same period of 2023.

The increase in revenues is primarily the result of higher transaction volumes for SaaS for the current period.

SaaS revenue, which consists of software licensed as a service on a subscription basis, increased $345 or 4% to $9,236 for the six months ended June 30, 2024 compared to $8,891 for the same period of 2023.

Gross profit increased $187, or 2%, to $8,473 for six months ended June 30, 2024 from $8,286 for the same period of 2023.

Our gross profit, as a percentage of revenues, was 91% and 92% for the six months ended June 30, 2024 and 2023, respectively.

Operating expenses, which consist of selling, general and administrative and research and development expenses, decreased $1,318, or 13%, to $9,197 for the six months ended June 30, 2024 compared to $10,515 for the same period of 2023.

This decrease was primarily driven by lower stock based compensation and severance expenses.

As a result of the factors noted above, the Company had a net loss of $(569) for the six months ended June 30, 2024 as compared to a net loss of $(2,240) for the six months ended June 30, 2023.

Liquidity and Capital Resources

As of March 31, 2024, we had cash and cash equivalents of $9,239, working capital (defined as current assets minus current liabilities) of $7,200, total assets of $22,615 and stockholders’ equity of $17,178.

During the three months ended March 31, 2024, we generated net cash of $869 in operating activities as compared to net cash of $233 provided by operating activities in the three months ended March 31, 2023.

Cash provided by investing activities was $4,390 for the three months ended March 31, 2024 compared to cash used in investing activities of $(17) for the three months ended March 31, 2023.

Cash used in financing activities was zero for the three months ended March 31, 2024 compared to net cash of $(57) used in financing activities for the three months ended March 31, 2023.

We currently anticipate that our available cash, expected cash from operations and availability under the revolving line of credit, will be sufficient to meet our anticipated working capital and capital expenditure requirements for at least the

next 12 months from the date of filing.

As of June 30, 2024, we had cash and cash equivalents of $7,260, working capital (defined as current assets minus current liabilities) of $6,611, total assets of $21,916 and stockholders’ equity of $17,307.

During the six months ended June 30, 2024, we used net cash of $(312) in operating activities as compared to net cash of $(856) used by operating activities in the six months ended June 30, 2023.

Cash provided by investing activities was $3,592 for the six months ended June 30, 2024 compared to cash used in investing activities of $(31) for the six months ended June 30, 2023.

Cash used in financing activities was zero for the six months ended June 30, 2024 compared to net cash of $(124) used in financing activities for the six months ended June 30, 2023.

Reference Note 6, “Debt,” in the Notes to Financial Statements for details on the Company’s revolving line of credit.

21 unchanged sentences

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

Three Months Ended March 31,

Three Months Ended June 30 Six Months Ended June 30

2024 2023 2024 2023

Net loss $ (127) $ (853) $ (569) $ (2,240)

Reconciling items:

Non-restructuring severance expenses — 417 — 417

Provision for income taxes — 4 2 12

10 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis