What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-11-10 compared with 2020-08-11 · 118 added, 112 removed, 151 unchanged (60% of the section changed)

23 unchanged sentences

FOREWARN is an app-based solution currently tailored for the real estate industry, providing instant knowledge prior to face-to-face engagement with a consumer, helping professionals identify and mitigate risk.

As of June 30, 2020 and 2019, idiCORE had 5,375 and 4,370 billable customers and FOREWARN had 40,857 and 19,721 users, respectively.

As of September 30, 2020 and 2019, idiCORE had 5,758 and 4,781 billable customers and FOREWARN had 44,927 and 23,853 users, respectively.

The Company defines a billable customer of idiCORE as a single entity that generated revenue in the last month of the period.

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Pricing contracts are generally annual contracts or longer, with auto renewal.

Revenue from pricing contracts represented 79 % and 73 % of total revenue for the three and six months ended June 30 , 20 20 , respectively , as compared to 62% and 64% for the three and six months ended June 30, 2019, respectively.

Revenue from pricing contracts represented 68 % and 7 1 % of total revenue for the three and nine months ended September 30 , 20 20 , respectively , as compared to 6 6 % and 6 5 % for the three and nine months ended September 30 , 2019, respectively.

Our go-to-market strategy leverages (a) an inside sales team that cultivates relationships, and ultimately closes business, with their end-user markets, (b) a strategic sales team that provides a more personal, face-to-face approach for major accounts within certain industries, and (c) distributors, resellers, and strategic partners that have a significant foothold in many of the industries that we have not historically served, as well as to further penetrate those industries that we do serve.

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In March 2020, the World Health Organization characterized Covid-19 as a pandemic.

We have taken numerous steps, and will continue to take further actions as appropriate, in our approach to minimizing the impact of the Covid-19 pandemic.

We have taken numerous steps, and will continue to take further actions as appropriate, in our approach to minimizing the impact of the Covid-19 pandemic on our business, results of operations and financial performance.

To ensure the health and well-being of our employees, beginning in March 2020, we instructed employees at our offices to work from home on a temporary basis.

During the second quarter of 2020, we implemented cost containment strategies across all areas of the organization, including continued curtailment of Company travel and partnering with suppliers, landlords and vendors for price concessions and payment deferrals during this interim period.

As a result of preventative and protective actions taken by federal, state and local governments, including the implementation of stay-at-home orders and social distancing policies which resulted in significantly reduced commercial activity, and certain temporary government-imposed moratoria on collection customers’ activities, we experienced reduced transactional volume.

In addition, we took a proactive customer-centric approach working with customers who were impacted by Covid-19.

Customers who had minimum contractual commitments and requested concessions because they were temporarily unable to meet their minimum contractual commitments as a result of Covid-19 were granted reductions, or eliminations where applicable, of minimums on a month-to-month basis during the second quarter.

Starting in the second quarter of 2020, we implemented cost containment strategies across all areas of the organization, including continued curtailment of Company travel and partnering with suppliers, landlords and vendors for price concessions and payment deferrals during this interim period.

Transaction volume returned to pre-Covid levels by the end of the third quarter 2020, except for collection customer volume, which was down $1.0 million, primarily attributable to our idiVERIFIED service, which is an ancillary collections market offering that is purely transactional and of a lower margin profile, for the three months ended September 30, 2020, compared to the three months ended March 31, 2020.

We expect collection customer transaction volume, including that of our idiVERIFIED service, to return to pre-Covid levels in the first half of 2021.

During the second and third quarters of 2020, we took a proactive customer-centric approach working with customers who were impacted by Covid-19.

The end date of the customer’s agreement was extended by one month for each month of the temporary concession.

In April 2020, we provided concessions to a total of 124 customers, representing $130 thousand reduction of minimum committed spend.

In May 2020, we provided concessions to a total of 123 customers, representing $129 thousand reduction of minimum committed spend.

In June 2020, we provided concessions to a total of 72 customers, representing $83 thousand reduction of minimum committed spend.

Beginning April 1, 2020, we elected, under Section 2302 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), to defer payment of the employer portion of Social Security payroll tax.

During the second quarter of 2020, we provided concessions to a total of 152 customers, representing a $342 reduction in minimum committed spend.

During the third quarter of 2020, we provided concessions to a total of 22 customers, representing a $94 reduction in minimum committed spend.

To further support our liquidity, beginning April 1, 2020, we elected, under Section 2302 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), to defer payment of the employer portion of Social Security payroll tax.

Under the CARES Act, employers can forgo timely payment of the employer portion of Social Security taxes that would otherwise be due from March 27, 2020 through December 31, 2020, without penalty or interest charges.

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See Note 1(b), “ Recently issued accounting standards,” in “Notes to Condensed Consolidated Financial Statements.”

Second Quarter Financial Results

For the three months ended June 30, 2020 as compared to the three months ended June 30, 2019:

Total revenue decreased 3% to $7.1 million.

Third Quarter Financial Results

For the three months ended September 30, 2020 as compared to the three months ended September 30, 2019:

Total revenue increased 12% to $9.3 million.

Platform revenue increased 27% to $9.0 million.

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Adjusted EBITDA increased 84% to $2.1 million.

Gross profit decreased 1% to $3.5 million.

Gross profit increased 24% to $5.5 million.

Gross margin increased to 59% from 54%.

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Adjusted gross margin increased to 71% from 62%.

Generated $1.8 million in cash from operating activities in the second quarter.

Cash and cash equivalents were $13.8 million as of June 30, 2020.

Covid-19 Impact, Recovery and Opportunity

Our high-margin, platform revenue business demonstrated strong resilience throughout the Covid-impacted period.

As a result, on less revenue our adjusted EBITDA more than doubled to $0.9 million and our positive cash flow from operating activities increased $1.7 million compared to prior year.

Business trends in the quarter have been positive since April, experiencing a 12% increase in monthly revenue for June compared to the April low.

June provided our highest monthly new customer applications for the year, surpassing our pre-Covid monthly high, and up 33% compared to April low.

The positive momentum building throughout the second quarter has continued in July with monthly revenue up 9% and new customer applications up 8% over June.

Government actions, including stay-at-home orders, social distancing policies, and temporary collections moratoria resulted in reduced transactional volumes during the quarter.

However, transactional volumes in July returned to pre-Covid levels.

Our services revenue, comprised of our ancillary collections market offering, idiVERIFIED™, which is purely transactional and of a lower margin profile, experienced sharp volume declines in April attributed to transitory collections moratoria, forbearance programs and government stimulus.

However, this offering showed signs of recovery in the quarter and into July.

Given current visibility, customer feedback and the overall economic impact on consumer financial profiles, we believe we will realize pent-up demand in the back half of 2020 with strong tailwinds extending throughout 2021.

During the quarter, we took a proactive customer-centric approach working with those impacted by the pandemic, temporarily granting requests for reductions, or eliminations where applicable, of minimum monthly contractual commitments on a month-to-month basis during the second quarter.

The end date of the customers’ agreement was extended by one month for each month of the temporary concession.

In April we provided concessions to a total of 124 customers, representing $130 thousand reduction of minimum committed spend.

In May we provided concessions to a total of 123 customers, representing $129 thousand reduction of minimum committed spend.

In June we provided concessions to a total of 72 customers, representing $83 thousand reduction of minimum committed spend.

In July we provided concessions to a total of 20 customers, representing $42 thousand reduction of minimum committed spend.

As our business model has proved resilient during this unprecedented time, we are well positioned within the markets we serve and with the solutions we provide to quickly return to our pre-Covid growth levels in the near-term.

The pandemic has accelerated the pace of digital transformation for virtually every business, creating a confluence of micro and macro trends that will provide strong momentum for our business for years to come through growth in e-commerce, demand for cloud efficiency and scale, increased reliance on fraud mitigation solutions as greater transactions move online, the necessity of solving for data fragmentation, and the need for enhanced understanding of consumer risk and financial profiles.

Generated $1.7 million in cash from operating activities in the third quarter.

Cash and cash equivalents were $12.4 million as of September 30, 2020.

Third Quarter and Recent Business Highlights

Our high-margin, platform revenue demonstrated accelerated growth throughout the third quarter.

As a result, we generated a record 71% adjusted gross margin, producing a record adjusted gross profit of $6.6 million.

Adjusted EBITDA increased 84% over prior year and increased 130% on a sequential quarter basis to $2.1 million.

Increased customer adoption of idiCORE™ with over 380 new customers added to the platform in the third quarter.

FOREWARN ® , our subscription app-based real estate solution, added over 4,000 users in the third quarter.

Strong revenue growth from existing customer expansion.

Growth revenue from existing customers increased 116% over prior year and 151% on a sequential quarter basis.

Platform revenue consists of both contractual and transactional revenue generated from our data fusion technology platform, CORE.

It includes all revenue generated through our idiCORE and FOREWARN solutions.

The cost of revenue, which consists primarily of data acquisition costs, remains relatively fixed irrespective of revenue generation.

Services revenue consists of transactional revenue generated from our idiVERIFIED service.

The cost of revenue, which consists primarily of third-party servicer costs, is variable.

The cost of platform revenue, which consists primarily of data acquisition costs, remains relatively fixed irrespective of revenue generation.

Services revenue consists of revenue generated from our idiVERIFIED service, which is an ancillary collections market offering that is purely transactional and of a lower margin profile.

The cost of services revenue, which consists primarily of third-party servicer costs, is variable.

Use and Reconciliation of Non-GAAP Financial Measures

Management evaluates the financial performance of our business on a variety of key indicators, including non-GAAP metrics of adjusted EBITDA, adjusted gross profit and adjusted gross margin.

Adjusted EBITDA is a financial measure equal to net loss, the most directly comparable financial measure based on GAAP, excluding interest income, net, depreciation and amortization, share-based compensation expense, and write-off of long-lived assets and others, as noted in the tables below.

Adjusted EBITDA is a financial measure equal to net loss, the most directly comparable financial measure based on GAAP, excluding interest expense (income), net, depreciation and amortization, share-based compensation expense, and write-off of long-lived assets and others, as noted in the tables below.

We define adjusted gross profit as revenue less cost of revenue (exclusive of depreciation and amortization), and adjusted gross margin as adjusted gross profit as a percentage of revenue.

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Three Months Ended

Nine Months Ended September 30,

(In thousands)

Interest income, net

June 30, 2020

Interest expense (income), net

Depreciation and amortization

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The following is a reconciliation of gross profit, the most directly comparable GAAP financial measure, to adjusted gross profit:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Three Months Ended

Nine Months Ended September 30,

(In thousands)

Cost of revenue (exclusive of depreciation and amortization)

Depreciation and amortization of intangible assets

June 30, 2020

Cost of revenue (exclusive of depreciation

and amortization)

Depreciation and amortization of intangible

Adjusted gross profit

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Results of Operations

Three months ended June 30, 2020 compared to three months ended June 30, 2019

Revenue decreased $0.1 million or 3% to $7.1 million for the three months ended June 30, 2020 from $7.2 million for the three months ended June 30, 2019.

As a result of government mandated stay-at-home orders and certain moratoria on our customer’s business activities as a result of Covid-19, we experienced reduced transactional volume for the three months ended June 30, 2020.

In addition, we took a proactive customer centric approach working with customers who were impacted by Covid-19.

Three months ended September 30, 2020 compared to three months ended September 30, 2019

Revenue increased $1.0 million or 12% to $9.3 million for the three months ended September 30, 2020 from $8.3 million for the three months ended September 30, 2019.

This increase was driven by strong growth in usage from existing customers, with growth revenue from existing customers increasing $1.5 million or 116%.

This growth was partially offset by a decrease in revenue from new customers of $0.7 million or 48%, as a result of Covid-19 related factors.

As government mandated stay-at-home orders were lifted and our customers adapted and became more efficient transacting in the Covid-19 environment, our transaction volume returned to pre-Covid levels by the end of the third quarter, with the exception of collection customer volume.

Collection customer volume was down $0.8 million, primarily attributable to our idiVERIFIED service, which is an ancillary collections market offering that is purely transactional and of a lower margin profile, for the three months ended September 30, 2020, as a result of certain government mandated collections moratoria remaining in place during the period.

We continued to take a proactive customer centric approach working with customers who were impacted by Covid-19.

The end date of the customer’s agreement was extended by one month for each month of the temporary concession.

As a result of these Covid-19 related factors, revenue from new customers decreased $0.7 million or 43%, and growth revenue from existing customers decreased $0.1 million or 6%, partially offset by base revenue from existing customers increasing $0.6 million or 13% for the three months ended June 30, 2020.

Our idiCORE billable customer base grew from 4,370 customers as of June 30, 2019 to 5,375 customers as of June 30, 2020.

Our idiCORE billable customer base grew from 4,781 customers as of September 30, 2019 to 5,758 customers as of September 30, 2020.

Our FOREWARN user base grew from 23,853 users to 44,927 users during that same period.

Revenue from new customers represents the total monthly revenue generated from new customers in a given period.

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Cost of revenue (exclusive of depreciation and amortization) .

Cost of revenue decreased $0.5 million or 15% to $2.6 million for the three months ended June 30, 2020 from $3.1 million for the three months ended June 30, 2019.

Cost of revenue decreased $0.4 million or 13% to $2.7 million for the three months ended September 30, 2020 from $3.1 million for the three months ended September 30, 2019.

Our cost of revenue primarily includes data acquisition costs.

Data acquisition costs consist primarily of the costs to acquire data either on a transactional basis or through flat-fee data licensing agreements, including unlimited usage agreements.

The decrease in cost of revenue was primarily attributable to the decrease in transactional based data acquisition costs.

We continue to enhance the breadth and depth of our data through the addition and expansion of relationships with key data suppliers, including our largest data supplier, which accounted for approximately 51% of our total data acquisition costs for the three months ended June 30, 2020 compared to approximately 41% for the three months ended June 30, 2019.

The decrease in cost of revenue was primarily attributable to the decrease in transactional based data acquisition costs associated with the reduction in our idiVERIFIED services revenue.

We continue to enhance the breadth and depth of our data through the addition and expansion of relationships with key data suppliers, including our largest data supplier, which accounted for approximately 48% of our total data acquisition costs for the three months ended September 30, 2020 compared to approximately 40% for the three months ended September 30, 2019.

Other cost of revenue items include expenses related to third-party infrastructure fees.

As the construct of our data costs is primarily a flat-fee, unlimited usage model, the cost of revenue as a percentage of revenue decreased to 37% for the three months ended June 30, 2020 from 42% for the three months ended June 30, 2019.

As the construct of our data costs is primarily a flat-fee, unlimited usage model, the cost of revenue as a percentage of revenue decreased to 29% for the three months ended September 30, 2020 from 38% for the three months ended September 30, 2019.

We expect that cost of revenue as a percentage of revenue will continue to decrease over the coming years as our revenue increases.

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Sales and marketing expenses .

Sales and marketing expenses decreased $0.3 million or 13% to $1.7 million for the three months ended June 30, 2020 from $2.0 million for the three months ended June 30, 2019.

Sales and marketing expenses increased $0.3 million or 15% to $2.2 million for the three months ended September 30, 2020 from $1.9 million for the three months ended September 30, 2019.

Sales and marketing expenses consist of salaries and benefits, advertising and marketing, travel expenses, and share-based compensation expense, incurred by our sales team, and provision for bad debts.

The decrease during the three months ended June 30, 2020 was primarily attributable to an aggregate of $0.2 million decrease in sales commissions from decreased revenue.

The increase during the three months ended September 30, 2020 was primarily attributable to an aggregate of $0.3 million increase in salaries and benefits, as we continue to invest in the expansion of our sales organization, and sales commissions from increased revenue.

General and administrative expenses .

General and administrative expenses de creased $ 1 .

1 million or 21 % to $ 4 .

3 million for the three months ended June 30 , 20 20 from $ 5 .4 million for the three months ended June 30 , 201 9 .

The de crease during the three months ended June 30 , 2020 was primarily attributable to the $ 1 .

3 million de crease in share-based compensation expense .

For the three months ended June 30, 2020 and 2019, our general and administrative expenses consisted primarily of employee salaries and benefits of $1.0 million and $1.0 million, share-based compensation expense of $2.2 million and $3.5 million, and professional fees of $0.5 million and $0.4 million, respectively.

General and administrative expenses increased $0.6 million or 19% to $4.1 million for the three months ended September 30, 2020 from $3.5 million for the three months ended September 30, 2019.

The increase during the three months ended September 30, 2020 was primarily attributable to the $0.4 million increase in share-based compensation expense.

For the three months ended September 30, 2020 and 2019, our general and administrative expenses consisted primarily of employee salaries and benefits of $1.2 million and $1.1 million, share-based compensation expense of $1.7 million and $1.3 million, and professional fees of $0.8 million and $0.6 million, respectively.

Depreciation and amortization .

Depreciation and amortization expenses increased $0.3 million or 46% to $1.0 million for the three months ended June 30, 2020 from $0.7 million for the three months ended June 30, 2019.

The increase in depreciation and amortization for the three months ended June 30, 2020 resulted primarily from the amortization of software developed for internal use that became ready for its intended use after June 30, 2019.

Depreciation and amortization expenses increased $0.3 million or 49% to $1.1 million for the three months ended September 30, 2020 from $0.8 million for the three months ended September 30, 2019.

The increase in depreciation and amortization for the three months ended September 30, 2020 resulted primarily from the amortization of software developed for internal use that became ready for its intended use after September 30, 2019.

Loss before income taxes .

L oss before income taxes narrowed $1.4 million or 34% to $2.5 million for the three months ended June 30, 2020 from $3.9 million for the three months ended June 30, 2019.

The decrease in loss before income taxes was primarily attributable to the decrease in share-based compensation expense of $1.3 million, sales commission of $0.2 million, and our cost of revenue as a percentage of revenue, which was partially offset by the increase in depreciation and amortization of $0.3 million.

L oss before income taxes narrowed $ 0 .

1 million or 9 % to $ 0 .

9 million for the three months ended September 30, 20 20 from $ 1 .

0 million for the three months ended September 30, 20 1 9 .

The de crease in loss before income taxes was primarily attributable to the increase in revenue and decrease in our cost of revenue as a percentage of revenue, which was partially offset by the in crease in share-based compensation expense of $ 0 .

5 million , employee salaries and benefits and sales commission of $ 0 .

4 million , and depreciation and amortization of $0.

Income taxes .

Income tax expense of $0 was recognized for the three months ended June 30, 2020 and 2019.

A full valuation allowance on the deferred tax assets was recognized as of June 30, 2020 and 2019.

Income tax expense of $0 was recognized for the three months ended September 30, 2020 and 2019.

A full valuation allowance on the deferred tax assets was recognized as of September 30, 2020 and 2019.

See Note 6, “Income Taxes,” included in “Notes to Condensed Consolidated Financial Statements,” for details.

Net loss narrowed $1.4 million or 34% to $2.5 million for the three months ended June 30, 2020 from $3.9 million for the three months ended June 30, 2019, as a result of the foregoing .

Six months ended June 30, 2020 compared to six months ended June 30, 2019

Revenue increased $3.4 million or 26% to $16.4 million for the six months ended June 30, 2020 from $13.0 million for the six months ended June 30, 2019.

Net loss narrowed $0.1 million or 7% to $0.9 million for the three months ended September 30, 2020 from $1.0 million for the three months ended September 30, 2019, as a result of the foregoing .

Nine months ended September 30, 2020 compared to nine months ended September 30, 2019

Revenue increased $4.4 million or 21% to $25.6 million for the nine months ended September 30, 2020 from $21.2 million for the nine months ended September 30, 2019.

This increase was driven by strong growth in usage from existing customers, with base revenue from existing customers increasing $3.8 million or 28% and growth revenue from existing customers increasing $1.8 million or 54%.

This growth was partially offset by a decrease in revenue from new customers of $0.6 million or 19%.

In the second half of the period, we experienced reduced transactional volume as a result of government mandated stay-at-home orders and certain moratoria on our customer’s business activities as a result of Covid-19.

In addition, we took a proactive customer centric approach working with customers who were impacted by Covid-19.

This growth was partially offset by a decrease in revenue from new customers of $1.2 million or 29%, as a result of Covid-19 related factors.

During the second and third quarter of 2020, we experienced reduced transaction volume as a result of government mandated stay-at-home orders and certain moratoria on our customer’s business activities as a result of Covid-19.

We continued to take a proactive customer centric approach working with customers who were impacted by Covid-19.

The end date of the customer’s agreement was extended by one month for each month of the temporary concession.

Collection customer volume was down $0.7 million for the nine months ended September 30, 2020, primarily attributable to our idiVERIFIED service, which is an ancillary collections market offering that is purely transactional and of a lower margin profile, as a result of certain government mandated collections moratoria remaining in place during the period.

Our idiCORE billable customer base grew from 4,781 customers as of September 30, 2019 to 5,758 customers as of September 30, 2020.

Our FOREWARN user base grew from 23,853 users to 44,927 users during that same period.

Revenue from new customers represents the total monthly revenue generated from new customers in a given period.

A customer is defined as a new customer during the first six months of revenue generation.

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Cost of revenue (exclusive of depreciation and amortization) .

Cost of revenue increased $0.2 million or 3% to $5.9 million for the six months ended June 30, 2020 from $5.7 million for the six months ended June 30, 2019.

Cost of revenue decreased $0.2 million or 3% to $8.6 million for the nine months ended September 30, 2020 from $8.8 million for the nine months ended September 30, 2019.

Our cost of revenue primarily includes data acquisition costs.

Data acquisition costs consist primarily of the costs to acquire data either on a transactional basis or through flat-fee data licensing agreements, including unlimited usage agreements.

The increase in cost of revenue was primarily attributable to the increase in flat-fee based data acquisition costs, which was partially offset by the decrease in transactional based data acquisition costs.

We continue to enhance the breadth and depth of our data through the addition and expansion of relationships with key data suppliers, including our largest data supplier, which accounted for approximately 44% of our total data acquisition costs for the six months ended June 30, 2020 compared to approximately 41% for the six months ended June 30, 2019.

The decrease in cost of revenue was primarily attributable to the decrease in transactional based data acquisition costs associated with the reduction in our idiVERIFIED services revenue.

We continue to enhance the breadth and depth of our data through the addition and expansion of relationships with key data suppliers, including our largest data supplier, which accounted for approximately 45% of our total data acquisition costs for the nine months ended September 30, 2020 compared to approximately 41% for the nine months ended September 30, 2019.

Other cost of revenue items include expenses related to third-party infrastructure fees.

As the construct of our data costs is primarily a flat-fee, unlimited usage model, the cost of revenue as a percentage of revenue decreased to 36% for the six months ended June 30, 2020 from 44% for the six months ended June 30, 2019.

As the construct of our data costs is primarily a flat-fee, unlimited usage model, the cost of revenue as a percentage of revenue decreased to 33% for the nine months ended September 30, 2020 from 42% for the nine months ended September 30, 2019.

We expect that cost of revenue as a percentage of revenue will continue to decrease over the coming years as our revenue increases.

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Sales and marketing expenses .

Sales and marketing expenses increased $0.

4 million or 12 % to $ 3 .

9 million for the six months ended June 30, 2020 from $ 3 .5 million for the six months ended June 30, 2019.

Sales and marketing expenses increased $0.7 million or 13% to $6.1 million for the nine months ended September 30, 2020 from $5.4 million for the nine months ended September 30, 2019.

The increase during the six months ended June 30, 2020 was primarily attributable to an aggregate of $0.

3 million increase in salaries and benefits, as we continue to invest in the expansion of our sales organization, and sales commissions from increased revenue.

The increase during the nine months ended September 30, 2020 was primarily attributable to an aggregate of $0.5 million increase in salaries and benefits, as we continue to invest in the expansion of our sales organization, and sales commissions from increased revenue.

General and administrative expenses .

General and administrative expenses increased $0.9 million or 12% to $8.7 million for the six months ended June 30, 2020 from $7.8 million for the six months ended June 30, 2019.

The increase during the six months ended June 30, 2020 was primarily attributable to the $0.6 million increase in share-based compensation expense.

For the six months ended June 30, 2020 and 2019, our general and administrative expenses consisted primarily of employee salaries and benefits of $2.2 million and $2.0 million, share-based compensation expense of $4.3 million and $3.7 million, and professional fees of $1.2 million and $1.2 million, respectively.

General and administrative expenses increased $ 1 .

5 million or 14 % to $ 12 .

8 million for the nine months ended September 30 , 2020 from $ 11 .

3 million for the nine months ended September 30 , 2019.

The increase during the nine months ended September 30 , 20 20 was primarily attributable to the $ 1 .

0 million increase in share-based compensation expense .

For the nine months ended September 30, 2020 and 2019, our general and administrative expenses consisted primarily of employee salaries and benefits of $3.4 million and $3.1 million, share-based compensation expense of $6.0 million and $5.0 million, and professional fees of $1.9 million and $1.8 million, respectively.

Depreciation and amortization .

Depreciation and amortization expenses increased $0.6 million or 46% to $1.9 million for the six months ended June 30, 2020 from $1.3 million for the six months ended June 30, 2019.

The increase in depreciation and amortization for the six months ended June 30, 2020 resulted primarily from the amortization of software developed for internal use that became ready for its intended use after June 30, 2019.

Depreciation and amortization expenses increased $1.0 million or 47% to $3.0 million for the nine months ended September 30, 2020 from $2.0 million for the nine months ended September 30, 2019.

The increase in depreciation and amortization for the nine months ended September 30, 2020 resulted primarily from the amortization of software developed for internal use that became ready for its intended use after September 30, 2019.

Loss before income taxes .

L oss before income taxes narrowed $1.2 million or 23% to $4.0 million for the six months ended June 30, 2020 from $5.2 million for the six months ended June 30, 2019.

The decrease in loss before income taxes was primarily attributable to the increase in revenue and the decrease in our cost of revenue as a percentage of revenue, which was partially offset by the increase in share-based compensation expense of $0.7 million, salaries and benefits and sales commission of $0.5 million, and depreciation and amortization of $0.6 million.

L oss before income taxes narrowed $1.3 million or 21% to $4.9 million for the nine months ended September 30, 2020 from $6.2 million for the nine months ended September 30, 2019.

The decrease in loss before income taxes was primarily attributable to the increase in revenue and the decrease in our cost of revenue as a percentage of revenue, which was partially offset by the increase in share-based compensation expense of $1.1 million, depreciation and amortization of $1.0 million, and salaries and benefits and sales commission of $0.8 million.

Income taxes .

Income tax expense of $0 was recognized for the six months ended June 30, 2020 and 2019.

A full valuation allowance on the deferred tax assets was recognized as of June 30, 2020 and 2019.

Income tax expense of $0 was recognized for the nine months ended September 30, 2020 and 2019.

A full valuation allowance on the deferred tax assets was recognized as of September 30, 2020 and 2019.

See Note 6, “Income Taxes,” included in “Notes to Condensed Consolidated Financial Statements,” for details.

Net loss narrowed $1.2 million or 23% to $4.0 million for the six months ended June 30, 2020 from $5.2 million for the six months ended June 30, 2019, as a result of the foregoing .

Net loss narrowed $1.3 million or 21% to $4.9 million for the nine months ended September 30, 2020 from $6.2 million for the nine months ended September 30, 2019, as a result of the foregoing .

Effect of Inflation

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Liquidity and Capital Resources

Cash flows provided by (used in) operating activities .

For the six months ended June 30, 2020, net cash provided by operating activities was $3.0 million, primarily the result of the net loss of $4.0 million, adjusted for certain non-cash items (consisting of share-based compensation expense, depreciation and amortization, write-off of long-lived assets, provision for bad debts and noncash lease expenses) totaling $7.1 million.

For the six months ended June 30, 2019, net cash used in operating activities was $1.1 million, primarily the result of the net loss of $5.2 million, adjusted for certain non-cash items, as mentioned above, totaling $5.7 million, and the cash used as a result of changes in assets and liabilities of $1.6 million, primarily the result of the increase in accounts receivable and decrease in operating lease liabilities.

Cash flows provided by operating activities .

For the nine months ended September 30, 2020, net cash provided by operating activities was $4.7 million, primarily the result of the net loss of $4.9 million, adjusted for certain non-cash items (consisting of share-based compensation expense, depreciation and amortization, write-off of long-lived assets, provision for bad debts, and noncash lease expenses) totaling $10.3 million, and the cash used as a result of changes in assets and liabilities of $0.6 million, primarily the result of the decrease in accrued expenses and other current liabilities and operating lease liabilities.

For the nine months ended September 30, 2019, net cash provided by operating activities was $0.4 million, primarily the result of the net loss of $6.2 million, adjusted for certain non-cash items, as mentioned above, totaling $8.1 million, and the cash used as a result of changes in assets and liabilities of $1.4 million, primarily the result of the increase in accounts receivable and decrease in operating lease liabilities.

Cash flows used in investing activities .

For the six months ended June 30, 2020 and 2019, net cash used in investing activities was $3.1 million and $2.9 million, respectively, primarily as a result of capitalized costs included in intangible assets.

For the nine months ended September 30, 2020 and 2019, net cash used in investing activities was $4.4 million and $4.5 million, respectively, primarily as a result of capitalized costs included in intangible assets.

Cash flows provided by financing activities .

For the six months ended June 30, 2020 and 2019, net cash provided by financing activities was $2.2 million and $0, respectively.

For the nine months ended September 30, 2020, net cash provided by financing activities was $0.3 million.

On May 5, 2020, we received funding under a promissory note dated May 5, 2020 evidencing the Loan in the principal amount of $2.2 million under the CARES Act.

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The interest rate on the Loan is 1.0% per annum.

Payments can be deferred until loan forgiveness is determined, or if the Company does not apply for forgiveness, then 10 months after the covered period ends.

As of June 30, 2020, we had material commitments under certain data licensing agreements of $10.8 million.

We anticipate funding our operations using available cash and cash flow generated from operations, and the Loan proceeds under the CARES Act, within the next twelve months.

We reported net loss of $ 2 .5 million and $ 3 .

9 million for the three months ended June 30, 2020 and 2019, respectively , and $ 4 .

0 million and $ 5 .

2 million for the six months ended June 30 , 2020 and 201 9 , respectively .

As of June 30 , 2020 , we had a total shareholders’ equity balance of $ 4 3 .

As of June 30, 2020, we had cash and cash equivalents of approximately $13.8 million.

Payments can be deferred until loan forgiveness is determined, or if we do not apply for forgiveness, then 10 months after the covered period ends.

We intend to apply for forgiveness by the end of December 2020.

In addition, we paid taxes of $1.8 million related to the net share settlement of vesting of restricted stock units during the nine months ended September 30, 2020 .

For the nine months ended September 30, 2019, net cash provided by financing activities of $7.4 million was as a result of the net proceeds raised through a registered direct offering in August 2019.

As of September 30, 2020, we had material commitments under certain data licensing agreements of $9.0 million.

We anticipate funding our operations using available cash and cash flow generated from operations within the next twelve months.

We reported net loss of $0.9 million and $1.0 million for the three months ended September 30, 2020 and 2019, respectively, and $4.9 million and $6.2 million for the nine months ended September 30, 2020 and 2019, respectively.

As of September 30, 2020, we had a total shareholders’ equity balance of $43.2 million.

As of September 30, 20 20 , we had cash and cash equivalents of approximately $ 1 2 .

Based on projections of growth in revenue and operating results in the next twelve months , and the available cash and cash equivalents held by us , we believe that we will have sufficient cash resources to finance our operations and expected capital expenditures for the next twelve months.

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Off-Balance Sheet Arrangements

As of June 30, 2020, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

As of September 30, 2020, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K.

Quantitative and Qualitative Disclosures About Market Risk.

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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