What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-11 compared with 2020-11-10 · 88 added, 145 removed, 124 unchanged (65% of the section changed)

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(“we,” “us,” “our,” “red violet,” or the “Company”), a Delaware corporation, is dedicated to making the world a safer place and reducing the cost of doing business.

We specialize in data fusion and analytics, providing cloud-based, mission-critical solutions to enterprises with use cases including fraud detection, risk mitigation, due diligence and marketing.

Through our intelligent platform, CORE TM , we uncover the relevance of disparate data points utilizing our analytical capabilities to provide real-time and insightful views of people, businesses, assets and their interrelationships.

Leveraging proprietary technology and applying machine learning and advanced analytical and decision-making capabilities, CORE provides compelling solutions to public and private sector organizations through intuitive, easy-to-use analytical applications.

We empower clients across markets and industries to better execute all aspects of their business, from managing risk, recovering debt, identifying fraud and abuse, and ensuring legislative compliance, to identifying and acquiring customers.

With a massive data repository of approximately nine petabytes of public-record, proprietary and publicly-available data, as well as self-reported consumer information and behavioral signals, we transform data into intelligence for our customers to enable better data-driven decisioning.

We presently market our solutions primarily through two brands, idiCORE™, our flagship product, and FOREWARN ® .

idiCORE is a next-generation, investigative solution used to address a variety of organizational challenges including due diligence, risk mitigation, identity authentication and legislative compliance, by financial services companies, insurance companies, healthcare companies, law enforcement and government, collections, law firms, retail, telecommunication companies, corporate security and investigative firms.

We build proprietary technologies and apply analytical capabilities to deliver identity intelligence.

Our technology powers critical solutions, which empower organizations to operate with confidence.

Our solutions enable the real-time identification and location of people, businesses, assets and their interrelationships.

These solutions are used for purposes including risk mitigation, due diligence, fraud detection and prevention, regulatory compliance, and customer acquisition.

Our intelligent platform, CORE TM , is purpose-built for the enterprise, yet flexible enough for organizations of all sizes, bringing clarity to massive datasets by transforming data into intelligence.

We drive wokflow efficiency and enable organizations to make better data-driven decisions.

Organizations are challenged by the structure, volume and disparity of data.

Our platform and applications transform the way our customers interact with information, presenting connections and relevance of information otherwise unattainable, which drives actionable insights and better outcomes.

Leveraging cloud-native proprietary technology and applying machine learning and advanced analytical capabilities, CORE provides essential solutions to public and private sector organizations through intuitive, easy-to-use analytical interfaces.

With massive data assets consisting of public-record, proprietary and publicly-available data, our differentiated information and innovative platform and solutions deliver intelligence relating to all things identity – entities, relationships, affiliations, interactions, and events.

Our solutions are used today to enable frictionless commerce, to ensure safety, and to reduce fraud and the concomitant expense borne by society.

While our platform powers many diverse solutions for our customers, we presently market our solutions primarily through two brands, idiCORE™, our flagship product, and FOREWARN ® .

idiCORE is a next-generation, investigative solution used to address a variety of organizational challenges including due diligence, risk mitigation, identity authentication and regulatory compliance, by financial services companies, insurance companies, healthcare companies, law enforcement and government, collections, law firms, retail, telecommunication companies, corporate security and investigative firms.

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 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.

As of March 31, 2021 and 2020, idiCORE had 5,902 and 5,326 billable customers and FOREWARN had 58,831 and 36,506 users, respectively.

The Company defines a billable customer of idiCORE as a single entity that generated revenue during the last three months of the period.

Billable customers are typically corporate organizations.

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

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.

Revenue from pricing contracts represented 80 % and 69 % of total revenue for the three months ended March 31, 202 1 and 20 20 , respectively .

We endeavor to understand our customers’ needs at the moment of first engagement.

We continuously engage with our customers and evaluate their usage of our solutions throughout their life cycle, to maximize utilization of our solutions and, hence, their productivity.

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.

We employ a “land and expand” approach.

Our sales model generally begins with a free trial followed by an initial purchase on a transactional basis or minimum-committed monthly spend.

As organizations derive benefits from our solutions, we are able to “land and expand” within larger organizations as additional use cases expand across departments, divisions and geographic locations and customers become increasingly reliant on our solutions in their daily workflow.

As organizations derive benefits from our solutions, we are able to expand within organizations as additional use cases are presented across departments, divisions and geographic locations and customers become increasingly reliant on our solutions in their daily workflow.

In order for us to continue to develop new products, grow our existing business and expand into additional markets, we must generate and sustain sufficient operating profits and cash flow in future periods.

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We continue to build out our sales organization to drive current products and to introduce new products into the marketplace.

In December 2019, a novel strain of coronavirus, now known as Covid-19, was reported in Wuhan, China and has since extensively impacted the global health and economic environment.

In December 2019, a novel strain of coronavirus, known as Covid-19, was reported in Wuhan, China and has since extensively impacted the global health and economic environment.

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 on our business, results of operations and financial performance.

We have taken numerous steps, and will continue to take further actions as appropriate, to minimize 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.

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.

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 transaction volume in the second and third quarters 2020.

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.

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 that resulted in significantly reduced commercial activity, and certain temporary government-imposed moratoria on collection customers’ activities, we experienced reduced transaction volume in the second and third quarters of 2020.

Transaction volume returned to pre-Covid levels by the end of the third quarter 2020, except for collection customer volume.

Collection customer transaction volume remained below pre-Covid levels during the first quarter of 2021, down $0.7 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 March 31, 2021, 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 second half of 2021.

Beginning the second quarter of 2020, 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.

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

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.

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

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

During the fourth quarter of 2020, we provided concessions to a total of 7 customers, representing a $32 thousand reduction in minimum committed spend.

We continue to work with customers who have been impacted by Covid-19 and consider potential concessions on a case-by-case basis.

We continue to take precautionary measures intended to minimize the risk of the Covid-19 pandemic to our employees, our customers, and the communities in which we operate.

These measures may result in inefficiencies, delays and additional costs to our business.

The Covid-19 pandemic and its impact on us and the economy has significantly limited our ability to forecast our future operating results, including our ability to predict revenue and expense levels, and plan for and model future operating results.

We will continue to evaluate the nature and extent of the impact of the COVID-19 pandemic to our business.

To further support our liquidity, b eginning 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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On May 5, 2020, we received funding under a promissory note dated May 5, 2020 evidencing an unsecured non-recourse loan in the principal amount of $2.2 million under the CARES Act (the “Loan”) .

We submitted an application for forgiveness of the Loan in November 2020.

We will continue to assess the CARES Act and other applicable government legislation aimed at assisting businesses during the Covid-19 pandemic.

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We began our first phase of employees returning to the Boca Raton, Florida office in June 2020.

We will continue to assess the need and timing of additional employees returning to the office.

By the end of the first quarter of 2021, nearly all of the Boca Raton office employees have returned to an in-office work environment.

We will continue to assess the need and timing of additional employees returning to an in- office work environment .

Given the dynamic nature of this health emergency, the full impact of the Covid-19 pandemic on our ongoing business, results of operations and overall financial performance cannot be reasonably estimated at this time .

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The preparati o n of these financial statements requires us to make estimates and judgments that affect the reported amounts of ass e ts, li a bi l it i es, revenues and expenses, and r e lated disclosure of contingent a ssets and liabilities.

On an ongo i ng basis, we evaluate our estimates, including those related to the allowance for doubtful accounts, useful lives of property and equipment and intangible ass e ts, recoverability of the carrying amounts of goodwill and intangible assets, share-based compensation and income tax provision.

On an ongo i ng basis, we evaluate our estimates, including those related to the allowance for doubtful accounts, useful lives of intangible ass e ts, recoverability of the carrying amounts of goodwill and intangible assets, share-based compensation and income tax provision.

We base our e s timates on historical ex p e rience a n d on various other assumptions that are believed to be reason a ble under the circumstances, the results of which form the basis f or making judgments ab o ut the ca rrying valu e s of a s s e ts and l i abi l it i es t hat a r e not readily apparent from other sources.

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

Third Quarter Financial Results

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

First Quarter Financial Results

For the three months ended March 31, 2021 as compared to the three months ended March 31, 2020:

Total revenue increased 10% to $10.2 million.

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Adjusted gross margin increased to 73% from 65%.

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.

Generated $1.2 million in cash from operating activities in the first quarter.

Cash and cash equivalents were $12.9 million as of March 31, 2021.

First Quarter and Recent Business Highlights

Revenue attributable to customer contracts reached a record 80%.

Customer contracts are generally annual contracts or longer with auto renewal.

Added over 170 new customers to idiCORE™ during the first quarter, ending the quarter with 5,902 customers.

Added over 10,400 users to FOREWARN ® during the first quarter, ending the quarter with 58,831 users.

Over 140 REALTOR ® Associations throughout the U.S.

are now contracted to use FOREWARN.

Added two seasoned business development leaders with deep industry knowledge across multiple verticals we serve today.

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

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

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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 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.

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, litigation costs 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 September 30,

Three Months Ended

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

June 30, 2020

Interest expense (income), net

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Share-based compensation expense

Litigation costs

Write-off of long-lived assets and others

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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 September 30,

Three Months Ended

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

June 30, 2020

Cost of revenue (exclusive of depreciation

and amortization)

Depreciation and amortization of intangible

Cost of revenue (exclusive of depreciation and amortization)

Depreciation and amortization of intangible assets

Adjusted gross profit

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Results of Operations

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.

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.

Base revenue from existing customers represents the total monthly revenue generated from existing customers in a given period that does not exceed the customers' trailing six-month average revenue.

A customer is defined as an existing customer six months after their initial month of revenue.

Growth revenue from existing customers represents the total monthly revenue generated from existing customers in a given period in excess of the customers' trailing six-month average revenue.

Cost of revenue (exclusive of depreciation and amortization) .

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 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 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.

Historically, at scale, the industry business model’s cost of revenue will trend between 15% and 30% as a percentage of revenue.

Sales and marketing expenses .

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 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 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 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 $ 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 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 $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.

Three months ended March 31, 2021 compared to three months ended March 31, 2020

Revenue increased $0.9 million or 10% to $10.2 million for the three months ended March 31, 2021 from $9.3 million for the three months ended March 31, 2020.

This increase was driven by strong growth in usage from existing customers, with base revenue from existing customers increasing $0.7 million or 11%, and growth revenue from existing customers increasing $0.6 million or 51%.

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.

This growth was partially offset by a decrease in revenue from new customers of $0.4 million or 32%.

As a result of certain Covid-19 related government mandated collections moratoria remaining in place during the period, collection customer volume was down $0.7 million for the three months ended March 31, 2021.

This was primarily attributable to our idiVERIFIED service, which is an ancillary collections market offering that is purely transactional and of a lower margin profile.

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

Our idiCORE billable customer base grew from 5,326 customers as of March 31, 2020 to 5,902 customers as of March 31, 2021, and our FOREWARN user base grew from 36,506 users to 58,831 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 $0.2 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.

Cost of revenue decreased $0.5 million or 16% to $2.8 million for the three months ended March 31, 2021 from $3.3 million for the three months ended March 31, 2020.

Our cost of revenue primarily includes data acquisition costs.

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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.

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 three months ended March 31, 2021 compared to approximately 39% for the three months ended March 31, 2020.

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 33% for the nine months ended September 30, 2020 from 42% for the nine months ended September 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 27% for the three months ended March 31, 2021 from 35% for the three months ended March 31, 2020.

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 $0.7 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.

Sales and marketing expenses remained consistent at $2.2 million for the three months ended March 31, 2021 and 2020.

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 $ 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.

General and administrative expenses increased $0.2 million or 3% to $4.6 million for the three months ended March 31, 2021 from $4.4 million for the three months ended March 31, 2020.

For the three months ended March 31, 2021 and 2020, our general and administrative expenses consisted primarily of employee salaries and benefits of $1.5 million and $1.2 million, share-based compensation expense of $1.9 million and $2.1 million, and professional fees of $0.7 million and $0.6 million, respectively.

Depreciation and amortization .

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.

Depreciation and amortization expenses increased $0.4 million or 38% to $1.3 million for the three months ended March 31, 2021 from $0.9 million for the three months ended March 31, 2020.

The increase in depreciation and amortization for the three months ended March 31, 2021 resulted primarily from the amortization of software developed for internal use that became ready for its intended use after March 31, 2020.

Loss before income taxes .

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.

L oss before income taxes narrowed $0.9 million or 61% to $0.6 million for the three months ended March 31, 2021 from $1.5 million for the three months ended March 31, 2020.

The decrease in loss before income taxes was primarily attributable to the increase in revenue, decrease in our cost of revenue as a percentage of revenue, and decrease in share-based compensation expense, which was partially offset by the increase in employee salaries and benefits and sales commission of $0.5 million, and depreciation and amortization of $0.4 million.

Income taxes .

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.

Income tax expense of $0 was recognized for the three months ended March 31, 2021 and 2020 .

A full valuation allowance on the deferred tax assets was recognized as of March 31, 2021 and 2020 .

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

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 .

Net loss narrowed $0.9 million or 61% to $0.6 million for the three months ended March 31, 2021 from $1.5 million for the three months ended March 31, 2020, as a result of the foregoing .

Effect of Inflation

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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.

For the three months ended March 31, 2021, net cash provided by operating activities was $1.2 million, primarily the result of the net loss of $0.6 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 $3.5 million, and the cash used as a result of changes in assets and liabilities of $1.7 million, primarily the result of the increase in accounts receivable and prepaid expenses and other current assets, and the decrease in accounts payable, accrued expenses and other current liabilities and operating lease liabilities.

For the three months ended March 31, 2020, net cash provided by operating activities was $1.2 million, primarily the result of the net loss of $1.5 million, adjusted for certain non-cash items, as mentioned above, totaling $3.4 million, and the cash used as a result of changes in assets and liabilities of $0.7 million, primarily the result of the increase in prepaid expenses and other current assets, and the decrease in accrued expenses and other current liabilities and operating lease liabilities.

Cash flows used in investing activities .

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 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.

The Loan has a two-year term and matures on May 5, 2022.

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

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.

For the three months ended March 31, 2021 and 2020, net cash used in investing activities was $1.3 million and $1.6 million, respectively, primarily as a result of capitalized costs included in intangible assets.

As of March 31, 2021, we had material commitments under certain data licensing agreements of $8.7 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 .

We reported net loss of $0.6 million and $1.5 million for the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, we had a total shareholders’ equity balance of $45.2 million.

As of March 31, 2021, we had cash and cash equivalents of approximately $12.9 million.

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 September 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 March 31, 2021, 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