T Stamp Inc
For the period ended Sep 30, 2024. Filed Nov 15, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 15, 2024
IDAI$2.26+3.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-13.
0001718939-24-000135
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-15.
0001718939-24-000202
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 134 previous paragraphs and 126 current paragraphs.
65 unchanged; 32 reworded; 29 added; 35 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 24 previous and 23 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (29)
Current report
Trust Stamp primarily develops proprietary artificial intelligence-powered solutions, researching and leveraging machine learning artificial intelligence, including computer vision, cryptography, and data mining, to process and protect data and deliver insightful outputs that identify and defend against fraud, protect sensitive user information, facilitate automated processes, and extend the reach of digital services through global accessibility. We utilize the power and agility of technologies such as GPU processing, edge computing, neural networks, and large language models to process and protect data faster and more effectively than historically possible to deliver results at a disruptively low cost for usage across multiple industries.
Current report
Our team has substantial expertise in the creation and development of AI-enabled software products. We license our technology and expertise in numerous fields, with an increasing emphasis on addressing diverse markets through established partners who will integrate our technology into field-specific applications.
Current report
Over the last 6-months, the Company has undertaken a multi-pronged process to position itself better to leverage the growing opportunities offered by the expanded use and acceptance of AI technologies. This process has included:
Current report
Reducing the size of the non-production-focused executive and consulting teams to reduce overhead for the 2025 calendar year.
Current report
Releasing sales staff that did not meet their targets.
Current report
Negotiating the sale of certain assets that have resulted in continuous operating losses to raise operating capital and eliminate the cash flow deficits associated with the assets. This will allow a sharpened focus on and investment in products with the best promise for profitable revenue generation. The negotiations are very advanced, and an announcement will be made when appropriate.
Current report
Negotiating a services contract to offset the cost of the technical team members while maintaining significant R&D and product development capabilities.
Current report
Refocusing go-to-market strategies on joint ventures with proven industry partners with access to target markets
Current report
Recent Developments
Current report
Securities Purchase Agreement and Registration Rights Agreement with DQI Holdings, Inc.
Current report
The Shares were not registered under the Securities Act of 1933, as amended (the “Securities Act”), and were offered pursuant to an exemption from the registration requirements of the Securities Act provided under Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated under the Securities Act.
Current report
The foregoing description of the SPA does not purport to be complete and is qualified in its entirety by reference to the full text of the SPA, a copy of which is filed as Exhibit 10.32 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.
Current report
Pursuant to the SPA, the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) with DQI on October 27, 2024, pursuant to which the Company must file a registration statement on Form S-3 (or, if the Company is ineligible to use a Form S-3, another appropriate form) with the Securities and Exchange Commission (the “SEC”) to register for resale by DQI of the Shares, with such registration statement becoming effective 5 days after the date the stockholders of the Company ratify, by vote, the approval of that certain Securities Purchase Agreement dated July 13, 2024 between our Company and DQI and all transactions contemplated thereunder, including, but not limited to, the sale of 4,597,701 shares of our Class A Common Stock to DQI.
Current report
Once the registration statement is filed, the Company must obtain SEC effectiveness of the registration statement within 45 days of the filing date – however, in the event of a “full review” by the SEC of the registration statement, the Company will have 75 days to obtain SEC effectiveness of the registration statement.
Current report
The foregoing summary of the Registration Rights Agreement is not complete, and is qualified by reference to a copy of the Registration Rights Agreement included as Exhibit 10.33 to this Quarterly Report on Form 10-Q and is incorporated herein by reference.
Current report
Election of New Board Member
Current report
On November 2, 2024, the Board of Directors of the Company elected Andrew Scott Francis, the current Chief Technology Officer of the Company, to the Board of Directors, effective immediately, to fill a vacancy on the Board of Directors left from the resignation of Joshua Allen from the Company's Board of Directors on September 26, 2024. Andrew Scott Francis will be a member of the “Class III” directors of the Company.
Current report
Adjusted EBITDA income (loss) (non-GAAP) for the three months ended September 30, 2024, decreased to a $2.14 million loss from a $316 thousand gain for the three months ended September 30, 2023. During the three months ended September 30, 2024, the Company signed a license agreement with Boumarang valued at $5.00 million and accounted for under other income. This figure was deducted from the Net income to arrive at the Adjusted EBITDA loss (non-GAAP), which is the primary driver for the significant change in Adjusted EBITDA income (loss) (non-GAAP) for the three months ended September 30, 2024 compared to the prior period. The $5.00 million was partially offset by other expense including a $1.17 million loss related to the difference in the cash paid for the warrants and the FMV of the warrants issued on September 3, 2024 and a loss of $360 thousand related to the difference in the cash paid for the warrants and the FMV of the warrants issued on September 10, 2024. Additionally, during the three months ended September 30, 2023, the Company recognized non-refundable license revenue advances from Interactive Global Solutions (“IGS”) for the provision of software of $2.51 million. This was a one-time occurrence which significantly improved our net revenues during the three months ended September 30, 2023 - and because there was no similar transaction during the three months ended September 30, 2024, was a contributor to the significant change in Adjusted EBITDA income (loss) (non-GAAP) for the three months ended September 30, 2024. See “Results of Operations” below for further discussion on the drivers behind the increase in Adjusted EBITDA income (loss) (non-GAAP) during the three months ended September 30, 2024.
Current report
Selling, general, and administrative expense (“SG&A”) increased by $128 thousand, or 6.25%, for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The increase in SG&A expense was driven by a $270 thousand increase in salaries, stock-based compensation, payroll costs, and sales commissions during the three months ended September 30, 2024. Included in the $270 thousand was an increase of $236 thousand during the three months ended September 30, 2024 due to the timing of stock-based compensation awards. In addition, the Company incurred a $145 thousand increase in IT services costs during the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase is due to an AWS billing for usage not applied to a contract or used by the R&D team during the three months ended September 30, 2024.
Current report
The Company’s Operating loss increased by $2.65 million or 12131.29% for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The increase in Operating loss was mainly related to a decrease in net revenue. This decrease related to the termination of the September 15, 2022 Master Services Agreement with IGS ("IGS Contract") which resulted in $2.51 million in Net revenue during the three months ended September 30, 2023 and the release from future contractual obligations for maintenance and upgrades as a result of the termination of the IGS Contract.
Current report
Other income increased by $5.00 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The increase was primarily due to the Company agreeing to grant a non-exclusive license to Boumarang to exploit certain of the Company’s patents for the purpose of producing, selling, marketing, and distributing drones. As consideration for the grant of the non-exclusive license, Boumarang agreed to pay the Company a non-refundable license fee of $5.00 million in the form of a prepaid warrant issued by Boumarang to the Company for 5,000,000 shares of common stock of Boumarang at $1.00 per share.
Current report
Other expense increased by $1.53 million for the three months ended September 30, 2024, compared to thethree months ended September 30, 2023. The Company incurred$1.17 million duringthe three months ended September 30, 2024 due tothe Company entering into a Termination and Release Agreement under which the transaction entered into between the Company andinstitutional investor that terminated the remaining 2,000,000 stock purchase warrants in Warrant Band 1,600,000 stock purchase warrants in Warrant C. In consideration of the termination of the Transaction Documents, the Company made a$1,650,000 payment to the institutional investor. In addition, the Company recorded a $360 thousand inducement expense during thethree months ended September 30, 2024 as a result of the Company entering into a securities purchase agreement on September 10, 2024 as an inducement to an a previously executed securities purchase agreement dated July 13, 2024.
Current report
Comparison of the Nine Months Ended September 30, 2024 and 2023
Current report
During the nine months ended September 30, 2024, Net revenue decreased by $2.40 million, or a 60.22% decrease from the Net revenue of $3.99 million for the nine months ended September 30, 2023. During the nine months ended September 30, 2024, the $1.59 million in Net revenue consisted of $991 thousand from an S&P 500 bank, $324 thousand from Mastercard, and various other customers for the remaining $269 thousand. The majority of the decrease in net revenue during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 was due to the termination of the September 15, 2022 Master Services Agreement with IGS ("IGS Contract"), which caused Company to recognize non-refundable license revenue advances from IGS under the IGS Contract for the provision of software of $2.51 million. This was a one-time occurrence which significantly improved our net revenues during the nine months ended September 30, 2023, and therefore is the primary reason for the stark decrease in net revenues of the Company during the nine months ended September 30, 2024.
Current report
The Company’s Operating loss increased by $3.17 million or 63.56% for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The increase in Operating loss was mostly related to the termination of the September 15, 2022 Master Services Agreement with IGS ("IGS Contract") which resulted in $2.51 million decrease in Net revenue when comparing the nine months ended September 30, 2024 with the nine months ended September 30, 2023 and the release from future contractual obligations for maintenance and upgrades as a result of the termination of the IGS Contract.
Current report
Interest expense, net increased by $120 thousand, or 402.95% for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The increase in interest expense is primarily due to an increase of $88 thousand as a result of TSI entering into two subordinated business loans and security agreements during the nine months ended September 30, 2024.
Current report
Other income increased by $4.97 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The increase was primarily due to the Company agreeing to grant a non-exclusive license to Boumarang to exploit certain of the Company’s patents for the purpose of producing, selling, marketing, and distributing drones. As consideration for the grant of the non-exclusive license, Boumarang agreed to pay the Company a non-refundable license fee of $5.00 million in the form of a prepaid warrant issued by Boumarang to the Company for 5,000,000 shares of common stock of Boumarang at $1.00 per share. In addition, there was an increase of $187 thousand for the gain from a settlement of a mobile hardware bill that was outstanding as of September 30, 2023, which we negotiated for a lower payment, and paid during the nine months ended September 30, 2024.
Current report
Other expense increased by $1.53 million for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The Company incurred $1.17 million in unrealized loss due to the difference in the carrying value of the warrants and the fair market value of the warrants for the nine months ended September 30, 2024. In addition, the Company recorded a $360 thousand inducement expense as a result of the Company entering into a securities purchase agreement on September 10, 2024 as an inducement to an a previously executed securities purchase agreement dated July 13, 2024.
Current report
On November 13, 2024, the Company entered into a secured promissory note, which provides for a term loan to the Company with the principal amount of $3.00 million and interest rate of 14% per annum. Principal and any accrued but unpaid interest under this Note shall be due and payable upon demand of the Holder at any time after January 12, 2025. The note is secured by all of the Borrower’s assets, including receivables.
Removed paragraphs (35)
Previous report
Trust Stamp was incorporated under the laws of the State of Delaware on April 11, 2016 as “T Stamp Inc.” T Stamp Inc. and its subsidiaries (“Trust Stamp”, “we”, or the “Company”) develop and market identity authentication software for enterprise and government partners and peer-to-peer markets.
Previous report
Trust Stamp develops proprietary artificial intelligence-powered identity and trust solutions at the intersection of biometrics, privacy, and cybersecurity. These solutions enable organizations to protect themselves and their users while empowering individuals to retain ownership of their identity data and prevent fraudulent activity using their identity.
Previous report
Trust Stamp tackles industry challenges including data protection, regulatory compliance, and financial accessibility, with cutting-edge technology including biometric science, cryptography, and machine learning. Our core technology irreversibly transforms identity information to create tokenized identifiers that enable accurate authentication without storing or sharing sensitive data. By retaining the usefulness of biometric-derived data while minimizing the risk, we allow businesses to adopt biometrics and other anti-fraud initiatives while protecting personal information from hacks and leaks.
Previous report
Trust Stamp’s key sub-markets are identity authentication for account opening, access, and fraud detection, tokenized digital identities to facilitate financial and societal inclusion, and in-community case management software for alternatives to detention and other governmental uses.
Previous report
As biometric solutions proliferate, so does the need to protect biometric data. Stored biometric images and templates represent a growing and unquantified financial, security, and PR liability and are the subject of governmental, media, and public scrutiny since biometric data cannot be “changed” once they are hacked, as they are directly linked to the user’s physical features and/or behaviors. Privacy concerns around biometric technology have led to close attention from regulators, with multiple jurisdictions placing biometrics in a special or sensitive category of personal data and demanding much stronger safeguards around collection and safekeeping.
Previous report
To address this unprecedented danger and increased cross-industry need to establish trust quickly and securely in virtual environments, Trust Stamp has developed its Irreversibly Transformed Identity Token, or IT 2 TM, solutions. These solutions replace biometric templates with a cryptographic hash that can never be rebuilt into the original data and cannot be used to identify the subject outside the environment for which it is designed.
Previous report
Trust Stamp’s data transformation and comparison technology is vendor and modality-agnostic, allowing organizations including other biometric services providers to benefit from our proprietary tokenization process's increased protection, efficiency, utility. With online and offline functionality, Trust Stamp technology is effective in even the most remote locations in the world.
Previous report
Trust Stamp also offers end-to-end solutions for multi-factor biometric authentication for account access and recovery, KYC/AML compliance, customer onboarding, and more, which allow organizations to approve more genuine users, keep bad actors from accessing systems and services and retain existing users with a superior user experience.
Previous report
Trust Stamp addresses this market with biometric identity verification and biometric authentication solutions. These solutions offer Trust Stamp’s proprietary irreversible identity token to perform biometric-based matching in a secure and tokenized domain, matching tokenized personally identifiable information while implementing liveness detection.
Previous report
The Company recently announced the development of a biometric authentication process for wire transfers and other high value transactions, a product of particular and immediate relevance to financial institutions concerned about the potential of deep fake attacks on existing authentication systems. The Company currently has three new banking clients who have indicated willingness to participate in a trial of the product scheduled for Q3 of 2024.
Previous report
Biometric Authentication
Previous report
•According to a 2022 report titled “Mobile Payment Biometrics,” published by Juniper Research, the value of biometrically authenticated remote mobile payments will reach $1.2 trillion globally by 2027.
Previous report
•The global biometric system market size is valued at $41.1 billion per annum in 2023, with a forecast compound growth of 20.4% from 2023 to 2030 with a 2030 revenue forecast of $150.6 billion according to the 2023 report titled “Biometric Technology Market Size, Share & Trends Analysis Report By Component, By Offering, By Authentication Type, By Application, By End-use, By Region, And Segment Forecasts, 2023 — 2030” published by Grand View Research.
Previous report
Trust Stamp addresses this market through its biometric authentication and liveness detection products. These products offer our proprietary IT 2 token to perform biometric matching in a secure and tokenized domain. This permits biometric authentication without the risk of storing pictures and biometric templates.
Previous report
In addition to identity authentication, the Company’s deep learning algorithms can be used to identify specific criteria from facial biometric captures and it has been developing and testing age-estimation software for the rapidly growing age verification market. The new age estimation software is expected to go live with a first commercial client in Q3 of 2024.
Previous report
Trust Stamp’s most important technology is the Irreversibly Transformed Identity Token or IT 2, which is combined with a data architecture that can use one or multiple sources of biometric or other identifying data. Once a “hash translation” algorithm is created, like-modality hashes are comparable regardless of their origin. The IT 2 protects against system and data redundancy, providing a lifelong “digital-DNA” that can store (or pivot to) any type of KYC or relationship data with fields individually hashed or (salted and) encrypted, facilitating selective data sharing. Products utilizing the IT 2 are Trust Stamp’s primary products, accounting for the majority of its revenues during the six months ended June 30, 2024.
Previous report
Historically, the Company generated most of its income through long-term partnerships, comprising a relationship with an S&P 500 bank with services provided pursuant to a Master Software Agreement entered into in 2017, together with a relationship with Mastercard International (“Mastercard”) with services provided under the terms of a five-year technology services agreement entered into in March 2019 and extended in March 2024 to April 2027 (the "TSA”). Both of those relationships remain strong, and the Company anticipates future revenue growth from the two relationships.
Previous report
Under the TSA, IT 2 technology is being implemented by Mastercard for Humanitarian & Development purposes as a core element of its Community Pass and Inclusive Identity offerings. Use cases include financial services for individuals and businesses and empowering people and communities to meet basic needs, such as nutritious food, clean water, housing, education, and healthcare. The Company is paid to develop and host software solutions utilizing the IT 2 and to support Mastercard’s implementations. In addition, the Company is paid on a “per user per year” basis for all transactions utilizing its technology. In December of 2022, the Company entered into a modification of the agreed pricing schedule with Mastercard to move from a per-use to a per-user-year model to broaden the range of potential use cases. The TSA may be terminated by either party in the event of a material breach by the other party that remains uncured within thirty days after notice is received of such a breach. Either party may terminate the TSA if the other party becomes, including, but not limited to, insolvent, subject to bankruptcy, dissolved, or liquidated. Unless the TSA is terminated, the TSA will automatically renew for additional one-year periods in perpetuity unless either party provides ninety days' written notice of intent not to renew. To date, the Company has received guaranteed minimum annual payments on account of usage. According to the October 2023 interview of Mastercard Executive Vice President and Founder of the Community Pass from the article titled “Mastercard’s Community Pass founder says digital ID platform improving lives, digital inclusion,” published by Biometric Update. Mastercard’s Community Pass program currently serves approximately 3.5 million users and is targeting 30 million users by 2027. Based on information provided to us by Mastercard, we anticipate user-based revenue will start in 2024 and grow year-on-year thereafter.
Previous report
In 2022, the Company expanded its key customer base to include a relationship with FIS, which was focused on implementing our Orchestration Layer and underlying technologies in FIS’ Global KYC product offering.
Previous report
The Orchestration Layer is a low-code platform designed to be a one-stop shop for Trust Stamp services and provides easy integration to our products, which are chargeable on a per-user basis. The Orchestration Layer utilizes the Company’s next-generation identity package, offering rapid deployment across devices and platforms, with custom workflows that seamlessly orchestrate trust across the identity lifecycle for a consistent user experience in processes for onboarding and KYC/AML, multi-factor authentication, account recovery, fraud prevention, compliance, and more. The Orchestration Layer facilitates no-code and low-code implementations of the Company’s technology, making adoption and updating faster and more cost-effective for a broader range of potential customers.
Previous report
In the third quarter of 2022, the Company acquired its first 2 new customers on the Orchestration Layer through its partnership with FIS, and in the fourth quarter of 2022, 4 additional FIS customers onboarded. As of June 30, 2024, a total of 54 financial institutions with over $345 billion in assets have been onboarded via FIS, bringing the total number of (FIS and non-FIS) customers either fully implemented or are currently implementing the Orchestration Layer to 62. The first (non-FIS) client onboarded to the Orchestration Layer in the third quarter of 2022 has generated $343 thousand of revenue for the Company to date including $110 thousand during the six months ended June 30, 2024. Although each institution onboarded via FIS pays a small onboarding fee, given the typical time a financial institution takes to test, implement, and roll out any new technology, the Company does not anticipate significant revenue from the new FIS customers until late 2024.
Previous report
Reinforced by the product-market fit indicated by the FIS rollout, the Company is building an internal direct sales force to offer the Orchestration Layer to non-FIS institutions. This expansion into direct sales is a work in progress, and the Company is dynamically adapting its approach based on progress toward acceptable success metrics.
Previous report
In Management's opinion, while the unanticipated loss of any one of our current customers, including our channel partnership with FIS, could adversely affect the Company’s financial position, it would not prevent us from continuing our operations.
Previous report
The Company’s Operating loss increased by $243 thousand or 10.20% for the three months ended June 30, 2024, compared to the three months ended June 30, 2023. The increase in Operating loss was mostly related to the increase of $283 thousand or 9.94% rise in operating expenses as a result of bolstering our sales resources and bringing in-house technical positions that outpaced Net revenue growth.
Previous report
Other income decreased by $176 thousand for the three months ended June 30, 2024, compared to the three months ended June 30, 2023. The decrease was primarily due to a $213 thousand gain on the sale of certain mobile hardware assets that occurred during the three months ended June 30, 2023, which was a one-time event and did not recur during the three months ended June 30, 2024. Likewise, during the three months ended June 30, 2024 Trust Stamp received $41 thousand from the University of Malta for a grant program, "Fusion; Technology Development Programme", aiming to provide state financing in the form of grants for research, development and innovation in science and technology. The Company received 50% of the applicable grant in May 2024. The Company expects to receive and recognize the remaining funds once the project is completed.
Previous report
Other expense decreased by $2 thousand for the three months ended June 30, 2024, compared to thethree months ended June 30, 2023. The Company incurred$0 and$3 thousand in unrealized loss on foreign currency translation expense for the three months ended June 30, 2024 and three months ended June 30, 2023, respectively, for intercompany transactions between the parent company, T Stamp Inc., and its subsidiaries, Trust Stamp Rwanda Limited with currencies denominated in United States Dollars and Rwandan Franc. Likewise, the Company incurred a $369 loss for fixed asset disposal for the three months ended June 30, 2024.
Previous report
Comparison of the Six Months Ended June 30, 2024 and 2023
Previous report
During the six months ended June 30, 2024, Net revenue increased by $155 thousand, or a 16.82% increase from the Net revenue of $919 thousand for the six months ended June 30, 2023. During the six months ended June 30, 2024, the $1.07 million in Net revenue consisted of $658 thousand from an S&P 500 bank, $238 thousand from Mastercard, and various other customers for the remaining $178 thousand. The majority of the increase in net revenue during the six months ended June 30, 2024 compared to the prior period is the result of an S&P 500 bank adopting the Orchestration Layer, which increased gross revenue by $405 thousand during the six months ended June 30, 2024.
Previous report
Other income
Previous report
Other income decreased by $32 thousand for the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The decrease is primarily due to a $213 thousand gain on the sale of certain mobile hardware assets during the six months ended June 30, 2023, which was a one-time event and did not recur during the six months ended June 30, 2024. This decrease was offset by a $187 thousand gain from a settlement of a mobile hardware bill that was outstanding as of June 30, 2023, which we negotiated for a lower payment, and paid during the six months ended June 30, 2024.
Previous report
Other expense
Previous report
Other expense decreased by $4 thousand for the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The Company incurred $6 thousand in unrealized loss on foreign currency translation expense for the six months ended June 30, 2024, for intercompany transactions between the parent company, T Stamp Inc., and its subsidiaries, Trust Stamp Rwanda Limited with currencies denominated in United States Dollars and Rwandan Franc, respectively.
Previous report
Subsequent Investment and Pro Forma Balance Sheet
Previous report
On July 13, 2024, T Stamp Inc. entered into a Securities Purchase Agreement (the “SPA”) with a certain investor (the “Purchaser”). Pursuant to the terms of the SPA, the Purchaser agreed, at the closing of the SPA (the “Closing”) and upon the terms and subject to the conditions set forth in the SPA, to purchase from the Company 4,597,701 shares of Class A Common Stock, par value $0.01 of the Company (the “Class A Common Stock”) at $0.435 per share, which was equal to the closing price of the Company’s Class A Common Stock on the Nasdaq Stock Market on July 11, 2024. The total purchase price for the shares was agreed to be paid pursuant to three promissory notes issued by the Purchaser to the Company comprised of (i) a $500,000 promissory note payable on July 31, 2024, which was paid on July 25, 2024; (ii) a $500,000 promissory note payable on August 31, 2024; and (iii) a $1,000,000 promissory note payable within three (3) trading days of an effective resale registration statement as contemplated by the Registration Rights Agreement. The Company filed a resale registration statement on Form S-3 for this purpose on July 18, 2024 (File No.: 333-280884), which is currently under review by the Commission. As of the date of this Quarterly Report on Form 10-Q, the resale registration statement is not yet effective. None of the promissory notes accrue interest, and each may be repaid before their respective due dates.
Previous report
The following table sets forth our consolidated cash and cash equivalents and capitalization as of June 30, 2024 on an actual basis and as adjusted basis to reflect (i) cash received on July 25, 2024 upon the repayment of the first $500,000 promissory note; and (ii) receivable for the second and third promissory notes totaling $1,500,000.
Reworded paragraphs (32)
Previous wording
On July 13, 2024 (the “Closing Date”), the Closing of the SPA occurred, and the Company issued 4,597,701 shares of Class A Common Stock to the Purchaser at $0.435 in exchange for the three promissory notes described above, totaling $2,000,000 in combined principal. The Closing of the SPA was subject to a number of customary closing conditions, including, but not limited to, the Company’s entry into a Registration Rights Agreement, the execution of which were conditions to the Closing of the SPA. Additionally, as part of the Closing of the SPA, the Purchaser executed a Voting Limitation Agreement.
Current wording
On October 27, 2024, the Company entered into a Securities Purchase Agreement the (“SPA”) with DQI Holdings, Inc. (“DQI”). Pursuant to the terms of the SPA, the Company agreed to sell, and DQI agreed to purchase from, at the closing of the SPA (the “Closing”) and upon the terms and subject to the conditions set forth in the SPA, 1,363,636.36 shares of Class A Common Stock, par value $0.01 of the Company (the “Class A Common Stock”) at $0.22 per share, subject to adjustment in certain circumstances. On October 28, 2024 (the “Closing Date”), the Closing of the SPA occurred, and the Company awarded 1,363,636.36 shares of Class A Common Stock to DQI (the “Shares”) in exchange for a cash payment of $300,000. The Closing of the SPA was subject to a number of customary closing conditions, including, but not limited to, the Company’s entry into a Registration Rights Agreement, the execution of which were conditions to the Closing of the SPA.
Previous wording
The Company’s initial business consisted of developing proprietary privacy-first identity solutions and implementing them through custom applications built and maintained for a few key customers. In 2022, the Company added to its product offerings a modular and highly scalable SaaS model with low-code or no implementation (“the Orchestration Layer”). Although the Company remains open to significant opportunities to deliver custom solutions, sales of Orchestration Layer products are the primary focus of the Company’s sales and development initiatives. This strategic pivot in the Company’s go-to-market approach negatively impacted revenue in 2023 but we believe it will substantially increase potential revenue.
Current wording
The Company’s initial business consisted of developing proprietary privacy-first identity solutions and implementing them through custom applications built and maintained for a few key customers. In 2022, the Company added to its product offerings a modular and highly scalable SaaS model with low-code or no implementation (“the Orchestration Layer”).
Previous wording
Reconciliation of Net Loss to Adjusted EBITDA
Current wording
Reconciliation of Net Income (Loss) to Adjusted EBITDA
Previous wording
Adjusted EBITDA loss (non-GAAP) for the three months ended June 30, 2024, increased by 2.85%, to $2.13 million from $2.07 million for the three months ended June 30, 2023. The overall increase in Adjusted EBITDA loss (non-GAAP) was driven primarily by the increase in Selling, general, and administrative expenses for the three months ended June 30, 2024 when compared to the three months ended June 30, 2023. See “Results of Operations” below for further discussion on the drivers behind the increase in Adjusted EBITDA loss (non-GAAP) during the three months ended June 30, 2024.
Current wording
Adjusted EBITDA income (loss) (non-GAAP) for the nine months ended September 30, 2024, increased by 64.25%, to a $6.65 million loss from a $4.05 million loss for the nine months ended September 30, 2023. The overall increase in Adjusted EBITDA income (loss) (non-GAAP) was driven primarily by the license agreement with Boumarang valued at $5.00 million and accounted for under other income. This figure got deducted from the Net loss before taxes to arrive at the adjusted EBITDA loss. The $5.00 million was partially offset by other expense including a $1.17 million loss related to the difference in the cash paid the warrants and the FMV of the warrants issued on September 3, 2024 and a loss of $360 thousand related to the difference in the cash paid for the warrants and the FMV of the warrants issued on September 10, 2024. Additionally, the decrease of $2.40 million or 60.22% in Net revenue as a result of recognizing the IGS non-refundable license revenue advances for the provision of software of $2.51 million during the nine months ended September 30, 2023 also is a factor in increase in Adjusted EBITDA loss during the nine months ended September 30, 2024 compared to the prior period, as there was no similar one-time transaction that occurred during the nine months ended September 30, 2024 that significantly increased net revenues. See “Results of Operations” below for further discussion on the drivers behind the increase in Adjusted EBITDA loss (non-GAAP) during the nine months ended September 30, 2024.
Previous wording
The following table summarizes our consolidated statements of operations for the three and six months ended June 30, 2024 and 2023:
Current wording
The following table summarizes our consolidated statements of operations for the three and nine months ended September 30, 2024 and 2023:
Previous wording
During the three months ended June 30, 2024, Net revenue increased to $500 thousand, or an 8.59% increase from the Net revenue of $461 thousand for the three months ended June 30, 2023. During the three months ended June 30, 2024, the $500 thousand in Net revenue consisted of $331 thousand from an S&P 500 bank, $84 thousand from Mastercard, and various other customers for the remaining $85 thousand. The majority of the increase in net revenue during the three months ended June 30, 2024 compared to the prior period is the result of an S&P 500 bank adopting the Orchestration Layer, which increased gross revenues earned during the three months ended June 30, 2024 by $189 thousand.
Current wording
During the three months ended September 30, 2024, Net revenue decreased to $511 thousand, or an 83.33% decrease from the Net revenue of $3.07 million for the three months ended September 30, 2023. During the three months ended September 30, 2024, the $511 thousand in Net revenue consisted of $339 thousand from an S&P 500 bank, $90 thousand from Mastercard, and various other customers for the remaining $82 thousand. The majority of the decrease in net revenue compared to the three months ended September 30, 2023 relates to the termination of the September 15, 2022 Master Services Agreement with IGS ("IGS Contract") which caused the Company to recognize non-refundable license revenue advances from IGS under the IGS Contract for the provision of software of $2.51 million. This was a one-time occurrence which significantly improved our net revenues during the three months ended September 30, 2023 and therefore is the primary reason for the stark decrease in net revenues of the Company during the three months ended September 30, 2024.
Previous wording
Layer customers. Since its launch in the third quarter of 2022, there have been 62 enterprise customers on the Orchestration Layer platform, including 54 financial institutions, as of June 30, 2024. Additionally, revenue from the Orchestration Layer's flagship enterprise customer grew 20.47% between the comparative periods as a result of transitioning and launching the customer on the Orchestration Layer platform. Orchestration Layer's flagship enterprise customer is already in full production and generating monthly recurring revenue with gross margins in excess of 83.15%. Finally, the Company S&P 500 bank customer complete its transition to an augmented version of the SaaS platform during the three months ended June 30, 2024.
Current wording
During the three months ended September 30, 2024, the Company generated $314 thousand total revenue from customers using the Orchestration Layer. This includes implementing the Orchestration Layer platform for 6 new enterprise customers through FIS on the Software-as-a-Service (SaaS) platform during the three months ended September 30, 2024. In comparison, during the three months ended September 30, 2023, the Company generated $139 thousand total revenue from Orchestration Layer customers. Since its launch in the third quarter of 2022, there have been 73 enterprise customers on the Orchestration Layer platform, including 60 financial institutions, as of September 30, 2024. Additionally, revenue from the Orchestration Layer's flagship enterprise customer grew 0.51% between the comparative periods as a result of transitioning and launching the customer on the Orchestration Layer platform. Orchestration Layer's flagship enterprise customer is already in full production and generating monthly recurring revenue with gross margins in excess of 79.64%. Finally, the Company S&P 500 bank customer completed its transition to an augmented version of the SaaS platform during the three months ended September 30, 2024.
Previous wording
Cost of services (“COS”) increased by $44 thousand or 21.33% for the three months ended June 30, 2024, compared to the three months ended June 30, 2023. The increase during this period was primarily driven by costs of $40 thousand for the expansion of our proof of identity solutions using a third-party as required for proof of identity contracts. The solution was not considered a cost of sale until the third quarter of 2023, thus, there were no expenses for this solution during the three months ended June 30, 2023.
Current wording
Cost of services (“COS”) increased by $16 thousand or 6.51% for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The increase during this period was primarily driven by costs of $91 thousand for the expansion of our proof of identity solutions using a third-party as required for proof of identity contracts. The solution was not considered a cost of sale until the fourth quarter of 2023, thus, there were no expenses for this solution during the three months ended September 30, 2023. This increase was partially offset by a decrease of $79 thousand in internal development cost of sales for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
Previous wording
Research and development (“R&D”) expenses decreased by $10 thousand, or 1.68% for the three months ended June 30, 2024, compared to the three months ended June 30, 2023. The decrease in R&D expense during the three months ended June 30, 2024 was primarily driven by the decrease in outsourced software development as the Company continued to transition this work internally which results in cost savings as internal work is more cost effective. Comparatively, outsourced software development costs decreased by 97.19% when comparing the three months ended June 30, 2024 to the three months ended June 30, 2023. In both periods, R&D expenses mainly were related to R&D payroll and other R&D compensation expenses.
Current wording
Research and development (“R&D”) expenses decreased by $36 thousand, or 5.90% for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The decrease in R&D expense during the three months ended September 30, 2024 was primarily driven by the decrease in outsourced software development with 10Clouds as the Company continued to transition this work internally which results in cost savings as internal work is more cost effective. Comparatively, outsourced software development costs decreased by 99.21% when comparing the three months ended September 30, 2024 to the three months ended September 30, 2023. In both periods, R&D expenses mainly were related to R&D payroll and other R&D compensation expenses.
Previous wording
The increases in SG&A were offset by notable reductions in SG&A for the three months ended June 30, 2024 including a total reduction of $302 thousand in professional fees, marketing, office rent, and other operating costs.
Current wording
The increases in SG&A were offset by net variance reductions in SG&A for the three months ended September 30, 2024 including a total reduction of $305 thousand in professional fees, marketing, travel costs, dues and subscription, office rent, and taxes.
Previous wording
Depreciation and amortization (“D&A”) decreased by $6 thousand, or 3.25% for the three months ended June 30, 2024, compared to the three months ended June 30, 2023. The primary driver for the decrease in D&A is due to fully depreciating the Pixelpin (a company we acquired in March 2021) intangible asset during the three months ended March 31, 2024. There was $0 of Pixelpin amortization expense during the three months ended June 30, 2024 compared to $6 thousand during the three months ended June 30, 2023.
Current wording
Depreciation and amortization (“D&A”) decreased by $8 thousand, or 4.31% for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The primary driver for the decrease in D&A is due to fully depreciating the Pixelpin (a company we acquired in March 2021) intangible asset during the three months ended September 30, 2024. There was $0 of Pixelpin amortization expense during the three months ended September 30, 2024 compared to $6 thousand during the three months ended September 30, 2023.
Previous wording
Interest expense, net increased by $7 thousand, or 71.28% for the three months ended June 30, 2024, compared to the three months ended June 30, 2023.The increase in interest expense is primarily due to an increase of $5 thousand as a result of the Malta loan interest rate increasing from 4.5% for the three months ended June 30, 2023 to 6.5% for the three months ended June 30, 2024. Interest earned decreased by $105 to $50 for the three months ended June 30, 2024 from $155 for the three months ended June 30, 2023.
Current wording
Interest expense, net increased by $105 thousand, or 1071.43% for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The increase in interest expense is primarily due to $88 thousand of interest expense incurred with respect to interest due to two subordinated business loans and security agreements that the Company entered into during the three months ended September 30, 2024. The Company also recorded $8 thousand in interest expense during the three months ended September 30, 2024 for interest accrued on Malta's tax obligations. Separately, the Company also had an increase of $5 thousand as a result of the Malta loan interest rate increasing from 4.5% for the three months ended September 30, 2023 to 6.5% for the three months ended September 30, 2024.
Previous wording
The Company recognized a gain in Change in fair value of warrant liability during the three months ended June 30, 2024 of $2 thousand compared to a gain of $7 thousand during the three months ended June 30, 2023. This change is based on the fair value assessment and adjustment for one warrant liability as described in Note 3 to the unaudited condensed consolidated financial statements provided under Item 1 of this report.
Current wording
The Company recognized a gain in Change in fair value of warrant liability during the three months ended September 30, 2024 of $1 thousand compared to a loss of $2 thousand during the three months ended September 30, 2023. This change is based on the fair value assessment and adjustment for one warrant liability as described in Note 3 to the unaudited condensed consolidated financial statements provided under Item 1 of this report.
Previous wording
During the six months ended June 30, 2024, the Company generated $614 thousand total revenue from customers using the Orchestration Layer including implementing the Orchestration Layer platform for 14 new enterprise customers added during the six months ended June 30, 2024 through FIS on the Software-as-a-Service (SaaS) platform. In comparison, during the six months ended June 30, 2023, the Company generated $219 thousand total revenue from Orchestration Layer customers. Since its launch in the third quarter of 2022, there have been 62 enterprise customers on the Orchestration Layer platform, including 54 financial institutions, as of June 30, 2024. Additionally, revenue from the Orchestration Layer's flagship enterprise customer grew 23.16% between the comparative periods as a result of transitioning and launching the customer on the Orchestration Layer platform. Orchestration Layer's flagship enterprise customer is already in full production and generating monthly recurring revenue with gross margins in excess of 83.30%. Finally, the Company's S&P 500 bank customer completed its transition to an augmented version of the SaaS platform during the six months ended June 30, 2024.
Current wording
On the other hand, during the nine months ended September 30, 2024, the Company generated $922 thousand total revenue from customers using the Orchestration Layer including implementing the Orchestration Layer platform for 20 new enterprise customers added during the nine months ended September 30, 2024 through FIS on the Software-as-a-Service (SaaS) platform. In comparison, during the nine months ended September 30, 2023, the Company generated $346 thousand total revenue from Orchestration Layer customers. Since its launch in the third quarter of 2022, there have been 73 enterprise customers on the Orchestration Layer platform, including 60 financial institutions, as of September 30, 2024. Additionally, revenue from the Orchestration Layer's flagship enterprise customer grew 15.32% between the comparative periods as a result of transitioning and launching the customer on the Orchestration Layer platform. Orchestration Layer's flagship enterprise customer is already in full production and generating monthly recurring revenue with gross margins in excess of 82.32%. Finally, the Company's S&P 500 bank customer completed its transition to an augmented version of the SaaS platform during the nine months ended September 30, 2024.
Previous wording
Cost of services (“COS”) increased by $121 thousand or 28.78% for the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The increase during this period was primarily driven by costs of $100 thousand for the expansion of our proof of identity solutions using a third-party as required for proof of identity contracts. The solution was not considered a cost of sale until the third quarter of 2023, thus, there were no expenses for this solution during the six months ended June 30, 2023.
Current wording
Cost of services (“COS”) increased by $137 thousand or 20.71% for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The increase during this period was primarily driven by costs of $194 thousand for the expansion of our proof of identity solutions using a third-party as required for proof of identity contracts. The solution was not considered a cost of sale until the fourth quarter of 2023, thus, there were no expenses for this solution during the nine months ended September 30, 2023. Furthermore, an AWS Advanced Consulting Partner was not present during thenine months ended September 30, 2023 and this incurred an expense of$28 thousand during the three months ended September 30, 2024.
Previous wording
In addition, the Company saw an increase in service requests during the six months ended June 30, 2024 resulting in an increase of $22 thousand when compared to the six months ended June 30, 2023. Apart from an increase in service requests, more development hours were charged directly to cost of sales for the six months ended June 30, 2024 when compared to the six months ended June 30, 2023.This increase was mainly due to a specific request made, by one of our main customers, for our development team to work on a specific project during the six months ended June 30, 2024.
Current wording
On the other hand, the Company saw a slight decrease in service requests during the nine months ended September 30, 2024 resulting in an decrease of $62 thousand when compared to the nine months ended September 30, 2023. Apart from a decrease in service requests, less development hours were charged directly to cost of sales for the nine months ended September 30, 2024 when compared to the nine months ended September 30, 2023.
Previous wording
Research and development (“R&D”) expenses decreased by $190 thousand, or 15.76% for the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The decrease in R&D expense during the six months ended June 30, 2024 was primarily driven by the decrease in outsourced software development as the Company continued to transition this work internally which results in cost savings as internal work is more cost effective. Comparatively, outsourced software development costs decreased by 79.34% when comparing the six months ended June 30, 2024 to the six months ended June 30, 2023. In both periods, R&D expenses mainly were related to R&D payroll and other R&D compensation expenses.
Current wording
Research and development (“R&D”) expenses decreased by $226 thousand, or 12.47% for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The decrease in R&D expense during the nine months ended September 30, 2024 was primarily driven by the decrease in outsourced software development as the Company continued to transition this work internally which results in cost savings as internal work is more cost effective. Comparatively, outsourced software development costs decreased by 83.99% when comparing the nine months ended September 30, 2024 to the nine months ended September 30, 2023. In both periods, R&D expenses mainly were related to R&D payroll and other R&D compensation expenses.
Previous wording
Selling, general, and administrative expense (“SG&A”) increased by $255 thousand, or 13.57%, for the three months ended June 30, 2024, compared to the three months ended June 30, 2023. The increase in SG&A expense was driven by a $468 thousand increase in salaries, stock-based compensation, payroll costs, and sales commissions during the three months ended June 30, 2024. Headcount increased by 3.75%, from 80 full-time employees ("FTE") as of June 30, 2023, compared to 83 FTE as of June 30, 2024 due to reinforcing our sales resources and bringing in-house technical positions that were previously outsourced. Included in the $468 thousand was an increase of $216 thousand during the three months ended June 30, 2024 due to the timing of stock-based compensation awards.
Current wording
Selling, general, and administrative expense (“SG&A”) increased by $905 thousand, or 15.34%, for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The increase in SG&A expense was driven by a $1.30 million increase in salaries, stock-based compensation, payroll costs, and sales commissions during the nine months ended September 30, 2024. Included in the $1.30 million increase in salaries, stock-based compensation, payroll costs, and sales commissions is an increase of $702 thousand in SG&A during the nine months ended September 30, 2024 due to the timing of stock-based compensation awards.
Previous wording
Selling, general, and administrative expense (“SG&A”) increased by $777 thousand, or 20.19%, for the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The increase in SG&A expense was driven by a $1.07 million increase in salaries, stock-based compensation, payroll costs, and sales commissions during the six months ended June 30, 2024. Headcount increased by 3.75%, from 80 FTE for the six months ended June 30, 2023, compared to 83 FTE for the six months ended June 30, 2024 due to reinforcing our sales resources and bringing in-house technical positions that were previously outsourced. Included in the $1.07 million increase is an increase of $466 thousand in SG&A during the six months ended June 30, 2024 due to the timing of stock-based compensation awards. In addition, the Company had an increase in dues and subscriptions, due to continued business development and growth, of $84 thousand during the six months ended June 30, 2024 when compared to the six months ended June 30, 2023. Furthermore, there was a $109 thousand increase in SG&A when comparing the six months ended June 30, 2024 to the six months ended June 30, 2023 resulting from the reversal of out-of-period costs incurred during the six months ended June 30, 2023 associated with carrying mobile hardware assets, reversed due to the cancellation of the related mobile hardware subscription.
Current wording
The Company also incurred a $141 thousand increase in IT services during the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase is due to an AWS billing for usage not applied to a contract or used by the R&D team during the nine months ended September 30, 2024. Furthermore, there was a $109 thousand increase in SG&A when comparing the nine months ended September 30, 2024 to the nine months ended September 30, 2023 resulting from the reversal of out-of-period costs incurred during the nine months ended September 30, 2023 associated with carrying mobile hardware assets, reversed due to the cancellation of the related mobile hardware subscription. In addition, the Company had an increase in dues and subscriptions, due to continued business development and growth, of $70 thousand during the nine months ended September 30, 2024 when compared to the nine months ended September 30, 2023. Other notable increases in SG&A for the nine months ended September 30, 2024 included a total increase of $93 thousand in travel costs and accounting and audit fees.
Previous wording
The increases in SG&A were offset by notable reductions in SG&A for the six months ended June 30, 2024 including a total reduction of $540 thousand in professional fees, management consulting and training, and office rent as direct result of the Company's recent non-personnel cost cutting initiative.
Current wording
The increases in SG&A were partially offset by notable reductions in SG&A for the nine months ended September 30, 2024 including a total reduction of $810 thousand in professional fees, management consulting and training, and office rent as direct result of the Company's recent non-personnel cost cutting initiative.
Previous wording
Depreciation and amortization (“D&A”) decreased by $40 thousand, or 9.95% for the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The primary driver for the decrease in D&A relates to the Company selling mobile hardware in April 2023. As a result of the sale, there is $0 expense for mobile hardware depreciation during the six months ended June 30, 2024 and $30 thousand of expense for mobile hardware depreciation during the six months ended June 30, 2023.
Current wording
Depreciation and amortization (“D&A”) decreased by $49 thousand, or 8.16% for the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023. The primary driver for the decrease in D&A relates to the Company selling mobile hardware in April 2023. As a result of the sale, there is no expense for mobile hardware depreciation during the nine months ended September 30, 2024 and $30 thousand of expense for mobile hardware depreciation during the nine months ended September 30, 2023. Additionally, there was a decrease in D&A during the nine months ended September 30, 2024 due to fully depreciating the Pixelpin (a company we acquired in March 2021) intangible asset during the nine months ended September 30, 2024. There was amortization expense of $17 thousand during the nine months ended September 30, 2023 compared to $2 thousand during the nine months ended September 30, 2024.
Previous wording
The Company’s Operating loss increased by $513 thousand or 10.33% for the six months ended June 30, 2024, compared to the six months ended June 30, 2023. The increase in Operating loss was mostly related to the increase of $667 thousand or 11.35% rise in operating expenses as a result of bolstering our sales resources and bringing in-house technical positions which led to increases in our SG&A expenses that outpaced Net revenue growth.
Current wording
The Company also noted an increase of $767 thousand or 8.56% rise in operating expenses as a result of bolstering our sales resources and bringing in-house technical positions which led to increases in our SG&A expenses that outpaced Net revenue growth.
Previous wording
Interest expense, net increased by $15 thousand, or 76.66% for the six months ended June 30, 2024, compared to the six months ended June 30, 2023.The increase in interest expense is primarily due to an increase of $9 thousand as a result of the Malta loan interest rate increasing from 4.5% for the six months ended June 30, 2023 to 6.5% for the six months ended June 30, 2024. Additionally, the Company recorded $4 thousand in interest expense during the six months ended June 30, 2024 for interest accrued on Malta's tax obligations. Interest earned decreased by $148 to $167 for the six months ended June 30, 2024 from $315 for the six months ended June 30, 2023.
Current wording
Furthermore, interest expense was also increased by a further $15 thousand as a result of the Malta loan interest rate increasing from 4.5% for the nine months ended September 30, 2023 to 6.5% for the nine months ended September 30, 2024. Additionally, the Company recorded $12 thousand in interest expense during the nine months ended September 30, 2024 for interest accrued on Malta's tax obligations. Interest earned decreased by $165 to $305 for the nine months ended September 30, 2024 from $470 for the nine months ended September 30, 2023.
Previous wording
The Company recognized a gain in Change in fair value of warrant liability during the six months ended June 30, 2024 of $5 thousand compared to a gain of $6 thousand during the six months ended June 30, 2023. This change is based on the fair value assessment and adjustment for one warrant liability as described in Note 3 to the unaudited condensed consolidated financial statements provided under Item 1 of this report.
Current wording
The Company recognized a gain in Change in fair value of warrant liability during the nine months ended September 30, 2024 of $6 thousand compared to a gain of $3 thousand during the nine months ended September 30, 2023. This change is based on the fair value assessment and adjustment for one warrant liability as described in Note 3 to the unaudited condensed consolidated financial statements provided under Item 1 of this report.
Previous wording
As of June 30, 2024, the Company had approximately $660 thousand cash in its banking accounts. The Company is generating revenues, but has not yet generated profits, with a net loss for the six months ended June 30, 2024 of $5.28 million, Net operating cash outflows of $3.76 million for the same period, and an accumulated deficit of $56.13 million as of June 30, 2024. The Company is not currently generating sufficient amounts of cash to meet its requirements for the next 12 months. The Company anticipates that it will need to raise capital from equity and/or debt financings within the next six (6) months in order to fund its operations.
Current wording
As of September 30, 2024, the Company had approximately $598 thousand cash in its banking accounts. The Company is generating revenues, but has not yet generated profits, with a net loss for the nine months ended September 30, 2024 of $4.59 million, Net operating cash outflows of $6.18 million for the same period, and an accumulated deficit of $55.45 million as of September 30, 2024. The Company is not currently generating sufficient amounts of cash to meet its requirements for the next 12 months. The Company anticipates that it will need to raise capital from equity and/or debt financings within the next six (6) months in order to fund its operations.
Previous wording
The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company is a business that has not yet generated profits, with a Net loss for the six months ended June 30, 2024 of $5.28 million, Net operating cash outflows of $3.76 million for the same period, and an Accumulated deficit of $56.13 million as of June 30, 2024.
Current wording
The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company is a business that has not yet generated profits, with a Net loss for the nine months ended September 30, 2024 of $4.59 million, Net operating cash outflows of $6.18 million for the same period, and an Accumulated deficit of $55.45 million as of September 30, 2024.
Previous wording
The following table summarizes our cash flows for the six months ended June 30, 2024 and 2023:
Current wording
The following table summarizes our cash flows for the nine months ended September 30, 2024 and 2023:
Previous wording
Net cash flows from operating activities increased by 4.90% from $3.58 million during the six months ended June 30, 2023, compared to $3.76 million during the six months ended June 30, 2024. Of the $5.28 million net loss for the six months ended June 30, 2024, there were various cash and non-cash adjustments that were added back to the Net loss to arrive at $3.76 million cash used for operating activities for the six months ended June 30, 2024.
Current wording
Net cash flows from operating activities increased by 5.08% from $5.88 million during the nine months ended September 30, 2023, compared to $6.18 million during the nine months ended September 30, 2024. Of the $4.59 million net loss for the nine months ended September 30, 2024, there were various cash and non-cash adjustments that were added back to the Net loss to arrive at $6.18 million cash used for operating activities for the nine months ended September 30, 2024.
Previous wording
Those adjustments included the add back of $605 thousand related to stock-based compensation mainly due to the timing of stock-based compensation awards. There was a $466 thousand increase in stock-based compensation during the six months ended June 30, 2024 when compared to the six months ended June 30, 2023 due to the timing of stock-based compensation awards. Additionally, there is an add back of $171 thousand in Deferred revenue mainly comprised of an annual license fee billing of $345 thousand that will be recognized over the current year in alignment with the service period. Cash and noncash add backs also included $366 thousand for non-cash Depreciation and amortization, $169 thousand for cash received on Accounts receivable, $100 thousand for Prepaid expenses, and $239 thousand from the pay down of accruals.
Current wording
Those adjustments included the add back of $5.00 million related to non-cash investment gain, $360 thousand from loss on inducement agreements, $1.17 million due to the termination of a common stock warrant agreement, $957 thousand related to stock-based compensation mainly due to the timing of stock-based compensation awards. There was a $651 thousand increase in stock-based compensation during the nine months ended September 30, 2024 when compared to the nine months ended September 30, 2023 due to the timing of stock-based compensation awards. Additionally, there is an add back of $85 thousand in Deferred revenue mainly comprised of a Mastercard annual license fee that will be recognized over the remaining months in the current year in alignment with the service period. Cash and noncash add backs also included $547 thousand for non-cash Depreciation and amortization, and $311 thousand for cash received on Accounts receivable.
Previous wording
The add backs were offset by reductions in certain cash and noncash adjustments including $162 thousand for the noncash settlement of mobile hardware liabilities.
Current wording
The add backs were offset by reductions in certain cash and noncash adjustments including $162 thousand for the noncash settlement of mobile hardware liabilities, $387 thousand for Prepaid expenses, and $368 thousand from the increase in accruals.
Previous wording
Net cash used in investing activities during the six months ended June 30, 2024 was $363 thousand, compared to net cash of $17 thousand used in the six months ended June 30, 2023. Cash used in investing activities during the six months ended June 30, 2024 related primarily to continued investments in technologies intended to be capitalized and monetized over time. In addition, the Company continued to prioritize intellectual property, which produced three (3) new pending patent applications and five (5) issued patents with the United States Patent and Trademark Office during the six months ended June 30, 2024.
Current wording
Net cash used in investing activities during the nine months ended September 30, 2024 was $687 thousand, compared to net cash of $180 thousand used in the nine months ended September 30, 2023. Cash used in investing activities during the nine months ended September 30, 2024 related primarily to continued investments in technologies intended to be capitalized and monetized over time. In addition, the Company continued to prioritize intellectual property, which produced seven (7) new pending patent applications and six (6) issued patents with the United States Patent and Trademark Office during the nine months ended September 30, 2024. Furthermore, on August 6, 2024, the Company made an investment in Boumarang, purchasing 100,000 shares of Boumarang's common stock at a price per share of $1.00 for a total investment amount of $100 thousand.
Previous wording
During the six months ended June 30, 2024, Net cash flows from financing activities was $1.63 million, compared to Net cash flows from financing activities of $7.42 million for the six months ended June 30, 2023. During the six months ended June 30, 2024, the Company raised $1.69 million in net proceeds from a securities purchase agreement with an institutional investor for the issuance of Class A Common Stock, pre-funded warrants, and common stock warrants. See Note 3 to the unaudited condensed consolidated financial statements provided under Item 1 of this report for more details. In addition, there was a $57 thousand in tax withholding payments for net issuances on employee equity compensation issued during the six months ended June 30, 2024.
Current wording
During the nine months ended September 30, 2024, Net cash flows from financing activities was $4.37 million, compared to Net cash flows from financing activities of $8.03 million for the nine months ended September 30, 2023. During the nine months ended September 30, 2024, the Company raised $3.99 million in net proceeds from a securities purchase agreement with institutional investors for the issuance of Class A Common Stock, pre-funded warrants, and common stock warrants. The Company also received $1.54 million from the exercise of warrants to common stock. See Note 3 to the unaudited condensed consolidated financial statements provided under Item 1 of this report for more details. In addition, the Company took out $845 thousand in loans payable and repaid $287 thousand during the nine months ended September 30, 2024. The increase to financing activities were offset by $1.65 million due the termination of a warrant agreement (also discussed in Note 3 to the unaudited condensed consolidated financial statements) and there was a $57 thousand in tax withholding payments for net issuances on employee equity compensation issued during the nine months ended September 30, 2024.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Adjusted EBITDA loss (non-GAAP) for the six months ended June 30, 2024, increased by 3.25%, to $4.49 million from $4.35 million for the six months ended June 30, 2023. The overall increase in Adjusted EBITDA loss (non-GAAP) was driven primarily by the increase in Selling, general, and administrative expenses for the six months ended June 30, 2024 when compared to the six months ended June 30, 2023. See “Results of Operations” below for further discussion on the drivers behind the increase in Adjusted EBITDA loss (non-GAAP) during the six months ended June 30, 2024.
Previous report — wording carried elsewhere
During the three months ended June 30, 2024, the Company generated $317 thousand total revenue from customers using the Orchestration Layer. This includes implementing the Orchestration Layer platform for 6 new enterprise customers through FIS on the Software-as-a-Service (SaaS) platform during the three months ended June 30, 2024. In comparison, during the three months ended June 30, 2023, the Company generated $112 thousand total revenue from Orchestration