NYIAX, INC. - Quarter Report: 2023 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission file number: 333-265357

NYIAX, Inc.

(Exact name of registrant as specified in its charter)

Delaware		46-0547534
(State or other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

180 Maiden Lane

New York, NY 10005

(917) 444-9259

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act: None.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of June 30, 2023 there were 18,556,349 shares of the registrant’s common stock, $0.0001 par value, issued and outstanding.

Table of Contents

		Page
PART I- FINANCIAL INFORMATION		1
Item 1: Unaudited Condensed Financial Statements for the Three Months Ended March 31, 2023 (unaudited) and December 31, 2022		1
Condensed Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022		1
Condensed Statements of Operations for the three months periods ended March 31, 2023 (unaudited) and March 31, 2022 (restated and unaudited)		2
Condensed Statements of Shareholders’ Equity (Deficit) for the three months periods ended March 31, 2023 (unaudited) and 2022 (restated and unaudited)		3
Condensed Statements of Cash Flows for the three months periods ended March 31, 2023 (unaudited) and 2022 (restated and unaudited)		5
Notes to Condensed Financial Statements (restated and unaudited)		6
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations		16
Item 3: Quantitative and Qualitative Disclosures About Market Risk		26
Item 4: Controls and Procedures		26
PART II - OTHER INFORMATION		27
Item 1: Legal Proceedings		27
Item 1A: Risk Factors		27
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds		27
Item 3: Defaults Upon Senior Securities		27
Item 4: Mine Safety Disclosures		27
Item 5: Other Information		27
Item 6: Exhibits		28
SIGNATURES		29

part I – FINANCIAL INFORMATION

Item 1. Financial Statements

NYIAX, Inc.
Condensed Balance Sheets

	March 31, 2023			December 31, 2022
	(unaudited)
Assets
Current assets
Cash		452,164			792,337
Accounts receivable, net		743,932			1,972,034
Prepaid expenses and other current assets		5,000			92,497
Total current assets		1,201,096			2,856,868
Capitalized software development costs, net		344,012			393,157
Property, plant and equipment, net		3,115			3,519
Operating lease right-of-use asset		358,558			395,470
Deferred Offering Costs					848,531
Security deposit		74,068			74,068
Total assets	$	1,980,849		$	4,571,613

Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable and accrued expenses	$	4,811,486		$	4,841,046
Convertible notes payable, net of deferred debt discounts of $214,265 as of December 31, 2022					2,355,735
Accrued Payment-In-Kind Interest					71,614
Operating lease obligations, current portion		165,699			162,503
Total current liabilities		4,977,185			7,430,897

Long-term liabilities
Operating lease obligations, net of current maturities		225,708			268,385
Note payable – stockholder		100,500			100,500
Total long-term liabilities		326,208			368,885
Total liabilities		5,303,394			7,799,782

Shareholders’ equity (deficit)

Common stock $0.0001 par value, 125,000,000 common shares authorized; 13,561,499 and 12,370,002 common shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively.		1,356			1,237
Preferred shares: 10,000,000 authorized, none outstanding, par value $0.0001 per share
Additional Paid in Capital		52,916,936			50,023,446
Accumulated deficit		(56,240,837	)		(53,252,852	)
Total shareholders’ (deficit) equity		(3,322,545	)		(3,228,169	)
Total liabilities and shareholders’ (deficit) equity	$	1,980,849		$	4,571,613

The accompanying notes are an integral part of these condensed financial statements.

NYIAX, Inc.
Condensed Statements of Operations

	March 31, 2023			March 31, 2022
	(unaudited)			(restated and unaudited)
Revenue, Net	$	138,037		$	485,065
Cost of Sales		222,421			288,281
Gross Margin		(84,384	)		196,784
Operating expenses
Technology and development		398,851			358,298
Selling, general and administrative		1,547,831			2,931,060
Deferred offering cost write-off		848,531
Depreciation and amortization		405			1,235

Total operating expenses		2,795,618			3,290,593
Loss from operations		(2,880,002	)		(3,093,809	)
Other (income) expenses
Interest expense		107,983			695,834
Total other (income) expenses		107,983			695,834
Loss before provision for income taxes		(2,987,985	)		(3,789,643	)
		-			—
Net loss		(2,987,985	)		(3,789,643	)
Net loss per share – basic and diluted	$	(0.23	)	$	(0.37	)
Weighted average number of common shares outstanding – basic and diluted		13,157,111			10,359,385

The accompanying notes are an integral part of these condensed financial statements.

NYIAX, Inc
Condensed Statements of Shareholders’ Equity (Deficit)

(unaudited)

	Common Stock						Additional
	Shares Outstanding			Amount			Paid in Capital		Accumulated Deficit			Total

Balance - January 1, 2023		12,370,002		$	1,237		$	50,023,446	$	(53,252,852	)	$	(3,228,169	)

Share-based compensation								125,635					125,635

Expense of issuing common stock pursuant to restricted stock awards (share-based compensation), net of forfeiture		(250,000	)		(25	)		32,657					32,632

Conversion of Convertible Notes		1,441,497			144			2,719,198					2,719,342

Deferred debt discount on 2023 convertible notes payable								16,000					16,000

Net Loss		-			-			-		(2,987,985	)		(2,987,985	)

Balance - March 31, 2023		13,561,499		$	1,356		$	52,916,936	$	(56,240,837	)	$	(3,322,545	)

The accompanying notes are an integral part of these condensed financial statements.

Condensed Statements of Shareholders’ Equity (Deficit)
for the three months periods ended March 31, 2022
(restated and unaudited)

	Common Stock				Additional
	Shares Outstanding		Amount		Paid in Capital		Accumulated Deficit			Total
Balance – January 1, 2022		10,243,442	$	1,024	$	38,089,295	$	(42,110,073	)	$	(4,019,754	)
Share-based compensation						969,511					969,511
Deemed Dividend from Inducement to Exercise Warrants		-		-		28,600		(28,600	)		-
Issuance of common stock pursuant to exercise of warrants		224,693		22		1,225,788					1,225,810
Net Loss								(3,789,643	)	$	(3,789,643	)
Balance – March 31, 2022		10,468,135	$	1,046	$	40,313,194	$	(45,928,316	)	$	(5,614,076	)

The accompanying notes are an integral part of these condensed financial statements.

NYIAX, Inc.
Condensed Statements of Cash Flows

	March 31, 2023			March 31, 2022
	(unaudited)			(restated and unaudited)
Cash flows from operating activities
Net loss	$	(2,987,985	)	$	(3,789,643	)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization		49,551			63,514
Operating lease right-of-use asset		(2,569	)
Accrued PIK Interest		99,287			179,409
Debt discount amortization		8,706			516,425
Share based compensation		158,267			969,511

Change in operating assets and liabilities:
Change in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable		1,228,102			994,228
Prepaid expense		87,497			(340,187	)
		-			-
Increase (decrease) in:		-
Accounts payable and accrued expenses		(29,560	)		(1,164,183	)

Total adjustments		1,599,281			1,218,717

Net cash used in operating activities		(1,388,704	)		(2,570,926	)

Cash flows from financing activities
Proceeds from convertible notes payable		200,000			-
Deferred offering cost write-off, net		848,531
Proceeds from issuance of common stock pursuant to exercise of warrants					1,225,810

Net cash (used) provided by financing activities		(1,048,531	)		1,225,810

Net increase (decrease) in cash and cash equivalents		(340,173	)		(1,345,116	)

Cash and cash equivalents - Beginning of period		792,337			3,387,200

Cash and cash equivalents - End of period	$	452,164		$	2,042,084

Supplemental disclosures of non-cash flow investing and financing activities:

Conversion of convertible note payable and accrued interest to common shares		2,719,342,
Deemed Dividend from Inducement to Exercise Warrants					28,600

The accompanying notes are an integral part of these condensed financial statements.

NYIAX, Inc.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
For the three months period ended March 31, 2023 (unaudited)

Note 1 — Nature of Operations

Brief Overview:

NYIAX, Inc. (the “Company” or “NYIAX”) was incorporated on July 12, 2012, in the State of Delaware.

NYIAX connects Media Buyers (brands, advertisers or agencies) and Media Sellers (publishers or media) to execute media advertising sales contracts. NYIAX receives a commission or fee upon completion of the media advertising contract. NYIAX does not take ownership or positions of the media at any time during the process.

Going Concern, Liquidity and Capital Resources

The Company believes it does not have sufficient cash to meet working capital and capital requirements for at least twelve months from the issuance of these financial statements.

Historically, the Company’s liquidity needs have been met by the sale of common shares, the issuance of common shares through the exercise of warrants, and issuance of convertible note payable. Without a new loan or other equity support, the Company would not be able to support the current operating plans through twelve months from the issuance of these financial statements. No assurance can be given at this time, however, as to whether we will be able to raise new equity or loan support.

For the three months ended March,31 2023, the Company’s operations lost approximately $3.0 million of which approximately $1.2 million were non-cash expenses, including approximately $313,000 of non-cash operating expenses and approximately $848,000 related to the write-off of deferred offering costs.

The Company generated negative cash flows from operations of approximately $1.4 million for the three months ended March 31, 2023. Historically, the Company’s liquidity needs have been met by the sale of common shares, the issuance of common shares through the exercise of warrants, and sale convertible note payable.

As of March 31, 2023, NYIAX had total current assets of approximately $1.2 million, of which approximately $452,000 was cash and total current liabilities of approximately $5.0 million.

To enable the Company to meet immediate capital requirements until longer term requirements can be met, during the first quarter of fiscal year 2023, the Company sold $200,000 convertible notes from two convertible notes offerings. 2023A Convertible Note Payable converted to common shares on February 7, 2023. 2023B Convertible Note Payable will convert upon when shares of common stock are sold to the public in the financing event. $1,970,000 of 2023B Convertible Note Payable were sold as of June 28,2023.

The Company is also subject to certain business risks, including dependence on key employees, competition, market acceptance of the Company’s platform, ability to source demand from buyers of advertising inventory and dependence on growth to achieve its business plan.

The Company has been and could in the future be adversely affected by health epidemics, such as the global COVID-19 pandemic. While the COVID-19 pandemic has generally accelerated a move from traditional media to digital media, many marketers have decreased or paused their advertising spending as a response to the economic uncertainty, decline in business activity, and other COVID-related impacts, which have negatively impacted, and may continue to negatively impact, our revenue and results of operations, the extent and duration of which we may not be able to accurately predict. As a result, our financial condition and results of operations may be adversely impacted.

Note 2 — Restatement

For the three months ended March 31, 2022, the Company restated its results due to the following correction of errors.

For the three months ended March 31, 2022, it was determined that the Company did not properly account for its agreement with its advisor. The advisor agreement, as discussed in note 4, Commitments and Licensing Fee, required the Company to compensate its advisor for financing transactions, including initial public offering and pre-initial public offering financings in the form of a cash commission and warrants and for various out-of-pocket costs. As previously reported, the Company did not record these expenses.

For the period ending March 31, 2022, the effects of recording the advisor agreement in 2021 were as follows:

Interest expense increased by $ 139,439 due to the amortization of the deferred debt discounts relating to the Company’s 2021 convertible notes offerings.

Selling Agent and Advisor warrants issuable to advisor has increased for the estimated number of warrants, 78,292.

The impact on EPS loss was to increase the EPS loss from $(0.35) to $(0.37), or by $(0.02).

For the three months ended March 31, 2022, the Company re-evaluated the classifications of the statement of operation and restated the expenses on the statement of operations in accordance with Rule 5-03(b) of Regulation S-X. As a result of this re-evaluation:

●

Employee expenses, including share-based compensation were allocated to

cost of sales,

technology and development, and

sales, general and administrative, and

●

Amortization of the capitalized software development costs was allocated to cost of sales.

●

There was no effect on loss from operations, other (income) expenses, net loss or net loss per share.

The table below summarizes the effects of the restatement on the financial statements for all periods being restated:

	As Previously reported			Adjustments, net			Restated Amounts

Statements of Shareholders’ Equity (Deficit) as of March 31, 2022

Additional Paid in Capital		39,170,551			1,114,043			40,284,594

Retained earnings		(44,513,616	)		(1,386,102	)		(45,899,718	)

Total shareholders’ (deficit)		(5,342,019	)		(272,059	)		(5,614,078	)

Amount of selling agent and advisor warrants		260,361			191,169			69,192

Statement of Operations for the period March 31, 2022

Net revenues		485,065						485,065
Cost of Sales		-			-			-
Cost of Sales		-			(288,281	)		(288,281	)
Gross Margin		485,065						773,346

Operating expenses
Technology and development		230,865			127,433			358,298
Selling, general and administrative		2,328,120			602,940			2,931,060
Depreciation and amortization		50,380			(49,145	)		1,235
Share-based compensation		969,510			(969,511	)

Total operating expenses		3,578,875			(288,282	)		3,290,594

Interest expense		556,395			139,439			695,834
Loss before provision for income taxes		(3,650,205	)		(139,440	)		(3,789,643	)
		-			-			-
Provision for income taxes		-			-			-
		-			-			-
Net loss		(3,650,205	)		(139,440	)		(3,789,643	)

Net loss per share – basic and diluted		(0.35	)		(0.02	)		(0.37	)

Statements of Cash Flows for three month period ended March 31, 2022

Cash flows from operating activities
Net loss		(3,650,204	)		(139,441	)		(3,789,643	)
Adjustments to reconcile net income to net cash
provided by operating activities:
Debt discount amortization		376,986			139,439			516,425

For period ended March, 31, 2022, it was determined that the Company did not properly account for its agreement with its advisor. The advisor agreement, as discussed in note 4, Commitments and Licensing Fee, required the Company to compensate its advisor for financing transactions, including initial public offering and pre-initial public offering financings in the form of a cash commission and warrants and for various out-of-pocket costs. As previously reported, the Company did not record these expenses.

Note 3 — Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements are presented in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by US GAAP. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the period presented. Operating results for the period from December 31, 2022 through March 31, 2023 are not necessarily indicative of the results that may be expected through December 31, 2023.

The accompanying unaudited condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included elsewhere in this Annual Report on Form 10-K.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ materially from these estimates.

On an on-going basis, management evaluates its estimates, primarily those related to: (1) revenue recognition criteria, including the determination of revenue reporting as net versus gross in the Company’s revenue arrangements, (2) allowances for doubtful accounts, (3) the useful lives of property and equipment and capitalized software development costs, (4) income taxes, (5) the valuation of share-based compensation, (6) assumptions used in the Black-Scholes option pricing model to determine the fair value of stock options and warrants and (7) the recognition and disclosure of contingent liabilities. These estimates are based on historical data and experience, as well as various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Estimates relating to the valuation of share-based compensation, options and warrants, require the selection of appropriate valuation methodologies and models, and significant judgment in evaluating ranges of assumptions and financial inputs. Actual results may differ materially from those estimates under different assumptions or circumstances.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents in the financial statements.

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash, and accounts receivable. The Company maintains its cash with financial institutions which exceed the Federal Deposit Insurance Corporation (“FDIC”) federally insured limits.

The Company considers all highly liquid investments with an original maturity of three months or less when purchased, to be cash equivalents. There were no cash equivalents at March 31, 2023 and December 31, 2022.

Fair Value of Financial Instruments

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Fair value measurements are based on a fair value hierarchy, based on three levels of inputs, of which the first two are considered observable and the last unobservable, which are the following:

Level 1 —		Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 —		Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted market prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.
Level 3 —		Unobservable inputs. Observable inputs are based on market data obtained from independent sources.

The carrying amounts of cash, accounts receivable, and accounts payable approximate fair value due to the short-term nature of these instruments.

Concentrations of Risk

As of March 31, 2023 two Media Buyers represented 54% and 12% of accounts receivable. For the three months ended March 31, 2023, two customers represented 44% and 16% of revenue, net. As of March 31, 2023, two Media Sellers represented 76% and 11% of accounts payable. For the three months ended March 31, 2022 one customers represented for 93% of revenue, net. As of December 31, 2022, two Media Sellers represented of 61% and 8% of accounts payable. As of December 31, 2021, two Media Buyer represented for 45% and 41% of accounts receivable. As of December 31, 2021, four Media Sellers represented 39%, 14%, 10% and 9% of accounts payable.

Accounts Receivable, Net

Accounts receivable consists of amounts billed to Media Buyers. Accounts receivable, net are carried at their contractual amounts, less an estimate for uncollectible amounts. Management estimates the allowance for bad debts based on existing economic conditions, historical experience, the financial conditions of the customers, and the amount and age of past due accounts. Receivables are considered past due if full payment is not received by the contractual due date. Past due accounts are generally written off against the allowance for bad debts only after all collection attempts have been exhausted.

The Company performs ongoing credit evaluations of Media Buyers. The allowance for doubtful accounts is based on the best estimate of the amount of probable credit losses in existing accounts receivable. The allowance for doubtful accounts is determined based on historical collection experience and the review in each period of the status of the then-outstanding accounts receivable, while taking into consideration current client information, subsequent collection history and other relevant data. The Company reviews the allowance for doubtful accounts on a quarterly basis. For the periods ended years ended March 31, 2023 and December 31, 2022, the Company had no allowance for doubtful accounts and no write-offs of accounts receivable.

Property and Equipment, Net

Property and equipment are stated at cost, net of accumulated depreciation and amortization, which is recorded commencing at the in-service date using the straight-line method over the estimated useful lives of the assets, as follows: 3 to 5 years for office equipment and software.

Repair and maintenance costs are expensed as incurred and major improvements are capitalized. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the Company’s operating results.

Capitalized Software Development Costs

The Company capitalizes or expenses costs associated with creating internally developed software related to the Company’s technology infrastructure in accordance with ASC 350 – 40, Intangibles — Goodwill and Other — Internal Use Software, that generally relate to software that the Company does not intend to sell or market.

All costs incurred during the preliminary project stages are expensed as incurred. Once the projects have been committed to and it is probable that the projects will meet functional requirements, costs are capitalized in accordance with guidance. Amortization commences when the software is available for its intended use. The estimated useful life of the capitalized software development costs is five years. The Company commenced amortizing the capitalized software development costs related to its platform in January 2020.

Certain long-lived assets including capitalized software development costs are also subject to measurement at fair value on a nonrecurring basis if they are deemed to be impaired as a result of an impairment review. For the three-month period ended March 31, 2023 and the year ended December 31, 2022, no impairments were recorded on those assets.

Revenue Recognition

NYIAX brings together Media Buyers (brands, advertisers or agencies) and Media Sellers (publishers or media) to execute media sales contracts. NYIAX receives a fee upon completion of the media contract. NYIAX does not take ownership of or positions in the media at any time during the process.

Generally, the Company bills Media Buyers the gross amount of advertising, including the Company’s commissions or fees in a single invoice and pays the Media Seller upon receipt. The Company’s accounts receivable are recorded at the amount of gross billings for the amounts it is responsible to collect, and accounts payable are recorded at the amount payable to Media Seller.

Substantially all of the Company’s revenues are recognized at the point in time that the (i) contract reconciliations are completed, (ii) accepted by the Media Buyer and Media Seller, and (iii) NYIAX’s performance obligations are completed.

The Company maintains agreements with each Media Buyer and Media Seller which set out the terms of the relationship.

Revenue is recognized based on the five-step process outlined in the Accounting Standards Codification (“ASC”) 606:

Step 1 — Identify the Contract with the Customer — A contract exists when (a) the parties to the contract have approved the contract and are committed to perform their respective obligations, (b) the entity can identify each party’s rights regarding the goods or services to be transferred, (c) the entity can identify the payment terms for the goods or services to be transferred, (d) the contract has commercial substance and it is probably that the entity will collect substantially all of the consideration to which it will be entitled in exchange for the goods or services that will be transferred to the customer.

Step 2 — Identify Performance Obligations in the Contract — Upon execution of a contract, the Company identifies as performance obligations each promise to transfer to the customer either (a) goods or services that are distinct, or (b) a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. To the extent a contract includes multiple promised goods or services, the Company must apply judgement to determine whether the goods or services are capable of being distinct within the context of the contract. If these criteria are not met, the goods or services are accounted for as a combined performance obligation.

Step 3 — Determine the Transaction Price — When (or as) a performance obligation is satisfied, the Company shall recognize as revenue the amount of the transaction price that is allocated to the performance obligation. The contract terms are used to determine the transaction price. Generally, all contracts include fixed consideration. If a contract did include variable consideration, the Company would determine the amount of variable consideration that should be included in the transaction price based on expected value method. Variable consideration would be included in the transaction price, if in the Company’s judgement, it is probable that a significant future reversal of cumulative revenue under the contract would not occur.

Step 4 — Allocate the Transaction Price — After the transaction price has been determined, the next step is to allocate the transaction price to each performance obligation in the contract. If the contract only has one performance obligation, the entire transaction price will be applied to that obligation. If the contract has multiple performance obligations, the transaction price is allocated to the performance obligations based on the relative standalone selling price at contract inception.

Step 5 — Satisfaction of the Performance Obligations (and Recognize Revenue) — Revenue is recognized when (or as) goods or services are transferred to a customer. The Company satisfies each of its performance obligations by transferring control of the promised good or service underlying that performance obligation to the customer. Control is the ability to direct the use of and obtain substantially all of the remaining benefits from an asset. It includes the ability to prevent other entities from directing the use of and obtaining the benefits from an asset. Indicators that control has passed to the customer include: a present obligation to pay; physical possession of the asset; legal title; risks and rewards of ownership; and acceptance of the asset(s). Performance obligations can be satisfied at a point in time or over time.

Substantially all of the Company’s revenues are recognized when the contract reconciliations are completed and accepted by the Media Buyer and Media Seller.

The Company maintains agreements with each Media Buyer and Media Seller which set out the terms of the relationship.

The Company has determined that it is acting as an agent for the Media Seller as (i) NYIAX does not obtain control of the Seller’s media (goods & services) before transferring control to the Buyer. The Seller has control of the media. Specifically, NYIAX does not control the specified media before transferring the media to the Media Buyer, the Company is not primarily responsible for the performance of the Media Seller, nor can the Company redirect those services to fulfill any other contracts. (ii) NYIAX does not have inventory or credit risk for the media, and (iii) the Media Seller establishes the pricing in the Smart-Contracts (self-executing contracts with the terms of the agreement between buyer and seller standardized. and the Media Buyers and Media Sellers agree the pricing.

Share-Based Compensation

The share-based compensation expense related to stock options and restricted stock awards which are referred to collectively as options and awards granted under the Company’s employee option plans, is measured and recognized in the financial statements based on the fair value of the awards granted. The fair value of each option award is estimated on the grant date using the Black-Scholes option-pricing model. We use the Black-Scholes model to calculate the fair value for all options granted, based on the inputs relevant on the date granted, such as the fair value. of our shares, prevailing risk-free interest rate, etc. The value of the portion of the award, after considering potential forfeitures, that is ultimately expected to vest is recognized as expense in our statements of operations over the requisite service periods. Awards are subject to forfeiture until vesting conditions have been satisfied under the terms of the award. Determining the fair value of stock options awards requires judgement. The Company’s use of the Black-Scholes option pricing model requires the input of subjective assumptions.

Deferred Offering Cost Write-off

On February 14, 2023, the Registration Statement on Form S-1 filed by the Company with the Securities and Exchange Commission was declared effective by the SEC.

In March, 2023, the Company’s financial advisor, representative and lead underwriter for the offering, Boustead Securities LLC (“Boustead”), informed the Company of its decision not to proceed with pricing of the Company’s Offering.

Pursuant to the Codification of Staff Accounting Bulletins / Topic 5: Miscellaneous Accounting A. Expenses of Offering, the Company had been deferring these expenses until the offering. As of December 31, 2022, $848,531 of deferred offering costs were recorded on the balance sheet. In accordance with the Codification of Staff Accounting Bulletins / Topic 5: Miscellaneous Accounting, the Company has written these costs off during the three month period ended March 31, 2023.

Income Taxes

The Company records income tax expense in accordance with ASC – 740 Income Taxes, as amended mandating how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. The standards require the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are more-likely-than-not of being sustained upon examination by the applicable tax authority, based on the technical merits of the tax position, and then recognizing the tax benefit that is more-likely-than-not to be realized. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax expense in the current reporting period. The Company has analyzed its tax positions and has concluded that as of March 31, 2023 and December 31, 2022, no uncertain positions are taken or are expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements.

The Company’s policy is to record interest expense and penalties pertaining to income taxes in operating expenses. For the periods ended March 31, 2023 and December 31, 2022, there were no interest and penalties expenses recorded and no accrued interest and penalties.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including net operating loss carryforwards (“NOL’s”), and liabilities, are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Realization of the deferred income tax asset is dependent on generating sufficient taxable income in future years. The amount of the deferred income tax asset considered realizable, if any, could be reduced in the near term if estimates of future taxable income are met.

Earnings Per Share

In accordance with ASC – 260 Earnings Per Share, basic earnings per share (EPS) is calculated by dividing the net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding. Diluted net income per share per share is computed by dividing net income by the weighted average number vested of common shares, plus the net impact of common shares (computed using the treasury stock method), if dilutive, resulting from the exercise of dilutive securities. In periods when losses are reported, the weighted-average number of common shares outstanding exclude common stock equivalents because their inclusion would be anti-dilutive. The Company has issued employee incentive options and warrants. These employee incentive options and warrants are excluded from the calculation as the employee incentive options and warrants are anti-dilutive.

As of March 31, 2022, the Company excluded the common stock equivalents summarized below, which entitle the holders thereof to ultimately acquire shares of common stock, from its calculation of earnings per share, as their effect would have been anti-dilutive.

	As of March 31, 2023
Equity Incentive Plans		3,086,626
Selling Agent and Advisor Warrants		23,538
Warrants Issued with Common Stock Offerings		889,500
Warrants Issued with Convertible Notes Offerings		967,150
Common Stock Issuable Upon Conversion of Convertible Notes, including PIK Interest		135,807
Total Common Stock Equivalents		5,102,621

Recently Issued Accounting Pronouncements

In August 2020, the FASB issued No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40) - Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments are effective for fiscal years beginning after December 15, 2023. The Company evaluated any potential impact from ASU 2021-07 and believes it will have no material impact on our financial results.

Note 4 — Shareholders’ Equity

On March 31, 2023 and December 31, 2022 the authorized capital stock of 135,000,000 shares consisting of 125,000,000 shares of common stock and 10,000,000 shares of preferred stock each with a par value of $0.0001 with 13,811,499 and 12,370,002 common shares issued and outstanding, respectively. No preferred stock has been issued.

Note 5 — Convertible Notes Payable

Issuance of 2023A Convertible Note Payable

On January 10, 2023, the Company commenced a Convertible Notes Offering (“2023A Convertible Note Payable”) pursuant to which it offered up to $500,000 of convertible notes. A total of approximately $200,000 of the 2023A Convertible Notes were sold.

The 2023A Convertible Notes convert at two dollars ($2.00) per share concurrently when shares of common stock are sold to the public in the Financing Event (defined as declaring the registration statement effective), or in the event the Financing Event is not completed within eighteen (18) months from the date of the individually issued notes, the Conversion Price shall be the reduced price of two dollars ($2.00) per share and the conversion amount shall automatically be converted into common stock of the Company at $2.00 per share on the Maturity Date. The annual rate of return is twelve percent (12.0%) per annum, which was paid as a Payment-in-Kind in the Company’s common stock valued at two dollars ($2.00) per share. Concurrently with the sales of the 2023A Convertible Note Payable, warrants (the “Warrants”) were issued at a rate of one (1) Warrant for every ten dollars ($10) principal amount of notes purchased. Each Warrant shall be exercisable for a period of five (5) years at a price of $5.50 per share.

The outstanding principal balance of the 2023A Convertible Notes and all accrued interest automatically converted into common stock of the Company on February 7, 2023, immediately prior to the Company’s receipt of an effective order from the SEC declaring the registration statement of its initial public offering effective.

Note 6 — Related Party Transactions

Related Party Transactions

For the three months period ended March 31, 2022, the Company recorded $10,000 of general and administrative expenses related to GoldStreet for office space which was included in accounts payable and accrued expenses as of March 31, 2022.

Note 7 — Subsequent Events

Management has evaluated events that have occurred subsequent to the date of these condensed financial statements and has determined that, other than those listed below, no such reportable subsequent events exist through July 20, 2023Based upon this review, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial statement other than noted above and below:

Convertible Note Offerings

2023B Convertible Note Payable

On April 3, 2023, the Company commenced a Convertible Notes Offering (“2023B Convertible Note Payable”) pursuant to which it will offer up to $2,000,000 of convertible notes.

The 2023B Convertible Notes convert at two dollars ($2.00) per share concurrently when shares of common stock are sold to the public in the Financing Event, or in the event the Financing Event is not completed within eighteen (18) months from the date of the individually issued notes, the Conversion Price shall be the reduced price of two dollars ($2.00) per share and the conversion amount shall automatically be converted into common stock of the Company at $2.00 per share on the Maturity Date. The annual rate of return is twelve percent (12.0%) per annum, which shall be paid as a Payment-in-Kind in the Company’s common stock valued at two dollars ($2.00) per share. Concurrently with the issuance of the 2023B Convertible Notes Payable, the company issued warrants (the “Warrants”) The Warrants were issued at a rate of one half warrant issued for every $10 of notes purchased with an exercise price of four dollars ($4.00) and one half warrant issued for every $10 of notes purchased with an exercise price of two dollars ($2.00). Each Warrant shall be exercisable for a period of five (5) years.

$1.970,000 of 2023B Convertible Note Payable were sold as of June 28, 2023 and the note offering was closed.

Threatened Litigation

On March 23, 2021, the company entered into an engagement letter (the “Engagement Letter”) with Boustead Securities, an advisor to the Company for certain corporate financing transactions. The Engagement Letter provides for Initial Public Offering (“IPO”), Pre-IPO and corporate finance transaction advice and the advisor expressed its intent to enter into an underwriting agreement with the Company to act as the lead underwriter for the proposed IPO on a firm commitment basis.

For financing transactions, including IPO and pre-IPO financings, the advisor would charge the Company (i) seven percent (7%) of the gross amount to be disbursed to the Company from each such investment transaction closing plus, (ii) a non-accountable expense allowance equal to one percent (1%) of the gross amount to the disbursed to the Company from each such investment transaction closing, plus (iii) warrants equal to seven percent (7%) of the gross amount to be received by to the Company from each such investment transaction closing. The warrant exercise price is defined as the lower of: (1) the fair market value price per share of the Company’s common stock as of each such financing closing date, (2) the price per share paid by investors in each respective financing, (3) in the event that securities convertible are sold in the financing, the conversion price of such securities, or (4) in the event that warrants or other rights are issued in the financing, the exercise price of such warrants or other rights. Notwithstanding the foregoing, whatever the Company raises up to the maximum note offering of $12 million during its in-process private placement from March 24, 2021 until April 22, 2021, the fees will be reduced to 33% of the amounts indicated in this paragraph during this time period. The engagement letter established accountable expenses up to an aggregate of $230,000.

The Engagement Letter terminated on the later of (i) eighteen (18) months from the date executed (March 23, 2021) or (ii) twelve months from the completion date of the IPO and the term may be extended pursuant to the engagement letter. Also, the Company agreed that the advisor shall have the right of first refusal (ROFR) for two (2) years from the consummation of a transaction or termination or expiration of the Engagement Letter to act as advisor or as joint financial advisor under at least equal economic terms to the Engagement Letter.

On February 14, 2023, the Registration Statement on Form S-1 filed by the Company with the Securities and Exchange Commission (the “SEC”) was declared effective by the SEC. The Company’s financial advisor, representative and lead underwriter for the Offering was Boustead Securities LLC (“Boustead”). Boustead informed the Company of its decision not to price and consequently the Company was unable to complete the initial public offering at such time. NYIAX requested the SEC declare the offering effective. Upon the SEC approval NYIAX became a 1934 Securities Act reporting company with all the related responsibilities and costs. The Company has determined to continue to pursue an initial public offering (“IPO”) and NASDAQ listing of its securities. On April 12, 2023, the Company engaged Spartan Capital Securities, LLC, as lead underwriter, deal manager and investment banker for the Company’s IPO. However, there can be no assurance that we will be able to complete an IPO in the near future, if at all.

On April 7, 2023, the Company received a demand letter from Boustead. Boustead claims that the Company owes or will owe Boustead approximately $1 million for commissions on funds privately raised by the Company during its engagement with Boustead and approximately $1,230,000 if the Company completes an IPO with another underwriter. The Company disputes the amounts owed that have been claimed by Boustead and further is of the belief that if any commissions are due to Boustead, they would be significantly less than the amounts claimed by Boustead.

There can be no assurance that Boustead will not initiate a lawsuit to recover the amounts it claims are owed and any such litigation could impede our ability to complete an IPO and could negatively affect our financial condition. In addition, there can be no assurance that the Company would prevail in any lawsuit it commences against Boustead.

Purchase of Intellectual Property Portfolio

On July 8, 2023, NYIAX, Inc. (the “Company”) completed the purchase of a portfolio of patents and trade secrets (the “Portfolio”) from Network Foundation Technologies, LLC (“NIFTY”). The Company issued 2,000,000 shares of its common stock to NIFTY as consideration for the Portfolio. The transaction was approved by the Company’s board of directors and by NIFTY’s board of directors. A purchase price of approximately $4 million (plus certain capitalized costs for legal and other costs) will be recorded. The 2 million shares of common stock of NYIAX have various registration restrictions and provisions for the clawback of shares by the Company in certain events as set forth in the Asset Purchase Agreement (the “Agreement”).

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and the related notes and the other financial information included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this prospectus. Dollars in tabular format are presented in thousands, except per share data, or otherwise indicated.

Restatement:

For the three months ended March 31, 2022, the Company restated its results due to the following correction of errors.

Details of the restatement are included in Note 2 — Restatement to the financial statements.

Revenues

NYIAX’s business model is focused on the creation of a marketplace where the listing of advertising inventory, campaigns and audience can easily be sold through utilization of highly efficient buying and selling technology.

The Company enters into agreements with both the Media Buyers and Media Sellers which set out the terms of the relationship and access to the Company’s platform; the Company considers both the Media Buyers and Media Sellers to be its customers. A media buyer (“Media Buyer”) is typically an advertiser or advertising agency that buys on behalf of an advertiser. Currently, the Media Buyers do not compensate the Company for the use of the platform and other services. A media seller (“Media Seller”) is typically a publisher of content, such as, websites, mobile or desktop applications, podcast, Connected TV (also commonly defined as OTT, over-the-top, and streaming, allowing brands to reach their audience on smart TVs and Internet devices) or other. The Media Sellers compensate the Company for the use of the platform and other services.

NYIAX’s technology platform provides Media Buyers and Media Sellers a marketplace where advertising or audience campaigns are listed, bought, or sold as a durable instrument; thereafter, contract flows directly into the Blockchain for contract management, reconciliation and automation purposes as a count of record. A Blockchain is basically a distributed ledger that tracks transactions among parties, that includes the following fundamental properties applicable to every single transaction: (i) all parties agree that the transaction occurred; (ii) all parties agree on the identities of the individuals participating in the transaction; (iii) all parties agree on the time of the transaction; (iv) the details of the transaction are easy to review and not subject to dispute; and evidence of the transaction persists, unchangeable, over time. The combination of these properties of Blockchain results in a system that, by design, timestamps and records all transactions in a secure and permanent manner, and is easily auditable in the future. Moreover, the ledger is distributed across many participants in the network, and copies are simultaneously updated with every fully participating node in the ecosystem. Due to such distributed nature, the system is highly resilient to downtime. Blockchain allows for immutability, consistency, and continuity of the contracts or advertising contracts from contract formation, execution, and delivery to reconciliation.

NYIAX uses coding through smart contracts (“Smart Contracts”), which are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized Blockchain network, and therefore render transactions traceable, transparent, and irreversible. The use of Smart Contracts allows NYIAX advertising contracts to self-effectuate (reconciling through automation without human intervention), which reduces backend audit and compliance costs for three parties: NYIAX, the Media Buyer and the Media Seller. Finally, all parties to the advertising contracts have the ability to view Blockchain as it populates with the contract formation, execution, and delivery, thereby providing a complete and full audit trail of events and subsequent changes to the contract or advertising contract. To our knowledge, our current implementation of near real time compliance which is displayed to both the advertiser/agency and publisher from contract formation to reconciliation currently does not exist in the advertising industry.

NYIAX connects Media Buyers (brands, advertisers or agencies) and Media Sellers (publishers or media) to execute media advertising sales contracts. NYIAX receives a commission or fee from Media Sellers upon completion of the media advertising contract. NYIAX does not take ownership or positions of the media at any time during the process.

The Company acts as an agent for the Media Seller and is not a principal in the purchase and sale of advertising inventory, data and other add-on features.

In 2020 and 2019, to scale the NYIAX platform in a commercial environment with publishers and advertising agencies, NYIAX Media Sellers a substantially reduced transaction fees. In 2019 and 2020 NYIAX had a single Media Buyer and a single Media Seller for a single campaign. The platform was being used by these customers and NYIAX. This campaign concluded on December 31, 2020.

In the first quarter of 2021, NYIAX reviewed its offering and marketing programs, launched a sales process, and hired a sales team.

The sales team was built in 2021 and subsequently reduced in 2022 due to capital concerns.

Factors Affecting Our Performance

Development of the NYIAX platform is substantially complete, although further features and user capabilities are expected to be added. NYIAX is currently monetizing the platform by building a sales infrastructure and attracting Media Buyers, Media Sellers, and business partners. A business partner is an advertising agency that represents one or more Media Buyers in acquiring media for use.

NYIAX’s Revenue Drivers:

Media Buyer — An advertiser or advertising agency that buys on behalf of an advertiser.

Business Partner — Typically Media Buyers are represented by advertising agencies that perform media planning and buying as an agent for the Media Buyer. The number and quality of the media buyers is pivotal to our success.

Media Sellers — Entities that NYIAX has signed onto the platform with a Master Services.

Sales Representatives — The relationships with Media Buyers, Media Sellers and business partners are key to NYIAX’s success. The quality and number of sales representatives that NYIAX employs directly affects its continued revenue growth.

Media on Exchange — A direct result of contracts between Media Buyers and Media Sellers, Media on Exchange, as reported, is the media that was bought and sold on the platform via our Smart Contract, delivered, reconciled and billed to the Media Buyer.

At times, the Media Buyer and Media Seller will settle the media cost outside the NYIAX Platform. Media on Exchange includes the notional amounts of these settlements.

Media Contracts — A Smart Contract between a Media Seller and Media Buyer. The Company is compensated for the execution of the Smart Contract. The compensation is variable based upon the volume of the contract, the Media Seller and other variables. A Media Contract is analogous to an insertion order whereby delivery, reconciliation and billing take place.

Transaction Fees — NYIAX charges transparent transaction fees.

Transaction fees are charged to the Media Seller (the publisher) for all advertising transactions at variable rates on the gross amount indicated in the Order from each contract. The rates are independent for each Media Seller and vary based on volume of media and service levels.

Transaction fees are billed to the Media Buyer along with the media during the reconciliation process or paid net by the Media Seller. After payment is received for the media and the transaction fee, the cost of the media is then paid to the Media Seller.

Other Potential Fees (Other Revenue) — Such as a seat licensing fee and transaction fee separate to the contract formation on all buy side contracts.

Revenue Ramp-Up

NYIAX is currently building its Business Development (sales and representatives) teams. The size, ramp-up and quality of the team will affect net revenue.

Other Factors affecting NYIAX’s Net Revenue

Identifying valuable ad impressions that we can profitably monetize at scale — We continuously review our available inventory from existing publishers across every format (mobile, desktop, digital video, Over the Top Media, CTV, and rich media). The factors we consider to determine which impressions we process include transparency on price, counterparties to the transaction, viewability, brand integrity in regard to ad placement and whether or not the impression is human sourced (also known as fraud). By consistently applying these criteria, we believe that the ad impressions we process will be valuable and marketable to advertisers.

Managing industry dynamics — We operate in the rapidly evolving digital advertising industry. Due to the scale and complexity of the digital advertising ecosystem, direct sales via manual, person-to-person processes are insufficient for delivering a real-time, personalized ad experience, creating the need for programmatic advertising. In turn, advances in programmatic technologies have enabled publishers to auction their ad inventory to more buyers, simultaneously, and in real time through a process referred to as header bidding. Header bidding has also provided advertisers with transparent access to ad impressions. As advertisers keep pace with ongoing changes in the way that consumers view and interact with digital media there will be further innovation and we anticipate that header bidding will be extended into new areas such as OTT/CTV. We believe our focus on publishers and buyers has allowed us to understand their needs and our ongoing innovation has enabled us to quickly adapt to changes in the industry, develop new solutions and do so cost effectively. Our performance depends on our ability to keep pace with industry changes such as header bidding and the evolving needs of our publishers and buyers while continuing our cost efficiency.

Seasonality — The advertising industry experiences seasonal trends that affect many participants in the digital advertising ecosystem. Most notably, advertisers have historically spent relatively more in the fourth quarter of the calendar year to coincide with the holiday shopping season, and relatively less in the first quarter. We expect seasonality trends to continue, and our ability to manage our resources in anticipation of these trends will affect our operating results.

Management’s Plans

NYIAX management’s plans for developing operations and generating substantive revenues and gross margins will require the following:

NYIAX has completed the development the initial platform.

The NYIAX sales team has been signing up Media Sellers and Media Buyers.

NYIAX is currently building out its sales organization. Currently, we have entered into four master service agreements with media buyer organizations, such as advertising agencies that represent a number of brands.

NYIAX expects that based upon this plan that it would not be able to realize substantive revenues until approximately I year from the IPO, or possibly later, depending on investment spend, later.

NYIAX recognizes that its business will require substantial scale in order to achieve profitability. The Company expects that there will be substantial sales, marketing and continued engineering and development costs to generate revenue and maintain the platform. As such, the Company will need to generate revenues at scale in order to become profitable. NYIAX is estimating that it would not be profitable until at least twelve months from investing into a substantial sales team. Current estimates reflect conditions the Company expects to exist, the course of action the Company expects to take, as the current estimates incorporate internal data, historical data, and financial models, all of which are unproven.

Results of Operations For Three Months Ended March 31, 2023 and 2022 (restated)

				*Restated*
	For the			For the
	Three-Month Period			Three-Month Period
	Ended			Ended
	March 31,			March 31,
	2023			2022
Revenue, net		138,037			485,065
Cost of Sales		222,421			288,281
Gross Margin		(84,384	)		196,784
Operating expenses
Technology and development		398,851			358,298
Selling, general and administrative		1,547,831			2,931,060
Deferred offering cost write-off		848,531
Depreciation and amortization		405			1,235
Total operating expenses		2,795,618			3,290,593
Loss from operations		(2,880,002	)		(3,093,810	)
Other (income) expenses
Interest and debt expense		107,983			695,834
Total other (income) expenses		107,983			695,834
Loss before provision for income taxes		(2,987,985	)		(3,789,643	)
Net loss		(2,987,985	)		(3,789,643	)
Net loss per share - basic and diluted		(0.23	)		(0.37	)
Weighted average number of common shares outstanding - basic and diluted		13,157,111			10,359,385

Net Revenue

For the three months ended March 31, 2023, compared to the three months ended March 31, 2022 (restated) net revenue decreased to $ 138,037 from $ 485,065, or $347,028. Management has concluded the decrease in revenue is related to a decreased in the number of business development headcount.

For the three months ended March 31, 2023, the Company was compensated for the completion of 170 Media Contracts with average compensation of $ 812 per Media Contract. For the three months ended March 31, 2022, the Company was compensated for the completion of 134 Media Contracts with average compensation of $3,620 per Media Contract.

The following chart illustrates Media Contracts completed in each of the following quarters of 2023, 2022 and 2021 with related quarterly revenue and revenue per contract:

	Media Contracts Completed		Quarterly Revenue		Average Revenue / Media Contract
Quarter Ending March 31, 2021		-		-
Quarter Ending June 30, 2021		20		30,084		1,504
Quarter Ending September 30, 2021		83		81,768		985
Quarter Ending December 31, 2021		177		482,047		2,723
Year Ending December 31, 2021		280

Quarter Ending March 31, 2022		134		485,065		3,620
Quarter Ending June 30, 2022		249		339,423		1,363
Quarter Ending September 30, 2022		417		124,987		300
Quarter Ending December 31, 2022		316		374,830		1,186
Year Ending December 31, 2022		1,116

Quarter Ending March 31, 2023		170		138,037		812

Obtaining new Media Contracts is dependent on several factors, including on our new business development (sales and representatives) team, which headcount has decreased from eleven at December 31, 2021 to three at March 31, 2023. The following table compares the business development headcount at quarter-end and the Company’s quarterly revenue.

	Quarterly Revenue		Business Development Headcount at Quarter-End
March 31,2021		-		1
June 30, 2021		30,084		6
September 30, 2021		81,768		9
December 31, 2021		482,047		11
March 31, 2022		485,065		13
June 30, 2022		339,423		7
September 30, 2022		124,987		3
December 31, 2022		374,830		3
March 31,2023		138,037		3

See “Risk Factors — Our revenue can vary greatly from period to period and it is dependent on several factors, including our business development team. Our net revenue decreased sequentially quarter on quarter in 2022.”

Technology and Development

For the three months ended March 31, 2023, compared to the three months ended March 31, 2022 (restated), technology and Development decreased to $ 398,851 from $ 358,298, or $40,553 (10%). The Company’s technology and development decreased due to expense reductions at the Company, including limited staffing reductions.

Technology and development consist of (i) Product development expenses related to the frontend client user interface and backend systems, ongoing maintenance and operation of the platform, integrations with clients and partners applications, including not limited to product and technology team members and outside services. Except to the extent that such costs are associated with software development that qualify for capitalization, which are then recorded as capitalized software development costs; and (ii) Infrastructure costs such as AWS (Amazon Web Services) or other cloud hosting solutions, Software development tools used for the creation and ongoing management and maintenance of the NYIAX platform and service.

Selling General and Administrative

For the three months ended March 31, 2023 compared to the three months ended March 31, 2022 (restated), selling general and administrative decreased to $1,547,831 from $2,931,060 or 1,383,229, (89%) primarily resulting from a marked decrease in share-based compensation of approximately $822,000, sales and marketing staff with related expenses and administrative costs related to the Company going public, such as an annual audit. Sales and marketing staff increased from one (during the three months ended March 31, 2021 ) to eleven (during the three months ended March 31, 2022).

Selling general and administrative consists primarily of personnel costs, including salaries, bonuses, employee benefits costs and the Company’s sales and marketing personnel. Sales and marketing expense also includes costs for market development programs, promotional and other marketing activities, and costs associated with the Company’s executive, finance, legal, human resources, compliance, and other administrative personnel, as well as accounting and legal professional services fees, and rent.

Deferred Offering Cost Write-off

On February 14, 2023, the Registration Statement on Form S-1 filed by the Company with the Securities and Exchange Commission was declared effective by the SEC.

In March, 2023, the Company’s financial advisor, representative and lead underwriter for the Offering, Boustead Securities LLC (“Boustead”), informed the Company of its decision not to proceed with pricing of the Company’s Offering.

Depreciation and Amortization

For the three months ended March 31, 2023, compared to the three months ended March 31, 2022 (restated), depreciation and amortization was essentially flat.

Amortization capitalized software costs of approximately $49,000 for the three months ended March 31, 2023 and 2022 was classified as cost of sales.

Share-Based Compensation

For the three months ended March 31, 2023 compared to the three months ended March 31, 2022 share-based compensation decreased to $158,267 from $969,511, or $811,244 due to fully vested awards for board members, executive management and other new awards awarded in the three months ended March 31, 2021 2022, partially offset by the completion of amortizing previous awards.

For the three-month periods ended March 31, 2023 and March 31, 2022 (restated), the Company classified the share-based compensation expenses on the statement of operation as follows:

	Three-Months Ended
	3/31/2023		3/31/2022
			(restated)
Shared-Based Compensation:
Cost of Sales		6,879		8,525
Technology and development		13,386
Sales, general and administrative		138,002		960,985
		158,267		969,510

The share-based compensation expense related to stock options and restricted stock awards which are referred to collectively as options and awards granted under the Company’s employee option plans, is measured and recognized in the financial statements based on the fair value of the awards granted. The fair value of each option award is estimated on the grant date using the Black-Scholes option-pricing model. The Company uses the Black-Scholes model to calculate the fair value for all options granted, based on the inputs relevant on the date granted, such as the fair value of our shares, prevailing risk-free interest rate, risk-free interest rate, expected term at issuance, volatility, and dividend rate, etc. The value of the portion of the award is ultimately expected to vest is recognized as expense in the statements of operations on an over the requisite service periods. Awards are subject to forfeiture until vesting conditions have been satisfied under the terms of the award. Determining the fair value of stock options awards requires judgement. The Company’s use of the Black-Scholes option pricing model requires the input of subjective assumptions.

Interest and Debt Expense, net

For the three months ended March 31, 2023 compared to the three months ended March 31, 2022 (restated) interest and debt expense, net increased to $695,834 from $107,983, an increase of $587,851. The increase is primarily interest expense related to the convertible notes payable issued in 2021 and 2022 being converted to shares.

Provision for Income Taxes

NYIAX, Inc. is taxed as a “C” Corporation subject to federal, state and local income taxes.

The provision for income taxes consists primarily of federal and state income taxes. Actual results may also differ from our estimates based on changes in economic conditions. Such changes could have a substantial impact on the income tax provision. We re-evaluate the judgments surrounding our estimates and make adjustments, as appropriate, each reporting period.

Our effective tax rate differs from the U.S. federal statutory income tax rate due to state taxes, utilizations of any net operating losses, potential technology and development tax credits, non-deductible share-based compensation, and other differences.

For the three months ended March 31, 2023 and the three months ended March 31, 2022 (restated), NYIAX did not have any income for tax purposes and therefore, no current tax liability or expense has been recorded in these financial statements.

At December 31, 2022, the Company has available Federal net operating loss carryforwards (“NOLs”), of approximately $23.9 million to reduce future taxable income which do not expire but are limited to 80% of taxable income and approximately $23.9 million in multiple states the earliest expiring in 2040

Cash Flows

For the three months ended March 31, 2023 and the three months ended March 31, 2022 (restated) net cash used in operating activities was $1,388,704 and $2,570,926, respectively.

For the three months ended March 31, 2023, the net cash used was principally on account of the net loss of $2,987,985 less share-based compensation of $158,267, debt discount amortization $8,706, accrued P-I-K interest $99,287 and depreciation and amortization $49,551, decrease in accounts receivable of $1,228,102 and an increase in prepaid expenses $87,497 , partially offset by decrease in accounts payable of $29,560.

For the three months ended March 31, 2022 (restated) , the net cash used was principally on account of the net loss of $ 3,789,643 less share-based compensation of $969,511, debt discount amortization of $516,425, increase in accounts receivable of $994,228, partially offset by increase in accounts payable of $1,164,183.

Net cash provided by financing activities three months ended March 31, 2023 and the three months ended March 31, 2022 (restated), were $ 1,048,531 and $1,225,810, respectively.

For the three months ended March 31, 2023, the net cash provided by financing activities was from sales of convertible notes payable of $200,000 and the deferred offering cost write-off of $848,531.

For the three months ended March 31, 2022 (restated), the net cash provided by financing activities was from the proceeds from exercise of stock warrants in the amount of $1,225,810.

Going Concern, Liquidity and Capital Resources

The Company believes it does not have sufficient cash to meet working capital and capital requirements for at least twelve months from the issuance of these financial statements.

For the three months ended March,31 2023, the Company’s operations lost approximately $3.0 million of which approximately $1.2 million were non-cash expenses, including $466,000 of non-cash operating expenses and $848,000 related to the write-off of deferred offering costs. The Company generated negative cash flows from operations of approximately $1.4 million for the three months ended March 31, 2023.

As of March 31, 2023, NYIAX had total current assets of approximately $1.2 million, of which approximately $452,000 was cash and total current liabilities of approximately $5.0 million.

During the 2023, the Company sold convertible notes from two convertible notes offerings.

2023A Convertible Note Payable

Under the terms of the 2023A Convertible Notes offered in the convertible notes:

●

The notes convert at two dollars ($2.00) per share concurrently when shares of common stock are sold to the public in the Financing Event, or in the event the Financing Event is not completed within eighteen (18) months from the date of the individually issued notes, the Conversion Price shall be the reduced price of two dollars ($2.00) per share and the conversion amount shall automatically be converted into common stock of the Company at $2.00 per share on the Maturity Date.

●

The annual rate of return is twelve percent (12.0%) per annum, which shall be paid as a Payment-in-Kind in the Company’s common stock valued at two dollars ($2.00) per share.

●

Warrants (the “Warrants”) were issued at a rate of one (1) Warrant for every ten dollars ($10) principal amount of notes purchased. Each Warrant shall be exercisable for a period of five (5) years at a price of $5.50 per share. See Subsequent Events footnote for more details relating to the 2023A Convertible Note Payable.

$200,000 of 2023A Convertible Note Payable were sold.

Future capital requirements will depend on many factors, including the Company’s rate of revenue growth and its level of expenditures. Additionally, the Company is planning an initial public offering of its common stock. To the extent that the offering is not successful, or that existing capital resources, revenue growth and cash flow from operations are not sufficient to fund future activities, the Company may need to raise additional funds through equity or debt financing or curtail expenses. However, no assurances can be provided that additional funding or alternative financing will be available at terms acceptable to the Company, if at all.

Management must evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.

Due to these factors, substantial doubt exists regarding the Company’s ability to continue as a going concern through twelve months from the issuance date of these the financial statements. Management has taken the steps to reduces the losses significantly by curtailing certain aspects of its operations or expansion activities. The financial statements for the period ended March 31, 2023, do not include any adjustment relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

2023B Convertible Note Payable

On April 3, 2023, the Company commenced a Convertible Notes Offering (“2023B Convertible Note Payable”) pursuant to which it will offer up to $2,000,000 of convertible notes.

Under the terms of the 2023A Convertible Notes offered in the convertible notes:

●

The annual rate of return is twelve percent (12.0%) per annum, which shall be paid as a Payment-in-Kind in the Company’s common stock valued at two dollars ($2.00) per share

●

Warrants (the “Warrants”) were issued at a rate of one half warrant issued for every $10 of Notes purchased with an exercise price of four dollars ($4.00).and one half warrant issued for every $10 of Notes purchased with an exercise price of two dollars ($2.00) . Each Warrant shall be exercisable for a period of five (5) year.

$1,970,000 of 2023B Convertible Note Payable were sold as of June 28, 2023. Note: Amount and date to change

Non-GAAP Financial Measures

We report our financial results in accordance with GAAP. However, management believes that Adjusted EBITDA, a non-GAAP financial measure (the “Non-GAAP Measure”), provides investors with additional useful information in evaluating our performance.

We calculate Adjusted EBITDA as net loss, adjusted to exclude: (1) interest expense and debt expense, net, (2) depreciation and amortization, (3) share-based compensation expense, and (4) other one-time items.

The Non-GAAP Measures are financial measures that are not required by, or presented in accordance with GAAP. We believe that the Non-GAAP Measures, when taken together with our financial results presented in accordance with GAAP, provides meaningful supplemental information regarding our operating performance and facilitates internal comparisons of our historical operating performance on a more consistent basis by excluding certain items that may not be indicative of our business, results of operations or outlook. In particular, we believe that the use of the Non-GAAP Measures are helpful to our investors as they are measures used by management in assessing the health of our business, determining incentive compensation and evaluating our operating performance, as well as for internal planning and forecasting purposes.

The Non-GAAP Measures are presented for supplemental informational purposes only, have limitations as an analytical tool and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Some of the limitations of the Non-GAAP Measures include that (1) the measures do not properly reflect capital commitments to be paid in the future, (2) although depreciation and amortization are non-cash charges, the underlying assets may need to be replaced and Adjusted EBITDA do not reflect these capital expenditures, (3) Adjusted EBITDA do not consider the impact of share-based compensation expense, which is an ongoing expense for our company and (4) Adjusted EBITDA do not reflect other non-operating expenses, including interest and debt expense. In addition, our use of the Non-GAAP Measures may not be comparable to similarly titled measures of other companies because they may not calculate the Non-GAAP Measures in the same manner, limiting its usefulness as a comparative measure. Because of these limitations, when evaluating our performance, you should consider the Non-GAAP Measures alongside other financial measures, including our net income (loss) and other results stated in accordance with GAAP.

The following table presents a reconciliation of Adjusted EBITDA to net loss, the most directly comparable financial measure stated in accordance with GAAP:

				*Restated*
	For the			For the
	Three-Month Period			Three-Month Period
	Ended			Ended
	March 31,			March 31,
	2023			2022
Net Loss	$	(2,987,985	)	$	(3,789,643	)
Reconciliation of Adjusted EBITDA Loss to Net Loss:
Depreciation and amortization		(49,551	)		(63,514	)
Deferred offering cost write-off		(848,531	)
Share-based compensation		(158,267	)		(969,511	)
Interest expense		(107,983	)		(695,834	)
Total Adjustments of EBITDA Loss to Net Loss	$	(1,164,332	)	$	(1,728,859	)
Adjusted EBITDA	$	(1,823,653	)	$	(2,060,784	)

Adjusted EBITDA

For the three months ended March 31, 2023, compared to the three months ended March 31, 2022 (restated), the adjusted EBITDA loss decreased to $1,823,653 from $2,060,784 or $237,131, (13%). The decrease in adjusted EBITDA loss was attributed to (i) a decrease in sales and marketing staff with related expenses, (ii) administrative costs related to the Company going public, such as an annual audit.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company and are not required to provide the information under this item pursuant to Regulation S-K.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) that are designed to be effective in providing reasonable assurance that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

In designing and evaluating disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute assurance of achieving the desired objectives. Also, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. The design of any system of controls is based, in part, upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of management, of the effectiveness of the design and operation of our disclosure controls and procedures.

Based on our assessments and those criteria, management determined that our internal controls over financial reporting were not effective as of December 31, 2022 and March 31, 2023, material weaknesses exist in the Company’s internal control over financial reporting and disclosures. These weaknesses are that the Company was unable to provide a timely financial reporting package in connection with the year end audits and quarterly reviews. In addition, the Company identified material weaknesses in the revenue recognition process, expense reimbursement controls as well as errors over financial reporting which required the Company to restate its prior years financial statements. These errors related to material adjustments over the Company’s accounting of deferred offering cost, debt discount, share-based payment awards and related disclosures. This was primarily the results of the Company’s lack of documentation of internal control in place, limited accounting personnel and lack of segregation of duties. Because of continued material weaknesses in our internal control over the completeness of contract recording and accounting personnel that lack experiences in SEC reporting regulation. Additionally, for the year ended December 31, 2022, there were material weaknesses identified in the Company’s Information Technology General Controls (“ITGCs”). The control deficiencies identified were over the design of internal controls surrounding user access security, and change management for the Company’s internally developed applications and external financial-based software used by the Company. These deficiencies were in regards to user access provisioning, terminations, user access review, change management, segregation of duties of developers and migrators. The Company’s ITGCs were not designed and not operating effectively to ensure (i) appropriate segregation of duties were in place to perform program changes and (ii) activities of individuals with access to modify data and make program changes not being appropriately monitored. These control deficiencies aggregated to a Material Weakness for Information Technology General Controls for absence and limited or no presence of compensating IT Controls that mitigate the risk associated with the IT deficiencies. There is a risk under the current circumstances that intentional or unintentional errors could occur and not be detected.

Changes in Internal Controls over Financial Reporting

During the three-month period ended March 31, 2023, we hired a new controller in January 2023 following the resignation of our former controller in December 2022.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

As a smaller reporting company, we are not required to provide the information required by this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

2023A Convertible Note Payable

Under the terms of the 2023A Convertible Note Payable:

●

The annual rate of return is twelve percent (12.0%) per annum, which shall be paid as a Payment-in-Kind in the Company’s common stock valued at two dollars ($2.00) per share.

●

The outstanding principal balance of the 2023A Convertible Note Payable and all accrued interest automatically converted into common stock of the Company on February 7, 2023, immediately prior to the Company’s receipt of an effective order from the SEC declaring the registration statement of its initial public offering effective.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The following exhibits are included and filed with this report.

Exhibit		Exhibit Description
3.1		Amended and Restated Certificate of Incorporation of NYIAX, Inc. (Incorporated by reference to Exhibit 3.1 to Registration Statement on Form S-1 filed on June 1, 2022, File No. 333-265357)
3.2		Bylaws of NYIAX, Inc. (Incorporated by reference to Exhibit 3.3 to Registration Statement on Form S-1 filed on June 1, File No. 333- 265357)
31.1		Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer
31.2		Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer
32.1		Section 1350 Certification of Principal Executive Officer and Principal Financial Officer
101		Interactive Data Files
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Taxonomy Extension Schema Document
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Definition
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

*	Furnished and not filed.

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized on July 20, 2023.

Person	Capacity	Date

/s/ Christopher Hogan	Interim Chief Executive Officer, President and Chief Operating Officer	July 20, 2023
Christopher Hogan	(Principal Executive Officer)

/s/ William Feldman	Chief Financial Officer and Treasurer	July 20, 2023
William Feldman	(Principal Financial and Accounting Officer)