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, 2024

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

Commission file number: 001-41626

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.)

900 Easton Ave. STE 26-1088

Somerset NJ 08873-1760

(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 February 14, 2025, there were 16,313,302 shares outstanding of the registrant’s common stock, par value $0.0001 per share.

Table of Contents

		Page
PART I- FINANCIAL INFORMATION		1
Item 1: Condensed Financial Statements for the Three Months Ended March 31, 2024 (unaudited) and December 31, 2023		1
Condensed Balance Sheets as of March 31, 2024 (unaudited) and December 31, 2023		1
Condensed Statements of Operations for the three months periods ended March 31, 2024 (unaudited) and March 31, 2023 (unaudited)		2
Condensed Statements of Shareholders’ Equity (Deficit) for the three months periods ended March 31, 2024 (unaudited) and 2023 (unaudited)		3
Condensed Statements of Cash Flows for the three months periods ended March 31, 2024 (unaudited) and 2023 (unaudited)		4
Notes to Condensed Financial Statements (unaudited)		5
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3: Quantitative and Qualitative Disclosures About Market Risk		29
Item 4: Controls and Procedures		29
PART II - OTHER INFORMATION		30
Item 1: Legal Proceedings		30
Item 1A: Risk Factors		30
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds		49
Item 3: Defaults Upon Senior Securities		50
Item 4: Mine Safety Disclosures		50
Item 5: Other Information		50
Item 6: Exhibits		51
SIGNATURES		52

part I – FINANCIAL INFORMATION

Item 1. Financial Statements

NYIAX, Inc.
Condensed Balance Sheets
As of March 31, 2024 and December 31, 2023

	March 31, 2024			December 31, 2023
	(Unaudited)
Assets
Current assets
Cash	$	446,891		$	55,014
Accounts receivable, net		84,955			262,588
Prepaid expenses and other current assets		47,253			5,000
Total current assets	$	579,099		$	322,602

Capitalized software development costs, net	$	147,426		$	196,572
Patents, net		3,107,438			3,404,958
Property, plant and equipment, net		1,986			2,196
Operating lease right-of-use asset		205,249			244,451
Security deposit		74,068			74,068
Total assets	$	4,115,266		$	4,244,847

Liabilities and Shareholders’ Equity
Current liabilities
Accounts payable and accrued expenses	$	5,732,325		$	5,327,206
Convertible notes payable, net of deferred debt discounts ($189,807 as of March 31, 2024 and $0 as of December 31, 2023)		2,280,193			1,970,000
Accrued Payment-In-Kind Interest		206,002			146,655
Operating lease obligations, current portion		178,984			175,585
Payables to shareholder-founders		169,500			264,000
Total current liabilities	$	8,567,004		$	7,883,446

Long-term liabilities
Operating lease obligations, net of current portion	$	46,724		$	92,800
Total long-term liabilities	$	46,724		$	92,800
Total liabilities	$	8,613,728		$	7,976,246

COMMITMENTS AND CONTINGENCIES

Shareholders’ equity (deficit)
Preferred shares: 10,000,000 authorized, 0 outstanding, par value $0.0001 per share	$	-		$	-
Common stock $0.0001 par value, 125,000,000 common shares authorized; 15,685,434 and 15,611,827 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively.	$	1,570		$	1,562
Additional Paid in Capital		58,500,991			58,244,754
Accumulated deficit		(63,001,023	)		(61,977,715	)
Total shareholders’ (deficit) equity	$	(4,498,462	)	$	(3,731,399	)
Total liabilities and shareholders’ (deficit) equity	$	4,115,266		$	4,244,847

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

NYIAX, Inc.
Condensed Statements of Operations

For the three-month period ended March 31, 2024 and 2023

(unaudited)

	March 31,			March 31,
	2024			2023

Revenue, Net	$	81,544		$	138,037
Cost of sales		168,860			222,421
Gross margin (deficit)	$	(87,316	)	$	(84,384	)
Operating expenses
Technology and development	$	245,069		$	398,851
Selling, general and administrative		991,502			1,547,831
Deferred offering cost write-off		-			848,531
Forfeiture of deferred compensation		(308,083	)		-
Depreciation and amortization		297,731			405
Total operating expenses	$	1,226,219		$	2,795,618
Loss from operations		(1,313,535	)		(2,880,002	)
Other (income) expenses
Interest expense		62,259			107,983
Total other (income) expenses	$	62,259		$	107,983
Loss before provision for income taxes	$	(1,375,794	)	$	(2,987,985	)
Net loss	$	(1,375,794	)	$	(2,987,985	)

Net loss per share – basic and diluted	$	(0.09	)	$	(0.23	)
Weighted average number of common shares outstanding – basic and diluted		15,644,959			13,157,111

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

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

As of March 31, 2024 and 2023

(unaudited)

	Common Stock				Additional
	Shares Outstanding		Amount		Paid in Capital			Accumulated Deficit			Total
Balance - January 1, 2024		15,611,827	$	1,562	$	58,244,754		$	(61,977,715	)	$	(3,731,399	)
Cumulative effect adjustment from adoption of ASU 2020-06						(352,486	)		352,486			-
Share-based compensation						123,502						123,502
Conversion of payables to shareholder-founders & accrued interest		73,607		8		294,416			-			294,424
Deferred debt discount on 2024 convertible notes payable		-		-		190,805			-			190,805
Net Loss		-		-		-			(1,375,794	)		(1,375,794	)
Balance - March 31, 2024		15,685,434	$	1,570	$	58,500,991		$	(63,001,023	)	$	(4,498,462	)

	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 unaudited condensed financial statements.

NYIAX, Inc.
Condensed Statements of Cash Flows

For the three-month period ended March 31, 2024 and 2023

(unaudited)

	March 31, 2024			March 31, 2023

Cash flows from operating activities
Net loss	$	(1,375,794	)	$	(2,987,985	)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization		346,877			49,551
Operating lease right-of-use asset		(3,475	)		(2,569	)
Accrued PIK Interest		61,270			99,287
Debt discount amortization		999			8,706
Share based compensation		123,502			158,267
Forfeiture of Deferred Compensation		(308,083	)		-
Deferred offering cost write-off, net		-			848,531
Change in operating assets and liabilities:
Accounts receivable		177,633			1,228,102
Prepaid expenses		(42,253	)		87,497
Accounts payable and accrued expenses		713,201			(29,560	)

Net cash used in operating activities	$	(306,123	)	$	(540,173	)

Cash flows from financing activities
Proceeds from convertible notes payable	$	500,000		$	200,000
Proceeds from payables to shareholder-founders		198,000			-

Net cash provided by financing activities	$	698,000		$	200,000

Net increase (decrease) in cash and cash equivalents	$	391,877		$	(340,173	)

Cash and cash equivalents - Beginning of period	$	55,014		$	792,337

Cash and cash equivalents - End of period	$	446,891		$	452,164

Supplemental disclosures of non-cash flow investing and financing activities:
Deferred debt discount on convertible note payable	$	190,806		$	-
Conversion of payables to shareholder-founders & accrued interest	$	294,416		$	-
Conversion of convertible note payable and accrued interest to common shares		-		$	2,719,342

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

NYIAX, Inc.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
For the three months period ended March 31, 2024 (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, Cash Flows 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, 2024, the Company lost approximately $1.4 million of which $221,090 were non-cash expenses, including a contra expense of $308,083 for employee compensation forfeitures.

The Company generated negative cash flows from operations of approximately $306,123 for the three months ended March 31, 2024. 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 of convertible note payable.

As of March 31, 2024, NYIAX had total current assets of approximately $579,099, of which approximately $447,000 was cash and total current liabilities of approximately $8.6 million, of which are approximately $2.7 million convertible notes payable, accrued interest, and payables to shareholder-founders.

To enable the Company to meet immediate capital requirements until longer term requirements can be met, through February 14, 2025, the Company sold approximately $1.3 million of the 2024A Convertible Note Payable approximately $0.9 million of the 2024B Convertible Note Payable and $0.2 million of the 2025A Convertible Note Payable.

The Company’s financial advisor, representative and lead underwriter for the Offering was WestPark Capital, Inc. (“WestPark”). Due to multiple factors, on March 5, 2024, WestPark and the Company mutually agreed to not proceed with the Offering.

Note 2 — 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 January 1, 2024 through March 31, 2024 are not necessarily indicative of the results that may be expected through December 31, 2024.

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) the useful lives of property and equipment and capitalized software development costs, (3) income taxes, (4) the valuation of share-based compensation, (5) assumptions used in the Black-Scholes option pricing model to determine the fair value of stock options and warrants (6) allowance for expected credit losses, (7) impairment estimates, and (8) 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, 2024 and December 31, 2023.

Periodically, the Company may carry cash balances at financial institutions more than the federally insured limit of $250,000 per institution. The amount in excess of the FDIC insurance as of March 31, 2024, was approximately $197,000. The Company has not experienced losses on account balances and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant.

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, 2024, 4 Media Buyers represented 28%, 21%, 17% and 17% of accounts receivable. For the three months ended March 31, 2024, 3 customers represented 42%, 21% and 21% of revenue, net. As of March 31, 2024, two Media Sellers represented 80% and 10% of accounts payable.

As of December 31, 2023, three Media Buyer represented 34%, 25% and 18% of accounts receivable. As of December 31, 2023, two Media Sellers represented 80% and 10% of accounts payable.

For the three months ended March 31, 2023, two customers represented 44% and 16% of revenue, net.

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 expected credit losses 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 expected credit losses only after all collection attempts have been exhausted.

The Company performs ongoing credit evaluation. The allowance for expected credit losses 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 expected credit losses on a quarterly basis. For the three-month period ended March 31, 2024 the Company had no allowance for expected credit losses and no direct write-offs of accounts receivable. For the year ended December 31, 2023, the Company had an allowance for expected credit losses of $106,959 and no direct 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.

Patents

Patents and other intellectual property acquired through purchase are recorded at the time of acquisition at cost of the acquisition plus the transaction costs, if material, of the acquired assets.

Amortization commences when the Patents are available for its intended use over their useful lives.

In accordance with ASC 360 Impairment Accounting for the Impairment or Disposal of Long-Lived Assets, the Company periodically reviews the carrying value of long-lived assets whenever events or changes in circumstances indicate that the historical carrying value of the long-lived assets may have been impaired. As discussed in Note 7 — Subsequent Events, management determined that as of September 30, 2024, that the Patent Portfolio was impaired.

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, 2024 and the year ended December 31, 2023, no impairments were recorded on those assets.

Expected credit loss

The Company accounts for expected credit losses in accordance with ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments requires entities to use a current lifetime expected credit loss methodology to measure impairments of certain financial 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, 2024 and December 31, 2023, 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 three month period ended March 31, 2024 and the year ended December 31, 2023, 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, 2024, 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.

	March 31, 2024
Equity Incentive Plans		2,934,038
Common Stock Issuable Upon Conversion of Convertible Notes, including PIK Interest		953,557
Selling Agent and Advisor Warrants		23,538
Warrants Issued with Common Stock Offerings		932,374
Warrants Issued with Convertible Notes Offerings		1,383,400
		6,226,907

Recently Issued Accounting Pronouncements

In August 2020, the FASB issued ASU 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 guidance simplified the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock, thereby limiting the accounting results in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 also amended the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. In addition, the guidance eliminated the treasury stock method to calculate diluted earnings per share for convertible instruments and requires the use of the if-converted method. The Company adopted the standard effective January 1, 2024 using the modified retrospective transition method. On January 1, 2024, the Company recorded a transition adjustment to debit additional paid-in capital and credit retained deficit for $352,486, representing the effect of the original bifurcated conversion feature recorded through December 31, 2023.

Note 3 — Commitments

Appointment of Chief Executive Officer

On January 19, 2024, the Company’s Board of Directors appointed Teresa Gallo as the Chief Executive Officer (the “CEO”) of the Company. In connection with Ms. Gallo’s appointment as CEO, the position of Interim Chief Executive Officer was eliminated. Ms. Gallo’s primary tasks as CEO will include the development and implementation of the Company’s long-term strategic plan for its digital advertising exchange platform.

On January 19, 2024, the Company entered into an employment agreement with Ms. Gallo (the “Agreement”). The term of the Agreement commenced on January 19, 2024 and continues for two (2) years unless terminated earlier pursuant to the terms of the Agreement, and thereafter will be automatically renewed for successive one (1) year periods, unless terminated earlier pursuant to the terms of the Agreement or unless either party provides written notice of its intention not to extend the term of the Agreement at least 30 days prior to the Initial Term.

Under the Agreement, Ms. Gallo will receive an annual base salary of $400,000 plus healthcare and other benefits including, but not limited to, life insurance coverage, expense allowances and indemnification.

In the event the Company terminates the Agreement without cause or does not renew the Agreement or Ms. Gallo terminates the Agreement for good reason, Ms. Gallo will be entitled to receive, among other severance benefits, cash payments equal to twelve (12) months base salary, continued health and medical benefits, and accelerated vesting of unvested stock equity pursuant to terms of the Agreement. In the event of termination for cause by the Company, Ms. Gallo unearned salary, benefits and unvested stock equity grants terminate.

Note 4 — Shareholders’ Equity

On March 31, 2024 and December 31, 2023 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 15,685,434 and 15,611,827 common shares issued and outstanding, respectively. No preferred stock has been issued.

During the three-month period ended March 31, 2024, $ 294,424 of payables to shareholder-founders pursuant to convertible notes, including interest, were converted to 73,607 common shares.

For the three-month periods ended March 31, 2024 and 2023, the Company recorded share based compensation as follows:

	Three-Month Period
	March 31, 2024		March 31, 2023
Shared-Based Compensation:
Cost of Sales	$	5,288	$	6,879
Technology and development		13,386		13,386
Sales, general and administrative		104,828		138,002
Total	$	123,502	$	158,267

Note 5 — Convertible Notes Payable

Issuance of 2024A Convertible Note Payable

In March 2024, Company offered (the “ 2024A Convertible Note Payable” offering) for sale up to $1,200,000 of its Units which may be increased to $2,000,000 by the Company, with each unit consisting of (i) a 10% unsecured convertible promissory note (each, a “Note”); and (ii) such number of common stock purchase warrants as shall be equal to fifty thousand (50,000) warrants for each $100,000 principal amount of Notes subscribed for in this Offering.

As of March 31, 2024, the Company has closed on approximately $500,000 of the 2024A Convertible Note Payable offering.

Upon completion of a subsequent financing where the Company raises cumulative gross proceeds of at least $1,500,000 (the “Financing Event”) the outstanding principal balance of the Notes and all accrued interest shall automatically convert into such securities under the same terms and conditions as those securities purchased in Financing Event. The conversion price of the securities will be the price per share equal to the following: the lower of (i) eighty-five (85%) percent of the price paid by purchasers of securities in such Financing Event or (ii) two ($2.00) dollars, but in no event less than one dollar and fifty cents ($1.50) per share. If a Financing Event shall not occur two (2) years from the final Closing of the Offering, the outstanding principal balance of the Note and the accrued interest shall convert into the Company’s common stock at two ($2.00) dollars per share.

The warrants were determined to be equity instruments, as they did not contain obligations of the Company to (i) redeem the warrants for cash or other assets, (ii) repurchase the Company’s equity shares by transferring assets, or (iii) to issue a variable number of equity shares. Upon adoption of ASU 2020-06 on January 1, 2024, the liability and equity components relating to the Company’s 2024A convertible notes are presented as a single liability. The relative fair value of the equity warrants issued in connection with the convertible notes was recorded as a debt discount and will be amortized over the respective terms of the convertible notes under the interest method.

The fair value of the warrants was determined using the Black-Scholes model, with as provided below:

●

Term — five years

●

Risk-free Interest Rate — 5.0%

●

Dividend Rate — 0

●

Volatility 58.8%

The following table illustrates the value of the convertible note payable as of March 31, 2024

2023B Convertible Notes	$	1,970,000
2024 Convertible Notes Payable Issued		500,000
	$	2,470,000
Deferred debt discount, representing the relative fair value of the warrants issued in connection with the notes	$	(190,806	)
Amortization of debt discount for three-month period ending March 31, 2024		999
Convertible Notes Payable, net at March 31, 2024	$	2,280,193

The 2023B convertible notes discount was amortized over a period which ended December 31, 2023, based upon management’s expectation upon issuance of the timing for its initial public offering. On February 1, 2024, for $1,695,000 of the $1,970,000 2023B convertible notes, holders agreed to the price of the conversion feature increasing to $4.00 per share from the $2.00 exercise price as originally issued. There was no change to the conversion price for the remaining $275,000 of 2023B convertible notes. The change in the conversion price represented a more than 10% change in the relative fair value of the conversion feature as a percentage of the carrying value of the convertible notes, resulting in an extinguishment and reissuance of the convertible notes to the same lender. There was no gain or loss recognized in connection with the extinguishment and there was no change to the carrying value of the convertible notes.

Note 6 — Related Party Transactions

Payables to Shareholder-Founders

At March 31, 2024 certain shareholder-founders loaned the Company $169,500.

●

$100,500 debt for reimbursement of certain expenses from 2016. On October 30, 2023, the Company entered into an agreement with shareholder-founders whereby the debt converts to 25,124 shares immediately upon pricing of the Company’s initial public offering.

●

$21,000 in the form of convertible notes from February 2024. These convertible notes payables to certain shareholder-founders of $21,000 plus interest automatically convert to common shares upon the completion of a financing event or within two (2) months from the date of the convertible notes at a share price of $4.00 per share.

●

On February 8, 2024, certain shareholder-founders advanced the Company $48,000. The advance, plus interest at 4% per annum was repaid on April 10, 2024.

Related Party Transactions — Former CEO

The Company’s former CEO is also a shareholder and Director of the Company.

The former CEO is a co-founder of a private investment fund, GoldStreet Holdings Limited Partnership (“GoldStreet”). For the year ended December 31, 2022, the Company recorded $10,000 of general and administrative expenses related to GoldStreet for office space. The Company did not record any related party expenses related to GoldStreet for the twelve-month period ended December 31, 2023.

Forfeiture of Deferred Compensation

As of March 31, 2024, in connection with the closing of the Company’s IPO and cash flows, certain NYIAX founders, owners, officers and employees agreed to defer $308,082 of compensation amounts, including payroll taxes, owed by NYIAX. The deferred compensation arose from a salary deferral program where each founder agreed to defer a portion of their contractual salary or contractor fees. This forfeiture represents a permanent waiver of rights to this deferred compensation.

This event was recorded as a contra-expense to selling, general and administrative expenses and a debit to accrued compensation.

Conversion of Notes

During the three-month period ended March 31, 2024, $294,424 of payables to shareholder-founders, including interest, were converted to 73,607 common shares.

Note 7 — Litigation and Contingencies

Investor Litigation Complaint

Investor Litigation Complaint On November 17, 2023, certain individual investors (the “Investors”) in NYIAX filed a complaint (the “Complaint”) in the United States District Court for the Southern District of New York (the “Court”) against the Company, Robert Ainbinder, Jr., a director of the Company since April 2016 and former chief executive officer from August 2019 until May 2022, Westpark Capital, Inc., and Michael Ainbinder, Robert Ainbinder Jr.’s brother. The complaint alleges, among other allegations, that the defendants, together or in their individual capacity, (i) violated Section 10(b) and Rule 10b-5 of the Exchange Act, (ii) violated Sections 206(1) and 206(2) of the Advisers Act (15 U.S.C. §§ 80b-6(1) and 80b-6(2)), (iii) committed fraud, (iv) committed negligent misrepresentation and omission, (v) breached fiduciary duties, (vi) breached contracts, (vii) breached duties of good faith and fair dealing, and (viii) committed negligence by, among other things, making material misrepresentations of fact related to plaintiffs’ investments in the Company and omitting material facts while soliciting plaintiffs’ investments in the Company.

The Investors paid $1,227,500 for 315,240 shares of common stock in various private placement offerings of the Company. $1,050,000 of the purchases were made during 2016, 2017 and 2018 for an aggregate of 277,906 shares of common stock; and $177,500 of the purchases were made during 2020, 2021 and 2022 for an aggregate of 37,334 shares of common stock. The Investors are seeking compensatory damages of $1,277,500, plus punitive damages of treble the compensatory damages, along with interest and attorney’s fees.

Additionally, the Company has certain indemnification obligations to WestPark resulting from this litigation and the various engagement letters executed with WestPark, and WestPark has given notice of indemnification to the Company.

The Company has concluded that it is not possible to assess the likelihood of a loss at this time.

The case underlying the Complaint could impede our ability to raise funds and may have a material adverse effect on the Company’s business, financial condition, operating results, or cash flows.

The Company intends to vigorously defend its positions. However, there can be no assurances that the Company’s contentions and affirmative defenses in response to claims will be successful in the Court or in arbitration.

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 provided 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.

The Engagement Letter terminates 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.

In accordance with the Engagement Letter, NYIAX had engaged Boustead Securities as its sole representative, underwriter and financial advisor. 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.

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 Registration Statement on Form S-1 effective. Upon the SEC approval, NYIAX became a 1934 Securities Act reporting company with all the related responsibilities and costs.

During the time the Company was engaged with Boustead with respect to the IPO, the Company raised approximately $10.0 million in private transactions. Based on the formula in the Engagement Letter, the commissions on such amount were approximately $588,000, which has been acknowledged by Boustead and are accrued in our Financial Statements as of December 31, 2023. Additionally, the Company issued Boustead 23,538 warrants to purchase NYIAX common stock at a per share exercise price of $4.00.

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 $1.2 million 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.

Boustead may claim 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 $1.2 million if the Company completes an IPO with another underwriter.

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 a capitalization and could negatively affect our financial condition. There can be no assurance that the Company will prevail in any lawsuit it commences against Boustead. 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 is a probability that the Company and Boustead will end up in litigation over claims by Boustead against the Company and claims by the Company against Boustead. Litigation is expensive and time consuming with uncertain outcomes. The Company has concluded that it is not possible to assess the likelihood of a loss at this time.

The Company intends to vigorously defend its positions regarding the payment of any commissions to Boustead, however there can be no assurances that the Company’s contentions and affirmative defenses in response to claims by Boustead for any commissions will be successful in the event that the issue of Engagement Letter termination and the entitlement to, and amount of, commissions pursuant to the Engagement Letter are contested by Boustead in a court of law or arbitration or if the matter is otherwise settled by the Company and Boustead.

Note 8 — Subsequent Events

Management has evaluated events that have occurred subsequent to the date of these condensed unaudited financial statements and has determined that, other than those listed below, no such reportable subsequent events exist through February 14, 2025. Based 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:

Impairment of Patent Portfolio

On July 8, 2023, Company completed the purchase of a portfolio of patents and trade secrets (the “Patent Portfolio”) As consideration for the Patent Portfolio, the Company issued 2,000,000shares of its common stock to NIFTY, a purchase price of $4,000,000. The Patent Portfolio consists of eighteen (18) patents and trade secrets, [of which six of the patents were active]. The Company purchased these patents as a first step to investing in and developing expanded product offerings in the areas of (i) market data, (ii) streaming media (advertising, livestreaming and video-on-demand), and (iii) the webinar market. The ultimate development, marketing and monetization of these expanded product offerings was expected to require significant investment by the Company, including the hiring of additional internal and external resources. Further, management of the Company understood that time was of the essence in ultimately developing the new products, taking advantage of the market opportunities and being able to monetize the patents within the respective patent lives. As such, contemporaneous with the purchase of the Patent Portfolio, management of the Company committed to the planning and consummation of the first of a series of capital raises that would be required to fund the development of these new products from the core Patent Portfolio.

The Company exerted significant effort from July 8, 2023 through December 26, 2024, on a public offering to raise the capital required to fund the initial investment needed to develop the Patent Portfolio. Through September 30, 2024, the Company was able to raise only $2.3 million, most of which was used by the Company for working capital to fund its core operating costs. This level of funding was insufficient, and did not provide funding for the commercialization of the Patent Portfolio and Company’s other operating costs.

The Company’s board of directors determined to abandon the project to develop the patent portfolio, as the Company has been unable to raise the capital required to fund the development of the Patent Portfolio and the Company’s significantly impaired ability to commercialize and monetize the developed patents, due to now shortened timelines available to both raise the capital and to develop the Patent Portfolio before the underlying patents expire. As such, the project to develop the Patent Portfolio into the new products was immediately terminated. In connection with the project termination, the Company determined to fully write off the unamortized book value of the Patent Portfolio as of the same date. Accordingly, on September 30, 2024, the Company recorded a charge of $2,512,396 to record the full impairment of the Patent Portfolio.

2024 Convertible Note Offerings

2024A Convertible Note Payable

As of February 14, 2025, the Company has closed on approximately $1.3 million in the 2024A Convertible Note Payable offering. The Offering consists of two-year convertible notes with 10% interest payment-in-kind in Company common stock at two ($2.00) dollars, which shall be paid at maturity or upon conversion. Additionally, the Company issued with the Notes, warrant coverage at the rate of one hundred (100%) percent of the dollar value of the Note at two ($2.00) dollars per share as the strike price of the Warrants. The Warrants are for a period of five (5) years.

2024B Convertible Note Payable

As of February 14, 2025, the Company has closed on approximately $0.9 million in the 2024B Convertible Note Payable offering. The Offering consists of two-year convertible notes with 10% interest payment-in-kind in Company common stock at two ($2.00) dollars, which shall be paid at maturity or upon conversion. Additionally, the Company issued with the Notes, warrant coverage at the rate of one hundred (100%) percent of the dollar value of the Note at two ($2.00) dollars per share as the strike price of the Warrants. The Warrants are for a period of five (5) years.

2025A Convertible Note Payable Offering

As of February 14, 2025, the Company has closed on approximately $0.2 million in the 2025A Convertible Note Payable offering. The Offering consists of two-year convertible notes with 10% interest payment-in-kind in Company common stock at two ($2.00) dollars, which shall be paid at maturity or upon conversion.

In the event the Company undergoes a Significant Transaction (as hereinafter defined) on or before the Maturity Date, then the outstanding principal balance of the Note and all accrued interest shall be automatically converted into common stock of the Company at the lower of: (i) $2.00 per share or (ii) the average closing price of the common stock of the public company which is part of the Significant Transaction for the 15 days immediately prior to the Significant Transaction ending five trading days before the closing of the Significant Transaction. The common stock issued upon conversion shall be subsequently exchanged or converted on the same terms and conditions as all Company shares of common stock in connection with the Significant Transaction. A Significant Transaction shall mean any of the following with respect to the Company: (i) the direct or indirect sale or exchange in a single or series of related transactions by the stockholders of the Company of more than fifty percent (50%) of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party; (iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company.

Executive Employment Appointment

On May 4, 2024, the Company appointed and entered into an employment agreement with Robert Ainbinder Jr. as the Director of Development for Special Projects of the Company the (“Agreement”). Mr. Ainbinder’s primary tasks as Director of Development for Special Projects include creating a successful Capital Attainment Program, working with the CEO and management to designate, identify and create new business lines for the Company, and other duties as mutually agreed to between the Mr. Ainbinder and the CEO. Mr. Ainbinder is also a Board member.

On May 4, 2024, the Company entered into an Agreement with Mr. Ainbinder. (The term of the Agreement commenced on May 4, 2024 and continues for a period of one (1) year or until otherwise terminated in accordance with the provisions of the Agreement. This Agreement shall automatically renew for successive four (4) month terms unless earlier terminated Under the Agreement. Mr. Ainbinder will receive an annual base salary of $225,000 plus healthcare and other benefits. During the term, in addition to the base salary, Mr. Ainbinder will be eligible for a discretionary bonus of up to 20% of base salary which may be in cash, equity compensation, or base salary increases.

Payables to Shareholder-Founders and Conversion to Common Shares

On February 8, 2024, certain shareholder-founders advanced the Company $48,000. The advance, plus interest at 4% per annum was repaid on April 10, 2024.

Lease Termination

Effective on April 16, 2024, the Company’s operating sub-lease for office space at 180 Maiden Lane, New York, NY 10005 that commenced on November 1, 2021 was terminated.

The Company does not anticipate a material charge from the termination.

Directors

On May 1, 2024, the Board of Directors (the “Board”) of the Company appointed Teresa Gallo, the Company’s CEO, independent Directors Bruce Cooperman, Michael Garone, and Paul Richardson as Directors of the Company. As of the date hereto, the independent Directors have not been granted equity compensation for their services. Independent Directors Bruce Cooperman and Paul Richardson resigned in December 2024.

On April 30, 2024, Thomas F. O’Neill, the Chairman of the Board of Directors of the Company advised the Board of the Company that he was resigning as Chairman of Board effective April 30, 2024.

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 our Annual Report on Form 10-K. 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 Form 10-Q and in Form 10-K for the fiscal year ended December 31, 2023. This discussion contains forward-looking statements that involve risks and uncertainties. Forward-looking statements are statements not based on historical information and which relate to future operations, strategies, financial results or other developments. Forward looking statements, particularly those identified with the words, “anticipates,” “believes,” “expects,” “plans,” “intends,” “objectives,” and similar expressions, are necessarily based upon estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements made by, or on our behalf. We disclaim any obligation to update forward-looking statements, except as required by law. When used herein, unless the context requires otherwise, references to the “Company,” “we,” “our” and “us” refer to NYIAX, Inc.

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.

In 2023, the sales team was minimal. As of the date herein, the Company has added two people to the sales team and one other has resigned.

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.

Revenue Build

NYIAX is currently building its Business Development (sales and representatives) teams. The size, ramp-up and quality of the team are effected by our liquidity and 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 of the initial platform.

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

NYIAX expects that based upon this plan that it would not be able to realize substantive revenues until approximately one year from a capital infusion.

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, 2024 and 2023

The following table presents the Company’s comparable financial results between the three-month periods ending March, 2024 and 2023:

	March 31,			March 31,
	2024			2023
	(unaudited)			(unaudited)
Revenue, Net	$	81,544		$	138,037
Cost of sales		168,860			222,421
Gross(deficit) margin	$	(87,316	)	$	(84,384	)
Operating expenses
Technology and development	$	245,069		$	398,851
Selling, general and administrative		991,502			1,547,831
Deferred offering cost write-off		-			848,531
Forfeiture of deferred compensation		(308,082	)		-
Depreciation and amortization		297,730			405
Total operating expenses	$	1,226,219		$	2,795,618
Loss from operations		(1,313,535	)		(2,880,002	)
Other (income) expenses
Interest expense		62,259			107,983
Total other (income) expenses	$	62,259		$	107,983
Loss before provision for income taxes	$	(1,375,794	)	$	(2,987,985	)
Net loss	$	(1,375,794	)	$	(2,987,985	)

Net loss per share – basic and diluted	$	(0.09	)	$	(0.23	)
Weighted average number of common shares outstanding – basic and diluted		15,644,959			13,157,111

Net Revenue

For the three months ended March 31, 2024, compared to the three months ended March 31, 2023 net revenue decreased to $81,544 from $138,037, or by $56,493. The decrease in revenue is related primarily to a decrease in the number of new business development headcount pursuing business. Revenue is dependent upon the cumulative effort of business development employees driving revenue relationships to the Company. The Company does not currently have a book of repeatable business and as such revenue is substantially dependent upon business development headcount driving relationships and new transactions.

For the three months ended March 31, 2024, the Company was compensated for the completion of 137 Media Contracts with average compensation of $595 per Media Contract. 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. The decrease in the average compensation relates to the Company executing contracts at lower commission rates and lower total contract value. Publishers compensate the Company at variable rates; lower commission rates resulted from a mix of publishers with lower negotiated rates. The total contract values decreased from lack of activation of several contracts with certain publishers.

The following chart illustrates Media Contracts completed in each of the following quarters of 2024, 2023 and 2022 with related quarterly revenue and revenue per contract:

	Media Contracts Completed		Quarterly Revenue		Revenue / Media Contract
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	$	1,324,305	$	1,187

Quarter Ending March 31, 2023		170	$	138,037	$	812
Quarter Ending June 30, 2023		163		88,977		546
Quarter Ending September 30, 2023		155		97,820		631
Quarter Ending December 31, 2023		202		331,266		1,640
Year Ending December 31, 2023		690	$	656,100	$	951

Quarter Ending March 31, 2024		137	$	81,544	$	595

Obtaining new Media Contracts is dependent on several factors, including on our new business development (sales and representatives) team, which headcount has decreased from 13 at March 31, 2022 to one at March 31, 2024. The Company appointed a new Company’s Chief Executive Officer on January 19, 2024. With the recent appointment of our new Chief Executive Officer, the Interim Chief Executive Officer position previously held by Mr. Hogan has been eliminated, as planned. The Interim Chief Executive Officer concentrated on business development and was classified as part of the Business Development headcount shown in the table below. During the first quarter of 2024, the New Company Chief Executive Officer spent significant time on capital raising matters and was not classified as a Business Development headcount below.

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
Quarter Ending March 31, 2022	$	485,065		13
Quarter Ending June 30, 2022		339,423		7
Quarter Ending September 30, 2022		124,987		3
Quarter Ending December 31, 2022		374,830		3
Quarter Ending March 31, 2023		138,037		2
Quarter Ending June 30, 2023		88,977		2
Quarter Ending September 30, 2023		97,820		2
Quarter Ending December 31, 2023		331,266		2
Quarter Ending March 31, 2024		81,544		1

Technology and Development

For the three months ended March 31, 2024, compared to the three months ended March 31, 2023, technology and Development decreased to $245,069 from $398,851, or by $156,782 (39%). The Company’s technology and development decreased due to expense reductions at the Company, including 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, 2024, compared to the three months ended March 31, 2023, selling general and administrative costs decreased to $ 991,502 from $1,547,831, or by 556,329 (36%) primarily resulting from a marked decrease in expenses related to the Company going public, such as an annual audit and other administrative costs.

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

The Company’s policy is to defer the recognition of deferred offering costs pursuant to the Codification of Staff Accounting Bulletins, Topic 5: Miscellaneous Accounting A. Expenses of Offering. Such deferred offering costs would be recorded as an offset to proceeds upon the consummation of the offering. Deferred offering costs would be charged to expense when and if it is determined that the offering will not be consummated.

As of December 31, 2022, $848,531 of deferred offering costs were recorded on the balance sheet in connection with a proposed offering. 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 then current 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. Boustead terminated its involvement in the offering. As such, during the three months ended 2023, we recorded a charge of $848,531 to fully write off the deferred offering costs related to the above referenced offering.

Forfeiture of Deferred Compensation

During the three-month period ended March 31, 2024, in connection with the Company’s attempted initial public offering, certain NYIAX current and former officers, agreed to forfeit $308,082 of deferred compensation amounts owed by NYIAX, including payroll taxes. The deferred compensation arose from a salary deferral program where each founder agreed to defer a portion of their contractual salary or contractor fees. This forfeiture represents a permanent waiver of rights to this deferred compensation. For the year ended December 31, 2023 certain NYIAX founders, owners, officers and employees agreed to forfeit $769,839 of deferred compensation amounts, including payroll taxes, owed by NYIAX.

Depreciation and Amortization

For the three months ended March 31, 2024, compared to the three months ended March 31, 2023 depreciation and amortization increased from $405 to $297,730. The increase was attributed to amortization of the purchase of intellectual property portfolio of $297,520 which commenced in July 2023 upon the acquisition of the patent portfolio in July 2023.

Amortization capitalized software costs of approximately $49,000 for the three months ended March 31, 2024 and 2023 were classified as cost of sales.

On July 8, 2023, Company completed the purchase of a portfolio of patents and trade secrets (the “Patent Portfolio”)

As consideration for the Patent Portfolio, the Company issued 2,000,000shares of its common stock to NIFTY, a purchase price of $4,000,000. The Patent Portfolio consists of eighteen (18) patents and trade secrets, [of which six of the patents were active]. The Company purchased these patents as a first step to investing in and developing expanded product offerings in the areas of (i) market data, (ii) streaming media (advertising, livestreaming and video-on-demand), and (iii) the webinar market. The ultimate development, marketing and monetization of these expanded product offerings was expected to require significant investment by the Company, including the hiring of additional internal and external resources. Further, management of the Company understood that time was of the essence in ultimately developing the new products, taking advantage of the market opportunities and being able to monetize the patents within the respective patent lives. As such, contemporaneous with the purchase of the Patent Portfolio, management of the Company committed to the planning and consummation of the first of a series of capital raises that would be required to fund the development of these new products from the core Patent Portfolio.

Share-Based Compensation

For the three months ended March 31, 2024, compared to the three months ended March 31, 2023 share-based compensation decreased to $123,502 from $158,267, or by $34,765 due to full vesting of certain awards.

For the three months ended March 31, 2024 and the three months ended March 31, 2023, the Company classified the share-based compensation expenses on the statement of operation as follows:

	Three-Months Ended
	March 31, 2024		March 31, 2023
Shared-Based Compensation:
Cost of Sales	$	5,288	$	6,879
Technology and development		13,386		13,386
Sales, general and administrative		104,828		138,002
	$	123,502	$	158,267

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, 2024, compared to the three months ended March 31, 2023, interest and debt expense, net decreased to $62,259 from $107,983, a decrease of $45,724. The decrease is primarily interest expense related to the convertible notes payable issued in 2021 and 2022 being converted to shares in first quarter of 2024.

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, 2024 and the three months ended March 31, 2023, NYIAX did not have any income for tax purposes and therefore, no current tax liability or expense has been recorded in these financial statements.

Cash Flows Summary

For the three months ended March 31, 2024, compared to the three months ended March 31, 2023, net cash used in operating activities was $306,123 and $540,173, respectively.

For the three months ended March 31, 2024, the net cash used was principally on account of the net loss of $1,375,794 less depreciation and amortization of $ 346,877, share-based compensation of $123,502, forfeiture of deferred compensation of $308,082, accrued P-I-K Interest of $61,270, and a decrease in accounts receivable of $177,633, all partially offset by increase in accounts payable of $713,201.

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, deferred offering cost write-off of $848,531, debt discount amortization $8,706, accrued P-I-K interest $99,287 and depreciation and amortization $49,551, and a decrease in accounts receivable of $1,228,102.

Net cash provided by financing activities three months ended March 31, 2024 and the three months ended March 31, 2023, were $698,000 and $200,000, respectively.

For the three months ended March 31, 2024, the net cash provided by financing activities was primarily from sales of convertible notes payable of $500,000.

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.

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 March31, 2024, the Company s lost approximately $1.4 million of which $221,090 were non-cash expenses, including a contra expense of $308,083 for employee compensation forfeitures.

To enable the Company to meet immediate capital requirements until longer term requirements can be met, through February 14, 2025 the Company sold approximately $1.3 million of the 2024A Convertible Note Payable approximately $0.9 million of the 2024B Convertible Note Payable and $0.2 million of the 2025A Convertible Note Payable and all management have accepted salary deferrals.

2024A Convertible Note Payable

The Company has closed on approximately $1.3 million in the 2024A Convertible Note Payable offering. The 2024A Convertible Note Payable offering closed on May 28, 2024. The Offering consisted of two-year convertible notes with 10% interest payment-in-kind in Company common stock at two ($2.00) dollars, which shall be paid at maturity or upon conversion. Additionally, the Company issued with the Notes, warrant coverage at the rate of one hundred (100%) percent of the dollar value of the Note at two ($2.00) dollars per share as the strike price of the Warrants. The Warrants are for a period of five (5) years.

2024B Convertible Note Payable

2025A Convertible Note Payable

Future capital requirements will depend on many factors, including the Company’s rate of revenue growth and its level of expenditures. 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 reduce the losses significantly by curtailing certain aspects of its operations or expansion activities. The financial statements for the period ended March 31, 2024, 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.

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.

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, such as impairment losses.

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:

	For the			For the
	Three-Month			Three-Month
	Period			Period
	Ended			Ended
	March 31,			March 31,
	2024			2023
Net Loss	$	(1,375,794	)	$	(2,987,985	)
Reconciliation of Adjusted EBITDA Loss to Net Loss:
Depreciation and amortization		(346,877	)		(49,551	)
Deferred offering cost write-off		-			(848,531	)
Forfeiture of deferred compensation		308,082			-
Share-based compensation		(123,502	)		(158,267	)
Interest expense		(62,259	)		(107,983	)
Total Adjustments of EBITDA Loss to Net Loss	$	(224,555	)	$	(1,164,332	)
Adjusted EBITDA	$	(1,151,239	)	$	(1,823,653	)

Adjusted EBITDA

For the three months ended March 31, 2024, compared to the three months ended March 31, 2023, the adjusted EBITDA loss decreased to approximately $1.2 million from approximately $1.8 million or approximately 37%. 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 March 31, 2024, 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 condensed statement of cashflows for the periods ended March 31, 2023, and 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, 2023, 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.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

Risks Related to Our Business

There is no guarantee that the Company will be successful in securing capital.

The Company requires additional capital. 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, 2024, the Company’s operations lost approximately $1.4 million of which approximately $534,000 were non-cash expenses. For the years ended December 31, 2023 and 2022, the Company’s operations lost approximately $8.7 million and $11.1 million, respectively, of which approximately $2.7 million and $4.1 million, respectively, were non-cash expenses, net.

The Company generated negative cash flows from operations of approximately $306,000 for the three months ended March 31, 2024. The Company generated negative cash used in operating activities of approximately $3.3 million for the twelve months ended December 31, 2023 and generated negative cash used in operating activities of approximately $5.3 million for the twelve months ended December 31, 2022. Historically, the Company’s liquidity needs have been met by the sale of convertible notes payable, common shares, and the issuance of common shares through the exercise of warrants.

As of March 31, 2024, NYIAX had total current assets of $579,099, of which approximately $447,000 was cash and total current liabilities of approximately $8.6 million, of which approximately $2.7 million convertible notes payable, accrued interest, and Payables to shareholder-founders, all payable-in-kind of the Company’s shares. As of December 31, 2023, NYIAX had total current assets of approximately $323,000, of which approximately $55,000 was cash and total current liabilities of approximately $7.9 million, of which approximately $2.4 million was convertible notes payable, accrued interest, and payables to shareholder-founders, all payable-in-kind of the Company’s shares.

We have incurred net losses and experienced net cash outflows from operating activities. If we do not effectively manage our cash and other liquid financial assets, execute our plan to increase profitability and obtain additional financing, we may not be able to satisfy repayment requirements on our obligations.

We have historically incurred operating losses, experienced cash outflows from operations and we have accumulated deficit. Our net loss was approximately $1.4 million for the three-month period ending March 31, 2024, approximately $8.7 million for the twelve months ended December 31, 2023, $11.1 million for the year ended December 31, 2022, $13.5 million for the year ended December 31, 2021, and $6.2 million for the year ended December 31, 2020.

As of March 31, 2024, the Company had negative working capital of approximately $7.9 million, including approximately $2.7 million were convertible notes payable, accrued interest, and note payable, stockholder, all payable-in-kind of the Company’s shares.

As of December 31, 2023, the Company had negative working capital of approximately $7.6 million, including approximately $2.4 million were convertible notes payable, accrued interest, and note payable, stockholder, all payable-in-kind of the Company’s shares.

The Company has also been historically reliant on sales of debt or equity securities to fund its working capital obligations. As a result, the Company is of the opinion that it will not have sufficient cash to meet working capital and capital requirements for at least twelve months from the date of this prospectus unless it is able to raise additional capital. Management has implemented various efforts to improve liquidity and conserve cash, including the sale of convertible notes and reducing staffing levels. Because we are not yet producing sufficient revenue to sustain our operating costs, we are dependent upon raising capital to continue our business.

If we are unable to raise additional capital, increase revenue and reduce operating expenses we may not be able to continue as a going concern.

We will not be able to execute our business plan or stay in business without additional or adequate funding.

Our ability to successfully develop our business, generate operating revenues and achieve profitability will depend upon our ability to obtain the necessary or adequate financing to implement our business plan. We will require financing through the issuance of additional debt and/or equity to implement our business plan, including identifying, acquiring and distributing consumer products, building inventory, hiring additional personnel as needed and eventually establishing profitable operations. Such financing may not be forthcoming. As has been widely reported, global and domestic financial markets and economic conditions have been, and continue to be, disrupted and volatile due to a variety of factors, including, but not limited to, economic conditions caused by the COVID-19 pandemic. As a result, the cost of raising money in the debt and equity capital markets may increase while the availability of funds from those markets could diminished significantly, even more so for smaller companies like ours. If such conditions and constraints exist, we may not be able to acquire funds either through credit markets or through equity markets and, even if financing is available, it may not be available on terms which we find favorable. Failure to secure funding when needed will have an adverse effect on our ability to meet our obligations and remain in business.

We may be subject to litigation from time to time during the normal course of business, which may adversely affect our business, financial condition and results of operations.

Currently, WestPark, the Company, and one of our directors are named defendants in a pending U.S. District Court case, which could have a negative effect on us or on our business.

On November 17, 2023, certain individual investors in NYIAX filed a complaint in the United States District Court for the Southern District of New York (the “Complaint”) against Westpark Capital, Inc., the Company, Robert Ainbinder, Jr., a director of the Company since April 2016, and Robert Ainbinder, Jr.’s brother. The case underlying the Complaint was earlier the subject of a FINRA arbitration case, without NYIAX as a party to the FINRA arbitration case, subsequently withdrawn and filed in the United States District Court for the Southern District of New York.

The Company has concluded that it is not possible to assess the likelihood of a loss at this time. The case underlying the Complaint could impede our ability to raise funds and may have a material adverse effect on the Company’s business, financial condition, operating results, or cash flows. The Company intends to vigorously defend its positions. However, there can be no assurances that the Company’s contentions and affirmative defenses in response to claims will be successful in the Court or in arbitration. A copy of the Complaint will be sent to any investor free of charge upon e-mail request to the Company at info@nyiax.com.

The Former Underwriter may initiate a lawsuit to recover amounts it claims are owed pursuant to its engagement by the Company and the Company may initiate litigation against the Former Underwriter.

The Former Underwriter claims that the Company owes or will owe the Former Underwriter approximately $1 million for commissions on funds privately raised by the Company during its engagement with the Former Underwriter and approximately $1.2 million if the Company completes an IPO with another underwriter.

The Former Underwriter may continue to claim that the Company owes or will owe the Former Underwriter approximately $1 million for commissions on funds privately raised by the Company during its engagement with the Former Underwriter and approximately $1.2 million if the Company completes an IPO with another underwriter.

There can be no assurance that the Former Underwriter 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. There can be no assurance that the Company will prevail in any lawsuit it commences against the Former Underwriter. The Company disputes the amounts owed that have been claimed by the Former Underwriter and further is of the belief that if any commissions are due to the Former Underwriter, they would be significantly less than the amounts claimed by the Former Underwriter. It is reasonably possible that the Company and the Former Underwriter will end up in litigation over claims by the Former Underwriter against the Company and claims by the Company against the Former Underwriter. Litigation is expensive and time consuming with uncertain outcomes.

The Former Underwriter may not release us from its ROFR under our engagement letter agreement.

The Company executed an engagement letter with the Former Underwriter that terminates 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. 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. The Former Underwriter has a right of first refusal (“ROFR”) pursuant to the initial engagement letter agreement entered into by and between the Company and the Former Underwriter.

There can be no assurance that the Former Underwriter will release us from the ROFR or that our ability to complete an IPO will not be impeded as a result.

Our business is subject to the risk of catastrophic events such as pandemics, earthquakes, flooding, fire, and power outages, and to interruption by man-made problems such as terrorism and wars.

Our business is vulnerable to damage or interruption from pandemics, earthquakes, flooding, fire, power outages, telecommunications failures, terrorist attacks, acts of war, human errors, break-ins, and similar events. A significant natural disaster could have a material adverse effect on our business, results of operations, and financial condition, and our insurance coverage may be insufficient to compensate us for losses that may occur.

Our business, financial condition and results of operations may be negatively affected by economic and other consequences from Russia’s military action against Ukraine and the international sanctions imposed in response to that action.

We employ a U.S. based development company, BWSoft Management LLC, (“BWSoft”) with employees around the world, including Russia. In late February 2022, Russia launched a large-scale military attack on Ukraine. In response to the military action by Russia, various countries, including the United States, issued broad-ranging economic sanctions against Russia. Such sanctions included, among other things, a prohibition on doing business with certain Russian companies. The war in Ukraine and related sanctions imposed on Russia could limit our ability to transact with our developer that has employees located in Russia. Currently, BWSoft is not under sanctions. The Company, along with BWSoft carefully monitors regulation initiatives. In the event of future sanctions, BWSoft and NYIAX will react accordingly to provide consistent and safe development services to NYIAX. We are currently reviewing other options for our external development. If our developer were to terminate the employment of these development team members located in Russia, such termination could disrupt or delay the development of incremental features to our platform, increase our costs, or force us to shift development efforts to resources in other geographies that may not possess the same level of cost efficiencies. Additionally, as of the date of this prospectus, there are no import or export control restrictions applicable to our business or our relationship with BWSoft.

Since our formation, we have never been profitable. Our lack of operating history makes it difficult to evaluate our business and prospects and may increase the risks associated with an investment in our Common Stock.

Since our formation, we have never been profitable. Our lack of operating history makes it difficult to evaluate our business and prospects and there can be no guarantee that we will ever be profitable. Furthermore, we do not expect positive cash flow from operations in the near term. There is no assurance that actual cash requirements for our business will not exceed our estimates. In particular, additional capital may be required if our operating costs increase beyond our expectations or we encounter greater costs associated with general and administrative expenses or other costs.

Two Board members recently resigned.

Legislation and regulation of online businesses, including privacy and data protection regulations/restrictions, could create unexpected costs, subject us to enforcement actions for compliance failures, or cause us to change our technology platform or business model, which could have a material adverse effect on our business.

Government regulation could increase the costs of doing business online. U.S. and foreign governments have enacted or are considering legislation related to online advertising and we expect to see an increase in legislation and regulation related to advertising online, the use of geo-location data to inform advertising, the collection and use of anonymous Internet user data and unique device identifiers, such as IP address or unique mobile device identifiers, and other data protection and privacy regulation. Recent revelations about bulk online data collection by the National Security Agency, and news articles suggesting that the National Security Agency may gather data from cookies placed by Internet advertisers to deliver interest-based advertising, may further interest governments in legislation regulating data collection by commercial entities, such as advertisers and publishers and technology companies that serve the advertising industry. Such legislation could affect the costs of doing business online and could reduce the demand for our solution or otherwise harm our business, financial condition and results of operations. For example, a wide variety of provincial, state, national and international laws and regulations apply to the collection, use, retention, protection, disclosure, transfer and other processing of personal data. Our failure to comply with applicable laws and regulations, or to protect personal data, could result in enforcement action against us, including fines, imprisonment of our officers and public censure, claims for damages by consumers and other affected individuals, damage to our reputation and loss of goodwill, any of which could have a material adverse impact on our business, financial condition and results of operations. Even the perception of privacy concerns, whether or not valid, could harm our reputation and inhibit adoption of our solution by current and future advertisers and advertising agencies.

Fee pressure may result in a reduction in the fees we are able to charge on our platform, which could have a material adverse effect on our business.

Fee pressure would be any pressure from publishers or advertisers to reduce the percentage that NYIAX would receive due to the downturn of the value of instruments or specific instruments including mismatched pricing. Fee pressures also have to do with the cyclicality of the advertising market, which is dependent upon the spend based on the particular time of the year. Any fee pressure could have a material adverse impact on the Company’s business and results of operations.

Projecting the market’s acceptance of a new price or structure is imperfect and we may price too high or too low, both of which may carry adverse consequences.

If our estimates related to expenditures are inaccurate, our business may fail.

Our success is dependent in part upon the accuracy of our management’s estimates of expenditures for the next twelve months and beyond. If such estimates are inaccurate, or we encounter unforeseen expenses and delays, we may not be able to carry out our business plan, which could result in the failure of our business.

Because we rely on third-party blockchain technologies, users of our platform could be subject to blockchain protocol risks.

Reliance upon other third-party blockchain technologies to create our platform subjects us and our customers to the risk of ecosystem malfunction, unintended function, unexpected functioning of, or attack on, the providers’ blockchain protocol, which may cause our platform to malfunction or function in an unexpected manner, including, but not limited to, slowdown or complete cessation in functionality of the platform.

Artificial Intelligence May Have a Risks to the Company’s Operations and Profitability

As Artificial Intelligence (AI) evolves, AI laws, regulations, and standards all may impact the Company’s productivity and profitability as well as have an impact on increased cybersecurity risks and social and ethical challenges from reliance on third-party AI systems. The Company is studying AI and its potential impacts.

We depend on a limited number of customers and the loss of one or more of these customers could have a material adverse effect on our business, financial condition and results of operations.

As of December 31, 2023, three Media Buyer represented 34%, 25% and 18% of accounts receivable. As of December 31, 2023, two Media Sellers represented 80% and 10% of accounts payable.

For the three months ended March 31, 2023, two customers represented 44% and 16% of revenue, net. As of March 31, 2023 two Media Buyers represented 54% and 12% of accounts receivable. As of March 31, 2023, two Media Sellers represented 76% and 11% of accounts payable.

Due to the concentration of revenues from a limited number of customers, if we do not receive the payments from or if our relationships become impaired with any of these major customers, our revenue, results of operation and financial condition will be negatively impacted.

In addition, we cannot assure that any of our customers in the future will not cease using our products and services, significantly reduce orders or seek price reductions in the future, and any such event could have a material adverse effect on our revenue, profitability, and results of operations.

Our revenue and operating results will be highly dependent on the overall demand for advertising and could fluctuate significantly depending upon various factors, such as seasonal fluctuations and market changes. Factors that affect the amount of advertising spending, such as economic downturns, particularly in the fourth quarter of our fiscal year, will make it difficult to predict our revenue, and could cause our operating results to fall below investors’ expectations and adversely affect our business and financial condition.

Our business depends on the overall demand for advertising and on the economic health of our current and prospective sellers and buyers. If advertisers reduce their overall advertising spending, our revenue and results of operations are directly affected. Many advertisers devote a disproportionate amount of their advertising budgets to the fourth quarter of the calendar year to coincide with increased holiday purchasing, and buyers may spend more in the fourth quarter for budget reasons. As a result, any events that reduce the amount of advertising spending during the fourth quarter or reduce the amount of inventory available to buyers during that period, could have a disproportionate adverse effect on our revenue and operating results for that fiscal year. Economic downturns or instability in political or market conditions generally may cause current or new advertisers to reduce their advertising budgets. Reductions in inventory due to loss of sellers would make our solution less robust and attractive to buyers. Adverse economic conditions and general uncertainty about economic recovery are likely to affect our business prospects. Uncertainty regarding economic conditions in the United States and other countries may cause general business conditions in the United States and elsewhere to deteriorate or become volatile, which could cause buyers to delay, decrease or cancel purchases, exposing us to reduced demand for our solution, and increased credit risk on buyer orders. Moreover, any changes in the favorable tax treatment of advertising expenses and the deductibility thereof would likely cause a reduction in advertising demand. In addition, concerns over the sovereign debt situation in certain countries in the European Union as well as continued geopolitical turmoil in many parts of the world have and may continue to put pressure on global economic conditions, which could lead to reduced spending on advertising.

Our revenue, cash flow from operations, operating results and other key operating and financial measures may vary from quarter to quarter due to the seasonal nature of advertiser spending. For example, many advertisers devote a disproportionate amount of their advertising budgets to the fourth quarter of the calendar year to coincide with increased holiday purchasing. Moreover, advertising inventory in the fourth quarter may be more expensive due to increased demand for advertising inventory.

Our revenue can vary greatly from period to period and it is dependent on several factors, including on our business development team and the Media Contracts. Our net revenue decreased sequentially quarter on quarter in 2022 and 2023.

Our business is in the early stage and depends on the overall demand for digital advertising, the economic health of our current and prospective sellers and buyers and the on-boarding of new Media Contracts, which can vary greatly from period to period. The value of each Media Contracts varies dependent upon several factors, including size of the media buy and commission rates. We currently have only a limited number of buyers and sellers on our platform and need to increase the number of Media Contracts in order to increase our revenues.

Revenue is also dependent upon the cumulative effort of business development employees driving revenue relationships to the Company. The Company does not currently have a book of repeatable business and as such revenue is substantially dependent upon business development headcount driving relationships and new transactions.

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. (At March 31, 2021, the business development headcount was one and revenue for the three-month period ended March 31, 2021 was nil.)

In addition, our revenue from quarter to quarter has decreased for quarters ended March 31, 2022, June 30, 2022, September 30, 2022, March 31, 2023, and June 30, 2023, and increased for the quarters ended December 31, 2022, September 30, 2023, December 31, 2023 and March 31, 2024 as follows:

	Quarterly Revenue
Quarter Ending March 31, 2022	$	485,065
Quarter Ending June 30, 2022		339,423
Quarter Ending September 30, 2022		124,987
Quarter Ending December 31, 2022		374,830
Year Ending December 31, 2022	$	1,324,305

Quarter Ending March 31, 2023	$	138,037
Quarter Ending June 30, 2023		88,977
Quarter Ending September 30, 2023		97,820
Quarter Ending December 31, 2023		331,266
Year Ending December 31, 2023	$	656,100

Quarter Ending March 31, 2024	$	81,544

There can be no assurance that we will be able to increase the number of Media Contracts the value per Media Contract, or our overall revenue. In the event that we are unable to increase the number of Media Contracts and/or the value per Media Contract, on our platform, we will not be able to increase revenues and may be unable to continue in business.

Our business depends substantially on the continuing efforts of our executive officers and key employees, and our business may be severely disrupted if we lose their services.

Our future success depends substantially on the continued services of our executive officers and key employees. If one or more of our executive officers and key employees are unable or unwilling to continue in their present positions, we may not be able to replace them readily, if at all. The loss of any of our officers, including the chief executive officer, and key employees could cause our business to be disrupted, and we may incur additional expenses to recruit and retain their replacements. On May 26, 2022, Robert E. Ainbinder resigned as our Chief Executive Officer, while he continues to serve as a Director of the Company. On the same day, Christopher Hogan, our Chief Operating Officer, was appointed Interim Chief Executive Officer and President. On January 19, 2024, Teresa Gallo, was appointed Chief Executive Officer of the Company. With the recent appointment of our new Chief Executive Officer, the Interim Chief Executive Officer position previously held by Mr. Hogan has been eliminated, as planned.

Our Chief Executive Officer is new to the Company.

On January 19, 2024 Teresa Gallo, was appointed Chief Executive Officer of the Company. Previously, to her appointment she was not with the Company. In 2023 Ms. Gallo founded Assemblage Digital, a boutique advisory firm focused on digital marketing, commercial strategies, and revenue development for technology companies. From May 2020 to May 2023, Ms. Gallo served as Executive Vice President and General Manager at Kinneso, a technology driven marketing and advertising agency and affiliate of Interpublic Group of Companies, Inc. (“IPG”), in New York, New York. Ms. Gallo led Kinneso’s global marketplace team and was responsible for organization design, strategy, operations, revenue delivery, partnerships and market expansion of its business. From December 2018 to May 2020, Ms. Gallo served as Chief Digital Officer for Orion, a subsidiary of IPG, where she oversaw Orion’s worldwide digital business and designed the roll-out and implementation of Orion’s programmatic advertising platform for publisher and advertiser utilization. From October 2013 to July 2018, Ms. Gallo served as Senior Vice President at OpenX, a programmatic advertising platform for publishers, advertisers, and agencies. Ms. Gallo was responsible for OpenX’s global corporate business development for publishers and advertisers. Prior to joining Open X, Ms. Gallo was a founding executive at Cadreon, IPG’s first global programmatic agency and she spent over a decade at AOL in leadership roles. Ms. Gallo currently serves on the board of directors of the Rutgers University Center for Innovation Education, where she participated in framing the direction and growth of the Rutgers’s Innovation Center and its Professional Science master’s degree in data.

Our management team has limited experience managing a public company and we will incur significantly increased costs and devote substantial management time as a result of operating as a public company.

Most members of our management team have limited experience managing a publicly traded company, interacting with public company investors, and complying with the increasingly complex laws, rules, and regulations that govern public companies. As a public company, we are subject to significant obligations relating to reporting, procedures and internal controls, and our management team may not successfully or efficiently manage such obligations. These obligations and scrutiny will require significant attention from our management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, results of operations, and financial condition. We expect that compliance with these requirements will increase our compliance costs. We will need to hire additional accounting, financial, and legal staff with appropriate public company experience and technical accounting knowledge and will need to establish an internal audit function. We cannot predict or estimate the amount of additional costs we may incur as a result of becoming a public company or the timing of these costs.

We may be subject to litigation from time to time during the normal course of business, which may adversely affect our business, financial condition and results of operations.

The Company, Robert Ainbinder, Jr., a director of the Company, and WestPark Capital, Inc. are named defendants in a pending case filed in the United States District Court for the Southern District of New York by a group of investors in NYIAX. From time to time in the normal course of business or otherwise, we may become subject to litigation that may result in liability material to our financial statements as a whole or may negatively affect our operating results if changes to business operation are required. The cost to defend such litigation may be significant and may require a diversion of our resources. There also may be adverse publicity associated with litigation that could negatively affect customer perception of our business, regardless of whether the allegations are valid or whether we are ultimately found liable. As a result, litigation may adversely affect our business, financial condition and results of operations.

We are subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not emerging growth companies and our shareholders could receive less information than they might expect to receive from more mature public companies.

Upon the completion of this offering, we will be required to publicly report on an ongoing basis as an “emerging growth company” (as defined in the JOBS Act) under the reporting rules set forth under the Exchange Act. For so long as we remain an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other Exchange Act reporting companies that are not emerging growth companies, including but not limited to:

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not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act;

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being permitted to comply with reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and

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being exempt from the requirement to hold a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

We expect to take advantage of these reporting exemptions until we are no longer an emerging growth company. We would remain an emerging growth company for up to five years, although if the market value of our common stock that is held by non-affiliates exceeds $700 million as of any June 30 before that time, we would cease to be an emerging growth company as of the following December 31.

Because we will be subject to ongoing public reporting requirements that are less rigorous than Exchange Act rules for companies that are not emerging growth companies, our shareholders could receive less information than they might expect to receive from more mature public companies. We cannot predict if investors will find our common stock less attractive if we elect to rely on these exemptions, or if taking advantage of these exemptions would result in less active trading or more volatility in the price of our common stock.

If we fail to establish and maintain effective internal controls, our ability to produce accurate financial statements and other disclosures on a timely basis could be impaired.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is accumulated and communicated to our principal executive and financial officers.

We are also continuing to expand our internal controls over financial reporting. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs, and significant management oversight. If any of these new or improved controls and systems do not perform as expected, we may experience material weaknesses in our controls. Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC.

We have identified material weaknesses in our internal control over financial reporting in connection with the preparation of our financial statements for the periods ended June 30, 2023, March 31, 2023, and the fiscal years ended December 31, 2023 and 2022, and may identify additional material weaknesses in the future that may cause us to fail to meet our reporting obligations or result in material misstatements of our financial statements. If we fail to remediate our material weakness or if we fail to establish and maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results, meet our reporting obligations, or prevent fraud. Failure to comply with requirements to design, implement and maintain effective internal controls or any inability to report and file our financial results accurately and timely could harm our business and adversely impact the trading price of our securities.

Prior to becoming a reporting company, we were a private company and had limited accounting and financial reporting personnel and other resources with which to address our internal controls and procedures. In connection with the review of our consolidated financial statements for the years ended December 31, 2023 and 2022 included in this Form 10-K, our management identified material weaknesses in our internal control over financial reporting. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Specifically, we identified certain payments made that were not in accordance with our policies, including reimbursement of expenses more than amounts owed, reimbursement of expenses without adequate documentation, and inadequate reporting of amounts paid to contractors.

Specifically, the material weakness related to the following:

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For the six-month period ended June 30 2023 and the three-month period ended March 31, 2023, the Company did not report the treatment of deferred offering costs in accordance with ASC 230, Statement of Cash Flows. In accordance with ASC 230-10-50, deferred offering cost write-off should be reflected in statement of cash flows within cash flows from operating activities and not within cash flows from financing activities as previously reported in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2023, filed with the SEC on July 21, 2023, and the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, filed with the SEC on August 14, 2023.

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For the year ended December 31, 2022 and as of June 30, 2023, there were material weakness 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.

The restatement matters were primarily the result of our lack of internal controls over completeness of contract recording and accounting personnel that lack experience in SEC reporting regulation.

As part of our plan to remediate these material weaknesses, we have adopted the following remediation efforts to improve our internal controls:

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Hired incremental financial staff

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Established separation of duties for cash payments

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Instituted new policies for:

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Expense and payment approvals

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Payment procedures that include segregation of duties

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Travel and entertainment reimbursement (revisions of previous policies)

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Ethics

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Reviewed payments to contractors

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Reinforced policies regarding board approval of all material contracts

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Will be retaining experienced accounting personnel that have experience in SEC reporting regulation after the IPO is completed.

Risks Related to the Advertising Technology Industry, Market and Competition

The digital advertising market is relatively new, dependent on growth in various digital advertising channels, and vulnerable to adverse public perceptions and increased regulatory responses. If this market develops more slowly or differently than we expect, or if issues encountered by other participants or the industry generally are imputed to or affect us, our business, growth prospects and financial condition would be adversely affected. Our technology could become obsolete and increased competition could adversely affect our business.

The digital advertising market is relatively new, and our solution may not achieve or sustain high levels of demand and market acceptance. While display advertising has been used successfully for many years, marketing via new digital advertising channels, such as mobile and social media and digital video advertising, is not as well established. The future growth of our business could be constrained by the level of acceptance and expansion of emerging digital advertising channels, as well as the continued use and growth of existing channels, such as digital display advertising, in which our capabilities are more established.

Further, the digital advertising industry is complex, and evolving, and there are relatively few publicly traded companies operating in the business. Consequently, the digital advertising industry may not be as widely followed or understood in the financial markets as more mature industries. Problems experienced by one industry participant (even private companies) or issues affecting a part of the business have the potential to have adverse effects on other participants in the industry or even the entire industry. Emerging understanding of how the digital advertising industry operates has spurred privacy concerns and misgivings about exploitation of consumer information and prompted regulatory responses that limit operational flexibility and impose compliance costs upon industry participants. As a general matter the digital advertising business is relatively new and digital advertising companies and their specific product and service offerings are not well understood.

Any expansion of the market for digital advertising solutions depends on several factors, including social and regulatory acceptance, the growth of the digital advertising market, the growth of social, mobile and video as advertising channels, and the actual or perceived technological viability, quality, cost, performance and value associated with emerging digital advertising solutions. If demand for digital display advertising and adoption of automation does not continue to grow, or if digital advertising solutions or advertising automation do not achieve widespread adoption, or there is a reduction in demand for digital advertising caused by weakening economic conditions, decreases in corporate spending, quality, viewability, malware issues or other issues associated with buyers, advertising channels or inventory, negative perceptions of digital advertising, additional regulatory requirements, or other factors, or if we fail to develop or acquire capabilities to meet the evolving business and regulatory requirements and needs of buyers and sellers of multi-channel advertising, our competitive position will be weakened and our revenue and results of operations could be harmed.

Our future operating results depend on market adoption by both advertisers and publishers, which could take a long period of time or may not happen at all. Any delay or failure to adopt by either Media Buyers or Media Sellers could delay revenue or recognition of revenue.

We operate in an intensely competitive market that includes companies that have greater financial, technical and marketing resources than we do. If we do not effectively compete against current and future competitors, our business, results of operations, and financial condition could be harmed.

There are other competitors which have vast access to resources and could have the ability to replicate a similar business model in time or with a highly scalable and financially rigorous transaction platform. Our ability to compete successfully depends on elements both within and outside of our control. We will face significant competition from major global companies as well as smaller companies focused on specific market niches. In addition, companies not currently in direct competition with us may introduce competing products in the future.

Our inability to compete effectively could materially adversely affect our business and results of operations. Products or technologies developed by competitors that are larger and have more substantial research and development budgets, or that are smaller and more targeted in their development efforts, may render our products or technologies obsolete or noncompetitive. We also may be unable to market and sell our products if they are not competitive on the basis of price, quality, technical performance, execution, features, system compatibility, customized design, innovation, availability, delivery timing and/or reliability. If we fail to compete effectively on developing strategic relationships with customers, our sales and revenue may be materially adversely affected. Competitive pressures may limit our ability to transact business, raise prices, and any inability to maintain revenue or raise prices to offset increases in costs could have a significant adverse effect on our gross margin, possibly contributing to a deficit in our gross margin. Reduced sales and lower gross margins (deficits) would materially adversely affect our business and results of operations.

Technology breaches or failures, including those resulting from a malicious cyber-attack on us or our business partners and service providers, could disrupt or otherwise negatively impact our business.

We will rely on information technology systems, including systems of Nasdaq Technology AB (“Nasdaq”), a wholly-owned subsidiary of Nasdaq, Inc., as part of our agreement with Nasdaq to process, transmit, store and protect the electronic information, financial data and proprietary models that are critical to our business. Furthermore, a significant portion of the communications between our employees and our business, banking and investment partners depends on information technology and electronic information exchange. Like all companies, our information technology systems and Nasdaq’s are vulnerable to data breaches, interruptions or failures due to events that may be beyond our control, including, but not limited to, natural disasters, theft, terrorist attacks, computer viruses, hackers and general technology failures.

Errors or failures in our software and transaction systems with Nasdaq could adversely affect our operating results and growth prospects. Moreover, errors in debugging or breaks in our system could create delay in publisher and advertiser adoption, which would have adverse effect on our business.

We believe that we have established and implemented appropriate security measures, controls and procedures to safeguard our information technology systems and to prevent unauthorized access to such systems and any data processed or stored in such systems and procedures. Despite these safeguards, disruptions to and breaches of our information technology systems are possible and may negatively impact our business. We have not secured insurance coverage designed to specifically protect us from an economic loss resulting from such events.

Our future success is dependent on Internet technology developments and our ability to adapt to these and other technological changes and to meet evolving industry standards.

Our ability to operate our business is dependent on the development and maintenance of Internet technology as well as our ability to adapt our solutions to changes in Internet technology.

We may encounter difficulties responding to these and other technological changes that could delay our introduction of products and services. The software and tech industries are characterized by rapid technological change and obsolescence, frequent product introduction, and evolving industry standards. Our future success will, to a significant extent, depend on our ability to enhance our existing products, develop and introduce new products, satisfy an expanded range of customer needs, and achieve market acceptance. We may not have sufficient resources to make the necessary investments to develop and implement the technological advances required to operate our business or maintain a competitive position.

Our intellectual property is valuable and integral to our success and competitive position. Any misuse of our intellectual property by others could harm our business, reputation and competitive position.

Our patent, copyrights, trade secrets and designs are valuable and integral to our success and competitive position. Despite our efforts to protect our intellectual property rights, we cannot assure you that we will be able to adequately protect our proprietary rights through reliance on a combination of patent, copyrights, trade secrets, confidentiality procedures, contractual provisions and technical measures from outside influences. Protection of trade secrets and other intellectual property rights in the markets in which we operate and compete is highly uncertain and may involve complex legal questions. In addition, the laws of various foreign countries may not protect our intellectual property rights to the same extent as laws in the United States. We cannot completely prevent the unauthorized use or infringement of our intellectual property rights, as such prevention is inherently difficult.

We also expect that the more successful we are, the more likely that competitors will try to illegally use our proprietary information and develop products that are like ours, which may infringe on our proprietary rights. In addition, we could potentially lose future trade secret protection for our source code if any unauthorized disclosure of such code occurs. The loss of future trade secret protection could make it easier for third parties to devise and implement competitive products (and services) more easily. Any changes in, or unexpected interpretations of, the trade secret and other intellectual property laws in any country in which we operate may compromise our ability to enforce our trade secret and intellectual property rights. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our confidential information and trade secret protection. If we are unable to protect our proprietary rights or if third parties independently develop or gain access to our or similar technologies, our business, service revenue, reputation and competitive position could be materially adversely affected.

No proven ability to commercialize our intellectual property.

To date we have generated relatively limited revenues from the exploitation or commercialization of our intellectual property, particularly our patents. In addition, we recently acquired a portfolio of patents and trade secrets from Network Foundation Technologies, LLC (“Nifty”) in exchange for two million (2,000,000) shares of our common stock. To our knowledge, Nifty had not generated any revenue from the commercialization of such portfolio of patents and trade secrets and there can be no assurance that we will realize any commercial benefits or revenue from such patents and/or trade secrets.

On December 26, 2024, the NYIAX board of directors decided that until the Company has secured sufficient financing, the Company is delaying the commercialization of the Portfolio and creating a revenue stream. If the Company is unable to raise adequate capital in a timely manner, there will be insufficient useful life of the Portfolio, and the Company will not be able to commercialize the Portfolio and create a revenue stream.

We may be subject to intellectual property rights claims and validity challenges by third parties, which are extremely costly to defend, could require us to pay significant damages and could limit our ability to use certain technologies.

Third parties may assert claims of infringement of intellectual property rights in proprietary technology or initiate invalidity proceedings challenging our patents, against us or against our advertisers for which we may be liable or have an indemnification obligation. Any claim of infringement by a third party, even those without merit, could cause us to incur substantial costs defending against the claim and could distract our management from operating our business. We might not have the necessary capital to defend against any potential claims which could adversely affect our business. There can be no assurance that any patents which we may file will be granted by the USPTO and foreign patent offices in the future.

Although third parties may offer a license to their technology, the terms of any offered license may not be acceptable and the failure to obtain a license or the costs associated with any license could cause our business, financial condition and results of operations to be materially and adversely affected. In addition, some licenses may be non-exclusive, and therefore our competitors may have access to the same technology licensed to us. Alternatively, we may be required to develop non-infringing technology, which could require significant effort and expense and ultimately may not be successful. Furthermore, a successful claimant could secure a judgment, or we may agree to a settlement that prevents us from distributing certain products or performing certain services or that requires us to pay substantial damages, including treble damages if we are found to have willfully infringed such claimant’s patents or copyrights, royalties or other fees. Any of these events could seriously harm our business financial condition and results of operations.

Risks Relating to our Technological Relationship with Nasdaq

If the NYIAX/Nasdaq platform does not operate up to technological expectations, we may be adversely affected.

We expect to be dependent on relationships with third parties particularly our agreements with Nasdaq to successfully commercialize our planned product lines. Our relationship with Nasdaq is critical to our commercial success and any deterioration or termination of this relationship would result in a material adverse effect on our business and could cause us to cease operations.

Publishers and advertisers may not migrate to the NYIAX platform and continue to use other existing platforms in the market. In such case, the Company will not meet its requisite minimum revenue goals for its agreement with Nasdaq, which could cause the Company to scale down or discontinue its operations.

If the NYIAX/Nasdaq platform does not operate up to technological expectations with respect to functionality and efficiency as compared to its competitors, it is unlikely that publishers and advertisers will continue to use the system thereby adversely affecting the Company’s ability to conduct business and its future operations and financial results.

Our technological relationship with NASDAQ is not an endorsement by NASDAQ of our company, this Offering, the value of the securities being offered, the success or failure of this Offering or the approval by NASDAQ of a listing of our Common Stock.

We have entered into commercial agreements with Nasdaq Technology AB (“NASDAQ”) to build the NYIAX platform. Our commercial relationship with Nasdaq should not be viewed as an endorsement by NASDAQ of our company, this Offering, the value of the securities being offered, the success or failure of this Offering or the approval by NASDAQ of a listing of our Common Stock. Nasdaq has not endorsed our securities or this offering and our commercial relationship with Nasdaq does not have any bearing on whether our application to list our common stock on the Nasdaq Capital Market will be approved. Investors should not view our relationship or agreement with NASDAQ as anything other than a commercial agreement among two unrelated parties.

Our relationship with NASDAQ commits the Company to make annual and revenue sharing payments to the Nasdaq

We have entered into commercial agreements with Nasdaq for services related to our platform. Our commercial relationship with Nasdaq requires the Company to make annual and revenue sharing payments to the Nasdaq which the Company has not made on a timely a basis. The Company and Nasdaq have negotiated an amended payment schedule. If the Company is unable to meet its commitments in the future, the Nasdaq may terminate the relationship.

Risk Relating to Possible Regulation and Supervision

Interest-based advertising, or the use of data to draw inferences about a user’s interests and deliver relevant advertising to that user, has come under increasing scrutiny by legislative, regulatory, and self-regulatory bodies in the United States and abroad that focus on consumer protection or data privacy. There may be some self-regulatory activities with regard to rules enforcement and market surveillance required by us in order to maintain an orderly market and forestall any external regulation needs.

We do not believe that our current activities and services provided to buyers and sellers of advertising trigger SEC securities regulation or futures/derivatives regulation of the United States Commodity Futures Trading Commission (“CFTC”). If in the future our services and products are expanded to include products and/or services that could trigger regulatory oversight by a market regulator (e.g. CFTC and/or SEC), we will engage with the appropriate regulator in a timely manner to ensure full compliance with applicable statute and regulations. There can be no assurance that we will be able to comply with future regulatory requirements, in which case we could be forced to discontinue applicable operations.

Risks Related to the Offering, Our Securities and the Securities Markets.

Our officers have broad discretion in the use of proceeds.

The executive officers of the Company will have broad discretion in allocating the net proceeds of the Offering, including for any of the purposes described in the section entitled “Use of Proceeds”, which creates uncertainty for shareholders and could adversely affect the Company’s business, prospects, financial condition and results of operations. You will not have the opportunity as part of your investment decision to assess whether our management is using the net proceeds appropriately. You must rely on the judgment of our management regarding the application of the net proceeds of this offering. Because of the number and variability of factors that will determine our use of our net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. Pending their use, we may invest our net proceeds from this offering in short-term, investment-grade, interest-bearing securities. The net proceeds may be used for corporate or other purposes with which you do not agree or that do not improve our profitability or increase our share price. The net proceeds from this offering may also be placed in investments that do not produce income or that lose value.

We have no dividend policy.

The Company does not presently intend to pay cash dividends in the near future, as any earnings must be retained for use in current operations. Investors must not look to an investment in the Company as a source of cash distributions.

There is potential future dilution to our current shareholders’ ownership in the Company.

The Company intends to raise additional capital in the future for working capital and business expansion. As a result, our shareholders will likely experience significant dilution of their ownership in the Company.

If securities industry analysts do not publish research reports on us, or publish unfavorable reports on us, then the market price and market trading volume of our common stock could be negatively affected.

Any trading market for our common stock may be influenced in part by any research reports that securities industry analysts publish about us. We do not currently have and may never obtain research coverage by securities industry analysts. If no securities industry analysts commence coverage of us, the market price and market trading volume of our common stock could be negatively affected. In the event we are covered by analysts, and one or more of such analysts downgrade our securities, or otherwise reports on us unfavorably, or discontinues coverage of us, the market price and market trading volume of our common stock could be negatively affected.

Future issuances of our common stock or securities convertible into, or exercisable or exchangeable for, our common stock, or the expiration of lock-up agreements that restrict the issuance of new common stock or the trading of outstanding common stock, could cause the market price of our common stock to decline. We cannot predict the effect, if any, of future issuances of our securities, or the future expirations of lock-up agreements, on the price of our common stock. In all events, future issuances of our common stock would result in the dilution of your holdings. In addition, the perception that new issuances of our securities could occur, or the perception that locked-up parties will sell their securities when the lock-ups expire, could adversely affect the market price of our common stock. In connection with this offering, we will enter into a lock-up agreement that prevents us, subject to certain exceptions, from offering additional shares of capital stock for up to 24 months after the closing of this offering, as further described in the section titled “Underwriting.” In addition to any adverse effects that may arise upon the expiration of these lock-up agreements, the lock-up provisions in these agreements may be waived, at any time and without notice. If the restrictions under the lock-up agreements are waived, our common stock may become available for resale, subject to applicable law, including without notice, which could reduce the market price for our common stock.

Future issuances of debt securities, which would rank senior to our common stock upon our bankruptcy or liquidation, and future issuances of preferred stock, which could rank senior to our common stock for the purposes of dividends and liquidating distributions, may adversely affect the level of return you may be able to achieve from an investment in our common stock.

In the future, we may attempt to increase our capital resources by offering debt securities. Upon bankruptcy or liquidation, holders of our debt securities, and lenders with respect to other borrowings we may make, would receive distributions of our available assets prior to any distributions being made to holders of our common stock. Moreover, if we issue preferred stock, the holders of such preferred stock could be entitled to preferences over holders of common stock in respect of the payment of dividends and the payment of liquidating distributions. Because our decision to issue debt or preferred stock in any future offering, or borrow money from lenders, will depend in part on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of any such future offerings or borrowings. Holders of our common stock must bear the risk that any future offerings we conduct or borrowings we make may adversely affect the level of return, if any, they may be able to achieve from an investment in our common stock.

Our officers and directors and other significant investors (the “Group”) own a significant amount of our outstanding common stock. As a result, the Group may have the ability to approve all matters submitted to our shareholders for approval.

As of March 31, 2024, our officers and directors will own approximately 15.5%, Network Foundation Technologies, LLC owns approximately 12.8%, Suwyn Investments, LLC owns approximately 7.1%, and Graham Mosley owns approximately 5.7% of our 15,685,434 outstanding voting shares.

Such persons may have the ability to significantly influence all matters submitted to our shareholders for approval including:

●

election of our board of directors;

●

removal of any of our directors;

●

any amendments to our articles of incorporation or our bylaws; and

●

adoption of measures that could delay or prevent a change in control or impede a merger, takeover or other business combination involving us.

In addition, this concentration of ownership may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could reduce our stock price or prevent our shareholders from realizing a premium over our stock price.

We expect to incur significant additional costs as a result of being a public company, which may materially and adversely affect our business, financial condition and results of operations.

Upon completion of this offering, we expect to incur costs associated with corporate governance requirements that will become applicable to us as a public company, including rules and regulations of the SEC, under the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Exchange Act, as well as the rules of the Nasdaq. These rules and regulations are expected to significantly increase our accounting, legal and financial compliance costs and make some activities more time-consuming. We also expect these rules and regulations to make it more expensive for us to obtain and maintain directors’ and officers’ liability insurance. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers. Accordingly, increases in costs incurred as a result of becoming a publicly traded company may materially and adversely affect our business, financial condition and results of operations.

Our stockholders will experience additional dilution due to the 2025 A Convertible Note Offering, 2023B Convertible Note Offering and the 2024A and 2024B Convertible Note Payable.

2023B Convertible Note Payable offering

Pursuant to the 2023B Convertible Note offering we sold $1,970,000 of convertible notes to accredited investors. The closing of the offering occurred on June 28, 2023. The 2023B Convertible Notes bear interest at twelve percent (12.0%) per annum, which shall be paid as a Payment-in-Kind in our common stock. For approximately 86% of the outstanding principal and interest of the 2023B Convertible Note Payable, the conversion price is four dollars ($4.00) per share and in the event that the Company has not received an effective order from the SEC on its registration statement by February 14, 2024, the outstanding principal of the 2023B Convertible Note Payable shall automatically be converted into common stock of the Company at $2.00 per share. For approximately 14% of the outstanding principal and interest of the 2023B Convertible Note Payable the conversion price is two dollars ($2.00) per share.

The additional shares of our common stock issuable upon automatic conversion of the notes could cause the market price of our common stock to decline. In addition, the notes automatically convertible into equity securities would result in dilution of our existing stockholders’ equity interest.

2024A Convertible Note Payable

2024B Convertible Note Payable

2025A Convertible Note Payable

Our management will have broad discretion in the use of the net proceeds from the 2023A Convertible Note Offering and the 2023B Convertible Note Offering, the 2024A Convertible Note Offering, 2025 Convertible Note Offering and the 2024B Convertible Note Offering.

Our management will have broad discretion in the application of the net proceeds from the convertible notes offerings and you will not have the opportunity as part of your investment decision to assess whether such proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of our existing cash and the net proceeds from the convertible notes offering, their ultimate use may vary substantially from their currently intended use. Our management might not apply our existing cash and the net proceeds from convertible notes offerings in ways that ultimately increase the value of your investment. The failure by our management to apply these funds effectively could harm our business. If we do not apply the net proceeds from the convertible notes offerings in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.

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

During the past two fiscal years, the Company made sales of the following unregistered securities:

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 amended terms of the 2023B Convertible Notes offered in the convertible notes:

●

For approximately 86% of the outstanding principal and interest of the 2023B Convertible Note Payable, the conversion price is four dollars ($4.00) per share and in the event that the Company has not received an effective order from the SEC on its registration statement by February 14, 2024, the outstanding principal of the 2023B Convertible Note Payable shall automatically be converted into common stock of the Company at $2.00 per share. For approximately 14% of the outstanding principal and interest of the 2023B Convertible Note Payable the conversion price is two dollars ($2.00) per share.

●

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 two and one half warrants issued for every $10 of Notes purchased with an exercise price of four dollars ($4.00)And two and one half warrants 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.

2024A Convertible Note Payable

2024B Convertible Note Payable

2025A Convertible Note Payable

Payables to Shareholder-Founders and Conversion to Common Shares

Certain shareholder-founders purchased $100,000 in the form of convertible notes in October 2023. These convertible notes payables to certain shareholder-founders of $100,000 plus interest automatically converted to 50,328 common shares in December 2023 at a share price of $4.00 per share.

From November 27, 2023 through December 11, 2023 the Company sold $263,500 of convertible notes to certain shareholder-founders. These convertible notes payables to certain shareholder-founders of $263,500 plus interest automatically converted to 41,144 common shares during the three-month period ending March 31, 2024 at a share price of $4.00 per share.

During January 2024 the Company sold $129,000 of convertible notes to certain shareholder-founders. The convertible notes payable, plus interest at 4%, automatically converted to 32,462 common shares during the three-month period ending March 31, 2024 at a share price of $4.00 per share.

During the three-month period ended March 31, 2024 certain shareholder-founders purchased $21,000 of these convertible notes payable. These notes plus interest automatically converted to common shares upon two (2) months from the date of the convertible notes at a share price of $4.00 per share.

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
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 February 14, 2025.

Person	Capacity	Date

/s/ Teresa Gallo	Chief Executive Officer, President and	February 14, 2025
Teresa Gallo	Chief Operating Officer
	(Principal Executive Officer)

/s/ William Feldman	Chief Financial Officer and Treasurer	February 14, 2025
William Feldman	(Principal Financial and Accounting Officer)

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