| Basis of Presentation and Summary of Significant Accounting Policies | 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 presentation of the balances
and results for the period presented. Operating results for the period from December 31, 2022 through September 30, 2023 are not
necessarily indicative of the results that may be expected through December 31, 2023. The accompanying unaudited condensed financial
statements should be read in conjunction with the audited financial statements and notes thereto included in our Annual Report on Form 10-K
as filed on July 21, 2023. Use of Estimates The preparation of financial statements in conformity
with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ materially from these estimates. On an on-going basis, management evaluates its
estimates, primarily those related to: (1) revenue recognition criteria, including the determination of revenue reporting as net
versus gross in the Company’s revenue arrangements, (2) allowances for doubtful accounts, (3) the useful lives of property
and equipment and capitalized software development costs, (4) income taxes, (5) the valuation of share-based compensation, (6) assumptions
used in the Black-Scholes option pricing model to determine the fair value of stock options and warrants, and (7) the recognition
and disclosure of contingent liabilities. These estimates are based on historical data and experience, as well as various other factors
that management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the
carrying value of assets and liabilities that are not readily apparent from other sources. Estimates relating to the valuation of share-based
compensation, options and warrants, require the selection of appropriate valuation methodologies and models, and significant judgment
in evaluating ranges of assumptions and financial inputs. Actual results may differ materially from those estimates under different assumptions
or circumstances. Concentrations of Credit risk 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 providing deposits insurance 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 September
30, 2023 and December 31, 2022. As of September 30, 2023 two Media Buyers represented
26% and 20% of accounts receivable. As of September 30, 2023, two Media Sellers represented 80% and 10% of accounts payable. For the nine
months ended September 30, 2023, two customers represented 47% and 9% of revenue, net. As of December 31, 2022, two Media Buyers represented
67% and 20% of accounts receivable. As of December 31, 2022, two Media Sellers represented 61% and 8% of accounts payable. As
of September 30, 2022, two Media Buyers represented 80% and 11% of accounts receivable. As of September 30, 2022, one Media Seller represented
44% of accounts payable. For the nine months ended September 30, 2022, one customer represented
84% of revenue, net. For the nine months ended September 30, 2022,
one customer represented 84% of net revenue. As of September 30, 2022, one Media Seller represented 44% of accounts payable and two Media
Buyers represented 80% and 11% of accounts receivable. 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. Accounts Receivable, Net In June 2016, the Financial Accounting Standards
Board, or the FASB, issued ASU 2016-13 – Measurement of Credit Losses on Financial Statements. The new standard requires that the
Company recognize an allowance for losses on accounts receivable in an amount equal to the current expected credit losses. The estimation
of the allowance is based on an analysis of historical loss experience, current receivables aging, and management’s assessment of
current conditions and reasonable and supportable expectation of future conditions, as well as an assessment of specific identifiable
customer accounts considered at risk or uncollectible. In November 2019, the FASB issued ASU 2019-10 – Financial Instruments –
Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates, which amended the effective date
for certain companies. The standard is effective for public companies eligible to be smaller reporting companies for annual and interim
periods beginning after December 15, 2022. On January 1, 2023, the Company adopted ASU 2016-13, using a modified retrospective approach.
The adoption of this standard did not have an effect on the Company’s financial position, results of operations, or cash flows. Accounts receivable consists of amounts billed
to Media Buyers. Accounts receivable, net are carried at their contractual amounts, less an estimate for uncollectible amounts. Management
estimates the allowance for bad debts based on existing economic conditions, historical experience, the financial conditions of the customers,
and the amount and age of past due accounts. Receivables are considered past due if full payment is not received by the contractual due
date. Past due accounts are generally written off against the allowance for bad debts only after all collection attempts have been exhausted. The Company performs ongoing credit evaluations
of Media Buyers. The allowance for doubtful accounts is based on the best estimate of the amount of probable credit losses in existing
accounts receivable. The allowance for doubtful accounts is determined based on historical collection experience and the review in each
period of the status of the then-outstanding accounts receivable, while taking into consideration current client information, subsequent
collection history and other relevant data. The Company reviews the allowance for doubtful accounts on a quarterly basis. For the year
ended and December 31, 2022, the Company had no allowance for doubtful accounts and no write-offs of accounts receivable. For
the period ended September 30, 2023, the Company had an allowance for doubtful accounts 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. 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 nine-month period ended September 30, 2023 and the year ended December 31, 2022, no impairments
were recorded on those assets. Acquisition of Intellectual Property 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 in
accordance with ASC 805-50. Asset acquisitions in which the consideration given is cash are measured
by the amount of cash paid. However, if the consideration given is not in the form of cash (that is, in the form of noncash assets, liabilities
incurred, or equity interests issued) measurement is based on either the cost which shall be measured based on the fair value of the consideration
given or the fair value of the assets (or net assets) acquired, whichever is more clearly evident and, thus, more reliably measurable. Each intellectual property asset, patent’s
valuation will be amortized over its useful life. The Company has concluded that patent portfolios have a determinant useful life in accordance
with the patents’ expiration dates. Additionally, the Company will prepare periodic
reviews of the patent portfolio in accordance with ASC 820 and ASC 360 to assess if a write-down is required. For the nine-month period
ended September 30, 2023, no impairments were recorded on those assets. Revenue Recognition NYIAX brings together Media Buyers (brands, advertisers
or agencies) and Media Sellers (publishers or media) to execute media sales contracts. NYIAX receives a fee upon completion of the media
contract. NYIAX does not take ownership of or positions in the media at any time during the process. Generally, the Company bills Media Buyers the
gross amount of advertising, including the Company’s commissions or fees in a single invoice and pays the Media Seller upon receipt.
The Company’s accounts receivable are recorded at the amount of gross billings for the amounts it is responsible to collect, and
accounts payable are recorded at the amount payable to Media Seller. Substantially all of the Company’s revenues
are recognized at the point in time that the (i) contract reconciliations are completed, (ii) accepted by the Media Buyer and
Media Seller, and (iii) NYIAX’s performance obligations are completed. The Company maintains agreements with each Media
Buyer and Media Seller which set out the terms of the relationship. Revenue is recognized based on the five-step process
outlined in the Accounting Standards Codification (“ASC”) 606: Step 1 — Identify
the Contract with the Customer — A contract exists when (a) the parties to the contract have approved the contract
and are committed to perform their respective obligations, (b) the entity can identify each party’s rights regarding the goods
or services to be transferred, (c) the entity can identify the payment terms for the goods or services to be transferred, (d) the
contract has commercial substance and it is probably that the entity will collect substantially all of the consideration to which it will
be entitled in exchange for the goods or services that will be transferred to the customer. Step 2 — Identify
Performance Obligations in the Contract — Upon execution of a contract, the Company identifies as performance obligations
each promise to transfer to the customer either (a) goods or services that are distinct, or (b) a series of distinct goods or
services that are substantially the same and have the same pattern of transfer to the customer. To the extent a contract includes multiple
promised goods or services, the Company must apply judgement to determine whether the goods or services are capable of being distinct
within the context of the contract. If these criteria are not met, the goods or services are accounted for as a combined performance obligation. Step 3 — Determine
the Transaction Price — When (or as) a performance obligation is satisfied, the Company shall recognize as revenue the
amount of the transaction price that is allocated to the performance obligation. The contract terms are used to determine the transaction
price. Generally, all contracts include fixed consideration. If a contract did include variable consideration, the Company would determine
the amount of variable consideration that should be included in the transaction price based on expected value method. Variable consideration
would be included in the transaction price, if in the Company’s judgement, it is probable that a significant future reversal of
cumulative revenue under the contract would not occur. Step 4 — Allocate
the Transaction Price — After the transaction price has been determined, the next step is to allocate the transaction
price to each performance obligation in the contract. If the contract only has one performance obligation, the entire transaction price
will be applied to that obligation. If the contract has multiple performance obligations, the transaction price is allocated to the performance
obligations based on the relative standalone selling price at contract inception. Step 5 — Satisfaction
of the Performance Obligations (and Recognize Revenue) — Revenue is recognized when (or as) goods or services are transferred
to a customer. The Company satisfies each of its performance obligations by transferring control of the promised good or service underlying
that performance obligation to the customer. Control is the ability to direct the use of and obtain substantially all of the remaining
benefits from an asset. It includes the ability to prevent other entities from directing the use of and obtaining the benefits from an
asset. Indicators that control has passed to the customer include: a present obligation to pay; physical possession of the asset; legal
title; risks and rewards of ownership; and acceptance of the asset(s). Performance obligations can be satisfied at a point in time or
over time. Substantially all of the Company’s
revenues are recognized when the contract reconciliations are completed and accepted by the Media Buyer and Media Seller. The Company maintains agreements with each Media
Buyer and Media Seller which set out the terms of the relationship. The Company has determined that it is acting as
an agent for the Media Seller as (i) NYIAX does not obtain control of the Seller’s media (goods & services) before
transferring control to the Buyer. The Seller has control of the media. Specifically, NYIAX does not control the specified media before
transferring the media to the Media Buyer, the Company is not primarily responsible for the performance of the Media Seller, nor can the
Company redirect those services to fulfill any other contracts. (ii) NYIAX does not have inventory or credit risk for the media,
and (iii) the Media Seller establishes the pricing in the Smart-Contracts (self-executing contracts with the terms of the agreement
between buyer and seller standardized, and the Media Buyers and Media Sellers agree the pricing. Share-Based
Compensation The
share-based compensation expense related to stock options and restricted stock awards which are referred to collectively as options and
awards granted under the Company’s employee option plans, is measured and recognized in the financial statements based on the fair
value of the awards granted. The fair value of each option award is estimated on the grant date using the Black-Scholes option-pricing
model. We use the Black-Scholes model to calculate the fair value for all options granted, based on the inputs relevant on the date granted,
such as the fair value of our shares, prevailing risk-free interest rate, etc. The value of the portion of the award, after considering
potential forfeitures, that is ultimately expected to vest is recognized as expense in our statements of operations over the requisite
service periods. Awards are subject to forfeiture until vesting conditions have been satisfied under the terms of the award. Determining
the fair value of stock options awards requires judgement. The Company’s use of the Black-Scholes option pricing model requires
the input of subjective assumptions. Deferred
Offering Cost Write-off It Is the Company’s policy to defer the
recognition of deferred offering costs Pursuant to the Codification of Staff Accounting Bulletins, Topic 5: Miscellaneous Accounting
A. Expenses of Offering. As of December 31, 2022, $848,531 of deferred offering costs were recorded on the balance sheet. 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 its initial public offering (the “Offering”), Boustead Securities LLC (“Boustead”),
informed the Company of its decision not to proceed with pricing of the Company’s Offering. In accordance with the Codification of Staff
Accounting Bulletins / Topic 5: Miscellaneous Accounting, the Company has written off these costs, $848,531, during the three-month period
ended March 31, 2023. And, for the three-month period ended September 30, 2023, the Company recorded $177,481 of deferred offering costs
which were written off during the three-month period ended September 30, 2023 as a result of Spartan Capital Securities, LLC’s
decision not to continue as lead underwriter on October 6, 2023 (the Company engaged Spartan Capital
Securities, LLC, as lead underwriter, deal manager and investment banker for the Offering on April 12, 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
September 30, 2023 and December 31, 2022, no uncertain positions are taken or are expected to be taken that would require recognition
of a liability (or asset) or disclosure in the financial statements. The
Company’s policy is to record interest expense and penalties pertaining to income taxes in operating expenses. For the periods
ended March 31, 2023, September 30, 2023 and December 31,
2022, there were no interest and penalties expenses recorded and no accrued interest and penalties. Deferred
tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets, including net operating loss
carryforwards (“NOL’s”), and liabilities, are measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment
date. Deferred
income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. Deferred tax assets
are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred
tax assets will not be realized. Realization of the deferred income tax asset is dependent on generating sufficient taxable income in
future years. The amount of the deferred income tax asset considered realizable, if any, could be reduced in the near term if estimates
of future taxable income are met. Earnings
Per Share In
accordance with ASC – 260 Earnings Per Share, basic earnings per share (EPS) is calculated by dividing the net income
attributable to common stockholders by the weighted-average number of shares of common stock outstanding. Diluted net income per share
per share is computed by dividing net income by the weighted average number vested of common shares, plus the net impact of common shares
(computed using the treasury stock method), if dilutive, resulting from the exercise of dilutive securities. In periods when losses are
reported, the weighted-average number of common shares outstanding exclude common stock equivalents because their inclusion would be
anti-dilutive. The Company has issued employee incentive options and warrants. These employee incentive options and warrants are excluded
from the calculation as the employee incentive options and warrants are anti-dilutive. Common
Stock Equivalents As of September 30, 2023, and September 30, 2022, the Company excluded
the common stock equivalents summarized below, which entitle the holders thereof to ultimately acquire shares of common stock, from its
calculation of earnings per share, as their effect would have been anti-dilutive.
As of As of
Equity Incentive Plans 3,086,626 3,086,626
Selling Agent and Advisor Warrants 23,538 362,191
Warrants Issued with Common Stock Offerings 932,374 889,500
Warrants Issued with Convertible Notes Offerings 1,133,400 352,188
Common Stock Issuable Upon Conversion of Convertible Notes, including PIK Interest 1,028,276 824,650
Total Common Stock Equivalents 6,204,214 5,515,155 Recently
Issued Accounting Pronouncements In August 2020, the FASB issued No. 2020-06, Debt—Debt
with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic
815-40) – Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The amendments are effective for
fiscal years beginning after December 15, 2023. The Company evaluated any potential impact from ASU 2021-07 and believes it will have
no material impact on our financial results. In
June 2016, the FASB issued Update 2016-13 Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial
Instruments. The Company evaluated any potential impact from Update 2016-13 Financial Instruments and believes it will have no material
impact on our financial results. |
