NOTE 8. CONSOLIDATED FINANCIAL STATEMENTS DETAILS

Consolidated Balance Sheets Details

Cash and cash equivalents

As of June 30, 2023 and December 31, 2022, the Company had cash and cash equivalents of $62,674 and $184,423, respectively, including $52,699 and $93,118, respectively, of cash received from advertising customers for future payments to vendors.

Accounts Receivable, Net and Allowance for Credit Losses

Property, Equipment and Improvements, Net

Depreciation expense was $675 and $1,153 for the three and six months ended June 30, 2023, respectively. Depreciation expense was $245 and $444 for the three and six months ended June 30, 2022, respectively. Of the $15,680 in property and equipment as of June 30, 2023, $2,410 consisted of work in progress not yet placed in service for internal use software development costs. Depreciation of internal use software development costs was $342 and $624 for the three and six months ended June 30, 2023, respectively. Depreciation of internal use software development costs was $42 and $83 for the three and six months ended June 30, 2022, respectively.

Accounts Payable

Consolidated Statements of Operations and Comprehensive Loss Details

Revenue

The Company serves two customer groups: (1) Commercial Enterprise, which today consists of customers in the commercial sector, including media and entertainment customers, advertising customers, content licensing customers and Hiring Solutions customers; and (2) Government & Regulated Industries, which today consists of customers in the government and regulated industries sectors, including state, local and federal government, legal, and compliance customers.

Software Products & Services consists of revenue generated from the Company’s aiWARE platform and Hiring Solutions’ talent acquisition solutions, any related support and maintenance services, and any related professional services associated with the deployment and or implementation of such solutions.

Managed Services consists of revenues generated from content licensing customers and advertising agency customers and related services.

Other Income (Expense), Net

Other in the table above consists primarily of foreign exchange gain of $1.7 million $2.8 million for the three and six months ended June 30, 2023, respectively.

Provision for Income Taxes

In accordance with ASC 740-270, Income Taxes, the provision or benefit from income taxes for interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items, if any, that are taken into account in the relevant period. Each quarter, the Company updates the estimate of the annual effective tax rate, and if the estimated tax rate changes, the Company records a cumulative adjustment. A separate estimated annual effective tax rate is applied for jurisdictions where an entity anticipates an ordinary loss or has an ordinary loss for the year to date for which no tax benefit can be recognized.

The Company’s effective tax rate for the three and six months ended June 30, 2023 was 5.6% and 3.4%, respectively. The difference between the effective tax rate and the U.S. federal statutory rate of 21% is primarily due to a valuation allowance established on the Company’s federal and state net deferred tax assets, as well as the impact of foreign operations subject to tax in foreign jurisdictions. The Company’s effective tax rate for the three and six months ended June 30, 2022 was 33.1% and 5.5%, respectively. The change in the effective tax rates for the three and six months ended June 30, 2023 as compared to the comparable prior year periods is primarily due to the impact of taxes on foreign operations and valuation allowances against domestic net deferred tax assets.

As of June 30, 2023, the Company continues to provide a valuation allowance against federal and state deferred tax assets that are not expected to be realizable. The Company continues to evaluate the realizability of deferred tax assets and the related valuation allowance. If the Company’s assessment of the deferred tax assets or the corresponding valuation allowance were to change, the Company would record the related adjustment to income during the period in which the determination is made. The tax benefit for the three months ended June 30, 2023 includes a $347 tax benefit relating to a change to beginning of the year valuation allowance. With the acquisition of Broadbean, the Company acquired deferred tax liabilities that provide a source of taxable income that allows for the release of valuation allowance related to the Company’s deferred tax assets.

As a result of the Broadbean acquisition, the Company expects to be subject to taxation in France and Australia, in addition to already being subject to taxation in the United States, Israel, and the United Kingdom. The United States, Israel, and the United Kingdom comprise the majority of the Company’s operations. In general, the U.S. federal statute of limitations is three years. However, the Internal Revenue Service may still adjust a tax loss or credit carryover in the year the tax loss or credit carryover is utilized. As such, the Company’s U.S. federal tax

returns and state tax returns are open for examination since inception. The Israeli statute of limitations period is generally four years commencing at the end of the year in which the return was filed. The UK statute of limitations period is typically twelve months following the date on which the return is filed. The Company is not currently under examination from income tax authorities in the jurisdictions in which the Company does business.

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act (“IRA”) which, among other things, implements a 15% corporate alternative minimum tax based on the adjusted financial statement income for certain large corporations and a 1% excise tax on net share repurchases. The minimum tax and excise tax, if applicable, are effective for fiscal years beginning after December 31, 2022. The Company does not expect the IRA to have a material impact on its financial position, results of operations or cash flows. The Company will continue to monitor additional future guidance from the IRS.

The main corporation tax rate for UK corporations increases from 19% to 25% for the financial year beginning April 1, 2023. The tax provision for the year ended June 30, 2023 is reflective of the change in tax rate.