Overview of NYIAX’s Financial Performance

Revenues

NYIAX’s business model is focused on creating a marketplace where advertising inventory, campaigns, and audience can be easily bought and sold using efficient technology. The company generates revenue by charging transaction fees to media sellers (publishers) when they use the NYIAX platform to execute advertising contracts with media buyers (advertisers or agencies).

In 2020 and 2019, NYIAX substantially reduced transaction fees for media sellers to help scale the platform. In 2019 and 2020, NYIAX had a single media buyer and a single media seller for a single campaign. This campaign concluded on December 31, 2020.

In the first quarter of 2021, NYIAX reviewed its offerings and marketing programs, launched a sales process, and hired a sales team. However, the sales team was reduced in 2022 due to capital concerns, and as of 2023, the sales team was minimal. As of the date of the report, the company has added two people to the sales team, with one other resigning.

Revenue Drivers

NYIAX’s key revenue drivers include:

• Media Buyers: Advertisers or advertising agencies that buy media on behalf of advertisers
• Business Partners: Advertising agencies that represent media buyers
• Media Sellers: Publishers and other entities that sell advertising inventory
• Sales Representatives: The relationships with media buyers, media sellers, and business partners are crucial for NYIAX’s success
• Media on Exchange: The media that is bought and sold on the NYIAX platform through smart contracts
• Media Contracts: The smart contracts between media sellers and media buyers
• Transaction Fees: The variable fees NYIAX charges media sellers for using the platform

Revenue Build and Other Factors

NYIAX is currently building its business development (sales and representatives) teams, and the size, ramp-up, and quality of this team will affect the company’s net revenue. Other factors that affect NYIAX’s net revenue include:

• Identifying valuable ad impressions that can be profitably monetized at scale
• Managing industry dynamics, such as the evolution of programmatic advertising and header bidding
• Seasonality in the advertising industry, with higher spending typically in Q4

Management’s Plans

NYIAX’s management plans to develop operations and generate substantive revenues and gross margins through the following steps:

1. Complete the development of the initial platform
2. Continue signing up media sellers and media buyers with the sales team
3. Expect to realize substantive revenues approximately one year after a capital infusion
4. Recognize the need for substantial scale to achieve profitability, with significant sales, marketing, and continued engineering and development costs required

Results of Operations

For the three months ended June 30, 2024 compared to the same period in 2023:

• Net revenue decreased by 6% to $83,310 due to lower average compensation per media contract
• Technology and development costs decreased by 72% to $79,977 due to expense reductions
• Selling, general, and administrative costs decreased by 48% to $822,203 due to reduced IPO-related expenses
• Depreciation and amortization increased significantly to $297,731 due to amortization of the patent portfolio
• The company recorded a $45,213 forfeiture of deferred compensation by current and former officers
• Interest expense decreased by 57% to $146,490 due to conversion of convertible notes

For the six months ended June 30, 2024 compared to the same period in 2023:

• Net revenue decreased by 27% to $164,854 due to lower media contracts and average compensation
• Technology and development costs decreased by 53% to $325,046 due to expense reductions
• Selling, general, and administrative costs decreased by 42% to $1,813,704 due to reduced IPO-related expenses
• The company recorded a $353,295 forfeiture of deferred compensation by current and former officers
• Interest expense decreased by 53% to $208,749 due to conversion of convertible notes

Non-GAAP Financial Measures

NYIAX reports Adjusted EBITDA, a non-GAAP financial measure, to provide investors with additional information about the company’s performance. Adjusted EBITDA is calculated as net loss adjusted to exclude interest expense, depreciation and amortization, share-based compensation, and other one-time items.

For the three months ended June 30, 2024, Adjusted EBITDA loss decreased by 54% to $837,076 compared to the same period in 2023. For the six months ended June 30, 2024, Adjusted EBITDA loss decreased by 45% to $2,037,460 compared to the same period in 2023.

Going Concern, Cash Flows, Liquidity, and Capital Resources

NYIAX believes it does not have sufficient cash to meet working capital and capital requirements for at least the next twelve months. The company’s operations used $909,863 in cash for the six months ended June 30, 2024, primarily due to the net loss of $5.5 million, partially offset by non-cash charges.

NYIAX has raised additional capital through the sale of convertible notes payable, including $1.3 million in the 2024A Convertible Note Payable offering, $0.9 million in the 2024B Convertible Note Payable offering, and $0.2 million in the 2025A Convertible Note Payable offering. However, the company still faces substantial doubt about its ability to continue as a going concern without additional financing or cost-cutting measures.

Outlook

NYIAX faces several challenges, including the need to scale its business, manage industry dynamics, and secure additional financing to fund its operations and development plans. The company’s ability to execute its strategy and achieve profitability will depend on its success in building out its sales team, attracting more media buyers and sellers to the platform, and controlling costs. Investors should carefully consider the risks and uncertainties facing the company as it works to establish a sustainable business model.