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What changed in authID Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of authID Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+225 added−243 removedSource: 10-K (2025-03-13) vs 10-K (2024-03-20)

Top changes in authID Inc.'s 2024 10-K

225 paragraphs added · 243 removed · 167 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThe solution includes a patented audit trail created for each transaction, containing the digitally signed transaction details, with proof of identity authentication and consent. 1 Account Access and Recovery authID’s Verified biometric identity authentication solution allows users to recover, via a facial biometric, account access that is lost or blocked due to expired credentials, lockouts, lost or stolen devices, or compromised accounts.
Biggest changeAccount Access and Recovery authID’s Verified biometric identity authentication solution allows users to recover, via a facial biometric, account access that is lost or blocked due to expired credentials, lockouts, lost or stolen devices, or compromised accounts. Because the account owner’s root of trust is established in the cloud, recovery is independent of any device or hardware.
Biometric Identity Authentication Biometric identity authentication provides any organization with a secure, convenient solution to validate that an individual is the verified account owner for various purposes including passwordless login and performing specific transactions, or functions.
Biometric Identity Authentication - Verified Biometric identity authentication provides any organization with a secure, convenient solution to validate that an individual is the verified account owner for various purposes including passwordless login and performing specific transactions, or functions.
We intend to continue to invest in research and development and hiring top technical talent to meet the identity proofing and authentication needs of our existing and prospective customers, as well as support new use cases, diversify our product offerings, and continually improve our key differentiators of speed, accuracy, and user experience. ● Select Acquisitions.
We intend to continue to invest in research and development and hiring top technical talent to meet the identity proofing and authentication needs of our existing and prospective customers, as well as support new use cases, diversify our product offerings, and continually improve our key differentiators of speed, accuracy, privacy, and user experience. ● Select Acquisitions.
Item 1. Business Overview authID Inc. (together with its subsidiaries, the “Company”, “authID”, “we” or “our”) ensures cyber-savvy enterprises “Know Who’s Behind the Device” TM for every customer or employee login and transaction.
Item 1. Business Overview authID Inc. (together with its subsidiaries, the “Company”, “authID”, “we” or “our”) ensures enterprises “Know Who’s Behind the Device” TM for every customer or employee login and transaction.
Our corporate headquarters is located at 1580 North Logan Street, Suite 660, Unit 51767, Denver, CO 80203 and our main phone number is (516) 274-8700. Our website address is www.authid.ai.
Our corporate headquarters is a virtual address located at 1580 North Logan Street, Suite 660, Unit 51767, Denver, CO 80203 and our main phone number is (516) 274-8700. Our website address is www.authid.ai.
Establishing a biometric root of trust for each user that is bound to their accounts, or provisioned devices, authID stops fraud at onboarding, eliminates password risks and costs, and provides the faster, frictionless, and more accurate user identity experience demanded by operators of today’s digital ecosystems.
Establishing a biometric root of trust for each user that is bound to their accounts, or provisioned devices, authID stops fraud at onboarding, eliminates password risks and costs, and provides the faster, more accurate and privacy preserving user identity experience demanded by operators of today’s digital ecosystems.
Our Verified TM platform detects presentation attack and spoofing threats, evaluates the authenticity of security fe atures present on a government-issued identity document, and biometrically matches the reference picture of the document with a live user’s selfie (a photograph that the user has taken of themselves).
Our Verified TM platform detects presentation attack and spoofing threats, evaluates the authenticity of security features present on a government-issued identity document, and biometrically matches the reference picture of the document with a live user’s selfie (a photograph that the user has taken of themselves).
Due to our ability to serve bot h identity verification and authentication needs, as well as the tendency for enterprises to acquire multiple digital identity solutions, we can and often do co-exist with competing products within our customer base.
Due to our ability to serve both identity verification and authentication needs, as well as the tendency for enterprises to acquire multiple digital identity solutions, we can and often do co-exist with competing products within our customer base.
However, we have no commitments with respect to any such acquisitions at this time. 3 Sales and Marketing authID provides its Verifi ed platform based on a subscription and usage-based model, with fees per transaction, enrolled or active users.
However, we have no commitments with respect to any such acquisitions at this time. Sales and Marketing authID provides its Verified platform based on a subscription and usage-based model, with fees per transaction, enrolled or active users.
To power our efforts, we have built a team of subject matter experts in the identity space, and applied a regimented sales execution strategy, allowing us to win against competitors with comparable products but a sub-optimal approach to the market. In the last six months of 2023, our new leadership team significantly expanded our sales force and technical sales support.
To power our efforts, we have built a team of subject matter experts in the identity space, and applied a regimented sales execution strategy, allowing us to win against competitors with comparable products but a sub-optimal approach to the market. Our leadership team significantly expanded our sales force and technical sales support.
Our Platform Our Verified TM cloud-based platform was developed with internally developed software as well as acquired and licensed technology and provides the following core services: ● Biometric Identity Verification ● Biometric Identity Authentication ● Account / Access Recovery ● FIDO Passkey binding Biometric Identity Verification Biometric identity verification establishes the trusted identity of a user based on a variety of ground truth sources, including government-issued identity documents such as national IDs, driver’s licenses and passports or electronic machine-readable travel documents (or eMRTDs).
Our Platform Our cloud-based platform was developed with internally developed software as well as acquired and licensed technology and provides the following core services: ● Biometric Identity Verification – Proof TM ● Biometric Identity Authentication - Verified TM ● PrivacyKey TM Privacy Preserving Biometrics ● Account / Access Recovery Biometric Identity Verification - Proof Biometric identity verification establishes the trusted identity of a user based on a variety of ground truth sources, including government-issued identity documents such as national IDs, driver’s licenses and passports or electronic machine-readable travel documents (or eMRTDs).
Employees in the U.S. receive health benefits on a cost-sharing basis and employees in Colombia are provided the respective Government required benefits. Subsidiaries Currently, the Company has four U.S. subsidiaries: Innovation in Motion Inc., Fin Holdings, Inc., ID Solutions Inc. and authID Gaming Inc. The Company has one subsidiary in Colombia: MultiPay S.A.S.
Employees in the U.S. and Latvia receive health benefits on a cost-sharing basis and employees in Colombia are provided the respective Government required benefits. 4 Subsidiaries Currently, the Company has four U.S. subsidiaries: Innovation in Motion Inc., Fin Holdings, Inc., ID Solutions Inc. and authID Gaming Inc.
The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov . The information contained on the websites referenced in this Form 10-K is not incorporated by reference into this filing. 5 Recent Developments On February 15, 2024, Mr.
The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov . The information contained on the websites referenced in this Form 10-K is not incorporated by reference into this filing. Recent Developments None.
As we have done in the past, we intend to selectively pursue acquisitions that will help us achieve our strategic goals, enhance our technology capabilities and accelerate growth. We believe pursuing these types of acquisitions will increase our ability to work with existing customers, add new customers, enter new markets, develop new services and enhance our processing platform capabilities.
We intend to selectively pursue acquisitions that will help us achieve our strategic goals, enhance our technology capabilities and accelerate growth. We believe pursuing these types of acquisitions will increase our ability to work with existing customers, add new customers, enter new markets, develop new services and enhance our processing platform capabilities.
Growth Strategy We orient our bus iness strategy and invest for future growth by focusing on the following key priorities: ● Drive new customer growth .
Growth Strategy We orient our business strategy and invest for future growth by focusing on the following key priorities: ● Drive new customer growth .
These regulations could have a significant impact on our business. Human Capital As of December 31, 2023, the Company had a total of approximately 22 employees who are located in the United States and Colombia as well as outsourced service providers. There are 17 employees in the United States who provide overall Company strategic, business and technological leadership.
These regulations could have a significant impact on our business. Human Capital As of December 31, 2024, the Company had a total of 46 employees who are located in the United States, Latvia and Colombia as well as outsourced service providers. There are 31 employees in the United States who provide overall Company strategic, business and technological leadership.
On August 29, 2022 the Company executed and completed the sale of the Cards Plus business. On June 30, 2023, the Company completed the sale of its legacy payments software by MultiPay.
On August 29, 2022 the Company executed and completed the sale of the Cards Plus business. On June 30, 2023, the Company completed the sale of its legacy payments software by MultiPay, which was dissolved in August 2024.
We also purchase or license technology that we incorporate into our products or services. While it may be necessary in the future to seek or renew licenses relating to various aspects of our products, we believe, based upon past experience and industry practice, such licenses generally could be obtained on commercially reasonable terms.
While it may be necessary in the future to seek or renew licenses relating to various aspects of our products, we believe, based upon past experience and industry practice, such licenses generally could be obtained on commercially reasonable terms.
Governments around the world are enacting new data privacy regulations and pushing for stronger authentication methods in commerce, which impose a “call to action” for many of these entities.
Organizations across all sectors need to control access to their data and applications by their employees. Governments around the world are enacting new data privacy regulations and pushing for stronger authentication methods in commerce, which impose a “call to action” for many of these entities.
As of December 31, 2022, MultiPay S.A.S., and IDGS S.A.S assets are presented as assets held for sale on the Company’s Consolidated Balance Sheets and their operations together with those of Cards Plus Pty Ltd., presented as discontinued operations in the Consolidated Statements of Operations during the years ended December 31, 2023 and 2022, as they met the criteria for discontinued operations under applicable accounting guidance. 2 Corporate Information The Company was incorporated in the State of Delaware on September 21, 2011, and changed our name from Ipsidy Inc. to authID Inc. on July 18, 2022.
MultiPay S.A.S., and IDGS S.A.S. operations, together with those of Cards Plus Pty Ltd., are presented as discontinued operations in the Consolidated Statements of Operations during the year ended December 31, 2023, as they met the criteria for discontinued operations under applicable accounting guidance. Corporate Information The Company was incorporated in the State of Delaware on September 21, 2011.
The authID Verified product allows users to confirm their identity with their facial biometric by simply taking a selfie on a mobile phone or device of their choosing (as opposed to dedicated hardware).
The authID Verified product allows users to confirm their identity with their facial biometric by simply taking a selfie on a mobile phone or device of their choosing (as opposed to dedicated hardware). The solution includes a patented audit trail created for each transaction, containing the digitally signed transaction details, with proof of identity authentication and consent.
Global Market Opportunity The momentum towards a digital economy in recent years, accompanied by a massive growth in cyberattacks, fraud, and account takeovers are driving the demand for more streamlined and more secure identity verification and authentication. The World Economic Forum estimates digitally enabled platform business models will drive 70% of new economic value created over the next ten years.
Global Market Opportunity The momentum towards a digital economy in recent years, accompanied by a massive growth in cyberattacks, fraud, and account takeovers fueled by Artificial Intelligence are driving the demand for more streamlined and more secure identity verification and authentication.
The Company has one subsidiary in the United Kingdom: Ipsidy Enterprises Limited. The Company is the sole shareholder of all its subsidiaries. Available Information Our Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendment to these reports are filed with the SEC.
Available Information Our Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendment to these reports are filed with the SEC.
Because the account owner’s root of trust is established in the cloud, recovery is independent of any device or hardware. In this way, account recovery is instant, portable, and does not require the presence of or access to a previously provisioned device in order to secure access from a different device.
In this way, account recovery is instant, portable, and does not require the presence of or access to a previously provisioned device in order to secure access from a different device. 1 Key Customer Benefits Our solution allows our enterprise customers to: ● Verify and Authenticate users.
For example, we enter into confidentiality and invention assignment agreements with our employees, consultants and other third parties, and control access to software, services, documentation and other proprietary information. We believe the duration of our patents is adequate relative to the expected lives of our service offerings.
Intellectual Property We rely on a combination of patents, trademarks, copyrights, trade secrets and contractual provisions to protect our proprietary technology. For example, we enter into confidentiality and invention assignment agreements with our employees, consultants and other third parties, and control access to software, services, documentation and other proprietary information.
We also use a premier lead generation service and digital marketing in order to carefully target potential customers and provide qualified leads for our sales representatives to develop. We also work with channel partners, such as banking infrastructure or cybersecurity providers who provide our services to their customers through reseller arrangements and allow us to broaden our customer reach.
We also use a lead generation service and digital marketing in order to carefully target potential customers and provide qualified leads for our sales representatives to develop.
In a digital, online world of increasing fraud and security threats, Proof speeds up onboarding and offers our customers confidence in the identities of consumers, employees or third-party vendors.
Additionally, authID’s PrivacyKey technology enables customers to perform biometric verification through the use of Public/Private Keys that is performed without storing any biometric data, which ensures individual data privacy. In a digital, online world of increasing fraud and security threats, Proof speeds up onboarding and offers our customers confidence in the identities of consumers, employees or third-party vendors.
Further it is predicted that Artificial Intelligence (AI) will almost certainly increase the volume and heighten the impact of cyberattacks over the next two years (NCSC Assessment, Jan 1, 2024).
Further it is predicted that Artificial Intelligence (AI) will almost certainly increase the volume and heighten the impact of cyberattacks over the next two years (NCSC Assessment, Jan 1, 2024). 2 Financial services, ecommerce, the sharing economy, and healthcare businesses, among other industry verticals, are confronted by the challenges of identifying their customers, patients and beneficiaries with ease and certainty in the digital world.
Passwords and device authentication alone no longer provide the security needed to fight today’s rampant cyber-attacks and account takeover schemes. According to Statista, approximately 480,000 incidents of cyberattacks were reported in the United States in 2022, nearly a 100% increase since 2016.
Passwords and device authentication alone no longer provide the security needed to fight today’s rampant cyber-attacks and account takeover schemes.
Our employees are located primarily in the United States, with additional sub-contractors based in Europe, India and the Caribbean.
Our employees are located primarily in the United States, with additional sub-contractors based in Europe, India and the Caribbean. We intend to continue to invest in our technology to strengthen and expand our platform to stay ahead of our competition and meet the evolving needs of our current and prospective customers.
We can verify identities using a wide spectrum of government-issued documents from around the world.
We can verify identities using a wide spectrum of government-issued documents from around the world. ● Perform secure biometric verification & authentication without the need to store biometric data. Our PrivacyKey technology removes the need to store any biometric data in order to perform verification or authentication transactions.
Yet vast amounts of data have been compromised, and ransomware attacks have cost businesses hundreds of millions in remediation costs, lost revenue and brand equity. MGM Resorts estimated that the cyber-attack reported in September 2023, cost them over $100 million alone.
The World Economic Forum estimates digitally enabled platform business models will drive 70% of new economic value created over the next ten years. Yet vast amounts of data have been compromised, and ransomware attacks have cost businesses hundreds of millions in remediation costs, lost revenue and brand equity.
Removed
FIDO Passkey Binding FIDO Passkey Binding enables enterprises and their users to bind biometrically verified user identities to FIDO2 passkeys, enabling strong authentication for device-based passwordless login and transaction authentication that is tied to a trusted identity.
Added
PrivacyKey Privacy Preserving Biometrics authID’s PrivacyKey solution provides biometric authentication without the requirement to store any biometric or derivative of biometric data.
Removed
This solution establishes a digital chain of trust between biometrically verified individuals, their accounts, and their devices, thus eliminating passwords and protecting users and systems against fraud attacks. Key Customer Benefits Our solution a llows our enterprise customers to: ● Verify and Authenticate users.
Added
The technology transforms biometric verification into Public/Private Key cryptography whereby the facial image of the person is converted into an elliptical public/private key pair where only the public key is stored and the private key only exists during authentication and is deleted immediately after.
Removed
Financial services, ecommerce, the sharing economy, and healthcare businesses, among other industry verticals, are confronted by the challenges of identifying their customers, patients and beneficiaries with ease and certainty in the digital world. Organizations across all sectors need to control access to their data and applications by their employees.
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The solution is compliant to the ISO30136 Privacy Biometric standard and provides a False Match Rate accuracy of 1:1 Billion at a False Rejection Rate of 0.3%, as confirmed by independent tests conducted by the Commonwealth Scientific and Industrial Research Organization (“CSRIO”).
Removed
The demand for Integrated Identity Platforms is estimated to reach a market size of $48 billion in 2023, increasing at a 24.6% CAGR to reach almost $116 billion by 2027 (Forbes Tech Council, June 6, 2023).
Added
PrivacyKey verification and authentication is seamlessly delivered thru either a web or mobile applications with a response time of less than 700ms.
Removed
Competition The market for our ser vice offerings is highly competitive and rapidly evolving.
Added
According to Statista, cybercrime costs in the United States alone increased to approximately $452 million in 2024 and are projected to increase to approximately $640 million in 2025 and continue rising to over $1.8 billion in 2028 (Statista: Annual Cost of Cybercrime in the U.S. 2017-2028).
Removed
We intend to continue to invest in our technology to strengthen and expand our platform to stay ahead of our competition and meet the evolving needs of our current and prospective customers. 4 Intellectual Property We rely on a combination of patents, trademarks, copyrights, trade secrets and contractual provisions to protect our proprietary technology.
Added
The Global Biometric Technology Market is estimated to reach a market size of $50 billion by 2024, increasing at a 20% CAGR to reach over $150 billion by 2030 (Grand View Research, Biometric Technology Market Size, Share & Trends Analysis Report, 2023 - 2030).
Removed
Joe Trelin tendered his resignation as Chairman and a Director of the Company, effective immediately. On February 20, 2024, the board of directors of the Company (the “Board”) accepted his resignation and agreed to vest the unvested portion of an option granted to Mr. Trelin June 28, 2023, amounting to 6,511 shares.
Added
We also work with partners such as banking infrastructure or cybersecurity providers who provide our services to their customers through reseller arrangements and allow us to broaden our customer reach. 3 Competition The market for our service offerings is highly competitive and rapidly evolving.
Removed
The Company is currently in discussions with one or more candidates to be appointed as an additional Independent Director, but no agreement has been reached regarding such appointment at this time. On February 20, 2024, the Board appointed Michael Thompson to the Audit Committee in compliance with Rule 5605(c)(2)(A) of the Nasdaq Rules. See “Subsequent Events” for further information.
Added
We believe the duration of our patents is adequate relative to the expected lives of our service offerings. We also purchase or license technology that we incorporate into our products or services.
Added
The Company had one subsidiary in Colombia: MultiPay S.A.S. which was dissolved as of August 2, 2024. The Company has one subsidiary in the United Kingdom: Ipsidy Enterprises Limited. The Company is the sole shareholder of all its subsidiaries.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe following factors could result in harm to our business, reputation, revenue, financial results, and prospects, among other impacts: ● We have a history of losses and we may not be able to achieve profitability going forward. ● We have yet to achieve positive cash flow and, given our projected funding needs, our ability to generate positive cash flow is uncertain. ● Our limited operating history makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance. ● There can be no assurance that we will successfully commercialize our products that are currently in development or that our existing products will sustain market acceptance. ● We depend upon key personnel and need additional personnel. ● Acquisitions present many risks that could have a material adverse effect on our business and results of operations. ● The market for our products is characterized by changing technology, requirements, standards and products, and we may be adversely affected if we do not respond promptly and effectively to these changes. ● If our technology and solutions are not adopted and used by customer organizations, we will not be able to grow our business and our operations will be negatively affected. ● We have in the past entered into and may seek in the future to enter into contracts with governments, as well as state and local governmental agencies and municipalities, which subjects us to certain risks associated with such types of contracts. ● We may have to seek business through a competitive bidding process. ● We rely in part on third-party software to develop and provide our solutions. ● We have historically depended upon a small number of large system sales ranging up to $1,500,000 and we may fail to achieve one or more large sales in the future, or fail to successfully transition to new products generating recurring revenues. ● Our efforts to expand our international operations are subject to a number of risks, any of which could adversely reduce our future international sales and increase our losses . ● We are exposed to risks in operating in foreign markets, which may make operating in those markets difficult and thereby force us to curtail our business operations. 6 ● Cyber-attacks, breaches of network or information technology security, presentation attacks, natural disasters, pandemics, or terrorist attacks could have an adverse effect on our business. ● The War in Ukraine and the Middle East may impact the business of the Company, the markets in which it operates and the financial markets, in which the Company needs to raise capital. ● Interruptions, delays in service or defects in our systems could impair the delivery of our services and harm our business. ● Third parties could obtain access to our proprietary information or could independently develop similar technologies. ● Third parties may assert that we are infringing their intellectual property rights; IP litigation could require us to incur substantial costs even when our efforts are successful. ● Our officers, directors and holders of 5% of outstanding shares together beneficially own a significant portion of our Common Stock and, as a result, can exercise control over stockholder and corporate actions. ● We face competition.
Biggest changeThe following factors could result in harm to our business, reputation, revenue, financial results, and prospects, among other impacts: ● We have a history of losses and we may not be able to achieve profitability going forward. ● We have yet to achieve positive cash flow and, given our projected funding needs, our ability to generate positive cash flow is uncertain. ● Our limited operating history makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance. ● There can be no assurance that we will successfully commercialize our products that are currently in development or that our existing products will sustain market acceptance. ● We depend upon key personnel and need additional personnel. ● Acquisitions present many risks that could have a material adverse effect on our business and results of operations. ● The market for our products is characterized by changing technology, requirements, standards and products, is impacted by the growing use of AI technologies and we may be adversely affected if we do not respond promptly and effectively to these changes. ● Issues relating to the development and use of AI, including generative AI, in our offerings may result in reputational harm, liability and adverse financial results. ● If our technology and solutions are not adopted and used by customer organizations, we will not be able to grow our business and our operations will be negatively affected. ● We have in the past entered into and may seek in the future to enter into contracts with governments, as well as state and local governmental agencies and municipalities, which subjects us to certain risks associated with such types of contracts. ● We may have to seek business through a competitive bidding process. ● We rely in part on third-party software to develop and provide our solutions. 5 ● We depend upon a small number of large sales with contractual commitments ranging from $500,000 up to $10,000,000, which take longer to close and may result in a concentration of business and unpredictable quarterly revenue. ● Our efforts to expand our international operations are subject to a number of risks, any of which could adversely reduce our future international sales and increase our losses . ● We are exposed to risks in operating in foreign markets, which may make operating in those markets difficult and thereby force us to curtail our business operations. ● Cyber-attacks, breaches of network or information technology security, presentation attacks, natural disasters, pandemics, or terrorist attacks could have an adverse effect on our business. ● The wars in Ukraine and the Middle East may impact the business of the Company, the markets in which it operates and the financial markets, in which the Company needs to raise capital. ● Interruptions, delays in service or defects in our systems could impair the delivery of our services and harm our business. ● Third parties could obtain access to our proprietary information or could independently develop similar technologies. ● Third parties may assert that we are infringing their intellectual property rights; IP litigation could require us to incur substantial costs even when our efforts are successful. ● Our officers, directors and holders of 5% of outstanding shares together beneficially own a significant portion of our Common Stock and, as a result, can exercise control over stockholder and corporate actions. ● We face competition.
Our products may contain technology provided to us by third parties. Because we did not develop such technology ourselves, we may have little or no ability to determine in advance whether such technology infringes the intellectual property rights of any other party.
Our products contain technology provided to us by third parties. Because we did not develop such technology ourselves, we may have little or no ability to determine in advance whether such technology infringes the intellectual property rights of any other party.
In the future: ● we may not be successful in developing and marketing new products or product features that respond to new AI driven cyberattacks, technological change or evolving industry standards; ● we may experience difficulties that could delay or prevent the successful development, or acquisition, introduction and marketing of these new products and features; or 9 ● our new products and product features may not adequately meet the requirements of the marketplace and achieve market acceptance.
In the future: ● we may not be successful in developing and marketing new products or product features that respond to new AI driven cyberattacks, technological change, or evolving industry standards; ● we may experience difficulties that could delay or prevent the successful development, or acquisition, introduction and marketing of these new products and features; or ● our new products and product features may not adequately meet the requirements of the marketplace and achieve market acceptance.
Our systems and data centers are vulnerable to damage or interruption from, among other things, fire, natural disaster, power loss, telecommunications failure, terrorist acts, war, unauthorized entry, human error, and computer viruses or other defects. They may also be subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct.
Our systems and host data centers are vulnerable to damage or interruption from, among other things, fire, natural disaster, power loss, telecommunications failure, terrorist acts, war, unauthorized entry, human error, and computer viruses or other defects. They may also be subject to break-ins, sabotage, intentional acts of vandalism and similar misconduct.
Competi tive bidding, whether for contracts with governments or with private enterprises, presents a number of risks, including: ● the frequent need to compete against companies or teams of companies with more financial and marketing resources and more experience than we have in bidding on and performing major contracts; ● the substantial cost and managerial time and effort necessary to prepare bids and proposals for contracts that may not be awarded to us; ● the need to accurately estimate the resources and cost structure that will be required to service any fixed-price contract that we are awarded; and ● the expense and delay that may arise if our competitors protest or challenge new contract awards made to us pursuant to competitive bidding or subsequent contract modifications, and the risk that any of these protests or challenges could result in the resubmission of bids on modified specifications, or in termination, reduction or modification of the awarded contract.
Competitive bidding, whether for contracts with governments or with private enterprises, presents a number of risks, including: ● the frequent need to compete against companies or teams of companies with more financial and marketing resources and more experience than we have in bidding on and performing major contracts; ● the substantial cost and managerial time and effort necessary to prepare bids and proposals for contracts that may not be awarded to us; ● the need to accurately estimate the resources and cost structure that will be required to service any fixed-price contract that we are awarded; and ● the expense and delay that may arise if our competitors protest or challenge new contract awards made to us pursuant to competitive bidding or subsequent contract modifications, and the risk that any of these protests or challenges could result in the resubmission of bids on modified specifications, or in termination, reduction or modification of the awarded contract.
Our future success will depend on our ability to enhance our existing products and to develop, or acquire and introduce, on a timely and cost-effective basis, new products and product features that counter these new threats, keep pace with technological developments and emerging industry standards and address the increasingly sophisticated needs of our customers.
Our future success will depend on our ability to enhance our existing products and to develop, or acquire and introduce, on a timely and cost-effective basis, new products and product features that counter these AI threats, keep pace with technological developments and emerging industry standards and address the increasingly sophisticated needs of our customers.
All or any of these risks separately, or in combination could have a material adverse effect on our business, financial condition, results of operations, and cash flows. 14 Interruptions, delays in service or defects in our systems could impair the delivery of our services and harm our business.
All or any of these risks separately, or in combination could have a material adverse effect on our business, financial condition, results of operations, and cash flows. Interruptions, delays in service or defects in our systems could impair the delivery of our services and harm our business.
In addition, our amended and restated bylaws provide that any person or entity purchasing or otherwise acquiring any interest in shares of our common stock is deemed to have notice of and consented to the Delaware Forum Provision. 18 Section 27 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder.
In addition, our amended and restated bylaws provide that any person or entity purchasing or otherwise acquiring any interest in shares of our common stock is deemed to have notice of and consented to the Delaware Forum Provision. 17 Section 27 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder.
Almost all of our network systems are hosted “in the cloud” by internationally recognized third party service providers such as Microsoft Azure and Amazon Web Services.
All of our network systems are hosted “in the cloud” by internationally recognized third party service providers such as Microsoft Azure and Amazon Web Services.
Our international operations could be subject to a number of risks, any of which could adversely affect our future international sales and operating results, including: ● trade restrictions; ● export duties and tariffs; ● export regulations or restrictions including sanctions; ● local Data Privacy and other regulations ● uncertain political, regulatory and economic developments; ● labor and social unrest; ● inability to protect our intellectual property rights; 12 ● highly aggressive competitors; ● currency issues, including currency exchange risk; ● difficulties in staffing, managing and supporting foreign operations; ● longer payment cycles; ● increased collection risks; and ● impact of the Coronavirus or other pandemics; ● impact of wars and terrorism Negative developments in any of these areas in one or more countries could result in a reduction in demand for our products, the cancellation or delay of orders already placed, difficulty in collecting receivables, and a higher cost of doing business, any of which could adversely affect ou r business, results of operations or financial condition.
Our international operations could be subject to a number of risks, any of which could adversely affect our future international sales and operating results, including: ● local Data Privacy and other regulations; ● trade restrictions; ● import duties and tariffs; ● export regulations or restrictions including sanctions; ● uncertain political, regulatory and economic developments; ● labor and social unrest; ● inability to protect our intellectual property rights; ● highly aggressive competitors; ● currency issues, including currency exchange risk; ● difficulties in staffing, managing and supporting foreign operations; ● longer payment cycles; ● increased collection risks; ● impact of the Coronavirus or other pandemics; and ● impact of wars and terrorism Negative developments in any of these areas in one or more countries could result in a reduction in demand for our products, the cancellation or delay of orders already placed, difficulty in collecting receivables, and a higher cost of doing business, any of which could adversely affect our business, results of operations or financial condition.
Further, there can be no guarantee that we will not lose business to our existing or potential new competitors. 8 We depend upon key personnel and need additional personnel. On March 23, 2023, Rhon Daguro was appointed as our Chief Executive Officer. Our success depends on the continued services of Mr.
Further, there can be no guarantee that we will not lose business to our existing or potential new competitors. 7 We depend upon key personnel and need additional personnel. On March 23, 2023, Rhon Daguro was appointed as our Chief Executive Officer. Our success depends on the continued services of Mr.
Our means of protecting our intellectual property rights in the United States or any other country in which we operate may not be adequate to fully protect our intellectual property rights. 15 Third parties may assert that we are infringing their intellectual property rights; IP litigation could require us to incur substantial costs even when our efforts are successful.
Our means of protecting our intellectual property rights in the United States or any other country in which we operate may not be adequate to fully protect our intellectual property rights. 14 Third parties may assert that we are infringing their intellectual property rights; IP litigation could require us to incur substantial costs even when our efforts are successful.
Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on our future results of operations and cash flow, our capital requirements and surplus, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Item 1B. Unresolved Staff Comments None. 21
Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on our future results of operations and cash flow, our capital requirements and surplus, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. 19 Item 1B. Unresolved Staff Comments None.
The war in Ukraine and the Middle East may impact the Company and its operations in a number of different ways, which are yet to be fully assessed and are therefore uncertain. The Company’s principal concern is for the safety of the personnel who support from those regions.
The wars in Ukraine and the Middle East may impact the Company and its operations in a number of different ways, which are yet to be fully assessed and are therefore uncertain. The Company’s principal concern is for the safety of the personnel who support from those regions.
In addition, the disease could lead to disruptions in our supply chain, causing shortages or unavailability of software updates, or necessary equipment. Any of these outcomes could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
In addition, such a disease could lead to disruptions in our supply chain, causing shortages or unavailability of software updates, or necessary equipment. Any of these outcomes could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
We face competition from a broad range of providers with solutions across the identity management lifecycle, including: ● Vendors providing identity verification or proofing through both biometric and non-biometric solutions (such as data-based verification using identity proxies, such as DMV records and addresses), both on-premise and cloud-based. ● Vendors of passwordless identity authentication using device-based and cloud-based biometrics. ● Larger companies providing identity and access management platforms, adding identity authentication services to their offering at low/no cost. ● New entrants seeking to develop and market competing technologies. 16 It is also possible that, as the digital identity market continues to grow and evolve, larger companies with significant resources may increase their presence in the market and develop competing solutions through internal efforts or partnerships with existing play ers.
We face competition from a broad range of providers with solutions across the identity management lifecycle, including: ● Vendors providing identity verification or proofing through both biometric and non-biometric solutions (such as data-based verification using identity proxies, such as DMV records and addresses), both on-premise and cloud-based. ● Vendors of passwordless identity authentication using device-based and cloud-based biometrics. ● Larger companies providing identity and access management platforms, adding identity authentication services to their offering at low/no cost. ● New entrants seeking to develop and market competing technologies. 15 It is also possible that, as the digital identity market continues to grow and evolve, larger companies with significant resources may increase their presence in the market and develop competing solutions through internal efforts or partnerships with existing players.
Any failure to implement and maintain effective internal control also could adversely affect the results of periodic management evaluations regarding the effectiveness of our internal control over financial reporting that are required to include in our periodic reports filed with the SEC, under Section 404(a) of the Sarbanes-Oxley Act or the annual auditor attestation reports regarding effectiveness of our internal controls over financial reporting that we will be required to include in our periodic reports filed with the SEC upon our ceasing to be an emerging growth company and a smaller reporting company, unless, under the JOBS Act, we meet certain criteria that would require such reports to be included prior to then, under Section 404(b) of the Sarbanes-Oxley Act.
Any failure to implement and maintain effective internal control also could adversely affect the results of periodic management evaluations regarding the effectiveness of our internal control over financial reporting that are required to include in our periodic reports filed with the SEC, under Section 404(a) of the Sarbanes-Oxley Act or the annual auditor attestation reports regarding effectiveness of our internal controls over financial reporting that we will be required to include in our periodic reports filed with the SEC upon our ceasing to be a smaller reporting company, unless we meet certain criteria that would require such reports to be included prior to then, under Section 404(b) of the Sarbanes-Oxley Act.
Our management is developing plans and executing certain programs to alleviate the negative trends and conditions described above, however there is no guarantee that suc h plans will be successfully implemented. Our ability to curtail our operating losses or generate a profit may be further impacted by the fact that our business plan is largely unproven.
Our management is developing plans and executing certain programs to alleviate the negative trends and conditions described above, however there is no guarantee that such plans will be successfully implemented. Our ability to curtail our operating losses or generate a profit may be further impacted by the fact that our business plan is largely unproven.
Some of our competitors have greater financial or other resources, longer operating histories and greater name recognition than we do and one or more of these competitors could use their greater resources and/or name recognition to gain market share at our expense or could make it very difficult for us to establish market share. ● Government regulation could negatively impact the business. ● Our business is subject to changing regulations regarding corporate governance, disclosure controls, internal control over financial reporting and other compliance areas that will increase both our costs and the risk of noncompliance.
Some of our competitors have greater financial or other resources, longer operating histories and greater name recognition than we do and one or more of these competitors could use their greater resources and/or name recognition to gain market share at our expense or could make it very difficult for us to establish market share. ● Government regulation, specifically that relating to data privacy protection could negatively impact the business. ● Our business is subject to changing regulations regarding corporate governance, disclosure controls, internal control over financial reporting and other compliance areas that will increase both our costs and the risk of noncompliance.
The continuing impact of this disease or any other disease which may give rise to a pandemic in the United States and worldwide are unknown, and the widespread growth in infections, or travel restrictions, quarantines or site closures imposed as a result of disease, is among other things, impacting the ability of our employees, sub-contractors, or our customers’ employees and sub-contractors to attend places of work, to meet with potential customers, or undertake implementations at our customer’s locations.
The impact of any disease which may give rise to a pandemic in the United States and worldwide are unknown, and the widespread growth in infections, or travel restrictions, quarantines or site closures imposed as a result of disease, among other things, may impact the ability of our employees, sub-contractors, or our customers’ employees and sub-contractors to attend places of work, to meet with potential customers, or undertake implementations at our customer’s locations.
We have changed the product set of the business to eliminate system sales and have developed a new range of software as a service (SaaS) based products and solutions, which are in a lower price range and intended to generate recurring revenue from a large number of customers.
We have changed the product set of the business and have developed a new range of software as a service (SaaS) based products and solutions, which are in a lower price range and intended to generate recurring revenue from a large number of customers.
Maintaining compliance with these rules and regulations, particularly after we cease to be an emerging growth company, will increase our legal, accounting and financial compliance costs, will make some activities more difficult, time-consuming and costly and may also place increased strain on our personnel, systems and resources. 17 The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and at the time we cease to be an emerging growth company and a smaller reporting company, we will be required to provide attestation that we maintain effective disclosure controls and procedures by our registered public accounting firm.
Maintaining compliance with these rules and regulations, particularly as we have ceased to be an emerging growth company, will increase our legal, accounting and financial compliance costs, will make some activities more difficult, time-consuming and costly and may also place increased strain on our personnel, systems and resources. 16 The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and at the time we cease to be a smaller reporting company, we will be required to provide attestation that we maintain effective disclosure controls and procedures by our registered public accounting firm.
We are still endeavoring to enter into multi-year contracts for our new products with minimum commitments ranging in price from $50,000 to $1,800,000 and we may, or may not, be successful in achieving such sales.
We are still endeavoring to enter into multi-year contracts for our new products with minimum commitments ranging in price from $50,000 to $10,000,000 and we may, or may not, be successful in achieving such sales.
War in Ukraine and the Middle East may impact the business of the Company, the markets in which it operates and the financial markets, in which the Company needs to raise capital.
The wars in Ukraine and the Middle East may impact the business of the Company, the markets in which it operates and the financial markets, in which the Company needs to raise capital.
Item 1A. Risk Factors Summary of Risk Factors The following summarizes the principal factors that make an investment in our company speculative or r isky, all of which are more fully described in the Risk Factors section below.
Item 1A. Risk Factors Summary of Risk Factors The following summarizes the principal factors that make an investment in our company speculative or risky, all of which are more fully described in the Risk Factors section below.
We rely in part on software licensed from third parties to develop and offer some of our solutions.
We rely in part on third-party software to develop and provide our solutions. We rely in part on software licensed from third parties to develop and offer some of our solutions.
Our failure to meet the continued listing requirements of the Nasdaq Capital Market could result in a de-listing of our Common Stock. ● Sales of a substantial number of shares of our Common Stock in the public market by our existing stockholders could cause our share price to fall. 7 ● We may be subject to securities litigation, which is expensive and could divert management attention. ● If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change their recommendations or publish negative reports regarding our business or our Common Stock, our stock price and trading volume could decline. ● The market price of our common stock has been volatile and your investment in our stock could suffer a decline in value. ● We do not anticipate paying any cash dividends in the foreseeable future.
Our failure to meet the continued listing requirements of the Nasdaq Capital Market could result in a de-listing of our Common Stock. ● Sales of a substantial number of shares of our Common Stock in the public market by our existing stockholders could cause our share price to fall. ● We may be subject to securities litigation, which is expensive and could divert management attention. ● If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change their recommendations or publish negative reports regarding our business or our Common Stock, our stock price and trading volume could decline. ● The market price of our common stock has been volatile and your investment in our stock could suffer a decline in value. ● We do not anticipate paying any cash dividends in the foreseeable future. 6 We have a history of losses and we may not be able to achieve profitability going forward.
You may not be able to resell your shares at or above the price you paid for them due to fluctuations in the market price of our stock caused by changes in our operating performance or prospects and other factors. 20 Some specific factors, in addition to the other risk factors identified above, that may have a significant effect on the price of our stock , many of which we cannot control, include but are not limited to: ● our announcements or our competitors’ announcements of technological innovations; ● actual or anticipated quarterly variations in operating results; ● variance in our financial performance from our own financial guidance, or from expectations of securities analysts; ● changes in our product pricing policies or those of our competitors; ● our involvement in claims of infringement of intellectual property rights or other litigation; ● the public’s reaction to our press releases, our other public announcements and our filings with the SEC; ● changes in accounting standards, policies, guidance, interpretations or principles; ● changes in our growth rate or our competitors’ growth rates; ● developments regarding our patents or proprietary rights or those of our competitors; ● our inability to raise additional capital as needed; ● changes in financial markets or general economic conditions, or in market valuations of other technology companies; ● short sales, hedging and other derivative transactions and short selling campaigns involving our capital stock; ● sales of stock by the Company, or members of our management team or Board or significant stockholders; and ● changes in stock market analyst recommendations or earnings estimates regarding our stock, other comparable companies or our industry generally.
Some specific factors, in addition to the other risk factors identified above, that may have a significant effect on the price of our stock, many of which we cannot control, include but are not limited to: ● our announcements or our competitors’ announcements of technological innovations; ● actual or anticipated quarterly variations in operating results; ● variance in our financial performance from our own financial guidance, or from expectations of securities analysts; ● changes in our product pricing policies or those of our competitors; ● our involvement in claims of infringement of intellectual property rights or other litigation; ● the public’s reaction to our press releases, our other public announcements and our filings with the SEC; ● changes in accounting standards, policies, guidance, interpretations or principles; ● changes in our growth rate or our competitors’ growth rates; ● developments regarding our patents or proprietary rights or those of our competitors; ● our inability to raise additional capital as needed; ● changes in financial markets or general economic conditions, or in market valuations of other technology companies; ● short sales, hedging and other derivative transactions and short selling campaigns involving our capital stock; ● sales of stock by the Company, or members of our management team or Board or significant stockholders; and ● changes in stock market analyst recommendations or earnings estimates regarding our stock, other comparable companies or our industry generally.
Our officers and directors and the holders of at least 5% of the outstanding shares of the Company currently beneficially own approximately 19.6% of our outstanding Common Stock, and 24.4% on a fully diluted basis assuming the exercise of both vested and unvested options and warrants.
Our officers and directors and the holders of at least 5% of the outstanding shares of the Company currently beneficially own approximately 20% of our outstanding Common Stock, and 24% on a fully diluted basis assuming the exercise of both vested and unvested options and warrants.
However, data protection legislation in various countries in which the Company does business (including Colombia and the United Kingdom) may require it to register its databases with governmental authorities in those countries and to comply with additional disclosure and consent requirements with regard to the collection, storage and use of personal information of individuals resident in those countries.
However, data protection legislation in various countries in which the Company does business (including India and the EEA) may require it to register its databases with governmental authorities in those countries and to comply with additional disclosure and consent requirements with regard to the collection, storage and use of personal information of individuals resident in those countries.
We have yet to achieve positive cash flow and, given our projected funding needs, our ability to generate positive cash flow is uncertain. We have had negative cash flow from operating activities of approximately $8.4 million and approximately $12.8 million for the years ended December 31, 2023 and 2022, respectively.
We have yet to achieve positive cash flow and, given our projected funding needs, our ability to generate positive cash flow is uncertain. We have had negative cash flow from operating activities of approximately $11.6 million and approximately $8.4 million for the years ended December 31, 2024 and 2023, respectively.
Compliance with such additional regulatory requirements are likely to result in additional operational costs in performing such Governmental Contracts which may impact our profitability.
Compliance with such additional regulatory requirements is likely to result in additional operational costs in performing such Governmental Contracts which may impact on our profitability.
Our growth-oriented business plan to offer products to our customers will require continued capital investment. Our research and development activities will also require continued investment. We raised approximately $15.4 million and $9.6 million net proceeds after expenses in 2023 and 2022, respectively, through equity and debt financing at varying terms.
Our growth-oriented business plan to offer products to our customers will require continued capital investment. Our research and development activities will also require continued investment. We raised approximately $10.0 million and $15.4 million net proceeds after expenses in 2024 and 2023, respectively, through equity and debt financing at varying terms.
We expect that we will continue to incur net losses in 2024. We may incur losses in the future for a number of reasons, including the other risks described in this report, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown events. Accordingly, we may not be able to achieve or maintain profitability.
We may incur losses in the future for a number of reasons, including the other risks described in this report, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown events. Accordingly, we may not be able to achieve or maintain profitability.
Foreign Corrupt Practices Act, or the FCPA, and other laws in the United States and elsewhere that prohibit improper payments or offers of payments to United States’, or foreign governments and their officials and political parties for the purpose of obtaining or retaining business.
Additionally, we are subject to the U.S. Foreign Corrupt Practices Act, or the FCPA, and other laws in the United States and elsewhere that prohibit improper payments or offers of payments to United States’, or foreign governments and their officials and political parties for the purpose of obtaining or retaining business.
Each of these competitors has the potential to capture market share in our target markets, which could have an adverse effect on our position in our industry and on our business and operating results. Government regulation could negatively impact the business.
Each of these competitors has the potential to capture market share in our target markets, which could have an adverse effect on our position in our industry and on our business and operating results. Government regulation, specifically that relating to data privacy protection could negatively impact the business.
To the extent that our business is based on Governmental Contracts, the relevant government authorities will need to approve us as a supplier and the terms of those contracts. However, it is possible that any proposed expansion to our business and operations in the future would require government approvals.
To the extent that our contracts are with Governmental or regulated entities, the relevant government authorities will need to approve us as a supplier and the terms of those contracts. However, it is possible that any proposed expansion to our business and operations in the future would require government approvals.
If we fail to comply with these regulations, we could face difficulties in preparing and filing timely and accurate financial reports. ● Our amended and restated bylaws designate certain courts as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees. ● We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to “emerging growth companies” will make our Common Stock less attractive to investors. ● There can be no assurance that we will be able to comply with the continued listing standards of the Nasdaq Capital Market.
If we fail to comply with these regulations, we could face difficulties in preparing and filing timely and accurate financial reports. ● Our amended and restated bylaws designate certain courts as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or employees. ● There can be no assurance that we will be able to comply with the continued listing standards of the Nasdaq Capital Market.
The m arket for our service offerings is highly competitive and rapidly evolving.
The market for our service offerings is highly competitive and rapidly evolving.
If we are unable to win particular contracts that are awarded through the competitive bidding process, we will incur expenses associated with such competitive bidding and may not be able to operate in the market for the products and services that are provided under those contracts for a number of years. 11 We rely in part on third-party software to develop and provide our solutions.
If we are unable to win particular contracts that are awarded through the competitive bidding process, we will incur expenses associated with such competitive bidding and may not be able to operate in the market for the products and services that are provided under those contracts for a number of years.
If any analysts who may cover us were to cease coverage of the Company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
If any analysts who may cover us were to cease coverage of the Company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. 18 The market price of our common stock has been volatile and your investment in our stock could suffer a decline in value.
Most recently, we have considered the impact of the coronavirus pandemic (COVID-19) on our overall operations.
Most recently, we have considered the impact of pandemics (e.g. COVID-19) on our overall operations.
Cyber-attacks, breaches of network or information technology security, presentation attacks, natural disasters, pandemics or terrorist attacks could have an adverse effect on our business. Cyber-attacks or other breaches of network or information technology (IT) security, natural disasters, pandemics such as Covid-19, terrorist acts or acts of war may cause equipment failures or disrupt our systems and operations.
Cyberattacks or other breaches of network or information technology (IT) security, natural disasters, pandemics such as Covid-19, terrorist acts or acts of war may cause equipment failures or disrupt our systems and operations.
For so long as the hostilities continue and perhaps even thereafter as the situation in Europe and the Middle East unfolds, we may see increased volatility in financial markets and a flight to safety by investors, which may impact our stock price and make it more difficult for the Company to raise additional capital at the time when it needs to do so, or for financing to be available upon acceptable terms.
On the other hand, the threat of increased cyber-attacks from multiple threat actors, including state-sponsored organizations may prompt enterprises to adopt additional security measures such as those offered by the Company. 13 For so long as the hostilities continue and perhaps even thereafter as the situation in Europe and the Middle East unfolds, we may see increased volatility in financial markets and a flight to safety by investors, which may impact our stock price and make it more difficult for the Company to raise additional capital at the time when it needs to do so, or for financing to be available upon acceptable terms.
For example, threat actors may leverage emerging artificial intelligence (or, AI) technologies to develop new hacking tools and attack vectors, generate deep fake images, exploit vulnerabilities, obscure their activities, and increase the difficulty of threat attribution.
For example, threat actors are leveraging emerging artificial intelligence (or, AI) technologies to develop new hacking tools and attack vectors, generate deep fake images, exploit vulnerabilities, obscure their activities, and increase the difficulty of threat attribution. The use of AI by bad actors can increase both the sophistication and ease of production and therefore proliferation of these new threats.
The market price of our common stock has been volatile and your investment in our stock could suffer a decline in value. The market price of our common stock has experienced significant price and volume fluctuations. For example, during the three year period ended December 31, 2023, the closing price of our common stock ranged from $2.40 to $141.44.
The market price of our common stock has experienced significant price and volume fluctuations. For example, during the three-year period ended December 31, 2024, the closing price of our common stock ranged from $2.40 to $114.64.
There can be no assurance we will achieve positive cash flows in the foreseeable future. We need access to additional financing, which may not be available to us on acceptable terms, or at all.
It may also diminish supplier or customer willingness to enter into transactions with us, and have other adverse effects that may impact our long-term viability. There can be no assurance we will achieve positive cash flows in the foreseeable future. We need access to additional financing, which may not be available to us on acceptable terms, or at all.
The introduction of products embodying new technologies and the emergence of new industry standards and practices can render existing products obsolete and unmarketable. In addition cyber attack attempts are increasing in number, magnitude, and technical sophistication, and we expect emerging technologies to contribute to the increasing sophistication of attacks and to lead to new threats.
In addition, cyberattack attempts are increasing in number, magnitude, and technical sophistication, and we expect emerging technologies to contribute to the increasing sophistication of attacks and to lead to new threats.
In the event of a de-listing, we would take actions to restore our compliance with the Nasdaq Capital Market’s listing requirements, but we can provide no assurance that any action taken by us would result in our Common Stock becoming listed again, or that any such action would stabilize the market price or improve the liquidity of our Common Stock. 19 Specifically, o n January 25, 2023, the Company received a notice letter from the Listing Qualifications staff of the Nasdaq that it was not in compliance with the Nasdaq Listing Rule 5550(a)(2) that the Company maintain a bid price for the Company’s common stock above $1.00 per share (“Bid Price Requirement”).
In the event of a de-listing, we would take actions to restore our compliance with the Nasdaq Capital Market’s listing requirements, but we can provide no assurance that any action taken by us would result in our Common Stock becoming listed again, or that any such action would stabilize the market price or improve the liquidity of our Common Stock.
Alth ough we are now focusing our efforts in generating more United States based revenues, we continue to pursue international sales, in particular in Europe.
Most of our revenues historically to date are attributable to sales and business operations in jurisdictions other than the United States. Although we are now focusing our efforts in generating more United States based revenues, we continue to pursue international sales, in particular in Asia and Europe.
To date, we have not been subject to cyber-attacks or other cyber incidents that we are aware of which, individually or in the aggregate, resulted in a material impact to our operations or financial condition. 13 For us to further penetrate the marketplace, the marketplace must be confident that we provide effective security protection for governmental and other secured identification documents and other personally identifiable information or protected personal information, or PII.
For us to further penetrate the marketplace, the marketplace must be confident that we provide effective security protection for governmental and other secured identification documents and other personally identifiable information or protected personal information, or PII.
We could be exposed to fines and penalties in the event of breach any applicable sanctions legislation or orders. In addition, we might be required to suspend or terminate existing contracts in order to comply with such sanctions legislation or orders, which would adversely impact our future revenues and cash flows.
In addition, we might be required to suspend or terminate existing contracts in order to comply with such sanctions, legislation or orders, which would adversely impact our future revenues and cash flows. 12 Cyber-attacks, breaches of network or information technology security, presentation attacks, natural disasters, pandemics, or terrorist attacks could have an adverse effect on our business.
We have a history of losses and we may not be able to achieve profitability going forward. We have an accumulated deficit of approximately $159.5 million as of December 31, 2023 and incurred an operating loss of approximately $19.4 million for the year ended December 31, 2023. We have had net losses in most of our quarters since our inception.
We have an accumulated deficit of approximately $173.8 million as of December 31, 2024 and incurred an operating loss of approximately $14.3 million for the year ended December 31, 2024. We have had net losses in most of our quarters since our inception. We expect that we will continue to incur net losses in 2025.
Failure to comply with the terms of any Governmental Contract could result in substantial civil and criminal fines and penalties, as well as suspension from future contracts for a significant period of time, any of which could adversely affect our business by requiring us to pay the fines and penalties and prohibiting us from earning revenues from Governmental Contracts during the suspension period.
Failure to comply with the terms of any Governmental Contract could result in substantial civil and criminal fines and penalties, as well as suspension from future contracts for a significant period of time, any of which could adversely affect our business by requiring us to pay fines and penalties and prohibiting us from earning revenues from Governmental Contracts during the suspension period. 10 Furthermore, governmental programs can experience delays or cancellation of funding and suspension of appropriations has occurred, for example the partial United States government shutdown in 2018/19 and current congressional uncertainty over the debt ceiling which could lead to a further shutdown, which can be unpredictable; this may make it difficult to forecast our revenues on a quarter-by-quarter basis.
As a result, we believe that quarter-to-quarter comparisons of our sales are not a good indication of our future performance. In some future quarters, our sales may be below the expectations of securities analysts and investors, in which case the market price of our Common Stock may decrease significantly.
In some future quarters, our sales may be below the expectations of securities analysts and investors, in which case the market price of our Common Stock may decrease significantly. 11 Our efforts to expand our international operations are subject to a number of risks, any of which could adversely reduce our future international sales and increase our losses .
We anticipate that we will continue to have negative cash flows from operating activities through March 31, 2025 as we expect to incur increased research and development, sales and marketing, and general and administrative expenses. Our business will require significant amounts of working capital to support our growth, particularly as we seek to introduce our new offered products.
We anticipate that we will continue to have negative cash flows from operating activities through at least the next 12 months as we expect to incur increased research and development, sales and marketing, and general and administrative expenses.
The occurrence of any of these risks could have a material adverse effect on our business, results of operations, financial condition or cash flows, particularly in the case of a larger acquisition, or concurrent acquisitions.
The occurrence of any of these risks could have a material adverse effect on our business, results of operations, financial condition or cash flows, particularly in the case of a larger acquisition, or concurrent acquisitions. 8 The market for our products is characterized by changing technology, requirements, standards and products, is impacted by the growing use of AI technologies and we may be adversely affected if we do not respond promptly and effectively to these changes.
The market for our products is characterized by changing technology, requirements, standards and products, and we may be adversely affected if we do not respond promptly and effectively to these changes. The market for our verified products is characterized by evolving technologies, changing industry standards, changing political and regulatory environments, frequent new product introductions and rapid changes in customer requirements.
The market for our identity verification and authentication products is characterized by evolving technologies, changing industry standards, changing political and regulatory environments, frequent new product introductions and rapid changes in customer requirements. The introduction of products embodying new technologies and the emergence of new industry standards and practices can render existing products obsolete and unmarketable.
The failure of our new product development efforts could have a material adverse effect on our business, results of operations and future growth. If our technology and solutions are not adopted and used by customer organizations, we will not be able to grow our business and our operations will be negatively affected.
The failure of our new product development efforts could have a material adverse effect on our business, results of operations and future growth. Issues relating to the development and use of AI, including generative AI, in our offerings may result in reputational harm, liability and adverse financial results.
An inability to generate positive cash flow from operations may adversely affect our ability to raise needed capital for our business on reasonable terms, if at all. It may also diminish supplier or customer willingness to enter into transactions with us, and have other adverse effects that may impact our long-term viability.
Our business will require significant amounts of working capital to support our growth, particularly as we seek to introduce our new offered products. An inability to generate positive cash flow from operations may adversely affect our ability to raise needed capital for our business on reasonable terms, if at all.
We have historically depended upon a small number of large system sales ranging up to $1,500,000 and we may fail to successfully transition to new products generating recurring revenues. Historically, we have derived a substantial portion of our revenues from a small number of sales of large, relatively expensive systems, typically ranging in price up to $1,500,000.
We depend upon a small number of large sales with contractual commitments ranging from $500,000 up to $10,000,000, which take longer to close and may result in a concentration of business and unpredictable quarterly revenue. We derive a substantial portion of our revenues from a small number of sales with large contractual commitments ranging from $500,000 up to $10,000,000.
Removed
Cancellation of any one of our major Governmental Contracts could have a material adverse effect on our financial condition. 10 Additionally, we are subject to the U.S.
Added
As there can be no assurance that the Company will be able to achieve positive cash flows (become cash flow positive) and raise sufficient capital to maintain operations, there is substantial doubt about the Company’s ability to continue as a going concern.
Removed
Furthermore, governmental programs can experience delays or cancellation of funding and suspension of appropriations has occurred, for example the partial United States government shutdown in 2018/19, which can be unpredictable; this may make it difficult to forecast our revenues on a quarter-by-quarter basis. We may have to seek business through a competitive bidding process.
Added
Social, ethical and operational issues relating to the use of AI, including generative AI, in our offerings may result in reputational harm, liability and additional costs. We are incorporating AI technologies, developed by third parties, into our offerings.
Removed
We have invested heavily in developing and launching such products but there is no guarantee that such efforts will be successful and that a satisfactory return on such investment will be achieved.
Added
If our AI development, deployment, data privacy and product disclosures, or governance is ineffective or inadequate, it may result in incidents that impair the public acceptance of our AI solutions, or cause harm to individuals, customers or society, or result in our offerings not working as intended or producing unexpected outcomes.
Removed
Our efforts to expand our international operations are subject to a number of risks, any of which could adversely reduce our future international sales and increase our losses . Most of our revenues historically to date are attributable to sales and business operations in jurisdictions other than the United States.
Added
Jurisdictions around the world are developing and passing new regulations that apply specifically to the use of AI. For example, the EU AI Act was adopted in 2024 and will be implemented in phases through 2030, and other jurisdictions are considering similarly focused legislation.
Removed
On the other hand, the threat of increased cyber-attacks from multiple threat actors, including state-sponsored organizations may prompt enterprises to adopt additional security measures such as those offered by the Company.
Added
These regulations and the evolving AI regulatory environment may, among other impacts, result in inconsistencies among AI regulations and frameworks across jurisdictions, increase our compliance, governance and research and development costs, increase our exposure to claims related to our AI models and increase liability related to the use of AI by our customers or users that are beyond our control.
Removed
We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to “emerging growth companies” will make our Common Stock less attractive to investors.
Added
There can be no guarantee that future AI regulations will not adversely impact us or conflict with our approach to AI, including affecting our ability to make our offerings available without costly changes, delaying or halting development of our offerings, requiring us to change our development practices, go to market strategies and indemnity protections and subjecting us to additional compliance requirements, regulatory action, competitive harm, reputational harm and legal liability.
Removed
We are an “emerging growth company,” as defined in the JOBS Act, and we expect to take advantage of certain exemptions and relief from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” In particular, while we are an “emerging growth company” (1) we will not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, (2) we will be exempt from any rules that may be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotations or a supplement to the auditor’s report on financial statements, (3) we will be subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (4) we will not be required to hold nonbinding advisory votes on executive compensation or stockholder approval of any golden parachute payments not previously approved.
Added
To the extent we rely on third-party AI technologies in our products, services and solutions, we will face risks inherent in how those technologies and their AI models have been developed and deployed. Uncertainty around new and evolving AI uses may require significant, additional investment. We may in the future experience, challenges accessing AI models, datasets or hardware.
Removed
In addition, we are eligible to delay the adoption of new or revised accounting standards applicable to public companies until those standards apply to private companies, and as a result, we may not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies.
Added
Developing, testing and deploying AI systems and countermeasures to AI threats outlined above, may also increase the cost of our offerings, including due to the nature of the computing costs. 9 If our technology and solutions are not adopted and used by customer organizations, we will not be able to grow our business and our operations will be negatively affected.
Removed
The Company has adopted and will be adopting all standards as they become effective for public companies. We also take advantage of reduced disclosure requirements, including regarding executive compensation.
Added
We may have to seek business through a competitive bidding process.
Removed
If we remain an “emerging growth company” in the future, we may take advantage of other exemptions, including the exemptions from the advisory vote requirements and executive compensation disclosures under the Dodd-Frank Wall Street Reform and Customer Protection Act, and the exemption from the provisions of Section 404(b) of the Sarbanes-Oxley Act.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

7 edited+1 added−2 removed20 unchanged
Biggest changeWe maintain controls and procedures that are designed to ensure prompt escalation of certain cybersecurity incidents so that decisions regarding public disclosure and reporting of such incidents can be made by management and the Board in a timely manner. 22 Risk Assessment At least annually, we conduct a cybersecurity risk assessment that takes into account information from internal stakeholders, known information security vulnerabilities, and information from external sources (e.g., reported security incidents that have impacted other companies, industry trends, and evaluations by third parties and consultants).
Biggest changeRisk Assessment At least annually, we conduct a cybersecurity risk assessment that takes into account information from internal stakeholders, known information security vulnerabilities, and information from external sources (e.g., reported security incidents that have impacted other companies, industry trends, and evaluations by third parties and consultants).
Risk assessment is integral to all engineering, business and operational decisions and in addition to the annual reviews, is an ongoing effort, as circumstances and facts arise. Self Audit At least annually we conduct a self-audit of our information security management systems (“ISMS”), in order to identify if there is any non-conformance with our ISMS policies and procedures.
Risk assessment is integral to all engineering, business and operational decisions and in addition to the annual reviews, is an ongoing effort, as circumstances and facts arise. 20 Self Audit At least annually we conduct a self-audit of our information security management systems (“ISMS”), in order to identify if there is any non-conformance with our ISMS policies and procedures.
We regularly remind employees of the importance of handling and protecting customer and employee data, including through regular privacy and security training and testing to enhance employee awareness of how to detect and respond to cybersecurity threats. 23 External Assessments Our cybersecurity policies, standards, processes and practices are regularly assessed by consultants and external independent auditors.
We regularly remind employees of the importance of handling and protecting customer and employee data, including through regular privacy and security training and testing to enhance employee awareness of how to detect and respond to cybersecurity threats. External Assessments Our cybersecurity policies, standards, processes and practices are regularly assessed by consultants and external independent auditors.
These assessments include a variety of activities including information security assessments, audits and independent reviews of our ISMS, control environment and operating effectiveness. For example, in 2022 and 2023, we conducted independent audits to assess our ISMS against the ISO/IEC 27001:2013 standard and received certification of compliance with the standard.
These assessments include a variety of activities including information security assessments, audits and independent reviews of our ISMS, control environment and operating effectiveness. For example, in 2023 and 2024, we conducted independent audits to assess our ISMS against the ISO/IEC 27001:2013 standard and received certification of compliance with the standard. We also undertake regular penetration testing of our systems.
They receive regular reports from management about the prevention, detection, mitigation, and remediation of cybersecurity incidents, including material security risks and information security vulnerabilities. Our Security Committee directly oversees our cybersecurity program.
Governance Board Oversight Our Board, in coordination with the Security Committee, oversees our management of cybersecurity risk. They receive regular reports from management about the prevention, detection, mitigation, and remediation of cybersecurity incidents, including material security risks and information security vulnerabilities. Our Security Committee directly oversees our cybersecurity program.
Cybersecurity processes are adjusted based on the information provided from these assessments. We have also obtained industry certifications and attestations that demonstrate our dedication to protecting the data our customers entrust to us. Governance Board Oversight Our Board, in coordination with the Security Committee, oversees our management of cybersecurity risk.
The results of significant assessments are reported to management and the Board. Cybersecurity processes are adjusted based on the information provided from these assessments. We have also obtained industry certifications and attestations that demonstrate our dedication to protecting the data our customers entrust to us.
Management’s Role Our Chief Technology Officer (“CTO”), Senior Vice President of Engineering (“SVP-Engineering”), Data Engineering and Security Director and General Counsel have primary responsibility for assessing and managing material cybersecurity risks and are members of management’s Security Committee, which is a governing body that drives alignment on security decisions across our company.
The Board receives periodic updates from management on cybersecurity risk resulting from risk assessments, progress of risk reduction initiatives, external auditor feedback, control maturity assessments, and relevant internal and industry cybersecurity incidents. 21 Management’s Role Our Chief Technology Officer (“CTO”), Senior Vice President of Engineering (“SVP-Engineering”), Data Engineering and Security Director and General Counsel have primary responsibility for assessing and managing material cybersecurity risks and are members of management’s Security Committee, which is a governing body that drives alignment on security decisions across our company.
Removed
In 2022 we also undertook independent testing to achieve conformance with ISO 30107-3 Level 1 and 2 for Presentation Attack Detection (PAD), for our Bioweb server and Verified dashboard. We also undertake regular penetration testing of our systems. The results of significant assessments are reported to management and the Board.
Added
We maintain controls and procedures that are designed to ensure prompt escalation of certain cybersecurity incidents so that decisions regarding public disclosure and reporting of such incidents can be made by management and the Board in a timely manner.
Removed
The Board receives periodic updates from management on cybersecurity risk resulting from risk assessments, progress of risk reduction initiatives, external auditor feedback, control maturity assessments, and relevant internal and industry cybersecurity incidents.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeWhile any litigation contains an element of uncertainty, we have no reason to believe that the outcome of such proceedings will have a material adverse effect on the financial condition or results of operations of the Company. Item 4. Mine Safety Disclosures Not applicable. 24 PART II
Biggest changeWhile any litigation contains an element of uncertainty, we have no reason to believe that the outcome of such proceedings will have a material adverse effect on the financial condition or results of operations of the Company. Item 4. Mine Safety Disclosures Not applicable. 22 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

18 edited+8 added−13 removed23 unchanged
Biggest changeOn May 12, 2023, in connection with certain recruitment services, the Company issued 187,500 common stock warrants to Madison III, LLC, an affiliate of Madison with a term of 5 years and an exercise price of $3.164 per share.
Biggest changeOn May 12, 2023, in connection with certain recruitment services, the Company issued 187,500 common stock warrants to Madison III, LLC, an affiliate of Madison with a term of 5 years and an exercise price of $3.164 per share. 25 On November 3, 2023, the Company entered into a further engagement agreement (the “November Engagement Agreement”) with Madison, pursuant to which Madison agreed to serve as non-exclusive exclusive placement agent for the issuance and sale in a public offering of an aggregate of 1,574,990 shares (the “November Registered Shares”).
The issuance of the above securities is exempt from the registration requirements under Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Regulation D promulgated thereunder. Item 6. Reserved. 28
The issuance of the above securities is exempt from the registration requirements under Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Regulation D promulgated thereunder. Item 6. Reserved.
Pursuant to the November Engagement Agreement, the Company reimbursed Madison $60,000 for fees and expenses of legal counsel and other out-of-pocket expenses. The November Engagement Agreement has indemnity and other customary provisions for transactions of this nature. 27 Director & Executive Officer Stock Option Grants On June 28, 2023, the Company made a grant of options to each of Messrs.
Pursuant to the June Engagement Agreement, the Company reimbursed Madison $60,000 for fees and expenses of legal counsel and other out-of-pocket expenses. The June Engagement Agreement has indemnity and other customary provisions for transactions of this nature. Director & Executive Officer Stock Option Grants On June 28, 2023, the Company made a grant of options to each of Messrs.
Other types of equity awards may also be granted under each of the plans include but are not limited to restricted stock, restricted stock units, and stock appreciation rights, which together with the ISO’s and Non-ISO’s are hereinafter collectively referred to as “Awards”.
Other types of equity awards may also be granted under each of the plans include but are not limited to restricted stock, restricted stock units, and stock appreciation rights, which together with the ISOs and Non-ISOs are hereinafter collectively referred to as “Awards”.
Sellitto to acquire 50,000 shares of common stock at an exercise price of $8.87 per share, exercisable for a period of ten years, vesting subject to achievement of performance and service conditions. On December 21, 2023, the Company granted Mr. Szoke and Mr.
Sellitto to acquire 50,000 shares of common stock at an exercise price of $8.87 per share, exercisable for a period of ten years, vesting subject to achievement of performance and service conditions. On December 21, 2023, the Company made a grant of options to Mr. Szoke and Mr.
The Company has no other equity incentive plans in effect as of December 31, 2023. 25 On September 28, 2017, the shareholders of the Company approved the 2017 Incentive Stock Plan (“2017 Incentive Plan”). On December 29, 2021 the shareholders of the Company approved the 2021 Equity Incentive Plan (“2021 Plan”).
The Company has no other equity incentive plans in effect as of December 31, 2024. On September 28, 2017, the shareholders of the Company approved the 2017 Incentive Stock Plan (“2017 Incentive Plan”). On December 29, 2021 the shareholders of the Company approved the 2021 Equity Incentive Plan (“2021 Plan”).
The 2021 Plan initially authorized Awards over 156,250 shares as well as (a) the balance of the shares which were not allocated to awards under the 2017 Incentive Plan and (b) any shares which are forfeited or cancelled under awards that lapse or expire under the prior plans.
No further awards may be made under the 2017 Incentive Plan. The 2021 Plan initially authorized Awards over 156,250 shares as well as (a) the balance of the shares which were not allocated to awards under the 2017 Incentive Plan and (b) any shares which are forfeited or cancelled under awards that lapse or expire under the prior plans.
Other Stock Option Grants During the year ended December 31, 2023, the Company also granted a total of 100,000 options to certain new employees at exercise prices ranging from $6.13 per share to $9.85 per share.
During the year ended December 31, 2023, the Company granted a total of 100,000 such options to certain new employees at exercise prices ranging from $6.13 per share to $9.85 per share.
The Company filed a further Registration Statement on Form S-8 on February 1, 2022, with respect to the 2021 Plan. 26 Unregistered Sales of Equity Securities Securities Purchase Agreement Between May 23 and June 7, 2023, the Company entered into a securities purchase agreement with accredited investors (the “Purchase Agreement”), pursuant to which the Company agreed to issue and sell, in a public offering an aggregate of 1,113,828 shares (the “Registered Shares”) of the Company’s common stock and in a concurrent private placement 1,121,482 shares (the “PIPE Shares”) of Common Stock (the “Offering”) at a price between $3.664 and $5.632 per share (or $4.00 if the purchaser is a director of the Company).
Unregistered Sales of Equity Securities Securities Purchase Agreement Between May 23 and June 7, 2023, the Company entered into a securities purchase agreement with accredited investors (the “Purchase Agreement”), pursuant to which the Company agreed to issue and sell, in a public offering an aggregate of 1,113,828 shares (the “Registered Shares”) of the Company’s common stock and in a concurrent private placement 1,121,482 shares (the “PIPE Shares”) of Common Stock (the “Offering”) at a price between $3.664 and $5.632 per share (or $4.00 if the purchaser is a director of the Company).
Sellitto options to acquire 5,000 and 7,000 shares of common stock, respectively, at an exercise price of $9.25 per share, exercisable for a period of ten years, vesting over twelve months.
Sellitto to acquire 5,000 and 7,000 shares of common stock, respectively, at an exercise price of $9.25 per share, exercisable for a period of ten years, vesting over twelve months. On May 20, 2024, the Company made a grant of options to Mr.
On November 3, 2023, the Company entered into a further engagement agreement (the “November Engagement Agreement”) with Madison, pursuant to which Madison agreed to serve as non-exclusive exclusive placement agent for the issuance and sale in a public offering of an aggregate of 1,574,990 shares (the “November Registered Shares”).
On June 12, 2024, the Company entered into a further engagement agreement (the “June Engagement Agreement”) with Madison, pursuant to which Madison agreed to serve as non-exclusive exclusive placement agent for the issuance and sale in a public offering of an aggregate of 1,464,965 shares (the “June Registered Shares”).
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The high and low per share closing sales prices of the Company’s stock on the Nasdaq Market (ticker symbol AUID) for each quarter for the years ended December 31, 2023 and 2022 were as follows: Quarter Ended High Low March 31, 2022 $ 114.64 $ 22.64 June 30, 2022 $ 36.40 $ 12.00 September 30, 2022 $ 26.96 $ 15.12 December 31, 2022 $ 23.92 $ 4.58 March 31, 2023 $ 5.84 $ 2.40 June 30, 2023 $ 7.12 $ 2.80 September 30, 2023 $ 10.96 $ 6.43 December 31, 2023 $ 9.94 $ 5.78 Holders of our Common Stock As of March 15, 2024, there were approximately 147 stockholders of record of our common stock.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information The high and low per share closing sales prices of the Company’s stock on the Nasdaq Market (ticker symbol AUID) for each quarter for the years ended December 31, 2024 and 2023 were as follows: Quarter Ended High Low March 31, 2023 $ 5.84 $ 2.40 June 30, 2023 $ 7.12 $ 2.80 September 30, 2023 $ 10.96 $ 6.43 December 31, 2023 $ 9.94 $ 5.78 March 31, 2024 $ 11.95 $ 7.01 June 30, 2024 $ 11.79 $ 7.16 September 30, 2024 $ 10.79 $ 6.29 December 31, 2024 $ 8.12 $ 5.21 Holders of our Common Stock As of March 10, 2025, there were approximately 128 stockholders of record of our common stock.
The 2017 Incentive Plan initially authorized Awards over 604,167 shares of common stock and at the Annual Meeting of Stockholders held on March 22, 2021, the stockholders approved and ratified an increase of 312,500 shares allocated to the 2017 Incentive Plan. No further awards may be made under the 2017 Incentive Plan.
The summaries, however, do not purport to be a complete description of all the provisions of each plan. 23 The 2017 Incentive Plan initially authorized Awards over 604,167 shares of common stock and at the Annual Meeting of Stockholders held on March 22, 2021, the stockholders approved and ratified an increase of 312,500 shares allocated to the 2017 Incentive Plan.
Securities Authorized for Issuance Under Equity Compensation Plans as of December 31, 2023 Plan Number of Securities to be issued upon exercise of outstanding options, awards and rights Weighted average exercise price of outstanding options, awards and rights Number of securities remaining available for issuance under equity compensation plans (excluding) securities reflected in first column) Equity compensation plans approved by security holders - 2017 Incentive Stock Plan 434,539 36.33 - Equity compensation plans approved by security holders - 2021 Equity Incentive Plan 863,701 7.14 17,003 Equity compensation plans not approved by security holders 498,501 42.69 185,000 The Company has adopted the authID Inc. 2017 Incentive Stock Plan and the 2021 Equity Incentive Plan.
Securities Authorized for Issuance Under Equity Compensation Plans as of December 31, 2024 Plan Number of Securities to be issued upon exercise of outstanding options, awards and rights Weighted average exercise price of outstanding options, awards and rights Number of securities remaining available for issuance under equity compensation plans (excluding) securities reflected in first column) Equity compensation plans approved by security holders - 2017 Incentive Stock Plan 403,498 32.52 - Equity compensation plans approved by security holders - 2021 Equity Incentive Plan 815,078 6.64 - Equity compensation plans approved by security holders - 2024 Equity Incentive Plan 158,135 8.67 340,262 Equity compensation plans not approved by security holders 770,689 32.38 - The Company has adopted the authID Inc. 2017 Incentive Stock Plan, 2021 Equity Incentive Plan, and 2024 Equity Incentive Plan.
At the Annual Meeting of Stockholders held on June 26, 2023, the stockholders approved and ratified an increase of 362,500 shares to the 2021 Plan. All plans are administered by the Compensation Committee.
At the Annual Meeting of Stockholders held on June 26, 2023, the stockholders approved and ratified an increase of 362,500 shares to the 2021 Plan. No further awards may be made under the 2021 Incentive Plan.
The Company filed a Registration Statement on Form S-8 on November 12, 2021, with respect to the 2017 Incentive Plan and all outstanding Awards set forth in the above table.
The options so granted are Non-ISOs and the terms of the Inducement Grants are contained in an agreement between the participant and the Company which are consistent with the Awards issued under the 2021 and 2024 Plans. 24 The Company filed a Registration Statement on Form S-8 on November 12, 2021, with respect to the 2017 Incentive Plan and all outstanding Awards set forth in the above table.
The Company has also authorized the grant of options to purchase up to 185,000 shares common stock by way of inducement grants to new employees under Nasdaq Rule 5635(c) (“Inducement Grants”).
In addition, the Compensation Committee has from time to time approved the grant of options to purchase shares of common stock by way of Inducement Grants to new employees, which are outside the approved Plans, pursuant to Nasdaq Listing Rule 5635(c)(4). During 2024 the Company granted 300,000 such options.
The following is a summary of principal features of the 2017 Incentive Plan and the 2021 Plan. The summaries, however, does not purport to be a complete description of all the provisions of each plan.
On June 26, 2024, the shareholders of the Company approved the 2024 Equity Incentive Plan (“2024 Plan”). The following is a summary of principal features of the 2017 Incentive Plan, the 2021 Plan, and the 2024 Plan.
Removed
On December 21, 2023, the Compensation Committee approved the grant of options to purchase up to 185,000 shares common stock by way of Inducement Grants to new employees, that the Company expected to hire commencing January 2024.
Added
The 2024 Plan initially authorized 395,000 shares as well as (a) the balance of the shares which were not allocated to awards under the 2021 Incentive Plan and (b) any shares which are forfeited or cancelled under awards that lapse or expire under the prior plans. All plans are administered by the Compensation Committee.
Removed
The grants are to be Non-ISO’s and the terms of the Inducement Grants shall be contained in an agreement between the participant and the Company and such terms shall be consistent with the Awards issued under the 2021 Plan.
Added
The Company filed a further Registration Statement on Form S-8 on February 1, 2022, with respect to the 2021 Plan.
Removed
March 2022 Private Placement On March 21, 2022, the Company entered into a Securities Purchase Agreement (“SPA”) with certain accredited investors, including certain directors of the Company or their affiliates (the “Note Investors”), and, pursuant to the SPA, sold to the Note Investors Senior Secured Convertible Notes (the “Convertible Notes”) with an aggregate initial principal amount of approximately $9.2 million and a conversion price of $29.60 per share.
Added
Pursuant to the November Engagement Agreement, the Company reimbursed Madison $60,000 for fees and expenses of legal counsel and other out-of-pocket expenses. The November Engagement Agreement has indemnity and other customary provisions for transactions of this nature.
Removed
The Convertible Notes were sold with an aggregate cash origination fee of approximately $200,000, and we issued a total of approximately 3,563 shares of our common stock to the Note Investors as an additional origination fee.
Added
The Company paid Madison an aggregate cash fee equal to 7.0% of the gross proceeds received by the Company from the sale of the June Registered Shares, $80,000 cash retainer fee and issued stock purchase warrants (the “June Madison Warrants”) to purchase up to 102,547 shares of common stock of the Company with a term of 5 years at an exercise price of $7.50 per share, which equal to 7.0% of the aggregate number of Shares placed in the Offering.
Removed
The Convertible Notes will accrue interest at the rate of 9.75% per annum, which will be payable in cash or, for some or all of the first five interest payments, in shares of our common stock at the Company’s option, on the last day of each calendar quarter before the maturity date and on the maturity date.
Added
Mehta to acquire 13,282 shares of common stock at the exercise price of $7.78 and exercisable for a period of ten years, subject to achievement of service conditions. On August 13, 2024, the Company made a grant of options to each of Messrs. Mehta, Jisser, Koehneman, Thompson and to Ms. White to acquire 15,627 shares of common stock.
Removed
The maturity date of the Convertible Notes is March 31, 2025.
Added
Each such option is at the exercise price of $8.67 per share, exercisable for a period of ten years, vesting over a period of twelve months. On November 12, 2024, the Company made a grant of options to Mr.
Removed
On March 18 and March 21, 2022, the Company entered into Subscription Agreements (the “Subscription Agreements”) with an accredited investor and certain members of authID’s management team (the “PIPE Investors”), and, pursuant to the Subscription Agreements, sold to the PIPE Investors a total of 132,940 shares of our common stock at prices of $24.24 per share for an outside investor and $29.60 per share for the management investors (the “PIPE”).
Added
Erick Soto to acquire 100,000 shares of common stock at an exercise price of $6.94, exercisable for a period of ten years, vesting over a period of thirty-six months. 26 Other Stock Option Grants In addition, the Company issued options by way of Inducement Grants to new employees, which are outside the approved Plans, pursuant to Nasdaq Listing Rule 5635(c)(4).
Removed
The aggregate gross proceeds from the PIPE are approximately $3.3 million.
Added
During the year ended December 31, 2024, the Company granted a total of 200,000 such options to certain new employees at exercise prices ranging from $5.99 per share to $9.61 per share. All the offers and sales of securities listed above were made to accredited investors.
Removed
Additionally, the Company entered into a Credit Facility with an accredited investor, who is both a current shareholder of the Company and a Note Investor, pursuant to which the accredited investor agreed to provide a $10.0 million unsecured standby line of credit facility that will rank behind the Convertible Notes and may be drawn down in several tranches, subject to certain conditions described in the Credit Facility.
Removed
Pursuant to the Credit Facility, the Company agreed to pay the Lender the Facility Commitment Fee of 12,500 shares of our common stock upon the effective date of the Facility Agreement.
Removed
The gross proceeds of the sale of the Convertible Notes and the PIPE were used to pay the expenses of those offerings and to provide working capital for the Company. Miscellaneous During the year ended December 31, 2022, the Company issued approximately 42,463 shares of common stock pursuant to exercises of common stock warrants and options.
Removed
The Company also issued 59,981 shares of common stock in lieu of interest payments for the Convertible Notes. During the year ended December 31, 2022, a holder of a Convertible Note converted the full principal amount of $50,000 and accrued interest of $406 into 1,690 and 17 shares of our common stock, respectively.
Removed
On March 21, 2022, the Company issued 17,837 common stock warrants in connection with Subscription Agreements and Convertible Notes referenced above with a term of five years and exercise price of $29,60 per share. All the offers and sales of securities listed above were made to accredited investors.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

48 edited+23 added−35 removed47 unchanged
Biggest changeGarchik and three directors of the Company, including the Chief Executive Officer and Chairman of the Board of Directors. ● The Company issued 111,516 shares of common stock for approximately $388,000 of interest accrued under the Convertible Notes and Credit Facility. 2022 Common Stock Transactions ● On March 18 and March 21, 2022, the Company entered into Subscription Agreements (the “Subscription Agreements”) with an accredited investor and certain members of authID’s management team (the “PIPE Investors”), and, pursuant to the Subscription Agreements, sold to the PIPE Investors a total of 132,940 shares of our common stock at prices of $24.24 per share for an outside investor and $29.60 per share for the management investors (the “PIPE”).
Biggest changeThe purchasers under the November Purchase Agreement included Stephen J. Garchik and three directors of the Company, including the Chief Executive Officer and Chairman of the Board of Directors. ● The Company issued 111,516 shares of common stock for approximately $388,000 of interest accrued under the Convertible Notes and Credit Facility.
Biometric Identity Authentication Biometric identity authentication provides any organization with a secure, convenient solution to validate that an individual is the verified account owner for various purposes including passwordless login and performing specific transactions, or functions.
Biometric Identity Authentication - Verified Biometric identity authentication provides any organization with a secure, convenient solution to validate that an individual is the verified account owner for various purposes including passwordless login and performing specific transactions, or functions.
Because of these limitations, adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using Adjusted EBITDA only as a supplement to our U.S.
Because of these limitations, adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our U.S. GAAP results and using Adjusted EBITDA only as a supplement to our U.S. GAAP results.
Our solution returns a very low-latency response, key to enabling high-volume use cases (such as logins and high-value transactions) and providing a frictionless user experience. ● Precisely and accurately identify their consumers and employees, giving the enterprise complete confidence in who is accessing their digital assets ● Provide a seamless user experience in terms of speed and self-guided flow, so that even users who are not tech-savvy are easily able to complete the identity verification and authentication processes ● Support a wide variety of devices .
Our solution returns a very low-latency response, key to enabling high-volume use cases (such as logins and high-value transactions) and providing a frictionless user experience. 28 ● Precisely and accurately identify their consumers and employees, giving the enterprise complete confidence in who is accessing their digital assets ● Provide a seamless user experience in terms of speed and self-guided flow, so that even users who are not tech-savvy are easily able to complete the identity verification and authentication processes ● Support a wide variety of devices .
The Company accounts for forfeitures of employee awards as they occur. 34 Adjusted EBITDA This discussion includes information about Adjusted EBITDA that is not prepared in accordance with U.S. GAAP. Adjusted EBITDA is not based on any standardized methodology prescribed by U.S. GAAP and is not necessarily comparable to similar measures presented by other companies.
The Company accounts for forfeitures of employee awards as they occur. Adjusted EBITDA This discussion includes information about Adjusted EBITDA that is not prepared in accordance with U.S. GAAP. Adjusted EBITDA is not based on any standardized methodology prescribed by U.S. GAAP and is not necessarily comparable to similar measures presented by other companies.
Research and development activities and technology deployment will require continued investment. The Company projects that the current and past investments in technology and systems will lead to revenue expansion thereby reducing liquidity needs. However, to further implement its business plan and satisfy its working capital requirements, the Company will need to raise more capital.
Research and development activities and technology deployment will require continued investment. 34 The Company projects that the current and past investments in technology and systems will lead to revenue expansion, thereby reducing liquidity needs. However, to further implement its business plan and satisfy its working capital requirements, the Company will need to raise more capital.
In 2024, the Company will continue to be opportunistic and judicious in raising additional funds to support its operations and investments as it creates a sustainable organization. There is no guarantee that such financing will be available if available on acceptable terms. Our growth-oriented business plan to offer products to our customers will require continued capital investment.
In 2025, the Company will continue to be opportunistic and judicious in raising additional funds to support its operations and investments as it creates a sustainable organization. There is no guarantee that such financing will be available if available on acceptable terms. Our growth-oriented business plan to offer products to our customers will require continued capital investment.
As discussed in “Liquidity and Capital Resources” below, the Company secured additional financing during 2023 which provides funding for its current operations as it continues to invest in its product, people, and technology. The Company projects that the investments will lead to revenue expansion thereby reducing liquidity needs.
As discussed in “Liquidity and Capital Resources” below, the Company secured additional financing during 2024 which provides funding for its current operations as it continues to invest in its product, people, and technology. The Company projects that the investments will lead to revenue expansion, thereby reducing liquidity needs.
As a result of such exchange, the issuance of shares in satisfaction of the Credit Facility and the purchase of additional shares of common stock as referenced above (See Note 9 “Shareholders’ Equity” to the Consolidated Financial Statements), Mr. Garchik is now a holder of more than 10% of the outstanding shares of the Company’s common stock.
As a result of such exchange, the issuance of shares in satisfaction of the Credit Facility and the purchase of additional shares of common stock as referenced above (See Note 8 “Shareholders’ Equity” to the Consolidated Financial Statements), Mr. Garchik is now a holder of more than 10% of the outstanding shares of the Company’s common stock.
If we are successful in these efforts, we would expect our revenue to continue to grow. 31 Going Concern The Company’s consolidated financial statements included in this Annual Report have been prepared in accordance with U.S.
If we are successful in these efforts, we would expect our revenue to continue to grow. 29 Going Concern The Company’s consolidated financial statements included in this Annual Report have been prepared in accordance with U.S.
Establishing a biometric root of trust for each user that is bound to their accounts, or provisioned devices, authID stops fraud at onboarding, eliminates password risks and costs, and provides the faster, frictionless, and more accurate user identity experience demanded by operators of today’s digital ecosystems.
Establishing a biometric root of trust for each user that is bound to their accounts, or provisioned devices, authID stops fraud at onboarding, eliminates password risks and costs, and provides the faster, more accurate and privacy preserving user identity experience demanded by operators of today’s digital ecosystems.
(together with its subsidiaries, the “Company”, “authID”, “we” or “our”) ensures cyber-savvy enterprises “Know Who’s Behind the Device” TM for every customer or employee login and transaction.
(together with its subsidiaries, the “Company”, “authID”, “we” or “our”) ensures enterprises “Know Who’s Behind the Device” TM for every customer or employee login and transaction.
Payments due by period Less than More than Contractual Obligations Total 1 year 1-3 years 3-5 years 5 years Convertible Notes Payable $ 245,000 $ - $ 245,000 $ - $ - Long Term Severance 325,000 - 325,000 - $ - $ 570,000 $ - $ 570,000 $ - $ -
Payments due by period Less than More than Contractual Obligations Total 1 year 1-3 years 3-5 years 5 years Convertible Notes Payable $ 245,000 $ 245,000 $ - $ - $ - Severance Payable 325,000 325,000 - - $ - $ 570,000 $ 570,000 $ - $ - $ -
Cash provided by financing activities in 2023 consisted primarily of the net proceeds from the sale of common stock in May 2023 and November 2023 and a $0.5 million initial drawdown net of debt issuance costs under the Company’s A&R Facility Agreement.
Cash provided by financing activities in 2023 consists of proceeds from the sale of common stock in May 2023 and November 2023 and a $0.5 million initial drawdown net of debt issuance costs under the Company’s A&R Facility Agreement.
The purchase price of the shares issued in this transaction was the same as the purchase price paid by all other investors in the same round and was higher than the Nasdaq Official Closing Price in effect on the date of the transaction.
The purchase price of the shares issued in this transaction was the same as the purchase price paid by all other investors in the same round and was higher than the Nasdaq Official Closing Price in effect on the date of the transaction. On June 26, 2024, Mr.
GAAP assuming the Company will continue on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations for the next year following the issuance date of these financial statements. As of December 31, 2023, the Company had an accumulated deficit of approximately $159.5 million.
GAAP assuming the Company will continue on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations for the next year following the issuance date of these financial statements. As of December 31, 2024, the Company had an accumulated deficit of approximately $173.8 million.
Other items included the following: ● Conversion expense of $7.5 million in 2023 and $0 in 2022 ● Severance cost of $0.9 million in 2023 and $0.2 million in 2022 ● Impairment loss of $0 in 2023 and $1.1 million in 2022 ● Loss on debt extinguishment of $0.4 million in 2023 and $0 in 2022 Management believes that Adjusted EBITDA, when viewed with our results under U.S.
Other items included the following: ● Conversion expense of $0 in 2024 and $7.5 million in 2023 ● Severance cost of $0.01 million in 2024 and $0.9 million in 2023 ● Loss on debt extinguishment of $0 in 2024 and $0.4 million in 2023 Management believes that Adjusted EBITDA, when viewed with our results under U.S.
Our Platform Our Verified TM cloud-based platform was developed with internally developed software as well as acquired and licensed technology and provides the following core services: ● Biometric Identity Verification ● Biometric Identity Authentication ● Account / Access Recovery ● FIDO Passkey binding 29 Biometric Identity Verification Biometric identity verification establishes the trusted identity of a user based on a variety of ground truth sources, including government-issued identity documents such as national IDs, driver’s licenses and passports or electronic machine-readable travel documents (or eMRTDs).
Our Platform Our cloud-based platform was developed with internally developed software as well as acquired and licensed technology and provides the following core services: ● Biometric Identity Verification – Proof TM ● Biometric Identity Authentication - Verified TM ● PrivacyKey TM Privacy Preserving Biometrics ● Account / Access Recovery 27 Biometric Identity Verification - Proof Biometric identity verification establishes the trusted identity of a user based on a variety of ground truth sources, including government-issued identity documents such as national IDs, driver’s licenses and passports or electronic machine-readable travel documents (or eMRTDs).
Interest expense Interest expense during the year ended December 31, 2023 compared to the year ended December 31, 2022 decreased by $0.3 million, principally due to the exchange of Convertible Notes for common stock in May 2023.
Interest expense Interest expense during the year ended December 31, 2024 compared to the year ended December 31, 2023 decreased by $1.1 million, principally due to the exchange of Convertible Notes for common stock in May 2023.
The continuation of the Company as a going concern is dependent upon financial support from the Company’s stockholders and noteholders, the ability of the Company to obtain additional debt or equity financing to continue operations, the Company’s ability to generate sufficient cash flows from operations, successfully locating and negotiating with other business entities for potential acquisition and /or acquiring new clients to generate revenues and cash flows.
The continuation of the Company as a going concern is dependent upon financial support from the Company’s stockholders, the ability of the Company to obtain additional debt or equity financing to continue operations, the Company’s ability to generate sufficient revenues and cash flows from operations (both from existing and new customers), and successfully locating and negotiating with cash generating business entities for potential acquisition by the Company.
As there can be no assurance that the Company will be able to achieve positive cash flows (become cash flow profitable) and raise sufficient capital to maintain operations, there is substantial doubt about the Company’s ability to continue as a going concern. Subsequent Events On February 15, 2024, Mr.
As there can be no assurance that the Company will be able to achieve positive cash flows (become cash flow positive) and raise sufficient capital to maintain operations, there is substantial doubt about the Company’s ability to continue as a going concern.
Liquidity and Capital Resources As of December 31, 2023, current assets were $10.9 million and current liabilities outstanding amounted to $1.7 million which resulted in net working capital of $9.2 million. Net cash used by operating activities was $8.4 million for the year ended December 31, 2023 compared to $12.8 million in 2022.
Liquidity and Capital Resources As of December 31, 2024, current assets were $10.1 million and current liabilities outstanding amounted to $3.0 million which resulted in net working capital of $7.1 million. Net cash used by operating activities was $11.6 million for the year ended December 31, 2024 compared to $8.4 million in 2023.
The purchasers under the November Purchase Agreement included Stephen J.
The purchasers under the June Purchase Agreement included Stephen J.
As of December 31, 2022, MultiPay S.A.S., and IDGS S.A.S assets are presented as assets held for sale on the Company’s Consolidated Balance Sheets and their operations together with those of Cards Plus Pty Ltd., presented as discontinued operations in the Consolidated Statements of Operations during the years ended December 31, 2023 and 2022, as they met the criteria for discontinued operations under applicable accounting guidance.
MultiPay S.A.S., and IDGS S.A.S. operations, together with those of Cards Plus Pty Ltd., are presented as discontinued operations in the Consolidated Statements of Operations during the year ended December 31, 2023, as they met the criteria for discontinued operations under applicable accounting guidance.
See Notes 6 and 7 of the Consolidated Financial Statements for additional information associated with the credit facility and convertible notes payable. 38 Equity Financing See Note 9 of the Consolidated Financial Statements for additional information associated with equity financing in 2023 and 2022. 2023 Common Stock Transactions ● Between May 23 and June 7, 2023, the Company entered into a securities purchase agreement with accredited investors (the “Purchase Agreement”), pursuant to which the Company agreed to issue and sell, in a public offering an aggregate of 1,113,828 shares (the “Registered Shares”) of the Company’s common stock and in a concurrent private placement 1,121,482 shares (the “PIPE Shares”) of Common Stock (the “May 2023 Offering”) at a per share price between $3.664 and $5.632 per share (or $4.00 if the purchaser is a director of the Company).
Garchik and one director of the Company. 2023 Common Stock Transactions ● Between May 23 and June 7, 2023, the Company entered into a securities purchase agreement with accredited investors (the “Purchase Agreement”), pursuant to which the Company agreed to issue and sell, in a public offering an aggregate of 1,113,828 shares (the “Registered Shares”) of the Company’s common stock and in a concurrent private placement 1,121,482 shares (the “PIPE Shares”) of Common Stock (the “May 2023 Offering”) at a per share price between $3.664 and $5.632 per share (or $4.00 if the purchaser is a director of the Company).
Full details of these transactions are set forth in Item 13 “Certain Relationships and Related Transactions and Director Independence” and in Note 8 “Related Party Transactions” to the Audited Consolidated Financial Statements of the Company as of and for the years ended December 31, 2022 and 2023, which are exhibited hereto (the “Consolidated Financial Statements”) .
Full details of these transactions are set forth in Item 13 “Certain Relationships and Related Transactions and Director Independence” and in Note 7 “Related Party Transactions” to the Audited Consolidated Financial Statements of the Company as of and for the years ended December 31, 2024 and 2023, which are exhibited hereto (the “Consolidated Financial Statements”). 30 On March 21, 2022 the Company entered into the Original Facility Agreement with Mr.
For the year ended December 31, 2023, the Company earned revenue of approximately $0.19 million, used $8.4 million to fund its operations, and incurred a net loss from continuing operations of approximately $19.6 million.
For the year ended December 31, 2024, the Company earned revenue of approximately $0.9 million, used $11.6 million to fund its operations, and incurred a net loss from continuing operations of approximately $14.3 million.
As further described in Item 13 “Certain Relationships and Related Transactions and Director Independence” and in Note 8 “Related Party Transactions” to the Consolidated Financial Statements, the Company has entered into various equity investments and employment agreements with Directors and Officers of the Company. 33 Critical Accounting Policies and Estimates Our significant accounting policies are more fully described in the notes to our consolidated financial statements.
As further described in Item 13 “Certain Relationships and Related Transactions and Director Independence” and in Note 7 “Related Party Transactions” to the Consolidated Financial Statements, the Company has entered into various equity investments and employment agreements with Directors and Officers of the Company.
On March 21, 2022 the Company entered into the Original Facility Agreement with Mr. Garchik, pursuant to which Mr. Garchik agreed to provide a $10.0 million unsecured standby line of credit facility. On April 18, 2022, Joseph Trelin, as Garchik’s designee under the Original Facility Agreement, was appointed as a member of the Board of Directors of the Company.
Garchik, pursuant to which Mr. Garchik agreed to provide a $10.0 million unsecured standby line of credit facility. On April 18, 2022, Joseph Trelin, as Garchik’s designee under the Original Facility Agreement, was appointed as a member of the Board of Directors of the Company. By virtue of such right of nomination Mr. Garchik considered himself a “director by deputization”.
In this way, account recovery is instant, portable, and does not require the presence of or access to a previously provisioned device in order to secure access from a different device.
In this way, account recovery is instant, portable, and does not require the presence of or access to a previously provisioned device in order to secure access from a different device. Key Customer Benefits Our solution allows our enterprise customers to: ● Verify and Authenticate users.
Ken Jisser, a director of the Company, is the founder and CEO of TPG, a technology-enabled services company that aims to deliver business results for companies looking to build a predictable and profitable pipeline.
Related Party Transactions On June 6, 2023, the Company entered into a services agreement with The Pipeline Group, Inc. (“TPG”). Ken Jisser, a director of the Company, is the founder and CEO of TPG, a technology-enabled services company that aims to deliver business results for companies looking to build a predictable and profitable pipeline.
As described in Note 6 “Working Capital Facility”, to the Consolidated Financial Statements, the Original Facility Agreement was amended and restated effective March 8, 2023 pursuant to which amendment the amount of the facility was reduced to $3.6 million, and an initial advance of $900,000 was made.
As described in Note 5 “Working Capital Facility”, the Original Facility Agreement was amended and restated effective March 8, 2023 pursuant to which amendment the amount of the facility was reduced to $3.6 million, an initial advance of $900,000 was made and subsequent advances under the A&R Facility Agreement are subject to various conditions including the granting of a security interest over substantially all the Company’s assets.
General and administrative expenses During the year ended December 31, 2023, general and administrative expenses decreased by approximately $6.8 million compared to the year ended December 31, 2022, principally due to lower stock-based compensation expenses as well as the Company’s cost saving measures resulting in lower headcount costs and lower third-party vendor costs.
General and administrative expenses During the year ended December 31, 2024, general and administrative expenses increased by approximately $1.1 million compared to the year ended December 31, 2023, principally due to higher stock-based compensation expenses as well as the Company’s increase in headcount costs and higher third-party vendor costs. 33 Research and development expenses During the year ended December 31, 2024, research and development expenses increased by approximately $3.7 million compared to the year ended December 31, 2023, principally due to higher stock-based compensation expenses as well as the Company’s increase in headcount costs and higher third-party vendor costs.
We also rely on Adjusted EBITDA as a primary measure to review and assess the operating performance of our company and our management, and it will be a focus as we invest in and grow the business.
We also rely on Adjusted EBITDA as a primary measure to review and assess the operating performance of our company and our management, and it will be a focus as we invest in and grow the business. 32 Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation from, or as a substitute for, analysis of our results as reported under GAAP.
All or any of these risks separately, or in combination could have a material adverse effect on our business, financial condition, results of operations, and cash flows. 37 Macro-Economic Conditions The global economy has been undergoing a period of political and economic uncertainty and stock markets are experiencing high levels of volatility, and it is difficult to predict how long this uncertainty and volatility will continue.
Macro-Economic Conditions The global economy has been undergoing a period of political and economic uncertainty and stock markets are experiencing high levels of volatility, and it is difficult to predict how long this uncertainty and volatility will continue.
There is no guarantee that the Company will be able to raise additional equity or debt financing at acceptable terms, if at all. We expect that we will need additional funding in the 4 th quarter of 2024.
There is no guarantee that the Company will be able to raise additional equity or debt financing at acceptable terms, if at all. There is no guarantee that our current business plan will not change, and because of such change, we will need additional capital to implement such business plan.
These services and their contracted pricing has been evaluated by Management based on historical experience with similar providers and determined to be priced at fair, market rates. On October 25, 2023, and on December 19, 2023, the Company entered into amendments to the above services agreement, pursuant to which TPG will provide certain additional services to the Company.
These services and their contracted pricing has been evaluated by Management based on historical experience with similar providers and determined to be priced at fair market rates.
In consideration of the services, the Company will pay TPG $98,000 per month during the remainder of the initial one-year term ending in June 2024. The foregoing is only a summary of the material terms of the agreements entered with TPG and does not purport to be a complete description of the rights and obligations of the parties thereunder.
The foregoing is only a summary of the material terms of the agreements entered with TPG and does not purport to be a complete description of the rights and obligations of the parties thereunder.
Results of Operations and Financial Condition for the Year Ended December 31, 2023 as Compared to the Year Ended December 31, 2022 – Continuing Operations Revenues, net During the year ended December 31, 2023, the Company revenues from Verified software license were approximately $186,000 compared to approximately $157,000 for the year ended December 31, 2022.
Results of Operations and Financial Condition for the Year Ended December 31, 2024 as Compared to the Year Ended December 31, 2023 Revenues, net During the year ended December 31, 2024, the Company revenues were approximately $886,000 compared to approximately $190,000 for the year ended December 31, 2023. Revenue increased as we acquired and went live with new customers.
There is no guarantee that our current business plan will not change, and because of such change, we will need additional capital to implement such business plan. Further, assuming we achieve our expected growth plan, of which there is no guarantee, we will need additional capital to implement growth beyond our current business plan.
Further, assuming we achieve our expected growth plan, of which there is no guarantee, we will need additional capital to implement growth beyond our current business plan. As a result of these factors, there is substantial doubt about the Company’s ability to continue as a going concern.
GAAP results. 35 Reconciliation of Net Loss From Continuing Operations to Adjusted EBITDA Continuing Operations For the Year Ended December 31, 2023 2022 Loss from continuing operations $ (19,617,969 ) $ (23,675,310 ) Addback: Interest expense 1,108,458 1,359,954 Other expense (income) (98,230 ) 37,221 Conversion expense 7,476,000 - Loss on debt extinguishment 380,741 - Severance cost 855,279 150,000 Depreciation and amortization 255,858 749,900 Non-Cash recruiting fees 438,000 - Impairment losses - 1,101,867 Taxes 2,864 7,670 Stock compensation 487,398 8,870,168 Adjusted EBITDA continuing operations (Non-GAAP) $ (8,711,601 ) $ (11,398,530 ) The decrease in Adjusted EBITDA Loss From Continuing Operations in 2023 compared to 2022 is principally due to cost saving measures taken in 2023 resulting in lower headcount costs and lower third-party vendors costs.
For the Year Ended December 31, 2024 2023 Loss from continuing operations $ (14,227,994 ) $ (19,617,969 ) Addback: Interest expense 48,930 1,108,458 Other expense (income) (455,227 ) (98,230 ) Conversion expense 7,476,000 Loss on debt extinguishment 380,741 Severance cost 14,251 855,279 Depreciation and amortization 179,075 255,858 Non-Cash recruiting fees 438,000 Taxes 2,864 Stock compensation 2,612,164 487,398 Adjusted EBITDA continuing operations (Non-GAAP) $ (11,878,801 ) $ (8,711,601 ) The increase in Adjusted EBITDA Loss From Continuing Operations in 2024 compared to 2023 can be attributed to several factors.
Net cash generated/(used) in investing activities in 2023 and 2022 was approximately $75,000 and ($182,000) as the Company received proceeds from the sale of its discontinued businesses. Net cash provided by financing activities for 2023 was approximately $15.4 million, compared to $10.2 million in 2022.
Cash used in operations for 2024 and 2023 was primarily the result of funding the business operations as the Company invested in people and product. Net cash (used)/generated in investing activities in 2024 and 2023 was approximately ($66,000) and $75,000 as the Company received certain proceeds from the sale of its discontinued businesses in 2023.
In a digital, online world of increasing fraud and security threats, Proof speeds up onboarding and offers our customers confidence in the identities of consumers, employees or third-party vendors.
Additionally, authID’s PrivacyKey technology enables customers to perform biometric verification through the use of Public/Private Keys that is performed without storing any biometric data, which ensures individual data privacy. In a digital, online world of increasing fraud and security threats, Proof speeds up onboarding and offers our customers confidence in the identities of consumers, employees or third-party vendors.
As a result of these factors, there is substantial doubt about the Company’s ability to continue as a going concern. Description of Indebtedness As described in Item 1A, (Risk Factors) the Company has a history of losses and may not be able to achieve profitability in the near term.
Description of Indebtedness As described in Item 1A (Risk Factors), the Company has a history of losses and may not be able to achieve profitability in the near term. The Company has not been able to achieve positive cash flows from operations and raised additional financing in 2024 and 2023 from the sale of equity and convertible notes.
We can verify identities using a wide spectrum of government-issued documents from around the world.
We can verify identities using a wide spectrum of government-issued documents from around the world. ● Perform secure biometric verification & authentication without the need to store biometric data. Our PrivacyKey technology removes the need to store any biometric data in order to perform verification or authentication transactions.
The Company has not been able to achieve positive cash flows from operations and raised additional financing in 2023 and 2022 from the sale of equity and convertible notes. As of December 31, 2023, the Company has a series of Senior Secured Convertible Notes outstanding for approximately $0.25 million due in March 2025.
As of December 31, 2024, the Company has the remaining balance of a series of Senior Secured Convertible Notes outstanding for $245,000 due in March 2025. See Notes 5 and 6 of the Consolidated Financial Statements for additional information associated with the convertible notes payable.
See Note 9 for details. ● Certain warrant, stock option and convertible note holders exercised their respective warrants and stock options and conversion right and were issued approximately 44,152 shares of our common stock. 39 Off-Balance Sheet Arrangements We have no off-balance sheet financing arrangements. Contractual Obligations As of December 31, 2023, the Company had the following contractual obligations.
Off-Balance Sheet Arrangements We have no off-balance sheet financing arrangements. 35 Contractual Obligations As of December 31, 2024, the Company had the following contractual obligations.
Research and development expenses During the year ended December 31, 2023, research and development expenses decreased by approximately $3.5 million compared to the year ended December 31, 2022, principally due to lower stock-based compensation expenses as well as the Company’s cost saving measures resulting in lower headcount costs and lower third-party vendor costs. 36 Depreciation and amortization expense During the year ended December 31, 2023, depreciation and amortization decreased by approximately $0.5 million compared to the year ended December 31, 2022, as the Company reduced the value of certain legacy business assets in 2022.
Depreciation and amortization expense During the year ended December 31, 2024, depreciation and amortization decreased by approximately $0.1 million compared to the year ended December 31, 2023, as the Company’s intangible assets useful life decreases.
Removed
FIDO Passkey Binding FIDO Passkey Binding enables enterprises and their users to bind biometrically verified user identities to FIDO2 passkeys, enabling strong authentication for device-based passwordless login and transaction authentication that is tied to a trusted identity.
Added
PrivacyKey Privacy Preserving Biometrics authID’s PrivacyKey solution provides biometric authentication without the requirement to store any biometric or derivative of biometric data.
Removed
This solution establishes a digital chain of trust between biometrically verified individuals, their accounts, and their devices, thus eliminating passwords and protecting users and systems against fraud attacks. 30 Key Customer Benefits Our solution allows our enterprise customers to: ● Verify and Authenticate users.
Added
The technology transforms biometric verification into Public/Private Key cryptography whereby the facial image of the person is converted into an elliptical public/private key pair where only the public key is stored and the private key only exists during authentication and is deleted immediately after.
Removed
Joe Trelin tendered his resignation as Chairman and a Director of the Company, effective immediately. On February 20, 2024, the board of directors of the Company (the “Board”) accepted his resignation and agreed to vest the unvested portion of an option granted to Mr. Trelin June 28, 2023, amounting to 6,511 shares.
Added
The solution is compliant to the ISO30136 Privacy Biometric standard and provides a False Match Rate accuracy of 1:1 Billion at a False Rejection Rate of 0.3%, as confirmed by independent tests conducted by The Commonwealth Scientific and Industrial Research Organization (“CSRIO”).
Removed
Pursuant to Rule 5605(b)(1) of the Rules of the Nasdaq Stock Market, (“Nasdaq”), a majority of the Board must be comprised of Independent Directors as defined in Rule 5605(a)(2). As a result of Mr. Trelin’s resignation, the Board currently consists of six directors of which three are considered Independent Directors.
Added
PrivacyKey verification and authentication is seamlessly delivered thru either a web or mobile applications with a response time of less than 700ms.
Removed
The Company is currently in discussions with one or more candidates to be appointed as an additional Independent Director, but no agreement has been reached regarding such appointment at this time.
Added
In June 2024, the Company raised approximately $10.0 million after expenses from existing and new stockholders through the sale of Common Stock pursuant to a registered direct offering. Going forward, the Company plans to raise additional funds to support its operations and investments as it seeks to create a sustainable organization.
Removed
Pursuant to Rule 5605(b)(1)(A), the Company has a cure period, within which to restore the majority of Independent Directors, expiring on the earlier of the date of the next Annual Meeting or one year from the date of the vacancy (subject to a minimum period of 180 days from the date of the vacancy).
Added
Our growth-oriented business plan to offer products to our customers will require continued capital investment and there is no guarantee that such financing will be available, or available on acceptable terms.
Removed
On February 20, 2024, the Board appointed Michael Thompson to the Audit Committee in compliance with Rule 5605(c)(2)(A) of the Nasdaq Rules. 32 Related Party Transactions On June 6, 2023, the Company entered into a services agreement with The Pipeline Group, Inc. (“TPG”).
Added
Subsequent Events Management of the Company has performed a review of all events and transactions occurring after the condensed consolidated balance sheet date and determined there were no events or transactions requiring adjustment to or disclosure in the accompanying condensed consolidated financial statements.
Removed
By virtue of such right of nomination Mr. Garchik considered himself a “director by deputization”.
Added
On October 25, 2023, on December 19, 2023 and on August 26, 2024, the Company entered into amendments to the above services agreement, pursuant to which TPG will provide certain additional services to the Company. In consideration of the services, the Company will pay TPG $70,000 per month during the current term ending in June 2025.
Removed
Actual results could differ from those estimates. Revenue Recognition Revenue recognition policy for significant revenue generating activities from continuing operations: All contracts are reviewed for their respective performance obligations and related revenue and expense recognition implications.
Added
Garchik, purchased 150,000 shares of the Company’s common stock at a price of $1,125,000. The purchase price of the shares issued in this transaction was the same as the purchase price paid by all other investors in the same round and represented a 24% discount to the Nasdaq Official Closing Price in effect on the date of the transaction.
Removed
A performance obligation under the revenue standard is defined as a promise to provide a “distinct” good or service to a customer and is the unit of account for revenue recognition. The Company’s revenues that are derived from the identity services could include multiple performance obligations.
Added
Since June 2023, the Company has employed Dale Daguro, the brother of our CEO, Rhon Daguro as a VP Sales. Dale Daguro’s employment is at will and may be terminated at any time, with or without cause. Dale’s compensation is commensurate with other executives employed by the Company at a similar level of seniority and experience.
Removed
Additionally, the contracts could include implementation services, or support on an “as needed” basis and we will review each contract and determine whether such performance obligations are separate and distinct and apply the standard accordingly to the revenue and expense derived from or related to each such service.
Added
During the year ended December 31, 2024, Dale Daguro earned approximately $255,000 in base salary and sales commission.
Removed
Goodwill Goodwill is recorded when the purchase price paid for an acquisition exceeds the fair value of net identified tangible and intangible assets acquired. The Company performs an annual impairment test of goodwill and further periodic tests to the extent indicators of impairment develop between annual impairment tests.
Added
Critical Accounting Policies and Estimates Our significant accounting policies are more fully described in the notes to our consolidated financial statements.
Removed
The Company’s impairment review process compares the fair value of the reporting unit to it carrying value, including the goodwill related to the reporting unit utilizing qualitative considerations. To determine the fair value of the reporting unit, the Company may use various approaches including an asset or cost approach, market approach or income approach or any combination thereof.
Added
Actual results could differ from those estimates. 31 Revenue Recognition Software License – The Company recognizes revenue based on the identified performance obligations over the performance period for fixed consideration and / or variable fees generated. Variable fees are typically earned over time based on monthly users and transaction volumes.
Removed
These approaches may require the Company to make certain estimates and assumptions including future cash flows, revenue and expenses. These estimates and assumptions are reviewed each time the Company tests goodwill for impairment and are typically developed as part of the Company’s routine business planning and forecasting process.
Added
We allocate the selling price in a contract which has multiple performance obligations based on the contract selling price that we believe represents a fair market price for the service rendered based on estimated standalone selling price. Transaction fees are billed monthly and are constrained to transactions incurred within the month.
Removed
While the Company believes its estimates and assumptions are reasonable, variations from those estimates could produce materially different results. During the year ended December 31, 2023 and 2022, the Company’s projection and assessment did not indicate that an impairment charge was required as its fair value was in excess of carrying value.
Added
For contracts with minimum annual fees, the Company generally recognizes the amount of revenue ratably over the contract year and records contract assets for the amount in excess of monthly contract billings relating to variable contract consideration.
Removed
Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation from, or as a substitute for, analysis of our results as reported under GAAP.
Added
For certain contracts, the Company enters into an agreement which stipulates a minimum annual fee which is generally due at the end of the contract year, in excess of the amount of monthly billings. The Company may also require milestone payments of the minimum annual fee.

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