Authid Inc. (Ipsidy Inc.) — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. The company, which changed its ticker to AUID and completed a 1-for-30 reverse stock split in June, describes its core strategy as a cloud-based biometric identity-verification and passwordless-authentication platform. Its reported operations also include payment processing and card services.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $528,349 | $515,692 | $1,695,129 | $1,630,600 |
| Operating loss | $(5,662,649) | $(1,711,286) | $(11,140,146) | $(7,190,515) |
| Net loss | $(5,198,905) | $(1,918,239) | $(10,746,514) | $(9,217,108) |
| Basic and diluted loss per share | $(0.24) | $(0.11) | $(0.52) | $(0.52) |
| Adjusted EBITDA loss (non-GAAP) | $(2,809,689) | $(1,322,929) | $(5,401,641) | $(4,063,480) |
- Revenue rose about 2.5% in Q3 and 4.0% for the nine-month period. Management attributed improvement principally to Cards Plus recovering from prior-year pandemic effects; North American revenue increased slightly year over year for nine months, while MultiPay revenue declined slightly.
- Gross profit, calculated as revenue less cost of sales, was approximately $407,000 in Q3 and $1.20 million for nine months, implying margins of about 77% and 71%, respectively. These are derived figures, not separately presented margin measures.
- Q3 operating expenses rose to $6.19 million from $2.23 million. General and administrative expense increased by about $3.8 million for the quarter and $4.9 million for nine months, reflecting higher compensation, marketing, technology, and stock-based compensation. Nine-month stock-based compensation was $4.80 million.
- Cash was $9.23 million at September 30, versus $3.77 million at year-end 2020. Working capital was approximately $7.4 million. Operating cash use was $5.52 million for nine months, up from $3.13 million a year earlier; financing provided $11.03 million, primarily from the equity offering.
- Total liabilities were $3.18 million, including $662,000 of current convertible debt. The filing also discusses approximately $700,000 of unconverted interest owed under the Restated Stern Note; the presentation of this amount relative to reported liabilities merits review.
Changes, outlook, and notable matters
- Operating and net losses widened despite modest revenue growth. The nine-month operating loss increased about $3.95 million year over year. The prior period included a $1.04 million impairment charge, while 2021 benefited from approximately $972,000 in gains on forgiveness of two PPP loans. Debt extinguishment gains and lower interest expense also affected comparisons.
- In August, the company sold 1,642,856 shares at $7.00 each, raising approximately $11.5 million gross. During the nine months, approximately $6.1 million of indebtedness was converted into about 1.14 million shares. These transactions strengthened cash and reduced debt but increased share count.
- Management said it expects to need approximately $5 million to $10 million to fund operations through December 2022, support growth, and repay outstanding convertible debt. A November 2021 shelf registration permits potential offerings of up to $200 million; neither future financing nor profitability is assured.
- The filing states there is substantial doubt about the company’s ability to continue as a going concern, citing losses, accumulated deficit of approximately $109 million, operating cash burn, and dependence on financing, new customers, or other business opportunities. The 2021 offering does not eliminate this stated doubt.
- COVID-19 restrictions affected Cards Plus in South Africa and slowed business development and customer negotiations. Management reported less immediate operational impact in the U.S. and Colombia. Other cited risks include commercialization, financing, third-party relationships, cybersecurity, regulation, competition, foreign operations, and intellectual property.
- Leadership changed in June: Thomas Thimot became CEO and Cecil Smith became President and Chief Technology Officer. The company reported effective disclosure controls as of September 30 and no material change in internal control over financial reporting. It reported no legal matters expected to have a material adverse effect.
Investor verification priorities
- Assess cash runway against the stated $5–$10 million funding need and the continuing going-concern warning; verify subsequent financing and actual cash burn.
- Reconcile the $662,000 reported convertible debt with the approximately $700,000 Stern Trust interest said to remain outstanding, including maturity, terms, and balance-sheet classification.
- Track revenue growth and customer adoption in the identity platform separately from legacy card and payment-processing revenue; the filing provides no formal revenue or profitability guidance.
- Review the scale and persistence of stock-based compensation, executive and director awards, potential dilution, and the effects of further equity issuance.
- Check the segment disclosure: its Q3 2021 loss-before-tax figure appears inconsistent with the consolidated statement of operations, which reports a loss before tax of $5.20 million; the segment table shows $(3.02) million.