Business context and reporting period
Annual report for Ipsidy Inc. and subsidiaries for the fiscal year ended December 31, 2020, compared with 2019. The filing describes an identity-as-a-service business providing biometric identity verification, authentication and transaction services, alongside payment processing and card products. The request metadata names Authid Inc., but the filing identifies the registrant as Ipsidy Inc.
Key financial metrics
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $2.14 million | $2.55 million |
| Cost of sales | $0.66 million | $0.67 million |
| Gross profit and margin | $1.48 million; 69.1% | $1.88 million; 73.8% |
| Operating loss | $9.01 million | $10.09 million |
| Net loss | $11.30 million | $10.50 million |
| Adjusted EBITDA loss (non-GAAP) | $5.18 million | $6.38 million |
| Cash used in operating activities | $4.67 million | $6.06 million |
| Cash and working capital at year-end | $3.77 million cash; $1.46 million working capital | $0.57 million cash |
| Total liabilities | $9.29 million | $5.26 million |
| Convertible debt, net of discounts | $5.80 million | $0.43 million |
Current assets were $4.40 million and current liabilities $2.95 million at year-end 2020. The reported current ratio was approximately 1.49. Cash increased during 2020 largely because financing provided $8.18 million; investing activities used $0.30 million. The filing reports 589.3 million common shares outstanding at year-end and 594.0 million at February 28, 2021.
Material changes versus 2019
- Revenue fell approximately $0.41 million, or 16%, with management attributing the decline principally to COVID-19-related disruption, including lower Cards Plus and Colombian operations revenue. Africa remained the largest revenue region.
- Operating loss narrowed by approximately $1.08 million, reflecting lower general and administrative and research and development costs, partly offset by impairment and higher depreciation and amortization.
- Net loss widened by approximately $0.80 million as interest expense rose and the company recorded a $0.99 million debt-extinguishment charge and $0.37 million warrant-inducement expense.
- Impairment charges were $1.33 million in 2020, including about $1.04 million of goodwill and $0.30 million of intangible assets, compared with $1.67 million in 2019.
- Operating cash outflow improved by approximately $1.39 million, but remained substantial. Financing included equity proceeds, warrant exercises, convertible notes and a PPP loan.
Outlook, risks and unusual items
- Going concern: Management and the auditor noted substantial doubt about the company’s ability to continue as a going concern. The company has a $98.2 million accumulated deficit, recurring losses and negative operating cash flow; audited statements were prepared on a going-concern basis.
- Funding needs: Management said it expects to need $14–16 million through December 2022 to support operations and its business plan, including repayment of convertible obligations. It warned that financing may not be available on acceptable terms, or at all. Management expected continued net losses in 2021.
- Debt: Convertible notes had $6.355 million principal outstanding and were generally due in February 2022; the year-end carrying value was $5.80 million after discounts and issuance costs. Certain notes bear 15% interest, are secured by company assets and include conversion terms that could increase share dilution. Management cited approximately $7.6 million of convertible obligations to repay in February 2022.
- PPP loans: The company received approximately $486,000 in 2020 and another approximately $486,000 in January 2021. Forgiveness was subject to government approval; amounts not forgiven must be repaid.
- Execution and market risks: New identity products and recurring-revenue models may not gain adoption; the company faces larger competitors, customer concentration, international and currency risks, privacy and biometric regulation, cybersecurity and third-party service risks, and COVID-19-related delays.
- Unusual and related-party matters: The company incurred severance costs for its former CEO and significant stock-based compensation. Related-party matters include secured financing involving a director-associated trust, warrant exercises involving directors or affiliated entities, and office rent paid to an entity principally owned by the former CEO and his family.
- Audit and controls: The auditor issued an unmodified opinion on the financial statements but highlighted goodwill impairment and identity-software revenue recognition as critical audit matters. Management reported effective disclosure controls and internal control over financial reporting and said it revised closing procedures to remediate a previously reported control deficiency.
Important facts for investors to verify
- Confirm the registrant and reporting period: the supplied filing is Ipsidy Inc.’s 2020 Form 10-K, not an Authid Inc. filing or a standalone 2020 Q4 report.
- Review the audited statements and notes for the revenue decline, customer and geographic concentration, and the judgments underlying identity-software revenue recognition.
- Verify available financing, the company’s cash runway, the $14–16 million funding estimate, and the ability to meet 2022 debt maturities.
- Assess note conversion and security terms, related-party creditor interests, and potential dilution from outstanding warrants, options and convertible debt.
- Track PPP forgiveness decisions, product commercialization and customer wins, impairment assumptions, and any subsequent changes to going-concern risks.