Ipsidy Inc. — Form 10-Q Summary
Filing identity: The supplied filing is for Ipsidy Inc. (formerly ID Global Solutions Corporation), not Authid Inc. It reports the quarter ended September 30, 2020 and the nine months then ended; the financial statements are unaudited.
Business context and period
Ipsidy described its business as a mobile biometric identity and transaction-services platform, alongside payment processing and card operations. Its reportable activities covered identity management and payment processing across North America, South America, and Africa.
Financial performance and position
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $515,692 | $552,761 | $1,630,600 | $1,938,100 |
| Operating loss | $1,711,286 | $2,247,748 | $7,190,515 | $6,500,660 |
| Net loss | $1,918,239 | $2,358,236 | $9,217,108 | $6,796,766 |
| Operating cash used | Not presented by quarter | Not presented by quarter | $3,131,729 | $5,028,196 |
| Adjusted EBITDA loss (non-GAAP) | $1,322,929 | $1,685,769 | $4,063,480 | $5,183,009 |
- Gross margin was approximately 78% for Q3 2020 and 67% for the first nine months, calculated from reported revenue less cost of sales.
- At September 30, cash was $569,597; current assets were $1.26 million against current liabilities of $3.30 million, and management reported a working-capital deficit of approximately $2.0 million.
- Total liabilities were $9.57 million and stockholders’ equity was $1.71 million. Convertible notes had $6.355 million of stated principal and a $5.682 million net carrying value; notes payable were $494,675, including a $485,760 PPP loan.
- Common shares outstanding were 547,986,424 at September 30 and 551,486,424 at October 31. The filing also reported 158.2 million outstanding options and 26.8 million warrants.
Changes versus the prior comparable period
- Nine-month revenue declined approximately 16% year over year; management attributed the decrease principally to COVID-19 effects on Cards Plus. Q3 revenue declined approximately 7%.
- Nine-month net loss widened by approximately $2.4 million, despite lower general and administrative costs and lower operating cash use. The period included a $1.036 million goodwill impairment, approximately $985,000 related to debt extinguishment, and $367,000 of warrant-exercise inducement expense.
- Interest expense rose to $701,861 for the nine months, from $290,804, chiefly following convertible debt offerings. The company also recorded an impairment of Cards Plus goodwill after revising revenue assumptions downward.
- Cash was nearly unchanged from year-end, but this reflected financing proceeds alongside operating cash outflows. The company issued shares and received warrant-exercise proceeds during the period.
Outlook, risks, and unusual items
- Management said it expected incremental revenue and cash from software deliveries to new customers beginning in the first quarter of 2021 and beyond. It estimated needing to raise approximately $7.5–$10.0 million to fund its business plan through December 31, 2021; financing availability and terms were not assured.
- The filing states there is substantial doubt about the company’s ability to continue as a going concern, citing recurring losses, limited cash, financing dependence, and the need to generate revenue and operating cash flow.
- After quarter-end, investors agreed on October 30 and November 6, 2020 to purchase 52.435 million shares and warrants for 26.218 million shares for approximately $5.24 million. The offering also carried a cash broker fee of approximately $367,000 and broker warrants for about 3.15 million shares.
- COVID-19 constrained South African Cards Plus operations and delayed customer and partner decisions, although management reported increased inquiries. The PPP loan may be forgiven subject to approval and requirements; any unforgiven amount is repayable.
- Secured convertible debt carries significant terms, including 15% interest and repayment/conversion premiums described in the filing. The company also disclosed related-party financing, warrant transactions, executive compensation, and office rent arrangements.
- Management said disclosure controls were effective at quarter-end. It was continuing remediation of a prior control deficiency related to goodwill and intangible-asset impairment procedures.
Important facts for investors to verify
- Confirm the issuer identity: the provided filing names Ipsidy Inc.; the request metadata names Authid Inc.
- Review the going-concern disclosure, near-term cash needs, and whether the post-quarter financing closed and provided adequate net proceeds.
- Assess the repayment, security, conversion, and dilution terms of convertible notes, options, warrants, and the subsequent equity financing.
- Track customer delivery timing and revenue conversion, particularly management’s expected 2021 software revenue and the ongoing COVID-19 effects on Cards Plus.
- Review the assumptions supporting the goodwill impairment and the status of internal-control remediation.