Business context and reporting period
This is Ipsidy Inc.’s unaudited Form 10-Q for the quarter ended March 31, 2021. The request metadata names Authid Inc., but the filing identifies the registrant as Ipsidy Inc. Ipsidy provides biometric identity verification and authentication, identity-management software, and payment-processing services.
Financial performance and position
| Metric | Q1 2021 | Q1 2020 or prior period |
|---|---|---|
| Revenue | $589,000 | $794,000 |
| Gross profit and gross margin | $373,000; 63.3% | $438,000; 55.2% |
| Operating loss | $(2.19) million | $(2.67) million |
| Net loss | $(2.49) million | $(3.84) million |
| Adjusted EBITDA loss (non-GAAP) | $(1.25) million | $(1.31) million |
| Operating cash flow | $(1.68) million | $(1.17) million |
| Cash at quarter-end | $2.62 million | $3.77 million at Dec. 31, 2020 |
| Working capital | Deficit of approximately $5.22 million | — |
| Total liabilities | $9.98 million | $9.29 million at Dec. 31, 2020 |
| Stockholders’ equity | $2.88 million | $4.58 million at Dec. 31, 2020 |
Convertible debt had a $5.81 million net carrying value and was classified as current; its stated principal is $6.24 million and it is due in 2022. The company also reported $971,520 of PPP loans, primarily long-term, and approximately $6,000 of current vehicle debt. Most convertible debt is secured by liens on company assets and bears interest at 8%, 10%, or 15%, depending on the instrument.
Material changes versus the comparable period
- Revenue declined approximately 26%, principally due to lower Cards Plus and Colombian business revenue amid COVID-19, partly offset by additional identity-services customers.
- Operating loss narrowed by about $486,000. The prior-year quarter included an $872,000 goodwill impairment; Q1 2021 did not.
- Net loss improved by about $1.35 million, also reflecting no repeat of the prior-year $986,000 debt-extinguishment charge. Interest expense increased to $297,000 from $179,000.
- Operating cash use increased by approximately $503,000 year over year. Cash declined by $1.15 million from year-end, despite $486,000 in proceeds from a second PPP loan.
- Shares outstanding rose to 603.5 million from 589.3 million at year-end, including shares issued on debt conversion and cashless option and warrant exercises. The filing also reports 162.3 million outstanding options and 42.3 million warrants.
Outlook, risks, and unusual items
- Going concern: Management states there is substantial doubt about the company’s ability to continue as a going concern. Continuation depends on financing, shareholder support, sufficient operating cash flows, and growth in customers and revenue. The company had an accumulated deficit of approximately $100.7 million.
- Funding need: Management estimated it would need to raise approximately $12.5–$15.0 million to fund operations and investment through December 31, 2022, generate expected product revenue, and repay convertible debt to the extent it is not converted. Financing availability and terms are not assured.
- COVID-19: South African Cards Plus operations were interrupted and remained limited; management said business opportunities and customer decisions were delayed across markets.
- PPP loans: Forgiveness of both approximately $486,000 loans is subject to SBA approval and compliance. Unforgiven amounts must be repaid; a finding of improper use or qualification could create material adverse effects.
- Post-quarter equity compensation: On May 5, 2021, the company granted approximately 50.5 million options, including 35 million performance-based options to two directors. Stockholders had also approved adding 75 million shares to the incentive plan and authorized a reverse split at a board-selected ratio between 1-for-2 and 1-for-50 by year-end 2021.
- Management cited reduced overall spending and prioritization of key products. It provided no specific revenue or earnings guidance. Ordinary-course legal matters were not expected by management to materially affect results.
Important facts for investors to verify
- Confirm the registrant’s identity: the supplied filing is for Ipsidy Inc., not a registrant named Authid Inc.
- Assess the company’s liquidity runway, access to financing, and ability to meet the stated $12.5–$15.0 million funding requirement and 2022 debt maturities.
- Review the terms, security, maturity, conversion provisions, and related-party aspects of the convertible debt, including the Stern Trust note.
- Track PPP forgiveness decisions and any repayment exposure.
- Evaluate dilution from outstanding options, warrants, approved incentive-plan shares, subsequent option grants, and the authorized reverse split.
- Monitor revenue recovery in South Africa and Colombia, customer adoption of identity products, and operating cash use; the quarter’s results may not predict full-year performance.