authID Inc. (AUID) — Q3 2022 Form 10-Q
Reporting period: Three and nine months ended September 30, 2022. The company changed its name from Ipsidy Inc. to authID Inc. on July 18, 2022. It is focusing on its Verified biometric identity and authentication platform and exiting non-core businesses.
Financial results and liquidity
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Continuing-operations revenue | $30,023 | $169,349 | $261,484 | $464,180 |
| Loss from continuing operations | $6.19 million | $4.93 million | $17.66 million | $10.31 million |
| Net loss, including discontinued operations | $6.33 million | $5.20 million | $18.21 million | $10.75 million |
| Adjusted EBITDA loss, continuing operations (non-GAAP) | $3.28 million | $2.58 million | $9.13 million | $5.03 million |
| Operating cash flow | Not separately provided for the quarter | Not separately provided for the quarter | $(9.55) million | $(5.52) million |
- Verified software license revenue was $30,023 for Q3 and $116,925 for the first nine months, compared with $12,281 and $45,302, respectively, in 2021. Legacy authentication revenue was zero in Q3 and $144,559 year to date; the prior-year comparatives were $157,068 and $418,878. Management attributed the decline to a large customer ending a legacy product on April 1, 2022.
- At September 30, cash was $7.11 million; current assets were $8.23 million and current liabilities $2.87 million, implying working capital of about $5.37 million. Total assets were $14.49 million and stockholders’ equity $3.92 million.
- Convertible debt had $9.79 million of gross principal outstanding and a reported carrying value of $8.36 million after discounts and issuance costs. This included $662,000 due December 31, 2022, subject to a possible six-month extension, and approximately $9.13 million due March 31, 2025.
- The company reported a $10 million unsecured standby credit facility with no borrowings at quarter-end. Draws are conditional; borrowings accrue interest at 15% annually.
- Continuing-operations operating expenses were $5.75 million in Q3 and $16.95 million for nine months. Stock-based compensation was $2.23 million in Q3 and $6.73 million year to date.
Changes, outlook, and risks
- Q3 continuing revenue fell about 82% year over year, while the continuing-operations loss widened about 25%. For the first nine months, continuing revenue declined about 44% and the continuing-operations loss widened about 71%. Research and development expense rose as the company added staff and third-party resources to develop Verified; interest expense also increased following the March 2022 convertible-note financing.
- Cash increased from $5.77 million at December 31, 2021, supported by financing. The company received approximately $3.3 million gross from a March equity placement and issued approximately $9.2 million of convertible notes. Management stated it believed available funds would support operations through December 31, 2023, while noting additional capital may be needed in the future.
- The company completed the sale of Cards Plus on August 29 for $300,000, with $150,000 received at closing and the balance expected within one year. It recorded a $188,247 loss on sale. The MultiPay Colombia exit was ongoing; management described a possible customer transition involving software and assumption of certain expenses, and estimated remaining exit costs of about $90,000 accrued plus approximately $41,000 of non-cash accelerated amortization.
- Management cited risks including limited revenue and a history of losses, customer adoption and retention, ability to raise capital, inflation and interest rates, COVID-19-related delays, and possible disruption to Eastern European contractors from the war in Ukraine. No formal revenue or earnings guidance is provided in the filing.
- Management reported disclosure controls were effective and no material change in internal control over financial reporting during the first nine months. It reported no material change to the risk factors in the 2021 Form 10-K and no legal proceedings expected to materially affect results.
Key investor verification points
- Track Verified customer wins, revenue conversion, and whether growth can offset the loss of legacy authentication revenue.
- Assess cash burn against management’s stated funding runway, and verify the conditions and practical availability of the unused $10 million facility.
- Review debt repayment, extension, interest, conversion, and dilution terms; the filing lists 13.75 million potentially dilutive securities excluded from diluted loss per share as anti-dilutive.
- Monitor MultiPay exit execution, the expected $150,000 remaining Cards Plus sale payment, and any related costs or customer-transition proceeds.
- Consider ongoing equity compensation and dilution: 24.91 million shares were outstanding at September 30, and 25,030,964 at October 31, 2022.