AUTHID INC. Overview
The explosive growth in online and mobile commerce, telemedicine, remote working and digital activities of all descriptions is self-evident to everyone who lived through the Covid 19 pandemic since 2020. Identity theft, phishing attacks, spear-phishing, password vulnerabilities, account takeovers, benefits fraud - it seems like these words have entered our daily lexicon overnight. These are significant impediments to the operations and growth of any business or organization, and dealing with the risks and consequences of these criminal activities has created significant friction in both time, cost and lost opportunity. Consider all the outdated methods that organizations have implemented in order to prevent fraud. The requests to receive and enter one-time passwords, that can be easily hijacked. The vulnerable security questions you get asked - whether on-line or when reaching out to a call center - what was your first pet's name? who was your best friend in high school? These steps all add up to friction, making it difficult for consumers to login, transact and execute daily tasks, with little added protection from fraud. Surely there is a better way to address these challenges? authID.ai believes there is.
authID.ai provides secure, facial biometric, identity verification, and strong customer authentication. We maintain a global, cloud-based IDaaS platform for our enterprise customers to enable their users to easily verify and authenticate their identity through a mobile device or desktop (with camera) of their choosing (without requiring dedicated hardware, or authentication apps). We can help our customers establish a proven identity, creating a root of trust that ensures the highest level of assurance for our passwordless login and step-up verification products. Our system enables participants to consent to transactions using their biometric information with a digitally signed authentication response, embedding the underlying transaction data and each user's identity attributes within every electronic transaction message processed through our platform.
Digital transformation across all market segments requires trusted identity. Our identity platform offers innovative solutions that are flexible, fast and easy to integrate and offer seamless user experiences. authID's products help advance digital transformation efforts without the fear of identity fraud, while delivering frictionless user experiences. We believe that it is also essential that electronic transactions have an audit trail, proving that the identity of the individual was duly authenticated. Our platform provides biometric and multi-factor identity software, which are intended to establish, authenticate and verify identity across a wide range of use cases and electronic transactions.
authID's products focus on the broad requirement for enabling frictionless commerce by allowing an entity to instantly "Recognise their Customer". Organizations of all descriptions require cost-effective and secure means of growing their business while mitigating identity fraud. We aim to offer our enterprise customers products that can be integrated easily into each of their business and organizational operations, in order to facilitate their adoption and enhance the end user customer experience.
Our management believes that some of the advantages of our IDaaS Platform approach are the ability to leverage the platform to support a variety of vertical markets and the adaptability of the platform to the requirements of new markets and new products requiring cost-effective, secure, and configurable mobile solutions. Our target markets include banking, fintech and other disrupters of traditional commerce, small and medium sized businesses, and system integrators working with government and Fortune 1000 enterprises. At its core, the Company's offering, combining its proprietary and acquired biometric and artificial intelligence technologies (or AI), is intended to facilitate frictionless commerce, whether in the physical or digital world. The Company intends to increase its investment in developing, patenting and acquiring the various elements necessary to enhance the platform, which are intended to allow us to achieve our goals. One of the principal intended areas of investment is to enhance and expand our use of artificial intelligence in proprietary software, that we believe will increase our value to enterprise customers and stockholders alike.
17
authid.ai is dedicated to developing advanced methods of protecting consumer privacy and deploying ethical and socially responsible AI. authID is developing a culture that proactively encourages and rewards our employees for considering the ethical implications of our products. We believe that a proactive commitment to ethical AI presents a strong business opportunity for authID and will enable us to bring more accurate products to market more quickly and with less risk to better serve our global user base. Our methods to achieve ethical AI include engaging the users of our products with informed consent, prioritizing the security of our user's personal information, considering and avoiding potential bias in our algorithms, and monitoring of algorithm performance in our applications.
The Company also owns an entity in
The Company was incorporated in the
Our Common Stock is traded on the Nasdaq Capital Market under the trading symbol
"AUID". Our corporate headquarters is located at
Adjusted EBITDA
This discussion includes information about Adjusted EBITDA that is not prepared in accordance with GAAP. Adjusted EBITDA is not based on any standardized methodology prescribed by GAAP and is not necessarily comparable to similar measures presented by other companies. A reconciliation of this non-GAAP measure is included below.
Adjusted EBITDA is a non-GAAP financial measure that represents GAAP net income (loss) adjusted to exclude (1) interest expense, (2) interest income, (3) provision for income taxes, (4) depreciation and amortization, (5) stock-based compensation expense (stock options and restricted stock) and (6) certain other items management believes affect the comparability of operating results.
Management believes that Adjusted EBITDA, when viewed with our results under GAAP and the accompanying reconciliations, provides useful information about our period-over-period results. Adjusted EBITDA is presented because management believes it provides additional information with respect to the performance of our fundamental business activities and is also frequently used by securities analysts, investors and other interested parties in the evaluation of comparable companies. We also rely on Adjusted EBITDA as a primary measure to review and assess the operating performance of our company and our management, and it will be a focus as we invest in and grow the business.
Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation from, or as a substitute for, analysis of our results as reported under GAAP. Some of these limitations are:
? Adjusted EBITDA does not reflect our cash expenditures or future requirements
for capital expenditures or contractual commitments;
? Adjusted EBITDA does not reflect changes in, or cash requirements for, our
working capital needs;
? Although depreciation and amortization are non-cash charges, the assets being
depreciated and amortized will often have to be replaced in the future, and
Adjusted EBITDA does not reflect any cash requirements for such replacements;
? Adjusted EBITDA does not include the impact of certain charges or gains
resulting from matters we consider not to be indicative of our ongoing
operations.
Because of these limitations, adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only as a supplement to our GAAP results.
18
Reconciliation of Net Loss to Adjusted EBITDA Loss
For the Quarter Ended
March 31, March 31,
2022 2021
(Unaudited)
Net loss $ (5,300,728 ) $ (2,489,999 )
Add Back:
Interest Expense 33,221 297,438
Other expense/(income) (5,151 ) (1,537 )
Severance cost 150,000 -
Depreciation and amortization 243,678 309,829
Taxes 6,321 7,188
Impairment loss 143,703 -
Stock compensation 1,866,989 626,579
Adjusted EBITDA (Non-GAAP) $ (2,861,967 ) $ (1,250,502 ) Adjusted EBITDA loss for the quarter ended
Three Months Ended
Revenues, net
During the three months ended
Cost of sales
During the three months ended
General and administrative expenses
During the three-month period ended
Research and development expenses
During the three-month period ended
Impairment loss
During the three months ended
Depreciation and amortization expense
During the three-month period ended
19
Interest expense
Interest expense decreased during the three-month period ended
Liquidity and Capital Resources
The Company has approximately
Cash used in operating activities was approximately
Cash provided by financing activities in the three months ended
? The Company entered into an SPA with the
SPA, sold to the
principal amount of approximately
per share. The Convertible Notes were sold with an aggregate cash origination
fee of approximately
28,500 shares of our common stock to the
origination fee.
? The Company entered into Subscription Agreements with the
pursuant to the Subscription Agreements, sold to the
1,063,514 shares of our common stock at prices of
outside investor and
aggregate gross proceeds from the PIPE are approximately
Additionally, the Company entered into a Credit Facility with an accredited
investor, who is both a current shareholder of the Company and a Note Investor,
pursuant to which the accredited investor agreed to provide a
The Company may need additional capital in the future but because of the above
financing activities, we believe we have sufficient funds to operate its
business through
Covid 19
Covid-19 emerged globally in
That said we have seen our business opportunities develop more slowly as business partners and potential customers include Covid-19 considerations. Furthermore, working remotely can cause a delay in decision making and finalization of negotiations and agreements.
Ukraine
The war in
20
The uncertainty impacting and potential interruption in energy and other supply
chains resulting from military hostilities in
For so long as the hostilities continue and perhaps even thereafter as the
situation in
Subsequent Event
The Board of Directors of
Colombia
The Company plans to exit the MultiPay business in
The Company will incur certain costs associated with its employees and other
contractual obligations. MultiPay will continue to service its customer base in
the interim as it will look to minimize all such costs and in addition to
realize proceeds from the potential disposition of its assets. The Company
cannot estimate the net costs to be incurred as a result of this decision at
this time, but believes that the overall additional cash costs will not exceed
South Africa
The Company plans to exit the Cards Plus business and will seek a buy out of our interests. We have had preliminary discussions with one group but no definitive terms for the sale have been agreed at this point.
If we are successful in achieving a sale of our interest it is expected that
there will be a net cash inflow resulting from the planned exit of our business
in
In the three months ended
The financial statements of Cards Plus and the Colombian operations have not
been classified as discontinued operations as of
21
Off-Balance Sheet Arrangements
The Company has no off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is deemed by our management to be material to investors.
Recent Accounting Policies
The recent material accounting policies that may be the most critical to understanding of the financial results and conditions are discussed in Note 1 of the unaudited financial statements.
In August the FASB issued a new standard (ASU 2021-06) to reduce the complexity
of accounting for convertible debt and other equity-linked instruments. For
certain convertible debt instruments with a cash conversion feature, the changes
are a trade-off between simplifications in the accounting model (no separation
of an "equity" component to impute a market interest rate, and simpler analysis
of embedded equity features) and a potentially adverse impact to diluted EPS by
requiring the use of the if-converted method. The new standard will also impact
other financial instruments commonly issued by both public and private
companies. For example, the separation model for beneficial conversion features
is eliminated simplifying the analysis for issuers of convertible debt and
convertible preferred stock. Also, certain specific requirements to achieve
equity classification and/ or qualify for the derivative scope exception for
contracts indexed to an entity's own equity are removed, enabling more
freestanding instruments and embedded features to avoid mark-to-market
accounting. The new standard is effective for companies that are
© Edgar Online, source
