SECURITIES AND ~~EXCHANGE~~EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, ~~2021~~2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number ~~000-54545~~001-40747

~~Ipsidy~~authID Inc.

(Exact name of registrant as specified in its charter)

Delaware

46-2069547

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

~~670 Long Beach Boulevard~~1325 S. Colorado Blvd

Long Beach, New York
11561Denver, CO 80222

(Address of principal executive offices) (zip code)

516-274-8700

(Registrant’s telephone number, including area code)

Ipsidy Inc., 670 Long Beach Boulevard, Long Beach, New York 11561

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol		Name of each exchange on which registered
~~Not applicable.~~Common Stock par value $0.0001 per share		AUID		The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such ~~files).~~ files.

☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth Company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ~~Yes ☐ No ☒~~

Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock as of the latest practicable date.

Class		Outstanding at July 31, ~~2021~~2022
Common Stock, par value $0.0001		~~21,391,257~~24,789,418 shares
Documents incorporated by reference:		None

TABLE OF CONTENTS

		Page No.
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.		1

Condensed Consolidated Balance Sheets as of June 30, ~~2021~~2022 (unaudited) and December 31, ~~2020~~2021		1

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2022 and 2021 ~~and 2020~~ (unaudited)		2

Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2022 and 2021 ~~and 2020~~ (unaudited)		3

Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2022 and 2021 ~~and 2020~~ (unaudited)		4

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2022 and 2021 ~~and 2020~~ (unaudited)		5

Notes to Unaudited Condensed Consolidated Financial Statements		~~6-20~~6-17

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.		~~21-26~~18-23

Item 3. Quantitative and Qualitative Disclosures About Market Risk.		2724

Item 4. Controls and Procedures.		2724

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.		2825

Item 1A. Risk Factors.		2825

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.		2825

Item 3. Defaults Upon Senior Securities.		2825

Item 4. Mine Safety Disclosures.		2825

Item 5. Other Information.		2826

Item 6. Exhibits.		2927

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

This report includes forward-looking statements that relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “likely,” “aim,” “will,” “would,” “could,” and similar expressions or phrases identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and future events and financial trends that we believe may affect our financial condition, results of operation, business strategy and financial needs.

You should read thoroughly this report and the documents that we refer to herein with the understanding that our actual future results may be materially different from and/or worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements including those made in this report, in Part I. Item 1A. Risk Factors also appear in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 and our other filings with the Securities and Exchange Commission. Some examples of risk factors which may affect our business are as follows:

●

our lack of significant revenues and history of losses,

	●
	●	market acceptance of our products;

	●	our ability to ~~continue as a going concern,~~attract and retain customers for existing and new products;

	●
	●	our ability to effectively maintain and update our technology and product and service portfolio;

	●	our ability to hire and retain key personnel and additional talent;

	●	our ability to raise ~~additional working~~ capital ~~as necessary,~~under acceptable terms;

	●
	●	our ability to ~~satisfy~~maintain listing of our ~~obligations as they become due,~~common stock on the Nasdaq Capital Market;

●

~~the failure to successfully commercialize our product or sustain market acceptance,~~

●

~~the reliance on third party agreements and relationships for development of our business,~~

●

~~our operations in foreign markets,~~

●

~~breaches of network or information technology services,~~

●

~~the control exercised by our management,~~

●

~~the impact of government regulation on our business,~~

●

our ability to ~~effectively compete,~~

●

~~the possible inability to effectively~~adequately protect our intellectual property, or the loss of some of our intellectual property rights through costly litigation or administrative proceedings;

●

~~the lack of a public market for our securities and the impact of the penny stock rules on trading in our common stock should a public market ever be established, and~~

	●	our ability to operate in non-US markets;

	●	the impact of the Covid-19 ~~Pandemic.~~Pandemic;

	●	the impact of the war in Ukraine;

	●	legislation and government regulation; and

	●	general economic conditions, inflation and access to capital.

Other sections of this report include additional factors which could adversely impact our business and financial performance. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.

OTHER PERTINENT INFORMATION

Unless specifically set forth to the contrary, when used in this report the terms ~~“Ipsidy,” “authID.ai”~~“authID”, the “Company,” “we,” “our,” “us,” and similar terms refer to ~~Ipsidy~~authID Inc., a Delaware corporation and its subsidiaries. The Company was formerly known as Ipsidy Inc.

~~Effective June 14, 2021 we completed a 1-for-30 reverse stock split of our common stock. Additionally, the Company~~On July 18, 2022, Ipsidy Inc. changed its ~~ticker symbol~~corporate name to ~~AUID.~~authID Inc.

The information which appears on our website www.authID.ai is not part of this report.

PART I – FINANCIAL INFORMATION

~~IPSIDY~~ITEM 1. FINANCIAL STATEMENTS.

authID INC. AND SUBSIDIARIES

~~CONDENSED CONSOLIDATED BALANCE SHEETS~~(formerly known as Ipsidy Inc.)

June 30, December 31,
2021 2020
(unaudited)
ASSETS
Current Assets:
Cash $ 1,805,414 $ 3,765,277
Accounts receivable, net 201,939 72,986
Current portion of net investment in direct financing lease 76,661 72,682
Inventory 138,781 254,951
Other current assets 650,308 237,769
Total current assets 2,873,103 4,403,665

Property and Equipment, net 148,493 97,829
Other Assets 136,163 240,223
Intangible Assets, net 3,941,547 4,527,476
Goodwill 4,183,232 4,183,232
Net investment in direct financing lease, net of current portion 382,671 422,021
Total assets $ 11,665,209 $ 13,874,446

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 2,103,954 $ 2,665,132
Notes payable obligation, current portion 4,632 5,947
Capital lease obligation, current portion 30,763 39,232
Convertible debt 662,000 -
Deferred revenue 461,083 237,690
Total current liabilities 3,262,432 2,948,001

Capital lease obligation, net of current portion - 10,562
Notes payable, net of discounts and current portion 485,760 487,339
Convertible debt - 5,800,976
Other liabilities - 47,809
Total liabilities 3,748,192 9,294,687

Commitments and Contingencies (Note 13)

Stockholders’ Equity:
Common stock, $0.0001 par value, 1,000,000,000 shares authorized; 21,363,027 and 19,642,401 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively 2,137 1,964
Additional paid in capital 111,493,973 102,651,304
Accumulated deficit (103,781,760 ) (98,234,151 )
Accumulated comprehensive income 202,667 160,642
Total stockholders’ equity 7,917,017 4,579,759
Total liabilities and stockholders’ equity $ 11,665,209 $ 13,874,446

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2022			2021
	(unaudited)
ASSETS
Current Assets:
Cash	$	9,978,252		$	5,767,276
Accounts receivable, net		38,076			26,846
Other current assets		997,113			502,721
Current assets held for sale		781,895			629,752
Total current assets		11,795,336			6,926,595

Property and Equipment, net		-			25,399
Other Assets		351,024			2,501
Intangible Assets, net		1,958,142			2,379,451
Goodwill		4,183,232			4,183,232
Non-current assets held for sale		73,981			312,831
Total assets	$	18,361,715		$	13,830,009

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$	1,784,682		$	1,778,092
Convertible debt		662,000			662,000
Deferred revenue		45,644			199,007
Current liabilities held for sale		534,118			295,332
Total current liabilities		3,026,444			2,934,431
Non-current Liabilities:
Convertible debt		7,607,011			-
Total liabilities		10,633,455			2,934,431

Commitments and Contingencies (Note 10)

Stockholders’ Equity:
Common stock, $0.0001 par value, 1,000,000,000 shares authorized; 24,789,418 and 23,294,024 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		2,478			2,329
Additional paid in capital		135,322,838			126,581,702
Accumulated deficit		(127,773,494	)		(115,899,939	)
Accumulated comprehensive income		176,438			211,486
Total stockholders’ equity		7,728,260			10,895,578
Total liabilities and stockholders’ equity	$	18,361,715		$	13,830,009

See notes to condensed consolidated financial statements.

~~IPSIDY~~authID INC. AND SUBSIDIARIES

(formerly known as Ipsidy Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended
June 30, Six Months Ended
June 30,
2021 2020 2021 2020

Revenues:
Products and services $ 565,165 $ 306,692 $ 1,141,078 $ 1,085,630
Lease income 12,616 14,427 25,702 29,278
Total revenues, net 577,781 321,119 1,166,780 1,114,908

Operating Expenses:
Cost of Sales 156,905 61,798 373,049 417,521
General and administrative 3,049,700 2,389,794 4,977,626 3,872,916
Research and development 347,173 190,339 669,183 620,740
Impairment loss - 163,822 - 1,035,629
Depreciation and amortization 314,590 321,987 624,419 647,331
Total operating expenses 3,868,368 3,127,740 6,644,277 6,594,137

Loss from operations (3,290,587 ) (2,806,621 ) (5,477,497 ) (5,479,229 )

Other Expense:
Warrant exercise inducement expense - (366,795 ) - (366,795 )
Extinguishment of debt - gain (loss) 485,760 - 485,760 (985,842 )
Other income 6,121 24,713 7,658 34,666
Interest expense, net (256,550 ) (310,153 ) (553,988 ) (489,203 )
Other income (expense), net 235,331 (652,235 ) (60,570 ) (1,807,174 )

Loss before income taxes (3,055,256 ) (3,458,856 ) (5,538,067 ) (7,286,403 )

Income Tax Expense (2,354 ) (3,592 ) (9,542 ) (12,466 )

Net loss $ (3,057,610 ) $ (3,462,448 ) $ (5,547,609 ) $ (7,298,869 )

Net Loss Per Share - Basic and Diluted $ (0.15 ) $ (0.20 ) $ (0.28 ) $ (0.42 )

Weighted Average Shares Outstanding - Basic and Diluted 20,248,868 17,441,164 20,003,913 17,473,583

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Revenues:
Verified software license	$	51,409		$	18,499		$	86,902		$	33,021
Legacy authentication services		15,000			128,272			144,559			261,810
Total revenues, net		66,409			146,771			231,461			294,831

Operating expenses:
General and administrative		4,806,275			2,733,786			9,284,897			4,343,822
Research and development		915,628			347,173			1,453,492			669,183
Depreciation and amortization		244,448			299,239			460,833			579,435
Total operating expenses		5,966,351			3,380,198			11,199,222			5,592,440

Loss from continuing operations		(5,899,942	)		(3,233,427	)		(10,967,761	)		(5,297,609	)

Other income (expense):
Other income		-			480,156			3,240			480,156
Interest expense, net		(459,262	)		(253,919	)		(493,904	)		(551,351	)
Other income (expense), net		(459,262	)		226,237			(490,664	)		(71,195	)

Loss from continuing operations before income taxes		(6,359,204	)		(3,007,190	)		(11,458,425	)		(5,368,804	)

Income tax expense		(7,316	)		(1,028	)		(8,100	)		(6,947	)

Loss from continuing operations		(6,366,520	)		(3,008,218	)		(11,466,525	)		(5,375,751	)

Loss from discontinued operations		(206,307	)		(49,392	)		(407,030	)		(171,858	)

Net loss	$	(6,572,827	)	$	(3,057,610	)	$	(11,873,555	)	$	(5,547,609	)

Net loss per share - Basic and Diluted
Continuing operations	$	(0.26	)	$	(0.15	)	$	(0.48	)	$	(0.27	)
Discontinued operations	$	(0.01	)	$	(0.00	)	$	(0.02	)	$	(0.01	)

Weighted average shares outstanding - Basic and Diluted		24,673,806			20,248,868			24,118,829			20,003,913

See notes to condensed consolidated financial statements.

~~IPSIDY~~authID INC. AND SUBSIDIARIES

(formerly known as Ipsidy Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

Three Months Ended
June 30, Six Months Ended
June 30,
2021 2020 2021 2020
Net Loss $ (3,057,610 ) $ (3,462,448 ) $ (5,547,609 ) $ (7,298,869 )
Foreign currency translation gain (loss) 1,669 80,235 42,025 (36,029 )
Comprehensive loss $ (3,055,941 ) $ (3,382,213 ) $ (5,505,584 ) $ (7,334,898 )

~~See notes to condensed consolidated financial statements.~~

~~IPSIDY INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY~~

~~(Unaudited)~~

Accumulated
Additional Other
Common Stock Paid-in Accumulated Comprehensive
Six Months Ended June 30, 2021 Shares Amount Capital Deficit Income Total
Balances, December 31, 2020 19,642,519 $ 1,964 $ 102,651,304 $ (98,234,151 ) $ 160,642 $ 4,579,759
Stock-based compensation - - 2,261,126 - - 2,261,126
Settlement of accrued expense with stock options - - 349,376 - - 349,376
Convertible notes converted to common stock 1,171,296 117 6,232,223 - - 6,232,340
Cashless stock option exercise 286,453 30 (30 ) - - -
Cashless warrant exercise 262,759 26 (26 ) - - -
Net loss - - - (5,547,609 ) - (5,547,609 )
Foreign currency translation - - - - 42,025 42,025
Balances, June 30, 2021 21,363,027 $ 2,137 $ 111,493,973 $ (103,781,760 ) $ 202,667 $ 7,917,017

Three Months Ended June 30, 2021
Balances, March 31, 2021 20,116,348 $ 2,012 $ 103,401,916 $ (100,724,150 ) $ 200,998 $ 2,880,776
Stock-based compensation - - 1,634,546 - - 1,634,546
Settlement of accrued expense with stock options - - 349,376 - - 349,376
Convertible notes converted to common stock 1,138,346 114 6,108,146 - - 6,108,260
Cashless stock option exercise 108,333 11 (11 ) - - -
Net loss - - - (3,057,610 ) - (3,057,610 )
Foreign currency translation - - - - 1,669 1,669
Balances, June 30, 2021 21,363,027 $ 2,137 $ 111,493,973 $ (103,781,760 ) $ 202,667 $ 7,917,017

Six Months Ended June 30, 2020
Balances, December 31, 2019 17,270,848 $ 1,727 $ 95,032,252 $ (86,935,593 ) $ 177,385 $ 8,275,771
Modification of warrants issued with debt - - 95,223 - - 95,223
Sale of common stock for cash 114,719 11 199,989 - - 200,000
Warrant exercise 682,700 68 1,248,915 - - 1,248,983
Warrant exercise inducement - - 366,795 - - 366,795
Stock-based compensation 150,000 15 629,978 - - 629,993
Issuance of common stock to settle accounts payable 3,540 0 8,270 - - 8,270
Net loss - - - (7,298,869 ) - (7,298,869 )
Foreign currency translation - - - - (36,029 ) (36,029 )
Balances, June 30, 2020 18,221,807 $ 1,822 $ 97,581,422 $ (94,234,462 ) $ 141,356 $ 3,490,138

Three Months Ended June 30, 2020
Balances, March 31, 2020 17,424,388 1,742 95,304,840 (90,772,014 ) 61,121 4,595,689
Sale of common stock for cash 114,719 11 199,989 - - 200,000
Warrant exercise 682,700 68 1,248,915 - - 1,248,983
Warrant exercise inducement - - 366,795 - - 366,795
Stock-based compensation - - 460,883 - - 460,883
Net loss - - - (3,462,448 ) - (3,462,448 )
Foreign currency translation - - - - 80,235 80,235
Balances, June 30, 2020 18,221,807 $ 1,822 $ 97,581,422 $ (94,234,462 ) $ 141,356 $ 3,490,138

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Net loss	$	(6,572,827	)	$	(3,057,610	)	$	(11,873,555	)	$	(5,547,609	)
Foreign currency translation gain (loss)		(67,788	)		1,669			(35,048	)		42,025
Comprehensive loss	$	(6,640,615	)	$	(3,055,941	)	$	(11,908,603	)	$	(5,505,584	)

See notes to condensed consolidated financial statements.

~~IPSIDY~~authID INC. AND SUBSIDIARIES

(formerly known as Ipsidy Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

Six Months Ended
June 30,
2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (5,547,609 ) $ (7,298,869 )
Adjustments to reconcile net loss with cash flows from operations:
Depreciation and amortization expense 624,419 600,978
Stock-based compensation 2,261,126 629,993
Extinguishment of note payable - 985,481
Warrant exercise inducement expense - 366,795
Amortization of debt discounts and issuance costs 237,435 214,668
Impairment losses - 1,059,495
Forgiveness of note payable (485,760 ) -
Changes in operating assets and liabilities:
Accounts receivable (127,930 ) (23,217 )
Net investment in direct financing lease 35,371 31,796
Other current assets and other assets (308,479 ) 21,984
Inventory 113,870 374,366
Accounts payable and accrued expenses 644,649 1,056,433
Deferred revenue 223,393 28,810
Other liabilities (47,809 ) -
Net cash flows from operating activities (2,377,324 ) (1,951,287 )

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (78,325 ) (2,394 )
Investment in other assets including work in progress (10,829 ) (124,870 )
Other assets - 13,462
Net cash flows from investing activities (89,154 ) (113,802 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of convertible note payable - 1,510,000
Payment of debt issuance costs - (104,800 )
Proceeds from sale of common stock, - 200,000
Proceeds from exercise of warrants - 283,950
Proceeds from payroll protection loan 485,760 485,760
Payments on notes payable (2,892 ) -
Principal payments on capital lease obligation (19,224 ) (19,487 )
Net cash flows from financing activities 463,644 2,355,423

Effect of Foreign Currencies 42,971 (42,465 )

Net Change in Cash (1,959,863 ) 247,869
Cash, Beginning of the Period 3,765,277 567,081
Cash, End of the Period $ 1,805,414 $ 814,950

Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 8,779 $ 5,296
Cash paid for income taxes $ 9,853 $ 12,466

Modification of warrants issued with convertible debt $ - $ 95,223
Exchange of notes payable and accrued interest for convertible notes payable $ - $ 2,662,000
Warrant exercise with a subscription receivable $ - $ 965,033
Settlement of accounts payable with issuance of common stock $ - $ 8,270

Conversion of convertible notes payable and accrued interest to common stock $ 6,232,340 $ -
Settlement of accounts payable with issuance of stock options $ 349,376 $ -

											Accumulated
					Additional						Other
	Common Stock				Paid-in			Accumulated			Comprehensive
	Shares		Amount		Capital			Deficit			Income			Total
Balances, December 31, 2021		23,294,024	$	2,329	$	126,581,702		$	(115,899,939	)	$	211,486		$	10,895,578
Stock-based compensation		-		-		4,499,107			-			-			4,499,107
Sale of common stock for cash, net of offering costs		1,063,514		106		3,146,834			-			-			3,146,940
Common stock issued with convertible debt		28,496		3		91,754			-			-			91,757
Common stock issued for working capital facility		100,000		10		302,990			-			-			303,000
Shares issued in lieu of interest		116,896		11		250,996			-			-			251,007
Warrants for services with the issuance of convertible debt		-		-		449,474			-			-			449,474
Cashless stock option exercise		185,111		19		(19	)		-			-			-
Cashless warrant exercise		1,377		-		-			-			-			-
Net loss		-		-		-			(11,873,555	)		-			(11,873,555	)
Foreign currency translation		-		-		-			-			(35,048	)		(35,048	)
Balances, June 30, 2022		24,789,418	$	2,478	$	135,322,838		$	(127,773,494	)	$	176,438		$	7,728,260

Balances, March 31, 2022		24,672,522	$	2,467	$	132,439,724		$	(121,200,667	)	$	244,226		$	11,485,750
Shares issued in lieu of interest		116,896		11		250,996			-			-			251,007
Stock-based compensation		-		-		2,632,118			-			-			2,632,118
Net loss		-		-		-			(6,572,827	)		-			(6,572,827	)
Foreign currency translation		-		-		-			-			(67,788	)		(67,788	)
Balances, June 30, 2022		24,789,418	$	2,478	$	135,322,838		$	(127,773,494	)	$	176,438		$	7,728,260

Balances, December 31, 2020		19,642,519	$	1,964	$	102,651,304		$	(98,234,151	)	$	160,642		$	4,579,759
Stock-based compensation		-		-		2,261,126			-			-			2,261,126
Settlement of accrued expense with stock options		-		-		349,376			-			-			349,376
Convertible note converted to common stock		1,171,296		117		6,232,223			-			-			6,232,340
Cashless stock option exercise		286,453		30		(30	)		-			-			-
Cashless warrant exercise		262,759		26		(26	)		-			-			-
Net loss		-		-		-			(5,547,609	)		-			(5,547,609	)
Foreign currency translation		-		-		-			-			42,025			42,025
Balances, June 30, 2021		21,363,027	$	2,137	$	111,493,973		$	(103,781,760	)	$	202,667		$	7,917,017

Balances, March 31, 2021		20,116,348	$	2,012	$	103,401,916		$	(100,724,150	)	$	200,998		$	2,880,776
Stock-based compensation		-		-		1,634,546			-			-			1,634,546
Settlement of accrued expense with stock options		-		-		349,376			-			-			349,376
Convertible note converted to common stock		1,138,346		114		6,108,146			-			-			6,108,260
Cashless stock option exercise		108,333		11		(11	)		-			-			-
Net loss		-		-		-			(3,057,610	)		-			(3,057,610	)
Foreign currency translation		-		-		-			-			1,669			1,669
Balances, June 30, 2021		21,363,027	$	2,137	$	111,493,973		$	(103,781,760	)	$	202,667		$	7,917,017

See notes to condensed consolidated financial statements.

~~IPSIDY~~authID INC. AND SUBSIDIARIES

(formerly known as Ipsidy Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(11,873,555	)	$	(5,547,609	)
Adjustments to reconcile net loss with cash flows from operations:
Depreciation and amortization expense		460,833			579,417
Stock-based compensation		4,499,107			2,261,126
Shares issued in lieu of interest		251,007			-
Amortization of debt discounts and issuance costs		210,722			237,435
Forgiveness of notes payable		-			(485,760	)
Changes in operating assets and liabilities:
Accounts receivable		(11,230	)		(86,607	)
Net investment in direct financing lease		-			(46,560	)
Other assets		(295,233	)		(289,716	)
Accounts payable and accrued expenses		6,587			780,062
Deferred revenue		(153,363	)		289,102
Other liabilities		-			(47,809	)
Adjustments relating to discontinued operations		422,423			(20,405	)
Net cash flows from operating activities		(6,482,702	)		(2,377,324	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(7,978	)		-
Purchase of property and equipment – discontinued operations		(16,159	)		(78,325	)
Purchase of intangible assets		(6,306	)		(10,829	)
Net cash flows from investing activities		(30,443	)		(89,154	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock, net of offering costs		3,146,940			-
Proceeds from issuance of convertible note payable, net of issuance costs		7,992,841			-
Cash paid for working capital facility		(300,000	)		-
Proceeds from the exercise of warrants		-			485,760
Payments on notes payable – discontinued operations		(1,579	)		(2,892	)
Principal payments on capital lease obligation – discontinued operations		(10,582	)		(19,224	)
Net cash flows from financing activities		10,827,620			463,644

Effect of foreign currencies		(33,826	)		42,971

Net change in cash		4,280,649			(1,959,863	)
Cash, beginning of the period		5,767,276			3,506,171
Cash, beginning of the period – discontinued operations		270,707			259,106
Cash, end of the period – discontinued operations		(340,380	)		(236,051	)
Cash, end of the period	$	9,978,252		$	1,569,363
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest – discontinued operations	$	-		$	8,779
Cash paid for income taxes	$	-		$	-
Cash paid for income taxes – discontinued operations	$	-		$	-
Schedule of Non-cash Investing and Financing Activities:
Cashless option and warrant exercises	$	19		$	56
Common stock issued with convertible notes	$	91,757		$	-
Common stock for working capital facility	$	303,000		$	-
Warrants for services with the issuance of convertible debt	$	449,474		$	-
Settlement of accounts payable with issuance of common stock	$	-		$	349,376
Conversion of convertible note payable and accrued interest to common stock	$	-		$	6,232,340

See notes to condensed consolidated financial statements.

authID INC. AND SUBSIDIARIES

(formerly known as Ipsidy Inc.)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION

In the opinion of Management, the accompanying unaudited condensed consolidated financial statements are prepared in accordance with instructions for Form 10-Q, include all adjustments (consisting only of normal recurring accruals) which we considered as necessary for a fair presentation of the results for the periods presented. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. The results of operations for the three and six months ended June 30, ~~2021~~2022 are not necessarily indicative of the results to be expected for future periods or the full year.

Effective July 18, 2022, the Company changed its name to authID, Inc.

The condensed consolidated financial statements include the accounts of ~~Ipsidy~~authID Inc. and its wholly-owned subsidiaries MultiPay S.A.S., ID Global LATAM, IDGS S.A.S., ID Solutions, Inc., FIN Holdings Inc., Ipsidy Enterprises Limited, Cards Plus Pty Ltd. and Ipsidy Peru S.A.C. (collectively the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation.

~~Reverse Stock Split~~

AtOn May 4, 2022, the ~~Annual Meeting~~Board of ~~stockholders~~Directors of authID, Inc. approved a plan to exit from certain non-core activities comprising the ~~Company held on March 22, 2021,~~MultiPay correspondent bank and payments services in Colombia and the ~~stockholders approved an amendment to our certificate~~Card Plus cards manufacturing and printing business in South Africa. As of ~~incorporation to effect a reverse stock split at a ratio not less than 1-for-2~~June 30, 2022 and ~~not greater than 1-for-50, with the exact ratio to be set within that range at the discretion of our board of directors before~~ December 31, 2021,

~~On June 14, 2021 (the “Effective Time”)~~ MultiPay S.A.S., ~~the Company completed a 1-for-30 reverse stock split of its Common Stock,~~IDGS S.A.S (collectively “MultiPay”) and Cards Plus Pty Ltd. (“Cards Plus”) legal entities’ assets are presented as previously authorized at the Annual Meeting. Pursuant to the reverse stock split, at the Effective Time, every 30 issued shares of Common Stock were automatically combined into one share of Common Stock without any change in the par value per share.

~~The par value of the Company’s Common Stock was unchanged at $0.0001 per share after the reverse stock split. As a result, on the effective date of the reverse stock split, the stated capital~~assets held for sale on the Company’s ~~balance sheet attributable to Common Stock was reduced proportionately based on~~Condensed Consolidated Balance Sheets and their results from operations presented as discontinued operations as they met the ~~reverse stock split ratio of 1-for-30 and~~criteria for discontinued operations under the ~~additional paid-in capital account was credited with the amount by which the stated capital was reduced.~~

~~After the reverse stock split, net income or loss per share, and other per share amounts were adjusted because there are fewer shares of the Company’s Common Stock outstanding.~~

~~The financial statements, net income or loss per share and other per share amounts~~applicable accounting guidance. See Discontinued Operations Note 9 for ~~periods ending before the reverse stock split were recast to give retroactive effect to the reverse stock split.~~details.

Going Concern

As of June 30, ~~2021,~~2022, the Company had an accumulated deficit of approximately ~~$103.8~~$127.8 million. For the three and six months ended June 30, ~~2021~~2022 the Company earned revenue from continuing operations of approximately ~~$1.2~~$0.1 million and 0.2 million and incurred a loss from continuing operations of approximately ~~$5.5 million.~~$6.4 million $11.5 million, respectively.

The reports of our independent registered public accounting firm on our consolidated financial statements for the years ended December 31, ~~2020~~2021 and ~~2019~~2020 contained an ~~explanatory~~emphasis of matter paragraph regarding ~~our ability~~the Company’s liquidity situation and management’s plan thereto.

In March 2022, the Company secured additional financing which management believes will provide adequate funding for its operations as it continues to ~~continue as a going concern based upon our net losses.~~invest in its product, people, and technology. The Company may need additional capital in the future but currently it believes it has sufficient funds and credit facilities to operate its business through December 31, 2023. See Notes 5, 6 and 8.

These unaudited condensed consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations for the next fiscal year. The continuation of the Company as a going concern is dependent upon financial support from the Company’s current shareholders, the ability of the Company to obtain additional financing to continue operations, the Company’s ability to generate sufficient cash flows from operations, successfully locating and negotiating with other business entities for potential acquisition and /or acquiring new clients to generate revenues and cash flows.

On June 28, 2021, the Company filed a Registration Statement on Form S-1 and a preliminary prospectus for an underwritten public offering of its Common Stock to be undertaken by ThinkEquity, a division of Fordham Financial Management, Inc. On July 16, 2021, the Company filed an Amendment to such Form S-1, indicating that, based on an assumed offering price of $11.03 per share, the Company was intending to offer approximately 1.8 million shares, for an aggregate offering price of approximately $20 million (before expenses). The Registration Statement also indicates that the Company has applied for its shares to be admitted to listing on the Nasdaq Capital Market under the symbol “AUID”. There is no assurance that such public offering will be completed, for the amount proposes, or at all, nor that the Company’s Common Stock will be admitted for listing to the Nasdaq market.

There is no assurance that the Company will ever be profitable or be able to secure funding or generate sufficient revenues to sustain operations. As such, there is substantial doubt about the Company’s ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

~~Covid-19~~

A novel strain of coronavirus (“Covid-19”) emerged globally in December 2019 and has been declared a pandemic. The extent to which Covid-19 will impact our customers, business, results and financial condition will depend on current and future developments, which are highly uncertain and cannot be predicted at this time. The Company’s day-to-day operations have been impacted differently depending on geographic location and services that are being performed. The Cards Plus business located in South Africa has had limitations on its operations as they are following the guidance and requirements of the South African government. Our operations in the United States and Colombia have suffered less immediate impact as most staff can work remotely and can continue to develop our product offerings.

That said we have seen our business opportunities develop more slowly as business partners and potential customers are dealing with Covid-19 issues, working remotely and these issues are causing delays in decision making and finalization of negotiations and agreements.

Net Loss per Common Share

The Company computes net loss per share in accordance with ~~FASB ASC~~Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible notes and stock warrants, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options, warrants and conversion of convertible notes. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive. The following potentially dilutive securities were excluded from the calculation of diluted loss per share for the three months and six months ended June 30, ~~2021~~2022 and ~~2020~~2021 because their effect was antidilutive:

Security	2021		2020		2022		2021
Convertible notes payable		117,529		1,182,557		2,601,503		117,529
Warrants		1,411,308		1,581,774		1,304,356		1,411,308
Stock options		9,167,642		3,660,778		9,697,615		9,167,642
		10,696,479		6,425,109		13,603,474		10,696,479

~~Inventories~~

Inventory of plastic/ID cards, digital printing material, which are held by Cards Plus Pty Ltd., are at the lower of cost (using the average method) or market. The Plastic/ID cards and digital printing material are used to provide plastic loyal ID and other types of cards. Inventories of kiosks held by IDGS S.A.S are stated at the lower of cost (using the first-in, first-out method) or net realizable value

Inventories at June 30, 2021 and December 31, 2020 consist of cards inventory. As of June 30, 2021 and December 31, 2020, the Company recorded an inventory valuation allowance of approximately $27,000 and $18,000 to reflect net realizable value of the cards inventory.

~~Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings in the current period.~~

Revenue Recognition

~~Cards Plus – The Company recognizes revenue for~~Starting in the ~~design and production of cards at the point in time when products are shipped, or services have been performed due to the short term nature of the contracts. Additionally, the cards produced by~~quarter ended June 30, 2022, the Company ~~have no alternative use and the Company has an enforceable right to payment~~separately reports Verified software license revenue from Legacy authentication services. Prior periods revenues are recast accordingly for ~~work performed should the contract be cancelled. As of June 30, 2021 and December 31, 2020, Cards Plus had approximately $22,000 and~~ ~~$88,000, respectively, of contract liability from payments received in advance that will be earned in future periods.~~comparison purpose.

Payment Processing – The Company recognizes revenue for variable fees generated for payment processing solutions that are earned on a usage fee over time based on monthly transaction volumes or on a monthly flat fee rate. Additionally, the Company also sells certain equipment from time to time for which revenue is recognized upon delivery to the customer.

~~Identity Solutions Software –~~ The Company recognizes revenue based on the identified performance obligations over the performance period for fixed consideration ~~and~~and/or for variable fees generated that are earned on a usage fee ~~based~~earned over time based on monthly transaction or user volumes and/or on a minimum monthly flat fee rate. The Company had a contract liability of approximately ~~$439,000~~$46,000 and ~~$150,000~~$199,000 as of June 30, ~~2021~~2022, and December 31, ~~2020 relating to~~2021, respectively, for certain revenue that will be earned in future periods. Of the $46,000 of deferred revenue contract liability as of June 30, 2022, the majority will be earned during the balance of 2022. The majority of the ~~$150,000 of~~ deferred revenue contract liability as of December 31, ~~2020~~2021 related to legacy authentication services and was ~~earned in the first quarter of fiscal year 2021. As of June 30, 2021, the majority of the deferred revenue contract liability of $439,000 will be~~ recognized in the ensuing three quarters. We have allocated the selling price in the contract to one customer; the contract has multiple performance obligations based on the contract selling price that we believe represents a standalone selling price for the service rendered.

quarter ended March 31, 2022. All contracts are reviewed for their respective performance obligations and related revenue and expense recognition implications. Certain of the revenues are derived from ~~identity services~~our products that could include multiple performance obligations. A performance obligation is defined as a promise to provide a “distinct” good or service to a customer. The Company has determined that one possible treatment under U.S. ~~GAAP~~Generally Accepted Accounting Principles (“GAAP”) is that these services will represent a stand-ready series of distinct daily services that are substantially the same, with the same pattern of transfer to the customer. Further, the Company has determined that the performance obligation to provide account access and facilitate transactions should meet the criteria for the “as invoiced” practical expedient, in that the Company has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the Company’s performance completed to date. As a result, the Company anticipates it may recognize revenue in the amount to which the Company has a right to invoice, based on completed performance at the relevant date. Additionally, the contracts could include implementation services, or support on an “as needed” basis and we will review each contract and determine whether such performance obligations are separate and distinct and apply the new standard accordingly to the revenue and expense derived from or related to each such service.

~~Revenue related~~The Company also provided annual software maintenance support services relating to ~~direct financing leases is outside the scope of Topic 606~~previously licensed software on a stand ready basis. These fees were billed in advance and is recognized ratably over the ~~term~~requisite service period as legacy authentication revenue. The contract terminated on April 1, 2022.

Furthermore, the Company will capitalize the incremental costs of acquiring and fulfilling a contract with a customer if the ~~lease~~Company expects to recover those costs. These incremental costs were immaterial in both three-month periods and the Company recognizes these costs as incurred as it typically relates to a period of less than one year as allowed by the practical expedient and the amounts in the period were immaterial.

Contract cost assets will be amortized using the ~~effective interest method.~~straight-line method over the expected period of benefit beginning at the time revenue begins to be realized. The amortization of contract fulfillment cost assets associated with facilitating transactions will be recorded as cost of services in the Company’s Consolidated Statements of Operations. The amortization of contract acquisition cost assets associated with sales commissions that qualify for capitalization will be recorded as selling, general and administrative expense in the Company’s Consolidated Statements of Operations.

As of June 30, 2022 and December 31, 2021, the Company did not have any deferred contract costs or fees payable.

NOTE 2 – OTHER CURRENT ASSETS AND OTHER ASSETS

Other current assets consisted of the following ~~as of~~at June 30, ~~2021~~2022 (unaudited) and December 31, ~~2020:~~2021:

June 30, December 31,
2021 2020

Prepaid insurance $ 227,800 $ 39,117
Deferred stock offering costs 166,967 -
Prepaid license fees 69,499 30,841
Operating lease right of use 92,503 131,568
Other 93,539 38,697
$ 650,308 $ 240,223

~~NOTE 3 – PROPERTY AND EQUIPMENT, NET~~

~~Property and equipment consisted of the following as of June 30, 2021 and December 31, 2020:~~

June 30,
2021 December 31,
2020
Property and equipment $ 376,164 $ 297,839
Equipment under finance lease (see Note 10) 163,407 163,407
539,571 461,246
Less Accumulated depreciation (391,078 ) (363,417 )
Property and equipment, net $ 148,493 $ 97,829

~~Depreciation expense totaled $27,661 and $26,533 for the six months ended June 30, 2021 and 2020, respectively.~~

~~NOTE 4 – OTHER ASSETS~~

	June 30, 2022		December 31, 2021
Prepaid Insurance	$	493,715	$	126,042
Unamortized working capital facility fees		199,156		-
Prepaid Marketing		80,551		157,972
Prepaid Third Party Services		135,676		57,354
Other		88,015		161,353
	$	997,113	$	502,721

Other assets consisted of the following at June 30, ~~2021~~2022 (unaudited) and December 31, ~~2020:~~2021:

June 30,
2021 December 31,
2020

Operating lease right of use assets $ - $ 49,856
Other 136,163 190,367
$ 136,163 $ 240,223

	June 30, 2022		December 31, 2021

Unamortized working capital facility fees	$	348,524	$	-
Other		2,400		2,501
	$	351,024	$	2,501

NOTE 53 – INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL)

The Company’s intangible assets primarily consist ~~primarily~~ of ~~intellectual property~~ acquired ~~from MultiPay~~ and ~~FIN and are~~developed software that is being amortized over their estimated useful lives as indicated below. The following is a summary of activity related to intangible assets for the six months ended June 30 ~~2021:~~,2022 (unaudited):

	Customer Relationships			Acquired and Developed Software			Intellectual Property			Patents			Total			Acquired and Developed Software			Patents			Total

Useful Lives		10 Years			5 Years			10 Years			N/A						5 Years			10 years

Carrying Value at December 31, 2020	$	811,303		$	3,171,394		$	416,471		$	128,308		$	4,527,476
Carrying Value at December 31, 2021																$	2,238,882		$	140,570		$	2,379,452
Additions		-			-			-			10,829			10,829			-			6,311			6,311
Amortization		(82,963	)		(466,294	)		(40,667	)		(6,834	)		(596,758	)		(419,627	)		(7,994	)		(427,621	)
Carrying Value at June 30, 2021	$	728,340		$	2,705,100		$	375,804		$	132,303		$	3,941,547
Carrying Value at June 30,2022																$	1,819,255		$	138,887		$	1,958,142

The following is a summary of intangible assets as of June 30, ~~2021~~2022 (unaudited):

	Customer Relationships			Acquired and Developed Software			Intellectual Property			Patents			Total			Acquired and Developed Software			Patents			Total

Cost	$	1,587,159		$	4,476,273		$	828,580		$	142,424		$	7,034,436		$	4,476,271		$	164,610		$	4,640,881
Accumulated amortization		(858,819	)		(1,771,173	)		(452,776	)		(10,121	)		(3,092,889	)		(2,657,016	)		(25,723	)		(2,682,739	)
Carrying Value at June 30, 2021	$	728,340		$	2,705,100		$	375,804		$	132,303		$	3,941,547
Carrying Value at June 30,2022																$	1,819,255		$	138,887		$	1,958,142

Amortization expense totaled ~~$596,758~~$428,00 and ~~$579,371~~$597,000, for the six months ended June 30, 2022, and 2021, ~~and 2020,~~ respectively.

Future expected amortization of intangible assets is as follows:

Fiscal Year Ending December 31,
Remainder of 2021	$	593,476
2022		1,093,618

Remainder of 2022			$	427,855
2023		1,042,629		804,722
2024		818,316		580,409
2025		301,699		63,791
2026				16,456
2027				16,456
Thereafter		91,809		48,453
	$	3,941,547	$	1,958,142

There is no impairment indicator identified for impairment of the Company’s intangible assets and goodwill as of June 30, 2022.

NOTE 64 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following as of June 30, ~~2021~~2022 (unaudited) and December 31, ~~2020:~~2021:

June 30,
2021 December 31,
2020
Trade payables $ 438,702 $ 311,024
Accrued interest 919 554,755
Accrued payroll and related obligations 1,160,478 891,790
Current portion of operating lease liabilities 92,503 117,414
Other* 411,352 790,149
Total $ 2,103,954 $ 2,665,132

Included in Other expenses was accrued non-employee Directors’ Compensation of approximately $349,000 at December 31, 2020. In May 2021, the non-employee Directors were compensated for their service through a grant of stock options and therefore the balance of the accrual for Director’s Compensation was $ 0 at June 30, 2021. See Note 10.

~~In June 2021, the majority of the accrued interest was converted into common stock. See Note 8.~~

	June 30, 2022		December 31, 2021
Trade payables	$	623,675	$	548,087
Accrued interest		66,653		33,533
Accrued payroll and related obligations		782,907		783,144
Other		311,447		413,328
Total	$	1,784,682	$	1,778,092

NOTE ~~7 - NOTES PAYABLE, NET~~5 – WORKING CAPITAL FACILTIY

On March 21, 2022, the Company entered into a Facility Agreement with a current shareholder and noteholder of the Company, pursuant to which the shareholder agreed to provide to the Company a $10.0 million unsecured standby line of credit facility that will rank behind the Convertible Notes (see Note 6) and may be drawn down in several tranches, subject to certain conditions described in the Facility Agreement (the “Credit Facility”). Pursuant to the Credit Facility, the Company paid a facility commitment fee of 100,000 shares of our common stock with a fair market value of $3.03 per share upon the effective date of the Credit Facility. The value of the shares along with the $300,000 cash fee paid to the placement agent are being expensed over the life of the Credit Facility that has a term ending on March 31, 2025.

The ~~following is~~outstanding borrowings under the Credit Facility will accrue interest at 15% per annum. Drawdowns of the Credit Facility will be in tranches of not less than $500,000 up to the maximum amount of the Credit Facility, subject to the satisfaction of customary certifications and a ~~summary~~certification from the Company that it has no more than $5 million of ~~notes payable~~cash available to it as of the date of the drawdown request. The Credit Facility contains customary representations and warranties and defined events of default. The Company will be permitted to prepay borrowings under the Credit Facility at any time, without penalty, in part or in full. Upon conversion or redemption of all amounts outstanding under the Convertible Notes and release of all security over the Company’s assets, the Company will provide a lien on the Company’s intellectual property assets to secure the Credit Facility.

There were no borrowings under the Credit Facility as of June 30, ~~2021~~2022. The unamortized deferred debt expense is approximately $548,000 of which $199,000 is included in Other current assets and ~~December 31, 2020:~~the balance in Other assets.

June 30,
2021 December 31,
2020

Paycheck Protection Program Loan #1 $ - $ 485,760
Paycheck Protection Program Loan #2 485,760 -
Installment loan payable related to a vehicle acquisition payable in monthly payments of $539 per month at an interest rate of 10.8% per annum payable for 36 months 4,632 7,526
Notes Payable, Net $ 490,392 $ 493,286
Notes Payable, current portion, $ 4,632 $ 5,947
Notes Payable, net of current portion 485,760 487,339
$ 490,392 $ 493,286

~~Paycheck Protection Program Loans~~

In May 2020, the Company received a loan of approximately $486,000 under the Paycheck Protection Program (“PPP”) as part of the CARES Act which is administered by the U.S. Small Business Association (“USSBA”) related to its U.S. Operations. The Company received notice from the USSBA on May 23, 2021, that the May 2020 PPP loan was forgiven as we met the applicable requirements. In accordance with ASC 470, extinguishment accounting, the amount forgiven by the USSBA is recorded as other income – gain on extinguishment of notes payable.

In January 2021, the Company received a second loan of approximately $486,000 under the PPP related to its U.S. Operations. The Company anticipates subject to approval by USSBA, if certain requirements are met the second loan will be forgiven. Any amounts not forgiven will be required to be repaid. The loan bears interest at an annual rate 1% per annum and matures on January 31, 2023.

If the USSBA determines that either PPP loan was not properly obtained and/or expenditures supporting forgiveness were not appropriate, the Company would need to repay some or all of the PPP loans and record additional expense which could have a material adverse effect on the Company’s financial condition and results of operations in a future period.

NOTE 86 – CONVERTIBLE NOTES PAYABLE

On ~~December 13, 2019,~~March 21, 2022, the Company entered into a Securities Purchase ~~Agreements~~Agreement (“SPA”) with ~~several~~certain accredited investors, ~~(the “8% Note Investors”) providing for the sale by~~including certain directors of the Company or their affiliates (the “Note Investors”), and, pursuant to the 8%SPA, sold to the Note Investors ~~of 8%~~Senior Secured Convertible Notes ~~in the~~(the “Convertible Notes”) with an aggregate initial principal amount of ~~$428,000 (the “8% Notes”).~~approximately $9.2 million and a conversion price of $3.70. The 8%Convertible Notes were sold with an aggregate cash origination fee of approximately $200,000, and we issued a total of approximately 28,500 shares of our common stock to ~~mature on November 30, 2021 and were a general unsecured obligation~~the Note Investors as an additional origination fee. The Convertible Notes will accrue interest at the rate of 9.75% per annum, which will be payable in cash or, for some or all of the ~~Company.~~first five quarterly interest payments, in shares of our common stock at the Company’s option, on the last day of each calendar quarter before the maturity date and on the maturity date. The maturity date of the Convertible Notes is March 31, 2025.

In ~~February 2020,~~the quarter ended June 30, 2022, the Company ~~and~~issued 116,896 shares of common stock for approximately $251,000 of interest owed from the ~~holders~~effective date of the ~~8% Notes entered into an amendment agreement pursuant~~loan until June 30, 2022. The number of shares issued to ~~which the principal and interest due under the 8% Notes will remain due and payable~~each Note Investor was based on the ~~same terms~~VWAP of the common stock as ~~exist~~defined in the 8%Convertible Notes, ~~prior to modification, that~~or a higher minimum price per share for certain directors, in accordance with the ~~maturity shall be extended to the same maturity date as the 2020 Notes, namely February 28, 2022, and the 8% Notes became a secured obligation~~terms of the ~~Company.~~Convertible Notes.

~~On February 14, 2020~~In connection with the issuance of the Convertible Notes, the Company ~~entered into Securities Purchase Agreements with several accredited investors (the “2020 Note Investors”) providing for the sale by the Company~~issued 142,690 common stock warrants to the ~~2020 Note Investors~~broker and its representatives with an estimated grant date fair value of ~~15% Senior Secured Convertible Notes~~approximately $449,000 which has been recorded as a reduction in the ~~aggregate amount of $1,510,000 (the “2020 Notes”). Philip D. Beck, Chief Executive Officer and Chairman~~carrying value of the Board, invested $50,000 in consideration of a 2020 Note in the principal amount of $50,000 paid by a deduction from his salary. Theodore Stern, a director of the Company, invested $50,000 in consideration of a 2020 Note in the principal amount of $50,000. Herbert Selzer, a director of the Company invested $100,000 in consideration of a 2020 Note in the principal amount of $100,000. Mr. Selzer provided $50,000 on the closing date and provided the balance of the funding in April 2020.Convertible Notes.

The ~~2020 Notes mature February 28, 2022 and are~~Company also has a ~~secured obligation of~~note outstanding to the ~~Company. At the option of the 2020 Note Investors, they may at any time convert the 2020 Notes. The number of shares delivered shall be equal to 150% of~~Stern Trust in the amount of $662,000 that earns interest at 10% per annum, which at the ~~principal converted divided by~~election of the Stern Trust can be paid in shares of common stock at a conversion price of $6.00 ~~per share. The Company may require that~~(the “Stern Note”). Theodore Stern, the ~~2020 Note Investors convert all or a portion~~Trustee of the ~~2020 Notes, if~~Stern Trust was formerly a director of the ~~Company’s volume weighted average price~~Company. The maturity date of the Stern Note was previously February 29, 2022 and the Stern Trust and the Company have mutually agreed to extend the due date to December 31, 2022. The Stern Trust shall have the right at is sole option to extend the maturity date for a further six months after December 31, 2022, by service of written notice upon the Borrower at any ~~preceding 20-day period is equal to~~time on or ~~greater than $9.00.~~before December 31, 2022.

~~In connection with this private offering, the Company paid Network 1 Financial Securities, Inc., a registered broker-dealer, a cash fee of approximately $104,800.~~

During the first quarter of 2021, convertible notes totaling $120,000 and a portion of their accrued interest at the option of the noteholders were converted into approximately 33,000 shares of common stock of the Company.

Additionally, during the six months ended June 30, 2021, the Company received conversion notices from (i) the Stern Trust converting the principal amount, repayment premium and interest in the amount of approximately $3.5 million payable under the Restated Stern Note into approximately 561,000 shares of common stock, (ii) the 8% Note Investors converting principal and interest in the amount of approximately $0.4 million into approximately 180,000 shares of common stock and (iii) the 2020 Note Investors converting principal, repayment premium and interest in the amount of approximately $2.5 million into approximately 398,000 shares of common stock. The Stern Trust is owed approximately $0.7 million in interest under the Restated Stern Note, which has not been converted and remains outstanding. As a result, a total of approximately $6.1~~million of Company net indebtedness was converted and the Company issued approximately~~ 1~~,138,000 shares of common stock in the aggregate.~~

The following is a summary of the convertible notes payable outstanding atas of June 30, ~~2021:~~2022 (unaudited):

8% convertible notes payable issued December 2019 $ -
15% convertible notes payable issued February 2020 -
10% convertible notes payable issued February 2020 662,000

$ 662,000

10.0% convertible note due December 31, 2022	$	662,000
9.75% convertible notes due March 31, 2025		9,176,224

less:
Unamortized debt discount expense		(249,067	)
Unamortized debt issuance expense		(1,320,146	)
	$	8,269,011

Future maturities of convertible notes payable ~~are~~ as ~~follows:~~of June 30,2022:

2021	$	-
2022		662.000	$	662,000
2025				9,176,224
			$	9,838,224
	$	662,000

NOTE 97 – RELATED PARTY TRANSACTIONS

Convertible Notes Payable

~~In 2021,~~During the ~~Company received conversion notices from Stern Trust~~six months ended June 30, 2022, two Directors, an affiliate of ~~which Theodore Stern, (a former member~~one of such Directors and one Executive Officer invested in $1.2 million of the ~~Board~~Convertible Notes issued. See Note 6. In connection with the payment of interest on the Convertible Notes, 10,978 shares were issued to two Directors asand an affiliate of June 14, 2021) is the Trustee, converting the principal amount, repayment premium and interest in the amount of approximately $3.5 million payable under the Restated Stern Note into approximately 561,000 shares of common stock. Additionally, Theodore Stern and Herbert Selzer (also a former memberone of the Board of Directors as of June 14, 2021) provided conversion notices for their respective 2020 Notes converting the principal, repayment premium and interest in the amount of approximately $256,000 into approximately 41,000 shares of common stock. The Stern Trust is owed approximately $0.7 million in interest under the Restated Stern Note, which has not been converted and remains outstanding.Directors.

~~Executive Officers~~Issuance of Common Stock

~~On June 14, 2021, Phillip L. Kumnick resigned as Chief~~Two Directors and one Executive Officer ~~of Ipsidy Inc., a Delaware corporation (the “Company”) and Thomas L. Thimot was appointed Chief Executive Officer~~invested $0.2 million in his place. Further, Philip R. Broenniman resigned as President and Chief Operating Officer and Cecil N. Smith III (Tripp) was appointed President and Chief Technology Officer. The Company granted to each of Mr. Kumnick and Mr. Broenniman options to acquire a total of 1,166,667 shares ofthe common stock ~~at an exercise price of $7.20 per share for a term of ten years that vest upon~~offering in the ~~achievement of certain market capitalization thresholds, or performance conditions.~~

Mr. Thomas Thimot and Mr. Cecil Smith, became employed by the Company as Chief Executive Officer and President and Chief Technology Officer effective June 14, 2021. Mr. Thimot and the Company entered into an Offer Letter pursuant to which Mr. Thimot will earn an annual salary of $325,000 with a bonus target at 50% of the base salary (pro-rated for 2021) upon terms to be agreed with the Compensation Committee for 2021 and on the understanding that the 2022 target will include a requirement of the Company achieving three times the annual revenue of 2021. Additionally, Mr. Thimot was granted an option to acquire 1,200,000 shares of common stock at an exercise price of $7.80 per share for a term of ten years of which half of the options vest monthly over four years and the balance is subject to certain performance vesting requirements.quarter ended March 31, 2022. See Note 8.

On June 14, 2021, Mr. Smith and the Company entered an into an Offer Letter pursuant to which Mr. Smith will earn an annual salary of $275,000 with a bonus target at 50% of the base salary (pro-rated for 2021) upon terms to be agreed with the Compensation Committee for 2021. In addition, Mr. Smith will receive a bonus of $50,000 after 90 days of service. Additionally. Mr. Smith was granted an option to acquire 600,000 shares of common stock at an exercise price of $7.80 per share for a term of ten years of which half of the options vest monthly over four years and the balance is subject to certain performance vesting requirements.

~~Appointment of Board of Directors~~Executive Officers Agreements

On June 9, 2021 Theodore Stern, Herbert Selzer and Thomas Szoke resigned as directors of the Company. The size of the Board of directors was increased to seven and Dr. Michael A. Gorriz, Michael L. Koehneman, Sanjay Puri, Mr. Thimot and Jacqueline L. White were appointed as additional directors of the Company. Messrs. Stern, Selzer and Szoke did not advise the Company of any disagreement with the Company on any matter relating to its operations, policies or practices. Mr. Szoke will continue with the Company as Chief Solutions Architect.

~~The Company granted each~~On April 25, 2022, Stuart Stoller indicated his intention to resign as Chief Financial Officer of the ~~four new~~Company in connection with his planned retirement. The resignation and retirement were effective as of June 17, 2022 at which time Annie Pham was appointed as Chief Financial Officer in his place. In connection with his retirement, the Board of Director’s approved the vesting of approximately 122,222 stock options which were unvested as of June 17, 2022. Additionally, the Board of Directors approved a consulting arrangement for Mr. Stoller to provide transitional services.

On April 25, 2022, Hang Pham and the Company entered an Offer Letter pursuant to which Ms. Pham agreed to serve as Chief Financial Officer with a planned employment date commencing June 20, 2022. Ms. Pham receives an annual salary of ~~June 2021 stock options~~$275,000. The Company agreed to provide a bonus of 40% of the base salary (pro rated for 2022) based on achievement of performance milestones, calculated and payable in accordance with the corporate milestones approved by the Board for the year 2022. For subsequent fiscal years the bonus shall be subject to performance targets to be mutually agreed with the Compensation Committee of the Board. In addition, Ms. Pham received a signing bonus in the amount of $25,000, which is fully refundable to the Company if Ms. Pham leaves her employment voluntarily or is terminated for cause prior to the first anniversary of the commencement of employment. Upon commencing employment, Ms. Pham was granted an option to acquire ~~62,500~~350,000 shares of common stock ~~or a total of 250,000~~ at an exercise price of ~~$7.80 per share for a term~~$2.41 with an exercise period of ten years ~~that vest one third per year after each Annual Meeting. The Company granted the previously serving Board of Directors stock options~~subject to acquire 93,470 common shares that are vested as the services were previously rendered. The stock options were granted in lieu of other forms of Board of Director Compensation The Company also granted Mr. Selzercertain performance and Mr. Stern 22,388 stock options to acquire common shares for service in 2021 prior to their resignation as Board Members. Upon their resignation as directors in June 2021, 13,992 stock options were vested and the balance were forfeitedmarket vesting requirements

NOTE 108 – STOCKHOLDER’S EQUITY

Common Stock

During the six months ended June 30, ~~2021,~~2022, shares of common stock were issued as a result of the following ~~non-cash~~ transactions:

●

~~In the first quarter of 2021, convertible notes totaling $120,000~~●

On March 18 and ~~a portion of their accrued interest at the option of the noteholders were converted into approximately 33,000 shares of common stock of the Company~~

●

~~Additionally, during the three and six months ended June 30, 2021,~~March 21, 2022, the Company ~~received conversion notices from (i)~~entered into Subscription Agreements (the “Subscription Agreements”) with an accredited investor and certain members of authID’s management team (the “PIPE Investors”), and, pursuant to the ~~Stern Trust converting~~Subscription Agreements, sold to the ~~principal amount, repayment premium and interest in the amount of approximately $3.5 million payable under the Restated Stern Note into approximately 561,000 shares of common stock, (ii) the 8% Note~~PIPE Investors converting principal and interest in the amount of approximately $0.4 million into approximately 180,000 shares of common stock and (iii) the 2020 Note Investors converting principal, repayment premium and interest in the amount of approximately $2.5 million into approximately 398,000 shares of common stock. The Stern Trust is owed approximately $0.7 million in interest under the Restated Stern Note, which has not been converted and remains outstanding. As a result, a total of ~~approximately $6.1 million of Company indebtedness was converted and the Company issued approximately 1,138,000~~1,063,514 shares of our common stock inat prices of $3.03 per share for an outside investor and $3.70 per share for the ~~aggregate.~~management investors (the “PIPE”). The aggregate gross proceeds from the PIPE are approximately $3.3 million.

●

The Company issued 28,496 shares of our common stock to the Note Investors as an additional origination fee. Additionally, on June 30, 2022, the Company issued 116,896 shares of common stock for approximately $251,000 of interest owed from the effective date of the Convertible Notes until June 30, 2022.

On March 21, 2022, the Company entered into a Facility Agreement with a current shareholder and noteholder of the Company, pursuant to which the shareholder agreed to provide to the Company a $10.0 million unsecured standby line of credit facility. Pursuant to the Credit Facility, the Company paid a facility commitment fee of 100,000 shares of our common stock with a fair market value of $3.03 per share upon the effective date of the Credit Facility

●

Certain warrant and stock option holders exercised their respective warrants and stock options by means of the cashless exercise feature and were issued approximately ~~549,000~~186,488 common shares of the Company.

Warrants

The following is a summary of the Company’s warrant activity for the six months ended June 30, ~~2021:~~2022 (unaudited):

Number of
Shares Weighted
Average
Exercise
Price Weighted
Average
Remaining
Life
Outstanding at December 31, 2020 1,823,267 $ 4.20 3.4 Years
Exercised/cancelled (411,926 ) 3.00 -
Outstanding at June 30, 2021 1,411,341 $ 4.41 3.7 Years

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Life
Outstanding at December 31, 2021		1,403,610		$	4.61	3.0 years
Granted		142,690		$	3.70	5.0 years
Exercised/cancelled		(241,944	)	$	4.49	0.1 years
Outstanding at June 30, 2022		1,304,356		$	4.53	3.3 years

Stock Options

The Company determined the grant date fair value of options granted for the six months ended June 30, 2022, using the Black Scholes Method and a Monte Carlo simulation for those stock options granted with a market vesting condition and the following assumptions:

Expected volatility			123-127%
Expected term			5 years
Risk free rate			2.14%-3.38%
Dividend rate			0.00%

Activity related to stock options for the six months ended June 30, ~~2021~~2022 (unaudited), is summarized as follows:

	●	The Company granted Mr. Thimot and Mr. Smith stock options to acquire 1,200,000 and 600,000 shares of common stock respectively upon their employment of which half of the options vest monthly over four years and the balance vest upon the achievement of certain market capitalization thresholds or performance conditions.

	Number of Shares			Weighted Average Exercise Price		Weighted Average Contractual Term (Yrs.)		Aggregate Intrinsic Value
Outstanding as of December 31, 2021		8,910,994		$	6.48		6.7	$	67,488,214
Granted		1,141,541		$	2.80		10.0		0
Exercised		(281,031	)	$	3.28		8.8		0
Forfeited/cancelled		(73,889	)	$	7.22				0
Outstanding as of June 30, 2022		9,697,615		$	5.96		6.1	$	403,078
Exercisable as of June 30, 2022		5,052,541		$	5.45		4.4	$	393,411

	●	The Company granted each of Mr. Kumnick and Mr. Broenniman stock options to acquire 583,333 shares of common stock that vest upon the achievement of certain market capitalization thresholds or performance conditions.

	●	The Company granted each of the 4 new Board of Directors as of June 2021 stock options to acquire 62,500 shares of common stock or a total of 250,000 that vest 1 third a year after each Annual Meeting.

The following table summarizes stock option information as of June 30, 2022 (unaudited):

	●	The Company granted the previously serving Board of Directors stock options to acquire 93,470 common shares that are vested as the services were rendered. The stock options were granted in lieu of other forms of Board of Director Compensation and was used to eliminate previously accrued Board of Director compensation. The Company also granted to each of Mr. Selzer and Mr. Stern 22,388 stock options to acquire common shares for service in 2021 prior to their resignation as Board Members. Upon their resignation as directors in June 2021, 6,997 stock options to each of them were vested and the balance were forfeited.

●

The Company granted options to acquire 583,334 shares of common stock to employees. The options for 383,334 vest annually over a three-year period, 100,000 vest equally over a four-year period, and the balance of 100,000 vest upon the achievement of certain market capitalization thresholds or performance conditions.

Exercise Price	Outstanding		Contractual Life (Yrs.)		Exercisable
$.03 - $4.00		4,438,577		4.2		3,097,242
$4.01 - $7.00		151,667		4.1		151,667
$7.01 - $10.00		3,416,135		8.9		724,466
$10.01 - $15.97		1,691,236		5.3		1,079,166
		9,697,615		6.1		5,052,541

During the six months ended June 30, 2022, the Company recognized approximately $4,499,000 of stock option compensation expense of which approximately $1,396,000 relates to market condition-based awards of directors and officers. As of June 30, 2022, there was approximately $13,450,774 of unrecognized compensation costs related to stock options outstanding that is expected to be expensed through 2026.

NOTE 9 – DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

The Board of Directors of authID considers it in the best interests of the Company to focus its business activities on providing biometric identity verification products and services by means of our proprietary IDaaS platform. Accordingly, on May 4, 2022, the Board approved a plan to exit from certain non-core activities comprising the MultiPay correspondent bank payments services in Colombia and the Cards Plus cards manufacturing and printing business in South Africa.

Cards Plus business in South Africa

The Company plans to exit the Cards Plus business and is in discussions with a buyer to purchase the Company’s interests in Cards Plus.

The estimated sale price is $300,000 less selling costs which resulted in a charge of approximately $68,000 for the Cards Plus. In the six months ended June 30, 2022, the Company also recorded an impairment charge of approximately $144,000 for certain intangible assets of Cards Plus.

MultiPay business in Colombia

The Company plans to exit the MultiPay business in Colombia in an orderly fashion, honoring our obligations to employees, customers and under applicable laws and regulations. We plan to maintain our customer support and operations team in Bogota, which performs essential functions to support the global operations of our Verified family of products.

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 or use of its assets.

As of June 30, 2022, MultiPay has notified the customers and the impacted employees of the Company’s plan. MultiPay also communicated to each employee their compensation entitlements and severance packages under its retention plan and obligations under the appropriate statutes.

As of June 30, 2022, MultiPay is working with a major customer to implement a transition plan to provide an essential service for certain bill pay services which will probably result in the leasing and sale of certain of MultiPay’s proprietary software as well as the assumption by the customer of certain expenses.

The Company expects to incur costs associated with the proposed exit of the MultiPay business which include approximately $195,000 for payment to employees and consultants including statutory obligations and certain contingent retention bonuses; and approximately $57,000 for accelerated depreciation (non-cash) for certain assets which reflects their estimated remaining useful life. In the six months ended June 30, 2022, MultiPay recorded $68,000 of additional expense for employee obligations during the transitional period. We should have a revenue offset to certain expenses as we solidify the sale of the assets.

MultiPay has accelerated the depreciation of certain assets with the effective date of the announcement to reflect the estimated remaining useful life.

The operations of Cards Plus and MultiPay for the three and six months ended June 30, 2022 on a consolidated basis are below (unaudited):

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Discontinued Operations

Total Revenues, net	$	579,246		$	431,010		$	1,021,556		$	871,949

Operating expenses:
Cost of sales		336,540			156,905			520,064			371,228
General and administrative		372,750			315,914			658,132			635,625
Impairment loss		67,984			-			211,703			-
Depreciation and amortization		11,572			15,351			39,774			44,984
Total operating expenses		788,846			488,170			1,429,673			1,051,837

Loss from operations		(209,600	)		(57,160	)		(408,117	)		(179,888	)

Other income (expense):
Other income		4,334			11,725			8,029			13,262
Interest expense, net		-			(2,631	)		(364	)		(2,637	)
Other income, net		4,334			9,094			7,665			10,625

Loss before income taxes		(205,266	)		(48,066	)		(400,452	)		(169,263	)

Income tax expense		(1,041	)		(1,326	)		(6,578	)		(2,595	)

Loss from discontinued operations	$	(206,307	)	$	(49,392	)	$	(407,030	)	$	(171,858	)

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Cards Plus

Total Revenues, net	$	510,142		$	334,679		$	883,300		$	679,435

Operating Expenses:
Cost of Sales		336,540			156,905			520,064			371,228
General and administrative		167,390			151,453			322,699			286,977
Impairment loss		67,984			-			211,703			-
Depreciation and amortization		4,667			16,113			25,897			35,233
Total operating expenses		576,581			324,471			1,080,363			693,438

Income (loss) from operations		(66,439	)		10,208			(197,063	)		(14,003	)

Other income (expense):
Other income		3,468			1,914			6,816			3,451
Interest expense, net		-			(1,111	)		(364	)		(2,637	)
Other income, net		3,468			803			6,452			814

Income (loss) before income taxes		(62,971	)		11,011			(190,611	)		(13,189	)

Income tax expense		-			-			(4,681	)		-

Income (loss) from discontinued operations	$	(62,971	)	$	11,011		$	(195,292	)	$	(13,189	)

~~The options have a term of ten years and all options were granted at market value.~~

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
MultiPay

Total Revenues, net	$	69,104		$	96,331		$	138,256		$	192,514

Operating Expenses:
General and administrative		205,360			164,461			335,433			348,648
Depreciation and amortization		6,905			(762	)		13,877			9,751
Total operating expenses		212,265			163,699			349,310			358,399

Loss from operations		(143,161	)		(67,368	)		(211,054	)		(165,885	)

Other Income:
Other income		866			8,291			1,213			9,811

Loss before income taxes		(142,295	)		(59,077	)		(209,841	)		(156,074	)

Income tax expense		(1,041	)		(1,326	)		(1,897	)		(2,595	)

Loss from discontinued operations	$	(143,336	)	$	(60,403	)	$	(211,738	)	$	(158,669	)

~~Activity related to stock options for the six months ended June 30, 2021, is summarized as follows:~~

Weighted
Average Weighted
Average Aggregate
Number of Exercise Contractual Intrinsic
Shares Price Term (Yrs.) Value
Outstanding as of December 31, 2020 5,645,802 $ 4.50 7.5 $ 8,283,639
Granted 3,938,246 7.54 10.0 -
Exercised/cancelled (416,405 ) 1.50 - -
Outstanding as of June 30, 2021 9,167,643 5.92 7.8 $ 55,257,928
Exercisable as of June 30, 2021 4,111,087 $ 5.77 6.1 $ 27,405,283

As a result of meeting the discontinued operations/assets held for sale criteria for Cards Plus and the MultiPay operations, the assets and liabilities have been reclassified as assets held for sale as of the respective balance sheet date as follows (unaudited):

	June 30, 2022		December 31, 2021
Discontinued Operations			��
Current assets:
Cash	$	340,380	$	270,707
Accounts receivable, net		105,844		110,977
Inventory		301,837		153,149
Other current assets		33,834		94,919
Current assets held for sale		781,895		629,752

Noncurrent assets:
Property and equipment, net		56,891		93,132
Intangible assets		-		153,004
Other assets		17,090		66,695
Noncurrent assets held for sale		73,981		312,831

Total assets held for sale	$	855,876	$	942,583

Current liabilities:
Accounts payable and accrued expenses	$	259,217	$	235,348
Deferred revenue		274,901		47,823
Notes payable obligation, current portion		-		1,579
Capital lease obligation, current portion		-		10,582
Total liabilities held for sale	$	534,118	$	295,332

	June 30, 2022		December 31, 2021
Cards Plus
Current assets:
Cash	$	325,247	$	182,518
Accounts receivable, net		36,139		88,235
Inventory		301,837		153,149
Other current assets		9,306		52,678
Current assets held for sale		672,529		476,580

Noncurrent assets:
Property and equipment, net		-		24,619
Intangible assets		-		153,004
Noncurrent assets held for sale		-		177,623

Total assets held for sale	$	672,529	$	654,203

Current liabilities:
Accounts payable and accrued expenses	$	121,195	$	122,725
Deferred revenue		274,901		47,823
Notes payable obligation, current portion		-		1,579
Capital lease obligation, current portion		-		10,582
Total liabilities held for sale	$	396,096	$	182,709

~~The following table summarizes stock option information as of June 30, 2021:~~

Exercise Price Outstanding Weighted Average
Contractual Life (Yrs). Exercisable
$ 0.0030 116,667 5.1 116,667
$ 1.5000 756,667 6.0 698,334
$ 1.8000 34,735 9.0 34,735
$ 2.1000 1,666,667 6.7 866,667
$ 2.7000 387,667 9.3 -
$ 3.0000 906,667 6.1 906,667
$ 3.5700 31,111 8.3 20,556
$ 3.9000 8,333 7.2 8,333
$ 4.5000 93,333 5.2 93,333
$ 6.6000 69,444 7.4 69,444
$ 7.2000 1,657,463 9.4 107,463
$ 7.5000 83,333 7.2 83,333
$ 7.8000 2,255,557 9.9 5,556
$ 8.7000 33,333 6.7 33,333
$ 12.0000 33,333 5.5 33,333
$ 13.5000 1,033,333 5.2 1,033,333
9,167,643 7.2 4,111,087

	June 30, 2022		December 31, 2021
MultiPay
Current Assets:
Cash	$	15,133	$	88,189
Accounts receivable, net		69,705		22,742
Other current assets		24,528		42,241
Current assets held for sale		109,366		153,172

Noncurrent Assets:
Property and equipment, net		56,891		68,513
Other assets		17,090		66,695
Noncurrent assets held for sale		73,981		135,208

Total assets held for sale	$	183,347	$	288,380

Current Liabilities:
Accounts payable and accrued expenses	$	138,022	$	112,623
Total liabilities held for sale	$	138,022	$	112,623

~~During~~As a result of meeting the ~~six months ended~~discontinued operations/assets held for sale criteria for Cards Plus and the MultiPay operations, the cash flow from operating activities related to discontinued operations is presented separately on the statement of cash flows as summarized below:

	Six Months Ended June 30,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(407,030	)	$	(171,858	)
Adjustments to reconcile net loss with cash flows from operations:
Depreciation and amortization expense		39,774			45,002
Impairment of intangible assets		211,703			-
Changes in operating assets and liabilities:
Accounts receivable		6,332			(41,323	)
Net investment in direct financing lease		(17,306	)		81,931
Other current assets		106,920			(18,763	)
Inventory		(140,653	)		113,870
Accounts payable and accrued expenses		(11,425	)		(135,413	)
Deferred revenue		227,078			(65,709	)
Adjustments relating to discontinued operations		422,423			(20,405	)
Cashflows from discontinued operations	$	15,393		$	(192,263	)

Notes to Financial Statements – Discontinued Operations

Inventories

Inventories at June 30, 2022 and December 31, 2021, ~~the Company recognized approximately $1,635,000~~consist of ~~stock option compensation expense of which approximately $1,229,000 relates to performance-based awards of directors and officers.~~cards inventory. As of June 30, 2022 and December 31, 2021, ~~there was approximately $16,527,000 of unrecognized compensation costs related to stock options outstanding that are expected to be expensed through 2025.~~

~~Additionally,~~respectively, the Company recorded an inventory valuation allowance of approximately ~~$625,000 for restricted stock expense as~~$23,000 and $20,000, respectively to reflect net realizable value of the ~~Company estimated that a portion of its performance-based awards will be earned.~~

~~Total stock-based compensation expense consisting of stock options and restricted stock in the six months ended June 30, 2021 was approximately $2,261,000.~~cards inventory.

AtAny adjustments to reduce the ~~Annual Meeting~~cost of ~~Stockholders held on March 22, 2021,~~inventories to their net realizable value are recognized in earnings in the ~~stockholders approved and ratified an increase of 2,500,000 shares of common stock allocated to the Company’s 2017 Incentive Stock Plan.~~current period.

~~See Note 6~~Revenue Recognition

Cards Plus recognizes revenue for ~~additional information regarding accrued Directors’ compensation.~~the design and production of cards at the point in time when products are shipped, or services have been performed due to the short-term nature of the contracts. As of June 30, 2022 and December 31, 2021, Cards Plus had approximately $275,000 and $48,000, respectively, of contract liability from payments received in advance that will be earned in future periods.

MultiPay recognizes revenue for variable fees generated for payment processing solutions that are earned on a usage fee over time based on monthly transaction volumes or on a monthly flat fee rate. Additionally, MultiPay also sells certain equipment from time to time for which revenue is recognized upon delivery to the customer.

~~NOTE 11 – DIRECT FINANCING LEASE~~

~~The Company and an entity in Colombia entered into a rental contract for the rental of 78 kiosks~~Revenue related to provide cash collection and fare services at transportation stations. The lease term began in May 2016 when the kiosk was installed and operational and when the lease commenced. The term of the rental contract is ten years at an approximate monthly rental of $11,900. The lease has the option at the end of the lease term to purchase each unit for approximately $40. The term of the lease approximates the expected economic life of the kiosks. The lease was accounted for as a direct financing ~~lease.~~

~~The Company has recorded~~leases is outside the ~~transaction as its net investment in the lease~~scope of Topic 606 and will receive monthly payments of $11,856 before estimated executory costs, or $142,272, annually, to reduce investment in the lease and record income associated with the related amount due. Executory costs are estimated to be $1,677 per month and initial direct costs are not considered significant. The transaction resulted in incremental revenue in the quarter ended June 30, 2021 of approximately $26,000.

~~The equipment~~ is subject to a direct lease valued at approximately $748,000. At the inception of the lease term, the aggregate minimum future lease payments to be received is approximately $1,422,000 before executory cost. Unearned income recorded at the inception of this lease was approximately $474,000 and will be recordedrecognized over the term of the lease using the effective ~~income rate~~interest method. ~~Future minimum lease payments to be received under the lease for the next five years and thereafter are as follows:~~

Year ending December 31
Remainder of 2021 61,074
2022 122,148
2023 122,148
2024 122,148
2025 122,148
Thereafter 40,716
Sub-total 590,382
Less deferred revenue (131,050 )
Net investment in lease $ 459,332

~~NOTE 12 – LEASE OBLIGATION PAYABLE~~

Note Payable

Cards Plus had an installment loan payable at a rate of 10.8% that was repaid in full the first quarter of 2022. The ~~Company~~outstanding loan balance was $1,579 as of December 31, 2021.

Lease Obligation

Cards Plus entered into a lease in March 2017 for the rental of its printer for its secured plastic and credential card products business under an arrangement that is classified as a finance lease. The leased equipment iswas amortized on a straight-line basis over its lease term including the last payment (61 payments) ~~which would transfer~~and ownership transferred to the Company. The ~~cost basis of the~~ lease ~~equipment is $163,407 and the accumulated amortization~~was fully paid off as of June 30, ~~2021 is $139,297. The following is a schedule showing~~2022.

Impairment loss

During the ~~future minimum lease payments under finance lease by year and the present~~six months ended June 30, 2022, Cards Plus recorded an impairment loss of approximately $143,000 associated with its intangible assets. We also recorded an additional $68,000 reserve as we estimate net realizable value of the ~~minimum~~net assets held for sale will be lower than their net book value.

Leases

In October 2021, MultiPay entered into a one-year lease ~~payments as of~~for approximately $2,900 per month in Bogota, Colombia. MultiPay provided notice that it will not be renewing the current lease.

Cards Plus leases space for its operation in South Africa. The lease term was through June 30, ~~2021. The interest rate related to the lease obligation is 12%~~2022, and the ~~maturity date~~facility is ~~March 31, 2022.~~

being rented on a month-to-month basis. The approximate monthly rent is $8,000.

Year ending December 31
2021 $ 21,548
2022 10,774
Total minimum lease payments 32,372
Less: Amount representing interest (1,559 )
Present value of minimum lease payments $ 30,763

NOTE 1310 – COMMITMENTS AND CONTINGENCIES

Legal Matters

From time to time, the Company is a party to various legal or administrative proceedings arising in the ordinary course of our business. While any litigation contains an element of uncertainty, we have no reason to believe the outcome of such proceedings will have a material adverse effect on the financial condition or results of operations of the Company.

~~Leases~~

~~For the six months ended June 30, 2021, lease expense was approximately $103,000 inclusive of short-term leases.~~

~~The lease related balances included in the Condensed Consolidated Balance Sheet as of June 30, 2021 were as follows:~~

~~Assets:~~

Current portion of operating lease ROU assets - included in other current assets $ 89,210

Operating lease ROU assets – included in Other Assets $ -

Total operating lease assets $ 89,210

~~Liabilities:~~

Current portion of ROU liabilities – included in Accounts payable and accrued expenses $ 92,503

Long-term portion of ROU liabilities – included in Other liabilities -

Total operating lease liabilities $ 92,503

Leases

~~The weighted average lease of the remaining term is approximately 1.0 years and weighted average discount rate used in the calculations were 13.55%.~~

~~The following table presents the maturity of the Company’s operating lease liabilities as of June 30, 2021:~~

Remainder of 2021 $ 48,303
2022 49,716
Total operating lease payments 98,019
Less: Imputed interest (5,516 )
Total operating lease liabilities $ 92,503

The Company ~~rents~~rented office space in Long Beach, New York at a monthly cost of $2,500. The agreement iswas month to month and ~~can be~~was terminated on ~~30 days’ notice.~~July 31, 2022. The agreement was between the Company and Bridgeworks LLC, an entity principally owned by Mr. Beck, a former CEO and Board Member along with his family.

In July 2022, the Company signed a new lease agreement and moved its headquarters to Denver, Colorado. The ~~Company leases an~~new office ~~location in Bogota, Colombia. In April 2017, MultiPay S.A.S. entered an office lease beginning April 22, 2017. The~~monthly lease cost ~~is approximately $8,500~~approximates $1,500 per month with an inflation adjustment after one year. The lease is automatically extended for one additional year unless written notice to the contrary is provided at least six months in advance. Multipay extended the lease through April 2021. In April 2021, Multipay entered into a six-month lease for a monthly rental of approximately $1,375.month.

~~The Company also leases space for its operation in South Africa. The current lease is through~~For the six months ended June 30, 2022, lease expense was approximately $80,000 inclusive of short-term leases of which $13,000 was for continuing operations and ~~the approximate monthly rent is $8,000.~~$67,000 was for discontinued operations

~~NOTE 14 – SEGMENT INFORMATION~~

~~General information~~

The segment and geographic information provided in the table below is being reported consistent with the Company’s method of internal reporting. Operating segments are defined as components of an enterprise for which separate financial information is available and which is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The CODM regularly reviews net revenue and gross profit by geographic regions. The Company’s products and services operate in 2 reportable segments; identity management and payment processing.

~~Information about revenue, profit/loss and assets~~

The CODM evaluates performance and allocates resources based on net revenue and operating results of the geographic region as the current operations of each geography are either primarily identity management or payment processing. Identity management revenue is generated in North America and Africa and payment processing revenue is earned in South America which are the three geographic regions of the Company. We have included the lease income in payment processing as the leases are related to unattended ticketing kiosks.

Long lived assets are in North America, South America and Africa. Most assets are intangible assets recorded from the acquisition of MultiPay (South America) in 2015 and FIN Holdings (North America and Africa) in 2016. Long-lived assets for North America, South America and Africa amounted to approximately $8.0 million, $0.1 million and $0.2 million consisting of property and equipment – net, intangible assets – net and goodwill.

Analysis of revenue by segment and geographic region and reconciliation to consolidated revenue, gross profit, and net loss are provided below. The Company has included in the schedule below an allocation of corporate overhead based on management’s estimate of resource requirements.

(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2021 2020 2021 2020
Net Revenues:
North America $ 153,687 $ 135,698 $ 301,747 $ 269,252
South America 89,415 72,133 185,598 185,757
Africa 334,679 113,288 679,435 659,899
577,781 321,119 1,166,780 1,114,908

Identity Management 488,366 248,986 981,182 929,151
Payment Processing 89,415 72,133 185,598 185,757
577,781 321,119 1,166,780 1,114,908

Loss From Operations
North America (2,017,716 ) (669,183 ) (3,288,119 ) (1,076,575 )
South America (1,053,365 ) (1,803,784 ) (1,785,053 ) (3,015,936 )
Africa (219,506 ) (333,654 ) (404,325 ) (1,386,718 )
(3,290,587 ) (2,806,621 ) (5,477,497 ) (5,479,229 )

Identity Management (2,237,222 ) (1,002,837 ) (3,692,444 ) (2,463,293 )
Payment Processing (1,053,365 ) (1,803,784 ) (1,785,053 ) (3,015,936 )
(3,290,587 ) (2,806,621 ) (5,477,497 ) (5,479,229 )

Interest Expense (256,550 ) (310,153 ) (553,988 ) (489,203 )
Other income/(expense) 491,881 (342,082 ) 493,418 (1,317,971 )

Loss before income taxes (3,055,256 ) (3,458,856 ) (5,538,067 ) (7,286,403 )

Income tax expense (2,354 ) (3,592 ) (9,542 ) (12,466 )

Net loss $ (3,057,610 ) $ (3,462,448 ) $ (5,547,609 ) $ (7,298,869 )

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Going concern~~Overview

~~As of June 30, 2021,~~authID Inc. (together with its subsidiaries, the Company had an accumulated deficit of approximately $103.8 million. For the six months ended June 30, 2021, the Company earned revenue of approximately $1.2 million and incurred a loss from operations of approximately $5.5 million.

The reports of our independent registered public accounting firm on our consolidated financial statements for the years ended December 31, 2020 and 2019 contained an explanatory paragraph regarding our ability to continue as a going concern based upon our net losses.

These unaudited condensed consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations for the next fiscal year. The continuation of the Company as a going concern is dependent upon financial support from the Company’s current shareholders, the ability of the Company to obtain additional equity financing to continue operations, the Company’s ability to generate sufficient cash flows from operations, successfully locating and negotiating with other business entities for potential acquisition and /or acquiring new clients to generate revenues and cash flows.

~~In January 2021, the Company received a second loan of approximately $486,000 under the PPP of the USSBA related to its U.S. operations.~~

On June 28, 2021, the Company filed a Registration Statement on Form S-1 and a preliminary prospectus for an underwritten public offering of its Common Stockto be undertaken by ThinkEquity, a division of Fordham Financial Management, Inc. On July 16, 2021, the Company filed an Amendment to such Form S-1, indicating that, based on an assumed offering price of $11.03 per share, the Company was intending to offer approximately $1.8 million shares, for an aggregate offering price of approximately $20 million (before expenses). The Registration Statement also indicates that the Company has applied for its shares to be admitted to listing on the Nasdaq Capital Market under the symbol “AUID”. There is no assurance that such public offering will be completed, for the amount proposes,“Company”, “authID”, “we” or ~~at all, nor that the Company’s Common Stock will be admitted for listing to the Nasdaq market.~~

~~Overview~~

~~authID.ai (Ipsidy Inc.~~“our”) is a leading provider of secure, mobile, biometric identity verification software products branded “Verified^TM”, delivered by an easy to integrate Identity as a Service (IDaaS) platform. Our mission is ultimately to eliminate all passwords and to be the preferred global platform for biometric identity authentication. Our vision is to enable every organization to “Recognise Your Customer” instantly, without friction or loss of privacy, powered by the most sophisticated biometric and artificial intelligence technologies.

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 ~~that~~ have entered our daily lexicon ~~it seems like~~ overnight. These ~~risks~~ 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 ~~had to implement~~implemented in order to prevent fraud. The requests to receive and enter one-time ~~passwords.~~passwords, that can be easily hijacked. The ~~maddening~~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.~~tasks, with little added protection from fraud. Surely there is a better way to address these challenges? ~~authID.ai~~authID believes there is.

~~authID.ai~~authID provides secure, facial biometric, identity verification, ~~FIDO2 passwordless login~~ 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 ~~phone~~device or ~~portable device~~desktop (with camera) of their choosing ~~(as opposed to~~(without requiring dedicated ~~hardware)~~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 ~~every~~ electronic ~~transaction has~~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 cybersecurity, workforce, 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.

~~authid.ai~~

authID 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 South Africa, Cards Plus and in Colombia, MultiPay. On May 4, 2022, the Board approved a plan to exit from certain non-core activities comprising the MultiPay correspondent bank, payments services in Colombia and the Card Plus cards manufacturing and printing business in South Africa. See Discontinued Operations.

The Company was incorporated in the State of Delaware on September 21, 2011 and changed ~~its~~our name tofrom Ipsidy Inc. to authID Inc. on ~~February 1, 2017, and our common stock~~July 18, 2022.

Our Common Stock is ~~currently (beginning July 13, 2021)~~ traded on the ~~OTCQB U.S.~~Nasdaq Capital Market under the trading symbol “AUID”. Our corporate headquarters ~~is located at 670 Long Beach~~have been relocated to 1325 S. Colorado, Blvd., ~~Long Beach, NY 11561~~Building A Suite 322, Denver, CO 80222 and our main phone number remains as is (516) 274-8700. We maintain a website at www.authID.ai. The ~~contents of~~information contained on, or that can be accessed through, our ~~website are~~websites is not incorporated by reference into ~~or otherwise to be regarded as part of,~~ this ~~Quarterly Report on Form 10-Q~~prospectus and is intended for informational purposes only.

Adjusted EBITDA – Continuing Operations

This discussion includes information about Adjusted EBITDA – Continuing Operations that is not prepared in accordance with GAAP. Adjusted ~~EBITDA~~EBITDA- Continuing Operations 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 – Continuing Operations is a non-GAAP financial measure that represents GAAP ~~net income (loss)~~loss from continuing operations adjusted to exclude (1) interest expense, (2) interest income, (3) ~~provision for~~ income ~~taxes,~~tax expense, (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.

~~Other items include the following:~~

~~For the six months ended June 30, 2021:~~

●

~~Gain on extinguishment of notes payable - $0.5 million~~

~~For the six months ended June 30, 2020:~~

●

~~Loss on extinguishment of debt of $1.0 million~~

●

~~Impairment loss of $0.9 million~~

~~Warrant exercise inducement expense $0.4 million~~

~~Severance expense $0.4 million~~

Management believes that Adjusted EBITDA – Continuing Operations, when viewed with our results under GAAP and the accompanying reconciliations, provides useful information about our period-over-period results. Adjusted EBITDA – Continuing Operations 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 – Continuing Operations 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. ~~Additionally, we will continue to use Adjusted EBITDA in connection with our executive performance-based compensation in 2021.~~

Adjusted EBITDA – Continuing Operations 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 – Continuing Operations does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

●

Adjusted EBITDA – Continuing Operations 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 – Continuing Operations does not reflect any cash requirements for such replacements;

●

Adjusted EBITDA – Continuing Operations 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 – Continuing Operations 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 Continuing Operations only as a supplement to our GAAP results.

~~Reconciliation of Net Loss to Adjusted EBITDA~~

For the Quarter Ended For the Six Months Ended
June 30,
2021 June 30,
2020 June 30,
2021 June 30,
2020

Net loss $ (3,057,610 ) $ (3,462,448 ) $ (5,547,609 ) $ (7,298,869 )

Add Back:

Interest Expense 256,550 310,153 553,988 489,203
Debt extinguishment - loss/(gain) (485,760 ) - (485,760 ) 985,842
Warrant exercise inducement expense - 366,795 - 366,795
Severance cost - 426,175 - 426,175
Other expense/(income) (6,121 ) (24,713 ) (7,658 ) (34,666 )
Depreciation and amortization 314,317 321,987 624,146 647,331
Taxes 2,354 3,592 9,542 12,466
Impairment loss - 163,822 - 1,035,629
Stock compensation 1,623,547 460,883 2,261,126 629,993

Adjusted EBITDA (Non-GAAP) $ (1,352,723 ) $ (1,433,754 ) $ (2,592,225 ) $ (2,740,101 )

Reconciliation of Loss from Continuing Operations to Adjusted EBITDA Continuing Operations

	For the Three Months Ended						For the Six Months Ended
	June 30, 2022			June 30, 2021			June 30, 2022			June 30, 2021

Loss from continuing operations	$	(6,366,520	)	$	(3,008,218	)	$	(11,466,525	)	$	(5,375,751	)

Add back:

Interest expense		459,262			253,919			493,904			551,351
Other (income)		-			(480,156	)		(3,240	)		(480,156	)
Severance cost		-			-			150,000			-
Depreciation and amortization		244,448			299,239			460,833			579,435
Taxes		7,316			1,028			8,100			6,947
Stock compensation		2,632,118			1,634,546			4,499,107			2,261,126

Adjusted EBITDA continuing operations (Non-GAAP)	$	(3,023,376	)	$	(1,299,642	)	$	(5,857,821	)	$	(2,457,048	)

Adjusted EBITDA loss continuing operations for the ~~six months ended June 30, 2021, decreased approximately $0.1 million compared to the previous year, due to a decrease in overall spending while focusing costs on key products.~~

~~Three and Six Months Ended June 30, 2021 and June 30, 2020~~

~~Revenues, net~~

~~During the three months~~quarter and six months ended June 30, ~~2021, the Company had revenues of~~2022, increased by approximately ~~$0.6~~$1.7 million and ~~$1.2~~$3.4 million compared to $0.3 million and $1.1 million in the three months and six months ended June 30, 2020. The increase in revenue in the three months period ended June 30, 2021 is principally related to increased activity at Cards Plus in the current year compareddue to the ~~prior year, when business was severely impacted due to Covid-19. Ipsidy revenues increased slightly~~Company’s investment in ~~the three~~people, technology, and ~~six month periods ended June 30, 2021 and Multipay revenues were relatively flat during both periods.~~marketing.

~~Cost of sales~~

~~During the three months ended~~Three and Six Months Ended June 30, 2022 and June 30, 2021 cost of sales was higher than the cost of sales in the three months ended June 30, 2020 principally due to higher revenue at Cards Plus. In the six month period ended June 30, 2021 compared to June 30, 2020, cost of sales was lower as Cards Plus sold products at higher margins.– Continuing Operations

~~General and administrative expenses~~Revenues, net

During the three-month and six-month periods ended June 30, 2021, compared to June 30, 2020, general and administrative expense increased by approximately $0.7 million and $1.1 million due to higher non-cash stock compensation charges.

~~Research and development expenses~~

During the three-month and six-month periods ended June 30, 2021 compared to June 30, 2020, research and development expenses increased by approximately $0.2 million and $0.1 million. In the three months ended June 30, 2020, the Company reduced overall spend including lower staff levels and in the six months ended June 30, 2021, the Company focused resources on key products initiatives and moderately adding certain skillsets.

~~Impairment loss~~

During the three and six months ended June 30, ~~2020,~~2022, the Company ~~recorded an impairment loss of~~revenues from Verified software license were approximately ~~$164,000~~$51,000 and ~~$1,036,000, respectively, associated with goodwill of one of its reporting units.~~

~~As a result of the current pandemic~~$87,000 compared to approximately $18,000 and ~~its potential impact on future results, the Company updated its reporting unit projections, and it indicated a goodwill impairment as the carrying value was~~$33,000 in ~~excess of its estimated recoverable value. The fair value of the reporting unit was determined using a discounted cash flow analysis.~~

~~Depreciation and amortization expense~~

~~Depreciation and amortization expense was approximately the same in both~~ the three and six months ended June 30, ~~2021 and June 30, 2020.~~2021. Verified software license revenue increased as we acquired new customers.

~~Other Income (Expense)~~

~~During~~Legacy authentication services revenues were $15,000 and $145,000, respectively during the three months and six months ended June 30, ~~2021,~~2022 compared to approximately $128,000 and $262,000, respectively for the ~~Company recorded a gain on the extinguishment of a note payable of approximately $486,000 related to the forgiveness of one Paycheck Protection Program loan.~~

~~During the~~three months and six months ended June 30, ~~2020,~~2021. Revenue from Legacy authentication services dropped significantly due to the ~~Company recorded a charge of approximately $985,000 related to an extinguishment~~loss of a ~~note payable and a charge~~large customer that decommissioned an older product offering as of ~~approximately $367,000 in connection with an inducement to certain warrant holders to exercise their outstanding warrants.~~April 1, 2022.

~~Interest expense~~General and administrative expenses

~~Interest expense decreased during~~During the three ~~months ended June 30, 2021~~ and ~~increased in the~~ six months ended June 30, ~~2021~~2022 compared to the three and six months ended June 30, ~~2020. The increase~~2021, general and administrative expense increased by approximately $2.1 million and $4.9 million principally due to higher non-cash stock compensation charges ($0.7 million and $2.3 million), higher compensation, marketing, and professional fee costs as the Company makes investment in people, marketing and its product offering.

Research and development expenses

During the three-month and six-month periods ended June 30, 2022 compared to June 30, 2021, research and development expenses increased by approximately $0.6 million and $0.8 million as the Company increased staffing and third party resources as it focuses on key products initiatives.

Depreciation and amortization expense

During the three and six months ended June 30, 2022 compared to June 30, 2021, isdepreciation and amortization expense was approximately $0.1 and $0.1 million less as the Company reduced the value of certain legacy business asset values.

Interest expense

Interest expense increased during the three-month period ended June 30, 2022 compared to June 30, 2021 principally due to the issuance of $9.2 million of convertible ~~debt~~notes in ~~February 2020.~~mid-March 2022. Interest expense decreased during the six months ended quarter ended June 30, 2022 as a majority of the 2020 convertible notes were outstanding for all of the period in 2021, and were converted into common shares at the end of June 2021.

Discontinued operations

The Board of Directors of authID considers it in the best interests of the Company to focus its business activities on providing biometric identity verification products and services by means of our proprietary IDaaS platform. Accordingly, on May 4, 2022, the Board approved a plan to exit from certain non-core activities comprising the MultiPay correspondent bank, payments services in Colombia and the Card Plus cards manufacturing and printing business in South Africa.

Cards Plus business in South Africa

~~Liquidity and Capital Resources~~

The Company plans to exit the Cards Plus business and is in discussions with a buyer to purchase the Company’s interests in Cards Plus.

As of June 30, 2021 the Company had approximately $1.8 million of cash on hand and has a deficiency in working capital of approximately $0.4 million as the remaining convertible debt has been reclassified to a current liability as it is due in February 2022.

~~Cash used in operating activities was approximately $2.4 million and $2.0 million in~~The estimated sale price is $300,000 less selling costs. In the six months ended June 30, ~~2021, and June 30, 2020, respectively.~~2022, the Cards Plus recorded an impairment charge of approximately $144,000 for certain intangible assets of Cards Plus.

~~In January 2021,~~MultiPay business in Colombia

The Company as of June 30, 2022, has notified the customers and the impacted employees of the Company’s plan. The Company also communicated to each employee their compensation entitlements and severance packages under the MultiPay retention plan and obligations under the appropriate statutes.

As of June 30, 2022, the Company ~~received~~is working with a ~~second loan~~major customer to implement a transition plan to provide an essential service for certain bill pay services which will probably result in the leasing and sale of ~~approximately $486,000 under~~certain of MultiPay’s proprietary software as well as the ~~Paycheck Protection Program of the U.S. Small Business Association (“USSBA”) related to its U.S. operations. The Company anticipates, subject to approval~~assumption by the ~~USSBA, if~~Customer of certain ~~requirements are met, the loan will be forgiven. Any amount not forgiven will be required to be repaid.~~expenses.

~~Additionally, in~~In the six months ended June 30, ~~2021,~~2022, MultiPay recorded $68,000 of additional expense for employee obligations during the ~~Company received conversion notices from (i)~~transitional period. We should have a revenue offset to certain expenses as we solidify the ~~Stern Trust converting~~sale of the principal amount, repayment premium and interest in the amount of approximately $3.5 million payable under the Restated Stern Note into approximately 561,000 shares of common stock, (ii) the 8% Note Investors converting principal and interest in the amount of approximately $0.4 million into approximately 180,000 shares of common stock and (iii) the 2020 Note Investors converting principal, repayment premium and interest in the amount of approximately $2.5 million into approximately 398,000 shares of common stock. The Stern Trust is owed approximately $0.7 million in interest under the Restated Stern Note, which has not been converted and remains outstanding. As a result, a total of approximately $6.1 million of Company net indebtedness was converted and the Company issued 1,138,000 shares of common stock in the aggregate.assets.

OnIn the three and six months ended June ~~28, 2021,~~30,2022, Cards Plus revenue was approximately $510,000 and $883,000, respectively. MultiPay revenue in those periods was approximately $69,000 and $138,000, respectively. Cards Plus had losses of $63,000 and $195,000, for the ~~Company filed a Registration Statement on Form S-1~~three and a preliminary prospectus for an underwritten public offering of its common stock par value $0.0001 (“Common Stock”) to be undertaken by ThinkEquity, a division of Fordham Financial Management, Inc. On July 16, 2021, the Company filed an Amendment to such Form S-1, indicating that, based on an assumed offering price of $11.03 per share, the Company was intending to offer approximately $1.8 million shares, for an aggregate offering pricesix months ended June 30, 2022, respectively. MultiPay had losses of approximately ~~$20 million (before expenses). The Registration Statement also indicates that~~$143,000 and $212,000, respectively in the Company has applied for its shares to be admitted to listing on the Nasdaq Capital Market under the symbol “AUID”. There is no assurance that such public offering will be completed, for the amount proposes, or at all, nor that the Company’s Common Stock will be admitted for listing to the Nasdaq market.same periods.

~~In order to implement~~The financial statements of Cards Plus and ~~grow our~~the MultiPay have been classified as discontinued operations ~~through December 31,~~as of June 30, 2022, achieve an expected revenue stream from our products and repay our outstanding convertible debt obligation (to the extent that the same is not converted to common stock), we expect that we will need to raise approximately $9.0 to $12.0 million. There is no guarantee that our current business plan will not change and, as ~~a result~~all required classification criteria under appropriate accounting guidance were met as of ~~such change, that we will need additional capital to implement such business plan.~~June 30, 2022.

~~Covid 19~~Liquidity and Capital Resources

~~A novel strain~~The Company has approximately $10.0 million of ~~coronavirus (“Covid-19”)~~cash on hand and approximately $8.8 million of working capital as of June 30 ,2022, as the fund raise in March 2022 provided cash of approximately $11.4 million.

The Company also has a $10.0 million unsecured working capital facility which has no borrowings outstanding as of June 30, 2022.

Cash used in operating activities was approximately $6.5 million and $2.4 million in the six months ended June 30, 2022 and June 30, 2021, respectively.

Cash provided by financing activities in the six months ended June 30, 2022, was as follows:

●

The Company entered into an SPA with the Note Investors, and, pursuant to the SPA, sold to the Note Investors the Convertible Notes with an aggregate initial principal amount of approximately $9.2 million and a conversion price of $3.70 per share. The Convertible Notes were sold with an aggregate cash origination fee of approximately $200,000, and issued a total of approximately 28,500 shares of our common stock to the Note Investors as an additional origination fee. Net proceeds from issuance of convertible notes are approximately $8 million.

●

The Company entered into Subscription Agreements with the PIPE Investors, and, pursuant to the Subscription Agreements, sold to the PIPE Investors a total of 1,063,514 shares of our common stock at prices of $3.03 per share for an outside investor and $3.70 per share for the management investors. The aggregate gross proceeds from the PIPE are approximately $3.3 million.

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 $10.0 million unsecured standby line of credit facility that will rank behind the Convertible Notes and may be drawn down in several tranches, subject to certain conditions described in the Credit Facility. Pursuant to the Credit Facility, the Company paid the lender a facility commitment fee of 100,000 shares of our common stock upon the effective date of the Credit Facility.

The Company may need additional capital in the future but because of the above financing activities, we believe we have sufficient funds and credit facilities to operate our business through December 31, 2023.

Covid 19

Covid-19 emerged globally in December 2019, and it has been declared a pandemic. ~~The extent to which~~ Covid-19 ~~will impact our~~is still impacting customers, business, results and financial condition ~~will depend on current and future developments, which are highly uncertain and cannot be predicted at this time.~~throughout the world. The Company’s day-to-day operations have been impacted differently depending on geographic location and services that are being performed. The Cards Plus business located in South Africa operations has had limitations on its operations as they are following the guidance and requirements of the South African government. Our operations in the United States and Colombia have suffered less immediate impact as most staff can work remotely and can continue to develop our product offerings.

~~That said~~Recently we have seen our business opportunities develop more slowly as business partners and potential customers ~~are dealing with~~include Covid-19 ~~issues,~~considerations and working remotely ~~and these issues are causing delays~~can cause a delay in decision making and finalization of negotiations and agreements.

~~See above – Impairment loss and Note 13 to the unaudited financial statements.~~Ukraine

The ongoing war in Ukraine may impact the Company and its operations in a number of different ways, which are yet to be fully assessed and are therefore causing uncertainty. The Company works with third party sub-contractors for outsourced services, including software engineering and development, some of whom are based in Eastern Europe, including Russia and Ukraine. The Company also works with outsourced engineers and developers and third-party providers in other parts of the world, including the United States, India, South Africa and South America. While the continuing impact of this conflict and the response of the United States and other countries to it by means of trade and economic sanctions, or other actions is still unknown, any disruption of our ability to work with such contractors caused by this conflict could require the Company to seek alternative sub-contractors at short notice, which may give rise to additional costs and delays in delivering software and product upgrades.

The uncertainty impacting and potential interruption in energy and other supply chains resulting from military hostilities in Europe and the response of the United States and other countries to it by means of trade and economic sanctions, or other actions, may give rise to increases in costs of goods and services generally and may impact the market for our products as prospective customers reconsider additional capital expenditure, or other investment plans until the situation becomes clearer. On the other hand, the threat of increased cyber-attacks from Russia or other countries may prompt enterprises to adopt additional security measures such as those offered by the Company.

For so long as the hostilities continue and perhaps even thereafter as the situation in Europe unfolds, we may see increased volatility in financial markets which may make it more difficult for the Company to raise additional capital at the time when it needs to do so, or for financing to be available on acceptable terms. All or any of these risks separately, or in combination, could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

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 ~~2020~~ the FASB issued a new standard (ASU ~~2020-06)~~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 SEC filers (except for Smaller Reporting Companies) for fiscal years beginning after December 15, 2021 and interim periods within that year, and two years later for other companies. Companies can early adopt the standard at the start of a fiscal year beginning after December 15, ~~2020.~~2021. The standard can either be adopted on a modified retrospective or a full retrospective basis. The Company is currently reviewing the newly issued standard and does not believe it will materially impact the Company.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a smaller reporting company, we are not required to include disclosure under this item.

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report, our Chief Executive Officer and Chief Financial Officer performed an evaluation of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on the evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, ~~2021,~~2022, the Company’s disclosure controls and procedures are effective to ensure that the information required to be disclosed by the Company in the report that it files or submits under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as that term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the six months ended June 30, ~~2021~~2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

From time to time, the Company is a party to various legal or administrative proceedings arising in the ordinary course of business. While any litigation contains an element of uncertainty, we have no reason to believe the outcome of such proceedings will have a material adverse effect on the financial condition or results of operations of the Company.

ITEM 1A. RISK FACTORS

Risk factors describing the major risks to our business can be found under Item 1A, “Risk Factors”, in our Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. There has been no material change in our risk factors from those previously discussed in the Annual Report on Form 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~None.~~On March 21, 2022, the Company entered into a Securities Purchase Agreement (“SPA”) with certain accredited investors, including certain directors of the Company or their affiliates (the “Note Investors”), and, pursuant to the SPA, sold to the Note Investors Senior Secured Convertible Notes (the “Convertible Notes”) with an aggregate initial principal amount of approximately $9.2 million and a conversion price of $3.70 per share. The Convertible Notes were sold with an aggregate cash origination fee of approximately $200,000, and we issued a total of approximately 28,500 shares of our common stock to the Note Investors as an additional origination fee. The Convertible Notes will accrue interest at the rate of 9.75% per annum, which will be payable in cash or, for some or all of the first five interest payments, in shares of our common stock at the Company’s option, on the last day of each calendar quarter before the maturity date and on the maturity date. The maturity date of the Convertible Notes is March 31, 2025.

On March 18 and March 21, 2022, the Company entered into Subscription Agreements (the “Subscription Agreements”) with an accredited investor and certain members of authID’s management team (the “PIPE Investors”), and, pursuant to the Subscription Agreements, sold to the PIPE Investors a total of 1,063,514 shares of our common stock at prices of $3.03 per share for an outside investor and $3.70 per share for the management investors (the “PIPE”). The aggregate gross proceeds from the PIPE are approximately $3.3 million.

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 $10.0 million unsecured standby line of credit facility that will rank behind the Convertible Notes and may be drawn down in several tranches, subject to certain conditions described in the Credit Facility. Pursuant to the Credit Facility, the Company agreed to pay the Lender a facility commitment fee of 100,000 shares of our common stock upon the effective date of the Facility Agreement.

During the quarter ended June 30, 2022, the Company issued approximately 186,488 shares of common stock pursuant to cashless exercises of common stock purchase warrants and options.

The gross proceeds of the sale of the Convertible Notes and the PIPE were used to pay the expenses of those offerings and to provide working capital for the Company. The shares issued in connection with Convertible Notes, the PIPE and the Credit Facility were subsequently registered under a resale registration statement on Form S-3.

The securities described herein been offered and sold pursuant to exemptions from the registration requirements of the Securities Act afforded by Section 4(a)(2) thereof and Rule 506 of Regulation D promulgated thereunder, for the sale of securities not involving a public offering.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable to our operations.

ITEM 5. OTHER INFORMATION

~~None.~~On March 21, 2022, the Company entered into a Credit Facility with Stephen J. Garchik, who is both a current shareholder of the Company and holds Senior Secured Convertible Notes (“Garchik”), pursuant to which Garchik agreed to provide to the Company a $10.0 million unsecured standby line of credit facility that will rank behind the Senior Secured Convertible Notes and may be drawn down in several tranches, subject to certain conditions described in the Facility Agreement. Upon request by Garchik and until the full amount due under the Credit Facility is repaid in full, the Company will provide for the nomination of one designee specified in writing by Garchik for appointment to our board of directors and for subsequent election to our board of directors and to recommend such nominee for election to our board of directors. The Company will be entitled to reject any nominee upon reasonable grounds, or the nominee may not be elected by the stockholders, in which case Garchik may nominate another person to be a director.

On April 18, 2022, Joseph Trelin, as Garchik’s designee under the Credit Facility, was appointed as a member of the Board of Directors of the Company. Except as set forth above, there is no understanding or arrangement between Mr. Trelin and any other person pursuant to which Mr. Trelin was selected as a director of the Company. Mr. Trelin does not have any family relationship with any director, executive officer or person nominated or chosen by us to become a director or an executive officer. Mr. Trelin has not had direct or indirect material interest in any transaction or proposed transaction in which the Company was or is a proposed participant exceeding $120,000.

On April 18, 2022, Mr. Trelin entered into a letter agreement with the Company pursuant to which he was appointed as a director of the Company in consideration of (i) an initial equity award having a Black Scholes value on the date of grant of $270,000, subject to annual vesting of one-third of the common shares over three years on the date of each Annual Meeting commencing with the 2022 Annual Meeting and (b) commencing following the Company’s 2023 Annual Meeting, assuming Mr. Trelin is re-elected to office, an annual equity award having a Black Scholes value on the date of grant of $90,000, subject to vesting over twelve months.

On April 25, 2022, Stuart Stoller indicated his intention to resign as Chief Financial Officer of the Company in connection with his planned retirement. The resignation and retirement were effective as of June 17, 2022.

On April 25, 2022, Hang Pham and the Company entered an Offer Letter pursuant to which Ms. Pham agreed to serve as Chief Financial Officer with a planned employment date commencing June 20, 2022. Ms. Pham will receive an annual salary of $275,000. The Company agreed to provide a bonus of 40% of the base salary (pro rated for 2022) based on achievement of performance milestones, calculated and payable in accordance with the corporate milestones approved by the Board for the year 2022. For subsequent fiscal years the bonus shall be subject to performance targets to be mutually agreed with the Compensation Committee of the Board. In addition, Ms. Pham received a signing bonus in the amount of $25,000, which is fully refundable to the Company if Ms. Pham leaves her employment voluntarily or is terminated for cause prior to the first anniversary of the commencement of employment. The employment of Ms. Pham will be at will and may be terminated at any time, with or without formal cause. The Company also entered an Executive Retention Agreement with Ms. Pham, pursuant to which the Company agreed to provide specified severance and bonus amounts and to accelerate the vesting on her equity awards upon termination upon a change of control or an involuntary termination, as each term is defined in the agreements. In the event of a termination upon a change of control or an involuntary termination, Ms. Pham is entitled to receive an amount equal to 100% of her base salary and the target bonus then in effect for the executive officer for the year in which such termination occurs. At the election of the executive officer, the Company will also continue to provide health related employee insurance coverage for up to twelve months, at the Company’s expense. Upon commencing employment, Ms. Pham was granted an option to acquire 350,000 shares of common stock at an exercise price of $2.41, an exercise period of ten years and is subject to certain performance vesting requirements.

ITEM 6. EXHIBITS

Exhibit Number		Description
3.1⁽¹⁾		Amended & Restated Certificate of Incorporation
3.2 (19)		Amended & Restated Bylaws of authID Inc. as of July 18, 2022
3.3 (3)		Certificate of Amendment dated June 1, 2021
3.4 (19)		Certificate of Amendment to its Amended and Restated Certificate of Incorporation as of July 18, 2022
4.1⁽¹⁾ (3)		Form of Stock Option
4.2 (4)		Form of 8.0% Convertible Note
4.3 (5)		Form of 15.0% Convertible Note
4.4 (5)		Amended and Restated Promissory Note issued to The Theodore Stern Revocable Trust
4.5 (6)		Paycheck Protection Program Term Note dated May 6, 2020
4.6 (7)		Paycheck Protection Program Term Note dated February 1, 2021
4.7 (16)		Description of the Registrant’s Securities
10.1⁽¹⁾ (3)		Form of Director Agreement
10.2⁽¹⁾ (3)		Form of Indemnification Agreement
10.3⁽¹⁾ (11)		Executive Retention Agreement entered between the Company and Stuart P. Stoller dated January 31, 2017
10.4 (8)		Executive Retention Agreement entered between the Company and Thomas Szoke dated January 31, 2017
10.5 (9)		2017 Incentive Stock Plan
10.7 (3)		Executive Retention Agreement entered between the Company and Thomas L. Thimot dated June 14, 2021
~~10.4~~⁽¹⁾10.8 (3)		Executive Retention Agreement entered between the Company and Cecil N. Smith III dated June 14, 2021
~~10.5~~⁽¹⁾10.9 (3)		Letter Agreement between the Company and Thomas L. Thimot dated June 14, 2021
~~10.6~~⁽¹⁾10.10 (3)		Letter Agreement between the Company and Cecil N. Smith III dated June 14, 2021
10.11 (13)		Letter Agreement between the Company and Phillip L. Kumnick dated as November 5, 2021
10.12 (13)		Letter Agreement between the Company and Philip R. Broenniman dated as November 5, 2021
10.13 (14)		AuthID Inc. 2021 Equity Incentive Plan
10.14 (16)		Letter Agreement between AuthID Inc. and Thomas Szoke dated November 19, 2021
10.15 (15)		Form of Securities Purchase Agreement entered into between the Company and the Note Investors dated March 21, 2022.
10.16 (15)		Form of Senior Secured Convertible Note issued by the Company to the Note Investors dated March 21, 2022.
10.17 (15)		Security and Pledge Agreement entered into between the Company and Stephen J. Garchik as Collateral Agent dated March 21, 2022.
10.19 (15)		Form of Registration Rights Agreement entered into between the Company and the Note Investors dated March 21, 2022.
10.20 (15)		Facility Agreement entered into between the Company and Stephen J. Garchik dated March 21, 2022.
10.21 (15)		Form of Subscription Agreement entered into between the Company and the PIPE Investors dated March 21, 2022.
10.22 (17)		Letter Agreement between Joseph Trelin and AuthID Inc. dated April 18, 2022
10.23 (18)		Letter Agreement between Annie Pham and AuthID Inc. dated April 25, 2022
14.1 (10)		Code of Ethics
21.1 (10)		List of Subsidiaries
31.1*		Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act
31.2*		Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act
32.1*		Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		Inline XBRL Instance Document *
101.SCH		Inline XBRL Taxonomy Extension Schema Document *
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document *
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document *
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document *
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document *
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) .

*	Filed herewith

(1)	Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on March 23, 2021.
(2)	Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on January 22, 2021.
(3)	Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on June 15, 2021.
(4)	Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on December 16, 2019.
(5)	Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on February 18, 2020.

(6)	Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on May 13, 2020.
(7)	Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities Exchange Commission on May 6, 2021.
(8)	Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on February 6, 2017.
(9)	Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities Exchange Commission on May 4, 2018.
(10)	Incorporated by reference to the Form 10-K Annual Report filed with the Securities Exchange Commission on July 12, 2017.
(11)	Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on February 1, 2017.
(12)	Incorporated by reference to the Form S-1/A Amendment No. 1 to the S-1 Registration Statement filed with the Securities Exchange Commission on July 16, 2021.
(13)	Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities Exchange Commission on November 8, 2021.
(14)	Incorporated by reference to the Form S-8 Registration Statement filed with the Securities Exchange Commission on February 1, 2022.
(15)	Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on March 21, 2022.
(16)	Incorporated by reference to the Form 10-K Annual Report filed with the Securities Exchange Commission on March 22, 2022.
(17)	Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on April 18, 2022.
(18)	Incorporated by reference to the Form 8-K current Report filed with the Securities and Exchange Commission on April 27, 2022.
(19)	Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on July 19, 2022.

~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	~~IPSIDY INC.~~authID, Inc.

	By:	/s/ Thomas L. Thimot
		Thomas L. Thimot
		Chief Executive Officer
		Principal Executive Officer

	By:	/s/ ~~Stuart Stoller~~Hang Thi Bich Pham
		Chief Financial Officer,
		Principal Financial and Accounting Officer

Dated: August ~~5, 2021~~9, 2022

3029

iso4217:USD xbrli:shares

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020

Revenues:
Products and services	$	565,165		$	306,692		$	1,141,078		$	1,085,630
Lease income		12,616			14,427			25,702			29,278
Total revenues, net		577,781			321,119			1,166,780			1,114,908

Operating Expenses:
Cost of Sales		156,905			61,798			373,049			417,521
General and administrative		3,049,700			2,389,794			4,977,626			3,872,916
Research and development		347,173			190,339			669,183			620,740
Impairment loss		-			163,822			-			1,035,629
Depreciation and amortization		314,590			321,987			624,419			647,331
Total operating expenses		3,868,368			3,127,740			6,644,277			6,594,137

Loss from operations		(3,290,587	)		(2,806,621	)		(5,477,497	)		(5,479,229	)

Other Expense:
Warrant exercise inducement expense		-			(366,795	)		-			(366,795	)
Extinguishment of debt - gain (loss)		485,760			-			485,760			(985,842	)
Other income		6,121			24,713			7,658			34,666
Interest expense, net		(256,550	)		(310,153	)		(553,988	)		(489,203	)
Other income (expense), net		235,331			(652,235	)		(60,570	)		(1,807,174	)

Loss before income taxes		(3,055,256	)		(3,458,856	)		(5,538,067	)		(7,286,403	)

Income Tax Expense		(2,354	)		(3,592	)		(9,542	)		(12,466	)

Net loss	$	(3,057,610	)	$	(3,462,448	)	$	(5,547,609	)	$	(7,298,869	)

Net Loss Per Share - Basic and Diluted	$	(0.15	)	$	(0.20	)	$	(0.28	)	$	(0.42	)

Weighted Average Shares Outstanding - Basic and Diluted		20,248,868			17,441,164			20,003,913			17,473,583

	June 30, 2021			December 31, 2020
Property and equipment	$	376,164		$	297,839
Equipment under finance lease (see Note 10)		163,407			163,407
		539,571			461,246
Less Accumulated depreciation		(391,078	)		(363,417	)
Property and equipment, net	$	148,493		$	97,829

	June 30, 2021		December 31, 2020

Operating lease right of use assets	$	-	$	49,856
Other		136,163		190,367
	$	136,163	$	240,223

	June 30, 2021		December 31, 2020

Paycheck Protection Program Loan #1	$	-	$	485,760
Paycheck Protection Program Loan #2		485,760		-
Installment loan payable related to a vehicle acquisition payable in monthly payments of $539 per month at an interest rate of 10.8% per annum payable for 36 months		4,632		7,526
Notes Payable, Net	$	490,392	$	493,286
Notes Payable, current portion,	$	4,632	$	5,947
Notes Payable, net of current portion		485,760		487,339
	$	490,392	$	493,286

8% convertible notes payable issued December 2019	$	-
15% convertible notes payable issued February 2020		-
10% convertible notes payable issued February 2020		662,000

	$	662,000

				Weighted Average		Weighted Average		Aggregate
	Number of			Exercise		Contractual		Intrinsic
	Shares			Price		Term (Yrs.)		Value
Outstanding as of December 31, 2020		5,645,802		$	4.50		7.5	$	8,283,639
Granted		3,938,246			7.54		10.0		-
Exercised/cancelled		(416,405	)		1.50		-		-
Outstanding as of June 30, 2021		9,167,643			5.92		7.8	$	55,257,928
Exercisable as of June 30, 2021		4,111,087		$	5.77		6.1	$	27,405,283

Exercise Price		Outstanding		Weighted Average Contractual Life (Yrs).		Exercisable
$	0.0030		116,667		5.1		116,667
$	1.5000		756,667		6.0		698,334
$	1.8000		34,735		9.0		34,735
$	2.1000		1,666,667		6.7		866,667
$	2.7000		387,667		9.3		-
$	3.0000		906,667		6.1		906,667
$	3.5700		31,111		8.3		20,556
$	3.9000		8,333		7.2		8,333
$	4.5000		93,333		5.2		93,333
$	6.6000		69,444		7.4		69,444
$	7.2000		1,657,463		9.4		107,463
$	7.5000		83,333		7.2		83,333
$	7.8000		2,255,557		9.9		5,556
$	8.7000		33,333		6.7		33,333
$	12.0000		33,333		5.5		33,333
$	13.5000		1,033,333		5.2		1,033,333
			9,167,643		7.2		4,111,087

Year ending December 31
Remainder of 2021		61,074
2022		122,148
2023		122,148
2024		122,148
2025		122,148
Thereafter		40,716
Sub-total		590,382
Less deferred revenue		(131,050	)
Net investment in lease	$	459,332

Year ending December 31
2021	$	21,548
2022		10,774
Total minimum lease payments		32,372
Less: Amount representing interest		(1,559	)
Present value of minimum lease payments	$	30,763

Current portion of operating lease ROU assets - included in other current assets	$	89,210

Operating lease ROU assets – included in Other Assets	$	-

Total operating lease assets	$	89,210

Current portion of ROU liabilities – included in Accounts payable and accrued expenses	$	92,503

Long-term portion of ROU liabilities – included in Other liabilities		-

Total operating lease liabilities	$	92,503

Remainder of 2021	$	48,303
2022		49,716
Total operating lease payments		98,019
Less: Imputed interest		(5,516	)
Total operating lease liabilities	$	92,503

	(Unaudited)
	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2021			2020			2021			2020
Net Revenues:
North America	$	153,687		$	135,698		$	301,747		$	269,252
South America		89,415			72,133			185,598			185,757
Africa		334,679			113,288			679,435			659,899
		577,781			321,119			1,166,780			1,114,908

Identity Management		488,366			248,986			981,182			929,151
Payment Processing		89,415			72,133			185,598			185,757
		577,781			321,119			1,166,780			1,114,908

Loss From Operations
North America		(2,017,716	)		(669,183	)		(3,288,119	)		(1,076,575	)
South America		(1,053,365	)		(1,803,784	)		(1,785,053	)		(3,015,936	)
Africa		(219,506	)		(333,654	)		(404,325	)		(1,386,718	)
		(3,290,587	)		(2,806,621	)		(5,477,497	)		(5,479,229	)

Identity Management		(2,237,222	)		(1,002,837	)		(3,692,444	)		(2,463,293	)
Payment Processing		(1,053,365	)		(1,803,784	)		(1,785,053	)		(3,015,936	)
		(3,290,587	)		(2,806,621	)		(5,477,497	)		(5,479,229	)

Interest Expense		(256,550	)		(310,153	)		(553,988	)		(489,203	)
Other income/(expense)		491,881			(342,082	)		493,418			(1,317,971	)

Loss before income taxes		(3,055,256	)		(3,458,856	)		(5,538,067	)		(7,286,403	)

Income tax expense		(2,354	)		(3,592	)		(9,542	)		(12,466	)

Net loss	$	(3,057,610	)	$	(3,462,448	)	$	(5,547,609	)	$	(7,298,869	)

	For the Quarter Ended						For the Six Months Ended
	June 30, 2021			June 30, 2020			June 30, 2021			June 30, 2020


Net loss	$	(3,057,610	)	$	(3,462,448	)	$	(5,547,609	)	$	(7,298,869	)

Add Back:

Interest Expense		256,550			310,153			553,988			489,203
Debt extinguishment - loss/(gain)		(485,760	)		-			(485,760	)		985,842
Warrant exercise inducement expense		-			366,795			-			366,795
Severance cost		-			426,175			-			426,175
Other expense/(income)		(6,121	)		(24,713	)		(7,658	)		(34,666	)
Depreciation and amortization		314,317			321,987			624,146			647,331
Taxes		2,354			3,592			9,542			12,466
Impairment loss		-			163,822			-			1,035,629
Stock compensation		1,623,547			460,883			2,261,126			629,993

Adjusted EBITDA (Non-GAAP)	$	(1,352,723	)	$	(1,433,754	)	$	(2,592,225	)	$	(2,740,101	)