| DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE | NOTE 9 – DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE The Board of Directors of authID considered it
in the best interests of the Company to focus its business activities on providing biometric authentication products and services by means
of our proprietary Verified 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 financial statements of Cards Plus are classified
as a discontinued operation and an asset held for sale, as all required classification criteria under appropriate accounting standards
were met as of June 30, 2022. On August 29, 2022, the Company completed the
sale of Cards Plus for a price of $300,000 of which $150,000 was received and the remaining balance of $150,000 recorded in other current
asset is expected to be received within one year, less $3,272 in costs to sell, and recognized a loss of $188,247 from the transaction. MultiPay business in Colombia The Company exited the MultiPay business in Colombia
in an orderly fashion, honoring our obligations to employees, customers and under applicable laws and regulations. We maintain our
customer support and operations team in Bogota, which performs essential functions to support the global operations of our Verified product. As of June 30, 2023, all impacted employees had
left the Company. MultiPay finalized the sale of the Company’s proprietary software to its major customer on June 30, 2023 for approximately
$96,000 of sale consideration. The Company recorded the receivable under the sale in Other current assets, released foreign currency translation
gain of approximately $155,000 and recognized a gain of $216,000 from the transaction. The following table summarizes the assets and
liabilities of the MultiPay sale and the consideration received (unaudited):
Amount
Carrying value of net assets sold:
Property and equipment write-off $ 19,528
Net assets write-off $ 19,528
Sale consideration on disposition of net assets:
Sale consideration $ 95,852
Less: Value added tax (15,304 )
Net Consideration $ 80,548
Foreign currency translation: $ 155,049
Net gain on sale of a discontinued operation $ 216,069 The operations of Cards Plus and MultiPay for
the three and six months ended June 30, 2023 and 2022 on a consolidated basis are below (unaudited):
Three Months Ended Six Months Ended
2023 2022 2023 2022
Discontinued Operations
Total Revenues, net $ 15,259 $ 579,246 $ 29,354 $ 1,021,556
Operating Expenses:
Cost of Sales - 336,540 - 520,064
General and administrative - 372,750 12,268 658,132
Impairment loss - 67,984 - 211,703
Depreciation and amortization 4,157 11,572 8,066 39,774
Total operating expenses 4,157 788,846 20,334 1,429,673
Income (Loss) from operations 11,102 (209,600 ) 9,020 (408,117 )
Other Income (Expense):
Other income (expense), net (224 ) 4,334 - 8,029
Interest expense, net - - - (364 )
Other income (expense), net (224 ) 4,334 - 7,665
Income (loss) before income taxes 10,878 (205,266 ) 9,020 (400,452 )
Income tax expense (5,184 ) (1,041 ) (5,581 ) (6,578 )
Income (loss) from discontinued operations 5,694 (206,307 ) 3,349 (407,030 )
Gain from sale of discontinued operations 216,069 - 216,069 -
Total income (loss) from discontinued operations $ 221,763 $ (206,307 ) $ 219,508 $ (407,030 )
Three Months Ended Six Months Ended
2023 2022 2023 2022
Cards Plus
Total Revenues, net $ - $ 510,142 $ - $ 883,300
Operating Expenses:
Cost of Sales - 336,540 - 520,064
General and administrative - 167,390 - 322,699
Impairment loss - 67,984 - 211,703
Depreciation and amortization - 4,667 - 25,897
Total operating expenses - 576,581 - 1,080,363
Income (loss) from operations - (66,439 ) - (197,063 )
Other Income (Expense):
Other income - 3,468 - 6,816
Interest expense, net - - - (364 )
Other income, net - 3,468 - 6,452
Loss before income taxes - (62,971 ) - (190,611 )
Income tax expense - - - (4,681 )
Loss from discontinued operations $ - $ (62,971 ) $ - $ (195,292 )
Three Months Ended Six Months Ended
2023 2022 2023 2022
MultiPay
Total Revenues, net $ 15,259 $ 69,104 $ 29,354 $ 138,256
Operating Expenses:
General and administrative - 205,360 12,268 335,433
Depreciation and amortization 4,157 6,905 8,066 13,877
Total operating expenses 4,157 212,265 20,334 349,310
Income (Loss) from operations 11,102 (143,161 ) 9,020 (211,054 )
Other Income (Expense):
Other income (expense), net (224 ) 866 - 1,213
Other income (expense), net (224 ) 866 - 1,213
Income (loss) before income taxes 10,878 (142,295 ) 9,020 (209,841 )
Income tax expense (5,184 ) (1,041 ) (5,581 ) (1,897 )
Income (loss) from discontinued operations 5,694 (143,336 ) 3,439 (211,738 )
Gain from sale of discontinued operations 216,069 - 216,069 -
Income (loss) from discontinued operations $ 221,763 $ (143,336 ) $ 219,508 $ (211,738 ) 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:
June 30, December 31,
(Unaudited) 2022
Discontinued Operations
Current Assets:
Cash $ - $ 2,703
Accounts receivable, net - 105,194
Other current assets - 10,562
Current assets held for sale - 118,459
Noncurrent Assets:
Property and equipment, net - 27,595
Noncurrent assets held for sale - 27,595
Total assets held for sale $ - $ 146,054
Current Liabilities:
Accounts payable and accrued expenses $ - $ 13,759
Total liabilities held for sale $ - $ 13,759 As a result of meeting the discontinued operations/assets
held for sale criteria for Cards Plus and the MultiPay operations, the cash flow activity related to discontinued operations is presented
separately on the statement of cash flows as summarized below (unaudited):
Six Months Ended
2023 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,439 $ (407,030 )
Adjustments to reconcile net loss with cash flows from operations:
Depreciation and amortization expense 8,067 39,774
Impairment of intangible assets - 211,703
Changes in operating assets and liabilities:
Accounts receivable 105,194 6,332 )
Net investment in direct financing lease - (17,306
Other current assets 10,562 106,920 )
Inventory - (140,653 )
Accounts payable and accrued expenses (13,759 ) (11,425
Deferred revenue - 227,078
Adjustments relating to discontinued operations 110,064 422,423
Cashflows from discontinued operations $ 113,503 $ 15,393 Notes to Financial Statements – Discontinued Operations Revenue Recognition Cards Plus – The Company recognized revenue
for 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 the Company have no alternative use and the Company has an enforceable right
to payment for work performed should the contract be cancelled. MultiPay recognized 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 – 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 authentication products and services by means
of our proprietary Verified 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 financial statements of Cards Plus are classified
as a discontinued operation and an asset held for sale, as all required classification criteria under appropriate accounting standards
were met as of December 31, 2022. On August 29, 2022, the Company completed the
sale of Cards Plus for a price of $300,000 of which $150,000 was received and the remaining balance of $150,000 recorded in other current
assets is expected to be received within one year, less $3,272 in costs to sell, and recognized a loss of $188,247 from the transaction.
The following table summarizes the assets and liabilities of the Cards Plus sale and the consideration received:
Carrying value of net assets sold: Amount
Cash $ 299,505
Accounts receivable 61,879
Inventory 231,955
Other current assets 1,490
Total current assets 594,829
Property and equipment 21,127
Total assets 615,956
Accounts payable 76,094
Accrued expenses 43,728
Deferred revenue 11,159
Total current liabilities 130,981
Net assets sold $ 484,975
Sale Consideration on disposition of net assets:
Proceeds $ 300,000
Legal fee (5,511 )
Write off net payable with CP 2,239
Net Consideration 296,728
Net loss on sale of a discontinued operation $ (188,247 ) MultiPay business in Colombia The Company is exiting the MultiPay business in
Colombia in an orderly fashion, honoring our obligations to employees, customers and under applicable laws and regulations. We maintain
our customer support and operations team in Bogota, which performs essential functions to support the global operations of our Verified
product. As of December 31, 2022, all impacted employees
left the Company. The Company also paid to each employee their severance packages under the MultiPay’s retention plan and obligations
under the appropriate statutes. As of December 31, 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 likely result
in the sale of the Company’s proprietary software as well as the assumption of certain expenses. The Company incurred costs of $196,500 which was
paid as of December 31, 2022 associated with the exit of the MultiPay business and approximately $41,000 for accelerated amortization
(non-cash) for certain technology licenses. 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 years ended December 31, 2022 and 2021 on a consolidated basis are below:
For the Year Ended
Discontinued Operations 2022 2021
Discontinued Operations Total Revenues, net $ 1,503,333 $ 1,678,780
Operating Expenses:
Cost of sales 665,269 653,773
General and administrative 1,021,649 1,892,783
Impairment loss 143,698 -
Depreciation and amortization 41,850 102,513
Total operating expenses 1,872,466 2,649,069
Loss from operations (369,133 ) (970,289 )
Other Income (Expense):
Other income 10,161 27,188
Interest expense, net (364 ) (5,164 )
Other income, net 9,797 22,024
Loss before income taxes (359,336 ) (948,265 )
Income tax expense (7,327 ) (6,030 )
Loss from discontinued operations (366,663 ) (954,295 )
Loss from sale of discontinued operations (188,247 ) -
Total loss from discontinued operations $ (554,910 ) $ (954,295 )
For the Year Ended
2022 2021
Cards Plus
Total Revenues, net $ 1,263,672 $ 1,318,029
Operating Expenses:
Cost of sales 665,269 653,773
General and administrative 412,243 606,110
Impairment loss 143,698 -
Depreciation and amortization 24,451 80,692
Total operating expenses 1,245,661 1,340,575
Income (Loss) from operations 18,011 (22,546 )
Other Income (Expense):
Other income (expense), net 8,919 6,867
Interest expense, net (364 ) (5,164 )
Other income, net 8,555 1,703
Income (Loss) before income taxes 26,566 (20,843 )
Income tax expense (4,681 ) -
Income (Loss) from discontinued operations 21,885 (20,843 )
Loss from sale of discontinued operations (188,247 ) -
Total income (loss) from discontinued operations $ (166,362 ) $ (20,843 )
For the Year Ended
2022 2021
MultiPay
Total Revenues, net $ 239,661 $ 360,751
Operating Expenses:
General and administrative 609,406 1,286,673
Depreciation and amortization 17,399 21,821
Total operating expenses 626,805 1,308,494
Loss from operations (387,144 ) (947,743 )
Other Income:
Other income, net 1,242 20,321
Other income 1,242 20,321
Loss before income taxes (385,902 ) (927,422 )
Income tax expense (2,646 ) (6,030 )
Loss from discontinued operations $ (388,548 ) $ (933,452 ) 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:
December 31, December 31
Discontinued Operations Current Assets:
Cash $ 2,703 $ 270,707
Accounts receivable, net 105,194 110,977
Inventory - 153,149
Other current assets 10,562 94,919
Current assets held for sale 118,459 629,752
Noncurrent Assets:
Property and equipment, net 27,595 93,132
Intangible assets - 153,004
Other assets - 66,695
Noncurrent assets held for sale 27,595 312,831
Total assets held for sale $ 146,054 $ 942,583
Current Liabilities:
Accounts payable and accrued expenses $ 13,759 $ 235,348
Deferred revenue - 47,823
Notes payable obligation, current portion - 1,579
Capital lease obligation, current portion - 10,562
Total liabilities held for sale $ 13,759 $ 295,312
December 31, December 31
Cards Plus Current Assets:
Cash $ - $ 182,518
Accounts receivable, net - 88,235
Inventory - 153,149
Other current assets - 52,678
Current assets held for sale - 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 $ - $ 654,203
Current Liabilities:
Accounts payable and accrued expenses $ - $ 122,725
Deferred revenue - 47,823
Notes payable obligation, current portion - 1,579
Capital lease obligation, current portion - 1,056
Total liabilities held for sale $ - $ 173,183
December 31, December 31
MultiPay Current Assets:
Cash $ 2,703 $ 88,189
Accounts receivable, net 105,194 22,742
Other current assets 10,562 42,241
Current assets held for sale 118,459 153,172
Noncurrent Assets:
Property and equipment, net 27,595 68,513
Other assets - 66,695
Noncurrent assets held for sale 27,595 135,208
Total assets held for sale $ 146,054 $ 288,380
Current Liabilities:
Accounts payable and accrued expenses $ 13,759 $ 112,623
Total liabilities held for sale $ 13,759 $ 112,623 As a result of meeting the discontinued operations/assets
held for sale criteria for Cards Plus and the MultiPay operations, the cash flow activity related to discontinued operations is presented
separately on the statement of cash flows as summarized below:
Year Ended December 31,
2022 2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (366,663 ) $ (954,295 )
Adjustments to reconcile net loss with cash flows from operations:
Depreciation and amortization expense 41,850 102,513
Impairment of intangible assets 143,698 -
Provision of Net Investment in direct financing lease - 422,022
Changes in operating assets and liabilities:
Accounts receivable (50,598 ) 18,722
Net investment in direct financing lease - 96,487
Other current assets 170,536 88,345
Inventory (78,806 ) 96,930
Accounts payable and accrued expenses (102,486 ) (115,870 )
Deferred revenue (36,664 ) (82,594 )
Adjustments relating to discontinued operations 87,530 626,555
Net cash flows from discontinued operations $ (279,133 ) $ (327,740 ) Notes to Financial Statements – Discontinued Operations Inventories Inventory of plastic/ID cards, digital printing
material, which were held by Cards Plus Pty Ltd., were at the lower of cost (using the average method) or market. As of December 31, 2021, the Company recorded
an inventory valuation allowance of approximately $20,000 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. As of December 31, 2022, inventories decreased
to zero as the Company completed the sale of Cards Plus business on August 29, 2022. Revenue Recognition Cards Plus – The Company recognized revenue
for 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 the Company have no alternative use and the Company has an enforceable right
to payment for work performed should the contract be cancelled. As of December 31, 2021, Cards Plus had approximately $48,000 of contract
liability from payments received in advance that will be earned in future periods. Contract liability decreased to zero as the Company
completed the sale of Cards Plus business on August 29, 2022. 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. Revenue related to direct financing leases is
outside the scope of Topic 606 and is recognized over the term of the lease using the effective interest method. Impairment loss During the year ended December 31, 2022, Cards
Plus recorded an impairment loss of zero and approximately $143,000, respectively associated with its intangible assets. Leases In October 2021, MultiPay entered into a one-year
lease for approximately $2,900 per month in Bogota, Colombia. MultiPay terminated the lease as of September 30, 2022. Cards Plus leased space for its operations in
South Africa. The facility was rented on a month-to-month basis with monthly rent of approximately $8,000 through August 29, 2022 as the
Company completed the sale of Cards Plus business. 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 was amortized on a straight-line basis over its lease term including the last payment (61 payments)
and ownership transferred to the Company. The lease was fully paid off. |
