Ipsidy Announces Results for Third Quarter Ended September 30, 2020

LONG BEACH, N.Y., Nov. 09, 2020 (GLOBE NEWSWIRE) -- Ipsidy Inc. (www.ipsidy.com) [OTCQB:IDTY] a leading provider of secure, mobile biometric identity solutions, including Identity as a Service (IDaaS), today announced its results for the third quarter ended September 30, 2020.

Financial Results for the Three Months and Nine Months Ended September 30, 2020

  • Total revenue for the three and nine-month periods in 2020 was $0.5 million and $1.6 million respectively compared to $0.6 million and $1.9 million respectively for the three and nine months in 2019. The decrease was principally due to the impact of the Covid-19 pandemic.
  • Net loss before taxes for the three and nine months ended September 30, 2020 was $1.9 million and $9.2 million respectively, compared to a net loss before taxes for the three and nine months ended September 30, 2019 of $2.4 million and $6.8 Million, respectively.
  • The decrease in the net loss for the three-month period reflects lower general and administrative expenses. The increase in the net loss in the nine-month period resulted primarily from non-cash charges relating to the convertible note financing, warrant exercise and impairment charges arising out of the Covid-19 pandemic, offset by lower general and administrative expenses.
  • Basic and diluted net loss per share was $0.00 cents and $0.02 in the three and nine months ended September 30, 2020, respectively, compared to basic and diluted net loss per share of $0.00 cents and $0.01 cents in the three and nine months ended September 30, 2019, respectively.
  • Adjusted EBITDA loss for the three and nine-month periods ended September 30, 2020 was $1.3 million and $4.1 million respectively compared to $1.7 million and $5.2 million respectively in 2019, representing decreases of approximately 22% in each period related to lower overall expenses.
  • Secured over $5 million of additional funding from existing and new investors in October 2020, through the issuance of common stock and warrants.

Refer to Table 1 for reconciliation of net income to Adjusted EBITDA (a non-GAAP measure).

The last quarter has seen continued progress for Ipsidy, said Phillip Kumnick, CEO & Chairman of Ipsidy. “We started to roll out our products to customers, secured new customers in the financial services sector and operated a successful pilot with a major financial institution. We are excited by the prospects for growth into 2021 that appear in our robust new business pipeline, supported by the recent injection of capital from our existing as well as new stockholders. We greatly appreciate their confidence in our ability to execute our plan.  

The following highlights of our activities during the first nine months of 2020 demonstrate execution of our strategy to expand the Ipsidy Partner Network with identity industry and technology professionals, that can effectively deliver our identity services to a range of markets and verticals that are demanding increased security and trust.

  • Launched a strategic partnership with LoginID Inc. to offer new tools in the fight against fraud in online activities. By integrating Ipsidy’s biometric identity verification platform with the LoginID FIDO as a Service platform, both companies will now offer seamless FIDO2 authentication and login services, delivered with enhanced security and the highest level of identity trust.
  • Joined the FIDO Alliance, a cross-industry coalition developing open, interoperable authentication standards that reduce reliance on passwords. Ipsidy’s vision is to establish and bind a rooted, trusted identity to a user. Strong identity verification removes any uncertainty of a user’s identity, thereby enhancing FIDO strong authentication and facilitating FIDO’s mission of eliminating the reliance on passwords.
  • Signed an agreement with an international bank pursuant to our membership in the Temenos Marketplace, to deploy Ipsidy’s biometric identity verification and FIDO compliant strong authentication services for remote digital onboarding, elimination of account passwords, and combating of identity fraud for their international banking customers.
  • Implemented and launched our technology with Intellicheck, Inc. (NASDAQ: IDN), a provider of identification authentication and age verification technology for North America that is being deployed for use with US financial institutions and payment providers.
  • Entered into reseller agreements with IECISA, a Gfi group company, which provides information technology services in 11 European countries and the Latin America Caribbean region, and ATOS Origin FZ LLC (a part of the ATOS Middle East, Turkey & Africa region), a global leader in digital transformation.  These partners are offering our identity verification and authentication services to build trust in today’s online, digital world across these international markets in the telecom, media, utilities, and financial services sectors.
  • Launched our web browser applications, in order to make it easier for more clients to deliver the solution to their users as well as simplify the user experience for both our ProofTM onboarding and account takeover fraud prevention application and our VerifiedTM mobile multi-factor authentication solution.
  • Appointed Phillip L. Kumnick as CEO in May 2020 and he became Chairman of the Board in October 2020. Mr. Kumnick was previously SVP Global Acquirer Processing at Visa and an experienced industry executive and joined our Board of Directors in December 2019.   
  • Appointed Philip R. Broenniman as President & COO in May 2020. Mr. Broenniman is an experienced investment manager with business operating and analytical skills and joined our Board of Directors in March 2020.  

The identity solutions market is rapidly developing and increasing demand for verifying digital identity during remote onboarding and digital transactions can be seen in our expanding pipeline and recent agreements. While remote access to a broad range of services and networks is not new, the COVID-19 pandemic is accelerating demand for verifying identity seamlessly during remote onboarding as well securing “touchless” interaction.  Our mobile biometric services are designed to help organizations thwart identity fraud and account takeover, by knowing the identity of their users with speed and accuracy. We believe Ipsidy’s solutions substantially enhance how they can confidently onboard new users and authenticate their access and services across the customer engagement.

We continue to carefully watch developments related to COVID-19. 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.  Beginning March 2020, the Company’s day-to-day operations have been impacted differently depending on geographic location and services that are being performed. We have seen our business opportunities develop more slowly as business partners and potential customers are dealing with Covid-19 issues and working remotely. These issues have caused delays in decision making and finalization of negotiations and agreements but at the same time we have seen an uptick in interest in our solutions, and we are optimistic that these will start to bear fruit. We appreciate the support of our employees, partners and customers in these difficult times.

Additional analysis of the Company’s performance can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2020 filed at www.sec.gov and posted on the Company’s investor relations website.

About Ipsidy:
Ipsidy Inc. (OTCQB:IDTY) www.ipsidy.com, is Digital Identity. Ipsidy’s mission is to ensure our customers know the identity of their users with biometric certainty. Our Identity as a Service (IDaaS) platform delivers a suite of secure, mobile, facial biometric identity solutions, available to any vertical, anywhere. Our robust identity verification and authentication solutions work great on their own but even better together to help answer everyday questions: Who is applying for a loan? Who is sending money? Who is requesting an account change? Ipsidy is committed to providing seamless, accurate and speedy identity solutions that establish security and trust in today’s digital world.

Ipsidy is headquartered in New York and has operating subsidiaries: MultiPay in Colombia, www.multipay.com.co; Cards Plus in South Africa, www.cardsplus.co.za; Ipsidy Enterprises in the U.K. and Ipsidy Perú S.A.C. Further information on Ipsidy can be found at www.ipsidy.com or contact us at sales@ipsidy.com.

Contacts:

Ipsidy Inc. 
Phillip Kumnick, CEO and Chairmanphillipkumnick@ipsidy.com
Stuart Stoller, CFOstuartstoller@ipsidy.com
 +1 (516) 274-8700

Notice Regarding Forward-Looking Statements.
Information contained in this announcement may include “forward-looking statements.” All statements other than statements of historical facts included herein, including, without limitation, those regarding the financial position, business strategy, plans and objectives of management for future operations of both Ipsidy and its business partners, future service launches with customers, the outcome of pilots and new initiatives and customer pipeline are forward-looking statements. Such forward-looking statements are based on a number of assumptions regarding Ipsidy present and future business strategies, and the environment in which Ipsidy expects to operate in the future, which assumptions may or may not be fulfilled in practice. Implementation of some or all of the new services referred to is subject to regulatory or other third party approvals. Actual results may vary materially from the results anticipated by these forward-looking statements as a result of a variety of risk factors, including the risk that implementation, adoption and offering of the service by customers, consumers and others may take longer than anticipated, or may not occur at all; changes in laws, regulations and practices; changes in domestic and international economic and political conditions, the as yet uncertain impact of the Covid-19 pandemic and others. Additional risks may arise with respect to commencing operations in new countries and regions, of which Ipsidy is not fully aware at this time. See the Company’s Annual Report Form 10-K for the Fiscal Year ended December 31, 2019 filed at www.sec.gov for other risk factors which investors should consider. These forward-looking statements speak only as to the date of this announcement and cannot be relied upon as a guide to future performance. Ipsidy expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this announcement to reflect any changes in its expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based.

Non-GAAP Financial Information.
The Company provides certain non-GAAP financial measures in this statement. Management believes that Adjusted EBITDA, when viewed with our results under GAAP and the accompanying reconciliations, provides useful information about our period-over-period results. Adjusted EBITDA is presented because management believes it provides additional information with respect to the performance of our fundamental business activities and is also frequently used by securities analysts, investors and other interested parties in the evaluation of comparable companies. We also rely on Adjusted EBITDA as a primary measure to review and assess the operating performance of our company and our management team in connection with our executive compensation. These non-GAAP key business indicators, which include Adjusted EBITDA, should not be considered replacements for and should be read in conjunction with the GAAP financial measures.

We define Adjusted EBITDA as GAAP net loss adjusted to exclude: (1) interest expense, (2) interest income, (3) provision for income taxes, (4) depreciation and amortization, (5) stock-based compensation expense (stock options and restricted stock) and (6) certain other items management believes affect the comparability of operating results. Please see Table 1 below for a reconciliation of Adjusted EBITDA to net income (loss), the most directly comparable financial measure calculated and presented in accordance with GAAP.



Reconciliation of Net Loss to Adjusted EBITDA
(Unaudited)

 Three Months Ended  Nine Months Ended 
 September 30,
2020
  September 30,
2019
  September 30,
2020
  September 30,
2019
 
Net Loss$(1,918,239) $(2,358,236) $(9,217,108) $(6,796,766)
                
Add Back:               
                
Interest expense 212,658   93,260   701,861   290,804 
Other (income) expense (16,779)  (6,271)  1,301,192   (23,565)
Severance cost -   -   426,175   - 
Depreciation and amortization 276,232   202,235   923,563   529,931 
Taxes 11,074   10,902   23,540   28,867 
Impairment loss -   -   1,035,629   - 
Stock compensation 112,125   372,341   741,668   787,720 
Adjusted EBITDA (Non-GAAP)$(1,322,929) $(1,685,769) $(4,063,480) $(5,183,009)



IPSIDY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 Three Months Ended  Nine Months Ended 
 September 30,  September 30, 
 2020  2019  2020  2019 
            
Revenues:           
Products and services$501,700  $537,097  $1,587,330  $1,889,943 
Lease income 13,992   15,664   43,270   48,157 
Total revenues, net 515,692   552,761   1,630,600   1,938,100 
                
Operating Expenses:               
Cost of sales 114,985   142,992   532,506   508,716 
General and administrative 1,527,723   2,097,993   5,400,639   6,440,042 
Research and development 308,038   357,289   928,778   960,071 
Impairment loss -   -   1,035,629   - 
Depreciation and amortization 276,232   202,235   923,563   529,931 
Total operating expenses 2,226,978   2,800,509   8,821,115   8,438,760 
                
Loss from operations (1,711,286)  (2,247,748)  (7,190,515)  (6,500,660)
                
Other Income (Expense):               
Interest expense (212,658)  (110,654)  (701,861)  (290,804)
Debt extinguishment -   -   (985,842)  - 
Warrant exercise inducement expense -   -   (366,795)  - 
Other income, net 16,779   11,068   51,445   23,565 
Other expense, net (195,879)  (99,586)  (2,003,053)  (267,239)
                
Loss before income taxes (1,907,165)  (2,347,334)  (9,193,568)  (6,767,899)
                
Income tax expense (11,074)  (10,902)  (23,540)  (28,867)
                
Net loss$(1,918,239) $(2,358,236) $(9,217,108) $(6,796,766)
                
Net loss per share - Basic and Diluted$(0.00) $(0.00) $(0.02) $(0.01)
                
Weighted Average Shares Outstanding - Basic and Diluted 547,129,400   518,125,454   529,933,365   492,288,043 

See notes to condensed consolidated financial statements.



IPSIDY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

 September 30,  December 31, 
 2020  2019 
 (unaudited)    
ASSETS  
Current Assets:     
Cash$569,597  $567,081 
Accounts receivable, net 70,238   125,859 
Current portion of net investment in direct financing lease 70,770   65,333 
Inventory 245,775   173,575 
Other current assets 302,750   753,505 
Total current assets 1,259,130   1,685,353 
        
Property and Equipment, net 130,232   161,820 
Other Assets 222,697   383,066 
Intangible Assets, net 5,043,529   5,593,612 
Goodwill 4,183,232   5,218,861 
Net investment in direct financing lease, net of current portion 440,925   494,703 
Total assets$11,279,745  $13,537,415 
        
LIABILITIES AND STOCKHOLDERS’ EQUITY       
Current Liabilities:       
Accounts payable and accrued expenses$2,872,384  $2,215,912 
Capital lease obligation, current portion 38,078   34,816 
Note payable, current portion 5,789   5,341 
Deferred revenue 388,374   425,276 
Total current liabilities 3,304,625   2,681,345 
        
Notes payable, net of discounts and current portion 488,886   1,970,937 
Convertible debt, net of discounts 5,682,258   428,000 
Capital lease obligation, net of current portion 20,814   49,794 
Other liabilities 70,532   131,568 
Total liabilities 9,567,115   5,261,644 
        
Commitments and Contingencies (Note 12)       
        
Stockholders’ Equity:       
Common stock, $0.0001 par value, 1,000,000,000 shares authorized; 547,986,424 and 518,125,454 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively 54,798   51,812 
Additional paid in capital 97,640,120   94,982,167 
Accumulated deficit (96,152,701)  (86,935,593)
Accumulated comprehensive income 170,413   177,385 
Total stockholders’ equity 1,712,630   8,275,771 
Total liabilities and stockholders’ equity$11,279,745  $13,537,415 

See notes to condensed consolidated financial statements.



IPSIDY INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 Nine Months Ended 
 September 30, 
 2020  2019 
CASH FLOWS FROM OPERATING ACTIVITIES:     
Net loss$(9,217,108) $(6,796,766)
Adjustments to reconcile net loss with cash flows from operations:       
Depreciation and amortization expense 923,563   527,498 
Stock-based compensation 741,668   1,066,270 
Stock issued for services -   41,112 
Amortization of debt discounts and issuance costs 333,388   82,323 
Impairment loss 1,035,629   - 
Loss on extinguishment of debt 985,482   - 
Warrant exercise inducement expense 366,795   - 
Changes in operating assets and liabilities:       
Accounts receivable 73,442   (66,815)
Net investment in direct financing lease 48,341   43,453 
Inventory (70,040)  (60,930)
Other current assets 450,755   (110,792)
Accounts payable and accrued expenses 1,233,258   200,117 
Deferred revenue (36,902)  46,334 
Net cash flows from operating activities (3,131,729)  (5,028,196)
        
CASH FLOWS FROM INVESTING ACTIVITIES:       
Purchases of property and equipment (8,643)  (32,277)
Increase  in other assets, including work in process (172,880)  (1,035,635)
Net cash flows from  investing activities (181,523)  (1,067,912)
        
CASH FLOWS FROM FINANCING ACTIVITIES:       
Net proceeds from issuance of convertible notes 1,510,000   - 
Payment of debt issuance costs (104,800)  - 
Proceeds from the sale of common stock, net of offering costs 200,000   2,928,271 
Proceeds from the exercise of warrants 1,248,983   - 
Proceeds from paycheck protection program 485,760   - 
Principal payments on capital lease obligation and notes payable (29,669)  (22,824)
Net cash flows from financing activities 3,310,274   2,905,447 
        
Effect of Foreign Currencies 5,494   (6,413)
        
Net Change in Cash 2,516   (3,197,074)
Cash, Beginning of the Period 567,081   4,972,331 
Cash, End of the Period$569,597  $1,775,257 
        
Supplemental Disclosure of Cash Flow Information:       
Cash paid for interest$7,505  $10,771 
Cash paid for income taxes$23,540  $28,867 
        
Non-cash Investing and Financing Activities:       
Purchase of vehicle with note payable$-  $16,510 
Recognition of right to use asset and obligation$-  $514,473 
Modification of warrants issued with convertible debt$95,223  $- 
Exchange of notes payable for convertible notes payable$2,662,000  $- 
Settlement of accounts payable with issuance of common stock$8,270  $- 
Reclass from other assets to intangible assets$327,020  $2,021,810 

   See notes to condensed consolidated financial statements. 

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