authID Inc

Overview

authID Inc. (together with its subsidiaries, the “Company”, “authID”, “we” or “our”) ensures cyber-savvy enterprises “Know Who’s Behind the Device”TM for every customer or employee login and transaction. Through its easy-to-integrate, patented, biometric identity platform, authID quickly and accurately verifies a user’s identity, eliminating any assumption of ‘who’ is behind a device and preventing cybercriminals from taking over accounts. authID combines digital onboarding, biometric passwordless authentication and account recovery, with a fast, accurate, user-friendly experience – delivering identity verification in 700ms. Establishing a biometric root of trust for each user that is bound to their accounts, or provisioned devices, authID stops fraud at onboarding, eliminates password risks and costs, and provides the faster, frictionless, and more accurate user identity experience demanded by operators of today’s digital ecosystems.

Our Platform

Our Verified TM cloud-based platform was developed with internally developed software as well as acquired and licensed technology and provides the following core services:

Biometric Identity Verification

Biometric identity verification establishes the trusted identity of a user based on a variety of ground truth sources, including government-issued identity documents such as national IDs, driver’s licenses and passports or electronic machine-readable travel documents (or eMRTDs). Our Verified TM platform detects presentation attack and spoofing threats, evaluates the authenticity of security features present on a government-issued identity document, and biometrically matches the reference picture of the document with a live user’s selfie (a photograph that the user has taken of themselves). Usually occurring at account opening or onboarding, identity verification ensures that the enterprise knows that the person interacting with the enterprise is who they say they are, in real time. authID’s Proof TM identity verification product eliminates the need for costly and less accurate face-to-face, in-person ID checks and instead provides a verified identity in seconds. In a digital, online world of increasing fraud and security threats, Proof speeds up onboarding and offers our customers confidence in the identities of consumers, employees or third-party vendors.

Biometric Identity Authentication

Biometric identity authentication provides any organization with a secure, convenient solution to validate that an individual is the verified account owner for various purposes including passwordless login and performing specific transactions, or functions. The authID Verified product allows users to confirm their identity with their facial biometric by simply taking a selfie on a mobile phone or device of their choosing (as opposed to dedicated hardware). The solution includes a patented audit trail created for each transaction, containing the digitally signed transaction details, with proof of identity authentication and consent.

Account Access and Recovery

authID’s Verified biometric identity authentication solution allows users to recover, via a facial biometric, account access that is lost or blocked due to expired credentials, lockouts, lost or stolen devices, or compromised accounts. Because the account owner’s root of trust is established in the cloud, recovery is independent of any device or hardware. In this way, account recovery is instant, portable, and does not require the presence of or access to a previously provisioned device in order to secure access from a different device.

FIDO Passkey Binding

FIDO Passkey Binding enables enterprises and their users to bind biometrically verified user identities to FIDO2 passkeys, enabling strong authentication for device-based passwordless login and transaction authentication that is tied to a trusted identity. This solution establishes a digital chain of trust between biometrically verified individuals, their accounts, and their devices, thus eliminating passwords and protecting users and systems against fraud attacks.

Key Customer Benefits

Our solution allows our enterprise customers to:

Discontinued Operations

On May 4, 2022, the Board of Directors of authID (the “Board” or the “Board of Directors”) 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”). On August 29, 2022 the Company executed and completed the sale of the Cards Plus business. On June 30, 2023, the Company completed the sale of its legacy payments software by MultiPay. As of December 31, 2022, MultiPay S.A.S., and IDGS S.A.S assets are presented as assets held for sale on the Company’s Consolidated Balance Sheets and their operations together with those of Cards Plus Pty Ltd., presented as discontinued operations in the Consolidated Statements of Operations during the years ended December 31, 2023 and 2022, as they met the criteria for discontinued operations under applicable accounting guidance.

Corporate Information

The Company was incorporated in the State of Delaware on September 21, 2011, and changed our name from Ipsidy Inc. to authID Inc. on July 18, 2022. Our corporate headquarters is located at 1580 North Logan Street, Suite 660, Unit 51767, Denver, CO 80203 and our main phone number is (516) 274-8700. Our website address is www.authid.ai. The information contained on, or that can be accessed through, our website is not incorporated by reference into this Form 10-K and you should not consider information on our website to be part of this Form 10-K.

Global Market Opportunity

The momentum towards a digital economy in recent years, accompanied by a massive growth in cyberattacks, fraud, and account takeovers are driving the demand for more streamlined and more secure identity verification and authentication. The World Economic Forum estimates digitally enabled platform business models will drive 70% of new economic value created over the next ten years. Yet vast amounts of data have been compromised, and ransomware attacks have cost businesses hundreds of millions in remediation costs, lost revenue and brand equity. MGM Resorts estimated that the cyber-attack reported in September 2023, cost them over $100 million alone. Passwords and device authentication alone no longer provide the security needed to fight today’s rampant cyber-attacks and account takeover schemes.

According to Statista, approximately 480,000 incidents of cyberattacks were reported in the United States in 2022, nearly a 100% increase since 2016. In the 2023 Verizon Data Breach Investigation Report, 83% of 4,000 data breaches studied involved external actors, while 74% of all breaches were attributed to some form of social engineering, stolen credentials, or human error. Verizon also found that Business Email Compromise (BEC) attacks now represent more than 50% of social engineering incidents, having almost doubled in recent years. Further it is predicted that Artificial Intelligence (AI) will almost certainly increase the volume and heighten the impact of cyberattacks over the next two years (NCSC Assessment, Jan 1, 2024).

Financial services, ecommerce, the sharing economy, and healthcare businesses, among other industry verticals, are confronted by the challenges of identifying their customers, patients and beneficiaries with ease and certainty in the digital world. Organizations across all sectors need to control access to their data and applications by their employees. Governments around the world are enacting new data privacy regulations and pushing for stronger authentication methods in commerce, which impose a “call to action” for many of these entities.

These factors have created a hyper-growth market for the identity verification and authentication industry as well as increased buyer demand for integrated identity platforms that can provide a range of identity solutions to address the full authentication lifecycle of the user journey. The demand for Integrated Identity Platforms is estimated to reach a market size of $48 billion in 2023, increasing at a 24.6% CAGR to reach almost $116 billion by 2027 (Forbes Tech Council, June 6, 2023).

Growth Strategy

We orient our business strategy and invest for future growth by focusing on the following key priorities:

Sales and Marketing

authID provides its Verified platform based on a subscription and usage-based model, with fees per transaction, enrolled or active users.

We sell our platform primarily through our direct sales team, which consists of inside sales and field sales professionals based in the United States. To power our efforts, we have built a team of subject matter experts in the identity space, and applied a regimented sales execution strategy, allowing us to win against competitors with comparable products but a sub-optimal approach to the market. In the last six months of 2023, our new leadership team significantly expanded our sales force and technical sales support. We also use a premier lead generation service and digital marketing in order to carefully target potential customers and provide qualified leads for our sales representatives to develop.

We also work with channel partners, such as banking infrastructure or cybersecurity providers who provide our services to their customers through reseller arrangements and allow us to broaden our customer reach.

Competition

The market for our service offerings is highly competitive and rapidly evolving. We face competition from a broad range of providers with solutions across the identity management lifecycle, including:

It is also possible that, as the digital identity market continues to grow and evolve, larger companies with significant resources may increase their presence in the market and develop competing solutions through internal efforts or partnerships with existing players.

Due to our ability to serve both identity verification and authentication needs, as well as the tendency for enterprises to acquire multiple digital identity solutions, we can and often do co-exist with competing products within our customer base.

Research and Development

Our research and development team is responsible for the design, development, testing and quality of our platform as well as any new technologies, features, integrations and improvements. The team includes specialists in software engineering, user experience, quality assurance, product management, infrastructure, and technical writing. Our employees are located primarily in the United States, with additional sub-contractors based in Europe, India and the Caribbean. We intend to continue to invest in our technology to strengthen and expand our platform to stay ahead of our competition and meet the evolving needs of our current and prospective customers.

Intellectual Property

We rely on a combination of patents, trademarks, copyrights, trade secrets and contractual provisions to protect our proprietary technology. For example, we enter into confidentiality and invention assignment agreements with our employees, consultants and other third parties, and control access to software, services, documentation and other proprietary information. We believe the duration of our patents is adequate relative to the expected lives of our service offerings. We also purchase or license technology that we incorporate into our products or services. While it may be necessary in the future to seek or renew licenses relating to various aspects of our products, we believe, based upon past experience and industry practice, such licenses generally could be obtained on commercially reasonable terms.

Governmental Regulations

Due to the security applications and biometric technology associated with the Company’s products and platforms, the activities and operations of the Company are subject to license restrictions and other regulations, such as (without limitation) export controls and other security regulation by government agencies. Expansion of the Company’s activities in areas such as financial services may require government licensing in different jurisdictions and may subject it to additional regulation and oversight.

Data protection legislation in various countries in which the Company does business may require it to register its databases with governmental authorities in those countries and to comply with additional disclosure and consent requirements with regard to the collection, storage and use of personal information of individuals resident in those countries. Several US states have adopted or are considering adopting a Biometric Information Privacy Act, or BIPA modelled on the Illinois statute, which governs the collection, processing, storage and distribution of biometric information such as facial biometric templates and fingerprints. Several of these new statutes give individuals rights of action to sue violators, which have resulted in several class action lawsuits. These regulations could have a significant impact on our business.

Human Capital

As of December 31, 2023, the Company had a total of approximately 22 employees who are located in the United States and Colombia as well as outsourced service providers. There are 17 employees in the United States who provide overall Company strategic, business and technological leadership. Employees in the U.S. receive health benefits on a cost-sharing basis and employees in Colombia are provided the respective Government required benefits.

Subsidiaries

Currently, the Company has four U.S. subsidiaries: Innovation in Motion Inc., Fin Holdings, Inc., ID Solutions Inc. and authID Gaming Inc. The Company has one subsidiary in Colombia: MultiPay S.A.S. The Company has one subsidiary in the United Kingdom: Ipsidy Enterprises Limited. The Company is the sole shareholder of all its subsidiaries.

Available Information

Our Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any amendment to these reports are filed with the SEC. Such reports and other information filed by us with the SEC are available free of charge on our website atinvestors.authid.aias soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC atwww.sec.gov. The information contained on the websites referenced in this Form 10-K is not incorporated by reference into this filing.

Recent Developments

On February 15, 2024, Mr. Joe Trelin tendered his resignation as Chairman and a Director of the Company, effective immediately. On February 20, 2024, the board of directors of the Company (the “Board”) accepted his resignation and agreed to vest the unvested portion of an option granted to Mr. Trelin June 28, 2023, amounting to 6,511 shares. The Company is currently in discussions with one or more candidates to be appointed as an additional Independent Director, but no agreement has been reached regarding such appointment at this time. On February 20, 2024, the Board appointed Michael Thompson to the Audit Committee in compliance with Rule 5605(c)(2)(A) of the Nasdaq Rules. See “Subsequent Events” for further information.