Intellicheck, Inc.

Current report

Disruptions at federal governmental agencies that we interact with, due to a reduction in workforce and/or inadequate funding, could prevent such agencies from performing normal functions on which our business relies, which could negatively impact our business.

Current report

The current President Trump administration (the “Trump Administration”) recently established the Department of Government Efficiency, which implemented a federal government hiring freeze and announced certain additional efforts to reduce federal government employee headcount and the size of the federal government. It is unclear how these executive actions or other potential actions by the Trump Administration or other parts of the federal government will impact the regulatory authorities that oversee our business and the governmental and quasi-governmental agencies that we interact with. These budgetary pressures may reduce the ability of certain governmental agencies to perform their responsibilities, which could have a material adverse effect on our business.

Current report

■protecting trade secrets, including software source code;

Current report

We are subject to risks related to data privacy and the storage of biometric information.

Current report

With the growing use of biometric data in identity verification, Intellicheck faces increased risks related to the usage and protection of this highly sensitive information. Biometric data, such as facial recognition patterns, are uniquely vulnerable as they cannot be changed if compromised. The company must implement robust security measures to protect this data from breaches, as any leak could lead to severe reputational damage, legal consequences, and loss of customer trust. Additionally, evolving privacy laws and regulations specifically targeting biometric data could impose new compliance burdens on the company.

Current report

We are subject to regulation and other legal obligations relating to data privacy and protection. Compliance with these requirements is complex and costly. The actual or perceived failure to comply with such obligations could materially harm our business.

Current report

We are or may become subject to numerous state, federal and foreign laws, requirements and regulations governing the collection, use, access to, confidentiality, disclosure, storage, processing, retention and security of personal information. Failure to comply with these laws, where applicable, can result in the imposition of significant civil and/or criminal penalties and private litigation. As an example, the California Privacy Rights Ace (the “CCPA”) requires covered businesses that process the personal information of California residents to, among other things: provide certain disclosures to California residents regarding the business’s collection, use, and disclosure of their personal information; receive and respond to requests from California residents to access, delete, and correct their personal information, or to opt out of certain disclosures of their personal information; and enter into specific contractual provisions with service providers that process California resident personal information on the business’s behalf. Similar laws have been passed in other states and are continuing to be proposed at the state and the federal level, reflecting a trend toward more stringent privacy legislation in the United States. The CCPA and other domestic privacy and data protection laws and regulations may increase our compliance costs and potential liability.

Current report

Although we work to comply with applicable laws, regulations and standards, as well as our contractual obligations and other legal obligations, relating to data privacy and security, these requirements are evolving and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction and/or organization to another, and may conflict with one another or other legal obligations with which we must comply. Any failure or perceived failure by us or our employees, representatives, contractors, consultants, collaborators, or other third parties to comply with such requirements or adequately address privacy data and security concerns, even if unfounded, could result in additional costs, claims by and liability to third parties, government investigations and enforcement actions, damage to our reputation, and other adverse effects on our business, financial condition and results of operations.

Current report

The expansion of the use of artificial intelligence ("AI") within our business will pose ethical and bias mitigation challenges.

Current report

As Intellicheck incorporates AI in its identity verification processes, the company faces risks related to AI ethics and potential biases in its algorithms. There's a growing concern about AI systems perpetuating or amplifying existing biases, particularly in identity verification contexts. Intellicheck must ensure its AI models are fair, transparent, and free from discriminatory outcomes across diverse demographic groups. Failure to address these ethical concerns could result in regulatory scrutiny, legal challenges, and damage to the company's reputation, potentially leading to loss of business and market share. Additionally, the models used in those processes may produce output or take action that is incorrect, expose private or confidential information, infringe on the intellectual property rights of others, or be otherwise harmful. Any of these risks could expose Intellicheck to liability or adverse legal or regulatory consequences.

Previous report

■protecting trade secrets;

Previous report

Our management has concluded that our internal controls over financial reporting were ineffective, as of December 31, 2023 as a result of the following: The Company did not design and maintain effective controls to periodically reassess whether Nexus was achieved in the states we do business. This caused us not to be able to collect sales tax from our customer and subsequently remitting those sales tax to the appropriate state tax agency. During our assessment in 2023, it was determined that we had prior period sales tax obligation on certain states, in which we failed to collect and remit the sales tax.. While management intends to remediate the material weakness, there is no assurance that such changes, when economically feasible and sustainable, will remediate the identified material weaknesses or that the controls will prevent or detect future material weaknesses. If we are not able to maintain effective internal control over financial reporting, our financial statements, including related disclosures, may be inaccurate, which could have a material adverse effect on our business.

Previous report

■economic and social effects of the COVID-19 virus or other pandemics;

Current report — wording carried from elsewhere

As a result, we would incur substantial costs, delays in product development, sales and shipments, and our revenues may decline substantially. Additionally, we may not be able to achieve the growth necessary for our continued success.