What changed in this filing

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Item 9A. Controls and Procedures

2023-03-28 compared with 2022-03-24 · 740 added, 791 removed, 185 unchanged (89% of the section changed)

Controls and Procedures

of Disclosure Controls and Procedures

Chief Executive Officer and our Chief Financial Officer evaluated, with the participation of our management, the effectiveness of our

disclosure controls and procedures as of the end of the period covered by this Annual Report on Form 10-K.

As of December 31, 2021, our

Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures, as defined in Rules 13a-15(e)

and 15d-15(e) under the Securities Exchange Act of 1934, were effective.

disclosure controls and procedures have been formulated to ensure (i) that information that we are required to disclose in reports that

we file or submit under the Securities Exchange Act of 1934 were recorded, processed, summarized and reported within the time periods

specified in Securities and Exchange Commission rules and forms and (ii) that the information required to be disclosed by us is accumulated

and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely

decisions regarding required disclosures.

in Internal Control over Financial Reporting

have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange

Act) that occurred during our most recently completed fiscal quarter that has materially affected, or are reasonably likely to materially

affect, our internal control over financial reporting.

Report of Management on Internal Control over Financial Reporting

is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and

15d-15(f) under the Exchange Act) for the Company.

Management, with the participation of our principal executive officer and our principal

financial officer, evaluated the effectiveness of our internal control over financial reporting as of December 31, 2021 (the end of our

fiscal year), based on the framework and criteria established in the 2013 Internal Control Integrated Framework issued by the Committee

of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, management concluded that our internal control over

financial reporting was effective as of December 31, 2021.

annual report does not include an attestation report of our registered public accounting firm on internal control over financial reporting.

Evaluation of Disclosure Controls and Procedures

and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act").

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms.

Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our Company's reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were ineffective as of December 31, 2022 due to a material weakness identified and described below.

In light of the material weakness described below, management performed additional analysis and other procedures to ensure that our interim and annual financial statements were prepared in accordance with U.S.

Accordingly, management believes that the financial statements included in this Annual Report on Form 10-K fairly present, in all material respects, our financial position, results of operations, and cash flows as of and for the periods presented, in accordance with U.S.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f).

Internal control over financial reporting includes policies and procedures that provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external reporting purposes in accordance with U.S.

Our internal control over financial reporting includes those policies and procedures that:

Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

Provide reasonable assurance that transactions are recorded properly to allow for the preparation of financial statements in accordance with U.S.

GAAP and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors;

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2022 based on the guidelines established in the "Internal Control—Integrated Framework" (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on its assessment, management concluded that the Company's internal control over financial reporting was ineffective as of December 31, 2022 due to a material weakness in our internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

The Company did not design and maintain effective controls over the assessment of the accounting for shares held to settle tax liabilities.

This annual report does not include an attestation report of our registered public accounting firm on internal control over financial reporting.

Remediation of Material Weakness existing as of December 31, 2022

Our management has executed a plan to remediate the material weakness described above.

This plan includes the enhancement of existing processes and controls over the accounting for shares held to settle tax liabilities.

The material weakness will be considered remediated when management concludes that, through testing, the applicable remedial controls are operating effectively.

Remediation of Previously Disclosed Material Weakness

We previously identified and disclosed in our 2021 Annual Report, as well as in our Quarterly Report on Form 10-Q filed for the quarters ended March 31, 2022, June 30, 2022, and September 30, 2022 certain material weakness in our control environment whereby the Company did not have adequate controls for its accounting for equity compensation.

As of December 31, 2022, management has completed our remediation efforts of this material weakness.

Our remediation efforts included the following:

The Company engaged additional experienced accounting resources and implemented training of new and existing personnel.

The Company implemented a new brokerage system to assist in the management of the equity incentive plans;

The Company amended the equity incentive plan to eliminate the use of cashless exercises of awards.

Changes in Internal Control over Financial Reporting

Other than described above, there have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2022 that has materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Other Information

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

Directors, Executive Officers and Corporate Governance

information required by this Item is incorporated herein by reference from our 2022 definitive Proxy Statement (which will be filed with

the SEC within 120 days after December 31, 2021 in connection with the solicitation of proxies for the Company’s 2022 annual meeting

of stockholders) (“2022 Proxy Statement”) under the captions “Proposal 1 – Election of Directors,” “Other

Information – Executive Officers,” and “Beneficial Ownership Reporting Compliance under Section 16(a) of the Exchange

The information required by this Item is incorporated herein by reference from our 2023 definitive Proxy Statement (which will be filed with the SEC within 120 days after December 31, 2022 in connection with the solicitation of proxies for the Company’s 2023 annual meeting of stockholders) (“2023 Proxy Statement”) under the captions “Proposal 1 – Election of Directors,” “Other Information – Executive Officers,” and “Beneficial Ownership Reporting Compliance under Section 16(a) of the Exchange Act.”

Executive Compensation

information required by this Item is incorporated herein by reference from our 2022 Proxy Statement under the captions “Executive

Compensation” and “Director Compensation.”

The information required by this Item is incorporated herein by reference from our 2023 Proxy Statement under the captions “Executive Compensation” and “Director Compensation.”

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

information required by this Item is incorporated herein by reference from our 2022 Proxy Statement under the captions “Other Information—Security

Ownership of Certain Beneficial Owners and Management” and “Other Information – Equity Compensation Plan Information.”

The information required by this Item is incorporated herein by reference from our 2023 Proxy Statement under the captions “Other Information—Security Ownership of Certain Beneficial Owners and Management” and “Other Information – Equity Compensation Plan Information.”

Certain Relationships and Related Transactions, and Director Independence

information required by this Item is incorporated herein by reference from our 2022 Proxy Statement under the captions “Other Information

– Related Party Transactions Overview,” “Other Information – Certain Transactions with Related Persons”

and “Director Attributes and Independence.”

The information required by this Item is incorporated herein by reference from our 2023 Proxy Statement under the captions “Other Information – Related Party Transactions Overview,” “Other Information – Certain Transactions with Related Persons” and “Director Attributes and Independence.”

Principal Accounting Fees and Services

information required by this Item is incorporated herein by reference from our 2022 Proxy Statement under the caption “Proposal

2 – Ratification of the Selection of Independent Auditors.”

independent registered public accounting firm is EisnerAmper LLP, Iselin New Jersey, Auditor Firm ID:

The information required by this Item is incorporated herein by reference from our 2023 Proxy Statement under the caption “Proposal 2 – Ratification of the Selection of Independent Auditors.”

Our independent registered public accounting firm is FORVIS, LLP, Auditor Firm ID:

Our previous independent registered public accounting firm was EisnerAmper LLP, Audit Firm ID:

Exhibits and Financial Statement Schedules

Sheets as of December 31, 2021 and 2020

of Operations for the years ended December 31, 2021 and 2020

of Stockholders’ Equity for the years ended December 31, 2021 and 2020

of Cash Flows for the years ended December 31, 2021 and 2020

(a)(1) Financial Statements

Balance Sheets as of December 31, 2022 and 2021

Statements of Operations for the years ended December 31, 2022 and 2021

Statements of Stockholders’ Equity for the years ended December 31, 2022 and 2021

Statements of Cash Flows for the years ended December 31, 2022 and 2021

3.1 Certificate of Incorporation of the Company (1)

8 unchanged sentences

10.5 Garrett Gafke Employment Agreement ( 1 2 ) *

10.6 Jeffrey Ishmael Employment Agreement**

14.1 Code of Business Conduct and Ethics (2)

16.1 Letter furnished by EisnerAmper LLP, dated October 3, 2022 (1 1 ) **

23.1 Consent of FORVIS LLP **

23.2 Consent of EisnerAmper LLP **

2 unchanged sentences

32 Certification of CEO and CFO pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 **

Instance Document **

Taxonomy Extension Schema **

Taxonomy Extension Calculation Linkbase **

Taxonomy Extension Definition Linkbase **

Taxonomy Extension Label Linkbase **

Taxonomy Extension Presentation Linkbase **

101.INS Inline XBRL Instance Document **

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101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase **

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a management contract or compensatory plan, contract or arrangement.

by reference to Registration Statement on Form SB-2 (File No.

* Denotes a management contract or compensatory plan, contract or arrangement.

** Filed herewith.

(1) Incorporated by reference to Registration Statement on Form SB-2 (File No.

333-87797) filed September 24, 1999.

by reference to Registrant’s Annual Report on Form 10-K filed March 30, 2004.

by reference to Registrant’s Annual Report on Form 10-K filed March 21, 2019.

by reference to Registrant’s Current Report on Form 8-K filed August 13, 2014.

by reference to Registrant’s Current Report on Form 8-K filed May 9, 2017.

by reference to Registrant’s Current Report on Form 8-K filed December 4, 2020.

by reference to Registrant’s Current Report on Form 8-K filed October 28, 2009.

by reference to Registrant’s Current Report on Form 8-K filed August 14, 2007.

by reference to Registrant’s Proxy Statement on Schedule 14A filed March 26, 2021.

to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant had duly caused this report to be

signed on its behalf by the undersigned, thereunto duly authorized.

(2) Incorporated by reference to Registrant’s Annual Report on Form 10-K filed March 30, 2004.

(3) Incorporated by reference to Registrant’s Annual Report on Form 10-K filed March 21, 2019.

(4) Incorporated by reference to Registrant’s Current Report on Form 8-K filed August 13, 2014.

(5) Incorporated by reference to Registrant’s Current Report on Form 8-K filed May 9, 2017.

(6) Incorporated by reference to Registrant’s Current Report on Form 8-K filed December 4, 2020.

(7) Incorporated by reference to Registrant’s Current Report on Form 8-K filed October 28, 2009.

(8) Incorporated by reference to Registrant’s Current Report on Form 8-K filed August 14, 2007.

(9) Incorporated by reference to Registrant’s Proxy Statement on Schedule 14A filed March 28, 2022.

(10) Incorporated by reference to Registrant's Annual Report on Form 10-K filed March 29, 2019.

(11) Incorporated by reference to Registrant's Current Report on Form 8-K filed October 3, 2022.

(12) Incorporated by reference to Registrant’s Annual Report on Form 10-K/A filed June 9, 2022.

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant had duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

March 28, 2023 INTELLICHECK, INC.

/s/ Bryan Lewis

Chief Executive Officer

(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

INTELLICHECK, INC.

Executive Officer and Director

to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the

Registrant and in the capacities and on the dates indicated.

INTELLICHECK,

March 28, 2023 By:

/s/ Bryan Lewis

Executive Officer and Director

Executive Officer)

/s/ Bill White

Financial Officer, Chief Operating Officer, Secretary and Treasurer

Financial and Accounting Officer)

Chief Executive Officer

(Principal Executive Officer)

March 28, 2023 By:

/s/ Jeffrey Ishmael

Jeffrey Ishmael

Chief Financial Officer

March 28, 2023 By:

Smith, Chairman and Director

March 28, 2023 By:

Bedard, Director

March 28, 2023 By:

Davis, Director

March 28, 2023 By:

/s/ William P.

Georges, Director

Glenn, Director

Ruzzo, Director

March 28, 2023 By:

/s/ Dylan Glenn

Dylan Glenn, Director

March 28, 2023 By:

/s/ Gregory B.

Braca, Director

March 28, 2023 By:

Ullman, Director

March 28, 2023 By:

/s/ Dondi Black

Dondi Black, Director

EXHIBIT INDEX

23.1 Consent of FORVIS LLP *

23.2 Consent of EisnerAmper LLP *

2 unchanged sentences

32 Certification of CEO and CFO pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 *

Instance Document *

Taxonomy Extension Schema *

Taxonomy Extension Calculation Linkbase *

Taxonomy Extension Definition Linkbase *

Taxonomy Extension Label Linkbase *

Taxonomy Extension Presentation Linkbase *

101.INS Inline XBRL Instance Document *

101.SCH Inline XBRL Taxonomy Extension Schema *

101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase *

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OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID:

* Filed herewith.

FINANCIAL STATEMENTS

REPORT S OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIR MS

FINANCIAL STATEMENTS:

Balance Sheets as of December 31, 202 2 and 20 21

3 unchanged sentences

NOTES TO FINANCIAL STATEMENTS

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and Stockholders of

Intellicheck,

on the Financial Statements

have audited the accompanying balance sheets of Intellicheck (the “Company”) as of December 31, 2021 and 2020, and the related

statements of operations, stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively

referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects,

the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each

of the years then ended, in conformity with accounting principles generally accepted in the United States of America.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits,

we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors, and Audit Committee

Intellicheck, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheet of Intellicheck, Inc.

(the Company) as of December 31, 2022, the related statements of operations, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits

provide a reasonable basis for our opinion.

critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated

or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial

statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter

does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit

matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Impairment Analysis

of December 31, 2021, the Company had goodwill of approximately $8.1 million.

As described in Notes 2 and 4 to the financial statements,

the Company performs its impairment test of goodwill annually, or whenever events or changes in circumstances indicate that the carrying

value of the Company exceeds its fair value.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the account or disclosure to which they relate.

Goodwill Impairment

As of December 31, 2022, the Company had recorded goodwill of approximately $8.1 million.

As described in Notes 2 and 5 to the financial statements, the Company tests goodwill for impairment on an annual basis in the fourth quarter, or between the annual tests, when events or changes in circumstances have been identified that may indicate that the carrying value of the Company exceeds its fair value.

If the carrying value exceeds the determined fair value, an impairment charge is recognized in an amount equal to the excess.

The Company operates as one reporting unit and performed the impairment assessment during the fourth quarter of 2022.

The fair value was determined using the weighting of certain valuation techniques, including both income and market approaches, which include a discounted cashflow analysis, an analysis of similar public company financial information, and an analysis of market transactions.

The Company’s fair value estimate, in performing this analysis requires management to make various judgments, assumptions, and estimates, the most significant of which include discount rates, projected revenue growth rates, operating margins and guideline public company multiples.

We identified the Company’s goodwill impairment assessment as a critical audit matter.

Our principal considerations for this determination included the high degree of auditor judgment and subjectivity in evaluating the reasonableness of management’s significant inputs and assumptions utilized in determining the reporting unit fair value, particularly as it

relates to discount rates, forecasted revenue growth rates, operating margins, and guideline public company multiples.

Furthermore, auditing certain of these inputs and assumptions made by management requires the use of an auditor-employed valuation specialist.

Our primary audit procedures performed to address this critical audit matter included:

• Obtained an understanding of management’s goodwill impairment assessment process, including management’s assessment of the significant inputs and assumptions utilized in determining the reporting unit fair value.

• Evaluated management’s forecasted revenue growth rates and operating margins by comparing actual results to management’s historical forecasts.

• Performed sensitivity analysis over significant estimates and assumptions including forecasted revenue growth rates and operating margins when assessing the overall impact on the estimate of fair value compared to the carrying value.

• Utilizing personnel with specialized knowledge and skills in valuation, we evaluated the significant assumptions in assessing the appropriateness of the fair value methodology utilized, including:

• Evaluating the reasonableness of certain assumptions used in the discounted cash flow model including the discount rates used by management by comparing it to a range of discount rates developed using existing market information for comparable entities, and

• Evaluating the market approaches including selected guideline company multiples and similar transactions for reasonableness, and

• Evaluating the mathematical accuracy of the calculations included in both the income and market approaches.

/s/ FORVIS, LLP

We have served as the Company’s auditor since 2022.

Tysons, Virginia

M arch 28, 2023

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Intellicheck, Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheet of Intellicheck (the “Company”) as of December 31, 2021, and the related statements of operations, stockholders’ equity, and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Correction of a Misstatement

On June 9, 2022, the Company’s restated the 2021 financial statements, to correct a misstatement as the Company determined that a cashless withholding to satisfy personal income tax obligations from certain option awards exercised commencing in the third quarter of 2020 and the first quarter of 2021, caused the underlying options to no longer qualify as

equity awards and should have instead been classified as liability awards commencing on the date of exercise.

The change in the classification of the awards to liability classified awards requires the Company to remeasure the fair value of the awards at the end of each reporting period they remain outstanding, with the increase or decrease in fair value correspondingly charged or credited to selling, general and administrative expenses in arriving at net loss.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgment.

The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill Impairment Analysis

As of December 31, 2021, the Company had goodwill of approximately $8.1 million.

As described in Notes 2 and 5 to the financial statements, the Company performs its impairment test of goodwill annually, or whenever events or changes in circumstances indicate that the carrying value of the Company exceeds its fair value.

The Company performed its annual impairment test of goodwill in the fourth quarter of 2021.

The Company operates as one reporting segment, operating segment and reporting unit.

The Company’s goodwill impairment test

involves comparing the Company’s carrying value to its estimated fair value.

The fair value was determined using the weighting

of certain valuation techniques, including both income and market approaches, which include a discounted cash flow analysis, similar

public company financial comparisons, along with market capitalization.

The Company’s fair value estimates require management to

make significant estimates and assumptions including discount rates, projected revenue growth rates, operating margins and guideline

public company multiples.

identified the impairment test of goodwill as a critical audit matter due to the significant judgement by management in the estimates

and assumptions used in developing the fair value estimate of the Company.

This in turn led to a high degree of auditor judgement, subjectivity,

and effort in performing procedures to evaluate the reasonableness of management’s significant estimates and assumptions related

to discount rates, projected revenue growth rates, operating margins and guideline public company multiples.

Additionally, the audit

effort involved the use of professionals with specialized skill and knowledge.

the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial

We obtained an understanding and evaluated the design of controls over the Company’s impairment test of goodwill, including

developing the estimate of fair value.

Our procedures included, among others:

evaluated the forecasted revenue growth rates and operating

margins to the Company’s underlying business strategies and growth plans and considered if they were consistent with evidence obtained

in other areas of the audit;

evaluated management’s ability to accurately forecast revenue growth rates and operating margins by

comparing actual results to management’s historical forecasts;

and performed sensitivity analyses over significant estimates and

assumptions including discount rates and projected revenue growth rates when assessing the overall impact on the estimate of fair value

compared to the carrying value.

In addition, we utilized our valuation specialists with specialized skills and knowledge, in evaluating

the reasonableness of the Company’s methodology for estimating fair value including both the income and market approaches;

the discount rates used by management by comparing it to a range of discount rates developed using existing market information for comparable

evaluating market approaches including selected guideline company multiples for reasonableness and evaluating the mathematical

accuracy of the calculations included in both the income and market approaches.

have served as the Company’s auditor since 2010.

/s/ EisnerAmper

The Company’s goodwill impairment test involves comparing the Company’s carrying value to its estimated fair value.

The fair value was determined using the weighting of certain valuation techniques, including both income and market approaches, which include a discounted cash flow analysis, similar public company financial comparisons, along with market capitalization.

The Company’s fair value estimates require management to make significant estimates and assumptions including discount rates, projected revenue growth rates, operating margins and guideline public company multiples.

We identified the impairment test of goodwill as a critical audit matter due to the significant judgement by management in the estimates and assumptions used in developing the fair value estimate of the Company.

This in turn led to a high degree of auditor judgement, subjectivity, and effort in performing procedures to evaluate the reasonableness of management’s significant estimates and assumptions related to discount rates, projected revenue growth rates, operating margins and guideline public company multiples.

Additionally, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements.

We obtained an understanding and evaluated the design of controls over the Company’s impairment test of goodwill, including developing the estimate of fair value.

Our procedures included, among

evaluated the forecasted revenue growth rates and operating margins to the Company’s underlying business strategies and growth plans and considered if they were consistent with evidence obtained in other areas of the audit;

evaluated management’s ability to accurately forecast revenue growth rates and operating margins by comparing actual results to management’s historical forecasts;

and performed sensitivity analyses over significant estimates and assumptions including discount rates and projected revenue growth rates when assessing the overall impact on the estimate of fair value compared to the carrying value.

In addition, we utilized our valuation specialists with specialized skills and knowledge, in evaluating the reasonableness of the Company’s methodology for estimating fair value including both the income and market approaches;

evaluating the discount rates used by management by comparing it to a range of discount rates developed using existing market information for comparable entities;

evaluating market approaches including selected guideline company multiples for reasonableness and evaluating the mathematical accuracy of the calculations included in both the income and market approaches.

We served as the Company’s auditor from 2010 to 2022.

/s/ EisnerAmper LLP

EISNERAMPER LLP

Iselin, New Jersey

March 24, 2022

INTELLICHECK,

31, 2021 and 2020

March 24, 2022, except for the effects of the restatement to the financial statements as discussed in the correction of misstatement paragraph above, as to which the date is June 9, 2022

INTELLICHECK, INC.

BALANCE SHEETS

DECEMBER 31, 2022 and 2021

(in thousands except share amounts)

CURRENT ASSETS:

Cash and cash equivalents $ 5,196 $ 13,651

Short-term investments 4,880 —

Accounts receivable, net of allowance of $ 20 and $ 3 as of December 31, 2022, and 2021, respectively

2 unchanged sentences

PROPERTY AND EQUIPMENT, NET 749 737

GOODWILL 8,102 8,102

INTANGIBLE ASSETS, NET 273 378

OPERATING LEASE RIGHT-OF-USE ASSET

OTHER ASSETS 8 8

Total assets $ 22,453 $ 25,711

LIABILITIES AND STOCKHOLDERS’ EQUITY

2 unchanged sentences

Accrued expenses 2,319 2,870

Operating lease liability, current portion

Income taxes payable 90 —

Equity awards liability 54 378

Liability for shares withheld 221 1,244

Deferred revenue, current portion 906 1,266

Total current liabilities 3,948 6,126

NONCURRENT LIABILITIES

OTHER LIABILITIES

Deferred revenue, long-term portion 1 8

2 unchanged sentences

STOCKHOLDERS’ EQUITY:

Preferred stock – $ 0.01 par value;

30,000 shares authorized;

Series A convertible preferred stock, zero shares issued and outstanding as of December 31, 2022 and 2021, respectively

Common stock – $ .001 par value;

5 unchanged sentences

Total liabilities and stockholders’ equity $ 22,453 $ 25,711

accompanying notes are an integral part of these financial statements.

INTELLICHECK,

OF OPERATIONS

THE YEARS ENDED DECEMBER 31, 2021 AND 2020

(in thousands except shares and per share amounts)

The accompanying notes are an integral part of these financial statements.

INTELLICHECK, INC.

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

(in thousands except share and per share amounts)

REVENUES $ 15,966 $ 16,393

COST OF REVENUES ( 1,275 ) ( 3,511 )

Gross profit 14,691 12,882

OPERATING EXPENSES

3 unchanged sentences

Loss from operations ( 3,722 ) ( 7,493 )

OTHER (EXPENSE) INCOME

Gain on forgiveness of unsecured promissory note — 10

Interest and other income

Total other income

Net (loss) income

Interest and other (expense) income ( 5 ) 5

Total other (expense) income ( 5 ) 15

Net loss before provision for income taxes ( 3,727 ) ( 7,478 )

Provision for income taxes 124 —

Net loss $ ( 3,851 ) $ ( 7,478 )

PER SHARE INFORMATION:

(Loss) income per common share -

Loss per common share -

Basic/Diluted $ ( 0.20 ) $ ( 0.40 )

Weighted average common shares used in computing per share amounts -

accompanying notes are an integral part of these financial statements.

INTELLICHECK,

OF STOCKHOLDERS’ EQUITY

THE YEARS ENDED DECEMBER 31, 2021 AND 2020

thousands, except number of shares)

Additional Paid-in

Total Stockholders’

Basic/Diluted 18,838,971 18,598,410

The accompanying notes are an integral part of these financial statements.

INTELLICHECK, INC.

STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

(in thousands, except number of shares)

Common Stock Additional Paid-in

Capital Accumulated

Deficit Total Stockholders’

Shares Amount

BALANCE, December 31, 2020 18,410,458 $ 18 $ 141,612 $ ( 119,419 ) $ 22,211

Stock-based compensation — — 3,068 — 3,068

Exercise of stock options, net of cashless exercise of 58,926 shares and 92,634 shares withheld

208,741 1 1,756 — 1,757

Equity compensation expense

Issuance of common stock, net of costs

Exercise of stock options, net of cashless exercise of 93,840 shares

Issuance of shares for vested restricted stock grants 32,170 — — — —

Exercise of warrants 9,000 — 19 — 19

Settlement of executive bonuses with issuance of restricted stock units

Shares forfeited in exchange for withholding taxes

Net loss — — — ( 7,478 ) ( 7,478 )

BALANCE, December 31, 2021 18,660,369 $ 19 $ 146,455 $ ( 126,897 ) $ 19,577

$ ( 116,377 )

Equity compensation expense

Exercise of stock options, net of cashless exercise of 58,926 shares

Stock-based compensation — — 2,778 — 2,778

Issuance of shares for vested restricted stock grants 296,997 — — — —

Exercise of warrants

Net loss — — — ( 3,851 ) ( 3,851 )

BALANCE, December 31, 2022 18,957,366 $ 19 $ 149,233 $ ( 130,748 ) $ 18,504

$ ( 120,523 )

accompanying notes are an integral part of these financial statements.

INTELLICHECK,

OF CASH FLOWS

THE YEARS ENDED DECEMBER 31, 2021 AND 2020

The accompanying notes are an integral part of these financial statements.

INTELLICHECK, INC.

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

(In thousands)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income

Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:

Net loss $ ( 3,851 ) $ ( 7,478 )

Adjustments to reconcile Net loss to net cash (used in) provided by operating activities:

Depreciation and amortization 285 169

Equity compensation expense

Stock-based compensation 2,455 6,400

Bad debt expense ( 17 ) —

Gain on forgiveness of unsecured promissory note — ( 10 )

1 unchanged sentence

(Increase) in accounts receivable ( 428 ) ( 72 )

Increase in other current assets

(Increase) decrease in other assets

Increase in accounts payable and accrued expenses

Increase (decrease) in deferred revenue

Net cash provided by (used in) operating activities

Decrease (increase) in other current assets 34 ( 302 )

(Increase) in other assets — ( 4 )

(Decrease) increase in accounts payable and accrued expenses ( 568 ) 1,551

(Decrease) increase in deferred revenue ( 367 ) 862

(Decrease) in liability for shares withheld ( 1,023 ) —

Net cash (used in) provided by operating activities ( 3,480 ) 1,116

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of software license

Purchases of short-term investments ( 4,880 ) —

Capital expenditures ( 192 ) ( 662 )

Collection on note receivable

Net cash (used in) investing activities ( 5,072 ) ( 662 )

1 unchanged sentence

Return of repayment of unsecured promissory note — 10

Net proceeds from issuance of common stock

Loan proceeds on unsecured promissory note under Paycheck Protection Program

Loan proceeds on unsecured promissory note under Economic Injury Disaster Loan program

Net proceeds from issuance of common stock from exercise of stock options — 47

Proceeds of insurance financing arrangement 319 —

Repayment of insurance financing arrangement ( 222 ) —

Proceeds from issuance of common stock from exercise of warrants — 19

Withholding taxes paid on exercise of stock options and vesting of restricted stock units

Loan payments on unsecured promissory note

Net cash provided by financing activities 97 76

Net increase in cash

Net (decrease) increase in cash ( 8,455 ) 530

CASH, beginning of year 13,651 13,121

CASH, end of year $ 5,196 $ 13,651

Supplemental disclosure of noncash investing and financing activities:

Settlement of executive bonuses with restricted stock units

accompanying notes are an integral part of these financial statements.

INTELLICHECK,

TO FINANCIAL STATEMENTS

dollar amounts are rounded to thousands, except share data )

Intellicheck,

(the “Company” or “Intellicheck”) is a prominent technology company that is engaged in developing, integrating

and marketing identity verification solutions to address challenges that include commercial retail and banking fraud prevention.

Intellicheck’s

products include solutions for preventing identity fraud across any industry delivered via smartphone, tablet, POS integration or other

electronic devices.

Intellicheck continues to develop and release innovative products based upon its rich patent portfolio consisting

of eighteen (18) U.S.

and one Canadian patents, as well as two patents pending.

the year ended December 31, 2021, the Company incurred a net loss of $ ( 4,146 ) and had cash provided by operating activities of $ 1,116 .

As of December 31, 2021, the Company had cash of $ 13,651 , working capital (defined as current assets minus current liabilities) of $ 11,982

and an accumulated deficit of $ 120,523 .

Based on the Company’s business plan and cash resources, Intellicheck expects its existing

and future resources and revenues generated from operations to satisfy its working capital requirements for at least the next 12 months

from the date of filing.

of the filing of this Form 10-K, the COVID-19 pandemic, which first began affecting the Company in the first quarter of 2020, has impacted

the Company’s business by a temporary decline in revenues from its customers.

Though the Company has had an increase in SaaS revenues

for the year ended December 31, 2021 compared to the same period of 2020, the COVID-19 pandemic may continue to impact our business directly

and/or indirectly for the foreseeable future.

The Company is further unable to accurately predict the full impact that the COVID-19 pandemic

will have on its results of operations or financial condition due to numerous factors that are not within its control, including the

duration and severity of the outbreak together with any potential statewide closures if cases increase, the spread of COVID-19 variants,

including the Delta and Omicron variants, and the widespread adoption of vaccination measures including booster regimens.

ACCOUNTING POLICIES

preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States

of America requires management to make estimates and assumptions that affect the amounts reported in the Company’s financial statements

and accompanying notes.

Significant estimates and assumptions that affect amounts reported in the financial statements include impairment

consideration and valuation of goodwill and intangible assets, deferred tax valuation allowances, allowance for doubtful accounts, revenue

recognition (including breakage revenue) and the fair value of stock options granted under the Company’s Equity compensation plan.

Due to the inherent uncertainties involved in making estimates, actual results reported in future periods may be different from those

for Doubtful Accounts

Company records its allowance for doubtful accounts based upon its assessment of various factors.

The Company considers historical experience,

the age of the accounts receivable balances, credit quality of the Company’s customers, current economic conditions and other factors

that may affect customers’ ability to pay.

Assets and Impairment of Long-Lived Assets

Company’s long-lived assets include property and equipment, goodwill, and intangible assets.

INTELLICHECK,

TO FINANCIAL STATEMENTS

dollar amounts are rounded to thousands, except share data )

Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of

these assets may not be fully recoverable in accordance with Accounting Standards Codification (“ASC”) 350 (“Intangibles

– Goodwill and Other”) and ASC 360 (“Property, Plant and Equipment”) to determine recoverability of its long-lived

assets, the Company evaluates the probability that future undiscounted net cash flows, without interest charges, will be less than the

carrying amount of the assets.

Supplemental disclosures of noncash investing and financing activities:

Reclassification of stock option awards $ — $ 1,411

Supplemental disclosures of cash flow information:

Cash paid for interest $ 5 $ —

Cash paid for income taxes $ 31 $ —

The accompanying notes are an integral part of these financial statements.

INTELLICHECK, INC.

NOTES TO FINANCIAL STATEMENTS

( All dollar amounts are rounded to thousands, except share data )

NATURE OF BUSINESS

Intellicheck, Inc.

(the “Company” or “Intellicheck”) is a prominent technology company that is engaged in developing, integrating and marketing identity verification solutions to address challenges that include commercial retail and banking fraud prevention.

Intellicheck’s products include solutions for preventing identity fraud across any industry delivered via smartphone, tablet, POS integration or other electronic devices.

Intellicheck continues to develop and release innovative products based upon its rich patent portfolio consisting of eighteen (18) U.S.

and one Canadian patents, as well as three U.S.

patents pending.

For the year ended December 31, 2022, the Company incurred a net loss of $( 3,851 ) and had net cash used in operating activities of $( 3,480 ).

As of December 31, 2022, the Company had cash and cash equivalents of $ 5,196 , short term investments of $ 4,880 , working capital (defined as current assets minus current liabilities) of $ 9,373 and an accumulated deficit of $ 130,748 .

Based on the Company’s business plan and cash resources, Intellicheck expects its existing and future resources and revenues generated from operations to satisfy its working capital requirements for at least the next 12 months from the date of filing.

As of the filing of this Form 10-K, the COVID-19 pandemic, which first began affecting the Company in the first quarter of 2020, has impacted the Company’s business by a temporary decline in revenues from its customers.

Though the Company has had an increase in SaaS revenues for the year ended December 31, 2022 compared to the same period of 2021, the COVID-19 pandemic could continue to impact our business directly and/or indirectly for the foreseeable future.

The Company is further unable to accurately predict the full impact that the COVID-19 pandemic will have on its results of operations or financial condition due to numerous factors that are not within its control, including the duration and severity of the outbreak together with any potential statewide closures if cases increase in the future, the spread of COVID-19 variants, and the widespread adoption of vaccination measures including booster regimens.

SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Use of Estimates

The preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the Company’s financial statements and accompanying notes.

Significant estimates and assumptions that affect amounts reported in the financial statements include impairment consideration and valuation of goodwill and intangible assets, deferred tax valuation allowances, allowance for doubtful accounts, revenue recognition (including breakage revenue) and the fair value of stock options granted under the Company’s Equity compensation plan.

Due to the inherent uncertainties involved in making estimates, actual results reported in future periods may be different from those estimates.

ASC 718 establishes fair value as the measurement objective in accounting for equity payment arrangements and requires all companies to apply a fair-value based measurement method in accounting for all equity payment transactions with employees.

The Company determined the fair value of these awards utilizing a Black-Scholes option pricing model.

Allowance for Doubtful Accounts

The Company records its allowance for doubtful accounts based upon its assessment of various factors.

The Company considers historical experience, the age of the accounts receivable balances, credit quality of the Company’s customers, current economic conditions and other factors that may affect customers’ ability to pay.

Cash and Cash Equivalents

INTELLICHECK, INC.

NOTES TO FINANCIAL STATEMENTS

( All dollar amounts are rounded to thousands, except share data )

We classify as cash equivalents time deposits and other investments that are highly liquid and have maturities of three months or less at the date of purchase.

Our cash and cash equivalents consist primarily of cash on deposits with banks and is maintained with major financial institutions in the United States.

Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000, however amounts may exceed FDIC insured limits.

Short-term investments

Short-term investments include investments in U.S.

treasury notes.

Debt investments with original maturities at the date of purchase greater than approximately three months but less than a year are classified as short-term investments, as they represent the investment of cash available for current operations.

All short-term investments that the company holds are classified as "held-to-maturity".

See Note 3 for more detail and a breakdown of the company's short-term investments.

Long-Lived Assets and Impairment of Long-Lived Assets

The Company’s long-lived assets include property and equipment, goodwill, and intangible assets.

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be fully recoverable in accordance with Accounting Standards Codification (“ASC”) 350 (“Intangibles – Goodwill and Other”) and ASC 360 (“Property, Plant and Equipment”).

To determine recoverability of its long-lived assets, the Company evaluates the probability that future undiscounted net cash flows, without interest charges, will be less than the carrying amount of the assets.

Impairment is measured at fair value.

and Equipment

and equipment are recorded at cost and are depreciated over their estimated useful lives ranging from three to ten-years using the straight-line

Leasehold improvements are amortized utilizing the straight-line method over the lesser of the term of the lease or estimated

useful life of the asset.

represents the excess of purchase price over the fair value of net assets acquired in business combinations.

Pursuant to ASC 350, the

Company tests goodwill for impairment on an annual basis in the fourth quarter, or between annual tests, in certain circumstances.

authoritative guidance, the Company first assessed qualitative factors to determine whether it was necessary to perform step one of the

quantitative goodwill impairment test.

An entity is not required to calculate the fair value of a reporting unit unless the entity determines,

based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount.

Events or changes

in circumstances which could trigger an impairment review include macroeconomic conditions, industry and market conditions, cost factors,

overall financial performance, other entity specific events and sustained decrease in share price.

Company performed its annual impairment test of goodwill in the fourth quarter for the years ended December 31, 2021 and 2020.

years ended December 31, 2021 and 2020, the Company determined no impairment charge was required.

assets include patents, copyrights, and developed technology.

The Company amortizes these assets on a straight-line basis over their

estimated useful lives, as it represents the pattern of economic benefits consumed.

The Company reviews its long-lived assets for impairment

whenever events or changes in circumstances indicate that the carrying amount of these assets may not be fully recoverable in accordance

with ASC 360.

To determine recoverability of its long-lived assets, the Company evaluates the probability that future undiscounted net

cash flows, without interest charges, will be less than the carrying amount of the assets.

There were no impairment charges recognized

for the years ended December 31, 2021 and 2020.

Recognition and Deferred Revenue

license fees and services revenue are generated from a combination of fixed-price and per-scan contracts.

Under the per-scan revenue

model, customers are charged a fee each time the customer scans an identity document, such as a driver’s license, with the Company’s

Under the fixed-price revenue model customers are charged a fixed monthly fee either per device or physical business location

to access the Company’s software.

Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services

in an amount that reflects the consideration expected to be received in exchange for those goods or services.

The Company measures revenue

based on the consideration specified in a customer arrangement, and revenue is recognized when the performance obligations in an arrangement

are satisfied.

Property and Equipment

Property and equipment are recorded at cost and are depreciated over their estimated useful lives ranging from three to seven-years using the straight-line method.

Leasehold improvements are amortized utilizing the straight-line method over the lesser of the term of the lease or estimated useful life of the asset.

Goodwill represents the excess of purchase price over the fair value of net assets acquired in business combinations.

Pursuant to ASC 350, the Company tests goodwill for impairment on an annual basis in the fourth quarter, or between annual tests, in certain circumstances.

Under authoritative guidance, the Company first assessed qualitative factors to determine whether it was necessary to perform step one of the quantitative goodwill impairment test.

An entity is not required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount.

Events or changes in circumstances which could trigger an impairment review include macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, other entity specific events and sustained decrease in share price.

The Company performed its annual impairment test of goodwill in the fourth quarter for the years ended December 31, 2022 and 2021 More detail about this is referenced in Note 5.

For the years ended December 31, 2022 and 2021, the Company determined no impairment charge was required.

Intangible Assets

Intangible assets include patents, copyrights, and developed technology.

The Company amortizes these assets on a straight-line basis over their estimated useful lives, as it represents the pattern of economic benefits consumed.

To determine recoverability of its long-lived assets, the Company evaluates the probability that future undiscounted net cash flows, will be less than the carrying amount of the assets.

There were no impairment charges recognized for the years ended December 31, 2022 and 2021.

INTELLICHECK, INC.

NOTES TO FINANCIAL STATEMENTS

( All dollar amounts are rounded to thousands, except share data )

Revenue Recognition and Deferred Revenue

Most license fees and services revenue are generated from a combination of fixed-price and per-scan contracts.

Under the per-scan revenue model, customers are charged a fee each time the customer scans an identity document, such as a driver’s license, with the Company’s software.

Under the fixed-price revenue model customers are charged a fixed monthly fee either per device or physical business location to access the Company’s software.

Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration expected to be received in exchange for those goods or services.

The Company measures revenue based on the consideration specified in a customer arrangement, and revenue is recognized when the performance obligations in an arrangement are satisfied.

A performance obligation is a promise in a contract to transfer a distinct service to the customer.

The transaction price

of a contract is allocated to each distinct performance obligation and recognized as revenue when or as, the customer receives the benefit

of the performance obligation.

The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as, the customer receives the benefit of the performance obligation.

Customers typically receive the benefit of the Company’s services as they are performed.

Substantially

all customer contracts provide that the Company is compensated for services performed to date.

INTELLICHECK,

TO FINANCIAL STATEMENTS

dollar amounts are rounded to thousands, except share data )

2021, the Company adopted an additional revenue model where customers purchase a predetermined number of transactions for the term of

the contract.

Revenue for these transactions are recognized on a per transaction basis.

The Company estimates the amount of unused transactions

at the end of each contract period and recognizes a portion of that revenue as breakage revenue each reporting period.

If the Company

expects the customer to use all transactions in the specified service period, the Company will recognize the transaction price

as revenue in the specified service period as the promised units of service are transferred to the customer.

Alternatively, if the

Company expects that the customer cannot or will not use all transactions in the specified service period (referred to as “breakage”),

the Company will recognize the estimated breakage amount as revenue ratably over the service period in proportion to the revenue

that the Company will recognize for actual transactions used by the customer in the service period.

is based on schedules established in customer contracts.

Payment terms are generally established from 30 to 60 days from the invoice

Product returns are recorded as a reduction to revenue.

of goods and services

following is a description of the products and services from which the Company generates revenue, as well as the nature, timing of satisfaction

of performance obligations, and significant payment terms for each:

as a Service (SaaS)

as a service (SaaS) for hosted subscription services and licensed software allows customers to access a set of data for a predetermined

period of time.

As the customer obtains access at a point in time but continues to have access for the remainder of the subscription

period, the customer is considered to simultaneously receive and consume the benefits provided by the entity’s performance as the

entity performs.

Accordingly, the revenue should be recognized over time, under the fixed pricing model, based on the usage of

the hosted subscription services and licensed software, which can vary from month to month.

Under the per-scan revenue model,

revenue is recognized each time the customer scans an identity document.

Subscription and Support Services

Company also recognizes revenues from other subscription and support services, which includes jurisdictional updates to certain commercial

customers and support services particularly to its Defense ID® customers.

These subscriptions require continuing service or post

contractual customer support and performance.

As the customer obtains access at a point in time but continues to have access for the

remainder of the subscription period, the customer is considered to simultaneously receive and consume the benefits provided by the entity’s

performance as the entity performs.

Accordingly, the revenue should be recognized over time based on usage, which can vary from month

The revenue is typically based on a formula such as number of locations in a given month multiplied by a fee per location.

from the sale of equipment is recognized at a point in time.

The point in time that the revenue is recognized is when the customer has

control of the equipment which is when the customer receives the benefit and the Company’s performance obligation has been satisfied.

Substantially all customer contracts provide that the Company is compensated for services performed to date.

During 2021, the Company adopted an additional revenue model where customers purchase a predetermined number of transactions for the term of the contract.

Revenue for these transactions is recognized on a per transaction basis.

The Company estimates the amount of unused transactions at the end of each contract period and recognizes a portion of that revenue as breakage revenue each reporting period.

If the Company expects the customer to use all transactions in the specified service period, the Company will recognize the transaction price as revenue in the specified service period as the promised units of service are transferred to the customer.

Alternatively, if the Company expects that the customer cannot or will not use all transactions in the specified service period (referred to as “breakage”), the Company will recognize the estimated breakage amount as revenue ratably over the service period in proportion to the revenue that the Company will recognize for actual transactions used by the customer in the service period.

Actual results could differ from estimates and as such differences may be material to the financial statements.

Invoicing is based on schedules established in customer contracts.

Payment terms are generally established from 30 to 60 days from the invoice date.

Product returns are estimated and recorded as a reduction to revenue, however, such amounts have been immaterial.

Nature of goods and services

The following is a description of the products and services from which the Company generates revenue, as well as the nature, timing of satisfaction of performance obligations, and significant payment terms for each:

Software as a Service (SaaS)

Software as a service (SaaS) for hosted subscription services allows customers to access a set of data for a predetermined period of time.

As the customer obtains access at a point in time but continues to have access for the remainder of the subscription period, the customer is considered to simultaneously receive and consume the benefits provided by the entity’s performance as the entity performs.

Accordingly, the revenue should be recognized over time, under the fixed pricing model, based on the usage of the hosted subscription services, which can vary from month to month.

Under the per-scan revenue model, the customer requires access to our hosted subscription service but revenue is recognized each time the customer scans an identity document.

Equipment Revenue

Revenue from the sale of equipment is recognized at a point in time.

The point in time that the revenue is recognized is when the customer has control of the equipment which is when the customer receives the benefit and the Company’s performance obligation has been satisfied.

Depending on the contract terms, that could either be at the time the equipment is shipped or at the time the equipment is received.

Non-Recurring

Services Revenue

non-recurring services include items such as training, installation, customization, and configuration.

The Company recognizes revenue

from non-recurring services contracts ratably over the service contract period as the customer consumes the benefit as it is provided

and the Company’s performance obligation has been satisfied.

INTELLICHECK,

TO FINANCIAL STATEMENTS

dollar amounts are rounded to thousands, except share data )

warranty revenues are generated when a warranty is provided to the customer separately of other performance obligations when the equipment

As the customer obtains access at a point in time and continues to have access for the remainder of the warranty term, the customer

is considered to simultaneously receive and consume the benefits provided by the Company’s performance as the Company performs.

When sales of equipment occur, we recognize shipping and handling costs with the sales of equipment that are recognized as revenue.

Other Revenue

INTELLICHECK, INC.

NOTES TO FINANCIAL STATEMENTS

( All dollar amounts are rounded to thousands, except share data )

Other Revenues, which historically have not been material, consist primarily of revenues from other subscription and support services, and extended warranties.

The Company’s revenues from other subscription and support services includes jurisdictional updates to certain commercial customers and support services particularly to its Defense ID® customers.

These subscriptions require continuing service or post contractual customer support and performance.

Accordingly, the revenue should be recognized over time based on usage, which can vary from month to month.

The revenue is typically based on a formula such as number of locations in a given month multiplied by a fee per location.

Extended warranty revenues are generated when a warranty is provided to the customer separately of other performance obligations when the equipment is sold.

As the customer obtains access at a point in time and continues to have access for the remainder of the warranty term, the customer is considered to simultaneously receive and consume the benefits provided by the Company’s performance as the Company performs.

The related revenue is recognized ratably over the specified term of the warranty period.

The extended warranty is separate to the Company’s

standard warranty of usually one year that it receives from its vendor.

Disaggregation

the following tables, revenue is disaggregated by product and service and the timing of revenue recognition.

The table also includes

a reconciliation of the disaggregated revenue.

SCHEDULE OF DISAGGREGATION OF REVENUE

The extended warranty is separate to the Company’s standard warranty of usually one year that it receives from its vendor.

Disaggregation of revenue

In the following tables, revenue is disaggregated by product and service and the timing of revenue recognition.

The table also includes a reconciliation of the disaggregated revenue.

For the Years Ended December 31,

1 unchanged sentence

Software as a Service (SaaS) $ 15,728 $ 12,970

Other subscription and support services

Non-recurring services

Extended warranties on equipment

Equipment 212 3,266

$ 15,966 $ 16,393

Timing of revenue recognition

1 unchanged sentence

Services transferred over time 15,728 13,127

current portion of deferred revenue at December 31, 2021 and December 31, 2020 was $ 1,266 and $ 403 , respectively, and primarily consists

of revenue that is recognized over time for software license contracts and hosted subscription services.

The changes in these balances

are related to the satisfaction or partial satisfaction of these contracts.

The entire December 31, 2020 current deferred revenue balance

was recognized as revenue in the year ended December 31, 2021.

The noncurrent deferred revenue balances were $ 8 and $ 9 as of December

31, 2021 and December 31, 2020, respectively.

Company did not recognize any material revenue in the current reporting period for performance obligations that were fully satisfied

in previous periods.

price allocated to the remaining performance obligations

following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied

(or partially unsatisfied) at the end of the reporting period:

SCHEDULE OF REVENUE PERFORMANCE OBLIGATION

$ 15,966 $ 16,393

Contract balances

The current portion of deferred revenue at December 31, 2022 and December 31, 2021 was $ 906 and $ 1,266 , respectively, and primarily consists of revenue that is recognized over time for software license contracts and hosted subscription services.

The changes in these balances are related to the satisfaction or partial satisfaction of these contracts.

The entire December 31, 2021, current deferred revenue balance was recognized as revenue in the year ended December 31, 2022.

The noncurrent deferred revenue balances were $ 1 and $ 8 as of December 31, 2022, and December 31, 2021, respectively.

INTELLICHECK, INC.

NOTES TO FINANCIAL STATEMENTS

( All dollar amounts are rounded to thousands, except share data )

Transaction price allocated to the remaining performance obligations

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period:

2023 2024 2025 Total

Software as a Service (SaaS) $ 904 $ — $ — $ 904

Other subscription and support services

Extended warranties on equipment

consideration from contracts with customers is included in the amounts presented above.

INTELLICHECK,

TO FINANCIAL STATEMENTS

dollar amounts are rounded to thousands, except share data )

costs, which are charged to expense as incurred, were $ 745 and $ 227 for the years ended December 31, 2021 and 2020, respectively.

Company’s shipping and handling costs are included in cost of revenues for all periods presented.

Company accounts for income taxes in accordance with ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized

for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets

and liabilities and their respective tax bases and net operating loss carryforwards.

Deferred tax assets and liabilities are measured

using expected tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

tax assets are recognized subject to management’s judgment that realization is more likely than not.

The Company has recorded a

full valuation allowance for its net deferred tax assets as of December 31, 2021 and 2020, due to the uncertainty of the realizability

of those assets.

Value of Financial Instruments

Company adheres to the provisions of ASC 820, “Fair Value Measurement” which requires the Company to calculate the fair value

of financial instruments and include this additional information in the notes to financial statements when the fair value of those financial

instruments is different than the book value.

The Company’s financial instruments include cash, accounts receivable, other current

assets, accounts payable and accrued expenses.

At December 31, 2021 and 2020, the carrying value of the Company’s financial instruments

approximated fair value, due to their short-term nature.

All of the Company’s financial instruments are categorized as Level 1

within the fair value hierarchy.

Concentration and Credit Risk

instruments, which subject the Company to concentrations of credit risk, consist primarily of cash.

The Company maintains cash with two

financial institutions.

Other 2 1 — 3

$ 906 $ 1 $ — $ 907

All consideration from contracts with customers is included in the amounts presented above.

Advertising Costs.

Advertising costs, which are charged to expense as incurred, were $ 683 and $ 745 for the years ended December 31, 2022 and 2021, respectively.

Shipping Costs

The Company’s shipping and handling costs related to sales are included in cost of revenues for all periods presented.

All other shipping and handling costs are included as a component of selling, general and administrative expenses on the Statements of Operations.

The Company accounts for income taxes in accordance with ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss carryforwards.

Deferred tax assets and liabilities are measured using expected tax rates in effect for the year in which those temporary differences are expected to be recovered or settled.

Deferred tax assets are recognized subject to management’s judgment that realization is more likely than not.

The Company has recorded a full valuation allowance for its net deferred tax assets as of December 31, 2022 and 2021, due to the uncertainty of the realizability of those assets.

Fair Value of Financial Instruments

The Company adheres to the provisions of ASC 820, “Fair Value Measurement” which requires the Company to calculate the fair value of financial instruments and include this additional information in the notes to financial statements when the fair value of those financial instruments is different than the book value.

The Company’s financial instruments include cash and cash equivalents, short-term investments, accounts receivable, other current assets, accounts payable and accrued expenses.

At December 31, 2022 and 2021, the carrying value of the Company’s financial instruments approximated fair value, due to their short-term nature.

Financial Accounting Standards Board (“FASB”) guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable.

Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

The three levels of the fair value hierarchy are as follows:

•Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities.

The Company's Level 1

INTELLICHECK, INC.

NOTES TO FINANCIAL STATEMENTS

( All dollar amounts are rounded to thousands, except share data )

assets consisted primarily of cash and cash equivalents as well as short-term investments totaling $ 10.1 million and $ 13.7 million as of December 31, 2022 and 2021, respectively.

•Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly (e.g., quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active).

Level 2 includes financial instruments that are valued using models or other valuation methodologies.

The Company had $ 54 and $ 378 of Level 2 liabilities as of December 31, 2022 and December 31, 2021 respectively, for the liability-classified stock options.

The fair value of these awards were determined by utilizing a Black-Scholes option pricing model.

•Level 3—Unobservable inputs for the asset or liability.

Financial instruments are considered Level 3 when the fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable.

The Company had no Level 3 assets or liabilities as of December 31, 2022 and December 31, 2021.

Business Concentration and Credit Risk

Financial instruments, which subject the Company to concentrations of credit risk, consist primarily of cash.

The Company maintains cash with two financial institutions.

The Company performs periodic evaluations of the relative credit standing of these institutions.

Company’s sales are principally made to large retail customers, financial institutions concentrated in the United States of America

The Company’s sales are principally made to large retail customers, financial institutions concentrated in the United States of America and to U.S.

government entities.

The Company performs ongoing credit evaluations, generally does not require collateral, and establishes

an allowance for doubtful accounts based upon factors surrounding the credit risk of customers, historical trends, and other information.

the year ended December 31, 2021, the Company made sales to two customers that accounted for approximately 55 % of revenue.

was associated with commercial identity sales customers.

These two customers, in addition to one other customer, represented 65 % of the

Company’s December 31, 2021 accounts receivable balance.

During the year ended December 31, 2020, the Company had two customers

that accounted for 41 % of revenue and 52 % of its December 31, 2020 accounts receivable balance.

INTELLICHECK,

TO FINANCIAL STATEMENTS

dollar amounts are rounded to thousands, except share data )

of December 31, 2021, the Company had four suppliers to produce its input devices.

The Company has modified its software to operate in

windows-based systems and can integrate with different hardware platforms that are readily available in the marketplace.

does not maintain a manufacturing facility of its own and is not dependent on maintaining its production relationships due to the flexibility

of its software to run on multiple existing platforms.

Income (Loss) Per Share

net income (loss) per share is computed by dividing the net income (loss) for the period by the weighted average number of common shares

outstanding during the period.

Diluted net income (loss) per share is computed by dividing the net income (loss) for the period by the

weighted average number of shares of common stock and potentially dilutive common stock equivalents outstanding during the period.

dilutive effect of these common stock equivalents comprising of outstanding options, warrants and restricted stock is reflected in diluted

earnings per share by application of the treasury stock method.

The calculation of diluted net income (loss) per share excludes all anti-dilutive

The Company performs ongoing credit evaluations, generally does not require collateral, and establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of customers, historical trends, and other information.

During the year ended December 31, 2022, the Company made sales to three customers that accounted for approximately 52 % of revenue, 22 %, 17 % and 13 %, respectively.

The revenue was associated with commercial identity sales customers.

These three customers, in addition to one other customer, represented 63 % of the Company’s December 31, 2022 accounts receivable balance.

These four customers accounted for approximately 37 %, 14 %, 11 % and 1 %, respectively, of the Company's accounts receivable balance at December 31, 2022.

During the year ended December 31, 2021, the Company had two customers that accounted for 55 % of revenue;

38 % and 17 %, respectively and those same two customers, including one other customer together accounted for 65 %;

31 %, 12 % and 22 %, respectively, of its December 31, 2021 accounts receivable balance.

As of December 31, 2022, the Company had four suppliers to produce its input devices.

The Company has modified its software to operate in windows-based systems and can integrate with different hardware platforms that are readily available in the marketplace.

The Company does not maintain a manufacturing facility of its own and is not dependent on maintaining its production relationships due to the flexibility of its software to run on multiple existing platforms.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period.

Diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of shares of common stock and potentially dilutive common stock equivalents outstanding during the period.

The dilutive effect of these common stock equivalents comprising of outstanding options, warrants and restricted stock is reflected in diluted earnings per share by application of the treasury stock method.

The calculation of

INTELLICHECK, INC.

NOTES TO FINANCIAL STATEMENTS

( All dollar amounts are rounded to thousands, except share data )

diluted net loss per share excludes all anti-dilutive shares.

In a period of net loss, all common stock equivalents are considered anti-dilutive.

SCHEDULE OF EARNINGS PER SHARE BASIC AND DILUTED

Net (Loss) Income

Net Loss $ ( 3,851 ) $ ( 7,478 )

Weighted average common shares –

Dilutive effect of equity compensation plans

Basic 18,838,971 18,598,410

Weighted average common shares -

Net (Loss) Income per share –

following table summarizes the common stock equivalents excluded from the 2021 loss per diluted share because their effect would be anti-dilutive:

SUMMARY OF COMMON STOCK EQUIVALENTS EXCLUDED FROM LOSS PER DILUTED SHARE

Diluted 18,838,971 18,598,410

Net Loss per share –

Basic $ ( 0.20 ) $ ( 0.40 )

Diluted $ ( 0.20 ) $ ( 0.40 )

The following table summarizes the common stock equivalents excluded from the 2022 loss per diluted share because their effect would be anti-dilutive:

Stock options 1,120,244 496,424

1 unchanged sentence

Performance stock units 177,688 228,498

Company accounts for the issuance of equity awards to employees in accordance ASC 718 (“Stock Compensation”) and ASC 505

(“Equity”), which requires that the cost resulting from all share-based payment transactions be recognized in the financial

This pronouncement establishes fair value as the measurement objective in accounting for share-based payment arrangements

and requires all companies to apply a fair value-based measurement method in accounting for all share-based payment transactions with

All equity compensation expenses are included in operating expenses.

The Company recognizes compensation expense related to

stock option grants on a straight-line basis over the vesting period.

INTELLICHECK,

TO FINANCIAL STATEMENTS

dollar amounts are rounded to thousands, except share data )

Comprehensive

Income (Loss)

Company’s comprehensive income (loss) is equal to its net income (loss) for the years ended December 31, 2021 and 2020.

Company adheres to the provisions of ASC 280 (“Segment Reporting”), which establishes standards for the way public business

enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected

information about operating segments in financial statements issued to shareholders.

Management has determined that it has only one reporting

Accounting Pronouncements

December 2019, the Financial Accounting Standards Board (“FASB”) issued ASU 2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes” as part of its initiative to reduce complexity in the accounting standards.

standard eliminates certain exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income

taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

The standard also clarifies

and simplifies other aspects of the accounting for income taxes.

The standard is effective for fiscal years, and interim periods within

those fiscal years, beginning after December 15, 2020 and early adoption is permitted.

The adoption of this standard did not have a material

impact on the Company’s financial statements.

Total 1,512,824 1,133,298

Stock-based Compensation

The Company accounts for the issuance of equity awards to employees in accordance ASC 718 (“Stock Compensation”) and ASC 505 (“Equity”), which requires that the cost resulting from all equity payment transactions be recognized in the financial statements.

This pronouncement establishes fair value as the measurement objective in accounting for equity payment arrangements and requires all companies to apply a fair value-based measurement method in accounting for all equity payment transactions with employees and directors.

All stock-based compensation expenses are included in operating expenses.

The Company recognizes compensation expense related to equity grants on a straight-line basis over the requisite service period.

Comprehensive Loss

The Company’s comprehensive loss is equal to its net loss for the years ended December 31, 2022 and 2021.

Segment Information

The Company adheres to the provisions of ASC 280 (“Segment Reporting”), which establishes standards for the way public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in financial statements issued to shareholders.

The Company’s Chief Operating Decision Maker, its Chief Executive Officer (“CEO”), reviews the financial information presented for purposes of allocating resources and evaluating its financial performance.

Accordingly, the Company has

INTELLICHECK, INC.

NOTES TO FINANCIAL STATEMENTS

( All dollar amounts are rounded to thousands, except share data )

determined that it operates in a single reportable segment.

All of the Company’s long-lived assets are located in the United States.

Since the Company operates in one operating segment, all required financial segment information can be found in the financial statements.

Research and Development

Research and development expenses are expensed as incurred and consist primarily of employee-related expenses (such as salaries, taxes, benefits and stock-based compensation), allocated overhead costs and outside services costs related to the development and improvement of the Company's SaaS applications.

Subsequent Events

The Company reviewed all material events through the date these financial statements were issued for subsequent event disclosure consideration.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments – Credit

Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments to measure credit losses on financial instruments, including

trade receivables.

The guidance eliminates the probable initial recognition threshold that was previously required prior to recognizing

a credit loss on financial instruments.

The credit loss estimate can now reflect an entity’s current estimate of all future expected

credit losses.

2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments to measure credit losses on financial instruments, including trade receivables.

The guidance eliminates the probable initial recognition threshold that was previously required prior to recognizing a credit loss on financial instruments.

The credit loss estimate can now reflect an entity’s current estimate of all future expected credit losses.

Under the previous guidance, an entity only considered past events and current conditions.

The guidance is effective for

smaller reporting companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The guidance is effective for smaller reporting companies for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

The adoption of certain amendments of this guidance must be applied on a modified retrospective basis and the adoption of the remaining

amendments must be applied on a prospective basis.

The Company does not expect this standard will have a material impact on its financial

INTELLICHECK,

TO FINANCIAL STATEMENTS

dollar amounts are rounded to thousands, except share data )

AND EQUIPMENT

and equipment are comprised of the following as of December 31, 2021 and 2020:

SCHEDULE OF PROPERTY AND EQUIPMENT

The adoption of certain amendments of this guidance must be applied on a modified retrospective basis and the adoption of the remaining amendments must be applied on a prospective basis.

The Company does not expect this standard will have a material impact on its financial statements.

CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS

Short-term investments include investments in U.S.

treasury notes.

Short-term investments with original maturities of approximately three months or less from the date of purchase are classified within cash and cash equivalents.

Debt investments with original maturities at the date of purchase greater than approximately three months are classified as short-term investments, as they represent the investment of cash available for current operations.

All short-term investments that the company holds are classified as "held-to-maturity".

The Company has accounted for and disclosed the purchase of its short-term investments in accordance with ASC 320 ("Investments - Debt Securities").

The following table summarizes the fair value of cash and cash equivalents, and short-term investments as well as any gross unrealized holding gains and losses as of December 31, 2022.

Due to the nature of these assets and the short-term nature of the U.S.

treasury notes being held to maturity, both these cash and cash equivalents and short-term investments fall under the Level 1 fair value hierarchy as referenced in Note 2.

As of December 31, 2022

Amortized cost Gross unrealized holding gains Gross unrealized holding losses Estimated fair value

Cash and cash equivalents $ 5,196 $ — $ — $ 5,196

treasury notes (1)

4,880 3 ( 15 ) 4,868

Total cash, cash equivalents and short-term investments $ 10,076 $ 3 $ ( 15 ) $ 10,064

(1) These U.S.

treasury notes are classified as "held-to-maturity" as they were purchased in December 2022 and mature in July 2023.

Since these securities are intended to be held until maturity and mature in less than a year from its purchase date, any unrealized gains or losses are not realized until its maturity date and the amortized cost of these securities can be found

INTELLICHECK, INC.

NOTES TO FINANCIAL STATEMENTS

( All dollar amounts are rounded to thousands, except share data )

on this Form 10-K's balance sheet under Current Assets - "Short-term investments".

Any coupon payments from these short-term investments fall under "Interest and other (expense) income" on the Company's Statement of Operations.

The Company did no t hold any securities that were in an unrealized loss position for more than 12 months as of December 31, 2022 and 2021.

There were no material realized gains or losses on these short-term investments during the years ended December 31, 2022 and 2021.

PROPERTY AND EQUIPMENT

Property and equipment are comprised of the following as of December 31, 2022 and 2021:

Computer equipment and software $ 1,796 $ 1,708

3 unchanged sentences

Less – Accumulated depreciation ( 1,800 ) ( 1,764 )

expense for the years ended December 31, 2021 and 2020 amounted to $ 64 and $ 88 respectively.

AND INTANGIBLE ASSETS

intangible assets

following tables set forth the components of intangible assets as of December 31, 2021 and 2020:

SCHEDULE OF INTANGIBLE ASSETS AND GOODWILL

As of December 31, 2021

Patents and copyrights

Developed technology

As of December 31, 2020

Patents and copyrights

Developed technology

following summarizes amortization of acquisition related intangible assets included in the statement of operations:

SCHEDULE OF FINITE-LIVED INTANGIBLE ASSETS AMORTIZATION EXPENSE

Depreciation expense for the years ended December 31, 2022 and 2021 amounted to $ 180 and $ 64 respectively.

Depreciation expense is included in the Statement of Operations within the Selling, general and administrative line item.

GOODWILL AND INTANGIBLE ASSETS

Identifiable intangible assets

The following tables set forth the components of intangible assets as of December 31, 2022 and 2021:

Life As of December 31, 2022

Amount Accumulated

Amortization Net

Patents and copyrights 2 - 17 years

$ 375 $ ( 275 ) $ 100

Developed technology 5 years 400 ( 227 ) 173

$ 775 $ ( 502 ) $ 273

Life As of December 31, 2021

Amount Accumulated

Amortization Net

Patents and copyrights 2 - 17 years

$ 375 $ ( 250 ) $ 125

Developed technology 5 years 400 ( 147 ) 253

$ 775 $ ( 397 ) $ 378

INTELLICHECK, INC.

NOTES TO FINANCIAL STATEMENTS

( All dollar amounts are rounded to thousands, except share data )

The following summarizes amortization of acquisition related intangible assets included in the statement of operations:

Years Ended December 31,

1 unchanged sentence

General and administrative 10 10

Amortization of intangible assets

INTELLICHECK,

TO FINANCIAL STATEMENTS

dollar amounts are rounded to thousands, except share data )

Company expects amortization expense for the next five succeeding years, and thereafter, will be as follows:

SCHEDULE OF FINITE-LIVED INTANGIBLE ASSETS, FUTURE AMORTIZATION EXPENSE

Finite-lived intangible assets, net

amounts are subject to change based upon the review of recoverability and useful lives that are performed at least annually.

represents the excess of purchase price over the fair value of the assets acquired in businesses combinations.

Under ASC 350, purchased

goodwill is not amortized, but rather is tested for impairment.

The Company’s goodwill balance was $ 8,102 as of December 31, 2021

The Company expects amortization expense for the next five succeeding years will be as follows:

These amounts are subject to change based upon the review of recoverability and useful lives that are performed at least annually.

Goodwill represents the excess of purchase price over the fair value of the assets acquired in businesses combinations.

Under ASC 350, purchased goodwill is not amortized, but rather is tested for impairment.

The Company’s goodwill balance was $ 8,102 as of December 31, 2022 and 2021.

This goodwill resulted from the acquisitions of Mobilisa, Inc.

and Positive Access Corporation.

the years ended December 31, 2021 and 2020, the Company performed its annual impairment test of goodwill in the fourth quarter.

authoritative guidance, the Company can use industry and Company specific qualitative factors to determine whether it is more likely

than not that impairment exists before performing step one of the quantitative goodwill impairment test.

An entity is not required to

calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely

than not that its fair value is less than its carrying amount.

Events or changes in circumstances which could trigger an impairment review

include macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, other entity specific

events and sustained decrease in share price.

Company performed the first step of the goodwill impairment test to identify potential impairment by comparing fair value of the Company

to its carrying amount, including goodwill.

The fair value was determined using the weighting of certain valuation techniques, including

both income and market approaches which include a discounted cash flow analysis, an analysis of similar public company financial information,

and an analysis of our market capitalization, which is sensitive to the volatility of the Company’s stock price.

Although the Company

believes that the factors considered in the impairment analysis are reasonable, changes in any one of the assumptions used could have

produced a different result which may have led to an impairment charge.

Any future impairment loss could have a material adverse effect

on our long-term assets and operating expenses in the period in which impairment is determined to exist.

the years ended December 31, 2021 and 2020, the Company determined that the fair value of the Company was greater than its carrying amount

and therefore the second step of the goodwill impairment test was not required.

April 9, 2020 the Company entered into an unsecured promissory note in the amount of $ 796 (the “Note”) with First Bank (the

“Loan Servicer”) under the Paycheck Protection Program (“PPP”) administered by the U.S.

Small Business Administration

(“SBA”) and established as part of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

The Company received these proceeds on April 14, 2020.

Under the terms of the Note, the Company can apply for forgiveness on this Note

with the Loan Servicer if certain conditions including the use of the Note proceeds are met over a 24-week period commencing from the

date of the Note.

The Note has an interest rate of 1 %.

The Company has not imputed interest on the Note as the rate is determined to

be a below-market rate due to the scope exception in ASC 835-30-15-3(e) for government-mandated interest rates.

In November 2020, the

Company received notification from the Loan Servicer that the Note was fully forgiven and recorded income from the extinguishment of

its obligation as the Company was legally released from being the primary obligor in accordance with ASC 405-20-40-1.

INTELLICHECK,

TO FINANCIAL STATEMENTS

dollar amounts are rounded to thousands, except share data )

April 15, 2020, the Company received a $ 10 advance from the U.S.

Small Business Administration (“SBA”) as part of the Coronavirus

Aid, Relief, and Economic Security Act (the “CARES Act”).

For the years ended December 31, 2022 and 2021, the Company performed its annual impairment test of goodwill in the fourth quarter.

Under authoritative guidance, the Company can use industry and Company specific qualitative factors to determine whether it is more likely than not that impairment exists before performing step one of the quantitative goodwill impairment test.

The Company performed the first step of the goodwill impairment test to identify potential impairment by comparing the fair value of the Company to its carrying amount, including goodwill.

The fair value was determined using the weighting of certain valuation techniques, including both income and market approaches which include a discounted cash flow analysis, an analysis of similar public company financial information, and an analysis of market transactions.

Although the Company believes that the factors considered in the impairment analysis are reasonable, changes in any one of the assumptions used could have produced a different result which may have led to an impairment charge.

Any future impairment loss could have a material adverse effect on our long-term assets and operating expenses in the period in which impairment is determined to exist.

For the years ended December 31, 2022 and 2021, the Company determined that the fair value of the Company was greater than its carrying amount and therefore the second step of the goodwill impairment test was not required.

INTELLICHECK, INC.

NOTES TO FINANCIAL STATEMENTS

( All dollar amounts are rounded to thousands, except share data )

Promissory Note

On April 15, 2020, the Company received a $ 10 advance from the U.S.

Small Business Administration (“SBA”) as part of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

The Company repaid this EIDL advance on December 7, 2020.

had not imputed interest on this advance as the rate was determined to be a below-market rate due to the scope exception in ASC 835-30-15-3(e)

for government-mandated interest rates.

On December 27, 2020, Congress passed the Economic Aid to Hard-Hit Small Businesses, Nonprofits

and Venues Act (“the Economic Aid Act”) which relieves companies of their obligations to repay EIDL advances.

of this ruling, the SBA returned this advance, plus interest to the Loan Servicer on February 18, 2021, which was immediately returned

to the Company and included in Other Income on the Statements of Operations.

Line of Credit

February 6, 2019, the Company entered into a revolving credit facility with Citibank that allows for borrowings up to the lesser of (i)

$ 2,000 or (ii) the collateralized balance in the Company’s existing fixed income investment account with Citibank subject to certain

The facility bears interest at a rate consistent of Citibank’s Base Rate (4.75% at December 31, 2021) minus 2%.

is payable monthly and as of December 31, 2021 and 2020, there were no amounts outstanding under this facility and unused availability

under this facility was $ 2,000 .

The Company had not imputed interest on this advance as the rate was determined to be a below-market rate due to the scope exception in ASC 835-30-15-3(e) for government-mandated interest rates.

On December 27, 2020, Congress passed the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (“the Economic Aid Act”) which relieves companies of their obligations to repay EIDL advances.

As a result of this ruling, the SBA returned this advance, plus interest to the Loan Servicer on February 18, 2021, which was immediately returned to the Company and included in Other income on the Statements of Operations.

Revolving Line of Credit

On February 6, 2019, the Company entered into a revolving credit facility with Citi Personal Wealth Management that allows for borrowings up to the lesser of (i) $ 2,000 or (ii) the collateralized balance in the Company’s existing fixed income investment account with Citi Personal Wealth Management subject to certain limitations.

The facility bears interest at a rate consistent of Citi Personal Wealth Management’s Base Rate ( 7.50 % at December 31, 2022) minus 2 %.

Interest is payable monthly and as of December 31, 2022 and 2021, there were no amounts outstanding under this facility and unused availability under this facility was $ 2,000 .

Insurance Financing Arrangement

On June 17, 2022 the Company entered a financing arrangement related to insurance premiums totaling $ 319 with an interest rate of 4.05 %.

The monthly loan payments of $ 32 are paid to HUB International New England for a total of 10 months.

As of December 31, 2022, the Company had a remaining commitment of $ 97 which is expected to be paid by March 17, 2023.

ACCRUED EXPENSES

expenses are comprised of the following as of December 31, 2021 and 2020:

SCHEDULE OF ACCRUED EXPENSES

Accrued expenses are comprised of the following as of December 31, 2022 and 2021:

Professional fees $ 259 $ 127

1 unchanged sentence

Incentive bonuses 846 1,565

Accrued expenses

Company’s deferred tax assets and liabilities are measured using the enacted tax rates that the Company believes will apply in

the years in which temporary differences are expected to be recovered or paid.

The Company is subject to federal and state income taxes

as a Subchapter C corporation.

As a result of continuing losses for tax purposes, the Company has historically not paid income taxes

and has recorded a full valuation allowance against its net deferred tax asset.

Company’s deferred tax assets are primarily the result of net operating losses (or NOLs).

The Company has recorded a valuation

allowance against its net deferred tax assets at December 31, 2021 as it is more likely than not that not all of the deferred tax assets

will be realized.

The valuation is based on management’s assessment that it is more likely than not the NOL carryforwards may not

be realized in the foreseeable future due to objective negative evidence that the Company would not generate sufficient taxable income

to realize the deferred tax assets.

income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial

reporting purposes and the amounts used for income tax purposes.

Significant components of the Company’s deferred tax assets for

federal and state income taxes as of December 31, 2021 and 2020 are as follows:

SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

$ 2,319 $ 2,870

The Company’s deferred tax assets and liabilities are measured using the enacted tax rates that the Company believes will apply in the years in which temporary differences are expected to be recovered or paid.

The Company is subject to federal and state income taxes as a Subchapter C corporation.

As a result of continuing losses for tax purposes, the Company has historically recorded a full valuation allowance against its net deferred tax asset.

The Company’s deferred tax assets are primarily the result of net operating losses (or NOLs).

The Company has recorded a valuation allowance against its net deferred tax assets at December 31, 2022 as it is more likely than not that not all of the deferred tax assets will be realized.

The valuation is based on management’s assessment that it is more likely than not the NOL carryforwards may not be realized in the foreseeable future due to objective negative evidence that the Company would not generate sufficient taxable income to realize the deferred tax assets.

INTELLICHECK, INC.

NOTES TO FINANCIAL STATEMENTS

( All dollar amounts are rounded to thousands, except share data )

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Significant components of the Company’s deferred tax assets for federal and state income taxes as of December 31, 2022 and 2021 are as follows:

Deferred tax assets:

1 unchanged sentence

Payroll related accruals 333 194

Equity compensation

Stock-based compensation 612 298

Intangible assets 89 89

174 Capitalized costs 1,237 —

Depreciation 18 —

Research and development tax credits 906 511

1 unchanged sentence

Deferred tax liabilities:

Depreciation — ( 84 )

Total deferred tax liabilities — ( 84 )

2 unchanged sentences

Deferred tax assets, net of allowance $ — $ —

INTELLICHECK,

TO FINANCIAL STATEMENTS

dollar amounts are rounded to thousands, except share data )

were no tax interest or penalties recorded in the financial statements for the years ended December 31, 2021 and 2020.

Company’s available NOL at December 31, 2021 was approximately $ 17,999 .

The federal and state NOL’s are available to offset

future taxable income and began to expire in 2021.

Company files numerous tax returns in various jurisdictions.

The Company is not currently under examination by any taxing authority,

nor has the Company signed any waiver of the statute of limitations with any taxing authority.

The Company remains open to examination

by major taxing jurisdictions from 2018 to date.

ASC 740 requires evaluation of uncertain tax positions and as of December 31, 2021,

the Company has no material uncertain tax positions.

effective tax rate for the years ended December 31, 2021 and 2020 is different from the tax benefit that would result from applying the

statutory tax rates primarily due to the recognition of valuation allowances.

In 2021, the valuation allowance increased approximately

$ 717 primarily related to an increase of the Company’s NOLs.

The Company had book loss in 2021 and a tax NOL was generated primarily

due to permanent differences that occurred during the year.

A reconciliation of the statutory U.S.

Federal rate to the Company’s effective tax rate is as follows:

Federal income tax benefit at statutory rate 21.00 21.00

State income taxes, net of federal benefit ( 2.59 ) 2.28

Permanent items ( 3.19 ) ( 0.20 )

Research and development tax credits 10.74 1.34

Cumulative deferred adjustments 28.30 ( 12.46 )

Rate change ( 19.55 ) —

Change in valuation allowance ( 37.35 ) ( 11.91 )

Other ( 0.73 ) ( 0.05 )

Effective income tax (benefit) expense rate ( 3.37 ) % — %

There were no tax interest or penalties recorded in the financial statements for the years ended December 31, 2022 and 2021.

The Company’s available NOL at December 31, 2022 was approximately $ 20.8 million, of which $ 10.9 million expires between 2035 and 2037.

In accordance with the Tax Cuts and Jobs Act of 2017 (the "Tax Act"), U.S.

NOLs arising in a tax year ending after 2017 will not expire.

The Company files numerous tax returns in various jurisdictions.

The Company is not currently under examination by any taxing authority, nor has the Company signed any waiver of the statute of limitations with any taxing authority.

The Company remains open to examination by major taxing jurisdictions from 2019 to date.

ASC 740 requires evaluation of uncertain tax positions and as of December 31, 2022, the Company has no material uncertain tax positions.

INTELLICHECK, INC.

NOTES TO FINANCIAL STATEMENTS

( All dollar amounts are rounded to thousands, except share data )

The Company recorded an income tax expense of approximately $ 124 for the year ended December 31, 2022 related to state minimum taxes and within jurisdictions where there were not sufficient state net operating losses to offset taxable income.

The effective tax rate for the years ended December 31, 2022 and 2021 is different from the tax benefit that would result from applying the statutory tax rates primarily due to the recognition of valuation allowances.

In 2022, the valuation allowance increased by approximately $ 1,372 , primarily related to temporary differences arising from Section 174 capitalized costs.

The Company had a taxable income in 2022 and the Company's existing NOL decreased primarily due to temporary differences that occurred during the year.

STOCKHOLDERS’ EQUITY

A Convertible Preferred Stock

January 1997, the Board of Directors authorized the creation of a class of Series A Convertible Preferred Stock with a par value of $ .01 .

The Series A Convertible Preferred Stock is convertible into an equal number of common shares at the holder’s option, subject to

adjustment for anti-dilution.

The holders of Series A Convertible Preferred Stock are entitled to receive dividends as and if declared

by the Board of Directors.

In the event of liquidation or dissolution of the Company, the holders of Series A Convertible Preferred Stock

are entitled to receive all accrued dividends, if applicable, plus the liquidation price of $ 1.00 per share.

As of December 31, 2021,

and 2020, there were no outstanding shares of Series A Convertible Preferred Stock.

retain and attract qualified personnel necessary for the success of the Company, the Company adopted the 2015 Omnibus Incentive Plan

(the “Plan”) covering up to 4,000,000 of the Company’s common shares, pursuant to which officers, directors, key employees

and consultants to the Company are eligible to receive incentive stock options, nonqualified stock options and restricted stock units.

Series A Convertible Preferred Stock

In January 1997, the Board of Directors authorized the creation of 30,000 class of Series A Convertible Preferred Stock with a par value of $ .01 .

The Series A Convertible Preferred Stock is convertible into an equal number of common shares at the holder’s option, subject to adjustment for anti-dilution.

The holders of Series A Convertible Preferred Stock are entitled to receive dividends as and if declared by the Board of Directors.

In the event of liquidation or dissolution of the Company, the holders of Series A Convertible Preferred Stock are entitled to receive all accrued dividends, if applicable, plus the liquidation price of $ 1.00 per share.

As of December 31, 2022, and 2021, there were no outstanding shares of Series A Convertible Preferred Stock.

Stock-based Compensation

To retain and attract qualified personnel necessary for the success of the Company, the Company adopted the 2015 Omnibus Incentive Plan (the “Plan”) covering up to 5,236,000 of the Company’s common shares, pursuant to which officers, directors, key employees and consultants to the Company are eligible to receive incentive stock options, nonqualified stock options and restricted stock units.

All the equity compensation plans prior to Company’s 2015 Omnibus Incentive Plan have been closed.

The Compensation Committee of

the Board of Directors administers this Plan and determines the terms and conditions of stock options granted, including the exercise

The Compensation Committee of the Board of Directors administers this Plan and determines the terms and conditions of stock options granted, including the exercise price.

This Plan generally provides that all stock options will expire within ten years of the date of grant.

Incentive stock options

granted under this Plan must be granted at an exercise price that is not less than the fair market value per share at the date of the

grant and the exercise price must not be less than 110 % of the fair market value per share at the date of the grant for grants to persons

owning more than 10 % of the voting stock of the Company.

This Plan also entitles non-employee directors to receive grants of non-qualified

stock options as approved by the Board of Directors.

Company uses the Black-Scholes option pricing model to value its stock options.

The table below presents the weighted average expected

life of the stock options in years.

The expected life computation is based on the time to stock option expiration.

Volatility is determined

using changes in historical stock prices.

The interest rate for periods within the expected life of the award is based on the U.S.

yield curve in effect on the grant date.

Options vest from one to four years.

fair value of the Company’s stock options granted in 2021 was estimated using the Black-Scholes option pricing model with the following

assumptions and weighted average fair values:

SCHEDULE OF FAIR VALUE OF SHARE BASED PAYMENT

Incentive stock options granted under this Plan must be granted at an exercise price that is not less than the fair market value per share at the date of the grant and the exercise price must not be less than 110 % of the fair market value per share at the date of the grant for grants to persons owning more than 10 % of the voting stock of the Company.

This Plan also entitles non-employee directors to receive grants of non-qualified stock options as approved by the Board of Directors.

The Company uses the Black-Scholes option pricing model to value the options on the grant date.

The table below presents the weighted average expected life of the stock options in years.

The Company uses the simplified method for all restricted stock units and stock options to estimate the expected life of the option and assumes that stock options will be exercised evenly over the period from vesting until the awards expire.

Volatility is determined using changes in historical stock prices.

The interest rate for periods within the expected life of the award is based on U.S.

Treasury yield curve in effect on the grant date.

Options, generally, vest from one year to four years .

The compensation expense is recognized over the requisite service period on a straight-line basis, reduced by forfeitures as they occur.

Certain option awards are classified as liability awards.

The fair values of these awards are determined at each reporting period utilizing a Black Scholes option pricing model, and the associated compensation expense (credit) for the reporting period is recorded.

The Company decreased by $( 324 ) and $ 3,332 , of stock-based compensation expense in the years ended December 31, 2022 and 2021, respectively.

INTELLICHECK, INC.

NOTES TO FINANCIAL STATEMENTS

( All dollar amounts are rounded to thousands, except share data )

The fair value of the Company’s stock options granted in 2022 that are being classified as equity awards were estimated using the Black-Scholes option pricing model with the following assumptions and weighted average fair values:

December 31, 2022

Valuation assumptions:

$ 7.78 – $ 11.50

Grant price $ 1.71 – $ 2.46

Exercise price $ 1.71 – $ 3.69

$ 7.78 – $ 11.50

Expected dividend yield 0 %

Expected volatility 84.59 % – 86.92 %

84.24 % – 90.94 %

Expected life (in years) 2.94 – 3.75

Risk-free interest rate 2.76 % – 3.07 %

INTELLICHECK,

TO FINANCIAL STATEMENTS

dollar amounts are rounded to thousands, except share data )

option activity during the periods indicated below was as follows:

SCHEDULE OF STOCK OPTION ACTIVITY

Weighted- average Exercise Price

Weighted- average Remaining Contractual Term

Aggregate Intrinsic Value

Outstanding at December 31, 2019

Outstanding at December 31, 2020

Outstanding at December 31, 2021

Exercisable at December 31, 2021

following is a summary of stock options as of December 31, 2021:

SUMMARY OF STOCK OPTIONS

Options Outstanding

Options Exercisable

Range of Exercise Prices

Remaining Life

The fair value of the Company’s stock options granted in the years ended, December 31, 2018 and December 31, 2019, that are being classified as liability awards were marked-to-market using the Black-Scholes option pricing model with the following assumptions and weighted average fair values:

December 31, 2022

Valuation assumptions:

Exercise price range $ 2.68 – $ 2.87

Expected dividend yield 0 %

Expected volatility range for grants after mark-to-market adjustment 82.03 % - 82.87 %

Expected life (in years) for grants after mark-to-market adjustment 0.04 – 0.96

Risk-free interest rate range for grants after mark-to-market adjustment 0.52 % - 4.74 %

Stock option activity during the periods indicated below was as follows:

Weighted- average Exercise Price Weighted- average Remaining

Contractual Term Aggregate Intrinsic Value

Outstanding at December 31, 2020 637,882 $ 2.50 2.55 years $ 5,686

Granted 221,843 10.38

Forfeited ( 3,000 ) 2.79

Exercised ( 360,301 ) 2.34

Outstanding at December 31, 2021 496,424 $ 6.13 3.03 years $ 528

Granted 732,228 2.14

Forfeited ( 108,408 ) 4.53

Exercised — —

Outstanding at December 31, 2022 1,120,244 $ 3.68 3.50 years $ 84

Exercisable at December 31, 2022 366,460 $ 5.35 1.78 years $ 84

INTELLICHECK, INC.

NOTES TO FINANCIAL STATEMENTS

( All dollar amounts are rounded to thousands, except share data )

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had they all exercised their options on December 31, 2022.

This amount changes based upon the fair market value of the Company’s stock.

The following is a summary of stock options as of December 31, 2022:

Options Outstanding Options Exercisable

Range of Exercise Prices Number of

Options Weighted-

Remaining Life Weighted-

Price Number of

Options Weighted-

$ 1.71 to $ 3.69

931,809 4.21 years $ 2.29 244,581 $ 2.70

$ 8.56 to $ 11.50

weighted-average fair value of the options granted during the year ended December 31, 2021 is $ 7.13 .

All stock options have been issued

with an exercise price that is equal or above the fair market value of the Company’s Common Stock on the date of grant.

Company periodically issues Restricted Stock Units (“RSUs”) which are equity-based instruments that may be settled in shares

of common stock of the Company.

188,435 3.20 years $ 10.56 121,879 $ 10.66

1,120,244 3.50 years $ 3.68 366,460 $ 5.35

The weighted-average fair value of the options granted during the year ended December 31, 2022 is $ 2.14 .

All stock options have been issued with an exercise price that is equal or above the fair market value of the Company’s Common Stock on the date of grant.

Restricted Stock Units

The Company periodically issues Restricted Stock Units (“RSUs”) which are equity-based instruments that may be settled in shares of common stock of the Company.

The Company issues RSUs to certain directors as compensation which vest with the passage of time.

vesting of all RSUs is contingent on continued board services.

compensation expense incurred by the Company for RSUs is based on the closing market price of the Company’s common stock on the

date of grant, is amortized on a straight-line basis over the requisite service period and charged to operating expenses with a corresponding

increase to additional paid-in capital.

INTELLICHECK,

TO FINANCIAL STATEMENTS

dollar amounts are rounded to thousands, except share data )

stock unit activity during the periods indicated below is as follows:

SCHEDULE OF RESTRICTED STOCK UNITS OUTSTANDING

The vesting of all RSUs is contingent on continued board and employment services.

The compensation expense incurred by the Company for RSUs is based on the closing market price of the Company’s common stock on the date of grant, is amortized on a straight-line basis over the requisite service period and charged to operating expenses with a corresponding increase to additional paid-in capital, reduced by forfeitures when they occur.

Restricted stock unit activity during the periods indicated below is as follows:

Shares Weighted

Outstanding at December 31, 2020 1,754 $ 11.40

Granted 443,442 10.30

Forfeited ( 4,650 ) 11.50

Vested and Settled in shares ( 32,170 ) 8.47

Outstanding at December 31, 2021 408,376 $ 10.43

Granted 139,958 2.23

Forfeited ( 36,445 ) 10.35

Vested and Settled in shares ( 296,997 ) 8.03

Outstanding December 31, 2022 214,892 $ 8.43

August 7, 2020, the Company issued 265,942 Performance Stock Units (PSUs) to its officers and certain employees as compensation (“PSU

50 % of the PSUs were to vest based on the Company’s market price and 50 % were to vest based on the Company’s

Adjusted EBITDA.

INTELLICHECK, INC.

NOTES TO FINANCIAL STATEMENTS

( All dollar amounts are rounded to thousands, except share data )

Performance Stock Units

On August 7, 2020, the Company issued 265,942 Performance Stock Units (PSUs) to its officers and certain employees as compensation (“PSU Plan”).

50 % of the PSUs were to vest based on the Company’s market price and 50 % were to vest based on the Company’s Adjusted EBITDA.

Both the conditions were to occur over a specified time and were contingent on continued employment services.

November 4, 2021, the Company amended its PSU Plan so that 100 % of the PSUs will vest based on the Company’s market price as the

sole vesting criteria.

As a result of this amendment, the adjusted EBITDA performance metric from the previous plan is no longer a criteria

performance metric.

The Company recorded additional share-based compensation expense of $ 164 in the fourth quarter of 2021 resulting

from the amendment to the PSU Plan.

expense is based on a Geometric Brownian Motion valuation model based on the closing market price of the Company’s common stock

on the date of grant and is amortized ratably on a straight-line basis over the requisite period.

If the Company determines that it is

probable that the performance criteria will be achieved, the amount of compensation cost derived for this performance metric is amortized

over the anticipated service period.

If these criteria are not met, no compensation cost is recognized, and any previously recognized

compensation cost would be reversed.

Compensation expense is charged to operating expenses with a corresponding increase to additional

paid-in capital.

SCHEDULE OF PERFORMANCE STOCK UNITS OUTSTANDING

On November 4, 2021, the Company amended its PSU Plan so that 100 % of the PSUs will vest based on the Company’s market price as the sole vesting criteria.

As a result of this amendment, the adjusted EBITDA performance metric from the previous plan is no longer a criteria performance metric.

The Company recorded additional stock-based compensation expense of $ 164 in the fourth quarter of 2021 resulting from the amendment to the PSU Plan.

The fair value of these awards with a market condition was estimated, at the date of grant, using the Monte Carlo Simulation model with compensation expense being determined on the closing market price of the Company’s common stock on the date of grant and is amortized ratably on a straight-line basis over the requisite service period.

With the amendment mentioned above such that the Company's market price is the sole vesting criteria for these awards, compensation expense is charged to operating expenses with a corresponding increase to additional paid-in capital and is not reversed if the vesting criteria is not met.

Shares Weighted

Outstanding at December 31, 2020 265,942 $ 7.91

Forfeited ( 37,444 ) 7.91

Outstanding at December 31, 2021 228,498 $ 7.91

Forfeited ( 50,810 ) 7.91

Outstanding at December 31, 2022 177,688 $ 7.91

INTELLICHECK,

TO FINANCIAL STATEMENTS

dollar amounts are rounded to thousands, except share data )

of December 31, 2021, there was $ 4,692 of total unrecognized compensation cost, net of estimated forfeitures, related to all unvested

stock options, restricted stock units and performance stock units.

These costs are expected to be recognized as compensation expense

over a weighted average period of approximately 1.86 years.

compensation expense for the years ended December 31, 2021 and 2020 is as follows:

SCHEDULE OF EQUITY COMPENSATION EXPENSE

As of December 31, 2022, there was $ 2,135 of total unrecognized compensation costs, related to all unvested stock options, restricted stock units and performance stock units.

These costs are expected to be recognized as compensation expense over a weighted average period of approximately 1.50 years.

Stock-based compensation expense for the years ended December 31, 2022 and 2021 is as follows:

Years Ended December 31,

2 unchanged sentences

Performance stock units 731 301

Equity Compensation, Total

compensation is included in operating expenses as follows:

SCHEDULE OF EQUITY COMPENSATION

$ 2,455 $ 6,400

INTELLICHECK, INC.

NOTES TO FINANCIAL STATEMENTS

( All dollar amounts are rounded to thousands, except share data )

Stock-based compensation is included in operating expenses as follows:

Years Ended December 31,

1 unchanged sentence

Research and development 666 618

Company has a net operating loss carry-forward as of December 31, 2021, and no excess tax benefits for the tax deductions related to

equity compensation awards were recognized in the statements of operations.

Additionally, no incremental tax benefits were recognized

from stock options exercised in 2021 that would have resulted in a reclassification to reduce net cash provided by operating activities

with an offsetting increase in net cash provided by financing activities.

of December 31, 2021, the Company had 1,360,830 shares available for future grants under the Company’s equity compensation plans.

previously granted warrants were issued with an exercise price that was equal to or above the fair market value of the Company’s

common stock on the date of grant.

$ 2,455 $ 6,400

As of December 31, 2022, the Company had 1,250,244 shares available for future grants under the Company’s equity compensation plans.

All previously granted warrants were issued with an exercise price that was equal to or above the fair market value of the Company’s common stock on the date of grant.

As of December 31, 2022, the Company had no remaining warrants available to exercise.

There were 9,000

warrants exercised at a price of $ 2.20 during the year ended December 31, 2021.

ISSUANCE OF COMMON STOCK

June 23, 2020, the Company completed a public offering of 1,769,230 shares of its common stock, offered to the public at $ 6.50 per share.

Net proceeds to the Company from this offering were approximately $ 10,710 after deducting underwriting discounts and commissions paid

by the Company.

Direct offering costs totaling approximately $ 141 were recorded as a reduction to the net proceeds and included in additional

paid-in-capital on the statement of stockholders’ equity.

There were 9,000 warrants exercised at a price of $ 2.20 during the year ended December 31, 2021.

COMMITMENTS AND CONTINGENCIES

Company leases an office in Melville, New York.

Rent expense, which includes utilities, was $ 79 and $ 126 for the years ended December

31, 2021 and 2020 and is included in Selling, general and administrative expenses on the Statement of Operations.

INTELLICHECK,

TO FINANCIAL STATEMENTS

dollar amounts are rounded to thousands, except share data )

Company determines if an arrangement is a lease at lease inception.

The arrangement is a lease if it conveys the right to the Company

to control the use of identified property, plant, or equipment for a period of time in exchange for consideration.

This operating lease

is included in Operating Lease Right-of-Use (ROU) Asset and Operating Lease Liability, current portion on the Balance Sheets.

As of December

31, 2020, the Company’s Operating Lease ROU was $ 31 and its Operating Lease liability was $ 33 .

The Company did not have an Operating

Lease ROU or Operating Lease Liability as of December 31, 2021, as its office lease is on a month-to-month term.

Company recognizes rent and utilities expense for this lease on a straight-line basis over the lease term.

ROU assets represent the right

to use an underlying asset for the lease term and operating lease liabilities represent the obligation to make lease payments arising

from the lease.

Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease

payments over the lease term.

As the Company’s lease does not provide an implicit rate, it uses its incremental borrowing rate

of 5 % based on the commencement date in determining the present value of these lease payments.

The Company considers instruments with

similar characteristics when calculating this incremental borrowing rate.

Lease terms may include options to extend or terminate the

lease when it is reasonably certain that the Company will exercise that option.

License Agreement

February 26, 2020, the Company entered into a license agreement with a third party (the “Licensor”) to purchase certain intellectual

property rights and licensed software subject to certain restrictions.

The purchase price of this license totaled $ 400 .

The Company has

an option to pay the Licensor an annual fee of $ 35 for maintenance and updates to be distributed from the Licensor.

Company is not aware of any infringement by our products or technology on the proprietary rights of others.

Company is not currently involved in any legal or regulatory proceeding, or arbitration, the outcome of which is expected to have a material

effect on its business.

Incentive Plans

May 2020, the Board entered into a 2020 separate executive incentive bonus plan (“the 2020 Bonus Plan”) with the Company’s

executive management team.

Each agreement, under the 2020 Bonus Plan, is based on certain goals achieved by the Company plus individual

achievements by each executive.

At December 31, 2021, this bonus liability was approximately $ 1,237 which is included in Accrued Expenses

on the Balance Sheets.

June 2020, the Company’s executive management team created a 2020 Employee Incentive Plan for all the Company’s non-executives

and non-sales personnel.

The incentive payment is based on the Company attaining certain revenue goals for the calendar year 2021 and

is based as a percentage of the employee’s salary.

At December 31, 2021 this bonus liability was $ 328 and is included in Accrued

Expenses on the Balance Sheets.

The Company leases an office in Melville, New York.

Rent expense, which includes utilities, was $ 78 and $ 79 for the years ended December 31, 2022 and 2021 and is included in Selling, general and administrative expenses on the Statement of Operations.

The Company determines if an arrangement is a lease at lease inception.

The arrangement is a lease if it conveys the right to the Company to control the use of identified property, plant, or equipment for a period of time in exchange for consideration.

The Company did no t have an Operating Lease ROU or Operating Lease Liability as of December 31, 2022, as its office lease is on a month-to-month term and allows for either party to terminate the lease without a significant penalty.

Legal Proceedings

The Company is not aware of any infringement by our products or technology on the proprietary rights of others.

The Company is not currently involved in any legal or regulatory proceeding, or arbitration, the outcome of which is reasonably possible to have a material effect on its business.

Cash Incentive Plans

In May 2020, the Board entered into a 2020 separate executive incentive bonus plan (“the 2020 Bonus Plan”) with the Company’s executive management team.

Each agreement, under the 2020 Bonus Plan, is based on certain goals achieved by the Company plus individual achievements by each executive.

In June 2020, the Company’s executive management team created a 2020 Employee Incentive Plan for all the Company’s non-executives and non-sales personnel.

The incentive payment is based on the Company attaining certain revenue goals for the calendar year 2022 and is based as a percentage of the employee’s salary.

At December 31, 2022, this bonus liability for the executive and employee bonus plans amounted to $ 846 and is included in the Accrued Expenses on the Balance Sheets as well as Note 7.

INTELLICHECK, INC.

NOTES TO FINANCIAL STATEMENTS

( All dollar amounts are rounded to thousands, except share data )

RETIREMENT PLAN

Company has a retirement savings 401(k) plan.

The plan permits eligible employees to make voluntary contributions to a trust, up to a

maximum of 35 %

of compensation, subject to certain limitations.

The Company has elected to contribute a matching contribution equal to 50 %

of the first 6 %

of an eligible employee’s deferral election.

The Company may also make discretionary contributions, subject to certain conditions,

as defined in the plan.

The Company’s matching contributions were $ 98

for 2021 and 2020, respectively.

The plan assets

were approximately $ 3.7

million and $ 3.0

million at December 31, 2021 and 2020, respectively.

The Company has a retirement savings 401(k) plan.

The plan permits eligible employees to make voluntary contributions to a trust, up to a maximum of 35 % of compensation, subject to certain limitations.

The Company has elected to contribute a matching contribution equal to 50 % of the first 6 % of an eligible employee’s deferral election.

The Company may also make discretionary contributions, subject to certain conditions, as defined in the plan.

The Company’s matching contributions were $ 118 and $ 98 for 2022 and 2021, respectively.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures