What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2022-03-24 compared with 2021-03-29 · 9 added, 376 removed, 19 unchanged (95% of the section changed)

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded on The Nasdaq Stock Market under the symbol “IDN.”

The following table indicates high and

low sales prices for the periods indicated.

First quarter

Second quarter

Third quarter

Fourth quarter

First quarter

Second quarter

Third quarter

Fourth quarter

First quarter*

Portion of first fiscal quarter through March 26, 2021.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our common stock is traded on The Nasdaq Stock Market under the symbol “IDN.”

As of March 24, 2022, there were 30 shareholders of record of our common stock.

No cash dividends or other cash distributions made by us during the fiscal year ended December 31, 2021.

Future dividend policy

will be determined by our Board of Directors based on our earnings, financial condition, capital requirements and other then existing

Future dividend policy will

be determined by our Board of Directors based on our earnings, financial condition, capital requirements and other then existing conditions.

It is anticipated that cash dividends will not be paid to the holders of our common stock in the foreseeable future.

Securities Authorized for Issuance Under Equity Compensation Plans

following table provides information as of December 31, 2020, with respect to the shares of our common stock that may be issued

under our existing equity compensation plans.

following table provides information as of December 31, 2021, with respect to the shares of our common stock that may be issued under

our existing equity compensation plans.

of securities

9 unchanged sentences

(excluding securities

reflected in column (a))

in column (a))

compensation plans approved by security holders (1)

Equity compensation

plans not approved by security holders

Represents 637,882 options, 1,754 restricted stock units and 265,942 performance stock units under the 2015 Omnibus Incentive

compensation plans not approved by security holders

Represents 496,424 options, 408,376 restricted stock units and 228,498 performance stock units under the 2015 Omnibus Incentive Plan.

Recent Sales of Unregistered Securities

1 unchanged sentence

were no shares purchased during 2021.

Selected Financial Data

following selected financial data presented under the captions “Statement of Operations Data”

and “Balance Sheet

as of the end of each of the five years ended December 31, 2020, are derived from our financial statements.

financial data should be read in conjunction with the financial statements as of December 31, 2020 and 2019 and for each of the

two years in the period ended December 31, 2020, the accompanying notes and the report of independent registered public accounting

firms thereon, which are included elsewhere in this Form 10-K.

Our financial statements include our accounts and our former wholly

owned subsidiaries, Mobilisa and Positive Access.

Ended December 31,

(In thousands, except

per share data)

Statement of Operations

(Loss) from operations

Net (loss) income

Net (loss) income per common share

Common shares used in computing per

share amounts

of December 31,

(In thousands)

Balance sheet data:

Working capital

Total liabilities

Stockholders’

Management’s Discussion and Analysis of Financial Condition and Results of Operations

are a prominent technology company that is engaged in developing, integrating and marketing identity authentication and threat

identification solutions to address challenges that include bank and retail fraud prevention, law enforcement threat identification,

and mobile and handheld access control and security for the government, military and commercial markets.

Our products driven by

our ID Check Authentication Engine, include Retail ID®, a solution for preventing fraud in the retail and banking industry

for both on-line and in-store transactions;

Age ID®, a smartphone or tablet-based solution for preventing sale of age-restricted

products to minors, and Defense ID®, a mobile and fixed infrastructure solution for threat identification, identity authentication

and access control to military bases and other government and commercial facilities.

Accounting Policies and the Use of Estimates

preparation of our financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”)

requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying

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 allocation

of multi-element arrangements and the fair value of stock options granted under our stock-based compensation plans.

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

believe that there are several accounting policies that are critical to understanding our historical and future performance, as

these policies affect the reported amounts of revenue and the more significant areas involving management’s judgments and

These significant accounting policies relate to revenue recognition, stock-based compensation, deferred taxes, goodwill

and intangible asset valuation and impairment, and commitments and contingencies.

These policies and our procedures related to

these policies are described in detail below.

of goodwill and other long-lived assets

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

As of December 31, 2020, the balances of property

and equipment, goodwill and intangible assets, all net of accumulated depreciation and amortization and impairments, were $138,870,

$8,101,661 and $482,591, respectively.

As of December 31, 2019, the balances of property and equipment, goodwill and intangible

assets, all net of accumulated depreciation and amortization and impairments, were $181,731, $8,101,661 and $174,237, respectively.

depreciate property and equipment and amortize intangible assets that have finite lives over their estimated useful lives.

purposes of determining whether there are any impairment losses, as further discussed below, management evaluates the carrying

amounts of identifiable long-lived tangible and intangible assets, including their estimated useful lives, when indicators of

impairment are present as more fully described below.

Based on our review of the carrying amounts of the long-lived tangible and

intangible assets with finite lives, we may also determine that shorter estimated useful lives are appropriate.

In that event,

we record depreciation and amortization over shorter future periods, which would reduce our earnings.

excess of the purchase consideration over the fair value of the assets of the acquired businesses is considered goodwill.

authoritative guidance, purchased goodwill is not amortized, but rather it is periodically reviewed for impairment.

We had goodwill

of $8,101,661 as of December 31, 2020 and 2019.

This goodwill resulted from the acquisition of Mobilisa, Inc.

and Positive Access

These entities were merged into one company under Intellicheck on December 31, 2018.

the years ended December 31, 2020 and 2019, we performed our annual impairment test of goodwill in the fourth quarter.

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

than not that impairment exists, before using a two-step quantitative analysis.

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.

We performed the first step of the

goodwill impairment test to identify potential impairment by comparing our fair value of the Company to our 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, similar public company financial comparisons, along

with market capitalization.

The market capitalization is sensitive to the volatility of our stock

Although we believe 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, 2020 and 2019, we determined that the fair value was more than our carrying amount and therefore

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

intangible assets consist of patents and a software license as described more fully in Note 5.

We use the straight-line method

to amortize these assets over their estimated useful lives.

We review our 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”) Topic 360.

To determine recoverability of its long-lived assets, we evaluate the probability

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

is measured at fair value.

No impairments were recognized during the years ended December 31, 2020 and 2019.

Recognition and Deferred Revenue

license fees and service revenues 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 our

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

location to access our software.

In certain instances, customization services are determined to be essential to the functionality

of the delivered 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.

We measure 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.

Customers typically receive the benefit of our services as they

are performed.

Substantially all customer contracts provide that we are compensated for services performed to date.

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.

is measured based on a consideration specified in a contract with a customer, and excludes any sales incentives and amounts collected

on behalf of third parties.

Revenues are recognized when control of the promised goods or services is transferred to the customer,

in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

we recognize revenue when we satisfy a performance obligation by transferring control over a product or service to a customer.

account for the issuance of equity awards to employees in accordance with ASC Topic 718, which requires that the cost resulting

from all share-based payment transactions be recognized in the financial statements.

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 employees.

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 carry forwards.

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.

We have recorded a full valuation allowance for our net deferred tax assets as of December

31, 2020 and 2019, due to the uncertainty of the realizability of those assets.

and Contingencies

are not currently involved in any legal or regulatory proceeding, or arbitration, the outcome of which is expected to have a material

adverse effect on our business.

above listing is not intended to be a comprehensive list of all our accounting policies.

In many cases, the accounting treatment

of a transaction is specifically dictated by generally accepted accounting principles, with no need for management’s judgment

in their application.

There are also areas in which management’s judgment in selecting any available alternative would not

produce a materially different result.

of Operations (All figures were rounded to the nearest $1,000)

OF THE YEAR ENDED DECEMBER 31, 2020

THE YEAR ENDED DECEMBER 31, 2019

Revenues for the year ended December 31, 2020 increased 40% to $10,735,000 compared to $7,664,000 for the year ended December

The increase in revenues in 2020 is a primarily the result of higher commercial Software as a Service (“SaaS”)

SaaS revenues, which consists of software licensed on a subscription basis, increased $3,271,000 or 54% to $9,373,000

for the year ended December 31, 2020 compared to $6,102,000 for the year ended December 31, 2019.

Gross profit increased by $2,641,000 to $9,309,000 for the year ended December 31, 2020 from $6,668,000 in the year

ended December 31, 2019.

Our gross profit, as a percentage of revenues, was 86.7% and 87.0% in 2020 and 2019, respectively.

decrease in percentage is primarily due to an increase in hardware sales which contain lower margins offset by our continued growth

of our SaaS revenue.

Operating expenses, which consist of selling, general and administrative expenses and research and development expenses,

increased by $252,000 or 3% to $9,568,000 for the year ended December 31, 2020 from $9,316,000 for the year ended December 31,

Selling, general and administrative expenses increased 4% to $5,893,000 for the year ended December 31, 2020 from $5,659,000

for the year ended December 31, 2019.

This increase is primarily due to higher personnel costs and accrued incentive plans.

and development expenses increased less than 1% to $3,675,000 for the year ended December 31, 2020 from $3,657,000 for the year

ended December 31, 2019.

ON FORGIVENESS ON UNSECURED PROMISSORY NOTE .

A gain on the forgiveness on an unsecured promissory note was $796,000 for the

year ended December 31, 2020.

This was the result of the forgiveness on a note under the Paycheck Protection Program administered

Small Business Administration.

AND OTHER INCOME .

Interest and other income were $22,000 for the year ended December 31, 2020 as compared to $99,000 during

the year ended December 31, 2019.

We had taxable net losses through the years ended December 31, 2020;

therefore, we have paid nominal income taxes.

INCOME (LOSS) .

As a result of the factors noted above, we had net income of $558,000 for the year ended December 31, 2020

as compared to a net loss of $2,549,000 for the year ended December 31, 2019.

and Capital Resources (All figures were rounded to the nearest $1,000)

of December 31, 2020, we had cash of $13,121,000, working capital (defined as current assets minus current liabilities) of $13,462,000,

total assets of $24,340,000 and stockholders’

equity of $22,211,000.

the year ended December 31, 2020, our cash increased by $9,771,000.

Cash used in operating activities was $19,000 for the year

ended December 31, 2020 as compared to cash used in operating activities of $1,841,000 for the year ended December 31, 2019.

used cash of $416,000 in investing activities for the year ended December 31, 2020 compared to cash provided by investing activities

of $22,000 for the year ended December 31, 2019.

Cash generated by financing activities was $10,205,000 for the year ended December

31, 2020 as compared to $794,000 for the year ended December 31, 2019.

June 23, 2020, we completed a public offering of 1,769,230 shares of our common stock, offered to the public at $6.50 per share.

Our net proceeds from this offering were approximately $10,710,000 after deducting underwriting discounts and commissions paid

Direct offering costs totaling approximately $141,000 were recorded as a reduction to the net proceeds and included in

additional paid-in-capital on the statement of stockholders’

February 6, 2019, we entered a revolving credit facility with Citibank that allows for borrowings up to the lesser of (i) $2,000,000

or (ii) the collateralized balance in our existing fixed income investment account with Citibank.

The facility bears interest

at a rate consistent of Citibank’s Base Rate (4.75% at December 31, 2020) minus 2% subject to certain limitations.

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

under this facility was $2,000,000.

are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business and including how it may impact our

customers, employees and vendors.

We did incur disruptions during the year ended December 31, 2020 from COVID-19 and we are unable

to predict the impact that this pandemic will have on us going forward, including our financial position, results of operations

and cash flows, the impact on our customers and the related demand for our services due to numerous uncertainties.

April 9, 2020 we entered into an unsecured promissory note in the amount of $796,100 (the “Note”) with First Bank

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

Small Business

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

We received these proceeds on April 14, 2020 plus an additional $10,000 advance under the Economic Injury Disaster Loan program

(“EIDL”) on April 15, 2020.

Under the terms of the Note, we 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%.

We have 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, we received notification

from the Loan Servicer that the Note was fully forgiven and recorded income from the extinguishment of our obligation as we were

legally released from being the primary obligor in accordance with ASC 405-20-40-1.

repaid our EIDL advance on December 7, 2020.

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 us.

currently anticipate that our available cash, as well as cash from the previously mentioned stock offerings, and expected cash

from operations and availability under the revolving credit agreement, will be sufficient to meet our anticipated working capital

and capital expenditure requirements for at least the next 12 months from the date of filing.

keep the option open to raise additional funds to respond to business contingencies which may include the need to fund more rapid

expansion, fund additional marketing expenditures, develop new markets for our technology, enhance our operating infrastructure,

respond to competitive pressures, or acquire complementary businesses or necessary technologies.

There can be no assurance that

we will be able to secure the additional funds when needed or obtain such on terms satisfactory to us, if at all.

have filed a universal shelf registration statement on Form S-3 with the Securities and Exchange Commission (“SEC”),

which became effective July 19, 2010.

Under the shelf registration statement, we may offer and sell, from time to time in the

future in one or more public offerings, our common stock, preferred stock, warrants, and units.

The aggregate initial offering

price of all securities sold by us will not exceed $25,000,000, and, pursuant to SEC rules, we may only sell up to one-third of

the market cap held by non-affiliate stockholders in any 12-month period.

We renewed this registration with the SEC on June 1,

2020 and it was declared effective June 4, 2020.

specific terms of any future offering, including the prices and use of proceeds, will be determined at the time of any such offering

and will be described in detail in a prospectus supplement which will be filed with the SEC at the time of the offering.

shelf registration statement is designed to give us the flexibility to access additional capital at some point in the future when

market conditions are appropriate.

are not currently involved in any legal or regulatory proceeding, or arbitration, the outcome of which is expected to have a material

adverse effect on our business.

use Adjusted EBITDA as a non-GAAP financial performance measurement.

Adjusted EBITDA is calculated by adjusting net income (loss)

for certain reductions such as gains on debt forgiveness and interest and other income and certain addbacks such as income taxes,

impairments of long-lived assets and goodwill, depreciation, amortization and stock-based compensation expense.

Adjusted EBITDA

is provided to investors to supplement the results of operations reported in accordance with GAAP.

Management believes that Adjusted

EBITDA provides an additional tool for investors to use in comparing our financial results with other companies that also use

Adjusted EBITDA in their communications to investors.

By excluding non-cash charges such as impairments of long-lived assets and

goodwill, amortization, depreciation and stock-based compensation, as well as non-operating charges for interest and income taxes,

investors can evaluate our operations and can compare its results on a more consistent basis to the results of other companies.

In addition, adjusted EBITDA is one of the primary measures management uses to monitor and evaluate financial and operating results.

consider Adjusted EBITDA to be an important indicator of our operational strength and performance of our business and a useful

measure of our historical operating trends.

However, there are significant limitations to the use of Adjusted EBITDA since it

excludes gains on debt forgiveness, interest and other income, impairments of long-lived assets and goodwill, stock-based compensation

expense, all of which impact our profitability, as well as depreciation and amortization related to the use of long-term assets

which benefit multiple periods.

We believe that these limitations are compensated by providing Adjusted EBITDA only with GAAP

net income (loss) and clearly identifying the difference between the two measures.

Consequently, Adjusted EBITDA should not be

considered in isolation or as a substitute for net income (loss) presented in accordance with GAAP.

Adjusted EBITDA as defined

us may not be comparable with similarly named measures provided by other entities.

reconciliation of GAAP net income (loss) to Adjusted EBITDA follows:

Ended December 31,

Net income (loss)

$ (2,548,711 )

Reconciling items:

Gain on forgiveness of unsecured promissory

Interest and other income

Depreciation and amortization

Stock-based compensation

Adjusted EBITDA

$ (1,813,010 )

Operating Loss Carry Forwards

available net operating loss (“NOL”) at December 31, 2020 was approximately $17 million.

The federal and state NOLs

are available to offset future taxable income and expire from 2021 through 2039 if not utilized.

is a table, which presents our contractual obligations and commitments as of December 31, 2020:

Due by Period

Total Contractual

Issued Accounting Pronouncements

as discussed below, we do not expect the impact of the future adoption of recently issued accounting pronouncements to have a

material impact on our financial statements.

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

Simplifying the Accounting for Income Taxes”

as part of its initiative to reduce complexity in the accounting

The 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.

not expect this standard will have a material impact on our financial statements.

January 2017, the FASB issued ASU No.

2017-04, Intangibles - Goodwill and Other (Topic 350):

Simplifying the Accounting for

Goodwill Impairment (“ASU 2017-04”).

ASU 2017-04 removes the requirement to perform a hypothetical purchase price

allocation to measure goodwill impairment.

A goodwill impairment will now be the amount by which a reporting unit’s carrying

value exceeds its fair value, not to exceed the carrying amount of goodwill.

ASU 2017-04 is effective for annual periods and interim

periods within those annual periods beginning after December 15, 2019, and early adoption is permitted.

We determined this standard

did not have a material impact on our financial statements.

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.

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

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.

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.

We do not expect this standard will have a material impact on our

financial statements.

Sheet Arrangements

have never entered any off-balance sheet financing arrangements and have never established any special purpose entities.

not guaranteed any debt or commitments of other entities or entered any options on non-financial assets.

Looking Statements

document contains “forward-looking statements”

within the meaning of the Private Securities Litigation Reform Act

of 1995, particularly statements anticipating future growth in revenues, loss from operations and cash flow.

Words such as “anticipates,”

“estimates,”

“expects,”

“projects,”

“intends,”

“plans,”

“believes”

and words and terms of similar substance used in connection with any discussion of future operating or financial performance identify

forward-looking statements.

These forward-looking statements are based on management’s current expectations and beliefs

about future events.

As with any projection or forecast, they are inherently susceptible to uncertainty and changes in circumstances,

and the Company is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements

whether as a result of such changes, new information, subsequent events or otherwise.

Quantitative and Qualitative Disclosures About Market Risk

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

We maintain cash in one financial institution.

We perform periodic evaluations of the relative credit standing of these institutions.

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 5. Market for Registrant’s Common Equity