What changed in this filing

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Item 1A. Risk Factors

2025-03-31 compared with 2024-04-01 · 42 added, 20 removed, 148 unchanged (30% of the section changed)

10 unchanged sentences

If one or more of these jurisdictions do not continue to provide this reference data, the utility of our proprietary software may be diminished in those jurisdictions.

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

The current President Trump administration (the “Trump Administration”) recently established the Department of Government Efficiency, which implemented a federal government hiring freeze and announced certain additional efforts to reduce federal government employee headcount and the size of the federal government.

It is unclear how these executive actions or other potential actions by the Trump Administration or other parts of the federal government will impact the regulatory authorities that oversee our business and the governmental and quasi-governmental agencies that we interact with.

These budgetary pressures may reduce the ability of certain governmental agencies to perform their responsibilities, which could have a material adverse effect on our business.

Our business strategy exposes us to long sales and implementation cycles for our products.

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These initiatives have costs associated with them, and we cannot assure you that they ultimately will prove successful, or result in, an increase to our revenues or profitability.

We could be negatively impacted by COVID-19, or other similar pandemics.

As a result of the COVID-19 pandemic, or other similar pandemics, we may in the future experience disruptions that could severely impact our business, including government shutdowns, stay-at-home orders, travel restrictions, business closures, cancellations of public gatherings, and other measures.

While many of the original restrictions levied by governments in 2020 have been removed, additional variants, or similar pandemics in the future, could cause governments to reinstitute some or all of the previously implemented restrictive measures.

Such restrictions could lead to the cancellation of industry events which could limit our ability to meet with existing and potential new customers.

The industry for our systems and software is evolving and its growth is uncertain.

19 unchanged sentences

■ maintaining and enforcing issued patents and filing patent applications on innovative solutions to commercially important problems;

■ protecting trade secrets;

■ protecting copyrights and trademarks by registration and other appropriate means;

■ protecting trade secrets, including software source code;

■ protecting trademarks by registration and other appropriate means;

■ establishing internal processes for identifying and appropriately protecting new and innovative technologies;

8 unchanged sentences

In addition, foreign laws treat the protection of proprietary rights differently from laws in the United States.

The failure of foreign laws or judicial systems to adequately protect our proprietary rights or intellectual property, including

intellectual property developed on our behalf by foreign contractors or subcontractors, may have a material adverse effect on our business, operations, and financial results.

The failure of foreign laws or judicial systems to adequately protect our proprietary rights or intellectual property, including intellectual property developed on our behalf by foreign contractors or subcontractors, may have a material adverse effect on our business, operations, and financial results.

If our future products incorporate technologies that infringe the proprietary rights of third parties, and we do not secure licenses from them, we could be liable for substantial damages.

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Further, these outcomes could damage investor confidence in the accuracy and reliability of our financial statements.

Our management has concluded that our internal controls over financial reporting were ineffective, as of December 31, 2023 as a result of the following:

The Company did not design and maintain effective controls to periodically reassess whether Nexus was achieved in the states we do business.

This caused us not to be able to collect sales tax from our customer and subsequently remitting those sales tax to the appropriate state tax agency.

During our assessment in 2023, it was determined that we had prior period sales tax obligation on certain states, in which we failed to collect and remit the sales tax..

While management intends to remediate the material weakness, there is no assurance that such changes, when economically feasible and sustainable, will remediate the identified material weaknesses or that the controls will prevent or detect future material weaknesses.

If we are not able to maintain effective internal control over financial reporting, our financial statements, including related disclosures, may be inaccurate, which could have a material adverse effect on our business.

Long lead times for the components used in certain products creates uncertainty in our supply chain and may prevent us from making required deliveries to our customers on time.

22 unchanged sentences

The occurrence of product defects or errors could result in negative publicity, delays in product introduction and the diversion of resources to remedy defects and loss of or delay in industry acceptance or claims by customers against us and could cause us to incur additional costs, any one of which could adversely affect our business.

Because of the risk of undetected error, we may be compelled to accept liability provisions that vary from our preferred contracting model in certain critical

transactions.

Because of the risk of undetected error, we may be compelled to accept liability provisions that vary from our preferred contracting model in certain critical transactions.

There is a risk that in certain contracts and circumstances we may not be successful in adequately minimizing product and related liabilities or that the protections negotiated will not ultimately be deemed enforceable.

6 unchanged sentences

Our percentage of revenues and customer concentration is significant.

Revenues from our ten largest customers accounted for 71% of total revenues in 2023 and 72% of total revenues in 2022.

We have a concentration of revenues with our ten largest customers which accounted for 71% of total revenues in 2024 and 2023.

Three customers accounted for 50% of revenues in 2024 and three customers accounted for 47% of revenues in 2023.

The loss of one or more significant customers could have a significant adverse impact on our business, financial condition, and results of operations.

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

With the growing use of biometric data in identity verification, Intellicheck faces increased risks related to the usage and protection of this highly sensitive information.

Biometric data, such as facial recognition patterns, are uniquely vulnerable as they cannot be changed if compromised.

The company must implement robust security measures to protect this data from breaches, as any leak could lead to severe reputational damage, legal consequences, and loss of customer

Additionally, evolving privacy laws and regulations specifically targeting biometric data could impose new compliance burdens on the company.

We are subject to regulation and other legal obligations relating to data privacy and protection.

Compliance with these requirements is complex and costly.

The actual or perceived failure to comply with such obligations could materially harm our business .

We are or may become subject to numerous state, federal and foreign laws, requirements and regulations governing the collection, use, access to, confidentiality, disclosure, storage, processing, retention and security of personal information.

Failure to comply with these laws, where applicable, can result in the imposition of significant civil and/or criminal penalties and private litigation.

As an example, the California Privacy Rights Ace (the “CCPA”) requires covered businesses that process the personal information of California residents to, among other things:

provide certain disclosures to California residents regarding the business’s collection, use, and disclosure of their personal information;

receive and respond to requests from California residents to access, delete, and correct their personal information, or to opt out of certain disclosures of their personal information;

and enter into specific contractual provisions with service providers that process California resident personal information on the business’s behalf.

Similar laws have been passed in other states and are continuing to be proposed at the state and the federal level, reflecting a trend toward more stringent privacy legislation in the United States.

The CCPA and other domestic privacy and data protection laws and regulations may increase our compliance costs and potential liability.

Although we work to comply with applicable laws, regulations and standards, as well as our contractual obligations and other legal obligations, relating to data privacy and security, these requirements are evolving and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction and/or organization to another, and may conflict with one another or other legal obligations with which we must comply.

Any failure or perceived failure by us or our employees, representatives, contractors, consultants, collaborators, or other third parties to comply with such requirements or adequately address privacy data and security concerns, even if unfounded, could result in additional costs, claims by and liability to third parties, government investigations and enforcement actions, damage to our reputation, and other adverse effects on our business, financial condition and results of operations.

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

As Intellicheck incorporates AI in its identity verification processes, the company faces risks related to AI ethics and potential biases in its algorithms.

There's a growing concern about AI systems perpetuating or amplifying existing biases, particularly in identity verification contexts.

Intellicheck must ensure its AI models are fair, transparent, and free from discriminatory outcomes across diverse demographic groups.

Failure to address these ethical concerns could result in regulatory scrutiny, legal challenges, and damage to the company's reputation, potentially leading to loss of business and market share.

Additionally, the models used in those processes may produce output or take action that is incorrect, expose private or confidential information, infringe on the intellectual property rights of others, or be otherwise harmful.

Any of these risks could expose Intellicheck to liability or adverse legal or regulatory consequences.

Public health crises, such as COVID-19 or other similar pandemics in the future, can adversely impact our business.

Public health crises, such as the COVID-19 pandemic, could lead to government shutdowns, stay-at-home orders, travel restrictions, business closures, cancellations of public gatherings, and other measures, which may have material adverse effects on our business.

The level and nature of the disruption caused by a public health crisis is unpredictable, may be cyclical and long-lasting and vary from location to location.

While many of the original restrictions levied by governments in response to COVID-19 have been removed, additional variants, or similar pandemics in the future, could cause governments to reinstitute some or all of the previously implemented restrictive measures.

Such restrictions could lead to the cancellation of industry events which could limit our ability to meet with existing and potential new customers.

Risks Related to Our Common Stock and the Market for Our Common Stock

1 unchanged sentence

The market price of our common stock, like the price of shares of technology companies generally, has been and may continue to be volatile.

From January 1, 2002 to April 1, 2024, the intra-day trading price of our common stock has varied from a high of $145.52 to a low of $0.75 per share, as reported on The Nasdaq Stock Market.

From January 1, 2002 to March 31, 2025, the intra-day trading price of our common stock has

varied from a high of $145.52 to a low of $0.75 per share, as reported on The Nasdaq Stock Market.

Many factors may cause the market price for our common stock to decline, including:

1 unchanged sentence

■ delays in development or roll-out of any of our products;

■ unfavorable outcomes from outstanding litigation;

■ overall decrease of US stock prices as a result of rising inflation experienced in the United States, the accompanying increases in the benchmark lending rate by the Federal Reserve, and each of their effects on the economy;

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

■ short selling or other market manipulation activities;

■ announcements by one or more competitors of new product acquisitions or technological innovations.

■ unfavorable outcomes from outstanding litigation.

In addition, the stock market experiences extreme fluctuations in price and volume, that particularly affect the market price of shares of technology companies, such as ours.

28 unchanged sentences

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 1A. Risk Factors