Greetings. And welcome to authID. Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Grace de Fries, Senior Vice President, Marketing, Communications and Investor Relations. Thank you. Mr. Kris, you may begin.

Thank you, operator. Good afternoon, everyone. With me on today's call Tom Thimot, CEO; Tripp Smith, our President and CTO; Annie Pham, our CFO; and Graham Arad, our General Counsel. By now, you should have access to today's press release announcing our second quarter 2022 results. If you have not received this, the release can be found on our website at www.authid.ai under the Investor Relations section. Throughout - we are now on slide two. Throughout this conference call, we will be presenting certain non-GAAP financial information. This information is not calculated in accordance with GAAP and may be calculated differently from other companies similarly titled non-GAAP information. Quantitative reconciliations of our non-GAAP adjusted EBITDA information to the most directly comparable GAAP financial information appear in today's press release. Before we begin our formal remarks, let me remind everyone that part of our discussion today will include forward-looking statements. Such forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Some of these risks are mentioned in today's press release, others are discussed in our Form 10-K and subsequent filings, which are made available at www.sec.com. For those on the webcast, please note that we have set up the presentation for you to advance the slides manually. You can do this by hovering over the slides and tapping the double arrows that appear on the right-hand side of the slide. Tom and Annie will provide cues for advancing the slides. We will have a Q&A session following our presentation. To participate in the Q&A you must be registered on the telephone. I'd now like to introduce our CEO, Tom Thimot

Thank you, Grace. Welcome, everyone, to today's call. I'd like to start on slide three and talk about the high technology standards we've achieved and the multiple points of validation we've earned for our platform advancements. During the second quarter, we completed two major security certifications in asset stations that demonstrate to our customers that they can count on authID to protect their security. Building on our previous achievements of meeting the SOC 2 security standard, we successfully upgraded to meet the ISO 27001 Standards for information security management programs. This means that our biometric authentication platform has met the rigorous security management industry standards that encompass key aspects of confidentiality, integrity and availability. We also achieved a perfect score under the ISO Standard for presentation attack detection or Pad Levels 1 and 2 that measure the verified platform's liveliness capability and success in detecting harmful attacks. Let me remind you that during this test, Verified successfully recognized and prevented more than 700 presentation attacks for a perfect performance. This demonstrates that we have the highest level of security to stop fraudsters from attempting to spoof biometrics. These independent tests are important for us to earn and promote because they help us reach organizations with IT and compliance departments that have high vendor management and control standards. These certifications give these decision-makers the confidence they need to choose authID to be their trusted partner in defending against cyber attacks. And in May, we issued a patent that protects - we were issued a patent to protects Verified multifactor authentication methodology, critical to fighting fraud is patented methodology creates an unchallengeable audit trail for all parties. We were also pleased along with our customer, Hamilton Reserve Bank to receive the FinTech Futures Banking Award for best use of risk, compliance and…

Thank you, Tom, and thank you for your earlier kind introduction. I'm very excited to have joined authID. I came to authID because it presents a compelling opportunity to grow our business in an exciting and fast-growing industry with a very talented team. I look forward to continue on our growth goals. Thanks to financial [Technical Difficulty] and capital management, all of which will contribute to adding value for our customers and shareholders. Now turning to slide number six. The following highlights comprised results from continuing operations and reflect our previous announcement that we are exiting the company noncore businesses in South Africa and Colombia. This business is now classified in our financial statements as discontinued operations or assets held for sale. Accordingly, all of my remarks will compare results from continuing operations for the quarter and six months ended June 30, 2022, with the quarter and six months ended June 30, 2021, unless specified otherwise. For both the three and six month period, Verified software license revenue increased year-over-year. Verified revenue for the quarter increased over the prior year by 178% to $51,000. For the six months in 2022, Verified revenue increased over the last year by 163% to 87,000. Total revenue for the quarter was $1 million compared - $41 million compared with $0.1 million for the prior year. For the six months in 2022, total revenue was $0.2 million compared with $0.3 million due mostly to the discontinuation of our legacy product. Operating expenses for the second quarter of 2022 totaled $6 million compared with $3.4 million for the prior year, principally due to higher noncash expenses of $3.2 million. Operating expenses for the six month period totaled $11.2 million compared with $5.6 million for the prior year, principally due to higher noncash expenses of $5.4 million.…

Tom, Graham Arad. While we're waiting for the queue of questions to be compiled, I can ask you a question. Ask you to clarify a bit more what it means for our workforce product in the marketplace that we're targeting now for the workforce services and how that compares to other products in the market?

Absolutely, Graham. Thanks. Clearly, as we highlighted earlier, when the consumer side of our business where a business uses our authentication technology to authenticate a user of that a consumer, we saw - while that was going down, we saw an increase in interest in our workforce product. And this is very typical in the cybersecurity industry in downturns in the economy, there was actually more investment made in cybersecurity to protect corporate assets and we have seen a significant uptick in interest in our products for that particular use case. It's why we have centered a lot of our marketing and sales around that And we think that we are uniquely positioned because as most companies are moving towards passwordless where you no longer will log into your corporate environment with a user name and password, but rather have a past key or a token on your phone the way to step up that authentication to make sure you know who is behind the phone is with a biometric. So in the world of passwords, people used a pin code texted to a phone, in the world of passwordless, where the device becomes the primary authentication, the authentication to make sure it is who is supposed to be behind that device is a biometric like what we offer in Verified, and we think we have the best product in the market to solve this problem.

Thank you. And just as a reminder to people who are listening us on the webcast or not able to ask a question directly. The company is always open to questions from investors, you can contact us at investors at investors.authid.ai you've had a chance to review the various materials that we've published today, and also to speak with a member of management. If you have further questions, please feel free to contact us at that time. Another question comes in the workforce marketplace, who would you say are main competitors that we're trying to look at?

A number of companies we've been looking at as competitive in the marketplace, traditional providers of texting solutions that would step up authentication through a PIN code, like a Twilio and a number of other solutions that are made independently by IT departments where they choose to go to a standard SaaS solution. One of the things that is exciting about the workforce marketplace, as opposed to the consumer marketplace is you tend to log into your work environment every day. You might log into your bank account once or twice a month. As a result, the value that we create and the price we're able to obtain is much higher in workforce than it is in consumer. Also because from an implementation perspective, it typically takes much longer to implement on the consumer side because you are constantly concerned with gaining consent and making sure that the friction is not driving away the consumer. When you're an employee of a company, you typically sign documents that say you will use the security protocols that are required by the company. So consent is not something that is gained by an employee, it is given when they accept employment with the company. So this is one of the reasons that we see a significant opportunity and an opportunity to partner with the existing IAM, identity and access management companies in the marketplace because we are augmenting this and making it more secure so that they can verify not just the employees device, but the fact that the employee is actually behind the device.

Thank you. Please stand by for our question. Our next question comes from the line of David Lerner with Renrel Partners. Your line is open.

Hey, Tom.

Hello, David.

A couple of questions. You mentioned Twilio, so clearly the plan is still to be a replacement to a onetime password. And it seems also that Twilio's own employees gave away their credentials. Do you see that as our big opportunity, number one. And then you mentioned a couple of new deals won in telecommunications, one in IAM or cybersecurity is not the same company and maybe we could elaborate on those and maybe some of the timing of those.

Absolutely. First and foremost, yes, when the world moves away from passwords and moves to it's called most commonly now a pass key on the device to token, a piece of software that's put on your phone or your laptop that identifies that, that phone or laptop is present and, therefore, logs you in. And then when there is either something risky you're doing, maybe you're accessing a certain area of information inside the company or an area that the data is more - has a much greater loss if it is breached, then the user is challenged to make sure it's them and basically ask to turn the phone to their face and verify their identity with the biometric. So that is a very different ecosystem. And this is where authID to use the overused metaphor of skate to where the puck is going. We saw when we came to authID that the world was going to finally move away from password. And when they did, there was going to be a need to know – are behind in the device, not just that the device was there. And that is a much safer and more secure world than where you remember a password and you get tested a code. And so many word, and you get texted a code. And so many of the companies and speaking to the pipeline that we spoke to whether it's in the health care market where we see significant need because once again, there is tremendous amount of sensitivity and privacy to doctors taking exams, patients and their health care information. This is data that clearly you do not want breached. If you look at the telecommunications opportunity that we're speaking to, it serve small and medium businesses that need to secure their employees and make sure that the person that is using the device provided by that wireless telecommunications company is the person that's supposed to be and finally, talking about a large cybersecurity company that is separate from the telecommunications company, they see the same opportunities and are implementing identity and access management solutions and realize that in cases of either high risk or sensitivity, they want to make sure who is behind the device, and we are best positioned to offer that because that has been our entire focus. It is also why we have looked to divest ourselves of businesses that are not tied to our ability to use a biometric to step up authentication. These are good businesses that add value and we'll have great homes with other companies, but they have very little to do with where we see the future of the market and the massive opportunity we see in biometric authentication. David, did I answer your questions?

Yes. Thank you. Last question, I have one more, if I may. Annie nice to meet you. She mentioned a couple of things, I heard an expansion to revenue and bookings, everything in the second half of this year. Obviously, it hasn't happened in the first half. Where do you see - I'm looking at 167,000 I think I saw with the ARR in maybe last quarter, so you got this quarter 1.5 more. Like to what magnitude is substantial, what do you think we can look for - is it 20 X, 10 X, 1 X? I mean, substantial from a small number is watch?

The one thing that we have very clearly stated, David, is that we remain confident that given our sales pipeline that by the start of 2024 we can be cash flow positive. And we have stated that we burn today roughly $1.1 million in cash. So that's roughly $13.2 million in cash burn on an annualized basis. To state the obvious to have cash flow positive, you would have to have receipts in excess of $13.2 million in order to be flowing cash positive. So if that's the start of 2024 and we sit here in the middle of 2022, I think we see a line in a path to reach that end goal that now is only 18 months away. And so yes, we would obviously have to significantly pick up $154,000 of ARR to get to $13.2 million of ARR. And I should clarify that because this business has deferred revenue and pre-payments that the combination of deferred revenue and ARR would need to exceed 132 not to the ARR by itself. Does that make sense?

No, 100%. So are there - in particular large customer, is this going to be one customer that if the number is $13 million, $15 million next year, how should we look at it 100 customers, meaning workforce, two customers, one large customer, how do we kind of think…

All of the above, David. I mean, here's is - we're in a very early stage company, a size company that typically you see in the venture markets. We consider - we're honored to be in the public markets, but we know that we have to bring investors that are maybe used to much more mature companies along with us on this journey. You typically start with very small customers that prove out your solution and then you gradually expand the size of your agreements with new customers. And ultimately, then when you improve in your customer, you have asset stations, you start winning awards, which you've been doing then some of the larger software company say, wait a second, this makes a lot of sense for us to put inside our solution because everyone's focused on we got to get rid of passwords. And naturally, no one's thinking to the next thing, great. I know the device is there. But do I know it's David learner behind that device, and how do I make sure it's David, and not just David's cellphone. And so there is a flow that the small deals help us to prove out our product, get all the certifications. I mean we had 700 presentation that tax detected, a perfect score, everything that could throw at us to try and defeat our technology failed, and we succeeded. And that happens because you have really good early customers that help you really bet the solution, which then allows you to take it to those that are going to embed it in their products, whether you're a wireless telecommunications company or a large cybersecurity software company or a risk engine that serves the health care industry. And all of these are - the opportunities get larger as you mature, and we're on that journey. And we remain confident that what we said when we raised money was that we'll be able to cross at the start of 2024.

Thank you, Tom. Thank you, team. That was also very nice to mention Ted Stern been wonderful man, and you guys enjoy the rest of your night and congrats on a lot of really good stuff that's getting done. Keep up the good work.

Thank you, David. Operator, we…

So don't seem like there's any more questions right now, but as I say, reiterate that anyone who would like further information, a follow up questions, they can contact us either through the contact page on our website or by e-mail to Investor Relations at authid.ai, investor relations at uthid.ai. Tom, I think, just remains for your closing remarks.

All right. Well, I'd like to thank everyone for their interest and investment in our company and their questions and insight today. In closing, we'll continue to focus our sales efforts on protecting the workforce and securing corporate assets from hackers and cyber criminals. And I really want to thank you for your time today. Take care, everyone.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now all disconnect.