Discontinued Operations and Assets Held for Sale

6 Months Ended

12 Months Ended

Jun. 30, 2023

Dec. 31, 2022

Discontinued Operations and Assets Held for Sale [Abstract]

DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

NOTE 9 – DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

The Board of Directors of authID considered it in the best interests of the Company to focus its business activities on providing biometric authentication products and services by means of our proprietary Verified platform.  Accordingly, on May 4, 2022, the Board approved a plan to exit from certain non-core activities comprising the MultiPay correspondent bank, payments services in Colombia and the Cards Plus cards manufacturing and printing business in South Africa.

Cards Plus business in South Africa

The financial statements of Cards Plus are classified as a discontinued operation and an asset held for sale, as all required classification criteria under appropriate accounting standards were met as of June 30, 2022.

On August 29, 2022, the Company completed the sale of Cards Plus for a price of $300,000 of which $150,000 was received and the remaining balance of $150,000 recorded in other current asset is expected to be received within one year, less $3,272 in costs to sell, and recognized a loss of $188,247 from the transaction.

MultiPay business in Colombia

The Company exited the MultiPay business in Colombia in an orderly fashion, honoring our obligations to employees, customers and under applicable laws and regulations.  We maintain our customer support and operations team in Bogota, which performs essential functions to support the global operations of our Verified product.

As of June 30, 2023, all impacted employees had left the Company. MultiPay finalized the sale of the Company’s proprietary software to its major customer on June 30, 2023 for approximately $96,000 of sale consideration. The Company recorded the receivable under the sale in Other current assets, released foreign currency translation gain of approximately $155,000 and recognized a gain of $216,000 from the transaction.

The following table summarizes the assets and liabilities of the MultiPay sale and the consideration received (unaudited):

	Amount
Carrying value of net assets sold:
Property and equipment write-off	$	19,528
Net assets write-off	$	19,528
Sale consideration on disposition of net assets:
Sale consideration	$	95,852
Less: Value added tax		(15,304	)
Net Consideration	$	80,548
Foreign currency translation:	$	155,049
Net gain on sale of a discontinued operation	$	216,069

The operations of Cards Plus and MultiPay for the three and six months ended June 30, 2023 and 2022 on a consolidated basis are below (unaudited):

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Discontinued Operations
Total Revenues, net	$	15,259		$	579,246		$	29,354		$	1,021,556
Operating Expenses:
Cost of Sales		-			336,540			-			520,064
General and administrative		-			372,750			12,268			658,132
Impairment loss		-			67,984			-			211,703
Depreciation and amortization		4,157			11,572			8,066			39,774
Total operating expenses		4,157			788,846			20,334			1,429,673
Income (Loss) from operations		11,102			(209,600	)		9,020			(408,117	)
Other Income (Expense):
Other income (expense), net		(224	)		4,334			-			8,029
Interest expense,  net		-			-			-			(364	)
Other income (expense), net		(224	)		4,334			-			7,665
Income (loss) before income taxes		10,878			(205,266	)		9,020			(400,452	)
Income tax expense		(5,184	)		(1,041	)		(5,581	)		(6,578	)
Income (loss) from discontinued operations		5,694			(206,307	)		3,349			(407,030	)
Gain from sale of discontinued operations		216,069			-			216,069			-
Total income (loss) from discontinued operations	$	221,763		$	(206,307	)	$	219,508		$	(407,030	)

	Three Months Ended June 30,					Six Months Ended June 30,
	2023		2022			2023		2022
Cards Plus
Total Revenues, net	$	-	$	510,142		$	-	$	883,300
Operating Expenses:
Cost of Sales		-		336,540			-		520,064
General and administrative		-		167,390			-		322,699
Impairment loss		-		67,984			-		211,703
Depreciation and amortization		-		4,667			-		25,897
Total operating expenses		-		576,581			-		1,080,363
Income (loss) from operations		-		(66,439	)		-		(197,063	)
Other Income (Expense):
Other income		-		3,468			-		6,816
Interest expense,  net		-		-			-		(364	)
Other income, net		-		3,468			-		6,452
Loss before income taxes		-		(62,971	)		-		(190,611	)
Income tax expense		-		-			-		(4,681	)
Loss from discontinued operations	$	-	$	(62,971	)	$	-	$	(195,292	)

	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
MultiPay
Total Revenues, net	$	15,259		$	69,104		$	29,354		$	138,256
Operating Expenses:
General and administrative		-			205,360			12,268			335,433
Depreciation and amortization		4,157			6,905			8,066			13,877
Total operating expenses		4,157			212,265			20,334			349,310
Income (Loss) from operations		11,102			(143,161	)		9,020			(211,054	)
Other Income (Expense):
Other income (expense), net		(224	)		866			-			1,213
Other income (expense), net		(224	)		866			-			1,213
Income (loss) before income taxes		10,878			(142,295	)		9,020			(209,841	)
Income tax expense		(5,184	)		(1,041	)		(5,581	)		(1,897	)
Income (loss) from discontinued operations		5,694			(143,336	)		3,439			(211,738	)
Gain from sale of discontinued operations		216,069			-			216,069			-
Income (loss) from discontinued operations	$	221,763		$	(143,336	)	$	219,508		$	(211,738	)

As a result of meeting the discontinued operations/assets held for sale criteria for Cards Plus and the MultiPay operations, the assets and liabilities have been reclassified as assets held for sale as of the respective balance sheet date as follows:

	June 30, 2023		December 31,
	(Unaudited)		2022
Discontinued Operations
Current Assets:
Cash	$	-	$	2,703
Accounts receivable, net		-		105,194
Other current assets		-		10,562
Current assets held for sale		-		118,459
Noncurrent Assets:
Property and equipment, net		-		27,595
Noncurrent assets held for sale		-		27,595
Total assets held for sale	$	-	$	146,054
Current Liabilities:
Accounts payable and accrued expenses	$	-	$	13,759
Total liabilities held for sale	$	-	$	13,759

As a result of meeting the discontinued operations/assets held for sale criteria for Cards Plus and the MultiPay operations, the cash flow activity related to discontinued operations is presented separately on the statement of cash flows as summarized below (unaudited):

	Six Months Ended June 30,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	3,439		$	(407,030	)
Adjustments to reconcile net loss with cash flows from operations:
Depreciation and amortization expense		8,067			39,774
Impairment of intangible assets		-			211,703
Changes in operating assets and liabilities:
Accounts receivable		105,194			6,332	)
Net investment in direct financing lease		-			(17,306
Other current assets		10,562			106,920	)
Inventory		-			(140,653	)
Accounts payable and accrued expenses		(13,759	)		(11,425
Deferred revenue		-			227,078
Adjustments relating to discontinued operations		110,064			422,423
Cashflows from discontinued operations	$	113,503		$	15,393

Notes to Financial Statements – Discontinued Operations

Revenue Recognition

Cards Plus – The Company recognized revenue for the design and production of cards at the point in time when products are shipped, or services have been performed due to the short-term nature of the contracts. Additionally, the cards produced by the Company have no alternative use and the Company has an enforceable right to payment for work performed should the contract be cancelled.

MultiPay recognized revenue for variable fees generated for payment processing solutions that are earned on a usage fee over time based on monthly transaction volumes or on a monthly flat fee rate. Additionally, MultiPay also sells certain equipment from time to time for which revenue is recognized upon delivery to the customer.

NOTE 11 – DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

The Board of Directors of authID considers it in the best interests of the Company to focus its business activities on providing biometric authentication products and services by means of our proprietary Verified platform.  Accordingly, on May 4, 2022, the Board approved a plan to exit from certain non-core activities comprising the MultiPay correspondent bank, payments services in Colombia and the Cards Plus cards manufacturing and printing business in South Africa.

Cards Plus business in South Africa

The financial statements of Cards Plus are classified as a discontinued operation and an asset held for sale, as all required classification criteria under appropriate accounting standards were met as of December 31, 2022.

On August 29, 2022, the Company completed the sale of Cards Plus for a price of $300,000 of which $150,000 was received and the remaining balance of $150,000 recorded in other current assets is expected to be received within one year, less $3,272 in costs to sell, and recognized a loss of $188,247 from the transaction. The following table summarizes the assets and liabilities of the Cards Plus sale and the consideration received:

Carrying value of net assets sold:	Amount
Cash	$	299,505
Accounts receivable		61,879
Inventory		231,955
Other current assets		1,490
Total current assets		594,829
Property and equipment		21,127
Total assets		615,956
Accounts payable		76,094
Accrued expenses		43,728
Deferred revenue		11,159
Total current liabilities		130,981
Net assets sold	$	484,975
Sale Consideration on disposition of net assets:
Proceeds	$	300,000
Legal fee		(5,511	)
Write off net payable with CP		2,239
Net Consideration		296,728
Net loss on sale of a discontinued operation	$	(188,247	)

MultiPay business in Colombia

The Company is exiting the MultiPay business in Colombia in an orderly fashion, honoring our obligations to employees, customers and under applicable laws and regulations.  We maintain our customer support and operations team in Bogota, which performs essential functions to support the global operations of our Verified product.

As of December 31, 2022, all impacted employees left the Company. The Company also paid to each employee their severance packages under the MultiPay’s retention plan and obligations under the appropriate statutes.

As of December 31, 2022, MultiPay is working with a major customer to implement a transition plan to provide an essential service for certain bill pay services which will likely result in the sale of the Company’s proprietary software as well as the assumption of certain expenses.

The Company incurred costs of $196,500 which was paid as of December 31, 2022 associated with the exit of the MultiPay business and approximately $41,000 for accelerated amortization (non-cash) for certain technology licenses.

MultiPay has accelerated the depreciation of certain assets with the effective date of the announcement to reflect the estimated remaining useful life.

The operations of Cards Plus and MultiPay for the years ended December 31, 2022 and 2021 on a consolidated basis are below:

	For the Year Ended December 31,
Discontinued Operations	2022			2021
Discontinued Operations Total Revenues, net	$	1,503,333		$	1,678,780
Operating Expenses:
Cost of sales		665,269			653,773
General and administrative		1,021,649			1,892,783
Impairment loss		143,698			-
Depreciation and amortization		41,850			102,513
Total operating expenses		1,872,466			2,649,069
Loss from operations		(369,133	)		(970,289	)
Other Income (Expense):
Other income		10,161			27,188
Interest expense,  net		(364	)		(5,164	)
Other income, net		9,797			22,024
Loss before income taxes		(359,336	)		(948,265	)
Income tax expense		(7,327	)		(6,030	)
Loss from discontinued operations		(366,663	)		(954,295	)
Loss from sale of discontinued operations		(188,247	)		-
Total loss from discontinued operations	$	(554,910	)	$	(954,295	)

	For the Year Ended December 31,
	2022			2021
Cards Plus
Total Revenues, net	$	1,263,672		$	1,318,029
Operating Expenses:
Cost of sales		665,269			653,773
General and administrative		412,243			606,110
Impairment loss		143,698			-
Depreciation and amortization		24,451			80,692
Total operating expenses		1,245,661			1,340,575
Income (Loss) from operations		18,011			(22,546	)
Other Income (Expense):
Other income (expense), net		8,919			6,867
Interest expense,  net		(364	)		(5,164	)
Other income, net		8,555			1,703
Income (Loss) before income taxes		26,566			(20,843	)
Income tax expense		(4,681	)		-
Income (Loss) from discontinued operations		21,885			(20,843	)
Loss from sale of discontinued operations		(188,247	)		-
Total income (loss) from discontinued operations	$	(166,362	)	$	(20,843	)

	For the Year Ended December 31,
	2022			2021
MultiPay
Total Revenues, net	$	239,661		$	360,751
Operating Expenses:
General and administrative		609,406			1,286,673
Depreciation and amortization		17,399			21,821
Total operating expenses		626,805			1,308,494
Loss from operations		(387,144	)		(947,743	)
Other Income:
Other income, net		1,242			20,321
Other income		1,242			20,321
Loss before income taxes		(385,902	)		(927,422	)
Income tax expense		(2,646	)		(6,030	)
Loss from discontinued operations	$	(388,548	)	$	(933,452	)

As a result of meeting the discontinued operations/assets held for sale criteria for Cards Plus and the MultiPay operations, the assets and liabilities have been reclassified as assets held for sale as of the respective balance sheet date as follows:

	December 31, 2022		December 31 2021
Discontinued Operations Current Assets:
Cash	$	2,703	$	270,707
Accounts receivable, net		105,194		110,977
Inventory		-		153,149
Other current assets		10,562		94,919
Current assets held for sale		118,459		629,752
Noncurrent Assets:
Property and equipment, net		27,595		93,132
Intangible assets		-		153,004
Other assets		-		66,695
Noncurrent assets held for sale		27,595		312,831
Total assets held for sale	$	146,054	$	942,583
Current Liabilities:
Accounts payable and accrued expenses	$	13,759	$	235,348
Deferred revenue		-		47,823
Notes payable obligation, current  portion		-		1,579
Capital lease obligation, current portion		-		10,562
Total liabilities held for sale	$	13,759	$	295,312

	December 31, 2022		December 31 2021
Cards Plus Current Assets:
Cash	$	-	$	182,518
Accounts receivable, net		-		88,235
Inventory		-		153,149
Other current assets		-		52,678
Current assets held for sale		-		476,580
Noncurrent Assets:
Property and equipment, net		-		24,619
Intangible assets		-		153,004
Noncurrent assets held for sale		-		177,623
Total assets held for sale	$	-	$	654,203
Current Liabilities:
Accounts payable and accrued expenses	$	-	$	122,725
Deferred revenue		-		47,823
Notes payable obligation, current  portion		-		1,579
Capital lease obligation, current portion		-		1,056
Total liabilities held for sale	$	-	$	173,183

	December 31, 2022		December 31 2021
MultiPay Current Assets:
Cash	$	2,703	$	88,189
Accounts receivable, net		105,194		22,742
Other current assets		10,562		42,241
Current assets held for sale		118,459		153,172
Noncurrent Assets:
Property and equipment, net		27,595		68,513
Other assets		-		66,695
Noncurrent assets held for sale		27,595		135,208
Total assets held for sale	$	146,054	$	288,380
Current Liabilities:
Accounts payable and accrued expenses	$	13,759	$	112,623
Total liabilities held for sale	$	13,759	$	112,623

As a result of meeting the discontinued operations/assets held for sale criteria for Cards Plus and the MultiPay operations, the cash flow activity related to discontinued operations is presented separately on the statement of cash flows as summarized below:

	Year Ended December 31,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(366,663	)	$	(954,295	)
Adjustments to reconcile net loss with cash flows from operations:
Depreciation and amortization expense		41,850			102,513
Impairment of intangible assets		143,698			-
Provision of Net Investment in direct financing lease		-			422,022
Changes in operating assets and liabilities:
Accounts receivable		(50,598	)		18,722
Net investment in direct financing lease		-			96,487
Other current assets		170,536			88,345
Inventory		(78,806	)		96,930
Accounts payable and accrued expenses		(102,486	)		(115,870	)
Deferred revenue		(36,664	)		(82,594	)
Adjustments relating to discontinued operations		87,530			626,555
Net cash flows from discontinued operations	$	(279,133	)	$	(327,740	)

Notes to Financial Statements – Discontinued Operations

Inventories

Inventory of plastic/ID cards, digital printing material, which were held by Cards Plus Pty Ltd., were at the lower of cost (using the average method) or market.

As of December 31, 2021, the Company recorded an inventory valuation allowance of approximately $20,000 to reflect net realizable value of the cards inventory. Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings in the current period.

As of December 31, 2022, inventories decreased to zero as the Company completed the sale of Cards Plus business on August 29, 2022.

Revenue Recognition

Cards Plus – The Company recognized revenue for the design and production of cards at the point in time when products are shipped, or services have been performed due to the short-term nature of the contracts. Additionally, the cards produced by the Company have no alternative use and the Company has an enforceable right to payment for work performed should the contract be cancelled. As of December 31, 2021, Cards Plus had approximately $48,000 of contract liability from payments received in advance that will be earned in future periods. Contract liability decreased to zero as the Company completed the sale of Cards Plus business on August 29, 2022.

MultiPay recognizes revenue for variable fees generated for payment processing solutions that are earned on a usage fee over time based on monthly transaction volumes or on a monthly flat fee rate. Additionally, MultiPay also sells certain equipment from time to time for which revenue is recognized upon delivery to the customer.

Revenue related to direct financing leases is outside the scope of Topic 606 and is recognized over the term of the lease using the effective interest method.

Impairment loss

During the year ended December 31, 2022, Cards Plus recorded an impairment loss of zero and approximately $143,000, respectively associated with its intangible assets.

Leases

In October 2021, MultiPay entered into a one-year lease for approximately $2,900 per month in Bogota, Colombia. MultiPay terminated the lease as of September 30, 2022.

Cards Plus leased space for its operations in South Africa. The facility was rented on a month-to-month basis with monthly rent of approximately $8,000 through August 29, 2022 as the Company completed the sale of Cards Plus business.

Cards Plus entered into a lease in March 2017 for the rental of its printer for its secured plastic and credential card products business under an arrangement that is classified as a finance lease. The leased equipment was amortized on a straight-line basis over its lease term including the last payment (61 payments) and ownership transferred to the Company. The lease was fully paid off.