AUID · Read the filing

Item 7. Management’s Discussion and Analysis of Financial

Condition and Results of Operations

The discussion and analysis

of our financial condition and results of operations are based on our financial statements, which we have prepared in accordance with

accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of these financial

statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure

of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the

reporting periods. On an ongoing basis, we evaluate estimates and judgments, including those described in greater detail below. We base

our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results

of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other

sources. Actual results may differ from these estimates under different assumptions or conditions.

As used in this “Management’s

Discussion and Analysis of Financial Condition and Results of Operation,” except where the context otherwise requires, the term

“we,” “us,” “our,” or “the Company,” refers to the business of Ipsidy Inc.

Overview

Ipsidy Inc. dba authID.ai

(together with its subsidiaries, the “Company”, “authID.ai”, “we” or “our”) is a

leading provider of secure, mobile, biometric identity verification software products delivered by an easy to integrate Identity as a

Service (IDaaS) platform. Our mission is ultimately to eliminate all passwords and to be the preferred global platform for biometric identity

authentication. Our vision is to enable every organization to “Recognise Your Customer” instantly, without friction or loss

of privacy, powered by the most sophisticated biometric and artificial intelligence technologies.

The explosive growth in online

and mobile commerce, telemedicine, remote working and digital activities of all descriptions is self-evident to everyone who lived through

the Covid 19 since 2020. Identity theft, phishing attacks, spear-phishing, password vulnerabilities, account takeovers, benefits fraud

- it seems like these words have entered our daily lexicon overnight. These are significant impediments to the operations and growth of

any business or organization, and dealing with the risks and consequences of these criminal activities has created significant friction

in both time, cost and lost opportunity. Consider all the outdated methods that organizations have implemented in order to prevent fraud.

The requests to receive and enter one-time passwords, that can be easily hijacked. The vulnerable security questions you get asked –

whether on-line or when reaching out to a call center – what was your first pet’s name? who was your best friend in high school?

These steps all add up to friction, making it difficult for consumers to login, transact and execute daily tasks, with little added protection

from fraud. Surely there is a better way to address these challenges? authID.ai believes there is.

authID.ai provides secure,

facial biometric, identity verification, and strong customer authentication. We maintain a global, cloud-based IDaaS platform for our

enterprise customers to enable their users to easily verify and authenticate their identity through a mobile device or desktop (with camera)

of their choosing (without requiring dedicated hardware, or authentication apps). We can help our customers establish a proven identity,

creating a root of trust that ensures the highest level of assurance for our passwordless login and step-up verification products. Our

system enables participants to consent to transactions using their biometric information with a digitally signed authentication response,

embedding the underlying transaction data and each user’s identity attributes within every electronic transaction message processed

through our platform.

Digital transformation across

all market segments requires trusted identity. Our identity platform offers innovative solutions that are flexible, fast and easy to integrate

and offer seamless user experiences. authID’s products help advance digital transformation efforts without the fear of identity

fraud, while delivering frictionless user experiences. We believe that it is also essential that electronic transactions have an audit

trail, proving that the identity of the individual was duly authenticated. Our platform provides biometric and multi-factor identity software,

which are intended to establish, authenticate and verify identity across a wide range of use cases and electronic transactions.

authID’s products focus

on the broad requirement for enabling frictionless commerce by allowing an entity to instantly “Recognise their Customer”.

Organizations of all descriptions require cost-effective and secure means of growing their business while mitigating identity fraud. We

aim to offer our enterprise customers products that can be integrated easily into each of their business and organizational operations,

in order to facilitate their adoption and enhance the end user customer experience.

Our management believes that

some of the advantages of our IDaaS Platform approach are the ability to leverage the platform to support a variety of vertical markets

and the adaptability of the platform to the requirements of new markets and new products requiring cost-effective, secure, and configurable

mobile solutions. Our target markets include banking, fintech and other disrupters of traditional commerce, small and medium sized businesses,

and system integrators working with government and Fortune 1000 enterprises. At its core, the Company’s offering, combining its

proprietary and acquired biometric and artificial intelligence technologies (or AI), is intended to facilitate frictionless commerce,

whether in the physical or digital world. The Company intends to increase its investment in developing, patenting and acquiring the various

elements necessary to enhance the platform, which are intended to allow us to achieve our goals. One of the principal intended areas of

investment is to enhance and expand our use of artificial intelligence in proprietary software, that we believe will increase our value

to enterprise customers and stockholders alike.

authid.ai is dedicated to

developing advanced methods of protecting consumer privacy and deploying ethical and socially responsible AI. authID is developing a culture

that proactively encourages and rewards our employees for considering the ethical implications of our products. We believe that a proactive

commitment to ethical AI presents a strong business opportunity for authID and will enable us to bring more accurate products to market

more quickly and with less risk to better serve our global user base. Our methods to achieve ethical AI include engaging the users of

our products with informed consent, prioritizing the security of our user’s personal information, considering and avoiding potential

bias in our algorithms, and monitoring of algorithm performance in our applications.

The Company also owns an entity

in South Africa Cards Plus which manufactures secure plastic identity credentials and loyalty card products.

Ipsidy Inc. (formerly ID Global

Solutions Corporation) (formerly IIM Global Corporation) (formerly Silverwood Acquisition Corporation) was incorporated on September 21,

2011, under the laws of the State of Delaware to engage in any lawful corporate undertaking, including, but not limited to, selected mergers

and acquisitions. In order to better align the branding of our Company with our future focus and goals on June 14, 2021, we changed our

business name to “authID.ai”. Ipsidy has been in the developmental stage since inception.

The Company’s headquarters are in Long Beach,

New York.

Key Trends

We believe that our financial

results will be impacted by several market trends in the identity verification and authentication markets, as well as expanding digital

transformation efforts across a wide range of market segments. These trends include growing concerns over identity theft and fraud, in

part resulting from the impact of the Coronavirus pandemic on the acceleration of digital transformation, for example online shopping

and remote working; the growth in the sharing economy; and the increase in electronic payments and alternative money transfer solutions

provided by both bank and non-bank entities. The key drivers for these alternative payment methods are consumer demands for safe, convenient

payment transactions, with less friction. Our results are also impacted by the changes in levels of spending on identity verification,

management and security methods, and thus, negative trends in the global economy and other factors which negatively impact such spending

may negatively impact the growth our revenue from those products. The global economy has been undergoing a period of political and economic

uncertainty and stock markets are experiencing high levels of volatility, and it is difficult to predict how long this uncertainty and

volatility will continue.

We plan to grow our business

by increasing the use of our services by our existing customers, by adding new customers through our channel partners and by expanding

into new markets and innovation. If we are successful in these efforts, we would expect our revenue to continue to grow. In addition,

based on the positive trends in the international payment processing industry noted above, we anticipate that as and when more payments

are made using electronic and mobile methods, such as those that we offer, our revenue would also increase.

Going Concern

These consolidated financial

statements have been prepared in accordance with United States generally accepted accounting principles (GAAP) assuming the Company will

continue as a going concern basis, which implies the Company will continue to meet its obligations and continue its operations for the

next year following the issuance date of these financial statements.

As of December 31, 2021, the

Company had an accumulated deficit of approximately $115.9 million. For the year ended December 31, 2021, the Company earned revenue of

approximately $2.3 million, used $8.8 million to fund its operations, and incurred a net loss of approximately $17.7 million.

The continuation of the Company as a going concern

is dependent upon financial support from the Company’s current shareholders, the ability of the Company to obtain additional debt

or equity financing to continue operations, the Company’s ability to generate sufficient cash flows from operations, successfully

locating and negotiating with other business entities for potential acquisition and /or acquiring new clients to generate revenues and

cash flows.

As discussed in the subsequent event below, the Company has secured

additional financing which provide adequate funding for its operations as it continues to invest in its product, people, and technology.

The Company projects that the investments will lead to revenue expansion thereby reducing liquidity needs. The Company may need additional

capital in the future but currently it believes it has the required funds to operate its business through a period no less than one year

from the issuance date of the consolidated financial statements.

Subsequent Event

On March 21, 2022, the Company entered into a

Securities Purchase Agreement (“SPA”) with certain accredited investors, including certain directors of the Company

or their affiliates (the “Note Investors”), and, pursuant to the SPA, sold to the Note Investors Senior Secured Convertible

Notes (the “Convertible Notes”) with an aggregate initial principal amount of approximately $9.2 million and an

initial conversion price of $3.70 per share. Also on March 21, 2022, the Company entered into a Facility Agreement the (“Facility

Agreement") with Stephen J. Garchik, who is both a current shareholder of the Company and a Note Investor (“Garchik”),

pursuant to which Garchik agreed to provide to the Company a $10.0 million unsecured standby line of credit facility that will rank behind

the Convertible Notes and may be drawn down in several tranches, subject to certain conditions described in the Facility Agreement. Pursuant

to the Facility Agreement, the Company agreed to pay Garchik a facility commitment fee of 100,000 shares of our common stock upon the

effective date of the Facility Agreement. On March 18 and March 21, 2022, the Company entered into Subscription Agreements (the “Subscription

Agreements”) with an accredited investor and certain members of authID.ai’s management team (the “PIPE Investors”),

and, pursuant to the Subscription Agreements, sold to the PIPE Investors a total of 1,063,514 shares of our common stock (the “Other

Stock”) at prices of $3.03 per share for an outside investor and $3.70 per share for the management investors (the “PIPE”).

The aggregate gross proceeds from the PIPE are approximately $3.3 million before expenses. The Company expects to use the net proceeds

from the Notes Private Placement, the PIPE and cash drawn under the Facility Agreement to fund operating expenses and for general working

capital, fees and expenses. As of March 21, 2022 The Company has received approximately $11,659,000 and is expecting to receive another

$625,000 in cash from the sale of the Convertible Notes and the PIPE.

Critical Accounting Policies and Estimates

Our significant accounting

policies are more fully described in the notes to our consolidated financial statements. Those material accounting estimates that we believe

are the most critical to an investor’s understanding of our financial results and condition are discussed immediately below and

are particularly important to the portrayal of our financial position and results of operations and require the application of significant

judgment by our management to determine the appropriate assumptions to be used in the determination of certain estimates.

Use of Estimates

In preparing these consolidated

financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that may affect the reported

amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements

and the reported amount of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Revenue Recognition

Below is the Company’s

revenue recognition policy determined by revenue stream for its significant revenue generating activities.

Cards Plus - The Company

recognizes 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.

Payment Processing –

The Company 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, the Company also sells certain equipment from time to time

for which revenue is recognized at a point in time the equipment is delivered to the customer.

Identity Solutions Software

– The Company recognizes revenue based on the identified performance obligations over the performance period for fixed consideration

and /or variable fees generated that are earned on a usage fee based over time based on monthly user or transaction volumes or on a monthly

flat fee rate. We allocate the selling price in the contract to one customer which has multiple performance obligations based on the contract

selling price that we believe represents a fair market price for the service rendered based on estimated standalone selling price.

All contracts are reviewed

for their respective performance obligations and related revenue and expense recognition implications. Certain of the revenues are derived

from the identity services could include multiple performance obligations. A performance obligation under the revenue standard is defined

as a promise to provide a “distinct” good or service to a customer. The Company has determined that one possible treatment

under the standard is that these services will represent a stand-ready series of distinct daily services that are substantially the same,

with the same pattern of transfer to the customer. Further, the Company has determined that the performance obligation to provide account

access and facilitate transactions may meet the criteria for the “as invoiced” practical expedient, in that the Company has

a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the Company’s

performance completed to date. As a result, the Company anticipates it may recognize revenue in the amount to which the Company has a

right to invoice, based on completed performance at the relevant date. Additionally, the contracts could include implementation services,

or support on an “as needed” basis and we will review each contract and determine whether such performance obligations are

separate and distinct and apply the standard accordingly to the revenue and expense derived from or related to each such service. During

both 2021 and 2020, the Company provided annual software maintenance support services relating to previously licensed software on a stand-ready

basis. These fees were billed in advance and recognized ratably over the requisite service period as revenue.

Additionally, the Company

capitalizes the incremental costs of acquiring and fulfilling a contract with a customer if the Company expects to recover those costs.

The incremental costs of acquiring and fulfilling a contract are those that the Company incurs to acquire and fulfill a contract with

a customer that it would not have incurred if the contract had not been acquired (for example, a sales commission or specific incremental

costs associated with the contract).

Financing revenue related

to direct financing leases is recognized over the term of the lease using the effective interest rate method.

Accounts Receivable

All customers are granted

credit on a short-term basis and related credit risks are considered minimal. The Company routinely reviews its trade receivables and

makes provisions for probable doubtful accounts; however, those provisions are estimates and actual results could differ from those estimates

and those differences may be material. Trade receivables are deemed uncollectible and removed from accounts receivable and the allowance

for doubtful accounts when collection efforts have been exhausted. On December 31, 2021, the Company had an allowance for doubtful accounts

of $7,500 and on December 31, 2020 no allowance for doubtful accounts was necessary.

Inventories

Inventory of plastic/ID cards,

digital printing material, which are held by Cards Plus Pty Ltd., are at the lower of cost (using the average method) or market. The Plastic/ID

cards and digital printing material are used to provide plastic loyal ID and other types of cards

Inventories as of December

31, 2021 and December 31, 2020, consist solely of cards inventory. As of December 31, 2021 and December 31, 2020, the Company recorded

an inventory valuation allowance of approximately $20,000 and $18,000, respectively, 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.

Other Assets – Software Development Costs

Other assets includes when

applicable, costs associated with software development of new product offerings and enhancements to existing applications. Research &

development costs are expensed as incurred. Development costs of computer software to be sold, leased or otherwise marketed are subject

to capitalization beginning when a product’s technological feasibility has been established and ending when a product is available

for general release to customers. As of December 31, 2021, all assets have been placed into service. As of December 31, 2020, a portion

of the software was still under development and had not been placed in service. Upon completion, the amounts were transferred to the appropriate

asset category and expensed over their estimated useful lives. In 2021 and 2020, approximately $0 million and $0.4 million respectively

of software development costs were placed into service and classified as internally developed software.

Goodwill

Goodwill is recorded when

the purchase price paid for an acquisition exceeds the fair value of net identified tangible and intangible assets acquired. The Company

performs an annual impairment test of goodwill and further periodic tests to the extent indicators of impairment develop between annual

impairment tests. The Company’s impairment review process compares the fair value of the reporting unit to it carrying value, including

the goodwill related to the reporting unit utilizing qualitative considerations. To determine the fair value of the reporting unit, the

Company may use various approaches including an asset or cost approach, market approach or income approach or any combination thereof.

These approaches may require the Company to make certain estimates and assumptions including future cash flows, revenue and expenses.

These estimates and assumptions are reviewed each time the Company tests goodwill for impairment and are typically developed as part of

the Company’s routine business planning and forecasting process. While the Company believes its estimates and assumptions are reasonable,

variations from those estimates could produce materially different results.

During the year ended December

31, 2021, the Company’s projection and assessment did not indicate that an impairment charge was required as its fair value was

in excess of carrying value.

During the year ended December 31, 2020, the Company updated our projections

associated with our reporting units and it indicated that the carrying value may not be recovered as revenue assumptions were not met.

The goodwill impairment loss for the year ended December 31, 2020, was approximately $1.0 at one of its reporting units.

The fair value of the reporting

unit in both years was determined using discounted cash flow as well as future realizable value.

Intangible Assets

Excluding goodwill, acquired

intangible assets and internally developed software are amortized over their estimated useful lives which is currently five to ten years.

Acquired amortizing intangible assets are carried at cost, less accumulated amortization. Internally developed software costs are capitalized

upon reaching technological feasibility.

Impairment of Long-Lived Assets

Long-lived assets are reviewed

for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability

of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows

expected to be generated by the asset.

If the carrying amount of

an asset exceeds its undiscounted estimated future cash flows, an impairment review is performed. An impairment charge is recognized in

the amount by which the carrying amount of the asset exceeds the fair value of the asset. Generally fair value is determined using valuations

techniques such as expected discounted cash flows or appraisals, as appropriate. Assets to be disposed of would be separately presented

in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell and are no longer depreciated.

The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and

liability sections of the balance sheet. During the year ended December 31, 2021, the Company determined that certain intangibles assets

would not be recovered and an impairment expense of approximately $831,000 was recognized. During the year ended December 31, 2020, the

Company impaired intangible assets of approximately $297,000 at one of the reporting units as the carrying amount was in excess its recoverable

amount.

Research and Development Costs

Research and development costs

consist of expenditures for the research and development of new products and technology. These costs are primarily expenses to vendors

contracted to perform research projects and develop technology for the Company’s products. Research and development costs are expensed

as incurred.

Stock-based compensation

The Company has accounted

for stock-based compensation under the provisions of FASB ASC 718 – “Stock Compensation” which requires the use of the

fair-value based method to determine compensation for all arrangements under which employees and others receive shares of stock or equity

instruments (stock options and common stock purchase warrants). For both employee and non-employee awards, the fair value of each stock

option award is estimated on the date of grant using the Black-Scholes valuation model that uses assumptions for expected volatility,

expected dividends, expected term, and the risk-free interest rate. . Expected volatilities are based on historical volatility of peer

companies and other factors estimated over the expected term of the stock options. For employee awards, the expected term of options granted

is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus the

contract term. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected

term.

Recent Accounting Pronouncements

In January 2017, the FASB

issued Accounting Standards Update (“ASU”) 2017-04, “Intangibles-Goodwill and Other: Simplifying the Test for Goodwill

Impairment” (ASU 2017-04). The standard simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill

impairment test. Under the amendments of ASU 2017-04, an entity should perform its goodwill impairment test by comparing the fair value

of a reporting unit with it carrying amount. An entity will recognize an impairment charge for the amount by which the carrying amount

exceeds the reporting unit’s fair value, but the loss cannot exceed the total amount of goodwill allocated to the reporting unit.

The Company adopted ASU 2017-04 for the calendar year ending December 31, 2021, the effective date for adoption. The adoption of this

standard did not have a have a material impact on the Company’s financial statements.

Adjusted EBITDA.

This discussion includes information

about Adjusted EBITDA that is not prepared in accordance with U.S. GAAP. Adjusted EBITDA is not based on any standardized methodology

prescribed by U.S. GAAP and is not necessarily comparable to similar measures presented by other companies. A reconciliation of this non-GAAP

measure is included below.

Adjusted EBITDA is a non-GAAP

financial measure that represents U.S. GAAP net income (loss) adjusted to exclude (1) interest expense, (2) interest income, (3)

provision for income taxes, (4) depreciation and amortization, (5) stock-based compensation expense (stock options and restricted stock)

and (6) certain other items management believes affect the comparability of operating results. Other items included the following:

● Severance cost of $0.3 million in 2021 and $0.4 million in 2020

● Impairment loss of $1.3 million in 2020

● Warrant inducement expense of $0.4 million in 2020.

Management believes that Adjusted

EBITDA, when viewed with our results under U.S. GAAP and the accompanying reconciliations, provides useful information about our period-over-period

results. Adjusted EBITDA is presented because management believes it provides additional information with respect to the performance of

our fundamental business activities and is also frequently used by securities analysts, investors and other interested parties in the

evaluation of comparable companies. We also rely on Adjusted EBITDA as a primary measure to review and assess the operating performance

of our company and our management, and it will be a focus as we invest in and grow the business.

Adjusted EBITDA has limitations

as an analytical tool, and you should not consider it in isolation from, or as a substitute for, analysis of our results as reported under

GAAP. Some of these limitations are:

Because of these limitations,

adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We

compensate for these limitations by relying primarily on our U.S. GAAP results and using Adjusted EBITDA only as a supplement to our U.S.

GAAP results.

Reconciliation of Net Loss to Adjusted EBITDA

For the Year Ended

Add Back:

Warrant exercise inducement expense - 366,795

The increase in Adjusted EBITDA loss in 2021 compared to 2020 is principally

due to the investment in people, technology and marketing associated with the rebranding of the Company and the improvement of its core

products as well as recording a reserve for $0.5 million at its Colombia operations principally for receivables.

Results of Operations and

Financial Condition for the Year Ended December 31, 2021 as Compared to the Year Ended December 31, 2020

Revenues

For the year ended December

31, 2021 compared to the year ended December 31, 2020, the Company’s revenue increased to $2.3 million from $2.1 million, or $0.2

million. The increase in revenue for the year ended December 31, 2021 is principally due to the increase in revenue from 2020 at Cards

Plus due to the impact of Covid-19 pandemic. 2021 Identity and Colombian revenue were on par with 2020, respectively.

Cost of sales

During the years ended December

31, 2021 and December 31, 2020, cost of sales was $0.7 million in both periods. Costs of sales as a percentage of revenue was slightly

higher in the year ended December 31, 2021 compared to December 31, 2020 due to lower margin revenue at Cards Plus.

General and administrative

General and administrative expenses for the year ended December 31,

2021, increased by approximately $9.2 million compared to the same period in 2020 due to increased compensation, marketing and technology

costs in addition to higher non-cash stock compensation charges. Stock compensation charges were $6.7 million in 2021 compared to $0.8

million in 2020. Additionally, the Company incurred higher expenses as it invested in people, technology and marketing as it rebranded

the Company and continues to improve and focus its core products as well as recording a reserve for $0.5 million at its Colombia operations

principally for receivables.

Research and development

During the year ended December

31, 2021, compared to the year ended December 31, 2020, research and development expenses increased by approximately $0.5 million as the

Company focused resources on key product initiatives.

Impairment loss

During the year ended December

31, 2021, the Company recorded an impairment loss of approximately $831,000 related to a customer list and certain intellectual property

from our 2016 acquisition due to the loss of the major customer as they decommissioned the product.

During the year ended December

31, 2020, the Company recorded a goodwill impairment loss of approximately $1.0 million, associated with goodwill at a reporting unit

based in Africa. Additionally, in the year ended December 31, 2020, the Company recorded an impairment on intangible assets of approximately

$0.3 million at a reporting unit in Latin America as the carrying value was in excess of its estimated recoverable value. As a result

of the pandemic and its potential impact on future results, the Company updated its reporting unit projections and these indicated impairments

for either goodwill or intangible assets were required as the carrying value may not be recovered as revenue assumptions and related revenue

were revised downward. The fair value of the reporting unit was determined using discounted cash flow.

Depreciation and amortization

expense was approximately the same during the year ended December 31, 2021, compared to December 31, 2020.

Interest Expense

Interest expense decreased

during the year ended December 31, 2021 compared to the year ended December 31, 2020, as the Company received conversion notices from

the majority of convertible noteholders in June 2021 and converted the majority of the Company’s outstanding indebtedness into common

shares, thereby reducing its interest obligation.

Other Income (Expense)

During the year ended December

31, 2021, the Company recorded a gain on the extinguishment of debt for two Paycheck Protection Program loans as the Company met the applicable

requirements.

During the year ended December

31, 2020, the Company recorded a charge of approximately $986,000 related to the amendment of a promissory note which was treated as an

extinguishment of a note payable and a charge of $367,000 in connection with the inducement to certain warrant holders to exercise their

outstanding warrants.

Ukraine

The war in the Ukraine may

impact the Company and its operations in a number of different ways, which are yet to be fully assessed and are therefore uncertain. The

Company’s principal concern is for the safety of the personnel who support us from that region. The Company works with third party

sub-contractors for outsourced services, including software engineering and development, some of whom are based in Eastern Europe, including

Russia and Ukraine. The Company also works with outsourced engineers and developers and third-party providers in other parts of the world,

including the United States, Europe, India, South Africa and South America. While the continuing impact of this conflict and the response

of the United States and other countries to it by means of trade and economic sanctions, or other actions is still unknown, it could disrupt

our ability to work with certain contractors The Company has taken steps to diversify its sub-contractor base, which may in the short

term give rise to additional costs and delays in delivering software and product upgrades.

The uncertainty impacting

and potential interruption in energy and other supply chains resulting from military hostilities in Europe and the response of the United

States and other countries to it by means of trade and economic sanctions, or other actions, may give rise to increases in costs of goods

and services generally and may impact the market for our products as prospective customers reconsider additional capital expenditure,

or other investment plans until the situation becomes clearer. On the other hand, the threat of increased cyber-attacks from Russia or

other countries may prompt enterprises to adopt additional security measures such as those offered by the Company.

For so long as the hostilities

continue and perhaps even thereafter as the situation in Europe unfolds, we may see increased volatility in financial markets and a flight

to safety by investors, which may impact our stock price and make it more difficult for the Company to raise additional capital at the

time when it needs to do so, or for financing to be available upon acceptable terms. All or any of these risks separately, or in combination

could have a material adverse effect on our business, financial condition, results of operations, and cash flows.

Covid-19

Covid-19 emerged globally

in December 2019, and it has been declared a pandemic. Covid-19 is still impacting customers, business, results and financial condition

throughout the world. The Company’s day-to-day operations have been impacted differently depending on geographic location and services

that are being performed. The Cards Plus business located in South Africa operations has had limitations on its operations as they are

following the guidance and requirements of the South African government. Our operations in the United States and Colombia have suffered

a lesser immediate impact as most staff can work remotely and can continue to develop our product offerings.

That said we have seen our

business opportunities develop more slowly as business partners and potential customers include Covid-19 considerations. Furthermore,

working remotely can cause a delay in decision making and finalization of negotiations and agreements.

Liquidity and Capital Resources

As of December 31, 2021, current

assets were $6.9 million and current liabilities outstanding amounted to $2.9 million which resulted in net working capital of $4.0 million.

Net cash used by operating

activities was $8.8 million for the year ended December 31, 2021 compared to $4.7 million in 2020. Cash used in operations for 2021 and

2020 was the primarily result of funding the business operations as the Company invested in people, product and marketing as we are developing

and expanding the business.

Net cash used in investing

activities in 2021 and 2020 was approximately $0.1 million and $0.3 million as the Company invested in software development expenditures

which were capitalized.

Net cash provided by financing

activities for 2021 and 2020 was approximately $11.1 million and $8.2 million, which consisted primarily of the net proceeds from the

sale of common stock and the exercise of stock options and warrants in 2021 and the sale of common stock, issuance of convertible notes

payable and exercise of warrants in 2020.

In 2022, the Company will

continue to be opportunistic as well as judicious in raising additional funds to support its operations and investments as it creates

a sustainable organization. There is no guarantee that such financing will be available if available on acceptable terms.

Our growth-oriented business

plan to offer products to our customers will require continued capital investment. Research and development activities and technology

deployment will require continued investment. We raised approximately $11.1 million and $8.2 million and in 2021 and 2020, respectively,

through equity and debt financing at varying terms. In order to implement and grow our operations through December 31, 2023 and achieve

an expected annual revenue stream from our products, we expect that we will need to raise between $17.5 million and $22.5 million dollars.

There is no guarantee that our current business plan will not change, and as a result of such change, we will need additional capital

to implement such business plan. Further, assuming we achieve our expected growth plan, of which there is no guarantee, we will need additional

capital to implement growth beyond our current business plan.

Subsequent Event

On March 21, 2022, the Company

entered into a Securities Purchase Agreement (“SPA”) with certain accredited investors, including certain directors of

the Company or their affiliates (the “Note Investors”), and, pursuant to the SPA, sold to the Note Investors Senior Secured

Convertible Notes (the “Convertible Notes”) with an aggregate initial principal amount of approximately $9.2 million

and an initial conversion price of $3.70 per share. Also on March 21, 2022, the Company entered into a Facility Agreement the (“Facility