Intellicheck Mobilisia (IDN) Risk Analysis

The sectors for all our products are characterized by rapid technological advancements. Significant technological change could render existing technology obsolete. If we are unable to successfully respond to these developments, or do not respond in a cost-effective manner, our business, financial condition, and results of operations will be materially adversely affected.

As of December 31, 2025, we had gross deferred tax assets of approximately $7,145, which were fully offset by a valuation allowance. These deferred tax assets consist primarily of federal and state net operating loss carryforwards of approximately $30,520 at the federal level and $3,670 at the state level. We evaluate the realizability of our deferred tax assets on a quarterly basis in accordance with ASC 740, weighing both positive and negative evidence. Significant factors in this assessment include our cumulative results over the most recent three-year period, projected future taxable income, the nature and timing of reversals of existing temporary differences, and available tax planning strategies. As of December 31, 2025, we were in a three-year cumulative loss position, which represents significant negative evidence under ASC 740, and accordingly we concluded that a full valuation allowance was required. Changes in our future earnings would result in a release of the valuation allowance and recognized in the period which the assessments change, as deemed appropriate under ASC 740. In future periods, if we determine that sufficient positive evidence exists to conclude that it is more likely than not that some or all of our deferred tax assets will be realized, we would reduce or eliminate the valuation allowance, resulting in a non-cash income tax benefit that could be material to our results of operations in the period of release. Any such benefit would not represent a change in cash flows or operating performance. Conversely, if we incur additional losses or determine that the expected future taxable income is insufficient to support the realization of our deferred tax assets, we could be required to increase the valuation allowance, which would result in additional income tax expense. Our federal net operating loss carryforwards include approximately $10,892 generated prior to 2018 that will expire if unused between 2035 and 2037, and approximately $19,628 generated after 2017 that may be carried forward indefinitely but are limited to offsetting 80% of taxable income in any given year. Our ability to utilize these carryforwards could be limited or eliminated by future changes in tax law or by an ownership change as defined under Section 382 of the Internal Revenue Code. We have not completed a formal analysis to determine whether any ownership changes have occurred that could limit our ability to utilize our net operating loss and tax credit carryforwards. If such a change has occurred, or occurs in the future, the annual amount of our carryforwards available to offset taxable income could be materially limited, which could result in a significant increase in our future income tax liability.

We depend, to a significant degree, on the skills, experience and efforts of our executive officers and other key management, technical, finance, sales and other personnel. Our failure to attract, integrate, motivate and retain existing or additional personnel could disrupt or otherwise harm our operations and financial results. We do not carry key man life insurance policies covering any employees. The loss of services of certain of our key employees, an inability to attract or retain qualified personnel in the future, or delays in hiring additional personnel could delay the development of our business and could cause our stock price to decline.

Our SaaS delivery model and internal operations depend heavily on third-party service providers, including cloud infrastructure services, data center operators, and software vendors. We also utilize third-party technology for some critical functions such as facial biometric matching and global document validation. While we implement security measures for our own systems, we do not have direct control over the cybersecurity protocols of these third-party providers. Sophisticated cyber attackers increasingly target these "supply chain" vendors to gain access to downstream customers like us. If a third-party provider is compromised, attackers could infiltrate our systems, access sensitive personal information (PII) of our customers or their end-users or inject malicious code into our software updates. Furthermore, any service outage, ransomware attack, or denial-of-service attack targeting our cloud providers could render our platform unavailable to customers, leading to immediate revenue loss and reputational damage. Under current laws and regulations, we may be held liable for the unauthorized disclosure of sensitive data even if the breach originates with a third-party vendor. Such an event could result in substantial fines, legal claims, termination of customer contracts, and a loss of confidence in our ability to protect sensitive identity data. Under our current governance structure, our Board of Directors oversees cybersecurity risk management as a principal business risk. However, there is no guarantee that our oversight processes or the cybersecurity protocols of our third-party vendors will be sufficient to prevent a material breach. Any such incident would require us to disclose the event under Item 1.05 of Form 8-K, which could lead to immediate negative market reaction and long-term reputational harm.

While we do not operate internationally or maintain direct exposure to conflict zones, our business may be indirectly affected by geopolitical instability through several channels. Export controls, trade restrictions, and economic sanctions imposed in response to international conflicts could limit our ability to procure hardware, software components, or services from affected vendors or geographies, potentially increasing our costs or requiring us to qualify alternative suppliers. In addition, geopolitical disruptions have contributed to volatility in energy markets and data-center operating costs, which may affect the pricing and availability of the cloud infrastructure on which our platform depends. Beyond our own cost structure, geopolitical instability and the inflationary pressures it can generate may adversely affect the businesses of our customers. Our revenue is driven in part by transaction volumes - the number of identity verifications our customers perform in connection with their own commercial activity. If inflationary conditions reduce consumer spending, tighten credit availability, or otherwise slow the business activity of our retail, financial services, or other commercial customers, the volume of transactions processed through our platform could decline, which would negatively affect our revenues. Although we do not currently anticipate material near-term impacts from these conditions, there can be no assurance that future geopolitical developments or sustained inflationary pressures will not adversely affect our vendor relationships, operating costs, customer transaction volumes, or ability to deliver services.