10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q/A

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2017

OR

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the transition period from ________________ to ________________

Commission File No.: 001-15465

Intellicheck, Inc. (f/k/a Intellicheck Mobilisa, Inc.)
(Exact name of Registrant as specified in its charter)

Delaware	11-3234779
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

100 Jericho Quadrangle, Suite 202, Jericho, NY 11753

(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (516) 992-1900

Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer [  ]	Accelerated filer [  ]	Non-accelerated filer [  ]	Smaller reporting company [X]
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Number of shares outstanding of the issuer’s Common Stock:

Class	Outstanding at August 14, 2017
Common Stock, $.001 par value	14,981,633

EXPLANATORY NOTE

This Amendment No. 1 to Quarterly Report on Form 10-Q/A (this “Amended Report”) is being filed with the Securities and Exchange Commission to amend the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2017 (the “Original 10-Q”) of Intellicheck, Inc., solely to furnish XBRL (eXtensible Business Reporting Language) documents under Exhibit 101.

Except for the foregoing, this Amended Report speaks as of the filing date of the Original 10-Q and does not update or discuss any other Company developments after the date of the Original 10-Q. This Amended Report restates only those portions of the Original 10-Q affected by the above changes.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: August 14, 2017	Intellicheck, Inc.
	By:	/s/ William Roof
		William Roof, PhD, MBA
		Chief Executive Officer
	By:	/s/ Bill White
		Bill White
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

INDEX TO EXHIBITS

The following exhibits are filed as part of the Quarterly Report on Form 10-Q:

Exhibit No	Description
31.1	Rule 13a-14(a) Certification of Chief Executive Officer
31.2	Rule 13a-14(a) Certification of Chief Financial Officer
32	18 U.S.C. Section 1350 Certifications
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, William Roof, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Intellicheck, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: August 14, 2017		/s/ William Roof
	Name:	William Roof, PhD, MBA
	Title:	Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bill White, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Intellicheck, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: August 14, 2017		/s/ Bill White
	Name:	Bill White
	Title:	Chief Financial Officer
		(Principal Financial and Accounting Officer)

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of Intellicheck, Inc. (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Quarterly Report on Form 10-Q for the period ended June 30, 2017 of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 14, 2017		/s/ William Roof
	Name:	William Roof, PhD, MBA
	Title:	Chief Executive Officer
		(Principal Executive Officer)

Date: August 14, 2017		/s/ Bill White
	Name:	Bill White
	Title:	Chief Financial Officer
		(Principal Financial and Accounting Officer)

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code) and is not being filed as part of the Form 10- or as a separate disclosure document.

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Document And Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Aug. 14, 2017
Document And Entity Information [Abstract]
Entity Registrant Name	Intellicheck, Inc.
Entity Central Index Key	0001040896
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2017
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		14,981,633
Trading Symbol	IDN
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2017

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Consolidated Balance Sheets - USD ($)	Jun. 30, 2017	Dec. 31, 2016
CURRENT ASSETS:
Cash	$ 1,035,190	$ 3,092,172
Accounts receivable, net of allowance of $74,354 as of June 30, 2017 and December 31, 2016, respectively	775,721	502,126
Inventory	82,127	70,547
Other current assets	354,134	165,473
Total current assets	2,247,172	3,830,318
NOTE RECEIVABLE, net of current portion	94,942	114,909
PROPERTY AND EQUIPMENT, net	232,752	270,776
GOODWILL	8,101,661	8,101,661
INTANGIBLE ASSETS, net	1,996,781	2,154,563
OTHER ASSETS	59,940	61,298
Total assets	12,733,248	14,533,525
CURRENT LIABILITIES:
Accounts payable	93,391	14,140
Accrued expenses	573,416	519,957
Deferred revenue, current portion	695,852	825,538
Total current liabilities	1,362,659	1,359,635
OTHER LIABILITIES:
Deferred revenue, long-term portion	131,330	177,306
Deferred rent		61,133
Total liabilities	1,493,989	1,598,074
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS EQUITY:
Common stock - $.001 par value; 40,000,000 shares authorized; 10,808,027 and 10,718,553 shares issued and outstanding, respectively	10,808	10,719
Additional paid-in capital	117,666,081	117,293,158
Accumulated deficit	(106,437,630)	(104,368,426)
Total stockholders' equity	11,239,259	12,935,451
Total liabilities and stockholders' equity	$ 12,733,248	$ 14,533,525

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Consolidated Balance Sheets (Parenthetical) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Allowance for accounts receivable	$ 74,354	$ 74,354
Common stock, par value	$ .001	$ .001
Common stock, shares authorized	40,000,000	40,000,000
Common stock, shares issued	10,808,027	10,718,553
Common stock, shares outstanding	10,808,027	10,718,553

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Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Income Statement [Abstract]
REVENUES	$ 951,334	$ 940,354	$ 1,663,994	$ 1,891,022
COST OF REVENUES	(204,634)	(191,654)	(314,070)	(354,696)
Gross profit	746,700	748,700	1,349,924	1,536,326
OPERATING EXPENSES
Selling, general and administrative	1,352,361	1,830,147	2,525,244	3,846,923
Research and development	495,048	697,747	865,645	1,617,203
Total operating expenses	1,847,409	2,527,894	3,390,889	5,464,126
Loss from operations	(1,100,709)	(1,779,194)	(2,040,965)	(3,927,800)
OTHER INCOME
Interest and other income	2,156	4,078	5,655	9,193
Net loss	$ (1,098,553)	$ (1,775,116)	$ (2,035,310)	$ (3,918,607)
PER SHARE INFORMATION
Loss per common share - Basic/Diluted	$ (0.10)	$ (0.19)	$ (0.19)	$ (0.42)
Weighted average common shares used in computing per share amounts - Basic/Diluted	10,769,437	9,108,856	10,750,751	9,393,587

XML

Consolidated Statement of Stockholders' Equity (Unaudited) - 6 months ended Jun. 30, 2017 - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Total
Balance at Dec. 31, 2016	$ 10,719	$ 117,293,158	$ (104,368,426)	$ 12,935,451
Balance, shares at Dec. 31, 2016	10,718,553
Cumulative adjustment upon modified retrospective adoption of ASU 2016-09 at Jun. 30, 2017		33,894	(33,894)
Balance after adoption of recent accounting pronouncement at Dec. 31, 2016	10,719	117,327,052	(104,402,320)	12,935,451
Balance after adoption of recent accounting pronouncement, shares at Dec. 31, 2016	10,718,553
Stock-based compensation expense		191,518		191,518
Exercise of stock options	$ 10	10,090		10,100
Exercise of stock options, shares	10,000
Exercise of warrants	$ 62	137,438		137,500
Exercise of warrants, shares	62,500
Vesting of restricted stock	$ 17	(17)
Vesting of restricted stock, shares	16,974
Net loss			(2,035,310)	(2,035,310)
Balance at Jun. 30, 2017	$ 10,808	$ 117,666,081	$ (106,437,630)	$ 11,239,259
Balance, shares at Jun. 30, 2017	10,808,027

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Consolidated Statements of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (2,035,310)	$ (3,918,607)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	208,600	223,170
Noncash stock-based compensation expense	191,518	667,694
Deferred rent	(22,215)	(17,559)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable	(273,595)	342,449
(Increase) in inventory	(11,580)	(2,245)
(Increase) in other current assets	(187,879)	(125,282)
Decrease (increase) in other assets	1,358	(1,498)
Increase in accounts payable and accrued expenses	93,792	166,096
(Decrease) increase in deferred revenue	(175,662)	41,157
Net cash used in operating activities	(2,210,973)	(2,624,625)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(12,794)	(39,316)
Collection of note receivable	19,185	19,249
Net cash provided by (used in) investing activities	6,391	(20,067)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock		1,780,800
Net proceeds from issuance of common stock from exercise of stock options	10,100
Net proceeds from issuance of common stock from exercise of warrants	137,500
Purchase and retirement of common stock		(1,096,608)
Net cash provided by financing activities	147,600	684,192
Net decrease in cash	(2,056,982)	(1,960,500)
CASH, beginning of period	3,092,172	5,953,257
CASH, end of period	$ 1,035,190	$ 3,992,757

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Nature of Business

6 Months Ended

Jun. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Business

1. NATURE OF BUSINESS

Business

Intellicheck, Inc. (the “Company” or “Intellicheck”), formerly known as Intellicheck Mobilisa, Inc., is a leading technology company that is engaged in developing, integrating and marketing threat identification and identity authentication solutions to address challenges that include retail fraud prevention, law enforcement threat identification, and mobile and handheld access control and security for the government, military and commercial markets. Intellicheck’s products include Retail ID™, the industry leading solution for preventing fraud in the retail industry; Age ID™, a smartphone or tablet-based solution for preventing sale of age-restricted products to minors; Law ID™, a smartphone-based solution used by law enforcement officers to identify and mitigate threats; and Defense ID®, a mobile and fixed infrastructure solution for threat identification, identity authentication and access control to military bases and other government facilities.

Intellicheck continues to develop and release innovative products based upon its rich patent portfolio consisting of over 25 patents.

Effective May 16, 2017, the Company formally changed its legal name from Intellicheck Mobilisa, Inc. to Intellicheck, Inc.

Liquidity

For the six months ended June 30, 2017, the Company incurred a net loss of $2,035,310 and used cash in operations of $2,210,973. As of June 30, 2017, the Company had cash of $1,035,190 and an accumulated deficit of $106,437,630. On August 4, 2017, the Company completed a public offering of 4,168,750 shares of its common stock, offered to the public at $2.25 per share resulting in net proceeds to the Company of approximately $8,570,000 after deducting underwriters discounts and commissions paid by the Company. Intellicheck intends to use these net proceeds for general corporate purposes including product development in key markets, the integration of new features into existing new products and expansion of its sales force and engineering personnel. This public offering is referenced in Note 9. Based on the Company’s business plan and cash resources, Intellicheck expects its existing and future resources and revenues generated from operations to satisfy its working capital requirements for at least the next 12 months.

However, if performance expectations fall short or expenses exceed expectations, the Company may need to secure additional financing or reduce expenses to continue operations. Failure to do so would have a material adverse impact on its consolidated financial condition. There can be no assurance that any contemplated additional financing will be available on terms acceptable, if at all. If required, the Company believes it would be able to reduce expenses to a sufficient level to continue as a going concern.

Principles of Consolidation

The consolidated financial statements include the accounts of Intellicheck and its wholly owned subsidiaries, Mobilisa, Inc. (“Mobilisa”) and Positive Access Corporation (“Positive Access”). All intercompany balances and transactions have been eliminated upon consolidation.

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Significant Accounting Policies

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Significant Accounting Policies

2. SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments necessary for a fair presentation of the Company’s consolidated financial position at June 30, 2017 and the consolidated results of operations for the three and six months ended June 30, 2017 and 2016 and consolidated stockholders’ equity and cash flows for the six months ended June 30, 2017. All such adjustments are of a normal and recurring nature. Interim consolidated financial statements are prepared on a basis consistent with the Company’s annual consolidated financial statements. Results of operations for the six month period ended June 30, 2017, are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2017.

The consolidated balance sheet as of December 31, 2016 has been derived from the audited financial statements at that date but does not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements.

References in this Quarterly Report on Form 10-Q to “authoritative guidance” is to the Accounting Standards Codification issued by the Financial Accounting Standards Board (“FASB”).

For further information, refer to the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 completes the joint effort by the FASB and International Accounting Standards Board (“IASB”) to improve financial reporting by creating common revenue recognition guidance for U.S. Generally Accepted Accounting Principles (“GAAP”) and International Financial Reporting Standards (“IFRS”). ASU 2014-09 applies to all companies that enter into contracts with customers to transfer goods or services. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which defers the effective date by one year, with early adoption on the original effective date permitted. As a result, ASU 2014-09 will be effective for annual and interim periods beginning after December 15, 2017.

The Company is in the process of evaluating the impact of its pending adoption of this ASU on revenue transactions, including any impacts on associated processes, systems, and internal controls. The Company’s evaluation includes the determination whether the unit of account (i.e., performance obligations) will change as compared to current GAAP, as well as determining the standalone selling price of each performance obligation. Standalone selling prices under the new guidance may not be substantially different from the Company’s current methodologies of establishing fair value on multiple element arrangements. The Company has started reviewing each of its revenue streams that may have an impact on its consolidated financial statements and is also assessing the capitalizing of its sales commissions upon adoption of the new ASU and is in the process of evaluating the period over which to amortize these capitalized costs. The Company continues to evaluate the impact of this guidance on its consolidated financial statements and any preliminary assessments are subject to change and expects completion of this evaluation in the third quarter of 2017.

On January 1, 2017, the Company adopted ASU No. 2016-09, Improvements to Employee Share Based Payment Accounting which simplifies several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards, forfeitures and classification on the statement of cash flows. ASU 2016-09 allows the Company to make an accounting policy election to either estimate forfeitures or account for forfeitures as they occur. The Company has elected to account for forfeitures as they occur and is required to be applied on a modified retrospective basis. As a result, the Company recorded a cumulative effect adjustment to accumulated deficit and additional paid-in-capital in the amount of $33,894 as of January 1, 2017 on the consolidated balance sheet.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. Significant estimates and assumptions that affect amounts reported in the financial statements include the evaluation of goodwill for impairment, valuation of intangible assets, deferred tax valuation allowances, and the fair value of stock options granted under the Company’s stock-based compensation plans. Due to the inherent uncertainties involved in making estimates, actual results reported in future periods may be different from those estimates.

Allowance for Doubtful Accounts

The Company records its allowance for doubtful accounts based upon its assessment of various factors. The Company considers historical experience, the age of the accounts receivable balances, credit quality of the Company’s customers, current economic conditions and other factors that may affect customers’ ability to pay.

Inventory

Inventory is stated at the lower of cost or market and cost is determined using the first-in, first-out method. Inventory is primarily comprised of finished goods. As of June 30, 2017 and December 31, 2016, the majority of inventory is related to Government and Commercial Identity products for intended near-term sales.

Goodwill

Goodwill represents the excess of acquisition cost over the fair value of net assets acquired in business combinations. Pursuant to ASC Topic 350, the Company tests goodwill for impairment on an annual basis in the fourth quarter, or between annual tests, in certain circumstances. Under authoritative guidance, the Company first assessed qualitative factors to determine whether it was necessary to perform the two-step quantitative goodwill impairment test. An entity is not required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. Events or changes in circumstances which could trigger an impairment review include macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, other entity specific events and sustained decrease in share price. There were no impairment charges recognized during the six months ended June 30, 2017 and 2016.

Intangible Assets

Intangible assets include trade names, patents and non-contractual customer relationships. The Company uses the straight line method to amortize these assets over their estimated useful lives. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be fully recoverable in accordance with ASC Topic 360. To determine recoverability of its long-lived assets, the Company evaluates the probability that future undiscounted net cash flows, without interest charges, will be less than the carrying amount of the assets. There were no impairment charges recognized during the six months ended June 30, 2017 and 2016.

Income Taxes

The Company accounts for income taxes under in accordance with ASC Topic 740, “Accounting for Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss carryforwards. Deferred tax assets and liabilities are measured using expected tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The Company has recorded a full valuation allowance for its net deferred tax assets as of June 30, 2017 and December 31, 2016, due to the uncertainty of the realizability of those assets.

Fair Value of Financial Instruments

The Company adheres to the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”. This pronouncement requires that the Company calculate the fair value of financial instruments and include this additional information in the notes to financial statements when the fair value is different than the book value of those financial instruments. The Company’s financial instruments include cash, accounts receivable, note receivable, accounts payable and accrued expenses. As of June 30, 2017 and December 31, 2016, the carrying value of the Company’s financial instruments approximated fair value, due to their short-term nature.

Revenue Recognition and Deferred Revenue

Revenue is generally recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable, collectability is probable, and there is no future Company involvement or commitment. The Company sells its commercial products directly through its sales force and through distributors. Revenue from direct sales of products is recognized when shipped to the customer and title has passed.

Under the provisions of ASC Topic 605-25, “Revenue Arrangements with Multiple Deliverables,” for multi-element arrangements that include tangible products containing software essential to the tangible product’s functionality and undelivered software elements relating to the tangible product’s essential software, the Company allocates revenue to all deliverables based on their relative selling prices. In such circumstances, the Company uses a hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i) vendor-specific objective evidence of fair value (“VSOE”), (ii) third-party evidence of selling price and (iii) best estimate of the selling price (“ESP”). VSOE generally exists only when the Company sells the deliverable separately and is the price actually charged by the Company for that deliverable. ESPs reflect the Company’s best estimates of what the selling prices of elements would be if they were sold regularly on a stand-alone basis.

The Company also recognizes revenues from licensing of its patented software to customers. The licensed software requires continuing service or post contractual customer support and performance; accordingly, a portion of the revenue is deferred based on its fair value and recognized ratably over the period in which the future service, support and performance are provided, which is generally one to three years. Royalties from the licensing of the Company’s technology are recognized as revenues in the period they are earned.

The Company also performs consulting work for other companies. These services are billed on a time and materials basis. Revenue from these arrangements is also recognized as time is spent on the contract and materials are purchased.

Subscriptions to database information can be purchased for month-to-month, one, two, and three year periods. Revenue from subscriptions are deferred and recognized over the contractual period, which is typically three years.

The Company offers enhanced extended warranties for its sales of hardware and software at a set price. The revenue from these sales are deferred and recognized on a straight-line basis over the contractual period, which is typically one to four years.

Business Concentrations and Credit Risk

During the three and six month periods ended June 30, 2017, the Company made sales to two customers that accounted for approximately 28% and 24% of total revenues, respectively. The revenue was associated with two commercial identity customers. These customers represented 23% of total accounts receivable at June 30, 2017. During the three and six month periods ended June 30, 2016, the Company made sales to three customers that accounted for approximately 38% and 35% of total revenues, respectively. The revenue was associated with three commercial identity sales customers.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding during the period. The dilutive effect of outstanding options and restricted stock is reflected in diluted earnings per share by application of the treasury stock method. The calculation of diluted net loss per share excludes all anti-dilutive shares.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
Numerator:
Net Loss	$	(1,098,553	)	$	(1,775,116	)	$	(2,035,310	)	$	(3,918,607	)
Denominator:
Weighted average common shares –
Basic/Diluted		10,769,437			9,108,856			10,750,751			9,393,587
Net Loss per share –
Basic/Diluted	$	(0.10	)	$	(0.19	)	$	(0.19	)	$	(0.42	)

The following table summarizes the common stock equivalents excluded from loss per diluted share because their effect would be anti-dilutive:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2017		2016		2017		2016
Stock options		1,652,920		2,054,547		1,652,920		2,054,547
Warrants		472,801		688,301		472,801		688,301
Restricted stock		28,025		53,017		28,025		53,017
		2,153,746		2,795,865		2,153,746		2,795,865

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Intangible Assets

6 Months Ended

Jun. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

3. INTANGIBLE ASSETS

The changes in the carrying amount of intangible assets for six months ended June 30, 2017 were as follows:

Balance at December 31, 2016	$	2,154,563
Deduction: Amortization expense		(157,782	)
Balance at June 30, 2017	$	1,996,781

The following summarizes amortization of intangible assets included in the accompanying consolidated statements of operations:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2017		2016		2017		2016
Cost of sales	$	59,164	$	59,163	$	118,326	$	118,326
General and administrative		19,728		19,728		39,456		39,455
	$	78,892	$	78,891	$	157,782	$	157,781

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Note Receivable

6 Months Ended

Jun. 30, 2017

Debt Disclosure [Abstract]

Note Receivable

4. NOTE RECEIVABLE

On August 31, 2015, the Company sold the wireless enterprise assets to the Jamestown S’Klallam Tribe (the “Buyer”) for total consideration of $350,000 which consists of an upfront cash payment of $30,000, the issuance of a promissory note totaling $200,000 and contingent consideration up to a maximum of $120,000 based on future earnings. Under the terms of the promissory note, monthly payments of $3,683 including principal and interest at 4%, are to be made over a 60-month term expiring in August 2020. At June 30, 2017, the total note receivable is $134,481, of which $39,539 and $94,942 is included in other current assets and note receivable, net of current portion, respectively, on the consolidated balance sheets. At December 31, 2016, the total note receivable was $153,667, of which $38,758 and $114,909 is included in other current assets and note receivable, net of current portion, respectively on the accompanying consolidated balance sheets.

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Debt

6 Months Ended

Jun. 30, 2017

Debt Disclosure [Abstract]

Debt

5. DEBT

Revolving Line of Credit

On May 22, 2017, the Company entered into revolving credit facility with Northwest Bank (“Northwest”) and simultaneously terminated its revolving credit facility with Silicon Valley Bank. This new agreement allows for borrowings to the lesser of (i) $2,000,000 or (ii) 95% of the balance in the Company’s money market account less $250,000. The borrowings are secured by the Company’s existing deposit and money market accounts with Northwest. The facility bears interest at a rate consistent with Northwest’s money market account (0.15% at June 30, 2017) plus 3%. Interest is payable monthly and the principal is due upon maturity on May 22, 2018. As of June 30, 2017, there were no amounts outstanding under this facility and unused availability under this facility was approximately $671,000.

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Accrued Expenses

6 Months Ended

Jun. 30, 2017

Payables and Accruals [Abstract]

Accrued Expenses

6. ACCRUED EXPENSES

Accrued expenses are comprised of the following:

	June 30,2017		December 31, 2016
Professional fees	$	109,749	$	73,999
Payroll and related		384,583		310,996
Severance payments to former officer		-		91,460
Other		79,084		43,502
	$	573,416	$	519,957

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Income Taxes

6 Months Ended

Jun. 30, 2017

Income Tax Disclosure [Abstract]

Income Taxes

7. INCOME TAXES

As of December 31, 2016, the Company had net operating loss carryforwards (NOL’s) for federal and New York state income tax purposes of approximately $7 million. In March 2016, the Company completed an Internal Revenue Code Section 382 study which determined that a cumulative three-year ownership change in excess of 50% had occurred in March 2016 due to a share repurchase. As a result, the Company’s available NOLs were reduced from $47.4 million at December 31, 2015 to $2.2 million during the first quarter of 2016. There can be no assurance that the Company will realize any benefit of the NOL’s. The federal and New York state NOL’s are available to offset future taxable income and expire from 2016 through 2036 if not utilized. The Company has a full valuation allowance on its deferred tax assets since management continues to believe that it is more likely than not that these assets will not be realized.

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Share Based Compensation

6 Months Ended

Jun. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share Based Compensation

8. SHARE BASED COMPENSATION

The Company accounts for the issuance of equity awards to employees in accordance with ASC Topic 718 and 505, which requires that the cost resulting from all share based payment transactions be recognized in the financial statements. These pronouncements establish fair value as the measurement objective in accounting for share based payment arrangements and requires all companies to apply a fair value based measurement method in accounting for all share based payment transactions with employees. All stock-based compensation is included in operating expenses for the periods as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2017		2016		2017		2016
Compensation cost recognized:
Selling, general & administrative	$	88,040	$	360,884	$	177,158	$	638,357
Research & development		6,678		8,780		14,360		29,337
	$	94,718	$	369,664	$	191,518	$	667,694

The Company uses the Black-Scholes option pricing model to value the options. The table below presents the weighted average expected life of the options in years. The expected life computation is based on the time to option expiration. Volatility is determined using changes in historical stock prices. The interest rate for periods within the expected life of the award is based on the U.S. Treasury yield curve in effect at the time of grant.

Stock option activity under the 1998, 1999, 2001, 2003, 2006 and 2015 Stock Option Plans (collectively, the “Plans”) during the periods indicated below were as follows:

	Number of Shares Subject to Issuance			Weighted-average Exercise Price		Weighted-average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2016		1,665,420		$	1.40		3.62 years	$	2,414,446
Granted		-			-
Forfeited or expired		(2,500	)		2.79
Exercised		(10,000	)		1.01
Outstanding at June 30, 2017		1,652,920		$	1.40		3.12 years	$	4,159,931
Exercisable at June 30, 2017		1,054,483		$	1.39		3.10 years	$	2,655,401

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had they all exercised their options on June 30, 2017. This amount changes based upon the fair market value of the Company’s stock.

As of June 30, 2017, the Company had 887,728 shares available for future grants under the Plans.

Restricted Stock Units

The Company issues Restricted Stock Units (“RSUs”) which are equity-based instruments that may be settled in shares of common stock of the Company. During the six months ended June 30, 2017, the Company issued RSUs to certain directors as compensation. RSU agreements can vest immediately or with the passage of time. The vesting of all RSUs is contingent on continued board and employment services.

The compensation expense incurred by the Company for RSUs is based on the closing market price of the Company’s common stock on the date of grant and is amortized ratably on a straight-line basis over the requisite service period and charged to general and administrative expense with a corresponding increase to additional paid-in capital.

	Number of Shares			Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding at December 31, 2016		32,714		$	1.89	$	26,010
Granted		12,285			3.01		-
Vested and settled in Shares		(16,974	)		2.42		-
Outstanding at June 30, 2017		28,025		$	2.14	$	20,060

As of June 30, 2017, there was $370,595 of total unrecognized compensation cost, net of estimated forfeitures, related to all unvested stock options and restricted stock units, which is expected to be recognized over a weighted average period of approximately 1.4 years.

Warrants

All previously granted warrants were issued with an exercise price that was equal to or above the fair market value of the Company’s common stock on the date of grant. As of June 30, 2017, the Company had 472,801 remaining warrants outstanding and exercisable through 2021. During the six months ended June 30, 2017, there were 62,500 warrants exercised at a price of $2.20 per share.

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Common Stock

6 Months Ended

Jun. 30, 2017

Stockholders' Equity Note [Abstract]

Common Stock

9. COMMON STOCK

On February 24, 2016, the Company entered into a stock repurchase agreement with two former directors, who were also members of management (the “Former Executives”) for the repurchase of all 979,114 shares owned by the Former Executives of the Company’s common stock for $1,096,608. The transaction was finalized on March 4, 2016.

On June 15, 2016, the Company completed a public offering of 1,200,000 shares of its common stock and 600,000 five year warrants to purchase shares with an exercise price of $2.20 per share, at a combined public offering of $1.75 per share and half-warrant. Net proceeds to the Company from this offering were approximately $1,902,000 after deducting underwriting discounts and commissions paid by the Company. As part of the offering, there was an overallotment option for the underwriters to purchase up to 180,000 shares of common stock at a purchase price of $1.63 per share and/or up to 90,000 additional warrants at a purchase price of $0.0001 per warrant. On June 20, 2016, the underwriters exercised their right to purchase 23,320 warrants. Direct offering costs totaling approximately $124,000 were recorded as a reduction to the net proceeds on the consolidated statement of stockholders’ equity.

On August 4, 2017, the Company completed a public offering of 3,625,000 shares of its common stock, offered to the public at $2.25 per share. Net proceeds to the Company from this offering were approximately $7,426,000 after deducting underwriting discounts and commissions paid by the Company. Direct offering costs are expected to approximate $200,000 which will be recorded as a reduction to the net proceeds on the consolidated statement of stockholders’ equity. The underwriters exercised their option to purchase 543,750 additional shares which resulted in additional proceeds to the Company of approximately $1,144,000.

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Legal Proceedings

6 Months Ended

Jun. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Legal Proceedings

10. LEGAL PROCEEDINGS

The Company is not aware of any infringement by the Company’s products or technology on the proprietary rights of others.

The Company is not currently involved in any legal or regulatory proceeding, or arbitration, the outcome of which is expected to have a material adverse effect on its business.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

11. COMMITMENTS AND CONTINGENCIES

The Company leases an office in Jericho, New York which require monthly payments of approximately $26,000 and expires in March 2018.

On May 19, 2016, Mr. Robert Williamsen, the Company’s Vice President and Chief Revenue Officer departed the Company, via mutual consent, to pursue other interests. Pursuant to Mr. Williamsen’s employment agreement with the Company, Mr. Williamsen will receive a payment of his monthly salary, subject to all applicable withholdings, for a period of 12 months following May 19, 2016, which the first payment commenced on July 7, 2016, and partial reimbursement for continued health, dental, and vision coverage through August 2016. Pursuant to the terms of Mr. Williamsen’s stock option agreements, Mr. Williamsen exercised his vested stock option awards.

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Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments necessary for a fair presentation of the Company’s consolidated financial position at June 30, 2017 and the consolidated results of operations for the three and six months ended June 30, 2017 and 2016 and consolidated stockholders’ equity and cash flows for the six months ended June 30, 2017. All such adjustments are of a normal and recurring nature. Interim consolidated financial statements are prepared on a basis consistent with the Company’s annual consolidated financial statements. Results of operations for the six month period ended June 30, 2017, are not necessarily indicative of the operating results that may be expected for the year ending December 31, 2017.

The consolidated balance sheet as of December 31, 2016 has been derived from the audited financial statements at that date but does not include all of the information and notes required by accounting principles generally accepted in the United States of America for complete financial statements.

References in this Quarterly Report on Form 10-Q to “authoritative guidance” is to the Accounting Standards Codification issued by the Financial Accounting Standards Board (“FASB”).

For further information, refer to the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 completes the joint effort by the FASB and International Accounting Standards Board (“IASB”) to improve financial reporting by creating common revenue recognition guidance for U.S. Generally Accepted Accounting Principles (“GAAP”) and International Financial Reporting Standards (“IFRS”). ASU 2014-09 applies to all companies that enter into contracts with customers to transfer goods or services. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, which defers the effective date by one year, with early adoption on the original effective date permitted. As a result, ASU 2014-09 will be effective for annual and interim periods beginning after December 15, 2017.

The Company is in the process of evaluating the impact of its pending adoption of this ASU on revenue transactions, including any impacts on associated processes, systems, and internal controls. The Company’s evaluation includes the determination whether the unit of account (i.e., performance obligations) will change as compared to current GAAP, as well as determining the standalone selling price of each performance obligation. Standalone selling prices under the new guidance may not be substantially different from the Company’s current methodologies of establishing fair value on multiple element arrangements. The Company has started reviewing each of its revenue streams that may have an impact on its consolidated financial statements and is also assessing the capitalizing of its sales commissions upon adoption of the new ASU and is in the process of evaluating the period over which to amortize these capitalized costs. The Company continues to evaluate the impact of this guidance on its consolidated financial statements and any preliminary assessments are subject to change and expects completion of this evaluation in the third quarter of 2017.

On January 1, 2017, the Company adopted ASU No. 2016-09, Improvements to Employee Share Based Payment Accounting which simplifies several aspects of the accounting for share-based payment transactions, including income tax consequences, classification of awards, forfeitures and classification on the statement of cash flows. ASU 2016-09 allows the Company to make an accounting policy election to either estimate forfeitures or account for forfeitures as they occur. The Company has elected to account for forfeitures as they occur and is required to be applied on a modified retrospective basis. As a result, the Company recorded a cumulative effect adjustment to accumulated deficit and additional paid-in-capital in the amount of $33,894 as of January 1, 2017 on the consolidated balance sheet.

Use of Estimates

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. Significant estimates and assumptions that affect amounts reported in the financial statements include the evaluation of goodwill for impairment, valuation of intangible assets, deferred tax valuation allowances, and the fair value of stock options granted under the Company’s stock-based compensation plans. Due to the inherent uncertainties involved in making estimates, actual results reported in future periods may be different from those estimates.

Allowance for Doubtful Accounts

Allowance for Doubtful Accounts

The Company records its allowance for doubtful accounts based upon its assessment of various factors. The Company considers historical experience, the age of the accounts receivable balances, credit quality of the Company’s customers, current economic conditions and other factors that may affect customers’ ability to pay.

Inventory

Inventory

Inventory is stated at the lower of cost or market and cost is determined using the first-in, first-out method. Inventory is primarily comprised of finished goods. As of June 30, 2017 and December 31, 2016, the majority of inventory is related to Government and Commercial Identity products for intended near-term sales.

Goodwill

Goodwill

Goodwill represents the excess of acquisition cost over the fair value of net assets acquired in business combinations. Pursuant to ASC Topic 350, the Company tests goodwill for impairment on an annual basis in the fourth quarter, or between annual tests, in certain circumstances. Under authoritative guidance, the Company first assessed qualitative factors to determine whether it was necessary to perform the two-step quantitative goodwill impairment test. An entity is not required to calculate the fair value of a reporting unit unless the entity determines, based on a qualitative assessment, that it is more likely than not that its fair value is less than its carrying amount. Events or changes in circumstances which could trigger an impairment review include macroeconomic conditions, industry and market conditions, cost factors, overall financial performance, other entity specific events and sustained decrease in share price. There were no impairment charges recognized during the six months ended June 30, 2017 and 2016.

Intangible Assets

Intangible Assets

Intangible assets include trade names, patents and non-contractual customer relationships. The Company uses the straight line method to amortize these assets over their estimated useful lives. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be fully recoverable in accordance with ASC Topic 360. To determine recoverability of its long-lived assets, the Company evaluates the probability that future undiscounted net cash flows, without interest charges, will be less than the carrying amount of the assets. There were no impairment charges recognized during the six months ended June 30, 2017 and 2016.

Income Taxes

Income Taxes

The Company accounts for income taxes under in accordance with ASC Topic 740, “Accounting for Income Taxes.” Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and net operating loss carryforwards. Deferred tax assets and liabilities are measured using expected tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The Company has recorded a full valuation allowance for its net deferred tax assets as of June 30, 2017 and December 31, 2016, due to the uncertainty of the realizability of those assets.

Fair Value of Financial Instruments

 Fair Value of Financial Instruments

The Company adheres to the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”. This pronouncement requires that the Company calculate the fair value of financial instruments and include this additional information in the notes to financial statements when the fair value is different than the book value of those financial instruments. The Company’s financial instruments include cash, accounts receivable, note receivable, accounts payable and accrued expenses. As of June 30, 2017 and December 31, 2016, the carrying value of the Company’s financial instruments approximated fair value, due to their short-term nature.

Revenue Recognition and Deferred Revenue

Revenue Recognition and Deferred Revenue

Revenue is generally recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable, collectability is probable, and there is no future Company involvement or commitment. The Company sells its commercial products directly through its sales force and through distributors. Revenue from direct sales of products is recognized when shipped to the customer and title has passed.

Under the provisions of ASC Topic 605-25, “Revenue Arrangements with Multiple Deliverables,” for multi-element arrangements that include tangible products containing software essential to the tangible product’s functionality and undelivered software elements relating to the tangible product’s essential software, the Company allocates revenue to all deliverables based on their relative selling prices. In such circumstances, the Company uses a hierarchy to determine the selling price to be used for allocating revenue to deliverables: (i) vendor-specific objective evidence of fair value (“VSOE”), (ii) third-party evidence of selling price and (iii) best estimate of the selling price (“ESP”). VSOE generally exists only when the Company sells the deliverable separately and is the price actually charged by the Company for that deliverable. ESPs reflect the Company’s best estimates of what the selling prices of elements would be if they were sold regularly on a stand-alone basis.

The Company also recognizes revenues from licensing of its patented software to customers. The licensed software requires continuing service or post contractual customer support and performance; accordingly, a portion of the revenue is deferred based on its fair value and recognized ratably over the period in which the future service, support and performance are provided, which is generally one to three years. Royalties from the licensing of the Company’s technology are recognized as revenues in the period they are earned.

The Company also performs consulting work for other companies. These services are billed on a time and materials basis. Revenue from these arrangements is also recognized as time is spent on the contract and materials are purchased.

Subscriptions to database information can be purchased for month-to-month, one, two, and three year periods. Revenue from subscriptions are deferred and recognized over the contractual period, which is typically three years.

The Company offers enhanced extended warranties for its sales of hardware and software at a set price. The revenue from these sales are deferred and recognized on a straight-line basis over the contractual period, which is typically one to four years.

Business Concentrations and Credit Risk

Business Concentrations and Credit Risk

During the three and six month periods ended June 30, 2017, the Company made sales to two customers that accounted for approximately 28% and 24% of total revenues, respectively. The revenue was associated with two commercial identity customers. These customers represented 23% of total accounts receivable at June 30, 2017. During the three and six month periods ended June 30, 2016, the Company made sales to three customers that accounted for approximately 38% and 35% of total revenues, respectively. The revenue was associated with three commercial identity sales customers.

Net Loss Per Share

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of shares of common stock and potentially dilutive common stock outstanding during the period. The dilutive effect of outstanding options and restricted stock is reflected in diluted earnings per share by application of the treasury stock method. The calculation of diluted net loss per share excludes all anti-dilutive shares.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
Numerator:
Net Loss	$	(1,098,553	)	$	(1,775,116	)	$	(2,035,310	)	$	(3,918,607	)
Denominator:
Weighted average common shares –
Basic/Diluted		10,769,437			9,108,856			10,750,751			9,393,587
Net Loss per share –
Basic/Diluted	$	(0.10	)	$	(0.19	)	$	(0.19	)	$	(0.42	)

The following table summarizes the common stock equivalents excluded from loss per diluted share because their effect would be anti-dilutive:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2017		2016		2017		2016
Stock options		1,652,920		2,054,547		1,652,920		2,054,547
Warrants		472,801		688,301		472,801		688,301
Restricted stock		28,025		53,017		28,025		53,017
		2,153,746		2,795,865		2,153,746		2,795,865

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Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Schedule of Earnings Per Share Basic and Diluted

The calculation of diluted net loss per share excludes all anti-dilutive shares.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2017			2016			2017			2016
Numerator:
Net Loss	$	(1,098,553	)	$	(1,775,116	)	$	(2,035,310	)	$	(3,918,607	)
Denominator:
Weighted average common shares –
Basic/Diluted		10,769,437			9,108,856			10,750,751			9,393,587
Net Loss per share –
Basic/Diluted	$	(0.10	)	$	(0.19	)	$	(0.19	)	$	(0.42	)

Summary of the Common Stock Equivalents Excluded from Loss per Diluted Share

The following table summarizes the common stock equivalents excluded from loss per diluted share because their effect would be anti-dilutive:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2017		2016		2017		2016
Stock options		1,652,920		2,054,547		1,652,920		2,054,547
Warrants		472,801		688,301		472,801		688,301
Restricted stock		28,025		53,017		28,025		53,017
		2,153,746		2,795,865		2,153,746		2,795,865

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Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets

The changes in the carrying amount of intangible assets for six months ended June 30, 2017 were as follows:

Balance at December 31, 2016	$	2,154,563
Deduction: Amortization expense		(157,782	)
Balance at June 30, 2017	$	1,996,781

Schedule of Finite-Lived Intangible Assets Amortization Expense

The following summarizes amortization of intangible assets included in the accompanying consolidated statements of operations:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2017		2016		2017		2016
Cost of sales	$	59,164	$	59,163	$	118,326	$	118,326
General and administrative		19,728		19,728		39,456		39,455
	$	78,892	$	78,891	$	157,782	$	157,781

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Accrued Expenses (Tables)

6 Months Ended

Jun. 30, 2017

Payables and Accruals [Abstract]

Schedule of Accrued Expenses

Accrued expenses are comprised of the following:

	June 30,2017		December 31, 2016
Professional fees	$	109,749	$	73,999
Payroll and related		384,583		310,996
Severance payments to former officer		-		91,460
Other		79,084		43,502
	$	573,416	$	519,957

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Share Based Compensation (Tables)

6 Months Ended

Jun. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Stock Based Compensation

All stock-based compensation is included in operating expenses for the periods as follows:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2017		2016		2017		2016
Compensation cost recognized:
Selling, general & administrative	$	88,040	$	360,884	$	177,158	$	638,357
Research & development		6,678		8,780		14,360		29,337
	$	94,718	$	369,664	$	191,518	$	667,694

Schedule of Stock Option Activity

Stock option activity under the 1998, 1999, 2001, 2003, 2006 and 2015 Stock Option Plans (collectively, the “Plans”) during the periods indicated below were as follows:

	Number of Shares Subject to Issuance			Weighted-average Exercise Price		Weighted-average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2016		1,665,420		$	1.40		3.62 years	$	2,414,446
Granted		-			-
Forfeited or expired		(2,500	)		2.79
Exercised		(10,000	)		1.01
Outstanding at June 30, 2017		1,652,920		$	1.40		3.12 years	$	4,159,931
Exercisable at June 30, 2017		1,054,483		$	1.39		3.10 years	$	2,655,401

Schedule of Restricted Stock Units Outstanding

	Number of Shares			Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding at December 31, 2016		32,714		$	1.89	$	26,010
Granted		12,285			3.01		-
Vested and settled in Shares		(16,974	)		2.42		-
Outstanding at June 30, 2017		28,025		$	2.14	$	20,060

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Nature of Business (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Net loss	$ 1,098,553	$ 1,775,116	$ 2,035,310	$ 3,918,607
Net cash used in operating activities			2,210,973	$ 2,624,625
Cash	1,035,190		1,035,190
Accumulated deficit	$ 106,437,630		106,437,630		$ 104,368,426
Common stock value			$ 8,570,000
Common stock per share	$ 2.25		$ 2.25
IPO [Member]
Common stock value			$ 4,168,750

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Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Jan. 02, 2017
Accounting Policies [Line Items]
Adjustment to accumulated deficit and additional paid-in-capital					$ 33,894
Impairment charges
Impairment charges on intangible assets
Accounts Receivable [Member]
Accounting Policies [Line Items]
Percentage of credit risk			23.00%
Two Customer [Member] | Sales Revenue, Net [Member]
Accounting Policies [Line Items]
Percentage of credit risk	28.00%		24.00%
Two Customer [Member] | Sales Revenue, Net [Member]
Accounting Policies [Line Items]
Percentage of credit risk		38.00%		35.00%

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Significant Accounting Policies - Schedule of Earnings Per Share Basic and Diluted (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Accounting Policies [Abstract]
Net Loss	$ (1,098,553)	$ (1,775,116)	$ (2,035,310)	$ (3,918,607)
Weighted average common shares - Basic/Diluted	10,769,437	9,108,856	10,750,751	9,393,587
Net loss per share - Basic/Diluted	$ (0.10)	$ (0.19)	$ (0.19)	$ (0.42)

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Significant Accounting Policies - Summary of the Common Stock Equivalents Excluded from Loss per Diluted Share (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share amount	2,153,746	2,795,865	2,153,746	2,795,865
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share amount	1,652,920	2,054,547	1,652,920	2,054,547
Warrants [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share amount	472,801	53,017	472,801	688,301
Restricted Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share amount	28,025	688,301	28,025	53,017

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Intangible Assets - Schedule of Finite-Lived Intangible Assets (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
Balance at December 31, 2016			$ 2,154,563
Deduction: Amortization expense	$ (78,892)	$ (78,891)	(157,782)	$ (157,781)
Balance at June 31, 2017	$ (1,996,781)		$ (1,996,781)

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Intangible Assets - Schedule of Finite-lived Intangible Assets Amortization Expense (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Finite-Lived Intangible Assets [Line Items]
Amortization of intangible assets	$ 78,892	$ 78,891	$ 157,782	$ 157,781
Cost of Sales [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization of intangible assets	59,164	59,163	118,326	118,326
Selling, General & Administrative [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization of intangible assets	$ 19,728	$ 19,728	$ 39,456	$ 39,456

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Note Receivable (Details Narrative) - USD ($)	Aug. 31, 2015	Jun. 30, 2017	Dec. 31, 2016
Note receivable		$ 134,481	$ 153,667
Note receivable net of allowances		39,539	38,758
Note receivable net		$ 94,942	$ 114,909
Buyer [Member]
Sale of assets cash consideration	$ 350,000
Upfront cash payment amount	30,000
Issuance of promissory note	200,000
Contingent consideration maximum amount	120,000
Promissory note monthly payment	$ 3,683
Promissory note interest rate	4.00%
Promissory note term	60 months
Promissory note expiration year	Aug. 31, 2020

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Debt (Details Narrative) - USD ($)	6 Months Ended
	Jun. 30, 2017	May 22, 2017
Line of Credit Facility [Line Items]
Line of credit facility, unused availability	$ 671,000
Revolving Credit Facility [Member] | Silicon Valley Bank [Member]
Line of Credit Facility [Line Items]
Line of credit facility, maximum borrowing capacity		$ 2,000,000
Line of credit		$ 250,000
Line of credit facility, interest rate description	The facility bears interest at a rate consistent with Northwest’s money market account (0.15% at June 30, 2017) plus 3%.
Line of credit maturity date	May 22, 2018
Revolving Credit Facility [Member] | Silicon Valley Bank [Member] | US Prime [Member]
Line of Credit Facility [Line Items]
Percentage of line of credit interest	95.00%

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Accrued Expenses - Schedule of Accrued Expenses (Details) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Payables and Accruals [Abstract]
Professional fees	$ 109,749	$ 73,999
Payroll and related	384,583	310,996
Severance payments to former officer		91,460
Other	79,084	43,502
Accrued expenses	$ 573,416	$ 519,957

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Income Taxes (Details Narrative) - USD ($)	1 Months Ended	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2017	Dec. 31, 2016	Dec. 31, 2015
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards federal and state			$ 7,000,000
Income tax, description	Internal Revenue Code Section 382 study which determined that a cumulative three-year ownership change in excess of 50% had occurred in March 2016 due to a share repurchase.
Operating loss carryforwards expiration term		2016 through 2036
Maximum [Member]
Operating Loss Carryforwards [Line Items]
Percentage of cumulative ownership changes	50.00%
Net Operating loss carryforwards				$ 47,400,000
Minimum [Member]
Operating Loss Carryforwards [Line Items]
Net Operating loss carryforwards	$ 2,200,000

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Share Based Compensation (Details Narrative)	6 Months Ended
	Jun. 30, 2017 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Class of warrant or right, outstanding	472,801
Warrants exercisable date	2021
Number of warrants exercised	62,500
Warrants exercise price | $ / shares	$ 2.20
Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost related to non-vested share-based compensation | $	$ 370,595
Recognized over weight average period	1 year 4 months 24 days
Stock Option Plans [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options available for future grants	887,728

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Share Based Compensatiion - Schedule of Stock Based Compensation (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Share-based Compensation Expense	$ 94,718	$ 369,664	$ 191,518	$ 667,694
Selling, General & Administrative [Member]
Share-based Compensation Expense	88,040	360,884	177,158	638,357
Research and Development [Member]
Share-based Compensation Expense	$ 6,678	$ 8,780	$ 14,360	$ 29,337

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Share Based Compensation - Schedule of Stock Option Activity (Details) - Stock Option Plans [Member]	6 Months Ended
	Jun. 30, 2017 USD ($) $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares Subject to Issuance, Outstanding | shares	1,665,420
Number of Shares Subject to Issuance, Granted | shares
Number of Shares Subject to Issuance, Forfeited or expired | shares	(2,500)
Number of Shares Subject to Issuance, Exercised | shares	(10,000)
Number of Shares Subject to Issuance, Outstanding | shares	1,652,920
Number of Shares Subject to Issuance, Exercisable | shares	1,054,483
Weighted-average Exercise Price, Outstanding | $ / shares	$ 1.40
Weighted-average Exercise Price, Granted | $ / shares
Weighted-average Exercise Price, Forfeited or expired | $ / shares	2.79
Weighted-average Exercise Price, Exercised | $ / shares	1.01
Weighted-average Exercise Price, Outstanding | $ / shares	1.40
Weighted-average Exercise Price, Exercisable | $ / shares	$ 1.39
Weighted-average Remaining Contractual Term, Outstanding Beginning	3 years 7 months 13 days
Weighted-average Remaining Contractual Term, Outstanding Ending	3 years 1 month 13 days
Weighted-average Remaining Contractual Term, Exercisable	3 years 1 month 6 days
Outstanding-Aggregate Intrinsic Value, Beginning | $	$ 2,414,446
Outstanding-Aggregate Intrinsic Value, Ending | $	4,159,931
Exercisable-Aggregate Intrinsic Value | $	$ 2,655,401

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Share Based Compensation - Schedule of Restricted Stock Units Outstanding (Details) - Restricted Stock Units (RSUs) [Member]	6 Months Ended
	Jun. 30, 2017 $ / shares shares
Number of Shares Outstanding Beginning Balance | shares	32,714
Number of Shares Granted | shares	12,285
Number of Shares Vested and Settled in Shares | shares	(16,974)
Number of Shares Outstanding Ending Balance | shares	28,025
Weighted Average Grant Date Fair Value Outstanding Beginning Balance	$ 1.89
Weighted Average Grant Date Fair Value Granted	3.01
Weighted Average Grant Date Fair Value Vested and Settled in Shares	2.42
Weighted Average Grant Date Fair Value Outstanding Ending Balance	2.14
Aggregate Intrinsic Value Outstanding Beginning Balance	26,010
Aggregate Intrinsic Value Outstanding Ending Balance	$ 20,060

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Common Stock (Details Narrative) - USD ($)				6 Months Ended
	Jun. 20, 2016	Jun. 15, 2016	Feb. 24, 2016	Jun. 30, 2017	Jun. 30, 2016
Class of Stock [Line Items]
Warrants exercise price per share				$ 2.20
Shares issued, price per share				$ 2.25
Proceeds from issuance of common stock					$ 1,780,800
Common Stock [Member] | Public Offering [Member]
Class of Stock [Line Items]
Stock issued during period, shares, new issues		1,200,000
Warrant to purchase of common stock shares		600,000
Warrants exercisable term		5 years
Warrants exercise price per share		$ 2.20
Shares issued, price per share		$ 1.75
Proceeds from issuance of offering		$ 1,902,000
Underwriters exercised their right to purchase number of warrants	23,320
Payments of stock issuance costs		$ 124,000
Common Stock [Member] | Public Offering [Member] | August 4, 2017 [Member]
Class of Stock [Line Items]
Stock issued during period, shares, new issues				3,625,000
Warrant to purchase of common stock shares				200,000
Shares issued, price per share				$ 2.25
Proceeds from issuance of offering				$ 7,426,000
Overallotment option for the underwriters to purchase number of maximum common stock				543,750
Proceeds from issuance of common stock				$ 1,144,000
Common Stock [Member] | Public Offering [Member] | Over-Allotment Option [Member]
Class of Stock [Line Items]
Warrant to purchase of common stock shares		90,000
Warrants exercise price per share		$ 0.0001
Shares issued, price per share		$ 1.63
Overallotment option for the underwriters to purchase number of maximum common stock		180,000
Former Executives [Member]
Class of Stock [Line Items]
Number of common stock shares repurchased during the period			979,114
Number of common value stock repurchase during the period			$ 1,096,608

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Commitments and Contingencies (Details Narrative)	6 Months Ended
	Jun. 30, 2017 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Monthly payments	$ 26,000
Leases expiration date description	March 2018