0001213900-19-015335.txt : 20190812 0001213900-19-015335.hdr.sgml : 20190812 20190812160826 ACCESSION NUMBER: 0001213900-19-015335 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 78 CONFORMED PERIOD OF REPORT: 20190630 FILED AS OF DATE: 20190812 DATE AS OF CHANGE: 20190812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Ipsidy Inc. CENTRAL INDEX KEY: 0001534154 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-54545 FILM NUMBER: 191016597 BUSINESS ADDRESS: STREET 1: 670 LONG BEACH BLVD. CITY: LONG BEACH STATE: NY ZIP: 11561 BUSINESS PHONE: 516-274-8700 MAIL ADDRESS: STREET 1: 670 LONG BEACH BLVD. CITY: LONG BEACH STATE: NY ZIP: 11561 FORMER COMPANY: FORMER CONFORMED NAME: ID Global Solutions Corp DATE OF NAME CHANGE: 20141014 FORMER COMPANY: FORMER CONFORMED NAME: IIM Global Corp DATE OF NAME CHANGE: 20130107 FORMER COMPANY: FORMER CONFORMED NAME: Silverwood Acquisition Corp DATE OF NAME CHANGE: 20111102 10-Q 1 f10q0619_ipsidyinc.htm QUARTERLY REPORT

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2019

 

OR

 

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

 

For the transition period from              to

 

Commission file number 000-54545

 

 

 

Ipsidy Inc.

(Exact name of registrant as specified in its charter)

 

(Former Name of Registrant as Specified in its Charter)

 

Delaware   46-2069547

(State or other jurisdiction of

incorporation or organization)

  (I.R.S. Employer
Identification No.)

 

670 Long Beach Boulevard

Long Beach, New York
11561

(Address of principal executive offices) (zip code)

 

516-274-8700

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 ☐   No

 

Indicate by check mark whether the 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 ☐   No

 

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

 

  Large accelerated filer ☐ Accelerated filer ☐
  Non-accelerated filer ☐ Smaller reporting company ☒
    Emerging growth company ☒

  

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. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

 

Yes   ☐ No   ☒

 

Securities registered pursuant to Section 12(b) of the Act: Not applicable.

 

Title of each class   Trading Symbol   Name of each exchange on which registered
Not applicable.        

  

Indicate the number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date.

 

Class   Outstanding at July 31, 2019
Common Stock, par value $0.0001   518,125,454 shares
Documents incorporated by reference:   None

 

☐ No

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page No.
PART I - FINANCIAL INFORMATION
     
Item 1. Financial Statements.   1
     
Condensed Consolidated Balance Sheets as of June 30, 2019 (unaudited) and December 31, 2018   1
     
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2019 (unaudited) and 2018 (unaudited)   2
     
Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2019 (unaudited) and 2018 (unaudited)   3
     
Condensed Consolidated Statements of Stockholders’ Equity for the Six Months Ended June 30, 2019 (unaudited) and June 30, 2018 (unaudited)   4
     
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 (unaudited) and 2018 (unaudited)   5
     
Notes to Unaudited Condensed Consolidated Financial Statements   6-19
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.   20 -23
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk.   23
     
Item 4. Controls and Procedures.   24
     
PART II - OTHER INFORMATION
     
Item 1. Legal Proceedings.   25
     
Item 1A. Risk Factors.   25
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.   25
     
Item 3. Defaults Upon Senior Securities.   25
     
Item 4. Mine Safety Disclosures.   25
     
Item 5. Other Information.   25
     
Item 6. Exhibits.   26-27

 

i

 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

 

This report includes forward-looking statements that relate to future events or our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Words such as, but not limited to, “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “likely,” “aim,” “will,” “would,” “could,” and similar expressions or phrases identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and future events and financial trends that we believe may affect our financial condition, results of operation, business strategy and financial needs.

 

You should read thoroughly this report and the documents that we refer to herein with the understanding that our actual future results may be materially different from and/or worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements including those made in this report, in Part I. Item 1A. Risk Factors also appear in our Annual Report on Form 10-K for the year ended December 31, 2018 and our other filings with the Securities and Exchange Commission. Some examples of risk factors which may affect our business are as follows:

 

  our lack of significant revenues/positive cash flow and history of losses,

 

  our ability to continue as a going concern,

 

  our ability to raise additional working capital as necessary,

 

  our ability to satisfy our obligations as they become due,

 

  the failure to successfully commercialize our product or sustain market acceptance,

 

  the reliance on third party agreements and relationships for development of our business,

 

  our operations in foreign markets.

 

  the control exercised by our management,

 

  the impact of government regulation on our business,

 

  our ability to effectively compete,

 

  the possible inability to effectively protect our intellectual property,

 

  the lack of a public market for our securities and the impact of the penny stock rules on trading in our common stock should a public market ever be established.

 

Other sections of this report include additional factors which could adversely impact our business and financial performance. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events. These forward-looking statements speak only as of the date of this report, and you should not rely on these statements without also considering the risks and uncertainties associated with these statements and our business.

 

OTHER PERTINENT INFORMATION

 

Unless specifically set forth to the contrary, when used in this report the terms “Ipsidy Inc.,” the “Company,” “we,” “our,” “us,” and similar terms refer to Ipsidy Inc., a Delaware corporation and its subsidiaries.

 

The information which appears on our website www.ipsidy.com is not part of this report.

 

ii

 

 

PART I – FINANCIAL INFORMATION

 

IPSIDY INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

   June 30,   December 31, 
   2019   2018 
   (unaudited)     
ASSETS
Current Assets:        
Cash  $4,184,220   $4,972,331 
Accounts receivable, net   183,958    130,875 
Current portion of net investment in direct financing lease   61,942    58,727 
Inventory   183,746    133,541 
Other current assets   559,904    471,834 
Total current assets   5,173,770    5,767,308 
           
Property and equipment, net   191,426    204,000 
Other assets   1,912,654    1,566,177 
Intangible assets, net   3,798,597    3,310,184 
Goodwill   6,736,043    6,736,043 
Net investment in direct financing lease, net of current portion   528,240    560,036 
Total assets  $18,340,730   $18,143,748 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY 
Current Liabilities:          
Accounts payable and accrued expenses  $1,864,148   $1,302,226 
Capital lease obligation, current portion   32,798    30,898 
Note payable, current portion   1,913,591    - 
Deferred revenue   409,788    236,270 
Total current liabilities   4,220,325    1,569,394 
           
Capital lease obligation, net of current portion   67,723    84,610 
Notes payable, net of unamortized discounts and current portion   10,267    1,853,648 
Other liabilities   215,163    45,000 
Total liabilities   4,513,478    3,552,652 
           
Commitments and Contingencies (Note 12)          
           
Stockholders’ Equity:          
Common stock, $0.0001 par value, 1,000,000,000 shares authorized; 518,125,454 and 478,950,996 shares issued and outstanding, respectively   51,812    47,895 
Additional paid in capital   94,527,749    90,770,682 
Subscription receivable   (100,000)   - 
Accumulated deficit   (80,873,765)   (76,435,235)
Accumulated comprehensive income   221,456    207,754 
Total stockholders’ equity   13,827,252    14,591,096 
Total liabilities and stockholders’ equity  $18,340,730   $18,143,748 

 

See notes to condensed consolidated financial statements. 

 

1

 

 

IPSIDY INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2019   2018   2019   2018 
                 
Revenues:                
Products and services  $628,905   $1,821,807   $1,352,846   $2,329,734 
Lease income   16,056    17,520    32,493    35,382 
Total revenues, net   644,961    1,839,327    1,385,339    2,365,116 
                     
Operating Expenses:                    
Cost of sales   189,261    743,709    365,724    863,957 
General and administrative   2,367,298    3,256,150    4,934,433    6,055,153 
Research and development   6,032    20,330    10,398    25,691 
Depreciation and amortization   166,908    113,768    327,696    224,140 
Total operating expenses   2,729,499    4,133,957    5,638,251    7,168,941 
                     
Loss from operations   (2,084,538)   (2,294,630)   (4,252,912)   (4,803,825)
                     
Other Income (Expense):                    
Other income   6,271    77,734    12,497    77,734 
Interest expense,  net   (93,260)   (246,298)   (180,150)   (485,467)
Other expense, net   (86,989)   (168,564)   (167,653)   (407,733)
                     
Loss before income taxes   (2,171,527)   (2,463,194)   (4,420,565)   (5,211,558)
                     
Income Taxes   (4,264)   (9,856)   (17,965)   (14,417)
                     
Net loss  $(2,175,791)  $(2,473,050)  $(4,438,530)  $(5,225,975)
                     
Net Loss Per Share - Basic and Diluted  $(0.00)  $(0.01)  $(0.01)  $(0.01)
                     
Weighted Average Shares Outstanding -                    
Basic and Diluted   479,787,679    407,490,811    476,369,338    405,872,537 

 

See notes to condensed consolidated financial statements.

 

2

 

 

IPSIDY INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30, 
   2019   2018   2019   2018 
Net Loss  $(2,175,791)  $(2,473,050)  $(4,438,530)  $(5,225,975)
Foreign currency translation gain (loss)   (10,526)   (29,018)   13,702    (2,729)
Comprehensive loss  $(2,186,317)  $(2,502,068)  $(4,424,828)  $(5,228,704)

 

See notes to condensed consolidated financial statements.

 

3

 

 

IPSIDY INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited)

 

                                  Accumulated        
For the six months ended June 30, 2019   Common Stock     Additional Paid-in     Subscription     Accumulated     Other Comprehensive        
    Shares     Amount     Capital     Receivable     Deficit     Income     Total  
Balances, December 31, 2018     478,950,996     $ 47,895     $ 90,770,682     $ -     $ (76,435,235 )   $ 207,754     $ 14,591,096  
Sale of common stock for cash     38,763,750       3,876       2,928,276       (100,000 )     -       -       2,832,152  
Common stock issued for services     410,708       41       41,071                               41,112  
Stock-based compensation             -       787,720       -       -       -       787,720  
Net loss     -       -       -       -       (4,438,530 )     -       (4,438,530 )
Foreign currency translation     -       -       -       -       -       13,702       13,702  
Balances, June 30, 2019     518,125,454     $ 51,812     $ 94,527,749     $ (100,000 )   $ (80,873,765 )   $ 221,456     $ 13,827,252  

 

                                  Accumulated        
For the three months ended June 30, 2019   Common Stock     Additional Paid-in     Subscription     Accumulated     Other Comprehensive        
    Shares     Amount     Capital     Receivable     Deficit     Income     Total  
Balances, March 31, 2019     478,950,996     $ 47,895     $ 91,186,061     $ -     $ (78,697,974 )   $ 231,982     $ 12,767,964  
Sale of common stock for cash     38,763,750       3,876       2,928,276       (100,000 )     -       -       2,832,152  
Common stock issued for services     410,708       41       41,071                       -       41,112  
Stock-based compensation     -       -       372,341       -               -       372,341  
Net loss     -       -       -       -       (2,175,791 )     -       (2,175,791 )
Foreign currency translation     -       -       -       -       -       (10,526 )     (10,526 )
Balances, June 30, 2019     518,125,454     $ 51,812     $ 94,527,749     $ (100,000 )   $ (80,873,765 )   $ 221,456     $ 13,827,252  

 

                            Accumulated        
                Additional           Other        
For the six months ended June 30, 2018   Common Stock     Paid-in     Accumulated     Comprehensive        
    Shares     Amount     Capital     Deficit     Income     Total  
Balances, December 31, 2017     403,311,988     $ 40,331     $ 79,053,339     $ (66,407,622 )   $ 254,851     $ 12,940,899  
Restricted stock issued for services     3,470,000       347       148,124       -       -       148,471  
Common stock issued for services     170,240       17       47,650       -       -       47,667  
Stock-based compensation     -       -       1,292,900       -       -       1,292,900  
Cashless exercise of common stock warrants     3,498,943       350       (350 )     -       -       -  
Cashless exercise of common stock options     1,122,233       112       (112 )     -       -       -  
Common stock issued for loan extension     1,500,000       150       (150 )     -       -       -  
Cancellation of shares in settlement of amounts due from prior acquisition     (728,448 )     (73 )     73       -       -       -  
Net loss     -       -       -       (5,225,975 )     -       (5,225,975 )
Foreign currency translation     -       -       -       -       (2,729 )     (2,729 )
Balances, June 30, 2018     412,344,956     $ 41,234     $ 80,541,474     $ (71,633,597 )   $ 252,122       9,201,233  

 

                            Accumulated        
                Additional           Other        
For the three months ended June 30, 2018   Common Stock     Paid-in     Accumulated     Comprehensive        
    Shares     Amount     Capital     Deficit     Income     Total  
Balances, March 31, 2018     405,708,228     $ 40,571     $ 79,791,311     $ (69,160,547 )   $ 281,140     $ 10,952,475  
Restricted stock issued for services     2,750,000       275       148,124       -       -       148,399  
Common stock issued for services     170,240       17       47,650       -       -       47,667  
Stock-based compensation     -       -       554,760       -       -       554,760  
Cashless exercise of common stock warrants     1,822,703       182       (182 )     -       -       -  
Cashless exercise of common stock options     1,122,233       112       (112 )     -       -       -  
Common stock issued for loan extension     1,500,000       150       (150 )     -       -       -  
Cancellation of shares in settlement of amounts due from prior acquisition     (728,448 )     (74 )     74       -       -       -  
Net loss     -       -       -       (2,473,050 )     -       (2,473,050 )
Foreign currency translation     -       -       -       -       (29,018 )     (29,018 )
Balances, June 30, 2018     412,344,956     $ 41,234     $ 80,541,474     $ (71,633,597 )   $ 252,122     $ 9,201,233  

 

See notes to condensed consolidated financial statements.

 

4

 

 

IPSIDY INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

   Six Months Ended
June 30,
 
   2019   2018 
CASH FLOWS FROM OPERATING ACTIVITIES:        
Net loss  $(4,438,530)  $(5,225,975)
Adjustments to reconcile net loss with cash flows from operations:          
Depreciation and amortization expense   327,696    224,140 
Stock-based compensation   787,720    1,292,900 
Stock issued for services   41,112    196,138 
Inventory reserve   -    348,308 
Amortization of debt discounts and issuance costs   54,882    323,114 
Changes in operating assets and liabilities:          
Accounts receivable   (63,869)   (620,817)
Net investment in direct financing lease   28,581    25,692 
Other current assets   155,035    (263,165)
Inventory   (60,818)   (41,435)
Accounts payable and accrued expenses   324,076    524,290 
Deferred revenue   173,518    535,434 
Net cash flows from operating activities   (2,670,597)   (2,681,376)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchase of property and equipment   (14,902)   (15,690)
Investment in other assets   (940,068)   (389,767)
Net cash flows from investing activities   (954,970)   (405,457)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from the sale of common stock, net of offering costs   2,832,152    - 
Principal payments on capital lease obligation   (14,987)   (13,301)
Net cash flows from financing activities   2,817,165    (13,301)
           
Effect of Foreign Currencies   20,291    (1,021)
           
Net Change in Cash   (788,111)   (3,101,155)
Cash, Beginning of the Period   4,972,331    4,413,822 
Cash, End of the Period  $4,184,220   $1,312,667 
           
Supplemental Disclosure of Cash Flow Information:          
Cash paid for interest  $6,996   $8,247 
Cash paid for income taxes  $4,264   $14,417 
           
Non-cash Investing and Financing Activities:          
Purchase of vehicle with note payable  $16,510   $- 
Recognition of right to use asset and obligation  $514,473   $- 

 

See notes to condensed consolidated financial statements.

 

5

 

 

IPSIDY INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – BASIS OF PRESENTATION

 

In the opinion of Management, the accompanying unaudited condensed consolidated financial statements are prepared in accordance with instructions for Form 10-Q, include all adjustments (consisting only of normal recurring accruals) which we considered as necessary for a fair presentation of the results for the periods presented. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The results of operations for the three or six months ended June 30, 2019 are not necessarily indicative of the results to be expected for future periods or the full year.

 

The condensed consolidated financial statements include the accounts of Ipsidy Inc. and its wholly-owned subsidiaries, Innovation in Motion, Inc., MultiPay S.A.S., ID Global LATAM, IDGS S.A.S., ID Solutions, Inc., FIN Holdings Inc., Ipsidy Enterprises Limited, and Cards Plus Pty Ltd. (collectively the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation.

 

Going concern

 

As of June 30, 2019, the Company had an accumulated deficit of approximately $80.9 million. For the six months ended June 30, 2019, the Company earned revenue of approximately $1.4 million and incurred a loss from operations of approximately $4.3 million.

 

The reports of our independent registered public accounting firm on our consolidated financial statements for the years ended December 31, 2018 and 2017 contained an explanatory paragraph regarding our ability to continue as a going concern based upon our net losses and accumulated deficit.

 

These unaudited condensed consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations for the next fiscal year. 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 equity or debt 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.

 

There is no assurance that the Company will ever be profitable or be able to secure funding or generate sufficient revenues to sustain operations. As such, there is substantial doubt about the Company’s ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

 

6

 

 

Net Loss per Common Share

 

The Company computes net loss per share in accordance with FASB ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible notes and stock warrants, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options, warrants and conversion of convertible notes. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive. The following potentially dilutive securities were excluded from the calculation of diluted loss per share for the six months ended June 30, 2019 and 2018 because their effect was antidilutive:

 

Security  2019   2018 
Stock Options   106,600,006    105,950,000 
Warrants   47,453,227    43,731,210 
Total   154,053,233    149,681,210 

  

Inventories

 

Inventories of kiosks held by IDGS S.A.S are stated at the lower of cost (using the first-in, first-out method) or net realizable value. The kiosks provide electronic ticketing for transit systems. Inventory of plastic/ID cards, digital printing material, which are held by Cards Plus Pty Ltd., are stated at the lower of cost (using the average method) or net realizable value. The Plastic/ID cards and digital printing material are used to provide plastic loyal ID and other types of cards. Inventories at June 30, 2019 and December 31, 2018 consist of kiosks that were not placed into service and are held for sale and cards inventory. Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings in the current period. As of June 30, 2019 and December 31, 2018, the Company had an inventory valuation allowance of approximately $354,000 and $707,000, respectively, to reflect net realizable value of the kiosks that are being held for sale, and the Company believes no valuation allowance was necessary regarding the cards inventory.

 

Leases

 

In February 2016, the FASB issued ASU No. 2016-02 (Topic 842). Topic 842 amends several aspects of lease accounting, including requiring lessees to recognize leases with a term greater than one year as a right-of-use asset and corresponding liability, measured at the present value of the lease payments. In July 2018, the FASB issued supplemental adoption guidance and clarification to Topic 842 within ASU 2018-10 “Codification Improvements to Topic 842, Leases” and ASU 2018-11 “Leases (Topic 842): Targeted Improvements.” The new guidance aims to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about leasing arrangements. A modified retrospective application is required with an option to not restate comparative periods in the period of adoption.

 

The Company, effective January 1, 2019 has adopted the provisions of the new standard. The Company decided to use the practical expedients available upon adoption of Topic 842 to aid the transition from former accounting to provisions of Topic 842. The package of expedients will effectively allow Ipsidy to run off existing leases, as initially classified as operating or financing, and classify new leases after implementation under the new standard as the business evolves.

 

The practical expedients elected by the Company in transition permits us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs. Furthermore, we have elected the short-term lease recognition exemption for leases with a term of 12 or less months which are not reasonably certain of exercising any available renewal options that would extend past 12 months. Additionally, we will continue to account for the executory costs of the direct financing lease as previously concluded and the initial direct costs were not considered significant.

 

7

 

 

The Company has operating leases principally for offices and some of the leases have renewal options. Management evaluates each lease independently to determine the purpose, necessity to its future operations in addition to other appropriate facts and circumstances.

  

We adopted Topic 842 using a modified retrospective approach for all existing leases at January 1, 2019. The adoption of Topic 842 impacted our balance sheet by the recognition of the operating lease right-of-use assets and the liability for operating leases. The accounting for finance leases (capital leases) was substantially unchanged. Accordingly, upon adoption, leases that were classified as operating leases under the previous guidance were classified as operating leases under Topic 842. The lease liability is based on the present value of the remaining lease payments, discounted using a market based incremental borrowing rate as the effective date of January 1, 2019 using current estimates as to lease term including estimated renewals for each operating lease. As of January 1, 2019, the Company recorded an adjustment of approximately $514,000 to operating lease right-of-use assets (“ROU”) and the related lease liability. See Note 12 for further information with respect to leases.

 

See Notes 7, 10, 11 and 12 to Condensed Consolidated Financial Statements for Additional Information.

 

Revenue Recognition

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”). Topic 606 supersedes the revenue recognition requirements in ASU Topic 605, Revenue Recognition (“Topic 605”), and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the considerations to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 also includes Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, which discusses the deferral of incremental costs of obtaining a contract with a customer, including the period of amortization of such costs. Collectively, we refer to Topic 606 and Subtopic 340-40 as the “new standard.” The new standard was adopted by the Company in the year beginning January 1, 2018.

 

The two permitted transition methods under the new standard are the full retrospective method, in which the new standard would be applied to each prior reporting period presented and the cumulative effect of applying the new standard would be recognized at the earliest period shown, or the modified retrospective method, in which the cumulative effect of applying the new standard would be recognized at the date of initial application. Based on our assessment, the impact of the new standard on our operations in prior periods was not significant. Below is the Company’s revenue recognition policy determined by revenue stream for its significant revenue generating activities through June 30, 2019.

 

Cards Plus - The Company recognizes revenue for the design and production of cards 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 upon delivery to the customer.

 

Identity Solutions – The Company recognizes revenue based on the identified performance obligations over the performance period for fixed consideration and for variable fees generated that are earned on a usage fee based over time based on monthly transaction volumes or on a monthly flat fee rate. The Company had a deferred revenue contract liability of approximately $410,000 and $236,000 as of June 30, 2019 and December 31, 2018, respectively, for certain revenue that will be earned in future periods. The majority of the $236,000 of deferred revenue contract liability as of December 31, 2018 was earned in the first three months of 2019. We anticipate that approximately $275,000 of the deferred revenue contract liability as of June 30, 2019 will be earned in the year ended December 31, 2019 and the balance in the first three months of 2020.

 

8

 

 

In 2018, the Company introduced a pay for performance plan for internal and external sales force, which is based on a percentage of revenues received by the Company. In the six months ended June 30, 2019 and June 30, 2018, no commissions were earned. We will defer and amortize any direct and incremental commission as well as costs to obtain a contract over the term of the related contracts. As of June 30, 2019 and December 31, 2018, there were no deferred commissions.

  

We will review each new contract for the related performance obligations and related revenue and expense recognition implications. We expect that the revenues derived from the new identity services could include multiple performance obligations. A performance obligation under the new 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 new 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 new standard accordingly to the revenue and expense derived from or related to each such service. A more complete analysis of the impact of the standard on these contracts will be performed at the period of time when services are expected to commence, and the conclusions reached by management may be different from those described above. For the quarter ended June 30, 2019, no revenues were recognized or required to be recognized under this practical expedient. 

 

Additionally, the Company will capitalize 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).

 

The Company capitalizes the costs incurred to acquire and fulfill a contract only if those costs meet all the following criteria:

 

a. The costs relate directly to a contract or to an anticipated contract that the Company can specifically identify.

 

b. The costs generate or enhance resources of the Company that will be used in satisfying (or in continuing to satisfy) performance obligations in the future.

 

c. The costs are expected to be recovered.

 

The Company will capitalize contract acquisition and fulfillment costs related to signing or renewing contracts that meet the above criteria, which will be classified as contract cost assets in the Company’s Consolidated Balance Sheets.

 

Contract cost assets are amortized using the straight-line method over the expected period of benefit beginning at the time revenue begins to be realized. The amortization of contract fulfillment cost assets associated with facilitating transactions are recorded as cost of services in the Company’s Consolidated Statements of Operations. The amortization of contract acquisition cost assets associated with sales commissions that qualify for capitalization are recorded as selling, general and administrative expense in the Company’s Consolidated Statements of Operations.

 

As of June 30, 2019, and December 31, 2018, the Company had deferred contract costs, represented by contract cost assets of approximately $4,000 and $11,000, respectively, which are included in other currents assets for certain costs incurred for the future delivery of election support services. The performance obligation will be met over the next two years and the costs will be expensed as the associated revenue is recognized as the Company performs its obligations.

 

9

 

 

As of June 30, 2019, and December 31, 2018, the Company had approximately $15,000 of accounts payable and accrued expenses related to the delivery of biometric identity system and services. The $15,000 will be paid in accordance with the terms of the service provider agreements.

 

Share Based Payments

 

On June 20, 2018, the FASB issued ASU 2018-07 which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. Previously, share-based payment arrangements to nonemployees were accounted for under ASC 718, while nonemployee share-based payments issued for goods and services were accounted for under ASC 505-50. Before the amendment, the major difference for the Company (but not limited to) was the determination of measurement date which generally is the date on which the measurement of equity classified share-based payments becomes fixed. Equity classified share-based payments for employees was fixed at the time of grant. Equity-classified nonemployee share-based payment awards are no longer measured at the earlier of the date which a commitment for performance by the counterparty is reached or the date at which the counterparty’s performance is complete. They are now measured at the grant date of the award which is the same as share-based payments for employees. The Company adopted the requirements of the new rule as of January 1, 2019, the effective date of the new guidance.

 

The Company has determined on the date of adoption that the impact of the new standard was not significant.

  

Beginning in 2019, the Company in accordance with the requirements of the new standard will expense the fair value of the existing non-employee share-based payments over their vesting period using the fair value determined on the date of adoption. See note 9 of the notes to condensed consolidated financial statements where employee and non-employee share-based payments are presented.

 

NOTE 2 – PROPERTY AND EQUIPMENT, NET

 

Property and equipment consisted of the following as of June 30, 2019 and December 31, 2018:

 

   2019   2018 
Computers and equipment  $299,528   $238,442 
Furniture and fixtures   156,867    156,867 
    456,395    395,309 
Less Accumulated depreciation   264,969    191,309 
Property and equipment, net  $191,426   $204,000 

 

Depreciation expense totaled $45,203 and $35,191 for the six months ended June 30, 2019 and 2018, respectively.

 

NOTE 3 – OTHER ASSETS

 

The Company’s other assets consist of software being developed for new product offerings that have not been placed into service and the operating lease ROU assets. The balances as of June 30, 2019 and December 31, 2018 are:

 

   2019   2018 
Software and development  $1,734,122   $1,566,177 
Operating Lease ROU assets, long term   178,532     
   $1,912,654   $1,566,177 

 

10

 

 

NOTE 4 – Intangible Assets, Net (Other than Goodwill)

 

The Company’s intangible assets consist of intellectual property acquired from MultiPay and FIN and are amortized over their estimated useful lives as indicated below. The following is a summary of activity related to intangible assets for the six months ended June 30, 2019:

  

       Acquired and                 
   Customer   Developed   Intellectual       Patents     
   Relationships   Software   Property   Non-Compete   Pending   Total 
                         
Useful Lives   10 Years    5 Years    10 Years    10 Years    N/A      
                               
Carrying Value at December 31, 2018  $1,128,734   $908,893   $1,191,942   $2,433   $78,182   $3,310,184 
Additions        764,739              6,167    770,906 
Amortization   (79,358)   (114,655)   (87,264)   (1,217)       (282,493)
Carrying Value at June 30,2019  $1,049,376   $1,558,977   $1,104,678   $1,216   $84,349   $3,798,597 

 

The following is a summary of intangible assets as of June 30, 2019:

 

       Acquired and                 
   Customer   Developed   Intellectual       Patents     
   Relationships   Software   Property   Non-Compete   Pending   Total 
Cost  $1,587,159   $1,724,621   $1,759,809   $14,087   $84,349   $5,170,025 
Accumulated amortization   (537,782)   (165,644)   (655,131)   (12,871)       (1,371,428)
Carrying Value at June 30,2019  $1,049,377   $1,558,977   $1,104,678   $1,216   $84,349   $3,798,597 

 

  

Future expected amortization of intangible assets is as follows:

 

Fiscal Year Ending December 31,    
Remainder of 2019  $358,948 
2020   715,502 
2021   715,502 
2022   622,168 
2023   571,180 
Thereafter   815,297 
   $3,798,597 

 

NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses consisted of the following as of June 30, 2019 and December 31, 2018:

 

   2019   2018 
         
Trade payables  $392,851   $401,272 
Accrued interest   520,834    401,667 
Accrued payroll and related obligations   282,513    260,153 
Current portion of operating lease liabilities   251,206     
Other accrued expenses   416,744    239,134 
   $1,864,148   $1,302,226 

 

11

 

 

NOTE 6 - NOTES PAYABLE, NET

 

The following is a summary of notes payable as of June 30, 2019 and December 31, 2018:

 

   June 30,
2019
   December 31,
2018
 
         
In January 2017, the Company issued a Senior Unsecured Note (“Note”) a face value of $3,000,000, payable two years from issuance, along with an aggregate of 4,500,000 shares of Common Stock, with a fair value of $1,147,500. The Company allocated the proceeds to the note payable and common stock based on their relative fair value and recorded a discount of $830,018 to be amortized into interest expense over the two-year term of the note. The Company also paid debt issuance costs consisting of a cash fee of $120,000 and 1,020,000 shares of common stock of the Company with a fair value of $306,000. On April 30, 2018, the Company and the Noteholder agreed to extend the due date of the note until April 30, 2020 for an extension fee of 1,500,000 shares of the Common Stock issued to the Noteholder.  The April 2018 change in terms of the Note payable has been determined to be a debt extinguishment in accordance with ASC 470.   The reported amounts under the debt extinguishment are not significantly different than that of the Company’s reported amounts.  See below  $2,000,000   $2,000,000 
Installment loan payable related to a vehicle acquisition payable in monthly payments of $539 per month at an interest rate of 10.8% per annum payable for 36 months   15,328     
Total Principal Outstanding  $2,015,328   $2,000,000 
Unamortized Deferred Debt Discount   (66,804)   (106,886)
Unamortized Deferred Debt Issuance Costs   (24,666)   (39,466)
Notes Payable, Net  $1,923,858   $1,853,648 
Notes Payable, current portion, net of discounts and current portion  $1,913,591   $ 
Notes Payable, Net of discounts and current portion   10,267    1,853,648 
   $1,923,858   $1,853,648 

  

 The following is a roll-forward of the Company’s notes payable and related discounts for the six months ended June 30, 2019:

 

   Principal
Balance
   Debt
Issuance
Costs:
   Debt
Discounts:
   Total: 
Balance at December 31, 2018  $2,000,000   $(39,466)  $(106,886)  $1,853,648 
Additions   16,510            16,510 
Amortization   (1,182)   14,800    40,082    53,700 
Balance at June 30, 2019  $2,015,328   $(24,666)  $(66,804)  $1,923,858 

 

Future maturities of notes payable are as follows as of June 30, 2019:

 

July 1, 2019 – June 30, 2020  $2,005,061 
July 1, 2020 – June 30, 2021   5,636 
April 1, 2021 – June 30, 2022   4,631 
   $2,015,328 

 

12

 

 

NOTE 7 – OTHER LIABILITIES

 

Other liabilities consisted of the following as of June 30, 2019 and December 31, 2018:

 

   2019   2018 
         
Operating lease liabilities, long term  $170,163   $ 
Other   45,000    45,000 
   $215,163   $45,000 

 

NOTE 8 – RELATED PARTY TRANSACTIONS

 

Notes Payable

 

During the quarter ended June 30,2019, the Company recorded approximately $119,000 of interest expense under the terms and conditions of the Note (see Note 6) that is due to the Theodore Stern Revocable Trust, whose trustee Mr. Stern is a member of the Company’s Board of Directors.

 

Purchase of Common Stock

 

In June 2019, two of the Company’s Directors and one Officer purchased 1,562,500 shares of common stock of the 2019 offering as described in Note 9.

 

Other

 

In connection with the 2019 offering of common stock, the Company incurred fees to Network 1 Financial Securities Inc. (“Network 1”), a registered broker dealer, one of the Company’s financial advisors. The Network 1 fees were approximately $109,000 paid in cash and 858,000 common stock purchase warrants with a fair value of approximately $54,000 that are exercisable during a term of five years at a price of $0.088 cents per share. A member of the Company’s Board of Director’s maintains a partnership with a key principal of Network 1.

 

Additionally, the Company rents office space in Long Beach, New York at a monthly cost of $7,425. The agreement is month to month and can be terminated on 30 days’ notice. The agreement is between the Company and Bridgeworks LLC, an entity principally owned by Mr. Beck, our CEO, and his family. During the three months ended June 30, 2019 and June 30, 2018, the Company paid $22,275 and $22,775, respectively.

 

NOTE 9STOCKHOLDER’S EQUITY

 

Common Stock

 

In June 2019, the Company entered into Subscription Agreements with accredited investors (the “2019 Accredited Investors”) pursuant to which the 2019 Accredited Investors purchased an aggregate of approximately 38,764,000 shares of the Company’s common stock for an aggregate purchase price of approximately $3,100,000. In connection with the private offering, the Company paid a cash fee of approximately $178,000 and issued 1,251,750 common stock purchase warrants with a fair value of approximately $79,000 that are exercisable during a term of five years at an exercise price of $0.088 per share.

 

The Company also issued 410,708 shares of common stock during the six months ended June 30, 2019 to two service providers in satisfaction of approximately $41,000 due for services.

 

13

 

 

Warrants

 

The granted warrants to its investment bankers in connection with the June 2019 private common stock offering as described above in the in the six months ended June 30, 2019:

 

   Number of
Shares
   Weighted
Average
Exercise
Price
   Weighted
Average
Remaining
Life
Outstanding at December 31, 2018   46,201,477   $0.08   1.9 Years
Granted   1,251,750    0.09   5.0 Years
Outstanding at June 30,2019   47,453,227   $0.09   1.3 Years

 

Stock Options

 

During the six months ended June 30, 2019, the Company granted options to acquire 600,000 shares of common stock to three employees at fair market value on date of grant. Of the 600,000 stock options, 475,000 options are earned over a three-year period and 125,000 options vest upon achieving certain performance thresholds. The options have a term of ten years and the approximate fair value of the options were $49,000.

 

Expected Volatility – 75%

Expected Term – 2.5 – 6.5 Years

Risk Free Rate – 2.0%

Dividend Rate – 0.00%

 

Activity related to stock options for the six months ended June 30, 2019 is summarized as follows:

 

       Weighted
Average
   Weighted
Average
   Aggregate 
   Number of   Exercise   Contractual   Intrinsic 
   Shares   Price   Term (Yrs.)   Value 
Outstanding as of December 31, 2018   106,253,339   $0.20    7.4   $1,989,163 
Granted   600,000    0.12    9.7    - 
Forfeitures   (253,333)   0.10    -    - 
Outstanding as of June 30,2019   106,600,006    0.20    7.1   $1,952,230 
Exercisable as of June 30,2019   99,404,867   $0.20    7.1   $1,920,074 

 

14

 

 

The following table summarizes stock option information as of June 30, 2019:

 

        Weighted Average     
        Contractual     
Exercise Price   Outstanding   Life (Yrs.)   Exercisable 
              
$0.00001    3,500,000    6.5    3,500,000 
 0.05    32,700,006    7.3    32,043,756 
 0.10    27,200,000    7.5    26,227,778 
 0.12    1,400,000    9.5     
 0.13    250,000    8.6    83,333 
 0.15    2,800,000    6.6    2,800,000 
 0.22    2,750,000    8.8    750,000 
 0.25    2,500,000    8.6    1,166,667 
 0.26    500,000    9.1    166,667 
 0.29    1,000,000    8.0    666,667 
 0.40    1,000,000    6.9    1,000,000 
 0.45    31,000,000    6.6    31,000,000 
                  
      106,600,006    7.1    99,404,867 

 

During the six months ended June 30,2019, the Company recognized approximately $654,000 of stock-based compensation expense related to options of which non-employees’ expense was approximately $151,000. As of June 30, 2019, there was approximately $840,000 of unrecognized compensation costs related to stock options outstanding of which approximately $108,000 was related to non-employees and will be expensed through 2022.

 

NOTE 10 – DIRECT FINANCING LEASE

 

In September 2015, the Company and an entity in Colombia entered into a rental contract for the rental of 78 kiosks to provide cash collection and fare services at transportation stations. The lease term began in May 2016 when the kiosks were installed and operational and when the lease commenced. The term of the rental contract is ten years at an approximate monthly rental of $11,900. The lessee has the option at the end of the lease term to purchase each unit for approximately $40. The term of the lease approximates the expected economic life of the kiosks. The lease was accounted for as a direct financing lease.

 

The Company has recorded the transaction as its net investment in the lease and will receive monthly payments of $11,856 before estimated executory costs, or $142,272, annually, to reduce investment in the lease and record income associated with the related amount due. Executory costs are estimated to be $1,677 month and initial direct costs are not considered significant. The transaction resulted in incremental revenue in the quarter ended June 30, 2019 of approximately $16,000.

 

The equipment is subject to a direct lease valued at approximately $748,000. At the inception of the lease term, the aggregate minimum future lease payments to be received was approximately $1,422,000 before executory cost. Unearned income recorded at the inception of this lease was approximately $474,000 and is being recorded over the term of the lease using the effective income rate method. Future minimum lease payments to be received under the lease for the next five years and thereafter are as follows:

 

15

 

 

Remainder 2019  $61,074 
2020   122,148 
2021   122,148 
2022   122,148 
2023   122,148 
Thereafter   285,012 
Sub-total   834,678 
Less deferred revenue   (244,496)
Net investment in lease  $590,182 

 

NOTE 11 – LEASE OBLIGATION PAYABLE

 

The Company entered into a lease in March 2017 for the rental of its printer for its secured plastic and credential card products business under an arrangement that is classified as a finance lease. The leased equipment is amortized on a straight-line basis over its lease term including the last payment (61 payments) which would transfer ownership to the Company. Total amortization related to the lease equipment as of June 30, 2019 is $75,006. The following is a schedule showing the future minimum lease payments under finance lease by year and the present value of the minimum lease payments as of June 30, 2019. The interest rate related to the lease obligation is 12% and the maturity date is June 30, 2022.

 

Year Ending    
     
Remainder of 2019  $21,548 
2020   43,096 
2021   43,096 
2022   10,774 
Total minimum lease payments   118,514 
Less: Amount representing interest   (17,993)
Present value of minimum lease payments  $100,521 

   

16

 

 

NOTE 12 – COMMITMENTS AND CONTINGENCIES

 

Legal Matters

 

From time to time, the Company is a party to various legal or administrative proceedings arising in the ordinary course of our business. While any litigation contains an element of uncertainty, we have no reason to believe the outcome of such proceedings will have a material adverse effect on the financial condition or results of operations of the Company.  

 

Leases

 

For the three months ended June 30, 2019, lease expense was approximately $236,000 inclusive of short-term leases.

 

The lease related balances included in the Condensed Consolidated Balance Sheet as of June 30, 2019 were as follows:

 

Assets:    
     
Current portion of operating lease ROU assets - included in other current assets  $243,105 
      
Operating lease ROU assets – included in Other Assets  178,532 
      
Total operating lease assets  $421,637 

 

Liabilities:    
     
Current portion of ROU liabilities – included in Accounts payable and accrued expenses  $251,206 
      
Long-term portion of ROU liabilities – included in Other liabilities   170,163 
      
Total operating lease liabilities  $421,369 

 

The weighted average lease term remining is 1.5 years and weighted average discount rate is 13.55%.

 

The following table presents the maturity of the Company’s operating lease liabilities as of June 30, 2019:

 

Remainder of 2019  $163,216 
2020   183,519 
2021   92,391 
2022   46,196 
Total operating lease payments   485,322 
Less: Imputed interest   (63,953)
Total operating lease liabilities  $421,369 

 

The Company leases approximately 2,100 square feet of office space in Plantation, Florida. Monthly rental is approximately $2,700 per month with a 3% increase on each annual anniversary. The Company will be responsible for their respective share of building expenses. The lease term is through August 2020.

 

Additionally, the Company rents office space in Long Beach, New York at a monthly cost of $7,425. The agreement is month to month and can be terminated on 30 days’ notice. The agreement is between the Company and Bridgeworks LLC, an entity principally owned by Mr. Beck, our CEO and his family.

 

In October 2018, the Company a entered into an office lease in Alpharetta, Georgia, for approximately $3,800 per month through June 30, 2020 or through the termination of the master lease.

 

17

 

 

The Company leases an office location in Bogota, Colombia. In April 2017, MultiPay S.A.S. entered an office lease beginning April 22, 2017 for two years. The new lease cost is approximately $8,500 per month with an inflation adjustment after one year. The lease is automatically extended for one additional year unless written notice to the contrary is provided at least six months in advance. Furthermore, the Company leases an apartment at approximately $2,000 a month for one of the management team.

 

The Company also leases space for its operation in South Africa. The current lease is through June 30, 2022 and the approximate monthly rent is $8,000.

 

NOTE 13 – SEGMENT INFORMATION

 

General information

 

The segment and geographic information provided in the table below is being reported consistent with the Company’s method of internal reporting. Operating segments are defined as components of an enterprise for which separate financial information is available and which is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The CODM regularly reviews net revenue and gross profit by geographic regions. The Company’s products and services operate in two reportable segments; identity solutions and payment processing.

 

Information about revenue, profit/loss and assets

 

The CODM evaluates performance and allocates resources based on net revenue and operating results of the geographic region as the current operations of each geography are either primarily identity management or payment processing. Identity management revenue is generated in North America and Africa and payment processing is earned in South America which are the three geographic regions of the Company. We have included the lease income in payment processing are the leases are related to unattended ticking kiosks.

 

Long lived assets are in North America, South America and Africa. Most assets are intangible assets recorded from the acquisition of MultiPay (South America) in 2015 and FIN Holdings (North America and Africa) in 2016. Assets for North America, South America and Africa amounted to approximately $8.0 million, $0.7 million and $2.1 million, respectively, of which $4.9 million, $0.1 million and $1.7 million related to goodwill as of June 30, 2019.

 

18

 

 

Analysis of revenue by segment and geographic region and reconciliation to consolidated revenue, gross profit, and net loss are provided below. The Company has included in the schedule below an allocation of corporate overhead based on management’s estimate of resource requirements.

 

   Three Months Ended   Six Months Ended 
   June 30,   June 30,   June 30,   June 30, 
   2019   2018   2019   2018 
Revenues, net                
North America  $146,583   $1,383,389   $373,624   $1,500,697 
South America   120,613    116,398    245,941    195,486 
Africa   377,765    339,540    765,774    668,933 
    644,961    1,839,327    1,385,339    2,365,116 
                     
Identity Solutions   524,348    1,722,929    1,139,398    2,169,630 
Payment Processing   120,613    116,398    245,941    195,486 
    644,961    1,839,327    1,385,339    2,365,116 
                     
Loss From Operations                    
North America   (681,690)   433,957    (1,419,652)   (613,929)
South America   (1,220,869)   (2,277,874)   (2,477,821)   (3,607,464)
Africa   (181,979)   (450,713)   (355,439)   (582,432)
    (2,084,538)   (2,294,630)   (4,252,912)   (4,803,825)
                     
Identity Solutions   (863,669)   (16,756)   (1,775,091)   (1,196,361)
Payment Processing   (1,220,869)   (2,277,874)   (2,477,821)   (3,607,464)
    (2,084,538)   (2,294,630)   (4,252,912)   (4,803,825)
                     
Interest Expense   (93,260)   (246,298)   (180,150)   (485,467)
Other income/(expense)   6,271    77,734    12,497    77,734 
                     
Loss before income taxes   (2,171,527)   (2,463,194)   (4,420,565)   (5,211,558)
                     
Income tax expense   (4,264)   (9,856)   (17,965)   (14,417)
                     
Net loss  $(2,175,791)  $(2,473,050)  $(4,438,530)  $(5,225,975)

 

19

 

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Going concern

 

As of June 30, 2019, the Company had an accumulated deficit of approximately $80.9 million. For the six months ended June 30, 2019 the Company earned revenue of approximately $1.4 million and incurred a loss from operations of approximately $4.3 million.

 

The reports of our independent registered public accounting firms on our consolidated financial statements for the years ended December 31, 2018 and 2017 contained an explanatory paragraph regarding our ability to continue as a going concern based upon our net losses.  

 

These unaudited condensed consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations for the next fiscal year. 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 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.

 

There is no assurance that the Company will ever be profitable or be able to secure funding or generate sufficient revenues to sustain operations. As such, there is substantial doubt about the Company’s ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

 

Overview

 

Ipsidy Inc. (together with its subsidiaries, the “Company”, “we” or “our”) operates an Identity as a Service (IDaaS) platform that delivers a suite of secure, mobile, biometric identity solutions, available to any vertical, anywhere. In a world that is increasingly digital and mobile, our mission is to help our customers know with biometric certainty the identity of the people with whom they are engaging. We provide solutions to everyday problems: Who is applying for a loan? Who is accessing the computer system? Who is at the door?

 

Ipsidy provides secure, biometric identification, identity verification and electronic transaction authentication and processing services. We have developed an identity transaction platform for our customers, be they businesses, residences, governments, or other organizations, to enable their users to more easily verify and authenticate their identity through a mobile phone or portable device of their choosing (as opposed to dedicated hardware). Our system enables participants to complete transactions with a digitally signed authentication response, including the underlying transaction data. In this way our systems can provide pre-transaction authentication of identity as well as embed each user’s identity attributes, within every electronic transaction message processed through our platform, or other electronic systems.

 

We believe that it is essential that businesses and consumers know who is on the other side of an electronic transaction and have an audit trail, proving that the identity of the other party was duly authenticated. Our solutions are intended to provide our customers with the next level of transaction security, control and certainty. Our platform uses biometric and multi-factor identity solutions, which are intended to support a wide variety of electronic transactions. We define “electronic transactions” in the broadest sense to include not only financial transactions (i.e. exchanges of value in all of their forms), and legal transactions (e.g. approving the release of personal or other confidential data), but also access control to physical environments (e.g. entrances to offices, public buildings, data centers and other sensitive locations) and digital environments (e.g. accessing financial accounts, voting systems, email systems and controlling data network log-ins).

 

The Company’s products focus on the broad requirement for identity verification and authentication, and access and transaction controls and associated identity management needs. Organizations of all descriptions require cost-effective and secure mobile electronic transaction solutions for them and their customers. We aim to offer our customers solutions that can be integrated into each customer’s business and organizational operations in order to facilitate their use and enhance the end user customer experience.

 

Our digital mobile wallet applications, or electronic account holders are used to contain different services and accounts that can be easily added and enable users to conveniently and securely effect a variety of electronic transactions, using their identity. One example is for consumers and employees to use their mobile application to authenticate identity, in order to access secure digital, or physical environments. We recently announced the launch of our integrated Verified solution with Datapro as an add-on to their online banking software. Another example is our closed-loop payment account, digital issuance platform, that is intended to offer secure and cost-effective methods of conversion of cash and paper to electronic payments.

 

20

 

 

The Company’s solutions for fingerprint-based identity management and electronic payment transaction processing have been in the market for several years. For example, in 2017, we won an international competitive tender to provide our IDSearch Automated Fingerprint Identification de-duplication system (AFIS) to the Zimbabwe Electoral Commission, for them to ensure that no duplicate entries existed in the voter roll for the 2018 election. The AFIS system was delivered under tight deadlines and within budget, in order to enable the voter roll to be published and the election to occur as planned.

 

Management believes that some of the advantages of the Company’s Identity Transaction Platform approach are the ability to leverage the platform to support a variety of vertical markets including the identity solutions and transaction processing sectors and the adaptability of the platform to the requirements of new markets and new products requiring low cost, secure, and configurable mobile solutions. These vertical markets include but are not limited to banking and payment transactions, elections, schools, public transportation, government and enterprise security. At its core, the Company’s offering, combining its proprietary biometric technologies, with those acquired is intended to facilitate the processing of diverse electronic transactions, be they payments, votes, or physical or digital access, all of which can include identity verification, authentication and identity transaction recording. The Company continues to invest in developing, patenting and acquiring the various elements necessary to enhance the platform, which is intended to allow us to achieve our goals.

 

The Company was incorporated in the State of Delaware on September 21, 2011 and changed its name to Ipsidy Inc. on February 1, 2017, and our common stock is traded on the OTCQX U.S. Market under the trading symbol “IDTY”. Our corporate headquarters is located at 670 Long Beach Blvd., Long Beach, NY 11561 and our main phone number is (516) 274-8700. We maintain a website at www.ipsidy.com. The contents of our website are not incorporated into, or otherwise to be regarded as part of, this Quarterly Report on Form 10-Q

 

Adjusted EBITDA

 

This discussion includes information about Adjusted EBITDA that is not prepared in accordance with GAAP. Adjusted EBITDA is not based on any standardized methodology prescribed by 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 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.

 

Management believes that Adjusted EBITDA, when viewed with our results under 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. Additionally, we will continue to use Adjusted EBITDA in connection with our executive performance-based compensation in 2019.

 

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:

 

Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;

 

Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

 

Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements;

 

Adjusted EBITDA does not include the impact of certain charges or gains resulting from matters we consider not to be indicative of our ongoing operations.

 

21

 

 

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 GAAP results and using Adjusted EBITDA only as a supplement to our GAAP results.

 

Reconciliation of Net Loss to Adjusted EBITDA

(Unaudited)

 

   Three Months  Ended   Six Months Ended 
   June 30,
2019
   June 30,
2018
  

June 30,

2019

   June 30,
2018
 
                 
Net loss  $(2,175,791)  $(2,473,050)  $(4,438,530)  $(5,225,975)
                     
Add Back:                    
                     
Interest Expense   93,260    246,928    180,150    485,467 
Other   (6,271)   (77,734)   (12,497)   (77,734)
Depreciation and amortization   166,908    113,768    327,696    224,140 
Taxes   4,264    9,856    17,965    14,417 
Stock compensation   372,341    624,581    787,720    1,292,900 
                     
Adjusted EBITDA (Non-GAAP)  $(1,545,289)  $(1,555,651)  $(3,137,496)  $(3,286,785)

 

Adjusted EBITDA loss for the six months ended June 30, 2019 decreased approximately $0.1 million due to improved results at its operations in South Africa and Colombia higher revenue offset by an increased investment in salary and technology expense as the Company expanded its infrastructure to support its Identity Transaction Platform.

 

Three Months and Six Months Ended June 30, 2019 and June 30, 2018

 

Revenues, net

 

During the three months and six months ended June 30, 2019, the Company had revenues of approximately $0.6 million and $1.4 million compared to $1.8 million and $2.4 million in the three and six months ended June 30, 2018. The decrease in 2019 compared to 2018 is related to the sale of a Automated Fingerprint Identification System (“AFIS”) and Identity Management System Solution in 2018 offset by revenue increases in 2019 from new products in addition to higher revenue at Cards Plus.

 

During the six months ended June 30, 2019, the Company had revenues from operations in North America, South America and Africa of $0.4 million, $0.2 million and $0.8 million respectively compared to $1.5 million, $0.2 million and $0.7 million in the six months ended June 30, 2018 respectively.

 

Cost of sales

 

During the three and six months ended June 30, 2019, cost of sales was less than the cost of sales in the three and six months ended June 30, 2018 principally due to the sale of a AFIS and Identity Management System Solution in 2018, which was not repeated in 2019.

 

Operating Expenses

 

During the three and six months ended June 30, 2019 compared to the three and six months ended June 30, 2018, general and administrative expense decreased by approximately $0.9 million and $1.1 million respectively, principally due to lower stock compensation charges and in 2018, the Company incurred a charge of $0.5 million which was principally for a valuation charge related to kiosks.

 

Depreciation and amortization expense increased in three months and six months ended June 30, 2019 compared to the three and six months ended June 30, 2018 due to increased amortization expenses associated with the new platform and services being offered.

 

22

 

 

Other Income (Expense)

 

Interest expense

 

Interest expense decreased in the three months and six months ended June 30, 2019 principally due to a decreased level of debt discount amortization expense as well as a lower outstanding balance compared to the three and six months ended June 30, 2018.

 

Liquidity and Capital Resources

 

Liquidity is the ability of a company to generate sufficient cash to satisfy its needs for cash. As of June 30, 2019, the Company had approximately $4.2 million of cash and $0.9 million of net working capital.

 

Cash used in operating activities was approximately $2.7 million and $2.7 million in the six months ended June 30, 2019 and June 30, 2018, respectively.

 

We expect the revenue will begin to increase sequentially in the ensuing quarters as we board customers for existing and new products and services being offered from the implementation of our new platform.

  

In June 2019, the Company entered into Subscription Agreements with accredited investors (the “2019 Accredited Investors”) pursuant to which the 2019 Accredited Investors purchased an aggregate of approximately 38,764,000 shares of the Company’s common stock for an aggregate purchase price of approximately $3,100,000. In connection with the private offering, the Company paid financial advisors a cash fee of approximately $178,000 and issued 1,251,750 common stock purchase warrants that are exercisable during a term of five years at an exercise price of $0.088 per share.

 

The Company intends to raise additional capital during of 2019. The amount required will be dependent on current operations, future investment and the execution of our business plan. We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time. There can be no assurance that such additional financing will be available to us on acceptable terms, or at market pricing, or at all. Our failure to obtain financing would have a material adverse effect on the organization.

 

The Company estimates its cash needs for the balance of 2019 and 2020 will approximate $10.0 million as the $2.0 million note payable and accrued interest is due in April 2020.

 

Off-Balance Sheet Arrangements

 

The Company has no off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is deemed by our management to be material to investors.

 

Recent Accounting Policies

 

The recent material accounting policies that may be the most critical to understanding of the financial results and conditions are discussed in Note 1 of the unaudited condensed consolidated financial statements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

As a smaller reporting company, we are not required to include disclosure under this item.

 

23

 

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

The Company’s management with the participation of the Company’s Chief Executive Officer and Chief Financial Officer has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. The term “disclosure controls and procedures”, as defined under Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. Based upon the evaluation of the disclosure controls and procedures at the end of the period covered by this report, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective for the quarter ended June 30, 2019.

  

Changes in Internal Control over Financial Reporting

 

During the six months ended June 30, 2019 and in the year end December 31, 2018, the Company continues to improve its internal control over financial reporting and believes the disclosure controls and procedures are adequate to ensure accurate and timely financial reporting in accordance with the applicable standards.

 

  - The Company has adequate financial reporting monitoring activities to mitigate the risk of management override and performs a review of results and reporting from its entities located outside the United States.

 

  - The Company monitors and reviews new accounting principles to ensure compliance with GAAP and SEC disclosure requirements but uses third party resources as appropriate.

 

  - The Company has used internal counsel and external counsel to support the review and edit of its financial statements to ensure compliance with SEC disclosure requirements.

 

  - The audit committee holds quarterly meetings and meets with the independent audit firm to support the financial reporting process.

 

  -

The Company has Board committees and periodic and regular meetings are held with the internal governance and compliance functions to discuss and coordinate operational, compliance and financial matters.

 

Except as set forth above, there have been no changes in our internal control over financial reporting

 

24

 

 

PART II

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time, the Company is a party to various legal or administrative proceedings arising in the ordinary course of business. While any litigation contains an element of uncertainty, we have no reason to believe the outcome of such proceedings will have a material adverse effect on the financial condition or results of operations of the Company. 

 

ITEM 1A. RISK FACTORS

 

Risk factors describing the major risks to our business can be found under Item 1A, “Risk Factors”, in our Annual Report on Form 10-K for the year ended December 31, 2018. There has been no material change in our risk factors from those previously discussed in the Annual Report on Form 10-K.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

In June 2019, the Company entered into Subscription Agreements with accredited investors (the “2019 Accredited Investors”) pursuant to which the 2019 Accredited Investors purchased an aggregate of approximately 38,764,000 shares of the Company’s common stock for an aggregate purchase price of approximately $3,100,000. In connection with the private offering, the Company paid registered broker-dealers, a cash fee of approximately $173,000 and issued 1,251,750 common stock purchase warrants that are exercisable during a term of five years at an exercise price of $0.088 per share.

 

The offers sales, and issuances of the securities were made to accredited investors and the Company relied upon the exemptions in Section 4 (a) 2 of the Securities Act and/or Rule 506 of Regulation D promulgated thereunder with regard to any sales. No advertising or general solicitations was employed in offering the securities. The offers and sales were made to accredited investors and transfer of the securities was restricted by the Company in accordance with the requirements of the Securities Act of 1933.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable to our operations. 

 

ITEM 5. OTHER INFORMATION

 

None.

   

25

 

 

ITEM 6. EXHIBITS

 

Exhibit

Number

  Description
2.1   (1) Agreement and Plan of Reorganization
       
3.1   (2) Certificate of Incorporation
       
3.2   (2) By-laws
       
3.3   (3) Certificate of Ownership and Merger
       
3.4   (4) Certificate of Amendment to the Certificate of Incorporation dated February 1, 2017
       

3.5

 

(5) 

Certificate of Amendment to the Certificate of Incorporation dated October 3, 2017

       
4.1   (6) Stock Option dated May 28, 2015 issued to Ricky Solomon
       
4.2   (7) Common Stock Purchase Warrant issued to Ricky Solomon
       
4.3   (8) Form of Common Stock Purchase Warrant issued to the 2015 Accredited Investors
       
4.4   (9) Stock Option dated September 25, 2015 issued to Herbert M. Seltzer
       
4.5   (10) Common Stock Purchase Warrant issued to ID Solutions Inc.

   

4.6   (11) Stock Option issued to Thomas Szoke dated September 25, 2015
       
4.7   (11) Stock Option issued to Douglas Solomon dated September 25, 2015
       
4.8   (11) Stock Option issued to Maksim Umarov dated September 25, 2015
       
4.9   (12) Form of Common Stock Purchase Warrant issued to the 2015 Accredited Investors
       
4.10   (13) Form of Common Stock Purchase Warrant issued to the April 2016 Accredited Investors
       
4.11   (14) Stock Option issued to Parity Labs, LLC
       
4.12   (15) Stock Option Agreement entered between the Company and Stuart P. Stoller dated January 31, 2017
       
4.13   (4) Stock Option Agreement entered between the Company and Philip D. Beck dated January 31 2017
       
4.14   (29) Letter Agreement between Ipsidy Inc. and Theodore Stern Revocable Trust dated April 30, 2018.
       
4.15   (30) Form of Subscription Agreement by and between Ipsidy Inc. and the August 2018 Accredited Investors
       
4.16   (31) Form of Subscription Agreement by and between Ipsidy Inc. and the June 2019 Accredited Investors
       
10.1   (16) Assignment of Patents
       
10.2   (16) Assignment of Patents
       
10.3   (16) Assignment of Patents
       
10.4   (17) The ID Global Solutions Corporation Equity Compensation Plan
       
10.5   (18) Share Purchase Agreement by and between ID Global Solutions Corporation and the Multipay S.A. Shareholders
       
10.6   (6) Director Agreement by and between ID Global Solutions Corporation and Ricky Solomon dated May 28, 2015
       
10.7   (19) Director Agreement by and between ID Global Solutions Corporation and Herbert M. Seltzer dated September 25, 2015

  

26

 

 

10.8   (20) Employment Agreement between ID Global Solutions Corporation and Maksim Umarov dated July 1, 2015
       
10.9   (21) Letter Agreement entered between ID Global Solutions Corporation and Maksim Umarov dated September 25, 2015
       
10.10   (22) Share Exchange Agreement by and between ID Global Solutions Corporation, Fin Holdings, Inc. and the Fin Holdings, Inc. shareholders
       
10.11   (23) Contract for the Provision of Cash Collection Services entered into by and between ID Global LATAM S.A.S. and Recaudo Bogota S.A.S. dated December 30, 2016

 

10.12   (15) Confidential Settlement Agreement and General Release between ID Global Solutions Corporation and Charles D. Albanese dated January 26, 2017
       
10.13   (15) Executive Retention Agreement entered between the Company and Stuart P. Stoller dated January 31, 2017
       
10.14   (4) Indemnification Agreement entered between the Company and Stuart P. Stoller dated January 31, 2017
       
10.15   (4) Executive Retention Agreement entered between the Company and Philip D. Beck dated January 31 2017
       
10.16   (4) Executive Retention Agreement entered between the Company and Thomas Szoke dated January 31 2017
       
10.17   (4) Executive Retention Agreement entered between the Company and Douglas Solomon dated January 31, 2017
       
10.18   (4) Form of Conversion Agreement dated January 31, 2017
       
10.19   (4) Stand-Off Agreement dated January 31, 2017 entered between Philip Beck, Stuart Stoller, Thomas Szoke, Douglas Solomon, Herbert Selzer, Ricky Solomon and the Company
       
10.20   (24) Amendment No. 1 to the Share Purchase Agreement by and between Ipsidy Inc and the MultiPay Shareholders dated March 7, 2015
       
10.21   (4) Form of Indemnity Agreement
       
10.22   (25) Confidential Settlement Agreement and General Release between Ipsidy Inc. and Douglas Solomon dated September 13, 2017
       
10.23   (25) Agency Agreement between Ipsidy Inc. and Douglas Solomon dated September 13, 2017
       
10.24   (26) Restricted Stock Agreement dated September 29, 2017 between Philip D. Beck and Ipsidy Inc.
       
10.25   (26) Restricted Stock Agreement dated September 29, 2017 between Stuart P. Stoller and Ipsidy Inc.
       
10.26   (27) Settlement Agreement entered between ID Global LATAM S.A.S. and Recaudo Bogota S.A.S.
       
10.27*   (29) 2017 Incentive Stock Plan
       
10.28*   (29) Letter from Ipsidy Inc. to Philip Beck dated May 3, 2018
       
10.29*   (29)  Letter from Ipsidy Inc. to Stuart Stoller dated May 3, 2018
       
10.30*   (29)  Letter from Ipsidy Inc. to Thomas Szoke dated May 3, 2018
       
14.1   (28) Code of Ethics
       
21.1   (28) List of Subsidiaries
       
31.1*     Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act
       
31.2*     Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act
       
32.1*     Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

27

 

 

101.INS XBRL Instance Document *

 

101.SC XBRL Taxonomy Extension Schema Document *

 

101.CA XBRL Taxonomy Extension Calculation Linkbase Document *

 

101.DEF XBRL Taxonomy Extension Definition Linkbase Document *

 

101.LA XBRL Taxonomy Extension Label Linkbase Document *

 

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document *

  

*Filed herewith

 

(1)Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on August 13, 2013.
  
(2)Incorporated by reference to the Form 10-12G Registration Statement filed with the Securities Exchange Commission on November 9, 2011.
  
(3)Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 9, 2014.
  
(4)Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on February 6, 2017.
  
(5)Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 3, 2017.
  
(6) Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on June 1, 2015.
   
(7) Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on September 9, 2015.
   
(8)Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 1, 2015.
  
(9)Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 1, 2015.
  
(10) Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 1, 2015.
   
(11) Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 1, 2015.
   
(12) Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on December 29, 2015.
   
(13) Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on April 25, 2016.
   
(14) Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on August 16, 2016.
   
(15) Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on February 1, 2017.

 

28

 

 

  (16) Incorporated by reference to the Form S-1 Registration Statement filed with the Securities Exchange Commission on February 13, 2014.
     
  (17) Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on November 28, 2014.
     
  (18) Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on March 12, 2015.
     
  (19) Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 1, 2015.

 

(20) Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 1, 2015.
   
(21) Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 1, 2015.
   
(22) Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on February 12, 2016.
   
(23) Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on January 6, 2017.
   
(24) Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities Exchange Commission on June 30, 2017.
   
(25) Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on September 14, 2017.
   
(26) Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities Exchange Commission on November 13, 2017.
   
(27) Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on November 15, 2017.
   
(28)Incorporated by reference to the Form 10-K Annual Report filed with the Securities Exchange Commission on July 12, 2017.
  
(29)Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities Exchange Commission on May 4, 2018.
  
(30)Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on August 17, 2018.
  
(31)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 21, 2019

 

29

 

  

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.

 

  IPSIDY INC.
   
  By: /s/ Philip Beck
    Philip Beck, Chairman of the Board of Directors, Chief Executive Officer, and President
    Principal Executive Officer
   
  By: /s/ Stuart Stoller
    Chief Financial Officer,
    Principal Financial and Accounting Officer
   
Dated: August 12, 2019  

 

 

 

30

 

 

 

EX-31.1 2 f10q0619ex31-1_ipsidyinc.htm CERTIFICATION

Exhibit 31.1

 

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

 

I, Philip Beck, Chairman of the Board of Directors, Chief Executive Officer and President certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Ipsidy 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 officers 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 controls 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;

 

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

 

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data 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 12, 2019 /s/ Philip Beck
  Philip Beck
 

Chairman of the Board of Directors,

Chief Executive Officer and President

(Principal Executive Officer)

  

EX-31.2 3 f10q0619ex31-2_ipsidyinc.htm CERTIFICATION

Exhibit 31.2

 

CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

 

I, Stuart Stoller Chief Financial Officer, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Ipsidy 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 officers 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 controls 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;

 

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

 

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data 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 12, 2019 /s/ Stuart Stoller
  Stuart Stoller
 

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

 

EX-32.1 4 f10q0619ex32-1_ipsidyinc.htm CERTIFICATION

Exhibit 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

In connection with the Quarterly Report of Ipsidy Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2019 as filed with the Securities and Exchange Commission (the “Report”), I, Philip Beck, Chairman of the Board of Directors, Chief Executive Officer and President of the Company, and, Stuart Stoller, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. SS. 1350, as adopted pursuant to SS. 906 of the Sarbanes-Oxley Act of 2002, that:

 

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

 

2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 

Date: August 12, 2019 /s/ Philip Beck
  Philip Beck, Chairman of the Board of Directors,
Chief Executive Officer and President
  (Principal Executive Officer)

 

Date: August 12, 2019 /s/ Stuart Stoller
  Stuart Stoller, Chief Financial Officer
  (Principal Financial and Accounting Officer)

 

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Assets, Current Assets Liabilities, Current Liabilities Stockholders' Equity Attributable to Parent Liabilities and Equity Operating Expenses Interest Expense Nonoperating Income (Expense) Income Tax Expense (Benefit) Comprehensive Income (Loss), Net of Tax, Attributable to Parent InventoryReserve Increase (Decrease) in Accounts Receivable Increase (Decrease) in Leasing Receivables Increase (Decrease) in Other Current Assets Increase (Decrease) in Inventories Increase (Decrease) in Accounts Payable and Accrued Liabilities Contract with Customer, Liability, Revenue Recognized Net Cash Provided by (Used in) Operating Activities Payments to Acquire Property, Plant, and Equipment Payments for (Proceeds from) Other Investing Activities Net Cash Provided by (Used in) Investing Activities Finance Lease, Principal Payments Net Cash Provided by (Used in) Financing Activities Cash and Cash Equivalents, Period Increase (Decrease) Accounts Payable and Accrued Liabilities Intangible Assets, Net (Excluding Goodwill) Amortization of Intangible Assets Finite-Lived Intangible Assets, Accumulated Amortization Accounts Payable and Other Accrued Liabilities, Current Debt Issuance Costs, Net Debt, Current Notes Payable NotesPayableTotalPrincipalOutstanding AdditionsPrincipleBalance AdditionsIssuanceCostsAmortization DebtIssuanceCostsAmortization AdditionsDebtDiscounts NotesPayableDebtDiscountAmortization NotesPayablePrincipalAddition NotesPayablePrincipalAmortization1 Long-term Debt Other Liabilities WarrantTerm Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period, Weighted Average Grant Date Fair Value ShareBasedCompensationArrangementByShareBasedPaymentAwardEquityInstrumentsOtherThanOptionsOutstandingGrantedWeightedAverageRemainingContractualTerms Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Number Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Weighted Average Exercise Price SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsOutstandingWeightedAverageRemainingContractualTermGranted SharebasedCompensationArrangementBySharebasedPaymentAwardOptionsOutstandingWeightedAverageRemainingContractualTermForfeitures Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsGrantInPeriodIntrinsicValue ShareBasedCompensationArrangementByShareBasedPaymentAwardOptionsForfeituresInPeriodIntrinsicValue Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value Share-based Payment Arrangement, Option, Exercise Price Range, Shares Outstanding Share-based Payment Arrangement, Option, Exercise Price Range, Shares Exercisable Capital Leases, Future Minimum Payments, Receivable in Two Years Capital Leases, Future Minimum Payments, Receivable in Three Years Capital Leases, Future Minimum Payments, Receivable in Four Years Capital Leases, Future Minimum Payments, Receivable in Five Years Capital Leases, Future Minimum Payments, Receivable Thereafter Capital Leases, Future Minimum Payments Receivable CapitalLeasesFutureMinimumPaymentsReceivableDeferredIncome CapitalLeasesFutureMinimumNetPaymentsReceivable Capital Leases, Future Minimum Payments Receivable, Remainder of Fiscal Year Capital Leases, Future Minimum Payments Receivable, Rolling Year Two Capital Leases, Future Minimum Payments Receivable, Rolling Year Three Capital Leases, Future Minimum Payments Receivable, Rolling Year Four CapitalLeasesFutureMinimumPaymentsReceivableDueThereafter1 CapitalLeasesFutureMinimumPaymentsInterest CapitalLeasesFutureMinimumPayments Lessee, Operating Lease, Liability, Payments, Remainder of Fiscal Year Lessee, Operating Lease, Liability, Payments, Due Year Two Lessee, Operating Lease, Liability, Payments, Due Year Three Lessee, Operating Lease, Liability, Payments, Due Year Four LesseeOperatingLeaseLiabilityPaymentsDueGross LesseeOperatingLeaseLiabilityImputedInterest1 EX-101.PRE 11 idty-20190630_pre.xml XBRL PRESENTATION FILE XML 12 R1.htm IDEA: XBRL DOCUMENT v3.19.2
Document and Entity Information - shares
6 Months Ended
Jun. 30, 2019
Jul. 31, 2019
Document And Entity Information    
Entity Registrant Name Ipsidy Inc.  
Entity Central Index Key 0001534154  
Document Type 10-Q  
Document Period End Date Jun. 30, 2019  
Amendment Flag false  
Current Fiscal Year End Date --12-31  
Entity File Number 000-54545  
Entity Incorporation, State or Country Code DE  
Entity Reporting Status Current Yes  
Entity Interactive Data Current Yes  
Entity Small Business true  
Entity Filer Category Non-accelerated Filer  
Entity Emerging Growth true  
Entity Ex Transition Period false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding   518,125,454
Document Fiscal Period Focus Q2  
Document Fiscal Year Focus 2019  
XML 13 R2.htm IDEA: XBRL DOCUMENT v3.19.2
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) - USD ($)
Jun. 30, 2019
Dec. 31, 2018
Current Assets:    
Cash $ 4,184,220 $ 4,972,331
Accounts receivable, net 183,958 130,875
Current portion of net investment in direct financing lease 61,942 58,727
Inventory 183,746 133,541
Other current assets 559,904 471,834
Total current assets 5,173,770 5,767,308
Property and equipment, net 191,426 204,000
Other assets 1,912,654 1,566,177
Intangible assets, net 3,798,597 3,310,184
Goodwill 6,736,043 6,736,043
Net investment in direct financing lease, net of current portion 528,240 560,036
Total assets 18,340,730 18,143,748
Current Liabilities:    
Accounts payable and accrued expenses 1,864,148 1,302,226
Capital lease obligation, current portion 32,798 30,898
Note payable, current portion 1,913,591
Deferred revenue 409,788 236,270
Total current liabilities 4,220,325 1,569,394
Capital lease obligation, net of current portion 67,723 84,610
Notes payable, net of unamortized discounts and current portion 10,267 1,853,648
Other liabilities 215,163 45,000
Total liabilities 4,513,478 3,552,652
Commitments and Contingencies (Note 12)
Stockholders' Equity:    
Common stock, $0.0001 par value, 1,000,000,000 shares authorized; 518,125,454 and 478,950,996 shares issued and outstanding, respectively 51,812 47,895
Additional paid in capital 94,527,749 90,770,682
Subscription receivable (100,000)
Accumulated deficit (80,873,765) (76,435,235)
Accumulated comprehensive income 221,456 207,754
Total stockholders' equity 13,827,252 14,591,096
Total liabilities and stockholders' equity $ 18,340,730 $ 18,143,748
XML 14 R3.htm IDEA: XBRL DOCUMENT v3.19.2
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) - $ / shares
Jun. 30, 2019
Dec. 31, 2018
Statement of Financial Position [Abstract]    
Common stock, par value (in dollars per share) $ 0.0001 $ 0.0001
Common stock, authorized 1,000,000,000 1,000,000,000
Common stock, issued 518,125,454 478,950,996
Common stock, outstanding 518,125,454 478,950,996
XML 15 R4.htm IDEA: XBRL DOCUMENT v3.19.2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Revenues:        
Total revenues, net $ 644,961 $ 1,839,327 $ 1,385,339 $ 2,365,116
Operating Expenses:        
Cost of sales 189,261 743,709 365,724 863,957
General and administrative 2,367,298 3,256,150 4,934,433 6,055,153
Research and development 6,032 20,330 10,398 25,691
Depreciation and amortization 166,908 113,768 327,696 224,140
Total operating expenses 2,729,499 4,133,957 5,638,251 7,168,941
Loss from operations (2,084,538) (2,294,630) (4,252,912) (4,803,825)
Other Income (Expense):        
Other income 6,271 77,734 12,497 77,734
Interest expense, net (93,260) (246,298) (180,150) (485,467)
Other expense, net (86,989) (168,564) (167,653) (407,733)
Loss before income taxes (2,171,527) (2,463,194) (4,420,565) (5,211,558)
Income Taxes (4,264) (9,856) (17,965) (14,417)
Net loss $ (2,175,791) $ (2,473,050) $ (4,438,530) $ (5,225,975)
Net Loss Per Share - Basic and Diluted (in dollars per share) $ 0.00 $ (0.01) $ (0.01) $ (0.01)
Weighted Average Shares Outstanding -        
Basic and Diluted (in shares) 479,787,679 407,490,811 476,369,338 405,872,537
Lease Income [Member]        
Revenues:        
Total revenues, net $ 16,056 $ 17,520 $ 32,493 $ 35,382
Products and services [Member]        
Revenues:        
Total revenues, net $ 628,905 $ 1,821,807 $ 1,352,846 $ 2,329,734
XML 16 R5.htm IDEA: XBRL DOCUMENT v3.19.2
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Statement of Other Comprehensive Income [Abstract]        
Net Loss $ (2,175,791) $ (2,473,050) $ (4,438,530) $ (5,225,975)
Foreign currency translation gain (loss) (10,526) (29,018) 13,702 (2,729)
Comprehensive loss $ (2,186,317) $ (2,502,068) $ (4,424,828) $ (5,228,704)
XML 17 R6.htm IDEA: XBRL DOCUMENT v3.19.2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Unaudited) - USD ($)
Common Stock [Member]
Additional Paid-In Capital [Member]
Subscription Receivable [Member]
Accumulated Deficit [Member]
Accumulated Other Comprehensive Income [Member]
Total
Balance, beginning at Dec. 31, 2017 $ 40,331 $ 79,053,339   $ (66,407,622) $ 254,851 $ 12,940,899
Balance, beginning (in shares) at Dec. 31, 2017 403,311,988          
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Restricted stock issued for services $ 347 148,124   148,471
Restricted stock issued for services (in shares) 3,470,000          
Common stock issued for services $ 17 47,650   47,667
Common stock issued for services (in shares) 170,240          
Stock-based compensation 1,292,900   1,292,900
Cashless exercise of common stock warrants $ 350 (350)  
Cashless exercise of common stock warrants (in shares) 3,498,943          
Cashless exercise of common stock options $ 112 (112)  
Cashless exercise of common stock options (in shares) 1,122,233          
Common stock issued for loan extension $ 150 (150)  
Common stock issued for loan extension (in shares) 1,500,000          
Cancellation of shares in settlement of amounts due from prior acquisition $ (73) 73  
Cancellation of shares in settlement of amounts due from prior acquisition (in shares) (728,448)          
Net loss   (5,225,975) (5,225,975)
Foreign currency translation   (2,729) (2,729)
Balance, ending at Jun. 30, 2018 $ 41,234 80,541,474   (71,633,597) 252,122 9,201,233
Balance, ending (in shares) at Jun. 30, 2018 412,344,956          
Balance, beginning at Mar. 31, 2018 $ 40,571 79,791,311   (69,160,547) 281,140 10,952,475
Balance, beginning (in shares) at Mar. 31, 2018 405,708,228          
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Restricted stock issued for services $ 275 148,124   148,399
Restricted stock issued for services (in shares) 2,750,000          
Common stock issued for services $ 17 47,650   47,667
Common stock issued for services (in shares) 170,240          
Stock-based compensation 554,760   554,760
Cashless exercise of common stock warrants $ 182 (182)  
Cashless exercise of common stock warrants (in shares) 1,822,703          
Cashless exercise of common stock options $ 112 (112)  
Cashless exercise of common stock options (in shares) 1,122,233          
Common stock issued for loan extension $ 150 (150)  
Common stock issued for loan extension (in shares) 1,500,000          
Cancellation of shares in settlement of amounts due from prior acquisition $ (74) 74  
Cancellation of shares in settlement of amounts due from prior acquisition (in shares) (728,448)          
Net loss   (2,473,050) (2,473,050)
Foreign currency translation     (29,018) (29,018)
Balance, ending at Jun. 30, 2018 $ 41,234 80,541,474   (71,633,597) 252,122 9,201,233
Balance, ending (in shares) at Jun. 30, 2018 412,344,956          
Balance, beginning at Dec. 31, 2018 $ 47,895 90,770,682 (76,435,235) 207,754 $ 14,591,096
Balance, beginning (in shares) at Dec. 31, 2018 478,950,996         478,950,996
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Sale of common stock for cash $ 3,876 3,876 (100,000) $ 2,832,152
Sale of common stock for cash (in shares) 38,763,750          
Common stock issued for services $ 41 41,071       41,112
Common stock issued for services (in shares) 410,708          
Stock-based compensation 787,720 787,720
Net loss (4,438,530) (4,438,530)
Foreign currency translation 13,702 13,702
Balance, ending at Jun. 30, 2019 $ 51,812 94,527,749 (100,000) (80,873,765) 221,456 $ 13,827,252
Balance, ending (in shares) at Jun. 30, 2019 518,125,454         518,125,454
Balance, beginning at Mar. 31, 2019 $ 47,895 91,186,061 (78,697,974) 231,982 $ 12,767,964
Balance, beginning (in shares) at Mar. 31, 2019 478,950,996          
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Sale of common stock for cash $ 3,876 2,928,276 (100,000) 2,832,152
Sale of common stock for cash (in shares) 38,763,750          
Common stock issued for services $ 41 41,071     41,112
Common stock issued for services (in shares) 410,708          
Stock-based compensation 372,341     372,341
Net loss (2,175,791) (2,175,791)
Foreign currency translation (10,526) (10,526)
Balance, ending at Jun. 30, 2019 $ 51,812 $ 94,527,749 $ (100,000) $ (80,873,765) $ 221,456 $ 13,827,252
Balance, ending (in shares) at Jun. 30, 2019 518,125,454         518,125,454
XML 18 R7.htm IDEA: XBRL DOCUMENT v3.19.2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)
6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (4,438,530) $ (5,225,975)
Adjustments to reconcile net loss with cash flows from operations:    
Depreciation and amortization expense 327,696 224,140
Stock-based compensation 787,720 1,292,900
Stock issued for services 41,112 196,138
Inventory reserve 348,308
Amortization of debt discounts and issuance costs 54,882 323,114
Changes in operating assets and liabilities:    
Accounts receivable (63,869) (620,817)
Net investment in direct financing lease 28,581 25,692
Other current assets 155,035 (263,165)
Inventory (60,818) (41,435)
Accounts payable and accrued expenses 324,076 524,290
Deferred revenue 173,518 535,434
Net cash flows from operating activities (2,670,597) (2,681,376)
CASH FLOWS FROM INVESTING ACTIVITIES:    
Purchase of property and equipment (14,902) (15,690)
Investment in other assets (940,068) (389,767)
Net cash flows from investing activities (954,970) (405,457)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Proceeds from the sale of common stock, net of offering costs 2,832,152
Principal payments on capital lease obligation (14,987) (13,301)
Net cash flows from financing activities 2,817,165 (13,301)
Effect of Foreign Currencies 20,291 (1,021)
Net Change in Cash (788,111) (3,101,155)
Cash, Beginning of the Period 4,972,331 4,413,822
Cash, End of the Period 4,184,220 1,312,667
Supplemental Disclosure of Cash Flow Information:    
Cash paid for interest 6,996 8,247
Cash paid for income taxes 4,264 14,417
Non-cash Investing and Financing Activities:    
Purchase of vehicle with note payable 16,510
Recognition of right to use asset and obligation $ 514,473
XML 19 R8.htm IDEA: XBRL DOCUMENT v3.19.2
BASIS OF PRESENTATION
6 Months Ended
Jun. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
BASIS OF PRESENTATION

NOTE 1 – BASIS OF PRESENTATION

 

In the opinion of Management, the accompanying unaudited condensed consolidated financial statements are prepared in accordance with instructions for Form 10-Q, include all adjustments (consisting only of normal recurring accruals) which we considered as necessary for a fair presentation of the results for the periods presented. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The results of operations for the three or six months ended June 30, 2019 are not necessarily indicative of the results to be expected for future periods or the full year.

 

The condensed consolidated financial statements include the accounts of Ipsidy Inc. and its wholly-owned subsidiaries, Innovation in Motion, Inc., MultiPay S.A.S., ID Global LATAM, IDGS S.A.S., ID Solutions, Inc., FIN Holdings Inc., Ipsidy Enterprises Limited, and Cards Plus Pty Ltd. (collectively the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation.

 

Going concern

 

As of June 30, 2019, the Company had an accumulated deficit of approximately $80.9 million. For the six months ended June 30, 2019, the Company earned revenue of approximately $1.4 million and incurred a loss from operations of approximately $4.3 million.

 

The reports of our independent registered public accounting firm on our consolidated financial statements for the years ended December 31, 2018 and 2017 contained an explanatory paragraph regarding our ability to continue as a going concern based upon our net losses and accumulated deficit.

 

These unaudited condensed consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations for the next fiscal year. 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 equity or debt 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.

 

There is no assurance that the Company will ever be profitable or be able to secure funding or generate sufficient revenues to sustain operations. As such, there is substantial doubt about the Company’s ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

 

Net Loss per Common Share

 

The Company computes net loss per share in accordance with FASB ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible notes and stock warrants, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options, warrants and conversion of convertible notes. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive. The following potentially dilutive securities were excluded from the calculation of diluted loss per share for the six months ended June 30, 2019 and 2018 because their effect was antidilutive:

 

Security   2019     2018  
Stock Options     106,600,006       105,950,000  
Warrants     47,453,227       43,731,210  
Total     154,053,233       149,681,210  

  

Inventories

 

Inventories of kiosks held by IDGS S.A.S are stated at the lower of cost (using the first-in, first-out method) or net realizable value. The kiosks provide electronic ticketing for transit systems. Inventory of plastic/ID cards, digital printing material, which are held by Cards Plus Pty Ltd., are stated at the lower of cost (using the average method) or net realizable value. The Plastic/ID cards and digital printing material are used to provide plastic loyal ID and other types of cards. Inventories at June 30, 2019 and December 31, 2018 consist of kiosks that were not placed into service and are held for sale and cards inventory. Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings in the current period. As of June 30, 2019 and December 31, 2018, the Company had an inventory valuation allowance of approximately $354,000 and $707,000, respectively, to reflect net realizable value of the kiosks that are being held for sale and the Company believes no valuation allowance was necessary regarding the cards inventory.

 

Leases

 

In February 2016, the FASB issued ASU No. 2016-02 (Topic 842). Topic 842 amends several aspects of lease accounting, including requiring lessees to recognize leases with a term greater than one year as a right-of-use asset and corresponding liability, measured at the present value of the lease payments. In July 2018, the FASB issued supplemental adoption guidance and clarification to Topic 842 within ASU 2018-10 “Codification Improvements to Topic 842, Leases” and ASU 2018-11 “Leases (Topic 842): Targeted Improvements.” The new guidance aims to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about leasing arrangements. A modified retrospective application is required with an option to not restate comparative periods in the period of adoption.

 

The Company, effective January 1, 2019 has adopted the provisions of the new standard. The Company decided to use the practical expedients available upon adoption of Topic 842 to aid the transition from former accounting to provisions of Topic 842. The package of expedients will effectively allow Ipsidy to run off existing leases, as initially classified as operating or financing and classify new leases after implementation under the new standard as the business evolves.

 

The practical expedients elected by the Company in transition permits us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs. Furthermore, we have elected the short-term lease recognition exemption for leases with a term of 12 or less months which are not reasonably certain of exercising any available renewal options that would extend past 12 months. Additionally, we will continue to account for the executory costs of the direct financing lease as previously concluded and the initial direct costs were not considered significant.

 

The Company has operating leases principally for offices and some of the leases have renewal options. Management evaluates each lease independently to determine the purpose, necessity to its future operations in addition to other appropriate facts and circumstances.

  

We adopted Topic 842 using a modified retrospective approach for all existing leases at January 1, 2019. The adoption of Topic 842 impacted our balance sheet by the recognition of the operating lease right-of-use assets and the liability for operating leases. The accounting for finance leases (capital leases) was substantially unchanged. Accordingly, upon adoption, leases that were classified as operating leases under the previous guidance were classified as operating leases under Topic 842. The lease liability is based on the present value of the remaining lease payments, discounted using a market based incremental borrowing rate as the effective date of January 1, 2019 using current estimates as to lease term including estimated renewals for each operating lease. As of January 1, 2019, the Company recorded an adjustment of approximately $514,000 to operating lease right-of-use assets (“ROU”) and the related lease liability. See Note 12 for further information with respect to leases.

 

See Notes 7, 10, 11 and 12 to Condensed Consolidated Financial Statements for Additional Information.

 

Revenue Recognition

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”). Topic 606 supersedes the revenue recognition requirements in ASU Topic 605, Revenue Recognition (“Topic 605”), and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the considerations to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 also includes Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, which discusses the deferral of incremental costs of obtaining a contract with a customer, including the period of amortization of such costs. Collectively, we refer to Topic 606 and Subtopic 340-40 as the “new standard.” The new standard was adopted by the Company in the year beginning January 1, 2018.

 

The two permitted transition methods under the new standard are the full retrospective method, in which the new standard would be applied to each prior reporting period presented and the cumulative effect of applying the new standard would be recognized at the earliest period shown, or the modified retrospective method, in which the cumulative effect of applying the new standard would be recognized at the date of initial application. Based on our assessment, the impact of the new standard on our operations in prior periods was not significant. Below is the Company’s revenue recognition policy determined by revenue stream for its significant revenue generating activities through June 30, 2019.

 

Cards Plus - The Company recognizes revenue for the design and production of cards 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 upon delivery to the customer.

 

Identity Solutions – The Company recognizes revenue based on the identified performance obligations over the performance period for fixed consideration and for variable fees generated that are earned on a usage fee based over time based on monthly transaction volumes or on a monthly flat fee rate. The Company had a deferred revenue contract liability of approximately $410,000 and $236,000 as of June 30, 2019 and December 31, 2018, respectively, for certain revenue that will be earned in future periods. The majority of the $236,000 of deferred revenue contract liability as of December 31, 2018 was earned in the first three months of 2019. We anticipate that approximately $275,000 of the deferred revenue contract liability as of June 30, 2019 will be earned in the year ended December 31, 2019 and the balance in the first three months of 2020.

 

In 2018, the Company introduced a pay for performance plan for internal and external sales force, which is based on a percentage of revenues received by the Company. In the six months ended June 30, 2019 and June 30, 2018, no commissions were earned. We will defer and amortize any direct and incremental commission as well as costs to obtain a contract over the term of the related contracts. As of June 30, 2019 and December 31, 2018, there were no deferred commissions.

  

We will review each new contract for the related performance obligations and related revenue and expense recognition implications. We expect that the revenues derived from the new identity services could include multiple performance obligations. A performance obligation under the new 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 new 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 new standard accordingly to the revenue and expense derived from or related to each such service. A more complete analysis of the impact of the standard on these contracts will be performed at the period of time when services are expected to commence, and the conclusions reached by management may be different from those described above. For the quarter ended June 30, 2019, no revenues were recognized or required to be recognized under this practical expedient. 

 

Additionally, the Company will capitalize 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).

 

The Company capitalizes the costs incurred to acquire and fulfill a contract only if those costs meet all the following criteria:

 

a. The costs relate directly to a contract or to an anticipated contract that the Company can specifically identify.

 

b. The costs generate or enhance resources of the Company that will be used in satisfying (or in continuing to satisfy) performance obligations in the future.

 

c. The costs are expected to be recovered.

 

The Company will capitalize contract acquisition and fulfillment costs related to signing or renewing contracts that meet the above criteria, which will be classified as contract cost assets in the Company’s Consolidated Balance Sheets.

 

Contract cost assets are amortized using the straight-line method over the expected period of benefit beginning at the time revenue begins to be realized. The amortization of contract fulfillment cost assets associated with facilitating transactions are recorded as cost of services in the Company’s Consolidated Statements of Operations. The amortization of contract acquisition cost assets associated with sales commissions that qualify for capitalization are recorded as selling, general and administrative expense in the Company’s Consolidated Statements of Operations.

 

As of June 30, 2019, and December 31, 2018, the Company had deferred contract costs, represented by contract cost assets of approximately $4,000 and $11,000, respectively, which are included in other currents assets for certain costs incurred for the future delivery of election support services. The performance obligation will be met over the next two years and the costs will be expensed as the associated revenue is recognized as the Company performs its obligations.

 

As of June 30, 2019, and December 31, 2018, the Company had approximately $15,000 of accounts payable and accrued expenses related to the delivery of biometric identity system and services. The $15,000 will be paid in accordance with the terms of the service provider agreements.

 

Share Based Payments

 

On June 20, 2018, the FASB issued ASU 2018-07 which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. Previously, share-based payment arrangements to nonemployees were accounted for under ASC 718, while nonemployee share-based payments issued for goods and services were accounted for under ASC 505-50. Before the amendment, the major difference for the Company (but not limited to) was the determination of measurement date which generally is the date on which the measurement of equity classified share-based payments becomes fixed. Equity classified share-based payments for employees was fixed at the time of grant. Equity-classified nonemployee share-based payment awards are no longer measured at the earlier of the date which a commitment for performance by the counterparty is reached or the date at which the counterparty’s performance is complete. They are now measured at the grant date of the award which is the same as share-based payments for employees. The Company adopted the requirements of the new rule as of January 1, 2019, the effective date of the new guidance.

 

The Company has determined on the date of adoption that the impact of the new standard was not significant.

  

Beginning in 2019, the Company in accordance with the requirements of the new standard will expense the fair value of the existing non-employee share-based payments over their vesting period using the fair value determined on the date of adoption. See note 9 of the notes to condensed consolidated financial statements where employee and non-employee share-based payments are presented.

XML 20 R9.htm IDEA: XBRL DOCUMENT v3.19.2
PROPERTY AND EQUIPMENT, NET
6 Months Ended
Jun. 30, 2019
Property, Plant and Equipment [Abstract]  
PROPERTY AND EQUIPMENT, NET

NOTE 2 – PROPERTY AND EQUIPMENT, NET

 

Property and equipment consisted of the following as of June 30, 2019 and December 31, 2018:

 

    2019     2018  
Computers and equipment   $ 299,528     $ 238,442  
Furniture and fixtures     156,867       156,867  
      456,395     395,309  
Less Accumulated depreciation     264,969       191,309  
Property and equipment, net   $ 191,426     $ 204,000  

 

Depreciation expense totaled $45,203 and $35,191 for the six months ended June 30, 2019 and 2018, respectively.

XML 21 R10.htm IDEA: XBRL DOCUMENT v3.19.2
OTHER ASSETS
6 Months Ended
Jun. 30, 2019
Other Assets [Abstract]  
OTHER ASSETS

NOTE 3 – OTHER ASSETS

 

The Company’s other assets consist of software being developed for new product offerings that have not been placed into service and the operating lease ROU assets. The balances as of June 30, 2019 and December 31, 2018 are:

 

    2019     2018  
Software and development   $ 1,734,122     $ 1,566,177  
Operating Lease ROU assets, long term     178,532        
    $ 1,912,654     $ 1,566,177  

XML 22 R11.htm IDEA: XBRL DOCUMENT v3.19.2
INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL)
6 Months Ended
Jun. 30, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL)

NOTE 4 – INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL)

 

The Company’s intangible assets consist of intellectual property acquired from MultiPay and FIN and are amortized over their estimated useful lives as indicated below. The following is a summary of activity related to intangible assets for the six months ended June 30, 2019:

 

          Acquired and                          
    Customer     Developed     Intellectual           Patents        
    Relationships     Software     Property     Non-Compete     Pending     Total  
                                     
Useful Lives     10 Years       5 Years       10 Years       10 Years       N/A          
                                                 
Carrying Value at December 31, 2018   $ 1,128,734     $ 908,893     $ 1,191,942     $ 2,433     $ 78,182     $ 3,310,184  
Additions             764,739                       6,167       770,906  
Amortization     (79,358 )     (114,655 )     (87,264 )     (1,217 )           (282,493 )
Carrying Value at June 30,2019   $ 1,049,376     $ 1,558,977     $ 1,104,678     $ 1,216     $ 84,349     $ 3,798,597  

 

The following is a summary of intangible assets as of June 30, 2019:

 

          Acquired and                          
    Customer     Developed     Intellectual           Patents        
    Relationships     Software     Property     Non-Compete     Pending     Total  
Cost   $ 1,587,159     $ 1,724,621     $ 1,759,809     $ 14,087     $ 84,349     $ 5,170,025  
Accumulated amortization     (537,782 )     (165,644 )     (655,131 )     (12,871 )           (1,371,428 )
Carrying Value at June 30,2019   $ 1,049,377     $ 1,558,977     $ 1,104,678     $ 1,216     $ 84,349     $ 3,798,597  

 

Future expected amortization of intangible assets is as follows:

 

Fiscal Year Ending December 31,      
Remainder of 2019   $ 358,948  
2020     715,502  
2021     715,502  
2022     622,168  
2023     571,180  
Thereafter     815,297  
    $ 3,798,597
XML 23 R12.htm IDEA: XBRL DOCUMENT v3.19.2
ACCOUNTS PAYABLE AND ACCRUED EXPENSES
6 Months Ended
Jun. 30, 2019
Payables and Accruals [Abstract]  
ACCOUNTS PAYABLE AND ACCRUED EXPENSES

NOTE 5 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

Accounts payable and accrued expenses consisted of the following as of June 30, 2019 and December 31, 2018:

 

    2019     2018  
             
Trade payables   $ 392,851     $ 401,272  
Accrued interest     520,834       401,667  
Accrued payroll and related obligations     282,513       260,153  
Current portion of operating lease liabilities     251,206        
Other accrued expenses     416,744       239,134  
    $ 1,864,148     $ 1,302,226  

XML 24 R13.htm IDEA: XBRL DOCUMENT v3.19.2
NOTES PAYABLE, NET
6 Months Ended
Jun. 30, 2019
Debt Disclosure [Abstract]  
NOTES PAYABLE, NET

NOTE 6 - NOTES PAYABLE, NET

 

The following is a summary of notes payable as of June 30, 2019 and December 31, 2018:

 

    June 30,
2019
    December 31,
2018
 
             
In January 2017, the Company issued a Senior Unsecured Note (“Note”) a face value of $3,000,000, payable two years from issuance, along with an aggregate of 4,500,000 shares of Common Stock, with a fair value of $1,147,500. The Company allocated the proceeds to the note payable and common stock based on their relative fair value and recorded a discount of $830,018 to be amortized into interest expense over the two-year term of the note. The Company also paid debt issuance costs consisting of a cash fee of $120,000 and 1,020,000 shares of common stock of the Company with a fair value of $306,000. On April 30, 2018, the Company and the Noteholder agreed to extend the due date of the note until April 30, 2020 for an extension fee of 1,500,000 shares of the Common Stock issued to the Noteholder.  The April 2018 change in terms of the Note payable has been determined to be a debt extinguishment in accordance with ASC 470.   The reported amounts under the debt extinguishment are not significantly different than that of the Company’s reported amounts.  See below   $ 2,000,000     $ 2,000,000  
Installment loan payable related to a vehicle acquisition payable in monthly payments of $539 per month at an interest rate of 10.8% per annum payable for 36 months     15,328        
Total Principal Outstanding   $ 2,015,328     $ 2,000,000  
Unamortized Deferred Debt Discount     (66,804 )     (106,886 )
Unamortized Deferred Debt Issuance Costs     (24,666 )     (39,466 )
Notes Payable, Net   $ 1,923,858     $ 1,853,648  
Notes Payable, current portion, net of discounts and current portion   $ 1,913,591     $  
Notes Payable, Net of discounts and current portion     10,267       1,853,648  
    $ 1,923,858     $ 1,853,648  

  

 The following is a roll-forward of the Company’s notes payable and related discounts for the six months ended June 30, 2019:

 

    Principal
Balance
    Debt
Issuance
Costs:
    Debt
Discounts:
    Total:  
Balance at December 31, 2018   $ 2,000,000     $ (39,466 )   $ (106,886 )   $ 1,853,648  
Additions     16,510                   16,510  
Amortization     (1,182 )     14,800       40,082       53,700  
Balance at June 30, 2019   $ 2,015,328     $ (24,666 )   $ (66,804 )   $ 1,923,858  

 

Future maturities of notes payable are as follows as of June 30, 2019:

 

July 1, 2019 – June 30, 2020   $ 2,005,061  
July 1, 2020 – June 30, 2021     5,636  
April 1, 2021 – June 30, 2022     4,631  
  $ 2,015,328  
XML 25 R14.htm IDEA: XBRL DOCUMENT v3.19.2
OTHER LIABILITIES
6 Months Ended
Jun. 30, 2019
Other Liabilities Disclosure [Abstract]  
OTHER LIABILITIES

NOTE 7 – OTHER LIABILITIES

 

Other liabilities consisted of the following as of June 30, 2019 and December 31, 2018:

 

    2019     2018  
             
Operating lease liabilities, long term   $ 170,163     $  
Other     45,000       45,000  
    $ 215,163     $ 45,000  

XML 26 R15.htm IDEA: XBRL DOCUMENT v3.19.2
RELATED PARTY TRANSACTIONS
6 Months Ended
Jun. 30, 2019
Related Party Transactions [Abstract]  
RELATED PARTY TRANSACTIONS

NOTE 8 – RELATED PARTY TRANSACTIONS

 

Notes Payable

 

During the quarter ended June 30,2019, the Company recorded approximately $119,000 of interest expense under the terms and conditions of the Note (see Note 6) that is due to the Theodore Stern Revocable Trust, whose trustee Mr. Stern is a member of the Company’s Board of Directors.

 

Purchase of Common Stock

 

In June 2019, two of the Company’s Directors and one Officer purchased 1,562,500 shares of common stock of the 2019 offering as described in Note 9.

 

Other

 

In connection with the 2019 offering of common stock, the Company incurred fees to Network 1 Financial Securities Inc. (“Network 1”), a registered broker dealer, one of the Company’s financial advisors. The Network 1 fees were approximately $109,000 paid in cash and 858,000 common stock purchase warrants with a fair value of approximately $54,000 that are exercisable during a term of five years at a price of $0.088 cents per share. A member of the Company’s Board of Director’s maintains a partnership with a key principal of Network 1.

 

Additionally, the Company rents office space in Long Beach, New York at a monthly cost of $7,425. The agreement is month to month and can be terminated on 30 days’ notice. The agreement is between the Company and Bridgeworks LLC, an entity principally owned by Mr. Beck, our CEO, and his family. During the three months ended June 30, 2019 and June 30, 2018, the Company paid $22,275 and $22,775, respectively.

XML 27 R16.htm IDEA: XBRL DOCUMENT v3.19.2
STOCKHOLDER'S EQUITY
6 Months Ended
Jun. 30, 2019
Share-based Payment Arrangement [Abstract]  
STOCKHOLDER'S EQUITY

NOTE 9STOCKHOLDER’S EQUITY

 

Common Stock 

 

In June 2019, the Company entered into Subscription Agreements with accredited investors (the “2019 Accredited Investors”) pursuant to which the 2019 Accredited Investors purchased an aggregate of approximately 38,764,000 shares of the Company’s common stock for an aggregate purchase price of approximately $3,100,000. In connection with the private offering, the Company paid a cash fee of approximately $178,000 and issued 1,251,750 common stock purchase warrants with a fair value of approximately $79,000 that are exercisable during a term of five years at an exercise price of $0.088 per share. 

 

The Company also issued 410,708 shares of common stock during the six months ended June 30, 2019 to two service providers in satisfaction of approximately $41,000 due for services. 

 

Warrants 

 

The granted warrants to its investment bankers in connection with the June 2019 private common stock offering as described above in the in the six months ended June 30, 2019:

 

    Number of
Shares
    Weighted
Average
Exercise
Price
    Weighted
Average
Remaining
Life
Outstanding at December 31, 2018     46,201,477     $ 0.08     1.9 Years
Granted     1,251,750       0.09     5.0 Years
Outstanding at June 30,2019     47,453,227     $ 0.09     1.3 Years

  

Stock Options

 

During the six months ended June 30, 2019, the Company granted options to acquire 600,000 shares of common stock to three employees at fair market value on date of grant. Of the 600,000 stock options, 475,000 options are earned over a three-year period and 125,000 options vest upon achieving certain performance thresholds. The options have a term of ten years and the approximate fair value of the options were $49,000.

 

Expected Volatility – 75% 

Expected Term – 2.5 – 6.5 Years 

Risk Free Rate – 2.0% 

Dividend Rate – 0.00% 

 

Activity related to stock options for the six months ended June 30, 2019 is summarized as follows: 

 

          Weighted
Average
    Weighted
Average
    Aggregate  
    Number of     Exercise     Contractual     Intrinsic  
    Shares     Price     Term (Yrs.)     Value  
Outstanding as of December 31, 2018     106,253,339     $ 0.20       7.4     $ 1,989,163  
Granted     600,000       0.12       9.7       -  
Forfeitures     (253,333 )     0.10       -       -  
Outstanding as of June 30,2019     106,600,006       0.20       7.1     $ 1,952,230  
Exercisable as of June 30,2019     99,404,867     $ 0.20       7.1     $ 1,920,074  

  

The following table summarizes stock option information as of June 30, 2019: 

 

            Weighted Average        
            Contractual        
Exercise Price     Outstanding     Life (Yrs.)     Exercisable  
                     
$ 0.00001       3,500,000       6.5       3,500,000  
  0.05       32,700,006       7.3       32,043,756  
  0.10       27,200,000       7.5       26,227,778  
  0.12       1,400,000       9.5        
  0.13       250,000       8.6       83,333  
  0.15       2,800,000       6.6       2,800,000  
  0.22       2,750,000       8.8       750,000  
  0.25       2,500,000       8.6       1,166,667  
  0.26       500,000       9.1       166,667  
  0.29       1,000,000       8.0       666,667  
  0.40       1,000,000       6.9       1,000,000  
  0.45       31,000,000       6.6       31,000,000  
                             
          106,600,006       7.1       99,404,867  

  

During the six months ended June 30,2019, the Company recognized approximately $654,000 of stock-based compensation expense related to options of which non-employees’ expense was approximately $151,000. As of June 30, 2019, there was approximately $840,000 of unrecognized compensation costs related to stock options outstanding of which approximately $108,000 was related to non-employees and will be expensed through 2022.

XML 28 R17.htm IDEA: XBRL DOCUMENT v3.19.2
DIRECT FINANCING LEASE
6 Months Ended
Jun. 30, 2019
Leases [Abstract]  
DIRECT FINANCING LEASE

NOTE 10 – DIRECT FINANCING LEASE

 

In September 2015, the Company and an entity in Colombia entered into a rental contract for the rental of 78 kiosks to provide cash collection and fare services at transportation stations. The lease term began in May 2016 when the kiosks were installed and operational and when the lease commenced. The term of the rental contract is ten years at an approximate monthly rental of $11,900. The lessee has the option at the end of the lease term to purchase each unit for approximately $40. The term of the lease approximates the expected economic life of the kiosks. The lease was accounted for as a direct financing lease.

 

The Company has recorded the transaction as its net investment in the lease and will receive monthly payments of $11,856 before estimated executory costs, or $142,272, annually, to reduce investment in the lease and record income associated with the related amount due. Executory costs are estimated to be $1,677 month and initial direct costs are not considered significant. The transaction resulted in incremental revenue in the quarter ended June 30, 2019 of approximately $16,000.

 

The equipment is subject to a direct lease valued at approximately $748,000. At the inception of the lease term, the aggregate minimum future lease payments to be received was approximately $1,422,000 before executory cost. Unearned income recorded at the inception of this lease was approximately $474,000 and is being recorded over the term of the lease using the effective income rate method. Future minimum lease payments to be received under the lease for the next five years and thereafter are as follows:

 

Remainder 2019   $ 61,074  
2020     122,148  
2021     122,148  
2022     122,148  
2023     122,148  
Thereafter     285,012  
Sub-total     834,678  
Less deferred revenue     (244,496 )
Net investment in lease   $ 590,182  
XML 29 R18.htm IDEA: XBRL DOCUMENT v3.19.2
LEASE OBLIGATION PAYABLE
6 Months Ended
Jun. 30, 2019
Leases [Abstract]  
LEASE OBLIGATION PAYABLE

NOTE 11 – LEASE OBLIGATION PAYABLE

 

The Company entered into a lease in March 2017 for the rental of its printer for its secured plastic and credential card products business under an arrangement that is classified as a finance lease. The leased equipment is amortized on a straight-line basis over its lease term including the last payment (61 payments) which would transfer ownership to the Company. Total amortization related to the lease equipment as of June 30, 2019 is $75,006. The following is a schedule showing the future minimum lease payments under finance lease by year and the present value of the minimum lease payments as of June 30, 2019. The interest rate related to the lease obligation is 12% and the maturity date is June 30, 2022.

 

Year Ending      
       
Remainder of 2019   $ 21,548  
2020     43,096  
2021     43,096  
2022     10,774  
Total minimum lease payments     118,514  
Less: Amount representing interest     (17,993 )
Present value of minimum lease payments   $ 100,521  
XML 30 R19.htm IDEA: XBRL DOCUMENT v3.19.2
COMMITMENTS AND CONTINGENCIES
6 Months Ended
Jun. 30, 2019
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

NOTE 12 – COMMITMENTS AND CONTINGENCIES

 

Legal Matters

 

From time to time, the Company is a party to various legal or administrative proceedings arising in the ordinary course of our business. While any litigation contains an element of uncertainty, we have no reason to believe the outcome of such proceedings will have a material adverse effect on the financial condition or results of operations of the Company.  

 

Leases

 

For the three months ended June 30, 2019, lease expense was approximately $236,000 inclusive of short-term leases.

 

The lease related balances included in the Condensed Consolidated Balance Sheet as of June 30, 2019 were as follows:

 

Assets:      
       
Current portion of operating lease ROU assets - included in other current assets   $ 243,105  
         
Operating lease ROU assets – included in Other Assets     178,532  
         
Total operating lease assets   $ 421,637  

 

Liabilities:      
       
Current portion of ROU liabilities – included in Accounts payable and accrued expenses   $ 251,206  
         
Long-term portion of ROU liabilities – included in Other liabilities     170,163  
         
Total operating lease liabilities   $ 421,369  

 

The weighted average lease term remining is 1.5 years and weighted average discount rate is 13.55%.

 

The following table presents the maturity of the Company’s operating lease liabilities as of June 30, 2019:

 

Remainder of 2019   $ 163,216  
2020     183,519  
2021     92,391  
2022     46,196  
Total operating lease payments     485,322  
Less: Imputed interest     (63,953 )
Total operating lease liabilities   $ 421,369  

 

The Company leases approximately 2,100 square feet of office space in Plantation, Florida. Monthly rental is approximately $2,700 per month with a 3% increase on each annual anniversary. The Company will be responsible for their respective share of building expenses. The lease term is through August 2020.

 

Additionally, the Company rents office space in Long Beach, New York at a monthly cost of $7,425. The agreement is month to month and can be terminated on 30 days’ notice. The agreement is between the Company and Bridgeworks LLC, an entity principally owned by Mr. Beck, our CEO and his family.

 

In October 2018, the Company a entered into an office lease in Alpharetta, Georgia, for approximately $3,800 per month through June 30, 2020 or through the termination of the master lease.

 

The Company leases an office location in Bogota, Colombia. In April 2017, MultiPay S.A.S. entered an office lease beginning April 22, 2017 for two years. The new lease cost is approximately $8,500 per month with an inflation adjustment after one year. The lease is automatically extended for one additional year unless written notice to the contrary is provided at least six months in advance. Furthermore, the Company leases an apartment at approximately $2,000 a month for one of the management team.

 

The Company also leases space for its operation in South Africa. The current lease is through June 30, 2022 and the approximate monthly rent is $8,000.

XML 31 R20.htm IDEA: XBRL DOCUMENT v3.19.2
SEGMENT INFORMATION
6 Months Ended
Jun. 30, 2019
Segment Reporting [Abstract]  
SEGMENT INFORMATION

NOTE 13 – SEGMENT INFORMATION

 

General information

 

The segment and geographic information provided in the table below is being reported consistent with the Company’s method of internal reporting. Operating segments are defined as components of an enterprise for which separate financial information is available and which is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The CODM regularly reviews net revenue and gross profit by geographic regions. The Company’s products and services operate in two reportable segments; identity solutions and payment processing.

 

Information about revenue, profit/loss and assets

 

The CODM evaluates performance and allocates resources based on net revenue and operating results of the geographic region as the current operations of each geography are either primarily identity management or payment processing. Identity management revenue is generated in North America and Africa and payment processing is earned in South America which are the three geographic regions of the Company. We have included the lease income in payment processing are the leases are related to unattended ticking kiosks.

 

Long lived assets are in North America, South America and Africa. Most assets are intangible assets recorded from the acquisition of MultiPay (South America) in 2015 and FIN Holdings (North America and Africa) in 2016. Assets for North America, South America and Africa amounted to approximately $8.0 million, $0.7 million and $2.1 million, respectively, of which $4.9 million, $0.1 million and $1.7 million related to goodwill as of June 30, 2019.

 

Analysis of revenue by segment and geographic region and reconciliation to consolidated revenue, gross profit, and net loss are provided below. The Company has included in the schedule below an allocation of corporate overhead based on management’s estimate of resource requirements.

 

    Three Months Ended     Six Months Ended  
    June 30,     June 30,     June 30,     June 30,  
    2019     2018     2019     2018  
Revenues, net                        
North America   $ 146,583     $ 1,383,389     $ 373,624     $ 1,500,697  
South America     120,613       116,398       245,941       195,486  
Africa     377,765       339,540       765,774       668,933  
      644,961       1,839,327       1,385,339       2,365,116  
                                 
Identity Solutions     524,348       1,722,929       1,139,398       2,169,630  
Payment Processing     120,613       116,398       245,941       195,486  
      644,961       1,839,327       1,385,339       2,365,116  
                                 
Loss From Operations                                
North America     (681,690 )     433,957       (1,419,652 )     (613,929 )
South America     (1,220,869 )     (2,277,874 )     (2,477,821 )     (3,607,464 )
Africa     (181,979 )     (450,713 )     (355,439 )     (582,432 )
      (2,084,538 )     (2,294,630 )     (4,252,912 )     (4,803,825 )
                                 
Identity Solutions     (863,669 )     (16,756 )     (1,775,091 )     (1,196,361 )
Payment Processing     (1,220,869 )     (2,277,874 )     (2,477,821 )     (3,607,464 )
      (2,084,538 )     (2,294,630 )     (4,252,912 )     (4,803,825 )
                                 
Interest Expense     (93,260 )     (246,298 )     (180,150 )     (485,467 )
Other income/(expense)     6,271       77,734       12,497       77,734  
                                 
Loss before income taxes     (2,171,527 )     (2,463,194 )     (4,420,565 )     (5,211,558 )
                                 
Income tax expense     (4,264 )     (9,856 )     (17,965 )     (14,417 )
                                 
Net loss   $ (2,175,791 )   $ (2,473,050 )   $ (4,438,530 )   $ (5,225,975 )
XML 32 R21.htm IDEA: XBRL DOCUMENT v3.19.2
BASIS OF PRESENTATION (Policies)
6 Months Ended
Jun. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Going concern

Going concern

 

As of June 30, 2019, the Company had an accumulated deficit of approximately $80.9 million. For the six months ended June 30, 2019, the Company earned revenue of approximately $1.4 million and incurred a loss from operations of approximately $4.3 million.

 

The reports of our independent registered public accounting firm on our consolidated financial statements for the years ended December 31, 2018 and 2017 contained an explanatory paragraph regarding our ability to continue as a going concern based upon our net losses and accumulated deficit.

 

These unaudited condensed consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations for the next fiscal year. 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 equity or debt 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.

 

There is no assurance that the Company will ever be profitable or be able to secure funding or generate sufficient revenues to sustain operations. As such, there is substantial doubt about the Company’s ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should the Company be unable to continue as a going concern.

Net Loss per Common Share

Net Loss per Common Share

 

The Company computes net loss per share in accordance with FASB ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible notes and stock warrants, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options, warrants and conversion of convertible notes. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive. The following potentially dilutive securities were excluded from the calculation of diluted loss per share for the six months ended June 30, 2019 and 2018 because their effect was antidilutive:

 

Security   2019     2018  
Stock Options     106,600,006       105,950,000  
Warrants     47,453,227       43,731,210  
Total     154,053,233       149,681,210  

Inventories

Inventories

 

Inventories of kiosks held by IDGS S.A.S are stated at the lower of cost (using the first-in, first-out method) or net realizable value. The kiosks provide electronic ticketing for transit systems. Inventory of plastic/ID cards, digital printing material, which are held by Cards Plus Pty Ltd., are stated at the lower of cost (using the average method) or net realizable value. The Plastic/ID cards and digital printing material are used to provide plastic loyal ID and other types of cards. Inventories at June 30, 2019 and December 31, 2018 consist of kiosks that were not placed into service and are held for sale and cards inventory. Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings in the current period. As of June 30, 2019 and December 31, 2018, the Company had an inventory valuation allowance of approximately $354,000 and $707,000, respectively, to reflect net realizable value of the kiosks that are being held for sale and the Company believes no valuation allowance was necessary regarding the cards inventory.

Leases

Leases

 

In February 2016, the FASB issued ASU No. 2016-02 (Topic 842). Topic 842 amends several aspects of lease accounting, including requiring lessees to recognize leases with a term greater than one year as a right-of-use asset and corresponding liability, measured at the present value of the lease payments. In July 2018, the FASB issued supplemental adoption guidance and clarification to Topic 842 within ASU 2018-10 “Codification Improvements to Topic 842, Leases” and ASU 2018-11 “Leases (Topic 842): Targeted Improvements.” The new guidance aims to increase transparency and comparability among organizations by requiring lessees to recognize lease assets and lease liabilities on the balance sheet and requiring disclosure of key information about leasing arrangements. A modified retrospective application is required with an option to not restate comparative periods in the period of adoption.

 

The Company, effective January 1, 2019 has adopted the provisions of the new standard. The Company decided to use the practical expedients available upon adoption of Topic 842 to aid the transition from former accounting to provisions of Topic 842. The package of expedients will effectively allow Ipsidy to run off existing leases, as initially classified as operating or financing and classify new leases after implementation under the new standard as the business evolves.

 

The practical expedients elected by the Company in transition permits us not to reassess our prior conclusions about lease identification, lease classification and initial direct costs. Furthermore, we have elected the short-term lease recognition exemption for leases with a term of 12 or less months which are not reasonably certain of exercising any available renewal options that would extend past 12 months. Additionally, we will continue to account for the executory costs of the direct financing lease as previously concluded and the initial direct costs were not considered significant.

 

The Company has operating leases principally for offices and some of the leases have renewal options. Management evaluates each lease independently to determine the purpose, necessity to its future operations in addition to other appropriate facts and circumstances.

  

We adopted Topic 842 using a modified retrospective approach for all existing leases at January 1, 2019. The adoption of Topic 842 impacted our balance sheet by the recognition of the operating lease right-of-use assets and the liability for operating leases. The accounting for finance leases (capital leases) was substantially unchanged. Accordingly, upon adoption, leases that were classified as operating leases under the previous guidance were classified as operating leases under Topic 842. The lease liability is based on the present value of the remaining lease payments, discounted using a market based incremental borrowing rate as the effective date of January 1, 2019 using current estimates as to lease term including estimated renewals for each operating lease. As of January 1, 2019, the Company recorded an adjustment of approximately $514,000 to operating lease right-of-use assets (“ROU”) and the related lease liability. See Note 12 for further information with respect to leases.

 

See Notes 7, 10, 11 and 12 to Condensed Consolidated Financial Statements for Additional Information.

Revenue Recognition

Revenue Recognition

 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”). Topic 606 supersedes the revenue recognition requirements in ASU Topic 605, Revenue Recognition (“Topic 605”), and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the considerations to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 also includes Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, which discusses the deferral of incremental costs of obtaining a contract with a customer, including the period of amortization of such costs. Collectively, we refer to Topic 606 and Subtopic 340-40 as the “new standard.” The new standard was adopted by the Company in the year beginning January 1, 2018.

 

The two permitted transition methods under the new standard are the full retrospective method, in which the new standard would be applied to each prior reporting period presented and the cumulative effect of applying the new standard would be recognized at the earliest period shown, or the modified retrospective method, in which the cumulative effect of applying the new standard would be recognized at the date of initial application. Based on our assessment, the impact of the new standard on our operations in prior periods was not significant. Below is the Company’s revenue recognition policy determined by revenue stream for its significant revenue generating activities through June 30, 2019.

 

Cards Plus - The Company recognizes revenue for the design and production of cards 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 upon delivery to the customer.

 

Identity Solutions – The Company recognizes revenue based on the identified performance obligations over the performance period for fixed consideration and for variable fees generated that are earned on a usage fee based over time based on monthly transaction volumes or on a monthly flat fee rate. The Company had a deferred revenue contract liability of approximately $410,000 and $236,000 as of June 30, 2019 and December 31, 2018, respectively, for certain revenue that will be earned in future periods. The majority of the $236,000 of deferred revenue contract liability as of December 31, 2018 was earned in the first three months of 2019. We anticipate that approximately $275,000 of the deferred revenue contract liability as of June 30, 2019 will be earned in the year ended December 31, 2019 and the balance in the first three months of 2020.

 

In 2018, the Company introduced a pay for performance plan for internal and external sales force, which is based on a percentage of revenues received by the Company. In the six months ended June 30, 2019 and June 30, 2018, no commissions were earned. We will defer and amortize any direct and incremental commission as well as costs to obtain a contract over the term of the related contracts. As of June 30, 2019 and December 31, 2018, there were no deferred commissions.

  

We will review each new contract for the related performance obligations and related revenue and expense recognition implications. We expect that the revenues derived from the new identity services could include multiple performance obligations. A performance obligation under the new 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 new 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 new standard accordingly to the revenue and expense derived from or related to each such service. A more complete analysis of the impact of the standard on these contracts will be performed at the period of time when services are expected to commence, and the conclusions reached by management may be different from those described above. For the quarter ended June 30, 2019, no revenues were recognized or required to be recognized under this practical expedient. 

 

Additionally, the Company will capitalize 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).

 

The Company capitalizes the costs incurred to acquire and fulfill a contract only if those costs meet all the following criteria:

 

a. The costs relate directly to a contract or to an anticipated contract that the Company can specifically identify.

 

b. The costs generate or enhance resources of the Company that will be used in satisfying (or in continuing to satisfy) performance obligations in the future.

 

c. The costs are expected to be recovered.

 

The Company will capitalize contract acquisition and fulfillment costs related to signing or renewing contracts that meet the above criteria, which will be classified as contract cost assets in the Company’s Consolidated Balance Sheets.

 

Contract cost assets are amortized using the straight-line method over the expected period of benefit beginning at the time revenue begins to be realized. The amortization of contract fulfillment cost assets associated with facilitating transactions are recorded as cost of services in the Company’s Consolidated Statements of Operations. The amortization of contract acquisition cost assets associated with sales commissions that qualify for capitalization are recorded as selling, general and administrative expense in the Company’s Consolidated Statements of Operations.

 

As of June 30, 2019, and December 31, 2018, the Company had deferred contract costs, represented by contract cost assets of approximately $4,000 and $11,000, respectively, which are included in other currents assets for certain costs incurred for the future delivery of election support services. The performance obligation will be met over the next two years and the costs will be expensed as the associated revenue is recognized as the Company performs its obligations.

 

As of June 30, 2019, and December 31, 2018, the Company had approximately $15,000 of accounts payable and accrued expenses related to the delivery of biometric identity system and services. The $15,000 will be paid in accordance with the terms of the service provider agreements.

Share Based Payments

Share Based Payments

 

On June 20, 2018, the FASB issued ASU 2018-07 which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. Previously, share-based payment arrangements to nonemployees were accounted for under ASC 718, while nonemployee share-based payments issued for goods and services were accounted for under ASC 505-50. Before the amendment, the major difference for the Company (but not limited to) was the determination of measurement date which generally is the date on which the measurement of equity classified share-based payments becomes fixed. Equity classified share-based payments for employees was fixed at the time of grant. Equity-classified nonemployee share-based payment awards are no longer measured at the earlier of the date which a commitment for performance by the counterparty is reached or the date at which the counterparty’s performance is complete. They are now measured at the grant date of the award which is the same as share-based payments for employees. The Company adopted the requirements of the new rule as of January 1, 2019, the effective date of the new guidance.

 

The Company has determined on the date of adoption that the impact of the new standard was not significant.

  

Beginning in 2019, the Company in accordance with the requirements of the new standard will expense the fair value of the existing non-employee share-based payments over their vesting period using the fair value determined on the date of adoption. See note 9 of the notes to condensed consolidated financial statements where employee and non-employee share-based payments are presented.

XML 33 R22.htm IDEA: XBRL DOCUMENT v3.19.2
BASIS OF PRESENTATION (Tables)
6 Months Ended
Jun. 30, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Schedule of potentially dilutive securities

The following potentially dilutive securities were excluded from the calculation of diluted loss per share for the three months ended June 30, 2019 and 2018 because their effect was antidilutive:

 

Security   2019     2018  
Stock Options     106,600,006       105,950,000  
Warrants     47,453,227       43,731,210  
Total     154,053,233       149,681,210  
XML 34 R23.htm IDEA: XBRL DOCUMENT v3.19.2
PROPERTY AND EQUIPMENT, NET (Tables)
6 Months Ended
Jun. 30, 2019
Property, Plant and Equipment [Abstract]  
Schedule of property and equipment

Property and equipment consisted of the following as of June 30, 2019 and December 31, 2018:

 

    2019     2018  
Computers and equipment   $ 299,528     $ 238,442  
Furniture and fixtures     156,867       156,867  
      456,395     395,309  
Less Accumulated depreciation     264,969       191,309  
Property and equipment, net   $ 191,426     $ 204,000  
XML 35 R24.htm IDEA: XBRL DOCUMENT v3.19.2
OTHER ASSETS (Tables)
6 Months Ended
Jun. 30, 2019
Other Assets [Abstract]  
Schedule of other assets

The balances as of June 30, 2019 and December 31, 2018 are:

 

    2019     2018  
Software and development   $ 1,734,122     $ 1,566,177  
Operating Lease ROU assets, long term     178,532        
    $ 1,912,654     $ 1,566,177

XML 36 R25.htm IDEA: XBRL DOCUMENT v3.19.2
INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL) (Tables)
6 Months Ended
Jun. 30, 2019
Goodwill and Intangible Assets Disclosure [Abstract]  
Schedule of intangible assets, net (other than goodwill)

The following is a summary of activity related to intangible assets for the six months ended June 30, 2019:

 

          Acquired and                          
    Customer     Developed     Intellectual           Patents        
    Relationships     Software     Property     Non-Compete     Pending     Total  
                                     
Useful Lives     10 Years       5 Years       10 Years       10 Years       N/A          
                                                 
Carrying Value at December 31, 2018   $ 1,128,734     $ 908,893     $ 1,191,942     $ 2,433     $ 78,182     $ 3,310,184  
Additions             764,739                       6,167       770,906  
Amortization     (79,358 )     (114,655 )     (87,264 )     (1,217 )           (282,493 )
Carrying Value at June 30,2019   $ 1,049,376     $ 1,558,977     $ 1,104,678     $ 1,216     $ 84,349     $ 3,798,597  

 

The following is a summary of intangible assets as of June 30, 2019:

 

          Acquired and                          
    Customer     Developed     Intellectual           Patents        
    Relationships     Software     Property     Non-Compete     Pending     Total  
Cost   $ 1,587,159     $ 1,724,621     $ 1,759,809     $ 14,087     $ 84,349     $ 5,170,025  
Accumulated amortization     (537,782 )     (165,644 )     (655,131 )     (12,871 )           (1,371,428 )
Carrying Value at June 30,2019   $ 1,049,377     $ 1,558,977     $ 1,104,678     $ 1,216     $ 84,349     $ 3,798,597  
Schedule of future amortization expense of intangible assets

Future expected amortization of intangible assets is as follows:

 

Fiscal Year Ending December 31,      
Remainder of 2019   $ 358,948  
2020     715,502  
2021     715,502  
2022     622,168  
2023     571,180  
Thereafter     815,297  
    $ 3,798,597
XML 37 R26.htm IDEA: XBRL DOCUMENT v3.19.2
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables)
6 Months Ended
Jun. 30, 2019
Payables and Accruals [Abstract]  
Schedule of accounts payable and accrued expenses

Accounts payable and accrued expenses consisted of the following as of June 30, 2019 and December 31, 2018:

 

    2019     2018  
             
Trade payables   $ 392,851     $ 401,272  
Accrued interest     520,834       401,667  
Accrued payroll and related obligations     282,513       260,153  
Current portion of operating lease liabilities     251,206        
Other accrued expenses     416,744       239,134  
    $ 1,864,148     $ 1,302,226  
XML 38 R27.htm IDEA: XBRL DOCUMENT v3.19.2
NOTES PAYABLE, NET (Tables)
6 Months Ended
Jun. 30, 2019
Debt Disclosure [Abstract]  
Schedule of notes payable

The following is a summary of notes payable as of June 30, 2019 and December 31, 2018:

 

    June 30,
2019
    December 31,
2018
 
             
In January 2017, the Company issued a Senior Unsecured Note (“Note”) a face value of $3,000,000, payable two years from issuance, along with an aggregate of 4,500,000 shares of Common Stock, with a fair value of $1,147,500. The Company allocated the proceeds to the note payable and common stock based on their relative fair value and recorded a discount of $830,018 to be amortized into interest expense over the two-year term of the note. The Company also paid debt issuance costs consisting of a cash fee of $120,000 and 1,020,000 shares of common stock of the Company with a fair value of $306,000. On April 30, 2018, the Company and the Noteholder agreed to extend the due date of the note until April 30, 2020 for an extension fee of 1,500,000 shares of the Common Stock issued to the Noteholder.  The April 2018 change in terms of the Note payable has been determined to be a debt extinguishment in accordance with ASC 470.   The reported amounts under the debt extinguishment are not significantly different than that of the Company’s reported amounts.  See below   $ 2,000,000     $ 2,000,000  
Installment loan payable related to a vehicle acquisition payable in monthly payments of $539 per month at an interest rate of 10.8% per annum payable for 36 months     15,328        
Total Principal Outstanding   $ 2,015,328     $ 2,000,000  
Unamortized Deferred Debt Discount     (66,804 )     (106,886 )
Unamortized Deferred Debt Issuance Costs     (24,666 )     (39,466 )
Notes Payable, Net   $ 1,923,858     $ 1,853,648  
Notes Payable, current portion, net of discounts and current portion   $ 1,913,591     $  
Notes Payable, Net of discounts and current portion     10,267       1,853,648  
    $ 1,923,858     $ 1,853,648  

  

Schedule of notes payable and related discounts

The following is a roll-forward of the Company’s notes payable and related discounts for the six months ended June 30, 2019:

 

    Principal
Balance
    Debt
Issuance
Costs:
    Debt
Discounts:
    Total:  
Balance at December 31, 2018   $ 2,000,000     $ (39,466 )   $ (106,886 )   $ 1,853,648  
Additions     16,510                   16,510  
Amortization     (1,182 )     14,800       40,082       53,700  
Balance at June 30, 2019   $ 2,015,328     $ (24,666 )   $ (66,804 )   $ 1,923,858
Schedule of future maturities of notes payable

Future maturities of notes payable are as follows as of June 30, 2019:

 

July 1, 2019 – June 30, 2020   $ 2,005,061  
July 1, 2020 – June 30, 2021     5,636  
April 1, 2021 – June 30, 2022     4,631  
    $ 2,015,328
XML 39 R28.htm IDEA: XBRL DOCUMENT v3.19.2
OTHER LIABILITIES (Tables)
6 Months Ended
Jun. 30, 2019
Other Liabilities Disclosure [Abstract]  
Schedule of other liabilities

Other liabilities consisted of the following as of June 30, 2019 and December 31, 2018:

 

    2019     2018  
             
Operating lease liabilities, long term   $ 170,163     $  
Other     45,000       45,000  
    $ 215,163     $ 45,000  
XML 40 R29.htm IDEA: XBRL DOCUMENT v3.19.2
STOCKHOLDERS' EQUITY (Tables)
6 Months Ended
Jun. 30, 2019
Share-based Payment Arrangement [Abstract]  
Schedule of granted warrants

The granted warrants to its investment bankers in connection with the June 2019 private common stock offering as described above in the in the six months ended June 30, 2019:

 

    Number of
Shares
    Weighted
Average
Exercise
Price
    Weighted
Average
Remaining
Life
Outstanding at December 31, 2018     46,201,477     $ 0.08     1.9 Years
Granted     1,251,750       0.09     5.0 Years
Outstanding at June 30,2019     47,453,227     $ 0.09     1.3 Years
Schedule of black - scholes option-pricing model valuation assumption

The options have a term of ten years and the approximate fair value of the options were $49,000.

 

Expected Volatility – 75%

Expected Term – 2.5 – 6.5 Years

Risk Free Rate – 2.0%

Dividend Rate – 0.00%

Schedule of outstanding stock options

Activity related to stock options for the six months ended June 30, 2019 is summarized as follows: 

 

          Weighted
Average
    Weighted
Average
    Aggregate  
    Number of     Exercise     Contractual     Intrinsic  
    Shares     Price     Term (Yrs.)     Value  
Outstanding as of December 31, 2018     106,253,339     $ 0.20       7.4     $ 1,989,163  
Granted     600,000       0.12       9.7       -  
Forfeitures     (253,333 )     0.10       -       -  
Outstanding as of June 30,2019     106,600,006       0.20       7.1     $ 1,952,230  
Exercisable as of June 30,2019     99,404,867     $ 0.20       7.1     $ 1,920,074  

  

Schedule of stock option

The following table summarizes stock option information as of June 30, 2019:

 

            Weighted Average        
            Contractual        
Exercise Price     Outstanding     Life (Yrs.)     Exercisable  
                     
$ 0.00001       3,500,000       6.5       3,500,000  
  0.05       32,700,006       7.3       32,043,756  
  0.10       27,200,000       7.5       26,227,778  
  0.12       1,400,000       9.5        
  0.13       250,000       8.6       83,333  
  0.15       2,800,000       6.6       2,800,000  
  0.22       2,750,000       8.8       750,000  
  0.25       2,500,000       8.6       1,166,667  
  0.26       500,000       9.1       166,667  
  0.29       1,000,000       8.0       666,667  
  0.40       1,000,000       6.9       1,000,000  
  0.45       31,000,000       6.6       31,000,000  
                             
          106,600,006       7.1       99,404,867  
XML 41 R30.htm IDEA: XBRL DOCUMENT v3.19.2
DIRECT FINANCING LEASE (Tables)
6 Months Ended
Jun. 30, 2019
Leases [Abstract]  
Schedule of future minimum lease payments to be received

Future minimum lease payments to be received under the lease for the next five years and thereafter are as follows:

 

Remainder 2019   $ 61,074  
2020     122,148  
2021     122,148  
2022     122,148  
2023     122,148  
Thereafter     285,012  
Sub-total     834,678  
Less deferred revenue     (244,496 )
Net investment in lease   $ 590,182  

XML 42 R31.htm IDEA: XBRL DOCUMENT v3.19.2
LEASE OBLIGATION PAYABLE (Tables)
6 Months Ended
Jun. 30, 2019
Leases [Abstract]  
Schedule of lease obligation payable

The interest rate related to the lease obligation is 12% and the maturity date is June 30, 2022.

 

Year Ending      
       
Remainder of 2019   $ 21,548  
2020     43,096  
2021     43,096  
2022     10,774  
Total minimum lease payments     118,514  
Less: Amount representing interest     (17,993 )
Present value of minimum lease payments   $ 100,521
XML 43 R32.htm IDEA: XBRL DOCUMENT v3.19.2
COMMITMENTS AND CONTINGENCIES (Tables)
6 Months Ended
Jun. 30, 2019
Commitments and Contingencies Disclosure [Abstract]  
Schedule of related lease balance

The lease related balances included in the Condensed Consolidated Balance Sheet as of June 30, 2019 were as follows:

 

Assets:      
       
Current portion of operating lease ROU assets - included in other current assets   $ 243,105  
         
Operating lease ROU assets – included in Other Assets     178,532  
         
Total operating lease assets   $ 421,637  

 

Liabilities:      
       
Current portion of ROU liabilities – included in Accounts payable and accrued expenses   $ 251,206  
         
Long-term portion of ROU liabilities – included in Other liabilities     170,163  
         
Total operating lease liabilities   $ 421,369  
Schedule of future minimum lease payments required under non convertible operating leases

The following table presents the maturity of the Company’s operating lease liabilities as of June 30, 2019:

 

Remainder of 2019   $ 163,216  
2020     183,519  
2021     92,391  
2022     46,196  
Total operating lease payments     485,322  
Less: Imputed interest     (63,953 )
Total operating lease liabilities   $ 421,369  
XML 44 R33.htm IDEA: XBRL DOCUMENT v3.19.2
SEGMENT INFORMATION (Tables)
6 Months Ended
Jun. 30, 2019
Segment Reporting [Abstract]  
Schedule of geographic region

The Company has included in the schedule below an allocation of corporate overhead based on management’s estimate of resource requirements.

 

    Three Months Ended     Six Months Ended  
    June 30,     June 30,     June 30,     June 30,  
    2019     2018     2019     2018  
Revenues, net                        
North America   $ 146,583     $ 1,383,389     $ 373,624     $ 1,500,697  
South America     120,613       116,398       245,941       195,486  
Africa     377,765       339,540       765,774       668,933  
      644,961       1,839,327       1,385,339       2,365,116  
                                 
Identity Solutions     524,348       1,722,929       1,139,398       2,169,630  
Payment Processing     120,613       116,398       245,941       195,486  
      644,961       1,839,327       1,385,339       2,365,116  
                                 
Loss From Operations                                
North America     (681,690 )     433,957       (1,419,652 )     (613,929 )
South America     (1,220,869 )     (2,277,874 )     (2,477,821 )     (3,607,464 )
Africa     (181,979 )     (450,713 )     (355,439 )     (582,432 )
      (2,084,538 )     (2,294,630 )     (4,252,912 )     (4,803,825 )
                                 
Identity Solutions     (863,669 )     (16,756 )     (1,775,091 )     (1,196,361 )
Payment Processing     (1,220,869 )     (2,277,874 )     (2,477,821 )     (3,607,464 )
      (2,084,538 )     (2,294,630 )     (4,252,912 )     (4,803,825 )
                                 
Interest Expense     (93,260 )     (246,298 )     (180,150 )     (485,467 )
Other income/(expense)     6,271       77,734       12,497       77,734  
                                 
Loss before income taxes     (2,171,527 )     (2,463,194 )     (4,420,565 )     (5,211,558 )
                                 
Income tax expense     (4,264 )     (9,856 )     (17,965 )     (14,417 )
                                 
Net loss   $ (2,175,791 )   $ (2,473,050 )   $ (4,438,530 )   $ (5,225,975 )
XML 45 R34.htm IDEA: XBRL DOCUMENT v3.19.2
BASIS OF PRESENTATION (Details) - shares
6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Antidilutive securities, Shares 154,053,233 149,681,210
Employee Stock Option [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Antidilutive securities, Shares 106,600,006 105,950,000
Warrants [Member]    
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]    
Antidilutive securities, Shares 47,453,227 43,731,210
XML 46 R35.htm IDEA: XBRL DOCUMENT v3.19.2
BASIS OF PRESENTATION (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Dec. 31, 2019
Jan. 31, 2019
Dec. 31, 2018
Accumulated deficit $ (80,873,765)   $ (80,873,765)       $ (76,435,235)
Revenue 644,961 $ 1,839,327 1,385,339 $ 2,365,116      
Loss from operations (2,084,538) $ (2,294,630) (4,252,912) $ (4,803,825)      
Deferred contract costs 4,000   4,000       11,000
Deferred revenue contract liability 410,000   410,000       236,000
Inventory valuation allowance 354,000   354,000       707,000
Operating lease right-of-use assets 421,637   421,637     $ 514,000  
Accounts payable and accrued expenses $ 15,000   15,000       $ 15,000
Payment for service provider agreements     $ 15,000        
Subsequent Event [Member]              
Deferred revenue contract liability         $ 275,000    
XML 47 R36.htm IDEA: XBRL DOCUMENT v3.19.2
PROPERTY AND EQUIPMENT, NET (Details) - USD ($)
Jun. 30, 2019
Dec. 31, 2018
Property, Plant and Equipment [Line Items]    
Property and equipment, gross $ 456,395 $ 395,309
Less Accumulated depreciation 264,969 191,309
Property and equipment, net 191,426 204,000
Computer and Equipment [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross 299,528 238,442
Furniture and Fixtures [Member]    
Property, Plant and Equipment [Line Items]    
Property and equipment, gross $ 156,867 $ 156,867
XML 48 R37.htm IDEA: XBRL DOCUMENT v3.19.2
PROPERTY AND EQUIPMENT, NET (Details Narrative) - USD ($)
6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Property, Plant and Equipment [Abstract]    
Depreciation expense $ 45,203 $ 35,191
XML 49 R38.htm IDEA: XBRL DOCUMENT v3.19.2
OTHER ASSETS (Details) - USD ($)
Jun. 30, 2019
Dec. 31, 2018
Other Assets [Abstract]    
Software and development $ 1,734,122 $ 1,566,177
Operating Lease ROU assets, long term 178,532
Other assets $ 1,912,654 $ 1,566,177
XML 50 R39.htm IDEA: XBRL DOCUMENT v3.19.2
INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL) (Details)
6 Months Ended
Jun. 30, 2019
USD ($)
Finite-Lived Intangible Assets [Line Items]  
Carrying Value at beginning $ 3,310,184
Additions 770,906
Amortization (282,493)
Carrying Value at ending $ 3,798,597
Customer Relationships [Member]  
Finite-Lived Intangible Assets [Line Items]  
Useful Lives 10 years
Carrying Value at beginning $ 1,128,734
Amortization (79,358)
Carrying Value at ending $ 1,049,377
Acquired And Developed Software [Member]  
Finite-Lived Intangible Assets [Line Items]  
Useful Lives 5 years
Carrying Value at beginning $ 908,893
Additions 764,739
Amortization (114,655)
Carrying Value at ending $ 1,558,977
Intellectual Property [Member]  
Finite-Lived Intangible Assets [Line Items]  
Useful Lives 10 years
Carrying Value at beginning $ 1,191,942
Amortization (87,264)
Carrying Value at ending $ 1,104,678
Non-Compete [Member]  
Finite-Lived Intangible Assets [Line Items]  
Useful Lives 10 years
Carrying Value at beginning $ 2,433
Amortization (1,217)
Carrying Value at ending 1,216
Patents Pending [Member]  
Finite-Lived Intangible Assets [Line Items]  
Carrying Value at beginning 78,182
Additions 6,167
Amortization
Carrying Value at ending $ 84,349
XML 51 R40.htm IDEA: XBRL DOCUMENT v3.19.2
INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL) (Details 1) - USD ($)
Jun. 30, 2019
Dec. 31, 2018
Finite-Lived Intangible Assets [Line Items]    
Cost $ 5,170,025  
Accumulated amortization (1,371,428)  
Carrying Value 3,798,597 $ 3,310,184
Customer Relationships [Member]    
Finite-Lived Intangible Assets [Line Items]    
Cost 1,587,159  
Accumulated amortization (537,782)  
Carrying Value 1,049,377 1,128,734
Acquired And Developed Software [Member]    
Finite-Lived Intangible Assets [Line Items]    
Cost 1,724,621  
Accumulated amortization (165,644)  
Carrying Value 1,558,977 908,893
Intellectual Property [Member]    
Finite-Lived Intangible Assets [Line Items]    
Cost 1,759,809  
Accumulated amortization (655,131)  
Carrying Value 1,104,678 1,191,942
Non-Compete [Member]    
Finite-Lived Intangible Assets [Line Items]    
Cost 14,087  
Accumulated amortization (12,871)  
Carrying Value 1,216 2,433
Patents Pending [Member]    
Finite-Lived Intangible Assets [Line Items]    
Cost 84,349  
Carrying Value $ 84,349 $ 78,182
XML 52 R41.htm IDEA: XBRL DOCUMENT v3.19.2
INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL) (Details 2) - USD ($)
Jun. 30, 2019
Dec. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]    
Remainder of 2019 $ 358,948  
2020 715,502  
2021 715,502  
2022 622,168  
2023 571,180  
Thereafter 815,297  
Carrying Value $ 3,798,597 $ 3,310,184
XML 53 R42.htm IDEA: XBRL DOCUMENT v3.19.2
ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($)
Jun. 30, 2019
Dec. 31, 2018
Payables and Accruals [Abstract]    
Trade payables $ 392,851 $ 401,272
Accrued interest 520,834 401,667
Accrued payroll and related obligations 282,513 260,153
Current portion of operating lease liabilities 251,206
Other accrued expenses 416,744 239,134
Total $ 1,864,148 $ 1,302,226
XML 54 R43.htm IDEA: XBRL DOCUMENT v3.19.2
NOTES PAYABLE, NET (Details) - USD ($)
Jun. 30, 2019
Dec. 31, 2018
Jan. 31, 2017
Short-term Debt [Line Items]      
Total Principle Outstanding $ 2,015,328 $ 2,000,000  
Unamortized Deferred Debt Discount (66,804) (106,886)  
Unamortized Deferred Debt Issuance Costs (24,666) (39,466)  
Notes Payable, Net 1,923,858 1,853,648  
Notes Payable, current portion, net of discounts and current portion 1,913,591  
Notes Payable, Net of discounts and current portion 10,267 1,853,648  
Total 1,923,858 1,853,648  
Senior Unsecured Note [Member]      
Short-term Debt [Line Items]      
Total Principle Outstanding 2,000,000 2,000,000  
Unamortized Deferred Debt Discount     $ (830,018)
Vehicle [Member]      
Short-term Debt [Line Items]      
Total Principle Outstanding $ 15,328  
XML 55 R44.htm IDEA: XBRL DOCUMENT v3.19.2
NOTES PAYABLE, NET (Details 1)
6 Months Ended
Jun. 30, 2019
USD ($)
Principal Balance  
Begining Balance $ 2,000,000
Additions 16,510
Amortization (1,182)
Ending Balance 2,015,328
Debt Issuance Costs  
Begining Balance (39,466)
Additions
Amortization 14,800
Ending Balance (24,666)
Debt Discounts  
Begining Balance (106,886)
Additions
Amortization 40,082
Ending Balance (66,804)
Total  
Begining Balance 1,853,648
Additions 16,510
Amortization 53,700
Ending Balance $ 1,923,858
XML 56 R45.htm IDEA: XBRL DOCUMENT v3.19.2
NOTES PAYABLE, NET (Details 2)
Jun. 30, 2019
USD ($)
Debt Disclosure [Abstract]  
July 1, 2019 - June 30, 2020 $ 2,005,061
July 1, 2020 - June 30, 2021 5,636
April 1, 2021 - June 30, 2022 4,631
Total $ 2,015,328
XML 57 R46.htm IDEA: XBRL DOCUMENT v3.19.2
NOTES PAYABLE, NET (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended
Apr. 30, 2018
Jan. 31, 2017
Jun. 30, 2019
Jun. 30, 2019
Dec. 31, 2018
Short-term Debt [Line Items]          
Debt discount     $ 66,804 $ 66,804 $ 106,886
Common stock issues value     $ 2,832,152 $ 2,832,152  
Senior Unsecured Note [Member]          
Short-term Debt [Line Items]          
Debt term   2 years      
Debt discount   $ 830,018      
Debt issuance costs consisting shares value   $ 306,000      
Debt issuance costs consisting shares   1,020,000      
Common stock issued to the noteholder $ 1,500,000        
Face amount   $ 3,000,000      
Cash fee   120,000      
Common stock issues value   $ 1,147,500      
Common stock issues shares   4,500,000      
Vehicle [Member]          
Short-term Debt [Line Items]          
Debt term       36 months  
Interest rate     10.80% 10.80%  
Monthly payments       $ 539  
XML 58 R47.htm IDEA: XBRL DOCUMENT v3.19.2
OTHER LIABILITIES (Details) - USD ($)
Jun. 30, 2019
Dec. 31, 2018
Other Liabilities [Abstract]    
Operating lease liabilities, long term $ 170,163  
Other 45,000 $ 45,000
Total other liabilities $ 215,163 $ 45,000
XML 59 R48.htm IDEA: XBRL DOCUMENT v3.19.2
RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)
1 Months Ended 6 Months Ended
Jan. 31, 2017
Jun. 30, 2019
Jun. 30, 2019
Jun. 30, 2018
Due to related parties paid   $ 22,275 $ 22,275 $ 22,275
New Office Facilities [Member] | Long Beach, New York [Member]        
Additional monthly rental payments     $ 7,425  
Agreement term     30 days  
Senior Unsecured Note [Member]        
Interest Expenses     $ 119,000  
Number of common stock purchased, shares 4,500,000      
Network 1 Financial Securities Inc [Member] | Warrants [Member]        
Number of common stock purchased, shares     858,000  
Fair value of warrants     $ 54,000  
Fees incurred     $ 109,000  
Warrant term     5 years  
Share price (in dollars per share)   $ 0.088 $ 0.088  
Directors And Officer [Member]        
Number of common stock purchased, shares   1,562,500    
XML 60 R49.htm IDEA: XBRL DOCUMENT v3.19.2
STOCKHOLDER'S EQUITY (Details)
6 Months Ended
Jun. 30, 2019
$ / shares
shares
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]  
Outstanding balance at beginning | shares 46,201,477
Granted | shares 1,251,750
Outstanding balance at ending | shares 47,453,227
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Weighted Average Exercise Price [Roll Forward]  
Beginning Balance Outstanding | $ / shares $ 0.08
Granted | $ / shares 0.09
Ending Balance Outstanding | $ / shares $ 0.09
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Weighted Average Remaining Life [Roll Forward]  
Beginning Balance Outstanding 1 year 10 months 24 days
Granted 5 years
Ending Balance Outstanding 1 year 3 months 18 days
XML 61 R50.htm IDEA: XBRL DOCUMENT v3.19.2
STOCKHOLDER'S EQUITY (Details 1)
6 Months Ended
Jun. 30, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Expected Volatility 75.00%
Risk Free Rate 2.00%
Dividend Rate 0.00%
Minimum [Member]  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Expected Term 2 years 6 months
Maximum [Member]  
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]  
Expected Term 5 years 10 months 24 days
XML 62 R51.htm IDEA: XBRL DOCUMENT v3.19.2
STOCKHOLDER'S EQUITY (Details 2)
6 Months Ended
Jun. 30, 2019
USD ($)
$ / shares
shares
Number of Shares [Roll Forward]  
Outstanding at beginning | shares 106,253,339
Granted | shares 600,000
Forfeitures | shares (253,333)
Outstanding at ending | shares 106,600,006
Exercisable at ending | shares 99,404,867
Weighted Average Exercise Price [Roll Forward]  
Outstanding at beginning | $ / shares $ 0.20
Granted | $ / shares 0.12
Forfeitures | $ / shares 0.10
Outstanding at ending | $ / shares 0.20
Exercisable at ending | $ / shares $ 0.20
Weighted Average Contractual Term [Roll Forward]  
Outstanding at beginning 7 years 4 months 24 days
Granted 9 years 8 months 12 days
Forfeitures
Outstanding at ending 7 years 1 month 6 days
Exercisable at ending 7 years 1 month 6 days
Aggregate Intrinsic Value [Roll Forward]  
Outstanding at beginning | $ $ 1,989,163
Forfeitures | $
Outstanding at ending | $ 1,952,230
Exercisable at ending | $ $ 1,920,074
XML 63 R52.htm IDEA: XBRL DOCUMENT v3.19.2
STOCKHOLDER'S EQUITY (Details 3)
6 Months Ended
Jun. 30, 2019
shares
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Outstanding 106,600,006
Weighted Average Contractual Life (Yrs.) 7 years 1 month 6 days
Exercisable 99,404,867
Exercise Price $0.00001 [Member]  
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Outstanding 3,500,000
Weighted Average Contractual Life (Yrs.) 6 years 6 months
Exercisable 3,500,000
Exercise Price $0.05 [Member]  
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Outstanding 32,700,006
Weighted Average Contractual Life (Yrs.) 7 years 3 months 18 days
Exercisable 32,043,756
Exercise Price $0.10 [Member]  
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Outstanding 27,200,000
Weighted Average Contractual Life (Yrs.) 7 years 6 months
Exercisable 26,227,778
Exercise Price $0.12 [Member]  
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Outstanding 1,400,000
Weighted Average Contractual Life (Yrs.) 9 years 6 months
Exercisable
Exercise Price $0.13 [Member]  
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Outstanding 250,000
Weighted Average Contractual Life (Yrs.) 8 years 7 months 6 days
Exercisable 83,333
Exercise Price $0.15 [Member]  
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Outstanding 2,800,000
Weighted Average Contractual Life (Yrs.) 6 years 7 months 6 days
Exercisable 2,800,000
Exercise Price $0.22 [Member]  
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Outstanding 2,750,000
Weighted Average Contractual Life (Yrs.) 8 years 9 months 18 days
Exercisable 750,000
Exercise Price $0.25 [Member]  
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Outstanding 2,500,000
Weighted Average Contractual Life (Yrs.) 8 years 7 months 6 days
Exercisable 1,166,667
Exercise Price $0.26 [Member]  
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Outstanding 500,000
Weighted Average Contractual Life (Yrs.) 9 years 1 month 6 days
Exercisable 166,667
Exercise Price $0.29 [Member]  
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Outstanding 1,000,000
Weighted Average Contractual Life (Yrs.) 8 years
Exercisable 666,667
Exercise Price $0.40 [Member]  
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Outstanding 1,000,000
Weighted Average Contractual Life (Yrs.) 6 years 10 months 24 days
Exercisable 1,000,000
Exercise Price $0.45 [Member]  
Share-based Payment Arrangement, Option, Exercise Price Range [Line Items]  
Outstanding 31,000,000
Weighted Average Contractual Life (Yrs.) 6 years 7 months 6 days
Exercisable 31,000,000
XML 64 R53.htm IDEA: XBRL DOCUMENT v3.19.2
STOCKHOLDER'S EQUITY (Details Narrative) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Stock based compensation     $ 787,720 $ 1,292,900
Number of common shares issued, amount $ 2,832,152   2,832,152  
Number of common shares issued for services, amount $ 41,112 $ 47,667 $ 41,112 $ 47,667
Number of options granted     600,000  
Vesting term     3 years  
Vesting rights description     Of the 600,000 stock options, 475,000 options are earned over a three-year period and 125,000 options vest upon achieving certain performance thresholds.  
Common Stock [Member]        
Number of common stock purchased, shares 38,763,750   38,763,750  
Number of common shares issued, amount $ 3,876   $ 3,876  
Number of common shares issued for services, shares 410,708 170,240 410,708 170,240
Number of common shares issued for services, amount $ 41 $ 17 $ 41 $ 17
Subscription Agreements [Member] | Accredited Investors 2019 [Member]        
Fees paid $ 178,000   $ 178,000  
Share price (in dollars per share) $ 0.088   $ 0.088  
Subscription Agreements [Member] | Accredited Investors 2019 [Member] | Two Service Providers [Member]        
Number of common shares issued for services, shares     410,708  
Number of common shares issued for services, amount     $ 41,000  
Subscription Agreements [Member] | Accredited Investors 2019 [Member] | Warrants [Member]        
Number of common stock purchased, shares     1,251,750  
Warrant term     5 years  
Fair value of warrants     $ 79,000  
Subscription Agreements [Member] | Accredited Investors 2019 [Member] | Common Stock [Member]        
Number of common stock purchased, shares     38,764,000  
Number of common shares issued, amount     $ 3,100,000  
Employee Stock Option [Member]        
Stock based compensation     654,000  
Unrecognized compensation costs $ 840,000   $ 840,000  
Number of options granted     49,000  
Vesting term     10 years  
Non Employee Stock Option [Member]        
Stock based compensation     $ 151,000  
Unrecognized compensation costs $ 108,000   $ 108,000  
XML 65 R54.htm IDEA: XBRL DOCUMENT v3.19.2
DIRECT FINANCING LEASE (Details)
Jun. 30, 2019
USD ($)
Leases [Abstract]  
Remainder 2019 $ 61,074
2020 122,148
2021 122,148
2022 122,148
2023 122,148
Thereafter 285,012
Sub-total 834,678
Less deferred revenue (244,496)
Net investment in lease $ 590,182
XML 66 R55.htm IDEA: XBRL DOCUMENT v3.19.2
DIRECT FINANCING LEASE (Details Narrative)
3 Months Ended 6 Months Ended
Sep. 30, 2015
USD ($)
Kiosks
$ / shares
Jun. 30, 2019
USD ($)
Jun. 30, 2018
USD ($)
Jun. 30, 2019
USD ($)
Jun. 30, 2018
USD ($)
Revenue   $ 644,961 $ 1,839,327 $ 1,385,339 $ 2,365,116
Equipment under capital lease   748,000   748,000  
Aggregate minimum future lease payments   $ 1,422,000   1,422,000  
Unearned income       474,000  
Cash Collection Services (the "Contract") [Member] | Recaudo Bogota S.A.S. [Member]          
Number of kiosks | Kiosks 78        
Lease contract term 10 years        
Lease monthly rental $ 11,900        
Lease rent expense 142,272        
Estimated executory costs $ 1,677        
Purchase price at the end of lease term (in dollars per unit) | $ / shares $ 40        
Revenue       $ 16,000  
Receive monthly payments $ 11,856        
XML 67 R56.htm IDEA: XBRL DOCUMENT v3.19.2
LEASE OBLIGATION PAYABLE (Details)
Jun. 30, 2019
USD ($)
Leases [Abstract]  
Remainder of 2019 $ 21,548
2020 43,096
2021 43,096
2022 10,774
Total minimum lease payments 118,514
Less: Amount representing interest (17,993)
Present value of minimum lease payments $ 100,521
XML 68 R57.htm IDEA: XBRL DOCUMENT v3.19.2
LEASE OBLIGATION PAYABLE (Details Narrative)
6 Months Ended
Jun. 30, 2019
USD ($)
Leases [Abstract]  
Amortization of lease equipment $ 75,006
Lease obligation interest rate 12.00%
Lease obligation maturity date Jun. 30, 2022
XML 69 R58.htm IDEA: XBRL DOCUMENT v3.19.2
COMMITMENTS AND CONTINGENCIES (Details) - USD ($)
Jun. 30, 2019
Jan. 31, 2019
Assets:    
Current portion of operating lease ROU assets - included in other current assets $ 243,105  
Operating lease ROU assets - included in Other Assets 178,532  
Total operating lease assets 421,637 $ 514,000
Liabilities:    
Current portion of ROU liabilities - included in Accounts payable and accrued expenses 251,206  
Long-term portion of ROU liabilities - included in Other liabilities 170,163  
Total operating lease liabilities $ 421,369  
XML 70 R59.htm IDEA: XBRL DOCUMENT v3.19.2
COMMITMENTS AND CONTINGENCIES (Details 1)
Jun. 30, 2019
USD ($)
Operating Leases Year Ending December 31:  
Remainder of 2019 $ 163,216
2020 183,519
2021 92,391
2022 46,196
Total operating lease payments 485,322
Less: Imputed interest (63,953)
Total operating lease liabilities $ 421,369
XML 71 R60.htm IDEA: XBRL DOCUMENT v3.19.2
COMMITMENTS AND CONTINGENCIES (Details Narrative)
1 Months Ended 6 Months Ended
Oct. 31, 2018
USD ($)
Apr. 30, 2017
USD ($)
Jun. 30, 2019
USD ($)
ft²
Weighted average lease term     1 year 6 months
lease expense     $ 236,000
Weighted average discount rate     13.55%
New Office Facilities [Member] | Plantation [Member]      
Monthly rental payments     $ 2,700
Area of land for rent | ft²     2,100
New Office Facilities [Member] | Long Beach, New York [Member]      
Additional monthly rental payments     $ 7,425
Agreement term     30 days
New Office Facilities [Member] | Alpharetta Georgia [Member]      
Monthly rental payments $ 3,800    
New Office Facilities [Member] | COLOMBIA [Member] | MultiPay S.A.S [Member]      
Monthly rental payments   $ 8,500  
Agreement term   2 years  
New Office Facilities [Member] | South Africa [Member]      
Monthly rental payments     $ 8,000
Apartment [Member] | COLOMBIA [Member]      
Monthly rental payments     $ 2,000
XML 72 R61.htm IDEA: XBRL DOCUMENT v3.19.2
SEGMENT INFORMATION (Details) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2019
Jun. 30, 2018
Jun. 30, 2019
Jun. 30, 2018
Revenues, net $ 644,961 $ 1,839,327 $ 1,385,339 $ 2,365,116
Loss From Operations (2,084,538) (2,294,630) (4,252,912) (4,803,825)
Interest Expense (93,260) (246,298) (180,150) (485,467)
Other income/(expense) 6,271 77,734 12,497 77,734
Loss before income taxes (2,171,527) (2,463,194) (4,420,565) (5,211,558)
Income tax expense (4,264) (9,856) (17,965) (14,417)
Net loss (2,175,791) (2,473,050) (4,438,530) (5,225,975)
Identity Solutions [Member]        
Revenues, net 524,348 1,722,929 1,139,398 2,169,630
Loss From Operations (863,669) (16,756) (1,775,091) (1,196,361)
Payment Processing [Member]        
Revenues, net 120,613 116,398 245,941 195,486
Loss From Operations (1,220,869) (2,277,874) (2,477,821) (3,607,464)
North America [Member]        
Revenues, net 146,583 1,383,389 373,624 1,500,697
Loss From Operations (681,690) 433,957 (1,419,652) (613,929)
South America [Member]        
Revenues, net 120,613 116,398 245,941 195,486
Loss From Operations (1,220,869) (2,277,874) (2,477,821) (3,607,464)
Africa [Member]        
Revenues, net 377,765 339,540 765,774 668,933
Loss From Operations $ (181,979) $ (450,713) $ (355,439) $ (582,432)
XML 73 R62.htm IDEA: XBRL DOCUMENT v3.19.2
SEGMENT INFORMATION (Details Narrative)
6 Months Ended
Jun. 30, 2019
USD ($)
Segment
Dec. 31, 2018
USD ($)
Number of reportable segments | Segment 2  
Goodwill $ 6,736,043 $ 6,736,043
North America [Member]    
Gross long lived assets 8,000,000  
Goodwill 4,900,000  
South America [Member]    
Gross long lived assets 700,000  
Goodwill 100,000  
Africa [Member]    
Gross long lived assets 2,100,000  
Goodwill $ 1,700,000  
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