STOCKHOLDER'S EQUITY

9 Months Ended

Sep. 30, 2020

Equity [Abstract]

STOCKHOLDER'S EQUITY

NOTE 9 – STOCKHOLDER’S EQUITY

Common Stock

During the nine months ended September 30, 2020, the Company granted 4,500,000 shares of Restricted Common Stock of which 3,000,000 shares were granted to two new members of our Board of Directors in connection with their compensation for service as Board Members and 1,500,000 to an employee in connection with his employment compensation. The shares were valued at the fair market value at the date of grant. The restricted stock vests upon the achievement of certain performance criteria.

During the nine months ended September 30, 2020, the Company issued approximately 106,000 shares of common stock to a third-party provider of services in lieu of cash compensation.

In June 2020, the Company entered into Subscription Agreements with two accredited investors (the “June 2020 Accredited Investors”) pursuant to which the June 2020 Accredited Investors agreed to purchase 3,441,558 shares of common stock for $200,000.

On June 30, 2020, Company entered into and consummated a private transaction pursuant to which a portion of the Company’s $0.10 Warrants were exercised for cash at an exercise price of $0.07 per share. In addition, the holders that exercised the $0.10 Warrants received a $0.15 Warrant for every four $0.10 Warrants exercised. As a result, the Company issued 10,008,333 shares of common stock and 2,502,085 $0.15 Warrants in consideration of $700,583.

On June 30, 2020, Company entered into and consummated a private transaction pursuant to which a portion of the Company’s $0.05 Warrants were exercised for cash. In addition, the holders that exercised the $0.05 Warrants received a $0.15 Warrant for every two $0.05 Warrants exercised. As a result, the Company issued 4,632,000 shares of common stock and 2,316,000 $0.15 Warrants, in consideration of $231,600. Separately, certain holders of the $0.05 Warrants to acquire 1,770,000 shares of common stock exercised on a cashless basis resulting in the issuance of 560,659 shares of common stock.

On June 30, 2020, Company entered into and consummated a private transaction pursuant to which a portion of the Company’s $0.06 Warrants were exercised. In addition, the holders that exercised the $0.06 Warrants also received $0.15 Warrant for every two $0.06 Warrants exercised. As a result, the Company issued 5,280,000 shares of common stock and 2,640,000 $0.15 Warrants in consideration of $316,800.

The June 2020 subscriptions and warrant exercise transactions resulted in the issuance of approximately 23.9 million shares of common stock for approximately $1.45 million, including a stock subscription receivable of approximately $0.97 million which was collected in full by September 30, 2020.

The Company recorded a charge of approximately $367,000 in connection with an inducement to the warrant holders who exercised their outstanding warrants.

Warrants

The following is a summary of the Company’s warrant activity for the nine months ended September 30, 2020:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Life
Outstanding at December 31, 2019		47,453,227		$	0.08		1.4 Years
Granted		7,458,085			0.15		2.0 Years
Exercised/Cancelled		(28,159,533	)		0.06		0.8 Years
Outstanding at September 30, 2020		26,751,779		$	0.12		1.3 Years

During the nine months ended September 30, 2020, certain of the 2015 Warrant holders participated in the 2020 Note offering and the Company extended the exercise period by two years, subject to an increase in the Exercise Price from $0.05 per share (as defined therein) to $0.06 per share of 2015 Warrants representing the right to acquire 6,380,000 shares of common stock. As noted above a portion of the 2015 Warrants (or $0.06 Warrants) were exercised for cash on September 30, 2020. Vista of which Mr. Selzer, a director of the Company, is the General Partner held 880,000 2015 Warrants, which were also extended as a result of his investment and were exercised for cash on September 30, 2020. The fair market value of the modification of warrants extended was approximately $95,000.

Stock Options

During the nine months ended September 30, 2020, the Company determined the grant date fair value of the options granted using the Black Scholes Method. The following assumptions were used in the nine months ended September 30, 2020:

Expected Volatility – 68-75%

Expected Term – 5.0 Years

Risk Free Rate – 0.30- 0.34%

Dividend Rate – 0.00%

Activity related to stock options for the nine months ended September 30, 2020 is summarized as follows:

				Weighted Average		Weighted Average		Aggregate
	Number of			Exercise		Contractual		Intrinsic
	Shares			Price		Term (Yrs.)		Value
Outstanding as of December 31, 2019		109,400,006		$	0.20		6.5	$	280,000
Granted		51,044,054			0.07		10.0		298,000
Forfeitures/exercises		(2,199,999	)		0.10		-		-
Outstanding as of September 30, 2020		158,244,061			0.19		7.5	$	3,247,000
Exercisable as of September 30, 2020		112,209,561		$	0.15		7.0	$	2,034,000

The following table summarizes stock option information as of September 30, 2020:

Exercise Price		Outstanding		Weighted Avg. Life		Exercisable
$	0.0001		3,500,000		5.75		3,500,000
$	0.05		34,200,006		6.60		30,450,006
$	0.06		1,044,054		9.60		1,044,054
$	0.07		50,000,000		9.90		10,000,000
$	0.10		27,200,000		6.50		27,200,000
$	0.119		400,001		9.22		158,334
$	0.124		600,000		8.75		390,000
$	0.130		250,000		7.80		166,667
$	0.15		2,800,000		5.85		2,800,000
$	0.22		2,583,333		8.05		1,500,000
$	0.250		2,500,000		7.85		1,833,333
$	0.260		166,667		8.30		166,667
$	0.290		1,000,000		7.30		1,000,000
$	0.400		1,000,000		6.17		1,000,000
$	0.450		31,000,000		5.85		31,000,000
			158,244,061		7.49		112,209,561

See related party information with respect to the grant of stock options to Messrs. Kumnick and Broenniman.

During the nine months ended September 30, 2020, the Company recognized approximately $629,000 of stock option based compensation expense related to options of which non-employees’ expense was approximately $20,000. As of September 30, 2020, there was approximately $352,000 of unrecognized compensation costs related to stock options outstanding of which approximately $7,000 is related to non-employees and will be expensed through 2022.

On October 30, 2020 and on November 6, 2020, Ipsidy Inc. entered into Securities Purchase Agreements with several accredited investors (the “October 2020 Accredited Investors”) pursuant to which the October 2020 Accredited Investors agreed to purchase an aggregate of 52,435,000 shares of the Company’s common stock together Warrants to acquire 26,217,500 shares of common stock for a term of five years at an exercise price of $0.15 per share for an aggregate purchase price of approximately $5.24 million. In connection with this private offering, the Company paid or will pay a registered broker-dealer, a cash fee of approximately $367,000 and issue the broker-dealer a common stock purchase warrant to acquire approximately 3.15 million shares of common stock of the Company exercisable for a term of five years at an exercise price of $0.15 per share.