ACQUISITIONS

12 Months Ended

Dec. 31, 2016

Business Combinations [Abstract]

ACQUISITIONS

NOTE 2 –ACQUISITIONS

Multipay S.A.

On April 6, 2015 (the “Closing Date”), the Company and all of the shareholders (the “Multipay Shareholders”) of Multipay S.A., a Colombian corporation (“Multipay”), closed (the “Closing”) on the Share Purchase Agreement entered into between the parties on March 6, 2015. As a result of the Closing, the Company acquired 100% of the issued and outstanding shares of Multipay (the “Multipay Shares”) from the Multipay Shareholders on a fully diluted basis. In consideration for the Multipay Shares, the Company agreed to issue to the Multipay Shareholders up to an aggregate of 7,600,000 shares of common stock of the Company. Under the terms of the initial agreement, within ten days of the Closing Date, the Company was required to issue 7,000,000 shares of common stock. Upon the Multipay Shareholders paying certain liabilities in the approximate amount of $370,000, the Company was required to deliver the balance of 600,000 shares of common stock to the Multipay Shareholders. In the event the Multipay Shareholders did not pay the entire amount of certain liabilities by the 12-month anniversary of the Closing Date, the Company would not be required to deliver the remaining shares of common stock. On May 7, 2015, the Company and Multipay executed an amendment to the Share Purchase Agreement to 1) amend the number of shares to be issued within ten days of the Closing Date from 7,000,000 shares to 6,101,517 shares; and 2) to amend the balance of shares to be delivered from 600,000 shares to 1,498,483 shares, upon the payment of certain liabilities by the Multipay Shareholders. The payment of these shares was extended by six months to November 7, 2016. The 6,101,517 shares were issued on May 18, 2015. The Company recorded a contingent liability of approximately $370,000 because of the contingency of the shares to be issued and debt to be released upon the payment of certain liabilities by the Multipay Shareholders. See Note 14 related to Contingent Purchase Consideration.

In accordance with ASC 805, “Business Combinations,” the Company accounted for the acquisition of Multipay as a business combination using the acquisition method of accounting. The purchase price was allocated to specific identifiable tangible and intangible assets at their respective fair values at the date of the acquisition.

The following table summarizes the total fair value of consideration transferred as well as the fair values of the assets acquired and liabilities assumed.

Common stock consideration	$	860,491
Liabilities assumed		909,721
Total purchase consideration		1,770,212
Current assets		(295,655	)
Property and equipment		(20,000	)
Customer relationships		(14,087	)
Intellectual property		(1,273,781	)
Goodwill	$	166,689

 Goodwill was calculated as the excess of the consideration transferred over the fair value of the net assets recognized and represents the expected revenue and cost synergies of the combined company, which are further described above. Goodwill recognized as a result of the acquisition is not deductible for tax purposes. See Notes 1 and 3 for additional information about goodwill and other intangible assets. The recognized goodwill related to MultiPay is directly attributable to its payment gateway platform. 

As noted above, control was obtained on April 6, 2015, pursuant to the Share Purchase Agreement at which time the management of Ipsidy took over the operations of MultiPay. Control was achieved with Ipsidy personnel in Colombia and a restructuring of the reporting hierarchy to Ipsidy management.

FIN Holdings, Inc.

On February 8 2016, the Company entered into a Share Exchange Agreement with Fin Holdings, Inc., a Florida corporation (“FIN”), and all of the FIN shareholders (the “FIN Shareholders”), pursuant to which the Company acquired 100% of the issued and outstanding shares of FIN (the “FIN Shares”) which included FIN’s two wholly-owned subsidiaries, ID Solutions, Inc. and Cards Plus Pty Ltd. (collectively, the “Subsidiaries”), from the FIN Shareholders. One of the FIN shareholders was the Company’s Chief Operating Officer and owned then approximately 1.7% of the Company’s outstanding common stock at the time of the acquisition. In consideration for the FIN Shares, the Company issued to the FIN Shareholders an aggregate of 22,500,000 shares of common stock of the Company (the “Purchase Shares”) with a fair value of $0.40 per share or $9,000,000. The closing occured on February 8, 2016.

In accordance with ASC 805, “Business Combinations”, the Company accounted for the acquisition of FIN using the acquisition method of accounting. The purchase price was allocated to specific identifiable tangible and intangible assets at their respective fair values at the date of acquisition.

The following table summarizes the total fair value of the consideration transferred as well as the fair values of the assets and liabilities assumed.

Common stock consideration	$	9,000,000
Liabilities assumed		914,218
Total purchase consideration		9,914,218
Current assets		(843,317	)
Property and equipment		(100,339	)
Customer relationships		(1,587,159	)
Intellectual property		(814,049	)
Goodwill	$	6,569,354

Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the expected revenue and benefits of the combined company. FIN was acquired on February 8, 2016 pursuant to a Share Exchange Agreement at which time control was achieved through a restructuring of the reporting hierarchy to Ipsidy management.

The condensed consolidated financial statements for the year ended December 31, 2016 include FIN’s results for the period from the date of acquisition to December 31, 2016. Revenue and operating income for the year ended December 31, 2016 included in the results was approximately $1,583,000 and net operating profit of approximately $242,000.

The following unaudited proforma financial information gives effect to the Company’s acquisition of FIN as if the acquisition had occurred on January 1, 2015 and had been included in the Company’s consolidated statement of operations for the years ended 2016 and 2015.

	Year ended December 31
	2016			2015
Proforma net revenue	$	2,051,494		$	2,309,547
Proforma net loss		(9,858,944	)		(36,945,398	)

The activity for goodwill for the years ending December 31, 2016 and 2015 is as follows: 

Balance, January 1, 2015	$	—
Acquisition of Multipay		166,689
Balance, December 31, 2015		166,689
Acquisition of FIN Holdings		6,569,354
Balance, December 31, 2016	$	6,736,043