10-Q

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 March 31, 2017

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	(I.R.S. Employer Identification No.)
incorporation or organization)

780 Long Beach Boulevard

Long Beach, New York

11561

(Address of principal executive offices) (zip code)

407-951-8640 

(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, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, “non-accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

	Large Accelerated filer     ☐	Accelerated filer      ☐
	Non-accelerated filer       ☐	Smaller reporting company    ☒
(do not check if 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).

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

Yes ☐  No ☒  

Class Common Stock, par value $0.0001 Documents incorporated by reference: ☐  No Outstanding at July 15, 2017 344,214,142 shares None

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

	Page No.
Item 1. Financial Statements	4 - 7
Condensed Consolidated Balance Sheets as of March 31, 2017 (unaudited) and December 31, 2016	4
Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2017 (unaudited) and 2016 (unaudited)	5
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2017 (unaudited) and 2016 (unaudited)	6
Condensed Consolidated Statement of Stockholders’ Equity (Deficit) for the Three Months Ended March 31, 2017 (unaudited)	7
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2017 (unaudited) and 2016 (unaudited)	8
Notes to Unaudited Condensed Consolidated Financial Statements	9-20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20-22
Item 3. Quantitative and Qualitative Disclosures About Market Risk	23
Item 4. Controls and Procedures	23-24
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	24
Item 1A. Risk Factors	24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	24
Item 3. Defaults Upon Senior Securities	25
Item 4. Mine Safety Disclosures	25
Item 5. Other Information	25
Item 6. Exhibits	25-29

 2

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. Forward-looking statements include, but are not limited to, statements about:

● our lack of significant revenues 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,

● 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.

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 appearing in our Annual Report on Form 10-K for the year ended December 31, 2016 and our other filings with the Securities and Exchange Commission. 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 “ID Global,” the “Company,” “we,” “our,” “us,” and similar terms refers to Ipsidy Inc., a Delaware corporation formerly known as ID Global Solutions and its subsidiaries. As of February 1, 2017, the Company formally changed its name to Ipsidy Inc.

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

 3

ITEM 1. FINANCIAL STATEMENTS 

IPSIDY INC. AND SUBSIDIARIES

(FORMERLY ID GLOBAL SOLUTIONS CORPORATION)

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2017			December 31, 2016
	(Unaudited)
ASSETS
Current Assets:
Cash	$	4,946,012		$	689,105
Accounts receivable, net		112,634			138,359
Current portion of net investment in direct financing lease		48,734			44,990
Inventory		147,816			150,679
Other current assets		388,200			166,479
Total current assets		5,643,396			1,189,612
Property and Equipment, net		268,386			115,682
Other Assets		693,872			358,343
Intangible Assets, net		3,388,149			3,474,291
Goodwill		6,736,043			6,736,043
Net Investment in Direct Financing Lease, net of current portion		658,877			674,015
Total assets	$	17,388,723		$	12,547,986
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued expenses	$	2,089,020		$	1,687,900
Convertible notes payable, net, current portion		—			250,000
Derivative liability		—			8,388,355
Notes payable, net, current portion		45,646			109,819
Capital lease obligation, current portion		25,071			—
Deferred revenue		255,657			398,680
Total current liabilities		2,415,394			10,834,754
Convertible notes payable, net, less current maturities		—			2,245,596
Notes payable, net less current maturities		1,943,526			3,051,603
Capital lease obligation, net of current portion		136,379			—
Derivative liability, net of current portion		—			9,668,276
Total liabilities		4,495,299			25,800,229
Commitments and Contingencies (Note 14)
Stockholders’ Equity (Deficit):
Common stock, $0.0001 par value, 500,000,000 shares authorized; 344,093,411 and 234,704,655 shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively		34,409			23,470
Additional paid in capital		70,952,037			35,341,669
Stock subscription receivable		(830,000	)		—
Accumulated deficit		(57,595,085	)		(48,925,993	)
Accumulated comprehensive income		332,063			308,611
Total stockholders’ equity (deficit)		12,893,424			(13,252,243	)
Total liabilities and stockholders’ equity (deficit)	$	17,388,723		$	12,547,986

See notes to condensed consolidated financial statements.

4

IPSIDY INC. AND SUBSIDIARIES

(FORMERLY ID GLOBAL SOLUTIONS CORPORATION)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended March 31,
	2017			2016
Revenues:
Products and services	$	565,545		$	320,746
Lease income		19,144			—
Total revenues, net		584,689			320,746
Operating Expenses:
Cost of sales		149,129			118,110
General and administrative		4,255,382			4,392,886
Research and development		29,070			29,072
Depreciation and amortization		109,534			103,079
Total operating expenses		4,543,115			4,643,147
Loss from operations		(3,958,426	)		(4,322,401	)
Other Income (Expense):
(Loss) gain on derivative liability		(452,146	)		12,941,663
Gain on extinguishment of notes payable		2,802,235			—
Loss on modification of derivatives		(319,770	)		—
Loss on modification of warrants		(158,327	)		—
Loss on conversion of debt		(5,978,643	)		—
Interest expense		(604,015	)		(926,752	)
Other income (expense), net		(4,710,666	)		12,014,911
(Loss) income before income taxes		(8,669,092	)		7,692,510
Income taxes		—			—
Net (loss) income	$	(8,669,092	)	$	7,692,510
Net income (loss) per share - Basic	$	(0.03	)	$	0.04
Net income (loss) per share - Diluted	$	(0.03	)	$	(0.02	)
Weighted Average Shares Outstanding - Basic		295,596,151			201,816,797
Weighted Average Shares Outstanding - Diluted		295,596,151			270,712,051

See notes to condensed consolidated financial statements.

5

IPSIDY INC. AND SUBSIDIARIES 

(FORMERLY ID GLOBAL SOLUTIONS CORPORATION) 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)

	Three Months Ended March 31,
	2017			2016
Net (loss) income	$	(8,669,092	)	$	7,692,510
Foreign currency translation gains		23,452			47,538
Comprehensive income (loss)	$	(8,645,640	)	$	7,740,048

See notes to condensed consolidated financial statements.

6

IPSIDY INC. AND SUBSIDIARIES

(FORMERLY ID GLOBAL SOLUTIONS CORPORATION)

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

	Common Stock Shares			Amount			Stock Subscription Receivable			Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Income		Total
Balances, December 31, 2016		234,704,655		$	23,470		$	—		$	35,341,669		$	(48,925,993	)	$	308,611	$	(13,252,243	)
Reclassification of derivatives upon removal of price protection in warrants		—			—			—			7,614,974			—			—		7,614,974
Issuance of common stock upon conversion of debt and related interest		84,822,006			8,482			—			21,601,191			—			—		21,609,673
Loss on modification of warrants		—			—			—			158,327			—			—		158,327
Stock-based compensation		—			—			—			2,294,160			—			—		2,294,160
Common stock issued for services		366,750			37			—			42,339			—			—		42,376
Common stock issued with note payable		4,500,000			450			—			841,277			—			—		841,727
Common stock issued for debt issuance costs		1,200,000			120			—			224,340			—			—		224,460
Common stock issued for cash		20,000,000			2,000			(830,000	)		3,998,000			—			—		3,170,000
Cash and common stock issued for equity issuance costs		1,000,000			100			—			(289,490	)		—			—		(289,390	)
Common stock returned as part of extinguishment of notes payable		(2,500,000	)		(250	)		—			(874,750	)		—			—		(875,000	)
Net loss		—			—			—			—			(8,669,092	)		—		(8,669,092	)
Foreign currency translation		—			—			—			—			—			23,452		23,452
Balances, March 31, 2017		344,093,411		$	34,409		$	(830,000	)	$	70,952,037		$	(57,595,085	)	$	332,063	$	12,893,424

See notes to condensed consolidated financial statements.

7

IPSIDY INC. AND SUBSIDIARIES

(FORMERLY ID GLOBAL SOLUTIONS CORPORATION)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) 

	Three Months Ended March 31,
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(8,669,092	)	$	7,692,510
Adjustments to reconcile net (loss) income with cash flows from operations:
Depreciation and amortization expense		109,534			103,079
Stock-based compensation		2,294,160			3,214,732
Common stock issued for services		42,376			270,000
Amortization of debt discount		235,985			655,817
Amortization of debt issuance costs		268,954			167,700
Loss (gain) on derivative liability		452,146			(12,941,663	)
Gain on settlement of notes payable		(2,802,235	)		—
Loss on modifcation of derivatives		319,770			—
Loss on modification of warrants		158,327			—
Loss on conversion of debt		5,978,643			—
Changes in operating assets and liabilities:
Accounts receivable		25,725			731,004
Net investment in direct financing lease		11,394			—
Other current assets		(226,174	)		(32,200	)
Inventory		2,863			(74,261	)
Accounts payable and accrued expenses		736,535			(284,877	)
Deferred revenue		(143,012	)		(70,116	)
Net cash flows from operating activities		(1,204,101	)		(568,275	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(4,563	)		(11,307	)
Investment in other assets including work in process		(343,655	)		(20,157	)
Cash acquired in acquisition		—			419,042
Net cash flows from investing activities		(348,218	)		387,578
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable and common stock		3,000,000			100,000
Proceeds from the sale of common stock, net		2,880,710			—
Payment of debt issuance costs		(86,331	)		—
Principal payments on notes payable		(14,173	)		(16,372	)
Principal payments on capital lease obligation		(1,957	)		—
Net cash flows from financing activities		5,778,249			83,628
Effect of Foreign Currencies		30,977			57,229
Net Change in Cash		4,256,907			(39,840	)
Cash, Beginning of the Period		689,105			349,873
Cash, End of the Period	$	4,946,012		$	310,033
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest	$	—		$	—
Cash paid for income taxes	$	—		$	—
Non-cash Investing and Financing Activities:
Issuance of common stock for conversion of debt and related interest	$	21,609,673		$	21,222
Reclassification of derivative liabilities upon conversion of related notes payable	$	—		$	316,734
Reclassification of derivatives upon removal of price protection in warrants		7,614,974			—
Issuance of common stock for debt issuance costs	$	224,460		$	76,000
Acquisition of equipment pursuant to a capital lease	$	163,407			—
Acquisition of FIN Holdings:
Issuance of common stock as consideration	$	—		$	9,000,000
Assumed liabilities		—			914,218
Inventory		—			(112,408	)
Accounts receivable		—			(311,867	)
Property and equipment		—			(100,339	)
Intangible assets		—			(8,970,562	)
Cash acquired	$	—		$	419,042

See notes to condensed consolidated financial statements.

8

IPSIDY INC. AND SUBSIDIARIES

(FORMERLY ID GLOBAL SOLUTIONS CORPORATION)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTATION

In the opinion of the Company, 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 (US GAAP) 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, 2016. The results of operations for the three months ended March 31, 2017 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 MultiPay S.A.S., ID Global LATAM S.A.S., IDGS S.A.S., ID Solutions, Inc., FIN Holdings Inc., Innovation in Motion Inc. and Cards Plus Pty Ltd. (the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation.

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 income (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 table illustrates the computation of basic and diluted EPS:

	For the three months ended March 31, 2017								For the three months ended March 31, 2016
	Net Loss			Shares		Per Share Amount			Net Income			Shares		Per Share Amount
Basic EPS
Income (loss) available to stockholders	$	(8,669,092	)		295,596,151	$	(0.03	)	$	7,692,510			201,816,797	$	0.04
Effect of Dilutive Securities
Stock Options		—			—		—			—			13,387,521		—
Warrants		—			—		—			—			26,910,433		—
Convertible Debt		—			—		—			(12,014,911	)		28,597,300		—
Dilute EPS
Income available to stockholders plus assumed conversions	$	(8,669,092	)		295,596,151	$	(0.03	)	$	(4,322,401	)		270,712,051	$	(0.02	)

9

Going concern

As of March 31, 2017, the Company had an accumulated deficit of approximately $57.6 million. For the three months ended March 31, 2017 the Company earned revenue of approximately $0.6 million and incurred a loss from operations of approximately $4.0 million.

The reports of our independent registered public accounting firms on our consolidated financial statements for the years ended December 31, 2016 and 2015 contained an explanatory paragraph regarding our ability to continue as a going concern based upon our net losses and accumulated deficits.

These 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. As there can be no assurance that the Company will be able to achieve positive cash flows (become profitable) and raise sufficient capital to maintain operations there is substantial doubt about the Company’s ability to continue as a going concern.

These 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.

Inventories

Inventory of plastic/ID cards, digital printing material, which are held by Cards Plus Pty Ltd., are at the lower of cost (using the average method) or market. The Plastic/ID cards and digital printing material are used to provide plastic loyal ID and other types of cards. Inventories at March 31, 2017 and December 31, 2016 consist solely of cards inventory. As of March 31, 2017 and December 31, 2016, the Company did not believe an inventory valuation allowance was necessary to record inventory to net realizable value were necessary.

Leases

All leases are classified at the inception as direct finance leases or operating leases based on whether the lease transfers substantially all the risks and rewards of ownership. Leases that transfer to the lessee substantially all of the risks and rewards incidental to ownership of the asset are classified as direct finance leases.

Revenue Recognition

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable. Revenue generally is recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities.

Revenue from the sale of unique secure credential products and solutions to customers is recorded at the completion of the project unless the solution includes benefits to the end user in which additional resources or services are required to be provided.

Revenue from cloud-based services arrangements that allow for the use of a hosted software product or service that are provided on a consumption basis (for example, the number of transactions processed over a period of time) is recognized commensurate with the customer utilization of such resources, Generally, the contract calls for a minimum number of transactions to be charged by the Company on a monthly basis. Accordingly, the Company records the minimum transactional fee based on the passage of a month’s time as revenues. Amounts in excess of the monthly minimum, are charged to customers based on the actual number of transactions.

Consulting services revenue is recognized as services are rendered, generally based on the negotiated hourly rate in the consulting arrangement and the number of hours worked during the period. Consulting revenue for fixed-price services arrangements is recognized as services are provided.

Revenue related to direct financing leases is recognized over the term of the lease using the effective interest method.

Income Taxes

The Company accounts for income taxes under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740 “Income Taxes.” Under the asset and liability method of FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. For the three months ending March 31, 2017 and 2016, there is no provision for income tax as the Company had a tax loss for United States and foreign activities and all of the Company’s carryforwards are reserved for. The Company’s gain or loss on derivative liability during three months ending March 31, 2017 and 2016 is not subject to tax.

Recent Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-04 – Simplifying the Test for Goodwill Impairment, which modified the goodwill impairment test and required an entity to write down the carrying value of goodwill up to the amount by which the carrying amount of a reporting unit exceeded its fair value. We have not early adopted this ASU and are currently evaluating the impact on our financial statements.

10

In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. The effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. We are currently reviewing the potential impact to the financial statements. 

NOTE 2 – OTHER CURRENT ASSETS

The Company has continued to make an investment in kiosks to provide electronic ticketing for transit systems in Colombia. The increase in other current assets is principally due to payments made in relation to the expansion of the kiosk program on account. Kiosks when received will be included in inventory until they are placed into service.

NOTE 3 – 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 three months ended March 31, 2017:

	Customer Relationships			Intellectual Property			Non-Compete			Patents Pending
Useful Lives	10 Years			10 Years			10 Years			n/a		Total
Carrying Value at December 31, 2016	$	1,446,166		$	2,000,858		$	8,067		$	19,200	$	3,474,291
Additions		—			—			—			8,126		8,126
Amortization		(39,679	)		(53,885	)		(704	)		—		(94,268	)
Carrying Value at March 31, 2017	$	1,406,487		$	1,946,973		$	7,363		$	27,326	$	3,388,149

The following is a summary of intangible assets as of March 31, 2017:

	Customer Relationships			Intellectual Property			Non-Compete			Patent Pending		Total
Cost	$	1,587,159		$	2,444,646		$	14,087		$	27,326	$	4,073,218
Accumulated amortization		(180,672	)		(497,673	)		(6,724	)		—		(685,069	)
Carrying Value at March 31, 2017	$	1,406,487		$	1,946,973		$	7,363		$	27,326	$	3,388,149

Future expected amortization of intangible assets is as follows:

Fiscal Year Ending December 31,
2017		305,780
2018		407,706
2019		407,706
2020		402,109
2021		398,567
Thereafter		1,466,281
	$	3,388,149

NOTE 4 – OTHER ASSETS

The Company continues to make investments in its technology platforms that prior to these assets being placed into service are included in other assets.

NOTE 5 – PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following as of March 31, 2017 and December 31, 2016:

	2017		2016
Computers and equipment	$	360,897	$	192,928
Furniture and fixtures		109,200		109,200
		470,097	$	302,128
Less Accumulated depreciation		201,711		186,446
Property and equipment, net	$	268,386	$	115,682

Depreciation expense totaled $15,266 and $9,013 for the three months ended March 31, 2017 and 2016, respectively.

See Note 12 for equipment ($163,407) acquired pursuant to a capital lease.

11

NOTE 6 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following as of March 31, 2017 and December 31, 2016:

	2017		2016
Trade payables	$	1,416,238	$	341,002
Accrued interest		48,112		600,624
Accrued payroll and related		540,977		421,771
Other accrued expenses		83,693		324,503
Total	$	2,089,020	$	1,687,900

NOTE 7 - NOTES PAYABLE, NET

On January 31, 2017, the Company entered into Conversion Agreements with several accredited investors (the “Investors”) pursuant to which substantially all Investors agreed to convert all amounts of notes payable and convertible notes payable (note 7) due and payable to such persons including interest under the terms of their respective financing or loan agreement as of January 31, 2017 into shares of Company common stock at $0.10 per share. Certain Investors that had a conversion price less than $0.10 converted at such applicable conversion price. The Conversion Agreements resulted in the conversion of notes and convertible notes amounting to $6,331,000 into 84,822,006 shares of Company common stock with a fair value of $21,691,000. The Investors also agreed to waive any existing rights with respect to certain anti-dilution rights contained in their Stock Purchase Warrants. The Company agreed to reduce the exercise of all outstanding Stock Purchase Warrants acquired as part of a financing or loan that had an exercise price in excess of $0.10 per share to $0.10 per share.

As a result of the above agreements associated with the conversion Agreements, the Company recorded a loss on the conversion of debt of approximately $6.0 million (including the effect of the elimination of related conversion feature derivative liabilities - see note 9), a loss on the modification of the warrants of approximately $0.2 million, and a loss on modification of the derivatives of approximately $0.3 million.

On February 22, 2017, the Company entered into an Agreement and Release (the “February 22, 2017 Agreement”) with a holder of certain debentures that will represent final and full payment of all amounts owed under these debentures which include debt with a face value of $300,000, accrued interest of approximately $31,000, cancellation of 3,600,000 warrants previously accounted for as derivative liabilities as well as certain pledged shares (2,500,000 shares) in exchange for $300,000 in cash which was paid in May 2017. As a result of the February 22, 2017 Agreement, the Company recorded a gain on the extinguishment of notes payable of approximately $2.8 million.

See notes 8 and 9.

The following is a summary of notes payable as of March 31, 2017 and December 31, 2016:		2017		2016
In connection with the acquisition of MultiPay in 2015, the Company assumed three promissory notes. At March 31, 2017, the remaining outstanding note carried an outstanding balance of $32,037. Payments of $6,300 including principal and interest are due monthly. The interest rate is 15.47% per annum. Total outstanding principal and interest is due on September 16, 2017.		$	32,037	$	46,210
The below section of notes payable were all converted to common stock at $0.10 per share. In connection with the January 2017 conversion agreements described above	.
In September 2015, the Company issued 12% notes totaling $973,000. The notes were secured by the assets of the Company, matured in September 2016, and accrued interest was convertible into common stock of the Company at a rate of $0.10 per share.  In connection with the issuance of these notes, the Company also issued warrants for the purchase of 6,486,667 shares of the Company’s common stock at an exercise price of $0.15 per share for a period of five years.  The Company also incurred debt issuance costs of $77,480, which were presented as a discount against the notes and amortized into interest expense over the terms of the notes.			—		963,000

12

In October 2015, the Company issued 12% notes in the amount of $225,000. The notes were secured by the assets of the Company, matured in October 2016, and accrued interest was convertible into common stock of the Company at a rate of $0.10 per share.  In connection with the issuance of these notes, the Company also issued warrants for the purchase of 1,500,000 shares of the Company’s common stock at an exercise price of $0.15 per share for a period of five years.  The Company also incurred debt issuance costs of $36,400, which were presented as a discount against the note and amortized into interest expense over the terms of the notes.	—	225,000
In November 2015, the Company issued a 12% note in the amount of $25,000. The note was secured by the assets of the Company, matured in October 2016, and accrued interest was convertible into common stock of the Company at a rate of $0.10 per share.  In connection with the issuance of this note, the Company also issued warrants for the purchase of 166,667 shares of the Company’s common stock at an exercise price of $0.15 per share for a period of five years.  The Company also incurred debt issuance costs of $94,400, which was presented as a discount against the note and amortized into interest expense over the term of the note.	—	25,000
In December 2015, the Company issued 12% notes totaling $850,000. The notes are secured by the assets of the Company and matured in December 2016.  Any unpaid accrued interest on the note is convertible into common stock of the Company at a rate of $0.48 per share.  In connection with the issuance of these notes, the Company also issued warrants for the purchase of 1,770,834 shares of the Company’s common stock at an exercise price of $0.48 per share for a period of five years.  The conversion rate on the accrued interest and the exercise price on the warrants provide the holders with anti-dilution protection that requires these features to be bifurcated and presented as derivative liabilities at their fair values.  See Note 8.	—	850,000
In January 2016, the Company issued 12% notes totaling $100,000. The note was secured by the assets of the Company, matured in January 2017, and accrued interest was convertible into common stock of the Company at a rate of $0.48 per share. In connection with the issuance of these notes, the Company also issued warrants for the purchase of 208,332 shares of the Company’s common stock at an exercise price of $0.48 per share for a period of five years. The conversion rate on the accrued interest and the warrants provide the holders with anti-dilution protection that requires these features to be bifurcated and presented as derivative liabilities at their fair values. See Note 8.	—	100,000
In December 2016, the Company issued promissory notes with an aggregate face value of $1,275,000 which were payable one year from the date of issuance and accrued interest of 10% per annum for the initial six months of the term of the Notes and 15% per annum for the remaining six months of the term of the Notes.  The notes holders also received 1,912,500 shares of common stock, with a fair value of $191,250.  The Company allocated the proceeds to the notes and common stock based on their relative fair values, resulting in a discount against the notes for the common stock of $166,304, which was amortized into expense through the date of conversion.  In connection with the issuance of the notes and common stock, the Company also incurred debt issuance costs of $212,427, of which $184,719 was recorded as debt issuance costs against the notes to be amortized over the one-year terms of the notes.	—	1,275,000

13

In November 2016,, the Company issued a 12% promissory note due in January 2017 to an officer and principal stockholder in the amount of $13,609.  In connection with the issuance of this note, the company also issued warrants for the purchase of 1,146,667 shares of the  Company’s common stock at an exercise price of $0.15 per share.   This loan was repaid in April 2017.  The note holder also received 20,414, shares of the Company’s common stock with a fair value of $2,041.		13,609			13,609
In January 2017, the Company issued a Senior Unsecured Note with a face value of $3,000,000, payable two years form issuance, along with an aggregate of 4,500,000 shares of Common Stock, with a fair value of $1,170,000.  The Company allocated the proceeds to the common stock based on their relative fair value and recorded a discount of $841,727 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 1,200,000 shares of common stock of the Company with a fair value of $312,000, of which $224,460 was recorded as debt issuance costs to be amortized into interest expense over the two-year term of the note.		3,000,000			—
Total Principal Outstanding	$	3,045,646		$	3,497,819
Unamortized Deferred Debt		(284,891	)		(159,375	)
Unamortized Deferred Debt Issuance Costs		(771,583	)		(177,022	)
Notes Payable, Net	$	1,989,172		$	3,161,422

The following is a roll-forward of the Company’s notes payable and related discounts for the three months ended March 31, 2017:

	Principal Balance			Debt Issuance Costs			Debt Discounts			Total
Balance at December 31, 2016	$	3,497,819		$	(177,022	)	$	(159,375	)	$	3,161,422
New issuances		3,000,000			(310,790	)		(841,727	)		1,847,483
Payments		(14,173	)		—			—			(14,173	)
Conversions		(3,438,000	)								(3,438,000	)
Amortization		—			202,921			229,519			432,440
Balance at March 31, 2017	$	3,045,646		$	(284,891	)	$	(771,583	)	$	1,989,172

Future maturities of notes payable are as follows:

Year Ending December 31,
2017	$	45,646
2018		—
2019		3,000,000
Thereafter		—
	$	3,045,646

14

NOTE 8 - CONVERTIBLE NOTES PAYABLE, NET

See Note 7 for transactions associated with the reduction in convertible notes payable on January 31, 2017.

Convertible notes consisted of the following as of March 31, 2017 and December 31, 2016:

		2017		2016
The below section of convertible notes payable were all converted to common stock at $0.10 per share in connection with the January 2017 conversion agreements described in Note 7	.
In June 2015, the Company issued 10% convertible notes in the aggregate principal amount of $700,000.  The notes were secured by the assets of the Company, matured in June 2016, and were convertible into common stock of the Company at a conversion rate of $0.03 per share, subject to adjustment.  In connection with the issuance of these notes, the Company also issued warrants for the purchase of 15,400,000 shares of the Company’s common stock at an exercise price of $0.05 per share for a period of five years.  The conversion rate on the notes and exercise price of the warrants are subject to adjustment to anti-dilution protection that required these features to be bifurcated and presented as derivative liabilities at their fair values.  See Note 9. The Company also incurred debt issuance costs of $124,000, which were presented as a discount against the note and amortized into interest expense over the term of the note.			—	$	680,000
In July 2015, the Company issued 10% convertible notes with in the aggregate principal amount of $190,000.  The notes are secured by the assets of the Company, matured in July 2016, and are convertible into common stock of the Company at a conversion rate of $0.03 per share, subject to adjustment.  In connection with the issuance of these notes, the Company also issued warrants for the purchase of 4,180,000 shares of the Company’s common stock at an exercise price of $0.05 per share for a period of five years.  The conversion rate on the notes and exercise price of the warrants are subject for adjustment to anti-dilution protection that requires these features to be bifurcated and presented as derivative liabilities at their fair values.  See Note 9. The Company also incurred debt issuance costs of $16,200, which are presented as a discount against the note and amortized into interest expense over the term of the note.			—		166,000
In February 2016, the Company re-issued a 12% convertible note in the amount of $172,095. The note is secured by the assets of the Company, originally maturing in September 2016, and is convertible into common stock of the Company at a rate of $0.10 per share. In connection with the issuance of this note, the Company issued warrants for the purchase of 1,146,667 shares of the Company’s common stock at an exercise price of $0.15 per share for a period of five years.			—		172,095
In April 2016, the Company issued 12% convertible notes in the amount of $1,550,000. The note is secured by the assets of the Company, matures in October 2016, and is convertible into common stock of the Company at a rate of $0.25 per share.  In connection with the issuance of these notes, the Company also issued warrants for the purchase of 6,200,000 shares of the Company’s common stock at an exercise price of $0.25 per share for a period of five years.  The Company also issued 1,033,337 shares of common stock to the noteholders. The Company also incurred debt issuance costs of $226,400, which are presented as a discount against the note and amortized into interest expense over the term of the note.  In August 2016, the Company entered into an agreement with the April 2016 Investors to reduce the exercise price on the embedded conversion feature and warrants to $0.10 and increase the number of warrants to 15,500,000.  The August 2016 change in the terms of these convertible notes 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.			—		1,550,000
Total Principal Outstanding		$	—	$	2,568,095
Unamortized Discounts – Derivatives			—		(6,466	)
Unamortized Discounts – Debt issuance costs			—		(66,033	)
Convertible Notes, Net		$	—	$	2,495,596

The following is a roll-forward of the Company’s convertible notes and related discounts for the three months ended March 31, 2017:

	Principal Balance			Debt Issuance Costs			Debt Discounts			Total
Balance at December 31, 2016	$	2,568,095		$	(66,033	)	$	(6,466	)	$	2,495,596
Conversions		(2,568,095	)		—			—			(2,568,095	)
Amortization		—			66,033			6,466			72,499
Balance at March 31, 2017	$	—		$	—		$	—		$	—

15

NOTE 9 –DERIVATIVE LIABILITY

Due to the potential adjustment in the conversion price associated with certain of the convertible debentures and the potential adjustment in the exercise price of certain of the warrants, the Company had determined that certain conversion features and warrants are derivative liabilities.

As described in Note 7 above, the Company on January 31, 2017 entered into Conversion Agreements with Investors pursuant to which Investors agreed to convert all amounts of debt accrued and payable to such persons including interest under the terms of their respective financing or loan agreement into shares of Company common stock at $0.10 per share. Certain Investors that had a conversion price less than $0.10 converted at such applicable conversion price. The investors at the time of conversion also agreed to waive any existing rights with respect to certain price protection and anti-dilution rights contained in their Stock Purchase Warrants.

Additionally, on February 22, 2017, the Company entered into an Agreement and Release with a holder of certain debentures that will represent final and full payment of all amounts owed under such which include debt with a face value of $300,000, accrued interest of approximately $31,000, cancellation of 3,600,000 warrants (previously accounted for as derivative liabilities) as well as certain pledged shares (2,500,000 shares) in exchange for $300,000 in cash. These debentures also had potential price adjustments on these debentures that have also been eliminated.

Therefore, as a result of the conversion and repayment of the outstanding indebtedness and related accrued interest as well as the elimination of anti-dilution rights of Stock Purchase Warrants, the Company no longer holds liabilities with derivatives requiring fair value as of March 31, 2017.

A summary of derivative activity for the three months ended March 31, 2017 is as follows:

Balance at December 31, 2016	$	18,056,631
Modification of derivatives		319,770
Cancellation of warrants previously accounted for as derivative liabilities and elimination of derivative conversion features resulting from conversion of related debt to equity		(11,213,573	)
Reclassification of derivatives to equity upon removal of price protection in warrants		(7,614,974	)
Change in fair value		452,146
Balance at March 31, 2017	$	—

NOTE 10 – RELATED PARTY TRANSACTIONS

Amount Due Officer and Director

In November 2016, the Company issued a note payable for $13,609 to one if its Board of Directors and was outstanding at December 31, 2016. The note was repaid in April 2017. In November 2016, the related party also received 20,414 shares of the Company’s common stock with a fair value of $2,041.

Convertible Notes Payable

On January 31, 2017, the Company entered into Conversion Agreements with Mr. Selzer, a director of the Company and Vista Associates, a family partnership to which Mr. Selzer converted $150,000 in debt plus interest into 1,753,500 shares of common stock and $40,000 of debt plus interest into 1,537,778 shares of common stock.

16

Purchase of Common Stock

In April 2017, Mr. Selzer purchased an additional 500,000 shares of common stock of the latest offering as described in Note 10.

Other

In connection with securing third-party financing, the Company incurred fees to Network 1 Financial Securities, Inc. (“Network 1”), a registered broker-dealer. The Network 1 fees comprise of $360,000 payable in cash and the issuance of 2,200,000 shares of common stock of the Company. A member of the Company’s Board of Directors previously maintained a partnership with a key principal of Network 1. The agreement calls for Network 1 to receive commission, in cash and stock based on the total amount of proceeds from any financing it secures for the Company.

The Company’s headquarters are located in Long Beach, New York where the Company leases offices from Bridgeworks LLC (“Bridgeworks”), a company providing office facilities which is principally owned by Mr. Beck, the Chief Executive Officer of the Company. The Company paid Bridgeworks, $13,500 during the first three months ended March 31, 2017.

NOTE 11 – STOCKHOLDER’S EQUITY (DEFICIT)

Common Stock

As described in Note 7, on January 31, 2017, in connection with the issuance of a $3,000,000 Senior Unsecured Note, an aggregate of 4,500,000 shares of Common Stock was issued to the Investor and the Company issued Network 1 Financial Securities, Inc., a registered broker-dealer, 1,200,000 shares of common stock of the Company in conjunction with its services.

As described in Notes 7 and 8, on January 31, 2017, the Company entered into Conversion Agreements with Investors pursuant to which Investors agreed to convert all amounts of debt accrued and payable to such person including interest under the terms of their respective financing or loan agreement as of January 31, 2017 into shares of Company common stock at $0.10 per shares. The Conversion Agreements resulted in the issuance of approximately 84,822,000 shares of Company common stock.

On March 22, 2017, Ipsidy Inc. (the “Company”) entered into Subscription Agreements with several accredited investors (the “March 2017 Accredited Investors”) pursuant to which the March 2017 Accredited Investors agreed to purchase an aggregate of 20,000,000 shares of the Company’s common stock for an aggregate purchase price of $4,000,000. The Company has received proceeds of $3,170,000. One individual March 2017 Accredited Investor, has agreed to fund $830,000 by the balance of the offering by the end of the third quarter of 2017 of which $400,000 has been received as of the date of this report. In connection with this private offering, the Company paid Network 1 Financial Securities, Inc. (“Network”), a registered broker-dealer, a cash fee of $240,000 and agreed to issue Network 1,000,000 shares of common stock of the Company upon increasing its authorized shares of common stock.

Additionally, the Company cancelled certificates for 2,500,000 shares of common stock acquired in conjunction with the purchase of certain debentures.

During the quarter ended March 31, 2017, the Company issued 366,750 shares of common stock as consideration for services. The fair value of the shares, totaling $42,377, was estimated based on the publicly quoted trading price and recorded as expense.

Warrants

As more fully described above the Company agreed to reduce the exercise of all outstanding Stock Purchase Warrants acquired as part of a financing or loan that had an exercise price in excess of $0.10 per share to $0.10 per share. Certain warrants were issued in connection with business arrangements and those warrants remained at original price per share of common stock.

Furthermore, as more fully described above in Note 7, the Company as part of a transaction cancelled 3.6 million warrants.

17

The following is a summary of the Company’s warrant activity for the three months ended March 31, 2017:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Life
Outstanding at December 31, 2016		51,138,697		$	0.11		3.8 Years
Cancelled		(3,600,000	)	$	0.08		3.9 Years
Outstanding at March 31, 2017		47,538,697		$	0.08		3.5 Years

Stock Options

On August 10, 2016, the Company entered into an amended agreement (the “Amendment”) with Parity Labs, LLC (“Parity”) to amend the compensation section of an existing Advisory Agreement previously entered into between the Company and Parity on November 16, 2015 for the provision of strategic advisory services. The Amendment calls for the Company to issue to Parity the option (the “Parity Option”) to acquire 20,000,000 shares of common stock of the Company, exercisable at $0.05 per share for a period of ten years. The Parity Option vests as to 10,000,000 shares of common stock immediately and then in 12 equal tranches of 833,333 shares per month commencing on September 1, 2016. Parity options vested in entirety upon Mr. Beck becoming Chief Executive Officer (“CEO”) of Ipsidy, Inc. in January 2017. Mr. Beck is the manager of Parity.

In connection with the engagement of the CEO and Chief Financial Officer (“CFO”) on January 31, 2017, the Company granted the CEO and CFO stock options to acquire 15,000,000 shares and 5,000,000 shares of common stock of the Company, respectively, at an exercise price of $0.10 per share for a period of ten years. Further, upon the Company being legally entitled to do so, the Company has agreed to enter a Restricted Stock Purchase Agreements with the CEO and CFO in which they will be provided 15,000,000 shares and 5,000,000 shares of common stock at a per share price of $0.0001, which shares of common stock vest upon achieving a performance threshold as defined in their respective agreements.

The Company determined the grant date fair value of the options granted during the three months ended March 31, 2017 using the Black Scholes Method and the following assumptions:

Expected Volatility – 85% 

Expected Term – 5.0 Years

Risk Free Rate – 1.92% 

Dividend Rate – 0.00%

Activity related to stock options for the three months ended March 31, 2017 is summarized as follows:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Contractual Term (Yrs.)		Aggregate Intrinsic Value
Outstanding as of December 31, 2016		86,925,000		$	0.21		9.5	$	10,023,400
Granted		20,000,000		$	0.10		9.8	$	—
Forfeitures		(875,000	)	$	0.10		8.8	$	—
Outstanding as of March 31, 2017		106,050,000		$	0.19		9.1	$	16,594,997
Exercisable as of March 31, 2017		72,575,000		$	0.16		8.9	$	9,411,664

The following table summarizes stock option information as of March 31, 2017:

Exercise Prices		Outstanding		Weighted Average Contractual Life		Exercisable
$	0.0001		3,500,000		8.5 Years		3,062,500
$	0.05		36,500,000		9.4 Years		21,750,000
$	0.10		27,250,000		9.6 Years		12,520,834
$	0.15		6,300,000		8.4 Years		3,641,666
$	0.25		500,000		9.0 Years		100,000
$	0.40		1,000,000		8.9 Years		1,000,000
$	0.45		31,000,000		8.5 Years		30,500,000
	Total		106,050,000		9.1 Years		72,575,000

18

During the three months ended March 31, 2017, the Company recognized approximately $2,294,000 of stock-based compensation expense of which approximately $1,620,000 and $674,000 was related to employee and non-employees, respectively. As of March 31, 2017, there was approximately $4,830,000 of unrecognized compensation costs related to stock options outstanding which will be expensed through 2019.

NOTE 12 – DIRECT FINACING 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 kiosk 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 lease 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 it 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 for the three months ended March 31, 2017 of approximately $19,000. There was no income in the first three months of 2016 as the equipment was placed into service in May 2016.

The equipment is subject to direct lease valued at approximately $748,000. At the inception of the lease term, the aggregate minimum future lease payments to be received is approximately $1,422,000 before executory cost. Unearned income is recorded at the inception of this lease was approximately $474,000 and will be 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:

2017	$	91,608
2018		122,145
2019		122,145
2020		122,145
2021		122,145
Thereafter		529,322
Sub-total		1,109,510
Less deferred revenue		(401,899	)
Net investment in lease	$	707,611

NOTE 13– 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 capital 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 March 31, 2017 is $2,679. The following is a schedule showing the future minimum lease payments under capital lease by year and the present value of the minimum lease payments as of March 31, 2017. The interest rate related to the lease obligation is 12% and the maturity date is March 31, 2022.

Year Ending
2017	$	32,322
2018		43,096
2019		43,096
2020		43,096
2021		43,096
Thereafter		10,776
Total minimum lease payments		215,482
Less: Amount representing interest		54,032
Present value of minimum lease payments	$	161,450

19

NOTE 14 – COMMITMENTS AND CONTINGENCIES

Legal Matters

From time to time, claims are made against the Company in the ordinary course of business, which could result in litigation. Claims and associated litigation are subject to inherent uncertainties and unfavorable outcomes could occur, such as monetary damages, fines, penalties or injunctions prohibiting the Company from selling one or more products or engaging in other activities. The occurrence of an unfavorable outcome in any specific period could have a material adverse effect on the Company’s results of operations for that period or future periods. The Company is not presently a party to any pending or threatened legal proceedings. 

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

The discussion and analysis of our financial condition and results of operations are based on our financial statements, which we have prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods. On an ongoing basis, we evaluate estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

As used in this “Management’s Discussion and Analysis of Financial Condition and Results of Operation,” except where the context otherwise requires, the term “we,” “us,” “our,” or “the Company,” refers to the business of Ipsidy Inc. and its subsidiaries.

Overview

Ipsidy Inc. together with its subsidiaries (the “Company”, “we” or “our”), is a provider of secure, biometric identification, identity management and electronic transaction processing services. In a world that is increasingly digital and mobile, our vision is to enable solutions that provide pre-transaction verification of identity as well as embed identity verification within every electronic transaction message processed through our platform or other electronic systems. We are building upon our existing capabilities in biometric identification and multi-factor identity management solutions to develop an identity transaction platform for our business customers. The platform is being designed to enable the end users of our business customers to more easily authenticate their identity to a mobile phone or portable device of their choosing (as opposed to dedicated hardware). The existing system enables participants to complete transactions with a digitally signed authentication response, including the underlying transaction data and embedded attributes of the participant’s identity.

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

Management believes that some of the advantages of the Company’s platform approach are the ability to leverage the platform to support a variety of vertical markets including the identity management 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 border security, public safety, public transportation, enterprise security payment transactions and banking. 

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 OTC Markets under the trading symbol “IDGS”. Our corporate headquarters is located at 780 Long Beach Blvd., Long Beach, NY 11561 and our main phone number is (407) 951-8640. 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 Annual Report on Form 10-K. 

Key Trends

We believe that our financial results will be impacted by several market trends in the identity management and transaction processing marketplace, including growing concerns over identity theft and fraud and the increase in electronic payments, solutions provided by non-bank entities. Our results are also impacted by the changes in levels of spending on identity management and security methods, and thus, negative trends in the global economy and other factors which negatively impact such spending may negatively impact the growth our revenue from those products. The global economy has been undergoing a period of political and economic uncertainty and stock markets are experiencing high levels of volatility, and it is difficult to predict how long this uncertainty and volatility will continue.

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We plan to grow our business by increasing the use of our services by our existing customers, by adding new customers by expanding into new markets and innovation. If we are successful in these efforts, we would expect our revenue to continue to grow. In addition, based on the positive trends in the international payment processing industry noted above, we anticipate that as and when more payments are made using electronic and mobile methods, such as those that we offer, our revenue would also increase. 

Going concern

As of March 31, 2017, the Company had an accumulated deficit of approximately $57.6 million. For the three months ended March 31, 2017 the Company earned revenue of approximately $0.6 million and incurred a loss from operations of approximately $4.0 million.

The reports of our independent registered public accounting firms on our consolidated financial statements for the years ended December 31, 2016 and 2015 contained an explanatory paragraph regarding our ability to continue as a going concern based upon our net losses.

These 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. These 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.

Three Month Ended March 31, 2017 and March 31, 2016

Revenues, net

During the three-months ended March 31, 2017, the Company had revenues of approximately $585,000 compared to $321,000 in the three- months ended March 31, 2016. Cards Plus and ID Solutions (which were acquired on February 8, 2016) had revenue of $458,000 in the three months ended March 31, 2017 compared to $271,000 in the three months of 2016, an increase of $187,000.

Cost of sales

During the three months ended March 31, 2017, cost of sales were higher than the cost of sales in the three month period ended March 31, 2016 due to the revenue increase. The revenue increases were principally related to the acquisition of Cards Plus in 2016.

Operating Expenses

During the three months ended March 31, 2017 compared to March 31, 2016, general and administrative expense decreased by approximately $0.1 million principally due to lower stock compensation charges (approximately $0.9 million) offset by higher staff compensation expense as staff and consulting resources were added to support the current and future operations.

During the three months ended March 31, 2017, the Company recorded approximately $2.3 million compared to $3.2 million in the three months ended March 31, 2016 for stock compensation expense.

Depreciation and amortization expense remained consistent in the three months ended March 31, 2017 compared to March 31, 2016.

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Other Income (Expense)

Derivative Liability and Net Loss on Modification of Debt

The derivative liability is associated with potential adjustments in the conversion price associated with certain convertible debentures and warrants that were used to finance the business. As a result of the valuation of these provisions as of March 31, 2016, the Company experienced a reduction in the derivative liability and recorded a benefit of approximately $12.9 million in the three months ended March 31, 2016. The decline in the derivative liability is associated with the lower stock price.

During the first three months of 2017, the Company performed valuations of the existing liability at the applicable dates as these debentures and warrant terms and conditions were modified and/or eliminated as a result of the Company’s elimination and repayment of certain existing obligations as of January 31, 2017. In the first three months of 2017, the Company recorded an expense of approximately $0.5 million due to these valuations. Additionally, the Company recorded a gain on the extinguishment of certain notes payable (approximately $2.8 million), a loss on the modification of derivatives (approximately $0.3 million), loss on modification of warrants (approximately $0.2 million), and a loss on the conversion of debt (approximately $6.0 million). (See Notes 7 and 9).

Interest expense

Interest expense decreased in the three months ended March 31, 2017 principally due to the debt for equity conversion on January 31, 2017.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate sufficient cash to satisfy its needs for cash. As of March 31, 2017, the Company had approximately $4.9 million of cash and had approximately $3.2 million of net working capital.

Cash used in operating activities was approximately $1.2 million and $0.6 million in the three months ended March 31, 2017 and March 31, 2016, respectively.

The Company raised approximately $7.0 million of additional financing in the first three months 2017 as the Company entered into and closed a Securities Purchase Agreement with an accredited investor pursuant to which the Company borrowed $3.0 million in consideration of a Senior Unsecured Note and an aggregate of 4.5 million shares of Common Stock.  The Senior Unsecured Note matures in January 2019 and bears interest at a rate of 10%. Additionally, on March 22, 2017, the “Company entered into Subscription Agreements with several accredited investors (the “March 2017 Accredited Investors”) pursuant to which the March 2017 Accredited Investors agreed to purchase an aggregate of 20,000,000 shares of the Company’s common stock for an aggregate purchase price of approximately $4.0 million. The Company has received proceeds of approximately $3.2 million and one individual March 2017 Accredited Investor has agreed to fund approximately $.8 million by the end of the third quarter of 2017 of which approximately $.4 million has been received as of the date of the filing of this report.

We do not have any formal commitments or arrangements for the sales of stock or the advancement or loan of funds at this time other than the amounts detailed in the subsequent events. There can be no assurance that such additional financing will be available to us on acceptable terms, or at all. Our failure to obtain financing would have a material adverse effect on the organization

As described in Note 7, on January 31, 2017, the Company converted approximately $6.3 million of debt and accrued interest into 84,822,006 shares of Company common stock. All Investors that converted their debt and accrued interest to equity also agreed to waive any existing rights with respect to certain anti-dilution rights contained in their Stock Purchase Warrants. The Company agreed to reduce the exercise of all outstanding Stock Purchase Warrants acquired as part of a financing or loan that had an exercise price in excess of $0.10 per share to $0.10 per share. Additionally, on February 22, 2017, the Company entered into an Agreement and Release (“February 22, 2017 Agreement”) with a holder of certain debentures that will represent final and full payment of all amounts owed under these debentures which include debt with a face value of $300,000, accrued interest of approximately $31,000, cancellation of 3,600,000 warrants as well as the right to certain pledged shares in exchange (2,500,000 shares) for $300,000 in cash which was paid in May 2017.

The combination of the above events effectively refinanced the Company’s financial position in the first quarter of 2017 and provided near-term financing requirements. The Company anticipates additional financing will be required beyond the current actions and the amounts will be dependent on current operations and investments the Company may pursue.

Additionally, during the first three months of 2017, the Company entered into a lease that met the criteria for capitalization and resulted in a capital lease obligation of approximately $161,000 at lease inception. The payments are approximately $43,095 annually during the five year lease term.

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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 2 of the audited financial statements included in our annual report on form 10K for the year ended December 31, 2016.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

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

ITEM 4. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Pursuant to Rules 13a-15(b) and 15-d-15(b) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer of 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 not effective as a result of continuing weaknesses in its internal control over financial reporting initially identified in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 which are as follows:

- The Company has not established adequate financial reporting monitoring activities to mitigate the risk of management override, specifically because there are few employees and only two officers with management functions and therefore there is lack of segregation of duties. The Company expanded significantly in 2015 and 2016 as a result of the acquisition of MulitPay and FIN Holdings. Due to the Company’s limited capital resources, it has not been able to establish the proper financial reporting of its subsidiaries, which have operations in Colombia and South Africa.

- There is a strong reliance on outside consultants to prepare the annual and quarterly consolidated financial statements as well as provide assistance in monitoring new accounting principles to ensure compliance with US GAAP and SEC disclosure requirements.

- There is a strong reliance on the external attorneys to review and edit the annual and quarterly filings and to ensure compliance with SEC disclosure requirements.

- A formal audit committee has not been formed.

In order to address the above material weaknesses, Philip D. Beck, the Chief Executive Officer and President of the Company, and Stuart P. Stoller, the Chief Financial Officer of the Company, which were appointed to such offices on January 31, 2017, and have initiated the following actions to remediate the material weaknesses:

- In addition to the engagement of Mr. Beck and Mr. Stoller, who are both experienced public company executives, the Company is evaluating its personnel resources and is considering engaging additional permanent skilled finance and accounting resources. One additional financial resource will begin in August 2017.

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- The Company has engaged independent consultants to assist with certain areas of the reconciliation and accounting functions and may continue such engagement or hire additional consultants as needed.

- The Company has taken certain steps to enhance its control environment to promote the adherence to appropriate internal control policies and procedures. These efforts included assessing the capabilities of the financial staff, reviewing systems and ensuring appropriate levels of analytical reviews among other appropriate steps.

- The Company has and is continuing to reassess and revise key policies and procedures, including the general ledger, general ledger reconciliation, capital expenditure and accounts payable, to develop and deploy effective policies and procedures and reinforced compliance in an effort to constantly improve the Company’s internal control environment.

- The Company has taken steps to enhance its internal governance and compliance function. The Company intends to form appropriate committees during the next six months and periodic and regular meetings will be held with the internal governance and compliance functions to discuss and coordinate operational, compliance and financial matters as well as the progress of the Company’s plan to remediate its material weaknesses.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2017 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

We are currently not a party to any material legal or administrative proceedings and are not aware of any pending or threatened material legal or administrative proceedings arising in the ordinary course of business.  We may from time to time become a party to various legal or administrative proceedings arising in the ordinary course of our business.

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, 2016. 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

On January 31, 2017, Mr. Stoller and the Company entered into an Executive Retention Agreement pursuant to which Mr. Stoller agreed to serve as Chief Financial Officer pursuant to which the Company granted Mr. Stoller a Stock Option to acquire 5 million shares of common stock of the Company at an exercise price of $0.10 per share for a period of ten years. Further, upon the Company being legally entitled to do so, the Company has agreed to enter a Restricted Stock Purchase Agreement with Mr. Stoller pursuant to which Mr. Stoller will purchase 5 million shares of common stock at a per share price of $0.0001, which shares of common stock vest upon achieving various milestones. The Stock Options vest with respect to (i) one-third of the shares of common stock upon the one year anniversary of the grant date and (ii) in 24 equal tranches commencing on the one-year anniversary of the grant date.

On January 31, 2017, Mr. Beck and the Company entered into an Executive Retention Agreement pursuant to which the Company granted Mr. Beck a Stock Option to acquire 15 million shares of common stock of the Company at an exercise price of $0.10 per share for a period of ten years. Further, upon the Company being legally entitled to do so, the Company has agreed to enter a Restricted Stock Purchase Agreement with Mr. Beck pursuant to which Mr. Beck will purchase 15 million shares of common stock at a per share price of $0.0001, which shares of common stock vest upon achieving various milestones. The Stock Options vest with respect to (i) one-third of the shares of common stock upon January 31, 2017 and (ii) in 24 equal monthly tranches commencing on the grant date. 

On January 31, 2017, the Company entered into Conversion Agreements with several accredited investors (the “Investors”) pursuant to which each of the Investors agreed to convert all amounts of debt accrued and payable to such person including interest under the terms of their respective financing or loan agreement as of January 31, 2017 into shares of Company common stock at $0.10 per share provided that certain Investors that had a conversion price less than $0.10 converted at such applicable conversion price. The Conversion Agreements resulted in the conversion of an aggregate of $6,331,000 into 84,822,006 shares of Company common stock. Certain Investors also agreed to waive any existing rights with respect to certain anti-dilution rights contained in their Stock Purchase Warrants. The Company agreed to reduce the exercise of all outstanding Stock Purchase Warrants acquired as part of a financing or loan that had an exercise price more than $0.10 per share to $0.10 per share.

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On January 31, 2017, the Company entered and closed a Securities Purchase Agreement with the Theodore Stern Revocable Trust (the “Stern Trust”) pursuant to which the Stern Trust invested an aggregate of $3 million into the Company in consideration of a Promissory Note (the “Stern Note”) and 4.5 million shares of common stock. The Stern Note is payable two years from the date of issuance and bears interest of 10% per annum, which compounds annually. The Stern Note may be prepaid in whole or in part by the Company at any time without penalty; provided, that any partial payment of principal must be accompanied by payment of accrued interest to the date of prepayment. The Stern Trust may convert interest payable under the Stern Note into shares of common stock of the Company at a conversion price of $0.20 per share. The Company is required to prepay all outstanding principal and accrued but unpaid interest on this Note upon the Company (including any of its subsidiaries) closing on financing that, individually or collectively, generates gross proceeds equal to or more than approximately $15 million.

On March 22, 2017, the Company entered into Subscription Agreements with several accredited investors (the “March 2017 Accredited Investors”) pursuant to which the March 2017 Accredited Investors agreed to purchase an aggregate of 20,000,000 shares of the Company’s common stock for an aggregate purchase price of $4.0 million or a per share price of $0.20. The Company has received proceeds of $3.2 million as of March 22, 2017. An individual March 2017 Accredited Investor has agreed to fund $0.8 million no later than the end of the second quarter of 2017. In connection with this private offering, the Company paid Network 1 Financial Securities, Inc. (“Network”), a registered broker-dealer, a cash fee of $0.2 million and agreed to issue Network 1,000,000 shares of common stock of the Company upon increasing its authorized shares of common stock.

The above offers and sales of the securities were made to accredited investors and the Company relied upon the exemptions contained in Section 4(2) of the Securities Act and/or Rule 506 of Regulation D promulgated there under with regards to the sales. No advertising or general solicitation was employed in offerings 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

ITEM 6. EXHIBITS

Exhibit  Number	Description
2.1	(2)	Agreement and Plan of Reorganization
3.1	(1)	Certificate of Incorporation
3.2	(1)	By-laws
3.3	(7)	Certificate of Ownership and Merger

3.4	(58)	Certificate of Amendment to the Certificate of Incorporation dated February 1, 2017
4.1	(13)	Stock Option dated May 28, 2015 issued to Ricky Solomon
4.2	(14)	Stock Option dated May 28, 2015 issued to Charles D. Albanese

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4.3	(17)	Form of Securities Purchase Agreement by and between ID Global Solutions Corporation and the June 2015 Investors
4.4	(18)	Form of Security Agreement by and between ID Global Solutions Corporation and the June 2015 Investors
4.5	(19)	Form of Secured Convertible Debenture issued to the June 2015 Investors
4.6	(20)	Form of Common Stock Purchase Warrant issued to the June 2015 Investors
4.7	(21)	Securities Purchase Agreement by and between ID Global Solutions Corporation and Ricky Solomon
4.8	(22)	Security Agreement by and between ID Global Solutions Corporation and Ricky Solomon
4.9	(23)	Secured 10% Secured Promissory Note issued to Ricky Solomon
4.10	(24)	Common Stock Purchase Warrant issued to Ricky Solomon
4.11	(25)	Form of Securities Purchase Agreement by and between ID Global Solutions Corporation and the 2015 Accredited Investors
4.12	(26)	Form of Security Agreement by and between ID Global Solutions Corporation and the 2015 Accredited Investors
4.13	(27)	Form of Secured 12% Secured Promissory Note issued to the 2015 Accredited Investors
4.14	(28)	Form of Common Stock Purchase Warrant issued to the 2015 Accredited Investors
4.15	(29)	Stock Option dated September 25, 2015 issued to Herbert M. Seltzer
4.16	(30)	Letter Agreement by and between ID Global Solutions Corporation and ID Solutions Inc.
4.17	(31)	Secured 12% Convertible Promissory Note issued to ID Solutions Inc.
4.18	(32)	Common Stock Purchase Warrant issued to ID Solutions Inc.
4.19	(33)	Stock Option issued to Thomas Szoke dated September 25, 2015
4.20	(34)	Stock Option issued to Douglas Solomon dated September 25, 2015
4.21	(35)	Stock Option issued to Maksim Umarov dated September 25, 2015
4.22	(43)	Form of Securities Purchase Agreement by and between ID Global Solutions Corporation and the 2015 Accredited Investors
4.23	(44)	Form of Stock Pledge Agreement by and between ID Global Solutions Corporation and the 2015 Accredited Investors
4.24	(45)	Form of 12% Promissory Note issued to the 2015 Accredited Investors
4.25	(46)	Form of Common Stock Purchase Warrant issued to the 2015 Accredited Investors
4.26	(49)	Form of Securities Purchase Agreement by and between ID Global Solutions Corporation and the April 2016 Accredited Investors
4.27	(50)	Form of Stock Pledge Agreement by and between the Affiliates and the April 2016 Accredited Investors
4.28	(51)	Form of Secured Convertible Debenture issued to the April 2016 Accredited Investors
4.29	(52)	Form of Common Stock Purchase Warrant issued to the April 2016 Accredited Investors
4.30	(53)	Form of Securities Purchase Agreement by and between ID Global Solutions Corporation and the December 2016 Accredited Investors

4.31	(54)	Form of Promissory Note issued to the December 2016 Accredited Investors
4.32	(56)	Form of Subscription Agreement by and between ID Global Solutions Corporation and the August 2016 Accredited Investors
4.33	(56)	Form of Letter Agreement entered with the April 2016 Accredited Investors

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4.34	(56)	Stock Option issued to Parity Labs, LLC
4.35	(57)	Stock Option Agreement entered between the Company and Stuart P. Stoller dated January 31, 2017
4.36	(58)	Securities Purchase Agreement entered between the Company and the Theodore Stern Revocable Trust dated January 31, 2017
4.37	(58)	Promissory Note in the principal amount of $3,000,000 payable to the Theodore Stern Revocable Trust
4.38	(58)	Stock Option Agreement entered between the Company and Philip D. Beck dated January 31 2017
4.39	(59)	Form of Subscription Agreement by and between Ipsidy Inc and the March 2017 Accredited Investors
10.2	(3)	Assignment of Patents
10.3	(3)	Assignment of Patents
10.4	(3)	Assignment of Patents
10.5	(3)	Employment Agreement of David Jones
10.6	(3)	Employment Agreement of Douglas Solomon
10.7	(3)	Employment Agreement of Thomas Szoke
10.8	(3)	Promissory Note
10.9	(3)	Flextronics Manufacturing Services Agreement
10.10	(4)	Agreement with Tiber Creek Corporation
10.11	(4)	Adjusted Compensation Agreement David S. Jones through September 30, 2013
10.12	(4)	Adjusted Compensation Agreement David S. Jones from October 1, 2013
10.13	(5)	Agreement extending due date of $600,000 Penn Investments Note
10.14	(5)	Agreement extending due date of $310,000 Penn Investments Note
10.15	(5)	Promissory Note for $20,000 payable to Penn Investments
10.16	(5)	Promissory Note for $180,000 payable to Penn Investments
10.17	(6)	Note Conversion Agreement dated September 24, 2014 by and between ID Global Corporation and Penn Investments, Inc.
10.18	(8)	Promissory Note in the principal amount of $17,000 dated August 7, 2014 from Thomas Szoke
10.19	(8)	Promissory Note in the principal amount of $17,000 dated August 28, 2014 from Thomas Szoke
10.20	(9)	The ID Global Solutions Corporation Equity Compensation Plan
10.21	(10)	Real Estate Purchase Agreement dated December 12, 2014 by and between ID Global Solutions Corporation and Megan DeVault and Jeffrey DeLeon
10.21(a)	(10)	Commercial Lease Agreement dated December 19, 2014 by and between ID Global Solutions Corporation and DeLeon-Costa Investments, LLC
10.22	(11)	Share Purchase Agreement by and between ID Global Solutions Corporation and the Multipay S.A. Shareholders

10.23	(12)	Form of Share Purchase Agreement by and between ID Global Solutions Corporation and the Multipay S.A. Shareholders
10.24	(15)	Director Agreement by and between ID Global Solutions Corporation and Ricky Solomon dated May 28, 2015
10.25	(16)	Executive Employment Agreement by and between ID Global Solutions Corporation and Charles D. Albanese dated May 28, 2015

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10.26	(25)	Rental Contract with Purchase Option by and between ID Global Solutions Corporation and Basetek S.A.S., a Colombian company, dated September 15, 2015
10.27	(36)	Director Agreement by and between ID Global Solutions Corporation and Herbert M. Seltzer dated September 25, 2015
10.28	(37)	Director Agreement by and between ID Global Solutions Corporation and Charles Albanese dated September 25, 2015
10.29	(38)	Employment Agreement between ID Global Solutions Corporation and Maksim Umarov dated July 1, 2015
10.30	(39)	Letter Agreement entered between ID Global Solutions Corporation and Maksim Umarov dated September 25, 2015
10.31	(40)	Letter Agreement entered between ID Global Solutions Corporation and Douglas Solomon dated September 25, 2015
10.32	(41)	Letter Agreement entered between ID Global Solutions Corporation and Thomas Szoke dated September 25, 2015
10.33	(48)	Share Exchange Agreement by and between ID Global Solutions Corporation, Fin Holdings, Inc. and the Fin Holdings, Inc. shareholders
10.34	(55)	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
10.35	(57)	Confidential Settlement Agreement and General Release between ID Global Solutions Corporation and Charles D. Albanese dated January 26, 2017
10.36	(57)	Executive Retention Agreement entered between the Company and Stuart P. Stoller dated January 31, 2017
10.37	(58)	Indemnification Agreement entered between the Company and Stuart P. Stoller dated January 31, 2017
10.38	(58)	Executive Retention Agreement entered between the Company and Philip D. Beck dated January 31 2017
10.39	(58)	Executive Retention Agreement entered between the Company and Thomas Szoke dated January 31 2017
10.40	(58)	Executive Retention Agreement entered between the Company and Douglas Solomon dated January 31, 2017
10.41	(58)	Form of Conversion Agreement dated January 31, 2017
10.42	(58)	Stand-Off Agreement dated January 31, 2017 entered between Philip Beck, Stuart Stoller, Thomas Szoke, Douglas Solomon, Herbert Selzer, Ricky Solomon and the Company
10.43	(60)	Amendment No. 1 to the Share Purchase Agreement by and between Ipsidy Inc and the MultiPay Shareholders dated March 7, 2015
10.44	(58)	Form of Indemnity Agreement
14.1	(61)	Code of Ethics
21.1	(61)	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

101.INS XBRL Instance Document * 

101.SC XBRL Taxonomy Extension Schema Document * 

H  

101.CA XBRL Taxonomy Extension Calculation Linkbase Document * 

L 

101.DEF XBRL Taxonomy Extension Definition Linkbase Document * 

101.LA XBRL Taxonomy Extension Label Linkbase Document * 

B 

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document *

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* Filed herein

(1)            Previously filed on Form 10-12G on November 9, 2011 (File No.: 000-54545) as the same exhibit number as the exhibit number listed here, and incorporated herein by this reference.

(2)            Previously filed on Form 8-K on August 13, 2013 (File No.: 000-54545) as the same exhibit number as the exhibit number listed here, and incorporated herein by this reference.

(3)            Previously filed on Form S-1 on February 13, 2014 (File No.: 333-193924), as amended, as the same exhibit number as the exhibit number listed here, and incorporated herein by this reference.

(4)            Previously filed on Form S-1 on June 26, 2014 (File No.: 333-193924), as amended, as the same exhibit number as the exhibit number listed here, and incorporated herein by this reference

(5)            Previously filed on Form S-1 on August 12, 2014 (File No.: 333-193924), as amended, as the same exhibit number as the exhibit number listed here, and incorporated herein by this reference

(6)            Previously filed on Form 8-K on September 25, 2014 (File No.: 000-54545) as the same exhibit number as the exhibit number listed here, and incorporated herein by this reference.

(7)            Previously filed on Form 8-K on October 9, 2014 (File No.: 000-54545) as the same exhibit number as the exhibit number listed here, and incorporated herein by this reference.

(8)            Previously filed on Form 10-Q on November 14, 2014 (File No.: 000-54545) as the same exhibit number as the exhibit number listed here, and incorporated herein by this reference.

(9)            Previously filed on Form 8-K on November 28, 2014 (File No.: 000-54545) as the same exhibit number as the exhibit number listed here, and incorporated herein by this reference.

(10)          Previously filed on Form 8-K on December 22, 2014 (File No.: 000-54545) as the same exhibit number as the exhibit number listed here, and incorporated herein by this reference.

(11)          Previously filed on Form 8-K on March 12, 2015 (File No.: 000-54545) and incorporated herein by this reference.

(12)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on March 12, 2015.

(13)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on June 1, 2015.

(14)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on June 1, 2015.

(15)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on June 1, 2015.

(16)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on June 1, 2015.

(17)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on July 2, 2015.  

(18)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on July 2, 2015.

(19)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on July 2, 2015.

(20)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on July 2, 2015.

(21)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on September 9, 2015.

(22)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on September 9, 2015.

(23)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on September 9, 2015.

(24)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on September 9, 2015

(25)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on September 22, 2015.

(26)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 1, 2015.

(27)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 1, 2015.

 29

(28)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 1, 2015.

(29)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 1, 2015.

(30)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 1, 2015.

(31)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 1, 2015.

(32)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 1, 2015.

(33)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 1, 2015.

(34)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 1, 2015.

(35)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 1, 2015.

(36)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 1, 2015.

(37)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 1, 2015.

(38)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 1, 2015.

(39)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 1, 2015.

(40)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 1, 2015.

(41)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 1, 2015.

(42)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 1, 2015.

(43)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on December 29, 2015.

(44)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on December 29, 2015.

(45)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on December 29, 2015.

(46)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on December 29, 2015.

(47)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on January 8, 2016.

(48)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on February 12, 2016.

(49)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on April 25, 2016.

(50)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on April 25, 2016.

(51)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on April 25, 2016.

(52)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on April 25, 2016.

(53)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on December 28, 2016.

(54)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on December 28, 2016.

(55)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on January 6, 2017.

(56)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on August 16, 2016.

(57)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on February 1, 2017.

(58)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on February 6, 2017.

(59)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on March 23, 2017

(60)          Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities Exchange Commission on March 31, 2017.

(61)          Incorporated by reference to the Form 10-K Annual Report filed with the Securities Exchange Commission on July 12, 2017.

 30

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 4, 2017

 31

EX-31.1

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 4, 2017	/s/Philip Beck
	Philip Beck
	Chairman of the Board of Directors, Chief Executive Officer and President (Principal Executive Officer)

32

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL EXECUTIVE 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 4, 2017	/s/ Stuart Stoller
	Stuart Stoller
	Chief Financial Officer (Principal Financial and Accounting Officer)

33

EX-32.1

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 March 31, 2016 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.

/s/ Philip Beck

Philip Beck, Chairman of the Board of Directors, Chief Executive Officer and President

(principal executive officer)

August 4, 2017	/s/ Stuart Stoller
	Stuart Stoller, Chief Financial Officer
	(principal financial and accounting officer)

34

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2017	Jul. 15, 2017
Document And Entity Information
Entity Registrant Name	Ipsidy Inc.
Entity Central Index Key	0001534154
Document Type	10-Q
Trading Symbol	IDGS
Document Period End Date	Mar. 31, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity a Well-known Seasoned Issuer	No
Entity a Voluntary Filer	No
Entity's Reporting Status Current	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		344,214,142
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2017

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Current Assets:
Cash	$ 4,946,012	$ 689,105
Accounts receivable, net	112,634	138,359
Current portion of net investment in direct financing lease	48,734	44,990
Inventory	147,816	150,679
Other current assets	388,200	166,479
Total current assets	5,643,396	1,189,612
Property and Equipment, net	268,386	115,682
Other Assets	693,872	358,343
Intangible Assets, net	3,388,149	3,474,291
Goodwill	6,736,043	6,736,043
Net Investment in Direct Financing Lease, net of current portion	658,877	674,015
Total assets	17,388,723	12,547,986
Current Liabilities:
Accounts payable and accrued expenses	2,089,020	1,687,900
Convertible notes payable, net current portion		250,000
Derivative liability		8,388,355
Notes payable, net, current portion	45,646	109,819
Capital lease obligation, current portion	25,071
Deferred revenue	255,657	398,680
Total current liabilities	2,415,394	10,834,754
Convertible notes payable, net, less current maturities		2,245,596
Notes payable, net less current maturities	1,943,526	3,051,603
Capital lease obligation, net of current portion	136,379
Derivative liability, net of current portion		9,668,276
Total liabilities	4,495,299	25,800,229
Commitments and Contingencies (Note 14)
Stockholders' Equity (Deficit):
Common stock, $0.0001 par value, 500,000,000 shares authorized; 344,093,411 and 234,704,655 shares issued and outstanding as of March 31, 2017 and December 31, 2016, respectively	34,409	23,470
Additional paid in capital	70,952,037	35,341,669
Stock subscription receivable	(830,000)
Accumulated deficit	(57,595,085)	(48,925,993)
Accumulated comprehensive income	332,063	308,611
Total stockholders' equity (deficit)	12,893,424	(13,252,243)
Total liabilities and stockholders' equity (deficit)	$ 17,388,723	$ 12,547,986

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares	Mar. 31, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, authorized	500,000,000	500,000,000
Common stock, issued	344,093,411	234,704,655
Common stock, outstanding	344,093,411	234,704,655

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Revenues:
Products and services	$ 565,545	$ 320,746
Lease income	19,144
Total revenues, net	584,689	320,746
Operating Expenses:
Cost of sales	149,129	118,110
General and administrative	4,255,382	4,392,886
Research and development	29,070	29,072
Depreciation and amortization	109,534	103,079
Total operating expenses	4,543,115	4,643,147
Loss from operations	(3,958,426)	(4,322,401)
Other Income (Expense):
(Loss) gain on derivative liability	(452,146)	12,941,663
Gain on extinguishment of notes payable	2,802,235
Loss on modification of derivatives	(319,770)
Loss on modification of warrants	(158,327)
Loss on conversion of debt	(5,978,643)
Interest expense	(604,015)	(926,752)
Other income (expense), net	(4,710,666)	12,014,911
(Loss) income before income taxes	(8,669,092)	7,692,510
Income taxes
Net (loss) income	$ (8,669,092)	$ 7,692,510
Net income (loss) per share - Basic (in dollars per share)	$ (0.03)	$ 0.04
Net income (loss) per share - Diluted (in dollars per share)	$ (0.03)	$ (0.02)
Weighted Average Shares Outstanding - Basic (in shares)	295,596,151	201,816,797
Weighted Average Shares Outstanding - Diluted (in shares)	295,596,151	270,712,051

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Statement of Comprehensive Income [Abstract]
Net (loss) income	$ (8,669,092)	$ 7,692,510
Foreign currency translation gains	23,452	47,538
Comprehensive income (loss)	$ (8,645,640)	$ 7,740,048

XML

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) - 3 months ended Mar. 31, 2017 - USD ($)	Common Stock [Member]	Stock Subscription Receivable [Member]	Additional Paid-in Capital [Member]	Accumulated Deficit [Member]	Accumulated Other Comprehensive Income [Member]	Total
Balance, beginning at Dec. 31, 2016	$ 23,470		$ 35,341,669	$ (48,925,993)	$ 308,611	$ (13,252,243)
Balance, beginning (in shares) at Dec. 31, 2016	234,704,655					234,704,655
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Reclassification of derivatives upon removal of price protection in warrants			7,614,974			$ 7,614,974
Issuance of common stock upon conversion of debt and related interest	$ 8,482		21,601,191			21,609,673
Issuance of common stock upon conversion of debt and related interest (in shares)	84,822,006
Loss on modification of warrants			158,327			158,327
Stock-based compensation			2,294,160			2,294,160
Common stock issued for services	$ 37		42,339			42,376
Common stock issued for services (in shares)	366,750
Common stock issued with note payable	$ 450		841,277			841,727
Common stock issued with note payable (in shares)	4,500,000
Common stock issued for debt issuance costs	$ 120		224,340			224,460
Common stock issued for debt issuance costs (in shares)	1,200,000
Common stock issued for cash	$ 2,000	(830,000)	3,998,000			3,170,000
Common stock issued for cash (in shares)	20,000,000
Cash and common stock issued for equity issuance costs	$ 100		(289,490)			(289,390)
Cash and common stock issued for equity issuance costs (in shares)	1,000,000
Common stock returned as part of extinguishment of notes payable	$ (250)		(874,750)			(875,000)
Common stock returned as part of extinguishment of notes payable (in shares)	(2,500,000)
Net loss				(8,669,092)		(8,669,092)
Foreign currency translation					23,452	23,452
Balance, ending at Mar. 31, 2017	$ 34,409	$ (830,000)	$ 70,952,037	$ (57,595,085)	$ 332,063	$ 12,893,424
Balance, ending (in shares) at Mar. 31, 2017	344,093,411					344,093,411

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$ (8,669,092)	$ 7,692,510
Adjustments to reconcile net (loss) income with cash flows from operations:
Depreciation and amortization expense	109,534	103,079
Stock-based compensation	2,294,160	3,214,732
Common stock issued for services	42,376	270,000
Amortization of debt discount	235,985	655,817
Amortization of debt issuance costs	268,954	167,700
Loss (gain) on derivative liability	452,146	(12,941,663)
Gain on settlement of notes payable	(2,802,235)
Loss on modification of derivatives	319,770
Loss on modification of warrants	158,327
Loss on conversion of debt	5,978,643
Changes in operating assets and liabilities:
Accounts receivable	25,725	731,004
Net investment in direct financing lease	11,394
Other current assets	(226,174)	(32,200)
Inventory	2,863	(74,261)
Accounts payable and accrued expenses	736,535	(284,877)
Deferred revenue	(143,012)	(70,116)
Net cash flows from operating activities	(1,204,101)	(568,275)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(4,563)	(11,307)
Investment in other assets including work in process	(343,655)	(20,157)
Cash acquired in acquisition		419,042
Net cash flows from investing activities	(348,218)	387,578
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable and common stock	3,000,000	100,000
Proceeds from the sale of common stock, net	2,880,710
Payment of debt issuance costs	(86,331)
Principal payments on notes payable	(14,173)	(16,372)
Principal payments on capital lease obligation	(1,957)
Net cash flows from financing activities	5,778,249	83,628
Effect of Foreign Currencies	30,977	57,229
Net Change in Cash	4,256,907	(39,840)
Cash, Beginning of the Period	689,105	349,873
Cash, End of the Period	4,946,012	310,033
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest
Cash paid for income taxes
Non-cash Investing and Financing Activities:
Issuance of common stock for conversion of debt and related interest	21,609,673	21,222
Reclassification of derivative liabilities upon conversion of related notes payable		316,734
Reclassification of derivatives upon removal of price protection in warrants	7,614,974
Issuance of common stock for debt issuance costs	224,460	76,000
Acquisition of equipment pursuant to a capital lease	163,407
Acquisition of FIN Holdings:
Issuance of common stock as consideration		9,000,000
Assumed liabilities		914,218
Inventory		(112,408)
Accounts receivable		(311,867)
Property and equipment		(100,339)
Intangible assets		(8,970,562)
Cash acquired		$ 419,042

XML

BASIS OF PRESENTATION

3 Months Ended

Mar. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION

NOTE 1 – BASIS OF PRESENTATION

In the opinion of the Company, 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 (US GAAP) 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, 2016. The results of operations for the three months ended March 31, 2017 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 MultiPay S.A.S., ID Global LATAM S.A.S., IDGS S.A.S., ID Solutions, Inc., FIN Holdings Inc., Innovation in Motion Inc. and Cards Plus Pty Ltd. (the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation.

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 income (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 table illustrates the computation of basic and diluted EPS:

	For the three months ended March 31, 2017								For the three months ended March 31, 2016
	Net Loss			Shares		Per Share Amount			Net Income			Shares		Per Share Amount
Basic EPS
Income (loss) available to stockholders	$	(8,669,092	)		295,596,151	$	(0.03	)	$	7,692,510			201,816,797	$	0.04
Effect of Dilutive Securities
Stock Options		—			—		—			—			13,387,521		—
Warrants		—			—		—			—			26,910,433		—
Convertible Debt		—			—		—			(12,014,911	)		28,597,300		—
Dilute EPS
Income available to stockholders plus assumed conversions	$	(8,669,092	)		295,596,151	$	(0.03	)	$	(4,322,401	)		270,712,051	$	(0.02	)

Going concern

As of March 31, 2017, the Company had an accumulated deficit of approximately $57.6 million. For the three months ended March 31, 2017 the Company earned revenue of approximately $0.6 million and incurred a loss from operations of approximately $4.0 million.

The reports of our independent registered public accounting firms on our consolidated financial statements for the years ended December 31, 2016 and 2015 contained an explanatory paragraph regarding our ability to continue as a going concern based upon our net losses and accumulated deficits.

These 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. As there can be no assurance that the Company will be able to achieve positive cash flows (become profitable) and raise sufficient capital to maintain operations there is substantial doubt about the Company’s ability to continue as a going concern.

These 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.

Inventories

Inventory of plastic/ID cards, digital printing material, which are held by Cards Plus Pty Ltd., are at the lower of cost (using the average method) or market. The Plastic/ID cards and digital printing material are used to provide plastic loyal ID and other types of cards. Inventories at March 31, 2017 and December 31, 2016 consist solely of cards inventory. As of March 31, 2017 and December 31, 2016, the Company did not believe an inventory valuation allowance was necessary to record inventory to net realizable value were necessary.

Leases

All leases are classified at the inception as direct finance leases or operating leases based on whether the lease transfers substantially all the risks and rewards of ownership. Leases that transfer to the lessee substantially all of the risks and rewards incidental to ownership of the asset are classified as direct finance leases.

Revenue Recognition

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable. Revenue generally is recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities.

Revenue from the sale of unique secure credential products and solutions to customers is recorded at the completion of the project unless the solution includes benefits to the end user in which additional resources or services are required to be provided.

Revenue from cloud-based services arrangements that allow for the use of a hosted software product or service that are provided on a consumption basis (for example, the number of transactions processed over a period of time) is recognized commensurate with the customer utilization of such resources, Generally, the contract calls for a minimum number of transactions to be charged by the Company on a monthly basis. Accordingly, the Company records the minimum transactional fee based on the passage of a month’s time as revenues. Amounts in excess of the monthly minimum, are charged to customers based on the actual number of transactions.

Consulting services revenue is recognized as services are rendered, generally based on the negotiated hourly rate in the consulting arrangement and the number of hours worked during the period. Consulting revenue for fixed-price services arrangements is recognized as services are provided.

Revenue related to direct financing leases is recognized over the term of the lease using the effective interest method.

Income Taxes

The Company accounts for income taxes under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740 “Income Taxes.” Under the asset and liability method of FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. For the three months ending March 31, 2017 and 2016, there is no provision for income tax as the Company had a tax loss for United States and foreign activities and all of the Company’s carryforwards are reserved for. The Company’s gain or loss on derivative liability during three months ending March 31, 2017 and 2016 is not subject to tax.

Recent Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-04 – Simplifying the Test for Goodwill Impairment, which modified the goodwill impairment test and required an entity to write down the carrying value of goodwill up to the amount by which the carrying amount of a reporting unit exceeded its fair value. We have not early adopted this ASU and are currently evaluating the impact on our financial statements.

In July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic 260 to recognize the effect of the down round feature when it is triggered. The effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20, Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. We are currently reviewing the potential impact to the financial statements. 

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OTHER CURRENT ASSETS

3 Months Ended

Mar. 31, 2017

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

OTHER CURRENT ASSETS

NOTE 2 – OTHER CURRENT ASSETS

The Company has continued to make an investment in kiosks to provide electronic ticketing for transit systems in Colombia. The increase in other current assets is principally due to payments made in relation to the expansion of the kiosk program on account. Kiosks when received will be included in inventory until they are placed into service.

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INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL)

3 Months Ended

Mar. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL)

NOTE 3 – 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 three months ended March 31, 2017:

	Customer Relationships			Intellectual Property			Non-Compete			Patents Pending
Useful Lives	10 Years			10 Years			10 Years			n/a		Total
Carrying Value at December 31, 2016	$	1,446,166		$	2,000,858		$	8,067		$	19,200	$	3,474,291
Additions		—			—			—			8,126		8,126
Amortization		(39,679	)		(53,885	)		(704	)		—		(94,268	)
Carrying Value at March 31, 2017	$	1,406,487		$	1,946,973		$	7,363		$	27,326	$	3,388,149

The following is a summary of intangible assets as of March 31, 2017:

	Customer Relationships			Intellectual Property			Non-Compete			Patent Pending		Total
Cost	$	1,587,159		$	2,444,646		$	14,087		$	27,326	$	4,073,218
Accumulated amortization		(180,672	)		(497,673	)		(6,724	)		—		(685,069	)
Carrying Value at March 31, 2017	$	1,406,487		$	1,946,973		$	7,363		$	27,326	$	3,388,149

Future expected amortization of intangible assets is as follows:

Fiscal Year Ending December 31,
2017		305,780
2018		407,706
2019		407,706
2020		402,109
2021		398,567
Thereafter		1,466,281
	$	3,388,149

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OTHER ASSETS

3 Months Ended

Mar. 31, 2017

Other Assets [Abstract]

OTHER ASSETS

NOTE 4 – OTHER ASSETS

The Company continues to make investments in its technology platforms that prior to these assets being placed into service are included in other assets.

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PROPERTY AND EQUIPMENT, NET

3 Months Ended

Mar. 31, 2017

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT, NET

NOTE 5 – PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following as of March 31, 2017 and December 31, 2016:

	2017		2016
Computers and equipment	$	360,897	$	192,928
Furniture and fixtures		109,200		109,200
		470,097	$	302,128
Less Accumulated depreciation		201,711		186,446
Property and equipment, net	$	268,386	$	115,682

Depreciation expense totaled $15,266 and $9,013 for the three months ended March 31, 2017 and 2016, respectively.

See Note 12 for equipment ($163,407) acquired pursuant to a capital lease.

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES

3 Months Ended

Mar. 31, 2017

Payables and Accruals [Abstract]

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

NOTE 6 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following as of March 31, 2017 and December 31, 2016:

	2017		2016
Trade payables	$	1,416,238	$	341,002
Accrued interest		48,112		600,624
Accrued payroll and related		540,977		421,771
Other accrued expenses		83,693		324,503
Total	$	2,089,020	$	1,687,900

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NOTES PAYABLE, NET

3 Months Ended

Mar. 31, 2017

Debt Disclosure [Abstract]

NOTES PAYABLE, NET

NOTE 7 - NOTES PAYABLE, NET

On January 31, 2017, the Company entered into Conversion Agreements with several accredited investors (the “Investors”) pursuant to which substantially all Investors agreed to convert all amounts of notes payable and convertible notes payable (note 7) due and payable to such persons including interest under the terms of their respective financing or loan agreement as of January 31, 2017 into shares of Company common stock at $0.10 per share. Certain Investors that had a conversion price less than $0.10 converted at such applicable conversion price. The Conversion Agreements resulted in the conversion of notes and convertible notes amounting to $6,331,000 into 84,822,006 shares of Company common stock with a fair value of $21,691,000. The Investors also agreed to waive any existing rights with respect to certain anti-dilution rights contained in their Stock Purchase Warrants. The Company agreed to reduce the exercise of all outstanding Stock Purchase Warrants acquired as part of a financing or loan that had an exercise price in excess of $0.10 per share to $0.10 per share.

As a result of the above agreements associated with the conversion Agreements, the Company recorded a loss on the conversion of debt of approximately $6.0 million (including the effect of the elimination of related conversion feature derivative liabilities - see note 9), a loss on the modification of the warrants of approximately $0.2 million, and a loss on modification of the derivatives of approximately $0.3 million.

On February 22, 2017, the Company entered into an Agreement and Release (the “February 22, 2017 Agreement”) with a holder of certain debentures that will represent final and full payment of all amounts owed under these debentures which include debt with a face value of $300,000, accrued interest of approximately $31,000, cancellation of 3,600,000 warrants previously accounted for as derivative liabilities as well as certain pledged shares (2,500,000 shares) in exchange for $300,000 in cash which was paid in May 2017. As a result of the February 22, 2017 Agreement, the Company recorded a gain on the extinguishment of notes payable of approximately $2.8 million.

See notes 8 and 9.

The following is a summary of notes payable as of March 31, 2017 and December 31, 2016:		2017		2016
In connection with the acquisition of MultiPay in 2015, the Company assumed three promissory notes. At March 31, 2017, the remaining outstanding note carried an outstanding balance of $32,037. Payments of $6,300 including principal and interest are due monthly. The interest rate is 15.47% per annum. Total outstanding principal and interest is due on September 16, 2017.		$	32,037	$	46,210
The below section of notes payable were all converted to common stock at $0.10 per share. In connection with the January 2017 conversion agreements described above	.
In September 2015, the Company issued 12% notes totaling $973,000. The notes were secured by the assets of the Company, matured in September 2016, and accrued interest was convertible into common stock of the Company at a rate of $0.10 per share.  In connection with the issuance of these notes, the Company also issued warrants for the purchase of 6,486,667 shares of the Company’s common stock at an exercise price of $0.15 per share for a period of five years.  The Company also incurred debt issuance costs of $77,480, which were presented as a discount against the notes and amortized into interest expense over the terms of the notes.			—		963,000

In October 2015, the Company issued 12% notes in the amount of $225,000. The notes were secured by the assets of the Company, matured in October 2016, and accrued interest was convertible into common stock of the Company at a rate of $0.10 per share.  In connection with the issuance of these notes, the Company also issued warrants for the purchase of 1,500,000 shares of the Company’s common stock at an exercise price of $0.15 per share for a period of five years.  The Company also incurred debt issuance costs of $36,400, which were presented as a discount against the note and amortized into interest expense over the terms of the notes.	—	225,000
In November 2015, the Company issued a 12% note in the amount of $25,000. The note was secured by the assets of the Company, matured in October 2016, and accrued interest was convertible into common stock of the Company at a rate of $0.10 per share.  In connection with the issuance of this note, the Company also issued warrants for the purchase of 166,667 shares of the Company’s common stock at an exercise price of $0.15 per share for a period of five years.  The Company also incurred debt issuance costs of $94,400, which was presented as a discount against the note and amortized into interest expense over the term of the note.	—	25,000
In December 2015, the Company issued 12% notes totaling $850,000. The notes are secured by the assets of the Company and matured in December 2016.  Any unpaid accrued interest on the note is convertible into common stock of the Company at a rate of $0.48 per share.  In connection with the issuance of these notes, the Company also issued warrants for the purchase of 1,770,834 shares of the Company’s common stock at an exercise price of $0.48 per share for a period of five years.  The conversion rate on the accrued interest and the exercise price on the warrants provide the holders with anti-dilution protection that requires these features to be bifurcated and presented as derivative liabilities at their fair values.  See Note 8.	—	850,000
In January 2016, the Company issued 12% notes totaling $100,000. The note was secured by the assets of the Company, matured in January 2017, and accrued interest was convertible into common stock of the Company at a rate of $0.48 per share. In connection with the issuance of these notes, the Company also issued warrants for the purchase of 208,332 shares of the Company’s common stock at an exercise price of $0.48 per share for a period of five years. The conversion rate on the accrued interest and the warrants provide the holders with anti-dilution protection that requires these features to be bifurcated and presented as derivative liabilities at their fair values. See Note 8.	—	100,000
In December 2016, the Company issued promissory notes with an aggregate face value of $1,275,000 which were payable one year from the date of issuance and accrued interest of 10% per annum for the initial six months of the term of the Notes and 15% per annum for the remaining six months of the term of the Notes.  The notes holders also received 1,912,500 shares of common stock, with a fair value of $191,250.  The Company allocated the proceeds to the notes and common stock based on their relative fair values, resulting in a discount against the notes for the common stock of $166,304, which was amortized into expense through the date of conversion.  In connection with the issuance of the notes and common stock, the Company also incurred debt issuance costs of $212,427, of which $184,719 was recorded as debt issuance costs against the notes to be amortized over the one-year terms of the notes.	—	1,275,000

In November 2016,, the Company issued a 12% promissory note due in January 2017 to an officer and principal stockholder in the amount of $13,609.  In connection with the issuance of this note, the company also issued warrants for the purchase of 1,146,667 shares of the  Company’s common stock at an exercise price of $0.15 per share.   This loan was repaid in April 2017.  The note holder also received 20,414, shares of the Company’s common stock with a fair value of $2,041.		13,609			13,609
In January 2017, the Company issued a Senior Unsecured Note with a face value of $3,000,000, payable two years form issuance, along with an aggregate of 4,500,000 shares of Common Stock, with a fair value of $1,170,000.  The Company allocated the proceeds to the common stock based on their relative fair value and recorded a discount of $841,727 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 1,200,000 shares of common stock of the Company with a fair value of $312,000, of which $224,460 was recorded as debt issuance costs to be amortized into interest expense over the two-year term of the note.		3,000,000			—
Total Principal Outstanding	$	3,045,646		$	3,497,819
Unamortized Deferred Debt		(284,891	)		(159,375	)
Unamortized Deferred Debt Issuance Costs		(771,583	)		(177,022	)
Notes Payable, Net	$	1,989,172		$	3,161,422

The following is a roll-forward of the Company’s notes payable and related discounts for the three months ended March 31, 2017:

	Principal Balance			Debt Issuance Costs			Debt Discounts			Total
Balance at December 31, 2016	$	3,497,819		$	(177,022	)	$	(159,375	)	$	3,161,422
New issuances		3,000,000			(310,790	)		(841,727	)		1,847,483
Payments		(14,173	)		—			—			(14,173	)
Conversions		(3,438,000	)								(3,438,000	)
Amortization		—			202,921			229,519			432,440
Balance at March 31, 2017	$	3,045,646		$	(284,891	)	$	(771,583	)	$	1,989,172

Future maturities of notes payable are as follows:

Year Ending December 31,
2017	$	45,646
2018		—
2019		3,000,000
Thereafter		—
	$	3,045,646

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CONVERTIBLE NOTES PAYABLE, NET

3 Months Ended

Mar. 31, 2017

Debt Disclosure [Abstract]

CONVERTIBLE NOTES PAYABLE, NET

NOTE 8 - CONVERTIBLE NOTES PAYABLE, NET

See Note 7 for transactions associated with the reduction in convertible notes payable on January 31, 2017.

Convertible notes consisted of the following as of March 31, 2017 and December 31, 2016:

		2017		2016
The below section of convertible notes payable were all converted to common stock at $0.10 per share in connection with the January 2017 conversion agreements described in Note 7	.
In June 2015, the Company issued 10% convertible notes in the aggregate principal amount of $700,000.  The notes were secured by the assets of the Company, matured in June 2016, and were convertible into common stock of the Company at a conversion rate of $0.03 per share, subject to adjustment.  In connection with the issuance of these notes, the Company also issued warrants for the purchase of 15,400,000 shares of the Company’s common stock at an exercise price of $0.05 per share for a period of five years.  The conversion rate on the notes and exercise price of the warrants are subject to adjustment to anti-dilution protection that required these features to be bifurcated and presented as derivative liabilities at their fair values.  See Note 9. The Company also incurred debt issuance costs of $124,000, which were presented as a discount against the note and amortized into interest expense over the term of the note.			—	$	680,000
In July 2015, the Company issued 10% convertible notes with in the aggregate principal amount of $190,000.  The notes are secured by the assets of the Company, matured in July 2016, and are convertible into common stock of the Company at a conversion rate of $0.03 per share, subject to adjustment.  In connection with the issuance of these notes, the Company also issued warrants for the purchase of 4,180,000 shares of the Company’s common stock at an exercise price of $0.05 per share for a period of five years.  The conversion rate on the notes and exercise price of the warrants are subject for adjustment to anti-dilution protection that requires these features to be bifurcated and presented as derivative liabilities at their fair values.  See Note 9. The Company also incurred debt issuance costs of $16,200, which are presented as a discount against the note and amortized into interest expense over the term of the note.			—		166,000
In February 2016, the Company re-issued a 12% convertible note in the amount of $172,095. The note is secured by the assets of the Company, originally maturing in September 2016, and is convertible into common stock of the Company at a rate of $0.10 per share. In connection with the issuance of this note, the Company issued warrants for the purchase of 1,146,667 shares of the Company’s common stock at an exercise price of $0.15 per share for a period of five years.			—		172,095
In April 2016, the Company issued 12% convertible notes in the amount of $1,550,000. The note is secured by the assets of the Company, matures in October 2016, and is convertible into common stock of the Company at a rate of $0.25 per share.  In connection with the issuance of these notes, the Company also issued warrants for the purchase of 6,200,000 shares of the Company’s common stock at an exercise price of $0.25 per share for a period of five years.  The Company also issued 1,033,337 shares of common stock to the noteholders. The Company also incurred debt issuance costs of $226,400, which are presented as a discount against the note and amortized into interest expense over the term of the note.  In August 2016, the Company entered into an agreement with the April 2016 Investors to reduce the exercise price on the embedded conversion feature and warrants to $0.10 and increase the number of warrants to 15,500,000.  The August 2016 change in the terms of these convertible notes 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.			—		1,550,000
Total Principal Outstanding		$	—	$	2,568,095
Unamortized Discounts – Derivatives			—		(6,466	)
Unamortized Discounts – Debt issuance costs			—		(66,033	)
Convertible Notes, Net		$	—	$	2,495,596

The following is a roll-forward of the Company’s convertible notes and related discounts for the three months ended March 31, 2017:

	Principal Balance			Debt Issuance Costs			Debt Discounts			Total
Balance at December 31, 2016	$	2,568,095		$	(66,033	)	$	(6,466	)	$	2,495,596
Conversions		(2,568,095	)		—			—			(2,568,095	)
Amortization		—			66,033			6,466			72,499
Balance at March 31, 2017	$	—		$	—		$	—		$	—

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DERIVATIVE LIABILITY

3 Months Ended

Mar. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE LIABILITY

NOTE 9 –DERIVATIVE LIABILITY

Due to the potential adjustment in the conversion price associated with certain of the convertible debentures and the potential adjustment in the exercise price of certain of the warrants, the Company had determined that certain conversion features and warrants are derivative liabilities.

As described in Note 7 above, the Company on January 31, 2017 entered into Conversion Agreements with Investors pursuant to which Investors agreed to convert all amounts of debt accrued and payable to such persons including interest under the terms of their respective financing or loan agreement into shares of Company common stock at $0.10 per share. Certain Investors that had a conversion price less than $0.10 converted at such applicable conversion price. The investors at the time of conversion also agreed to waive any existing rights with respect to certain price protection and anti-dilution rights contained in their Stock Purchase Warrants.

Additionally, on February 22, 2017, the Company entered into an Agreement and Release with a holder of certain debentures that will represent final and full payment of all amounts owed under such which include debt with a face value of $300,000, accrued interest of approximately $31,000, cancellation of 3,600,000 warrants (previously accounted for as derivative liabilities) as well as certain pledged shares (2,500,000 shares) in exchange for $300,000 in cash. These debentures also had potential price adjustments on these debentures that have also been eliminated.

Therefore, as a result of the conversion and repayment of the outstanding indebtedness and related accrued interest as well as the elimination of anti-dilution rights of Stock Purchase Warrants, the Company no longer holds liabilities with derivatives requiring fair value as of March 31, 2017.

A summary of derivative activity for the three months ended March 31, 2017 is as follows:

Balance at December 31, 2016	$	18,056,631
Modification of derivatives		319,770
Cancellation of warrants previously accounted for as derivative liabilities and elimination of derivative conversion features resulting from conversion of related debt to equity		(11,213,573	)
Reclassification of derivatives to equity upon removal of price protection in warrants		(7,614,974	)
Change in fair value		452,146
Balance at March 31, 2017	$	—

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RELATED PARTY TRANSACTIONS

3 Months Ended

Mar. 31, 2017

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 10 – RELATED PARTY TRANSACTIONS

Amount Due Officer and Director

In November 2016, the Company issued a note payable for $13,609 to one if its Board of Directors and was outstanding at December 31, 2016. The note was repaid in April 2017. In November 2016, the related party also received 20,414 shares of the Company’s common stock with a fair value of $2,041.

Convertible Notes Payable

On January 31, 2017, the Company entered into Conversion Agreements with Mr. Selzer, a director of the Company and Vista Associates, a family partnership to which Mr. Selzer converted $150,000 in debt plus interest into 1,753,500 shares of common stock and $40,000 of debt plus interest into 1,537,778 shares of common stock.

Purchase of Common Stock

In April 2017, Mr. Selzer purchased an additional 500,000 shares of common stock of the latest offering as described in Note 10.

Other

In connection with securing third-party financing, the Company incurred fees to Network 1 Financial Securities, Inc. (“Network 1”), a registered broker-dealer. The Network 1 fees comprise of $360,000 payable in cash and the issuance of 2,200,000 shares of common stock of the Company. A member of the Company’s Board of Directors previously maintained a partnership with a key principal of Network 1. The agreement calls for Network 1 to receive commission, in cash and stock based on the total amount of proceeds from any financing it secures for the Company.

The Company’s headquarters are located in Long Beach, New York where the Company leases offices from Bridgeworks LLC (“Bridgeworks”), a company providing office facilities which is principally owned by Mr. Beck, the Chief Executive Officer of the Company. The Company paid Bridgeworks, $13,500 during the first three months ended March 31, 2017.

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STOCKHOLDER'S EQUITY (DEFICIT)

3 Months Ended

Mar. 31, 2017

Equity [Abstract]

STOCKHOLDER'S EQUITY (DEFICIT)

NOTE 11 – STOCKHOLDER’S EQUITY (DEFICIT)

Common Stock

As described in Note 7, on January 31, 2017, in connection with the issuance of a $3,000,000 Senior Unsecured Note, an aggregate of 4,500,000 shares of Common Stock was issued to the Investor and the Company issued Network 1 Financial Securities, Inc., a registered broker-dealer, 1,200,000 shares of common stock of the Company in conjunction with its services.

As described in Notes 7 and 8, on January 31, 2017, the Company entered into Conversion Agreements with Investors pursuant to which Investors agreed to convert all amounts of debt accrued and payable to such person including interest under the terms of their respective financing or loan agreement as of January 31, 2017 into shares of Company common stock at $0.10 per shares. The Conversion Agreements resulted in the issuance of approximately 84,822,000 shares of Company common stock.

On March 22, 2017, Ipsidy Inc. (the “Company”) entered into Subscription Agreements with several accredited investors (the “March 2017 Accredited Investors”) pursuant to which the March 2017 Accredited Investors agreed to purchase an aggregate of 20,000,000 shares of the Company’s common stock for an aggregate purchase price of $4,000,000. The Company has received proceeds of $3,170,000. One individual March 2017 Accredited Investor, has agreed to fund $830,000 by the balance of the offering by the end of the third quarter of 2017 of which $400,000 has been received as of the date of this report. In connection with this private offering, the Company paid Network 1 Financial Securities, Inc. (“Network”), a registered broker-dealer, a cash fee of $240,000 and agreed to issue Network 1,000,000 shares of common stock of the Company upon increasing its authorized shares of common stock.

Additionally, the Company cancelled certificates for 2,500,000 shares of common stock acquired in conjunction with the purchase of certain debentures.

During the quarter ended March 31, 2017, the Company issued 366,750 shares of common stock as consideration for services. The fair value of the shares, totaling $42,377, was estimated based on the publicly quoted trading price and recorded as expense.

Warrants

As more fully described above the Company agreed to reduce the exercise of all outstanding Stock Purchase Warrants acquired as part of a financing or loan that had an exercise price in excess of $0.10 per share to $0.10 per share. Certain warrants were issued in connection with business arrangements and those warrants remained at original price per share of common stock.

Furthermore, as more fully described above in Note 7, the Company as part of a transaction cancelled 3.6 million warrants.

The following is a summary of the Company’s warrant activity for the three months ended March 31, 2017:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Life
Outstanding at December 31, 2016		51,138,697		$	0.11		3.8 Years
Cancelled		(3,600,000	)	$	0.08		3.9 Years
Outstanding at March 31, 2017		47,538,697		$	0.08		3.5 Years

Stock Options

On August 10, 2016, the Company entered into an amended agreement (the “Amendment”) with Parity Labs, LLC (“Parity”) to amend the compensation section of an existing Advisory Agreement previously entered into between the Company and Parity on November 16, 2015 for the provision of strategic advisory services. The Amendment calls for the Company to issue to Parity the option (the “Parity Option”) to acquire 20,000,000 shares of common stock of the Company, exercisable at $0.05 per share for a period of ten years. The Parity Option vests as to 10,000,000 shares of common stock immediately and then in 12 equal tranches of 833,333 shares per month commencing on September 1, 2016. Parity options vested in entirety upon Mr. Beck becoming Chief Executive Officer (“CEO”) of Ipsidy, Inc. in January 2017. Mr. Beck is the manager of Parity.

In connection with the engagement of the CEO and Chief Financial Officer (“CFO”) on January 31, 2017, the Company granted the CEO and CFO stock options to acquire 15,000,000 shares and 5,000,000 shares of common stock of the Company respectively at an exercise price of $0.10 per share for a period of ten years. Further, upon the Company being legally entitled to do so, the Company has agreed to enter a Restricted Stock Purchase Agreements with the CEO and CFO in which they will be provided 15,000,000 shares and 5,000,000 shares of common stock at a per share price of $0.0001, which shares of common stock vest upon achieving a performance threshold as defined in their respective agreements.

The Company determined the grant date fair value of the options granted during the three months ended March 31, 2017 using the Black Scholes Method and the following assumptions:

Expected Volatility – 85% 

Expected Term – 5.0 Years

Risk Free Rate – 1.92% 

Dividend Rate – 0.00%

Activity related to stock options for the three months ended March 31, 2017 is summarized as follows:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Contractual Term (Yrs.)		Aggregate Intrinsic Value
Outstanding as of December 31, 2016		86,925,000		$	0.21		9.5	$	10,023,400
Granted		20,000,000		$	0.10		9.8	$	—
Forfeitures		(875,000	)	$	0.10		8.8	$	—
Outstanding as of March 31, 2017		106,050,000		$	0.19		9.1	$	16,594,997
Exercisable as of March 31, 2017		72,575,000		$	0.16		8.9	$	9,411,664

The following table summarizes stock option information as of March 31, 2017:

Exercise Prices		Outstanding		Weighted Average Contractual Life		Exercisable
$	0.0001		3,500,000		8.5 Years		3,062,500
$	0.05		36,500,000		9.4 Years		21,750,000
$	0.10		27,250,000		9.6 Years		12,520,834
$	0.15		6,300,000		8.4 Years		3,641,666
$	0.25		500,000		9.0 Years		100,000
$	0.40		1,000,000		8.9 Years		1,000,000
$	0.45		31,000,000		8.5 Years		30,500,000
	Total		106,050,000		9.1 Years		72,575,000

During the three months ended March 31, 2017, the Company recognized approximately $2,294,000 of stock-based compensation expense of which approximately $1,620,000 and $674,000 was related to employee and non-employees, respectively. As of March 31, 2017, there was approximately $4,830,000 of unrecognized compensation costs related to stock options outstanding which will be expensed through 2019.

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DIRECT FINANCING LEASE

3 Months Ended

Mar. 31, 2017

Direct Financing Lease

DIRECT FINANCING LEASE

NOTE 12 – DIRECT FINACING 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 kiosk 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 lease 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 it 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 for the three months ended March 31, 2017 of approximately $19,000. There was no income in the first three months of 2016 as the equipment was placed into service in May 2016.

The equipment is subject to direct lease valued at approximately $748,000. At the inception of the lease term, the aggregate minimum future lease payments to be received is approximately $1,422,000 before executory cost. Unearned income is recorded at the inception of this lease was approximately $474,000 and will be 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:

2017	$	91,608
2018		122,145
2019		122,145
2020		122,145
2021		122,145
Thereafter		529,322
Sub-total		1,109,510
Less deferred revenue		(401,899	)
Net investment in lease	$	707,611

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LEASE OBLIGATION PAYABLE

3 Months Ended

Mar. 31, 2017

Lease Obligation Payable Details Narrative

LEASE OBLIGATION PAYABLE

NOTE 13 – 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 capital 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 March 31, 2017 is $2,679. The following is a schedule showing the future minimum lease payments under capital lease by year and the present value of the minimum lease payments as of March 31, 2017. The interest rate related to the lease obligation is 12% and the maturity date is March 31, 2022.

Year Ending
2017	$	32,322
2018		43,096
2019		43,096
2020		43,096
2021		43,096
Thereafter		10,776
Total minimum lease payments		215,482
Less: Amount representing interest		54,032
Present value of minimum lease payments	$	161,450

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COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2017

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 14 – COMMITMENTS AND CONTINGENCIES

Legal Matters

From time to time, claims are made against the Company in the ordinary course of business, which could result in litigation. Claims and associated litigation are subject to inherent uncertainties and unfavorable outcomes could occur, such as monetary damages, fines, penalties or injunctions prohibiting the Company from selling one or more products or engaging in other activities. The occurrence of an unfavorable outcome in any specific period could have a material adverse effect on the Company’s results of operations for that period or future periods. The Company is not presently a party to any pending or threatened legal proceedings.

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BASIS OF PRESENTATION (Policies)

3 Months Ended

Mar. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

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 income (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 table illustrates the computation of basic and diluted EPS:

	For the three months ended March 31, 2017								For the three months ended March 31, 2016
	Net Loss			Shares		Per Share Amount			Net Income			Shares		Per Share Amount
Basic EPS
Income (loss) available to stockholders	$	(8,669,092	)		295,596,151	$	(0.03	)	$	7,692,510			201,816,797	$	0.04
Effect of Dilutive Securities
Stock Options		—			—		—			—			13,387,521		—
Warrants		—			—		—			—			26,910,433		—
Convertible Debt		—			—		—			(12,014,911	)		28,597,300		—
Dilute EPS
Income available to stockholders plus assumed conversions	$	(8,669,092	)		295,596,151	$	(0.03	)	$	(4,322,401	)		270,712,051	$	(0.02	)

Going concern

Going concern

As of March 31, 2017, the Company had an accumulated deficit of approximately $57.6 million. For the three months ended March 31, 2017 the Company earned revenue of approximately $0.6 million and incurred a loss from operations of approximately $4.0 million.

The reports of our independent registered public accounting firms on our consolidated financial statements for the years ended December 31, 2016 and 2015 contained an explanatory paragraph regarding our ability to continue as a going concern based upon our net losses and accumulated deficits.

These 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. These 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.

Inventories

Inventories

Inventory of plastic/ID cards, digital printing material, which are held by Cards Plus Pty Ltd., are at the lower of cost (using the average method) or market. The Plastic/ID cards and digital printing material are used to provide plastic loyal ID and other types of cards. Inventories at March 31, 2017 and December 31, 2016 consist solely of cards inventory. As of March 31, 2017 and December 31, 2016, the Company did not believe an inventory valuation allowance was necessary to record inventory to net realizable value were necessary.

Leases

Leases

All leases are classified at the inception as direct finance leases or operating leases based on whether the lease transfers substantially all the risks and rewards of ownership. Leases that transfer to the lessee substantially all of the risks and rewards incidental to ownership of the asset are classified as direct finance leases.

Revenue Recognition

Revenue Recognition

Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability is probable. Revenue generally is recognized net of allowances for returns and any taxes collected from customers and subsequently remitted to governmental authorities.

Revenue from the sale of unique secure credential products and solutions to customers is recorded at the completion of the project unless the solution includes benefits to the end user in which additional resources or services are required to be provided.

Revenue from cloud-based services arrangements that allow for the use of a hosted software product or service that are provided on a consumption basis (for example, the number of transactions processed over a period of time) is recognized commensurate with the customer utilization of such resources, Generally, the contract calls for a minimum number of transactions to be charged by the Company on a monthly basis. Accordingly, the Company records the minimum transactional fee based on the passage of a month’s time as revenues. Amounts in excess of the monthly minimum, are charged to customers based on the actual number of transactions.

Consulting services revenue is recognized as services are rendered, generally based on the negotiated hourly rate in the consulting arrangement and the number of hours worked during the period. Consulting revenue for fixed-price services arrangements is recognized as services are provided.

Revenue related to direct financing leases is recognized over the term of the lease using the effective interest method.

Income Taxes

Income Taxes

The Company accounts for income taxes under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740 “Income Taxes.” Under the asset and liability method of FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. For the three months ending March 31, 2017 and 2016, there is no provision for income tax as the Company had a tax loss for United States and foreign activities. The Company’s gain or loss on derivative liability during three months ending March 31, 2017 and 2016 is not subject to tax.

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BASIS OF PRESENTATION (Tables)

3 Months Ended

Mar. 31, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of potentially dilutive securities

The following table illustrates the computation of basic and diluted EPS:

	For the three months ended March 31, 2017								For the three months ended March 31, 2016
	Net Loss			Shares		Per Share Amount			Net Income			Shares		Per Share Amount
Basic EPS
Income (loss) available to stockholders	$	(8,669,092	)		295,596,151	$	(0.03	)	$	7,692,510			201,816,797	$	0.04
Effect of Dilutive Securities
Stock Options		—			—		—			—			13,387,521		—
Warrants		—			—		—			—			26,910,433		—
Convertible Debt		—			—		—			(12,014,911	)		28,597,300		—
Dilute EPS
Income available to stockholders plus assumed conversions	$	(8,669,092	)		295,596,151	$	(0.03	)	$	(4,322,401	)		270,712,051	$	(0.02	)

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INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL) (Tables)

3 Months Ended

Mar. 31, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of intangible assets

The following is a summary of activity related to intangible assets for the three months ended March 31, 2017:

	Customer Relationships			Intellectual Property			Non-Compete			Patents Pending
Useful Lives	10 Years			10 Years			10 Years			n/a		Total
Carrying Value at December 31, 2016	$	1,446,166		$	2,000,858		$	8,067		$	19,200	$	3,474,291
Additions		—			—			—			8,126		8,126
Amortization		(39,679	)		(53,885	)		(704	)		—		(94,268	)
Carrying Value at March 31, 2017	$	1,406,487		$	1,946,973		$	7,363		$	27,326	$	3,388,149

The following is a summary of intangible assets as of March 31, 2017:

	Customer Relationships			Intellectual Property			Non-Compete			Patent Pending		Total
Cost	$	1,587,159		$	2,444,646		$	14,087		$	27,326	$	4,073,218
Accumulated amortization		(180,672	)		(497,673	)		(6,724	)		—		(685,069	)
Carrying Value at March 31, 2017	$	1,406,487		$	1,946,973		$	7,363		$	27,326	$	3,388,149

Schedule of future amortization expense of intangible assets

Future expected amortization of intangible assets is as follows:

Fiscal Year Ending December 31,
2017		305,780
2018		407,706
2019		407,706
2020		402,109
2021		398,567
Thereafter		1,466,281
	$	3,388,149

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PROPERTY AND EQUIPMENT, NET (Tables)

3 Months Ended

Mar. 31, 2017

Property, Plant and Equipment [Abstract]

Schedule of property and equipment

Property and equipment consisted of the following as of March 31, 2017 and December 31, 2016:

	2017		2016
Computers and equipment	$	360,897	$	192,928
Furniture and fixtures		109,200		109,200
		470,097	$	302,128
Less Accumulated depreciation		201,711		186,446
Property and equipment, net	$	268,386	$	115,682

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables)

3 Months Ended

Mar. 31, 2017

Payables and Accruals [Abstract]

Schedule of accounts payable and accrued expenses

Accounts payable and accrued expenses consisted of the following as of March 31, 2017 and December 31, 2016:

	2017		2016
Trade payables	$	1,416,238	$	341,002
Accrued interest		48,112		600,624
Accrued payroll and related		540,977		421,771
Other accrued expenses		83,693		324,503
Total	$	2,089,020	$	1,687,900

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NOTES PAYABLE, NET (Tables)

3 Months Ended

Mar. 31, 2017

Debt Disclosure [Abstract]

Schedule of notes payable

The following is a summary of notes payable as of March 31, 2017 and December 31, 2016:		2017		2016
In connection with the acquisition of MultiPay in 2015, the Company assumed three promissory notes. At March 31, 2017, the remaining outstanding note carried an outstanding balance of $32,037. Payments of $6,300 including principal and interest are due monthly. The interest rate is 15.47% per annum. Total outstanding principal and interest is due on September 16, 2017.		$	32,037	$	46,210
The below section of notes payable were all converted to common stock at $0.10 per share. In connection with the January 2017 conversion agreements described above	.
In September 2015, the Company issued 12% notes totaling $973,000. The notes were secured by the assets of the Company, matured in September 2016, and accrued interest was convertible into common stock of the Company at a rate of $0.10 per share.  In connection with the issuance of these notes, the Company also issued warrants for the purchase of 6,486,667 shares of the Company’s common stock at an exercise price of $0.15 per share for a period of five years.  The Company also incurred debt issuance costs of $77,480, which were presented as a discount against the notes and amortized into interest expense over the terms of the notes.			—		963,000

In October 2015, the Company issued 12% notes in the amount of $225,000. The notes were secured by the assets of the Company, matured in October 2016, and accrued interest was convertible into common stock of the Company at a rate of $0.10 per share.  In connection with the issuance of these notes, the Company also issued warrants for the purchase of 1,500,000 shares of the Company’s common stock at an exercise price of $0.15 per share for a period of five years.  The Company also incurred debt issuance costs of $36,400, which were presented as a discount against the note and amortized into interest expense over the terms of the notes.	—	225,000
In November 2015, the Company issued a 12% note in the amount of $25,000. The note was secured by the assets of the Company, matured in October 2016, and accrued interest was convertible into common stock of the Company at a rate of $0.10 per share.  In connection with the issuance of this note, the Company also issued warrants for the purchase of 166,667 shares of the Company’s common stock at an exercise price of $0.15 per share for a period of five years.  The Company also incurred debt issuance costs of $94,400, which was presented as a discount against the note and amortized into interest expense over the term of the note.	—	25,000
In December 2015, the Company issued 12% notes totaling $850,000. The notes are secured by the assets of the Company and matured in December 2016.  Any unpaid accrued interest on the note is convertible into common stock of the Company at a rate of $0.48 per share.  In connection with the issuance of these notes, the Company also issued warrants for the purchase of 1,770,834 shares of the Company’s common stock at an exercise price of $0.48 per share for a period of five years.  The conversion rate on the accrued interest and the exercise price on the warrants provide the holders with anti-dilution protection that requires these features to be bifurcated and presented as derivative liabilities at their fair values.  See Note 8.	—	850,000
In January 2016, the Company issued 12% notes totaling $100,000. The note was secured by the assets of the Company, matured in January 2017, and accrued interest was convertible into common stock of the Company at a rate of $0.48 per share. In connection with the issuance of these notes, the Company also issued warrants for the purchase of 208,332 shares of the Company’s common stock at an exercise price of $0.48 per share for a period of five years. The conversion rate on the accrued interest and the warrants provide the holders with anti-dilution protection that requires these features to be bifurcated and presented as derivative liabilities at their fair values. See Note 8.	—	100,000
In December 2016, the Company issued promissory notes with an aggregate face value of $1,275,000 which were payable one year from the date of issuance and accrued interest of 10% per annum for the initial six months of the term of the Notes and 15% per annum for the remaining six months of the term of the Notes.  The notes holders also received 1,912,500 shares of common stock, with a fair value of $191,250.  The Company allocated the proceeds to the notes and common stock based on their relative fair values, resulting in a discount against the notes for the common stock of $166,304, which was amortized into expense through the date of conversion.  In connection with the issuance of the notes and common stock, the Company also incurred debt issuance costs of $212,427, of which $184,719 was recorded as debt issuance costs against the notes to be amortized over the one-year terms of the notes.	—	1,275,000

In November 2016,, the Company issued a 12% promissory note due in January 2017 to an officer and principal stockholder in the amount of $13,609.  In connection with the issuance of this note, the company also issued warrants for the purchase of 1,146,667 shares of the  Company’s common stock at an exercise price of $0.15 per share.   This loan was repaid in April 2017.  The note holder also received 20,414, shares of the Company’s common stock with a fair value of $2,041.		13,609			13,609
In January 2017, the Company issued a Senior Unsecured Note with a face value of $3,000,000, payable two years form issuance, along with an aggregate of 4,500,000 shares of Common Stock, with a fair value of $1,170,000.  The Company allocated the proceeds to the common stock based on their relative fair value and recorded a discount of $841,727 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 1,200,000 shares of common stock of the Company with a fair value of $312,000, of which $224,460 was recorded as debt issuance costs to be amortized into interest expense over the two-year term of the note.		3,000,000			—
Total Principal Outstanding	$	3,045,646		$	3,497,819
Unamortized Deferred Debt		(284,891	)		(159,375	)
Unamortized Deferred Debt Issuance Costs		(771,583	)		(177,022	)
Notes Payable, Net	$	1,989,172		$	3,161,422

Schedule of notes payable and related discounts

The following is a roll-forward of the Company’s notes payable and related discounts for the three months ended March 31, 2017:

	Principal Balance			Debt Issuance Costs			Debt Discounts			Total
Balance at December 31, 2016	$	3,497,819		$	(177,022	)	$	(159,375	)	$	3,161,422
New issuances		3,000,000			(310,790	)		(841,727	)		1,847,483
Payments		(14,173	)		—			—			(14,173	)
Conversions		(3,438,000	)								(3,438,000	)
Amortization		—			202,921			229,519			432,440
Balance at March 31, 2017	$	3,045,646		$	(284,891	)	$	(771,583	)	$	1,989,172

Schedule of future maturities of notes payable

Future maturities of notes payable are as follows:

Year Ending December 31,
2017	$	45,646
2018		—
2019		3,000,000
Thereafter		—
	$	3,045,646

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CONVERTIBLE NOTES PAYABLE, NET (Tables)

3 Months Ended

Mar. 31, 2017

Debt Disclosure [Abstract]

Schedule of convertible notes payable outstanding

Convertible notes consisted of the following as of March 31, 2017 and December 31, 2016:

		2017		2016
The below section of convertible notes payable were all converted to common stock at $0.10 per share in connection with the January 2017 conversion agreements described in Note 7	.
In June 2015, the Company issued 10% convertible notes in the aggregate principal amount of $700,000.  The notes were secured by the assets of the Company, matured in June 2016, and were convertible into common stock of the Company at a conversion rate of $0.03 per share, subject to adjustment.  In connection with the issuance of these notes, the Company also issued warrants for the purchase of 15,400,000 shares of the Company’s common stock at an exercise price of $0.05 per share for a period of five years.  The conversion rate on the notes and exercise price of the warrants are subject to adjustment to anti-dilution protection that required these features to be bifurcated and presented as derivative liabilities at their fair values.  See Note 9. The Company also incurred debt issuance costs of $124,000, which were presented as a discount against the note and amortized into interest expense over the term of the note.			—	$	680,000
In July 2015, the Company issued 10% convertible notes with in the aggregate principal amount of $190,000.  The notes are secured by the assets of the Company, matured in July 2016, and are convertible into common stock of the Company at a conversion rate of $0.03 per share, subject to adjustment.  In connection with the issuance of these notes, the Company also issued warrants for the purchase of 4,180,000 shares of the Company’s common stock at an exercise price of $0.05 per share for a period of five years.  The conversion rate on the notes and exercise price of the warrants are subject for adjustment to anti-dilution protection that requires these features to be bifurcated and presented as derivative liabilities at their fair values.  See Note 9. The Company also incurred debt issuance costs of $16,200, which are presented as a discount against the note and amortized into interest expense over the term of the note.			—		166,000
In February 2016, the Company re-issued a 12% convertible note in the amount of $172,095. The note is secured by the assets of the Company, originally maturing in September 2016, and is convertible into common stock of the Company at a rate of $0.10 per share. In connection with the issuance of this note, the Company issued warrants for the purchase of 1,146,667 shares of the Company’s common stock at an exercise price of $0.15 per share for a period of five years.			—		172,095
In April 2016, the Company issued 12% convertible notes in the amount of $1,550,000. The note is secured by the assets of the Company, matures in October 2016, and is convertible into common stock of the Company at a rate of $0.25 per share.  In connection with the issuance of these notes, the Company also issued warrants for the purchase of 6,200,000 shares of the Company’s common stock at an exercise price of $0.25 per share for a period of five years.  The Company also issued 1,033,337 shares of common stock to the noteholders. The Company also incurred debt issuance costs of $226,400, which are presented as a discount against the note and amortized into interest expense over the term of the note.  In August 2016, the Company entered into an agreement with the April 2016 Investors to reduce the exercise price on the embedded conversion feature and warrants to $0.10 and increase the number of warrants to 15,500,000.  The August 2016 change in the terms of these convertible notes 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.			—		1,550,000
Total Principal Outstanding		$	—	$	2,568,095
Unamortized Discounts – Derivatives			—		(6,466	)
Unamortized Discounts – Debt issuance costs			—		(66,033	)
Convertible Notes, Net		$	—	$	2,495,596

Schedule of convertible notes and related discounts

The following is a roll-forward of the Company’s convertible notes and related discounts for the three months ended March 31, 2017:

	Principal Balance			Debt Issuance Costs			Debt Discounts			Total
Balance at December 31, 2016	$	2,568,095		$	(66,033	)	$	(6,466	)	$	2,495,596
Conversions		(2,568,095	)		—			—			(2,568,095	)
Amortization		—			66,033			6,466			72,499
Balance at March 31, 2017	$	—		$	—		$	—		$	—

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DERIVATIVE LIABLITY (Tables)

3 Months Ended

Mar. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of derivative activity

A summary of derivative activity for the three months ended March 31, 2017 is as follows:

Balance at December 31, 2016	$	18,056,631
Modification of derivatives		319,770
Cancellation of warrants previously accounted for as derivative liabilities and elimination of derivative conversion features resulting from conversion of related debt to equity		(11,213,573	)
Reclassification of derivatives to equity upon removal of price protection in warrants		(7,614,974	)
Change in fair value		452,146
Balance at March 31, 2017	$	—

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STOCKHOLDER'S EQUITY (Tables)

3 Months Ended

Mar. 31, 2017

Equity [Abstract]

Schedule of warrant activity

The following is a summary of the Company’s warrant activity for the three months ended March 31, 2017:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Life
Outstanding at December 31, 2016		51,138,697		$	0.11		3.8 Years
Cancelled		(3,600,000	)	$	0.08		3.9 Years
Outstanding at March 31, 2017		47,538,697		$	0.08		3.5 Years

Schedule of black - scholes option-pricing model valuation assumption

The Company determined the grant date fair value of the options granted during the three months ended March 31, 2017 using the Black Scholes Method and the following assumptions:

Expected Volatility – 85% 

Expected Term – 5.0 Years

Risk Free Rate – 1.92% 

Dividend Rate – 0.00% 

Schedule of outstanding stock options

Activity related to stock options for the three months ended March 31, 2017 is summarized as follows:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Contractual Term (Yrs.)		Aggregate Intrinsic Value
Outstanding as of December 31, 2016		86,925,000		$	0.21		9.5	$	10,023,400
Granted		20,000,000		$	0.10		9.8	$	—
Forfeitures		(875,000	)	$	0.10		8.8	$	—
Outstanding as of March 31, 2017		106,050,000		$	0.19		9.1	$	16,594,997
Exercisable as of March 31, 2017		72,575,000		$	0.16		8.9	$	9,411,664

Schedule of stock option

The following table summarizes stock option information as of March 31, 2017:

Exercise Prices		Outstanding		Weighted Average Contractual Life		Exercisable
$	0.0001		3,500,000		8.5 Years		3,062,500
$	0.05		36,500,000		9.4 Years		21,750,000
$	0.10		27,250,000		9.6 Years		12,520,834
$	0.15		6,300,000		8.4 Years		3,641,666
$	0.25		500,000		9.0 Years		100,000
$	0.40		1,000,000		8.9 Years		1,000,000
$	0.45		31,000,000		8.5 Years		30,500,000
	Total		106,050,000		9.1 Years		72,575,000

XML

DIRECT FINANCING LEASE (Tables)

3 Months Ended

Mar. 31, 2017

Direct Financing Lease

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:

2017	$	91,608
2018		122,145
2019		122,145
2020		122,145
2021		122,145
Thereafter		529,322
Sub-total		1,109,510
Less deferred revenue		(401,899	)
Net investment in lease	$	707,611

XML

LEASE OBLIGATION PAYABLE (Tables)

3 Months Ended

Mar. 31, 2017

Lease Obligation Payable Details Narrative

Schedule of lease obligation payable

The following is a schedule showing the future minimum leas payments under capital lease by year and the present value of the minimum lease payments as of March 31, 2017. The interest rate related to the lease obligation is 12% and the maturity date is March 31, 2022.

Year Ending
2017	$	32,322
2018		43,096
2019		43,096
2020		43,096
2021		43,096
Thereafter		10,776
Total minimum lease payments		215,482
Less: Amount representing interest		54,032
Present value of minimum lease payments	$	161,450

XML

BASIS OF PRESENTATION (Details) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Basic EPS
Income (loss) available to stockholders, Income	$ (8,669,092)	$ 7,692,510
Income (loss) available to stockholders, Shares	295,596,151	201,816,797
Income (loss) available to stockholders, Per-Share Amount	$ (0.03)	$ 0.04
Dilute EPS
Income available to stockholders plus assumed conversions, Income	$ (8,669,092)	$ (4,322,401)
Income available to stockholders plus assumed conversions, Shares	295,596,151	270,712,051
Income available to stockholders plus assumed conversions, Per-Share Amount	$ (0.03)	$ (0.02)
Stock Options [Member]
Effect of Dilutive Securities
Antidilutive securities, Income
Antidilutive securities, Shares		13,387,521
Warrant [Member]
Effect of Dilutive Securities
Antidilutive securities, Income
Antidilutive securities, Shares		26,910,433
Convertible Debt [Member]
Effect of Dilutive Securities
Antidilutive securities, Income		$ (12,014,911)
Antidilutive securities, Shares		28,597,300

XML

BASIS OF PRESENTATION (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Accumulated deficit	$ (57,595,085)		$ (48,925,993)
Revenue	584,689	$ 320,746
Loss from operations	$ (3,958,426)	$ (4,322,401)

XML

INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL) (Details)	3 Months Ended
	Mar. 31, 2017 USD ($)
Finite-Lived Intangible Assets [Line Items]
Carrying Value at beginning	$ 3,474,291
Additions	8,126
Amortization	(94,268)
Carrying Value at end	$ 3,388,149
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Lives	10 years
Carrying Value at beginning	$ 1,446,166
Additions
Amortization	(39,679)
Carrying Value at end	$ 1,406,487
Intellectual Property [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Lives	10 years
Carrying Value at beginning	$ 2,000,858
Additions
Amortization	(53,885)
Carrying Value at end	$ 1,946,973
Non-Compete [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Lives	10 years
Carrying Value at beginning	$ 8,067
Additions
Amortization	(704)
Carrying Value at end	7,363
Patents Pending [Member]
Finite-Lived Intangible Assets [Line Items]
Carrying Value at beginning	19,200
Additions	8,126
Amortization
Carrying Value at end	$ 27,326

XML

INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL) (Details 1) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Finite-Lived Intangible Assets [Line Items]
Cost	$ 4,073,218
Accumulated amortization	(685,069)
Carrying Value	3,388,149	$ 3,474,291
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	1,587,159
Accumulated amortization	(180,672)
Carrying Value	1,406,487	1,446,166
Intellectual Property [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	2,444,646
Accumulated amortization	(497,673)
Carrying Value	1,946,973	2,000,858
Non-Compete [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	14,087
Accumulated amortization	(6,724)
Carrying Value	7,363	8,067
Patents Pending [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	27,326
Accumulated amortization
Carrying Value	$ 27,326	$ 19,200

XML

INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL) (Details 2) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
2017	$ 305,780
2018	407,706
2019	407,706
2020	402,109
2021	398,567
Thereafter	1,466,281
Carrying Value	$ 3,388,149	$ 3,474,291

XML

PROPERTY AND EQUIPMENT, NET (Details) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 470,097	$ 302,128
Less Accumulated depreciation	201,711	186,446
Property and equipment, net	268,386	115,682
Computer and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	360,897	192,928
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 109,200	$ 109,200

XML

PROPERTY AND EQUIPMENT, NET (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 15,266	$ 9,013
Acquisition of equipment pursuant to a capital lease	$ 163,407

XML

ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Payables and Accruals [Abstract]
Trade payables	$ 1,416,238	$ 341,002
Accrued interest	48,112	600,624
Accrued payroll and related	540,977	421,771
Other accrued expenses	83,693	324,503
Total	$ 2,089,020	$ 1,687,900

XML

NOTES PAYABLE, NET (Details) - USD ($)	Mar. 31, 2017	Jan. 31, 2017	Dec. 31, 2016
Short-term Debt [Line Items]
Total Principal Outstanding	$ 3,045,646		$ 3,497,819
Unamortized Deferred Debt	(284,891)		(159,375)
Unamortized Deferred Debt Issuance Costs	(771,583)		(177,022)
Convertible Notes, Net	1,989,172		3,161,422
15.47% Promissory Note [Member]
Short-term Debt [Line Items]
Total Principal Outstanding	32,037		46,210
12% Note Due September 2016 [Member]
Short-term Debt [Line Items]
Total Principal Outstanding			963,000
12% Note Due October 2016 [Member]
Short-term Debt [Line Items]
Total Principal Outstanding			225,000
12% Note Due October 2016 [Member]
Short-term Debt [Line Items]
Total Principal Outstanding			25,000
12% Note Due December 2016 [Member]
Short-term Debt [Line Items]
Total Principal Outstanding			850,000
12% Note Due January 2017 [Member]
Short-term Debt [Line Items]
Total Principal Outstanding			100,000
10% Promissory Notes [Member]
Short-term Debt [Line Items]
Total Principal Outstanding			1,275,000
Unamortized Deferred Debt			(166,304)
12% Note Due January 2017 [Member]
Short-term Debt [Line Items]
Total Principal Outstanding	13,609		13,609
Senior Unsecured Note [Member]
Short-term Debt [Line Items]
Total Principal Outstanding	$ 3,000,000
Unamortized Deferred Debt		$ (841,727)

XML

NOTES PAYABLE, NET (Details 1)	3 Months Ended
	Mar. 31, 2017 USD ($)
Principal Balance
Balance at beginning	$ 3,497,819
New issuances	3,000,000
Payments	(14,173)
Conversions	(3,438,000)
Amortization
Balance at end	3,045,646
Debt Issuance Costs
Balance at beginning	177,022
New issuances	(310,790)
Payments
Conversions
Amortization	202,921
Balance at end	771,583
Debt Discounts
Balance at beginning	159,375
New issuances	(841,727)
Payments
Conversions
Amortization	229,519
Balance at end	284,891
Total
Balance at beginning	3,161,422
New issuances	1,847,483
Payments	(14,173)
Conversions	(3,438,000)
Amortization	432,440
Balance at end	$ 1,989,172

XML

NOTES PAYABLE, NET (Details 2) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Debt Disclosure [Abstract]
2017	$ 45,646
2018
2019	3,000,000
Thereafter
Net investment in lease	$ 3,045,646	$ 3,497,819

XML

NOTES PAYABLE, NET (Details Narrative)

1 Months Ended

3 Months Ended

Feb. 22, 2017

USD ($)

shares

Nov. 30, 2016

USD ($)

$ / shares

shares

Jan. 31, 2017

USD ($)

$ / shares

shares

Dec. 31, 2016

USD ($)

shares

Jan. 31, 2016

$ / shares

shares

Dec. 31, 2015

$ / shares

shares

Nov. 30, 2015

USD ($)

$ / shares

shares

Oct. 31, 2015

USD ($)

$ / shares

shares

Sep. 30, 2015

USD ($)

$ / shares

shares

Mar. 31, 2017

USD ($)

Note

$ / shares

shares

Mar. 31, 2016

USD ($)

Short-term Debt [Line Items]

Face amount

$ 300,000

Total Principal Outstanding

$ 3,497,819

$ 3,045,646

Debt discount

159,375

284,891

Debt accrued interest

$ 31,000

Number of cancellation shares | shares

2,500,000

Number of cancellation shares, value

$ 300,000

Gain on extinguishment of notes payable

2,802,235

Loss on modification of derivatives

(319,770)

Loss on modification of warrant

(158,327)

Loss on modification of debt

(5,978,643)

Common stock issues value

$ 3,170,000

15.47% Promissory Note [Member]

Short-term Debt [Line Items]

Number of notes issued | Note

3

Total Principal Outstanding

46,210

$ 32,037

Amount of principal and interest payment

$ 6,300

Interest rate

15.47%

12% Note Due September 2016 [Member]

Short-term Debt [Line Items]

Face amount

$ 973,000

Total Principal Outstanding

963,000

Interest rate

12.00%

Description of collateral

assets of the Company

Conversion price (in dollars per share) | $ / shares

$ 0.10

Debt issuance costs

$ 77,480

12% Note Due October 2016 [Member]

Short-term Debt [Line Items]

Total Principal Outstanding

225,000

Interest rate

12.00%

Description of collateral

assets of the Company

Conversion price (in dollars per share) | $ / shares

$ 0.10

Debt issuance costs

$ 36,400

12% Note Due October 2016 [Member]

Short-term Debt [Line Items]

Face amount

$ 25,000

Total Principal Outstanding

25,000

Interest rate

12.00%

Description of collateral

assets of the Company

Conversion price (in dollars per share) | $ / shares

$ 0.10

Debt issuance costs

$ 94,400

12% Note Due December 2016 [Member]

Short-term Debt [Line Items]

Total Principal Outstanding

850,000

Interest rate

12.00%

Description of collateral

assets of the Company

Conversion price (in dollars per share) | $ / shares

$ 0.48

12% Note Due January 2017 [Member]

Short-term Debt [Line Items]

Total Principal Outstanding

100,000

Interest rate

12.00%

Description of collateral

assets of the Company

Conversion price (in dollars per share) | $ / shares

$ 0.48

10% Promissory Notes [Member]

Short-term Debt [Line Items]

Total Principal Outstanding

1,275,000

Debt discount

166,304

Debt issuance costs

212,427

Amortized debt issuance costs

$ 184,719

Description interest rate

Payable one year from the date of issuance and accrued interest of 10% per annum for the initial six months of the term of the Notes and 15% per annum for the remaining six months of the term of the Notes.

Interest rate

10.00%

Warrant term

1 year

Common stock issues value

$ 191,250

Common stock issues shares | shares

1,912,500

12% Promissory Notes Due in January 2017 [Member]

Short-term Debt [Line Items]

Face amount

$ 13,609

Total Principal Outstanding

$ 13,609

13,609

Interest rate

12.00%

Number of common shares purchased | shares

20,414

Common stock issues value

$ 2,041

Senior Unsecured Note [Member]

Short-term Debt [Line Items]

Face amount

$ 3,000,000

Total Principal Outstanding

$ 3,000,000

Debt discount

841,727

Debt issuance costs

312,000

Debt issuance costs consisting shares value

$ 120,000

Debt issuance costs consisting shares | shares

1,200,000

Amortized debt issuance costs

$ 224,460

Warrant term

2 years

Common stock issues value

$ 1,170,000

Common stock issues shares | shares

4,500,000

Warrant [Member]

Short-term Debt [Line Items]

Exercise price (in dollars per share) | $ / shares

$ 0.10

Number of cancellation shares | shares

3,600,000

3,600,000

Warrant [Member] | 12% Note Due September 2016 [Member]

Short-term Debt [Line Items]

Number of common shares purchased | shares

6,486,667

Exercise price (in dollars per share) | $ / shares

$ 0.15

Warrant term

5 years

Warrant [Member] | 12% Note Due October 2016 [Member]

Short-term Debt [Line Items]

Number of common shares purchased | shares

1,500,000

Exercise price (in dollars per share) | $ / shares

$ 0.15

Warrant term

5 years

Warrant [Member] | 12% Note Due October 2016 [Member]

Short-term Debt [Line Items]

Number of common shares purchased | shares

166,667

Exercise price (in dollars per share) | $ / shares

$ 0.15

Warrant term

5 years

Warrant [Member] | 12% Note Due December 2016 [Member]

Short-term Debt [Line Items]

Number of common shares purchased | shares

1,770,834

Exercise price (in dollars per share) | $ / shares

$ 0.48

Warrant term

5 years

Warrant [Member] | 12% Note Due January 2017 [Member]

Short-term Debt [Line Items]

Number of common shares purchased | shares

208,332

Exercise price (in dollars per share) | $ / shares

$ 0.48

Warrant term

5 years

Warrant [Member] | 12% Promissory Notes Due in January 2017 [Member]

Short-term Debt [Line Items]

Number of common shares purchased | shares

1,146,667

Exercise price (in dollars per share) | $ / shares

$ 0.15

Conversion Agreements [Member]

Short-term Debt [Line Items]

Face amount

$ 300,000

Debt accrued interest

$ 31,000

Number of cancellation shares | shares

2,500,000

Number of cancellation shares, value

$ 300,000

Gain on settlement of debt

$ 2,800,000

Loss on modification of derivatives

300,000

Loss on modification of warrant

200,000

Loss on modification of debt

$ 6,000,000

Conversion Agreements [Member] | Several Accredited Investors (the "Investors") [Member]

Short-term Debt [Line Items]

Face amount

$ 21,691,000

Conversion price (in dollars per share) | $ / shares

$ 0.10

Exercise price (in dollars per share) | $ / shares

$ 0.10

Number of shares issued on conversion value

$ 6,331,000

Number of shares issued on conversion | shares

84,822,006

Conversion Agreements [Member] | Warrant [Member]

Short-term Debt [Line Items]

Number of cancellation shares | shares

3,600,000

XML

CONVERTIBLE NOTES PAYABLE, NET (Details) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Short-term Debt [Line Items]
Total Principal Outstanding		$ 2,568,095
Unamortized Discounts - Derivatives		(6,466)
Unamortized Discounts - Debt issuance costs		(66,033)
Convertible Notes, Net		2,495,596
10% Convertible Notes Due June 2016 [Member]
Short-term Debt [Line Items]
Total Principal Outstanding		680,000
10% Convertible Notes Due July 2016 [Member]
Short-term Debt [Line Items]
Total Principal Outstanding		166,000
12% Convertible Notes Due September 2016 [Member]
Short-term Debt [Line Items]
Total Principal Outstanding		172,095
12% Convertible Notes Due October 2016 [Member]
Short-term Debt [Line Items]
Total Principal Outstanding		$ 1,550,000

XML

CONVERTIBLE NOTES PAYABLE, NET (Details 1)	3 Months Ended
	Mar. 31, 2017 USD ($)
Principal Balance
Balance at beginning	$ 2,568,095
Conversions	(2,568,095)
Amortization
Balance at end
Debt Issuance Costs
Balance at beginning	(66,033)
Conversions
Amortization	66,033
Balance at end
Debt Discounts
Balance at beginning	(6,466)
Conversions
Amortization	6,466
Balance at end
Total
Balance at beginning	2,495,596
Conversions	(2,568,095)
Amortization	72,499
Balance at end

XML

CONVERTIBLE NOTES PAYABLE, NET (Details Narrative) - USD ($)

1 Months Ended

3 Months Ended

Feb. 22, 2017

Jan. 31, 2017

Apr. 30, 2016

Feb. 29, 2016

Jul. 31, 2015

Jun. 30, 2015

Mar. 31, 2017

Aug. 10, 2016

Short-term Debt [Line Items]

Principal amount

$ 300,000

Debt accrued interest

31,000

Conversion Agreements [Member]

Short-term Debt [Line Items]

Principal amount

300,000

Debt accrued interest

$ 31,000

Conversion Agreements [Member] | Several Accredited Investors (the "Investors") [Member]

Short-term Debt [Line Items]

Principal amount

$ 21,691,000

Conversion price (in dollars per share)

$ 0.10

Exercise price (in dollars per share)

$ 0.10

Number of shares issued on conversion

84,822,006

Warrant [Member]

Short-term Debt [Line Items]

Exercise price (in dollars per share)

$ 0.10

Common Stock [Member]

Short-term Debt [Line Items]

Number of shares issued

20,000,000

10% Convertible Notes Due June 2016 [Member]

Short-term Debt [Line Items]

Principal amount

$ 700,000

Interest rate

10.00%

Description of collateral

The note are secured by the assets of the Company.

Conversion price (in dollars per share)

$ 0.03

Debt issuance costs

$ 124,000

10% Convertible Notes Due June 2016 [Member] | Warrant [Member]

Short-term Debt [Line Items]

Number of common shares purchased

15,400,000

Exercise price (in dollars per share)

$ 0.05

Warrant term

5 years

10% Convertible Notes Due July 2016 [Member]

Short-term Debt [Line Items]

Principal amount

$ 190,000

Interest rate

10.00%

Description of collateral

The note are secured by the assets of the Company.

Conversion price (in dollars per share)

$ 0.03

Debt issuance costs

$ 16,200

10% Convertible Notes Due July 2016 [Member] | Warrant [Member]

Short-term Debt [Line Items]

Number of common shares purchased

4,180,000

Exercise price (in dollars per share)

$ 0.05

Warrant term

5 years

12% Convertible Notes Due September 2016 [Member]

Short-term Debt [Line Items]

Principal amount

$ 172,095

Interest rate

12.00%

Description of collateral

The note is secured by the assets of the Company.

Conversion price (in dollars per share)

$ 0.10

12% Convertible Notes Due September 2016 [Member] | Warrant [Member]

Short-term Debt [Line Items]

Number of common shares purchased

1,146,667

Exercise price (in dollars per share)

$ 0.15

Warrant term

5 years

12% Convertible Notes Due October 2016 [Member]

Short-term Debt [Line Items]

Principal amount

$ 1,550,000

Interest rate

12.00%

Description of collateral

The note is secured by the assets of the Company.

Conversion price (in dollars per share)

$ 0.25

Debt issuance costs

$ 226,400

12% Convertible Notes Due October 2016 [Member] | Letter Agreement [Member] | Several Accredited Investors (the "Investors") [Member]

Short-term Debt [Line Items]

Conversion price (in dollars per share)

$ 0.10

12% Convertible Notes Due October 2016 [Member] | Warrant [Member]

Short-term Debt [Line Items]

Number of common shares purchased

6,200,000

Exercise price (in dollars per share)

$ 0.25

Warrant term

5 years

12% Convertible Notes Due October 2016 [Member] | Warrant [Member] | Letter Agreement [Member] | Several Accredited Investors (the "Investors") [Member]

Short-term Debt [Line Items]

Number of common shares purchased

15,500,000

Exercise price (in dollars per share)

$ 0.10

12% Convertible Notes Due October 2016 [Member] | Common Stock [Member]

Short-term Debt [Line Items]

Number of shares issued

1,033,337

XML

DERIVATIVE LIABILITY (Details) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Balance at beginning	$ 8,388,355
Modification of derivatives	319,770
Cancellation of warrants previously accounted for as derivative liabilities and elimination of derivative conversion features resulting from conversion of related debt to equity	(11,213,573)
Reclassification of derivatives upon removal of price protection in warrants	(7,614,974)
Change in fair value	(452,146)	$ 12,941,663
Balance at ending

XML

DERIVATIVE LIABILITY (Details Narrative) - USD ($)		3 Months Ended
	Feb. 22, 2017	Mar. 31, 2017	Jan. 31, 2017
Debt accrued interest	$ 31,000
Number of cancellation shares	2,500,000
Number of cancellation shares, value	$ 300,000
Face amount	$ 300,000
Warrant [Member]
Number of cancellation shares	3,600,000	3,600,000
Conversion Agreements [Member] | Several Accredited Investor [Member]
Share price			$ 0.10
Conversion Agreements [Member] | Several Accredited Investor [Member] | Minimum [Member]
Conversion price			$ 0.10

XML

RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)				3 Months Ended
	Mar. 22, 2017	Jan. 31, 2017	Nov. 30, 2016	Mar. 31, 2017	Apr. 30, 2017	Feb. 22, 2017
Face amount						$ 300,000
Common stock issued for cash				$ 3,170,000
Common Stock [Member]
Common stock issued for cash				$ 2,000
Number of shares issued				20,000,000
Network 1 Financial Securities, Inc. [Member]
Cash fee				$ 360,000
Network 1 Financial Securities, Inc. [Member] | Common Stock [Member]
Number of shares issued				2,200,000
Bridgeworks LLC [Member]
Lease expenses				$ 13,500
Conversion Agreements [Member]
Face amount						$ 300,000
Conversion Agreements [Member] | Herbert Selzer [Member]
Total debt		$ 150,000
Conversion Agreements [Member] | Vista Associates [Member]
Total debt		$ 40,000
Number of shares issued on conversion		1,537,778
Conversion Agreements [Member] | Herbert Selzer [Member]
Number of shares issued on conversion		1,753,500
Subscription Agreements [Member] | Herbert Selzer [Member] | Subsequent Event [Member]
Additional number of shares issued					500,000
Subscription Agreements [Member] | Network 1 Financial Securities, Inc. [Member]
Cash fee	$ 240,000
Number of shares issued	1,000,000
12% Promissory Notes Due in January 2017 [Member]
Face amount			$ 13,609
Number of common shares purchased			20,414
Common stock issued for cash			$ 2,041

XML

STOCKHOLDER'S EQUITY (DEFICIT) (Details) - Warrant [Member]	3 Months Ended
	Mar. 31, 2017 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award, Non-Option Equity Instruments, Outstanding [Roll Forward]
Outstanding at beginning | shares	51,138,697
Cancelled | shares	(3,600,000)
Outstanding at ending | shares	47,538,697
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Weighted Average Exercise Price [Roll Forward]
Outstanding at beginning | $ / shares	$ 0.11
Cancelled | $ / shares	0.08
Outstanding at ending | $ / shares	$ 0.08
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Weighted Average Remaining Life [Roll Forward]
Outstanding at beginning	3 years 9 months 18 days
Cancelled	3 years 10 months 24 days
Outstanding at end	3 years 6 months

XML

STOCKHOLDER'S EQUITY (DEFICIT) (Details 1)	3 Months Ended
	Mar. 31, 2017
Equity [Abstract]
Expected Volatility	85.00%
Expected Term	5 years
Risk Free Rate	1.92%
Dividend Rate	0.00%

XML

STOCKHOLDER'S EQUITY (DEFICIT) (Details 2)	3 Months Ended
	Mar. 31, 2017 USD ($) $ / shares shares
Number of Shares [Roll Forward]
Outstanding at beginning | shares	86,925,000
Granted | shares	20,000,000
Forfeitures | shares	(875,000)
Outstanding at end | shares	106,050,000
Exercisable at end | shares	72,575,000
Weighted Average Exercise Price [Roll Forward]
Outstanding at beginning | $ / shares	$ 0.21
Granted | $ / shares	0.10
Forfeitures | $ / shares	0.10
Outstanding at end | $ / shares	0.19
Exercisable at end | $ / shares	$ 0.16
Weighted Average Contractual Term [Roll Forward]
Outstanding at beginning	9 years 6 months
Granted	9 years 9 months 18 days
Forfeitures	8 years 9 months 18 days
Outstanding at end	9 years 1 month 6 days
Exercisable at end	8 years 10 months 24 days
Aggregate Intrinsic Value [Roll Forward]
Outstanding at beginning | $	$ 10,023,400
Granted | $
Forfeitures | $
Outstanding at end | $	16,594,997
Exercisable at end | $	$ 9,411,664

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STOCKHOLDER'S EQUITY (DEFICIT) (Details 3)	3 Months Ended
	Mar. 31, 2017 shares
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding	106,050,000
Weighted Average Contractual Life	9 years 1 month 6 days
Exercisable	72,575,000
Exercise Price $0.0001 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding	3,500,000
Weighted Average Contractual Life	8 years 6 months
Exercisable	3,062,500
Exercise Price $0.05 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding	36,500,000
Weighted Average Contractual Life	9 years 4 months 24 days
Exercisable	21,750,000
Exercise Price $0.10 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding	27,250,000
Weighted Average Contractual Life	9 years 7 months 6 days
Exercisable	12,520,834
Exercise Price $0.15 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding	6,300,000
Weighted Average Contractual Life	8 years 4 months 24 days
Exercisable	3,641,666
Exercise Price $0.25 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding	500,000
Weighted Average Contractual Life	9 years
Exercisable	100,000
Exercise Price $0.40 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding	1,000,000
Weighted Average Contractual Life	8 years 10 months 24 days
Exercisable	1,000,000
Exercise Price $0.45 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding	31,000,000
Weighted Average Contractual Life	8 years 6 months
Exercisable	30,500,000

XML

STOCKHOLDER'S EQUITY (DEFICIT) (Details Narrative) - USD ($)

3 Months Ended

Mar. 22, 2017

Feb. 22, 2017

Jan. 31, 2017

Aug. 10, 2016

Mar. 31, 2017

Mar. 31, 2016

Sep. 30, 2017

Dec. 31, 2016

Common stock issued for cash

$ 3,170,000

Proceeds from issuance of shares

2,880,710

Face amount

$ 300,000

Cancellation of common stock

2,500,000

Number of shares issued for services, value

$ 42,376

Number of options granted

20,000,000

Common stock par value (in dollars per share)

$ 0.0001

$ 0.0001

Stock based compensation

$ 2,294,160

$ 3,214,732

Unrecognized compensation costs

$ 4,830,000

Common Stock [Member]

Number of shares issued

20,000,000

Common stock issued for cash

$ 2,000

Number of shares issued for services

366,750

Number of shares issued for services, value

$ 37

Warrant [Member]

Exercise price (in dollars per share)

$ 0.10

Cancellation of common stock

3,600,000

3,600,000

Network 1 Financial Securities, Inc. [Member]

Cash fee

$ 360,000

Network 1 Financial Securities, Inc. [Member] | Common Stock [Member]

Number of shares issued

2,200,000

Mr. Philip D. Beck [Member]

Exercise price (in dollars per share)

$ 0.10

Number of options granted

15,000,000

Expiration term

10 years

Mr. Stuart P. Stoller [Member]

Exercise price (in dollars per share)

$ 0.10

Number of options granted

5,000,000

Expiration term

10 years

Employees [Member]

Stock based compensation

$ 1,620,000

Non - Employees [Member]

Stock based compensation

674,000

Securities Purchase Agreement [Member] | Accredited Investor [Member] | 10% Senior Unsecured Note Due January 2019 [Member]

Number of shares issued

4,500,000

Common stock issued for cash

$ 3,000,000

Securities Purchase Agreement [Member] | Network 1 Financial Securities, Inc. [Member]

Number of shares issued for services

1,200,000

Conversion Agreements [Member] | Several Accredited Investor [Member]

Number of shares issued on conversion

84,822,000

Share price

$ 0.10

Subscription Agreements [Member]

Cancellation of common stock

2,500,000

Subscription Agreements [Member] | Network 1 Financial Securities, Inc. [Member]

Number of shares issued

1,000,000

Cash fee

$ 240,000

Subscription Agreements [Member] | Several Accredited Investors (the "March 2017 Accredited Investors") [Member]

Number of shares issued

20,000,000

Common stock issued for cash

$ 4,000,000

Proceeds from issuance of shares

$ 3,170,000

Face amount

$ 830,000

Subscription Agreements [Member] | Several Accredited Investors (the "March 2017 Accredited Investors") [Member] | Subsequent Event [Member]

Face amount

$ 400,000

Amended Agreement [Member] | Parity Labs LLC [Member]

Number of shares issued

20,000,000

Exercise price (in dollars per share)

$ 0.05

Vesting term

10 years

Description vesting period

12 equal tranches of 833,333 shares per month commencing on September 1, 2016.

Number of shares vested

10,000,000

Restricted Stock Purchase Agreements [Member] | Mr. Philip D. Beck [Member]

Number of options granted

15,000,000

Common stock par value (in dollars per share)

$ 0.0001

Restricted Stock Purchase Agreements [Member] | Mr. Stuart P. Stoller [Member]

Number of options granted

5,000,000

Common stock par value (in dollars per share)

$ 0.0001

XML

DIRECT FINANCING LEASE (Details)	Mar. 31, 2017 USD ($)
Direct Financing Lease
2017	$ 91,608
2018	122,145
2019	122,145
2020	122,145
2021	122,145
Thereafter	529,322
Sub-total	1,109,510
Less deferred revenue	(401,899)
Net investment in lease	$ 707,611

XML

DIRECT FINANCING LEASE (Details Narrative)	1 Months Ended	3 Months Ended
	Sep. 30, 2015 USD ($) Kiosks $ / Units	Mar. 31, 2017 USD ($)
Equipment under capital lease		$ 748,000
Aggregate minimum future lease payments		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) | $ / Units	40
Revenues		$ 19,000

XML

LEASE OBLIGATION PAYABLE (Details)	Mar. 31, 2017 USD ($)
Lease Obligation Payable Details Narrative
2017	$ 32,322
2018	43,096
2019	43,096
2020	43,096
2021	43,096
Thereafter	10,776
Total minimum lease payments	215,482
Less: Amount representing interest	54,032
Present value of minimum lease payments	$ 161,450

XML

LEASE OBLIGATION PAYABLE (Details Narrative)	3 Months Ended
	Mar. 31, 2017 USD ($)
Lease Obligation Payable Details Narrative
Amortization of lease equipment	$ 2,679
Lease obligation interest rate	12.00%
Lease obligation maturity date	Mar. 31, 2022