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 September 30, 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 incorporation or organization)	(I.R.S. Employer Identification No.)

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. 

Class	Outstanding at October 31, 2017
Common Stock, par value $0.0001	364,320,216 shares
Documents incorporated by reference:	None	Yes ☐      No ☒

☐ No

TABLE OF CONTENTS

	Page No.
PART I - FINANCIAL INFORMATION
Item 1.Financial Statements.	4 - 7
Condensed Consolidated Balance Sheets as of September 30, 2017 (unaudited) and December 31, 2016	4
Condensed Consolidated Statements of Operations for the Three and Nine months Ended September 30, 2017 (unaudited) and 2016 (unaudited)	5
Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine months Ended September 30, 2017 (unaudited) and 2016 (unaudited)	6
Condensed Consolidated Statement of Stockholders’ Equity (Deficit) for the Nine months Ended September 30, 2017 (unaudited)	7
Condensed Consolidated Statements of Cash Flows for the Nine months Ended September 30, 2017 (unaudited) and 2016 (unaudited)	8
Notes to Unaudited Condensed Consolidated Financial Statements	9-22
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.	23-28
Item 3.Quantitative and Qualitative Disclosures About Market Risk.	27
Item 4.Controls and Procedures.	27
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.	28
Item 1A. Risk Factors.	28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	28
Item 3. Defaults Upon Senior Securities.	29
Item 4.Mine Safety Disclosures.	29
Item 5. Other Information.	30
Item 6. Exhibits.	31-37

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 “Ipsidy,“ID Global,” the “Company,” “we,” “our,” “us,” and similar terms refers to Ipsidy Inc., a Delaware corporation formerly known as ID Global Solutions Corporation 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.

 ITEM 1. FINANCIAL STATEMENTS

IPSIDY INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
	2017			2016
	(Unaudited)
ASSETS
Current Assets:
Cash	$	1,440,179		$	689,105
Accounts receivable, net		216,921			138,359
Current portion of net investment in direct financing lease		51,402			44,990
Inventory		853,647			150,679
Other current assets		207,938			166,479
Total current assets		2,770,087			1,189,612
Property and Equipment, net		242,290			115,682
Other Assets		1,270,876			358,343
Intangible Assets, net		3,185,416			3,474,291
Goodwill		6,736,043			6,736,043
Net Investment in Direct Financing Lease, net of current portion		632,492			674,015
Total assets	$	14,837,204		$	12,547,986
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued expenses	$	1,684,377		$	1,687,900
Convertible notes payable, net		—			250,000
Derivative liability		—			8,388,355
Notes payable, net, current portion		—			109,819
Capital lease obligation, current portion		26,614			—
Deferred revenue		277,287			398,680
Total current liabilities		1,988,278			10,834,754
Convertible notes payable, net, less current maturities		—			2,245,596
Notes payable, net less current maturities		2,231,648			3,051,603
Capital lease obligation, net of current portion		122,674			—
Derivative liability, net of current portion		—			9,668,276
Total liabilities		4,342,600			25,800,229
Commitments and Contingencies (Notes 8 and 12)
Stockholders’ Equity (Deficit):
Common stock, $0.0001 par value, 1,000,000,000 and 500,000,000 shares authorized; 364,320,216 and 234,704,655 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively		36,432			23,470
Additional paid in capital		73,646,880			35,341,669
Accumulated deficit		(63,507,684	)		(48,925,993	)
Accumulated comprehensive income		318,976			308,611
Total stockholders’ equity (deficit)		10,494,604			(13,252,243	)
Total liabilities and stockholders’ equity (deficit)	$	14,837,204		$	12,547,986

See notes to condensed consolidated financial statements.

4

IPSIDY INC. AND SUBSIDIARIES  

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS 

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Revenues:
Products and services	$	589,576		$	576,466		$	1,695,737		$	1,373,892
Lease income		18,070			19,735			56,050			33,050
Total revenues, net		607,646			596,201			1,751,787			1,406,942
Operating Expenses:
Cost of sales		144,367			116,376			448,637			349,034
General and administrative		2,236,543			2,171,627			10,242,880			10,711,942
Research and development		6,278			65,582			63,116			387,246
Depreciation and amortization		99,779			127,473			346,313			388,233
Total operating expenses		2,486,967			2,481,058			11,100,946			11,836,455
Loss from operations		(1,879,321	)		(1,884,857	)		(9,349,159	)		(10,429,513	)
Other Income (Expense):
Gain (loss) on derivative liability		—			(1,594,636	)		(452,146	)		16,082,616
Gain on extinguishment of notes payable		—			—			2,802,234			—
Loss on modification of derivatives		—			—			(319,770	)		—
Loss on modification of warrants		—			—			(158,327	)		—
Loss on settlement of notes payable		—			—			(5,978,643	)		—
Interest expense		(230,698	)		(853,543	)		(1,125,880	)		(3,126,320	)
Other income (expense), net		(230,698	)		(2,448,179	)		(5,232,532	)		12,956,296
(Loss) income before income taxes		(2,110,019	)		(4,333,036	)		(14,581,691	)		2,526,783
Income Taxes		—			—			—			—
Net (loss) income	$	(2,110,019	)	$	(4,333,036	)	$	(14,581,691	)	$	2,526,783
Net (loss) income Per Share - Basic	$	(0.01	)	$	(0.02	)	$	(0.04	)	$	0.01
Net Loss Per Share - Diluted	$	(0.01	)	$	(0.02	)	$	(0.04	)	$	(0.04	)
Weighted Average Shares Outstanding - Basic		344,658,454			226,796,302			328,131,720			212,790,554
Weighted Average Shares Outstanding - Diluted		344,658,454			226,796,302			328,131,720			289,858,911

See notes to condensed consolidated financial statements.

5

IPSIDY INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME  

(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
Net income (loss)	$	(2,110,019	)	$	(4,333,036	)	$	(14,581,691	)	$	2,526,783
Foreign currency translation (losses) gains		33,685			(18,304	)		10,365			102,739
Comprehensive income (loss)	$	(2,076,334	)	$	(4,351,340	)	$	(14,571,326	)	$	2,629,522

See notes to condensed consolidated financial statements.

6

IPSIDY INC. AND SUBSIDIARIES 

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

(Unaudited)

													Accumulated
							Additional						Other
	Common Stock						Paid-in			Accumulated			Comprehensive
	Shares			Amount			Capital			Deficit			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 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
Stock-based compensation		—			—			4,891,251			—			—		4,891,251
Common stock issued for services		593,555			60			140,091			—			—		140,151
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			3,998,000			—			—		4,000,000
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	)
Common stock issued for restricted stock		20,000,000			2,000			—			—			—		2,000
Loss on modification of warrants		—			—			158,327								158,327
Net loss		—			—			—			(14,581,691	)		—		(14,581,691	)
Foreign currency translation		—			—			—			—			10,365		10,365
Balances, September 30, 2017		364,320,216		$	36,432		$	73,646,880		$	(63,507,684	)	$	318,976	$	10,494,604

See notes to condensed consolidated financial statements.

7

IPSIDY INC. AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

(Unaudited)

	Nine Months Ended
	September 30,
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(14,581,691	)	$	2,526,783
Adjustments to reconcile net income (loss) with cash flows from operations:
Depreciation and amortization expense		346,313			388,233
Stock-based compensation		4,891,251			6,805,776
Common stock issued for services		140,151			285,227
Amortization of debt discount		446,410			2,191,786
Amortization of debt issuance costs		346,651			549,867
Loss (gain) on derivative liability		452,146			(16,082,616	)
Gain on settlement of notes payable		(2,802,234	)		—
Loss on modification of derivatives		319,770			—
Loss on modification of warrants		158,327			—
Loss on settlement of debt		5,978,643			—
Write off of abandoned product		—			225,862
Changes in operating assets and liabilities:
Accounts receivable		(75,806	)		125,814
Net investment in direct financing lease		35,111			17,845
Other current assets		(41,459	)		(12,929	)
Inventory		(704,326	)		(159,494	)
Accounts payable and accrued expenses		319,814			(401,465	)
Deferred revenue		(121,395	)		476,457
Net cash flows from operating activities		(4,892,324	)		(3,062,854	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(11,392	)		(23,309	)
Investment in other assets		(921,780	)		(136,162	)
Cash acquired in acquisition		—			419,042
Net cash flows from investing activities		(933,172	)		259,571
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable and common stock		3,000,000			1,650,000
Proceeds from the sale of common stock and other		4,002,000			1,250,000
Payment of debt and equity issuance costs		(375,821	)		(253,642	)
Principal payments on notes payable		(59,819	)		(60,875	)
Principal payments on capital lease obligation		(14,119	)		—
Net cash flows from financing activities		6,552,241			2,585,483
Effect of Foreign Currencies		24,329			102,739
Net Change in Cash		751,074			(115,061	)
Cash, Beginning of the Period		689,105			349,873
Cash, End of the Period	$	1,440,179		$	234,812
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest	$	—		$	—
Cash paid for income taxes	$	—		$	—
Non-cash Investing and Financing Activities:	$	21,609,673		$	21,222
Issuance of common stock for conversion of debt and accrued interest	$	—		$	79,081
Issuance of common stock in settlment of a contingent liability	$	—		$	59,681
Reclassification of derivative liabilities upon removal of price protection in warrants	$	7,614,974		$	692,850
Issuance of warrants for inventory costs	$	224,460		$	169,125
Reclassification of inventory to net investment in direct financing lease	$	—		$	747,944
Acquisition of equipment pursuant to a capital lease	$	163,407		$	—
Issunace of common stock with convertible debt	$	—		$	54,470
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 

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 and nine months ended September 30, 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., Innovation in Motion Inc., FIN Holdings 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. For the three and nine months ended September 30, 2017, and the three months ended September 30, 2016, all potentially diluted shares were excluded from the calculation of diluted EPS because their impact was anti-dilutive. The following table illustrates the computation of basic and diluted EPS for the nine months ended September 30, 2016:

	Net Income			Shares		Per Share Amount
Basic EPS
Income available to stockholders	$	2,526,783			212,790,554	$	0.01
Effect of Dilutive Securities
Stock Options		—			17,037,007
Warrants		—			21,350,729
Convertible Debt		(15,533,674	)		38,680,621
Dilute EPS
Loss available to stockholders plus assumed conversions	$	(12,806,891	)		289,858,911	$	(0.04	)

9 

Going concern

As of September 30, 2017, the Company had an accumulated deficit of approximately $63.5 million. For the nine months ended September 30, 2017, the Company earned revenue of approximately $1.8 million and incurred a loss from operations of approximately $9.3 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

Inventories of kiosks held by IDGS S.A.S are stated at the lower of cost (using the first-in, first-out method) or market. The kiosks will provide electronic ticketing for transit systems. 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 as of September 30, 2017 consist of cards inventory and kiosks that have not been placed into service and inventory as of December 31, 2016 consist solely of cards inventory. The Company, in 2017, acquired approximately $707,000 of additional kiosks and components.

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.

Other Assets

The increase in other assets is principally due to its continuing investments in its technology platform prior to the respective assets being placed into service.

Revenue Recognition

Revenue is recognized when persuasive evidence of arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is probable. Revenue 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 benefits to the end user in which additional resources or services are required to be provided.

Revenue from club-based services arrangements that allow for the use of hosted software product 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 monthly. 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.

10 

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 and nine months ended September 30, 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 the nine months ending September 30, 2017 and 2016 is not subject to tax.

Recent Accounting Pronouncements

On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under generally accepted accounting principles in the United States. The core principal of the new standard is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The Company will adopt the new standard on January 1, 2018 and expects to use the modified retrospective approach upon adoption. The Company believes the impact of adopting the new accounting standard will not have a significant impact on its consolidated financial position, results of operations or cash flows. However, the Company’s evaluation of the new standard and the final determination of the impact of the new standard’s adoption is still in progress.

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 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”) 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.

11 

NOTE 2 – 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 nine months ended September 30, 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		—			—			—			9,247		9,247
Amortization		(119,037	)		(176,972	)		(2,113	)		—		(298,122	)
Carrying Value at September 30, 2017	$	1,327,129		$	1,823,886		$	5,954		$	28,447	$	3,185,416

The following is a summary of intangible assets as of September 30, 2017:

	Customer Relationships			Intellectual Property			Non-Compete			Patent Pending		Total
Cost	$	1,587,159		$	2,444,646		$	14,087		$	28,447	$	4,074,339
Accumulated amortization		(260,030	)		(620,760	)		(8,133	)		—		(888,923	)
Carrying Value at September 30, 2017	$	1,327,129		$	1,823,886		$	5,954		$	28,447	$	3,185,416

Future expected amortization of intangible assets is as follows for the three-month period remaining in 2017 and the calendar years ending from 2018-2022 and thereafter: 

2017		101,927
2018		407,706
2019		407,706
2020		402,109
2021		398,567
2022		389,076
Thereafter		1,078,325
	$	3,185,416

NOTE 3 – PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following as of September 30, 2017 and December 31, 2016:

	2017			2016
Computers and equipment	$	197,491		$	192,928
Equipment under capital lease (see note 12)		163,407			—
Furniture and fixtures		109,200			109,200
		470,098		$	302,128
Less Accumulated depreciation		(227,808	)		(186,446	)
Property and equipment, net	$	242,290		$	115,682

Depreciation expense totaled $48,191 and $24,029 for the nine months ended September 30, 2017 and 2016, respectively.

See Note 11 for equipment amounting to $163,407 acquired pursuant to a capital lease.

12 

NOTE 4 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following as of September 30, 2017 and December 31, 2016:

	2017		2016
Trade payables	$	353,793	$	341,002
Accrued interest		295,657		600,624
Accrued payroll and related liabilites		626,712		421,771
Other accrued expenses		408,215		324,503
Total	$	1,684,377	$	1,687,900

NOTE 5 - 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 6) 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 approximately $6,331,000 into 84,822,006 shares of Company common stock with a fair value of approximately $21,610,000. 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 7), a loss on the modification of warrants of approximately $0.2 million, and a loss on the 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 6 and 7. 

13 

The following is a summary of notes payable as of September 30, 2017 and December 31, 2016:

	2017		2016
In connection with the acquisition of MultiPay in 2015, the Company assumed three promissory notes. The interest rate was 15.47% per annum. Note was fully repaid in the third quarter of 2017.	$	—	$	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 in the amount of $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 nine months of the term of the Notes and 15% per annum for the remaining nine 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
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 $1,147,500.  This loan is due to a Board Member upon his election in September 2017. The Company allocated the proceeds to the common stock based on their relative fair value and recorded a discount of $391,304 to be amortized into interest expense over the two-year term of the note.  The Company also paid debt issuance costs consisting of a cash fee of $120,000 and 1,020,000 shares of common stock of the Company with a fair value of $306,000, of which $208,696 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	$	3,000,000		$	3,497,819
Unamortized Deferred Debt Discounts		(561,158	)		(159,375	)
Unamortized Deferred Debt Issuance Costs		(207,194	)		(177,022	)
Notes Payable, Net	$	2,231,648		$	3,161,422

14 

The following is a roll-forward of the Company’s notes payable and related discounts for the nine months ended September 30, 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		(59,819	)		—			—			(59,819	)
Conversions		(3,438,000	)		—			—			(3,438,000	)
Amortization		—			280,618			439,944			720,562
Balance at September 30, 2017	$	3,000,000		$	(207,194	)	$	(561,158	)	$	2,231,648

Future maturities of notes payable are as follows for the three-month period remaining in 2017 and the calendar years ending from 2018-2019:

2017	$	—
2018		—
2019		3,000,000
	$	3,000,000

 15

NOTE 6 - CONVERTIBLE NOTES PAYABLE, NET

See Note 5 for transactions associated with the reduction in convertible notes payable on January 31, 2017.

Convertible notes consisted of the following as of September 30, 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 5.   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 September 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 7. 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 7. 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 nine months ended September 30, 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 September 30, 2017	$	—		$	—		$	—		$	—

 16

NOTE 7 –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 5 above, the Company on January 31, 2017 entered into Conversion Agreements with Investors pursuant to which each 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 September 30, 2017.

A summary of derivative activity for the nine months ended September 30, 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 party 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 September 30, 2017	$	—

NOTE 8 – 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 March 2017, Mr. Selzer purchased an additional 500,000 shares of common stock of the latest offering as described in Note 9.

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.

 17

The Company leases it Corporate headquarters from Bridgeworks LLC, (“Bridgeworks”), a company providing office facilities to emerging companies, principally owned by Mr. Beck and his family. Mr. Beck is Chairman, Chief Executive Officer and President of the Company. During the first nine months of 2017, the Company paid Bridgeworks $52,322.

The Company entered into a consulting agreement with Graham Beck, a son of Mr. Beck for digital marketing services beginning April 1, 2017 at a rate of $2,500 per month. During the first nine months of 2017, the expense associated with Graham Beck was $15,000.

On September 13, 2017, one of the former officers and a former director (Douglas Solomon) of the Company entered into a Confidential Settlement Agreement and General Release (the “Settlement Agreement”) pursuant to which the Offer Letter and Executive Retention Agreement entered between the Company and Mr. Solomon dated January 31, 2017, were terminated effective September 1, 2017 and Mr. Solomon resigned as Executive Director, Government Relations Enterprise Security upon execution of the Settlement Agreement. The Company agreed to pay Mr. Solomon approximately $8,000 representing unused 2017 vacation entitlement and pay for one day, reimburse Mr. Solomon for all expenses consistent with the Company’s reimbursement policy and pay Mr. Solomon’s COBRA employee only benefits through September 2018 if Mr. Solomon elected to be included under such coverage. The parties also provided mutual releases from all claims, demands, actions, causes of action or liabilities. As further consideration for entering into the Settlement Agreement, Mr. Solomon and the Company entered into an Agency Agreement dated September 13, 2017 pursuant to which Mr. Solomon agreed to be engaged as a non-exclusive sales agent for the Company’s products on an as needed basis for a term of three years in consideration of sales commissions including a monthly non-refundable minimum commission to be paid for 24 months. During the quarter ended September 30, 2017, the Company paid Mr. Solomon $13,028 under the terms of such agreement.

 18

NOTE 9 – STOCKHOLDER’S EQUITY (DEFICIT)

Common Stock

On September 28, 2017, the stockholders of the Company approved increasing the number of authorized shares of common stock from 500,000,000 to 1,000,000,000.

As described in Note 5, 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. (“Network 1”), a registered broker-dealer, 1,200,000 shares of common stock of the Company in conjunction with its services.

As described in Notes 5 and 6, on January 31, 2017, the Company entered into Conversion Agreements with Investors pursuant to which each 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 an approximately of 84,822,000 shares of Company common stock.

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 $4,000,000. The proceeds were received during 2017. 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 issued Network 1,000,000 shares of common stock of the Company.

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

During the nine months ended September 30, 2017, the Company issued approximately 594,000 shares of common stock as consideration for services. The fair value of the shares, totaling approximately $140,000 was estimated based on the publicly quoted trading price and recorded as expense.

In connection with the engagement of the CEO and Chief Financial Officer (“CFO”) on January 31, 2017 (the “Grant Date”), the Company agreed to enter into Restricted Stock Purchase Agreements (the “Restricted Shares”) with the CEO and CFO to provide 15,000,000 and 5,000,000 shares of common stock, respectively, at a per share price of $0.0001. On September 29, 2017, and in connection with the increase in the authorized shares, the Company issued the Restricted Shares. The shares are restricted and are not able to be sold or otherwise transferred by the CEO or CFO until such time the Restricted Shares vest. The Restricted Shares vest only upon achieving one of several performances thresholds. As of September 30, 2017, none of the performance thresholds have been met. Accordingly, no compensation expense has been recorded in connection with the issuance of these Restricted Shares. Compensation expense associated with these Restricted Shares will be recorded based on the fair value of the shares on the date it is determined that it is probable that one or more of the performance thresholds will be met in the near term.

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.

Furthermore, as more fully described above in Note 5, 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 nine months ended September 30, 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 September 30, 2017		47,538,697		$	0.08		2.9 Years

 19

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 when Mr. Beck became 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. Additionally, the Company granted one employee stock options to acquire 1,000,000 shares of common stock at an exercise price of $0.29 per share for a period of ten years.

The Company determined the grant date fair value of the options granted during the Nine months ended September 30, 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 nine months ended September 30, 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		21,000,000		$	0.11		10.0	$	—
Forfeitures		(3,425,000	)	$	0.06		10.0	$	—
Outstanding as of September 30, 2017		104,500,000		$	0.19		9.1	$	3,989,000
Exercisable as of September 30, 2017		78,704,170		$	0.17		8.7	$	2,788,000

 20

The following table summarizes stock option information as of September 30, 2017:

Exercise Prices		Outstanding		Weighted Average Contractual Life		Exercisable
$	0.0001		3,500,000		8.00 Years		3,500,000
$	0.05		33,950,000		8.86 Years		23,312,502
$	0.10		27,250,000		9.05 Years		15,583,336
$	0.15		6,300,000		7.85  Years		4,258,332
$	0.25		500,000		8.50 Years		300,000
$	0.29		1,000,000		9.75 Years		—
$	0.40		1,000,000		8.42 Years		1,000,000
$	0.45		31,000,000		8.00 Years		30,750,000
	Total		104,500,000		8.57 Years		78,704,170

Stock option expense for the three and nine months ended September 30, 2017 was approximately $625,000 and $4,892,000, respectively, and for the corresponding periods ended September 30, 2016 was $654,000 and $6,806,000, respectively. The three and nine months ended September 30, 2017, included approximately $61,000 and $1,565,000, respectively of non-employee stock compensation. As of September 30, 2017, there was approximately $3,652,000 of unrecognized compensation costs related to stock options outstanding which will be expensed through 2020.

NOTE 10 – DIRECT FINANCING LEASE

In September 2015, the Company and an entity in Colombia entered into a rental contract for the rental of 78 kiosks to provide cash collection and fare services at transportation stations. The lease term began in May 2016 when the 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’s 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 monthly and initial direct costs are not considered significant. The transaction resulted in incremental revenue in the nine months ended September 30, 2017 of approximately $56,000.

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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 for the three-month period remaining in 2017 and the calendar years ending from 2018-2022 and thereafter: 

2017	$	30,537
2018		122,145
2019		122,145
2020		122,145
2021		122,145
2022		122,145
Thereafter		407,175
Sub-total		1,048,437
Less deferred revenue		(364,543	)
Net investment in lease	$	683,894

NOTE 11 – LEASE OBLIGATION PAYABLE

The Company entered into a lease in March 2017 for the rental of its printer for its secured plastic and credential card products business under an arrangement that is classified as a 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 September 30, 2017 is $18.752. 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 September 30, 2017. The interest rate related to the lease obligation is 12% and the maturity date is March 31, 2022. Future cash payment related to this capital lease are as follow for the three-month period remaining in 2017 and the calendar years ending from 2018-2022 and thereafter. 

2017	$	10,773
2018		43,096
2019		43,096
2020		43,096
2021		43,096
2022		10,776
Total minimum lease payments		193,933
Less: Amount representing interest		44,645
Present value of minimum lease payments	$	149,288

NOTE 12 – COMMITMENTS AND CONTINGENCIES

Legal Matters

From time to time, Company may be involved in legal proceedings in the ordinary course of business, which could result in litigation. While any litigation contains an element of uncertainty, we have no reason to believe that the outcome of such proceedings will have a material adverse effect on the financial condition or results of operations of the Company. 

Other

The Company entered into an Agency Agreement dated September 13, 2017 pursuant to which a former officer and director agreed to be engaged as a non-exclusive sales agent for the Company’s products on an as needed basis for a term of three years in consideration of sales commissions including a monthly non-refundable minimum commission to be paid for 24 months. The minimum commitment during the term of the agreement is approximately $335,000.

In September 2017, the Company entered into a consulting agreement and agency agreement with an organization to provide ongoing business development and marketing analysis/support beginning October 1, 2017 for a period of 24 months but is cancelable at the end of the first year. The minimum commitment for the first year is $180,000 payable monthly at a rate of $15,000. The agreement also provides a one-time payment of $75,000 upon the Company meeting a performance target. The agency agreement provides for additional compensation to be paid upon successful customer acquisition and cash collection from introduced new customers.

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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 are located at 780 Long Beach Boulevard, Long Beach, NY 11561 and our main phone number is (407) 951-8640. We maintain our website at www.ipsidy.com. The contents of our website are not incorporated into, or otherwise to be regarded as part of this Report on this Quarterly Report on Form 10-Q.

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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.

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 September 30, 2017, the Company had an accumulated deficit of approximately $63.5 million. For the nine months ended September 30, 2017 the Company earned revenue of approximately $1.8 million and incurred a loss from operations of approximately $9.3 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 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.

Adjusted EBITDA

This discussion includes information about Adjusted EBITDA that is not prepared in accordance with GAAP. Adjusted EBITDA is not based on any standardized methodology prescribed by GAAP and is not necessarily comparable to similar measures presented by other companies. A reconciliation of this non-GAAP measure is included below.

Adjusted EBITDA is a non-GAAP financial measure that represents GAAP net income (loss) adjusted to exclude (1) interest expense, (2) interest income, (3) provision for income taxes, (4) depreciation and amortization, (5) stock-based compensation expense and (6) certain other items management believes affect the comparability of operating results.

Management believes that Adjusted EBITDA, when viewed with our results under GAAP and the accompanying reconciliations, provides useful information about our period-over-period results. Adjusted EBITDA is presented because management believes it provides additional information with respect to the performance of our fundamental business activities and is also frequently used by securities analysts, investors and other interested parties in the evaluation of comparable companies. We also rely on Adjusted EBITDA as a primary measure to review and assess the operating performance of our company and our management, and it will be a focus as we invest in and grow the business. Additionally, we will consider using Adjusted EBITDA in connection with our executive compensation in 2018.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation from, or as a substitute for, analysis of our results as reported under GAAP. Some of these limitations are:

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

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

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

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

Because of these limitations, adjusted EBITDA should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only as a supplement to our GAAP results.

Reconciliation of Net Loss to Adjusted EBITDA 

	Three Months Ended						Nine months Ended
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016
Net (loss) gain	$	(2,110,019	)	$	(4,333,036	)	$	(14,581,691	)	$	2,526,783
Add Back:
Interest expense		230,698			853,543			1,125,880			3,126,320
Conversion of debt, derivative liability, and modifications		—			1,594,636			4,106,652			(16,082,616	)
Depreciation and amortization		99,779			127,473			346,313			388,233
Write-off of asset		—			225,862			—			225,862
Taxes		—			—			—			—
Stock compensation		624,581			654,066			4,891,251			6,805,776
Adjusted EBITDA (Non-GAAP)	$	(1,154,961	)	$	(877,456	)	$	(4,111,595	)	$	(3,009,642	)

The increase in adjusted EBITDA loss in 2017 compared to 2016 is principally due to the Company’s investment in resources required to provide the support for future operations.

Three and Nine Months Ended September 30, 2017 and September 30, 2016

Revenues, net

During the three and nine months ended September 30, 2017, the Company had revenues of approximately $0.6 million and $1.8 million, respectively, compared to $0.6 million and $1.4 million in the three and nine months ended September 30, 2016, respectively. The increase in the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 is principally related to Cards Plus and ID Solutions which were acquired on February 8, 2016.

Cost of sales

During the three and nine months ended September 30, 2017, cost of sales were higher than the cost of sales in the three and nine months ended September 30, 2016 due to the revenue increase at Cards Plus which was acquired in February 2016.

Operating Expenses

During the three month and nine months ended September 30, 2017 general and administrative expenses were $2.3 million and $10.3 million, respectively, compared to general and administrative expenses of $2.2 million and $10.7 million for the three and nine months ended September 30, 2016, respectively. Stock compensation was approximately $.1 million and $1.9 million less in the three and nine months in 2017 compared to 2016. The increase in expenses in 2017 other than the decrease in stock compensation was principally due to higher staff compensation expense and consulting services as resources were added to support the current and future operations.

During the nine months ended September 30, 2017, the Company’s research and development expense decreased by approximately $0.3 million as the nine months ended September 30, 2016 included a write-off of certain costs associated with assets being tested which were no longer considered viable.

Depreciation and amortization expense remained largely consistent with the three and nine months ended September 30, 2017 compared to September 30, 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 September 30, 2016, the Company experienced an increase in the derivative liability of approximately $1.6 million in the three months and a reduction in the derivative liability of approximately $16.1 million in the nine months. The decline in the derivative liability for the nine months is associated with the lower stock price.

During the nine months ended September 30, 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 nine months of 2017, the Company recorded an expense of $0.5 million due to these valuations. Additionally, the Company recorded a gain on the extinguishment of certain notes payable (approximately $2.8 million), and a loss on the modification of derivatives (approximately $.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 5, 6, and 7).

Interest expense

Interest expense decreased in the three and nine months ended September 30, 2017 compared to the prior year 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 September 30, 2017, the Company had approximately $1.4 million of cash and had $0.8 million of net working capital. Stockholders’ equity was approximately $10.5 million as of September 30, 2017.

Cash used in operating activities was approximately $4.9 million in the nine months ended September 30, 2017 compared to $3.1 million in the nine months ended September 30, 2016 as the Company invested in staff and consulting services to support current and future operations.

The Company raised $7.0 million of additional financing in the first nine months of 2017. the Company entered into and closed a Securities Purchase Agreement with an accredited investor pursuant to which the Company borrowed $3.0 million on January 31, 2017 in consideration of a Senior Unsecured Note and an aggregate of 4,500,000 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 $4.0 million.

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 6, on January 31, 2017, the Company converted approximately $6.3 million of debt and accrued interest in 84,822,006 shares of Company’s 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 price 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 previously accounted for as derivative liabilities 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 nine months of 2017 and provided the current period 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. We are expecting to raise capital in the fourth quarter of 2017.

26 

Additionally, during the first nine 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.

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 10-K 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 but improving 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, and as a result of the Company’s March 31, 2017 Form 10-Q amended filing, 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.

- An outside consultant assists in the preparation of the annual and quarterly financial statements and partners with the Company to ensure compliance with US GAAP and SEC disclosure requirements.

- Outside counsel assists the Company in the external attorneys to review and editing of the annual and quarterly filings and to ensure compliance with SEC disclosure requirements.

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, who were appointed to such offices on January 31, 2017 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 evaluated its personnel resources and processes and have made certain changes to improve its efficiency and effectiveness in financial reporting.  On August 1, 2017. the Company hired one additional financial resource.

27 

- The Company continues to use independent consultants and specialists to support its accounting functions which could include the implementation of new accounting standards such as revenue recognition.

- The Compared expanded significantly in 2015 and 2016 as a result of the acquisition of operations in Colombia and South Africa. Due to the Company’s limited human and capital resources, it is in the process of establishing the proper review of the financial reporting and operations of its foreign subsidiaries.

- 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 its 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 enhanced its internal governance and compliance function by forming committees and it will have periodic and regular meetings to support its internal governance and compliance functions including the formation of a formal audit committee in the 4^th quarter of 2017.   

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 30, 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. 

28 

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 approximately $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. 

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 $15 million. Mr. Stern became a Board Member upon his election in September 2017.

 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 $4,000,000 or a per share price of $0.20. The Company has received proceeds of $3,170,000 as of March 22, 2017. One individual March 2017 Accredited Investor has agreed to fund $830,000, of which $400,000 was received the second quarter of 2017 and the balance will be received in the third quarter of 2017. In connection with this private offering, the Company paid Network 1, a registered broker-dealer, a cash fee of $240,000 and issued Network 1,000,000 shares of common stock of the Company upon increasing its authorized shares of common stock.

On January 31, 2017, in connection with the issuance of the Stern Note an aggregate of 4,500,000 shares of Common Stock, the Company issued Network 1, a registered broker-dealer 1,200,000 shares of common stock of the Company in conjunction with its services.

On September 29, 2017, the Company issued to the CEO and CFO in connection with their Restricted Stock Purchase Agreements 15,000,000 and 5,000,000 shares of common stock.   

During 2017, the Company issued approximately 594,000 shares of common stock issued in consideration of certain technical services.

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. 

29 

ITEM 5. OTHER INFORMATION

Annual Meeting

The Company held its Annual Meeting on September 28, 2017 in Long Beach, New York. Of the 336,565,097 shares of Common Stock outstanding on August 29, 2017, the record date, 281,040,309 shares were represented at the Annual Meeting, in person or by proxy, constituting a quorum. The proposals considered at the Annual Meeting are described in detail in the Proxy Statement. The proposals described below were voted upon at the Annual Meeting and the number of votes cast with respect to each proposal was as set forth below:

(1) Elect five (5) directors until his successor is duly elected and qualified, or until his earlier death, resignation or removal. The five directors receiving the highest vote were appointed to the board. The following directors were elected to the board.

	For	Withheld
PHILIP D. BECK	266,299,861	14,740,448
HERBERT SELZER	266,799,861	14,240,448
RICKY SOLOMON	266,299,861	14,740,448
THEODORE STERN	266,799,861	14,240,448
THOMAS SZOKE	276,511,543	4,528,766

(2) Ratify the appointment of Cherry Bekaert LLP as the Company’s independent auditors for the fiscal year ending December 31, 2017. This matter was determined based on majority of the shares cast.

For	Against	Abstain
266,799,961	14,240,348	0

(3) Approving the 2017 Incentive Stock Plan and to authorize 70,000,000 shares of Common Stock for issuance thereunder. This matter was determined based on majority of the shares cast.

For	Against	Abstain
195,348,041	60,724,008	24,968,260

(4) Approving the amendment of the Company’s Certificate of Incorporation to increase the number of authorized shares of common stock from 500,000,000 to 1,000,000,000. This matter was determined based on majority of the shares outstanding.

For	Against	Abstain
232,319,547	48,720,762	0

(5) Approving an amendment to our certificate of incorporation to effect a reverse stock split at a ratio not less than 1-for-2 and not greater than 1-for-25, with the exact ratio to be set within that range at the discretion of our board of directors before December 31, 2018 without further approval or authorization of our stockholders. This matter was determined based on majority of the shares cast.

For	Against	Abstain
187,964,609	67,607,440	25,468,260

Amendment to the Certificate of Incorporation

As detailed above, on September 28, 2017, the stockholders of the Company approved an amendment to the Company’s Certificate of Incorporation, increasing the number of authorized shares of common stock from 500,000,000 to 1,000,000,000. The increase in authorized shares was effected pursuant to a Certificate of Amendment to the Certificate of Incorporation filed with the Secretary of State of the State of Delaware.

Other

On December 30, 2016, LATAM, a wholly owned subsidiary of the Company, entered into a Contract for the Provision of Cash Collection Services (the “Contract”) with Recaudo Bogota S.A.S. (“RB”), a Colombian company, pursuant to which the Company agreed to supply, maintain and provide platform services for 740 unattended payment collection and fare ticketing kiosks, in consideration of approximately $30 million dollars (excluding VAT) payable over the ten year period of the Contract. The parties are currently re-negotiating the terms of the Contract, including a potential termination of the Contract by mutual consent. There is no guarantee that the parties will be able to enter a definitive agreement pertaining to the re-negotiation or cancellation of the Contract.

30 

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
3.5	(63)	Certificate of Amendment to the Certificate of Incorporation dated October 3, 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
4.3	(17)	Form of Securities Purchase Agreement by and between ID Global Solutions Corporation and the September 2015 Investors

4.4	(18)	Form of Security Agreement by and between ID Global Solutions Corporation and the September 2015 Investors
4.5	(19)	Form of Secured Convertible Debenture issued to the September 2015 Investors
4.6	(20)	Form of Common Stock Purchase Warrant issued to the September 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

31 

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
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

32 

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
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

33 

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, 2105
10.44	(58)	Form of Indemnity Agreement
10.45	(62)	Confidential Settlement Agreement and General Release between Ipsidy Inc. and Douglas Solomon dated September 13, 2017
10.46	(62)	Agency Agreement between Ipsidy Inc. and Douglas Solomon dated September 13, 2017
10.47		Restricted Stock Agreement dated September 29, 2017 between Philip D. Beck and Ipsidy Inc.
10.48		Restricted Stock Agreement dated September 29, 2017 between Stuart P. Stoller and Ipsidy Inc.
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 *

* 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 September26, 2014 (File No.: 333-193924), as amended, as the same exhibit number as the exhibit number listed here, and incorporated herein by this reference

34 

(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 September1, 2015.

(14)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on September1, 2015.

(15)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on September1, 2015.

(16)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on September1, 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.

35 

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

(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.

36 

(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.

(62)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on September 14, 2017

(63)          Incorporated by reference to the Form 8-K Current Report filed with the Securities Exchange Commission on October 3, 2017

37 

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: November 13, 2017

38 

EX-10.47

 Exhibit 10.47

IPSIDY INC.

RESTRICTED STOCK AGREEMENT

This Restricted Stock Agreement (the “Agreement”) is made and entered into as of September 29, 2017 (the “Effective Date”) by and between Ipsidy Inc., a Delaware corporation (the “Company”), and the purchaser named below (the “Purchaser”).

Name of Purchaser	Total Number of Shares	Purchase Price Per Share	Total Purchase Price
Philip Beck	15,000,000	$0.0001	$1,500.00

1.             PURCHASE OF SHARES.

1.1           Purchase of Shares. On the Effective Date and subject to the terms and conditions of this Agreement, Purchaser hereby purchases from the Company, and the Company hereby sells to Purchaser, the Total Number of Shares set forth above (the “Shares”) of the Company’s Common Stock, $0.0001 par value per share, at the Purchase Price Per Share as set forth above (the “Purchase Price Per Share”) for a Total Purchase Price as set forth above (the “Purchase Price”). As used in this Agreement, the term “Shares” includes the Shares purchased under this Agreement and all securities received (a) in replacement of the Shares, (b) as a result of stock dividends or stock splits with respect to the Shares, and (c) in replacement of the Shares in a merger, recapitalization, reorganization or similar corporate transaction.

1.2           Payment. Company hereby agrees to make payment of the Purchase Price on behalf of Purchaser by way of bonus payment, receipt of which is acknowledged by the Company.

2.            COMPANY’S REPURCHASE OPTION FOR UNVESTED SHARES. The Company, or its assignee, shall have the option to repurchase all or a portion of the Purchaser’s Unvested Shares (as defined below) on the terms and conditions set forth in this Section (the “Repurchase Option”) in the event of Purchaser’s termination for any reason whatsoever except in the event of Termination Upon Change of Control (as defined in the Executive Retention Agreement entered into between Company and Purchaser on the date hereof (“Retention Agreement”).

2.1           Termination and Termination Date. In case of any dispute as to whether Purchaser is terminated, the Board of Directors of the Company or any Compensation Committee of the Board if such then exists (the “Board”) shall have discretion to determine whether Purchaser has been terminated and the effective date of such termination (the “Termination Date”).

2.2           Vested and Unvested Shares. Shares that are vested pursuant to the schedule set forth in this Section 2.2 are “Vested Shares.” Shares that are not vested pursuant to such schedule are “Unvested Shares.”

2.2.1       Vesting of Shares. On the Effective Date all of the Shares will be Unvested Shares (the “Unvested Shares”). If Purchaser has continuously provided services to the Company (which shall include for this purpose any subsidiary or parent of the Company), whether as an employee, director, officer or consultant at all times from the Effective Date to the date upon which any of the applicable “Performance Goals” set forth in the schedule below (the “Performance Based Vesting Schedule”) are achieved (such date the “Performance Date”), the “Number of Unvested Shares Becoming Vested Shares” on such Performance Date shall become Vested Shares upon written certification by the Board that the corresponding “Performance Goal” as set forth in the Performance Based Vesting Schedule have been satisfied; provided that such Performance Date occurs on or prior to the last day of the applicable “Performance Period” specified in the Performance Based Vesting Schedule. The Board shall make all such determinations with respect to the achievement and timing of the Performance Goal within the applicable Performance Period. Notwithstanding the foregoing, any Unvested Shares that do not become Vested Shares within the applicable Performance Period shall be forfeited and may be repurchased pursuant to Section 2.3 hereof.

-1-

Performance Based Vesting Schedule

A.            Performance Goal

(1) the occurrence of a Change of Control, (as defined below); OR

(2) the filing of Company’s Annual Report on Form 10K in any year, which Report shows that the Company has achieved Adjusted EBITDA for the year, as reported therein, which is not less $10,000,000; OR

(3) the Company’s shares becoming listed on a national securities exchange AND (x) if the Board determines that additional equity funding is required, the Company’s closing (whether at the time of listing or subsequent thereto) of a public offering of its equity, raising not less than $10,000,000 in gross proceeds in the aggregate, AND (y) the Company achieving a valuation of not less than $125,000,000 which shall be satisfied either by the closing of the aforementioned public offering with an offering price which equates to a valuation of the Company, which is not less than $125,000,000; or the Company’s shares achieving a closing price on such exchange on 10 trading days out of a period of 30 days, which when multiplied by the number of issued and outstanding shares of Common Stock which are so listed at such time equate to a market capitalization of the Company of not less than $125,000,000; OR

(4) the filing of an Annual Report on Form 10K, or a Quarterly Report on Form 10Q, showing that the Company has generated total revenue of not less than $20,000,000 during the 12 month period ending with the period to which the relevant report relates. If such conditions are fulfilled, or waived by the Board, the above bonus shall be payable with the next payroll following the occurrence of the relevant event, subject to all applicable deductions required by law.

“Change of Control” shall mean (1) the Company is party to a merger or consolidation, or series of related transactions, which results in the voting securities of the Company outstanding immediately prior thereto failing to continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), directly or indirectly, at least fifty (50%) percent of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; OR (2) the sale or disposition of all or substantially all of the Company’s assets, or consummation of any transaction, or series of related transactions, having similar effect (other than to a subsidiary of the Company)

B.            Expiration Date of Performance Period: The Termination Date

C.            Number of Unvested Shares Becoming Vested Shares: 15,000,000

If the number of outstanding common shares is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company, without consideration, then the number of Shares subject to this Agreement, the number of Shares, and all other performance criteria set forth in this Section 2.2.1 will be equitably and proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and compliance with applicable securities laws; provided that fractions of a Share will not be issued but will either be replaced by a cash payment equal to the Fair Market Value (as defined below) of such fraction of a Share or will be rounded up to the nearest whole Share, as determined by the Board.

-2-

2.3         Exercise of Repurchase Option. At any time within ninety (90) days after the Purchaser’s Termination Date or the Expiration Date of the Performance Period, the Company, or its assignee, shall repurchase any or all the Purchaser’s Unvested Shares by giving Purchaser written notice of exercise of the Repurchase Option, specifying the number of Unvested Shares to be repurchased. Such Unvested Shares shall be repurchased at the price of $1 in the aggregate (the “Repurchase Price”).

2.4         Right of Termination Unaffected. Nothing in this Agreement shall be construed to limit or otherwise affect in any manner whatsoever the right or power of the Company (or any Parent or Subsidiary of the Company) to terminate Purchaser’s employment or other relationship with Company (or the Parent or Subsidiary of the Company) at any time, for any reason or no reason, with or without cause.

3.            REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and warrants to the Company as follows.

3.2           Access to Information. Purchaser has had access to all information regarding the Company and its present and prospective business, assets, liabilities and financial condition that Purchaser reasonably considers important in making the decision to purchase the Shares, and Purchaser has had ample opportunity to ask questions of the Company’s representatives concerning such matters and this investment.

3.3           Understanding of Risks. Purchaser is fully aware of: (a) the highly speculative nature of the investment in the Shares; (b) the financial hazards involved; (c) the lack of liquidity of the Shares and the restrictions on transferability of the Shares (e.g., that Purchaser may not be able to sell or dispose of the Shares or use them as collateral for loans); (d) the qualifications and backgrounds of the management of the Company; and (e) the tax consequences of investment in the Shares.

3.4           Purchase for Own Account for Investment. Purchaser is purchasing the Shares for Purchaser’s own account for investment purposes only and not with a view to, or for sale in connection with, a distribution of the Shares within the meaning of the Securities Act. Purchaser has no present intention of selling or otherwise disposing of all or any portion of the Shares and no one other than Purchaser has any beneficial ownership of any of the Shares.

3.5           No General Solicitation. At no time was Purchaser presented with or solicited by any publicly issued or circulated newspaper, mail, radio, television or other form of general advertising or solicitation in connection with the offer, sale and purchase of the Shares.

3.6           SEC Rule 144. Purchaser has been advised that SEC Rule 144 promulgated under the Securities Act, which permits certain limited sales of unregistered securities, may be available with respect to the Shares and, in any event, requires that the Shares be held for a minimum of six (6) months, and in certain cases one (1) year, after they have been purchased and paid for (within the meaning of Rule 144). Purchaser understands that Rule 144 may indefinitely restrict transfer of the Shares so long as Purchaser remains an “affiliate” of the Company or if “current public information” about the Company (as defined in Rule 144) is not publicly available.

4.            ADDITIONAL RESTRICTIONS UPON SHARE OWNERSHIP OR TRANSFER.

4.1           Rights as a Stockholder. Subject to the terms and conditions of this Agreement, Purchaser will have all of the rights of a stockholder of the Company with respect to the Shares from and after the date that Shares are issued to Purchaser until such time as Purchaser disposes of the Shares or the Company and/or its assignee(s) exercise(s) the Repurchase Option except the right to receive cash distributions or dividends, which to the extent the same are declared shall be held in escrow by the Company and shall only be paid if and to the extent that the Shares become Vested Shares. Upon exercise of the Repurchase Option, Purchaser will have no further rights as a holder of the Shares so purchased upon such exercise, other than the right to receive payment for the Shares so purchased in accordance with the provisions of this Agreement.

-3-

4.2           Legends. Unless and until the Shares become Vested Shares and are registered under the Securities Act, all certificates representing the Shares and any certificates subsequently issued in substitution therefor and any certificate for any securities issued pursuant to any stock split, share reclassification, stock dividend or other similar capital event shall bear legends in substantially the following form:

THESE SECURITIES ARE SUBJECT TO A RESTRICTED STOCK AGREEMENT BETWEEN THE STOCKHOLDER AND THE COMPANY WHICH CONTAINS RESTRICTIONS ON TRANSFER AND HAVE NOT BEEN REGISTERED OR OTHERWISE QUALIFIED UNDER THE SECURITIES ACT OF 1933 (THE ‘SECURITIES ACT’) OR UNDER THE APPLICABLE OR SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF WITHOUT THE CONSENT OF THE COMPANY AND IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS THEREFROM.

and/or such other legend or legends as the Company and its counsel deem necessary or appropriate. Appropriate stop transfer instructions with respect to the Shares have been or may be placed with the Company’s transfer agent.

4.3           Encumbrances on Shares. Purchaser may not grant a lien or security interest in, or pledge, hypothecate or encumber, any Unvested Shares.

4.4           Restrictions on Transfers. Unvested Shares may not be sold or otherwise transferred by Purchaser without the Company’s prior written consent. Notwithstanding the foregoing, Purchaser shall be able to transfer the Shares, whether or not Vested Shares, for bona fide estate planning purposes to a person or to an entity that constitutes an Authorized Transferee. Subject to Company’s insider trading and other related policies, Purchaser hereby agrees that Purchaser shall make no disposition of the Shares (other than as permitted by this Agreement) unless and until:

(a)            Purchaser shall have notified the Company of the proposed disposition and provided a written summary of the terms and conditions of the proposed disposition;

(b)            Purchaser shall have complied with all requirements of this Agreement applicable to the disposition of the Shares, including the Repurchase Option; and

(c)            Purchaser shall have provided the Company with written assurances, in form and substance satisfactory to counsel for the Company, that (i) the proposed disposition does not require registration of the Shares under the Securities Act or under any state securities laws, and (ii) all appropriate actions necessary for compliance with the registration and qualification requirements of the Securities Act and any state securities laws, or of any exemption from registration or qualification, available thereunder (including Rule 144) have been taken.

Each person (other than the Company) to whom the Shares are transferred by means of one of the permitted transfers specified in this Agreement must, as a condition precedent to the validity of such transfer, acknowledge in writing to the Company that such person is bound by the provisions of this Agreement and that the transferred Shares are subject to the Repurchase Option granted hereunder, to the same extent such Shares would be so subject if retained by the Purchaser or otherwise determined by the Board.

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4.5           Stop-transfer Orders. Purchaser understands and agrees that to ensure compliance with the restrictions imposed by this Agreement, the Company may issue appropriate “stop-transfer” instructions to its transfer agent. The Company will not be required (a) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (b) to treat as owner of such Shares, or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares have been so transferred.

5.            TAX WITHOLDING AND TAX CONSEQUENCES. The Company may withhold federal, state, local and foreign taxes as required and permitted by applicable law and is authorized to withhold from Shares otherwise deliverable to Purchaser upon vesting that number of Shares having a Fair Market Value determined as of the date of withholding equal to the minimum amount required to be withheld. PURCHASER UNDERSTANDS THAT PURCHASER MAY SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF PURCHASER’S PURCHASE OR DISPOSITION OF THE SHARES. PURCHASER REPRESENTS (a) THAT PURCHASER HAS CONSULTED WITH ANY TAX ADVISER THAT PURCHASER DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR DISPOSITION OF THE SHARES AND (b) THAT PURCHASER IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE.

5.1           Section 83(b) Election. Purchaser hereby acknowledges that Purchaser has been informed that, with respect to Unvested Shares, unless an election is filed by Purchaser with the Internal Revenue Service (and, if necessary, the proper state taxing authorities) within 30 days after the purchase of the Shares electing, pursuant to Section 83(b) of the Internal Revenue Code (and similar state tax provisions, if applicable), to be taxed currently on any difference between the Purchase Price of the Unvested Shares and their Fair Market Value on the date of purchase, there will be a recognition of taxable income to Purchaser, measured by the excess, if any, of the Fair Market Value of the Unvested Shares, at the time they cease to be Unvested Shares, over the Purchase Price for such Shares. Purchaser represents that Purchaser has consulted any tax advisers Purchaser deems advisable in connection with Purchaser’s purchase of the Shares and the filing of the election under Section 83(b) and similar tax provisions. A form of Election under Section 83(b) is attached hereto as Exhibit A for reference. BY PROVIDING THE FORM OF ELECTION, THE COMPANY DOES NOT THEREBY UNDERTAKE TO FILE THE ELECTION FOR PURCHASER, WHICH OBLIGATION TO FILE SHALL REMAIN SOLELY WITH PURCHASER.

5.2           “Fair Market Value”. For the purposes of this Agreement Fair Market Value shall mean the average closing price of the Company’s Common Stock on the principal trading market for the Common Stock during the thirty (30) trading days immediately preceding the date upon which the Fair Market Value is to be determined.

6.            GENERAL PROVISIONS.

6.1           Successors and Assigns. The Company may assign any of its rights under this Agreement, including its rights to purchase Shares under the Repurchase Option. Neither Purchaser, nor any of Purchaser’s successors and assigns, may assign, whether voluntarily or by operation of law, any of its rights and obligations under this Agreement, except with the prior written consent of the Company. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement will be binding upon Purchaser and Purchaser’s heirs, executors, administrators, legal representatives, successors and assigns.

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6.2           Notices. Any and all notices required or permitted to be given to a party pursuant to the provisions of this Agreement will be in writing and will be effective and deemed to provide such party sufficient notice under this Agreement on the earliest of the following: (a) at the time of personal delivery, if delivery is in person; (b) one (1) business day after deposit with an express overnight courier for United States deliveries, or two (2) business days after such deposit for deliveries outside of the United States, with proof of delivery from the courier requested; or (c) three (3) business days after deposit in the United States mail by certified mail (return receipt requested) for United States deliveries. All notices for delivery outside the United States will be sent by express courier. All notices not delivered personally will be sent with postage and/or other charges prepaid and properly addressed to the party to be notified at the address set forth below the signature lines of this Agreement, or at such other address as such other party may designate by one of the indicated means of notice herein to the other parties hereto. Notices to the Company will be marked “Attention: Secretary.”

6.3           Further Assurances. The parties agree to execute such further documents and instruments and to take such further actions as may be reasonably necessary to carry out the purposes and intent of this Agreement.

6.4           Entire Agreement. This Agreement, together with all Exhibits hereto, constitute the entire agreement and understanding of the parties with respect to the subject matter of this Agreement, and supersede all prior understandings and agreements, between the parties hereto with respect to the specific subject matter hereof.

6.5           Severability. If any provision of this Agreement is determined by any court or arbitrator of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such provision will be enforced to the maximum extent possible given the intent of the parties hereto. If such clause or provision cannot be so enforced, such provision shall be stricken from this Agreement and the remainder of this Agreement shall be enforced as if such invalid, illegal or unenforceable clause or provision had (to the extent not enforceable) never been contained in this Agreement. Notwithstanding the forgoing, if the value of this Agreement based upon the substantial benefit of the bargain for any party is materially impaired, which determination as made by the presiding court or arbitrator of competent jurisdiction shall be binding, then both parties agree to substitute such provision(s) through good faith negotiations.

6.6           Execution. This Agreement may be entered into in two or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same agreement. This Agreement may be executed and delivered by facsimile and, upon such delivery, the facsimile signature will be deemed to have the same effect as if the original signature had been delivered to the other party.

IN WITNESS WHEREOF, the parties have executed this Restricted Stock Agreement, as of the date first set forth above.

IPSIDY INC.		PURCHASER
By:	/s/Stuart Stoller	/s/Philip Beck
		(Signature)
STUART STOLLER, CFO		PHILIP BECK
(Please print name and title)		(Please print name)
Address:		Address:
780 Long Beach Boulevard		188 Fairway Road
Long Beach, New York 11561		Lido Beach, NY 11561

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EXHIBIT A

ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE

The undersigned Taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include the excess, if any, of the fair market value of the property described below at the time of transfer over the amount paid for such property, as compensation for services in the calculation of regular gross income.

1.	TAXPAYER’S NAME:
	TAXPAYER’S ADDRESS:
	SOCIAL SECURITY NUMBER:

2. The property with respect to which the election is made is described as follows: _______ shares of Common Stock of Ipsidy Inc.., a Delaware corporation (the “Company”) which were transferred pursuant to an Incentive Restricted Stock Agreement entered into by Taxpayer and the Company, which is Taxpayer’s employer or the corporation for whom the Taxpayer performs services.

3. The date on which the shares were transferred pursuant to the purchase of the shares was ____________________, 2017 and this election is made for calendar year 2017.

4. The shares received are subject to the following restrictions: The Company may repurchase all or a portion of the shares for an aggregate purchase price of $1 under certain conditions at the time of Taxpayer’s termination of employment or services, or Taxpayer’s failure to satisfy certain specified performance conditions.

5. The fair market value of the shares (without regard to restrictions other than restrictions which by their terms will never lapse) was $________ per share X _________ shares = $______ at the time of purchase.

6. The amount paid for such shares by Taxpayer was $________ per share x _______ shares = $_______.

7. The Taxpayer has submitted a copy of this statement to the Company.

8. The amount to include in gross income is $______________. [The result of the amount reported in Item 5 minus the amount reported in Item 6.]

THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE (“IRS”), AT THE OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS, WITHIN 30 DAYS AFTER THE DATE OF TRANSFER OF THE SHARES, AND MUST ALSO BE FILED WITH THE TAXPAYER’S INCOME TAX RETURNS FOR THE CALENDAR YEAR. THE ELECTION CANNOT BE REVOKED WITHOUT THE CONSENT OF THE IRS.

Dated:
	Taxpayer’s Signature

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EX-10.48

Exhibit 10.48

IPSIDY INC.

RESTRICTED STOCK AGREEMENT

This Restricted Stock Agreement (the “Agreement”) is made and entered into as of September 29, 2017 (the “Effective Date”) by and between Ipsidy Inc., a Delaware corporation (the “Company”), and the purchaser named below (the “Purchaser”).

Name of Purchaser	Total Number of Shares		Purchase Price Per Share		Total Purchase Price
Stuart Stoller		5,000,000	$	0.0001	$	500.00

1.             PURCHASE OF SHARES.

1.1       Purchase of Shares. On the Effective Date and subject to the terms and conditions of this Agreement, Purchaser hereby purchases from the Company, and the Company hereby sells to Purchaser, the Total Number of Shares set forth above (the “Shares”) of the Company’s Common Stock, $0.0001 par value per share, at the Purchase Price Per Share as set forth above (the “Purchase Price Per Share”) for a Total Purchase Price as set forth above (the “Purchase Price”). As used in this Agreement, the term “Shares” includes the Shares purchased under this Agreement and all securities received (a) in replacement of the Shares, (b) as a result of stock dividends or stock splits with respect to the Shares, and (c) in replacement of the Shares in a merger, recapitalization, reorganization or similar corporate transaction.

1.2       Payment. Company hereby agrees to make payment of the Purchase Price on behalf of Purchaser by way of bonus payment, receipt of which is acknowledged by the Company.

2.             COMPANY’S REPURCHASE OPTION FOR UNVESTED SHARES. The Company, or its assignee, shall have the option to repurchase all or a portion of the Purchaser’s Unvested Shares (as defined below) on the terms and conditions set forth in this Section (the “Repurchase Option”) in the event of Purchaser’s termination for any reason whatsoever except in the event of Termination Upon Change of Control (as defined in the Executive Retention Agreement entered into between Company and Purchaser on the date hereof (“Retention Agreement”).

2.1       Termination and Termination Date. In case of any dispute as to whether Purchaser is terminated, the Board of Directors of the Company or any Compensation Committee of the Board if such then exists (the “Board”) shall have discretion to determine whether Purchaser has been terminated and the effective date of such termination (the “Termination Date”).

2.2       Vested and Unvested Shares. Shares that are vested pursuant to the schedule set forth in this Section 2.2 are “Vested Shares.” Shares that are not vested pursuant to such schedule are “Unvested Shares.”

2.2.1        Vesting of Shares. On the Effective Date all of the Shares will be Unvested Shares (the “Unvested Shares”). If Purchaser has continuously provided services to the Company (which shall include for this purpose any subsidiary or parent of the Company), whether as an employee, director, officer or consultant at all times from the Effective Date to the date upon which any of the applicable “Performance Goals” set forth in the schedule below (the “Performance Based Vesting Schedule”) are achieved (such date the “Performance Date”), the “Number of Unvested Shares Becoming Vested Shares” on such Performance Date shall become Vested Shares upon written certification by the Board that the corresponding “Performance Goal” as set forth in the Performance Based Vesting Schedule have been satisfied; provided that such Performance Date occurs on or prior to the last day of the applicable “Performance Period” specified in the Performance Based Vesting Schedule. The Board shall make all such determinations with respect to the achievement and timing of the Performance Goal within the applicable Performance Period. Notwithstanding the foregoing, any Unvested Shares that do not become Vested Shares within the applicable Performance Period shall be forfeited and may be repurchased pursuant to Section 2.3 hereof.

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Performance Based Vesting Schedule

A.       Performance Goal

(1) the occurrence of a Change of Control, (as defined below); OR

(2) the filing of Company’s Annual Report on Form 10K in any year, which Report shows that the Company has achieved Adjusted EBITDA for the year, as reported therein, which is not less $10,000,000; OR

(3) the Company’s shares becoming listed on a national securities exchange AND (x) if the Board determines that additional equity funding is required, the Company’s closing (whether at the time of listing or subsequent thereto) of a public offering of its equity, raising not less than $10,000,000 in gross proceeds in the aggregate, AND (y) the Company achieving a valuation of not less than $125,000,000 which shall be satisfied either by the closing of the aforementioned public offering with an offering price which equates to a valuation of the Company, which is not less than $125,000,000; or the Company’s shares achieving a closing price on such exchange on 10 trading days out of a period of 30 days, which when multiplied by the number of issued and outstanding shares of Common Stock which are so listed at such time equate to a market capitalization of the Company of not less than $125,000,000; OR

(4) the filing of an Annual Report on Form 10K, or a Quarterly Report on Form 10Q, showing that the Company has generated total revenue of not less than $20,000,000 during the 12 month period ending with the period to which the relevant report relates. If such conditions are fulfilled, or waived by the Board, the above bonus shall be payable with the next payroll following the occurrence of the relevant event, subject to all applicable deductions required by law.

“Change of Control” shall mean (1) the Company is party to a merger or consolidation, or series of related transactions, which results in the voting securities of the Company outstanding immediately prior thereto failing to continue to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity), directly or indirectly, at least fifty (50%) percent of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation; OR (2) the sale or disposition of all or substantially all of the Company’s assets, or consummation of any transaction, or series of related transactions, having similar effect (other than to a subsidiary of the Company)

B.            Expiration Date of Performance Period: The Termination Date

C.            Number of Unvested Shares Becoming Vested Shares: 5,000,000

If the number of outstanding common shares is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company, without consideration, then the number of Shares subject to this Agreement, the number of Shares, and all other performance criteria set forth in this Section 2.2.1 will be equitably and proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and compliance with applicable securities laws; provided that fractions of a Share will not be issued but will either be replaced by a cash payment equal to the Fair Market Value (as defined below) of such fraction of a Share or will be rounded up to the nearest whole Share, as determined by the Board.

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2.3 Exercise of Repurchase Option. At any time within ninety (90) days after the Purchaser’s Termination Date or the Expiration Date of the Performance Period, the Company, or its assignee, shall repurchase any or all the Purchaser’s Unvested Shares by giving Purchaser written notice of exercise of the Repurchase Option, specifying the number of Unvested Shares to be repurchased. Such Unvested Shares shall be repurchased at the price of $1 in the aggregate (the “Repurchase Price”).

2.4 Right of Termination Unaffected. Nothing in this Agreement shall be construed to limit or otherwise affect in any manner whatsoever the right or power of the Company (or any Parent or Subsidiary of the Company) to terminate Purchaser’s employment or other relationship with Company (or the Parent or Subsidiary of the Company) at any time, for any reason or no reason, with or without cause.

3.            REPRESENTATIONS AND WARRANTIES OF PURCHASER. Purchaser represents and warrants to the Company as follows.

3.2       Access to Information. Purchaser has had access to all information regarding the Company and its present and prospective business, assets, liabilities and financial condition that Purchaser reasonably considers important in making the decision to purchase the Shares, and Purchaser has had ample opportunity to ask questions of the Company’s representatives concerning such matters and this investment.

3.3       Understanding of Risks. Purchaser is fully aware of: (a) the highly speculative nature of the investment in the Shares; (b) the financial hazards involved; (c) the lack of liquidity of the Shares and the restrictions on transferability of the Shares (e.g., that Purchaser may not be able to sell or dispose of the Shares or use them as collateral for loans); (d) the qualifications and backgrounds of the management of the Company; and (e) the tax consequences of investment in the Shares.

3.4       Purchase for Own Account for Investment. Purchaser is purchasing the Shares for Purchaser’s own account for investment purposes only and not with a view to, or for sale in connection with, a distribution of the Shares within the meaning of the Securities Act. Purchaser has no present intention of selling or otherwise disposing of all or any portion of the Shares and no one other than Purchaser has any beneficial ownership of any of the Shares.

3.5       No General Solicitation. At no time was Purchaser presented with or solicited by any publicly issued or circulated newspaper, mail, radio, television or other form of general advertising or solicitation in connection with the offer, sale and purchase of the Shares.

3.6       SEC Rule 144. Purchaser has been advised that SEC Rule 144 promulgated under the Securities Act, which permits certain limited sales of unregistered securities, may be available with respect to the Shares and, in any event, requires that the Shares be held for a minimum of six (6) months, and in certain cases one (1) year, after they have been purchased and paid for (within the meaning of Rule 144). Purchaser understands that Rule 144 may indefinitely restrict transfer of the Shares so long as Purchaser remains an “affiliate” of the Company or if “current public information” about the Company (as defined in Rule 144) is not publicly available.

4.             ADDITIONAL RESTRICTIONS UPON SHARE OWNERSHIP OR TRANSFER.

4.1       Rights as a Stockholder. Subject to the terms and conditions of this Agreement, Purchaser will have all of the rights of a stockholder of the Company with respect to the Shares from and after the date that Shares are issued to Purchaser until such time as Purchaser disposes of the Shares or the Company and/or its assignee(s) exercise(s) the Repurchase Option except the right to receive cash distributions or dividends, which to the extent the same are declared shall be held in escrow by the Company and shall only be paid if and to the extent that the Shares become Vested Shares. Upon exercise of the Repurchase Option, Purchaser will have no further rights as a holder of the Shares so purchased upon such exercise, other than the right to receive payment for the Shares so purchased in accordance with the provisions of this Agreement.

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4.2       Legends. Unless and until the Shares become Vested Shares and are registered under the Securities Act, all certificates representing the Shares and any certificates subsequently issued in substitution therefor and any certificate for any securities issued pursuant to any stock split, share reclassification, stock dividend or other similar capital event shall bear legends in substantially the following form:

THESE SECURITIES ARE SUBJECT TO A RESTRICTED STOCK AGREEMENT BETWEEN THE STOCKHOLDER AND THE COMPANY WHICH CONTAINS RESTRICTIONS ON TRANSFER AND HAVE NOT BEEN REGISTERED OR OTHERWISE QUALIFIED UNDER THE SECURITIES ACT OF 1933 (THE 'SECURITIES ACT') OR UNDER THE APPLICABLE OR SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF WITHOUT THE CONSENT OF THE COMPANY AND IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS THEREFROM.

and/or such other legend or legends as the Company and its counsel deem necessary or appropriate. Appropriate stop transfer instructions with respect to the Shares have been or may be placed with the Company's transfer agent.

4.3       Encumbrances on Shares. Purchaser may not grant a lien or security interest in, or pledge, hypothecate or encumber, any Unvested Shares.

4.4       Restrictions on Transfers. Unvested Shares may not be sold or otherwise transferred by Purchaser without the Company’s prior written consent. Notwithstanding the foregoing, Purchaser shall be able to transfer the Shares, whether or not Vested Shares, for bona fide estate planning purposes to a person or to an entity that constitutes an Authorized Transferee. Subject to Company’s insider trading and other related policies, Purchaser hereby agrees that Purchaser shall make no disposition of the Shares (other than as permitted by this Agreement) unless and until:

(a)       Purchaser shall have notified the Company of the proposed disposition and provided a written summary of the terms and conditions of the proposed disposition;

(b)       Purchaser shall have complied with all requirements of this Agreement applicable to the disposition of the Shares, including the Repurchase Option; and

(c)       Purchaser shall have provided the Company with written assurances, in form and substance satisfactory to counsel for the Company, that (i) the proposed disposition does not require registration of the Shares under the Securities Act or under any state securities laws, and (ii) all appropriate actions necessary for compliance with the registration and qualification requirements of the Securities Act and any state securities laws, or of any exemption from registration or qualification, available thereunder (including Rule 144) have been taken.

Each person (other than the Company) to whom the Shares are transferred by means of one of the permitted transfers specified in this Agreement must, as a condition precedent to the validity of such transfer, acknowledge in writing to the Company that such person is bound by the provisions of this Agreement and that the transferred Shares are subject to the Repurchase Option granted hereunder, to the same extent such Shares would be so subject if retained by the Purchaser or otherwise determined by the Board.

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4.5       Stop-transfer Orders. Purchaser understands and agrees that to ensure compliance with the restrictions imposed by this Agreement, the Company may issue appropriate “stop-transfer” instructions to its transfer agent. The Company will not be required (a) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (b) to treat as owner of such Shares, or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares have been so transferred.

5.            TAX WITHOLDING AND TAX CONSEQUENCES. The Company may withhold federal, state, local and foreign taxes as required and permitted by applicable law and is authorized to withhold from Shares otherwise deliverable to Purchaser upon vesting that number of Shares having a Fair Market Value determined as of the date of withholding equal to the minimum amount required to be withheld. PURCHASER UNDERSTANDS THAT PURCHASER MAY SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF PURCHASER’S PURCHASE OR DISPOSITION OF THE SHARES. PURCHASER REPRESENTS (a) THAT PURCHASER HAS CONSULTED WITH ANY TAX ADVISER THAT PURCHASER DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR DISPOSITION OF THE SHARES AND (b) THAT PURCHASER IS NOT RELYING ON THE COMPANY FOR ANY TAX ADVICE.

5.1       Section 83(b) Election. Purchaser hereby acknowledges that Purchaser has been informed that, with respect to Unvested Shares, unless an election is filed by Purchaser with the Internal Revenue Service (and, if necessary, the proper state taxing authorities) within 30 days after the purchase of the Shares electing, pursuant to Section 83(b) of the Internal Revenue Code (and similar state tax provisions, if applicable), to be taxed currently on any difference between the Purchase Price of the Unvested Shares and their Fair Market Value on the date of purchase, there will be a recognition of taxable income to Purchaser, measured by the excess, if any, of the Fair Market Value of the Unvested Shares, at the time they cease to be Unvested Shares, over the Purchase Price for such Shares. Purchaser represents that Purchaser has consulted any tax advisers Purchaser deems advisable in connection with Purchaser’s purchase of the Shares and the filing of the election under Section 83(b) and similar tax provisions. A form of Election under Section 83(b) is attached hereto as Exhibit A for reference. BY PROVIDING THE FORM OF ELECTION, THE COMPANY DOES NOT THEREBY UNDERTAKE TO FILE THE ELECTION FOR PURCHASER, WHICH OBLIGATION TO FILE SHALL REMAIN SOLELY WITH PURCHASER.

5.2       “Fair Market Value”. For the purposes of this Agreement Fair Market Value shall mean the average closing price of the Company’s Common Stock on the principal trading market for the Common Stock during the thirty (30) trading days immediately preceding the date upon which the Fair Market Value is to be determined.

6.            GENERAL PROVISIONS.

6.1       Successors and Assigns. The Company may assign any of its rights under this Agreement, including its rights to purchase Shares under the Repurchase Option. Neither Purchaser, nor any of Purchaser’s successors and assigns, may assign, whether voluntarily or by operation of law, any of its rights and obligations under this Agreement, except with the prior written consent of the Company. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement will be binding upon Purchaser and Purchaser’s heirs, executors, administrators, legal representatives, successors and assigns.

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6.2       Notices. Any and all notices required or permitted to be given to a party pursuant to the provisions of this Agreement will be in writing and will be effective and deemed to provide such party sufficient notice under this Agreement on the earliest of the following: (a) at the time of personal delivery, if delivery is in person; (b) one (1) business day after deposit with an express overnight courier for United States deliveries, or two (2) business days after such deposit for deliveries outside of the United States, with proof of delivery from the courier requested; or (c) three (3) business days after deposit in the United States mail by certified mail (return receipt requested) for United States deliveries. All notices for delivery outside the United States will be sent by express courier. All notices not delivered personally will be sent with postage and/or other charges prepaid and properly addressed to the party to be notified at the address set forth below the signature lines of this Agreement, or at such other address as such other party may designate by one of the indicated means of notice herein to the other parties hereto. Notices to the Company will be marked “Attention: Secretary.”

6.3       Further Assurances. The parties agree to execute such further documents and instruments and to take such further actions as may be reasonably necessary to carry out the purposes and intent of this Agreement.

6.4       Entire Agreement. This Agreement, together with all Exhibits hereto, constitute the entire agreement and understanding of the parties with respect to the subject matter of this Agreement, and supersede all prior understandings and agreements, between the parties hereto with respect to the specific subject matter hereof.

6.5       Severability. If any provision of this Agreement is determined by any court or arbitrator of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such provision will be enforced to the maximum extent possible given the intent of the parties hereto. If such clause or provision cannot be so enforced, such provision shall be stricken from this Agreement and the remainder of this Agreement shall be enforced as if such invalid, illegal or unenforceable clause or provision had (to the extent not enforceable) never been contained in this Agreement. Notwithstanding the forgoing, if the value of this Agreement based upon the substantial benefit of the bargain for any party is materially impaired, which determination as made by the presiding court or arbitrator of competent jurisdiction shall be binding, then both parties agree to substitute such provision(s) through good faith negotiations.

6.6       Execution. This Agreement may be entered into in two or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same agreement. This Agreement may be executed and delivered by facsimile and, upon such delivery, the facsimile signature will be deemed to have the same effect as if the original signature had been delivered to the other party.

IN WITNESS WHEREOF, the parties have executed this Restricted Stock Agreement, as of the date first set forth above.

IPSIDY INC.		PURCHASER
By: /s/	PHILIP BECK	/s/	STUART STOLLER
		(Signature)
PHILIP BECK, CEO		STUART STOLLER
(Please print name and title)		(Please print name)
Address:		Address:
780 Long Beach Boulevard		28 Elderberry Lane East
Long Beach, New York 11561		Valley Stream, NY 11581

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EXHIBIT A

ELECTION UNDER SECTION 83(b)
OF THE INTERNAL REVENUE CODE

The undersigned Taxpayer hereby elects, pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include the excess, if any, of the fair market value of the property described below at the time of transfer over the amount paid for such property, as compensation for services in the calculation of regular gross income.

1.	TAXPAYER’S NAME:
	TAXPAYER’S ADDRESS:
	SOCIAL SECURITY NUMBER:

2. The property with respect to which the election is made is described as follows: _______ shares of Common Stock of Ipsidy Inc.., a Delaware corporation (the “Company”) which were transferred pursuant to an Incentive Restricted Stock Agreement entered into by Taxpayer and the Company, which is Taxpayer’s employer or the corporation for whom the Taxpayer performs services.

3. The date on which the shares were transferred pursuant to the purchase of the shares was ____________________, 2017 and this election is made for calendar year 2017.

4. The shares received are subject to the following restrictions: The Company may repurchase all or a portion of the shares for an aggregate purchase price of $1 under certain conditions at the time of Taxpayer’s termination of employment or services, or Taxpayer’s failure to satisfy certain specified performance conditions.

5. The fair market value of the shares (without regard to restrictions other than restrictions which by their terms will never lapse) was $________ per share X _________ shares = $______ at the time of purchase.

6. The amount paid for such shares by Taxpayer was $________ per share x _______ shares = $_______.

7. The Taxpayer has submitted a copy of this statement to the Company.

8. The amount to include in gross income is $______________. [The result of the amount reported in Item 5 minus the amount reported in Item 6.]

THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE (“IRS”), AT THE OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS, WITHIN 30 DAYS AFTER THE DATE OF TRANSFER OF THE SHARES, AND MUST ALSO BE FILED WITH THE TAXPAYER’S INCOME TAX RETURNS FOR THE CALENDAR YEAR. THE ELECTION CANNOT BE REVOKED WITHOUT THE CONSENT OF THE IRS.

Dated:
	Taxpayer’s Signature

-7-

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: November 13, 2017	/s/Philip Beck
	Philip Beck
	Chairman of the Board of Directors, Chief Executive Officer and President (Principal Executive Officer)

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: November 13, 2017	/s/ Stuart Stoller
	Stuart Stoller Chief Financial Officer (Principal Financial and Accounting Officer)

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 September 30, 2017 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)

November 13, 2017	/s/ Stuart Stoller
	Stuart Stoller, Chief Financial Officer
	(principal financial and accounting officer)

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Oct. 31, 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	Sep. 30, 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		364,320,216
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2017

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Current Assets:
Cash	$ 1,440,179	$ 689,105
Accounts receivable, net	216,921	138,359
Current portion of net investment in direct financing lease	51,402	44,990
Inventory	853,647	150,679
Other current assets	207,938	166,479
Total current assets	2,770,087	1,189,612
Property and Equipment, net	242,290	115,682
Other Assets	1,270,876	358,343
Intangible Assets, net	3,185,416	3,474,291
Goodwill	6,736,043	6,736,043
Net Investment in Direct Financing Lease, net of current portion	632,492	674,015
Total assets	14,837,204	12,547,986
Current Liabilities:
Accounts payable and accrued expenses	1,684,377	1,687,900
Convertible notes payable, net		250,000
Derivative liability		8,388,355
Notes payable, net, current portion		109,819
Capital lease obligation, current portion	26,614
Deferred revenue	277,287	398,680
Total current liabilities	1,988,278	10,834,754
Convertible notes payable, net, less current maturities		2,245,596
Notes payable, net less current maturities	2,231,648	3,051,603
Capital lease obligation, net of current portion	122,674
Derivative liability, net of current portion		9,668,276
Total liabilities	4,342,600	25,800,229
Commitments and Contingencies (Notes 8 and 12)
Stockholders' Equity (Deficit):
Common stock, $0.0001 par value, 1,000,000,000 and 500,000,000 shares authorized; 364,320,216 and 234,704,655 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively	36,432	23,470
Additional paid in capital	73,646,880	35,341,669
Accumulated deficit	(63,507,684)	(48,925,993)
Accumulated comprehensive income	318,976	308,611
Total stockholders' equity (deficit)	10,494,604	(13,252,243)
Total liabilities and stockholders' equity (deficit)	$ 14,837,204	$ 12,547,986

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares	Sep. 30, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, authorized	1,000,000,000	500,000,000
Common stock, issued	364,320,216	234,704,655
Common stock, outstanding	364,320,216	234,704,655

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Revenues:
Products and services	$ 589,576	$ 576,466	$ 1,695,737	$ 1,373,892
Lease income	18,070	19,735	56,050	33,050
Total revenues, net	607,646	596,201	1,751,787	1,406,942
Operating Expenses:
Cost of sales	144,367	116,376	448,637	349,034
General and administrative	2,236,543	2,171,627	10,242,880	10,711,942
Research and development	6,278	65,582	63,116	387,246
Depreciation and amortization	99,779	127,473	346,313	388,233
Total operating expenses	2,486,967	2,481,058	11,100,946	11,836,455
Loss from operations	(1,879,321)	(1,884,857)	(9,349,159)	(10,429,513)
Other Income (Expense):
Gain (loss) on derivative liability		(1,594,636)	(452,146)	16,082,616
Gain on extinguishment of notes payable			2,802,234
Loss on modification of derivatives			(319,770)
Loss on modification of warrants			(158,327)
Loss on settlement of notes payable			(5,978,643)
Interest expense	(230,698)	(853,543)	(1,125,880)	(3,126,320)
Other income (expense), net	(230,698)	(2,448,179)	(5,232,532)	12,956,296
(Loss) income before income taxes	(2,110,019)	(4,333,036)	(14,581,691)	2,526,783
Income Taxes
Net (loss) income	$ (2,110,019)	$ (4,333,036)	$ (14,581,691)	$ 2,526,783
Net (loss) income Per Share - Basic (in shares)	$ (0.01)	$ (0.02)	$ (0.04)	$ 0.01
Net Loss Per Share - Diluted (in dollars per share)	$ (0.01)	$ (0.02)	$ (0.04)	$ (0.04)
Weighted Average Shares Outstanding - Basic (in shares)	344,658,454	226,796,302	328,131,720	212,790,554
Weighted Average Shares Outstanding - Diluted (in shares)	344,658,454	226,796,302	328,131,720	289,858,911

XML

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ (2,110,019)	$ (4,333,036)	$ (14,581,691)	$ 2,526,783
Foreign currency translation (losses) gains	33,685	(18,304)	10,365	102,739
Comprehensive income (loss)	$ (2,076,334)	$ (4,351,340)	$ (14,571,326)	$ 2,629,522

XML

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (Unaudited) - 9 months ended Sep. 30, 2017 - USD ($)	Common Stock [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 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
Stock-based compensation		4,891,251			4,891,251
Common stock issued for services	$ 60	140,091			140,151
Common stock issued for services (in shares)	593,555
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	3,998,000			4,000,000
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)
Common stock issued for restricted stock	$ 2,000				2,000
Common stock issued for restricted stock (in shares)	20,000,000
Loss on modification of warrants		158,327			158,327
Net loss			(14,581,691)		(14,581,691)
Foreign currency translation				10,365	10,365
Balance, ending at Sep. 30, 2017	$ 36,432	$ 73,644,880	$ (63,507,684)	$ 318,976	$ 10,494,604
Balance, ending (in shares) at Sep. 30, 2017	364,320,216				364,320,216

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (Ioss)	$ (14,581,691)	$ 2,526,783
Adjustments to reconcile net income (loss) with cash flows from operations:
Depreciation and amortization expense	346,313	388,233
Stock-based compensation	4,891,251	6,805,776
Common stock issued for services	140,151	285,227
Amortization of debt discount	446,410	2,191,786
Amortization of debt issuance costs	346,651	549,867
Loss (gain) on derivative liability	452,146	(16,082,616)
Gain on settlement of notes payable	(2,802,234)
Loss on modification of derivatives	319,770
Loss on modification of warrants	158,327
Loss on settlement of debt	5,978,643
Write off of abandoned product		225,862
Changes in operating assets and liabilities:
Accounts receivable	(75,806)	125,814
Net investment in direct financing lease	35,111	17,845
Other current assets	(41,459)	(12,929)
Inventory	(704,326)	(159,494)
Accounts payable and accrued expenses	319,814	(401,465)
Deferred revenue	(121,395)	476,457
Net cash flows from operating activities	(4,892,324)	(3,062,854)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment	(11,392)	(23,309)
Investment in other assets	(921,780)	(136,162)
Cash acquired in acquisition		419,042
Net cash flows from investing activities	(933,172)	259,571
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes payable and common stock	3,000,000	1,650,000
Proceeds from the sale of common stock and other	4,002,000	1,250,000
Payment of debt and equity issuance costs	(375,821)	(253,642)
Principal payments on notes payable	(59,819)	(60,875)
Principal payments on capital lease obligation	(14,119)
Net cash flows from financing activities	6,552,241	2,585,483
Effect of Foreign Currencies	24,329	102,739
Net Change in Cash	751,074	(115,061)
Cash, Beginning of the Period	689,105	349,873
Cash, End of the Period	1,440,179	234,812
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest
Cash paid for income taxes
Non-cash Investing and Financing Activities:	21,609,673	21,222
Issuance of common stock for conversion of debt and accrued interest		79,081
Issuance of common stock in settlment of a contingent liability		59,681
Reclassification of derivative liabilities upon removal of price protection in warrants	7,614,974	692,850
Issuance of warrants for inventory costs	224,460	169,125
Reclassification of inventory to net investment in direct financing lease		747,944
Acquisition of equipment pursuant to a capital lease	163,407
Issunace of common stock with convertible debt		54,470
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

9 Months Ended

Sep. 30, 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 and nine months ended September 30, 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., Innovation in Motion Inc., FIN Holdings 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. For the three and nine months ended September 30, 2017, and the three months ended September 30, 2016, all potentially diluted shares were excluded from the calculation of diluted EPS because their impact was anti-dilutive. The following table illustrates the computation of basic and diluted EPS for the nine months ended September 30, 2016:

	Net Income			Shares		Per Share Amount
Basic EPS
Income available to stockholders	$	2,526,783			212,790,554	$	0.01
Effect of Dilutive Securities
Stock Options		—			17,037,007
Warrants		—			21,350,729
Convertible Debt		(15,533,674	)		38,680,621
Dilute EPS
Loss available to stockholders plus assumed conversions	$	(12,806,891	)		289,858,911	$	(0.04	)

Going concern

As of September 30, 2017, the Company had an accumulated deficit of approximately $63.5 million. For the nine months ended September 30, 2017, the Company earned revenue of approximately $1.8 million and incurred a loss from operations of approximately $9.3 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

Inventories of kiosks held by IDGS S.A.S are stated at the lower of cost (using the first-in, first-out method) or market. The kiosks will provide electronic ticketing for transit systems. 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 as of September 30, 2017 consist of cards inventory and kiosks that have not been placed into service and inventory as of December 31, 2016 consist solely of cards inventory. The Company, in 2017, acquired approximately $707,000 of additional kiosks and components.

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.

Other Assets

The increase in other assets is principally due to its continuing investments in its technology platform prior to the respective assets being placed into service.

Revenue Recognition

Revenue is recognized when persuasive evidence of arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is probable. Revenue 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 benefits to the end user in which additional resources or services are required to be provided.

Revenue from club-based services arrangements that allow for the use of hosted software product 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 monthly. 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 and nine months ended September 30, 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 the nine months ending September 30, 2017 and 2016 is not subject to tax.

Recent Accounting Pronouncements

On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under generally accepted accounting principles in the United States. The core principal of the new standard is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The Company will adopt the new standard on January 1, 2018 and expects to use the modified retrospective approach upon adoption. The Company believes the impact of adopting the new accounting standard will not have a significant impact on its consolidated financial position, results of operations or cash flows. However, the Company’s evaluation of the new standard and the final determination of the impact of the new standard’s adoption is still in progress.

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 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”) 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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INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL)

9 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL)

NOTE 2 – 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 nine months ended September 30, 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		—			—			—			9,247		9,247
Amortization		(119,037	)		(176,972	)		(2,113	)		—		(298,122	)
Carrying Value at September 30, 2017	$	1,327,129		$	1,823,886		$	5,954		$	28,447	$	3,185,416

The following is a summary of intangible assets as of September 30, 2017:

	Customer Relationships			Intellectual Property			Non-Compete			Patent Pending		Total
Cost	$	1,587,159		$	2,444,646		$	14,087		$	28,447	$	4,074,339
Accumulated amortization		(260,030	)		(620,760	)		(8,133	)		—		(888,923	)
Carrying Value at September 30, 2017	$	1,327,129		$	1,823,886		$	5,954		$	28,447	$	3,185,416

Future expected amortization of intangible assets is as follows for the three-month period remaining in 2017 and the calendar years ending from 2018-2022 and thereafter:

2017		101,927
2018		407,706
2019		407,706
2020		402,109
2021		398,567
2022		389,076
Thereafter		1,078,325
	$	3,185,416

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PROPERTY AND EQUIPMENT, NET

9 Months Ended

Sep. 30, 2017

Property, Plant and Equipment [Abstract]

PROPERTY AND EQUIPMENT, NET

NOTE 3 – PROPERTY AND EQUIPMENT, NET

Property and equipment consisted of the following as of September 30, 2017 and December 31, 2016:

	2017		2016
Computers and equipment	$	197,491	$	192,928
Equipment under capital lease (see note 12)		163,407		—
Furniture and fixtures		109,200		109,200
		470,098	$	302,128
Less Accumulated depreciation		(227,808)		(186,446)
Property and equipment, net	$	242,290	$	115,682

Depreciation expense totaled $48,191 and $24,029 for the nine months ended September 30, 2017 and 2016, respectively.

See Note 11 for equipment amounting to $163,407 acquired pursuant to a capital lease.

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES

9 Months Ended

Sep. 30, 2017

Payables and Accruals [Abstract]

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

NOTE 4 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following as of September 30, 2017 and December 31, 2016:

	2017		2016
Trade payables	$	353,793	$	341,002
Accrued interest		295,657		600,624
Accrued payroll and related liabilites		626,712		421,771
Other accrued expenses		408,215		324,503
Total	$	1,684,377	$	1,687,900

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NOTES PAYABLE, NET

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

NOTES PAYABLE, NET

NOTE 5 - 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 6) 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 approximately $6,331,000 into 84,822,006 shares of Company common stock with a fair value of approximately $21,610,000. 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 7), a loss on the modification of warrants of approximately $0.2 million, and a loss on the 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 6 and 7. 

The following is a summary of notes payable as of September 30, 2017 and December 31, 2016:

	2017			2016
In connection with the acquisition of MultiPay in 2015, the Company assumed three promissory notes. The interest rate was 15.47% per annum. Note was fully repaid in the third quarter of 2017.	$		__	$	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 in the amount of $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 nine months of the term of the Notes and 15% per annum for the remaining nine 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
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 $1,147,500.  This loan is due to a Board Member upon his election in September 2017. The Company allocated the proceeds to the common stock based on their relative fair value and recorded a discount of $391,304 to be amortized into interest expense over the two-year term of the note.  The Company also paid debt issuance costs consisting of a cash fee of $120,000 and 1,020,000 shares of common stock of the Company with a fair value of $306,000, of which $208,696 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	$	3,000,000		$	3,497,819
Unamortized Deferred Debt Discounts		(561,158	)		(159,375	)
Unamortized Deferred Debt Issuance Costs		(207,194	)		(177,022	)
Notes Payable, Net	$	2,231,648		$	3,161,422

The following is a roll-forward of the Company’s notes payable and related discounts for the nine months ended September 30, 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		(59,819	)		—			—			(59,819	)
Conversions		(3,438,000	)		—			—			(3,438,000	)
Amortization		—			280,618			439,944			720,562
Balance at September 30, 2017	$	3,000,000		$	(207,194	)	$	(561,158	)	$	2,231,648

Future maturities of notes payable are as follows for the three-month period remaining in 2017 and the calendar years ending from 2018-2019:

2017	$	—
2018		—
2019		3,000,000
	$	3,000,000

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CONVERTIBLE NOTES PAYABLE, NET

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

CONVERTIBLE NOTES PAYABLE, NET

NOTE 6 - CONVERTIBLE NOTES PAYABLE, NET

See Note 5 for transactions associated with the reduction in convertible notes payable on January 31, 2017.

Convertible notes consisted of the following as of September 30, 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 5.   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 September 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 7. 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 7. 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 nine months ended September 30, 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 September 30, 2017	$	—		$	—		$	—		$	—

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DERIVATIVE LIABILITY

9 Months Ended

Sep. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE LIABILITY

NOTE 7 –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 5 above, the Company on January 31, 2017 entered into Conversion Agreements with Investors pursuant to which each 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 September 30, 2017.

A summary of derivative activity for the nine months ended September 30, 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 party 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 September 30, 2017	$	—

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RELATED PARTY TRANSACTIONS

9 Months Ended

Sep. 30, 2017

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 8 – 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 March 2017, Mr. Selzer purchased an additional 500,000 shares of common stock of the latest offering as described in Note 9.

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 leases it Corporate headquarters from Bridgeworks LLC, (“Bridgeworks”), a company providing office facilities to emerging companies, principally owned by Mr. Beck and his family. Mr. Beck is Chairman, Chief Executive Officer and President of the Company. During the first nine months of 2017, the Company paid Bridgeworks $52,322.

The Company entered into a consulting agreement with Graham Beck, a son of Mr. Beck for digital marketing services beginning April 1, 2017 at a rate of $2,500 per month. During the first nine months of 2017, the expense associated with Graham Beck was $15,000.

On September 13, 2017, one of the former officers and a former director (Douglas Solomon) of the Company entered into a Confidential Settlement Agreement and General Release (the “Settlement Agreement”) pursuant to which the Offer Letter and Executive Retention Agreement entered between the Company and Mr. Solomon dated January 31, 2017, were terminated effective September 1, 2017 and Mr. Solomon resigned as Executive Director, Government Relations Enterprise Security upon execution of the Settlement Agreement. The Company agreed to pay Mr. Solomon approximately $8,000 representing unused 2017 vacation entitlement and pay for one day, reimburse Mr. Solomon for all expenses consistent with the Company’s reimbursement policy and pay Mr. Solomon’s COBRA employee only benefits through September 2018 if Mr. Solomon elected to be included under such coverage. The parties also provided mutual releases from all claims, demands, actions, causes of action or liabilities. As further consideration for entering into the Settlement Agreement, Mr. Solomon and the Company entered into an Agency Agreement dated September 13, 2017 pursuant to which Mr. Solomon agreed to be engaged as a non-exclusive sales agent for the Company’s products on an as needed basis for a term of three years in consideration of sales commissions including a monthly non-refundable minimum commission to be paid for 24 months. During the quarter ended September 30, 2017, the Company paid Mr. Solomon $13,028 under the terms of such agreement.

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STOCKHOLDER'S EQUITY (DEFICIT)

9 Months Ended

Sep. 30, 2017

Equity [Abstract]

STOCKHOLDER'S EQUITY (DEFICIT)

NOTE 9 – STOCKHOLDER’S EQUITY (DEFICIT)

Common Stock

On September 28, 2017, the stockholders of the Company approved increasing the number of authorized shares of common stock from 500,000,000 to 1,000,000,000.

As described in Note 5, 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. (“Network 1”), a registered broker-dealer, 1,200,000 shares of common stock of the Company in conjunction with its services.

As described in Notes 5 and 6, on January 31, 2017, the Company entered into Conversion Agreements with Investors pursuant to which each 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 an approximately of 84,822,000 shares of Company common stock.

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 $4,000,000. The proceeds were received during 2017. 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 issued Network 1,000,000 shares of common stock of the Company.

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

During the nine months ended September 30, 2017, the Company issued approximately 594,000 shares of common stock as consideration for services. The fair value of the shares, totaling approximately $140,000 was estimated based on the publicly quoted trading price and recorded as expense.

In connection with the engagement of the CEO and Chief Financial Officer (“CFO”) on January 31, 2017 (the “Grant Date”), the Company agreed to enter into Restricted Stock Purchase Agreements (the “Restricted Shares”) with the CEO and CFO to provide 15,000,000 and 5,000,000 shares of common stock, respectively, at a per share price of $0.0001. On September 29, 2017, and in connection with the increase in the authorized shares, the Company issued the Restricted Shares. The shares are restricted and are not able to be sold or otherwise transferred by the CEO or CFO until such time the Restricted Shares vest. The Restricted Shares vest only upon achieving one of several performances thresholds. As of September 30, 2017, none of the performance thresholds have been met. Accordingly, no compensation expense has been recorded in connection with the issuance of these Restricted Shares. Compensation expense associated with these Restricted Shares will be recorded based on the fair value of the shares on the date it is determined that it is probable that one or more of the performance thresholds will be met in the near term.

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.

Furthermore, as more fully described above in Note 5, 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 nine months ended September 30, 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 September 30, 2017		47,538,697		$	0.08		2.9 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 when Mr. Beck became 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. Additionally, the Company granted one employee stock options to acquire 1,000,000 shares of common stock at an exercise price of $0.29 per share for a period of ten years.

The Company determined the grant date fair value of the options granted during the Nine months ended September 30, 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 nine months ended September 30, 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		21,000,000		$	0.11		10.0	$	—
Forfeitures		(3,425,000	)	$	0.06		10.0	$	—
Outstanding as of September 30, 2017		104,500,000		$	0.19		9.1	$	3,989,000
Exercisable as of September 30, 2017		78,704,170		$	0.17		8.7	$	2,788,000

The following table summarizes stock option information as of September 30, 2017:

Exercise Prices		Outstanding		Weighted Average Contractual Life		Exercisable
$	0.0001		3,500,000		8.00 Years		3,500,000
$	0.05		33,950,000		8.86 Years		23,312,502
$	0.10		27,250,000		9.05 Years		15,583,336
$	0.15		6,300,000		7.85  Years		4,258,332
$	0.25		500,000		8.50 Years		300,000
$	0.29		1,000,000		9.75 Years		—
$	0.40		1,000,000		8.42 Years		1,000,000
$	0.45		31,000,000		8.00 Years		30,750,000
	Total		104,500,000		8.57 Years		78,704,170

Stock option expense for the three and nine months ended September 30, 2017 was approximately $625,000 and $4,892,000, respectively, and for the corresponding periods ended September 30, 2016 was $654,000 and $6,806,000, respectively. The three and nine months ended September 30, 2017, included approximately $61,000 and $1,565,000, respectively of non-employee stock compensation. As of September 30, 2017, there was approximately $3,652,000 of unrecognized compensation costs related to stock options outstanding which will be expensed through 2020.

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DIRECT FINANCING LEASE

9 Months Ended

Sep. 30, 2017

Direct Financing Lease

DIRECT FINANCING LEASE

NOTE 10 – DIRECT FINANCING LEASE

In September 2015, the Company and an entity in Colombia entered into a rental contract for the rental of 78 kiosks to provide cash collection and fare services at transportation stations. The lease term began in May 2016 when the 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’s 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 monthly and initial direct costs are not considered significant. The transaction resulted in incremental revenue in the nine months ended September 30, 2017 of approximately $56,000.

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 for the three-month period remaining in 2017 and the calendar years ending from 2018-2022 and thereafter: 

2017	$	30,537
2018		122,145
2019		122,145
2020		122,145
2021		122,145
2022		122,145
Thereafter		407,175
Sub-total		1,048,437
Less deferred revenue		(364,543	)
Net investment in lease	$	683,894

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LEASE OBLIGATION PAYABLE

9 Months Ended

Sep. 30, 2017

Lease Obligation Payable Details Narrative

LEASE OBLIGATION PAYABLE

NOTE 11 – LEASE OBLIGATION PAYABLE

The Company entered into a lease in March 2017 for the rental of its printer for its secured plastic and credential card products business under an arrangement that is classified as a 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 September 30, 2017 is $18.752. 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 September 30, 2017. The interest rate related to the lease obligation is 12% and the maturity date is March 31, 2022. Future cash payment related to this capital lease are as follow for the three-month period remaining in 2017 and the calendar years ending from 2018-2022 and thereafter. 

2017	$	10,773
2018		43,096
2019		43,096
2020		43,096
2021		43,096
2022		10,776
Total minimum lease payments		193,933
Less: Amount representing interest		44,645
Present value of minimum lease payments	$	149,288

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 12 – COMMITMENTS AND CONTINGENCIES

Legal Matters

From time to time, Company may be involved in legal proceedings in the ordinary course of business, which could result in litigation. While any litigation contains an element of uncertainty, we have no reason to believe that the outcome of such proceedings will have a material adverse effect on the financial condition or results of operations of the Company.

Other

The Company entered into an Agency Agreement dated September 13, 2017 pursuant to which a former officer and director agreed to be engaged as a non-exclusive sales agent for the Company’s products on an as needed basis for a term of three years in consideration of sales commissions including a monthly non-refundable minimum commission to be paid for 24 months. The minimum commitment during the term of the agreement is approximately $335,000.

In September 2017, the Company entered into a consulting agreement and agency agreement with an organization to provide ongoing business development and marketing analysis/support beginning October 1, 2017 for a period of 24 months but is cancelable at the end of the first year. The minimum commitment for the first year is $180,000 payable monthly at a rate of $15,000. The agreement also provides a one-time payment of $75,000 upon the Company meeting a performance target. The agency agreement provides for additional compensation to be paid upon successful customer acquisition and cash collection from introduced new customers.

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BASIS OF PRESENTATION (Policies)

9 Months Ended

Sep. 30, 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. For the three and nine months ended September 30, 2017, and the three months ended September 30, 2016, all potentially diluted shares were excluded from the calculation of diluted EPS because their impact was anti-dilutive. The following table illustrates the computation of basic and diluted EPS for the nine months ended September 30, 2016:

	Net Income			Shares		Per Share Amount
Basic EPS
Income available to stockholders	$	2,526,783			212,790,554	$	0.01
Effect of Dilutive Securities
Stock Options		—			17,037,007
Warrants		—			21,350,729
Convertible Debt		(15,533,674	)		38,680,621
Dilute EPS
Loss available to stockholders plus assumed conversions	$	(12,806,891	)		289,858,911	$	(0.04	)

Going concern

Going concern

As of September 30, 2017, the Company had an accumulated deficit of approximately $63.5 million. For the nine months ended September 30, 2017, the Company earned revenue of approximately $1.8 million and incurred a loss from operations of approximately $9.3 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

Inventories

Inventories of kiosks held by IDGS S.A.S are stated at the lower of cost (using the first-in, first-out method) or market. The kiosks will provide electronic ticketing for transit systems. 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 as of September 30, 2017 consist of cards inventory and kiosks that have not been placed into service and inventory as of December 31, 2016 consist solely of cards inventory. The Company, in 2017, acquired approximately $707,000 of additional kiosks and components.

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.

Other Assets

Other Assets

The increase in other assets is principally due to its continuing investments in its technology platform prior to the respective assets being placed into service.

Revenue Recognition

Revenue Recognition

Revenue is recognized when persuasive evidence of arrangement exists, delivery has occurred, the fee is fixed or determinable and collectability is probable. Revenue 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 benefits to the end user in which additional resources or services are required to be provided.

Revenue from club-based services arrangements that allow for the use of hosted software product 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 monthly. 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 and nine months ended September 30, 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 the nine months ending September 30, 2017 and 2016 is not subject to tax.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under generally accepted accounting principles in the United States. The core principal of the new standard is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The Company will adopt the new standard on January 1, 2018 and expects to use the modified retrospective approach upon adoption. The Company believes the impact of adopting the new accounting standard will not have a significant impact on its consolidated financial position, results of operations or cash flows. However, the Company’s evaluation of the new standard and the final determination of the impact of the new standard’s adoption is still in progress.

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 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”) 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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BASIS OF PRESENTATION (Tables)

9 Months Ended

Sep. 30, 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 nine months ended September 30, 2016:

	Net Income			Shares		Per Share Amount
Basic EPS
Income available to stockholders	$	2,526,783			212,790,554	$	0.01
Effect of Dilutive Securities
Stock Options		—			17,037,007
Warrants		—			21,350,729
Convertible Debt		(15,533,674	)		38,680,621
Dilute EPS
Loss available to stockholders plus assumed conversions	$	(12,806,891	)		289,858,911	$	(0.04	)

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

9 Months Ended

Sep. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of intangible assets

The following is a summary of activity related to intangible assets for the nine months ended September 30, 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		—			—			—			9,247		9,247
Amortization		(119,037	)		(176,972	)		(2,113	)		—		(298,122	)
Carrying Value at September 30, 2017	$	1,327,129		$	1,823,886		$	5,954		$	28,447	$	3,185,416

The following is a summary of intangible assets as of September 30, 2017:

	Customer Relationships			Intellectual Property			Non-Compete			Patent Pending		Total
Cost	$	1,587,159		$	2,444,646		$	14,087		$	28,447	$	4,074,339
Accumulated amortization		(260,030	)		(620,760	)		(8,133	)		—		(888,923	)
Carrying Value at September 30, 2017	$	1,327,129		$	1,823,886		$	5,954		$	28,447	$	3,185,416

Schedule of future amortization expense of intangible assets

Future expected amortization of intangible assets is as follows for the three-month period remaining in 2017 and the calendar years ending from 2018-2022 and thereafter:

2017		101,927
2018		407,706
2019		407,706
2020		402,109
2021		398,567
2022		389,076
Thereafter		1,078,325
	$	3,185,416

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PROPERTY AND EQUIPMENT, NET (Tables)

9 Months Ended

Sep. 30, 2017

Property, Plant and Equipment [Abstract]

Schedule of property and equipment

Property and equipment consisted of the following as of September 30, 2017 and December 31, 2016:

	2017		2016
Computers and equipment	$	197,491	$	192,928
Equipment under capital lease (see note 12)		163,407		—
Furniture and fixtures		109,200		109,200
		470,098	$	302,128
Less Accumulated depreciation		(227,808)		(186,446)
Property and equipment, net	$	242,290	$	115,682

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Tables)

9 Months Ended

Sep. 30, 2017

Payables and Accruals [Abstract]

Schedule of accounts payable and accrued expenses

Accounts payable and accrued expenses consisted of the following as of September 30, 2017 and December 31, 2016:

	2017		2016
Trade payables	$	353,793	$	341,002
Accrued interest		295,657		600,624
Accrued payroll and related liabilites		626,712		421,771
Other accrued expenses		408,215		324,503
Total	$	1,684,377	$	1,687,900

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NOTES PAYABLE, NET (Tables)

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Schedule of notes payable

The following is a summary of notes payable as of September 30, 2017 and December 31, 2016:

	2017			2016
In connection with the acquisition of MultiPay in 2015, the Company assumed three promissory notes. The interest rate was 15.47% per annum. Note was fully repaid in the third quarter of 2017.	$		__	$	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 in the amount of $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 nine months of the term of the Notes and 15% per annum for the remaining nine 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
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 $1,147,500.  This loan is due to a Board Member upon his election in September 2017. The Company allocated the proceeds to the common stock based on their relative fair value and recorded a discount of $391,304 to be amortized into interest expense over the two-year term of the note.  The Company also paid debt issuance costs consisting of a cash fee of $120,000 and 1,020,000 shares of common stock of the Company with a fair value of $306,000, of which $208,696 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	$	3,000,000		$	3,497,819
Unamortized Deferred Debt Discounts		(561,158	)		(159,375	)
Unamortized Deferred Debt Issuance Costs		(207,194	)		(177,022	)
Notes Payable, Net	$	2,231,648		$	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 nine months ended September 30, 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		(59,819	)		—			—			(59,819	)
Conversions		(3,438,000	)		—			—			(3,438,000	)
Amortization		—			280,618			439,944			720,562
Balance at September 30, 2017	$	3,000,000		$	(207,194	)	$	(561,158	)	$	2,231,648

Schedule of future maturities of notes payable

Future maturities of notes payable are as follows for the three-month period remaining in 2017 and the calendar years ending from 2018-2019:

2017	$	—
2018		—
2019		3,000,000
	$	3,000,000

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CONVERTIBLE NOTES PAYABLE, NET (Tables)

9 Months Ended

Sep. 30, 2017

Debt Disclosure [Abstract]

Schedule of convertible notes payable outstanding

Convertible notes consisted of the following as of September 30, 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 5.   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 September 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 7. 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 7. 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 nine months ended September 30, 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 September 30, 2017	$	—		$	—		$	—		$	—

XML

DERIVATIVE LIABLITY (Tables)

9 Months Ended

Sep. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of derivative activity

A summary of derivative activity for the nine months ended September 30, 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 party 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 September 30, 2017	$	—

XML

STOCKHOLDER'S EQUITY (Tables)

9 Months Ended

Sep. 30, 2017

Equity [Abstract]

Schedule of warrant activity

The following is a summary of the Company’s warrant activity for the nine months ended September 30, 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 September 30, 2017		47,538,697		$	0.08		2.9 Years

Schedule of black - scholes option-pricing model valuation assumption

The Company determined the grant date fair value of the options granted during the Nine months ended September 30, 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 nine months ended September 30, 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		21,000,000		$	0.11		10.0	$	—
Forfeitures		(3,425,000	)	$	0.06		10.0	$	—
Outstanding as of September 30, 2017		104,500,000		$	0.19		9.1	$	3,989,000
Exercisable as of September 30, 2017		78,704,170		$	0.17		8.7	$	2,788,000

Schedule of stock option

The following table summarizes stock option information as of September 30, 2017:

Exercise Prices		Outstanding		Weighted Average Contractual Life		Exercisable
$	0.0001		3,500,000		8.00 Years		3,500,000
$	0.05		33,950,000		8.86 Years		23,312,502
$	0.10		27,250,000		9.05 Years		15,583,336
$	0.15		6,300,000		7.85  Years		4,258,332
$	0.25		500,000		8.50 Years		300,000
$	0.29		1,000,000		9.75 Years		—
$	0.40		1,000,000		8.42 Years		1,000,000
$	0.45		31,000,000		8.00 Years		30,750,000
	Total		104,500,000		8.57 Years		78,704,170

XML

DIRECT FINANCING LEASE (Tables)

9 Months Ended

Sep. 30, 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 for the three-month period remaining in 2017 and the calendar years ending from 2018-2022 and thereafter: 

2017	$	30,537
2018		122,145
2019		122,145
2020		122,145
2021		122,145
2022		122,145
Thereafter		407,175
Sub-total		1,048,437
Less deferred revenue		(364,543	)
Net investment in lease	$	683,894

XML

LEASE OBLIGATION PAYABLE (Tables)

9 Months Ended

Sep. 30, 2017

Lease Obligation Payable Details Narrative

Schedule of lease obligation payable

Future cash payment related to this capital lease are as follow for the three-month period remaining in 2017 and the calendar years ending from 2018-2022 and thereafter. 

2017	$	10,773
2018		43,096
2019		43,096
2020		43,096
2021		43,096
2022		10,776
Total minimum lease payments		193,933
Less: Amount representing interest		44,645
Present value of minimum lease payments	$	149,288

XML

BASIS OF PRESENTATION (Details)	9 Months Ended
	Sep. 30, 2016 USD ($) $ / shares shares
Basic EPS
Income available to stockholders, Income | $	$ 2,526,783
Income available to stockholders, Shares | shares	212,790,554
Income available to stockholders, Per-Share Amount | $ / shares	$ 0.01
Dilute EPS
Loss available to stockholders plus assumed conversions, Income | $	$ (12,806,891)
Loss available to stockholders plus assumed conversions, Shares | shares	289,858,911
Loss available to stockholders plus assumed conversions, Per-Share Amount | $ / shares	$ (0.04)
Stock Options [Member]
Effect of Dilutive Securities
Antidilutive securities, Income | $
Antidilutive securities, Shares | shares	17,037,007
Warrant [Member]
Effect of Dilutive Securities
Antidilutive securities, Income | $
Antidilutive securities, Shares | shares	21,350,729
Convertible Debt [Member]
Effect of Dilutive Securities
Antidilutive securities, Income | $	$ (15,533,674)
Antidilutive securities, Shares | shares	38,680,621

XML

BASIS OF PRESENTATION (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Accumulated deficit	$ (63,507,684)		$ (63,507,684)		$ (48,925,993)
Revenue	607,646	$ 596,201	1,751,787	$ 1,406,942
Loss from operations	(1,879,321)	$ (1,884,857)	(9,349,159)	$ (10,429,513)
Addition inventory	$ 707,000		$ 707,000

XML

INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL) (Details)	9 Months Ended
	Sep. 30, 2017 USD ($)
Finite-Lived Intangible Assets [Line Items]
Carrying Value at beginning	$ 3,474,291
Additions	9,247
Amortization	(298,122)
Carrying Value at end	$ 3,185,416
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Lives	10 years
Carrying Value at beginning	$ 1,446,166
Additions
Amortization	(119,037)
Carrying Value at end	$ 1,327,129
Intellectual Property [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Lives	10 years
Carrying Value at beginning	$ 2,000,858
Additions
Amortization	(176,972)
Carrying Value at end	$ 1,823,886
Non-Compete [Member]
Finite-Lived Intangible Assets [Line Items]
Useful Lives	10 years
Carrying Value at beginning	$ 8,067
Additions
Amortization	(2,113)
Carrying Value at end	5,954
Patents Pending [Member]
Finite-Lived Intangible Assets [Line Items]
Carrying Value at beginning	19,200
Additions	9,247
Amortization
Carrying Value at end	$ 28,447

XML

INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL) (Details 1) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Finite-Lived Intangible Assets [Line Items]
Cost	$ 4,074,339
Accumulated amortization	(888,923)
Carrying Value	3,185,416	$ 3,474,291
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	1,587,159
Accumulated amortization	(260,030)
Carrying Value	1,327,129	1,446,166
Intellectual Property [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	2,444,646
Accumulated amortization	(620,760)
Carrying Value	1,823,886	2,000,858
Non-Compete [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	14,087
Accumulated amortization	(8,133)
Carrying Value	5,954	8,067
Patents Pending [Member]
Finite-Lived Intangible Assets [Line Items]
Cost	28,447
Accumulated amortization
Carrying Value	$ 28,447	$ 19,200

XML

INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL) (Details 2) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
2017	$ 101,927
2018	407,706
2019	407,706
2020	402,109
2021	398,567
2022	389,076
Thereafter	1,078,325
Carrying Value	$ 3,185,416	$ 3,474,291

XML

PROPERTY AND EQUIPMENT, NET (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 470,098	$ 302,128
Less Accumulated depreciation	(227,808)	(186,446)
Property and equipment, net	242,290	115,682
Computer and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	197,491	192,928
Equipment Under Capital Lease [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	163,407
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 ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 48,191	$ 24,029
Acquisition of equipment pursuant to a capital lease	$ 163,407

XML

ACCOUNTS PAYABLE AND ACCRUED EXPENSES (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Payables and Accruals [Abstract]
Trade payables	$ 353,793	$ 341,002
Accrued interest	295,657	600,624
Accrued payroll and related liabilites	626,712	421,771
Other accrued expenses	408,215	324,503
Total	$ 1,684,377	$ 1,687,900

XML

NOTES PAYABLE, NET (Details) - USD ($)	Sep. 30, 2017	Jan. 31, 2017	Dec. 31, 2016
Short-term Debt [Line Items]
Total Principal Outstanding	$ 3,000,000		$ 3,497,819
Unamortized Deferred Debt Discounts	(561,158)		(159,375)
Unamortized Deferred Debt Issuance Costs	(207,194)		(177,022)
Notes Payable, Net	2,231,648		3,161,422
15.47% Promissory Note [Member]
Short-term Debt [Line Items]
Total Principal Outstanding			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 Discounts			(166,304)
12% Note Due January 2017 [Member]
Short-term Debt [Line Items]
Total Principal Outstanding			13,609
Senior Unsecured Note [Member]
Short-term Debt [Line Items]
Total Principal Outstanding	$ 3,000,000
Unamortized Deferred Debt Discounts		$ (391,304)

XML

NOTES PAYABLE, NET (Details 1)	9 Months Ended
	Sep. 30, 2017 USD ($)
Principal Balance
Balance at beginning	$ 3,497,819
New issuances	3,000,000
Payments	(59,819)
Conversions	(3,438,000)
Amortization
Balance at end	3,000,000
Debt Issuance Costs
Balance at beginning	(177,022)
New issuances	(310,790)
Payments
Conversions
Amortization	280,618
Balance at end	(207,194)
Debt Discounts
Balance at beginning	(159,375)
New issuances	(841,727)
Payments
Conversions
Amortization	439,944
Balance at end	(561,158)
Total
Balance at beginning	3,161,422
New issuances	1,847,483
Payments	(59,819)
Conversions	(3,438,000)
Amortization	720,562
Balance at end	$ 2,231,648

XML

NOTES PAYABLE, NET (Details 2) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Debt Disclosure [Abstract]
2017
2018
2019	3,000,000
Net investment in lease	$ 3,000,000	$ 3,497,819

XML

NOTES PAYABLE, NET (Details Narrative)

1 Months Ended

3 Months Ended

9 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

Sep. 30, 2017

USD ($)

Note

$ / shares

Sep. 30, 2016

USD ($)

Sep. 30, 2017

USD ($)

Note

$ / shares

shares

Sep. 30, 2016

USD ($)

Short-term Debt [Line Items]

Total Principal Outstanding

$ 3,497,819

$ 3,000,000

$ 3,000,000

Debt discount

159,375

561,158

561,158

Gain on extinguishment of notes payable

2,802,234

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

$ 4,000,000

15.47% Promissory Note [Member]

Short-term Debt [Line Items]

Number of notes issued | Note

3

3

Total Principal Outstanding

46,210

Interest rate

15.47%

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

The notes were secured by the 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

The notes were secured by the 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

The notes were secured by the 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

The notes were secured by the 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

The notes were secured by the 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

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

$ 3,000,000

Debt discount

391,304

Debt issuance costs

306,000

Debt issuance costs consisting shares value

$ 120,000

Debt issuance costs consisting shares | shares

1,020,000

Amortized debt issuance costs

$ 208,696

Warrant term

2 years

Common stock issues value

$ 1,147,500

Common stock issues shares | shares

4,500,000

Warrant [Member]

Short-term Debt [Line Items]

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

$ 0.10

$ 0.10

Number of cancellation shares | shares

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

Value of cancellation shares

$ 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]

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

$ 0.10

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

$ 0.10

Value of shares issued on conversion

$ 6,331,000

Number of shares issued on conversion | shares

84,822,006

Fair value of notes payable

$ 21,610,000

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 ($)	Sep. 30, 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)	9 Months Ended
	Sep. 30, 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

9 Months Ended

Feb. 22, 2017

Jan. 31, 2017

Apr. 30, 2016

Feb. 29, 2016

Sep. 30, 2015

Jul. 31, 2015

Sep. 30, 2017

Aug. 10, 2016

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]

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

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DERIVATIVE LIABILITY (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 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 party 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		$ 1,594,636	452,146	$ (16,082,616)
Balance at ending

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DERIVATIVE LIABILITY (Details Narrative) - USD ($)		9 Months Ended
	Feb. 22, 2017	Sep. 30, 2017	Jan. 31, 2017
Warrant [Member]
Number of cancellation shares		3,600,000
Conversion Agreements [Member]
Debt accrued interest	$ 31,000
Number of cancellation shares	2,500,000
Number of cancellation shares, value	$ 300,000
Face amount	$ 300,000
Conversion Agreements [Member] | Warrant [Member]
Number of cancellation shares	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

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RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)

9 Months Ended

Sep. 13, 2017

Sep. 01, 2017

Mar. 22, 2017

Jan. 31, 2017

Nov. 30, 2016

Sep. 30, 2017

Mar. 31, 2017

Feb. 22, 2017

Common stock issued for cash

$ 4,000,000

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

$ 52,322

Conversion Agreements [Member]

Face amount

$ 300,000

Conversion Agreements [Member] | Herbert Selzer [Member]

Total debt

$ 150,000

Number of shares issued on conversion

1,753,500

Conversion Agreements [Member] | Vista Associates [Member]

Total debt

$ 40,000

Number of shares issued on conversion

1,537,778

Subscription Agreements [Member] | Herbert Selzer [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

Consulting Agreement [Member] | Graham Beck [Member]

Digital marketing services per month

2,500

Expenses from transactions with related party

$ 15,000

Description of related party transaction

The Company entered into a consulting agreement with Graham Beck, a son of Mr. Beck for digital marketing services beginning April 1, 2017 at a rate of $2,500 per month. During the first nine months of 2017, the expense associated with Graham Beck was $15,000.

Confidential Settlement Agreement and General Release [Member] | Mr. Douglas Solomon [Member]

Professional fees

$ 8,000

Number of shares vested

20,000,000

Agency Agreement [Member] | Mr. Douglas Solomon [Member]

Professional fees

$ 13,028

Description of non-exclusive sales agency

A non-exclusive sales agent for the Company’s products on an as needed basis for a term of three years in consideration of sales commissions including a monthly non-refundable minimum commission to be paid for 24 months.

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

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STOCKHOLDER'S EQUITY (DEFICIT) (Details) - Warrant [Member]	9 Months Ended
	Sep. 30, 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 10 months 24 days

XML

STOCKHOLDER'S EQUITY (DEFICIT) (Details 1)	9 Months Ended
	Sep. 30, 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)	9 Months Ended
	Sep. 30, 2017 USD ($) $ / shares shares
Number of Shares [Roll Forward]
Outstanding at beginning | shares	86,925,000
Granted | shares	21,000,000
Forfeitures | shares	(3,425,000)
Outstanding at end | shares	104,500,000
Exercisable at end | shares	78,704,170
Weighted Average Exercise Price [Roll Forward]
Outstanding at beginning | $ / shares	$ 0.21
Granted | $ / shares	0.11
Forfeitures | $ / shares	0.06
Outstanding at end | $ / shares	0.19
Exercisable at end | $ / shares	$ 0.17
Weighted Average Contractual Term [Roll Forward]
Outstanding at beginning	9 years 6 months
Granted	10 years
Forfeitures	10 years
Outstanding at end	9 years 1 month 6 days
Exercisable at end	8 years 8 months 12 days
Aggregate Intrinsic Value [Roll Forward]
Outstanding at beginning | $	$ 10,023,400
Granted | $
Forfeitures | $
Outstanding at end | $	3,989,000
Exercisable at end | $	$ 2,788,000

XML

STOCKHOLDER'S EQUITY (DEFICIT) (Details 3)	9 Months Ended
	Sep. 30, 2017 shares
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding	104,500,000
Weighted Average Contractual Life	8 years 6 months 25 days
Exercisable	78,704,170
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
Exercisable	3,500,000
Exercise Price $0.05 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding	33,950,000
Weighted Average Contractual Life	8 years 10 months 9 days
Exercisable	23,312,502
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 6 months
Exercisable	15,583,336
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	7 years 10 months 9 days
Exercisable	4,258,332
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	8 years 6 months
Exercisable	300,000
Exercise Price $0.29 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Outstanding	1,000,000
Weighted Average Contractual Life	9 years 9 months
Exercisable
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 5 months 1 day
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
Exercisable	30,750,000

XML

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

3 Months Ended

9 Months Ended

Mar. 22, 2017

Feb. 22, 2017

Jan. 31, 2017

Aug. 10, 2016

Sep. 30, 2017

Sep. 30, 2016

Sep. 30, 2017

Sep. 30, 2016

Sep. 28, 2017

Dec. 31, 2016

Common stock, authorized

1,000,000,000

1,000,000,000

500,000,000

500,000,000

Common stock issued for cash

$ 4,000,000

Proceeds from issuance of shares

4,002,000

$ 1,250,000

Number of shares issued for services, value

$ 140,151

Number of options granted

21,000,000

Common stock par value (in dollars per share)

$ 0.0001

$ 0.0001

$ 0.0001

Stock based compensation

$ 625,000

$ 654,000

$ 4,891,251

$ 6,805,776

Unrecognized compensation costs

$ 3,652,000

$ 3,652,000

Common Stock [Member]

Number of shares issued

20,000,000

Common stock issued for cash

$ 2,000

Number of shares issued for services

593,555

Number of shares issued for services, value

$ 60

Warrant [Member]

Exercise price (in dollars per share)

$ 0.10

$ 0.10

Cancellation of common stock

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

$ 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

$ 0.10

Number of options granted

5,000,000

Expiration term

10 years

One Employee [Member]

Exercise price (in dollars per share)

$ 0.29

$ 0.29

Number of options granted

1,000,000

Expiration term

10 years

Non - Employees [Member]

Stock based compensation

$ 61,000

$ 1,565,000

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]

Face amount

$ 300,000

Cancellation of common stock

2,500,000

Conversion Agreements [Member] | Warrant [Member]

Cancellation of common stock

3,600,000

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

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 shares issued

15,000,000

Number of per share price

$ 0.0001

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

Number of shares issued

5,000,000

Number of per share price

$ 0.0001

XML

DIRECT FINANCING LEASE (Details)	Sep. 30, 2017 USD ($)
Direct Financing Lease
2017	$ 30,537
2018	122,145
2019	122,145
2020	122,145
2021	122,145
2022	122,145
Thereafter	407,175
Sub-total	1,048,437
Less deferred revenue	(364,543)
Net investment in lease	$ 683,894

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DIRECT FINANCING LEASE (Details Narrative)	1 Months Ended	9 Months Ended
	Sep. 30, 2015 USD ($) kiosks $ / Units	Sep. 30, 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		$ 56,000

XML

LEASE OBLIGATION PAYABLE (Details)	Sep. 30, 2017 USD ($)
Lease Obligation Payable Details Narrative
2017	$ 10,773
2018	43,096
2019	43,096
2020	43,096
2021	43,096
2022	10,776
Total minimum lease payments	193,933
Less: Amount representing interest	44,645
Present value of minimum lease payments	$ 149,288

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LEASE OBLIGATION PAYABLE (Details Narrative)	9 Months Ended
	Sep. 30, 2017 USD ($)
Lease Obligation Payable Details Narrative
Amortization of lease equipment	$ 19
Lease obligation interest rate	12.00%
Lease obligation maturity date	Mar. 31, 2022

XML

COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)

1 Months Ended

Sep. 13, 2017

Sep. 30, 2017

Agency Agreement [Member] | Mr. Douglas Solomon [Member]

Description of non-exclusive sales agency

A non-exclusive sales agent for the Company’s products on an as needed basis for a term of three years in consideration of sales commissions including a monthly non-refundable minimum commission to be paid for 24 months.

Minimum commitment

$ 335,000

Consulting Agreement and Agency Agreement [Member]

Minimum commitment

$ 180,000

Frequency of periodic payment

Monthly

Minimum commitment periodic payment

$ 15,000

One-time payment

$ 75,000