8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 8-K

CURRENT REPORT

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

Date of report:

November 10, 2008

IdentiPHI, Inc.

(Exact name of registrant as specified in its charter)

Delaware	0-20270	95-4346070
(State or other jurisdiction of incorporation)	(Commission File No.)	(I.R.S. Employer Identification No.)

13809 Research Blvd, Suite 275

Austin, Texas 78750

(Address of principal executive offices)

(512) 492-6220

(Registrant’s telephone number, including area code)

(Registrant’s former name and former address)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

As used in this current report on Form 8-K, unless the context otherwise requires, the terms “we,” “us,” “the Company,” and “IdentiPHI” refer to IdentiPHI, Inc., a Delaware corporation.

Item 1.01.   Entry into a Material Definitive Agreement.

On November 10, 2008, we agreed with Key Ovation, LLC to terminate our respective rights and obligations under the secured promissory note we issued to Zaychan Pty Limited on March 12, 2008 (the “Old Note). Zaychan Pty Limited assigned the Old Note to Key Ovation on June 30, 2008. In connection with the termination of the Old Note, we issued to Key Ovation a new 8% convertible secured promissory note with an aggregate principal amount of $2.2 million, due October 31, 2009 (the “New Note”), to evidence the outstanding principal and accrued and unpaid interest related to the Old Note. The New Note bears interest at 8% per annum and is convertible into shares of our common stock at $0.18 per share at Key Ovation’s option throughout the term of the note. Our obligations under the New Note continue to be secured by all of our assets. In connection with the issuance of the New Note, we amended certain terms of Key Ovation’s outstanding warrants to purchase an aggregate of 420,934 shares of our common stock, which were issued in connection with the Old Note. The amendments reduced the per share exercise price from $0.80 to $0.18 and added warrant cancellation and prepayment provisions such that if we prepay $400,000 in principal under the New Note to Key Ovation (i) on or before January 31, 2009, the warrants will automatically be cancelled; or (ii) after January 31, 2009 but on or before April 30, 2009, the aggregate number of shares issuable upon full exercise of the warrants will be automatically reduced by 50%. Copies of the termination agreement, the New Note and the warrant amendment are filed with this current report as Exhibits 10.1, 10.2 and 10.3, respectively.

Also on November 10, 2008, we entered into a credit line facility with Key Ovation pursuant to which Key Ovation agreed to make available to us a committed line of credit of up to $1.0 million. Under the line of credit, we may draw down from time to time advances up to an aggregate $1.0 million at our sole discretion. The line of credit facility terminates on October 31, 2009, and aggregate advances may not exceed $100,000 during any one calendar month period. Key Ovation may suspend its obligations to make any further advances after January 31, 2009, if we have not completed an equity and/or debt financing for aggregate gross proceeds of at least $1.7 million. Upon our receipt of each advance, we agreed to issue to Key Ovation a warrant to purchase a number of shares of our common stock equal to 50% of the principal amount of such advance divided by 0.18, with each warrant having an exercise price of $0.18 per share. Each advance will be evidenced by a convertible promissory note due twelve months from the date of issuance and will bear interest at 8% per annum. The principal and accrued and unpaid interest outstanding at any time under each promissory note will be convertible into shares of our common stock at $0.18 per share at Key Ovation’s option. Copies of the line of credit agreement and form of promissory note are filed with this current report as Exhibits 10.4 and 10.5, respectively.

Chris Linegar, a beneficial owner of more than 10% of our common stock, is the principal member of Key Ovation. Peter A. Gilbert, our Vice Chairman and Senior Vice President of Sales and Marketing, and Mark A. Norwalk, our Chief Technology Officer, are also members of Key Ovation.

Item 1.02 Termination of a Material Definitive Agreement.

The information set forth in Item 1.01 above is hereby incorporated by reference into this Item 1.02.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information set forth in Item 1.01 above is hereby incorporated by reference into this Item 2.03.

Item 7.01 Regulation FD Disclosure.

On November 10, 2008, we issued a press release which included a letter to our shareholders that outlines some of the challenges we are facing and details some of our plans for the future. A copy of the press relese, including the shareholder letter, is furnished with this current report as Exhibit 99.1.

Please refer to the press release for a discussion of certain forward-looking statements. The press release and shareholder letter contain information about our management’s view of our future expectations, plans and prospects that constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Actual results may differ materially from historical results or those indicated by these forward-looking statements as a result of a variety of factors. These factors include, but are not

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limited to, risks and uncertainties associated with our financial condition, our ability to sell our products, our ability to compete with competitors and the growth of the security market and the successful delivery and adoption of our biometric products in the marketplace. In addition, we need to seek additional funds through the issuance of equity or debt securities or other sources of financing during 2008 and we do not have any arrangements or agreements in place for any such financing. If we are unable to obtain necessary additional financing, our ability to run our business will be adversely affected and we may be required to reduce the scope of our research and business activity or cease our operations. Even if we are successful in obtaining additional financing, if we are unable to generate sufficient cash flow from operations, we will need to seek additional funds through the issuance of additional equity or debt securities or other sources of financing. We may not be able to secure such additional financing on favorable terms, or at all. Any additional financings will likely cause substantial dilution to existing stockholders. If we are unable to obtain necessary additional financing, we may be required to reduce the scope of, or cease, our operations. Further, we will need to increase our revenues to be able to achieve and then maintain profitability and we cannot predict when, or if, we will become profitable in the future. Even if we achieve profitability, we may not be able to sustain it. Additional factors are included in our annual report on Form 10-K, as well as other documents we periodically file with the Securities and Exchange Commission.

Item 9.01 Financial Statements and Exhibits.

Exhibit No.	Description
10.1	Termination Agreement, dated November 10, 2008, by and between IdentiPHI, Inc. and Key Ovation, LLC
10.2	8% Convertible Secured Promissory Note, dated November 10, 2008
10.3	Amendment No. 1 to Common Stock Purchase Warrants
10.4	Line of Credit Agreement, dated November 10, 2008, by and between IdentiPHI, Inc. and Key Ovation, LLC
10.5	Form of Convertible Promissory Note (Line of Credit)
10.6	Amendment No. 1 to Security Agreement
99.1	Press release, dated November 10, 2008, including Letter to Shareholders

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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 hereunto duly authorized.

	IDENTIPHI, INC.
Dated: November 12, 2008	By:	/s/ Jeffrey T. Dick
		Jeffrey T. Dick
		Chief Financial Officer

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EX-10.1

Exhibit 10.1

TERMINATION AGREEMENT

This Termination Agreement (this “Agreement”) is entered into as of November 10, 2008 by and among IdentiPHI, Inc., a Delaware corporation (the “Company”) and Key Ovation, LLC (“Key Ovation”).

RECITALS

WHEREAS, the Company issued that certain Secured Promissory Note, dated as of March 12, 2008 (the “March Note”), to Zaychan Pty Limited (“Zaychan”) in the principal amount of up to AUD$1,750,000 and pursuant to which the Company granted Zaychan a security interest in certain assets of the Company; and

WHEREAS, the Company, Key Ovation and Zaychan entered into that certain Renewal, Modification and Extension of Promissory Note, dated as of June 30, 2008 (the “Renewal Agreement”), pursuant to which Zaychan assigned all of its rights and interest under the Secured Note to Key Ovation; and

WHEREAS, in connection with the execution of the Renewal Agreement, the Company and Key Ovation entered into that certain Security Agreement, dated as of June 30, 2008 (the “Security Agreement”), pursuant to which the Company granted Key Ovation a security interest in certain assets of the Company; and

WHEREAS, the Company and Key Ovation entered into subsequent amendments to the March Note and agree that the aggregate principal and accrued and unpaid interest as of November 1, 2008 is equal to Two Million One Hundred Fifty-Two Thousand Eight Hundred Six Dollars ($2,152,806.00); and

WHEREAS, the Company and Key Ovation desire to terminate and release their respective rights and obligations under the March Note (as amended through the date hereof) and the Renewal Agreement immediately prior to the issuance by the Company of that certain 8.0% Convertible Promissory Note in the aggregate principal amount of Two Million One Hundred Fifty-Two Thousand Eight Hundred Six Dollars ($2,152,806.00), in substantially the form of Exhibit A attached thereto (the “Convertible Note”), to Key Ovation; and

WHEREAS, the obligations under the Convertible Note shall be secured by certain of the Company’s assets as set forth in the Security Agreement, as amended on the date hereof.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

1. Termination of March Note and Renewal Agreement. The Company and Key Ovation hereby irrevocably waive and terminate their respective rights and obligations under the March Note (as amended through the date hereof) and the Renewal Agreement and the transactions contemplated therein and release each other party from all rights and obligations under the March Note (as amended through the date hereof) and the Renewal Agreement and the transactions contemplated therein whether arising prior to, on, or after the date of the Convertible Note.

2. General Mutual Release. In consideration of the covenants and agreements contained herein, and on behalf of their respective affiliates, successors, administrators and assigns, (i) the Company hereby fully and forever releases and discharges Key Ovation (and its affiliates, successors, officers, directors, shareholders, agents and assigns), and (ii) Key Ovation hereby fully and forever releases and discharges the Company (and its affiliates, successors, officers, directors, stockholders, agents and assigns), from any and all claims, demands, liabilities, obligations, responsibilities, suits, actions and causes of action, whether liquidated or unliquidated, fixed or contingent, known or unknown, past, present or future, or otherwise, arising out of or relating to the March Note or the Renewal Agreement and the transactions contemplated therein.

3. Warranties and Representations. The Company and Key Ovation each hereby represent and warrant that it has the power and authority to enter into this Agreement and take the actions contemplated hereunder.

4. Other Agreements. The Company and Key Ovation each acknowledge that this Agreement shall not affect any other agreements between the Company and Key Ovation or their respective affiliates.

5. Headings. Headings in this Agreement are for convenience of reference only and are not part of the substance hereof.

6. Counterparts. This Agreement may be executed in identical original counterparts, each of which will be deemed to be an original and taken together shall constitute one and the same instrument.

7. Entire Agreement. This Agreement constitutes the final agreement of the parties hereto with respect to the subject matter hereof and supersedes any prior agreement or understanding, written or oral, with respect to the matters contained herein.

8. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware (without regard to choice of law provisions).

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties hereto have caused this Termination Agreement to be executed by their respective officers thereunder duly authorized, as of the date first above written.

IDENTIPHI, INC.

By:

Name: 

Title:

KEY OVATION, LLC

By:

Name: 

Title:

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EXHIBIT A

FORM OF 8.0% CONVERTIBLE PROMISSORY NOTE

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EX-10.2

Exhibit 10.2

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING THIS NOTE, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR, IF REQUESTED BY THE COMPANY, THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR HOLDER OF THIS NOTE REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.

IDENTIPHI, INC.

8.0% CONVERTIBLE PROMISSORY NOTE

$2,152,806	November 10, 2008
	Austin, Texas

FOR VALUE RECEIVED, IdentiPHI, Inc., a Delaware corporation (the “Company”), hereby unconditionally promises to pay to Key Ovation, LLC (“Holder”), or Holder’s registered assigns, at such place or places as Holder may from time to time designate in writing, the aggregate principal sum of Two Million One Hundred Fifty-Two Thousand Eight Hundred Six Dollars ($2,152,806.00), together with all accrued and unpaid interest thereon, as provided herein. All unpaid principal, together with the balance of unpaid and accrued interest and other amounts payable hereunder, shall be due and payable on demand at any time upon and after the earlier of (a) October 31, 2009 (the “Maturity Date”), or (b) the occurrence of an Event of Default (as defined herein). All cash payments by the Company under this 8.0% Convertible Promissory Note (the “Note”) shall be in immediately available U.S. funds.

A. Definitions.

1. “Allowed Consideration” shall have the meaning set forth in Section C.5 hereof.

2. “Business Day” means any day other than (x) a Saturday or Sunday, or (y) a day on which banks in Austin, Texas are required to be closed.

3. “Change of Control Event” shall mean (a) any transaction in which the Company consummates a merger, consolidation, share exchange or other transaction or series of related transactions resulting in the exchange of the outstanding shares of the Company for securities of or other consideration issued, or caused to be issued, by an acquiring entity or any of its affiliates, in any such case if the stockholders of the Company immediately prior to such event own less than a majority of the outstanding voting equity securities of the surviving entity immediately following the event, or (b) a sale, lease, exclusive license or other disposition of all or substantially all of the assets of the Company.

4. “Common Stock” shall mean the common stock of the Company.

5. “Company” shall have the meaning set forth in the preamble hereof.

6. “Conversion Price” shall be $0.18.

7. “Conversion Shares” shall mean the shares of Common Stock (or Allowed Consideration) issuable upon conversion of this Note pursuant to Section C.3(a), including any securities of another company for which the Company’s Common Stock has been exchanged.

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8.0% CONVERTIBLE UNSECURED

PROMISSORY NOTE

8. “Event of Default” shall have the meaning set forth in Section D.1 hereof.

9. “Holder” shall have the meaning set forth in the preamble hereof.

10. “Maturity Date” shall have the meaning set forth in the preamble hereof.

11. “Note” shall have the meaning set forth in the preamble hereof.

12. “Notice Period” shall have the meaning set forth in Section C.2 hereof.

13. “Obligations” shall mean the outstanding principal and accrued but unpaid interest due hereunder and any additional amounts payable pursuant to the terms hereof.

14. “Reserved Shares” shall have the meaning set forth in Section C.4 hereof.

15. “Senior Executive Officers” shall mean the Company’s Chief Executive Officer, President and Chief Financial Officer.

B. Payment. All payments shall be made in lawful money of the United States of America at the principal office of the Company, or at such other place as the holder hereof may from time to time designate in writing to the Company.

C. Interest; Conversion Terms.

1. Interest. Interest shall accrue with respect to the principal amount loaned hereunder from the date hereof until such principal is fully paid or converted, at eight percent (8.0%) simple interest per annum (computed on the basis of a 365-day year, based upon the actual days elapsed).

2. Prepayment. The Company may prepay all or any portion of the Note at any time; provided, however, that the Company shall give Holder five (5) days’ prior written notice of such prepayment, during which time Holder may elect to convert the outstanding principal amount and accrued but unpaid interest under the Note pursuant to Section C.3 by giving the Company written notice of Holder’s election (the “Notice Period”). Any such prepayment will be applied first to the payment of interest accrued on the Note and then, if the amount of prepayment exceeds the amount of all accrued but unpaid interest, to the payment of principal of the Note.

3. Conversion.

(a) Optional Conversion. Holder has the right, at Holder’s option, at any time prior to payment in full of the principal balance of this Note, to convert this Note (including principal and accrued but unpaid interest to the date of conversion) in accordance with the provisions of this Section C.3, in whole or in part, into Conversion Shares. The number of Conversion Shares to be issued upon such conversion shall be equal to the number obtained by dividing (i) the outstanding principal amount and accrued but unpaid interest under this Note on the date of conversion by (ii) the Conversion Price. The number of Conversion Shares issuable to Holder upon such conversion shall be rounded down to the nearest whole number.

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8.0% CONVERTIBLE

PROMISSORY NOTE

(b) Mechanics and Effects of Conversion.

(i) Before Holder shall be entitled to convert this Note into Conversion Shares pursuant to Section C.3(a), it shall surrender this Note at the office of the Company and shall give written notice by mail, postage prepaid, to the Company at its principal executive office, of the election to convert the same pursuant to Section C.3(a), and shall state therein the name or names in which the certificate or certificates for Conversion Shares are to be issued. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of this Note, and the person or persons entitled to receive the Conversion Shares upon such conversion shall be treated for all purposes as the record holder or holders of such Conversion Shares as of such date.

(ii) As soon as reasonably practicable after conversion of this Note, and upon surrender of this Note, the Company will deliver or cause to be issued in the name of and delivered to Holder a certificate or certificates representing the number of Conversion Shares to which Holder shall be entitled on such conversion. No fractional shares will be issued on conversion of this Note, and in lieu thereof the number of Conversion Shares issuable to Holder upon such conversion shall be rounded down to the nearest whole number. Upon full conversion of this Note and the issuance of the certificate(s) as contemplated herein, the Company shall be forever released from all its Obligations and liabilities under this Note.

(c) Notice Regarding Change of Control Event. At least thirty (30) calendar days prior to the anticipated closing of a Change of Control Event (or, if such notice is impracticable thirty (30) calendar days prior to such Change of Control Event, as many days before the Change of Control Event as is practicable), written notice shall be delivered to the Holder of this Note pursuant to Section E.5 below notifying Holder of the terms and conditions of the Change of Control Event, the amount of the outstanding principal amount and accrued but unpaid interest under this Note, the anticipated date on which any such Change of Control Event will occur and calling upon such Holder to inform the Company whether Holder intends to elect to convert the outstanding principal amount and accrued but unpaid interest into Conversion Shares. Following notice of the Change of Control Event, any conversion of this Note by Holder may be made contingent upon the consummation of such Change of Control Event, if so elected by Holder in the notice of conversion.

(d) No Rights as Stockholder. Prior to its conversion, this Note shall not entitle Holder to any voting rights or to any other rights as a stockholder of the Company or to any other rights whatsoever except the rights stated herein or in the agreements referenced herein.

(e) Withholding Obligations; Form 1099. Holder authorizes the Company to withhold from Holder, or to demand cash payment from Holder for, any taxes required to be withheld from Holder on the conversion of this Note, or, to reduce or eliminate such withholding, to provide the Company with an fully executed and completed IRS Form W-9. Holder acknowledges that the Company may issue Holder a Form 1099, reporting the interest, to the Internal Revenue Service (even if the interest is converted into stock), in accordance with law.

(f) Conversion Price Adjustments. In the event the Company should at any time while this Note is outstanding fix a record date for the effectuation of a split or subdivision of the Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock without payment of any consideration by such holder for the additional shares of Common Stock, then, as of such record date, the Conversion Price shall be appropriately decreased so that the number of shares of Common Stock issuable upon conversion of this Note shall be increased in proportion to such increase of outstanding shares of Common Stock.

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8.0% CONVERTIBLE

PROMISSORY NOTE

4. Covenants as to Conversion Shares. The Company covenants and agrees that all Conversion Shares issued pursuant to the terms of this Note (the “Reserved Shares”) will, upon their issuance, be validly issued and outstanding, fully paid and nonassessable and free from all taxes, liens, and charges with respect to the issuance thereof. The Company further covenants and agrees that the Company will at all times have authorized and reserved a sufficient number of the Reserved Shares to provide for the conversion rights represented by this Note. If at any time while this Note remains outstanding the number of authorized but unissued shares of Common Stock shall not be sufficient to permit the conversion of this Note, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes.

5. Consolidation or Merger of the Company. If the Company is a party to (a) any consolidation, merger or share exchange with another corporation in which the Company is not the survivor, (b) any consolidation or merger of another entity into the Company in which the Company is the survivor but, in connection therewith, the Company’s equity securities are changed into or exchanged for stock or other securities of any other entity, or (c) any capital reorganization or reclassification of its Common Stock (in each such case excluding any merger effected exclusively for the purpose of changing the domicile of the Company), pursuant to any of which transactions the holders of the Company’s capital stock are entitled to receive with respect to or in exchange for such capital stock, stock or other securities, whether alone or together with any other consideration (such consideration being the “Allowed Consideration”), then as a condition of such transaction, lawful and adequate provisions reasonably acceptable to Holder shall be made whereby Holder shall thereafter have the right to purchase and receive (in lieu of Conversion Shares immediately theretofore receivable upon the conversion of this Note) such Allowed Consideration as may be issued or payable with respect to or in exchange for the number of such Conversion Shares immediately theretofore receivable upon the conversion of this Note. In any such case, appropriate provisions shall be made with respect to the rights and interests of Holder to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Conversion Price and the number of shares receivable upon the conversion of this Note) shall thereafter be applicable, as nearly as may be reasonably practicable (as determined in good faith by the Company’s Board of Directors, whose judgment shall be final and binding on Holder), in relation to the Allowed Consideration thereafter deliverable upon the conversion hereof. The Company will not effect any such consolidation or merger, unless, in connection with the consummation thereof, the successor corporation resulting from such consolidation or merger shall assume by written instrument the obligation to deliver to such Holder such Allowed Consideration as, in accordance with the foregoing provisions, such Holder may be entitled to purchase.

6. No Impairment. Except and to the extent as waived or consented to by Holder in writing, the Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company.

D. Default.

1. Events of Default. The occurrence of any of the following shall constitute an “Event of Default” under this Note:

(a) Failure to Pay. The Company shall fail to pay when due any principal, any interest or other payment required under the terms of this Note on the date due and such default shall continue unremedied for a period of ten (10) Business Days after the Company’s receipt of written notice from Holder of such failure to pay.

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(b) Breach of this Note. Except in the case of Section D.1(a) above, the Company shall be in material breach or default under any of the terms of this Note, and such breach or default shall continue unremedied for a period of thirty (30) Business Days after the Company’s receipt of written notice from Holder specifying such breach or default.

(c) Bankruptcy or Insolvency Proceedings.

(i) The Company shall (A) appoint, apply for or consent to the appointment of a receiver, trustee, liquidator, custodian, assignee for the benefit of creditors or similar judicial officer or agent to take possession, custody, control or charge of or liquidate any of its property or assets, (B) commence any voluntary proceeding under any provision of Title 11 of the United States Code, as now or hereafter amended, or commence any other proceeding, under any law, now or hereafter in force, relating to bankruptcy, insolvency, reorganization, liquidation, or otherwise to the relief of debtors or the readjustment of indebtedness, or (C) make any assignment for the benefit of creditors or a composition or similar arrangement with such creditors;

(ii) The commencement against the Company of any involuntary proceeding, or the consent by Company to any proceeding, of the kind described in Section D.1(c)(i) and such proceeding shall not have been dismissed within thirty (30) days;

(iii) The Company is adjudicated bankrupt or insolvent or a petition for reorganization is granted; or

(iv) The Company shall cause, or institute any proceeding for, or there shall occur, the dissolution of the Company.

(d) Change of Control Event. Without the prior written consent of Holder, the Company shall consummate a Change of Control Event and in connection therewith the Company changes its Senior Executive Officers such that the Senior Executive Officers serving immediately prior to such Change of Control Event no longer serve as the Company’s Senior Executive Officers immediately following such Change of Control Event.

2. Rights of Holders Upon Default. If any Event of Default shall occur for any reason, whether voluntary or involuntary, and be continuing, then Holder may, by written notice to the Company, declare all or any portion of the Obligations to be due and payable, whereupon the full outstanding principal and interest hereunder shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment, all of which are expressly waived by the Company.

E. Other Provisions.

1. Waivers and Amendments. This Note may not be amended or modified, nor may any of its terms be waived, except by a written instrument signed by Holder and the Company.

2. Severability. If any provision of this Note is determined to be invalid, illegal or unenforceable, in whole or in part, the validity, legality and enforceability of any of the remaining provisions or portions of this Note shall not in any way be affected or impaired thereby and this Note shall nevertheless be binding between the Company and Holder.

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3. Governing Law. This Note shall be governed by and interpreted in accordance with the internal laws of the State of Texas. In any action brought or arising out of this Note, the Company and Holder hereby consent to the jurisdiction of any federal or state court seated in Travis County, Texas and also consent to the service of process by any means authorized by Texas law.

4. Binding Effect. This Note shall be binding upon, and shall inure to the benefit of, the Company and Holder and their respective successors and assigns.

5. Notices. Any notice required or desired to be served, given or delivered hereunder shall be in writing and in the form and manner specified below, and shall be addressed to the party to be notified as follows:

If to the Company:	IdentiPHI, Inc.
	13809 Research Blvd., Ste 275
	Austin, Texas 78750
	Attention: Chief Executive Officer
	With a copy to:
	DLA Piper LLP
	701 Fifth Avenue, Suite 7000
	Seattle, WA 98104-7044
	Attention: Michael Hutchings, Esq.
If to Holder:	Key Ovation, LLC
	2111 West Braker Lane
	Austin, Texas 78758
	Attention: President
	With a copy to:
	Akin & Almanza, Attorneys and Counselors
	2301 Capital of Texas Highway South, Building H,
	Austin, Texas 78746
	Attention: Rick Akin, Esq.

or to such other address as each party designates to the other by notice in the manner herein prescribed. Notice shall be deemed given hereunder if (a) delivered personally or otherwise actually received, (b) sent by overnight delivery service, or (c) mailed by first-class United States mail, postage prepaid, registered or certified, with return receipt requested. Notice mailed as provided in clause (iii) above shall be effective upon the expiration of three (3) Business Days after its deposit in the United States mail. Notice given in any other manner described herein shall be effective upon receipt by the addressee thereof; provided, however, that if any notice is tendered to an addressee and delivery thereof is refused by such addressee, such notice shall be effective upon such tender unless expressly set forth in such notice.

6. Security Interest. This Note is secured by certain of the assets of the Company in accordance with a separate security agreement, dated as of June 30, 2008 and as amended of even date herewith (the “Security Agreement”), by and between the Company and Holder.

7. Payment. Payment shall be made in lawful tender of the United States.

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8. Transfer of Note or Securities Issuable on Conversion Hereof. Prior to conversion, neither this Note nor any rights hereunder may be transferred by Holder unless Holder delivers to the Company written notice of Holder’s intention of such transfer at least ten (10) days prior to such transfer and such transfer complies with applicable federal and state securities laws, except that Holder may freely assign this Note to an affiliate of Holder. For purposes of this agreement, “affiliate” shall be deemed to include with respect to a Holder: (a) a partnership or limited liability company, its partners, members, stockholders, former partners, former members or an affiliated entity managed by the same manager or managing partner or management company, or managed or owned by an entity controlling, controlled by, or under common control with, such member or manager or managing partner or management company, or (b) an individual, his or her spouse or lineal descendant or antecedent, or a trust or trusts for the exclusive benefit of Holder or Holder spouse or lineal descendant or antecedent, in each such case in connection with bona fide estate planning purposes. In the event this Note is transferred in accordance with this Section E.7, the new holder shall be deemed to be the “Holder” with respect to the provisions of this Note.

9. Replacement Note. If this Note is lost, stolen, mutilated or destroyed, the Company shall issue a new Note of like denomination, tenor and date as this Note, subject to the Company’s right to require Holder to give the Company a bond or other satisfactory security sufficient to indemnify the Company against any claim that may be made against it (including any expense or liability) on account of the alleged loss, theft, mutilation or destruction of this Note or the issuance of such new Note.

10. Headings. Section headings used in this Note have been set forth herein for convenience of reference only. Unless the contrary is compelled by the context, everything contained in each section hereof applies equally to this entire Note.

IN WITNESS WHEREOF, the Company has caused this 8.0% Convertible Promissory Note to be issued as of the date first written above.

IDENTIPHI, INC.

By: 

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8.0% CONVERTIBLE

PROMISSORY NOTE

EX-10.3

Exhibit 10.3

AMENDMENT NO. 1 TO

COMMON STOCK PURCHASE WARRANTS

OF IDENTIPHI, INC.

Date of Amendment: November 10, 2008

Date of Warrants: March 12, 2008; May 7, 2008; June 17, 2008; and September 24, 2008

This Amendment No. 1 (this “Amendment”) to the Warrants to Purchase Shares of Common Stock (the “Warrants”) of IdentiPHI, Inc. (the “Company”) set forth below is made and entered into as of November 10, 2008, by and among the Company and Key Ovation, LLC (“Holder”).

WHEREAS, the Company issued a Common Stock Purchase Warrant to Zaychan Pty Limited (“Prior Holder”) on March 12, 2008, entitling Prior Holder to subscribe for and purchase up to 144,497 shares of the Company’s common stock (the “March 2008 Warrant”); and

WHEREAS, the Company issued a Common Stock Purchase Warrant to Prior Holder on May 7, 2008, entitling Prior Holder to subscribe for and purchase up to 88,486 shares of the Company’s common stock (the “May 2008 Warrant”); and

WHEREAS, the Company issued a Common Stock Purchase Warrant to Prior Holder on June 17, 2008, entitling Prior Holder to subscribe for and purchase up to 87,951 shares of the Company’s common stock (the “June 2008 Warrant”); and

WHEREAS, the Company issued a Common Stock Purchase Warrant to Holder on September 24, 2008, entitling Holder to subscribe for and purchase up to 100,000 shares of the Company’s common stock (the “September 2008 Warrant”); and

WHEREAS, in connection with the Renewal, Modification and Extension of Promissory Note, dated as of June 30, 2008, by and among the Company, Prior Holder and Holder, Prior Holder assigned to Holder all of its rights in the March 2008 Warrant, the May 2008 Warrant and the June 2008 Warrant; and

WHEREAS, the Warrants may be amended by the written consent of the Company and the Holder.

Now, therefore, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. All capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Warrants.

2. The “Exercise Price” as set forth in the first paragraph of each of the Warrants is hereby amended to be equal to US$0.18.

3. A new Section 6 is hereby added to each of the Warrants as follows:

“Section 6. Cancellation of Warrant; Reduction of Warrant Shares.

a) If, on or prior to January 31, 2009, the Company shall prepay to the holder (or its registered assigns) of that certain 8.0% Convertible Promissory Note of the Company, dated as of November 10, 2008 (the “Promissory Note”) an aggregate principal amount of Four Hundred Thousand Dollars ($400,000) (the “Prepayment Amount”), this Warrant shall automatically be cancelled on the date of such payment equal to or exceeding the Prepayment Amount with no further obligations of the Company and Holder shall have no further right, title or interest in this Warrant or the Warrant Shares and the Company shall have no further obligation to issue the Warrant Shares.

b) If, after January 1, 2009 and on or prior to April 30, 2009, the Company shall prepay to the holder (or its registered assigns) of the Promissory Note the Prepayment Amount, the number of Warrant Shares issuable upon full exercise of this Warrant shall be reduced by fifty percent (50%), effective as of the date of such payment equal to or exceeding the Prepayment Amount.”

4. Except as amended by this Amendment, the terms and conditions of the Warrants shall remain in full force and effect.

5. This Amendment may be executed in any number of counterparts (including by facsimile), each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same Amendment. This Amendment shall be governed by and construed in accordance with the laws of the State of Texas, without regard to principles of conflicts of law thereof. Whenever possible, each provision of this Amendment shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Amendment shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Amendment.

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IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to Common Stock Purchase Warrants of IdentiPHI, Inc. to be duly executed by their respective authorized persons as of the date first indicated above.

IDENTIPHI, INC.
By:
	Name:
	Title:

KEY OVATION, LLC:
By:
	Name:
	Title:

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EX-10.4

Exhibit 10.4

LINE OF CREDIT AGREEMENT

This Line of Credit Agreement (“Agreement”), dated as of November 10, 2008, is entered into by and between Key Ovation, LLC (“Lender”), and IdentiPHI, Inc., a Delaware corporation (“Borrower”).

RECITALS

WHEREAS, Lender has agreed to lend to Borrower up to One Million Dollars ($1,000,000) and Borrower has agreed to borrow up to the amount of such funds on the terms set forth below.

NOW, THEREFORE, the parties hereto agree as follows:

1. LINE OF CREDIT.

1.1 Credit Line. Upon execution of this Agreement and subject to the terms hereof, Lender agrees to make available to Borrower a committed line of credit equal to One Million Dollars ($1,000,000) (the “Credit Line”).

1.2 Advances. “Advances” shall mean funds advanced to Borrower by Lender under the Credit Line. The aggregate amount of the Advances shall not exceed the Credit Line, and each Advance shall be at Borrower’s sole discretion; provided, however, that aggregate Advances may not exceed $100,000 during any one calendar month period. Each Advance shall be made by Lender within ten (10) Business Days (as defined in the Notes) of receipt of an executed draw down request from Borrower in the form of Exhibit A attached hereto (a “Draw Down Request”).

1.3 Issuance of Notes. All Advances made from time to time shall be evidenced by promissory notes in the form of Exhibit B attached hereto (each, a “Note” and, together, the “Notes”) and shall be repaid in accordance with the terms thereof.

1.4 Interest. Interest shall accrue with respect to the principal amount of each Advance from the date of such Advance until such principal is fully paid or converted, at eight percent (8.0%) simple interest per annum (computed on the basis of a 365- day year, based upon the actual days elapsed).

1.5 Payment. All unpaid principal of each Note, together with the balance of accrued but unpaid interest and other amounts payable under each Note, shall be due and payable on demand at any time upon and after the earlier of (a) the one year anniversary of the issuance of such Note, or (b) the occurrence of an Event of Default (as defined in the Notes). All payments shall be made in lawful money of the United States of America at the principal office of Borrower, or at such other place as Lender may from time to time designate in writing to Borrower. Borrower may prepay all or any portion of the Notes at any time in accordance with the provisions of the Notes.

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1.6 Optional Conversion. Lender shall have the right, at Lender’s option, at any time prior to payment in full of the principal balance of each Note, to convert the unpaid principal and accrued but unpaid interest under such Note, in whole or in part, into shares of Borrower’s common stock (the “Conversion Shares”). The number of Conversion Shares to be issued upon such conversion shall be equal to the number obtained by dividing (i) the total amount of unpaid principal and accrued but unpaid interest being converted under the subject Note on the date of conversion by (ii) $0.18.

1.7 Failure to Make an Advance. Lender’s failure to make an Advance within ten (10) Business Days of receipt of an Executed Draw Request shall constitute a breach of this Agreement.

1.8 Warrants. Upon Borrower’s receipt of each Advance, Borrower shall issue to Lender a common stock purchase warrant, in substantially the form of Exhibit C attached hereto (each, a “Warrant” and, together, the “Warrants”), which Warrant shall entitle Lender to purchase a number of shares of Borrower’s common stock equal to 50% of the principal amount of such Advance divided by 0.18, at an exercise price of $0.18 per share.

1.9 Cancellation of Credit Line. Borrower may cancel all or any portion of the unborrowed amounts of the Credit Line by delivery to Lender of a Notice of Cancellation in the form of Exhibit D attached hereto. In addition, any prepayment by Borrower, or any conversion by Lender, of any amount due under a Note shall automatically constitute a cancellation of the amount prepaid or converted and of such prepaid or converted Note.

1.10 Qualifying Financing. Lender, at its option, may suspend its obligations to make any further Advances after January 31, 2009, if Borrower has not, after the date hereof, completed an equity and/or debt financing (or series of financings) for aggregate gross proceeds to Borrower of at least $1.7 million (a “Qualifying Financing”) by delivery of written notice of such suspension to Borrower at least ten (10) Business Days prior to the effective date of such suspension. In the event Lender suspends its obligations to make further Advances pursuant to this Section 1.10, Lender’s obligations to make further Advances shall be automatically resumed upon the completion of a Qualifying Financing by Borrower after January 31, 2009.

2. ACCELERATION. If any Event of Default shall occur and be continuing: (a) Lender’s obligations to make any Advances shall be suspended; and (b) Lender, at its option, may, by notice to Borrower, declare the entire unpaid principal amount of the Notes, all interest accrued and unpaid thereon and all other amounts payable pursuant thereto to be forthwith due and payable, whereupon all unpaid principal of the Notes, all such accrued interest and all such other amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by Borrower.

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3. TERMINATION.

3.1 Termination. This Agreement shall terminate on October 31, 2009 (the “Termination Date”), unless earlier terminated pursuant to Section 3.2. In the event of termination of this Agreement, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Lender or Borrower or their respective officers, directors, stockholders, members, managers or affiliates; provided, however, that the provisions of this Section 3.1 and Section 4 of this Agreement shall remain in full force and effect and survive any termination of this Agreement.

3.2 Termination by Mutual Consent. This Agreement may be terminated at any time prior to the Termination Date by the mutual written consent of Lender and Borrower.

4. MISCELLANEOUS.

4.1 Notices. All notices which any party to this Agreement may be required or may wish to give may be given by addressing them to the other party at the addresses set forth below by: (a) personal delivery, (b) by commercial overnight courier with written verification of actual receipt, (c) by registered or certified mail, or (d) by facsimile with receipt confirmed:

If to Lender:	Key Ovation, LLC
	2111 West Braker Lane
	Austin, Texas 78758
	Attention: President
	Fax: (512) 795-9997
	With a copy to:
	Akin & Almanza, Attorneys and Counselors
	2301 Capital of Texas Highway South, Building H,
	Austin, Texas 78746
	Attention: Rick Akin, Esq.
	Fax: (512) 478-7151
If to Borrower:	IdentiPHI, Inc.
	13809 Research Blvd., Ste 275
	Austin, Texas 78750
	Attention: Chief Executive Officer
	Fax: (512) 492-6225
	With a copy to:
	DLA Piper LLP
	701 Fifth Avenue, Suite 7000
	Seattle, WA 98104-7044
	Attention: Michael Hutchings, Esq.
	Fax: (206) 839-4801

3

If so mailed or otherwise delivered, such notices shall be deemed and presumed to have been given on the earlier of the date of actual receipt or three (3) days after mailing or authorized form of delivery.

4.2 Governing Law. This Agreement shall be construed in accordance with, and the rights of the parties shall by governed by, the law of the State of Texas. Venue for any action arising out of this Agreement shall be Travis County, Texas.

4.3 Waiver. Lender’s acceptance of partial or delinquent payments or failure to enforce or delay in enforcing any right shall not waive or release any obligation of Borrower or right of Lender, or modify this Agreement or the Notes, or waive any default.

4.4 Amendment. This Agreement may not be amended or modified except by a written instrument signed by both Borrower and Lender.

4.5 Entire Agreement. This Agreement and the Notes constitute the entire agreement between Lender and Borrower with respect to this Agreement and supersede all prior agreements, understandings, offers and negotiations, oral or written.

4.6 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. Any party may execute this Agreement by facsimile signature, which shall be deemed to constitute an original for all purposes.

4.7 Assignment. No party shall assign this Agreement or any part hereof, interest herein, right or obligation hereunder without obtaining in each instance the prior written consent of the other party.

4.8 Expenses. Each party shall pay all costs and expenses that it incurs with respect to the negotiation, execution, delivery and performance of this Agreement.

4.9 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their permitted successors and assigns.

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4

IN WITNESS WHEREOF, the undersigned have executed this Line of Credit Agreement as of the date first above written.

BORROWER:

IdentiPHI, Inc.

By: 

LENDER:

Key Ovation, LLC

By: 

1

EXHIBIT A

DRAW DOWN REQUEST FORM

TO:	KEY OVATION, LLC	DATE:
FROM:	IDENTIPHI, INC.

The undersigned represents and warrants on behalf of IdentiPHI, Inc. that as of the date hereof there has been no Event of Default under the Line of Credit Agreement between IdentiPHI, Inc. and Key Ovation, LLC, dated as of November       , 2008 (the “Line of Credit Agreement”).

REQUESTED BY:
	AUTHORIZED SIGNER’S NAME

AUTHORIZED SIGNATURE:                                                                                                                                                                        

IdentiPHI, Inc. hereby requests an advance of the below referenced amount under Section 1.2 of the Line of Credit Agreement.

REQUESTED TRANSACTION TYPE	REQUEST DOLLAR AMOUNT
PRINCIPAL INCREASE (ADVANCE)	$

OTHER INSTRUCTIONS:

Exhibit A

EXHIBIT B

FORM OF CONVERTIBLE PROMISSORY NOTE

Exhibit B

EXHIBIT C

FORM OF WARRANT

Exhibit C

EXHIBIT D

NOTICE OF CANCELLATION

TO:	KEY OVATION, LLC	DATE:
FROM:	IDENTIPHI, INC.

AUTHORIZED SIGNATURE:                                                                                                                                                                    

IdentiPHI, Inc. hereby makes payment of the amount specified below and/or requests the cancellation of Key Ovation, LLC’s commitment to advance additional funds under the Line of Credit Agreement between IdentiPHI, Inc. and Key Ovation, LLC, dated as of November       , 2008.

REQUESTED TRANSACTION TYPE	REQUEST DOLLAR AMOUNT
CANCELLATION OF COMMITMENT	$

OTHER INSTRUCTIONS:

Exhibit D

EX-10.5

Exhibit 10.5

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING THIS NOTE, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE ACT, OR, IF REQUESTED BY THE COMPANY, THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR HOLDER OF THIS NOTE REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.

IDENTIPHI, INC.

CONVERTIBLE UNSECURED PROMISSORY NOTE

$	, 200
	Austin, Texas

FOR VALUE RECEIVED, IdentiPHI, Inc., a Delaware corporation (the “Company”), hereby unconditionally promises to pay to Key Ovation, LLC (“Holder”), or Holder’s registered assigns, at such place or places as Holder may from time to time designate in writing, the aggregate principal sum of __________________________________ Dollars ($_____________), together with all accrued and unpaid interest thereon, as provided herein. All unpaid principal, together with the balance of unpaid and accrued interest and other amounts payable hereunder, shall be due and payable on demand at any time upon and after the earlier of (a) ______________, 200     (the “Maturity Date”), or (b) the occurrence of an Event of Default (as defined herein). All cash payments by the Company under this Convertible Unsecured Promissory Note (the “Note”) shall be in immediately available U.S. funds. This Note is issued in connection with that certain Line of Credit Agreement, dated as of November 1, 2008, by and between the Company and Holder.

A. Definitions.

1. “Allowed Consideration” shall have the meaning set forth in Section C.5 hereof.

2. “Business Day” means any day other than (x) a Saturday or Sunday, or (y) a day on which banks in Austin, Texas are required to be closed.

3. “Change of Control Event” shall mean (a) any transaction in which the Company consummates a merger, consolidation, share exchange or other transaction or series of related transactions resulting in the exchange of the outstanding shares of the Company for securities of or other consideration issued, or caused to be issued, by an acquiring entity or any of its affiliates, in any such case if the stockholders of the Company immediately prior to such event own less than a majority of the outstanding voting equity securities of the surviving entity immediately following the event, or (b) a sale, lease, exclusive license or other disposition of all or substantially all of the assets of the Company.

4. “Common Stock” shall mean the common stock of the Company.

5. “Company” shall have the meaning set forth in the preamble hereof.

6. “Conversion Price” shall be $0.18.

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LINE OF CREDIT

PROMISSORY NOTE

7. “Conversion Shares” shall mean the shares of Common Stock (or Allowed Consideration) issuable upon conversion of this Note pursuant to Section C.3(a), including any securities of another company for which the Company’s Common Stock has been exchanged.

8. “Event of Default” shall have the meaning set forth in Section D.1 hereof.

9. “Holder” shall have the meaning set forth in the preamble hereof.

10. “Maturity Date” shall have the meaning set forth in the preamble hereof.

11. “Note” shall have the meaning set forth in the preamble hereof.

12. “Notice Period” shall have the meaning set forth in Section C.2 hereof.

13. “Obligations” shall mean the outstanding principal and accrued but unpaid interest due hereunder and any additional amounts payable pursuant to the terms hereof.

14. “Reserved Shares” shall have the meaning set forth in Section C.4 hereof.

15. “Senior Executive Officers” shall mean the Company’s Chief Executive Officer, President and Chief Financial Officer.

B. Payment. All payments shall be made in lawful money of the United States of America at the principal office of the Company, or at such other place as the holder hereof may from time to time designate in writing to the Company.

C. Interest; Conversion Terms.

1. Interest. Interest shall accrue with respect to the principal amount loaned hereunder from the date hereof until such principal is fully paid or converted, at eight percent (8.0%) simple interest per annum (computed on the basis of a 365-day year, based upon the actual days elapsed).

2. Prepayment. The Company may prepay all or any portion of the Note at any time; provided, however, that the Company shall give Holder five (5) days’ prior written notice of such prepayment, during which time Holder may elect to convert the outstanding principal amount and accrued but unpaid interest under the Note pursuant to Section C.3 by giving the Company written notice of Holder’s election (the “Notice Period”). Any such prepayment will be applied first to the payment of interest accrued on the Note and then, if the amount of prepayment exceeds the amount of all accrued but unpaid interest, to the payment of principal of the Note.

3. Conversion.

(a) Optional Conversion. Holder has the right, at Holder’s option, at any time prior to payment in full of the principal balance of this Note, to convert this Note (including principal and accrued but unpaid interest to the date of conversion) in accordance with the provisions of this Section C.3, in whole or in part, into Conversion Shares. The number of Conversion Shares to be issued upon such conversion shall be equal to the number obtained by dividing (i) the outstanding principal amount and accrued but unpaid interest under this Note on the date of conversion by (ii) the Conversion Price. The number of Conversion Shares issuable to Holder upon such conversion shall be rounded down to the nearest whole number.

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LINE OF CREDIT

PROMISSORY NOTE

(b) Mechanics and Effects of Conversion.

(i) Before Holder shall be entitled to convert this Note into Conversion Shares pursuant to Section C.3(a), it shall surrender this Note at the office of the Company and shall give written notice by mail, postage prepaid, to the Company at its principal executive office, of the election to convert the same pursuant to Section C.3(a), and shall state therein the name or names in which the certificate or certificates for Conversion Shares are to be issued. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of this Note, and the person or persons entitled to receive the Conversion Shares upon such conversion shall be treated for all purposes as the record holder or holders of such Conversion Shares as of such date.

(ii) As soon as reasonably practicable after conversion of this Note, and upon surrender of this Note, the Company will deliver or cause to be issued in the name of and delivered to Holder a certificate or certificates representing the number of Conversion Shares to which Holder shall be entitled on such conversion. No fractional shares will be issued on conversion of this Note, and in lieu thereof the number of Conversion Shares issuable to Holder upon such conversion shall be rounded down to the nearest whole number. Upon full conversion of this Note and the issuance of the certificate(s) as contemplated herein, the Company shall be forever released from all its Obligations and liabilities under this Note.

(c) Notice Regarding Change of Control Event. At least thirty (30) calendar days prior to the anticipated closing of a Change of Control Event (or, if such notice is impracticable thirty (30) calendar days prior to such Change of Control Event, as many days before the Change of Control Event as is practicable), written notice shall be delivered to the Holder of this Note pursuant to Section E.5 below notifying Holder of the terms and conditions of the Change of Control Event, the amount of the outstanding principal amount and accrued but unpaid interest under this Note, the anticipated date on which any such Change of Control Event will occur and calling upon such Holder to inform the Company whether Holder intends to elect to convert the outstanding principal amount and accrued but unpaid interest into Conversion Shares. Following notice of the Change of Control Event, any conversion of this Note by Holder may be made contingent upon the consummation of such Change of Control Event, if so elected by Holder in the notice of conversion.

(d) No Rights as Stockholder. Prior to its conversion, this Note shall not entitle Holder to any voting rights or to any other rights as a stockholder of the Company or to any other rights whatsoever except the rights stated herein or in the agreements referenced herein.

(e) Withholding Obligations; Form 1099. Holder authorizes the Company to withhold from Holder, or to demand cash payment from Holder for, any taxes required to be withheld from Holder on the conversion of this Note, or, to reduce or eliminate such withholding, to provide the Company with a fully executed and completed IRS Form W-9. Holder acknowledges that the Company may issue Holder a Form 1099, reporting the interest, to the Internal Revenue Service (even if the interest is converted into stock), in accordance with law.

(f) Conversion Price Adjustments. In the event the Company should at any time while this Note is outstanding fix a record date for the effectuation of a split or subdivision of the Common Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly, additional shares of Common Stock without payment of any consideration by such holder for the additional shares of Common Stock, then, as of such record date, the Conversion Price shall be appropriately decreased so that the number of shares of Common Stock issuable upon conversion of this Note shall be increased in proportion to such increase of outstanding shares of Common Stock.

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4. Covenants as to Conversion Shares. The Company covenants and agrees that all Conversion Shares issued pursuant to the terms of this Note (the “Reserved Shares”) will, upon their issuance, be validly issued and outstanding, fully paid and nonassessable and free from all taxes, liens, and charges with respect to the issuance thereof. The Company further covenants and agrees that the Company will at all times have authorized and reserved a sufficient number of the Reserved Shares to provide for the conversion rights represented by this Note. If at any time while this Note remains outstanding the number of authorized but unissued shares of Common Stock shall not be sufficient to permit the conversion of this Note, the Company will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes.

5. Consolidation or Merger of the Company. If the Company is a party to (a) any consolidation, merger or share exchange with another corporation in which the Company is not the survivor, (b) any consolidation or merger of another entity into the Company in which the Company is the survivor but, in connection therewith, the Company’s equity securities are changed into or exchanged for stock or other securities of any other entity, or (c) any capital reorganization or reclassification of its Common Stock (in each such case excluding any merger effected exclusively for the purpose of changing the domicile of the Company), pursuant to any of which transactions the holders of the Company’s capital stock are entitled to receive with respect to or in exchange for such capital stock, stock or other securities, whether alone or together with any other consideration (such consideration being the “Allowed Consideration”), then as a condition of such transaction, lawful and adequate provisions reasonably acceptable to Holder shall be made whereby Holder shall thereafter have the right to purchase and receive (in lieu of Conversion Shares immediately theretofore receivable upon the conversion of this Note) such Allowed Consideration as may be issued or payable with respect to or in exchange for the number of such Conversion Shares immediately theretofore receivable upon the conversion of this Note. In any such case, appropriate provisions shall be made with respect to the rights and interests of Holder to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Conversion Price and the number of shares receivable upon the conversion of this Note) shall thereafter be applicable, as nearly as may be reasonably practicable (as determined in good faith by the Company’s Board of Directors, whose judgment shall be final and binding on Holder), in relation to the Allowed Consideration thereafter deliverable upon the conversion hereof. The Company will not effect any such consolidation or merger, unless, in connection with the consummation thereof, the successor corporation resulting from such consolidation or merger shall assume by written instrument the obligation to deliver to such Holder such Allowed Consideration as, in accordance with the foregoing provisions, such Holder may be entitled to purchase.

6. No Impairment. Except and to the extent as waived or consented to by Holder in writing, the Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company.

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D. Default.

1. Events of Default. The occurrence of any of the following shall constitute an “Event of Default” under this Note:

(a) Failure to Pay. The Company shall fail to pay when due any principal, any interest or other payment required under the terms of this Note on the date due and such default shall continue unremedied for a period of ten (10) Business Days after the Company’s receipt of written notice from Holder of such failure to pay.

(b) Breach of this Note. Except in the case of Section D.1(a) above, the Company shall be in material breach or default under any of the terms of this Note, and such breach or default shall continue unremedied for a period of thirty (30) Business Days after the Company’s receipt of written notice from Holder specifying such breach or default.

(c) Bankruptcy or Insolvency Proceedings.

(i) The Company shall (A) appoint, apply for or consent to the appointment of a receiver, trustee, liquidator, custodian, assignee for the benefit of creditors or similar judicial officer or agent to take possession, custody, control or charge of or liquidate any of its property or assets, (B) commence any voluntary proceeding under any provision of Title 11 of the United States Code, as now or hereafter amended, or commence any other proceeding, under any law, now or hereafter in force, relating to bankruptcy, insolvency, reorganization, liquidation, or otherwise to the relief of debtors or the readjustment of indebtedness, or (C) make any assignment for the benefit of creditors or a composition or similar arrangement with such creditors;

(ii) The commencement against the Company of any involuntary proceeding, or the consent by Company to any proceeding, of the kind described in Section D.1(c)(i) and such proceeding shall not have been dismissed within thirty (30) days;

(iii) The Company is adjudicated bankrupt or insolvent or a petition for reorganization is granted; or

(iv) The Company shall cause, or institute any proceeding for, or there shall occur, the dissolution of the Company.

(d) Change of Control Event. Without the prior written consent of Holder, the Company shall consummate a Change of Control Event and in connection therewith the Company changes its Senior Executive Officers such that the Senior Executive Officers serving immediately prior to such Change of Control Event no longer serve as the Company’s Senior Executive Officers immediately following such Change of Control Event.

2. Rights of Holders Upon Default. If any Event of Default shall occur for any reason, whether voluntary or involuntary, and be continuing, then Holder may, by written notice to the Company, declare all or any portion of the Obligations to be due and payable, whereupon the full outstanding principal and interest hereunder shall be so declared due and payable shall be and become immediately due and payable, without further notice, demand or presentment, all of which are expressly waived by the Company.

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E. Other Provisions.

1. Waivers and Amendments. This Note may not be amended or modified, nor may any of its terms be waived, except by a written instrument signed by Holder and the Company.

2. Severability. If any provision of this Note is determined to be invalid, illegal or unenforceable, in whole or in part, the validity, legality and enforceability of any of the remaining provisions or portions of this Note shall not in any way be affected or impaired thereby and this Note shall nevertheless be binding between the Company and Holder.

3. Governing Law. This Note shall be governed by and interpreted in accordance with the internal laws of the State of Texas. In any action brought or arising out of this Note, the Company and Holder hereby consent to the jurisdiction of any federal or state court seated in Travis County, Texas and also consent to the service of process by any means authorized by Texas law.

4. Binding Effect. This Note shall be binding upon, and shall inure to the benefit of, the Company and Holder and their respective successors and assigns.

5. Notices. Any notice required or desired to be served, given or delivered hereunder shall be in writing and in the form and manner specified below, and shall be addressed to the party to be notified as follows:

If to the Company:	IdentiPHI, Inc.
	13809 Research Blvd., Ste 275
	Austin, Texas 78750
	Attention: Chief Executive Officer
	With a copy to:
	DLA Piper LLP
	701 Fifth Avenue, Suite 7000
	Seattle, WA 98104-7044
	Attention: Michael Hutchings, Esq.
If to Holder:	Key Ovation, LLC
	2111 West Braker Lane
	Austin, Texas 78758
	Attention: President
	With a copy to:
	Akin & Almanza, Attorneys and Counselors
	2301 Capital of Texas Highway South, Building H,
	Austin, Texas 78746
	Attention: Rick Akin, Esq.

or to such other address as each party designates to the other by notice in the manner herein prescribed. Notice shall be deemed given hereunder if (a) delivered personally or otherwise actually received, (b) sent by overnight delivery service, or (c) mailed by first-class United States mail, postage prepaid, registered or certified, with return receipt requested. Notice mailed as provided in clause (iii) above shall be effective

6

LINE OF CREDIT

PROMISSORY NOTE

upon the expiration of three (3) Business Days after its deposit in the United States mail. Notice given in any other manner described herein shall be effective upon receipt by the addressee thereof; provided, however, that if any notice is tendered to an addressee and delivery thereof is refused by such addressee, such notice shall be effective upon such tender unless expressly set forth in such notice.

6. Payment. Payment shall be made in lawful tender of the United States.

7. Transfer of Note or Securities Issuable on Conversion Hereof. Prior to conversion, neither this Note nor any rights hereunder may be transferred by Holder unless Holder delivers to the Company written notice of Holder’s intention of such transfer at least ten (10) days prior to such transfer and such transfer complies with applicable federal and state securities laws, except that Holder may freely assign this Note to an affiliate of Holder. For purposes of this agreement, “affiliate” shall be deemed to include with respect to a Holder: (a) a partnership or limited liability company, its partners, members, stockholders, former partners, former members or an affiliated entity managed by the same manager or managing partner or management company, or managed or owned by an entity controlling, controlled by, or under common control with, such member or manager or managing partner or management company, or (b) an individual, his or her spouse or lineal descendant or antecedent, or a trust or trusts for the exclusive benefit of Holder or Holder spouse or lineal descendant or antecedent, in each such case in connection with bona fide estate planning purposes. In the event this Note is transferred in accordance with this Section E.7, the new holder shall be deemed to be the “Holder” with respect to the provisions of this Note.

8. Replacement Note. If this Note is lost, stolen, mutilated or destroyed, the Company shall issue a new Note of like denomination, tenor and date as this Note, subject to the Company’s right to require Holder to give the Company a bond or other satisfactory security sufficient to indemnify the Company against any claim that may be made against it (including any expense or liability) on account of the alleged loss, theft, mutilation or destruction of this Note or the issuance of such new Note.

9. Headings. Section headings used in this Note have been set forth herein for convenience of reference only. Unless the contrary is compelled by the context, everything contained in each section hereof applies equally to this entire Note.

IN WITNESS WHEREOF, the Company has caused this Convertible Unsecured Promissory Note to be issued as of the date first written above.

IDENTIPHI, INC.

By: 

7

LINE OF CREDIT

PROMISSORY NOTE

EX-10.6

Exhibit 10.6

AMENDMENT NO. 1

TO

SECURITY AGREEMENT

This Amendment No. 1 (this “Amendment”) amends that certain Security Agreement, dated as of June 30, 2008 (the “Security Agreement”), by and between IdentiPHI, Inc. (the “Company”) and Key Ovation, LLC (“Key Ovation”).

WHEREAS, the Company issued that certain Secured Promissory Note, dated as of March 12, 2008 (the “March Note”), to Zaychan Pty Limited (“Zaychan”) in the principal amount of up to AUD$1,750,000 and pursuant to which the Company granted Zaychan a security interest in certain assets of the Company; and

WHEREAS, the Company, Key Ovation and Zaychan entered into that certain Renewal, Modification and Extension of Promissory Note, dated as of June 30, 2008 (the “Renewal Agreement”), pursuant to which Zaychan assigned all of its rights and interest under the March Note to Key Ovation; and

WHEREAS, in connection with the execution of the Renewal Agreement, the Company and Key Ovation entered into the Security Agreement, pursuant to which the Company granted Key Ovation a security interest in certain assets of the Company; and

WHEREAS, the Company and Key Ovation entered into subsequent amendments to the March Note and agree that the aggregate principal and accrued and unpaid interest as of November 1, 2008 is equal to Two Million One Hundred Fifty-Two Thousand Eight Hundred Six Dollars ($2,152,806.00) (the “Key Ovation Debt”); and

WHEREAS, in connection with this Amendment, the Company and Key Ovation have entered into that certain Termination Agreement, pursuant to which the Company’s and Key Ovation’s respective rights and obligations under the March Note and the Renewal Agreement shall be terminated the Key Ovation Debt shall be evidenced by a new 8.0% Convertible Promissory Note issued by the Company in the aggregate principal amount of Two Million One Hundred Fifty-Two Thousand Eight Hundred Six Dollars ($2,152,806.00) the “Convertible Note”); and

WHEREAS, the Company’s obligations under the Convertible Note shall continue to be secured by certain assets of the Company as set forth in the Security Agreement.

Now, therefore, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1. All capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Security Agreement.

2. Section 1.02 of the Security Agreement shall be amended and restated in its entirety to read as follows:

“Section 1.02. Note. The Debtor has issued to the Secured Party that certain 8% Convertible Promissory Note, dated as of November       , 2008, in the aggregate principal amount of $2,152,806 USD (as amended, modified or otherwise supplemented from time to time, the “Note”).”

3. The performance and payment of all obligations and indebtedness of the Company to Key Ovation pursuant to the Convertible Note shall be secured by the Collateral.

4. Except as amended by this Amendment, the terms and conditions of the Security Agreement shall remain in full force and effect.

5. This Amendment may be executed in any number of counterparts (including by facsimile), each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same Amendment. This Amendment shall be governed by and construed in accordance with the laws of the State of Texas, without regard to principles of conflicts of law thereof. Whenever possible, each provision of this Amendment shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Amendment shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Amendment.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

-2-

IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to Security Agreement to be duly executed by their respective authorized persons as of the date first indicated above.

IDENTIPHI, INC.
By:
	Name:
	Title:

KEY OVATION, LLC:
By:
	Name:
	Title:

-3-

EX-99.1

Exhibit 99.1

Press Contact:	Investor Relations Contact:
Andrew Goss	Equiti-trend Advisors LLC
VOXUS, Inc.	800-953-3350 Toll-Free
253-853-5151 x224	858-436-3350 Local or International
agoss@voxuspr.com	investors@identiphi.net

IdentiPHI to Host Conference Call to Discuss Third Quarter Results

Company also announces expansion of credit facility and upcoming investor roundtable meetings

AUSTIN, Tex – November 10, 2008 – IdentiPHI, Inc. (OTCBB: IDPI), an innovative leader in advanced authentication solutions for the enterprise, today announced it will review its third quarter financial results and current business operations during a conference call on Wednesday, November 12, 2008, beginning at 5:00 pm EST. Christer Bergman, IdentiPHI CEO and Chairman, will host the call which will include a question and answer session.

In addition to the earnings teleconference, IdentiPHI will host two investor roundtable meetings for shareholders at the end of the week. These will be held in Chicago, Illinois on Thursday, November 13 and in Boston, Massachusetts on Friday, November 14 – each beginning at 12:30 pm local time. To request a seat at either of the investor roundtable meetings, please email investors@identiphi.net.

IdentiPHI also announced that it has agreed to amend certain terms and extend the due date on its $2.1 million secured promissory note held by KeyOvation, LLC until October 31, 2009, and has agreed to a $1.0 million credit line facility with KeyOvation, which may be drawn down from time to time over the next twelve months. More complete information regarding these agreements will be included in IdentiPHI’s current report on Form 8-K to be filed with the Securities and Exchange Commission. Today, IdentiPHI is also releasing a letter to shareholders. The text of that letter can be found at the end of this press release.

“During our transition into an enterprise authentication company it is vital to keep our shareholders aware of our plans and progress,” said Bergman. “The shareholder letter is an important component of our ongoing outreach to investors. Furthermore, we are conducting the roundtables to provide our shareholders an opportunity to meet and speak with me in a more interactive setting. This is especially critical given our financial situation and today’s uncertain market conditions.”

To participate in the conference call, dial the following numbers – US/Canada: 866-393-1516, International: 706-902-0851 and using conference ID number 72506264. Participants are asked to call the assigned number approximately 10 minutes before the conference call is scheduled to begin. A replay of the call will be available for ten days following the call by dialing: US/Canada: 800-642-1687, International: (706) 645-9291 and entering the following passcode: 72506264. A replay of the conference call will also be available for 30 days at http://www.identiphi.net/ in the investor relations area of the web site.

About IdentiPHI

Headquartered in Austin Texas, IdentiPHI is an innovative technology company offering a comprehensive suite of advanced authentication solutions. Comprised of experienced partners and thought-leaders in the industry, IdentiPHI is setting the standard for what companies are looking for in a security solution. IdentiPHI solutions deliver enhanced identity assurance throughout the enterprise. The company is defining security technology to meet the evolving challenges of today’s ever changing fast-paced business needs. For more information, call 888-436-8744, or visit www.identiphi.net.

NOTE: “IdentiPHI” is a trademark of IdentiPHI, Inc.

This release contains information about our management’s view of our future expectations, plans and prospects that constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. Actual results may differ materially from historical results or those indicated by these forward-looking statements as a result of a variety of factors. These factors include, but are not limited to, risks and uncertainties associated with our financial condition, our ability to sell our products, our ability to compete with competitors and the growth of the security market and the successful delivery and adoption of our biometric products in the marketplace. In addition, we need to seek additional funds through the issuance of equity or debt securities or other sources of financing during 2008 and we do not have any arrangements or agreements in place for any such financing. If we are unable to obtain necessary additional financing, our ability to run our business will be adversely affected and we may be required to reduce the scope of our research and business activity or cease our operations. Even if we are successful in obtaining additional financing, if we are unable to generate sufficient cash flow from operations, we will need to seek additional funds through the issuance of additional equity or debt securities or other sources of financing. We may not be able to secure such additional financing on favorable terms, or at all. Any additional financings will likely cause substantial dilution to existing stockholders. If we are unable to obtain necessary additional financing, we may be required to reduce the scope of, or cease, our operations. Further, we will need to increase our revenues to be able to achieve and then maintain profitability and we cannot predict when, or if, we will become profitable in the future. Even if we achieve profitability, we may not be able to sustain it. Additional factors are included in our annual report on Form 10-K, as well as other documents we periodically file with the Securities and Exchange Commission.

Letter to Shareholders

Dear Shareholder,

I have now been CEO and Chairman of IdentiPHI, Inc. for the last three months, which, as you all know, has been a period of global economic crisis and volatile market conditions. The purpose of this letter is to introduce myself to you, tell you why I joined IdentiPHI, update you on where we are today and, lastly, share my ambitions and plans for the company.

Having been in the biometric industry for the last eight years and in the information technology market since 1984, I guess you can say that I am a seasoned industry veteran. During this time I have served as Managing Director, Country Manager, CEO and Chairman for both public and private companies. While in these positions, I have been aware of and worked with Saflink since 2000 and IdentiPHI since 2005. When I was approached earlier this year to serve as a member of the Board of Directors of the newly merged IdentiPHI, I did not hesitate – in fact I was thrilled. I have always seen SAFsolution – our cornerstone product – as a solid foundation for enterprise-wide authentication, while IdentiPHI had been focused on building distribution channels, partnerships and selling security solutions. I saw the merger as a combination of the best of both worlds and when I was approached to increase my role with the company by serving as CEO and Chairman, again I was thrilled to accept the offer. By adding my experience and familiarity with the authentication industry to the equation, I believe we can complete the transition of IdentiPHI into a leading enterprise authentication software provider.

We achieved the majority of our revenue during the first part of 2008 through reselling third party security products via our established OEM channel. This business has a relatively lower margin and we do not feel that it should be our principal focus in the long run. Earlier this year, we released the refreshed and completely rewritten SAFsolution, based on key features driven by the

market and our customers. Our ambition now is to focus on marketing our SAFsolution product suite to enterprises and organizations via a network of worldwide partners, while gradually expanding our OEM channel business. We have focused the organization and now have cash operating expense levels down to approximately $400,000 per month and our plan is to steadily increase the sales of SAFsolution from a historical average of $50,000 per month up to $400,000 per month by the middle of next year. We believe this focus and revenue ramp could turn us into a profitable company with the ability to grow. We also envision that these types of results could lead to a more active shareholder base and increase the trading volume in our common stock thereby facilitating a more reliable and representative value of the company. By achieving these results, we feel we can increase our market capitalization which could further fuel our ability to expand through technological advancement, international growth or strategic relationships.

During the last couple of months, we have reached out to the investor community in an effort to secure necessary additional financing to run our business and facilitate our efforts to achieve and maintain profitability. With the turbulent market conditions and global economic worries, there is the risk that we may be unable to raise sufficient additional capital, but I still believe we will be successful in our efforts to complete this mission.

I remain very optimistic about our company and our business. Some of the reasons for my optimism include:

• Our solid and well-respected SAFsolution product suite, with high gross margin and backed by strong intellectual property;

• Increasing market demand for strong authentication and solutions to create electronic audit trails;

• An installed base of SAFsolution customers that include well-known Fortune 500 accounts;

• Our experienced and well-connected management team, which has demonstrated its ability to close on business opportunities; and

• Performance-based equity incentives for certain members of our management team that are achieved when the market capitalization of our outstanding common stock reaches $50 million and $75 million, which we are working extremely hard to reach.

Lastly, an important part of leading a public company is communication and interaction with our shareholders. With this letter, I am reaching out and inviting you to be part of our journey towards profitability and success – with a solid and satisfied customer base, the best partners in the industry and in the end happy shareholders. In conjunction with the issuance of our third quarter report, we are holding two round table discussions to go over our results and plans for the future with shareholders; one in Chicago on Thursday November 13 and one in Boston on Friday, November 14, both beginning at 12:30 p.m. local time. Please RSVP to investors@identiphi.net to secure a spot for either of these events.

Sincerely yours,

Christer Bergman

Chairman and Chief Executive Officer

IdentiPHI, Inc.