NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – BASIS OF PRESENTATION
In
the opinion of the Company, the accompanying unaudited condensed consolidated financial statements are prepared in accordance
with instructions for Form 10-Q, include all adjustments (consisting only of normal recurring accruals) which we considered as
necessary for a fair presentation of the results for the periods presented. Certain information and footnote disclosures normally
included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the
United States of America (US GAAP) have been condensed or omitted. It is suggested that these condensed consolidated financial
statements be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2016. The
results of operations for the three months ended March 31, 2017 are not necessarily indicative of the results to be expected for
future periods or the full year.
The
condensed consolidated financial statements include the accounts of Ipsidy Inc. and its wholly-owned subsidiaries MultiPay S.A.S.,
ID Global LATAM S.A.S., IDGS S.A.S., ID Solutions, Inc., FIN Holdings Inc., Innovation in Motion Inc. and Cards Plus Pty Ltd.
(the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation.
Net
Loss per Common Share
The
Company computes net loss per share in accordance with FASB ASC 260, “Earnings per Share”. ASC 260 requires presentation
of both basic and diluted earnings per share (EPS) on the face of the statement of operations. Basic EPS is computed by dividing
net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period.
Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using
the treasury stock method, and convertible notes and stock warrants, using the if-converted method. In computing diluted EPS,
the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of
stock options, warrants and conversion of convertible notes. Diluted EPS excludes all dilutive potential common shares if their
effect is anti-dilutive. The following table illustrates the computation of basic and diluted EPS:
|
|
For
the three months ended
March
31, 2017
|
|
|
For
the three months ended
March
31, 2016
|
|
|
|
Net
Loss
|
|
|
Shares
|
|
|
Per
Share
Amount
|
|
|
Net
Income
|
|
|
Shares
|
|
|
Per
Share Amount
|
|
Basic EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) available to stockholders
|
|
$
|
(9,669,092
|
)
|
|
|
295,596,151
|
|
|
$
|
(0.03
|
)
|
|
$
|
7,692,510
|
|
|
|
201,816,797
|
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Dilutive Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
13,387,521
|
|
|
|
—
|
|
Warrants
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
26,910,433
|
|
|
|
—
|
|
Convertible Debt
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(12,014,911
|
)
|
|
|
28,597,300
|
|
|
|
—
|
|
Dilute EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income available to stockholders plus assumed
conversions
|
|
$
|
(9,669,092
|
)
|
|
|
295,596,151
|
|
|
$
|
(0.03
|
)
|
|
$
|
(4,322,401
|
)
|
|
|
270,712,051
|
|
|
$
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Going
concern
As
of March 31, 2017, the Company had an accumulated deficit of approximately $58.6 million. For the three months ended March 31,
2017 the Company earned revenue of approximately $0.6 million and incurred a loss from operations of approximately $5.0 million.
The
reports of our independent registered public accounting firms on our consolidated financial statements for the years ended December
31, 2016 and 2015 contained an explanatory paragraph regarding our ability to continue as a going concern based upon our net losses
and accumulated deficits.
These
condensed consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue
to meet its obligations and continue its operations for the next fiscal year. The continuation of the Company as a going concern
is dependent upon financial support from the Company’s current shareholders, the ability of the Company to obtain additional
equity financing to continue operations, the Company’s ability to generate sufficient cash flows from operations, successfully
locating and negotiating with other business entities for potential acquisition and /or acquiring new clients to generate revenues
and cash flows. As there can be no assurance that the Company will be able to achieve positive cash flows (become profitable) and raise sufficient capital to maintain operations there is substantial doubt about the Company’s ability to continue as a going concern.
These condensed consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications
of liabilities that may result should the Company be unable to continue as a going concern.
Inventories
Inventory of plastic/ID cards, digital printing
material, which are held by Cards Plus Pty Ltd., are at the lower of cost (using the average method) or market. The
Plastic/ID cards and digital printing material are used to provide plastic loyal ID and other types of cards. Inventories at
March 31, 2017 and December 31, 2016 consist solely of cards inventory. As of March 31, 2017 and December 31, 2016, the
Company did not believe an inventory valuation allowance was necessary to record inventory to net realizable value were
necessary.
Leases
All
leases are classified at the inception as direct finance leases or operating leases based on whether the lease transfers substantially
all the risks and rewards of ownership. Leases that transfer to the lessee substantially all of the risks and rewards incidental
to ownership of the asset are classified as direct finance leases.
Revenue
Recognition
Revenue
is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and
collectability is probable. Revenue generally is recognized net of allowances for returns and any taxes collected from customers
and subsequently remitted to governmental authorities.
Revenue
from the sale of unique secure credential products and solutions to customers is recorded at the completion of the project unless
the solution includes benefits to the end user in which additional resources or services are required to be provided.
Revenue
from cloud-based services arrangements that allow for the use of a hosted software product or service that are provided on a consumption
basis (for example, the number of transactions processed over a period of time) is recognized commensurate with the customer utilization
of such resources, Generally, the contract calls for a minimum number of transactions to be charged by the Company on a monthly
basis. Accordingly, the Company records the minimum transactional fee based on the passage of a month’s time as revenues.
Amounts in excess of the monthly minimum, are charged to customers based on the actual number of transactions.
Consulting
services revenue is recognized as services are rendered, generally based on the negotiated hourly rate in the consulting arrangement
and the number of hours worked during the period. Consulting revenue for fixed-price services arrangements is recognized as services
are provided.
Revenue
related to direct financing leases is recognized over the term of the lease using the effective interest
method.
Income
Taxes
The
Company accounts for income taxes under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) 740 “Income Taxes.” Under the asset and liability method of FASB ASC 740, deferred tax assets
and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered
or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income
in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than
not that the Company will not realize tax assets through future operations. For the three months ending March 31, 2017 and 2016,
there is no provision for income tax as the Company had a tax loss for United States and foreign activities and all of the Company’s
carryforwards are reserved for. The Company’s gain or loss on derivative liability during three months ending March 31,
2017 and 2016 is not subject to tax.
Recent
Accounting Pronouncements
In
January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
(“ASU”) 2017-04 –
Simplifying the Test for Goodwill Impairment
, which modified the goodwill
impairment test and required an entity to write down the carrying value of goodwill up to the amount by which the carrying
amount of a reporting unit exceeded its fair value. We have not early adopted this ASU and are currently evaluating the
impact on our financial statements.
In
July 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2017-11,
Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic
815)
. The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments
(or embedded features) with down round features. When determining whether certain financial instruments should be classified as
liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument
is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified
instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be
accounted for as a derivative liability at fair value as a result of the existence of a down round feature. For freestanding equity
classified financial instruments, the amendments require entities that present earnings per share (EPS) in accordance with Topic
260 to recognize the effect of the down round feature when it is triggered. The effect is treated as a dividend and as a reduction
of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down
round features are now subject to the specialized guidance for contingent beneficial conversion features (in Subtopic 470-20,
Debt—Debt with Conversion and Other Options), including related EPS guidance (in Topic 260). The amendments in Part II of
this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content
in the Codification, to a scope exception. We are currently reviewing the potential impact to the financial statements.
NOTE
2 – OTHER CURRENT ASSETS
The
Company has continued to make an investment in kiosks to provide electronic ticketing for transit systems in Colombia. The
increase in other current assets is principally due to payments made in relation to the expansion of the kiosk program on
account. Kiosks when received will be included in inventory until they are placed into service.
NOTE
3 – INTANGIBLE ASSETS, NET (OTHER THAN GOODWILL)
The
Company’s intangible assets consist of intellectual property acquired from MultiPay and FIN and are amortized over their
estimated useful lives as indicated below. The following is a summary of activity related to intangible assets for the three months
ended March 31, 2017:
|
|
Customer Relationships
|
|
|
Intellectual Property
|
|
|
Non-Compete
|
|
|
Patents
Pending
|
|
|
|
Useful Lives
|
|
10 Years
|
|
|
10 Years
|
|
|
10 Years
|
|
|
n/a
|
|
|
Total
|
|
Carrying Value at December 31, 2016
|
|
$
|
1,446,166
|
|
|
$
|
2,000,858
|
|
|
$
|
8,067
|
|
|
$
|
19,200
|
|
|
$
|
3,474,291
|
|
Additions
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,126
|
|
|
|
8,126
|
|
Amortization
|
|
|
(39,679
|
)
|
|
|
(53,885
|
)
|
|
|
(704
|
)
|
|
|
—
|
|
|
|
(94,268
|
)
|
Carrying Value at March 31, 2017
|
|
$
|
1,406,487
|
|
|
$
|
1,946,973
|
|
|
$
|
7,363
|
|
|
$
|
27,326
|
|
|
$
|
3,388,149
|
|
The
following is a summary of intangible assets as of March 31, 2017:
|
|
Customer Relationships
|
|
|
Intellectual Property
|
|
|
Non-Compete
|
|
|
Patent Pending
|
|
|
Total
|
|
Cost
|
|
$
|
1,587,159
|
|
|
$
|
2,444,646
|
|
|
$
|
14,087
|
|
|
$
|
27,326
|
|
|
$
|
4,073,218
|
|
Accumulated amortization
|
|
|
(180,672
|
)
|
|
|
(497,673
|
)
|
|
|
(6,724
|
)
|
|
|
—
|
|
|
|
(685,069
|
)
|
Carrying Value at March 31, 2017
|
|
$
|
1,406,487
|
|
|
$
|
1,946,973
|
|
|
$
|
7,363
|
|
|
$
|
27,326
|
|
|
$
|
3,388,149
|
|
Future
expected amortization of intangible assets is as follows:
Fiscal Year Ending December 31,
|
|
2017
|
|
|
305,780
|
|
2018
|
|
|
407,706
|
|
2019
|
|
|
407,706
|
|
2020
|
|
|
402,109
|
|
2021
|
|
|
398,567
|
|
Thereafter
|
|
|
1,466,281
|
|
|
|
$
|
3,388,149
|
|
NOTE
4 – OTHER ASSETS
The Company continues to make investments in its technology platforms
that prior to these assets being placed into service are included in other assets.
NOTE
5 – PROPERTY AND EQUIPMENT, NET
Property
and equipment consisted of the following as of March 31, 2017 and December 31, 2016:
|
|
2017
|
|
|
2016
|
|
Computers and equipment
|
|
$
|
360,897
|
|
|
$
|
192,928
|
|
Furniture and fixtures
|
|
|
109,200
|
|
|
|
109,200
|
|
|
|
|
470,097
|
|
|
$
|
302,128
|
|
Less Accumulated depreciation
|
|
|
201,711
|
|
|
|
186,446
|
|
Property and equipment, net
|
|
$
|
268,386
|
|
|
$
|
115,682
|
|
Depreciation
expense totaled $15,266 and $9,013 for the three months ended March 31, 2017 and 2016, respectively.
See Note 12 for equipment ($163,407) acquired pursuant
to a capital lease.
NOTE
6 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts
payable and accrued expenses consisted of the following as of March 31, 2017 and December 31, 2016:
|
|
2017
|
|
|
2016
|
|
Trade payables
|
|
$
|
1,416,238
|
|
|
$
|
341,002
|
|
Accrued interest
|
|
|
48,112
|
|
|
|
600,624
|
|
Accrued payroll and related
|
|
|
540,977
|
|
|
|
421,771
|
|
Other accrued expenses
|
|
|
83,693
|
|
|
|
324,503
|
|
Total
|
|
$
|
2,089,020
|
|
|
$
|
1,687,900
|
|
NOTE
7 - NOTES PAYABLE, NET
On
January 31, 2017, the Company entered into Conversion Agreements with several accredited investors (the
“Investors”) pursuant to which substantially all Investors agreed to convert all amounts of notes payable and
convertible notes payable (note 7) due and payable to such persons including interest under the terms of their
respective financing or loan agreement as of January 31, 2017 into shares of Company common stock at $0.10 per share. Certain
Investors that had a conversion price less than $0.10 converted at such applicable conversion price. The Conversion
Agreements resulted in the conversion of notes and convertible notes amounting to $6,331,000 into 84,822,006 shares of Company common stock with a fair value of $21,691,000. The
Investors also agreed to waive any existing rights with respect to certain anti-dilution rights contained in their Stock
Purchase Warrants. The Company agreed to reduce the exercise of all outstanding Stock Purchase Warrants acquired as part of a
financing or loan that had an exercise price in excess of $0.10 per share to $0.10 per share.
As
a result of the above agreements associated with the conversion Agreements, the Company recorded a loss on the conversion
of debt of approximately $6.0 million (including the effect of the elimination of related conversion feature
derivative liabilities - see note 9), a loss on the modification of the warrants of approximately $0.2 million, and a loss on
modification of the derivatives of approximately $0.3 million.
On
February 22, 2017, the Company entered into an Agreement and Release (the “February 22, 2017 Agreement”) with a
holder of certain debentures that will represent final and full payment of all amounts owed under these debentures which
include debt with a face value of $300,000, accrued interest of approximately $31,000, cancellation of 3,600,000 warrants
previously accounted for as derivative liabilities as well as certain pledged shares (2,500,000 shares) in exchange for
$300,000 in cash which was paid in May 2017. As a result of the February 22, 2017 Agreement, the Company recorded a gain on
the extinguishment of notes payable of approximately $2.8 million.
See
notes 8 and 9.
The
following is a summary of notes payable as of March 31, 2017 and December 31, 2016:
|
|
2017
|
|
|
2016
|
|
In connection with the acquisition of MultiPay in 2015, the Company assumed
three promissory notes. At March 31, 2017, the remaining outstanding note carried an outstanding balance of $32,037. Payments
of $6,300 including principal and interest are due monthly. The interest rate is 15.47% per annum. Total outstanding principal
and interest is due on September 16, 2017.
|
|
$
|
32,037
|
|
|
$
|
46,210
|
|
|
|
|
|
|
|
|
|
|
The below section of notes payable were all converted to common stock at $0.10 per share. In connection with the January 2017
conversion agreements described above
|
.
|
|
|
|
|
|
|
|
|
|
In September 2015, the Company issued 12% notes totaling $973,000. The notes were secured
by the assets of the Company, matured in September 2016, and accrued interest was convertible into common stock of the Company
at a rate of $0.10 per share. In connection with the issuance of these notes, the Company also issued warrants
for the purchase of 6,486,667 shares of the Company’s common stock at an exercise price of $0.15 per share for a period
of five years. The Company also incurred debt issuance costs of $77,480, which were presented as a discount against
the notes and amortized into interest expense over the terms of the notes.
|
|
|
—
|
|
|
|
963,000
|
|
|
|
|
|
|
|
|
|
|
In October 2015, the Company issued 12% notes in the amount of $225,000. The notes were
secured by the assets of the Company, matured in October 2016, and accrued interest was convertible into common stock of the
Company at a rate of $0.10 per share. In connection with the issuance of these notes, the Company also issued warrants
for the purchase of 1,500,000 shares of the Company’s common stock at an exercise price of $0.15 per share for a period
of five years. The Company also incurred debt issuance costs of $36,400, which were presented as a discount against
the note and amortized into interest expense over the terms of the notes.
|
|
|
—
|
|
|
|
225,000
|
|
|
|
|
|
|
|
|
|
|
In November 2015, the Company issued a 12% note in the amount of $25,000. The note was
secured by the assets of the Company, matured in October 2016, and accrued interest was convertible into common stock of the
Company at a rate of $0.10 per share. In connection with the issuance of this note, the Company also issued warrants
for the purchase of 166,667 shares of the Company’s common stock at an exercise price of $0.15 per share for a period
of five years. The Company also incurred debt issuance costs of $94,400, which was presented as a discount against
the note and amortized into interest expense over the term of the note.
|
|
|
—
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
In December 2015, the Company issued 12% notes totaling $850,000. The notes are secured
by the assets of the Company and matured in December 2016. Any unpaid accrued interest on the note is convertible
into common stock of the Company at a rate of $0.48 per share. In connection with the issuance of these notes,
the Company also issued warrants for the purchase of 1,770,834 shares of the Company’s common stock at an exercise price
of $0.48 per share for a period of five years. The conversion rate on the accrued interest and the exercise price
on the warrants provide the holders with anti-dilution protection that requires these features to be bifurcated and presented
as derivative liabilities at their fair values. See Note 8.
|
|
|
—
|
|
|
|
850,000
|
|
|
|
|
|
|
|
|
|
|
In
January 2016, the Company issued 12% notes totaling $100,000. The note was secured by the
assets of the Company, matured in January 2017, and accrued interest was convertible into
common stock of the Company at a rate of $0.48 per share. In connection with the issuance
of these notes, the Company also issued warrants for the purchase of 208,332 shares of the
Company’s common stock at an exercise price of $0.48 per share for a period of five
years. The conversion rate on the accrued interest and the warrants provide the holders with
anti-dilution protection that requires these features to be bifurcated and presented as derivative
liabilities at their fair values. See Note 8.
|
|
|
—
|
|
|
|
100,000
|
|
|
|
|
|
|
|
|
|
|
In December 2016, the Company issued promissory notes with an aggregate face value of $1,275,000
which were payable one year from the date of issuance and accrued interest of 10% per annum for the initial six months of
the term of the Notes and 15% per annum for the remaining six months of the term of the Notes. The notes holders
also received 1,912,500 shares of common stock, with a fair value of $191,250. The Company allocated the proceeds
to the notes and common stock based on their relative fair values, resulting in a discount against the notes for the common
stock of $166,304, which was amortized into expense through the date of conversion. In connection with the issuance
of the notes and common stock, the Company also incurred debt issuance costs of $212,427, of which $184,719 was recorded as
debt issuance costs against the notes to be amortized over the one-year terms of the notes.
|
|
|
—
|
|
|
|
1,275,000
|
|
|
|
|
|
|
|
|
|
|
In November 2016,, the Company issued a 12% promissory note due in January 2017 to an officer
and principal stockholder in the amount of $13,609. In connection with the issuance of this note, the company also
issued warrants for the purchase of 1,146,667 shares of the Company’s common stock at an exercise price of $0.15
per share. This loan was repaid in April 2017. The note holder also received 20,414, shares of the
Company’s common stock with a fair value of $2,041.
|
|
|
13,609
|
|
|
|
13,609
|
|
|
|
|
|
|
|
|
|
|
In January 2017, the Company issued a Senior Unsecured Note with a face value of $3,000,000,
payable two years form issuance, along with an aggregate of 4,500,000 shares of Common Stock, with a fair value of $1,170,000. The
Company allocated the proceeds to the common stock based on their relative fair value and recorded a discount of $841,727
to be amortized into interest expense over the two-year term of the note. The Company also paid debt issuance costs
consisting of a cash fee of $120,000 and 1,200,000 shares of common stock of the Company with a fair value of $312,000, of
which $224,460 was recorded as debt issuance costs to be amortized into interest expense over the two-year term of the note.
|
|
|
3,000,000
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Total Principal Outstanding
|
|
$
|
3,045,646
|
|
|
$
|
3,497,819
|
|
Unamortized Deferred Debt
|
|
|
(284,891
|
)
|
|
|
(159,375
|
)
|
Unamortized Deferred Debt Issuance Costs
|
|
|
(771,583
|
)
|
|
|
(177,022
|
)
|
Notes Payable, Net
|
|
$
|
1,989,172
|
|
|
$
|
3,161,422
|
|
The
following is a roll-forward of the Company’s notes payable and related discounts for the three months ended March 31, 2017:
|
|
Principal
Balance
|
|
|
Debt
Issuance
Costs
|
|
|
Debt
Discounts
|
|
|
Total
|
|
Balance at December 31, 2016
|
|
$
|
3,497,819
|
|
|
$
|
(177,022
|
)
|
|
$
|
(159,375
|
)
|
|
$
|
3,161,422
|
|
New issuances
|
|
|
3,000,000
|
|
|
|
(310,790
|
)
|
|
|
(841,727
|
)
|
|
|
1,847,483
|
|
Payments
|
|
|
(14,173
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(14,173
|
)
|
Conversions
|
|
|
(3,438,000
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,438,000
|
)
|
Amortization
|
|
|
—
|
|
|
|
202,921
|
|
|
|
229,519
|
|
|
|
432,440
|
|
Balance at March 31, 2017
|
|
$
|
3,045,646
|
|
|
$
|
(284,891
|
)
|
|
$
|
(771,583
|
)
|
|
$
|
1,989,172
|
|
Future
maturities of notes payable are as follows:
Year Ending December 31,
|
|
|
|
|
2017
|
|
|
$
|
45,646
|
|
2018
|
|
|
|
—
|
|
2019
|
|
|
|
3,000,000
|
|
Thereafter
|
|
|
|
—
|
|
|
|
|
$
|
3,045,646
|
|
NOTE
8 - CONVERTIBLE NOTES PAYABLE, NET
See
Note 7 for transactions associated with the reduction in convertible notes payable on January 31, 2017.
Convertible
notes consisted of the following as of March 31, 2017 and December 31, 2016:
|
|
2017
|
|
|
2016
|
|
The below section of convertible notes payable were all converted to common stock at $0.10 per share in connection with the
January 2017 conversion agreements described in Note 7
|
.
|
|
|
|
|
|
|
|
|
|
In June 2015, the Company issued 10% convertible notes in the aggregate principal
amount of $700,000. The notes were secured by the assets of the Company, matured in June 2016, and were convertible
into common stock of the Company at a conversion rate of $0.03 per share, subject to adjustment. In connection
with the issuance of these notes, the Company also issued warrants for the purchase of 15,400,000 shares of the Company’s
common stock at an exercise price of $0.05 per share for a period of five years. The conversion rate on the notes
and exercise price of the warrants are subject to adjustment to anti-dilution protection that required these features to be
bifurcated and presented as derivative liabilities at their fair values. See Note 9. The Company also incurred
debt issuance costs of $124,000, which were presented as a discount against the note and amortized into interest expense over
the term of the note.
|
|
|
—
|
|
|
$
|
680,000
|
|
|
|
|
|
|
|
|
|
|
In July 2015, the Company issued 10% convertible notes with in the aggregate principal
amount of $190,000. The notes are secured by the assets of the Company, matured in July 2016, and are convertible
into common stock of the Company at a conversion rate of $0.03 per share, subject to adjustment. In connection
with the issuance of these notes, the Company also issued warrants for the purchase of 4,180,000 shares of the Company’s
common stock at an exercise price of $0.05 per share for a period of five years. The conversion rate on the notes
and exercise price of the warrants are subject for adjustment to anti-dilution protection that requires these features to
be bifurcated and presented as derivative liabilities at their fair values. See Note 9. The Company also incurred
debt issuance costs of $16,200, which are presented as a discount against the note and amortized into interest expense over
the term of the note.
|
|
|
—
|
|
|
|
166,000
|
|
|
|
|
|
|
|
|
|
|
In
February 2016, the Company re-issued a 12% convertible note in the amount of $172,095. The
note is secured by the assets of the Company, originally maturing in September 2016, and is
convertible into common stock of the Company at a rate of $0.10 per share. In connection with
the issuance of this note, the Company issued warrants for the purchase of 1,146,667 shares
of the Company’s common stock at an exercise price of $0.15 per share for a period of
five years.
|
|
|
—
|
|
|
|
172,095
|
|
|
|
|
|
|
|
|
|
|
In April 2016, the Company issued 12% convertible notes in the amount of $1,550,000. The
note is secured by the assets of the Company, matures in October 2016, and is convertible into common stock of the Company
at a rate of $0.25 per share. In connection with the issuance of these notes, the Company also issued warrants
for the purchase of 6,200,000 shares of the Company’s common stock at an exercise price of $0.25 per share for a period
of five years. The Company also issued 1,033,337 shares of common stock to the noteholders. The Company also incurred
debt issuance costs of $226,400, which are presented as a discount against the note and amortized into interest expense over
the term of the note. In August 2016, the Company entered into an agreement with the April 2016 Investors to reduce
the exercise price on the embedded conversion feature and warrants to $0.10 and increase the number of warrants to 15,500,000. The
August 2016 change in the terms of these convertible notes has been determined to be a debt extinguishment in accordance with
ASC 470. The reported amounts under the debt extinguishment are not significantly different than that of the Company’s
reported amounts.
|
|
|
—
|
|
|
|
1,550,000
|
|
|
|
|
|
|
|
|
|
|
Total Principal Outstanding
|
|
$
|
—
|
|
|
$
|
2,568,095
|
|
Unamortized Discounts – Derivatives
|
|
|
—
|
|
|
|
(6,466
|
)
|
Unamortized Discounts – Debt issuance costs
|
|
|
—
|
|
|
|
(66,033
|
)
|
Convertible Notes, Net
|
|
$
|
—
|
|
|
$
|
2,495,596
|
|
The
following is a roll-forward of the Company’s convertible notes and related discounts for the three months ended March 31,
2017:
|
|
|
Principal
Balance
|
|
|
Debt
Issuance
Costs
|
|
|
Debt
Discounts
|
|
|
Total
|
|
Balance at December 31, 2016
|
|
|
$
|
2,568,095
|
|
|
$
|
(66,033
|
)
|
|
$
|
(6,466
|
)
|
|
$
|
2,495,596
|
|
Conversions
|
|
|
|
(2,568,095
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,568,095
|
)
|
Amortization
|
|
|
|
—
|
|
|
|
66,033
|
|
|
|
6,466
|
|
|
|
72,499
|
|
Balance at March 31, 2017
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
NOTE
9 –DERIVATIVE LIABILITY
Due
to the potential adjustment in the conversion price associated with certain of the convertible debentures and the potential adjustment
in the exercise price of certain of the warrants, the Company had determined that certain conversion features and warrants are
derivative liabilities.
As
described in Note 7 above, the Company on January 31, 2017 entered into
Conversion Agreements
with Investors pursuant to which Investors agreed to convert all amounts of debt accrued and payable to such persons including
interest under the terms of their respective financing or loan agreement into shares of Company common stock at $0.10 per share.
Certain Investors that had a conversion price less than $0.10 converted at such applicable conversion price. The investors at
the time of conversion also agreed to waive any existing rights with respect to certain price protection and anti-dilution rights
contained in their Stock Purchase Warrants.
Additionally,
on February 22, 2017, the Company entered into an Agreement and Release with a holder of certain debentures that will represent
final and full payment of all amounts owed under such which include debt with a face value of $300,000, accrued interest of approximately
$31,000, cancellation of 3,600,000 warrants (previously accounted for as derivative liabilities) as well as certain pledged shares
(2,500,000 shares) in exchange for $300,000 in cash. These debentures also had potential price adjustments on these debentures
that have also been eliminated.
Therefore,
as a result of the conversion and repayment of the outstanding indebtedness and related accrued interest as well as the elimination
of anti-dilution rights of Stock Purchase Warrants, the Company no longer holds liabilities with derivatives requiring fair value
as of March 31, 2017.
A
summary of derivative activity for the three months ended March 31, 2017 is as follows:
Balance at December 31, 2016
|
|
$
|
18,056,631
|
|
Modification of derivatives
|
|
|
319,770
|
|
Cancellation of warrants previously accounted for as derivative liabilities and elimination of derivative conversion features resulting from conversion of related debt to equity
|
|
|
(11,213,573
|
)
|
Reclassification of derivatives to equity upon removal of price protection
in warrants
|
|
|
(7,614,974
|
)
|
Change in fair value
|
|
|
452,146
|
|
Balance at March 31, 2017
|
|
$
|
—
|
|
NOTE
10 – RELATED PARTY TRANSACTIONS
Amount
Due Officer and Director
In
November 2016, the Company issued a note payable for $13,609 to one if its Board of Directors and was outstanding at December
31, 2016. The note was repaid in April 2017. In November 2016, the related party also received 20,414 shares of the Company’s
common stock with a fair value of $2,041.
Convertible
Notes Payable
On
January 31, 2017, the Company entered into Conversion Agreements with Mr. Selzer, a director of the Company and Vista Associates,
a family partnership to which Mr. Selzer converted $150,000 in debt plus interest into 1,753,500 shares of common stock and $40,000
of debt plus interest into 1,537,778 shares of common stock.
Purchase of Common Stock
In
April 2017, Mr. Selzer purchased an additional 500,000 shares of common stock of the latest offering as described in Note 10.
Other
In
connection with securing third-party financing, the Company incurred fees to Network 1 Financial Securities, Inc. (“Network
1”), a registered broker-dealer. The Network 1 fees comprise of $360,000 payable in cash and the issuance of 2,200,000 shares
of common stock of the Company. A member of the Company’s Board of Directors previously maintained a partnership with a
key principal of Network 1. The agreement calls for Network 1 to receive commission, in cash and stock based on the total amount
of proceeds from any financing it secures for the Company.
The
Company’s headquarters are located in Long Beach, New York where the Company leases offices from Bridgeworks LLC (“Bridgeworks”),
a company providing office facilities which is principally owned by Mr. Beck, the Chief Executive Officer of the Company. The
Company paid Bridgeworks, $13,500 during the first three months ended March 31, 2017.
NOTE
11
–
STOCKHOLDER’S EQUITY (DEFICIT)
Common
Stock
As
described in Note 7, on January 31, 2017, in connection with the issuance of a $3,000,000 Senior Unsecured Note, an aggregate
of 4,500,000 shares of Common Stock was issued to the Investor and the Company issued Network 1 Financial Securities, Inc., a
registered broker-dealer, 1,200,000 shares of common stock of the Company in conjunction with its services.
As
described in Notes 7 and 8, on January 31, 2017, the Company entered into
Conversion Agreements
with Investors pursuant to which Investors agreed to convert all amounts of debt accrued and payable to such person including
interest under the terms of their respective financing or loan agreement as of January 31, 2017 into shares of Company common
stock at $0.10 per shares. The Conversion Agreements resulted in the issuance of approximately 84,822,000 shares of Company
common stock.
On
March 22, 2017, Ipsidy Inc. (the “Company”) entered into Subscription Agreements with several accredited investors
(the “March 2017 Accredited Investors”) pursuant to which the March 2017 Accredited Investors agreed to purchase an
aggregate of 20,000,000 shares of the Company’s common stock for an aggregate purchase price of $4,000,000. The Company
has received proceeds of $3,170,000. One individual March 2017 Accredited Investor, has agreed to fund $830,000 by the balance
of the offering by the end of the third quarter of 2017 of which $400,000 has been received as of the date of this report. In
connection with this private offering, the Company paid Network 1 Financial Securities, Inc. (“Network”), a registered
broker-dealer, a cash fee of $240,000 and agreed to issue Network 1,000,000 shares of common stock of the Company upon increasing
its authorized shares of common stock.
Additionally,
the Company cancelled certificates for 2,500,000 shares of common stock acquired in conjunction with the purchase of certain debentures.
During
the quarter ended March 31, 2017, the Company issued 366,750 shares of common stock as consideration for services. The fair value
of the shares, totaling $42,377, was estimated based on the publicly quoted trading price and recorded as expense.
Warrants
As
more fully described above the Company agreed to reduce the exercise of all outstanding Stock Purchase Warrants acquired
as part of a financing or loan that had an exercise price in excess of $0.10 per share to $0.10 per share. Certain warrants
were issued in connection with business arrangements and those warrants remained at original price per share of common stock.
Furthermore,
as more fully described above in Note 7, the Company as part of a transaction cancelled 3.6 million warrants.
The
following is a summary of the Company’s warrant activity for the three months ended March 31, 2017:
|
|
|
Number
of
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Life
|
|
Outstanding at December 31, 2016
|
|
|
|
51,138,697
|
|
|
$
|
0.11
|
|
|
|
3.8 Years
|
|
Cancelled
|
|
|
|
(3,600,000
|
)
|
|
$
|
0.08
|
|
|
|
3.9
Years
|
|
Outstanding at March 31, 2017
|
|
|
|
47,538,697
|
|
|
$
|
0.08
|
|
|
|
3.5 Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Options
On
August 10, 2016, the Company entered into an amended agreement (the “Amendment”) with Parity Labs, LLC (“Parity”)
to amend the compensation section of an existing Advisory Agreement previously entered into between the Company and Parity on
November 16, 2015 for the provision of strategic advisory services. The Amendment calls for the Company to issue to Parity the
option (the “Parity Option”) to acquire 20,000,000 shares of common stock of the Company, exercisable at $0.05 per
share for a period of ten years. The Parity Option vests as to 10,000,000 shares of common stock immediately and then in 12 equal
tranches of 833,333 shares per month commencing on September 1, 2016. Parity options vested in entirety upon Mr. Beck becoming
Chief Executive Officer (“CEO”) of Ipsidy, Inc. in January 2017. Mr. Beck is the manager of Parity.
In
connection with the engagement of the CEO and Chief Financial Officer (“CFO”) on January 31, 2017,
the
Company granted the CEO and CFO stock options to acquire 15,000,000 shares and 5,000,000 shares of common stock of the
Company, respectively, at an exercise price of $0.10 per share for a period of ten years. Further, upon the Company being legally
entitled to do so, the Company has agreed to enter a Restricted Stock Purchase Agreements with the CEO and CFO in which they will
be provided 15,000,000 shares and 5,000,000 shares of common stock at a per share price of $0.0001, which shares of common stock
vest upon achieving a performance threshold as defined in their respective agreements.
The
Company determined the grant date fair value of the options granted during the three months ended March 31, 2017 using the Black
Scholes Method and the following assumptions:
Expected
Volatility – 85%
Expected
Term – 5.0 Years
Risk
Free Rate – 1.92%
Dividend
Rate – 0.00%
Activity
related to stock options for the three months ended March 31, 2017 is summarized as follows:
|
|
|
Number of
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Contractual
Term (Yrs.)
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding as of December 31, 2016
|
|
|
86,925,000
|
|
|
$
|
0.21
|
|
|
|
9.5
|
|
|
$
|
10,023,400
|
|
Granted
|
|
|
20,000,000
|
|
|
$
|
0.10
|
|
|
|
9.8
|
|
|
$
|
—
|
|
Forfeitures
|
|
|
(875,000
|
)
|
|
$
|
0.10
|
|
|
|
8.8
|
|
|
$
|
—
|
|
Outstanding as of March 31, 2017
|
|
|
106,050,000
|
|
|
$
|
0.19
|
|
|
|
9.1
|
|
|
$
|
16,594,997
|
|
Exercisable as of March 31, 2017
|
|
|
72,575,000
|
|
|
$
|
0.16
|
|
|
|
8.9
|
|
|
$
|
9,411,664
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
following table summarizes stock option information as of March 31, 2017:
Exercise Prices
|
|
|
Outstanding
|
|
|
Weighted
Average
Contractual
Life
|
|
|
Exercisable
|
|
$
|
0.0001
|
|
|
|
3,500,000
|
|
|
|
8.5
Years
|
|
|
|
3,062,500
|
|
$
|
0.05
|
|
|
|
36,500,000
|
|
|
|
9.4
Years
|
|
|
|
21,750,000
|
|
$
|
0.10
|
|
|
|
27,250,000
|
|
|
|
9.6
Years
|
|
|
|
12,520,834
|
|
$
|
0.15
|
|
|
|
6,300,000
|
|
|
|
8.4
Years
|
|
|
|
3,641,666
|
|
$
|
0.25
|
|
|
|
500,000
|
|
|
|
9.0
Years
|
|
|
|
100,000
|
|
$
|
0.40
|
|
|
|
1,000,000
|
|
|
|
8.9
Years
|
|
|
|
1,000,000
|
|
$
|
0.45
|
|
|
|
31,000,000
|
|
|
|
8.5
Years
|
|
|
|
30,500,000
|
|
|
Total
|
|
|
|
106,050,000
|
|
|
|
9.1
Years
|
|
|
|
72,575,000
|
|
During
the three months ended March 31, 2017, the Company recognized approximately $3,294,000 of stock-based compensation expense of
which approximately $1,620,000 and $1,674,000 was related to employee and non-employees, respectively. As of March 31, 2017, there
was approximately $4,830,000 of unrecognized compensation costs related to stock options outstanding which will be expensed through
2019 (see Note 15).
NOTE
12 – DIRECT FINACING LEASE
In
September 2015, the Company and an entity in Colombia entered into a rental contract for the rental of 78 kiosks to provide cash
collection and fare services at transportation stations. The lease term began in May 2016 when the kiosk were installed and operational
and when the lease commenced. The term of the rental contract is ten years at an approximate monthly rental of $11,900. The lease
has the option at the end of the lease term to purchase each unit for approximately $40. The term of the lease approximates the
expected economic life of the kiosks. The lease was accounted for as a direct financing lease.
The
Company has recorded the transaction as it net investment in the lease and will receive monthly payments of $11,856 before estimated
executory costs, or $142,272, annually, to reduce investment in the lease and record income associated with the related amount
due. Executory costs are estimated to be $1,677 month and initial direct costs are not considered significant. The transaction
resulted in incremental revenue for the three months ended March 31, 2017 of approximately $19,000. There was no income in the
first three months of 2016 as the equipment was placed into service in May 2016.
The
equipment is subject to direct lease valued at approximately $748,000. At the inception of the lease term, the aggregate minimum
future lease payments to be received is approximately $1,422,000 before executory cost. Unearned income is recorded at the inception
of this lease was approximately $474,000 and will be recorded over the term of the lease using the effective income rate method.
Future minimum lease payments to be received under the lease for the next five years and thereafter are as follows:
|
|
|
|
|
2017
|
|
|
$
|
91,608
|
|
2018
|
|
|
|
122,145
|
|
2019
|
|
|
|
122,145
|
|
2020
|
|
|
|
122,145
|
|
2021
|
|
|
|
122,145
|
|
Thereafter
|
|
|
|
529,322
|
|
Sub-total
|
|
|
|
1,109,510
|
|
Less
deferred revenue
|
|
|
|
(401,899
|
)
|
Net
investment in lease
|
|
|
$
|
707,611
|
|
|
|
|
|
|
|
|
NOTE
13– LEASE OBLIGATION PAYABLE
The
Company entered into a lease in March 2017 for the rental of its printer for its secured plastic and credential card products
business under an arrangement that is classified as a capital lease. The leased equipment is amortized on a straight line basis
over its lease term including the last payment (61 payments) which would transfer ownership to the Company. Total amortization
related to the lease equipment as of March 31, 2017 is $2,679. The following is a schedule showing the future minimum lease payments
under capital lease by year and the present value of the minimum lease payments as of March 31, 2017. The interest rate related
to the lease obligation is 12% and the maturity date is March 31, 2022.
Year Ending
|
|
|
|
|
|
|
|
|
2017
|
|
|
$
|
32,322
|
|
2018
|
|
|
|
43,096
|
|
2019
|
|
|
|
43,096
|
|
2020
|
|
|
|
43,096
|
|
2021
|
|
|
|
43,096
|
|
Thereafter
|
|
|
|
10,776
|
|
Total minimum lease payments
|
|
|
|
215,482
|
|
|
|
|
|
|
|
Less: Amount representing interest
|
|
|
|
54,032
|
|
|
|
|
|
|
|
Present value of minimum lease payments
|
|
|
$
|
161,450
|
|
|
|
|
|
|
|
|
NOTE
14 – COMMITMENTS AND CONTINGENCIES
Legal
Matters
From
time to time, claims are made against the Company in the ordinary course of business, which could result in litigation. Claims
and associated litigation are subject to inherent uncertainties and unfavorable outcomes could occur, such as monetary damages,
fines, penalties or injunctions prohibiting the Company from selling one or more products or engaging in other activities. The
occurrence of an unfavorable outcome in any specific period could have a material adverse effect on the Company’s results
of operations for that period or future periods. The Company is not presently a party to any pending or threatened legal proceedings.
NOTE 15 – RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL
STATEMNTS
Subsequent
to filing its Quarterly Report on Form 10-Q for the period ended March 31, 2017 (the “Form 10-Q”) with the Securities
and Exchange Commission (the “SEC”) on August 4, 2017, the Company determined that a computation error occurred in
its calculation of stock-based compensation for the period ended March 31, 2017.
In
accounting for the Company’s stock-based compensation for the period ended March 31, 2017, the Company utilized
an incorrect common stock fair value as an input in the black-scholes calculation which determines the fair value of
one stock option tranche that vested on January 31, 2017. Upon correcting for the previously used option price, the Company
determined that stock-based compensation should have been $1,000,000 higher than previously reported.
The
Company has restated its previously issued financial statements as of and for the three months ended March 31, 2017, to correct
the non-cash error related to its stock-based compensation.
The impact of the restatements
is reflected below for the periods indicated:
CONSOLIDATED BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Previously
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
Restated
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
Total assets
|
|
$
|
17,388,723
|
|
|
$
|
—
|
|
|
$
|
17,388,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
2,415,394
|
|
|
|
—
|
|
|
|
2,415,394
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term liabilities
|
|
|
2,079,905
|
|
|
|
—
|
|
|
|
2,079,905
|
|
Total liabilities
|
|
|
4,495,299
|
|
|
|
—
|
|
|
|
4,495,299
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and Contingencies (Note 14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value, 500,000,000 shares
|
|
|
|
|
|
|
|
|
|
|
|
|
authorized; 344,093,411 and 234,704,655 shares issued
|
|
|
|
|
|
|
|
|
|
|
|
|
and outstanding as of March 31, 2017 and December 31, 2016, respectively
|
|
|
34,409
|
|
|
|
—
|
|
|
|
34,409
|
|
Additional paid in capital
|
|
|
70,952,037
|
|
|
|
1,000,000
|
|
|
|
71,952,037
|
|
Stock subscription receivable
|
|
|
(830,000
|
)
|
|
|
—
|
|
|
|
(830,000
|
)
|
Accumulated deficit
|
|
|
(57,595,085
|
)
|
|
|
(1,000,000
|
)
|
|
|
(58,595,085
|
)
|
Accumulated comprehensive income
|
|
|
332,063
|
|
|
|
—
|
|
|
|
332,063
|
|
Total stockholders’ deficit
|
|
|
12,893,424
|
|
|
|
—
|
|
|
|
12,893,424
|
|
Total liabilities and stockholders’ deficit
|
|
$
|
17,388,723
|
|
|
$
|
—
|
|
|
$
|
17,388,723
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2017
|
|
|
|
|
|
|
|
|
|
|
As Previously
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
Restated
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues, net
|
|
$
|
584,689
|
|
|
$
|
—
|
|
|
$
|
584,689
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales
|
|
|
149,129
|
|
|
|
|
|
|
|
149,129
|
|
General and administrative
|
|
|
4,255,382
|
|
|
|
1,000,000
|
|
|
|
5,255,382
|
|
Research and development
|
|
|
29,070
|
|
|
|
—
|
|
|
|
29,070
|
|
Depreciation and amortization
|
|
|
109,534
|
|
|
|
—
|
|
|
|
109,534
|
|
Total operating expenses
|
|
|
4,543,115
|
|
|
|
1,000,000
|
|
|
|
5,543,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(3,958,426
|
)
|
|
|
(1,000,000
|
)
|
|
|
(4,958,426
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net
|
|
|
(4,710,666
|
)
|
|
|
—
|
|
|
|
(4,710,666
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income loss before income taxes
|
|
|
(8,669,092
|
)
|
|
|
(1,000,000
|
)
|
|
|
(9,669,092
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
|
|
$
|
(8,669,092
|
)
|
|
$
|
(1,000,000
|
)
|
|
$
|
(9,669,092
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) per share - Basic and diluted
|
|
$
|
(0.03
|
)
|
|
$
|
—
|
|
|
$
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding - Basic and diluted
|
|
|
295,596,151
|
|
|
|
—
|
|
|
|
295,596,151
|
|
STATEMENT OF COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Previously
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
Adjustment
|
|
|
Restated
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(8,669,092
|
)
|
|
$
|
(1,000,000
|
)
|
|
$
|
(9,669,092
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation gain
|
|
|
23,452
|
|
|
|
—
|
|
|
|
23,452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
$
|
(8,645,640
|
)
|
|
$
|
(1,000,000
|
)
|
|
$
|
(9,645,640
|
)
|
Certain amounts in the related statement
of cash flows have been corrected, but those changes did not impact the cash provided from or used in operating, investing or
financing activities.
The adjustment column for the condensed consolidated financial statement includes the increase in stock compensation by $1,000,000 in the balance sheet as of March 31,
2017 and for the three months ended March 31, 2017.
|
●
|
The balance
sheet reflects an increase by $1,000,000 to accumulated deficit and additional paid in
capital.
|
|
●
|
The statement
of operations increases general and administrative expense and net loss by
$1,000,000.
|
|
●
|
The statement of comprehensive income
reflects on increase in net loss for the increase in stock compensation expense.
|
|
●
|
There is
no impact on net cash flow from operating activities included on the statement of cash flow
for the three months ended March 31, 2017 and earnings per share – basic and diluted
is unchanged.
|