UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): August 7, 2018
Ipsidy Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 000-54545 | 46-2069547 |
| (State
or Other Jurisdiction of Incorporation) |
(Commission File Number) | (IRS
Employer Identification Number) |
780 Long Beach Boulevard, Long Beach, New York 11561
(Address of principal executive offices) (zip code)
516-274-8700
(Registrant's telephone number, including area code)
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))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
☒ Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
| Item 2.02 | Results of Operations and Financial Condition |
On August 7, 2018, Ipsidy Inc. (the “Company”) issued a press release regarding its financial results for the fiscal quarter ended June 30, 2018. The full text of the press release issued in connection with the announcement is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information contained in this Item 2.02 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
| Item | 9.01 Financial Statements and Exhibits |
(d) Index of Exhibits
| Exhibit Number |
Description | |
| 99.1 | Press Release dated August 7, 2018 |
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.
| Ipsidy Inc. | ||
| Date: August 22, 2018 | By: | /s/ Stuart Stoller |
| Name: Stuart Stoller | ||
| Title: Chief Financial Officer | ||
Exhibit 99.1
Ipsidy Announces Results for Second Quarter 2018 and
Common Equity Funding of $9.6 million
LONG BEACH, N.Y., August 7, 2018 -- Ipsidy Inc. (www.ipsidy.com) [OTCQX:IDTY], a provider of secure, biometric identification, identity management and electronic transaction processing services, today announced its results for the quarter ended June 30, 2018 and that it has received subscriptions for common stock in an equity fund raising of approximately $9.6 million.
Financial Highlights for the Three and Six Months Ended June 30, 2018
| ● | Total revenue for the three and six-month periods was $1.8 million and $2.4 million respectively compared to $0.6 million and $1.1 million respectively for the three and six months in 2017. The increase in revenue for the period reflected the successful completion of the supply of SearchTM, our Automated Fingerprint Identification System and related services to the Zimbabwe Electoral Commission (“ZEC”). |
| ● | Net loss for the three and six months was $2.5 million and $5.2 million respectively compared to a net loss of $2.8 million and $12.5 million respectively for the three and six months in 2017. In 2017, the satisfaction of notes payable in the first quarter resulted in a charge of approximately $4.1 million. |
| ● | Basic and fully diluted net loss per share for the three and six months in 2018 was $0.01 and $0.01 cents respectively compared to basic net loss per share of $0.01 and $0.04 cents respectively for the three and six months in 2017. |
| ● | Adjusted EBITDA loss for the three and six months in 2018 was $1.6 million and $3.3 million respectively compared to $1.4 million and $3.0 million respectively in 2017. Adjusted EBITDA loss for the six-month period increased approximately $0.3 million due to the increased investment in salary and technology expense, as the Company expanded its infrastructure to support future operations and in addition incurred a $0.5 million charge principally for the write-down in the value of legacy kiosks, offset by the revenue earned from the sale of our SearchTM system to ZEC. |
Subsequent Events
| ● | As of August 7, 2018, the Company has received subscriptions, for aggregate gross proceeds of approximately $9.6 million, by the issuance of approximately 63.9 million shares of Common Stock at $0.15 per share. The Theodore Stern Revocable Trust (the “Stern Trust”) has agreed to invest $1 million in this round. Mr. Theodore Stern, one of the directors of our Company, is the trustee of the Stern Trust. |
| ● | On August 6, 2018, the Company gave notice to the Stern Trust that it will partially prepay $1,000,000 of principal and approximately $158,000 of accrued interest, out of the $3,000,000 Note dated February 1, 2017 held by the Stern Trust. |
“Our flexible suite of Identity-as-a-Service solutions, makes biometrically authenticated identity core to the user experience in approving everyday transactions,” said Philip Beck Chairman and Chief Executive Officer of Ipsidy. “Our low cost IDaaS solutions can be delivered out of the box or easily integrated with our RESTful API’s. The recent fund-raising will help us execute on the large number of physical and virtual use cases for our solutions, in different markets and countries around the world.”
Operational Highlights
The Company continued to make progress enhancing our identity transaction platform to support the launch of our new identity solutions across several vertical and international markets:
| ● | Established Ipsidy Enterprises Ltd in England and hired Jonathan Ellis as our Managing Director, Europe, Middle East and Africa (EMEA) Sales. |
| ● | In May 2018 we delivered and installed our Search technology for the ZEC. This important project was delivered on time and on budget. |
| ● | In May 2018 we also announced the availability of the new Ipsidy App for iPhone and Android, in the App Store and on Google Play, providing mobile biometric, multi-factor identity authentication for a broad range of everyday transactions. |
| ● | In June 2018, the Company began production service of AccessTM with a major commercial real estate operator at the first location in the United States providing identity authentication for physical access control. The operator’s employees, contractors and visitors can utilize the Ipsidy mobile identity authentication application in conjunction with a proximity beacon to enter corporate offices for which they have been authorized. |
| ● | In June 2018 the Company signed a contract with Skypatrol, Miami based provider of innovative GPS-tracking and fleet-management software tools, for the provision of SkyguruTM our joint mobile wallet payment solution and expense management software for trucking fleets. Skypatrol currently operates in 25 countries. We are currently working to launch the product to Skypatrol’s fleet operators in Latin America and the Caribbean where its customers and end users operate in excess of 1,000,000 vehicles. |
| ● | Launch of AccessTM, our out-of-the-box Identity as a Service solution for access management. Using just a tablet and a Bluetooth beacon and requiring no integration or expensive hardware, Access delivers a highly secure, yet low-cost, biometric access solution to protect the perimeter and create a trusted environment. |
Additional analysis of the Company’s performance can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Quarterly Report on Form 10-Q for the Quarter ended June 30, 2018 filed at www.sec.gov and posted on the Company’s investor relations website.
Get the Ipsidy mobile app at: App Store or GooglePlay
Visit the Ipsidy website today at https://www.ipsidy.com/developers where you can create a demo account and run test authentications using the Ipsidy mobile app.
About Ipsidy:
Ipsidy Inc (OTCQX:IDTY) www.ipsidy.com is a provider of secure, biometric identification, identity management and electronic transaction processing services. Ipsidy is headquartered in New York and has operating subsidiaries: MultiPay in Colombia, www.multipay.com.co, Cards Plus in South Africa, www.cardsplus.co.za and Ipsidy Enterprises in the UK. Our identity transaction platform creates a trusted transaction, embedding authenticated identity and event details with a digital signature and using a participant’s mobile device to approve everyday transactions. Our platform offers biometric and multi-factor identity management solutions, which are intended to support a wide variety of electronic transactions. We believe that it is essential that businesses and consumers know who is on the other side of an electronic transaction and have an audit trail, proving that the identity of the other party was duly authenticated. We continue to enhance our solutions to provide our customers with the next level of transaction security, control and certainty over everyday transactions. Further information on Ipsidy can be found at www.ipsidy.com or contact us at sales@ipsidy.com.
Contacts:
| Ipsidy Inc. | |
Philip D. Beck, Chairman, CEO & President Stuart P. Stoller, CFO |
PhilipBeck@ipsidy.com StuartStoller@ipsidy.com +1 (516) 274-8700 |
Notice Regarding Forward-Looking Statements.
Information contained in this announcement may include “forward-looking statements.” All statements other than statements of historical facts included herein, including, without limitation, those regarding the financial position, business strategy, plans and objectives of management for future operations of both Ipsidy and its business partners, net revenue, net income, Adjusted EBITDA, earnings per share, future product and service launches with customers and new initiatives and customer pipeline are forward-looking statements. Such forward-looking statements are based on a number of assumptions regarding Ipsidy’s present and future business strategies, and the environment in which Ipsidy expects to operate in the future, which assumptions may or may not be fulfilled in practice. Implementation of some or all of the new services referred to is subject to regulatory or other third party approvals. Actual results may vary materially from the results anticipated by these forward-looking statements as a result of a variety of risk factors, including the risk that implementation, adoption and offering of the service by customers, consumers and others may take longer than anticipated, or may not occur at all; changes in laws, regulations and practices; changes in domestic and international economic and political conditions and others. Additional risks may arise with respect to commencing operations in new countries and regions, of which Ipsidy is not fully aware at this time. See the Company’s Annual Report Form 10-K for the Fiscal Year ended December 31, 2017 filed at www.sec.gov for other risk factors which investors should consider. These forward-looking statements speak only as to the date of this announcement and cannot be relied upon as a guide to future performance. Ipsidy expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained in this announcement to reflect any changes in its expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based.
Non-GAAP Financial Information.
The Company provides certain non-GAAP financial measures in this statement. Management believes that Adjusted EBITDA, when viewed with our results under GAAP and the accompanying reconciliations, provides useful information about our period-over-period results. Adjusted EBITDA is presented because management believes it provides additional information with respect to the performance of our fundamental business activities and is also frequently used by securities analysts, investors and other interested parties in the evaluation of comparable companies. We also rely on Adjusted EBITDA as a primary measure to review and assess the operating performance of our company and our management team in connection with our executive compensation. These non-GAAP key business indicators, which include Adjusted EBITDA, should not be considered replacements for and should be read in conjunction with the GAAP financial measures.
We define Adjusted EBITDA as GAAP net loss adjusted to exclude: (1) interest expense, (2) interest income, (3) provision for income taxes, (4) depreciation and amortization, (5) stock-based compensation expense (5) derivative income (expense) and (6) certain other items management believes affect the comparability of operating results. Please see “Adjusted EBITDA” below for more information and for a reconciliation of Adjusted EBITDA to net income, the most directly comparable financial measure calculated and presented in accordance with GAAP.
| Reconciliation of Net Loss to Adjusted EBITDA | ||||||||||||||||
| (Unaudited) | ||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, 2018 | June 30, 2017 | June 30, 2018 | June 30, 2017 | |||||||||||||
| Net loss | $ | (2,473,050 | ) | $ | (2,802,578 | ) | $ | (5,225,975 | ) | $ | (12,471,672 | ) | ||||
| Add Back: | ||||||||||||||||
| Interest Expense | 246,928 | 291,168 | 485,467 | 895,182 | ||||||||||||
| Conversion of debt, derivative liability, and modifications/other | (77,734 | ) | — | (77,734 | ) | 4,106,652 | ||||||||||
| Depreciation and amortization | 113,768 | 137,000 | 224,140 | 246,534 | ||||||||||||
| Taxes | 9,856 | 1,600 | 14,417 | 5,770 | ||||||||||||
| Stock compensation | 624,581 | 972,510 | 1,292,900 | 4,266,670 | ||||||||||||
| Adjusted EBITDA (Non-GAAP) | $ | (1,555,651 | ) | $ | (1,400,300 | ) | $ | (3,286,785 | ) | $ | (2,950,864 | ) | ||||
| IPSIDY INC AND SUBSIDIARIES | ||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| June 30, | December 31, | |||||||
| 2018 | 2017 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ | 1,312,667 | $ | 4,413,822 | ||||
| Accounts receivable, net | 775,730 | 165,929 | ||||||
| Current portion of net investment in direct financing lease | 55,679 | 52,790 | ||||||
| Inventory | 167,649 | 492,030 | ||||||
| Other current assets | 481,702 | 218,537 | ||||||
| Total current assets | 2,793,427 | 5,343,108 | ||||||
| Property and equipment, net | 190,218 | 209,719 | ||||||
| Other Assets | 1,610,996 | 1,243,531 | ||||||
| Intangible Assets, net | 2,711,129 | 2,878,080 | ||||||
| Goodwill | 6,736,043 | 6,736,043 | ||||||
| Net investment in direct financing lease, net of current portion | 590,182 | 618,763 | ||||||
| Total assets | $ | 14,631,995 | $ | 17,029,244 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | 1,944,356 | $ | 1,447,185 | ||||
| Capital lease obligation, current portion | 29,107 | 27,420 | ||||||
| Deferred revenue | 657,945 | 122,511 | ||||||
| Total current liabilities | 2,631,408 | 1,597,116 | ||||||
| Long-term liabilities: | ||||||||
| Notes payable, net | 2,698,834 | 2,375,720 | ||||||
| Capital lease obligation, net of current portion | 100,521 | 115,509 | ||||||
| Total liabilities | 5,430,763 | 4,088,345 | ||||||
| Commitments and Contingencies | ||||||||
| Stockholders’ Equity: | ||||||||
| Common stock, $0.0001 par value, 1,000,000,000 shares authorized; 412,344,956 and 403,311,988 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively | 41,234 | 40,331 | ||||||
| Additional paid in capital | 80,541,473 | 79,053,339 | ||||||
| Accumulated deficit | (71,633,597 | ) | (66,407,622 | ) | ||||
| Accumulated comprehensive income | 252,122 | 254,851 | ||||||
| Total stockholders’ equity | 9,201,232 | 12,940,899 | ||||||
| Total liabilities and stockholders’ equity | $ | 14,631,995 | $ | 17,029,244 | ||||
IPSIDY INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Revenues: | ||||||||||||||||
| Products and services | $ | 1,821,807 | $ | 540,616 | 2,329,734 | 1,106,161 | ||||||||||
| Lease income | 17,520 | 18,836 | 35,382 | 37,980 | ||||||||||||
| Total revenues, net | 1,839,327 | 559,452 | 2,365,116 | 1,144,141 | ||||||||||||
| Operating Expenses: | ||||||||||||||||
| Cost of Sales | 743,709 | 155,141 | 863,957 | 304,270 | ||||||||||||
| General and administrative | 3,256,150 | 2,749,355 | 6,055,153 | 8,000,567 | ||||||||||||
| Research and development | 20,330 | 27,766 | 25,691 | 56,838 | ||||||||||||
| Depreciation and amortization | 113,768 | 137,000 | 224,140 | 246,534 | ||||||||||||
| Total operating expenses | 4,133,957 | 3,069,262 | 7,168,941 | 8,608,209 | ||||||||||||
| Loss from operations | (2,294,630 | ) | (2,509,810 | ) | (4,803,825 | ) | (7,464,068 | ) | ||||||||
| Other Income (Expense): | ||||||||||||||||
| Loss on derivative liability | — | — | — | (452,146 | ) | |||||||||||
| Gain on extinguishment of note payable | — | — | — | 2,802,234 | ||||||||||||
| Loss on modification of derivatives | — | — | — | (319,770 | ) | |||||||||||
| Loss on modification of warrants | — | — | — | (158,327 | ) | |||||||||||
| Loss on settlement of notes payable | — | — | — | (5,978,643 | ) | |||||||||||
| Interest expense | (246,298 | ) | (291,168 | ) | (485,467 | ) | (895,182 | ) | ||||||||
| Other income | 77,734 | — | 77,734 | — | ||||||||||||
| Other (expense), net | (168,564 | ) | (291,168 | ) | (407,733 | ) | (5,001,834 | ) | ||||||||
| Loss before income taxes | (2,463,194 | ) | (2,800,978 | ) | (5,211,558 | ) | (12,465,902 | ) | ||||||||
| Income Taxes | (9,856 | ) | (1,600 | ) | (14,417 | ) | (5,770 | ) | ||||||||
| Net loss | $ | (2,473,050 | ) | $ | (2,802,578 | ) | $ | (5,225,975 | ) | $ | (12,471,672 | ) | ||||
| Net loss per share - Basic | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.04 | ) | ||||
| Net loss per share - Diluted | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.04 | ) | ||||
| Weighted Average Shares Outstanding - Basic | 407,490,811 | 344,140,554 | 405,872,537 | 319,868,353 | ||||||||||||
| IPSIDY INC AND SUBSIDIARIES | ||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
| (Unaudited) | ||||||||
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2018 | 2017 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (5,225,975 | ) | $ | (12,471,672 | ) | ||
| Adjustments to reconcile net loss with cash flow from operations: | ||||||||
| Depreciation and amortization expense | 224,140 | 246,534 | ||||||
| Stock-based compensation | 1,292,900 | 4,266,670 | ||||||
| Stock issued for services | 196,138 | 62,805 | ||||||
| Inventory reserve | 348,308 | — | ||||||
| Amortization of debt discounts and issuance costs | 323,114 | 648,996 | ||||||
| Loss on derivative liability | — | 452,146 | ||||||
| Gain on settlement of notes payable | — | (2,802,234 | ) | |||||
| Loss on modification of derivatives | — | 319,770 | ||||||
| Loss on modification of warrants | — | 158,327 | ||||||
| Loss on conversion of debt | — | 5,978,643 | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | (620,817 | ) | (16,913 | ) | ||||
| Net investment in direct financing lease | 25,692 | 23,094 | ||||||
| Other current assets | (263,165 | ) | (21,763 | ) | ||||
| Inventory | (41,435 | ) | (705,579 | ) | ||||
| Accounts payable and accrued expenses | 525,977 | 240,218 | ||||||
| Deferred revenue | 535,434 | (277,992 | ) | |||||
| Net cash flows from operating activities | (2,679,689 | ) | (3,898,950 | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | (15,690 | ) | (8,194 | ) | ||||
| Investment in other assets | (389,767 | ) | (536,184 | ) | ||||
| Net cash flows from investing activities | (405,457 | ) | (544,378 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from issuance of notes payable and common stock | — | 3,000,000 | ||||||
| Proceeds from the sale of common stock, net | — | 3,570,100 | ||||||
| Payment of debt and equity issuance costs | — | (375,821 | ) | |||||
| Principal payments on notes payable | — | (44,599 | ) | |||||
| Principal payments on capital lease obligations | (14,988 | ) | (9,904 | ) | ||||
| Net cash flows from financing activities | (14,988 | ) | 6,139,776 | |||||
| Effect of foreign currencies | (1,021 | ) | (9,356 | ) | ||||
| Net change in Cash | (3,101,155 | ) | 1,687,092 | |||||
| Cash, Beginning of Period | 4,413,822 | 689,105 | ||||||
| Cash, End of Period | $ | 1,312,667 | $ | 2,376,197 | ||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||
| Cash paid for interest | $ | 3,392 | $ | 1,634 | ||||
| Cash paid for income taxes | $ | 4,561 | $ | 4,170 | ||||
| Non-cash Investing and Financing Activities: | ||||||||
| Issuance of common stock for conversion of debt and accrued interest | $ | — | $ | 21,609,673 | ||||
| Issuance of warrants for inventory costs | $ | — | $ | 224,460 | ||||
| Reclassification of derivatives upon removal of price protection in warrants | $ | — | $ | 7,614,974 | ||||
| Acquisition of equipment due to a capital lease | $ | — | $ | 163,407 | ||||