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Ipsidy Announces Results for First Quarter 2017
[August 09, 2017]

Ipsidy Announces Results for First Quarter 2017


LONG BEACH, New York, Aug 7, 2017 /PRNewswire/ -- Ipsidy Inc. (www.ipsidy.com) [OTC:IDGS], (formerly known as ID Global Solutions Corporation), a provider of secure, biometric identification, identity management and electronic transaction processing services, today announced its results for the quarter ended March 31, 2017. 

Financial Highlights for the Quarter Ended March 31, 2017

  • Total revenue for the quarter was $0.6 million, compared to $0.3 million for the quarter in 2016.
  • Net loss for the quarter was $8.7 million, compared to net income of $7.7 million for 2016 (The net income in 2016 was driven by a $12.9 million gain on the reduction of the derivative liability).
  • Basic and diluted net loss per share for the quarter was $0.03 cents, compared to basic net income per share of $0.04 cents and diluted net loss per share of $0.02 cents for 2016.
  • Adjusted EBITDA loss for the quarter was $1.6 million, compared to $1.0 million in 2016, as the Company invested in people, infrastructure and technology to support on-going and future operations.
  • Converted outstanding debt and accrued interest in the amount of approximately $6.3 million into approximately 84.8 million shares of common stock.
  • Repaid an additional $0.3 million of outstanding debt, cancelled 3.6 million warrants and cancelled 2.5 million shares of the Company's common stock.
  • Secured $7.0 million of additional debt and equity financing.
  • Total liabilities reduced to $4.5 million compared to liabilities of $25.8 million as of December 31, 2016 and stockholders' equity increased to $12.9 million compared to a stockholders' deficit of $13.3 million as of December 31, 2016.

The combination of the above events is reflected in the substantial improvement in the Company's balance sheet and provided near-term working capital.

Refer to Table 1 for reconciliation of net income to Adjusted EBITDA (a non-GAAP measure).

Operational Highlights

  • Announced the appointment of Philip Beck as Chairman of the Board of Directors, Chief Executive and President and Stuart Stoller as CFO on January 31, 2017.
  • Continued process improvements to the Company's MultiPay bill pay transaction platform in Colombia.
  • Continued development of the Ipsidy identity transaction platform
  • Continued development of a digital payment processing platform comprising modules for payment card issuance, HCE, tokenization, and a consumer mobile wallet as well as a merchant acquiring gateway and mobile point of sale, and mobile-commerce, beacon marketing and loyalty products.

"Ipsidy is redefining identity as a transaction so that it can be managed as easily and securely as a payment transaction," said Philip Beck, Chairman and Chief Executive Officer of Ipsidy. "We are enabling our identity transaction platform to provide our customers with reimagined solutions that let a user authenticate their identity to their own device. Our platform facilitates the processing of diverse electronic transactions, be they payments, votes, or physical or digital access, embedded with the participant's identity."

In a world that is increasingly digital and mobile, but also fraught with account breaches and stolen identity information, our vision is to offer solutions that provide pre-transaction verification of identity as well as embed identity verification within every electronic transaction message processed through our platform, or other electronic systems. We 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 verified. Ipsidy is therefore developing solutions intended to provide our customers with the next level of transaction security, control and certainty operating in both physical and digital environments leveraging mobile eco-systems. 

We are building upon our existing capabilities in biometric identification and multi-factor identity management solutions to develop an identity transaction platform for our customers. The platform enables mobile users to more easily authenticate their identity to a mobile phone or portable device of their choosing (as opposed to other identity solutions requiring dedicated hardware). Our system allows participants to complete transactions with a digitally signed authentication response, including the underlying transaction data and embedded attributes of the participant's identity, accessible to the business.

Our strategy is to leverage our identity transaction platform to support a variety of vertical markets. These vertical markets include but are not limited to border security, public safety, public transportation, enterprise security, electronic payments transactions and banking. In addition, our platform is designed to be highly available and language agnostic thereby accessible to customers around the world. We believe that the various technologies that Ipsidy is developing and has acquired can be combined into a unified offering.

Ipsidy's digital mobile wallet application, or electronic account holder, will contain different services and accounts that enable users to conveniently and securely authenticate and authorize a variety of electronic transactions, using their identity. For example, our closed-loop payment account and digital issuance platform is intended to offer secure and cost-effective methods of conversion of cash and paper to electronic payments. Consumers accessing this system, using their mobile phones, electronic devices, or smart card payment tokens will be able to participate in the digital economy thereby facilitating financial inclusion for the un-banked and under banked population around the globe. Another example is for consumers and employees to use their mobile application to verify identity, in order to access secure, digital or physical environments.

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 March 31, 2017 filed at www.sec.gov and posted on the Company's investor relations website.

About Ipsidy:

Ipsidy 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 and Cards Plus in South Africa. www.cardsplus.co.za.  In a world that is increasingly digital and mobile, our vision is to enable solutions that provide pre-transaction verification of identity as well as embed identity verification within every electronic transaction message processed through our platform, or other electronic systems. We 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 verified. We are therefore developing solutions intended to provide our customers with the next level of transaction security, control and certainty. Further information on Ipsidy can be found at www.ipsidy.com or contact us at sales@ipsidy.com.

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, diluted earnings per share, future 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 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, 2016 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.



Table 1

Reconciliation of Net Loss to Adjusted EBITDA



Quarter Ended March 31,



2017


2016

Net Loss


$    (8,669,092)


$   (7,692,510)

Interest Expense


604,015


926,752

Conversion of debt, etc.


4,106,651


-

Gain on derivative liability


-


(12,941,663)

Depreciation and amortization


109,534


147,052

Taxes


-


-

Stock compensation


2,294,160


3,214,732






Adjusted EBITDA


$   (1,554,732)


$    (960,617)


 

IPSIDY INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS






March 31,
2017


December 31,
2016

ASSETS

Current Assets:








Cash






$    4,946,012


$        689,105

Accounts receivable, net




112,634


138,359

Current portion of net investment in direct financing lease

48,734


44,990

Inventory





147,816


150,679

Other current assets




388,200


166,479

Total current assets




5,643,396


1,189,612










Property and Equipment, net




268,386


115,682

Other Assets





693,872


358,343

Intangible Assets, net





3,388,149


3,474,291

Goodwill






6,736,043


6,736,043

Net investment in direct financing lease, net of current

658,877


674,015

Total assets





$  17,388,723


$   12,547,986










LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:








Accounts payable and accrued expenses



$    2,089,020


$     1,687,900

Convertible notes payable, net




-


250,000

Derivative liability





-


8,388,355

Capital lease obligation, current portion



25,071


-

Notes payable, net, current portion



45,646


109,819

Deferred revenue





255,657


398,680

Total current liabilities




2,415,394


10,834,754










Long-term Liabilities:







Convertible notes payable, net, less current maturities

-


2,245,596

Notes payable, net, less current maturities


1,943,526


3,051,603

Capital lease obligation, net of current portion


136,379



Derivative liability, net of current portion


-


9,668,276

Total long-term liabilities




2,079,905


14,965,475

        Total liabilities





4,495,299


25,800,229


Commitments and Contingencies







Stockholders' Equity (Deficit):







Common stock, $0.0001 par value, 500,000,000 shares




authorized; 344,093,411 and 234,704,655 shares issued




and outstanding as of March 31, 2017 and December 31, 2016, respectively

34,409


23,470

Additional paid in capital




70,952,037


35,341,669

Stock subscription receivable




(830,000)


-

Accumulated deficit




(57,595,085)


(48,925,993)

Accumulated comprehensive income



332,063


308,611

Total stockholders' equity (deficit)



12,893,424


(13,252,243)

Total liabilities and stockholders' equity (deficit)

$   17,388,723


$   12,547,986


 

IPSIDY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS







For the three months ended







March







2017


2016

Revenues:









Products and services




$       565,545


$      320,746

Lease income





19,144


-

Total revenues, net




584,689


320,746










Operating Expenses:








Cost of Sales





149,129


118,110

General and administrative




4,255,382


4,392,886

Research and development




28,948


29,072

Depreciation and amortization




109,534


103,079

Total operating expenses




4,543,115


4,643,147










Loss from operations




(3,958,422)


(4,322,401)










Other Income (Expense):







(Loss) gain on derivative liability



(452,146)


12,941,663

Gain on extinguishment of debt



2,802,235


-

(Loss) on conversion of debt




(5,978,643)


-

(Loss) on modification of warrant(s)



(158,327)


-

(Loss) on modification of derivatives



(319,770)


-

Interest expense





(604,015)


(926,752)

Other income (expense), net




(4,710,666)


12,014,911










Income loss before income taxes



(8,669,092)


7,692,510










Income Taxes





-


-










Net (loss) income





$  (8,669,092)


$   7,692,510










Net (loss) income per share - Basic



$           (0.03)


$            0.04










Net (loss) income per share - Diluted



$           (0.03)


$         (0.02)










Weighted Average Shares Outstanding - Basic


295,596,151


210,816,797










Weighted Average Shares Outstanding - Diluted


295,596,151


270,712,051


 

IPSIDY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS


For the three months ended


                                March 31,




2017


2016

CASH FLOWS FROM OPERATING ACTIVITIES:






Net loss





$       (8,669,092)

$       7,692,510

Adjustments to reconcile net loss with cash used in operations:





Depreciation and amortization expense



109,534


103,079

Stock-based compensation




2,294,160


3,214,732

Common stock issued for services



42,376


270,000

Amortization of debt discount



235,985


655,817

Amortization of debt issuance costs



268,954


167,700

Loss (gain) on derivative liability



452,146


(12,941,663)

Gain on extinguishment of notes payable



(2,802,235)


-

 Loss on modification of derivatives



319,770


-

 Loss on modification of warrants



158,327


-

 Loss on conversion of debt



5,978,643


-

Changes in operating assets and liabilities:






Accounts receivable




25,725


731,004

Lease receivable





11,394


-

Other current assets




(226,174)


(32,200)

Inventory





2,863


(74,261)

Accounts payable and accrued expenses



736,535


(284,877)

Deferred revenue





(143,012)


(70,116)

Net cash flows from operating activities



(1,204,101)


(568,275)










CASH FLOWS FROM INVESTING ACTIVITIES:






Purchase of property and equipment



(4,563)


(11,307)

Investment in other assets including work in process


(343,655)


(20,157)







Cash acquired in acquisitions




-


419,042

Net cash flows from investing activities



(348,218)


387,578










CASH FLOWS FROM FINANCING ACTIVITIES:






Proceeds from issuance of notes payable and common stock

3,000,000


100,000

Payment of debt issuance cost




(86,331)


-

Proceeds from sale of common stock



2,880,710


-







Principal payments on capital lease obligations



(1,957)



Principal payments on notes payable



(14,173)


(16,372)

Net cash flows from financing activities



5,778,249


83,628










Effect of foreign currencies




30,977


57,229










Net Change in Cash





4,256,907


(39,840)

Cash, Beginning of Period




689,105


349,873

Cash, End of Period




$ 4,946,012


$     310,033










Supplemental Disclosure of Cash Flow Information:






Cash paid for interest




$                -


$                 -

Cash paid for income taxes




$                -


$                 -










Non-cash Investing and Financing Activities:






Issuance of common stock for conversion of debt and related interest

$ 21,609,673


$       21,122







Issuance of common stock for debt issuance costs



$      224,460


$       76,000

Reclassification of derivatives upon removal of price protection in warrants

$   7,614,974


$-

Reclassification of derivative liabilities upon conversion into common stock

$   -


$     316,734

Acquisition of equipment due to a capital lease



$      163,407


$                 -

Acquisition of FIN Holdings (2016):






Issuance of common stock as consideration



$                 -


$  9,000,000

Assumed liabilities




-


914,218

Inventory





-


(112,408)

Accounts receivable




-


(311,867)

Property and equipment




-


(100,339)

Intangible assets





-


(8,970,562)

Cash acquired





$                 -


$     419,042











Contacts:
Ipsidy Inc.
+1-407-951-8640

Philip D. Beck, Chairman, CEO & President
PhilipBeck@ipsidy.com  

Stuart P. Stoller, CFO
StuartStoller@ipsidy.com

View original content:http://www.prnewswire.com/news-releases/ipsidy-announces-results-for-first-quarter-2017-300501970.html

SOURCE Ipsidy Inc.


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