What changed in this filing

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Item 1. Financial Statements

2022-06-09 compared with 2022-06-09 · 308 added, 410 removed, 340 unchanged (68% of the section changed)

FINANCIAL STATEMENTS

INTELLICHECK,

(As Restated)

receivable, net of allowance of $ 5,474 and $ 42,974 at June 30, 2021 and December 31, 2020, respectively

CURRENT ASSETS:

current assets

AND EQUIPMENT, net

LEASE RIGHT-OF-USE ASSET

AND STOCKHOLDERS’ EQUITY

lease liability, current portion

Accounts receivable, net of allowance of $ 42,974 at March 31, 2021 and December 31, 2020,

Other current assets

Total current assets

PROPERTY AND EQUIPMENT, net

INTANGIBLE ASSETS, net

OPERATING LEASE RIGHT-OF-USE ASSET

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES:

Accounts payable

Accrued expenses

Operating lease liability, current portion

Equity awards liability

Liability for shares withheld

revenue, current portion

current liabilities

revenue, long-term portion

AND CONTINGENCIES (Note 10)

STOCKHOLDERS’

stock - $ .001 par

40,000,000 shares

18,634,918 and

18,410,458 shares

issued and outstanding at June 30, 2021 and December 31, 2020, respectively

paid-in capital

Deferred revenue, current portion

Total current liabilities

NONCURRENT LIABILITIES:

Deferred revenue, long-term portion

Total liabilities

COMMITMENTS AND CONTINGENCIES (Note 10)

STOCKHOLDERS’ EQUITY:

Common stock - $ .001 par value;

40,000,000 shares authorized;

18,593,757 and 18,410,458 shares issued

and outstanding at March 31, 2021 and December 31, 2020, respectively

Additional paid-in capital

Accumulated deficit

( 124,043,557 )

( 119,419,109 )

stockholders’ equity

liabilities and stockholders’ equity

Total stockholders’ equity

Total liabilities and stockholders’ equity

accompanying notes to financial statements.

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OF OPERATIONS

months ended June 30,

(As Restated)

Three months ended March 31,

(As Restated)

( 1,468,516 )

( 1,689,244 )

general and administrative

and development

COST OF REVENUES

OPERATING EXPENSES

from operations

( 5,476,362 )

on forgiveness of unsecured promissory note

and other income

$ ( 836,162 )

$ ( 760,273 )

Selling, general and administrative

Research and development

Total operating expenses

(Loss) income from operations

( 4,639,590 )

Gain on forgiveness of unsecured promissory note

Interest and other income

Total other income

Net (loss) income

$ ( 4,624,448 )

SHARE INFORMATION

per common share -

Basic/Diluted

average common shares used in computing per share amounts -

Basic/Diluted

PER SHARE INFORMATION

(Loss) income per common share -

Weighted average common shares used in computing per share amounts -

accompanying notes to financial statements.

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OF STOCKHOLDERS’ EQUITY

Three months ended June 30, 2021

Stockholders’

March 31, 2021

$ 144,301,535

$ ( 124,043,557 )

of common stock, net of costs

of common stock, net of costs, shares

of stock options

of shares for restricted stock grants

Settlement of executive bonuses with issuance of restricted

stock units, shares

Shares forfeited in exchange for withholding taxes

Shares forfeited in exchange for withholding taxes, shares

June 30, 2021

$ 145,018,746

$ ( 124,879,719 )

months ended June 30, 2020

Three months ended March 31, 2021

(As Restated)

Stockholders’

March 31, 2020

$ 128,989,744

$ ( 116,908,510 )

of common stock, net of costs

of stock options, net of cashless exercise of 8,958

Shares withheld

for withholding taxes

of shares for restricted stock grants

of executive bonuses with issuance of restricted stock units

June 30, 2020

BALANCE, December 31, 2020

$ 141,612,140

$ ( 119,419,109 )

accompanying notes to financial statements.

INTELLICHECK,

OF STOCKHOLDERS’ EQUITY

months ended June 30, 2021 (As Restated)

Stockholders’

December 31, 2020

Equity compensation

Exercise of stock options, net of cashless exercise of 58,122 shares and 92,634 shares withheld

Issuance of shares for vested restricted stock grants

( 4,624,448 )

of stock options, net of cashless exercise of 58,122

shares and 92,634 shares withheld

of shares for restricted stock grants

( 4,624,448 )

BALANCE, March 31, 2021

$ 144,301,535

June 30, 2021

$ ( 124,043,557 )

months ended June 30, 2020

Three months ended March 31, 2020

Stockholders’

December 31, 2019

BALANCE, December 31, 2019

$ ( 116,935,112 )

of common stock, net of costs

of stock options, net of cashless exercise of 11,409 shares

of stock options, net of cashless exercise of shares

of shares for restricted stock grants

of executive bonuses with issuance of restricted stock units

forfeited in exchange for withholding taxes

June 30, 2020

Equity compensation

Exercise of warrants

Exercise of stock options, net of cashless exercise of 2,451 shares

Issuance of shares for vested restricted stock grants

(loss) income

BALANCE, March 31, 2020

$ ( 116,908,510 )

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OF CASH FLOWS

months ended June 30,

Three months ended March 31,

(As Restated)

FLOWS FROM OPERATING ACTIVITIES:

$ ( 5,460,610 )

$ ( 733,671 )

to reconcile net loss to net cash used in operating activities:

and amortization

in provision for doubtful accounts

of unsecured promissory note

in assets and liabilities:

decrease in accounts receivable

( 1,251,873 )

in other current assets

decrease in other assets

in accounts payable and accrued expenses

(decrease) in deferred revenue

cash used in operating activities

( 1,075,636 )

FLOWS FROM INVESTING ACTIVITIES:

of software license

of note receivable

cash used in investing activities

FLOWS FROM FINANCING ACTIVITIES:

of repayment on unsecured promissory note

proceeds from issuance of common stock

proceeds on unsecured promissory note

proceeds from issuance of common stock from exercise of stock options

from issuance of common stock from exercise of warrants

taxes paid on vesting of restricted stock units

cash provided by financing activities

(decrease) increase in cash

CASH FLOWS FROM OPERATING ACTIVITIES:

Net (loss) income

$ ( 4,624,448 )

beginning of period

end of period

disclosure of noncash investing and financing activities:

payable for software license

Reclassification

of stock option awards

of executive bonuses with restricted stock units

Adjustments to reconcile net (loss) income to net cash used in operating activities:

Depreciation and amortization

Equity compensation

Forgiveness of unsecured promissory note

Changes in assets and liabilities:

(Increase) in accounts receivable

(Increase) in other current assets

(Decrease) in accounts payable and accrued expenses

Increase in deferred revenue

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of software license

Purchases of property and equipment

Collection of note receivable

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Return of repayment on unsecured promissory note

Net proceeds from issuance of common stock from exercise of stock options

Proceeds from issuance of common stock from exercise of warrants

Net cash provided by financing activities

Net decrease in cash

CASH, beginning of period

CASH, end of period

Supplemental disclosure of noncash investing and financing activities:

Note payable for software license

Reclassification of stock option awards

accompanying notes to financial statements.

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pending patents.

the six months ended June 30, 2021, the Company incurred a net loss of $ 5,460,610

and used cash in operations of $ 1,075,636 .

As of June 30, 2021, the Company had cash of $ 11,939,948 ,

working capital of $ 11,334,550 and

an accumulated deficit of $ 124,879,719 .

Based on the Company’s business plan and cash resources, Intellicheck expects its existing and future resources and revenues generated

from operations to satisfy its working capital requirements for at least the next 12 months.

the three months ended March 31, 2021, the Company incurred a net loss of $ 4,624,448 and used cash in operations of $ 471,401 .

31, 2021, the Company had cash of $ 12,611,616 , working capital of $ 11,550,386 and an accumulated deficit of $ 124,043,557 Based on the

Company’s business plan and cash resources, Intellicheck expects its existing and future resources and revenues generated from

operations to satisfy its working capital requirements for at least the next 12 months.

of the filing of this Form 10-Q, the COVID-19 pandemic, which first began affecting the Company in the first quarter of 2020, has impacted

the Company’s business by a temporary decline in revenues from its customers.

Though the Company has had an increase in SaaS revenues

for the three and six months ended June 30, 2021 over the respective periods in 2020, the COVID-19 pandemic may continue to impact its

business directly and/or indirectly for the foreseeable future.

The Company is further unable to accurately predict the full impact that

the COVID-19 pandemic will have on its results of operations or financial condition due to numerous factors that are not within its control,

including the duration and severity of the outbreak together with any potential statewide closures if cases increase, the spread of recently

discovered COVID-19 variants, including the Delta variant, and the widespread adoption of vaccination measures.

the Company’s business by a decline in revenues from its customers which will likely continue to impact its business directly and/or

indirectly for the foreseeable future.

The Company is unable to accurately predict the full impact that the COVID-19 pandemic will have

on its results of operations or financial condition due to numerous factors that are not within its control, including the duration and

severity of the outbreak together with any potential statewide closures if cases increase, the spread of recently discovered COVID-19

variants and the widespread adoption of vaccination measures.

Part II, Item 1A for more information.

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May 16, 2022, management in concurrence with the Company’s Audit Committee of our Board of Directors (the “Audit Committee”),

concluded that that the financial statements previously issued as of and for the three and six months period ended June 30, 2021, should

no longer be relied upon due to errors in accounting for certain option awards.

Accordingly, we are restating our

Balance Sheets, Statements of Operations, Statements of Stockholders’ Equity, Statements of Cash Flows and the related notes as

of and for the three and six months ended June 30, 2021.

Specifically, the Company determined that a cashless

withholding to satisfy personal income tax obligations from certain option awards exercised commencing in the third quarter of 2020 and

the first quarter of 2021, caused the underlying options to no longer qualify as equity awards and should have instead been classified

as liability awards commencing on the date of exercise.

The change in the classification of the awards

to liability classified awards requires the Company to remeasure the fair value of the awards at the end of each reporting period they

remain outstanding, with the increase or decrease in fair value correspondingly charged or credited to selling, general and administrative

expenses in arriving at net income (loss).

Furthermore, the Company, due to an administrative error, failed to sell the shares withheld

in 2021 and did not remit the equivalent amount of funds to the tax authorities.

To date, the Company has not returned the shares or

otherwise reimbursed the effected individuals for the shares surrendered.

The Company is

currently in the process of arranging payment to the individuals, which is expected to be completed during the quarter ending June 30,

These errors resulted in misstatements to our

Balance Sheets, Statements of Operations, Statements of Stockholders’ Equity, and Statements of Cash Flows as of and for the three

and six months ended June 30, 2021 as follows:

OF ERRORS RESULTED IN MISSTATEMENTS

As of June 30, 2021

concluded that that the financial statements previously issued as of and for the quarterly period ended March 31, 2021, should no longer

be relied upon due to errors in accounting for certain option awards.

Accordingly, we are restating our Balance Sheets,

Statements of Operations, Statements of Stockholders’ Equity, Statements of Cash Flows and the related notes as of and for the

quarterly period ended March 31, 2021.

Specifically,

the Company determined that a cashless withholding to satisfy personal income tax obligations from certain option awards exercised commencing

in the third quarter of 2020 and the first quarter of 2021, caused the underlying options to no longer qualify as equity awards and should

have instead been classified as liability awards commencing on the date of exercise.

change in the classification of the awards to liability classified awards requires the Company to remeasure the fair value of the awards

at the end of each reporting period they remain outstanding, with the increase or decrease in fair value correspondingly charged or credited

to selling, general and administrative expenses in arriving at net income (loss).

Furthermore, the Company, due to an administrative

error, failed to sell the shares surrendered in 2021 and did not remit the equivalent amount of funds to the tax authorities.

the Company has not returned the shares or otherwise reimbursed the effected individuals for the shares withheld The Company is

currently in the process of arranging payment to individuals, which is expected to be completed during the quarter ending June 30, 2022.

errors resulted in misstatements to our Balance Sheets, Statements of Operations, Statements of Stockholders’ Equity, and Statements

of Cash Flows as of and for the quarterly period ended March 31, 2021 as follows:

SCHEDULE OF ERRORS RESULTED IN MISSTATEMENTS (Details)

As of March 31, 2021

As Previously

BALANCE SHEET

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Common stock (shares)

For the three months ended June 30, 2021

As Previously

STATEMENT OF OPERATIONS

Selling, general and administrative expenses

Total operating expenses

Loss from operations

$ ( 738,395 )

$ ( 836,772 )

$ ( 737,785 )

$ ( 836,162 )

PER SHARE INFORMATION

Loss per common share

Basic and Diluted

Weighted average common shares used in computing per share amounts - Basic and Diluted

For the six months ended June 30, 2021

For the three months ended March 31, 2021

As Previously

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Basic and Diluted

For the three months ended June 30, 2021

For the three months ended March 31, 2021

As Previously

Restatement Adjustment

STATEMENT OF STOCKHOLDERS’ EQUITY

Exercise of stock options, net of cashless exercise of 58,122 shares and 92,634 shares withheld

( 1,060,066 )

( 3,564,382 )

( 4,624,448 )

Common stock (shares)

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( 1,855,436 )

the six months ended June 30, 2021

OF STOCKHOLDERS’ EQUITY

stock options, net of cashless exercise of 58,122 shares and 92,634 shares withheld

$ ( 1,797,851 )

( 3,662,759 )

$ ( 5,460,610 )

Common stock (shares)

stock (dollars)

paid-in capital

$ 140,267,314

$ 145,018,746

$ ( 118,174,566 )

( 6,705,153 )

$ ( 124,879,719 )

stockholders’ equity

( 1,953,813 )

For the six months ended June 30, 2021

For the three months ended March 31, 2021

As Previously

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Equity compensation

( 3,662,759 )

Supplemental disclosure of noncash investing and financing activities:

Reclassification of stock option awards

The correction of these errors had no net effect on net cash used in

operating activities.

Basis of Presentation

The accompanying unaudited

financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for

interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X.

Accordingly, they do not include

all of the information and notes required by generally accepted accounting principles in the United States of America for complete financial

In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments necessary

for a fair presentation of the Company’s financial position at June 30, 2021 and the results of operations, stockholders’

equity and cash flows for the six months ended June 30, 2021 and 2020.

All such adjustments are of a normal and recurring nature.

financial statements are prepared on a basis consistent with the Company’s annual financial statements.

Results of operations for

the six-month period ended June 30, 2021, are not necessarily indicative of the operating results that may be expected for the year ending

December 31, 2021.

As noted in the Explanatory

Note, the Company has filed this Form 10-Q/A to amend our Quarterly Report on Form 10-Q for the three and six month periods ended June

30, 2021, originally filed with the SEC on August 11, 2021 (the “Original Form 10-Q”), to restate our Financial Statements

and related footnote disclosures as of and for the three and six months ended June 30, 2021.

The balance sheet as of December

31, 2020 has been derived from the audited financial statements at that date, as restated, but does not include all of the information

and notes required by accounting principles generally accepted in the United States of America (“GAAP”) for complete financial

correction of these errors had no net effect on net cash used in operating activities.

of Presentation

accompanying unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United

States of America for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X.

they do not include all of the information and notes required by generally accepted accounting principles in the United States of America

for complete financial statements.

In the opinion of management, the unaudited interim financial statements furnished herein include

all adjustments necessary for a fair presentation of the Company’s financial position at March 31, 2021 and the results of operations,

stockholders’ equity and cash flows for the three months ended March 31, 2021 and 2020.

All such adjustments are of a normal and

recurring nature.

Interim financial statements are prepared on a basis consistent with the Company’s annual financial statements.

Results of operations for the three-month period ended March 31, 2021, are not necessarily indicative of the operating results that may

be expected for the year ending December 31, 2021.

noted in the Explanatory Note, the Company has filed this Form 10-Q/A to amend our Quarterly Report on Form 10-Q for the three month

period ended March 31, 2021, originally filed with the SEC on May 12, 2021 (the “Original Form 10-Q”), to restate our Financial

Statements and related footnote disclosures as of and for the three months ended March 31, 2021.

balance sheet as of December 31, 2020 has been derived from the audited financial statements at that date, as restated, but does not

include all of the information and notes required by accounting principles generally accepted in the United States of America (“GAAP”)

for complete financial statements.

in this Quarterly Report on Form 10-Q to “authoritative guidance” is to the Accounting Standards Codification issued by the

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not have a material impact on its financial statements.

June 2016, the FASB issued ASU No.

2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses

on Financial Instruments to measure credit losses on financial instruments, including trade receivables.

The guidance eliminates

the probable initial recognition threshold that was previously required prior to recognizing a credit loss on financial instruments.

The credit loss estimate can now reflect an entity’s current estimate of all future expected credit losses.

Under the previous

guidance, an entity only considered past events and current conditions.

The guidance is effective for smaller reporting companies for

fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption is permitted for

fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

The adoption of certain amendments

of this guidance must be applied on a modified retrospective basis and the adoption of the remaining amendments must be applied on a

prospective basis.

The Company does not expect this standard will have a material impact on its financial statements.

preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States

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The company determined the fair value of these awards utilizing a Black-Scholes option pricing model.

Financial Accounting Standards

Board (“FASB”) guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques

are observable or unobservable.

Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect

market assumptions.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities

(Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

Accounting Standards Board (“FASB”) guidance specifies a hierarchy of valuation techniques based on whether the inputs to

those valuation techniques are observable or unobservable.

Observable inputs reflect market data obtained from independent sources, while

unobservable inputs reflect market assumptions.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets

for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).

three levels of the fair value hierarchy are as follows:

1—Unadjusted quoted prices in active markets for identical assets or liabilities that

the reporting entity has the ability to access at the measurement date.

Level 1 primarily

consists of financial instruments whose value is based on quoted market prices such as exchange-traded

instruments and listed equities.

2—Inputs other than quoted prices included within Level 1 that are observable for the

asset or liability, either directly or indirectly (e.g., quoted prices of similar assets

or liabilities in active markets, or quoted prices for identical or similar assets or

liabilities in markets that are not active).

Level 2 includes financial instruments that

are valued using models or other valuation methodologies.

The Company had $ 709,355 worth

of Level 2 liabilities as of June 30, 2021 for liability classified stock options.

1—Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability

to access at the measurement date.

Level 1 primarily consists of financial instruments whose value is based on quoted market prices

such as exchange-traded instruments and listed equities.

2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or

indirectly (e.g., quoted prices of similar assets or liabilities in active markets, or quoted prices for identical or similar assets

or liabilities in markets that are not active).

Level 2 includes financial instruments that are valued using models or other valuation

methodologies.

The Company had $610,978 worth of Level 2 liabilities as of March 31, 2021 for the liability classified stock options.

3—Unobservable inputs for the asset or liability.

Financial instruments are considered

Level 3 when the fair values are determined using pricing models, discounted cash flows or

similar techniques and at least one significant model assumption or input is unobservable.

The Company had no Level 3 assets or liabilities as of June 30, 2021 and 2020.

Financial instruments are considered Level 3 when the fair values are determined

using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable.

The Company had no Level 3 assets or liabilities as of March 31, 2021 and 2020.

for Doubtful Accounts

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and market conditions, cost factors, overall financial performance, other entity specific events and sustained decrease in share price.

There were no impairment charges recognized during either of the six months ended June 30, 2021 and 2020.

There were no impairment charges recognized during either of the three months ended March 31, 2021 and 2020.

assets include patents, copyrights, intellectual property rights and licensed software.

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To determine recoverability of its long-lived assets, the Company evaluates the probability that future undiscounted net cash flows,

without interest charges, will be less than the carrying amount of the assets.

There were no impairment charges recognized during either

of the six months ended June 30, 2021 and 2020.

without interest

will be less than the carrying amount of the assets.

There were no impairment charges recognized during either of the three months ended

March 31, 2021 and 2020.

Company accounts for income taxes under in accordance with ASC Topic 740, “Accounting for Income Taxes.” Deferred tax assets

3 unchanged sentences

to be recovered or settled.

The Company has recorded a full valuation allowance for its net deferred tax assets as of June 30, 2021 and

December 31, 2020, due to the uncertainty of the realizability of those assets.

The Company has recorded a full valuation allowance for its net deferred tax assets as of March 31, 2021

and December 31, 2020, due to the uncertainty of the realizability of those assets.

Value of Financial Instruments

5 unchanged sentences

include cash, accounts receivable, accounts payable and accrued expenses.

As of June 30, 2021 and December 31, 2020, the carrying value

As of March 31, 2021 and December 31, 2020, the carrying value

of the Company’s financial instruments approximated fair value, due to their short-term nature.

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a reconciliation of the disaggregated revenue.

OF DISAGGREGATION OF REVENUE

the Three Months Ended June 30,

as a Service (SaaS)

subscription and support services

Non-recurring

warranties on equipment

of revenue recognition

transferred at a point in time

transferred over time

the Six Months Ended June 30,

as a Service (SaaS)

subscription and support services

Non-recurring

warranties on equipment

of revenue recognition

transferred at a point in time

transferred over time

current portion of deferred revenue at June 30, 2021 and December 31, 2020 was $ 539,328 and $ 402,782 , respectively, and primarily consists

SCHEDULE OF DISAGGREGATION OF REVENUE

For the Three Months Ended March 31,

Products and services

Software as a Service (SaaS)

Other subscription and support services

Non-recurring services

Extended warranties on equipment

Products and services

Timing of revenue recognition

Products transferred at a point in time

Services transferred over time

Timing of revenue recognition

current portion of deferred revenue at March 31, 2021 and December 31, 2020 was $ 455,896 and $ 402,782 , respectively, and primarily consists

of revenue that is recognized over time for software license contracts and hosted subscription services.

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are related to the satisfaction or partial satisfaction of these contracts.

Of this balance, at December 31, 2020, $ 242,738 and $ 334,929

was recognized as revenue for the three and six months ended June 30, 2021, respectively.

The long-term portion of deferred revenue was

$ 6,598 and $ 8,662 as of June 30, 2021 and December 31, 2020, respectively.

Of this balance, at December 31, 2020, $ 242,738 was recognized

as revenue for the three months ended March 31, 2021, respectively.

The long-term portion of deferred revenue was $ 6,763 and $ 8,662 as

of March 31, 2021 and December 31, 2020, respectively.

Company did not recognize any material revenue in the current reporting period for performance obligations that were fully satisfied

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(or partially unsatisfied) at the end of the reporting period:

OF REVENUE PERFORMANCE OBLIGATION

as a Service (SaaS)

subscription and support services

warranties on equipment

SCHEDULE OF REVENUE PERFORMANCE OBLIGATION

Software as a Service (SaaS)

Other subscription and support services

Extended warranties on equipment

consideration from contracts with customers is included in the amounts presented above.

Concentrations and Credit Risk

the three and six-month periods ended June 30, 2021, the Company made sales to two customers that accounted for approximately 62 % and

57 % of total revenues, respectively.

the three-month period ended March 31, 2021, the Company made sales to three customers that accounted for approximately 59 % of total

The revenue was associated with commercial identity sales customers.

These customers represented

70 % of total accounts receivable at June 30, 2021.

During the three and six month periods ended June 30, 2020, the Company made sales

to four customers that accounted for approximately 44 % and 54 % of total revenues, respectively.

The revenue was associated with commercial

identity sales customers.

Loss Per Share

net loss per share is computed by dividing the net loss for the period by the weighted average number of common shares outstanding during

Diluted net loss per share is computed by dividing the net loss for the period by the weighted average number of shares of

common stock and potentially dilutive common stock equivalents outstanding during the period.

The dilutive effect of outstanding options,

warrants and restricted stock is reflected in diluted earnings per share by application of the treasury stock method.

The calculation

of diluted net loss per share excludes all anti-dilutive shares.

In the periods of a net loss, all common stock equivalents are considered

anti-dilutive.

OF EARNINGS PER SHARE BASIC AND DILUTED

$ ( 836,162 )

$ ( 760,273 )

$ ( 5,460,610 )

These customers represented 55 % of total accounts receivable

at March 31, 2021.

During the three-month period ended March 31, 2020, the Company made sales to three customers that accounted for approximately

51 % of total revenues.

The revenue was associated with commercial identity sales customers.

(Loss) Income Per Share

net (loss) income per share is computed by dividing the net (loss) income for the period by the weighted average number of common shares

outstanding during the period.

Diluted net (loss) income per share is computed by dividing the net (loss) income for the period by the

weighted average number of shares of common stock and potentially dilutive common stock equivalents outstanding during the period.

dilutive effect of outstanding options, warrants and restricted stock is reflected in diluted earnings per share by application of the

treasury stock method.

The calculation of diluted net (loss) income per share excludes all anti-dilutive shares.

In the periods of a

net loss, all common stock equivalents are considered anti-dilutive.

SCHEDULE OF EARNINGS PER SHARE BASIC AND DILUTED

Three Months Ended

Net (Loss) Income

$ ( 4,624,448 )

average common shares –

Basic/Diluted

loss per share –

Basic/Diluted

following table summarizes the common stock equivalents excluded from loss per diluted share because their effect would be anti-dilutive

to the net loss:

OF COMMON STOCK EQUIVALENTS EXCLUDED FROM LOSS PER DILUTED SHARE

Weighted average common shares – Basic

Dilutive effect of equity incentive plans

Weighted average common shares – Diluted

Net Loss per share –

following table summarizes the common stock equivalents excluded from (loss) income per diluted share because their effect would be anti-dilutive:

SUMMARY OF COMMON STOCK EQUIVALENTS EXCLUDED FROM LOSS PER DILUTED SHARE

Three Months Ended

Stock options

Restricted stock

Performance stock units

securities excluded from computation of earnings per share amount

INTANGIBLE ASSETS

changes in the carrying amount of intangible assets for the six months ended March 31, 2021 were as follows:

changes in the carrying amount of intangible assets for the three months ended March 31, 2021 were as follows:

OF FINITE LIVED INTANGIBLE ASSETS

balance at December 31, 2020

Net balance at December 31, 2020

Amortization expense

balance at June 30, 2021

Net balance at March 31, 2021

following summarizes amortization of intangible assets included in the accompanying statements of operations:

OF FINITE-LIVED INTANGIBLE ASSETS AMORTIZATION EXPENSE

and administrative

of intangible assets

April 15, 2020, the Company received an advance of $ 10,000

from the U.S.

Small Business Administration (“SBA”)

as part of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

The Company repaid this EIDL advance

on December 7, 2020.

The Company has not imputed interest on this advance as the rate was determined to be a below-market rate due to

the scope exception in ASC 835-30-15-3(e) for government-mandated interest rates.

On December 27, 2020, Congress passed the Economic

Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act (“the Economic Aid Act”) which relieves companies of their obligations

to repay EIDL advances.

As a result of this ruling, the SBA returned this advance, plus interest to the Loan Servicer on February 18,

2021, which was immediately returned to the Company and included in Other Income on the Statements of Operations.

OF FINITE LIVED INTANGIBLE ASSETS AMORTIZATION EXPENSES

Three Months Ended

Cost of sales

General and administrative

Amortization of intangible

April 15, 2020 the Company received an advance of $ 10,000 from the U.S.

Small Business Administration (“SBA”) as part of

the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).

The Company repaid this EIDL advance on December

The Company has not imputed interest on this advance as the rate was determined to be a below-market rate due to the scope exception

in ASC 835-30-15-3(e) for government-mandated interest rates.

On December 27, 2020, Congress passed the Economic Aid to Hard-Hit Small

Businesses, Nonprofits and Venues Act (“the Economic Aid Act”) which relieves companies of their obligations to repay EIDL

As a result of this ruling, the SBA returned this advance, plus interest to the Loan Servicer on February 18, 2021, which was

immediately returned to the Company and included in Other Income on the Statements of Operations.

Line of Credit

2 unchanged sentences

certain limitations.

The facility bears interest at a rate consistent of Citibank’s Base Rate ( 4.75 % at June 30, 2021) minus 2%.

Interest is payable monthly and as of June 30, 2021, there were no amounts outstanding and unused availability under this facility was

The facility bears interest at a rate consistent of Citibank’s Base Rate ( 4.75 % at March 31, 2021) minus 2% .

Interest is payable monthly and as of March 31, 2021, there were no amounts outstanding and unused availability under this facility was

$ 2,000,000 .

2 unchanged sentences

OF ACCRUED EXPENSES

December 31, 2020

Professional fees

Payroll and related

Incentive bonuses

Accrued Expenses

Company’s available net operating loss (“NOL”) at December 31, 2020 was approximately $ 17 million.

2 unchanged sentences

EQUITY COMPENSATION

The Company accounts for the

issuance of equity awards to employees in accordance with ASC Topic 718, which requires that the cost resulting from all equity

payment transactions be recognized in the financial statements.

This pronouncement establishes fair value as the measurement objective

in accounting for equity payment arrangements and requires all companies to apply a fair value based measurement method in accounting

for all equity payment transactions with employees.

All equity compensation is included in operating expenses for the

periods as follows:

OF STOCK BASED COMPENSATION

cost recognized:

general & administrative

& development

Compensation Expense

The Company uses the Black-Scholes

option pricing model to value the options on the grant date.

For the awards which were modified and are no longer classified as equity

awards, the Company uses the share price as of each reporting period to calculate the fair value of the options.

The table below

presents the weighted average expected life of the options in years.

The expected life computation is based on the time to option expiration.

Volatility is determined using changes in historical stock prices.

The interest rate for periods within the expected life of the award

is based on the U.S.

Treasury yield curve in effect at the time of grant.

As discussed above, certain

option awards no longer qualify as equity awards and instead are classified as liability awards.

The fair values of these awards are

determined at each reporting period utilizing a Black-Scholes option pricing model, and the associated compensation expense for the reporting

period is recorded.

The Company recorded $ 3,662,759 of additional compensation expense in the six months ended June 30, 2021 as a result

of this award reclassification.

Company accounts for the issuance of equity awards to employees in accordance with ASC Topic 718, which requires that the cost resulting

from all equity payment transactions be recognized in the financial statements.

This pronouncement establishes fair value as the measurement

objective in accounting for equity payment arrangements and requires all companies to apply a fair value based measurement method in

accounting for all equity payment transactions with employees.

All equity compensation is included in operating expenses for the periods

OF EQUITY COMPENSATION

Three Months Ended

Compensation cost recognized:

Selling, general & administrative

Research & development

Company uses the Black-Scholes option pricing model to value the options on the grant date.

The expected life computation is based on

the time to option expiration.

For the awards which were modified and are no longer classified as equity awards, the Company uses the

share price as of each reporting period to calculate the fair value of the options.

Volatility is determined using changes in historical

stock prices.

The interest rate for periods within the expected life of the award is based on the U.S.

Treasury yield curve in effect

at the time of grant.

discussed above, certain option awards no longer qualify as equity awards and instead are classified as liability awards.

The fair value

of these awards are determined at each reporting period utilizing a Black Scholes option pricing model, and the associated compensation

expense for the reporting period is recorded.

The Company recorded $ 3,564,382 of additional compensation expense in the first quarter

of 2021 as a result of this award reclassification.

option activity under the 2015 Stock Option Plan (the “Plan”) during the period indicated below were as follows:

1 unchanged sentence

of Shares Subject to Issuance

average Exercise

Remaining Contractual

at December 31, 2020

at June 30, 2021

Weighted-average

Exercise Price

Weighted-average

Remaining Contractual Term

Intrinsic Value

Outstanding at December 31, 2020

Outstanding at March 31, 2021

Exercisable at March 31, 2021

aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company’s

closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money options) that

would have been received by the option holders had they all exercised their options on June 30, 2021.

would have been received by the option holders had they all exercised their options on March 31, 2021.

This amount changes based upon

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stock of the Company.

During the six months ended June 30, 2021, the Company issued RSUs to its officers and certain employees and to

certain directors as compensation.

During the three months ended March 31, 2021, the Company issued RSUs to its officers and certain employees and

to certain directors as compensation.

RSU agreements can vest immediately or with the passage of time.

5 unchanged sentences

OF RESTRICTED STOCK UNITS OUTSTANDING

at December 31, 2020

and settled in shares

at June 30, 2021

Outstanding at December 31, 2020

Vested and settled in shares

Outstanding at March 31, 2021

August 7, 2020, the Company issued 265,942 Performance Stock Units (PSUs) to its officers and certain employees as compensation.

11 unchanged sentences

and research and development expense with a corresponding increase to additional paid-in capital.

OF PERFORMANCE STOCK UNITS

at December 31, 2020

at June 30, 2021

of June 30, 2021, there was $ 5,330,023

of total unrecognized compensation cost,

net of estimated forfeitures, related to all unvested stock options, RSUs and PSUs, which is expected to be recognized over a weighted

average period of approximately 2.46

Company had 1,471,526

shares available for future grants under

the Plan at June 30, 2021.

OF PERFORMANCE STOCK UNITS OUTSTANDING

Outstanding at December 31, 2020

Granted and Vested

Outstanding at March 31, 2021

of March 31, 2021, there was 5,951,407 of total unrecognized compensation cost, net of estimated forfeitures, related to all unvested

stock options, RSUs and PSUs, which is expected to be recognized over a weighted average period of approximately 2.69 years.

Company had 714,782 shares available for future grants under the Plan at March 31, 2021.

previously granted warrants were issued with an exercise price that was equal to or above the fair market value of the Company’s

common stock on the date of grant.

During the six months ended June 30, 2021, there were 9,000 warrants exercised at an exercise price

of $ 2.20 per share.

As of June 30, 2021, the Company had no remaining warrants available to exercise.

As of March 31, 2021, the Company had 12,680 warrants outstanding with an exercise price of $ 2.20

which are exercisable through 2021 .

During the three months ended March 31, 2021, no warrants were exercised.

June 23, 2020, the Company completed a public offering of 1,769,230 shares of its common stock, offered to the public at $ 6.50 per share.

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Board has appointed Garrett Gafke as the Company’s President.

Gafke’s first day of employment as President was March

With the appointment of Mr.

Gafke as President, Bryan Lewis is continuing

as the Company’s Chief Executive Officer.

In connection with becoming the Company’s President, Mr.

Gafke and the Company

have entered into an employment agreement, dated March 23, 2021 (the “Agreement”).

The Agreement with Mr.

Gafke provides

for certain severance payments in the event Mr.

Gafke is terminated without cause including pay for six (6) months if Mr.

Gafke is terminated

without cause less than 12 months after March 23, 2021 and pay for twelve (12) months if Mr.

Gafke is terminated without cause after

March 23, 2022.

Gafke as President, Bryan Lewis is continuing as the Company’s Chief Executive Officer.

connection with becoming the Company’s President, Mr.

Gafke and the Company have entered into an employment agreement, dated March

23, 2021 (the “Agreement”).

Gafke, on his first day of employment as President, was granted a restricted stock unit award

of 90,000 shares and an option to purchase 60,000 shares of the Company’s common stock, both of which are subject to a three-year

vesting schedule under the Company’s 2015 Omnibus Incentive Plan, as amended.

Company’s agreement with Mr.

Gafke also provides for certain severance payments in the event Mr.

Gafke is terminated without cause

including pay for six (6) months if Mr.

Gafke is terminated without cause less than 12 months after March 23, 2021 and pay for twelve

(12) months if Mr.

Gafke is terminated without cause after March 23, 2022 .

and Change-in-Control Agreements

26 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q/A

Item 1. Financial Statements