What changed in this filing

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Item 1. Financial Statements

2022-06-09 compared with 2022-06-09 · 358 added, 419 removed, 392 unchanged (66% of the section changed)

FINANCIAL STATEMENTS

INTELLICHECK,

(As Restated)

receivable, net of allowance of $ 0 and $ 42,974 at September 30, 2021 and December 31, 2020, respectively

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

current assets

15 unchanged sentences

18,410,458 shares

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

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

paid-in capital

6 unchanged sentences

OF OPERATIONS

months ended September 30,

September 30,

(As Restated)

months ended June 30,

(As Restated)

COST OF REVENUES

( 1,468,516 )

( 1,689,244 )

( 1,196,528 )

OPERATING EXPENSES

Selling, general and administrative

Research and development

general and administrative

and development

operating expenses

Loss from operations

( 1,025,300 )

( 3,016,975 )

( 6,501,662 )

from operations

( 5,476,362 )

OTHER INCOME (EXPENSE)

Gain on forgiveness of unsecured promissory

Interest and other income

(expense), net

Total other income (expense)

on forgiveness of unsecured promissory note

and other income

$ ( 836,162 )

2 unchanged sentences

$ ( 733,671 )

PER SHARE INFORMATION

Loss per common share -

Weighted average common shares used in computing per share amounts

SHARE INFORMATION

per common share -

Basic/Diluted

average common shares used in computing per share amounts -

Basic/Diluted

accompanying notes to financial statements.

1 unchanged sentence

OF STOCKHOLDERS’ EQUITY

Three months ended September 30, 2021

(As Restated)

Three months ended June 30, 2021

Stockholders’

BALANCE, June 30, 2021

$ 145,018,746

$ ( 124,879,719 )

Equity compensation

Issuance of common stock, net of costs

Issuance of common stock, net of costs, shares

Exercise of stock options, net of cashless exercise of 82,161 shares

Exercise of stock options, net of cashless exercise of 82,161

shares, shares

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

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

shares, shares

Exercise of stock options, net of cashless exercise of 93,570 shares

Exercise of stock options, net of cashless exercise of 93,570 shares,shares

Exercise of warrants

Exercise of warrants, shares

Issuance of shares for restricted stock grants

Shares withheld for withholding taxes

Shares withheld for withholding taxes, shares

Settlement of executive bonuses with issuance

of restricted stock units

Settlement of executive bonuses with issuance

of restricted stock units, shares

Exercise of liability awards

March 31, 2021

$ 144,301,535

$ ( 124,043,557 )

BALANCE, September 30, 2021

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 )

Three months ended September 30, 2020

(As Restated)

months ended June 30, 2020

Stockholders’

BALANCE, June 30, 2020

March 31, 2020

$ 128,989,744

Equity compensation

Exercise of warrants

Shares withheld for withholding taxes

Exercise of stock options, net of cashless exercise of 82,161 shares

Issuance of shares for restricted stock grants

Settlement of executive bonuses with issuance

of restricted stock units

Exercise of liability awards

$ ( 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

$ 139,715,197

BALANCE, September 30, 2020

$ ( 117,668,783 )

2 unchanged sentences

OF STOCKHOLDERS’ EQUITY

Nine months ended September 30, 2021

(As Restated)

months ended June 30, 2021 (As Restated)

Stockholders’

BALANCE, December 31, 2020

$ 141,612,140

December 31, 2020

$ ( 119,419,109 )

Equity compensation

Exercise of warrants

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

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

shares and 92,634 shares withheld

Issuance of shares for restricted stock grants

( 6,486,322 )

of shares for restricted stock grants

( 5,460,610 )

BALANCE, September 30, 2021

( 5,460,610 )

June 30, 2021

$ ( 124,879,719 )

Nine months ended September 30, 2020

(As Restated)

months ended June 30, 2020

Stockholders’

BALANCE, December 31, 2019

$ ( 116,935,112 )

Equity compensation

Issuance of common stock, net of costs

Exercise of warrants

Exercise of stock options, net of cashless exercise of 93,570 shares

Shares withheld for withholding taxes

( 1,475,750 )

( 1,475,931 )

Exercise of stock options, net of cashless exercise of shares

Exercise of liability awards

Issuance of shares for restricted stock grants

Settlement of executive bonuses with issuance

of restricted stock units

( 3,743,653 )

December 31, 2019

$ ( 116,935,112 )

BALANCE, September 30, 2020

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

$ ( 117,668,783 )

2 unchanged sentences

OF CASH FLOWS

months ended September 30,

(As Restated)

months ended June 30,

(As Restated)

CASH FLOWS FROM OPERATING ACTIVITIES:

FLOWS FROM OPERATING ACTIVITIES:

$ ( 5,460,610 )

$ ( 733,671 )

Adjustments to reconcile

net loss to net cash provided by (used in) operating activities:

Depreciation and amortization

Equity compensation

Forgiveness of unsecured

promissory note

Changes in assets and liabilities:

(Increase) in accounts

(Increase) in other current

(Increase) in other assets

Increase in accounts payable

and accrued expenses

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 provided by (used in) operating activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of software license

Capital expenditures

cash used in operating activities

( 1,075,636 )

FLOWS FROM INVESTING ACTIVITIES:

of software license

of note receivable

cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Return of repayment on

unsecured promissory note

Net proceeds from issuance

of common stock

Loan proceeds 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

taxes paid on exercise of stock options and vesting of restricted stock units

( 1,475,931 )

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

Net increase in cash

CASH, beginning of period

CASH, end of period

Supplemental disclosure of noncash investing

and financing activities:

Reclassification of stock option awards

(decrease) increase in cash

( 1,181,444 )

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

2 unchanged sentences

TO FINANCIAL STATEMENTS

(Unaudited) (As Restated)

(As Restated)

Intellicheck,

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pending patents.

the nine months ended September 30, 2021, the Company incurred a net loss of $ ( 6,486,322 ) and had cash provided by operating activities

of $ 407,331 .

As of September 30, 2021, the Company had cash of $ 13,266,031 , working capital (defined as current assets minus current

liabilities) of $ 10,835,919 and an accumulated deficit of $ 125,905,431 .

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 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.

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

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Though the Company has had an increase in SaaS revenues

for the three and nine months ended September 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 COVID-19 variants, including the Delta variant, and the widespread adoption of vaccination measures including recently approved

booster regimens.

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.

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 nine months ended September 30, 2021 and 2020,

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 nine months ended September 30, 2021 and 2020.

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.

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

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 nine months ended September 30, 2021 and 2020, as follows:

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

of September 30, 2021

Equity awards

As of June 30, 2021

BALANCE SHEET

Equity awards liability

Liability for shares withheld

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$ ( 124,879,719 )

Total stockholders’

Total stockholders’ equity

( 1,953,813 )

Common stock (shares)

For the three months ended September 30, 2021

As Previously

STATEMENT OF OPERATIONS

Selling, general and administrative expenses

Total operating expenses

Loss from operations

$ ( 951,821 )

$ ( 1,025,300 )

$ ( 952,233 )

$ ( 1,025,712 )

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 nine months ended September 30, 2021

For the three months ended June 30, 2021

As Previously

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$ ( 836,162 )

( 3,736,238 )

$ ( 6,486,322 )

PER SHARE INFORMATION

2 unchanged sentences

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

For the three months ended September 30, 2020

As Previously

STATEMENT OF OPERATIONS

Selling, general and administrative expenses

Total operating expenses

Income (loss) from operations

( 3,042,394 )

$ ( 3,016,975 )

Net income (loss)

( 3,042,394 )

$ ( 3,009,982 )

PER SHARE INFORMATION

Income (loss) per common share

Basic and Diluted

Weighted average common shares used in computing per share amounts -

For the nine months ended September 30, 2020

For the six months ended June 30, 2021

As Previously

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Basic and Diluted

For the three months ended September 30, 2021

For the three months ended June 30, 2021

As Previously

Restatement Adjustment

STATEMENT OF STOCKHOLDERS’ EQUITY

12 unchanged sentences

( 1,953,813 )

For the nine months ended September 30, 2021

As Previously

STATEMENT OF STOCKHOLDERS’ EQUITY

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

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 )

2 unchanged sentences

Common stock (shares)

Common stock (dollars)

Additional paid-in capital

$ 140,905,895

$ 145,657,327

Accumulated deficit

$ ( 119,126,799 )

( 6,778,632 )

$ ( 125,905,431 )

Total stockholders’ equity

( 2,027,292 )

Three months ended September 30, 2020

As Previously

STATEMENT OF STOCKHOLDERS’ EQUITY

Exercise of liability awards

Net income (loss)

( 3,042,394 )

$ ( 3,009,982 )

Accumulated deficit

$ ( 117,636,371 )

( 3,042,394 )

$ ( 120,678,765 )

Additional paid-in capital

$ 138,411,649

$ 141,454,043

Total stockholders’ equity

Nine months ended September 30, 2020

As Previously

STATEMENT OF STOCKHOLDERS’ EQUITY

Exercise of liability awards

$ ( 701,259 )

( 3,042,394 )

stock (dollars)

paid-in capital

$ 140,267,314

Accumulated deficit

$ 145,018,746

1 unchanged sentence

( 6,705,153 )

Additional paid-in capital

$ ( 124,879,719 )

stockholders’ equity

( 1,953,813 )

Total stockholders’ equity

For the nine months ended September 30, 2021

For the six months ended June 30, 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

For the nine months ended September 30, 2020

As Previously

STATEMENT OF CASH FLOWS

$ ( 701,259 )

( 3,042,394 )

$ ( 3,743,653 )

Equity compensation

correction of the errors had no effect on net cash used in operating activities for either period.

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 September 30, 2021 and the results of

operations, stockholders’ equity and cash flows for the nine months ended September 30, 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

Results of operations for the nine-month period ended September 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 nine months ended September 30, 2021,

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

footnote disclosures as of and for the three and nine months ended September 30, 2021 and 2020.

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.

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

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

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granted under the Company’s Equity compensation plan.

Due to the inherent uncertainties involved in making estimates, actual

results reported in future periods may be different from those estimates.As discussed above, certain option awards no longer qualify as equity

Due to the inherent uncertainties involved in making estimates, actual results

reported in future periods may be different from those estimates.

As discussed above, certain option awards no longer qualify as equity

awards and instead are being classified as liability awards.

3 unchanged sentences

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

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).

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).

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 $ 782,834 worth of Level 2 liabilities as of September 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 $ 709,355 worth

of Level 2 liabilities as of June 30, 2021 for 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 September 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 June 30, 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 nine months ended September 30, 2021 and 2020.

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

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

The Company uses the straight-line method to

amortize these assets over their estimated useful lives, as it represents the pattern of economic benefits consumed.

reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these

assets may not be fully recoverable in accordance with ASC Topic 360.

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 nine months ended September 30, 2021 and 2020.

amortize these assets over their estimated useful lives.

The Company reviews its long-lived assets for impairment whenever events or

changes in circumstances indicate that the carrying amount of these assets may not be fully recoverable in accordance with ASC Topic

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.

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

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to be recovered or settled.

The Company has recorded a full valuation allowance for its net deferred tax assets as of September 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 June 30, 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 September 30, 2021 and December 31, 2020, the carrying

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

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

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

Recognition and Deferred Revenue

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Product returns are recorded as a reduction to revenue.

is measured based on a consideration specified in a contract with a customer, and excludes any sales incentives and amounts collected

on behalf of third parties.

Revenues are recognized when control of the promised goods or services is transferred to the customer, in

an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

the Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer.

of goods and services

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OF DISAGGREGATION OF REVENUE

the Three Months Ended

September 30,

Products and services

Software as a Service (SaaS)

Other subscription and support services

Non-recurring services

Extended warranties on equipment

Timing of revenue recognition

Products transferred at a point in time

Services transferred

the Nine Months Ended

September 30,

Products and services

Software as a Service (SaaS)

Other subscription and support services

Non-recurring services

Extended warranties on equipment

Timing of revenue recognition

Products transferred at a point in time

Services transferred

current portion of deferred revenue at September 30, 2021 and December 31, 2020 was $ 1,372,311 and $ 402,782 , respectively, and primarily

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

The changes in these

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

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

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

The changes in these balances

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

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

$ 383,162 was recognized as revenue for the three and nine months ended September 30, 2021, respectively.

The long-term portion of deferred

revenue was $ 9,737 and $ 8,662 as of September 30, 2021 and December 31, 2020, respectively.

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.

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

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OF REVENUE PERFORMANCE OBLIGATION

Software as a Service (SaaS)

Other subscription and support services

Extended warranties

as a Service (SaaS)

subscription and support services

warranties on equipment

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

Concentrations and Credit Risk

the three and nine-month periods ended September 30, 2021, the Company made sales to two customers that accounted for approximately 60 %

and 58 % of total revenues, respectively.

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 revenue was associated with commercial identity sales customers.

These customers represented

28 % of total accounts receivable at September 30, 2021.

During the three and nine month periods ended September 30, 2020, the Company

made sales to two customers that accounted for approximately 46 % and 37 % of total revenues, respectively.

The revenue was associated

with commercial identity sales customers.

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 the period.

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.

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.

SCHEDULE OF EARNINGS PER

SHARE BASIC AND DILUTED

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 )

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$ ( 733,671 )

Weighted average common shares – Basic and Diluted

Net loss per share –

Basic and Diluted

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

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OF COMMON STOCK EQUIVALENTS EXCLUDED FROM LOSS PER DILUTED SHARE

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 nine months ended September 30, 2021 were as follows:

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

OF FINITE-LIVED INTANGIBLE ASSETS

Net balance at December 31, 2020

Net balance at September 30, 2021

balance at December 31, 2020

Amortization expense

balance at June 30, 2021

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

OF FINITE-LIVED INTANGIBLE ASSETS AMORTIZATION EXPENSE

Cost of sales

General and administrative

Amortization of intangible

and administrative

of intangible assets

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

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on December 7, 2020.

The Company had 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.

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

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certain limitations.

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

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

was $ 2,000,000 .

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

$ 2,000,000 .

ACCRUED EXPENSES

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OF ACCRUED EXPENSES

Professional fees

Payroll and related

Incentive bonuses

Accrued expenses

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

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EQUITY COMPENSATION

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:

SCHEDULE OF STOCK BASED COMPENSATION

Compensation cost recognized:

Selling, general & administrative

Research & development

Share-based compensation

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 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.

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 $ 3,736,238 of additional compensation expense in the nine months ended September 30, 2021 as a result of this award reclassification.

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.

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

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of Shares Subject to Issuance

Weighted-average

Exercise Price

Weighted-average

Remaining Contractual Term

Intrinsic Value

Outstanding at December 31, 2020

Outstanding at September 30, 2021

Exercisable at September 30, 2021

average Exercise

Remaining Contractual

at December 31, 2020

at June 30, 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 September 30, 2021.

This amount changes based

upon the fair market value of the Company’s stock.

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

This amount changes based upon

the fair market value of the Company’s stock.

Company issues Restricted Stock Units (“RSUs”) which are equity-based instruments that may be settled in shares of common

stock of the Company.

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

and to certain directors as compensation.

During the six months ended June 30, 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.

The vesting of all RSUs is

contingent on continued board and employment services.

The vesting of all RSUs is contingent

on continued board and employment services.

compensation expense incurred by the Company for RSUs is based on the closing market price of the Company’s common stock on the

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OF RESTRICTED STOCK UNITS OUTSTANDING

Outstanding at December 31, 2020

Vested and settled in shares

Outstanding at September 30, 2021

at December 31, 2020

and settled in shares

at June 30, 2021

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

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OF PERFORMANCE STOCK UNITS

Outstanding at December 31, 2020

Outstanding at September 30, 2021

of September 30, 2021, there was $ 4,712,464 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 2.25 years.

Company had 1,467,554 shares available for future grants under the Plan at September 30, 2021.

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.

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.

As of September 30, 2021, the Company had no

remaining warrants available to exercise.

the nine months ended September 30, 2021, there were 9,000 warrants exercised at an exercise price of $ 2.20 per share.

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.

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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in additional paid-in-capital on the statement of stockholders’ equity.

COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

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effect on its business.

COMMITMENTS AND CONTINGENCIES

of New President

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

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.

and Change-in-Control Agreements

November 25, 2020, Bill White, the Chief Financial Officer and Chief Operating Officer entered into a severance agreement with the Company

(the “Agreement”).

The Agreement provides that in consideration of his services and pursuant to the Agreement, in the event

White’s employment is terminated without “cause” (as such term is defined in the Agreement), Mr.

receive a 24-month continuation of salary payments, continuation of certain eligible medical benefits under the COBRA program, and a

lump sum payment equal to any quarterly bonus target applicable during the quarter of termination plus any prior completed quarterly

bonus which has not yet been determined (if any).

In addition, the Agreement provides that upon such termination without cause, the Company

will accelerate the vesting of all of Mr.

White’s outstanding but unvested stock options or other equity incentives.

This Agreement

expires on November 29, 2023 and replaces an amended severance agreement previously executed by Mr.

White and the Company on November

Company’s employment agreement dated February 1, 2018 (the “Agreement”) with Bryan Lewis, the Chief Executive Officer

provides for certain severance payments in the event Mr.

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

is terminated without cause less than 12 months after February 1, 2018, pay for twelve (12) months if Mr.

Lewis is terminated without

cause between one (1) and five (5) years after February 1, 2018, and pay for eighteen (18) months if Mr.

Lewis is terminated without

cause after the fifth anniversary of this Agreement, in addition to reimbursement for certain living expenses and relocation advances

and expenses in certain situations.

of the agreements requires the executive to devote substantially all his time and efforts to our business and contains non-competition

and nondisclosure covenants of the officer for the term of his employment and for a one-year period thereafter.

Each agreement provides

that we may terminate the agreement for cause.

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