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Basis of Presentation | 3 Months Ended
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Mar. 31, 2022
Accounting Policies [Abstract] |
BASIS OF PRESENTATION | NOTE 1 – BASIS OF PRESENTATION In the opinion of Management, the accompanying unaudited condensed consolidated financial statements are prepared in accordance with instructions for Form 10-Q, include all adjustments (consisting only of normal recurring accruals) which we considered as necessary for a fair presentation of the results for the periods presented. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for future periods or the full year. The condensed consolidated financial statements include the accounts of Ipsidy Inc. and its wholly-owned subsidiaries MultiPay S.A.S., ID Global LATAM, IDGS S.A.S., ID Solutions, Inc., FIN Holdings Inc., Ipsidy Enterprises Limited, Cards Plus Pty Ltd. and Ipsidy Peru S.A.C. (collectively the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation. Going Concern As of March 31, 2022, the Company had an accumulated deficit of approximately $121.2 million. For the three months ended March 31, 2022 the Company earned revenue of approximately $0.6 million and incurred a loss from operations of approximately $5.3 million. The reports of our independent registered public accounting firm on our consolidated financial statements for the years ended December 31, 2021 and 2020 contained an emphasis of matter paragraph regarding the Company’s liquidity situation and management’s plan thereto. These unaudited condensed consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations for the next fiscal year. As discussed in our Annual Report on Form 10-K for the year ended December 31, 2021, the Company has secured additional financing which management believes will provide adequate funding for its operations as it continues to invest in its product, people, and technology. The Company may need additional capital in the future but currently it believes it has sufficient funds to operate its business through December 31, 2023. See Notes 6, 8 and 10. Subsequent Event The Board of Directors of Ipsidy considers it in the best interests of the Company to focus its business activities on providing biometric identity verification products and services by means of our proprietary IDaaS platform. Accordingly, on May 4, 2022, the Board approved a plan to start to exit from certain non-core activities comprising the MultiPay correspondent bank, payments services in Colombia and the Card Plus cards manufacturing and printing business in South Africa. Colombia The Company plans to exit the MultiPay business in Colombia in an orderly fashion through the end of the 2022, honoring our obligations to employees, customers and under applicable laws and regulations. We plan to maintain our customer support and operations team in Bogota, which performs essential functions to support the global operations of our Verified family of products. The Company will incur certain costs associated with its employees and other contractual obligations. MultiPay will continue to service its customer base in the interim as it will look to minimize all such costs and in addition to realize proceeds from the potential disposition of its assets. The Company cannot estimate the net costs to be incurred as a result of this decision at this time, but believes that the overall additional cash costs will not exceed $250,000. The Company has not recorded the potential costs or write-down in the three months ended March 31, 2022. South Africa The Company plans to exit the Cards Plus business and will seek a buy out of our interests. We have had preliminary discussions with one group but no definitive terms for the sale have been agreed at this point. If we are successful in achieving a sale of our interest it is expected that there will be a net cash inflow resulting from the planned exit of our business in South Africa. There is no guarantee that we will be successful in finding a buyer for our interest, that such sale will be on acceptable terms or that this will result in a net cash inflow. As a result of these preliminary discussions, the Company has decided to write-down the value of the Cards Plus intangible assets and has recorded an impairment charge of approximately $144,000 in the three months ended March 31, 2022. In the three months ended March 31, 2022, MultiPay and Cards Plus revenue was approximately $69,000 and $373,000, respectively, and MultiPay had a loss of approximately $68,000 with Cards Plus contributing approximately $11,000 of net income. These amounts do not include any corporate overhead allocation nor any amounts relating to the proposed exits. The financial statements of Cards Plus and the Colombian operations have not been classified as discontinued operations as of March 31, 2022 as all required classification criteria under Accounting Standards Codification 205 were not met until May 2022. Net Loss per Common Share The Company computes net loss per share in accordance with FASB ASC 260, “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the statement of operations. Basic EPS is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible notes and stock warrants, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options, warrants and conversion of convertible notes. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive. The following potentially dilutive securities were excluded from the calculation of diluted loss per share for the three months ended March 31, 2022 and 2021 because their effect was antidilutive:
Security |  |  |
|  | 2022 |  |  | 2021 |
Convertible notes payable |  |  | 2,598,741 |  |  |  | 1,146,917 |
Warrants |  |  | 1,544,633 |  |  |  | 1,411,308 |
Stock options |  |  | 9,151,167 |  |  |  | 5,411,180 |
|  |  | 13,294,541 |  |  |  | 7,969,405 |
Inventories Inventory of plastic/ID cards, digital printing material, which are held by Cards Plus Pty Ltd., are at the lower of cost (using the average method) or market. The Plastic/ID cards and digital printing material are used to provide plastic loyalty ID and other types of cards. Inventories of kiosks held by IDGS S.A.S are stated at the lower of cost (using the first-in, first-out method) or net realizable value. Inventories at March 31, 2022 and December 31, 2021 consist of cards inventory. As of March 31, 2022 and December 31, 2021, respectively, the Company recorded an inventory valuation allowance of approximately $23,000 and $20,000, respectively to reflect net realizable value of the cards inventory. Any adjustments to reduce the cost of inventories to their net realizable value are recognized in earnings in the current period. Revenue Recognition Cards Plus – The Company recognizes revenue for the design and production of cards at the point in time when products are shipped, or services have been performed due to the short-term nature of the contracts. Additionally, the cards produced by the Company have no alternative use and the Company has an enforceable right to payment for work performed should the contract be cancelled. As of March 31, 2022 and December 31, 2021, Cards Plus had approximately $332,000 and $48,000, respectively, of contract liability from payments received in advance that will be earned in future periods. Payment Processing – The Company recognizes revenue for variable fees generated for payment processing solutions that are earned on a usage fee over time based on monthly transaction volumes or on a monthly flat fee rate. Additionally, the Company also sells certain equipment from time to time for which revenue is recognized upon delivery to the customer. Identity Solutions Software – The Company recognizes revenue based on the identified performance obligations over the performance period for fixed consideration and/or for variable fees generated that are earned on a usage fee earned over time based on monthly transaction or user volumes and/or on a monthly flat fee rate. The Company had a contract liability of approximately $71,000 and $150,000 as of March 31, 2022, and December 31, 2021, respectively, for certain revenue that will be earned in future periods. Of the $71,000 of deferred revenue contract liability as of March 31, 2022, the majority will be earned during the balance of 2022. The majority of the deferred revenue contract liability as of December 31, 2020, was recognized in the quarter ended March 31, 2021. All contracts are reviewed for their respective performance obligations and related revenue and expense recognition implications. Certain of the revenues are derived from identity services that could include multiple performance obligations. A performance obligation is defined as a promise to provide a “distinct” good or service to a customer. The Company has determined that one possible treatment under U.S. GAAP is that these services will represent a stand-ready series of distinct daily services that are substantially the same, with the same pattern of transfer to the customer. Further, the Company has determined that the performance obligation to provide account access and facilitate transactions should meet the criteria for the “as invoiced” practical expedient, in that the Company has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of the Company’s performance completed to date. As a result, the Company anticipates it may recognize revenue in the amount to which the Company has a right to invoice, based on completed performance at the relevant date. Additionally, the contracts could include implementation services, or support on an “as needed” basis and we will review each contract and determine whether such performance obligations are separate and distinct and apply the new standard accordingly to the revenue and expense derived from or related to each such service. During the three months ended March 31, 2022 and 2021, the Company provided annual software maintenance support services relating to previously licensed software on a stand ready basis. These fees were billed in advance and recognized ratably over the requisite service period as revenue. During the three months ended March 31, 2022, the Company had revenues from operations in North America, South America and Africa of $0.2 million, $0.1 million and $0.3 million, respectively, compared to $0.1 million, $0.1 million and $0.4 million, respectively, in the three months ended March 31, 2021. Furthermore, the Company will capitalize the incremental costs of acquiring and fulfilling a contract with a customer if the Company expects to recover those costs. These incremental costs were immaterial in both three-month periods and the Company recognizes these costs as incurred as it typically relates to a period of less than 1 year as allowed by the practical expedient and the amounts in the period were immaterial. Contract cost assets will be amortized using the straight-line method over the expected period of benefit beginning at the time revenue begins to be realized. The amortization of contract fulfillment cost assets associated with facilitating transactions will be recorded as cost of services in the Company’s Consolidated Statements of Operations. The amortization of contract acquisition cost assets associated with sales commissions that qualify for capitalization will be recorded as selling, general and administrative expense in the Company’s Consolidated Statements of Operations. As of March 31, 2022 and December 31, 2021, the Company did not have any deferred contract costs or fees payable. Revenue related to direct financing leases is outside the scope of Topic 606 and is recognized over the term of the lease using the effective interest method.

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- Definition The entire disclosure for the business description and basis of presentation concepts. Business description describes the nature and type of organization including but not limited to organizational structure as may be applicable to holding companies, parent and subsidiary relationships, business divisions, business units, business segments, affiliates and information about significant ownership of the reporting entity. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI https://asc.fasb.org/topic&trid=2122369 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -URI https://asc.fasb.org/topic&trid=2122149 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -URI https://asc.fasb.org/topic&trid=2134479 + Details
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