10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2017

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  to 

Commission file number 000-31927 

VERIFYME, INC.

(Exact Name of Registrant as Specified in Its Charter)

Nevada	23-3023677
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
409 Boot Road Downingtown, PA	19335
(Address of Principal Executive Offices)	(Zip Code)
(212) 994-7002
(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal year, if Changed Since Last Report)

 Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒     No ☐  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes ☒     No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐		Accelerated filer	☐
Non-accelerated filer	☐	(Do not check if a smaller reporting company)	Smaller reporting company	☒

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ☐     No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 38,031,259 shares of common stock outstanding at August 14, 2017.

2

PART I - FINANCIAL INFORMATION
ITEM 1.	Financial Statements	4
Condensed Balance Sheets (Unaudited)		4
Condensed Statements of Operations (Unaudited)		5
Condensed Statement of Changes in Stockholders' Deficit (Unaudited)		6
Condensed Statements of Cash Flows (Unaudited)		7
Notes to Condensed Financial Statements (Unaudited)		8
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	24
ITEM 4.	Controls and Procedures	24
PART II - OTHER INFORMATION
ITEM 1.	Legal Proceedings	25
ITEM 1A.	Risk Factors	25
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
TIEM 3.	Defaults Upon Senior Securities	26
ITEM 4.	Mine Safety Disclosures	26
ITEM 5.	Other Information	26
ITEM 6.	Exhibits	26
SIGNATURES		27

3

FINANCIAL STATEMENTS

ITEM 1.

VerifyMe, Inc.

Condensed Balance Sheets

June 30, 2017 and December 31, 2016

	June 30, 2017			December 31, 2016
	(Unaudited)			(Audited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	538,317		$	22,644
Prepaid expenses		9,125			9,425
Inventory		31,997			17,093
TOTAL CURRENT ASSETS		579,439			49,162
PROPERTY AND EQUIPMENT
Capital equipment, net of accumulated depreciation of $203,223 as of June 30, 2017 and December 31, 2016		-			-
OTHER ASSETS
Patents and Trademark, net of accumulated amortization of $200,567 and $194,236 as of June 30, 2017 and December 31, 2016		225,621			231,952
TOTAL ASSETS	$	805,060		$	281,114
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	961,183		$	867,436
Note payable, net of discount of $0 and $60,931 as of June 30, 2017 and December 31, 2016		50,000			68,069
Embedded derivative liability		-			228,718
Warrant liability		60,887			394,744
TOTAL CURRENT LIABILITIES		1,072,070			1,558,967
CONTINGENCIES
STOCKHOLDERS' DEFICIT
Series A Convertible Preferred Stock, $ .001 par value; 37,564,767 shares authorized; 344,778 shares issued and outstanding
as of June 30, 2017 and 397,778 issued and outstanding as of December 31, 2016		345			398
Series B Convertible Preferred Stock, $.001 par value; 85 shares authorized; 0.92 shares issued and outstanding
as of June 30, 2017 and December 31, 2016		-			-
Series C Convertible Preferred Stock, $.001 par value; 7,500,000 shares authorized; 0 shares issued and outstanding
as of June 30, 2017 and 1,912,500 issued and outstanding as of December 31, 2016		-			1,913
Series D Convertible Preferred Stock, $.001 par value; 6,000,000 shares authorized; 0 shares issued and outstanding
as of June 30, 2017 and 166,750 shares issued and outstanidng as of December 31, 2016		-			167
Common stock, $ .001 par value; 675,000,000 shares authorized; 37,981,799 and 8,681,236 shares issued, 37,631,259 and 8,330,696
shares outstanding as of June 30, 2017 and December 31, 2016		37,631			8,331
Additional paid in capital		42,266,044			40,469,272
Treasury stock, at cost (350,540 shares at June 30, 2017 and December 31, 2016 )		(113,389	)		(113,389	)
Accumulated deficit		(42,457,641	)		(41,644,545	)
STOCKHOLDERS' DEFICIT		(267,010	)		(1,277,853	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		805,060		$	281,114

See the accompanying notes to the condensed financial statements.

4

VerifyMe, Inc.

Condensed Statements of Operations

For the Three and Six Months Ended June 30, 2017 and 2016

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016
NET REVENUES
Sales	$	-		$	11,705		$	-		$	11,705
Royalties		-			-			-			-
TOTAL NET REVENUE		-			11,705			-			11,705
COST OF SALES		-			5,910			-			5,910
GROSS PROFIT		-			5,795			-			5,795
OPERATING EXPENSES
General and administrative (a)		482,384			87,325			628,831			205,083
Legal and accounting		82,162			117,582			91,206			232,927
Payroll expenses		20,252			683,737			43,062			1,311,660
Research and development		8,641			167,846			17,310			257,181
Sales and marketing		-			146,443			1,535			211,774
Total operating expenses		593,439			1,202,933			781,944			2,218,625
LOSS BEFORE OTHER INCOME (EXPENSE)		(593,439	)		(1,197,138	)		(781,944	)		(2,212,830	)
OTHER INCOME (EXPENSE)
Interest expense		(145,772	)		(1,000	)		(212,316	)		(2,000	)
Change in fair value of warrants		130,000			1,589,524			101,744			3,320,457
Change in fair value of embedded derivative liability		100,702			1,202,000			79,420			739,000
Fair value of warrants in excess of consideration for convertible preferred stock		-			-			-			(1,767,575	)
		84,930			2,790,524			(31,152	)		2,289,882
NET INCOME (LOSS)		(508,509	)		1,593,386			(813,096	)		77,052
Less:  Deemed preferred dividend distributions		(144,219	)		-			(144,219	)		(1,235,000	)
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS	$	(652,728	)	$	1,593,386		$	(957,315	)	$	(1,157,948	)
INCOME (LOSS) PER SHARE
BASIC	$	(0.05	)	$	0.24		$	(0.09	)	$	(0.20	)
DILUTED	$	(0.05	)	$	0.06		$	(0.09	)	$	(0.20	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
BASIC		12,598,466			6,572,673			10,220,611			5,913,418
DILUTED		12,598,466			26,106,185			10,220,611			5,913,418

(a) Includes share based compensation of $284,373 and $335,970 for the three and six months ended June 30, 2017 and $0 and $36,343 for the three and six months ended June 30, 2016.

See the accompanying notes to the condensed financial statements.

5

VerifyMe, Inc.

Condensed Statement of Changes in Stockholders’ Deficit

For the Six Months Ended June 30, 2017 

	Series A						Series B				Series C						Series D
	Convertible						Convertible				Convertible						Convertible
	Preferred						Preferred				Preferred						Preferred						Common
	Stock						Stock				Stock						Stock						Stock				Additional
	Number of						Number of				Number of						Number of						Number of				Paid-In			Treasury			Accumulated
	Shares			Amount			Shares		Amount		Shares			Amount			Shares			Amount			Shares		Amount		Capital			Stock			Deficit			Total
Balance at December 31, 2016 (Audited)		397,778		$	398			0.92	$	-		1,912,500		$	1,913			166,750		$	167			8,330,696	$	8,331	$	40,469,272		$	(113,389	)	$	(41,644,545	)	$	(1,277,853	)
Conversion of Series A Convertible Preferred Stock		(53,000	)		(53	)		-		-		-			-			-			-			1,060,000		1,060		(1,007	)		-			-			-
Conversion of Series C Convertible Preferred Stock		-			-			-		-		(1,912,500	)		(1,913	)		-			-			12,014,286		12,014		(10,101	)		-			-			-
Effect of Series C Convertible Preferred Stock
conversion on embedded derivative liability		-			-			-		-		-			-			-			-			-		-		137,625			-			-			137,625
Effect of Series C Convertible Preferred Stock
conversion on warrant liability		-			-			-		-		-			-			-			-			-		-		189,008			-			-			189,008
Converson of Series D Convertible Preferred Stock		-			-			-		-		-			-			(166,750	)		(167	)		1,810,429		1,810		(1,643	)		-			-			-
Effect of Series D Convertible Preferred Stock
conversion on embedded derivative liability		-			-			-		-		-			-			-			-			-		-		11,673			-			-			11,673
Deemed dividend upon issuance of warrants with
conversion of Series D Convertible Preferred Stock		-			-			-		-		-			-			-			-			-		-		43,105			-			-			43,105
Sale of common stock		-			-			-		-		-			-			-			-			7,596,875		7,597		523,653			-			-			531,250
Stock issuance costs								-		-		-			-			-			-			-		-		(15,128	)		-			-			(15,128	)
Conversion of accounts payable into common stock		-			-			-		-		-			-			-			-			1,154,725		1,155		79,595			-			-			80,750
Converson of notes payable and accrued interest into common stock		-			-			-		-		-			-			-			-			5,664,246		5,664		390,437			-			-			396,101
Warrants issued in conjunction with notes payable		-			-			-		-		-			-			-			-			-		-		113,585			-			-			113,585
Fair value of stock options		-			-			-		-		-			-			-			-			-		-		335,970			-			-			335,970
Net Loss		-			-			-		-		-			-			-			-			-		-		-			-			(813,096	)		(813,096	)
																																					-
Balance June 30, 2017 (Unaudited)		344,778		$	345			0.92	$	-		-		$	-			-		$	-			37,631,257	$	37,631	$	42,266,044		$	(113,389	)	$	(42,457,641	)	$	(267,010	)

See the accompanying notes to the condensed financial statements.

6

VerifyMe, Inc.

Condensed Statements of Cash Flows

 (Unaudited)

	Six Months Ended
	June 30, 2017			June 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(813,096	)	$	77,052
Adjustments to reconcile net loss to net cash used in
operating activities:
Fair value of options and warrants issued in exchange for services		335,970			812,935
Common stock issued for services		-			20,775
Accretion of discount on notes payable		204,516			-
Change in fair value of warrant liability		(101,744	)		(1,552,882	)
Change in fair value of embedded derivative liability		(79,420	)		(739,000	)
Amortization and depreciation		6,331			15,248
Amortization of deferred compensation		-			309,421
(Increase) decrease in assets
Accounts receivable		-			(11,705	)
Inventory		300			(13,714	)
Prepaid expenses		(14,904	)		-
Decrease in liabilities
Accounts payable and accrued expenses		180,598			76,728
Net cash used in operating activities		(281,449	)		(1,005,142	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes payable		281,000			-
Proceeds from sale of common stock		531,250			1,235,000
Stock issuance costs		(15,128	)		(17,500	)
Net cash provided by financing activities		797,122			1,217,500
NET INCREASE  IN CASH AND
CASH EQUIVALENTS		515,673			212,358
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		22,644			4,152
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	538,317		$	216,510
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest	$	-		$	-
Income taxes	$	-		$	-
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Series A Convertible Preferred Stock converted to common stock	$	1,060		$	589
Series B Convertible Preferred Stock converted to common stock	$	-		$	292
Series C Convertible Preferred Stock converted to common stock	$	12,014		$	1,050
Series D Convertible Preferred Stock converted to common stock	$	1,810		$	-
Security deposit offset against accounts payable	$	-		$	37,197
Accretion of discount on preferred stock as deemed distribution	$	-		$	1,235,000
Deemed dividend distribution on issuance of common stock for conversion of
Series C and Series D	$	525,630		$	-
Revaluation of restricted stock units between additional paid in capital and deferred
compensation	$	-		$	90,375
Forfeited restricted common stock	$	-		$	637,500
Revaluation of embedded derivative liability upon conversion of Series C Convertible Preferred Stock	$	137,625		$	313,000
Revaluation of embedded derivative liability upon conversion of Series D Convertible Preferred Stock	$	11,673		$	-
Revaluation of warrant liability upon conversion of Series C Convertible Preferred Stock	$	189,008		$	-
Revaluation of warrant liability upon conversion of Series D Convertible Preferred Stock	$	43,105		$	-
Warrants issued as discount to notes payable	$	113,585		$	-
Conversion of accounts payable and accrued expenses to common stock	$	80,750		$	-
Conversion of notes payable and accrued interest to common stock	$	396,101		$	-

See the accompanying notes to the condensed financial statements.

7

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of the Business

The Company was incorporated in the State of Nevada on November 10, 1999. The Company is based in Downingtown, Pennsylvania and its common stock, par value $0.001 per share (the “Common Stock”), is traded on the over-the-counter market and quoted on the OTCQB under the ticker symbol “VRME.”

The Company is a technology pioneer in the anti-counterfeiting industry. This broad market encompasses counterfeiting of physical and material goods and products, as well as counterfeiting of identity in digital transactions. The Company delivers security solutions for identification and authentication of people, products and packaging in a variety of applications in the security field for both digital and physical transactions. The products can be used to manage and issue secure credentials, including national IDs, passports, driver licenses and access control credentials. In addition, the Company has begun developing comprehensive authentication security software to secure physical and logical access to facilities, computer networks, internet sites and mobile applications. When the Company has sufficient working capital, management intends to devote resources resolving certain functionality issues which presently affect this technology.

The Company’s activities are subject to significant risks and uncertainties, including the need to secure additional funding to operationalize the Company’s current technology.

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions for Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The accompanying unaudited financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 as filed with the SEC. Operating results for the three and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.  

Basic and Diluted Net Income per Share of Common Stock

The Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 260, “Earnings Per Share,” when reporting earnings per share resulting in the presentation of basic and diluted earnings per share. Basic net income per common share is based on the weighted average number of shares outstanding during the periods presented. Diluted net income per common share is computed using the weighted average number of common shares plus dilutive common share equivalents outstanding during the period. Potential common shares that would have the effect of increasing diluted earnings per share are considered to be anti-dilutive, i.e., the exercise prices of the outstanding stock options were greater than the market price of the Common Stock. Anti-dilutive Common Stock equivalents, which were excluded from the calculation of number of dilutive Common Stock equivalents, amounted to 6,856,805 shares for the three and six months ended June 30, 2016.

Recently Adopted Accounting Pronouncements

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payment award transactions, including: (1) income tax consequences; (2) classification of awards as either equity or liabilities, and (3) classification on the statement of cash flows.  For public companies, the amendments in the ASU are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods.  This pronouncement had no impact on the financial statements since any excess tax benefits were fully offset by the valuation allowance and not recognized for financial statement purposes.

8

Recently Issued Accounting Pronouncements Not Yet Adopted

As of June 30, 2017, there are no recently issued accounting standards not yet adopted which would have a material effect on the Company’s financial statements through 2017.

NOTE 2 – MANAGEMENT PLANS

The accompanying condensed financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred significant losses and experienced negative cash flow from operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company does not believe that its existing cash resources will be sufficient to sustain operations during the next twelve months. The Company currently needs to generate revenue in order to sustain its operations. In the event that the Company cannot generate sufficient revenue to sustain its operations, the Company will need to reduce expenses or obtain financing through the sale of debt and/or equity securities. The issuance of additional equity would result in dilution to existing stockholders. If the Company is unable to obtain additional funds when they are needed or if such funds cannot be obtained on terms acceptable to the Company, the Company may be unable to execute upon the business plan or pay costs and expenses as they are incurred, which could have a material adverse effect on the business, financial condition and results of operations.

If sufficient revenues are not generated to sustain operations or additional funding cannot be obtained in the short term, the Company will need to reduce monthly expenditures to a level that will enable the Company to continue until such funds can be obtained.

Successful completion of the Company’s development program, and the attainment of profitable operations are dependent upon future events, including obtaining adequate financing to fulfill its development activities and achieving a level of sales adequate to support the Company’s cost structure. However, there can be no assurances that the Company will be able to secure additional equity investment or achieve an adequate sales level.

NOTE 3 – INCOME TAXES

Income tax expense was $0 for the three and six months ended June 30, 2017 and 2016.

As of January 1, 2017, the Company had no unrecognized tax benefits, and accordingly, the Company did not recognize interest or penalties during 2017 related to unrecognized tax benefits. There has been no change in unrecognized tax benefits during the three and six months ended June 30, 2017, and there was no accrual for uncertain tax positions as of June 30, 2017.  Tax years from 2013 through 2016 remain subject to examination by major tax jurisdictions.

There is no income tax benefit for the losses for the three and six months ended June 30, 2017 and 2016, since management has determined that the realization of the net tax deferred asset is not assured and has created a valuation allowance for the entire amount of such benefits.  The Company had income for the three and six months ended June 30, 2016; however, due to tax adjustments, the Company had a loss for income tax purposes.

9

NOTE 4 – NOTES PAYABLE

Notes payable consist of the following as of June 30, 2017 and December 31, 2016:  

	June 30,		December 31,
	2017		2016
Series A notes payable; interest at 8% per annum; principal and accrued interest due at maturity in October 2011 (past due)		50,000		50,000
Notes payable; interest rate at 5% per annum; principal and accrued interest due at maturity on June 30, 2017		-		79,000
Less: Unamortized discount		-		(60,931	)
		50,000		68,069
Less: Current portion		50,000		68,069
	$	-	$	-

On January 24, 2017 and January 31, 2017, the Company issued notes payable in the amount of $20,000, in addition to warrants to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $0.40 per share and a term of five years. The notes bear interest at the rate of 5% per annum and are due on June 30, 2017. In accordance with FASB ASC 470-20, “Debt with Conversion and Other Options,” the proceeds of notes payable with detachable stock purchase warrants have been allocated between the two based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at the time of issuance.  The warrants were valued at $15,895 fair value, using the Black-Scholes option pricing model to calculate the grant-date fair value of the warrants, with the following assumptions: no dividend yield, expected volatility of 197.5% to 197.7%, risk free interest rate of 1.94% to 1.90% and expected option life of 5 years.  The warrant values were treated as a discount to the value of the note payable in accordance with FASB ASC 835-30-25, Recognition and were accreted over the term of the note payable for financial statement purposes. 

On February 13, 2017, the Company issued a note payable in the amount of $100,000 in addition to a warrant to purchase 5,000,000 shares of the Company’s common stock at an exercise price of $0.40 per share and a term of five years. The notes bear no interest and are due on June 30, 2017. In accordance with FASB ASC 470-20, “Debt with Conversion and Other Options,” the proceeds of notes payable with detachable stock purchase warrants have been allocated between the two based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at the time of issuance.  The warrants were valued at $76,390 fair value, using the Black-Scholes option pricing model to calculate the grant-date fair value of the warrants, with the following assumptions: no dividend yield, expected volatility of 197.4%, risk free interest rate of 1.88% and expected option life of 5 years.  The warrant values were treated as a discount to the value of the note payable in accordance with FASB ASC 835-30-25, Recognition and were accreted over the term of the note payable for financial statement purposes. 

On March 28, 2017, the Company issued a note payable in the amount of $25,000 in addition to a warrant to purchase 1,250,000 shares of the Company’s common stock at an exercise price of $0.40 per share and a term of five years. The notes bear no interest and are due on June 30, 2017. In accordance with FASB ASC 470-20, “Debt with Conversion and Other Options,” the proceeds of notes payable with detachable stock purchase warrants have been allocated between the two based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at the time of issuance.The warrants were valued at $21,300 fair value, using the Black-Scholes option pricing model to calculate the grant-date fair value of the warrants, with the following assumptions: no dividend yield, expected volatility of 202.1%, risk free interest rate of 1.97% and expected option life of 5 years.  The warrant values were treated as a discount to the value of the note payable in accordance with FASB ASC 835-30-25, Recognition and were accreted over the term of the note payable for financial statement purposes. 

On April 13, 2017, the Company issued notes payable in the principal amount of $10,000 in exchange for a loan bearing no interest maturing June 30, 2017.

On April 26, 2017, the Company issued a secured promissory note (the “Note”) in the principal amount of $30,000 in exchange for a loan bearing no interest maturing October 31, 2017. The Note is secured by a first lien on all assets of the Company in accordance with a security agreement entered into in connection with the Note. In the event the Company completes a financing of at least $750,000 prior to maturity of the Note, the principal of the Note will automatically convert into a number of shares of common stock of the Company equivalent to an investment of $60,000 under the terms of such financing. In the event of such a conversion or a voluntary prepayment by the Company, the Company will also pay six months of interest payments on the $60,000 principal of the Note.

10

In May 2017, the Company issued notes payable in the principal amount of $60,000 in exchange for a loan bearing no interest maturing June 30, 2017.

In June 2017, the Company issued notes payable in the principal amount of $36,000 in exchange for a loan bearing no annual interest maturing June 30, 2017.

On June 30, 2017, all of these notes payable amounting to $360,000 and converting at $390,000 plus accrued interest of $6,101, except for the $50,000 note payable from 2009, were converted into 5,664,246 shares of the Company’s common stock and warrants to purchase 5,664,246 shares of the Company’s common stock at an exercise price of $0.15, with a term of five years (See Note 8).

As of June 30, 2017 and December 31, 2016, accrued interest on notes payable was $31,667 and $29,968. Interest expense including accretion of debt discount for the three and six months ended June 30, 2017 was $143,971 and $204,516.  Interest expense including accretion of debt discount for the three and six months ended June 30, 2016 was $1,000 and $2,000.

NOTE 5 – EMBEDDED DERIVATIVE LIABILITY

The conversion feature of the 0% Series C Convertible Preferred Stock (“Series C”) is an embedded derivative, which due to anti-dilution adjustments is classified as a liability in accordance with FASB ASC Topic 815, “Derivatives and Hedging” and ASU 2014-16, and was valued in accordance with FASB ASC 470, “Debt”, as a beneficial conversion feature at a combined fair market value of $1,235,000 as of February 2016.  This was classified as an embedded derivative liability and a discount to Series C.  Because the Series C can be converted at any time, the full amount was accreted and classified as a reduction to the discount on Series C and a deemed dividend.

The conversion feature of the 0% Series D Convertible Preferred Stock (“Series D”) is an embedded derivative, which due to anti-dilution adjustments is classified as a liability in accordance with FASB ASC Topic 815, “Derivatives and Hedging” and ASU 2014-16, and was valued in accordance with FASB ASC 470, “Debt”, as a beneficial conversion feature at a combined fair market value of $181,942 as of October 24, 2016.  This was classified as an embedded derivative liability and a discount to Series D.  Because the Series D can be converted at any time, the full amount was accreted and classified as a reduction to the discount on Series D and a deemed dividend.

In addition, the embedded derivative liability must be valued every reporting period and adjusted to market with the increase or decrease being adjusted through earnings.  

On April 14, 2017, 375,000 shares of the Series C were converted into 375,000 shares of the Company’s common stock and the associated embedded derivative liability was valued at $45,000 at March 31, 2017 and $30,000 at April 14, 2017.  Therefore, $15,000 was adjusted through earnings and $30,000 was adjusted through additional paid in capital.

On June 30, 2017, the Company cancelled the outstanding warrants to purchase 3,087,500 of the Company’s common stock related to the Series C and issued 6,175,000 shares of the Company’s common stock which is equivalent to two times the previously outstanding warrants for the Series C.  In addition, on June 30, 2017, the remaining 1,537,500 shares of Series C were converted into 5,464,286 shares of the Company’s common stock (See Notes 7 and 8).  The embedded derivative liability was valued as of June 30, 2017 at $107,625 and the difference between the remaining value of $184,990 and $107,625, or $77,365 was adjusted through earnings as of June 30, 2017.  The balance of $107,625 was adjusted through additional paid in capital.  The net effect on the net loss attributable to common stockholders was an increase of $137,625.

On June 30, 2017, the Company cancelled the outstanding warrants to purchase 667,000 shares of the Company’s common stock related to the Series D and issued 1,334,000 shares of the Company’s common stock, which is equivalent to two times the previously outstanding warrants for the Series D. In addition, on June 30, 2017, the 166,750 shares of Series D and the warrants were converted into 467,429 shares of the Company’s common stock (See Notes 7 and 8).  The embedded derivative liability was valued as of June 30, 2017 at $11,673 and the difference between the remaining value of $20,010 and $11,673, or $8,337, was adjusted through earnings as of June 30, 2017.  The balance of $11,673 was adjusted through additional paid in capital.  The net effect on the net loss attributable to common stockholders was an increase of $11,673.

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As of June 30, 2017 and December 31, 2016, the fair value of the embedded derivative liability was $0 and $228,718.  For the three and six months ended June 30, 2017, the Company realized income of $100,702 and $79,420 relative to the embedded derivative liability.  For the three and six months ended June 30, 2016, the Company realized income of $1,202,000 and $739,000 relative to the embedded derivative liability.

NOTE 6 – WARRANT LIABILITY

On December 31, 2012, the Company entered into an Investment Agreement, a Technology and Service Agreement, a Patent and Technology License Agreement and an Asset Purchase Agreement (collectively, the “VFM Agreements”) with VerifyMe, Inc. – Texas (“VFM”) on the same date entered into a Technology and Service Agreement with Zaah Technologies, Inc. (collectively with the VFM Agreements, the “Agreements”). The Agreements contemplate warrant issuances by the Company for the purchase of common stock.

Warrants exercisable for 627,451 shares of common stock associated with these Agreements are subject to anti-dilution adjustments outlined in the Agreements. In accordance with FASB ASC 815, the warrants were classified as a liability in the total amount of $2.4 million at December 31, 2012. In addition, the warrants must be valued every reporting period and adjusted to market with the increase or decrease being adjusted through earnings. As of June 30, 2017 and December 31, 2016, the fair value of the warrant liability was $34,017 and $22,063.

The 392,157 warrants associated with the Company’s Series A Convertible Preferred Stock were also classified as a liability since they were subject to anti-dilutive adjustments outlined in the warrant agreement and valued at a fair market value of $2,995,791 at January 31, 2013. In addition, the warrants must be valued every reporting period and adjusted to market with the increase or decrease being adjusted through earnings. As of June 30, 2017 and December 31, 2016 the fair value of the warrants was $21,937 and $18,107.

On January 1, 2014, the Company issued warrants to purchase 74,697 shares of Common Stock as consideration for technology received from VFM under the VFM Patent and Technology License Agreement dated December 31, 2012. The warrants were exercisable at $0.10 per share. The warrants are subject to anti-dilution adjustments outlined in the VFM Patent and Technology Agreement. In accordance with FASB ASC 815, the warrants were classified as a liability with an initial fair value of $444,000, which was immediately expensed as research and development costs. In addition, the warrants must be valued every reporting period and adjusted to market with the increase or decrease being adjusted through earnings. As of June 30, 2017 and December 31, 2016, the fair value of the warrant liability was $4,707 and $4,885.

Warrants to purchase 3,529 shares of Common Stock associated with the notes payable incurred on August 5, 2014, were revalued and at June 30, 2017 and December 31, 2016, the fair value of those warrants was $226 and $262.

In conjunction with the issuance of Series C, the Company issued warrants to purchase 3,087,500 shares of the Company’s Common Stock.  The warrants are subject to anti-dilution adjustments outlined in the warrant agreement. In accordance with FASB ASC 815 and ASU 2014-16, the warrants were classified as a liability with an initial fair value of $1,767,576, which was immediately expensed. In addition, the warrants must be valued every reporting period and adjusted to market with the increase or decrease being adjusted through earnings. As of June 30, 2017 and December 31, 2016, the fair value of the warrant liability was $189,383 and $285,290.  On June 30, 2017, the Company cancelled the outstanding warrants to purchase 3,087,500 of the Company’s common stock related to the Series C and issued 6,175,000 shares of the Company’s common stock which is equivalent to two times the previously outstanding warrants for the Series C.  The common stock was valued at $432,250 based on the closing price of the Company’s common stock of $0.07 on June 30, 2017 and was recorded as a deemed dividend distribution.  The net effect in additional paid in capital relating to this transactions was $0, as both sides of the entry affected additional paid in capital.  In addition, the warrant liability write off of $189,008 was recorded as a negative deemed dividend distribution.  The net effect of the deemed dividend distribution on the net loss attributable to common stockholders was a decrease of $243,242.

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In conjunction with the issuance of Series D, the Company issued warrants to purchase 667,000 shares of the Company’s Common Stock.  The warrants are subject to anti-dilution adjustments outlined in the warrant agreement. In accordance with FASB ASC 815 and ASU 2014-16, the warrants were classified as a liability with an initial fair value of $181,942, which was immediately expensed. In addition, the warrants must be valued every reporting period and adjusted to market with the increase or decrease being adjusted through earnings. As of June 30, 2017 and December 31, 2016, the fair value of the warrant liability was $43,105 and $64,137.  On June 30, 2017, the Company cancelled the outstanding warrants to purchase 667,000 shares of the Company’s common stock related to the Series D and issued 1,334,000 shares of the Company’s common stock, which is equivalent to two times the previously outstanding warrants for the Series C.  The common stock was valued at $93,380 based on the closing price of the Company’s common stock of $0.07 on June 30, 2017 and was recorded as a deemed dividend distribution.  The net effect in additional paid in capital relating to this transactions was $0, as both sides of the entry affected additional paid in capital.  In addition, the warrant liability write off of $43,105 was recorded as a negative deemed dividend distribution.  The net effect of the deemed dividend distribution on the net loss attributable to common stockholders was a decrease of $50,275.

NOTE 7 – CONVERTIBLE PREFERRED STOCK

Subscription Agreement

The Company entered into a Subscription Agreement with VerifyMe, Inc., a Texas corporation (“VFM”) on January 31, 2013 (the “Subscription Agreement”). Under the terms of the Subscription Agreement, VFM subscribed to purchase 392,157 shares of Series A Convertible Preferred Stock post 85-for-1 reverse stock split and a warrant to purchase 392,157 shares of Common Stock post 85-for-1 reverse stock split at an exercise price of $10.20 per share, for $1 million.

Series A Convertible Preferred Stock

On January 6, 2017, 13,000 shares of Series A Convertible Preferred Stock were converted into 260,000 shares of the Company’s Common Stock.

On March 29, 2017, 20,000 shares of Series A Convertible Preferred Stock were converted into 400,000 shares of the Company’s Common Stock.

On May 9, 2017, 20,000 shares of Series A Convertible Preferred Stock were converted into 400,000 shares of the Company’s Common Stock.

Series B Convertible Preferred Stock

There were no conversions of Series B Convertible Preferred Stock during the six months ended June 30, 2017.

Series C Convertible Preferred Stock

On February 9, 2016, the Company issued 2,587,500 shares of Series C, par value $0.001 per share, at a purchase price of $0.40 per share with gross proceeds to the Company of $1,035,000. In connection with the sale of the Series C, the Company issued to the purchasers warrants to purchase in the aggregate 2,587,500 shares of the Company’s common stock at an exercise price of $0.40 per share. Further, as a part of the same offering, on February 29, 2016, the Company issued 500,000 shares of Series C, at a purchase price of $0.40 per share with gross proceeds to the Company of $200,000. In connection with the sale of the Series C, the Company issued to the purchasers warrants to purchase in the aggregate 500,000 shares of the Company’s common stock at an exercise price of $0.40 per share. Each share of Series C is convertible into one share of common stock. The Series C provides for certain adjustments that may be made to the exercise price and the number of shares issuable upon exercise due to future corporate events or otherwise, including, for a prescribed period of time, upon the issuance of securities at a price that is less than the exercise price of the Series C.  In addition, the Company incurred stock issuance costs of $17,500 related to the issuance of Series C.

On April 14, 2017, 375,000 shares of the Company’s Series C were converted into 375,000 shares of the Company’s common stock.

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On June 30, 2017, the Company converted the remaining 1,537,500 Series C convertible preferred shares into 5,464,286 shares of the Company’s common stock.  In addition, the 3,087,500 outstanding warrants were converted into the Company’s common stock equivalent to two times the outstanding warrants or 6,175,000 shares.  The Company issued a total of 11,639,286 shares of the Company’s common stock relative to this transaction (See Note 6).

Series D Convertible Preferred Stock

On June 30, 2017, the Company converted the remaining 166,750 Series D convertible preferred shares into 476,429 shares of the Company’s common stock.  In addition, the 667,000 outstanding warrants were converted into the Company’s common stock equivalent to two times the outstanding warrants or 1,334,000 shares.  The Company issued a total of 1,810,429 shares of the Company’s common stock relative to this transaction (See Note 6).

NOTE 8 – STOCKHOLDERS’ EQUITY

On January 6, 2017, 13,000 shares of Series A Convertible Preferred Stock were converted into 260,000 shares of the Company’s Common Stock.

On March 29, 2017, 20,000 shares of Series A Convertible Preferred Stock were converted into 400,000 shares of the Company’s Common Stock.

On May 9, 2017, 20,000 shares of Series A Convertible Preferred Stock were converted into 400,000 shares of the Company’s Common Stock.

On April 14, 2017, 375,000 shares of the Company’s Series C were converted into 375,000 shares of the Company’s common stock.

On June 30, 2017, notes payable in the amount of $360,000 and converting at $390,000, were converted into 5,664,246 shares of the Company’s common stock and warrants to purchase 5,664,246 shares of the Company’s common stock (See Note 4).

On June 30, 2017, shareholders of Series C converted 1,537,500 shares of the Company’s common stock and warrants to purchase 3,087,500 shares of the Company’s common stock into 12,014,286 shares of common stock (See Notes 5, 6 and 7).

On June 30, 2017, shareholders of Series D converted 166,750 shares of the Company’s common stock and warrants to purchase 667,000 shares of the Company’s common stock into 1,810,429 shares of common stock (See Notes 5, 6 and 7).

On June 30, 2017, the Company sold 7,596,875 shares of the Company’s common stock and warrants to purchase 7,596,875 of the Company’s common stock for $531,250.  The Company recognized stock issuance costs of $15,128, which were recorded as a reduction to additional paid in capital.

On June 30, 2017, the Company converted $43,750 of Director’s fees payable into 625,625 shares of the Company’s common stock and warrants to purchase 625,625 shares of the Company’s common stock.

On June 30, 2017, the Company converted $26,250 of accounts payable to a consultant into 375,375 shares of the Company’s common stock and warrants to purchase 375,375 shares of the Company’s common stock at an exercise price of $0.15 and a term of five years.  In conjunction with this transaction, the consultant forfeited 450,000 options to purchase shares of the Company’s common stock and has agreed to convert $31,500 of consulting fees into 450,450 shares of the Company’s common stock and warrants to purchase 450,450 shares of the Company’s common stock at an exercise price of $0.15 in equal increments through December 31, 2017.

On June 30, 2017, the Company converted $10,750 of accounts payable to a consultant into 153,725 shares of the Company’s common stock and a warrant to purchase 153,725 shares of the Company’s common stock.

NOTE 9 – FAIR VALUE OF FINANCIAL INSTRUMENTS

Derivative Liabilities

For purposes of determining whether certain instruments are derivatives for accounting treatment, the Company follows the accounting standard that provides guidance for determining whether an equity-linked financial instrument, or embedded feature, is indexed to an entity’s own stock. The standard applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative, and to any freestanding financial instruments that are potentially settled in an entity’s own common stock.

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Liabilities measured at fair value on a recurring basis are summarized as follows:

	June 30, 2017									December 31, 2016
	Level 1		Level 2			Level 3		Total		Level 1		Level 2		Level 3		Total
Embedded derivative liability related to beneficial conversion option	$	-	$	-		$	-	$	-	$	-	$	-	$	228,718	$	228,718
Derivative liability related to fair value of warrants		-		-			60,886		60,886		-		-		394,744		394,744
Total	$	-	$	-		$	60,886	$	60,886	$	-	$	-	$	623,462	$	623,462
			Total
Balance at December 31, 2016			$	623,462
Reduction in value resulting from conversion of Preferred Series C and D shares				(381,411	)
Change in fair value of derivative liablities				(181,164	)
Balance at June 30, 2017			$	60,887

The Company has no assets that are measured at fair value on a recurring basis. There were no assets or liabilities measured at fair value on a non-recurring basis during the three months ended June 30, 2017.

As of June 30, 2017, some of the Company’s outstanding warrants were treated as derivative liabilities and changes in the fair value were recognized in earnings. These warrants did not trade in an active securities market, and as such, the Company estimated the fair value of these warrants using the Black-Scholes option pricing model and the following assumptions:

	June 30, 2017	December 31, 2015
Annual Dividend Yield	0.0%	0.0%
Expected Life (Years)	1.0 - 2.1	2.0 - 3.0
Risk-Free Interest Rate	1.2% - 1.4%	1.1% - 1.3%
Expected Volatility	231.6% - 244.7%	178.5% - 179.3%

Expected volatility was based primarily on historical volatility. Historical volatility was computed using daily pricing observations for recent periods. The Company believes this method produced an estimate that was representative of the Company’s expectations of future volatility over the expected term of these warrants. The Company had no reason to believe future volatility over the expected remaining life of these warrants was likely to differ materially from historical volatility. The expected life was based on the remaining contractual term of the warrants. The risk-free rate was based on the U.S. Treasury rate that corresponded to the expected term of the warrants.

NOTE 10 – STOCK OPTIONS

During 2013, the Board adopted a new omnibus incentive compensation plan that was ratified by the shareholders at the 2013 annual meeting, (the “2013 Plan”) which serves as the successor incentive compensation plan to the 2003 Plan. Under the 2013 Plan, the Company is authorized to grant awards of stock options, restricted stock, restricted stock units and other stock-based awards of up to an aggregate of 20,000,000 shares of Common Stock.  The 2013 Plan is intended to permit stock options granted to employees under the 2013 Plan to qualify as incentive stock options.  All options granted under the 2013 Plan, which are not intended to qualify as Incentive Stock Options, are deemed to be Non-Statutory Stock Options.  As of June 30, 2017, under the 2013 Plan grants of restricted stock and options to purchase 19,280,147 shares of Common Stock have been issued and are unvested or unexercised, and 719,853 shares of Common Stock remain available for grants under the 2013 Plan.  

The 2013 Plan is administered by a committee of the Board (“Compensation Committee”) which determines the persons to whom awards will be granted, the number of awards to be granted and the specific terms of each grant, including the vesting thereof, subject to the provisions of the plan.

In connection with Incentive Stock Options, the exercise price of each option may not be less than 100% of the fair market value of the Common Stock on the date of the grant (or 110% of the fair market value in the case of a grantee holding more than 10% of the outstanding stock of the Company). The aggregate fair market value (determined at the time of the grant) of stock for which an employee may exercise Incentive Stock Options under all plans of the company shall not exceed $1,000,000 per calendar year. If any employee shall have the right to exercise any options in excess of $100,000 during any calendar year, the options in excess of $100,000 shall be deemed to be Non-Statutory Stock Options, including prices, duration, transferability and limitations on exercise.

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The Company issued Non-Statutory Stock Options pursuant to contractual agreements with non-employees. Options granted under the agreements are expensed when the related service or product is provided.

Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions. The Company uses the Black-Scholes option pricing model to value its stock option awards. The assumptions used in calculating the fair value represent management’s best estimates and involve inherent uncertainties and judgments.

On January 31, 2017, the Company issued options to purchase 225,000 shares of Common Stock at an exercise price of $0.09 per share, with a term of five years, to a consultant, which vest over three months. The fair value of options issued was $19,727. These options were valued using the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 197.7%, risk-free interest rate of 1.90% and expected option life of five years. The options were revalued on February 28, 2017 and March 31, 2017 and it was determined that there was an increase in the value of the options of $2,307, which will be expensed over the remaining term of the options.  These options were cancelled on June 30, 2017.

On February 6, 2017, the Company issued options to purchase 250,000 shares of Common Stock at an exercise price of $0.068 per share and options to purchase 250,000 shares of Common Stock at an exercise price of $0.25, with a term of five years, to a consultant, which vest immediately. The fair value of options issued was $32,508. These options were valued using the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 198.0%, risk-free interest rate of 1.86% and expected option life of five years. The options were expensed immediately.

On April 30, 2017, the Company issued options to purchase 225,000 shares of Common Stock at an exercise price of $0.064 per share, with a term of five years, to a consultant, which vest over three months. The fair value of options issued was $14,011. These options were valued using the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 196.2%, risk-free interest rate of 1.84% and expected option life of five years. The options were revalued during the three months ended June 30, 2017 and the Company expensed $3,986 relative to these options during the three and six months ended June 30, 2017.  All of the options were forfeited as part of renegotiating the agreement, whereby the Company was to pay the consultant $5,250 per month for 11 months in return for forfeiting the options.  Additionally, the consultant has agreed to forgive the associated accounts payable and reinvest the proceeds he would have received in return for 825,825 shares of the Company’s common stock and warrants to purchase 825,825 shares of the Company’s common stock.  As of June 30, 2017, the consultant had earned $26,250 of the total $57,750 consulting fees and converted the earned portion into 375,375 shares of the Company’s common stock and warrants to purchase 375,375 shares of the Company’s common stock.  The remaining $31,500 of consulting fees will be converted into common stock and warrants when the consulting fees are earned (See Note 8).

On June 12, 2017, the Company issued options to purchase 5 million shares of Common Stock at an exercise price of $0.07 per share, with a term of five years, to a consultant, 3 million which vest immediately and the remainder over two years. The fair value of options issued was $242,112. These options were valued using the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 196.7%, risk-free interest rate of 1.71% and expected option life of five years. The unvested options were revalued as of June 30, 2017, which resulted in an increase in value of $39,521 and as the consulting agreement had no stated term, the $281,633 fair value was expensed immediately.

On June 29, 2017, the Company issued options to purchase 10 million shares of Common Stock at an exercise price of $0.07 per share, with a term of five years, to the Chairman of the Board of Directors which vest immediately. The fair value of options issued was $583,340. These options were valued using the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 197.9%, risk-free interest rate of 1.85% and expected option life of five years. The options are being expensed over the term of the consulting agreement which is three years.

On June 30, 2017, the Company converted $10,750 of accounts payable to a consultant into 153,725 shares of the Company’s common stock and a warrant to purchase 153,725 shares of the Company’s common stock.

For the three and six months ended June 30, 2017, the Company expensed $284,373 and $335,970 with respect to the options.  For the three and six months ended June 30, 2016, the Company expensed $427,223 and $763,050 with respect to the options.

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The following table summarizes the activities for our stock options for the six months ended June 30, 2017:

	Options Outstanding
							Weighted -
							Average
							Remaining		Aggregate
				Weighted-			Contractual		Intrinsic
	Number of			Average			Term		Value
	Shares			Exercise Price			(in years)		(in 000's) (1)
Balance as of December 31, 2016		3,282,647		$	0.52			7.9
Granted		15,950,000			0.07
Forfeited/cancelled		(500,000	)		(0.13	)
Balance June 30, 2017		18,732,647		$	0.15			5.4	$	1
Exercisable at June 30, 2017		16,732,647		$	0.16			5.5	$	1
Exercisable at June 30, 2017 and expected to
vest thereafter		18,732,647		$	0.16			5.5	$	1

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the closing stock price of $0.07 for our common stock on June 30, 2017.

The following table summarizes the activities for the Company’s unvested stock options for the six months ended June 30, 2017:

	Unvested Options
				Weighted -
				Average
				Grant
	Number of			Date Fair
	Shares			Value (1)
Balance December 31, 2016		-		$	-
Granted		15,950,000			0.06
Vested		(13,500,000	)		(0.06	)
Cancelled/forfeited/expired		(450,000	)		(0.07	)
Balance June 30, 2017		2,000,000		$	0.07

As of June 30, 2017 there was $583,340 of unrecognized compensation cost related to outstanding stock options. This amount is expected to be recognized over a weighted-average period of 3 years. To the extent the actual forfeiture rate is different from what the Company has estimated, stock-based compensation related to these awards will be different from the Company’s expectations. The difference between the stock options exercisable at June 30, 2017 and the stock options exercisable and expected to vest relates to management’s estimate of options expected to vest in the future.

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The following table summarizes the activities for our warrants for the six months ended June 30, 2017:

	Warrants Outstanding
						Weighted -
						Average
						Remaining		Aggregate
				Weighted-		Contractual		Intrinsic
	Number of			Average		Term		Value
	Shares			Exercise Price		in years)		(in 000's) (1)
Balance, December 31, 2016		9,216,452		$	1.82		3.7	$	10
Granted		21,665,846			0.12
Cancelled		(3,754,500	)		0.40
Balance, June 30, 2017		27,127,798		$	0.11		4.6	$	6
Exercisable at June 30, 2017		27,127,798		$	0.11		4.6	$	6

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the closing stock price of $0.07 for our common stock on June 30, 2017.

All warrants were vested on the date of grant.

For the three and six months ended June 30, 2017, the Company expensed $204,516 relative to the warrants issued as warrant discounts.  For the three and six months ended June 30, 2016, the Company expensed $49,885 relative to the warrants.

NOTE 11 – OPERATING LEASES

For the three and six months ended June 30, 2017, total rent expense under leases amounted to $3,000 and $6,000.  For the three and six months ended June 30, 2016, total rent expense under leases amounted to $1,500 and $11,835.  As of June 30, 2017, the Company was not obligated under any non-cancelable operating lease arrangements.

NOTE 12 – RELATED PARTIES

As of June 30, 2017, the Company owed the CEO $2,467, and the Company owed the CFO $20,419 for services rendered.  All of these amounts are included in accounts payable.

NOTE 13 – SUBSEQUENT EVENTS

In July 2017, the Company sold 2,431,000 shares of the Company’s common stock and issued a warrant to purchase 2,431,000 shares of the Company’s common stock for $170,000.

In August 2017, the Company sold 715,000 shares of the Company’s common stock and issued a warrant to purchase 715,000 shares of the Company’s common stock for $50,000.

Patrick White has been appointed the Chief Executive Officer of the Company effective August 15, 2017. Mr. Gardner will remain as Chairman of the Board.

On August 9, 2017 the Company granted 300,000 shares of restricted common stock to each director except its chairman and new Chief Executive Officer. The shares vest in 75,000 share increments subject to continued board service on applicable vesting dates.
 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Overview

VerifyMe is a technology pioneer in the anti-counterfeiting industry. This broad market encompasses counterfeiting of physical and material goods and products, as well as counterfeiting of identity in digital transactions. We can deliver security solutions for identification and authentication of people, products and packaging in a variety of applications in the security field for both digital and physical transactions. Our products can be used to manage and issue secure credentials, including national identifications, passports, driver licenses and access control credentials. In addition, the Company has begun developing comprehensive authentication security software to secure physical and logical access to facilities, computer networks, internet sites and mobile applications. When the Company has sufficient working capital, management intends to devote resources resolving certain functionality issues which presently affect this technology.

The challenges associated with digital access control and identity theft are problems that are highly relevant in the world today. Consumers, citizens, employees, governments and employers demand comprehensive solutions that are reliable but not intrusive. The current widespread use of passwords or PINs for authentication has been proven insecure and inadequate. Individuals increasingly expect anywhere-anytime experiences—whether they are making purchases, crossing borders, accessing services or logging into online accounts or corporate resources. They expect those experiences to ensure the protection of their privacy and to provide uncompromising confidentiality.

With further development, we believe that the digital technologies we own will enable businesses and consumers to reconstruct their overall approaches to security—from identity and authentication to the management of legacy passwords and PINs. Our goal is to empower our customers to take advantage of the full capabilities of smart mobile devices and provide solutions that are both simple to use and deliver the highest level of security that can be applied to corporate networks, financial services, e-gov services, digital wallets, mobile payments, entertainment, subscription services, and social media.

Brand owners, government agencies, professional associations, and others all share in the challenge of responding to counterfeit goods and product protection issues. Counterfeit goods span across multiple industries including from currency, passports, ID cards, pharmaceuticals, apparel, accessories, music, software, food, beverages, tobacco, automobile and airplane parts, consumer goods, toys and electronics. Described by the U.S. Federal Bureau of Investigation as the crime of the twenty-first century, product counterfeiting accounts for an estimated 2.5% of global trade or $461 billion and wreaks dire global health, safety and economic consequences on individuals, corporations, government and society.

We believe that the physical technologies we own will enable businesses and consumers to reconstruct their overall approaches to security—from counterfeit identification to employee or customer monitoring. Potential applications of our technologies are available in different types of products and industries—e.g., gaming, apparel, tobacco, fragrances,  pharmaceuticals, event and transportation tickets, driver’s licenses, insurance cards, passports, computer software, and credit cards. We generate sales through licenses of our technology or through direct sales of our technology.

Our physical technologies involve the utilization of invisible and/or color shifting/changing inks, which are compatible with today’s printing machines. The inks may be used with certain printing systems such as offset, flexographic, silkscreen, gravure, and laser. Based upon our experience, we believe that the ink technologies may be incorporated into existing manufacturing processes. We believe that some of our patents may have non-security applications, and we are attempting to commercialize these opportunities.

Our digital technologies will involve the utilization of multiple authentication mechanisms, some of which we own and some of which we license.  These mechanisms may include biometric factors, knowledge factors, possession factors and location factors.   

19

Results of Operations

Comparison of the Three Months Ended June 30, 2017 and 2016

The following discussion analyzes our results of operations for the three months ended June 30, 2017 and 2016. The following information should be considered together with our condensed financial statements for such period and the accompanying notes thereto.

Net Revenue/Net Loss

We have not generated significant revenue since our inception. For the three months ended June 30, 2017 and 2016, we generated revenues of $0.  For the three months ended June 30, 2017 and 2016, we had a net loss of $508,509 and net income of $1,593,386. 

General and Administrative Expenses

General and administrative expenses increased $395,059 to $482,384 for the three months ended June 30, 2017 from $87,325 for the three months ended June 30, 2016. The increase resulted primarily from an increase in consulting expenses. During the quarter ended June 30, 2017, we focused on eliminating toxic convertible preferred stock, raising capital and restarting our business under new management.

Legal and Accounting

Legal and accounting fees decreased $35,420 to $82,162 for the three months ended June 30, 2017 from $117,582 for the three months ended June 30, 2016. The decrease in legal and accounting fees between the periods was primarily a result of the costs associated with the Registration Statement on Form S-1 in the second quarter of 2016, which were not incurred during the 2017 period. Our legal fees were high in the most recent quarter as a result of the complexities stemming from our Series C and Series D Convertible Preferred Stock and negotiations to eliminate them.

Payroll Expenses

Payroll expenses were $20,252 for the three months ended June 30, 2017, a decrease of $663,485 from $683,737 for the three months ended June 30, 2016.  The decrease is the result of the three officers leaving the Company in 2016, during 2016. Going forward we expect payroll expenses to increase.

Research and Development

Research and development expenses were $8,641 and $167,846 for the three months ended June 30, 2017 and 2016, a decrease of $159,205.  The decrease is a result of cost containment procedures and research and development programs being reduced to a minimum.

Sales and Marketing

Sales and marketing expenses for the three months ended June 30, 2017 were $0 as compared to $146,443 for the three months ended June 30, 2016. The decrease relates to cost containment procedures associated with travel and minimal marketing activities. 

Interest Expense

During the three months ended June 30, 2017, the Company incurred interest expense of $145,772 as compared to $1,000 for the three months ended June 30, 2016, an increase of $144,772. The increase in interest expense was a result of the Company resorting to debt to fund its operations during the fourth quarter of 2016 and the first half of 2017.

20

Change in Fair Value of Warrants

During the three months ended June 30, 2017, the Company reported an unrealized gain on the market value of warrants of $130,000 as compared to a gain of 1,589,524 for the three months ended June 30, 2016, a decrease in the gain of $1,459,524. The change primarily resulted from the valuation of warrants associated with the Investment Agreement entered into on December 31, 2012 with VerifyMe, Inc. – Texas (“VFM”) and the Subscription Agreement entered into on January 31, 2013 with VFM.  The value of these warrants has decreased less substantially during the three months ended June 30, 2017 than during the three months ended June 30, 2016.

Change in Fair Value of Embedded Derivative Liability

During the three months ended June 30, 2017, the Company reported an unrealized gain of $100,702 for the change in the fair value of the embedded derivative liability as compared to a gain of $1,202,000 for the three months ended June 30, 2016.  This change is related to an increase in the value of the beneficial conversion option related to the 0% Series C Convertible Preferred Stock, par value $0.001 per share (the “Series C”), issued in February 2016 and the Series A Preferred Stock issued in conjunction with the Subscription Agreement entered into on January 31, 2013 with VFM.  The decrease in the embedded derivative liability is due to the decrease in the trading price of the Company’s Common Stock.

Comparison of the Six Months Ended June 30, 2017 and 2016

The following discussion analyzes our results of operations for the six months ended June 30, 2017 and 2016. The following information should be considered together with our condensed financial statements for such period and the accompanying notes thereto.

Net Revenue/Net Loss

We have not generated significant revenue since our inception. For the six months ended June 30, 2017 and 2016, we generated revenues of $0.  For the six months ended June 30, 2017 and 2016, we had a net loss of $813,096 and net income of $77,052. 

General and Administrative Expenses

General and administrative expenses increased $423,748 to $628,831 for the six months ended June 30, 2017 from $205,083 for the six months ended June 30, 2016. The increase resulted primarily from an increase in consulting expenses. During the six months ended June 30, 2017, we focused on eliminating toxic convertible preferred stock, raising capital and restarting our business under new management.

Legal and Accounting

Legal and accounting fees decreased $141,721 to $91,206 for the six months ended June 30, 2017 from $232,927 for the six months ended June 30, 2016. The decrease in legal and accounting fees between the periods was primarily a result of the costs associated costs associated with the Registration Statement on Form S-1 in the first half of 2016, which were not incurred during the 2017 period. Our legal fees were high during the six months ended June 30, 2017 as a result of the complexities stemming from our Series C and D Convertible Preferred Stock and negotiations to eliminate them.

Payroll Expenses

Payroll expenses were $43,062 for the six months ended June 30, 2017, a decrease of $1,268,598 from $1,311,660 for the six months ended June 30, 2016.  The decrease is the result of the three officers leaving the Company during 2016. Going forward we expect payroll expenses to increase.

Research and Development

Research and development expenses were $17,310 and $257,181 for the six months ended June 30, 2017 and 2016, a decrease of $239,871.  The decrease is a result of cost containment procedures and research and development programs being reduced to a minimum.

21

Sales and Marketing

Sales and marketing expenses for the six months ended June 30, 2017 were $1,535 as compared to $211,774 for the six months ended June 30, 2016, a decrease of $210,239. The decrease relates to cost containment procedures associated with travel and minimal marketing activities. 

Interest Expense

During the six months ended June 30, 2017, the Company incurred interest expense of $212,316 as compared to $2,000 for the six months ended June 30, 2016, an increase of $210,316. The increase in interest expense was a result of the Company resorting to debt to fund its operations during the fourth quarter of 2016 and the first half of 2017.

Change in Fair Value of Warrants

During the six months ended June 30, 2017, the Company reported an unrealized gain on the market value of warrants of $101,744 as compared to a gain of 3,320,457 for the six months ended June 30, 2016, a decrease in the gain of $3,218,713. The change primarily resulted from the valuation of warrants associated with the Investment Agreement entered into on December 31, 2012 with VerifyMe, Inc. – Texas (“VFM”) and the Subscription Agreement entered into on January 31, 2013 with VFM.  The value of these warrants has decreased less substantially during the three months ended June 30, 2017 than during the three months ended June 30, 2016. 

Change in Fair Value of Embedded Derivative Liability

During the six months ended June 30, 2017, the Company reported an unrealized gain of $79,420 for the change in the fair value of the embedded derivative liability as compared to a gain of $739,000 for the six months ended June 30, 2016.  This change is related to an increase in the value of the beneficial conversion option related to the 0% Series C Convertible Preferred Stock, par value $0.001 per share (the “Series C”), issued in February 2016 and the Series A Preferred Stock issued in conjunction with the Subscription Agreement entered into on January 31, 2013 with VFM.  The decrease in the embedded derivative liability is due to the decrease in the trading price of the Company’s Common Stock.

Fair value of warrants in excess of consideration for convertible preferred stock

During the six months ended June 30, 2016, upon the issuance of the Series C, the associated warrants were valued and that value exceeded the amount that was received by the Company for the Series C, in the amount of $1,767,575, fair value, and was expensed.

Liquidity and Capital Resources

Net cash used in operating activities increased $723,693 to $(281,449) for the six months ended June 30, 2017 as compared to $(1,005,142) for the six months ended June 30, 2016.  The increase resulted primarily from operational changes discussed previously as well as a reduction in option and warrant expenses and accretion of discounts on notes payable.

Net cash provided by financing activities decreased by $420,378 to $797,122 for the six months ended June 30, 2017 from $1,217,500 for the six months ended June 30, 2016.  Cash provided by financing activities during the six months ended June 30, 2016, consisted primarily of our Series C Preferred Stock offerings which raised $1,217,500, net of offering costs, while we only raised bridge loans of $281,000 during the six months ended June 30, 2017. 

Since our inception, we have focused on developing and implementing our business plan. Our business plans are dependent on our ability to raise capital through private placements of our common stock and/or preferred stock, through the possible exercise of outstanding options and warrants, through debt financing and/or through future public offering of our securities.  

As of August 14, 2017 we had cash resources of approximately $600,000. If we are unsuccessful in either borrowing raising additional funds, we will not be able to fully implement our operating and marketing plans and we may cease operations.

22

Cautionary Note Regarding Forward-Looking Statements

This report includes forward-looking statements including statements regarding our increase in compensation and our liquidity.

The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. 

The results anticipated by any or all of these forward-looking statements might not occur. Important factors, uncertainties and risks that may cause actual results to differ materially from these forward-looking statements include our ability to raise capital to support our operations and begin meaningful marketing of our products, and the condition of the capital markets for microcap companies. Further information on our risk factors is contained in our filings with the SEC, including the Form 10-K for the year ended December 31, 2016. Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We undertake no obligation to publicly update or revise any forward-looking statements, whether as the result of new information, future events or otherwise.

Off-Balance Sheet Arrangements

As of the six months ended June 30, 2017, we do not have any off-balance sheet arrangements.

Critical Accounting Policies

Our financial statements are impacted by the accounting policies used and the estimates and assumptions made by management during their preparation. We have identified below the accounting policies that are of particular importance in the presentation of our financial position, results of operations and cash flows and which require the application of significant judgment by management.

Stock-based Compensation

We account for stock-based compensation under the provisions of FASB ASC 718, “Compensation—Stock Compensation,” which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date. We estimate the fair value of stock-based awards on the date of grant using the Black-Scholes option pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods using the straight-line method.

We account for stock-based compensation awards to non-employees in accordance with FASB ASC 505-50, “Equity-Based Payments to Non-Employees”. Under FASB ASC 505-50, we determine the fair value of the warrants or stock-based compensation awards granted as either the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable.

All issuances of stock options or other equity instruments to non-employees as consideration for goods or services received by the Company are accounted for based on the fair value of the equity instruments issued. Any stock options issued to non-employees are recorded as an expense and additional paid in capital in stockholders’ equity over the applicable service periods using variable accounting through the vesting dates based on the fair value of the options at the end of each period.

Revenue Recognition

In accordance with FASB ASC 605, “Revenue Recognition”, we recognize revenue when (i) persuasive evidence of a customer or distributor arrangement exists, (ii) a retailer, distributor or wholesaler receives the goods and acceptance occurs, (iii) the price is fixed or determinable, and (iv) collectability of the sales revenues is reasonably assured. Subject to these criteria, the Company recognizes revenue from product sales, consisting mainly of pigments and penlights, upon shipment to the customer. Royalty revenue is recognized upon receipt of notification from a customer that the Company’s product has been used in the customer’s production process.

23

License fee revenue is recognized on a straight-line basis over the term of the license agreement.

Recently Issued Accounting Pronouncements

Recently issued accounting pronouncements are discussed in Note 1 of the notes to condensed financial statements contained in this report.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

ITEM 4. CONTROLS AND PROCEDURES.

(a) Evaluation of Disclosure Controls and Procedures. Our disclosure controls and procedures are designed to ensure information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. The Company’s Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of six months ended June 30, 2017, the end of the fiscal quarter covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2017, our disclosure controls and procedures were ineffective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is: (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b) Changes in Internal Controls. There has been no change in our internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

24

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None.

ITEM 1A. RISK FACTORS.

Not required.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On April 13, 2017, the Company issued notes payable in the principal amount of $10,000 in exchange for a loan bearing 10% annual interest maturing June 30, 2017.

On April 26, 2017, the Company issued a secured promissory note (the “Note”) in the principal amount of $30,000 in exchange for a loan bearing 10% annual interest maturing October 31, 2017. The Note is secured by a first lien on all assets of the Company in accordance with a security agreement entered into in connection with the Note. In the event the Company completes a financing of at least $750,000 prior to maturity of the Note, the principal of the Note will automatically convert into a number of shares of common stock of the Company equivalent to an investment of $60,000 under the terms of such financing. In the event of such a conversion or a voluntary prepayment by the Company, the Company will also pay six months of interest payments on the $30,000 principal of the Note.

In May 2017, the Company issued notes payable in the principal amount of $60,000 in exchange for a loan bearing 10% annual interest maturing June 30, 2017.

In June 2017, the Company issued notes payable in the principal amount of $36,000 in exchange for a loan bearing 10% annual interest maturing June 30, 2017.

On June 30, 2017, notes payable in the amount of $360,000 were converted into 5,637,157 shares of the Company’s common stock and warrants to purchase 5,637,157 shares of the Company’s common stock (See Note 4).

On June 30, 2017, shareholders of Series C converted 1,537,500 shares of the Company’s common stock and warrants to purchase 6,175,000 shares of the Company’s common stock into 12,014,286 shares of common stock (See Notes 5, 6 and 7).

On June 30, 2017, shareholders of Series D converted 166,750 shares of the Company’s common stock and warrants to purchase 1,334,000 shares of the Company’s common stock into 1,810,429 shares of common stock (See Notes 5, 6 and 7).

On June 30, 2017, the Company sold 7,596,875 shares of the Company’s common stock for $516,122, net of stock issuance costs of $15,128.

On June 30, 2017, the Company converted $43,750 of Director’s fees payable into 625,625 shares of the Company’s common stock.

On June 30, 2017, the Company converted $68,500 of accounts payable to a consultant into 979,550 shares of the Company’s common stock and warrants to purchase 979,550 shares of the Company’s common stock at an exercise price of $0.15 and a term of five years.  In conjunction with this transaction, the consultant forfeited 450,000 options to purchase shares of the Company’s common stock and will also convert $31,500 of consulting fees into 450,450 shares of the Company’s common stock and warrants to purchase 450,450 shares of the Company’s common stock in equal increments through December 31, 2017.

25

All of the above securities were issued and sold to accredited investors in reliance upon the exemption from registration contained in Section 4(a)(2) and/or Section 3(a)(9) of the Securities Act of 1933 (the “Act”) and Rule 506 promulgated thereunder.

 ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS

EXHIBIT INDEX

		Incorporated by Reference			Filed or Furnished
Exhibit #	Exhibit Description	Form	Date	Number	Herewith
3.1	Certificate of Amendment to Amended and Restated Articles of Incorporation	10-Q	8/19/15	3.1
3.2	Amended Certificate of Designation of Series A Preferred Stock	8-K	2/6/13	3.1
3.3	Second Amended Certificate of Designation for Series A Preferred Stock	8-K	6/18/15	3.2
3.4	Certificate of Designation for Series B Preferred Stock, dated as of June 2015	8-K	6/18/15	3.3
3.5	Certificate of Designation for Series C Preferred Stock, filed with the Nevada Secretary of State on January 27, 2016	8-K	2/10/16	3.1
3.6	Certificate of Designation for Series D Preferred Stock filed with the Nevada Secretary of State on December 5, 2016	10-K	4/12/17	3.9
3.7	Amended and Restated Bylaws,as amended	8-K	5/18/16	3.2
10.1	Form of Securities Purchase Agreement				Filed
10.2	Form of Warrant				Filed
10.3	Form of Securities Exchange Agreement dated May 30, 2017	8-K	5/31/17	10.1
10.4	Form of Conversion Agreement for Series C and D dated May 17, 2017				Filed
10.5	Business Consulting Services Agreement for Patrick White dated June 2, 2017				Filed
10.6	Consulting Agreement for Norman Gardner dated June 30, 2017				Filed
31.1	Certification of Principal Executive Officer (302)				Filed
31.2	Certification of Principal Financial Officer (302)				Filed
32.1	Certification of Principal Executive (906)				Furnished**
32.2	Certification of Principal Financial Officer (906)				Furnished**
101.INS	XBRL Instance Document				Filed
101.SCH	XBRL Taxonomy Extension Schema Document				Filed
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document				Filed
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document				Filed
101.LAB	XBRL Taxonomy Extension Label Linkbase Document				Filed
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document				Filed

———————
 

** This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.

Copies of this report (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our shareholders who make a written request to VerifyMe, Inc., at the address on the cover page of this report, Attention: Corporate Secretary. 

26

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	VERIFYME, INC.
Date: August 14, 2017	By:	/s/ Scott McPherson
		Scott McPherson
		Chief Financial Officer

27

EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULE 13a-14(a) UNDER

THE SECURITIES EXCHANGE ACT OF 1934

I, Norman A. Gardner, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of VerifyMe, Inc. (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: August 14, 2017	By:	/s/ Norman A. Gardner
		Norman A. Gardner
		Chief Executive Officer

EX-31.2

 Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULE 13a-14(a) UNDER

THE SECURITIES EXCHANGE ACT OF 1934

I, Scott McPherson, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of VerifyMe, Inc. (the “Registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The Registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: August 14, 2017	By:	/s/ Scott McPherson
		Scott McPherson
		Chief Financial Officer

EX-32.1

 Exhibit 32.1

Certification Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with this Quarterly Report of VerifyMe, Inc. (the “Registrant”) on Form 10-Q for the quarter ended June 30, 2017, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, Norman A. Gardner, Chief Executive Officer (Principal Executive Officer) of the Registrant, certify to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1) This Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Date: August 14, 2017	By:	/s/ Norman A. Gardner
		Norman A. Gardner
		Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification Pursuant to 18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with this Quarterly Report of VerifyMe, Inc. (the “Registrant”) on Form 10-Q for the quarter ended June 30, 2017, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, Scott A. McPherson, Chief Financial Officer (Principal Financial Officer) of the Registrant, certify to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1) This Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2) The information contained in this Report fairly presents, in all material respects, the financial condition and results of operations

 of the Registrant.

Date: August 14, 2017	By:	/s/ Scott A. McPherson
		Scott A. McPherson
		Chief Financial Officer

Copies of this report (including the financial statements) and any of the exhibits referred to above will be furnished at no cost to our shareholders who make a written request to VerifyMe, Inc., at the address on the cover page of this report, Attention: Corporate Secretary.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Aug. 14, 2017
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q2
Trading Symbol	VRME
Entity Registrant Name	VerifyMe, Inc.
Entity Central Index Key	0001104038
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		38,031,259

XML

Condensed Balance Sheets - USD ($)	Jun. 30, 2017	Dec. 31, 2016
CURRENT ASSETS
Cash and cash equivalents	$ 538,317	$ 22,644
Prepaid expenses	9,125	9,425
Inventory	31,997	17,093
TOTAL CURRENT ASSETS	579,439	49,162
PROPERTY AND EQUIPMENT
Capital equipment, net of accumulated depreciation of $203,223 as of June 30, 2017 and December 31, 2016
OTHER ASSETS
Patents and Trademark, net of accumulated amortization of $200,567 and $194,236 as of June 30, 2017 and December 31, 2016	225,621	231,952
TOTAL ASSETS	805,060	281,114
CURRENT LIABILITIES
Accounts payable and accrued expenses	961,183	867,436
Note payable, net of discount of $0 and $60,931 as of June 30, 2017 and December 31, 2016	50,000	68,069
Embedded derivative liability		228,718
Warrant liability	60,887	394,744
TOTAL CURRENT LIABILITIES	1,072,070	1,558,967
CONTINGENCIES
STOCKHOLDERS' DEFICIT
Common stock, $ .001 par value; 675,000,000 shares authorized; 37,981,799 and 8,681,236 shares issued, 37,631,259 and 8,330,696 shares outstanding as of June 30, 2017 and December 31, 2016	37,631	8,331
Additional paid in capital	42,266,044	40,469,272
Treasury stock, at cost (350,540 shares at June 30, 2017 and December 31, 2016 )	(113,389)	(113,389)
Accumulated deficit	(42,457,641)	(41,644,545)
STOCKHOLDERS' DEFICIT	(267,010)	(1,277,853)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	805,060	281,114
Series A Convertible Preferred Stock [Member]
STOCKHOLDERS' DEFICIT
Convertible Preferred Stock	345	398
STOCKHOLDERS' DEFICIT	345	398
Series B Convertible Preferred Stock [Member]
STOCKHOLDERS' DEFICIT
Convertible Preferred Stock
STOCKHOLDERS' DEFICIT
Series C Convertible Preferred Stock [Member]
CURRENT LIABILITIES
Embedded derivative liability	107,625
STOCKHOLDERS' DEFICIT
Convertible Preferred Stock		1,913
Common stock, $ .001 par value; 675,000,000 shares authorized; 37,981,799 and 8,681,236 shares issued, 37,631,259 and 8,330,696 shares outstanding as of June 30, 2017 and December 31, 2016	432,250
STOCKHOLDERS' DEFICIT		1,913
Series D Convertible Preferred Stock [Member]
CURRENT LIABILITIES
Embedded derivative liability	11,673
STOCKHOLDERS' DEFICIT
Convertible Preferred Stock		167
Common stock, $ .001 par value; 675,000,000 shares authorized; 37,981,799 and 8,681,236 shares issued, 37,631,259 and 8,330,696 shares outstanding as of June 30, 2017 and December 31, 2016	93,380
STOCKHOLDERS' DEFICIT		$ 167

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Condensed Balance Sheets (Parenthetical) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Accumulated depreciation on capital equipment	$ 203,223	$ 203,223
Accumulated amortization, patent and trademarks	200,567	194,236
Net of discount on note payable	$ 0	$ 60,931
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	675,000,000	675,000,000
Common stock, shares issued	37,981,799	8,681,236
Common stock, shares outstanding	37,631,259	8,330,696
Treasury stock, shares	350,540	350,540
Series A Convertible Preferred Stock [Member]
Preferred stock, par value	$ .001	$ 0.001
Preferred stock, shares authorized	37,564,767	37,564,767
Preferred stock, shares issued	344,778	397,778
Preferred stock, shares outstanding	344,778	397,778
Series B Convertible Preferred Stock [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	85	85
Preferred stock, shares issued	0.92	0.92
Preferred stock, shares outstanding	0.92	0.92
Series C Convertible Preferred Stock [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	7,500,000	7,500,000
Preferred stock, shares issued	0	1,912,500
Preferred stock, shares outstanding	0	1,912,500
Common stock, shares issued	12,014,286
Series D Convertible Preferred Stock [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	6,000,000	6,000,000
Preferred stock, shares issued	0	166,750
Preferred stock, shares outstanding	0	166,750
Common stock, shares issued	1,810,429

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Condensed Statements of Operations - USD ($)		3 Months Ended		6 Months Ended
		Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
NET REVENUES
Sales			$ 11,705		$ 11,705
Royalties
TOTAL NET REVENUE			11,705		11,705
COST OF SALES			5,910		5,910
GROSS PROFIT			5,795		5,795
OPERATING EXPENSES
General and administrative	[1]	482,384	87,325	628,831	205,083
Legal and accounting		82,162	117,582	91,206	232,927
Payroll expenses		20,252	683,737	43,062	1,311,660
Research and development		8,641	167,846	17,310	257,181
Sales and marketing			146,443	1,535	211,774
Total operating expenses		593,439	1,202,933	781,944	2,218,625
LOSS BEFORE OTHER INCOME (EXPENSE)		(593,439)	(1,197,138)	(781,944)	(2,212,830)
OTHER INCOME (EXPENSE)
Interest expense		(145,772)	(1,000)	(212,316)	(2,000)
Change in fair value of warrants		130,000	1,589,524	101,744	3,320,457
Change in fair value of embedded derivative liability		100,702	1,202,000	79,420	739,000
Fair value of warrants in excess of consideration for convertible preferred stock					(1,767,575)
TOTAL OTHER INCOME (EXPENSE)		84,930	2,790,524	(31,152)	2,289,882
NET INCOME (LOSS)		(508,509)	1,593,386	(813,096)	77,052
Less: Deemed preferred dividend distributions		(144,219)		(144,219)	(1,235,000)
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS		$ (652,728)	$ 1,593,386	$ (957,315)	$ (1,157,948)
INCOME (LOSS) PER SHARE
BASIC		$ (0.05)	$ 0.24	$ (0.09)	$ (0.20)
DILUTED		$ (0.05)	$ 0.06	$ (0.09)	$ (0.20)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
BASIC		12,598,466	6,572,673	10,220,611	5,913,418
DILUTED		12,598,466	26,106,185	10,220,611	5,913,418

[1] Includes share based compensation of $284,373 and $335,970 for the three and six months ended June 30, 2017 and $0 and $36,343 for the three and six months ended June 30, 2016.

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Condensed Statements of Operations (Parenthetical) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Income Statement [Abstract]
Share based compensation	$ 284,373	$ 0	$ 335,970	$ 36,343

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Condensed Statement of Changes in Stockholders' Deficit - 6 months ended Jun. 30, 2017 - USD ($)	Common Stock [Member] Series A Convertible Preferred Stock [Member]	Common Stock [Member] Series C Convertible Preferred Stock [Member]	Common Stock [Member] Series D Convertible Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member] Series C Convertible Preferred Stock [Member]	Additional Paid-in Capital [Member] Series D Convertible Preferred Stock [Member]	Additional Paid-in Capital [Member]	Treasury Stock [Member]	Accumulated Deficit [Member]	Series A Convertible Preferred Stock [Member]	Series B Convertible Preferred Stock [Member]	Series C Convertible Preferred Stock [Member]	Series D Convertible Preferred Stock [Member]	Total
Balance at Dec. 31, 2016				$ 8,331			$ 40,469,272	$ (113,389)	$ (41,644,545)	$ 398		$ 1,913	$ 167	$ (1,277,853)
Balance (in shares) at Dec. 31, 2016				8,330,696						397,778	0.92	1,912,500	166,750
Conversion of Convertible Preferred Stock	$ 1,060	$ 12,014	$ 1,810		$ (10,101)	$ (1,643)	$ (1,007)			$ (53)		$ (1,913)	$ (167)
Conversion of Convertible Preferred Stock (in shares)	1,060,000	12,014,286	1,810,429							(53,000)		(1,912,500)	(166,750)
Effect of Convertible Preferred Stock conversion on embedded derivative liability					$ 137,625	$ 11,673								137,625
Effect of Convertible Preferred Stock conversion on warrant liability							189,008							189,008
Deemed dividend upon issuance of warrants with conversion of Series D Convertible Preferred Stock							43,105							43,105
Sale of common stock				$ 7,597			523,653							531,250
Sale of common stock, shares				7,596,875								6,175,000	1,334,000
Stock issuance costs							(15,128)							(15,128)
Conversion of accounts payable into common stock				$ 1,155			79,595							80,750
Conversion of accounts payable into common stock, shares				1,154,725
Converson of notes payable and accrued interest into common stock				$ 5,664			390,437							396,101
Converson of notes payable and accrued interest into common stock, shares				5,664,246
Warrants issued in conjunction with notes payable							113,585							113,585
Fair value of stock options and warrants							335,970							335,970
Net income									(813,096)					(813,096)
Balance at Jun. 30, 2017				$ 37,631			$ 42,266,044	$ (113,389)	$ (42,457,641)	$ 345				$ (267,010)
Balance (in shares) at Jun. 30, 2017				37,631,257						344,778	0.92

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Condensed Statements of Cash Flows - USD ($)	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (813,096)	$ 77,052
Adjustments to reconcile net loss to net cash used in operating activities:
Fair value of options and warrants issued in exchange for services	335,970	812,935
Common stock issued for services		20,775
Accretion of discount on notes payable	204,516
Change in fair value of warrant liability	(101,744)	(1,552,882)
Change in fair value of embedded derivative liability	(79,420)	(739,000)
Amortization and depreciation	6,331	15,248
Amortization of deferred compensation		309,421
(Increase) decrease in assets
Accounts receivable		(11,705)
Inventory	300	(13,714)
Prepaid expenses	(14,904)
Decrease in liabilities
Accounts payable and accrued expenses	180,598	76,728
Net cash used in operating activities	(281,449)	(1,005,142)
CASH FLOWS FROM INVESTING ACTIVITIES
Employee advances
Net cash used in investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes payable	281,000
Proceeds from sale of Convertible Preferred Stock	531,250	1,235,000
Stock issuance costs	(15,128)	(17,500)
Net cash provided by financing activities	797,122	1,217,500
NET INCREASE IN CASH AND CASH EQUIVALENTS	515,673	212,358
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD	22,644	4,152
CASH AND CASH EQUIVALENTS - END OF PERIOD	538,317	216,510
Cash paid during the year for: Interest
Cash paid during the year for: Income taxes
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Convertible Preferred Stock converted to common stock	43,750
Security deposit offset against accounts payable		37,197
Accretion of discount on preferred stock as deemed distribution		1,235,000
Deemed dividend distribution on issuance of common stock for conversion of Series C and Series D	525,630
Revaluation of restricted stock units between additional paid in capital and deferred compensation		90,375
Forfeited restricted common stock		637,500
Warrants issued as discount to notes payable	113,585
Conversion of accounts payable and accrued expenses to common stock	80,750
Conversion of notes payable and accrued interest to common stock	396,101
Series A Convertible Preferred Stock [Member]
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
CASH FLOWS FROM FINANCING ACTIVITIES
Stock issuance costs
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Convertible Preferred Stock converted to common stock	1,060	589
Series B Convertible Preferred Stock [Member]
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
CASH FLOWS FROM FINANCING ACTIVITIES
Stock issuance costs
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Convertible Preferred Stock converted to common stock		292
Series C Convertible Preferred Stock [Member]
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Change in fair value of embedded derivative liability	184,990
CASH FLOWS FROM FINANCING ACTIVITIES
Stock issuance costs
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Convertible Preferred Stock converted to common stock	12,014	1,050
Revaluation of embedded derivative liability upon conversion of Convertible Preferred Stock	137,625	313,000
Revaluation of warrant liability upon conversion Convertible Preferred Stock	189,008
Series D Convertible Preferred Stock [Member]
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Change in fair value of embedded derivative liability	20,010
CASH FLOWS FROM FINANCING ACTIVITIES
Stock issuance costs
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Convertible Preferred Stock converted to common stock	1,810
Revaluation of embedded derivative liability upon conversion of Convertible Preferred Stock	11,673
Revaluation of warrant liability upon conversion Convertible Preferred Stock	$ 43,105

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of the Business

The Company was incorporated in the State of Nevada on November 10, 1999. The Company is based in Downingtown, Pennsylvania and its common stock, par value $0.001 per share (the “Common Stock”), is traded on the over-the-counter market and quoted on the OTCQB under the ticker symbol “VRME.”

The Company is a technology pioneer in the anti-counterfeiting industry. This broad market encompasses counterfeiting of physical and material goods and products, as well as counterfeiting of identity in digital transactions. The Company delivers security solutions for identification and authentication of people, products and packaging in a variety of applications in the security field for both digital and physical transactions. The products can be used to manage and issue secure credentials, including national IDs, passports, driver licenses and access control credentials. In addition, the Company has begun developing comprehensive authentication security software to secure physical and logical access to facilities, computer networks, internet sites and mobile applications. When the Company has sufficient working capital, management intends to devote resources resolving certain functionality issues which presently affect this technology.

The Company’s activities are subject to significant risks and uncertainties, including the need to secure additional funding to operationalize the Company’s current technology.

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions for Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The accompanying unaudited financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 as filed with the SEC. Operating results for the three and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017. 

Basic and Diluted Net Income per Share of Common Stock

The Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 260, “Earnings Per Share,” when reporting earnings per share resulting in the presentation of basic and diluted earnings per share. Basic net income per common share is based on the weighted average number of shares outstanding during the periods presented. Diluted net income per common share is computed using the weighted average number of common shares plus dilutive common share equivalents outstanding during the period. Potential common shares that would have the effect of increasing diluted earnings per share are considered to be anti-dilutive, i.e., the exercise prices of the outstanding stock options were greater than the market price of the Common Stock. Anti-dilutive Common Stock equivalents, which were excluded from the calculation of number of dilutive Common Stock equivalents, amounted to 6,856,805 shares for the three and six months ended June 30, 2016.

Recently Adopted Accounting Pronouncements

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payment award transactions, including: (1) income tax consequences; (2) classification of awards as either equity or liabilities, and (3) classification on the statement of cash flows.  For public companies, the amendments in the ASU are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods.  This pronouncement had no impact on the financial statements since any excess tax benefits were fully offset by the valuation allowance and not recognized for financial statement purposes.

Recently Issued Accounting Pronouncements Not Yet Adopted

As of June 30, 2017, there are no recently issued accounting standards not yet adopted which would have a material effect on the Company’s financial statements through 2017.

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MANAGEMENT PLANS

6 Months Ended

Jun. 30, 2017

MANAGEMENT PLANS [Abstract]

MANAGEMENT PLANS

NOTE 2 – MANAGEMENT PLANS

The accompanying condensed financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred significant losses and experienced negative cash flow from operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The Company does not believe that its existing cash resources will be sufficient to sustain operations during the next twelve months. The Company currently needs to generate revenue in order to sustain its operations. In the event that the Company cannot generate sufficient revenue to sustain its operations, the Company will need to reduce expenses or obtain financing through the sale of debt and/or equity securities. The issuance of additional equity would result in dilution to existing stockholders. If the Company is unable to obtain additional funds when they are needed or if such funds cannot be obtained on terms acceptable to the Company, the Company may be unable to execute upon the business plan or pay costs and expenses as they are incurred, which could have a material adverse effect on the business, financial condition and results of operations.

If sufficient revenues are not generated to sustain operations or additional funding cannot be obtained in the short term, the Company will need to reduce monthly expenditures to a level that will enable the Company to continue until such funds can be obtained.

Successful completion of the Company’s development program, and the attainment of profitable operations are dependent upon future events, including obtaining adequate financing to fulfill its development activities and achieving a level of sales adequate to support the Company’s cost structure. However, there can be no assurances that the Company will be able to secure additional equity investment or achieve an adequate sales level.

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INCOME TAXES

6 Months Ended

Jun. 30, 2017

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 3 – INCOME TAXES

Income tax expense was $0 for the three and six months ended June 30, 2017 and 2016.

As of January 1, 2017, the Company had no unrecognized tax benefits, and accordingly, the Company did not recognize interest or penalties during 2017 related to unrecognized tax benefits. There has been no change in unrecognized tax benefits during the three and six months ended June 30, 2017, and there was no accrual for uncertain tax positions as of June 30, 2017.  Tax years from 2013 through 2016 remain subject to examination by major tax jurisdictions.

There is no income tax benefit for the losses for the three and six months ended June 30, 2017 and 2016, since management has determined that the realization of the net tax deferred asset is not assured and has created a valuation allowance for the entire amount of such benefits.  The Company had income for the three and six months ended June 30, 2016; however, due to tax adjustments, the Company had a loss for income tax purposes.

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NOTES PAYABLE

6 Months Ended

Jun. 30, 2017

Notes Payable [Abstract]

NOTES PAYABLE

NOTE 4 – NOTES PAYABLE

Notes payable consist of the following as of June 30, 2017 and December 31, 2016: 

	June 30,		December 31,
	2017		2016
Series A notes payable; interest at 8% per annum; principal and accrued interest due at maturity in October 2011 (past due)		50,000		50,000
Notes payable; interest rate at 5% per annum; principal and accrued interest due at maturity on June 30, 2017		-		79,000
Less: Unamortized discount		-		(60,931	)
		50,000		68,069
Less: Current portion		50,000		68,069
	$	-	$	-

On January 24, 2017 and January 31, 2017, the Company issued notes payable in the amount of $20,000, in addition to warrants to purchase 1,000,000 shares of the Company’s common stock at an exercise price of $0.40 per share and a term of five years. The notes bear interest at the rate of 5% per annum and are due on June 30, 2017. In accordance with FASB ASC 470-20, “Debt with Conversion and Other Options,” the proceeds of notes payable with detachable stock purchase warrants have been allocated between the two based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at the time of issuance.  The warrants were valued at $15,895 fair value, using the Black-Scholes option pricing model to calculate the grant-date fair value of the warrants, with the following assumptions: no dividend yield, expected volatility of 197.5% to 197.7%, risk free interest rate of 1.94% to 1.90% and expected option life of 5 years.  The warrant values were treated as a discount to the value of the note payable in accordance with FASB ASC 835-30-25, Recognition and were accreted over the term of the note payable for financial statement purposes. 

On February 13, 2017, the Company issued a note payable in the amount of $100,000 in addition to a warrant to purchase 5,000,000 shares of the Company’s common stock at an exercise price of $0.40 per share and a term of five years. The notes bear no interest and are due on June 30, 2017. In accordance with FASB ASC 470-20, “Debt with Conversion and Other Options,” the proceeds of notes payable with detachable stock purchase warrants have been allocated between the two based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at the time of issuance.  The warrants were valued at $76,390 fair value, using the Black-Scholes option pricing model to calculate the grant-date fair value of the warrants, with the following assumptions: no dividend yield, expected volatility of 197.4%, risk free interest rate of 1.88% and expected option life of 5 years.  The warrant values were treated as a discount to the value of the note payable in accordance with FASB ASC 835-30-25, Recognition and were accreted over the term of the note payable for financial statement purposes. 

On March 28, 2017, the Company issued a note payable in the amount of $25,000 in addition to a warrant to purchase 1,250,000 shares of the Company’s common stock at an exercise price of $0.40 per share and a term of five years. The notes bear no interest and are due on June 30, 2017. In accordance with FASB ASC 470-20, “Debt with Conversion and Other Options,” the proceeds of notes payable with detachable stock purchase warrants have been allocated between the two based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at the time of issuance.The warrants were valued at $21,300 fair value, using the Black-Scholes option pricing model to calculate the grant-date fair value of the warrants, with the following assumptions: no dividend yield, expected volatility of 202.1%, risk free interest rate of 1.97% and expected option life of 5 years.  The warrant values were treated as a discount to the value of the note payable in accordance with FASB ASC 835-30-25, Recognition and were accreted over the term of the note payable for financial statement purposes. 

On April 13, 2017, the Company issued notes payable in the principal amount of $10,000 in exchange for a loan bearing no interest maturing June 30, 2017.

On April 26, 2017, the Company issued a secured promissory note (the “Note”) in the principal amount of $30,000 in exchange for a loan bearing no interest maturing October 31, 2017. The Note is secured by a first lien on all assets of the Company in accordance with a security agreement entered into in connection with the Note. In the event the Company completes a financing of at least $750,000 prior to maturity of the Note, the principal of the Note will automatically convert into a number of shares of common stock of the Company equivalent to an investment of $60,000 under the terms of such financing. In the event of such a conversion or a voluntary prepayment by the Company, the Company will also pay six months of interest payments on the $30,000 principal of the Note.

In May 2017, the Company issued notes payable in the principal amount of $60,000 in exchange for a loan bearing no interest maturing June 30, 2017.

In June 2017, the Company issued notes payable in the principal amount of $36,000 in exchange for a loan bearing no annual interest maturing June 30, 2017.

On June 30, 2017, all of these notes payable amounting to $360,000 and converting at $390,000 plus accrued interest of $6,101, except for the $50,000 note payable from 2009, were converted into 5,664,246 shares of the Company’s common stock and warrants to purchase 5,664,246 shares of the Company’s common stock at an exercise price of $0.15, with a term of five years (See Note 8).

As of June 30, 2017 and December 31, 2016, accrued interest on notes payable was $31,667 and $29,968. Interest expense including accretion of debt discount for the three and six months ended June 30, 2017 was $143,971 and $204,516.  Interest expense including accretion of debt discount for the three and six months ended June 30, 2016 was $1,000 and $2,000.

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EMBEDDED DERIVATIVE LIABILITY

6 Months Ended

Jun. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

EMBEDDED DERIVATIVE LIABILITY

NOTE 5 – EMBEDDED DERIVATIVE LIABILITY

The conversion feature of the 0% Series C Convertible Preferred Stock (“Series C”) is an embedded derivative, which due to anti-dilution adjustments is classified as a liability in accordance with FASB ASC Topic 815, “Derivatives and Hedging” and ASU 2014-16, and was valued in accordance with FASB ASC 470, “Debt”, as a beneficial conversion feature at a combined fair market value of $1,235,000 as of February 2016.  This was classified as an embedded derivative liability and a discount to Series C.  Because the Series C can be converted at any time, the full amount was accreted and classified as a reduction to the discount on Series C and a deemed dividend.

The conversion feature of the 0% Series D Convertible Preferred Stock (“Series D”) is an embedded derivative, which due to anti-dilution adjustments is classified as a liability in accordance with FASB ASC Topic 815, “Derivatives and Hedging” and ASU 2014-16, and was valued in accordance with FASB ASC 470, “Debt”, as a beneficial conversion feature at a combined fair market value of $181,942 as of October 24, 2016.  This was classified as an embedded derivative liability and a discount to Series D.  Because the Series D can be converted at any time, the full amount was accreted and classified as a reduction to the discount on Series D and a deemed dividend.

In addition, the embedded derivative liability must be valued every reporting period and adjusted to market with the increase or decrease being adjusted through earnings.  

On April 14, 2017, 375,000 shares of the Series C were converted into 375,000 shares of the Company’s common stock and the associated embedded derivative liability was valued at $45,000 at March 31, 2017 and $30,000 at April 14, 2017.  Therefore, $15,000 was adjusted through earnings and $30,000 was adjusted through additional paid in capital.

On June 30, 2017, the Company cancelled the outstanding warrants to purchase 3,087,500 of the Company’s common stock related to the Series C and issued 6,175,000 shares of the Company’s common stock which is equivalent to two times the previously outstanding warrants for the Series C.  In addition, on June 30, 2017, the remaining 1,537,500 shares of Series C were converted into 5,464,286 shares of the Company’s common stock (See Notes 7 and 8).  The embedded derivative liability was valued as of June 30, 2017 at $107,625 and the difference between the remaining value of $184,990 and $107,625, or $77,365 was adjusted through earnings as of June 30, 2017.  The balance of $107,625 was adjusted through additional paid in capital. The net effect on the net loss attributable to common stockholders was an increase of $137,625.

On June 30, 2017, the Company cancelled the outstanding warrants to purchase 667,000 shares of the Company’s common stock related to the Series D and issued 1,334,000 shares of the Company’s common stock, which is equivalent to two times the previously outstanding warrants for the Series D. In addition, on June 30, 2017, the 166,750 shares of Series D and the warrants were converted into 467,429 shares of the Company’s common stock (See Notes 7 and 8).  The embedded derivative liability was valued as of June 30, 2017 at $11,673 and the difference between the remaining value of $20,010 and $11,673, or $8,337, was adjusted through earnings as of June 30, 2017.  The balance of $11,673 was adjusted through additional paid in capital. The net effect on the net loss attributable to common stockholders was an increase of $11,673.

As of June 30, 2017 and December 31, 2016, the fair value of the embedded derivative liability was $0 and $228,718.  For the three and six months ended June 30, 2017, the Company realized income of $100,702 and $79,420 relative to the embedded derivative liability.  For the three and six months ended June 30, 2016, the Company realized income of $1,202,000 and $739,000 relative to the embedded derivative liability.

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WARRANT LIABILITY

6 Months Ended

Jun. 30, 2017

Warrants and Rights Note Disclosure [Abstract]

WARRANT LIABILITY

NOTE 6 – WARRANT LIABILITY

On December 31, 2012, the Company entered into an Investment Agreement, a Technology and Service Agreement, a Patent and Technology License Agreement and an Asset Purchase Agreement (collectively, the “VFM Agreements”) with VerifyMe, Inc. – Texas (“VFM”) on the same date entered into a Technology and Service Agreement with Zaah Technologies, Inc. (collectively with the VFM Agreements, the “Agreements”). The Agreements contemplate warrant issuances by the Company for the purchase of common stock.

Warrants exercisable for 627,451 shares of common stock associated with these Agreements are subject to anti-dilution adjustments outlined in the Agreements. In accordance with FASB ASC 815, the warrants were classified as a liability in the total amount of $2.4 million at December 31, 2012. In addition, the warrants must be valued every reporting period and adjusted to market with the increase or decrease being adjusted through earnings. As of June 30, 2017 and December 31, 2016, the fair value of the warrant liability was $34,017 and $22,063.

The 392,157 warrants associated with the Company’s Series A Convertible Preferred Stock were also classified as a liability since they were subject to anti-dilutive adjustments outlined in the warrant agreement and valued at a fair market value of $2,995,791 at January 31, 2013. In addition, the warrants must be valued every reporting period and adjusted to market with the increase or decrease being adjusted through earnings. As of June 30, 2017 and December 31, 2016 the fair value of the warrants was $21,937 and $18,107.

On January 1, 2014, the Company issued warrants to purchase 74,697 shares of Common Stock as consideration for technology received from VFM under the VFM Patent and Technology License Agreement dated December 31, 2012. The warrants were exercisable at $0.10 per share. The warrants are subject to anti-dilution adjustments outlined in the VFM Patent and Technology Agreement. In accordance with FASB ASC 815, the warrants were classified as a liability with an initial fair value of $444,000, which was immediately expensed as research and development costs. In addition, the warrants must be valued every reporting period and adjusted to market with the increase or decrease being adjusted through earnings. As of June 30, 2017 and December 31, 2016, the fair value of the warrant liability was $4,707 and $4,885.

Warrants to purchase 3,529 shares of Common Stock associated with the notes payable incurred on August 5, 2014, were revalued and at June 30, 2017 and December 31, 2016, the fair value of those warrants was $226 and $262.

In conjunction with the issuance of Series C, the Company issued warrants to purchase 3,087,500 shares of the Company’s Common Stock.  The warrants are subject to anti-dilution adjustments outlined in the warrant agreement. In accordance with FASB ASC 815 and ASU 2014-16, the warrants were classified as a liability with an initial fair value of $1,767,576, which was immediately expensed. In addition, the warrants must be valued every reporting period and adjusted to market with the increase or decrease being adjusted through earnings. As of June 30, 2017 and December 31, 2016, the fair value of the warrant liability was $189,383 and $285,290.  On June 30, 2017, the Company cancelled the outstanding warrants to purchase 3,087,500 of the Company’s common stock related to the Series C and issued 6,175,000 shares of the Company’s common stock which is equivalent to two times the previously outstanding warrants for the Series C.  The common stock was valued at $432,250 based on the closing price of the Company’s common stock of $0.07 on June 30, 2017 and was recorded as a deemed dividend distribution.  The net effect in additional paid in capital relating to this transactions was $0, as both sides of the entry affected additional paid in capital.  In addition, the warrant liability write off of $189,008 was recorded as a negative deemed dividend distribution.  The net effect of the deemed dividend distribution on the net loss attributable to common stockholders was a decrease of $243,242.

In conjunction with the issuance of Series D, the Company issued warrants to purchase 667,000 shares of the Company’s Common Stock.  The warrants are subject to anti-dilution adjustments outlined in the warrant agreement. In accordance with FASB ASC 815 and ASU 2014-16, the warrants were classified as a liability with an initial fair value of $181,942, which was immediately expensed. In addition, the warrants must be valued every reporting period and adjusted to market with the increase or decrease being adjusted through earnings. As of June 30, 2017 and December 31, 2016, the fair value of the warrant liability was $43,105 and $64,137.  On June 30, 2017, the Company cancelled the outstanding warrants to purchase 667,000 shares of the Company’s common stock related to the Series D and issued 1,334,000 shares of the Company’s common stock, which is equivalent to two times the previously outstanding warrants for the Series C.  The common stock was valued at $93,380 based on the closing price of the Company’s common stock of $0.07 on June 30, 2017 and was recorded as a deemed dividend distribution.  The net effect in additional paid in capital relating to this transactions was $0, as both sides of the entry affected additional paid in capital.  In addition, the warrant liability write off of $43,105 was recorded as a negative deemed dividend distribution.  The net effect of the deemed dividend distribution on the net loss attributable to common stockholders was a decrease of $50,275.

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CONVERTIBLE PREFERRED STOCK

6 Months Ended

Jun. 30, 2017

CONVERTIBLE PREFERRED STOCK [Abstract]

CONVERTIBLE PREFERRED STOCK

NOTE 7 – CONVERTIBLE PREFERRED STOCK

Subscription Agreement

The Company entered into a Subscription Agreement with VerifyMe, Inc., a Texas corporation (“VFM”) on January 31, 2013 (the “Subscription Agreement”). Under the terms of the Subscription Agreement, VFM subscribed to purchase 392,157 shares of Series A Convertible Preferred Stock post 85-for-1 reverse stock split and a warrant to purchase 392,157 shares of Common Stock post 85-for-1 reverse stock split at an exercise price of $10.20 per share, for $1 million.

Series A Convertible Preferred Stock

On January 6, 2017, 13,000 shares of Series A Convertible Preferred Stock were converted into 260,000 shares of the Company’s Common Stock.

On March 29, 2017, 20,000 shares of Series A Convertible Preferred Stock were converted into 400,000 shares of the Company’s Common Stock.

On May 9, 2017, 20,000 shares of Series A Convertible Preferred Stock were converted into 400,000 shares of the Company’s Common Stock.

Series B Convertible Preferred Stock

There were no conversions of Series B Convertible Preferred Stock during the six months ended June 30, 2017.

Series C Convertible Preferred Stock

On February 9, 2016, the Company issued 2,587,500 shares of Series C, par value $0.001 per share, at a purchase price of $0.40 per share with gross proceeds to the Company of $1,035,000. In connection with the sale of the Series C, the Company issued to the purchasers warrants to purchase in the aggregate 2,587,500 shares of the Company’s common stock at an exercise price of $0.40 per share. Further, as a part of the same offering, on February 29, 2016, the Company issued 500,000 shares of Series C, at a purchase price of $0.40 per share with gross proceeds to the Company of $200,000. In connection with the sale of the Series C, the Company issued to the purchasers warrants to purchase in the aggregate 500,000 shares of the Company’s common stock at an exercise price of $0.40 per share. Each share of Series C is convertible into one share of common stock. The Series C provides for certain adjustments that may be made to the exercise price and the number of shares issuable upon exercise due to future corporate events or otherwise, including, for a prescribed period of time, upon the issuance of securities at a price that is less than the exercise price of the Series C.  In addition, the Company incurred stock issuance costs of $17,500 related to the issuance of Series C.

On April 14, 2017, 375,000 shares of the Company’s Series C were converted into 375,000 shares of the Company’s common stock.

On June 30, 2017, the Company converted the remaining 1,537,500 Series C convertible preferred shares into 5,464,286 shares of the Company’s common stock.  In addition, the 3,087,500 outstanding warrants were converted into the Company’s common stock equivalent to two times the outstanding warrants or 6,175,000 shares.  The Company issued a total of 11,639,286 shares of the Company’s common stock relative to this transaction (See Note 6).

Series D Convertible Preferred Stock

On June 30, 2017, the Company converted the remaining 166,750 Series D convertible preferred shares into 476,429 shares of the Company’s common stock.  In addition, the 667,000 outstanding warrants were converted into the Company’s common stock equivalent to two times the outstanding warrants or 1,334,000 shares.  The Company issued a total of 1,810,429 shares of the Company’s common stock relative to this transaction (See Note 6).

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STOCKHOLDERS' EQUITY

6 Months Ended

Jun. 30, 2017

Equity [Abstract]

Stockholders' Equity

NOTE 8 – STOCKHOLDERS’ EQUITY

On January 6, 2017, 13,000 shares of Series A Convertible Preferred Stock were converted into 260,000 shares of the Company’s Common Stock.

On March 29, 2017, 20,000 shares of Series A Convertible Preferred Stock were converted into 400,000 shares of the Company’s Common Stock.

On May 9, 2017, 20,000 shares of Series A Convertible Preferred Stock were converted into 400,000 shares of the Company’s Common Stock.

On April 14, 2017, 375,000 shares of the Company’s Series C were converted into 375,000 shares of the Company’s common stock.

On June 30, 2017, notes payable in the amount of $360,000 and converting at $390,000, were converted into 5,664,246 shares of the Company’s common stock and warrants to purchase 5,664,246 shares of the Company’s common stock (See Note 4).

On June 30, 2017, shareholders of Series C converted 1,537,500 shares of the Company’s common stock and warrants to purchase 3,087,500 shares of the Company’s common stock into 12,014,286 shares of common stock (See Notes 5, 6 and 7).

On June 30, 2017, shareholders of Series D converted 166,750 shares of the Company’s common stock and warrants to purchase 667,000 shares of the Company’s common stock into 1,810,429 shares of common stock (See Notes 5, 6 and 7).

On June 30, 2017, the Company sold 7,596,875 shares of the Company’s common stock and warrants to purchase 7,596,875 of the Company’s common stock for $531,250.  The Company recognized stock issuance costs of $15,128, which were recorded as a reduction to additional paid in capital.

On June 30, 2017, the Company converted $43,750 of Director’s fees payable into 625,625 shares of the Company’s common stock and warrants to purchase 625,625 shares of the Company’s common stock.

On June 30, 2017, the Company converted $26,250 of accounts payable to a consultant into 375,375 shares of the Company’s common stock and warrants to purchase 375,375 shares of the Company’s common stock at an exercise price of $0.15 and a term of five years.  In conjunction with this transaction, the consultant forfeited 450,000 options to purchase shares of the Company’s common stock and has agreed to convert $31,500 of consulting fees into 450,450 shares of the Company’s common stock and warrants to purchase 450,450 shares of the Company’s common stock at an exercise price of $0.15 in equal increments through December 31, 2017.

On June 30, 2017, the Company converted $10,750 of accounts payable to a consultant into 153,725 shares of the Company’s common stock and a warrant to purchase 153,725 shares of the Company’s common stock.

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FAIR VALUE OF FINANCIAL INSTRUMENTS

6 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

FAIR VALUE OF FINANCIAL INSTRUMENTS

NOTE 9 – FAIR VALUE OF FINANCIAL INSTRUMENTS

Derivative Liabilities

For purposes of determining whether certain instruments are derivatives for accounting treatment, the Company follows the accounting standard that provides guidance for determining whether an equity-linked financial instrument, or embedded feature, is indexed to an entity’s own stock. The standard applies to any freestanding financial instruments or embedded features that have the characteristics of a derivative, and to any freestanding financial instruments that are potentially settled in an entity’s own common stock.

Liabilities measured at fair value on a recurring basis are summarized as follows:

	June 30, 2017									December 31, 2016
	Level 1		Level 2			Level 3		Total		Level 1		Level 2		Level 3		Total
Embedded derivative liability related to beneficial conversion option	$	-	$	-		$	-	$	-	$	-	$	-	$	228,718	$	228,718
Derivative liability related to fair value of warrants		-		-			60,886		60,886		-		-		394,744		394,744
Total	$	-	$	-		$	60,886	$	60,886	$	-	$	-	$	623,462	$	623,462
			Total
Balance at December 31, 2016			$	623,462
Reduction in value resulting from conversion of Preferred Series C and D shares				(381,411	)
Change in fair value of derivative liablities				(181,164	)
Balance at June 30, 2017			$	60,887

The Company has no assets that are measured at fair value on a recurring basis. There were no assets or liabilities measured at fair value on a non-recurring basis during the three months ended June 30, 2017.

As of June 30, 2017, some of the Company’s outstanding warrants were treated as derivative liabilities and changes in the fair value were recognized in earnings. These warrants did not trade in an active securities market, and as such, the Company estimated the fair value of these warrants using the Black-Scholes option pricing model and the following assumptions:

	June 30, 2017	December 31, 2015
Annual Dividend Yield	0.0%	0.0%
Expected Life (Years)	1.0 - 2.1	2.0 - 3.0
Risk-Free Interest Rate	1.2% - 1.4%	1.1% - 1.3%
Expected Volatility	231.6% - 244.7%	178.5% - 179.3%

Expected volatility was based primarily on historical volatility. Historical volatility was computed using daily pricing observations for recent periods. The Company believes this method produced an estimate that was representative of the Company’s expectations of future volatility over the expected term of these warrants. The Company had no reason to believe future volatility over the expected remaining life of these warrants was likely to differ materially from historical volatility. The expected life was based on the remaining contractual term of the warrants. The risk-free rate was based on the U.S. Treasury rate that corresponded to the expected term of the warrants.

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STOCK OPTIONS

6 Months Ended

Jun. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK OPTIONS

NOTE 10 – STOCK OPTIONS

During 2013, the Board adopted a new omnibus incentive compensation plan that was ratified by the shareholders at the 2013 annual meeting, (the “2013 Plan”) which serves as the successor incentive compensation plan to the 2003 Plan. Under the 2013 Plan, the Company is authorized to grant awards of stock options, restricted stock, restricted stock units and other stock-based awards of up to an aggregate of 20,000,000 shares of Common Stock.  The 2013 Plan is intended to permit stock options granted to employees under the 2013 Plan to qualify as incentive stock options.  All options granted under the 2013 Plan, which are not intended to qualify as Incentive Stock Options, are deemed to be Non-Statutory Stock Options.  As of June 30, 2017, under the 2013 Plan grants of restricted stock and options to purchase 19,280,147 shares of Common Stock have been issued and are unvested or unexercised, and 719,853 shares of Common Stock remain available for grants under the 2013 Plan.  

The 2013 Plan is administered by a committee of the Board (“Compensation Committee”) which determines the persons to whom awards will be granted, the number of awards to be granted and the specific terms of each grant, including the vesting thereof, subject to the provisions of the plan.

In connection with Incentive Stock Options, the exercise price of each option may not be less than 100% of the fair market value of the Common Stock on the date of the grant (or 110% of the fair market value in the case of a grantee holding more than 10% of the outstanding stock of the Company). The aggregate fair market value (determined at the time of the grant) of stock for which an employee may exercise Incentive Stock Options under all plans of the company shall not exceed $1,000,000 per calendar year. If any employee shall have the right to exercise any options in excess of $100,000 during any calendar year, the options in excess of $100,000 shall be deemed to be Non-Statutory Stock Options, including prices, duration, transferability and limitations on exercise.

The Company issued Non-Statutory Stock Options pursuant to contractual agreements with non-employees. Options granted under the agreements are expensed when the related service or product is provided.

Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions. The Company uses the Black-Scholes option pricing model to value its stock option awards. The assumptions used in calculating the fair value represent management’s best estimates and involve inherent uncertainties and judgments.

On January 31, 2017, the Company issued options to purchase 225,000 shares of Common Stock at an exercise price of $0.09 per share, with a term of five years, to a consultant, which vest over three months. The fair value of options issued was $19,727. These options were valued using the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 197.7%, risk-free interest rate of 1.90% and expected option life of five years. The options were revalued on February 28, 2017 and March 31, 2017 and it was determined that there was an increase in the value of the options of $2,307, which will be expensed over the remaining term of the options.  These options were cancelled on June 30, 2017.

On February 6, 2017, the Company issued options to purchase 250,000 shares of Common Stock at an exercise price of $0.068 per share and options to purchase 250,000 shares of Common Stock at an exercise price of $0.25, with a term of five years, to a consultant, which vest immediately. The fair value of options issued was $32,508. These options were valued using the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 198.0%, risk-free interest rate of 1.86% and expected option life of five years. The options were expensed immediately.

On April 30, 2017, the Company issued options to purchase 225,000 shares of Common Stock at an exercise price of $0.064 per share, with a term of five years, to a consultant, which vest over three months. The fair value of options issued was $14,011. These options were valued using the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 196.2%, risk-free interest rate of 1.84% and expected option life of five years. The options were revalued during the three months ended June 30, 2017 and the Company expensed $3,986 relative to these options during the three and six months ended June 30, 2017.  All of the options were forfeited as part of renegotiating the agreement, whereby the Company was to pay the consultant $5,250 per month for 11 months in return for forfeiting the options.  Additionally, the consultant has agreed to forgive the associated accounts payable and reinvest the proceeds he would have received in return for 825,825 shares of the Company’s common stock and warrants to purchase 825,825 shares of the Company’s common stock.  As of June 30, 2017, the consultant had earned $26,250 of the total $57,750 consulting fees and converted the earned portion into 375,375 shares of the Company’s common stock and warrants to purchase 375,375 shares of the Company’s common stock.  The remaining $31,500 of consulting fees will be converted into common stock and warrants when the consulting fees are earned (See Note 8).

On June 12, 2017, the Company issued options to purchase 5 million shares of Common Stock at an exercise price of $0.07 per share, with a term of five years, to a consultant, 3 million which vest immediately and the remainder over two years. The fair value of options issued was $242,112. These options were valued using the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 196.7%, risk-free interest rate of 1.71% and expected option life of five years. The unvested options were revalued as of June 30, 2017, which resulted in an increase in value of $39,521 and as the consulting agreement had no stated term, the $281,633 fair value was expensed immediately.

On June 29, 2017, the Company issued options to purchase 10 million shares of Common Stock at an exercise price of $0.07 per share, with a term of five years, to the Chairman of the Board of Directors which vest immediately. The fair value of options issued was $583,340. These options were valued using the Black-Scholes option pricing model to calculate the grant-date fair value of the options, with the following assumptions: no dividend yield, expected volatility of 197.9%, risk-free interest rate of 1.85% and expected option life of five years. The options are being expensed over the term of the consulting agreement which is three years.

On June 30, 2017, the Company converted $10,750 of accounts payable to a consultant into 153,725 shares of the Company’s common stock and a warrant to purchase 153,725 shares of the Company’s common stock.

For the three and six months ended June 30, 2017, the Company expensed $284,373 and $335,970 with respect to the options.  For the three and six months ended June 30, 2016, the Company expensed $427,223 and $763,050 with respect to the options.

The following table summarizes the activities for our stock options for the six months ended June 30, 2017:

	Options Outstanding
							Weighted -
							Average
							Remaining		Aggregate
				Weighted-			Contractual		Intrinsic
	Number of			Average			Term		Value
	Shares			Exercise Price			(in years)		(in 000's) (1)
Balance as of December 31, 2016		3,282,647		$	0.52			7.9
Granted		15,950,000			0.07
Forfeited/cancelled		(500,000	)		(0.13	)
Balance June 30, 2017		18,732,647		$	0.15			5.4	$	1
Exercisable at June 30, 2017		16,732,647		$	0.16			5.5	$	1
Exercisable at June 30, 2017 and expected to
vest thereafter		18,732,647		$	0.16			5.5	$	1

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the closing stock price of $0.07 for our common stock on June 30, 2017.

The following table summarizes the activities for the Company’s unvested stock options for the six months ended June 30, 2017:

	Unvested Options
				Weighted -
				Average
				Grant
	Number of			Date Fair
	Shares			Value (1)
Balance December 31, 2016		-		$	-
Granted		15,950,000			0.06
Vested		(13,500,000	)		(0.06	)
Cancelled/forfeited/expired		(450,000	)		(0.07	)
Balance June 30, 2017		2,000,000		$	0.07

As of June 30, 2017 there was $583,340 of unrecognized compensation cost related to outstanding stock options. This amount is expected to be recognized over a weighted-average period of 3 years. To the extent the actual forfeiture rate is different from what the Company has estimated, stock-based compensation related to these awards will be different from the Company’s expectations. The difference between the stock options exercisable at June 30, 2017 and the stock options exercisable and expected to vest relates to management’s estimate of options expected to vest in the future.

The following table summarizes the activities for our warrants for the six months ended June 30, 2017:

	Warrants Outstanding
						Weighted -
						Average
						Remaining		Aggregate
				Weighted-		Contractual		Intrinsic
	Number of			Average		Term		Value
	Shares			Exercise Price		in years)		(in 000's) (1)
Balance, December 31, 2016		9,216,452		$	1.82		3.7	$	10
Granted		21,665,846			0.12
Cancelled		(3,754,500	)		0.40
Balance, June 30, 2017		27,197,798		$	0.11		4.6	$	6
Exercisable at June 30, 2017		27,127,798		$	0.11		4.6	$	6

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the closing stock price of $0.07 for our common stock on June 30, 2017.

All warrants were vested on the date of grant.

For the three and six months ended June 30, 2017, the Company expensed $204,516 relative to the warrants issued as warrant discounts.  For the three and six months ended June 30, 2016, the Company expensed $49,885 relative to the warrants.

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OPERATING LEASES

6 Months Ended

Jun. 30, 2017

Leases [Abstract]

OPERATING LEASES

NOTE 11 – OPERATING LEASES

For the three and six months ended June 30, 2017, total rent expense under leases amounted to $3,000 and $6,000.  For the three and six months ended June 30, 2016, total rent expense under leases amounted to $1,500 and $11,835.  As of June 30, 2017, the Company was not obligated under any non-cancelable operating lease arrangements.

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RELATED PARTIES

6 Months Ended

Jun. 30, 2017

Related Parties

RELATED PARTIES

NOTE 12 – RELATED PARTIES

As of June 30, 2017, the Company owed the CEO $2,467, and the Company owed the CFO $20,419 for services rendered.  All of these amounts are included in accounts payable.

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SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2017

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 13 – SUBSEQUENT EVENTS

In July 2017, the Company sold 2,431,000 shares of the Company’s common stock and issued a warrant to purchase 2,431,000 shares of the Company’s common stock for $170,000.

In August 2017, the Company sold 715,000 shares of the Company’s common stock and issued a warrant to purchase 715,000 shares of the Company’s common stock for $50,000.

Patrick White has been appointed the Chief Executive Officer of the Company effective August 15, 2017. Mr. Gardner will remain as Chairman of the Board.

On August 9, 2017 the Company granted 300,000 shares of restricted common stock to each director except its chairman and new Chief Executive Officer. The shares vest in 75,000 share increments subject to continued board service on applicable vesting dates.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Nature of the Business

Nature of the Business

The Company was incorporated in the State of Nevada on November 10, 1999. The Company is based in Downingtown, Pennsylvania and its common stock, par value $0.001 per share (the “Common Stock”), is traded on the over-the-counter market and quoted on the OTCQB under the ticker symbol “VRME.”

The Company is a technology pioneer in the anti-counterfeiting industry. This broad market encompasses counterfeiting of physical and material goods and products, as well as counterfeiting of identity in digital transactions. The Company delivers security solutions for identification and authentication of people, products and packaging in a variety of applications in the security field for both digital and physical transactions. The products can be used to manage and issue secure credentials, including national IDs, passports, driver licenses and access control credentials. In addition, the Company has begun developing comprehensive authentication security software to secure physical and logical access to facilities, computer networks, internet sites and mobile applications. When the Company has sufficient working capital, management intends to devote resources resolving certain functionality issues which presently affect this technology.

The Company’s activities are subject to significant risks and uncertainties, including the need to secure additional funding to operationalize the Company’s current technology.

Basis of Presentation

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions for Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The accompanying unaudited financial statements should be read in conjunction with the financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016 as filed with the SEC. Operating results for the three and six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

Basic and Diluted Net Income per Share of Common Stock

Basic and Diluted Net Income per Share of Common Stock

The Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 260, “Earnings Per Share,” when reporting earnings per share resulting in the presentation of basic and diluted earnings per share. Basic net income per common share is based on the weighted average number of shares outstanding during the periods presented. Diluted net income per common share is computed using the weighted average number of common shares plus dilutive common share equivalents outstanding during the period. Potential common shares that would have the effect of increasing diluted earnings per share are considered to be anti-dilutive, i.e., the exercise prices of the outstanding stock options were greater than the market price of the Common Stock. Anti-dilutive Common Stock equivalents, which were excluded from the calculation of number of dilutive Common Stock equivalents, amounted to 6,856,805 shares for the three and six months ended June 30, 2016.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payment award transactions, including: (1) income tax consequences; (2) classification of awards as either equity or liabilities, and (3) classification on the statement of cash flows.  For public companies, the amendments in the ASU are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods.  This pronouncement had no impact on the financial statements since any excess tax benefits were fully offset by the valuation allowance and not recognized for financial statement purposes.

Recently Issued Accounting Pronouncements Not Yet Adopted

Recently Issued Accounting Pronouncements Not Yet Adopted

As of June 30, 2017, there are no recently issued accounting standards not yet adopted which would have a material effect on the Company’s financial statements through 2017.

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NOTES PAYABLE (Tables)

6 Months Ended

Jun. 30, 2017

Notes Payable [Abstract]

NOTES PAYABLE

Notes payable consist of the following as of June 30, 2017 and December 31, 2016: 

	June 30,		December 31,
	2017		2016
Series A notes payable; interest at 8% per annum; principal and accrued interest due at maturity in October 2011 (past due)		50,000		50,000
Notes payable; interest rate at 5% per annum; principal and accrued interest due at maturity on June 30, 2017		-		79,000
Less: Unamortized discount		-		(60,931	)
		50,000		68,069
Less: Current portion		50,000		68,069
	$	-	$	-

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2017

Fair Value Disclosures [Abstract]

Schedule of Liabilities Measured at Fair Value on a Recurring Basis

Liabilities measured at fair value on a recurring basis are summarized as follows:

	June 30, 2017								December 31, 2016
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Embedded derivative liability related to beneficial conversion option	$	-	$	-	$	-	$	-	$	-	$	-	$	228,718	$	228,718
Derivative liability related to fair value of warrants		-		-		60,886		60,886		-		-		394,744		394,744
Total	$	-	$	-	$	60,886	$	60,886	$	-	$	-	$	623,462	$	623,462

Schedule of market based inputs used in valuation of embedded derivative liability

	Total
Balance at December 31, 2016	$	623,462
Reduction in value resulting from conversion of Preferred Series C and D shares		(381,411	)
Change in fair value of derivative liablities		(181,164	)
Balance at June 30, 2017	$	60,887

Schedule of Common Stock Purchase Warrants Valuation Assumptions

These warrants did not trade in an active securities market, and as such, the Company estimated the fair value of these warrants using the Black-Scholes option pricing model and the following assumptions:

	June 30, 2017	December 31, 2015
Annual Dividend Yield	0.0%	0.0%
Expected Life (Years)	1.0 - 2.1	2.0 - 3.0
Risk-Free Interest Rate	1.2% - 1.4%	1.1% - 1.3%
Expected Volatility	231.6% - 244.7%	178.5% - 179.3%

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STOCK OPTIONS (Tables)

6 Months Ended

Jun. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Summary of the activities for stock options

The following table summarizes the activities for our stock options for the six months ended June 30, 2017:

	Options Outstanding
							Weighted -
							Average
							Remaining		Aggregate
				Weighted-			Contractual		Intrinsic
	Number of			Average			Term		Value
	Shares			Exercise Price			(in years)		(in 000's) (1)
Balance as of December 31, 2016		3,282,647		$	0.52			7.9
Granted		15,950,000			0.07
Forfeited/cancelled		(500,000	)		(0.13	)
Balance June 30, 2017		18,732,647		$	0.15			5.4	$	1
Exercisable at June 30, 2017		16,732,647		$	0.16			5.5	$	1
Exercisable at June 30, 2017 and expected to
vest thereafter		18,732,647		$	0.16			5.5	$	1

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the closing stock price of $0.07 for our common stock on June 30, 2017.

Summary of the activities for unvested stock options

The following table summarizes the activities for the Company’s unvested stock options for the six months ended June 30, 2017:

	Unvested Options
				Weighted -
				Average
				Grant
	Number of			Date Fair
	Shares			Value (1)
Balance December 31, 2016		-		$	-
Granted		15,950,000			0.06
Vested		(13,500,000	)		(0.06	)
Cancelled/forfeited/expired		(450,000	)		(0.07	)
Balance June 30, 2017		2,000,000		$	0.07

Summary of the activities for warrants

The following table summarizes the activities for our warrants for the six months ended June 30, 2017:

	Warrants Outstanding
						Weighted -
						Average
						Remaining		Aggregate
				Weighted-		Contractual		Intrinsic
	Number of			Average		Term		Value
	Shares			Exercise Price		in years)		(in 000's) (1)
Balance, December 31, 2016		9,216,452		$	1.82		3.7	$	10
Granted		21,665,846			0.12
Cancelled		(3,754,500	)		0.40
Balance, June 30, 2017		27,127,798		$	0.11		4.6	$	6
Exercisable at June 30, 2017		27,127,798		$	0.11		4.6	$	6

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the closing stock price of $0.07 for our common stock on June 30, 2017.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - $ / shares	Jun. 30, 2017	Dec. 31, 2016
Accounting Policies [Abstract]
Common stock, par value	$ 0.001	$ 0.001

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INCOME TAXES (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Income Tax Disclosure [Abstract]
Income Tax Expense (Benefit)	$ 0	$ 0	$ 0	$ 0
Unrecognized tax benefits					$ 0
Interest or penalties related to unrecognized tax benefits			0
Change in unrecognized tax benefits	0		0
Accrual for uncertain tax positions	$ 0		$ 0

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NOTES PAYABLE (Narrative) (Details) - USD ($)		1 Months Ended					3 Months Ended		6 Months Ended
	Apr. 13, 2017	Jun. 30, 2017	May 31, 2017	Apr. 26, 2017	Feb. 13, 2017	Jan. 31, 2017	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Debt Instrument [Line Items]
Proceeds from issuance of notes payable									$ 281,000
Interest expense							$ 145,772	$ 1,000	212,316	$ 2,000
Note payable balance		$ 50,000					50,000		50,000		$ 68,069
Accrued interest		$ 31,667					$ 31,667		$ 31,667		$ 29,668
Notes Payable [Member]
Debt Instrument [Line Items]
Expected warrant term									5 years
Proceeds from issuance of notes payable									$ 360,000
Debt conversion, converted amount									$ 390,000
Number of common stock called by warrants (in shares)		5,664,246					5,664,246		5,664,246
Exercise price (in dollars per share)		$ 0.15					$ 0.15		$ 0.15
Accrued interest		$ 6,101					$ 6,101		$ 6,101
Notes Payable [Member] | Loan [Member]
Debt Instrument [Line Items]
Proceeds from issuance of notes payable	$ 10,000	$ 36,000	$ 60,000
Promissory Note [Member] | Loan [Member]
Debt Instrument [Line Items]
Proceeds from issuance of notes payable				$ 30,000
Financing [Member]
Debt Instrument [Line Items]
Proceeds from issuance of notes payable				750,000
Investment in common stock				60,000
Interest expense				$ 30,000
Warrant [Member] | Notes Payable [Member]
Debt Instrument [Line Items]
Expected dividend yield					0.00%	0.00%			0.00%
Expected volatility					197.40%				202.10%
Risk-free interest rate					1.88%				1.97%
Expected warrant term					5 years	5 years			5 years
Proceeds from issuance of notes payable					$ 100,000	$ 20,000			$ 25,000
Number of common stock called by warrants (in shares)		1,250,000			5,000,000	1,000,000	1,250,000		1,250,000
Exercise price (in dollars per share)		$ 0.40			$ 0.40	$ 0.40	$ 0.40		$ 0.40
Fair value of warrant liability		$ 21,300			$ 76,390	$ 15,895	$ 21,300		$ 21,300
Interest rate, notes payable		5.00%					5.00%		5.00%
Warrant [Member] | Notes Payable [Member] | Minimum [Member]
Debt Instrument [Line Items]
Expected volatility						197.50%
Risk-free interest rate						1.94%
Warrant [Member] | Notes Payable [Member] | Maximum [Member]
Debt Instrument [Line Items]
Expected volatility						197.70%
Risk-free interest rate						1.90%

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NOTES PAYABLE (Schedule of Notes Payable) (Details) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Less: Unamortized discount		$ (60,931)
Less: Current portion	50,000	68,069
Long-term portion
Adjustment [Member]
Debt Instrument [Line Items]
Less: Current portion	68,069	68,069
Series A Notes Payable Due At Maturity In October 2011 (Past Due) [Member]
Debt Instrument [Line Items]
Notes payable	50,000	50,000
Notes Payable Due June Thirty Thousand Seventeen [Member]
Debt Instrument [Line Items]
Notes payable		79,000
Notes Payable One Due Junel Thirty Thousand Seventeen [Member]
Debt Instrument [Line Items]
Notes payable

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NOTES PAYABLE (Schedule of Notes Payable) (Details)	Jun. 30, 2017	Dec. 31, 2016
Series A Notes Payable Due At Maturity In October 2011 (Past Due) [Member]
Debt Instrument [Line Items]
Interest rate	8.00%	8.00%
Notes Payable Due At Maturity In June 30, 2017 [Member]
Debt Instrument [Line Items]
Interest rate	5.00%	5.00%

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EMBEDDED DERIVATIVE LIABILITY (Details) - USD ($)		1 Months Ended		3 Months Ended		6 Months Ended
	Apr. 14, 2017	Oct. 24, 2016	Feb. 29, 2016	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Mar. 31, 2017	Dec. 31, 2016
Beneficial conversion feature at a combined fair market value		$ 181,942	$ 1,235,000
Adjustment through earnings	$ 15,000
Adjustment through additional paid in captial	30,000
Deemed dividend distribution						$ 525,630
Fair value of the embedded derivative liability	$ 30,000							$ 45,000	$ 228,718
Change in fair value of embedded derivative liability				$ 100,702	$ 1,202,000	$ 79,420	$ 739,000
Warrant[Member]
Conversion of Stock, Shares Converted						467,429
Series C Convertible Preferred Stock [Member]
Dividend rate percentage						0.00%
Conversion of Stock, Shares Converted	375,000					5,464,286
Adjustment through earnings						$ 77,365
Adjustment through additional paid in captial						$ 107,625
Outstanding warrant cancelled				3,087,500		3,087,500
Sale of common stock, shares						6,175,000
Remaining shares converted				1,537,500		1,537,500
Fair value of the embedded derivative liability				$ 107,625		$ 107,625
Change in fair value of embedded derivative liability						(184,990)
Increase in net loss attributable to common stockholders						$ 137,625
Series D Convertible Preferred Stock [Member]
Dividend rate percentage						0.00%
Conversion of Stock, Shares Converted						476,429
Adjustment through earnings						$ 8,337
Adjustment through additional paid in captial						$ 11,673
Outstanding warrant cancelled				667,000		667,000
Sale of common stock, shares						1,334,000
Remaining shares converted				166,750		166,750
Fair value of the embedded derivative liability				$ 11,673		$ 11,673
Change in fair value of embedded derivative liability						(20,010)
Increase in net loss attributable to common stockholders						$ 11,673

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WARRANT LIABILITY (Details) - USD ($)	1 Months Ended	6 Months Ended
	Jan. 31, 2014	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016	Feb. 29, 2016	Feb. 09, 2016	Aug. 05, 2014	Jan. 02, 2014	Jan. 31, 2013	Dec. 31, 2012
Major Agreements [Line Items]
Common stock value		$ 37,631		$ 8,331
Deemed dividend distribution		525,630
Verify Me [Member] | Agreements [Member] | Research and Development Expense [Member]
Major Agreements [Line Items]
Initial fair value of warrant expensed	$ 444,000
Verify Me [Member] | Warrants Issued on January 1, 2014 [Member]
Major Agreements [Line Items]
Fair value of warrant liability		$ 4,707		4,885
Number of warrants issued								74,697
Exercise price								$ 0.10
Zaah Technologies [Member] | Agreements [Member]
Major Agreements [Line Items]
Warrant liability										$ 2,400,000
Number of common stock shares purchased under warrants (in shares)		627,451
Fair value of warrant liability		$ 34,017		22,063
Notes Payable [Member]
Major Agreements [Line Items]
Number of common stock shares purchased under warrants (in shares)		5,664,246
Exercise price		$ 0.15
Notes Payable [Member] | Debt Instrument Date Five August 2014 [Member]
Major Agreements [Line Items]
Number of common stock shares purchased under warrants (in shares)							3,529
Fair value of warrant liability		$ 226		262
Series A Convertible Preferred Stock [Member]
Major Agreements [Line Items]
Number of common stock shares purchased under warrants (in shares)									392,157
Fair value of warrant liability		$ 21,937		18,107					$ 2,995,791
Series C Convertible Preferred Stock [Member]
Major Agreements [Line Items]
Number of common stock shares purchased under warrants (in shares)		3,087,500			500,000	2,587,500
Fair value of warrant liability		$ 189,008		285,290
Initial fair value of warrant expensed		$ 1,767,576
Outstanding warrant cancelled		3,087,500
Sale of common stock, shares		6,175,000
Common stock value		$ 432,250
Closing price of common stock		$ 0.07
Exercise price					$ 0.40	$ 0.40
Decrease in net loss attributable to common stockholders		$ 243,242
Series D Convertible Preferred Stock [Member]
Major Agreements [Line Items]
Number of common stock shares purchased under warrants (in shares)		667,000
Fair value of warrant liability		$ 43,105		$ 64,137
Initial fair value of warrant expensed		$ 181,942
Outstanding warrant cancelled		667,000
Sale of common stock, shares		1,334,000
Common stock value		$ 93,380
Closing price of common stock		$ 0.07
Net effect on the net loss attributable to common stockholders		$ (50,275)

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CONVERTIBLE PREFERRED STOCK (Details) - USD ($)						1 Months Ended		6 Months Ended
	May 09, 2017	Apr. 14, 2017	Jan. 06, 2017	Feb. 29, 2016	Feb. 09, 2016	Mar. 29, 2017	Jan. 31, 2013	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Class of Stock [Line Items]
Proceeds from sale of Series C Convertible Preferred Stock								$ 531,250	$ 1,235,000
Stock issuance costs								$ 15,128	$ 17,500
Common stock issued								37,981,799		8,681,236
Common Stock [Member]
Class of Stock [Line Items]
Conversion of Stock, Shares Converted	400,000	375,000	260,000			400,000
Number of preferred stock purchased								7,596,875
Stock issuance costs
Verify Me [Member] | Subscription Agreement [Member] | Common Stock [Member]
Class of Stock [Line Items]
Exercise price							$ 10.20
Value of shares issued							$ 1,000,000
Series A Convertible Preferred Stock [Member]
Class of Stock [Line Items]
Conversion of Stock, Shares Converted	20,000		13,000			20,000
Conversion of shares of preferred stock to common stock, shares	400,000		260,000			400,000		(53,000)
Preferred stock, par value								$ .001		$ 0.001
Preferred stock, shares authorized								37,564,767		37,564,767
Number of common stock called by warrants (in shares)							392,157
Stock issuance costs
Number of common stock shares purchased under warrants (in shares)							392,157
Series A Convertible Preferred Stock [Member] | Common Stock [Member]
Class of Stock [Line Items]
Conversion of shares of preferred stock to common stock, shares								1,060,000
Series C Convertible Preferred Stock [Member]
Class of Stock [Line Items]
Conversion of Stock, Shares Converted		375,000						5,464,286
Conversion of shares of preferred stock to common stock, shares								(1,912,500)
Shares of convertible preferred stock issued				500,000	2,587,500
Preferred stock, par value					$ 0.001			$ 0.001		$ 0.001
Preferred stock, shares authorized								7,500,000		7,500,000
Proceeds from sale of Series C Convertible Preferred Stock				$ 200,000	$ 1,035,000
Number of common stock called by warrants (in shares)				500,000	2,587,500			3,087,500
Purchase price (in dollars per share)				$ 0.40	$ 0.40
Exercise price				$ 0.40	$ 0.40
Number of preferred stock purchased								6,175,000
Stock issuance costs					$ 17,500
Remaining shares converted								1,537,500
Common stock issued								12,014,286
Number of common stock shares purchased under warrants (in shares)				500,000	2,587,500			3,087,500
Series C Convertible Preferred Stock [Member] | Common Stock [Member]
Class of Stock [Line Items]
Conversion of shares of preferred stock to common stock, shares								12,014,286
Convertible Preferred Stock [Member] | Verify Me [Member] | Subscription Agreement [Member] | Pre Reverse Stock Split [Member]
Class of Stock [Line Items]
Number of preferred stock purchased							392,157
Series D Convertible Preferred Stock [Member]
Class of Stock [Line Items]
Conversion of Stock, Shares Converted								476,429
Conversion of shares of preferred stock to common stock, shares								(166,750)
Preferred stock, par value								$ 0.001		$ 0.001
Preferred stock, shares authorized								6,000,000		6,000,000
Number of common stock called by warrants (in shares)								667,000
Number of preferred stock purchased								1,334,000
Stock issuance costs
Remaining shares converted								166,750
Common stock issued								1,810,429
Number of common stock shares purchased under warrants (in shares)								667,000
Series D Convertible Preferred Stock [Member] | Common Stock [Member]
Class of Stock [Line Items]
Conversion of shares of preferred stock to common stock, shares								1,810,429

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STOCKHOLDERS' EQUITY (Details) - USD ($)						1 Months Ended	6 Months Ended
	May 09, 2017	Apr. 14, 2017	Jan. 06, 2017	Feb. 29, 2016	Feb. 09, 2016	Mar. 29, 2017	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016	Jan. 31, 2013
Proceeds from issuance of notes payable							$ 281,000
Common stock issued							37,981,799		8,681,236
Proceeds From Issuance Of Convertible Preferred Stock							$ 531,250	1,235,000
Issuance costs of stock							15,128	17,500
Conversion of Stock, value Converted							$ 43,750
Consultant [Member]
Number of common stock called by warrants (in shares)							153,725
Shares issued to convert accounts payable							153,725
Shares issued to convert accounts payable, value							$ 10,750
Common Stock [Member]
Issuance costs of stock
Conversion of Stock, Shares Converted	400,000	375,000	260,000			400,000
Common stock and warrant [Member]
Common stock sold							7,596,875
Proceeds From Issuance Of Convertible Preferred Stock							$ 531,250
Issuance costs of stock							$ 15,128
Conversion of Stock, Shares Converted							625,625
Common stock and warrant [Member] | Consultant [Member]
Conversion of Stock, value Converted							$ 31,500
Common stock and warrant [Member] | Consultant [Member]
Conversion of Stock, Shares Converted							375,375
Exercise price							$ 0.15
Expected warrant term							5 years
Option foreited to purchase common stock							450,000
Series C Convertible Preferred Stock [Member]
Number of common stock called by warrants (in shares)				500,000	2,587,500		3,087,500
Remaining shares converted							1,537,500
Common stock issued							12,014,286
Proceeds From Issuance Of Convertible Preferred Stock				$ 200,000	$ 1,035,000
Issuance costs of stock					$ 17,500
Conversion of Stock, value Converted							$ 12,014	1,050
Conversion of Stock, Shares Converted		375,000					5,464,286
Exercise price				$ 0.40	$ 0.40
Series D Convertible Preferred Stock [Member]
Number of common stock called by warrants (in shares)							667,000
Remaining shares converted							166,750
Common stock issued							1,810,429
Issuance costs of stock
Conversion of Stock, value Converted							$ 1,810
Conversion of Stock, Shares Converted							476,429
Series A Convertible Preferred Stock [Member]
Number of common stock called by warrants (in shares)										392,157
Issuance costs of stock
Conversion of Stock, value Converted							1,060	$ 589
Conversion of Stock, Shares Converted	20,000		13,000			20,000
Notes Payable [Member]
Proceeds from issuance of notes payable							360,000
Debt conversion, converted amount							$ 390,000
Number of common stock called by warrants (in shares)							5,664,246
Exercise price							$ 0.15
Expected warrant term							5 years
Account payable [Member]
Conversion of Stock, value Converted							$ 26,250
Consulting fees [Member] | Common stock and warrant [Member]
Conversion of Stock, value Converted							$ 31,500
Conversion of Stock, Shares Converted							450,450
Exercise price							$ 0.15

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Schedule of Liabilities Measured at Fair Value on a Recurring Basis) (Details) - Fair Value, Measurements, Recurring [Member] - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Embedded derivative liability related to beneficial conversion option	$ 60,886	$ 228,718
Derivative liability related to fair value of warrants		394,744
Total	60,886	623,462
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Embedded derivative liability related to beneficial conversion option
Derivative liability related to fair value of warrants
Total
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Embedded derivative liability related to beneficial conversion option
Derivative liability related to fair value of warrants
Total
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Embedded derivative liability related to beneficial conversion option	60,886	228,718
Derivative liability related to fair value of warrants		394,744
Total	$ 60,886	$ 623,462

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Fair Value Measurements within Fair Value Hierarchy of Derivative Liabilities Using Level 3 Inputs) (Details)	6 Months Ended
	Jun. 30, 2017 USD ($)
Fair Value Disclosures [Abstract]
Balance at December 31, 2016	$ 623,462
Reduction in value resulting from conversion of Preferred Series C and D shares	(381,411)
Change in fair value of derivative liabilities	(181,164)
Balance at June 30, 2017	$ 60,887

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Schedule of Common Stock Purchase Warrants Valuation Assumptions) (Details) - Warrant [Member]	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2015
Fair Value, Option, Quantitative Disclosures [Line Items]
Annual Dividend Yield	0.00%	0.00%
Minimum [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Expected Life (Years)	1 year	2 years
Risk-Free Interest Rate	1.20%	1.10%
Expected Volatility	231.60%	178.50%
Maximum [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Expected Life (Years)	2 years 1 month 6 days	3 years
Risk-Free Interest Rate	1.40%	1.30%
Expected Volatility	244.70%	179.30%

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STOCK OPTIONS (Narrative) (Details) - USD ($)			1 Months Ended			3 Months Ended		6 Months Ended
	Jun. 12, 2017	Feb. 06, 2017	Jun. 29, 2017	Apr. 30, 2017	Jan. 31, 2017	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option, expense						$ 204,516	$ 49,885	$ 204,516	$ 49,885
Fair value of options						284,373	0	335,970	36,343
Consultant fee						$ 82,162	117,582	91,206	232,927
Conversion of Stock, value Converted								43,750
Consultant [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option, expense								57,750
Consultant earned								$ 26,250
Number of common stock called by warrants (in shares)						153,725		153,725
Shares issued to convert accounts payable								153,725
Shares issued to convert accounts payable, value								$ 10,750
Warrant [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Conversion of Stock, Shares Converted								467,429
Common stock and warrant [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Conversion of Stock, Shares Converted								625,625
Common stock and warrant [Member] | Consultant [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Consultant earned								$ 375,375
Conversion of Stock, value Converted								$ 31,500
Stock Compensation Plan [Member] | Stock Option 2013 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized to be granted under plan										20,000,000
Number of options available to be issued						719,853		719,853
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Increase in value of options								$ 2,307
Number of options issued	5,000,000	250,000	10,000,000	250,000	225,000			15,950,000
Exercise price of options issued	$ 0.07	$ 0.068	$ 0.07	$ 0.064	$ 0.09			$ 0.07
Expected option life (in years)	5 years	5 years	5 years	5 years
Dividend yield	0.00%		0.00%	0.00%	0.00%
Expected volatility	196.70%		197.90%	196.20%	197.70%
Risk free interest rate	1.71%		1.85%	1.84%	1.90%
Expected Life (Years)	5 years		5 years	5 years	5 years
Option, expense						$ 284,373	$ 427,223	$ 335,970	$ 763,050
Closing stock price per share						$ 0.12		$ 0.12
Fair value of options	$ 242,112	$ 32,508	$ 583,340	$ 14,011	$ 19,727
Maximum percentage of outstanding stock								100.00%
Maximum aggregate fair market value								$ 1,000,000
Maximum fair value of options per employee								100,000
Number of options vested	3,000,000
Increase in value of unvested options								39,521
Fair value of unvested options								281,633
Employee Stock Option [Member] | Consultant [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option, expense						$ 3,986		3,986
Consultant fee								$ 5,250
Number of shares invested								825,825
Employee Stock Option [Member] | Warrant [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Closing stock price per share						$ 0.12		$ 0.12
Employee Stock Option [Member] | Majority Shareholder [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum percentage of outstanding stock								110.00%
Employee Stock Option [Member] | Stock Option 2003 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of common shares that can be purchased through equity awards that have been issued, unvested or unexercised						19,280,147		19,280,147
Nonvested Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of options issued								15,950,000
Unrecognized compensation cost related to outstanding stock options						$ 583,340		$ 583,340
Unrecognized compensation cost related to stock options, period of recognition								3 years
Number of options vested								13,500,000
Employee Stock Option One [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of options issued		250,000
Exercise price of options issued		$ 0.25
Expected option life (in years)		5 years
Dividend yield		0.00%
Expected volatility		198.00%
Risk free interest rate		1.86%

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STOCK OPTIONS (Summary of Activities for Stock Options) (Details) - Employee Stock Option [Member] - USD ($)				1 Months Ended			6 Months Ended
		Jun. 12, 2017	Feb. 06, 2017	Jun. 29, 2017	Apr. 30, 2017	Jan. 31, 2017	Jun. 30, 2017
Number of Shares
Balance, beginning						3,282,647	3,282,647
Granted		5,000,000	250,000	10,000,000	250,000	225,000	15,950,000
Forfeited/cancelled							(500,000)
Balance June 30, 2017							18,732,647
Exercisable 30, 2017							16,732,647
Exercisable at June 30, 2017 and expected to vest thereafter							18,732,647
Weighted-Average Exercise Price
Balance, beginning						$ 0.52	$ 0.52
Granted		$ 0.07	$ 0.068	$ 0.07	$ 0.064	$ 0.09	0.07
Forfeited/cancelled							(0.13)
Balance June 30, 2017							0.15
Exercisable at June 30, 2017							0.16
Exercisable at June 30, 2017 and expected to vest thereafter							$ 0.16
Weighted Average Remaining Contractual Term (in years)
Balance, beginning							7 years 10 months 25 days
Balance June 30, 2017							5 years 4 months 24 days
Exercisable at June 30, 2017							5 years 6 months
Exercisable at June 30, 2017 and expected to vest thereafter							5 years 6 months
Aggregate Intrinsic Value (in 000's)
Balance June 30, 2017	[1]						$ 1,000
Exercisable at June 30, 2017	[1]						1,000
Exercisable at June 30, 2017 and expected to vest thereafter	[1]						$ 1,000

[1] The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying options and the closing stock price of $0.07 for our common stock on June 30, 2017.

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STOCK OPTIONS (Schedule of Unvested Stock Option Activity) (Details) - Nonvested Stock Options [Member]	6 Months Ended
	Jun. 30, 2017 $ / shares shares
Number of Shares
Balance, Beginning | shares
Granted | shares	15,950,000
Vested | shares	(13,500,000)
Cancelled/forfeited/expired | shares	(450,000)
Balance, Ending | shares	2,000,000
Weighted-Average Grant Date Fair Value
Balance, Beginning | $ / shares
Granted | $ / shares	0.06
Vested | $ / shares	(0.06)
Cancelled/forfeited/expired | $ / shares	(0.07)
Balance, Ending | $ / shares	$ 0.07

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STOCK OPTIONS (Summary of Activities for Warrants) (Details) - Warrant [Member]	6 Months Ended
	Jun. 30, 2017 USD ($) $ / shares shares
Number of Shares
Balance, December 31, 2016 | shares	9,216,452
Granted | shares	21,665,846
Cancelled | shares	(3,754,500)
Balance, June 30, 2017 | shares	27,127,798
Exercisable at June 30, 2017 | shares	27,127,798
Weighted-Average Exercise Price
Balance, December 31, 2016 | $ / shares	$ 1.82
Granted | $ / shares	0.12
Expired | $ / shares	0.40
Balance, June 30, 2017 | $ / shares	0.11
Exercisable at June 30, 2017 | $ / shares	$ 0.11
Weighted-Average Remaining Contractual Term (in years)
Balance, December 31, 2016	3 years 8 months 12 days
Balance, June 30, 2017	4 years 7 months 6 days
Exercisable at June 30, 2017	4 years 7 months 6 days
Aggregate Intrinsic Value
Balance, December 31, 2016 | $	$ 10,000	[1]
Balance, June 30, 2017 | $	6,000	[1]
Exercisable at June 30, 2017 | $	$ 6,000	[1]

[1] The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the closing stock price of $0.07 for our common stock on June 30, 2017.

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OPERATING LEASES (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Leases [Abstract]
Total rent expense under leases	$ 3,000	$ 1,500	$ 6,000	$ 11,835

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RELATED PARTIES (Details)	Jun. 30, 2017 USD ($)
Chief Executive Officer [Member]
Due to related parties	$ 2,467
Chief Financial Officer [Member]
Due to related parties	$ 20,419

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SUBSEQUENT EVENTS (Details) - USD ($)	1 Months Ended			3 Months Ended	6 Months Ended
	Aug. 31, 2017	Aug. 09, 2017	Jul. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Jun. 30, 2016
Proceeds From Issuance Of Convertible Preferred Stock					$ 531,250	$ 1,235,000
Scenario, Forecast [Member]
Shares issued for services				75,000
Common stock and warrant [Member]
Common stock sold					7,596,875
Conversion of Stock, Shares Converted					625,625
Proceeds From Issuance Of Convertible Preferred Stock					$ 531,250
Subsequent Event [Member] | Restricted Stock [Member]
Granted		300,000
Subsequent Event [Member] | Common stock and warrant [Member]
Common stock sold	715,000		2,431,000
Conversion of Stock, Shares Converted	715,000		2,431,000
Proceeds From Issuance Of Convertible Preferred Stock	$ 50,000		$ 170,000