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 September 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.)
Clinton Square, 75 S. Clinton Ave, Suite 510 Rochester, NY
	14604
(Address of Principal Executive Offices)	(Zip Code)
(585)-736-9400
(Registrant’s Telephone Number, Including Area Code) 409 Boot Road Downingtown, PA, 19335

(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: 49,648,497 shares of common stock outstanding at October 24, 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	18
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	23
ITEM 4.	Controls and Procedures	23
PART II - OTHER INFORMATION
ITEM 1.	Legal Proceedings	24
ITEM 1A.	Risk Factors	24
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24
ITEM 3.	Defaults Upon Senior Securities	25
ITEM 4.	Mine Safety Disclosures	25
ITEM 5.	Other Information	25
ITEM 6.	Exhibits	25
SIGNATURES		26

3

FINANCIAL STATEMENTS

ITEM 1.

VerifyMe, Inc.

Condensed Balance Sheet

September 30, 2017 and December 31, 2016

	September 30, 2017			December 31, 2016
	(Unaudited)			(Audited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	759,698		$	22,644
Prepaid expenses and other current assets		21,773			9,425
Inventory		31,997			17,093
TOTAL CURRENT ASSETS		813,468			49,162
PROPERTY AND EQUIPMENT
Capital equipment, net of accumulated depreciation of $203,223   as of
September 30, 2017 and December 31, 2016		-			-
OTHER ASSETS
Patents and Trademarks, net of accumulated amortization of
$206,834 and $194,236 as of September 30, 2017 and December 31, 2016		219,354			231,952
TOTAL ASSETS	$	1,032,822		$	281,114
LIABILITIES AND STOCKHOLDERS'' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	892,057		$	867,436
Notes payable net of discount of $0 and $60,931,  as of September 30, 2017
and December 31, 2016		50,000			68,069
Embedded derivative liability		-			228,718
Warrant liability		59,104			394,744
TOTAL CURRENT LIABILITIES		1,001,161			1,558,967
STOCKHOLDERS' DEFICIT
Series A Convertible Prefeed Stock, $.001 par value, 37,164,767 shares
authorized; 344,778 shares issued and outstanding as of September 30, 2017 and
397,778 shares 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 September 30, 2017		-			-
Series C Convertible Preferred Stock, $.001 par value; 7,000,000 shares
authorized, 0 shares issued and outstanding as of September 30, 2017 and
1,912,500 issued and outstanding as of December 31, 2016		-			1,913
Series D Convertible Preferred Stock, $.001 par value;  6,500,000
shares authorized; 0 shares issued and outstanding as o f September 30, 2017
and 166,750 issued and outstanding as of December 31, 2016		-			167
Common stock of $.001 par value; 675,000,000 authorized; 48,218,497
and 8,681,236 issued, 47,867,957 and 8,330,696 shares outstanding		47,868			8,331
as of September 30, 2017 and December 31, 2016
Additional paid in capital		42,939,461			40,469,272
Treasury stock as cost( 350,540 shares at September 30, 2017 and
December 31, 2016)		(113,389	)		(113,389	)
Accumulated deficit		(42,842,624	)		(41,644,545	)
STOCKHOLDERS' EQUITY (DEFICIT)		31,661			(1,277,853	)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ( DEFICIT)	$	1,032,822		$	281,114

See the accompanying notes to condensed financial statements

4

VerifyMe, Inc.

Condensed Statement of Operations

For the Three and Nine Months Ended September 30, 2017 and 2016

(Unaudited)

	Three months ended						Nine months ended
	September 30, 2017			September 30, 2016			September 30, 2017			September 30, 2016
NET REVENUES
Sales	$	392		$	-		$	392		$	11,705
Royalties		-			-
TOTAL NET REVENUE		392			-			392			11,705
COST OF SALES		-									5,910
GROSS PROFIT		392			-			392			5,795
OPERATING EXPENSES
General and administrative (a)		242,401			107,340			872,767			357,723
Legal and accounting		51,926			71,005			143,132			303,932
Payroll expenses (a)		71,898			257,712			114,960			1,569,372
Research and development		15,933			-			33,243			211,881
Sales and marketing		-			15,177			-			226,951
Total Operating expenses		382,158			451,234			1,164,102			2,669,859
LOSS BEFORE OTHER INCOME (EXPENSE)		(381,766	)		(451,234	)		(1,163,710	)		(2,664,064	)
OTHER INCOME (EXPENSE)
Interest expenses		(5,000	)		(1,000	)		(217,316	)		(3,000	)
Change in fair value of warrants		1,783			(820,667	)		103,527			2,499,790
Change in fair value of embedded derivative liability		-			(500,000	)		79,420			239,000
Fair value of warrants in excess of consideration for
convertible preferred stock		-			-			-			(1,767,575	)
		(3,217	)		(1,321,667	)		(34,369	)		968,215
NET LOSS		(384,983	)		(1,772,901	)		(1,198,079	)		(1,695,849	)
INCOME (LOSS) PER SHARE
BASIC	$	(0.01	)	$	(0.24	)	$	(0.06	)	$	(0.26	)
DILUTED	$	(0.01	)	$	(0.24	)	$	(0.06	)	$	(0.26	)
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING
BASIC		42,642,914			7,420,112			21,355,120			6,415,649
DILUTED		42,642,914			7,420,112			21,355,120			6,415,649

 

(a) Includes shared based compensation of $101,229  and $ 452,949 for the three and nine months ended September 30, 2017 and $134,127 and $894,177 for the three and nine months ended September 30, 2016.

See the accompanying notes to condensed financial statements

5

VerifyMe, Inc.

Condensed Statement of Changes in Stockholders' Deficit

For the Nine Months Ended September 30. 2017

(Unaudited)

	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 Conversion of Series C Convertible Preferred
Stock on embedded derivative liability		-			-			-		-		-			-			-			-			-		-		137,625			-			-		$	137,625
Effect of Conversion of Series C Convertible Preferred																																				$	-
Stock on warrant liability		-			-			-		-		-			-			-			-			-		-		189,008			-			-		$	189,008
Conversion of Series D Convertible Preferred Stock		-			-			-		-		-			-			(166,750	)		(167	)		1,810,429		1,810		(1,643	)		-			-		$	-
Effect of Conversion of Series D Convertible Preferred																																				$	-
Stock on embedded derivative liability		-			-			-		-		-			-			-			-			-		-		11,673			-			-		$	11,673
Deemed dividend distribution upon issuance of warrants with
conversion of  D Convertible Preferred Stock		-			-			-		-		-			-			-			-			-		-		43,105			-			-		$	43,105
Sale of common stock		-			-			-		-		-			-			-			-			15,733,575		15,734		1,084,516			-			-		$	1,100,250
Stock issuance costs		-			-			-		-		-			-			-			-			-		-		(17,453	)		-			-		$	(17,453	)
Conversion of accounts payable into common stock		-			-			-		-		-			-			-			-			1,154,725		1,155		79,595			-			-		$	80,750
Conversion 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 option		-			-			-		-		-			-			-			-			-		-		440,664			-			-		$	440,664
Restricted Stock awards		-			-			-		-		-			-			-			-			2,100,000		2,100		10,185			-			-		$	12,285
Net loss		-			-			-		-		-			-			-			-			-		-		-			-			(1,198,079	)	$	(1,198,079	)
		-			-			-		-		-			-			-			-			-		-		-			-			-			-
Balance at September 30, 2017 (Unaudited)		344,778		$	345			0.92	$	-		-		$	-			-		$	-			47,867,957	$	47,868	$	42,939,461		$	(113,389	)	$	(42,842,624	)		31,661

See the accompanying notes to condensed financial statements

6

VerifyMe, Inc.

Condensed Statements of Cash Flows

(Unaudited)

	Nine Months Ended
	September 30, 2017			September 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(1,198,079	)	$	(1,695,849	)
Adjustments to reconcile net loss to net cash used in
operating activities:
Fair value of options and warrants issued in exchange for services		440,664			1,034,062
Common stock issued for services		12,285			20,775
Accretion of discount on notes payable		204,516			-
Change in fair value of warrant liability		(103,527	)		(732,214	)
Change in fair value of embedded derivative liability		(79,420	)		(239,000	)
Amortization and depreciation		12,598			22,852
Reversal of expense from forfeiture of restricted stock		-			(280,500	)
Amortization of deferred compensation		-			563,942
(Increase) decrease in assets
Inventory		(14,904	)		(30,692	)
Prepaid expenses		(12,348	)		5,625
Decrease in liabilities
Accounts payable and accrued expenses		111,472			115,886
Net cash used in operating activities		(626,743	)		(1,215,113	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes payable		281,000			-
Proceeds from sale of common stock		1,100,250			1,235,000
Stock issuance costs		(17,453	)		(17,500	)
Net cash provided by financing activities		1,363,797			1,217,500
NET INCREASE  IN CASH AND
CASH EQUIVALENTS		737,054			2,387
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		22,644			4,152
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	759,698		$	6,539
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		$	883
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 dividend 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 additional paid in capital and deferred
compensation	$	-		$	90,375
Forfeited restricted common stock	$	-		$	918,000
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	$	189,383		$	-
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 into
common stock	$	80,750		$	-
Conversion of notes payable and accrued interest to common stock	$	396,101		$	-

See the accompanying notes to 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 Rochester, New York 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 a pioneer in patented physical, cyber and biometric technologies that authenticate people and products. This broad market encompasses counterfeiting of physical and material goods and products, as well as counterfeiting the identity of people in digital transactions. The Company is able to 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. 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 and biometrics to secure physical and logical access to facilities, computer networks, internet sites, secure mobile banking transactions and other mobile applications such as social media verification. The Company has a patented methodology/process that gives a 99% confidence level based on biometrics and other proprietary user data as to the true identity of individuals that require authentication prior to making transactions, gaining access to computer networks or facilities, email, or any other process requiring a verifiable identity. In addition, the Company has secure technologies that authenticate, prevent product diversion and protect counterfeiting of labels, packaging, products, metal objects, secure documents etc. that need this type of technology protection. These particular technologies can be printed using traditional printing presses or high speed digital presses such as the HP Indigo press.  Secret invisible coding can be variable or static and they work in combination with secure QR codes for product checking and business intelligence data gathering. .

The Company has signed a five-year global contract with the Indigo division of HP Inc. HP Indigo incorporates the Company’s proprietary pigments into a security HP Electroink. The combination of the HP Indigo press and the VerifyMe patented ink provides a unique solution for packaging and label authentication against counterfeiting as well as item level serialization for diversion tracking which gives a traceable identity to each product. The Company will receive a royalty for each impression utilizing the ink from printers and brand owners. HP Indigo will market the technology globally to owners of the 6000 series of HP Indigo digital presses.     Management believes that this agreement will impact revenues beginning in 2018.  However, there can be no assurance that any revenues will be generated.

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 Securities and Exchange Commission (SEC). Operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

Reclassifications:

Certain prior period amounts have been reclassified to conform to the current period’s financial statement presentations.

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 earnings per share reflect the actual weighted average of shares issued and outstanding during the period. Diluted earnings per share are computed including the number of additional shares that would have been outstanding if dilutive potential shares had been issued. In a loss period, the calculation for basic and diluted earnings per share is considered to be the same, as the impact of potential common shares is anti-dilutive.

As of September 30, 2017, there were approximately 72.0 million (25.0 million at September 30, 2016) shares potentially issuable pursuant to preferred share agreements, options, and warrants that could dilute basic earnings per share in the future that were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive to the Company’s losses during the periods presented.

8

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.

9

Recently Issued Accounting Pronouncements Not Yet Adopted

As of September, 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 nine months ended September 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 nine months ended September 30, 2017, and there was no accrual for uncertain tax positions as of September 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 nine months ended September 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. 

10

NOTE 4 – NOTES PAYABLE

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

	September 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.

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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 (including the Note) 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 September 30, 2017, and December 31, 2016, accrued interest on notes payable was $32,667 and $29,968. Interest expense including accretion of debt discount for the three and nine months ended September 30, 2017 was $1,000 and $205,516.  Interest expense for the three and nine months ended September 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. 

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. 

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As of September 30, 2017, and December 31, 2016, the fair value of the embedded derivative liability was $0 and $228,718.  For the three and nine months ended September 30, 2017, the Company realized income of $0 and $79,420 relative to the embedded derivative liability.  For the three and nine months ended September 30, 2016, the Company realized loss of $500,000 and income of $239,000 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 September 30, 2017, and December 31, 2016, the fair value of the warrant liability was $33,099 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 September 30, 2017, and December 31, 2016 the fair value of the warrants was $20,686 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 September 30, 2017, and December 31, 2016, the fair value of the warrant liability was $5,076 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 September 30, 2017 and December 31, 2016, the fair value of those warrants was $243 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. 

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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. 

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 purchased 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 nine months ended September 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 which converted 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 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.

During the nine months ended September 30, 2017, the Company sold an aggregate of 15,733,575 shares of the Company’s common stock and warrants to purchase an aggregate of 15,733,575 of the Company’s common stock for $1,100,250.  The Company recognized stock issuance costs of $17,453, which were recorded as a reduction to additional paid in capital.

The following table summarizes the activities for our warrants for the nine months ended September 30, 2017:

	Warrants Outstanding
	Number of Shares			Weighted- Average Exercise Price		Weighted - Average Remaining Contractual Term in years)		Aggregate Intrinsic Value (in 000's) (1)
Balance, December 31, 2016		9,216,452		$	1.82		3.7	$	10
Granted		29,802,546			0.12
Cancelled		(3,754,500	)		0.40
Balance, September 30, 2017		35,264,498		$	0.12		4.4	$	158
Exercisable at September 30, 2017		35,264,498		$	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 $0.08 for our common stock on September 30, 2017.

All warrants were vested on the date of grant.

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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:

	September 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		-		-			59,104		59,104		-		-		394,744		394,744
Total	$	-	$	-		$	59,104	$	59,104	$	-	$	-	$	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 liabilities				(182,947	)
Balance at September 30, 2017			$	59,104

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 and nine months ended September 30, 2017.

As of September 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:

	September 30, 2017	December 31, 2016
Annual Dividend Yield	0.0%	0.0%
Expected Life (Years)	0.75 - 1.9	2.0 - 3.0
Risk-Free Interest Rate	1.3% - 1.5%	1.1% - 1.3%
Expected Volatility	199%	178.5% - 179.3%

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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. Theexpected life was based onthe 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 BASED COMPENSATION

During the nine months ended September 30, 2017, the Company granted 19,950,000 options at an average exercise price of $0.07 and cancelled/ forfeited 1,219,117 options resulting in 22,013,530 options outstanding at September 30, 2017.

During the three and nine months ended September 30, 2017, $101,229 and $452,949 respectively, was charged to operations as stock based compensation costs for the options and the restricted shares granted. At September 30, 2017, there was approximately $883,018 of unrecognized compensation cost related to non-vested options and stock grants that is expected to be recognized over a period of approximately five years.

The Company granted 2,100,000 shares of restricted stock with a fair value of $73,710 to its directors that vest over a year.

A restricted stock award is an award of common shares that are subject to certain restrictions during a specified period. Restricted stock awards are independent of option grants and are generally subject to forfeiture if employment terminates prior to the release of restrictions. The grantee cannot transfer the shares before the restricted shares vest. Shares on non-vested restricted stock have the same voting rights as common stock, are entitled to receive dividends and other distributions thereon and are currently issued and outstanding. The Company’s restricted stock awards vest of a period of one to three years. The Company expenses the cost of restricted stock awards, which is determined to be the fair market value of the shares at the date of grant, straight-line over the period during which the restrictions lapse with corresponding credit to additional paid in capital. For these purposes, the fair market value of the restricted stock is determined on the Closing price of the Company’s common stock on the grant date.

NOTE 11 – SUBSEQUENT EVENTS

In October 2017, the Company sold an aggregate of 1,430,000 shares of the Company’s common stock and warrants to purchase an aggregate of 1,430,000 of the Company’s common stock for $100,000. 

In November 2017, the Company adopted the 2017 Equity Incentive Plan Covering 13 million shares of common stock issuable upon exercise of options and grant of restricted stock and other equity awards.

     

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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 patented physical, cyber and biometric technologies that authenticate people and products. . This broad market encompasses counterfeiting of physical and material goods and products, as well as counterfeiting of a person’s 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 which utilizes biometrics and other data pertaining to an individual to provide confidence that the physical access or transactions are properly secured, This includes secure physical and logical access to facilities, computer networks, internet sites, social media, financial banking transactions and mobile applications.

The challenges associated with digital access control and identity theft are problems that are highly relevant in the world today. Businesses, consumers, citizens, employees and government entities   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, creating banking transactions, using social media, 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.

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, cosmetics, 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, cosmetics, 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 including high speed digital presses such as the HP Indigo. The inks may be used with certain printing systems such as offset, flexographic, silkscreen, gravure, ink jet 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 patented digital technologies 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.   

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Results of Operations

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

The following discussion analyzes our results of operations for the three months ended September 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 September 30, 2017 and 2016, we generated revenue of $392 and $0, respectively.  For the three months ended September 30, 2017 and 2016, we had a net loss of $384,983 and $1,772,901, respectively. 

General and Administrative Expenses

General and administrative expenses increased by $135,061 to $242,401 for the three months ended September 30, 2017 from $107,340 for the three months ended September 30, 2016. The increase resulted primarily from an increase in consulting expenses. During the the three months ended September 30, 2017, we focused on raising capital and restarting our business under new management.

Legal and Accounting

Legal and accounting fees decreased $19,079 to $51,926 for the three months ended September 30, 2017 from $71,005 for the three months ended September 30, 2016. The decrease in legal and accounting fees between the periods was primarily a result of transaction costs incurred in the third quarter quarter of 2016, which were not incurred during the 2017 period.

Payroll Expenses

Payroll expenses were $71,898 for the three months ended September 30, 2017, a decrease of $185,814 from $257,712 for the three months ended September 30, 2016.  The decrease is the result of the reduced executives during 2017. Going forward we expect payroll expenses to increase.

Research and Development

Research and development expenses were $15,933 and $0 for the three months ended September 30, 2017 and 2016.  The increase was a result of additional product development activities in 2017.

Sales and Marketing

Sales and marketing expenses for the three months ended September 30, 2017 were $0 as compared to $15,177 for the three months ended September 30, 2016. The decrease relates to cost containment procedures associated with travel and minimal marketing activities. 

Interest Expense

During the three months ended September 30, 2017, the Company incurred interest expense of $5,000 as compared to $1,000 for the three months ended September 30, 2016.

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Change in Fair Value of Warrants

During the three months ended September 30, 2017, the Company reported an unrealized non-cash loss on the market value of warrants of $1,783 as compared to a loss of 820,667 for the three months ended September 30, 2016.  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.  Significant number of warrants were converted as of June 30, 2017, thereby reducing the number of warrants and the resulting valuation.

Change in Fair Value of Embedded Derivative Liability

During the three months ended September 30, 2017, the Company did not have any unrealized gain or loss for the change in the fair value of the embedded derivative liability as compared to a loss of $500,000 for the three months ended September 30, 2016.  The change was due to elimination of derivative liability upon conversion related to host instruments in June 2017.

Comparison of the Nine Months Ended September 30, 2017 and 2016

The following discussion analyzes our results of operations for the nine months ended September 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 nine months ended September 30, 2017 and 2016, we generated revenues of $392 and $11,705, respectively.  For the nine months ended September 30, 2017 and 2016, we had a net loss of $1,198,079 and $1,695,849. 

General and Administrative Expenses

General and administrative expenses increased $515,044 to $872,767 for the nine months ended September 30, 2017 from $357,723 for the nine months ended September 30, 2016. The increase resulted primarily from an increase in consulting expenses. During the nine months ended September 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 $160,800 to $143,132 for the nine months ended September 30, 2017 from $303,9327 for the nine months ended September  30, 2016. The decrease in legal and accounting fees between the periods was primarily a result of transaction costs incurred in 2016, which were not incurred during the 2017 period.  Our legal fees were high during the nine months ended September 30, 2017 as a result of the complexities stemming from our Series C and D Convertible Preferred Stock and negotiations to eliminate them in June 2017.

Payroll Expenses

Payroll expenses were $114,960 for the nine months ended September 30, 2017, a decrease of $1,454,412 from $1,569,372 for the nine months ended September 30, 2017.  The decrease is the result of the reduced executives, during 2017. Going forward we expect payroll expenses to increase.

Research and Development

Research and development expenses were $33,423 and $211,881 for the nine months ended September 30, 2017 and 2016, a decrease of $178,638.  The decrease is a result of cost containment procedures and research and development programs being reduced to a minimum.

20

Sales and Marketing

Sales and marketing expenses for the nine months ended September 30, 2017 were $0 as compared to $226,951 for the nine months ended September 30, 2017, a decrease of $226,951. The decrease relates to cost containment procedures associated with travel and minimal marketing activities. 

Interest Expense

During the nine months ended September 30, 2017, the Company incurred interest expense of $217,316 as compared to $3,000 for the nine months ended September 30, 2016, an increase of $214,316. 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 nine months ended September 30, 2017, the Company reported an unrealized gain on the market value of warrants of $103,527 as compared to a gain of $2,499,970 for the nine months ended September 30, 2017, a decrease in the gain of $2,396,263. 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 nine months ended September 30, 2017 than during the nine months ended September 30, 2016. 

Change in Fair Value of Embedded Derivative Liability

During the nine months ended September 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 $239,000 for the nine months ended September 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 change, in part, was due elimination of derivative liability upon conversion related host instruments in June 2017 and 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 nine months ended September 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

Our working capital deficiency at September 30, 2017 was approximately $188,000 compared to a deficiency of $1,510,000 at December 31, 2016. The decreased in working working capital deficiency was due to additional equity capital we raised in 2017 offset bey operating losses

Our operations used approximately $627,000 of cash during the nine months ended September 30, 2017 compared to approximately $1,215,000 during the comparable period in 2016. During nine months ended September 30, 2017, our operations, adjusted for non-cash items, cash used approximately $711,00 of cash and changes in working capital items provided cash of approximately 84,000. During the nine months ended September 30, 2016, our operations, adjusted for non-cash items, used cash of approximately $1,306,000 and changes in working capital items provided cash of approximately $91,000.

 During the nine months ended September 30, 2017, we sold an aggregate of 15,733,575 shares of our common stock and warrants to purchase an aggregate of 15,733,575 of our common stock for $1,100,250. In addition, we raised bridge loans of $281,000 during the nine months ended  which was settled by conversion to shares of our common stock on June 30, 2017. Cash provided by financing activities during the nine months ended September 30, 2016, consisted primarily of our Series C Preferred Stock offerings which raised $1,217,500, net of offering costs

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 November 6, 2017, we had cash resources of approximately $732,000.To fund our operations for the next 12 months, to allow us to continue the development of its business plans and satisfy its obligations on a timely basis we need to raise additional financing. Should additional financing not be available, we will not be able to implement implement our operating and marketing plans. There can be no assurance that we will be to obtain additional financing.

21

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 September 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.

22

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 nine months ended September 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 September 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.

23

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.

The Company sold an aggregate of  9,849,125 shares of the Company’s common stock and warrants to purchase an aggregate of 9,849,125 of the Company’s common stock for $688,750. 

The Company granted a total of 2,100,000 shares of restricted stock to its directors (except its Chairman and Chief Executive Officer) that vest over a year

The Company entered into an consulting agreement with Keith Goldstein dated September 1, 2017 under which the Company granted him 2,000,000 five-year stock options exercisable at $0.04, subject to execution of the Company’s standard Stock Option Agreement.

All of the above-mentioned securities were issued and sold to accredited investors in reliance upon the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933 (the “Act”) and Rule 506 promulgated thereunder. All of the above-mentioned securities were acquired for the purpose of investment and not with a view to distribution.

24

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS

EXHIBIT INDEX

ITEM 6. EXHIBITS		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	8-K	8/15/17	3.1
10.1	Form of Employment Agreement with Patrick White dated 8/9/17 +				Filed
10.2	Form of Consulting Agreement with Vasan Thatham dated 8/16/17 +				Filed
10.3	Form of Compensation Agreement with Howard Goldberg dated 10/6/17 +				Filed
10.4	Form of Consulting Agreement with Keith Goldstein dated 09/1/17 +				Filed
10.5	Form of Consulting Agreement with Norman Gardner dated 6/29/17 +				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. 

+ Compensation Agreement.

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.

25

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: November 14, 2017 By: /S/ Patrick White Patrick White Chief Executive Officer   By/S/ Vasan Thatham  Vasan Thatham  Chief Financial Officer

26

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, Patrick White, 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: November 14, 2017	By:	/s/ Patrick White
		Patrick White
		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, Vasan Thatham, 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: November 14, 2017	By:	/s/ Vasan Thatham
		Vasan Thatham
		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 September 30, 2017, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, Patrick White, 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: November 14, 2017	By:	/s/ Patrick White
		Patrick White
		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, Vasan Thatham, 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: November 14, 2017	By:	/s/ Vasan Thatham
		Vasan Thatham
		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	9 Months Ended
	Sep. 30, 2017	Oct. 24, 2017
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
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		49,648,497

XML

Condensed Balance Sheets - USD ($)	Sep. 30, 2017	Dec. 31, 2016
CURRENT ASSETS
Cash and cash equivalents	$ 759,698	$ 22,644
Prepaid expenses and other current assets	21,773	9,425
Inventory	31,997	17,093
TOTAL CURRENT ASSETS	813,468	49,162
PROPERTY AND EQUIPMENT
Capital equipment, net of accumulated depreciation of $203,223 as of September 30, 2017 and December 31, 2016
OTHER ASSETS
Patents and Trademarks, net of accumulated amortization of $206,834 and $194,236 as of September 30, 2017 and December 31, 2016	219,354	231,952
TOTAL ASSETS	1,032,822	281,114
CURRENT LIABILITIES
Accounts payable and accrued expenses	892,057	867,436
Notes payable net of discount of $0 and $60,931, as of September 30, 2017 and December 31, 2016	50,000	68,069
Embedded derivative liability		228,718
Warrant liability	59,104	394,744
TOTAL CURRENT LIABILITIES	1,001,161	1,558,967
STOCKHOLDERS' DEFICIT
Common stock of $.001 par value; 675,000,000 authorized; 48,218,497and 8,681,236 issued, 47,867,957 and 8,330,696 shares outstanding as of September 30, 2017 and December 31, 2016	47,868	8,331
Additional paid in capital	42,939,461	40,469,272
Treasury stock as cost (350,540 shares at September 30, 2017 and December 31, 2016)	(113,389)	(113,389)
Accumulated deficit	(42,842,624)	(41,644,545)
STOCKHOLDERS' EQUITY (DEFICIT)	31,661	(1,277,853)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	1,032,822	281,114
Series A Convertible Preferred Stock [Member]
STOCKHOLDERS' DEFICIT
Convertible Preferred Stock	345	398
STOCKHOLDERS' EQUITY (DEFICIT)	345	398
Series B Convertible Preferred Stock [Member]
STOCKHOLDERS' DEFICIT
Convertible Preferred Stock
STOCKHOLDERS' EQUITY (DEFICIT)
Series C Convertible Preferred Stock [Member]
STOCKHOLDERS' DEFICIT
Convertible Preferred Stock		1,913
STOCKHOLDERS' EQUITY (DEFICIT)		1,913
Series D Convertible Preferred Stock [Member]
STOCKHOLDERS' DEFICIT
Convertible Preferred Stock		167
STOCKHOLDERS' EQUITY (DEFICIT)		$ 167

XML

Condensed Balance Sheets (Parenthetical) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Accumulated depreciation on capital equipment	$ 203,223	$ 203,223
Accumulated amortization, patent and trademarks	206,834	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	48,218,497	8,681,236
Common stock, shares outstanding	47,867,957	8,330,696
Treasury stock, shares	350,540	350,540
Series A Convertible Preferred Stock [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	37,164,767	37,164,767
Preferred stock, shares issued	397,778	397,778
Preferred stock, shares outstanding	397,778	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	7,000,000	7,000,000
Preferred stock, shares issued	0	1,912,500
Preferred stock, shares outstanding	0	1,912,500
Series D Convertible Preferred Stock [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	6,500,000	6,500,000
Preferred stock, shares issued	0	166,750
Preferred stock, shares outstanding	0	166,750

XML

Condensed Statement of Operations (Unaudited) - USD ($)		3 Months Ended		9 Months Ended
		Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
NET REVENUES
Sales		$ 392		$ 392	$ 11,705
Royalties
TOTAL NET REVENUE		392		392	11,705
COST OF SALES					5,910
GROSS PROFIT		392		392	5,795
OPERATING EXPENSES
General and administrative	[1]	242,401	107,340	872,767	357,723
Legal and accounting		51,926	71,005	143,132	303,932
Payroll expenses	[1]	71,898	257,712	114,960	1,569,372
Research and development		15,933		33,243	211,881
Sales and marketing			15,177		226,951
Total operating expenses		382,158	451,234	1,164,102	2,669,859
LOSS BEFORE OTHER INCOME (EXPENSE)		(381,766)	(451,234)	(1,163,710)	(2,664,064)
OTHER INCOME (EXPENSE)
Interest expenses		(5,000)	(1,000)	(217,316)	(3,000)
Change in fair value of warrants		1,783	(820,667)	103,527	2,499,790
Change in fair value of embedded derivative liability			(500,000)	79,420	239,000
Fair value of warrants in excess of consideration for convertible preferred stock					(1,767,575)
TOTAL OTHER INCOME (EXPENSE)		(3,217)	(1,321,667)	(34,369)	968,215
NET LOSS		$ (384,983)	$ (1,772,901)	$ (1,198,079)	$ (1,695,849)
INCOME (LOSS) PER SHARE
BASIC		$ (0.01)	$ (0.24)	$ (0.06)	$ (0.26)
DILUTED		$ (0.01)	$ (0.24)	$ (0.06)	$ (0.26)
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING
BASIC		42,642,914	7,420,112	21,355,120	6,415,649
DILUTED		42,642,914	7,420,112	21,355,120	6,415,649
Share based compensation		$ 101,229	$ 134,127	$ 452,949	$ 894,177

[1] Includes shared based compensation of $101,229 and $452,949 for the three and nine months ended September 30, 2017 and $134,127 and $894,177 for the three and nine months ended September 30, 2016.

XML

Condensed Statement of Changes in Stockholders' Deficit (Unaudited) - 9 months ended Sep. 30, 2017 - USD ($)	Common Stock [Member] Series A Convertible Preferred Stock [Member]	Common Stock [Member] Series C Convertible Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member] Series A Convertible Preferred 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	$ (1,007)	$ (10,101)	$ (1,643)				$ (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			$ 15,734				1,084,516							1,100,250
Sale of common stock, shares			15,733,575
Stock issuance costs							(17,453)							(17,453)
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							440,664							440,664
Restricted Stock awards			$ 2,100				10,185							12,285
Restricted Stock awards, shares			2,100,000
Net income									(1,198,079)					(1,198,079)
Balance at Sep. 30, 2017			$ 47,868				$ 42,939,461	$ (113,389)	$ (42,842,624)	$ 345				$ 31,661
Balance (in shares) at Sep. 30, 2017			47,867,957							344,778	0.92

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Condensed Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (1,198,079)	$ (1,695,849)
Adjustments to reconcile net loss to net cash used in operating activities:
Fair value of options and warrants issued in exchange for services	440,664	1,034,062
Common stock issued for services	12,285	20,775
Accretion of discount on notes payable	204,516
Change in fair value of warrant liability	(103,527)	(732,214)
Change in fair value of embedded derivative liability	(79,420)	(239,000)
Amortization and depreciation	12,598	22,852
Reversal of expense from forfeiture of restricted stock		(280,500)
Amortization of deferred compensation		563,942
(Increase) decrease in assets
Inventory	(14,904)	(30,692)
Prepaid expenses	(12,348)	5,625
Decrease in liabilities
Accounts payable and accrued expenses	111,472	115,886
Net cash used in operating activities	(626,743)	(1,215,113)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of notes payable	281,000
Proceeds from sale of common stock	1,100,250	1,235,000
Stock issuance costs	(17,453)	(17,500)
Net cash provided by financing activities	1,363,797	1,217,500
CASH EQUIVALENTS	737,054	2,387
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD	22,644	4,152
CASH AND CASH EQUIVALENTS - END OF PERIOD	759,698	6,539
Cash paid during the year for: Interest
Cash paid during the year for: Income taxes
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Security deposit offset against accounts payable		37,197
Accretion of discount on preferred stock as deemed dividend 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 additional paid in capital and deferred compensation		90,375
Forfeited restricted common stock		918,000
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	883
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)
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	189,383
Series D Convertible Preferred Stock [Member]
Adjustments to reconcile net loss to net cash used in operating activities:
Change in fair value of embedded derivative liability	20,010
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

9 Months Ended

Sep. 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 Rochester, New York 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 a pioneer in patented physical, cyber and biometric technologies that authenticate people and products. This broad market encompasses counterfeiting of physical and material goods and products, as well as counterfeiting the identity of people in digital transactions. The Company is able to 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. 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 and biometrics to secure physical and logical access to facilities, computer networks, internet sites, secure mobile banking transactions and other mobile applications such as social media verification. The Company has a patented methodology/process that gives a 99% confidence level based on biometrics and other proprietary user data as to the true identity of individuals that require authentication prior to making transactions, gaining access to computer networks or facilities, email, or any other process requiring a verifiable identity. In addition, the Company has secure technologies that authenticate, prevent product diversion and protect counterfeiting of labels, packaging, products, metal objects, secure documents etc. that need this type of technology protection. These particular technologies can be printed using traditional printing presses or high speed digital presses such as the HP Indigo press.  Secret invisible coding can be variable or static and they work in combination with secure QR codes for product checking and business intelligence data gathering. .

The Company has signed a five-year global contract with the Indigo division of HP Inc. HP Indigo incorporates the Company’s proprietary pigments into a security HP Electroink. The combination of the HP Indigo press and the VerifyMe patented ink provides a unique solution for packaging and label authentication against counterfeiting as well as item level serialization for diversion tracking which gives a traceable identity to each product. The Company will receive a royalty for each impression utilizing the ink from printers and brand owners. HP Indigo will market the technology globally to owners of the 6000 series of HP Indigo digital presses.     Management believes that this agreement will impact revenues beginning in 2018.  However, there can be no assurance that any revenues will be generated.

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 Securities and Exchange Commission (SEC). Operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

Reclassifications:

Certain prior period amounts have been reclassified to conform to the current period’s financial statement presentations.

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 earnings per share reflect the actual weighted average of shares issued and outstanding during the period. Diluted earnings per share are computed including the number of additional shares that would have been outstanding if dilutive potential shares had been issued. In a loss period, the calculation for basic and diluted earnings per share is considered to be the same, as the impact of potential common shares is anti-dilutive.

As of September 30, 2017, there were approximately 72.0 million (25.0 million at September 30, 2016) shares potentially issuable pursuant to preferred share agreements, options, and warrants that could dilute basic earnings per share in the future that were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive to the Company’s losses during the periods presented.

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 September, 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

9 Months Ended

Sep. 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

9 Months Ended

Sep. 30, 2017

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 3 – INCOME TAXES

Income tax expense was $0 for the three and nine months ended September 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 nine months ended September 30, 2017, and there was no accrual for uncertain tax positions as of September 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 nine months ended September 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.

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NOTES PAYABLE

9 Months Ended

Sep. 30, 2017

Notes Payable [Abstract]

NOTES PAYABLE

NOTE 4 – NOTES PAYABLE

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

	September 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.

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 (including the Note) 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 September 30, 2017, and December 31, 2016, accrued interest on notes payable was $32,667 and $29,968. Interest expense including accretion of debt discount for the three and nine months ended September 30, 2017 was $1,000 and $205,516.  Interest expense for the three and nine months ended September 30, 2016 was $1,000 and $2,000.

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EMBEDDED DERIVATIVE LIABILITY

9 Months Ended

Sep. 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. 

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.

As of September 30, 2017, and December 31, 2016, the fair value of the embedded derivative liability was $0 and $228,718.  For the three and nine months ended September 30, 2017, the Company realized income of $0 and $79,420 relative to the embedded derivative liability.  For the three and nine months ended September 30, 2016, the Company realized loss of $500,000 and income of $239,000 relative to the embedded derivative liability.

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WARRANT LIABILITY

9 Months Ended

Sep. 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 September 30, 2017, and December 31, 2016, the fair value of the warrant liability was $33,099 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 September 30, 2017, and December 31, 2016 the fair value of the warrants was $20,686 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 September 30, 2017, and December 31, 2016, the fair value of the warrant liability was $5,076 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 September 30, 2017 and December 31, 2016, the fair value of those warrants was $243 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.

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.

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CONVERTIBLE PREFERRED STOCK

9 Months Ended

Sep. 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 purchased 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 nine months ended September 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

9 Months Ended

Sep. 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 which converted 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 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.

During the nine months ended September 30, 2017, the Company sold an aggregate of 15,733,575 shares of the Company’s common stock and warrants to purchase an aggregate of 15,733,575 of the Company’s common stock for $1,100,250.  The Company recognized stock issuance costs of $17,453, which were recorded as a reduction to additional paid in capital.

The following table summarizes the activities for our warrants for the nine months ended September 30, 2017:

	Warrants Outstanding
	Number of Shares			Weighted- Average Exercise Price		Weighted - Average Remaining Contractual Term in years)		Aggregate Intrinsic Value (in 000's) (1)
Balance, December 31, 2016		9,216,452		$	1.82		3.7	$	10
Granted		29,802,546			0.12
Cancelled		(3,754,500	)		0.40
Balance, September 30, 2017		35,264,498		$	0.12		4.4	$	158
Exercisable at September 30, 2017		35,264,498		$	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 $0.08 for our common stock on September 30, 2017.

All warrants were vested on the date of grant.

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FAIR VALUE OF FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 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:

	September 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		-		-			59,104		59,104		-		-		394,744		394,744
Total	$	-	$	-		$	59,104	$	59,104	$	-	$	-	$	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 liabilities				(182,947	)
Balance at September 30, 2017			$	59,104

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 and nine months ended September 30, 2017.

As of September 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:

	September 30, 2017	December 31, 2016
Annual Dividend Yield	0.0%	0.0%
Expected Life (Years)	0.75 - 1.9	2.0 - 3.0
Risk-Free Interest Rate	1.3% - 1.5%	1.1% - 1.3%
Expected Volatility	199%	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. Theexpected life was based onthe 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 BASED COMPENSATION

9 Months Ended

Sep. 30, 2017

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

STOCK BASED COMPENSATION

NOTE 10 – STOCK BASED COMPENSATION

During the nine months ended September 30, 2017, the Company granted 19,950,000 options at an average exercise price of $0.07 and cancelled/ forfeited 1,219,117 options resulting in 22,013,530 options outstanding at September 30, 2017.

During the three and nine months ended September 30, 2017, $101,229 and $452,949 respectively, was charged to operations as stock based compensation costs for the options and the restricted shares granted. At September 30, 2017, there was approximately $883,018 of unrecognized compensation cost related to non-vested options and stock grants that is expected to be recognized over a period of approximately five years.

The Company granted 2,100,000 shares of restricted stock with a fair value of $73,710 to its directors that vest over a year.

A restricted stock award is an award of common shares that are subject to certain restrictions during a specified period. Restricted stock awards are independent of option grants and are generally subject to forfeiture if employment terminates prior to the release of restrictions. The grantee cannot transfer the shares before the restricted shares vest. Shares on non-vested restricted stock have the same voting rights as common stock, are entitled to receive dividends and other distributions thereon and are currently issued and outstanding. The Company’s restricted stock awards vest of a period of one to three years. The Company expenses the cost of restricted stock awards, which is determined to be the fair market value of the shares at the date of grant, straight-line over the period during which the restrictions lapse with corresponding credit to additional paid in capital. For these purposes, the fair market value of the restricted stock is determined on the Closing price of the Company’s common stock on the grant date.

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2017

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 11 – SUBSEQUENT EVENTS

In October 2017, the Company sold an aggregate of 1,430,000 shares of the Company’s common stock and warrants to purchase an aggregate of 1,430,000 of the Company’s common stock for $100,000. 

In November 2017, the Company adopted the 2017 Equity Incentive Plan Covering 13 million shares of common stock issuable upon exercise of options and grant of restricted stock and other equity awards.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 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 Rochester, New York 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 a pioneer in patented physical, cyber and biometric technologies that authenticate people and products. This broad market encompasses counterfeiting of physical and material goods and products, as well as counterfeiting the identity of people in digital transactions. The Company is able to 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. 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 and biometrics to secure physical and logical access to facilities, computer networks, internet sites, secure mobile banking transactions and other mobile applications such as social media verification. The Company has a patented methodology/process that gives a 99% confidence level based on biometrics and other proprietary user data as to the true identity of individuals that require authentication prior to making transactions, gaining access to computer networks or facilities, email, or any other process requiring a verifiable identity. In addition, the Company has secure technologies that authenticate, prevent product diversion and protect counterfeiting of labels, packaging, products, metal objects, secure documents etc. that need this type of technology protection. These particular technologies can be printed using traditional printing presses or high speed digital presses such as the HP Indigo press.  Secret invisible coding can be variable or static and they work in combination with secure QR codes for product checking and business intelligence data gathering. .

The Company has signed a five-year global contract with the Indigo division of HP Inc. HP Indigo incorporates the Company’s proprietary pigments into a security HP Electroink. The combination of the HP Indigo press and the VerifyMe patented ink provides a unique solution for packaging and label authentication against counterfeiting as well as item level serialization for diversion tracking which gives a traceable identity to each product. The Company will receive a royalty for each impression utilizing the ink from printers and brand owners. HP Indigo will market the technology globally to owners of the 6000 series of HP Indigo digital presses.     Management believes that this agreement will impact revenues beginning in 2018.  However, there can be no assurance that any revenues will be generated.

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 Securities and Exchange Commission (SEC). Operating results for the three and nine months ended September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

Reclassifications

Reclassifications:

Certain prior period amounts have been reclassified to conform to the current period’s financial statement presentations.

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 earnings per share reflect the actual weighted average of shares issued and outstanding during the period. Diluted earnings per share are computed including the number of additional shares that would have been outstanding if dilutive potential shares had been issued. In a loss period, the calculation for basic and diluted earnings per share is considered to be the same, as the impact of potential common shares is anti-dilutive.

As of September 30, 2017, there were approximately 72.0 million (25.0 million at September 30, 2016) shares potentially issuable pursuant to preferred share agreements, options, and warrants that could dilute basic earnings per share in the future that were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive to the Company’s losses during the periods presented.

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 September, 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)

9 Months Ended

Sep. 30, 2017

Notes Payable [Abstract]

NOTES PAYABLE

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

	September 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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STOCKHOLDERS’ EQUITY (Tables)

9 Months Ended

Sep. 30, 2017

Equity [Abstract]

Summary of the activities for warrants

The following table summarizes the activities for our warrants for the nine months ended September 30, 2017:

	Warrants Outstanding
	Number of Shares			Weighted- Average Exercise Price		Weighted - Average Remaining Contractual Term in years)		Aggregate Intrinsic Value (in 000's) (1)
Balance, December 31, 2016		9,216,452		$	1.82		3.7	$	10
Granted		29,802,546			0.12
Cancelled		(3,754,500	)		0.40
Balance, September 30, 2017		35,264,498		$	0.12		4.4	$	158
Exercisable at September 30, 2017		35,264,498		$	0.11		4.6	$	6

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 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:

	September 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		-		-			59,104		59,104		-		-		394,744		394,744
Total	$	-	$	-		$	59,104	$	59,104	$	-	$	-	$	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 liabilities				(182,947	)
Balance at September 30, 2017			$	59,104

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:

	September 30, 2017	December 31, 2016
Annual Dividend Yield	0.0%	0.0%
Expected Life (Years)	0.75 - 1.9	2.0 - 3.0
Risk-Free Interest Rate	1.3% - 1.5%	1.1% - 1.3%
Expected Volatility	199%	178.5% - 179.3%

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - $ / shares	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Accounting Policies [Abstract]
Common stock, par value	$ 0.001		$ 0.001
Anti-dilutive common stock equivalents, excluded from the calculation of earnings per share	72,000,000	25,000,000

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INCOME TAXES (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Tax Disclosure [Abstract]
Income Tax Expense (Benefit)	$ 0	$ 0	$ 0	$ 0
Unrecognized tax benefits	0		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		9 Months Ended
	Apr. 13, 2017	Jun. 30, 2017	May 31, 2017	Apr. 26, 2017	Feb. 13, 2017	Jan. 31, 2017	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Debt Instrument [Line Items]
Proceeds from issuance of notes payable									$ 281,000
Interest expense							$ 5,000	$ 1,000	217,316	$ 3,000
Interest expense including accretion of debt discount							1,000		205,516
Note payable balance							50,000		50,000		$ 68,069
Accrued interest							$ 32,667		$ 32,667		$ 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
Exercise price (in dollars per share)							$ 0.15		$ 0.15
Note payable balance		$ 50,000
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				$ 60,000
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)					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
Fair value of warrant liability					$ 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 ($)	Sep. 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	50,000	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)	Sep. 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		9 Months Ended
	Apr. 14, 2017	Jun. 30, 2017	Oct. 24, 2016	Feb. 29, 2016	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 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						$ (500,000)	$ 79,420	$ 239,000
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					5,464,286
Adjustment through earnings		$ 77,365
Adjustment through additional paid in captial		$ 107,625
Outstanding warrant cancelled		3,087,500
Sale of common stock, shares		6,175,000
Remaining shares converted		1,537,500
Fair value of the embedded derivative liability		$ 107,625
Change in fair value of embedded derivative liability		$ 184,990					$ 184,990
Series D Convertible Preferred Stock [Member]
Dividend rate percentage							0.00%
Conversion of Stock, Shares Converted		476,429					476,429
Adjustment through earnings		$ 8,337
Adjustment through additional paid in captial		$ 11,673
Outstanding warrant cancelled		667,000
Sale of common stock, shares		1,334,000
Remaining shares converted		166,750
Fair value of the embedded derivative liability		$ 11,673
Change in fair value of embedded derivative liability		$ (20,010)					$ (20,010)

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WARRANT LIABILITY (Details) - USD ($)	1 Months Ended		9 Months Ended
	Jun. 30, 2017	Jan. 31, 2014	Sep. 30, 2017	Sep. 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			$ 47,868		$ 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			$ 5,076		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			$ 33,099		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			$ 243		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			$ 20,686		18,107					$ 2,995,791
Sale of common stock, shares
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	$ 189,383				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
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

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CONVERTIBLE PREFERRED STOCK (Details) - USD ($)						1 Months Ended			9 Months Ended
	May 09, 2017	Apr. 14, 2017	Jan. 06, 2017	Feb. 29, 2016	Feb. 09, 2016	Jun. 30, 2017	Mar. 29, 2017	Jan. 31, 2013	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016
Class of Stock [Line Items]
Conversion of shares of preferred stock to common stock, shares
Proceeds from sale of Series C Convertible Preferred Stock									$ 1,100,250	$ 1,235,000
Stock issuance costs									$ 17,453	$ 17,500
Common stock issued									48,218,497		8,681,236
Common Stock [Member]
Class of Stock [Line Items]
Conversion of Stock, Shares Converted	400,000	375,000	260,000				400,000
Conversion of shares of preferred stock to common stock, shares									1,810,429
Number of preferred stock purchased									15,733,575
Series A Convertible Preferred Stock [Member]
Class of Stock [Line Items]
Number of common stock called by warrants (in shares)								392,157
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									$ 0.001		$ 0.001
Preferred stock, shares authorized									37,164,767		37,164,767
Number of common stock called by warrants (in shares)								392,157
Number of preferred stock purchased
Stock issuance costs
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			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									7,000,000		7,000,000
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						11,639,286
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			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									6,500,000		6,500,000
Number of common stock called by warrants (in shares)						667,000
Number of preferred stock purchased						1,334,000
Remaining shares converted						166,750
Common stock issued						1,810,429

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STOCKHOLDERS' EQUITY (Narrative) (Details) - USD ($)						1 Months Ended		9 Months Ended
	May 09, 2017	Apr. 14, 2017	Jan. 06, 2017	Feb. 29, 2016	Feb. 09, 2016	Jun. 30, 2017	Mar. 29, 2017	Sep. 30, 2017	Sep. 30, 2016	Dec. 31, 2016	Jan. 31, 2013
Proceeds from issuance of notes payable								$ 281,000
Common stock issued								48,218,497		8,681,236
Proceeds From Issuance Of Convertible Preferred Stock								$ 1,100,250	1,235,000
Issuance costs of stock								$ 17,453	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						10,750
Common Stock [Member]
Conversion of Stock, Shares Converted	400,000	375,000	260,000				400,000
Common stock and warrant [Member]
Common stock sold								15,733,575
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						11,639,286
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		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
Conversion of Stock, value Converted								$ 1,810
Conversion of Stock, Shares Converted						476,429		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	$ 883
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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STOCKHOLDERS' EQUITY (Summary of Activities for Warrants) (Details) - Warrant [Member]	9 Months Ended
	Sep. 30, 2017 USD ($) $ / shares shares
Number of Shares
Balance, December 31, 2016 | shares	9,216,452
Granted | shares	29,802,546
Cancelled | shares	(3,754,500)
Balance, September 30, 2017 | shares	35,264,498
Exercisable at September 30, 2017 | shares	35,264,498
Weighted-Average Exercise Price
Balance, December 31, 2016 | $ / shares	$ 1.82
Granted | $ / shares	0.12
Expired | $ / shares	0.40
Balance, September 30, 2017 | $ / shares	0.12
Exercisable at September 30, 2017 | $ / shares	$ 0.11
Weighted-Average Remaining Contractual Term (in years)
Balance, December 31, 2016	3 years 8 months 12 days
Balance, September 30, 2017	4 years 4 months 24 days
Exercisable at September 30, 2017	4 years 7 months 6 days
Aggregate Intrinsic Value
Balance, December 31, 2016 | $	$ 10	[1]
Balance, September 30, 2017 | $	158	[1]
Exercisable at September 30, 2017 | $	$ 6	[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 $0.08 for our common stock on September 30, 2017.

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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 ($)	Sep. 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		$ 228,718
Derivative liability related to fair value of warrants	59,104	394,744
Total	59,104	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		228,718
Derivative liability related to fair value of warrants	59,104	394,744
Total	$ 59,104	$ 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)	9 Months Ended
	Sep. 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	(182,947)
Balance at September 30, 2017	$ 59,104

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FAIR VALUE OF FINANCIAL INSTRUMENTS (Schedule of Common Stock Purchase Warrants Valuation Assumptions) (Details) - Warrant [Member]	9 Months Ended	12 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
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)	9 months	2 years
Risk-Free Interest Rate	1.30%	1.10%
Expected Volatility		178.50%
Maximum [Member]
Fair Value, Option, Quantitative Disclosures [Line Items]
Expected Life (Years)	1 year 10 months 25 days	3 years
Risk-Free Interest Rate	1.50%	1.30%
Expected Volatility	199.00%	179.30%

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STOCK BASED COMPENSATION (Narrative) (Details) - USD ($)	1 Months Ended	3 Months Ended		9 Months Ended
	Jun. 30, 2017	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair value of options		$ 101,229	$ 134,127	$ 452,949	$ 894,177
Consultant fee		51,926	$ 71,005	$ 143,132	$ 303,932
Conversion of Stock, value Converted	$ 43,750
Restricted Stock [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of options issued				2,100,000
Unrecognized compensation cost related to stock options, period of recognition				1 year
Fair value of options				$ 73,710
Nonvested Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost related to outstanding stock options		$ 883,018		$ 883,018
Unrecognized compensation cost related to stock options, period of recognition				5 years
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options outstanding		22,013,530		22,013,530
Forfeited/cancelled				1,219,117
Increase in value of options		$ 101,229		$ 452,949
Number of options issued				19,950,000
Exercise price of options issued				$ 0.07

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SUBSEQUENT EVENTS (Details) - USD ($)	1 Months Ended		9 Months Ended
	Nov. 30, 2017	Oct. 31, 2017	Sep. 30, 2017	Sep. 30, 2016
Proceeds From Issuance Of Convertible Preferred Stock			$ 1,100,250	$ 1,235,000
Subsequent Event [Member] | Restricted Stock [Member]
Conversion of Stock, Shares Converted	13,000,000
Common stock and warrant [Member]
Common stock sold			15,733,575
Common stock and warrant [Member] | Subsequent Event [Member]
Common stock sold		1,430,000
Conversion of Stock, Shares Converted		1,430,000
Proceeds From Issuance Of Convertible Preferred Stock		$ 100,000