10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q 

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

For the quarterly period ended September 30, 2018

o 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)

(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 x     No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).     Yes x      No o

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	☐	Smaller reporting company	x
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 o     No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 102,203,166 shares of common stock outstanding at November 2, 2018.

 2

PART I - FINANCIAL INFORMATION
ITEM 1.	Financial Statements	4
Balance Sheets (Unaudited)		4
Statements of Operations (Unaudited)		5
Statements of Cash Flows (Unaudited)		6
Notes to Financial Statements (Unaudited)		7
ITEM 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	16
ITEM 3.	Quantitative and Qualitative Disclosures about Market Risk	23
ITEM 4.	Controls and Procedures	23
PART II - OTHER INFORMATION
ITEM 1.	Legal Proceedings	23
ITEM 1A.	Risk Factors	23
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
ITEM 3.	Defaults Upon Senior Securities	23
ITEM 4.	Mine Safety Disclosures	24
ITEM 5.	Other Information	24
ITEM 6.	Exhibits	24
SIGNATURES		25

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FINANCIAL STATEMENTS 

ITEM 1. 

VerifyMe, Inc.

Balance Sheets

	As of
	September 30, 2018			December 31, 2017
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	2,124,272		$	693,001
Accounts Receivable		28,462			-
Prepaid expenses and other current assets		18,668			18,668
Inventory		35,102			-
TOTAL CURRENT ASSETS		2,206,504			711,669
OTHER ASSETS
Patents and Trademarks, net of accumulated amortization of
$253,259 and $237,331 as of September 30, 2018 and December 31, 2017		192,269			191,507
Capitalized Software		30,223			-
TOTAL ASSETS	$	2,428,996		$	903,176
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses	$	442,737		$	923,202
Notes payable		-			50,000
Common Stock payable		-			122,478
TOTAL CURRENT LIABILITIES		442,737			1,095,680
STOCKHOLDERS' EQUITY (DEFICIT)
Series A Convertible Preferred Stock, $.001 par value, 37,564,767 shares
authorized; 304,778 shares issued and outstanding as of September 30, 2018 and
324,778 shares issued and outstanding as of December 31, 2017		305			325
Series B Convertible Preferred Stock, $.001 par value; 85 shares
authorized; 0.85 shares issued and outstanding as of September 30, 2018 and
0.92 shares issued and outstanding as of December 31, 2017		-			-
Common stock of $.001 par value; 675,000,000 authorized; 102,546,708 and 53,873,872 issued, 102,196,168 and 53,523,332 shares outstanding as of September 30, 2018 and December 31, 2017		102,196			53,522
Additional paid in capital		60,726,539			56,198,126
Treasury stock as cost (350,540 shares at September 30, 2018 and December 31, 2017)		(113,389	)		(113,389	)
Accumulated deficit		(58,729,392	)		(56,331,088	)
STOCKHOLDERS' EQUITY (DEFICIT)		1,986,259			(192,504	)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$	2,428,996		$	903,176

The accompanying notes are an integral part of these unaudited financial statements.

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VerifyMe, Inc.

Statements of Operations

(Unaudited)

	Three months ended						Nine Months Ended
	September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
NET REVENUE
Sales	$	28,273		$	392		$	35,072		$	392
COST OF SALES		12,281			-			14,281
											-
GROSS PROFIT		15,992			392			20,791			392
OPERATING EXPENSES
General and administrative (a)		357,665			242,401			1,378,999			872,767
Legal and accounting		64,897			51,926			362,371			143,132
Payroll expenses (a)		77,664			71,898			269,518			114,960
Research and development		73,843			15,933			102,272			33,243
Sales and marketing		9,150			-			17,217
Total Operating expenses		583,219			382,158			2,130,377			1,164,102
		-
LOSS BEFORE OTHER INCOME (EXPENSE)		(567,227	)		(381,766	)		(2,109,586	)		(1,163,710	)
OTHER (EXPENSE) INCOME
Interest (expenses) income, net		1,084			(5,000	)		1,367			(217,316	)
Gain on derecognition of note payable and accrued interest		86,667			-			86,667			-
Settlement agreement with shareholders		-						(779,000	)		-
Gain on accounts payable forgiveness		-						402,248
Change in fair value of warrants		-			1,783			-			103,527
Change in fair value of embedded derivative liability		-						-			79,420
		87,751			(3,217	)		(288,718	)		(34,369	)
		-
NET LOSS	$	(479,476	)	$	(384,983	)	$	(2,398,304	)	$	(1,198,079	)
LOSS PER SHARE
BASIC	$	(0.00	)	$	(0.01	)	$	(0.03	)	$	(0.06	)
DILUTED	$	(0.00	)	$	(0.01	)	$	(0.03	)	$	(0.06	)
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING
BASIC		101,186,416			42,642,914			91,453,702			21,355,120
DILUTED		101,186,416			42,642,914			91,453,702			21,355,120

(a) Includes share-based compensation of $204,227 and $709,940 for the three and nine months ended September 30, 2018 and $101,229 and $452,949 for the three and nine months ended September 30, 2017.

The accompanying notes are an integral part of these unaudited financial statements.

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VerifyMe, Inc.

Statements of Cash Flows

(Unaudited)

	Nine Months Ended
	September 30, 2018			September 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(2,398,304	)	$	(1,198,079	)
Adjustments to reconcile net loss to net cash used in
operating activities:
Stock based compensation		44,120			12,285
Fair value of options and warrants issued in exchange for services		270,339			440,664
Fair value of restricted stock and restricted stock units issued in exchange for services		395,481			-
Gain on accounts payable forgiveness		(402,248	)		-
Share-based payment for settlement agreement with shareholders		279,000			-
Gain on derecognition of note payable and accrued interest		(86,667	)		-
Accretion of discount on notes payable		-			204,516
Change in fair value of warrant liability		-			(103,527	)
Change in fair value of embedded derivative liability		-			(79,420	)
Amortization and depreciation		15,928			12,598
Changes in operating assets and liabilities:
Accounts Receivable		(28,462	)
Inventory		(35,102	)		(14,904	)
Prepaid expenses		-			(12,348	)
Accounts payable and accrued expenses		(41,550	)		111,472
Net cash used in operating activities		(1,987,465	)		(626,743	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Patents		(16,690	)		-
Capitalized Software Costs		(30,223	)		-
Net cash used in investing activities		(46,913	)		-
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of warrants		2,311,438			-
Proceeds from issuance of notes payable		-			281,000
Proceeds from sale of common stock		1,154,211			1,100,250
Stock issuance costs		-			(17,453	)
Net cash provided by financing activities		3,465,649			1,363,797
NET INCREASE  IN CASH AND
CASH EQUIVALENTS		1,431,271			737,054
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD		693,001			22,644
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	2,124,272		$	759,698
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	$	400		$	1,060
Series B Convertible Preferred Stock converted to common stock	$	599		$	-
Series C Convertible Preferred Stock converted to common stock	$	-		$	12,014
Series D Convertible Preferred Stock converted to common stock	$	-		$	1,810
Cashless Exercise of Stock Options	$	4,028		$	-
Cashless Exercise of Warrants	$	176		$	-
Common Stock and Warrants Issued for Common Stock Payable	$	122,478		$	-
Deemed divided distribution on issuance of common stock for conversion of Series C and Series D	$	-		$	525,630
Revaluation of embedded derivative liability upon conversion of Series C Convertible Preferred Stock	$	-		$	137,625
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 to common stock	$	-		$	80,750
Conversion of notes payable and accrued expenses to common stock	$	-		$	396,101

The accompanying notes are an integral part of these unaudited financial statements.

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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, is traded on the over-the-counter market and quoted on the OTCQB.

The Company is a technology pioneer in the anti-counterfeiting industry. This broad market encompasses counterfeiting of physical and material goods and products, as well as counterfeiting of identity in digital transactions. The Company 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 physical transactions and owns digital patents which are in the same field. The products can be used to manage and issue secure credentials, including national IDs, passports, driver licenses and access control credentials, as well as comprehensive authentication security software to secure physical and logical access to facilities, computer networks, internet sites and mobile applications.

The accompanying unaudited interim financial statements (the “Interim Statements”) have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and disclosures required by Generally Accepted Accounting Principles (“GAAP”) for complete financial statements are not included herein. The Interim Statements should be read in conjunction with the financial statements and notes thereto included in the Company’s latest Annual Report on Form 10-K for the year ended December 31, 2017 as filed with the Securities and Exchange Commission (the “SEC”) on April 16, 2018.  The accompanying interim financial statements are unaudited; however, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The interim results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018 or for any future interim periods.

The Company’s activities are subject to significant risks and uncertainties, including the need to secure additional funding to further develop the Company’s patents.

Basis of Presentation

The accompanying financial statements are presented in accordance with GAAP.

Revenue Recognition

The Company accounts for revenues according to ASC Topic 606, “Revenue from Contracts with Customers” which establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers.

7

The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:

· identify the contract with a customer;

· identify the performance obligations in the contract;

· determine the transaction price;

· allocate the transaction price to performance obligations in the contract; and

· recognize revenue as the performance obligation is satisfied.

During the three and nine months ended September 30, 2018, the Company’s revenues were primarily made up of revenue generated from printing labels with the Company’s technology.

Basic and Diluted Net Income per Share of Common Stock

The Company follows FASB ASC 260, “Earnings Per Share,” when reporting Earnings Per Share resulting in the presentation of basic and diluted earnings per share.  Because the Company reported a net loss for each of the periods presented, common stock equivalents, including preferred stock, stock options and warrants were anti-dilutive; therefore, the amounts reported for basic and diluted loss per share were the same.

For the three and nine months ended September 30, 2018 and 2017, there were shares potentially issuable, 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 years presented.

For the three and nine months ended September 30, 2018 there were approximately 41,237,000 anti-dilutive shares consisting of 18,014,000 shares issuable upon exercise of options, 9,909,000 shares issuable upon exercise of warrants and 13,314,000 shares issuable upon conversion of preferred stock.  For the three and nine months ended September 30, 2017 there were approximately 71,987,000 anti-dilutive shares consisting of 22,014,000 shares issuable upon exercise of options, 35,264,000 shares issuable upon exercise of warrants, and 14,709,000 shares issuable upon conversion of preferred stock.

Recently Issued Accounting Pronouncements Not Yet Adopted

As of September 30, 2018, there are no recently issued accounting standards not yet adopted which would have a material effect on the Company’s financial statements through September 30, 2018.

NOTE 2 – OTHER ASSETS

Patents and Trademarks

The current granted patent portfolio consists of 10 granted U.S. patents, 3 pending patents applications, one registered trademark and four pending trademark applications. The Company has recently received notice that one of its core printing technology patents has been granted in the European Union and will issue in approximately eight designated countries. Management has also conducted a review of its intellectual patent portfolio and determined that several of the applications, even if issued, would not be central to the pursuit of the Company’s anti-counterfeiting and diversion business and thus not cost effective hence the Company did not continue to pursue the applications. Accordingly, costs associated with the registration and legal defense of these patents have been capitalized and are amortized on a straight-line basis over the estimated lives of the patents which were determined to be 17 to 19 years.   During the nine months ended September 30, 2018 and 2017, the Company capitalized $16,690 and $0 of patent costs and trademarks. Amortization expense for patents and trademarks was $5,034 and $6,267 for the three months ended September 30, 2018 and 2017 and $15,928 and $12,598 for the nine months ended September 30, 2018 and 2017.

Capitalized Software

Costs incurred in connection with the development of software related to our proprietary digital products are accounted for in accordance with the Financial Accounting Standards Board Accounting Standards Codification ("ASC") 985 “Costs of Software to Be Sold, Leased or Marketed.” Costs incurred prior to the establishment of technological feasibility are charged to research and development expense. Software development costs are capitalized after a product is determined to be technologically feasible and is in the process of being developed for market. Amortization of capitalized software development costs begins once the product is available to the market. Capitalized software development costs are amortized over the estimated life of the related product, generally three years, using the straight-line method. The Company will evaluate its software assets for impairment whenever events or change in circumstances indicate that the carrying amount of such assets may not be recoverable. As of September 30, 2018, the Company capitalized $30,223. As of December 31, 2017, the Company had not capitalized any software development costs.

8

NOTE 3 – NOTES PAYABLE

Notes payable consist of the following as of September 30, 2018 and December 31, 2017:
 

	September 30,		December 31,
	2018		2017
Series A notes payable; interest at 8% per annum; principal and accrued interest due at maturity in October 2011 (past due)		-		50,000
Net		-		50,000
Less: Current portion		-		(50,000	)
	$	-	$	-

At September 30, 2018 and December 31, 2017 accrued interest on notes payable was $0 and $33,667.

On October 28, 2009 the Company issued an unsecured note payable for $50,000. The note and accrued interest at 8% per annum were due in full in October 2011.  The holder has never demanded payment. Since the note matured on September 30, 2011, the holder cannot commence an action to enforce payment of the note as the statute of limitations for the note expired on September 30, 2017. Applying guidance from ASC Topic 405-20, liabilities should be derecognized only when the obligor is legally released from the obligation, which occurred for the Company upon expiration of the statute of limitations. The carrying value of the note payable of $50,000 and accrued interest of $36,667 was derecognized in the three months ended September 30, 2018 and recorded as ‘Gain on derecognition of note payable and accrued interest’ and included in the Statement of Operations.

As of December 31, 2017, 1,749,683 shares of common stock and 1,749,683 shares underlying warrants issuable upon conversion for $120,000 principal and $2,478 accrued interest had not yet been issued in relation to the conversion of related party note payable held by a member of the Board, and as such the amount has been recorded as Common Stock payable included on the Balance Sheets as of December 31, 2017. During the nine months ended September 30, 2018, those shares of common stock and warrants were issued and delivered.

Pursuant to ASC 470-50- 40 Modifications and Extinguishments, the Company assessed the nature of the transaction and based on its assessment concluded it is a capital transaction in essence, and as such accounted for it through Additional Paid-In Capital with no gain or loss recognized in the Income Statement during the period.

Interest expense including accretion of debt discount for the three and nine months ended September 30, 2018 was $1,000 and $3,000.  Interest expense including accretion of debt discount for the three and nine months ended September 30, 2017 was $1,000 and $205,516.   

NOTE 4 – CONVERTIBLE PREFERRED STOCK

The Company has outstanding Series A Preferred Stock (the “Series A”) and Series B Preferred Stock (the “Series B”). As of September 30, 2018, there were 37,564,767 authorized and 304,778 outstanding shares of Series A and 85 authorized and 0.85 outstanding shares of Series B. Each share of Series A and B has limited voting rights, is entitled to participate with the common stock on liquidation and holders of Series A and B have beneficial ownership limitations.

Series A Convertible Preferred Stock

During the nine months ended September 30, 2018, 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

During the nine months ended September 30, 2018, 0.07 shares of Series B Convertible Preferred Stock were converted into 599,362 shares of the Company’s Common Stock.

NOTE 5 – STOCKHOLDERS’ EQUITY

For the three and nine months ended September 30, 2018 the Company expensed $0 and $8,625 relative to restricted stock units.  The Company did not have any expenses related to restricted stock units for the three and nine months ended September 30, 2017.

During the nine months ended September 30, 2018, 37,500 restricted stock units were vested in relation to a consulting service agreement and a total of $8,625 was expensed.

9

During the nine months ended September 30, 2018, the Company granted a total of 600,000 restricted stock awards to two directors of the Company, each receiving 300,000 shares of restricted common stock, for joining the Board of Directors. On April 25, 2018 the Company approved the immediate vesting of all of the Company’s outstanding restricted common stock issued in 2017 and 2018 to non-employee directors of the Company.

During the nine months ended September 30, 2018, the Company granted a total of 1,425,000 shares of restricted common stock to the directors and the Chief Executive Officer of the Company for their services and 150,000 shares to one attorney, vesting over a one-year period.

For the three and nine months ended September 30, 2018, the Company expensed $160,077 and $386,856 relative to restricted common stock.  For the three and nine months ended September 30, 2017 the Company expensed $12,285 and $12,285, respectively.

On September 8, 2017, the Company entered into a consulting agreement stipulating partial payment in restricted common stock.  During the three and nine months ended September 30, 2018, 49,500 and 169,500 shares have been issued in relation to this agreement.  These shares were valued at the closing price of the Company’s common stock as they became due for a total expense of $44,120 for the nine months ended September 30, 2018.

In 2017 the Company authorized a private placement with a maximum offering amount of $2,100,000 allowing investors to purchase units consisting of 715,000 shares of common stock and 715,000 five-year warrants exercisable at $0.15 per share.  In January 2018 the Company’s Board of Directors increased the size of the private placement by an additional amount beyond the $2,100,000 limit. During the nine months ended September 30, 2018 the Company raised gross proceeds of $1,154,211 for the purchase of 16,513,311 shares of common stock and 16,513,311 warrants. Of these amounts, gross proceeds of $530,777 for the purchase of 7,590,111 shares of common stock and 7,590,111 warrants related to directors and relatives of the directors of the Company.

In January 2018, the Chairman of the Board of Directors, made a cashless exercise of 5,000,000 options related to services in 2017, whereby the Chairman disposed of 972,222 shares to the Company as part of his exercise, amounting to an issuance of 4,027,778 shares, see Note 6.

On January 30, 2018, the Company authorized a 30-day offer, beginning on February 20, 2018, to the holders of the Company’s outstanding warrants exercisable at $0.15 to exercise their warrants at $0.10 per share.  This authorization was extended until June 30, 2018.  The Company authorized certain holders, who had sent in their exercise notices prior to June 30, 2018, to submit payment before July 27, 2018 and exercise their warrants at $0.10 per share. For the nine months ended September 30, 2018, 20,787,784 warrants were exercised and a total of 20,787,784 shares of common stock were issued for gross proceeds of $2,078,778. Included in the above amounts are gross proceeds of $1,205,458 from directors in exchange for exercise of 12,054,576 warrants and issuance of 12,054,576 shares of common stock.

In January 2018, a member of the Board exercised 104,876 warrants with an exercise price of $0.15 and a total of 104,876 shares of common stock were issued for gross proceeds of $15,731.

On March 31, 2018, the Company entered into a Confidential Settlement Agreement (the “Settlement Agreement”) with Paul Klapper, a member of the Company’s Board, Stephen Silver, PFK Development Group, Ltd. (“PFKD”) and certain other parties named in the Settlement Agreement. Pursuant to the terms of the Settlement Agreement, the Company (i) paid a total of $500,000 (the “Settlement Amount”) to PFKD and Mr. Silver and (ii) issued them each 500,000 shares of the Company’s common stock (the “Settlement Shares”). The shares were valued at $279,000 whereby $139,500 related to common stock issued to a related party and $139,500 related to common stock issued to a third party. The Settlement Agreement provides for cancellation as of March 31, 2018 of certain revenue sharing agreements between the Company and each of Mr. Klapper, Mr. Silver and PFKD, and terminates the Company’s obligation to issue warrants to purchase 3.7 million shares of the Company’s common stock at an exercise price of $0.40 per share. Mr. Klapper joined the Board of Directors on July 14, 2017 and resigned as of March 31, 2018.

In January 2018, the Company issued 1,749,683 shares of common stock and 1,749,683 warrants with an exercise price of $0.15 to Mr. Klapper relating to the Note payable conversion that took place in June 2017.

 On March 28, 2018, the Company accelerated the vesting of 150,000 shares of restricted common stock owned by Mr.  Klapper.

In April 2018, the former Chief Executive Officer of the Company exercised his warrants at an exercise price of $0.01 for gross proceeds of $1,000 resulting in an issuance of 100,000 shares.

On July 27, 2018 the Company cancelled 607,143 shares as a result of an over-issuance of shares to an investor in connection with the Company’s 2017 exchange.

On July 31, 2018, a member of the Board exercised 1,439,524 warrants held by an entity under his control at an exercise price of $0.15 per share for a total price of $215,929.

In August 2018, a warrant holder, made a cashless exercise of 366,047 warrants, whereby the warrant holder disposed of 190,386 shares to the Company as part of this exercise, amounting to an issuance of 175,661 shares, see Note 6.

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NOTE 6– STOCK OPTIONS, RESTRICTED STOCK AND WARRANTS

During 2013, the Company adopted a new incentive compensation plan (the “2013 Plan”). Under the 2013 Plan, the Company is authorized to grant awards of stock options, restricted stock, restricted stock units and other stock-based awards of up to an aggregate of 20,000,000 shares of common stock.  The 2013 Plan is intended to permit stock options granted to employees under the 2013 Plan to qualify as Incentive Stock Options.  All options granted under the 2013 Plan, which are not intended to qualify as Incentive Stock Options are deemed to be Non-Statutory Stock Options.  

On November 14, 2017, the Executive Committee of the Company’s Board of Directors (the “Executive Committee”) adopted the 2017 Equity Incentive Plan (the “Plan”) which covers the potential issuance of 13 million shares of common stock. The Plan provides that directors, officers, employees, and consultants of the Company will be eligible to receive equity incentives under the Plan at the discretion of the Board or the Compensation Committee. The Compensation Committee may adopt rules and regulations to carry out the terms of the Plan. The Plan terminates on November 14, 2027 unless sooner terminated.

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

In connection with Incentive Stock Options, the exercise price of each option may not be less than 100% of the fair market value of the common stock on the date of the grant (or 110% of the fair market value in the case of a grantee holding more than 10% of the outstanding stock of the Company).

Incentive Stock Options under all plans of the Company shall not exceed $1,000,000 per calendar year. If any employee shall have the right to first exercise any options in excess of $100,000 during any calendar year, the options in excess of $100,000 shall be deemed to be Non-Statutory Stock Options, including prices, duration, transferability and limitations on exercise.

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

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

During the three and nine months ended September 30, 2018 the Company expensed $44,151 and $270,339 with respect to options.  For the three and nine months ended September 30, 2017, the Company expensed $101,229 and $452,949 with respect to the options. 

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The following table presents the weighted-average assumptions used to estimate the fair value of the stock options granted during the nine months ended September 30, 2018:

Risk Free Interest Rate		2.54	%
Expected Volatility		202.25	%
Expected Life (in years)		5.0
Dividend Yield		0	%
Weighted average estimated fair value of
options during the period	$	0.26

	Options Outstanding
						Weighted -
						Average
						Remaining		Aggregate
				Weighted-		Contractual		Intrinsic
	Number of			Average		Term		Value
	Shares			Exercise Price		(in years)		(1)
Balance as of December 31, 2017		22,013,529		$	0.11
Granted		1,000,000			0.21
Exercised		(5,000,000	)		0.07
Balance September 30, 2018		18,013,529		$	0.13
Exercisable at September 30, 2018		16,513,529		$	0.13		4.1	$	4,269,150

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock for options that were in-the-money at each respective period.  As of September 30, 2018, the aggregate intrinsic value of options exercisable under the Company’s stock option plans was $4,269,150.

In the nine months ended September 30, 2018, the Company amended the consulting agreement held with its Chief Operating Officer and granted him 1,000,000 stock options with an exercise price of $0.2102 with 500,000 stock options vesting immediately and the remaining 500,000 stock options vesting on February 28, 2019 subject to continuing to provide consulting services.

In January 2018, the Chairman of the Board made a cashless exercise of 5,000,000 options related to services in 2017, whereby the Chairman disposed of 972,222 shares to the Company as part of his exercise, amounting to an issuance of 4,027,778 shares, see Note 6.

12

VerifyMe, Inc.

Notes to the Financial Statements

The following table summarizes the activities for the Company’s unvested stock options for the nine months ended September 30, 2018:

	Unvested Options
				Weighted -
				Average
				Grant
	Number of Unvested			Date Exercise Price
	Options
Balance December 31, 2017		2,666,666		$	0.06
Granted		1,000,000			0.21
Vested		(2,166,666	)		0.09
Balance September 30, 2018		1,500,000		$	0.12

13

VerifyMe, Inc.

Notes to the Financial Statements

The following table summarizes the activities for the Company’s warrants for the nine months ended September 30, 2018:

	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, 2017		32,292,580		$	0.30
Granted		18,262,994			0.15
Exercised		(22,798,231	)		0.10
Expired		(1,019,608	)		0.07
Cancelled/Forfeited		(4,950,000	)		0.40
Balance, September 30, 2018		21,787,735		$	0.27		4.0
Exercisable at September 30, 2018		21,787,735		$	0.27		4.0	$	4,741

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the closing stock price of $0.36 for our common stock on September 30, 2018.

For the nine months ended September 30, 2018, the Company has received gross proceeds of $1,154,211 for the purchase of 16,513,311 shares of common stock and 16,513,311 warrants in relation to the private placement.  See Note 5.

In January 2018, the Company issued 1,749,683 shares of common stock and 1,749,683 warrants with an exercise price of $0.15 to Mr. Klapper relating to the Note payable conversion that took place in June 2017.  Additionally, 3,700,000 warrants were forfeited. See Note 5.

For the nine months ended September 30, 2018, 20,787,784 shares of warrants were exercised and a total of 20,787,784 shares of common stock were issued for gross proceeds of $2,078,778. See Note 5.

In January 2018, a member of the Board exercised 104,876 warrants with an exercise price of $0.15 and a total of 104,876 shares of common stock were issued for gross proceeds of $15,731, see Note 5.

In April 2018, the former Chief Executive Officer of the Company exercised 100,000 warrants at an exercise price of $0.01 for gross proceeds of $1,000 resulting in an issuance of 100,000 shares.

On July 31, 2018, a member of the Board exercised 1,439,524 warrants held by an entity under his control at an exercise price of $0.15 per share for a total price of $215,929. See note 5.

In August 2018, a warrant holder, made a cashless exercise of 366,047 warrants, whereby the warrant holder disposed of 190,386 shares to the Company as part of this exercise, amounting to an issuance of 175,661 shares, see Note 5.

During the nine months ended September 30, 2018 an additional 1,250,000 warrants were forfeited in relation to a note payable conversion occurring in the prior year.

All warrants were vested on the date of grant.

14

VerifyMe, Inc.

Notes to the Financial Statements 

NOTE 7 – DEBT FORGIVENESS

During the nine months ended September 30, 2018 the Company negotiated with certain vendors regarding balances outstanding for prior year services resulting in a Gain on accounts payable forgiveness included in the Statement of Operations for $402,248.

NOTE 8 – CONCENTRATIONS

Revenue

For the three and nine months ended September 30, 2018, two customers represented more than 10.0% of revenues.

Accounts Receivable

As of September 30, 2018, two customers represented more than 10.0% of consolidated accounts receivable.

NOTE 9 – SUBSEQUENT EVENTS

On November 2, 2018, an investor made a cashless exercise of 11,678 warrants and was issued 6,998 shares of the Company’s common stock.

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

Overview

VerifyMe is a technology pioneer in the anti-counterfeiting industry. This broad market encompasses counterfeiting of physical and material goods and products, as well as counterfeiting of identity in digital transactions. We can deliver security solutions for identification and authentication of people, products and packaging in a variety of applications in the security field for physical transactions and hold patents with the application to digital transactions. Our products can be used to manage and issue secure credentials, including national identifications, passports, driver licenses and access control credentials, as well as comprehensive authentication security software to secure physical and logical access to facilities, computer networks, internet sites and mobile applications.

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

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. We are on target to complete development of our digital patents by the end of the year. Our goal is to enable 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. These solutions 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 currency, passports, ID cards, pharmaceuticals, apparel, cosmetics, accessories, music, software, food, wine, 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 creates global health, safety and economic consequences for 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, luxury goods, tobacco, fragrances and 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 color changing inks, which are compatible with today’s printing presses. The inks may be used with certain printing systems such as offset, flexographic, silkscreen, gravure, and laser. Based upon our experience, we believe that the ink technologies may be incorporated into existing manufacturing processes. We believe that some of our patents may have non-security applications, and we are attempting to commercialize these opportunities.

Our digital technologies involve the utilization of multiple authentication mechanisms, some of which we own and some of which we license.  These mechanisms include biometric factors, knowledge factors, possession factors and location factors.   Biometric factors include facial recognition with liveness detection, finger print and voice recognition.  Knowledge factors include a personal gesture swipe and a safe and panic color choice.  Possession factor includes devices that the user has in their possession such as a smartphone, smart watch, and other wearable computing devices.  The location factor geo-locates the user during a secure login.  We surround these authentication mechanisms with proprietary systems that improve the usability and the security of the solutions. Our solutions allow the assessment and quantification of risk using a sophisticated heuristic scoring mechanism.  We have specialized systems that perform ‘liveness’ detection to insure the subject of authentication is in fact a live human being. We have systems that introduce learning capabilities into our solutions to improve the ease of use and flexibility.

We believe that our physical technologies will play a role in the supply chain management process.  Our invisible ink can be used as a unique identifier in a digital serialization application.

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Serialization or Unique identification helps brand owners identify who manufactured the product, which wholesaler has sold the product  to retailers or hospitals and other pertinent information concerning the products supply chain.  The implementation of serialization and track and trace provides the ability to track and trace the lifecycle of products in the system end-to-end.  Our invisible ink is applied during the printing process of product labels and packaging and can be used as a unique invisible serialization identifying number or code on labels and packaging.   The invisibleness of our ink acts as an additional layer of security since the ink needs to be revealed with special equipment.

A track and trace system improves security by:

1. Knowing the life cycle of a product or prescription drug, from where it is manufactured, who is repackaging it, who is distributing, when it is prescribed and when it is sold

2. Meeting accurate regulatory and compliance requirement questions such as “What, Where, When and Who”

3. Locating prescription drug batches and precisely where they are distributed

4. Enabling the option to recall a particular batch or entire batches which are reported as having a product/batch failure or having not met standards

5. Identify if the prescribed drug is counterfeit, stolen, contaminated etc.

6. Know about the multi-container packaging item level details

Track and trace works in the following ways:

1. Generate and apply unique serialization number for manufactured drugs.

2. Capture unique serialization number and store in centralized database (distributed or non-distributed).

3. Update serialization data in EPCIS centralized database.

4. Wholesalers, Repackagers and Pharmacies can have the ability to validate the serialization when they perform transactions.

Each time a transaction for serialized drugs is carried out, the transaction drug history is updated in the e-pedigree system.

Our physical and digital technologies include the following products:

RainbowSecure™ Print Technology – Invisible ink technology that only our special VeriPAS Mobile phone Authenticator device can see and read variable codes into the cloud. This technology is made and supported by HP Indigo for use by brand owners and printers with 6000 series HP Indigo digital printing presses. It is ideal for producing labels and packaging requiring counterfeit prevention, authentication, serialization and traceability. RainbowSecure works with our new Smart Phone reading device as well as the “VeriPAS” global product authentication software.

VeriPAS Mobile Phone Authenticator – This is our Smart Phone Authenticator Device designed to read RainbowSecure invisible codes into a powerful cloud based Global Product authentication, track and trace system called, “VeriPAS”. Investigators will be able to use their personal smart phones with this device to authenticate and track products.

VeriPAS Track and Trace Software: VeriPAS is a serialization, track and trace system for both consumers and brand owners to verify a product’s authenticity. In addition, brand owners can access powerful data intelligence, GPS hot spots of counterfeited product awareness, and track a product’s complete “life cycle.”

VeriPAS Quick-Check –This product is a hand-held device which instantly verifies the actual products authenticity. This technology can verify the authenticity of products made of metal, plastic, ceramic or even fabric. This is a quick press of a button notification for product investigators to validate the actual products authenticity rather than just a product’s packaging and or labels.

17

Results of Operations

Comparison of the Three Months Ended September 30, 2018 and 2017

The following discussion analyzes our results of operations for the three months ended September 30, 2018 and 2017. The following information should be considered together with our financial statements for such period and the accompanying notes thereto.

Revenue

We generated revenue of $28,273 for the three months ended September 30, 2018. This compares to $392 revenue in 2017. We were engaged for an order for the printing of labels with VerifyMe’s authentication serialization technology for a large global brand owner. The $28,273 primarily represents a portion of this order of labels printed with our technology.

General and Administrative Expenses

General and administrative expenses increased by $115,264 to $357,665 for the three months ended September 30, 2018 from $242,401 for the three months ended September 30, 2017. The increase resulted primarily to an increase in non-cash charges related to restricted stock awards.

Legal and Accounting

Legal and accounting fees increased by $12,971 to $64,897 for the three months ended September 30, 2018 from $51,926 for the three months ended September 30, 2017. 

Payroll Expenses

Payroll expenses were $77,664 for the three months ended September 30, 2018, an increase of $5,766 from $71,898 for the three months ended September 30, 2017. 

Research and Development

Research and development expenses were $73,843 and $15,933 for the three months ended September 30, 2018 and 2017, respectively.

Gain on derecognition of note payable and accrued interest

Gain on derecognition of note payable and accrued interest was $86,667 and $0 for the three months ended September 30, 2018 and 2017, respectively. The release related to a note payable that had matured in 2011. We were not able to contact the holder, nor had the holder reached out us. As a result, we derecognized the amounts payable once the applicable statute of limitations expired.

Net Loss

Our net loss increased to $479,476 for the three months ended September 30, 2018 from $384,983 for the three months ended September 30, 2017.

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Comparison of the Nine months Ended September 30, 2018 and 2017

The following discussion analyzes our results of operations for the nine months ended September 30, 2018 and 2017. The following information should be considered together with our financial statements for such period and the accompanying notes thereto.

Revenue

We generated revenue of $35,072 for the nine months ended September 30, 2018 and $392 for the nine months ended September 30, 2017. We were engaged for an order for the printing of labels with VerifyMe’s authentication serialization technology for a large global brand owner. The $35,072 primarily represents a portion of this order of labels printed with our technology.

General and Administrative Expenses

General and administrative expenses increased by $506,232 to $1,378,999 for the nine months ended September 30, 2018 from $872,767 for the nine months ended September 30, 2017. The increase resulted primarily to an increase in non-cash charges related to restricted stock awards and options to consultants and our directors for $200,000.  The remaining increases related to increase in consulting charges and expenses related to activities that will expand our operations.

Legal and Accounting

Legal and accounting fees increased by $219,239 to $362,371 for the nine months ended September 30, 2018 from $143,132 for the nine months ended September 30, 2017.  In the quarter ended March 31, 2017 we had released our then attorneys and hired our current attorneys in the second quarter of 2017.

Payroll Expenses

Payroll expenses were $269,518 for the nine months ended September 30, 2018, an increase of $154,558 from $114,960 for the nine months ended September 30, 2017.  The increase relates to compensation for our Chief Executive Officer.

Research and Development

Research and development expenses were $102,272 and $33,243 for the nine months ended September 30, 2018 and 2017, respectively. The increase relates to the expenditure for our developed technologies.

Interest Expense, net

During the nine months ended September 30, 2018, the Company incurred interest income, net of $1,367 as compared to interest expense, net of $217,316 for the nine months ended September 30, 2017.  The decrease in interest expense is related to the settlement of notes payable in the second quarter of 2017.

Change in Fair Value of Warrants

During the nine months ended September 30, 2018, the Company did not have any unrealized gain or loss for the change in Fair Value of Warrants as compared to a gain of $103,527 for the nine months ended September 30, 2017.  As of September 30, 2017, warrants with derivative liabilities were exchanged for common stock. 

Change in Fair Value of Embedded Derivative Liability

During the nine months ended September 30, 2018, 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 gain of $79,420 for the nine months ended September 30, 2017. 

Settlement agreement with shareholders

In the first half of 2018 we made a strategic decision to end a future revenue sharing program resulting in settlement expenses of $779,000.

Gain on derecognition of note payable and accrued interest

Gain on derecognition of note payable and accrued interest was $86,667 and $0 for the nine months ended September 30, 2018 and 2017, respectively. The release related to a note payable that had a matured in 2011. We were not able to contact the holder, nor had the holder reached out us. As a result, we derecognized the amounts payable once the applicable statute of limitations expired.

Net Loss

Our net loss increased to $2,398,304 from $1,198,079 for the nine months ended September 30, 2018 and 2017, respectively.

19

Non-GAAP – Financial Measures

The following discussion and analysis includes both financial measures in accordance with GAAP, as well as non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP. Non-GAAP financial measures should be viewed as supplemental to, and should not be considered as alternatives to net income, operating income, and cash flow from operating activities, liquidity or any other financial measures. They may not be indicative of the historical operating results of AGI nor are they intended to be predictive of potential future results. Investors should not consider non-GAAP financial measures in isolation or as substitutes for performance measures calculated in accordance with GAAP.

Our management uses and relies on EBITDA and Adjusted EBITDA, which are non-GAAP financial measures. We believe that both management and shareholders benefit from referring to the following non-GAAP financial measures in planning, forecasting and analyzing future periods. Our management uses these non-GAAP financial measures in evaluating its financial and operational decision making and as a means to evaluate period-to-period comparison. Our management recognizes that the non-GAAP financial measures have inherent limitations because of the described excluded items.

The Company defines Adjusted EBITDA as earnings (or loss) from operations before the items in the table below including non-recurring charges. Adjusted EBITDA is an important measure of our operating performance because it allows management, investors and analysts to evaluate and assess our core operating results from period-to-period after removing the impact of items of a non-operational nature that affect comparability.

We have included a reconciliation of our non-GAAP financial measures to the most comparable financial measure calculated in accordance with GAAP. We believe that providing the non-GAAP financial measures, together with the reconciliation to GAAP, helps investors make comparisons between us  and other companies. In making any comparisons to other companies, investors need to be aware that companies use different non-GAAP measures to evaluate their financial performance. Investors should pay close attention to the specific definition being used and to the reconciliation between such measure and the corresponding GAAP measure provided by each company under applicable SEC rules.

The following table presents a reconciliation of EBITDA and Adjusted EBITDA to net income (loss) allocable to common shareholders, a GAAP financial measure:

	Three Months Ended September 30,						Nine Months Ended September 30,
ADJUSTED EBITDA (Non-GAAP)	2018			2017			2018			2017
Net loss	$	(479,476	)	$	(384,983	)	$	(2,398,304	)	$	(1,198,079	)
Interest expenses (income), net		(1,084	)		5,000			(1,367	)		217,316
Amortization and depreciation		5,034			6,267			15,928			12,598
Total EBITDA (Non- GAAP)		(475,526	)		(373,716	)		(2,383,743	)		(968,165	)
Adjustments:
Stock based compensation		1			12,285			44,120			12,285
Fair value of options and warrants issued in exchange for services		44,151			104,694			270,339			440,664
Fair value of restricted stock and restricted stock units issued in exchange for services		160,077			-			395,481			-
Change in fair value of warrants					(1,783	)					(103,527	)
Change in fair value of embedded derivative liability											(79,420	)
Share-based payment for settlement agreement with shareholders		-			-			279,000			-
Cash payment for settlement agreement with shareholders		-			-			500,000			-
Total Adjusted EBITDA (Non-GAAP)	$	(271,297	)	$	(258,520	)	$	(894,803	)	$	(698,163	)

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Liquidity and Capital Resources

Our operations used $1,987,465 of cash during the nine months ended September 30, 2018 compared to $626,743 during the comparable period in 2017 due to a $500,000 payment made related to the Settlement Agreement and due to changes in operations occurring in the first half of 2017.

In March 2018, we made a financial strategic decision to end a future revenue sharing program, so that we could benefit entirely from future revenues.  To do this, we paid out cash in relation to the Settlement Agreement mentioned in Note 6 to the financial statements, of $500,000.  Management believes that the potential future savings that will be incurred by this transaction significantly outweigh the costs.

Cash used in investing activities was $46,913 during the nine months ended September 30, 2018 compared to nil during the nine months ended September 30, 2017. Cash used in investing activities primarily related to capitalized software costs.

Cash provided by financing activities during the nine months ended September 30, 2018, was $3,465,649 compared to $1,363,797 during the nine months ended September 30, 2017.  During the nine months ended September 30, 2018, the Company sold common stock for gross proceeds of $1,154,211.  Additionally, the Company raised $2,311,438 from the exercise of warrants.

As of October 31, 2018, we had approximately $1,957,000 of cash which we expect will meet our liquidity and working capital needs for more than the next 12 months. Ultimately, we must not only generate revenue from our technologies but we must generate positive cash flow from operations. If we do not, we will be required to raise more capital, which will likely be very dilutive or cease operating our current business.

Cautionary Note Regarding Forward-Looking Statements

This report includes forward-looking statements including statements regarding our product development and capabilities, and generation of revenue.

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.

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 complete development of our digital patents, to close sales leads, begin meaningful marketing of our products, and begin generating revenue from our products. Further information on our risk factors is contained in our filings with the SEC, including our annual report on Form 10-K for the year ended December 31, 2017. 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

None.

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.

Revenue Recognition

We account for revenues according to ASC Topic 606, “Revenue from Contracts with Customers” which establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers.

21

We apply the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:

· identify the contract with a customer;

· identify the performance obligations in the contract;

· determine the transaction price;

· allocate the transaction price to performance obligations in the contract; and

· recognize revenue as the performance obligation is satisfied.

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.

Recently Issued Accounting Pronouncements

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

22

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 three months ended September 30, 2018, 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, 2018, 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.

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.

In addition to those unregistered securities previously disclosed in filings with the SEC, we have issued shares of common stock which are not registered under the Securities Act of 1933, as described below.

The Company’s offer to holders of the Company’s outstanding $0.15 warrants to exercise their warrants at the reduced price of $0.10 expired on June 30, 2018. On July 19, 2018 the Company authorized certain holders (the “Extension Holders”) who had sent in their exercise notices prior to June 30, 2018, an extension until July 27, 2018 to submit payment. As of September 30, 2018, the Company received gross proceeds of $2,292 and has issued 22,924 shares to the Extension Holders.

On July 27, 2018 the Company cancelled 607,143 shares of common stock as a result of an over issuance from 2017.

On July 31, 2018, Laurence Blickman, one of our directors, exercised 1,439,524 warrants held by an entity under his control at an exercise price of $0.15 per share for a total price of $215,929.

On August 29, 2018, an investor cashlessly exercised 1,250,000 warrants and was issued 175,662 shares of the Company’s common stock.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

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ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6: EXHIBITS

EXHIBIT INDEX

		Incorporated by Reference			Filed or Furnished
Exhibit #	Exhibit Description	Form	Date	Number	Herewith
3.1	Articles of Incorporation, as amended	10-Q	August 19, 2015	3.1
3.2	Amended and Restated Bylaws of VerifyMe, Inc.	8-K	August 15, 2017	3.1
4.1	Second Amended Certificate of Designation for Series A Preferred Stock	8-K	June 18, 2015	3.2
4.2	Certificate of Designation for Series B Preferred Stock	8-K	June 18, 2015	3.3
10.1	Form of Consulting Agreement for Margaret Gezerlis*				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 and 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

* Management contract or compensatory plan or arrangement.

** 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.

+     Certain schedules, appendices and exhibits to this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule and/or exhibit will be furnished supplementally to the Securities and Exchange Commission staff upon request.

24

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, 2018	By: /S/ Patrick White
	Patrick White
	Chief Executive Officer
Date: November 14, 2018	By/S/ Margaret Gezerlis
	Margaret Gezerlis
	Chief Financial Officer

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EX-10.1

Exhibit 10.1

CFO CONSULTING AGREEMENT

CFO CONSULTING AGREEMENT entered into as of May 17, 2018 (this “Agreement”), between VerifyMe, Inc., a Nevada corporation (the “Company”), and Margaret Gezerlis (the “Consultant”).

WHEREAS, the Board of Directors of the Company desires to engage Consultant to provide consulting services, upon the terms and subject to the conditions hereinafter set forth; and

WHEREAS, the Consultant has agreed to provide such consulting services, upon the terms and subject to the conditions hereinafter set forth;

WHEREAS, the Company has agreed to and entered into a separate consulting service agreement for pre-audit services and SEC compliance services with The CFO Squad LLC dated January 9, 2018 (the “CFO Squad Agreement”);

NOW, THEREFORE, in consideration of the above premises and for other good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto agree as follows:

1. Independent Consultant. The Company, through the action of its Board of Directors (the “Board”), hereby engages the Consultant, and the Consultant will serve the Company, as a consultant. During the term of this Agreement, the Consultant will serve as the non-employee chief financial officer (“CFO”) of the Company on a part-time basis. The Company confirms that the Consultant has been duly appointed as the CFO of the Company and will remain as an executive officer of the Company during the term of this Agreement.

2. Duties, Term, and Compensation. The Consultant’s duties, term of engagement, compensation and provisions for payment thereof are detailed in the attached Exhibit A, which may be amended in writing from time to time by the Consultant and agreed to by the Company, and which collectively are hereby incorporated by reference. During the term of this agreement, the Consultant shall devote as much of her productive time, energy and abilities for the timely performance of her duties. The Company acknowledges that this Agreement only obligates the Consultant to serve a limited percent of her working time with the Company, that the Consultant has numerous other commitments. The Consultant is expressly free to perform services for other parties while performing services for the Company and is permitted to be employed by The CFO Squad LLC.

3. Out-of-Pocket Expenses. During the term of this Agreement, the Consultant shall bill and the Company shall promptly reimburse the Consultant for all reasonable and approved out-of-pocket expenses which are incurred in connection with the performance of the duties hereunder

4. Confidentiality. The Consultant acknowledges that during the engagement she will have access to and become acquainted with various trade secrets, inventions, innovations, processes, information, records and specifications owned or licensed by the Company and/or used by the Company in connection with the operation of its business including, without limitation, the Company’s business and product processes, methods, customer lists, accounts and procedures (“Confidential Information”). Except as may be required by the lawful order of a court or agency of competent jurisdiction including the whistleblower provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or except to the extent that Consultant has express authorization from the Company, the Consultant may not disclose any Confidential Information, directly or indirectly, or use any Confidential Information in any manner, during the term of this Agreement or at any time, except as required in the course of this engagement with the Company. Confidential Information does not include: (i) information which, at the time of disclosure is published, is known publicly or is otherwise in the public domain, through no fault of Consultant; (ii) information which, after disclosure is published or becomes known publicly or otherwise becomes part of the public domain, through no fault of Consultant; and (iii) information which is required to be disclosed in compliance with applicable laws or regulations or by order of a court or other regulatory body of competent jurisdiction. Nothing in this Agreement prevents Consultant from using, in connection with Consultant’s engagement for herself, or an employer other than the Company and its affiliates, knowledge which was acquired by Consultant during the course of Consultant’s engagement with the Company and its affiliates and which is generally known to persons of Consultant’s experience in other companies in the same industry.

5. Exclusive Property. All files, records, documents, blueprints, specifications, information, letters, notes, media lists, original artwork/creative, notebooks, and similar items relating to the business of the Company, whether prepared by the Consultant or otherwise coming into her possession, shall remain the exclusive property of the Company. The Consultant may not retain any copies of the foregoing without the Company’s prior written permission. Upon the expiration or earlier termination of this Agreement, or whenever requested by the Company, the Consultant shall immediately deliver to the Company all such files, records, documents, specifications, information, and other items in her possession or under her control.

6. Conflicts of Interest; Non-hire Provision. The Consultant represents that she is free to enter into this Agreement, and that this engagement does not violate the terms of any agreement between the Consultant and any third party. Further, the Consultant, in rendering her duties shall not utilize any invention, discovery, development, improvement, innovation, or trade secret in which she does not have a proprietary interest.

7. Merger. This Agreement automatically terminates upon the merger or consolidation of the Company into or with any other entity. As to the paragraphs of this Agreement that survive the termination or expiration of this Agreement, those paragraphs shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), assigns, heirs, fiduciaries and legal representatives.

8. Termination. Either party may terminate this Agreement at any time by thirty (30) days written notice to the other party, or earlier upon mutual agreement by the parties, but shall automatically terminate after thirty (30) days if for any reason the Company has terminated its CFO Squad Agreement for Pre-Audit Services and SEC Compliance Services.

9. Independent Consultant. This Agreement shall not render the Consultant an employee, partner, agent of, or joint venturer with the Company for any purpose. The Consultant is and will remain an independent Consultant in her relationship to the Company. The Company shall not be responsible for withholding taxes with respect to the Consultant’s compensation hereunder. The Consultant shall have no claim against the Company hereunder or otherwise for vacation pay, sick leave, retirement benefits, social security, worker’s compensation, health or disability benefits, unemployment insurance benefits, or employee benefits of any kind.

10. Successors and Assigns. All of the provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, if any, successors, and assigns.

11. Choice of Law. The laws of the state of New York shall govern the validity of this Agreement, the construction of its terms and the interpretation of the rights and duties of the parties hereto. The parties shall bring any action or proceeding arising out of or in connection with this Agreement only in the state or federal court located in New York, New York (the “New York Courts”), and not in any other state or federal court in the United States of America or any court in any other country; consent to submit to the exclusive jurisdiction of the New York Courts for purposes of any action or proceeding arising out of or in connection with this Agreement; waive any objection to the laying of venue of any such action or proceeding in the New York Courts; and waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the New York Courts has been brought in an improper or inconvenient forum.

12. Headings. Section headings are not to be considered a part of this Agreement and are not intended to be a full and accurate description of the contents hereof.

13. Waiver. Waiver by one party hereto of breach of any provision of this Agreement by the other shall not operate or be construed as a continuing waiver.

14. Assignment. The Consultant shall not assign any of her rights under this Agreement, or delegate the performance of any of her duties hereunder, without the prior written consent of the Company.

15. Notices. Any and all notices, demands, or other communications required or desired to be given hereunder by any party shall be in writing and shall be validly given or made to another party if personally served, or if deposited in the United States mail, certified or registered, postage prepaid, return receipt requested. If such notice or demand is served personally, notice shall be deemed constructively made at the time of such personal service. If such notice, demand or other communication is given by mail, such notice shall be conclusively deemed given five days after deposit thereof in the United States mail addressed to the party to whom such notice, demand or other communication is to be given as follows:

If to the Consultant:	Margaret Gezerlis 585 Stewart Avenue, L-30 Garden City, New York
If to the Company:	VerifyMe, Inc. Attn: Patrick White, President / CEO 75 S. Clinton Ave, Suite 510 Rochester, NY 14604

Any party hereto may change its address for purposes of this paragraph 16 by written notice given in the manner provided above.

16. Modification or Amendment. No amendment, change or modification of this Agreement shall be valid unless in writing signed by the parties hereto.

17. Entire Understanding. This document and any exhibit attached constitute the entire understanding and agreement of the parties, and any and all prior agreements, understandings, and representations are hereby terminated and canceled in their entirety and are of no further force and effect.

18. Unenforceability of Provisions. If any provision of this Agreement, or any portion thereof, is held to be invalid and unenforceable, then the remainder of this Agreement shall nevertheless remain in full force and effect.

IN WITNESS WHEREOF the undersigned have executed this Agreement as of the day and year first written above. The parties hereto agree that facsimile signatures shall be as effective as if originals.

VerifyMe, Inc.	Margaret Gezerlis
By: /s/ Patrick White	By:

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

I, Patrick White, certify that:

1.             I have reviewed this quarterly report on Form 10-Q of VerifyMe, Inc.;

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, 2018

/s/ Patrick White

Patrick White

Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

I, Margaret Gezerlis, certify that:

1.             I have reviewed this quarterly report on Form 10-Q of VerifyMe, Inc.;

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, 2018

/s/ Margaret Gezerlis

Margaret Gezerlis

Chief Financial Officer

(Principal 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 the quarterly report of VerifyMe, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2018, as filed with the Securities and Exchange Commission on the date hereof, I, Patrick White, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The quarterly 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 the quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Patrick White

Patrick White

Chief Executive Officer

(Principal Executive Officer)

Dated: November 14, 2018

In connection with the quarterly report of VerifyMe, Inc. (the “Company”) on Form 10-Q for the quarter ended September 30, 2018, as filed with the Securities and Exchange Commission on the date hereof, I, Margaret Gezerlis, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The quarterly 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 the quarterly report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Margaret Gezerlis

Margaret Gezerlis

Chief Financial Officer

(Principal Financial Officer)

Dated: November 14, 2018

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Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2018	Nov. 02, 2018
Document And Entity Information
Entity Registrant Name	VerifyMe, Inc.
Entity Central Index Key	0001104038
Document Type	10-Q
Trading Symbol	VRME
Document Period End Date	Sep. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Ex Transition Period	false
Entity's Reporting Status Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		102,203,166
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2018

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Balance Sheets (Unaudited) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
CURRENT ASSETS
Cash and cash equivalents	$ 2,124,272	$ 693,001
Accounts Receivable	28,462
Prepaid expenses and other current assets	18,668	18,668
Inventory	35,102
TOTAL CURRENT ASSETS	2,206,504	711,669
OTHER ASSETS
Patents and Trademarks, net of accumulated amortization of $253,259 and $237,331 as of September 30, 2018 and December 31, 2017	192,269	191,507
Capitalized Software	30,223
TOTAL ASSETS	2,428,996	903,176
CURRENT LIABILITIES
Accounts payable and accrued expenses	442,737	923,202
Notes payable		50,000
Common Stock payable		122,478
TOTAL CURRENT LIABILITIES	442,737	1,095,680
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock of $.001 par value; 675,000,000 authorized; 102,546,708 and 53,873,872 issued, 102,196,168 and 53,523,332 shares outstanding as of September 30, 2018 and December 31, 2017	102,196	53,522
Additional paid in capital	60,726,539	56,198,126
Treasury stock as cost (350,540 shares at September 30, 2018 and December 31, 2017)	(113,389)	(113,389)
Accumulated deficit	(58,729,392)	(56,331,088)
STOCKHOLDERS' EQUITY (DEFICIT)	1,986,259	(192,504)
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	2,428,996	903,176
Series A Convertible Preferred Stock [Member]
STOCKHOLDERS' EQUITY (DEFICIT)
Convertible Preferred Stock	305	325
Series B Convertible Preferred Stock [Member]
STOCKHOLDERS' EQUITY (DEFICIT)
Convertible Preferred Stock

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Balance Sheets (Unaudited) (Parenthetical) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Accumulated amortization, patent and trademarks	$ 253,259	$ 237,331
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	675,000,000	675,000,000
Common stock, shares issued	102,546,708	53,873,872
Common stock, shares outstanding	102,196,168	53,523,332
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	37,564,767	37,564,767
Preferred stock, shares issued	304,778	324,778
Preferred stock, shares outstanding	304,778	324,778
Series B Convertible Preferred Stock [Member]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	85	85
Preferred stock, shares issued	0.85	0.92
Preferred stock, shares outstanding	0.85	0.92

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Statements of Operations (Unaudited) - USD ($)		3 Months Ended		9 Months Ended
		Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017
NET REVENUE
Sales		$ 28,273	$ 392	$ 35,072	$ 392
COST OF SALES		12,281		14,281
GROSS PROFIT		15,992	392	20,791	392
OPERATING EXPENSES
General and administrative	[1]	357,665	242,401	1,378,999	872,767
Legal and accounting		64,897	51,926	362,371	143,132
Payroll expenses	[1]	77,664	71,898	269,518	114,960
Research and development		73,843	15,933	102,272	33,243
Sales and marketing		9,150		17,217
Total Operating expenses		583,219	382,158	2,130,377	1,164,102
LOSS BEFORE OTHER INCOME (EXPENSE)		(567,227)	(381,766)	(2,109,586)	(1,163,710)
OTHER (EXPENSE) INCOME
Interest (expenses) income, net		1,084	(5,000)	1,367	(217,316)
Gain on derecognition of note payable and accrued interest		86,667		86,667
Settlement agreement with shareholders				(779,000)
Gain on accounts payable forgiveness				402,248
Change in fair value of warrants			1,783		103,527
Change in fair value of embedded derivative liability					79,420
TOTAL OTHER INCOME (EXPENSE)		87,751	(3,217)	(288,718)	(34,369)
NET LOSS		$ (479,476)	$ (384,983)	$ (2,398,304)	$ (1,198,079)
LOSS PER SHARE
BASIC (in dollars per share)		$ (0.00)	$ (0.01)	$ (0.03)	$ (0.06)
DILUTED (in dollars per share)		$ (0.00)	$ (0.01)	$ (0.03)	$ (0.06)
WEIGHTED AVERAGE COMMON SHARE OUTSTANDING
BASIC (in shares)		101,186,416	42,642,914	91,453,702	21,355,120
DILUTED (in shares)		101,186,416	42,642,914	91,453,702	21,355,120

[1] Includes share-based compensation of $204,227 and $709,940 for the three and nine months ended September 30, 2018 and $101,229 and $452,949 for the three and nine months ended September 30, 2017.

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Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (2,398,304)	$ (1,198,079)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation	44,120	12,285
Fair value of options and warrants issued in exchange for services	270,339	440,664
Fair value of restricted stock and restricted stock units issued in exchange for services	395,481
Gain on accounts payable forgiveness	(402,248)
Share-based payment for settlement agreement with shareholders	279,000
Gain on derecognition of note payable and accrued interest	(86,667)
Accretion of discount on notes payable		204,516
Change in fair value of warrant liability		(103,527)
Change in fair value of embedded derivative liability		79,420
Amortization and depreciation	15,928	12,598
Changes in operating assets and liabilities:
Accounts Receivable	(28,462)
Inventory	(35,102)	(14,904)
Prepaid expenses		(12,348)
Accounts payable and accrued expenses	(41,550)	111,472
Net cash used in operating activities	(1,987,465)	(626,743)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Patents	(16,690)
Capitalized Software Costs	(30,223)
Net cash used in investing activities	(46,913)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from exercise of warrants	2,311,438
Proceeds from issuance of notes payable		281,000
Proceeds from sale of common stock	1,154,211	1,100,250
Stock issuance costs		(17,453)
Net cash provided by financing activities	3,465,649	1,363,797
NET INCREASE IN CASH AND CASH EQUIVALENTS	1,431,271	737,054
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD	693,001	22,644
CASH AND CASH EQUIVALENTS - END OF PERIOD	2,124,272	759,698
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for: Interest
Cash paid during the year for: Income taxes
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Cashless Exercise of Stock Options	4,028
Cashless Exercise of Warrants	176
Common Stock and Warrants Issued for Common Stock Payable	122,478
Deemed divided distribution on issuance of common stock for conversion of Series C and Series D		525,630
Revaluation of embedded derivative liability upon conversion of Series C Convertible preferred stock		137,625
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 to common stock		80,750
Conversion of notes payable and accrued expenses to common stock		396,101
Series A Convertible Preferred Stock [Member]
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Convertible Preferred Stock converted to common stock	400	1,060
Series B Convertible Preferred Stock [Member]
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Convertible Preferred Stock converted to common stock	599
Series C Convertible Preferred Stock [Member]
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Convertible Preferred Stock converted to common stock		12,014
Revaluation of embedded derivative liability upon conversion of Series C Convertible preferred stock		137,625
Revaluation of warrant liability upon conversion of Series C Convertible Preferred Stock		189,383
Series D Convertible Preferred Stock [Member]
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 Series C Convertible preferred stock		11,673
Revaluation of warrant liability upon conversion of Series C Convertible Preferred Stock		$ 43,105

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2018

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, is traded on the over-the-counter market and quoted on the OTCQB.

The Company is a technology pioneer in the anti-counterfeiting industry. This broad market encompasses counterfeiting of physical and material goods and products, as well as counterfeiting of identity in digital transactions. The Company 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 physical transactions and owns digital patents which are in the same field. The products can be used to manage and issue secure credentials, including national IDs, passports, driver licenses and access control credentials, as well as comprehensive authentication security software to secure physical and logical access to facilities, computer networks, internet sites and mobile applications.

The accompanying unaudited interim financial statements (the “Interim Statements”) have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and disclosures required by Generally Accepted Accounting Principles (“GAAP”) for complete financial statements are not included herein. The Interim Statements should be read in conjunction with the financial statements and notes thereto included in the Company’s latest Annual Report on Form 10-K for the year ended December 31, 2017 as filed with the Securities and Exchange Commission (the “SEC”) on April 16, 2018.  The accompanying interim financial statements are unaudited; however, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The interim results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018 or for any future interim periods.

The Company’s activities are subject to significant risks and uncertainties, including the need to secure additional funding to further develop the Company’s patents.

Basis of Presentation

The accompanying financial statements are presented in accordance with GAAP.

Revenue Recognition

The Company accounts for revenues according to ASC Topic 606, “Revenue from Contracts with Customers” which establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers.

The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:

· identify the contract with a customer;

· identify the performance obligations in the contract;

· determine the transaction price;

· allocate the transaction price to performance obligations in the contract; and

· recognize revenue as the performance obligation is satisfied.

During the three and nine months ended September 30, 2018, the Company’s revenues were primarily made up of revenue generated from printing labels with the Company’s technology.

Basic and Diluted Net Income per Share of Common Stock

The Company follows FASB ASC 260, “Earnings Per Share,” when reporting Earnings Per Share resulting in the presentation of basic and diluted earnings per share.  Because the Company reported a net loss for each of the periods presented, common stock equivalents, including preferred stock, stock options and warrants were anti-dilutive; therefore, the amounts reported for basic and diluted loss per share were the same.

For the three and nine months ended September 30, 2018 and 2017, there were shares potentially issuable, 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 years presented.

For the three and nine months ended September 30, 2018 there were approximately 41,237,000 anti-dilutive shares consisting of 18,014,000 shares issuable upon exercise of options, 9,909,000 shares issuable upon exercise of warrants and 13,314,000 shares issuable upon conversion of preferred stock.  For the three and nine months ended September 30, 2017 there were approximately 71,987,000 anti-dilutive shares consisting of 22,014,000 shares issuable upon exercise of options, 35,264,000 shares issuable upon exercise of warrants, and 14,709,000 shares issuable upon conversion of preferred stock.

Recently Issued Accounting Pronouncements Not Yet Adopted

As of September 30, 2018, there are no recently issued accounting standards not yet adopted which would have a material effect on the Company’s financial statements through September 30, 2018.

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OTHER ASSETS

9 Months Ended

Sep. 30, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

OTHER ASSETS

NOTE 2 – OTHER ASSETS

Patents and Trademarks

The current granted patent portfolio consists of 10 granted U.S. patents, 3 pending patents applications, one registered trademark and four pending trademark applications. The Company has recently received notice that one of its core printing technology patents has been granted in the European Union and will issue in approximately eight designated countries. Management has also conducted a review of its intellectual patent portfolio and determined that several of the applications, even if issued, would not be central to the pursuit of the Company’s anti-counterfeiting and diversion business and thus not cost effective hence the Company did not continue to pursue the applications. Accordingly, costs associated with the registration and legal defense of these patents have been capitalized and are amortized on a straight-line basis over the estimated lives of the patents which were determined to be 17 to 19 years.   During the nine months ended September 30, 2018 and 2017, the Company capitalized $16,690 and $0 of patent costs and trademarks. Amortization expense for patents and trademarks was $5,034 and $6,267 for the three months ended September 30, 2018 and 2017 and $15,928 and $12,598 for the nine months ended September 30, 2018 and 2017.

Capitalized Software

Costs incurred in connection with the development of software related to our proprietary digital products are accounted for in accordance with the Financial Accounting Standards Board Accounting Standards Codification ("ASC") 985 “Costs of Software to Be Sold, Leased or Marketed.” Costs incurred prior to the establishment of technological feasibility are charged to research and development expense. Software development costs are capitalized after a product is determined to be technologically feasible and is in the process of being developed for market. Amortization of capitalized software development costs begins once the product is available to the market. Capitalized software development costs are amortized over the estimated life of the related product, generally three years, using the straight-line method. The Company will evaluate its software assets for impairment whenever events or change in circumstances indicate that the carrying amount of such assets may not be recoverable. As of September 30, 2018, the Company capitalized $30,223. As of December 31, 2017, the Company had not capitalized any software development costs.

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NOTES PAYABLE

9 Months Ended

Sep. 30, 2018

Notes Payable [Abstract]

NOTES PAYABLE

NOTE 3 – NOTES PAYABLE

Notes payable consist of the following as of September 30, 2018 and December 31, 2017:

	September 30,		December 31,
	2018		2017
Series A notes payable; interest at 8% per annum; principal and accrued interest due at maturity in October 2011 (past due)		-		50,000
Net		-		50,000
Less: Current portion		-		(50,000	)
	$	-	$	-

At September 30, 2018 and December 31, 2017 accrued interest on notes payable was $0 and $33,667.

On October 28, 2009 the Company issued an unsecured note payable for $50,000. The note and accrued interest at 8% per annum were due in full in October 2011.  The holder has never demanded payment. Since the note matured on September 30, 2011, the holder cannot commence an action to enforce payment of the note as the statute of limitations for the note expired on September 30, 2017. Applying guidance from ASC Topic 405-20, liabilities should be derecognized only when the obligor is legally released from the obligation, which occurred for the Company upon expiration of the statute of limitations. The carrying value of the note payable of $50,000 and accrued interest of $36,667 was derecognized in the three months ended September 30, 2018 and recorded as ‘Gain on derecognition of note payable and accrued interest’ and included in the Statement of Operations.

As of December 31, 2017, 1,749,683 shares of common stock and 1,749,683 shares underlying warrants issuable upon conversion for $120,000 principal and $2,478 accrued interest had not yet been issued in relation to the conversion of related party note payable held by a member of the Board, and as such the amount has been recorded as Common Stock payable included on the Balance Sheets as of December 31, 2017. During the nine months ended September 30, 2018, those shares of common stock and warrants were issued and delivered.

Pursuant to ASC 470-50- 40 Modifications and Extinguishments, the Company assessed the nature of the transaction and based on its assessment concluded it is a capital transaction in essence, and as such accounted for it through Additional Paid-In Capital with no gain or loss recognized in the Income Statement during the period.

Interest expense including accretion of debt discount for the three and nine months ended September 30, 2018 was $1,000 and $3,000.  Interest expense including accretion of debt discount for the three and nine months ended September 30, 2017 was $1,000 and $205,516. 

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CONVERTIBLE PREFERRED STOCK

9 Months Ended

Sep. 30, 2018

CONVERTIBLE PREFERRED STOCK [Abstract]

CONVERTIBLE PREFERRED STOCK

NOTE 4 – CONVERTIBLE PREFERRED STOCK

The Company has outstanding Series A Preferred Stock (the “Series A”) and Series B Preferred Stock (the “Series B”). As of September 30, 2018, there were 37,564,767 authorized and 304,778 outstanding shares of Series A and 85 authorized and 0.85 outstanding shares of Series B. Each share of Series A and B has limited voting rights, is entitled to participate with the common stock on liquidation and holders of Series A and B have beneficial ownership limitations.

Series A Convertible Preferred Stock

During the nine months ended September 30, 2018, 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

During the nine months ended September 30, 2018, 0.07 shares of Series B Convertible Preferred Stock were converted into 599,362 shares of the Company’s Common Stock.

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STOCKHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2018

Equity [Abstract]

STOCKHOLDERS' EQUITY

NOTE 5 – STOCKHOLDERS’ EQUITY

For the three and nine months ended September 30, 2018 the Company expensed $0 and $8,625 relative to restricted stock units.  The Company did not have any expenses related to restricted stock units for the three and nine months ended September 30, 2017.

During the nine months ended September 30, 2018, 37,500 restricted stock units were vested in relation to a consulting service agreement and a total of $8,625 was expensed.

During the nine months ended September 30, 2018, the Company granted a total of 600,000 restricted stock awards to two directors of the Company, each receiving 300,000 shares of restricted common stock, for joining the Board of Directors. On April 25, 2018 the Company approved the immediate vesting of all of the Company’s outstanding restricted common stock issued in 2017 and 2018 to non-employee directors of the Company.

During the nine months ended September 30, 2018, the Company granted a total of 1,425,000 shares of restricted common stock to the directors and the Chief Executive Officer of the Company for their services and 150,000 shares to one attorney, vesting over a one-year period.

For the three and nine months ended September 30, 2018, the Company expensed $160,077 and $386,856 relative to restricted common stock.  For the three and nine months ended September 30, 2017 the Company expensed $12,285 and $12,285, respectively.

On September 8, 2017, the Company entered into a consulting agreement stipulating partial payment in restricted common stock.  During the three and nine months ended September 30, 2018, 49,500 and 169,500 shares have been issued in relation to this agreement.  These shares were valued at the closing price of the Company’s common stock as they became due for a total expense of $44,120 for the nine months ended September 30, 2018.

In 2017 the Company authorized a private placement with a maximum offering amount of $2,100,000 allowing investors to purchase units consisting of 715,000 shares of common stock and 715,000 five-year warrants exercisable at $0.15 per share.  In January 2018 the Company’s Board of Directors increased the size of the private placement by an additional amount beyond the $2,100,000 limit. During the nine months ended September 30, 2018 the Company raised gross proceeds of $1,154,211 for the purchase of 16,513,311 shares of common stock and 16,513,311 warrants. Of these amounts, gross proceeds of $530,777 for the purchase of 7,590,111 shares of common stock and 7,590,111 warrants related to directors and relatives of the directors of the Company.

In January 2018, the Chairman of the Board of Directors, made a cashless exercise of 5,000,000 options related to services in 2017, whereby the Chairman disposed of 972,222 shares to the Company as part of his exercise, amounting to an issuance of 4,027,778 shares, see Note 6.

On January 30, 2018, the Company authorized a 30-day offer, beginning on February 20, 2018, to the holders of the Company’s outstanding warrants exercisable at $0.15 to exercise their warrants at $0.10 per share.  This authorization was extended until June 30, 2018.  The Company authorized certain holders, who had sent in their exercise notices prior to June 30, 2018, to submit payment before July 27, 2018 and exercise their warrants at $0.10 per share. For the nine months ended September 30, 2018, 20,787,784 warrants were exercised and a total of 20,787,784 shares of common stock were issued for gross proceeds of $2,078,778. Included in the above amounts are gross proceeds of $1,205,458 from directors in exchange for exercise of 12,054,576 warrants and issuance of 12,054,576 shares of common stock.

In January 2018, a member of the Board exercised 104,876 warrants with an exercise price of $0.15 and a total of 104,876 shares of common stock were issued for gross proceeds of $15,731.

On March 31, 2018, the Company entered into a Confidential Settlement Agreement (the “Settlement Agreement”) with Paul Klapper, a member of the Company’s Board, Stephen Silver, PFK Development Group, Ltd. (“PFKD”) and certain other parties named in the Settlement Agreement. Pursuant to the terms of the Settlement Agreement, the Company (i) paid a total of $500,000 (the “Settlement Amount”) to PFKD and Mr. Silver and (ii) issued them each 500,000 shares of the Company’s common stock (the “Settlement Shares”). The shares were valued at $279,000 whereby $139,500 related to common stock issued to a related party and $139,500 related to common stock issued to a third party. The Settlement Agreement provides for cancellation as of March 31, 2018 of certain revenue sharing agreements between the Company and each of Mr. Klapper, Mr. Silver and PFKD, and terminates the Company’s obligation to issue warrants to purchase 3.7 million shares of the Company’s common stock at an exercise price of $0.40 per share. Mr. Klapper joined the Board of Directors on July 14, 2017 and resigned as of March 31, 2018.

In January 2018, the Company issued 1,749,683 shares of common stock and 1,749,683 warrants with an exercise price of $0.15 to Mr. Klapper relating to the Note payable conversion that took place in June 2017.

 On March 28, 2018, the Company accelerated the vesting of 150,000 shares of restricted common stock owned by Mr.  Klapper.

In April 2018, the former Chief Executive Officer of the Company exercised his warrants at an exercise price of $0.01 for gross proceeds of $1,000 resulting in an issuance of 100,000 shares.

On July 27, 2018 the Company cancelled 607,143 shares as a result of an over-issuance of shares to an investor in connection with the Company’s 2017 exchange.

On July 31, 2018, a member of the Board exercised 1,439,524 warrants held by an entity under his control at an exercise price of $0.15 per share for a total price of $215,929.

In August 2018, a warrant holder, made a cashless exercise of 366,047 warrants, whereby the warrant holder disposed of 190,386 shares to the Company as part of this exercise, amounting to an issuance of 175,661 shares, see Note 6.

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STOCK OPTIONS, RESTRICTED STOCK AND WARRANTS

9 Months Ended

Sep. 30, 2018

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

STOCK OPTIONS, RESTRICTED STOCK AND WARRANTS

NOTE 6– STOCK OPTIONS, RESTRICTED STOCK AND WARRANTS

During 2013, the Company adopted a new incentive compensation plan (the “2013 Plan”). Under the 2013 Plan, the Company is authorized to grant awards of stock options, restricted stock, restricted stock units and other stock-based awards of up to an aggregate of 20,000,000 shares of common stock.  The 2013 Plan is intended to permit stock options granted to employees under the 2013 Plan to qualify as Incentive Stock Options.  All options granted under the 2013 Plan, which are not intended to qualify as Incentive Stock Options are deemed to be Non-Statutory Stock Options.  

On November 14, 2017, the Executive Committee of the Company’s Board of Directors (the “Executive Committee”) adopted the 2017 Equity Incentive Plan (the “Plan”) which covers the potential issuance of 13 million shares of common stock. The Plan provides that directors, officers, employees, and consultants of the Company will be eligible to receive equity incentives under the Plan at the discretion of the Board or the Compensation Committee. The Compensation Committee may adopt rules and regulations to carry out the terms of the Plan. The Plan terminates on November 14, 2027 unless sooner terminated.

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

In connection with Incentive Stock Options, the exercise price of each option may not be less than 100% of the fair market value of the common stock on the date of the grant (or 110% of the fair market value in the case of a grantee holding more than 10% of the outstanding stock of the Company).

Incentive Stock Options under all plans of the Company shall not exceed $1,000,000 per calendar year. If any employee shall have the right to first exercise any options in excess of $100,000 during any calendar year, the options in excess of $100,000 shall be deemed to be Non-Statutory Stock Options, including prices, duration, transferability and limitations on exercise.

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

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

During the three and nine months ended September 30, 2018 the Company expensed $44,151 and $270,339 with respect to options.  For the three and nine months ended September 30, 2017, the Company expensed $101,229 and $452,949 with respect to the options. 

The following table presents the weighted-average assumptions used to estimate the fair value of the stock options granted during the nine months ended September 30, 2018:

Risk Free Interest Rate		2.54	%
Expected Volatility		202.25	%
Expected Life (in years)		5.0
Dividend Yield		0	%
Weighted average estimated fair value of
options during the period	$	0.26

	Options Outstanding
						Weighted -
						Average
						Remaining		Aggregate
				Weighted-		Contractual		Intrinsic
	Number of			Average		Term		Value
	Shares			Exercise Price		(in years)		(1)
Balance as of December 31, 2017		22,013,529		$	0.11
Granted		1,000,000			0.21
Exercised		(5,000,000	)		0.07
Balance September 30, 2018		18,013,529		$	0.13
Exercisable at September 30, 2018		16,513,529		$	0.13		4.1	$	4,269,150

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock for options that were in-the-money at each respective period.  As of September 30, 2018, the aggregate intrinsic value of options exercisable under the Company’s stock option plans was $4,269,150.

In the nine months ended September 30, 2018, the Company amended the consulting agreement held with its Chief Operating Officer and granted him 1,000,000 stock options with an exercise price of $0.2102 with 500,000 stock options vesting immediately and the remaining 500,000 stock options vesting on February 28, 2019 subject to continuing to provide consulting services.

In January 2018, the Chairman of the Board made a cashless exercise of 5,000,000 options related to services in 2017, whereby the Chairman disposed of 972,222 shares to the Company as part of his exercise, amounting to an issuance of 4,027,778 shares, see Note 6.

The following table summarizes the activities for the Company’s unvested stock options for the nine months ended September 30, 2018:

	Unvested Options
				Weighted -
				Average
				Grant
	Number of Unvested			Date Exercise Price
	Options
Balance December 31, 2017		2,666,666		$	0.06
Granted		1,000,000			0.21
Vested		(2,166,666	)		0.09
Balance September 30, 2018		1,500,000		$	0.12

The following table summarizes the activities for the Company’s warrants for the nine months ended September 30, 2018:

	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, 2017		32,292,580		$	0.30
Granted		18,262,994			0.15
Exercised		(22,798,231	)		0.10
Expired		(1,019,608	)		0.07
Cancelled/Forfeited		(4,950,000	)		0.40
Balance, September 30, 2018		21,787,735		$	0.27		4.0
Exercisable at September 30, 2018		21,787,735		$	0.27		4.0	$	4,741

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the closing stock price of $0.36 for our common stock on September 30, 2018.

For the nine months ended September 30, 2018, the Company has received gross proceeds of $1,154,211 for the purchase of 16,513,311 shares of common stock and 16,513,311 warrants in relation to the private placement.  See Note 5.

In January 2018, the Company issued 1,749,683 shares of common stock and 1,749,683 warrants with an exercise price of $0.15 to Mr. Klapper relating to the Note payable conversion that took place in June 2017.  Additionally, 3,700,000 warrants were forfeited. See Note 5.

For the nine months ended September 30, 2018, 20,787,784 shares of warrants were exercised and a total of 20,787,784 shares of common stock were issued for gross proceeds of $2,078,778. See Note 5.

In January 2018, a member of the Board exercised 104,876 warrants with an exercise price of $0.15 and a total of 104,876 shares of common stock were issued for gross proceeds of $15,731, see Note 5.

In April 2018, the former Chief Executive Officer of the Company exercised 100,000 warrants at an exercise price of $0.01 for gross proceeds of $1,000 resulting in an issuance of 100,000 shares.

On July 31, 2018, a member of the Board exercised 1,439,524 warrants held by an entity under his control at an exercise price of $0.15 per share for a total price of $215,929. See note 5.

In August 2018, a warrant holder, made a cashless exercise of 366,047 warrants, whereby the warrant holder disposed of 190,386 shares to the Company as part of this exercise, amounting to an issuance of 175,661 shares, see Note 5.

During the nine months ended September 30, 2018 an additional 1,250,000 warrants were forfeited in relation to a note payable conversion occurring in the prior year.

All warrants were vested on the date of grant.

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DEBT FORGIVENESS

9 Months Ended

Sep. 30, 2018

Debt Forgiveness

DEBT FORGIVENESS

NOTE 7 – DEBT FORGIVENESS

During the nine months ended September 30, 2018 the Company negotiated with certain vendors regarding balances outstanding for prior year services resulting in a Gain on accounts payable forgiveness included in the Statement of Operations for $402,248.

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CONCENTRATIONS

9 Months Ended

Sep. 30, 2018

Concentrations

CONCENTRATIONS

NOTE 8 – CONCENTRATIONS

Revenue

For the three and nine months ended September 30, 2018, two customers represented more than 10.0% of revenues.

Accounts Receivable

As of September 30, 2018, two customers represented more than 10.0% of consolidated accounts receivable.

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SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2018

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

NOTE 9 – SUBSEQUENT EVENTS

[None will be update before filing]

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2018

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, is traded on the over-the-counter market and quoted on the OTCQB.

The Company is a technology pioneer in the anti-counterfeiting industry. This broad market encompasses counterfeiting of physical and material goods and products, as well as counterfeiting of identity in digital transactions. The Company 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 physical transactions and owns digital patents which are in the same field. The products can be used to manage and issue secure credentials, including national IDs, passports, driver licenses and access control credentials, as well as comprehensive authentication security software to secure physical and logical access to facilities, computer networks, internet sites and mobile applications.

The accompanying unaudited interim financial statements (the “Interim Statements”) have been prepared pursuant to the rules and regulations for reporting on Form 10-Q. Accordingly, certain information and disclosures required by Generally Accepted Accounting Principles (“GAAP”) for complete financial statements are not included herein. The Interim Statements should be read in conjunction with the financial statements and notes thereto included in the Company’s latest Annual Report on Form 10-K for the year ended December 31, 2017 as filed with the Securities and Exchange Commission (the “SEC”) on April 16, 2018.  The accompanying interim financial statements are unaudited; however, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The interim results for the three and nine months ended September 30, 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018 or for any future interim periods.

The Company’s activities are subject to significant risks and uncertainties, including the need to secure additional funding to further develop the Company’s patents.

Basis of Presentation

Basis of Presentation

The accompanying financial statements are presented in accordance with GAAP.

Revenue Recognition

Revenue Recognition

The Company accounts for revenues according to ASC Topic 606, “Revenue from Contracts with Customers” which establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity's contracts to provide goods or services to customers.

The Company applies the following five steps in order to determine the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements:

· identify the contract with a customer;

· identify the performance obligations in the contract;

· determine the transaction price;

· allocate the transaction price to performance obligations in the contract; and

· recognize revenue as the performance obligation is satisfied.

During the three and nine months ended September 30, 2018, the Company’s revenues were primarily made up of revenue generated from printing labels with the Company’s technology.

Basic and Diluted Net Income per Share of Common Stock

Basic and Diluted Net Income per Share of Common Stock

The Company follows FASB ASC 260, “Earnings Per Share,” when reporting Earnings Per Share resulting in the presentation of basic and diluted earnings per share.  Because the Company reported a net loss for each of the periods presented, common stock equivalents, including preferred stock, stock options and warrants were anti-dilutive; therefore, the amounts reported for basic and diluted loss per share were the same.

For the three and nine months ended September 30, 2018 and 2017, there were shares potentially issuable, 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 years presented.

For the three and nine months ended September 30, 2018 there were approximately 41,237,000 anti-dilutive shares consisting of 18,014,000 shares issuable upon exercise of options, 9,909,000 shares issuable upon exercise of warrants and 13,314,000 shares issuable upon conversion of preferred stock.  For the three and nine months ended September 30, 2017 there were approximately 71,987,000 anti-dilutive shares consisting of 22,014,000 shares issuable upon exercise of options, 35,264,000 shares issuable upon exercise of warrants, and 14,709,000 shares issuable upon conversion of preferred stock.

Recently Issued Accounting Pronouncements Not Yet Adopted

Recently Issued Accounting Pronouncements Not Yet Adopted

As of September 30, 2018, there are no recently issued accounting standards not yet adopted which would have a material effect on the Company’s financial statements through September 30, 2018.

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NOTES PAYABLE (Tables)

9 Months Ended

Sep. 30, 2018

Notes Payable [Abstract]

NOTES PAYABLE

Notes payable consist of the following as of September 30, 2018 and December 31, 2017:
 

	September 30,		December 31,
	2018		2017
Series A notes payable; interest at 8% per annum; principal and accrued interest due at maturity in October 2011 (past due)		-		50,000
Net		-		50,000
Less: Current portion		-		(50,000	)
	$	-	$	-

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STOCK OPTIONS, RESTRICTED STOCK AND WARRANTS (Tables)

9 Months Ended

Sep. 30, 2018

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

Schedule of weighted-average assumptions used to estimate the fair value of the stock options granted

The following table presents the weighted-average assumptions used to estimate the fair value of the stock options granted during the nine months ended September 30, 2018:

Risk Free Interest Rate		2.54	%
Expected Volatility		202.25	%
Expected Life (in years)		5.0
Dividend Yield		0	%
Weighted average estimated fair value of
options during the period	$	0.26

Schedule of stock option activity

	Options Outstanding
						Weighted -
						Average
						Remaining		Aggregate
				Weighted-		Contractual		Intrinsic
	Number of			Average		Term		Value
	Shares			Exercise Price		(in years)		(1)
Balance as of December 31, 2017		22,013,529		$	0.11
Granted		1,000,000			0.21
Exercised		(5,000,000	)		0.07
Balance September 30, 2018		18,013,529		$	0.13
Exercisable at September 30, 2018		16,513,529		$	0.13		4.1	$	4,269,150

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock for options that were in-the-money at each respective period.  As of September 30, 2018, the aggregate intrinsic value of options exercisable under the Company’s stock option plans was $4,269,150.

Summary of the activities of unvested stock options

The following table summarizes the activities for the Company’s unvested stock options for the nine months ended September 30, 2018: 

	Unvested Options
				Weighted -
				Average
				Grant
	Number of Unvested			Date Exercise Price
	Options
Balance December 31, 2017		2,666,666		$	0.06
Granted		1,000,000			0.21
Vested		(2,166,666	)		0.09
Balance September 30, 2018		1,500,000		$	0.12

Schedule of warrant activity

The following table summarizes the activities for the Company’s warrants for the nine months ended September 30, 2018:

	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, 2017		32,292,580		$	0.30
Granted		18,262,994			0.15
Exercised		(22,798,231	)		0.10
Expired		(1,019,608	)		0.07
Cancelled/Forfeited		(4,950,000	)		0.40
Balance, September 30, 2018		21,787,735		$	0.27		4.0
Exercisable at September 30, 2018		21,787,735		$	0.27		4.0	$	4,741

(1) The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the closing stock price of $0.36 for our common stock on September 30, 2018.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - $ / shares	3 Months Ended		9 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Common stock, par value	$ 0.001		$ 0.001		$ 0.001
Anti-dilutive common stock equivalents, excluded from the calculation of earnings per share	41,237,000	71,987,000	41,237,000	71,987,000
Preferred share agreements [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive common stock equivalents, excluded from the calculation of earnings per share	13,314,000	14,709,000	13,314,000	14,709,000
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive common stock equivalents, excluded from the calculation of earnings per share	9,909,000	35,264,000	9,909,000	35,264,000
Employee Stock Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive common stock equivalents, excluded from the calculation of earnings per share	18,014,000	22,014,000	18,014,000	22,014,000

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OTHER ASSETS (Details Narrative)	3 Months Ended		9 Months Ended
	Sep. 30, 2018 USD ($) Number	Sep. 30, 2017 USD ($)	Sep. 30, 2018 USD ($) Number	Sep. 30, 2017 USD ($)
Finite-Lived Intangible Assets [Line Items]
Capitalized Software Costs | $			$ 30,223
Patents [Member]
Finite-Lived Intangible Assets [Line Items]
Number of patents granted	10		10
Number of pending patents	3		3
Number of trademarks	1		1
Number of pending trademarks	4		4
Amortization method			Straight-line basis
Capitalized patent costs and trademarks | $			$ 16,690	$ 0
Patents [Member] | Maximum [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated lives of intangible assets			19 years
Patents [Member] | Minimum [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated lives of intangible assets			17 years
Computer Software [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated lives of intangible assets			3 years
Trademarks [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization method			Straight-line basis
Patents And Trademark [Member]
Finite-Lived Intangible Assets [Line Items]
Amortization expense | $	$ 5,034	$ 6,267	$ 15,928	$ 12,598

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NOTES PAYABLE (Details) - USD ($)	Sep. 30, 2018	Dec. 31, 2017
Short-term Debt [Line Items]
Net		$ 50,000
Less: Current portion		(50,000)
Notes payable, noncurrent
8% Series A Notes Payable Due on October 2011 [Member]
Short-term Debt [Line Items]
Net		$ 50,000

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NOTES PAYABLE (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Dec. 31, 2017	Oct. 28, 2009
Short-term Debt [Line Items]
Accrued interest	$ 36,667		$ 36,667		$ 33,667
Notes Payable					50,000
Interest expense	(1,084)	$ 5,000	(1,367)	$ 217,316
Debt Interest					2,478
Conversion of issuable of common stock					$ 120,000
Gain on Derecognition Of Note Payable And Accrued Interest [Member]
Short-term Debt [Line Items]
Accrued interest	33,667		33,667
Notes Payable	50,000		50,000
8% Unsecured Note Payable Due on October 2011 [Member]
Short-term Debt [Line Items]
Face amount						$ 50,000
Interest expense	$ 1,000	$ 1,000	$ 3,000	$ 205,516
Common Stock [Member]
Short-term Debt [Line Items]
Conversion of shares issuable of common stock					1,749,683
Warrant [Member]
Short-term Debt [Line Items]
Conversion of shares issuable of common stock					1,749,683

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CONVERTIBLE PREFERRED STOCK (Details Narrative) - shares	9 Months Ended
	Sep. 30, 2018	Dec. 31, 2017
Preferred stock, voting rights	<p><font style="font: 10pt Times New Roman, Times, Serif">Each share of Series A and B has limited voting rights, is entitled to participate with the common stock on liquidation and holders of Series A and B have beneficial ownership limitations.</font></p>
Series A Convertible Preferred Stock [Member]
Convertible Preferred Stock, authorized (in shares)	37,564,767	37,564,767
Convertible Preferred Stock, outstanding (in shares)	304,778	324,778
Conversion of stock, shares converted (in shares)	20,000
Conversion of shares of preferred stock to common stock (in shares)	400,000
Series B Convertible Preferred Stock [Member]
Convertible Preferred Stock, authorized (in shares)	85	85
Convertible Preferred Stock, outstanding (in shares)	0.85	0.92
Conversion of stock, shares converted (in shares)	0.07
Conversion of shares of preferred stock to common stock (in shares)	599,362

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STOCKHOLDERS' EQUITY (Details Narrative) - USD ($)					1 Months Ended		3 Months Ended		9 Months Ended				12 Months Ended
	Aug. 31, 2018	Jul. 31, 2018	Jul. 27, 2018	Mar. 31, 2018	Apr. 30, 2018	Jan. 31, 2018	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2017	Dec. 31, 2017	Mar. 28, 2018
Common stock issued							102,546,708		102,546,708	102,546,708			53,873,872
Proceeds from issuance of convertible stock										$ 2,311,438
Share-based payment for settlement agreement with shareholders										279,000
Shares issued during period value										$ 1,154,211
Shares issued during period										16,513,311
Exercised total share price										22,798,231
Third Party [Member]
Share-based payment for settlement agreement with shareholders				$ 279,000
Related Party [Member]
Share-based payment for settlement agreement with shareholders				$ 139,500
Board of Director [Member]
Proceeds from issuance of convertible stock										$ 2,079,102
Issuance of shares cashless exercise of options related to services						4,027,778
Chairman of Board [Member]
Disposed shares related to services						972,222
Private Placement [Member]
Proceeds From Issuance of Private Placement										1,154,211			$ 2,100,000
Number of share cancelled			607,143
Private Placement [Member] | Board of Director [Member]
Proceeds From Issuance of Private Placement						$ 2,100,000				$ 530,777
Common Stock [Member] | Common stock and warrant [Member]
Common stock sold										16,513,311			715,000
Warrant term													5 years
Common Stock [Member] | Board of Director [Member]
Shares issued to convert accounts payable						1,749,683
Common stock sold										20,791,023
Proceeds from issuance of convertible stock										$ 12,054,576
Exercise price (in dollars per share)						$ 0.15
Restricted stock awards granted										300,000
Common Stock [Member] | Board of Director [Member] | Common stock and warrant [Member]
Common stock sold										7,590,111
Warrant [Member]
Exercise price (in dollars per share)													$ 0.15
Shares issued during period										16,513,311
Warrant [Member] | Common stock and warrant [Member]
Common stock sold										16,513,311			715,000
Warrant term													5 years
Warrant [Member] | Board of Director [Member]
Shares issued to convert accounts payable						1,749,683
Common stock sold										20,787,784
Proceeds from issuance of convertible stock										$ 1,205,458
Exercise price (in dollars per share)		$ 0.15	$ 0.10			$ 0.15
Shares issued during period value										$ 2,078,778
Shares issued during period										20,787,784
Exercised total share price		1,439,524
Exercised total price		$ 215,929
Number of cashless exercise of warrants	366,047
Number of disposed share	190,386
Number of issuance share	175,661
Warrant [Member] | Board of Director [Member] | Common stock and warrant [Member]
Common stock sold										7,590,111
Warrant [Member] | Officer [Member]
Proceeds from issuance of convertible stock						$ 15,731
Warrants exercisable Price						$ 0.15
Stock issued						104,876
Employee Stock Option [Member] | Board of Director [Member]
Issuance of shares cashless exercise of options related to services						5,000,000
Restricted Stock Units (RSUs) [Member] | Consulting service agreement [Member]
Restricted stock units, Expense							$ 0			$ 8,625
Restricted stock of vested, shares										37,500
Restricted stock of vested, amount										8,625
Restricted Stock Units (RSUs) [Member] | Consultant [Member]
Restricted stock units issued							49,500			169,500
Restricted stock units fair value										$ 44,120
Restricted Stock [Member]
Option vesting														150,000
Restricted Stock [Member] | Consulting service agreement [Member]
Option foreited to purchase common stock								12,285	160,077	386,856		12,285
Restricted Stock [Member] | Two Director [Member]
Restricted stock awards granted										600,000
Restricted Stock [Member] | Director and Chief Executive Officer [Member]
Restricted stock of vested, shares									150,000
Restricted stock awards granted									1,425,000
Restricted stock awards granted term									1 year
Chief Executive Officer [Member] | Employee Stock Option [Member] | Warrant [Member]
Exercise price (in dollars per share)					$ 0.01
Shares issued during period value					$ 1,000
Shares issued during period					100,000
Settlement Agreement [Member] | Board of Director [Member]
Number of common stock called by warrants (in shares)				3,700,000
Common stock issued				500,000
Exercise price (in dollars per share)				$ 0.40
Amount of Settlement paid				$ 500,000
Share-based payment for settlement agreement with shareholders				$ 139,500

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STOCK OPTIONS, RESTRICTED STOCK AND WARRANTS (Details)	9 Months Ended
	Sep. 30, 2018 $ / shares
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Risk Free Interest Rate	2.54%
Expected Volatility	202.25%
Expected Life (in years)	5 years
Dividend Yield	0.00%
Weighted average estimated fair value of options during the period	$ 0.26

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STOCK OPTIONS, RESTRICTED STOCK AND WARRANTS (Details 1) - Employee Stock Option [Member]	9 Months Ended
	Sep. 30, 2018 USD ($) $ / shares shares
Number of Shares
Balance, beginning | shares	22,013,529
Granted | shares	1,000,000
Exercised | shares	(5,000,000)
Balance, ending | shares	18,013,529
Exercisable | shares	16,513,529
Weighted Average Exercise Price
Balance, beginning | $ / shares	$ 0.11
Granted | $ / shares	0.21
Exercised | $ / shares	0.07
Balance, ending | $ / shares	0.13
Exercisable | $ / shares	$ 0.13
Weighted Average Remaining Contractual Term
Exercisable	4 years 1 month 6 days
Aggregate Intrinsic Value
Exercisable | $	$ 4,269,150	[1]

[1] The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company's common stock for options that were in-the-money at each respective period. As of September 30, 2018, the aggregate intrinsic value of options exercisable under the Company's stock option plans was $4,269,150.

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STOCK OPTIONS, RESTRICTED STOCK AND WARRANTS (Details 2) - Nonvested Stock Options [Member]	9 Months Ended
	Sep. 30, 2018 $ / shares shares
Number of Shares
Balance, Beginning | shares	2,666,666
Granted | shares	1,000,000
Vested | shares	(2,166,666)
Balance, Ending | shares	1,500,000
Weighted-Average Grant Date Exercise Price
Balance, Beginning | $ / shares	$ 0.06
Granted | $ / shares	0.21
Vested | $ / shares	0.09
Balance, Ending | $ / shares	$ 0.12

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STOCK OPTIONS, RESTRICTED STOCK AND WARRANTS (Details 3)	9 Months Ended
	Sep. 30, 2018 USD ($) $ / shares shares
Number of Shares
Balance, beginning | shares	32,292,580
Granted | shares	18,262,994
Exercised | shares	(22,798,231)
Expired | shares	(1,019,608)
Cancelled/Forfeited | shares	(4,950,000)
Balance, ending | shares	21,787,735
Exercisable | shares	21,787,735
Weighted Average Exercise Price
Balance, beginning	$ 0.30
Granted	0.15
Exercised	0.10
Expired	0.07
Cancelled/Forfeited	0.40
Balance, ending	0.27
Exercisable	$ 0.27
Weighted - Average Remaining Contractual Term
Balance, ending	4 years
Exercisable	4 years
Aggregate Intrinsic Value:
Exercisable | $	$ 4,741,000	[1]
Closing stock price	$ 0.36

[1] The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the closing stock price of $0.36 for our common stock on September 30, 2018.

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STOCK OPTIONS, RESTRICTED STOCK AND WARRANTS (Details Narrative) - USD ($)				1 Months Ended		3 Months Ended		9 Months Ended
	Feb. 28, 2019	Aug. 31, 2018	Jul. 31, 2018	Apr. 30, 2018	Jan. 31, 2018	Sep. 30, 2018	Sep. 30, 2017	Sep. 30, 2018	Sep. 30, 2017	Jul. 27, 2018	Dec. 31, 2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option, expense						$ 44,151	$ 101,229	$ 270,339	$ 452,949
Shares issued during period value								$ 1,154,211
Shares issued during period								16,513,311
Chairman of Board [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Disposed shares related to services					972,222
Board of Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issuance of shares cashless exercise of options related to services					4,027,778
Shares issued in conversion of debt					1,749,683
Warrant [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares issued during period								16,513,311
Exercise price (in dollars per share)											$ 0.15
Warrants exercised								1,250,000
Warrant [Member] | Member of Board [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares issued during period value			$ 215,929		$ 15,731
Shares issued during period			1,439,524		104,876
Exercise price (in dollars per share)			$ 0.15		$ 0.15
Warrants exercised					104,876
Warrant [Member] | Board of Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares issued during period value								$ 2,078,778
Shares issued during period								20,787,784
Shares issued in conversion of debt					1,749,683
Exercise price (in dollars per share)			$ 0.15		$ 0.15					$ 0.10
Forfeited warrants					3,700,000
Warrants exercised								20,787,784
Number of cashless exercise of warrants		366,047
Number of disposed share		190,386
Number of issuance share		175,661
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise price, description								<p style="margin: 0pt"></p> <p style="color: #000000; font: 10pt Times New Roman, Times, Serif; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">In connection with Incentive Stock Options, the exercise price of each option may not be less than 100% of the fair market value of the common stock on the date of the grant (or 110% of the fair market value in the case of a grantee holding more than 10% of the outstanding stock of the Company). </font></p> <p style="color: #000000; font: 10pt Times New Roman, Times, Serif; text-align: justify"><font style="font: 10pt Times New Roman, Times, Serif">Incentive Stock Options under all plans of the Company shall not exceed $1,000,000 per calendar year. If any employee shall have the right to exercise any options in excess of $100,000 during any calendar year, the options in excess of $100,000 shall be deemed to be Non-Statutory Stock Options, including prices, duration, transferability and limitations on exercise.</font></p>
Granted								1,000,000
Warrants exercised								5,000,000
Employee Stock Option [Member] | Board of Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issuance of shares cashless exercise of options related to services					5,000,000
Stock Options, Restricted Stock and Units, and Other Stock-based Awards [Member] | Stock Option 2013 Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares authorized to be granted under plan						20,000,000		20,000,000
Chief Executive Officer [Member] | Employee Stock Option [Member] | Warrant [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares issued during period value				$ 1,000
Shares issued during period				100,000
Exercise price (in dollars per share)				$ 0.01
Warrants exercised				100,000
Chief Operating Officer [Member] | Employee Stock Option [Member] | Consulting Agreement [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vested								500,000
Granted								1,000,000
Exercise price (in dollars per share)						$ 0.2102		$ 0.2102
Chief Operating Officer [Member] | Employee Stock Option [Member] | Consulting Agreement [Member] | Subsequent Event [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vested	500,000

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DEBT FORGIVENESS (Details)	9 Months Ended
	Sep. 30, 2018 USD ($)
Debt Forgiveness
Gain on accounts payable forgiveness	$ 402,248

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CONCENTRATIONS (Details Narrative)	3 Months Ended	9 Months Ended
	Sep. 30, 2018	Sep. 30, 2018
Customer Concentration Risk One [Member] | Revenues [Member]
Concentration risk, percentage	10.00%	10.00%
Customer Concentration Risk One [Member] | Accounts Receivable [Member]
Concentration risk, percentage		10.00%
Customer Concentration Risk Two [Member] | Revenues [Member]
Concentration risk, percentage	10.00%	10.00%
Customer Concentration Risk Two [Member] | Accounts Receivable [Member]
Concentration risk, percentage		10.00%

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SUBSEQUENT EVENTS (Details Narrative) - shares		9 Months Ended
	Nov. 02, 2018	Sep. 30, 2018
Subsequent Event [Line Items]
Shares issued during period		16,513,311
Subsequent Event [Member] | Investor [Member | Warrant [Member]
Subsequent Event [Line Items]
Number of cashless exercise of warrants	11,678
Shares issued during period	6,998