UNITED STATES
SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
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| For the quarterly period ended March 31, |
☐ | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
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| For the transition period from |
STRIKEFORCE TECHNOLOGIES, INC. |
(Exact name of registrant as specified in its Charter) |
| 000-55012 |
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| 22-3827597 | ||
(State or other jurisdiction of incorporation or organization) | (Commission file number) |
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Identification No.) |
1090 King Georges Post Road, Suite 603
Edison, NJ 08837
(Address of Principal Executive Offices)
(732) 661-9641
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each class |
| Name of each exchange on which registered |
N/A |
| N/A |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, | SFOR | OTCQB |
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes No ☒ No
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 ☒ YesNo ☐ No
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 a shorter period that the registrant was required to submit and post such files). Yes ☒ YesNo ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 | ☐ | Smaller reporting company | ☒ |
Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Class |
| Outstanding at May |
Common stock, $0.0001 par value |
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Indicate the number of shares outstanding of each of the issuer’s classes of preferred stock, as of the latest practicable date.
Class |
| Outstanding at May |
Preferred stock, Series A, no par value |
| 3 |
Class |
| Outstanding at May |
Preferred stock, Series B, $0.10 par value |
| 36,667 |
Transitional Small Business Disclosure Format Yes ☐ No ☒
Documents Incorporated By Reference
None
STRIKEFORCE TECHNOLOGIES, INC.
INDEX TO FORM 10-Q FILING
MARCH 31, 20212022
STRIKEFORCE TECHNOLOGIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
See accompanying notes to the condensed consolidated financial statements.
STRIKEFORCE TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
See accompanying notes to the condensed consolidated financial statements.
STRIKEFORCE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (Unaudited) Three months ended March 31, 2022
See accompanying notes to the condensed consolidated financial statements.
STRIKEFORCE TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (Unaudited) Three months ended March 31, 2021
See accompanying notes to the condensed consolidated financial statements.
STRIKEFORCE TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
See accompanying notes to the condensed consolidated financial statements.
StrikeForce Technologies, Inc. Notes to the Condensed Consolidated Financial Statements Three months ended March 31,
Note 1 - Organization and Summary of Significant Accounting Policies
StrikeForce Technologies, Inc. (the “Company”) is a software development and services company that offers a suite of integrated computer network security products using proprietary technology. The Company’s operations are based in Edison, New Jersey.
Basis of
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods have been included. The results of operations for the three months ended March 31,
The condensed consolidated financial statements include the accounts of the Company and its subsidiary, BlockSafe Technologies, Inc. (“BST”). BST is owned 49% by the Company and 31% by three executive officers of the Company. BST meets the definition of a variable interest entity (“VIE”) and based on the determination that the Company is the primary beneficiary of At March 31,
Going Concern We have yet to establish any history of profitable operations. During the three months ended March 31, 2022, the Company incurred a net loss of $2,867,000 and used cash in operating activities of $1,060,000, and at March 31, 2022, the Company had a stockholders’ deficit of $12,814,000. In addition, we are in default on notes payable and convertible notes payable in the aggregate amount of $2,861,000. These factors raise substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued. In addition, the Company’s independent registered public accounting firm, in its report published on our December 31, 2021 year-end financial statements, raised substantial doubt about the Company’s ability to continue as a going concern. The Company’s financial statements do not include any adjustments that might result from the outcome of this uncertainty should we be unable to continue as a going concern. Management estimates that the current funds on hand will be sufficient to continue operations through the next six months. Our ability to continue as a going concern is dependent upon our ability to continue to implement our business plan. Currently, management is attempting to increase revenues by selling through a channel of distributors, value added resellers, strategic partners and original equipment manufacturers. While we believe in the viability of its strategy to increase revenues, there can be no assurances to that effect. Our ability to continue as a going concern is dependent upon our ability to increase our customer base and realize increased revenues. No assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing, if needed, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing. COVID-19
In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, has adversely affected workforces, customers, economies, and financial markets globally. It has also disrupted the normal operations of many businesses. This outbreak could decrease spending, adversely affect demand for the Company’s products, and harm the Company’s business and results of operations.
During the three months ended March 31,
The Company has been following the recommendations of health authorities to minimize exposure risk for its team members during the pandemic, including the temporary closure of its corporate office and having team members work remotely.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include those related to accounting for financing obligations, assumptions used in valuing stock instruments issued for services, assumptions used in valuing derivative liabilities, the valuation allowance for deferred tax assets, and the accrual of potential liabilities. Actual results could differ from those estimates.
Revenue Recognition
The Company follows the guidance of Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.
The Company’s revenue consists of revenue from sales and support of our software products. Revenue primarily consists of sales of software licenses of our ProtectID®, GuardedID®, MobileTrust® and SafeVchat™ products. The Company
The Company offers no discounts, rebates, rights of return, or other allowances to clients which would result in the establishment of reserves against service revenue. Additionally, to date, the Company has not incurred incremental costs in obtaining customer contracts.
Cost of revenue includes direct costs and fees related to the sale of our products.
The following tables present our revenue disaggregated by major product and service lines:
Fair Value of Financial Instruments
The Company follows the authoritative guidance issued by the Financial Accounting Standards Board (“FASB”) for fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels as follows:
Level 1—Quoted prices in active markets for identical assets or liabilities. Level 2—Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly. Level 3—Unobservable inputs based on the
The Company is required to use of observable market data if such data is available without undue cost and effort.
The Company believes the carrying amounts reported in the balance sheet for accounts receivable, accounts payable, accrued expenses, convertible notes, and notes payables approximate fair values because of the short-term nature of these financial instruments.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The Company evaluates embedded conversion features within its convertible debt to determine whether the embedded conversion features should be bifurcated from the host instrument and accounted for as a derivative. The fair value of the embedded derivatives are determined using
Stock-Based Compensation
The Company periodically issues stock options, warrants, and shares of common stock as share-based compensation to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for such grants issued and vesting based on FASB ASC 718, Compensation – Stock Compensation (Topic 718) whereby the value of the award is measured on the date of grant and recognized as compensation expense on the straight-line basis over the vesting period. The Company recognizes the fair value of stock-based compensation within its Statements of Operations with classification depending on the nature of the services rendered.
The fair value of the Company’s stock options and warrants are estimated using the Black-Scholes-Merton
Loss per Share
Basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding, plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued using the treasury stock method. Diluted loss per share excludes all potential common shares if their effect is anti-dilutive. The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive:
Concentrations
For the three months ended March 31, 2022, sales to four customers comprised 38%, 26%, 11% and 10% of revenues. For the three months ended March 31, 2021, sales to two customers comprised
The Company maintains the majority of its cash balances with one financial institution, in the form of demand deposits. At March 31,
Segments
The Company operates in one segment for the development and distribution of our software products. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base, single sales team, marketing department, customer service department, operations department, finance and accounting department to support its operations and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying financial statements.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments
Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the
Note 2 - Convertible Notes Payable
Convertible notes payable consisted of the following:
At March 31, 2022 and December 31, 2021, the outstanding balance of unsecured convertible notes payable amounted to $895,000, respectively and deemed in default. The convertible notes payable, including accrued interest are convertible to approximately thirteen shares of the Company’s common stock. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Note 3 - Convertible Notes Payable – Related Parties
In previousprior years, the Company issued unsecured convertible notes to related parties/officersits Chief Executive Officer (CEO) in exchange for cash and/or services rendered. The notes are unsecured and are due on December 31, 2021. The notes are unsecured, and have due dates of December 31, 2021, as amended. Certain notes payable are due to the Company’s Chief Executive Officer and have a compounded interest rate of 8% per annum.annum and will mature on December 31, 2022, as amended. The aggregate notes are convertible by the note holders into approximately less than one share of the Company’s common stock at fixed conversion prices adjusted for applicable reverse stock splits.splits that occurred in prior years. As of March 31, 2022 and December 31, 2020,2021, the outstanding balance of the notes payable amounted to $298,000.
During the three months ended$268,000. As of March 31, 2021,2022, the convertible notes payable, aggregating $30,000 were repaid. At March 31, 2021,including accrued interest are convertible to approximately six shares of the balance of convertible notes payable-related parties totaled $268,000.Company’s common stock.
Note 4 - Notes Payable
Notes payable consisted of the following:
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| March 31, 2021 |
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| December 31, 2020 |
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Unsecured notes |
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(a) Notes payable-$1,639,000 in default |
| $ | 1,699,000 |
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| $ | 1,699,000 |
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(b) Notes payable issued by BST-in default |
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| 350,000 |
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| 475,000 |
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(c) Note payable-PPP loans |
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| 490,000 |
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| 313,000 |
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(d) Note payable-EID loan |
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| 150,000 |
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| 150,000 |
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Secured notes payable |
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(e) Notes payable ($5,000 in default at March 31, 2021) |
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| 56,000 |
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| 128,000 |
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Total notes payable principal outstanding |
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| 2,745,000 |
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| 2,765,000 |
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Debt discount |
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| (29,000 | ) |
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| (52,000 | ) |
Less current portion of notes payable, net of discount |
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| (2,076,000 | ) |
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| (2,250,000 | ) |
Long term notes payable |
| $ | 640,000 |
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| $ | 463,000 |
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| March 31, 2022 |
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| December 31, 2021 |
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Unsecured notes |
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(a) Notes payable- $1,639,000 - in default |
| $ | 1,639,000 |
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| $ | 1,639,000 |
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(b) Notes payable issued by BST - in default |
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| 310,000 |
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| 310,000 |
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(c) Note payable-EID loan |
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| 150,000 |
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| 150,000 |
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Secured notes payable |
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(d) Notes payable - in default |
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| 16,000 |
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| 23,000 |
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Total notes payable principal outstanding |
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| 2,115,000 |
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| 2,122,000 |
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Less current portion of notes payable, net of discount |
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| (1,965,000 | ) |
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| (1,972,000 | ) |
Long term notes payable |
| $ | 150,000 |
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| $ | 150,000 |
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(a) | In previous years, the Company issued notes payable in exchange for cash. The notes are unsecured, bear interest at a rate of 8% through 14% per annum and matured starting in fiscal 2011 up to November 2021. | |
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(b) | In fiscal 2018, the Company’s consolidated subsidiary BlockSafe, issued promissory notes in exchange for cash. The notes are unsecured, bearing interest at a rate of 8% per annum, and matured in September 2019. At | |
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(c) |
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| On May 15, 2020, the Company received a $150,000 loan (the “EID Loan”) from the | |
Outstanding balance of the note payable as of March 31, 2022 and December 31, 2021 amounted to $150,000, respectively. The Company was in compliance with the terms of the EID loan as of March 31, |
| In fiscal 2019 and 2020, the Company issued notes payable aggregating $468,000. The notes bear interest at a rate starting from 8% to 148% per annum, each agreement secured by substantially all of the assets of the Company, maturing between March 2020 and July 2021. The Company also made principal payments of $319,000, and one secured note of $21,000 was extinguished as part of a debt settlement obligation transaction. At December 31, | |
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At March 31, |
Note 5 - Notes Payable – Related PartiesParty
Notes payable-related partiesparty notes represent unsecured notes payable to the Company’s Chief Executive Officer (CEO) ranging in interest rates of 0% per annum to 10% per annum.annum and will mature on December 31, 2022, as amended. The notes are unsecured and the outstanding balance of these notes payable at March 31, 2022 and December 31, 20202021 amounted to $952,000.
During the three months ended March 31, 2021, the Company made payments of $259,000.
At March 31, 2021, the balance of notes payable-related parties totaled $693,000, which are all due to the Company’s Chief Executive Officer. The notes are due on December 31, 2021.respectively.
Note 6 -– Financing Obligation
The Company is in the process of developing Coins or Tokens which are an envisioned virtual currency. In fiscal 2018, the Company’s consolidated subsidiary BlockSafe (BST), issued promissory notes to unrelated parties aggregating $776,000. As part of issuance, the Company agreed to pay a financing obligation to the note holders equal to the note principal in tokens, as defined, to be issued by BlockSafe. In addition, the Company also agreed to issue tokens to an unrelated party in exchange for cash of $50,000. As of December 31, 2018, outstanding balance of the financing obligation amounted to $826,000 to be paid by tokens to be issued by BlockSafe.
During the year ended December 31, 2019, BlockSafe agreed to issue tokens to unrelated parties in exchange for cash of $122,000. In addition, certain note holders of promissory notes issued by BlockSafe agreed to exchange $315,000 of outstanding principal and accrued interest into the financing obligation to be paid by tokens to be issued by BlockSafe.
At March 31, 20212022 and December 31, 2020,2021, the outstanding balance of financing obligations amounted to $1,263,000, respectively, to be paid in tokens, as defined. At March 31, 20212022 and through the date of filing, BST has not developed or issued any tokens and there is no assurance as to whether, or at what amount, or on what terms, tokens will be available to be issued, if ever. At March 31, 2021,2022, as the tokens do not exist, and any amounts received for tokens are not considered equity or revenue, management determined that 100% of the obligation of $1,263,000 is a liability to be settled by BST, through the issuance of tokens, or through other means if tokens are never issued.
Note 7 -– Contingent Payment Obligation
On September 6, 2017, the Company entered into a litigation funding agreement with Therium Inc. (subsequently Therium Luxembourg) and VGL Capital, LLC (collectively the “Funders”). Under the agreement, the Company received $1,500,000 from the Funders to allow the Company to pursue patent enforcement actions against infringements of its patents. In exchange, the Funders are entitled to receive, after the payment of legal fees, the first $1,500,000 from the gross proceeds of any claims awarded, 10% of any additional claim proceeds until the Funders have received an additional $7,500,000, and 2.5% of any claim proceeds thereafter. The Funders shall be paid only in the event that the Company achieves recoveries of claim proceeds.
At DecemberMarch 31, 20202022 and MarchDecember 31, 2021, the Company has reflected the $1,500,000 received from the Funders as a contingent payment obligation to be paid only if claim proceeds are recovered.
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Note 8 - Derivative Financial Instruments
In prior years, the Company issued convertible notes payable whose conversion shares were not explicitly limited. As a result, the Company was unable to conclude that it had enough authorized and unissued shares available to settle the conversion option. The result was that the conversion option was bifurcated from the debt host and accounted for as a derivative liability in accordance with ASC 815, and re-measured at the end of every reporting period with the change in value reported in the statement of operations. Furthermore, since the number of shares to be issued to settle the conversion option was potentially unlimited, the Company would be unable to conclude that it has sufficient authorized and available shares to satisfy other commitments to issue shares if it did not have a sequencing policy. The Company has not adopted, documented and disclosed a sequencing approach that allows its other equity linked financial instruments and conversion options to be classified as equity if they meet the requirements of ASC 815.
The derivative liability was valued using a Monte Carlo valuation method through the assistance of a valuations specialist. The Monte Carlo valuation method uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the conversion features, and future dividends. The Monte Carlo method is used in corporate finance and mathematical finance to value and analyze (complex) instruments, portfolios and investments by simulating the various sources of uncertainty affecting their value, and then determining the distribution of their value over the range of resultant outcomes. This is usually done by help of stochastic asset models. At December 31, 2020, the balance of the derivative liabilities was $163,000.
During the three months ended March 31, 2021, the corresponding convertible notes payable were converted to equity (see Note 2 and 10). Pursuant to current accounting guidelines, the Company determined the fair value of the derivative liability one last time which amounted to $382,000 and as a result, the Company recorded a change in fair value of $219,000. The Company also extinguished the derivative liability of $382,000 as part of loss on debt extinguishment. At March 31, 2021, the Company has no more instruments accounted as derivative liabilities.
The fair value of the embedded derivative was determined using the following average assumptions:
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| January 2021 to March 2021 |
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| December 31, 2020 |
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Conversion feature: |
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Risk-free interest rate |
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| 0.08 | % |
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| 0.09 | % |
Expected volatility |
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| 424 | % |
| 495%-691% |
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Expected life (in years) |
| 0.41 year |
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| 0.25 to 0.57 year |
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Expected dividend yield |
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Fair Value: |
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Conversion feature |
| $ | 382,000 |
|
| $ | 163,000 |
|
The risk-free interest rate was based on rates established by the Federal Reserve Bank. The expected volatility is based on the historical volatility of the Company’s stock. The expected life of the conversion feature of the notes was based on the remaining terms of the related notes. The expected dividend yield was based on the fact that the Company has not customarily paid dividends to its common stockholders in the past and does not expect to pay dividends to its common stockholders in the future.
The following table sets forth a summary of the changes in the estimated fair value of our embedded derivative during the three months ended March 31, 2021 and 2020:
|
| Three months ended March 31, 2021 |
|
| Three months ended March 31, 2020 |
| ||
Fair value at beginning of period |
| $ | 163,000 |
|
| $ | 1,516,000 |
|
Recognition of derivative liabilities upon initial valuation |
|
| - |
|
|
| 535,000 |
|
Extinguishment of derivative liabilities |
|
| (382,000 | ) |
|
| (545,000 | ) |
Net change in the fair value of derivative liabilities |
|
| 219,000 |
|
|
| (199,000 | ) |
Fair value at end of period |
| $ | - |
|
| $ | 1,307,000 |
|
Note 9 - Operating Lease
In January 2019, the Company entered into a noncancelable operating lease for its office headquarters office requiring payments of approximately $4,000 per month, payments increasing 3% each year, and ending on January 31, 2024. At March 31, 2021,We determine if an arrangement is a lease at inception. Lease assets are presented as operating lease right-of-use assets and the remainingrelated liabilities are presented as lease term was 2.83 years. The Company does not have any other leases.liabilities in our consolidated balance sheets pursuant to ASC 842, Leases.
Operating lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The operating lease ROU asset includes any lease payments made and excludes lease incentives.
The components of lease expense and supplemental cash flow information related to leases for the period are as follows:
|
| Three months ended March 31, 2021 |
|
| Three months ended March 31, 2020 |
|
| Three months ended March 31, 2022 |
|
| Three months ended March 31, 2021 |
| ||||
Lease Cost |
|
|
|
|
|
|
|
|
|
| ||||||
Operating lease cost (included in general and administration in the Company’s statement of operations) |
| $ | 14,000 |
| $ | 14,000 |
|
| $ | 14,000 |
| $ | 14,000 |
| ||
|
|
|
|
|
|
|
|
|
|
| ||||||
Other Information |
|
|
|
|
|
|
|
|
|
| ||||||
Cash paid for amounts included in the measurement of lease liabilities for the three months ended March 31, 2021 and 2020 |
| $ | 14,000 |
| $ | 13,000 |
| |||||||||
Cash paid for amounts included in the measurement of lease liabilities for the three months ended March 31, 2022 and 2021 |
| $ | 14,000 |
| $ | 14,000 |
| |||||||||
Weighted average remaining lease term – operating leases (in years) |
| 2.8 |
| 3.8 |
|
| 1.8 |
| 2.8 |
| ||||||
Average discount rate – operating leases |
| 10.0 | % |
| 10.0 | % |
| 10.0 | % |
| 10.0 | % |
The supplemental balance sheet information related to leases for the period is as follows:
|
| At March 31, 2021 |
|
| At March 31, 2022 |
| ||
Operating leases |
|
|
|
|
|
| ||
Long-term right-of-use assets |
| $ | 145,000 |
|
| $ | 94,000 |
|
|
|
|
|
|
|
| ||
Short-term operating lease liabilities |
| $ | 51,000 |
|
| $ | 55,000 |
|
Long-term operating lease liabilities |
|
| 99,000 |
|
|
| 43,000 |
|
Total operating lease liabilities |
| $ | 150,000 |
|
| $ | 98,000 |
|
Maturities of the Company’s lease liabilities are as follows:
Year Ending |
| Operating Leases |
|
| Operating Leases |
| ||
2021 (9 months) |
| 42,000 |
| |||||
2022 |
| 58,000 |
| |||||
2022 (9 months) |
| 43,000 |
| |||||
2023 |
| 59,000 |
|
| 59,000 |
| ||
2024 |
|
| 5,000 |
|
|
| 5,000 |
|
Total lease payments |
| 164,000 |
|
| 107,000 |
| ||
Less: Imputed interest/present value discount |
|
| (14,000 | ) |
|
| (9,000 | ) |
Present value of lease liabilities |
| $ | 150,000 |
|
| $ | 98,000 |
|
Lease expenses were $14,000 and $14,000 during the three months ended March 31, 20212022 and 2020,2021, respectively.
Note 109 – Stockholders’ Deficit
Common Stock
During the three months ended March 31, 2021,2022, the Company issued an aggregate of 89,014,167134,853 shares of its common stock as follows:for consulting services, with a fair value of $6,000.
| ||
| ||
| ||
|
Table of Contents |
Warrants
The table below summarizes the Company’s warrant activities for the three months ended March 31, 2021:2022:
|
| Number of Warrant Shares |
|
| Exercise Price Range Per Share |
|
| Weighted Average Exercise Price |
| |||
|
|
|
|
|
|
|
|
|
| |||
Balance, January 1, 2021 |
|
| 27,405,475 |
|
| $ | 0.0045-2.90 |
|
| $ | 0.011676 |
|
Granted |
|
| - |
|
|
| - |
|
|
| - |
|
Canceled/Expired |
|
| (50,000 | ) |
|
| - |
|
|
| - |
|
Exercised |
|
| - |
|
|
| - |
|
|
| - |
|
Balance outstanding, March 31, 2021 |
|
| 27,355,475 |
|
| $ | 0.0045-2.90 |
|
| $ | 0.010327 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance exercisable, March 31, 2021 |
|
| 27,355,475 |
|
| $ | 0.0045-2.90 |
|
| $ | 0.010327 |
|
In March 2021, the Company issued 16,931,437 shares of common stock with a fair value of $3,239,000 in connection with the cancellation of warrants to purchase 50,000 shares of common stock that were granted in fiscal 2020 as part of a financing transaction. The common shares issued were valued at the date of issuance and recorded as a finance cost.
|
| Number of Warrant Shares |
|
| Exercise Price Range Per Share |
|
| Weighted Average Exercise Price |
| |||
|
|
|
|
|
|
|
|
|
| |||
Balance, January 1, 2022 |
|
| 68,981,234 |
|
| 0.0045-2.90 |
|
| $ | 0.042647 |
| |
Granted |
|
| - |
|
|
| - |
|
|
| - |
|
Canceled/Expired |
|
| - |
|
|
| - |
|
|
| - |
|
Exercised |
|
| - |
|
|
| - |
|
|
| - |
|
Balance, March 31, 2022 |
|
| 68,981,234 |
|
| $ | 0.0045-2.90 |
|
| $ | 0.042647 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance outstanding and exercisable, March 31, 2022 |
|
| 68,981,234 |
|
| $ | 0.0045-2.90 |
|
| $ | 0.042647 |
|
At March 31, 2021,2022, the intrinsic value of the warrants amounted to $2,623,000.$464,000.
The following table summarizes information concerning outstanding and exercisable warrants as of March 31, 2021:2022:
|
|
|
| Warrants Outstanding and Exercisable |
|
|
|
| Warrants Outstanding and Exercisable |
| ||||||||||||||||||
Range of Exercise Prices | Range of Exercise Prices |
|
| Number Outstanding |
|
| Average Remaining Contractual Life (in years) |
| Weighted Average Exercise Price |
| Range of Exercise Prices |
|
| Number Outstanding |
|
| Average Remaining Contractual Life (in years) |
| Weighted Average Exercise Price |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
$ | 0.0045 |
| 26,666,665 |
| 5.00 |
| $ | 0.0045 |
| 0.0045 |
| 13,349,242 |
| 4.00 |
| $ | 0.0045 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
$ | 0.085 |
| 588,235 |
| 5.00 |
| $ | 0.085 |
| 0.085 |
| 588,235 |
| 4.00 |
| $ | 0.085 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
$ | 0.75 |
| 83,333 |
| 5.00 |
| $ | 0.75 |
| 0.05 |
| 55,000,000 |
| 5.00 |
| $ | 0.05 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
$ | 2.90 |
| 17,242 |
| 5.00 |
| $ | 2.90 |
| 0.75 |
| 26,515 |
| 3.00 |
| $ | 0.75 |
| ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
$ | 0.0045 - $2.90 |
|
|
| 27,355,475 |
|
|
| 5.00 |
|
| $ | 0.010327 |
| 2.90 |
| 17,241 |
| 3.00 |
| $ | 2.90 |
| |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
$ | 0.0045 - $2.90 |
|
|
| 68,981,234 |
|
|
| 4.00 |
|
| $ | 0.042647 |
|
Note 11 -10 – Stock Options
The table below summarizes the Company’s stock option activities for the period January 1, 2021 tothree months ended March 31, 2021:2022:
|
| Number of Options Shares |
|
| Exercise Price Range Per Share |
|
| Weighted Average Exercise Price |
| |||
|
|
|
|
|
|
|
|
|
| |||
Balance, January 1, 2021 |
|
| 58,133,001 |
|
| $ | 0.005-1,121,250,000 |
|
| $ | 0.03704 |
|
|
| Number of Options Shares |
|
| Exercise Price Range Per Share |
|
| Weighted Average Exercise Price |
| |||||||||||||||
Balance, January 1, 2022 |
| 83,133,001 |
| 0.005- 1,121,250,000 |
| $ | 0.0274 |
| ||||||||||||||||
Granted |
| - |
| - |
| - |
|
| - |
| - |
| - |
| ||||||||||
Exercised |
| (17,500,000 | ) |
| $ | 0.005 |
| $ | 0.005 |
|
| - |
| - |
| - |
| |||||||
Expired |
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
|
| - |
|
Balance outstanding, March 31, 2021 |
|
| 40,633,001 |
|
| $ | 0.005-1,121,250,000 |
|
| $ | 0.05084 |
| ||||||||||||
Balance exercisable, March 31, 2021 |
|
| 23,365,241 |
|
| $ | 0.005-1,121,250,000 |
|
| $ | 0.05084 |
| ||||||||||||
Balance outstanding, March 31, 2022 |
|
| 83,133,001 |
|
| $ | 0.005- 1,121,250,000 |
|
| $ | 0.0274 |
| ||||||||||||
Balance exercisable, March 31, 2022 |
|
| 53,433,547 |
|
| $ | 0.005- 1,121,250,000 |
|
| $ | 0.0274 |
|
At March 31, 2021,2022, the intrinsic value of outstanding options was $4,000,000.
In February 2021, 12,250,000 unvested options granted in fiscal 2020 were modified and such options became fully vested. Pursuant to current accounting guidelines, the Company remeasured the fair value of these options and determined their fair value to be $3,675,000 and was recorded as stock compensation expense.$717,000.
During the period ended March 31, 2021,2022, the Company recorded additionalrecognized stock compensation expense of $1,555,000$1,636,000 to account forthe fair value of stock options granted in the prior year that vested. In addition, the Company also issued 17,208,335 shares of the Company’s common stock upon cashless exercise of 17,500,000 options. As of March 31, 2021, the unamortized2022, fair value of unvested stock compensationoptions amounted to approximately $1,157,000 which$1.3 million and will be recognized during the remainder of fiscal 2021.as stock compensation expense in future periods as it vests.
Table of Contents |
The following table summarizes information concerning the Company’s stock options as of March 31, 2021:2022:
|
|
|
| Options Outstanding |
| Options Exercisable |
|
|
|
| Options Outstanding |
| Options Exercisable |
| ||||||||||||||||||||||||||||||||||||||
Range of Exercise Prices | Range of Exercise Prices |
|
| Number Outstanding |
|
| Average Remaining Contractual Life (in years) |
| Weighted Average Exercise Price |
|
| Number Exercisable |
|
| Average Remaining Contractual Life (in years) |
| Weighted Average Exercise Price |
| Range of Exercise Prices |
|
| Number Outstanding |
|
| Average Remaining Contractual Life (in years) |
| Weighted Average Exercise Price |
|
| Number Exercisable |
|
| Average Remaining Contractual Life (in years) |
| Weighted Average Exercise Price |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||
$ | 1,121,250,000 |
| 1 |
| 2 |
| $ | 1,121,250,000 |
| 1 |
| 2 |
| $ | 1,121,250,000 |
| 1,121,250,000 |
| 1 |
| 2 |
| $ | 1,121,250,000 |
| 1 |
| 1 |
| $ | 1,121,250,000 |
| ||||||||||||||||||||
$ | 0.005 |
| 40,000,000 |
| 10 |
| $ | 0.005 |
| 22,732,240 |
| 10 |
| $ | 0.005 |
| 2.85 |
| 126,000 |
| 7 |
| 2.85 |
| 126,000 |
| 6 |
| 2.85 |
| ||||||||||||||||||||||
$ | 2.85 |
| 126,000 |
| 7 |
| $ | 2.85 |
| 126,000 |
| 7 |
| $ | 2.85 |
| 3.125 |
| 392,000 |
| 6 |
| 3.125 |
| 392,000 |
| 5 |
| 3.125 |
| ||||||||||||||||||||||
$ | 2.05 |
| 115,000 |
| 9 |
| $ | 2.05 |
| 115,000 |
| 9 |
| $ | 2.05 |
| 2.05 |
| 115,000 |
| 9 |
| 2.05 |
| 115,000 |
| 8 |
| 2.05 |
| ||||||||||||||||||||||
$ | 3.125 |
|
|
| 392,000 |
|
|
| 6 |
|
| $ | 3.125 |
|
|
| 392,000 |
|
|
| 6 |
|
| $ | 3.125 |
| 0.0375 |
| 65,000,000 |
| 10 |
| 0.0375 |
| 36,748,634 |
| 10 |
| 0.0375 |
| ||||||||||||
$ | 0.0041 - 975,000,000 |
|
|
| 40,633,001 |
|
|
| 6.8 |
|
| $ | 0.05084 |
|
|
| 23,365,241 |
|
|
| 6.8 |
|
| $ | 0.05084 |
| 0.005 |
|
|
| 17,500,000 |
|
|
| 10 |
|
|
| 0.005 |
|
|
| 16,051,912 |
|
|
| 10 |
|
|
| 0.005 |
|
$ | 0.005 – 1,121,250,000 |
|
|
| 83,133,001 |
|
|
| 6.8 |
|
| $ | 0.03704 |
|
|
| 53,433,547 |
|
|
| 6.8 |
|
| $ | 0.0274 |
|
Note 12 - Commitments and Contingencies
Asset Sale and Licensing Agreement
On August 24, 2015, the Company entered into an agreement with Cyber Safety, Inc., a New York corporation (“Cyber Safety”) for Cyber Safety to license, and retain an option to purchase, the patents and intellectual property related to the GuardedID® and MobileTrust® software. Cyber Safety had the option to buy the Company’s GuardedID® patent for $10,000,000 that expires on September 30, 2021. If the purchase price is not paid by September 30, 2021, it will increase to $11,000,000 and be due September 30, 2022. The Company believes, but cannot guarantee, Cyber Safety will exercise its option to purchase GuardedID® based on ongoing constructive discussions with Cyber Safety. There have been no new negotiations with them in regard to the exercise of the option, but there are continuing discussions with them regarding some of their large contracts. The option remains open until September 30, 2022 and Cyber Safety, to the Company’s knowledge, is still contemplating the exercise of the option. Cyber Safety also licensed the Malware Suite until September 30, 2020 and agreed to pay the Company 15% to 20% of the net amount Cyber Safety receives from this product. During the three months ended March 31, 2021 and 2020, the Company recorded revenue of $0 and $0, respectively, from Cyber Safety.
Note 13 -11 – Subsequent Events
Subsequent to March 31, 2021, notes payable and accrued interest aggregating $67,200 were repaid.
Subsequent to March 31, 2021,2022, the Company issued 500,000 shares of common stock with a fair value of $36,000, for the purchase of a complimentary business, Cybersecurity Risk Solutions, LLC. At the date of acquisition, Cybersecurity Risk Solutions, LLC had nominal assets and liabilities, no revenues and limited operating history. Furthermore, the Company also determined that the acquisition did not meet the requirement of a significant acquisition pursuant to the regulations of the Securities and Exchange Commission.
Subsequent to March 31, 2021, the Company issued 32,68096,083 shares of common stock for services with a fair value of $2,000.$4,000.
SubsequentIn May 2022, the Company amended the exercise price of 50 million shares of stock warrants granted in September 2021 from $0.05 per share to March 31, 2021,$0.02 per share. As a result, these warrant holders exercised their warrants and the Company issued 28,219,06350 million shares of common stock with a fair value of $3,330,000 in connection with the cancellation of warrants to purchase 83,333 shares of common stock that were granted in fiscal 2019 as part of a financing transaction.
Subsequent to March 31, 2021, the Company issued 12,349,726 shares of common stock upon a cashless exercise of 13,333,333 warrants.
On May 11, 2021, the Company’s filing of an Offering Circular on Form 1-A, pursuant to Regulation A (File Number: 024-11512) was qualified by the Securities and Exchange Commission. The Company registered 150,000,000 shares of common stock maximum proceeds of $7,065,000 (after deducting the maximum broker discount and costs of the offering). As a result, the Company issued 5,000,000 shares of its common stock to investors for cash proceeds of $250,000 pursuant$1,000,000. As an inducement to these warrant holders to exercise their warrants, the May 2021 Offering Circular.Company granted them stock warrants to purchase 50 million shares of common stock. The warrants are exercisable at $0.05 per share and will expire in 5 years. The Company is in the process of determining the appropriate accounting for these transactions.
Table of Contents |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Included in this interim report are "forward-looking"“forward-looking” statements, within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"(“PSLRA”) as well as historical information. Some of our statements under "Business”“Business”, "Properties”“Properties”, "Legal“Legal Proceedings”, "Management's“Management’s Discussion and Analysis of Financial Condition and Results of Operations”,"” the Notes to Condensed Consolidated Financial Statements” and elsewhere in this report constitute "forward-looking statements"“forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that the expectations reflected in these forward-looking statements will prove to be correct. Our actual results could differ materially from those anticipated in forward-looking statements as a result of certain factors, including matters described in the section titled "Risk“Risk Factors."” Forward-looking statements include those that use forward-looking terminology, such as the words "anticipate," "believe," "estimate," "expect," "intend," "may," "project," "plan," "will," "shall," "should,"“anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “project,” “plan,” “will,” “shall,” “should,” and similar expressions, including when used in the negative. Although we believe that the expectations reflected in these forward-looking statements are reasonable and achievable, these statements involve risks and uncertainties and we cannot assure you that actual results will be consistent with these forward-looking statements. We claim the protection afforded by the safe harbor for forward-looking statements provided by the PSLRA.
Such risks include, among others, the following: international, national and local general economic and market conditions: our ability to sustain, manage or forecast our growth; material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the current inflation rate and supply chain disruptions; the implications and consequences of the COVID-19 pandemic on our business and on our clients’ business and on the effectiveness and distributions of recently announced vaccines and boosters, domestically and internationally, to limit the impact of COVID-19, and changes to mask mandate policies;policies and to transitioning from a pandemic to an endemic; the ability to attract and retain qualified personnel; the ability to protect technology; and other factors referenced in this filing.
Consequently, all the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results anticipated by management will be realized or, even if substantially realized, that they will have the expected consequences to or effects on our business operations. We undertake no obligation to update or revise these forward-looking statements, whether to reflect events or circumstances after the date initially filed or published, to reflect the occurrence of unanticipated events or otherwise.
Unless otherwise noted, references in this Form 10-Q to “StrikeForce”, “we”, “us”, “our”, “SFT”, “our company”, and the “Company” means StrikeForce Technologies, Inc., a Wyoming corporation.
Background
We are a software development and services company that offers a suite of integrated computer network security products using proprietary technology. Our ongoing strategy is developing and marketing our suite of network security products to the corporate, financial, healthcare, legal, government, technology, insurance, e-commerce and consumer sectors. We plan to continue to grow our business primarily through our expanding sales channel and internally generated sales, rather than by acquisitions. We hold a 49% interest in BlockSafe Technologies, Inc., and as of April 2021, we hold a 100% interest in Cybersecurity Risk Solutions, LLC.
Table of Contents |
In March 2020, the World Health Organization declared the spread of COVID-19 a pandemic. This outbreak continues to spread throughout the U.S. and around the world. As a result, authorities continue to implement numerous measures to try to contain the virus, including restrictions on travel, quarantines, shelter-in-place orders, business restrictions and complete shutdowns. We are not considered an “essential business” due to the industries and customers we serve. As of, and subsequent to, March 31, 2021,2022, we have been following the recommendations of the CDC and state/local health authorities to minimize exposure risk for our team members forduring the past several months,pandemic, including the temporary closure of our corporate office and having our team members work remotely. MostDuring the second quarter of 2021, we reopened our corporate office while continuing to adhere to the guidelines issued by health authorities. Many customers and vendors have transitioned to electronic submission of invoices and payments. The COVID-19 pandemic has resulted in longer response times from potential new customers and certain existing customers. We cannot anticipate the effect that the impairments caused by the COVID-19 pandemic will have on our fiscal 20212022 or 2023 results, or the effectiveness and distributions of vaccines, boosters, and their distribution in 20212022 and 2023, changes to mask mandate policies.policies and to transitioning from a pandemic to an endemic. The pandemic has significantly impacted the economic conditions both in the United States and worldwide, with accelerated effects through the date of this Quarterly Report,report, as federal, state and local governments react to the public health crisis, creating significant uncertainties in both the worldwide and the United States economies. The situation is rapidly changing, including the onset of the ongoing subsequent waves of the virus caused by the possibility of various variants over time, and additional impacts to our business may arise that we are not aware of currently. We cannot predict whether, when or the manner in which, the conditions surrounding COVID-19 will change including the timing of lifting any restrictions or office closure requirements. We will continue to evaluate the nature and extent of COVID-19’s impact to our business, consolidated results of operations, financial condition and liquidity, and our results presented herein are not necessarily indicative of the results to be expected for future periodsperiods.
During the three months ended March 31, 2022, we believe the COVID-19 pandemic did impact our operating results as sales to customers were down 30% as compared from the three months ended March 31, 2021. However, we have not observed any impairments of our assets or a significant change in 2021the fair value of our assets due to the COVID-19 pandemic. At this time, it is not possible for us to predict the duration or beyond.magnitude of the adverse results of the outbreak and its effects on our business or results of operations, financial condition, or liquidity.
We have been following the recommendations of health authorities to minimize exposure risk for our team members, including the temporary closure of our corporate office and having team members work remotely. Most customers and vendors have transitioned to electronic submission of invoices and payments.
Management believes that cyber security is a growing requirement as the pandemic continues, and that more people are working remotely as well as using digital forms on a regular basis. Consequently, the market demand, in our estimation, is increasing. However, our Companycompany is also experiencing the impact of the ongoing pandemic. Currently our management is not working from our office location and it impedes our ability to take full advantage of the increasing market demand. Many of our current clients have experienced a dramatic slowdown in their business, limiting their ability to have the resources to pay for our services. We still producegenerate revenues and we anticipate, but cannot guarantee, we will have the resources to advance our video conferencing tool, SafeVchat™ and PrivacyLoK™, whichthat provides authentication and securityencryption (using our existing products), for which we believe there will have gained acceptancebe great interest in the market. Currently, we have companies doing beta testing which is continuing into 2021. During the three months ended March 31, 2022 and the year ended December 31, 2021, we earned revenues of $500$3,000 and $74,000, respectively, from SafeVchat™ and PrivacyLoK™.
On November 13, 2020, our filing and overall revenues of an Offering Circular on Form 1-A, pursuant to Regulation A (File Number: 024-11267) was qualified by the Securities$32,000 and Exchange Commission. We registered 668,449,198 shares of common stock for maximum proceeds of $2,315,000 (after deducting the maximum broker discount and costs of the offering). As of March 31, 2021, the offering was fully subscribed as we accepted the subscriptions for an aggregate of 474,453,653 shares of common stock for full satisfaction of the entire offering of $2,500,000 (of which we received $2,315,000). We announced the closing of the offering on our Current Report on Form 8-K as filed on February 8, 2021.
On May 11, 2021, our filing of an Offering Circular on Form 1-A, pursuant to Regulation A (File Number: 024-11512) was qualified by the Securities and Exchange Commission. We registered 150,000,000 shares of common stock for maximum proceeds of $7,065,000 (after deducting the maximum broker discount and costs of the offering). Subsequent to March 31, 2021, we issued 5,000,000 shares of common stock to investors for cash proceeds of $250,000 pursuant to the May 2021 Offering Circular.
We finished development of our SafeVchat™ Secure Video Conferencing and PrivacyLoK™ products at the end of 2020 and deployed SafeVchat™ beta testing by some by our clients and individuals through our resellers. SafeVchat™, in management’s estimation, is one of the most secure video conferencing products on the market. PrivacyLoK™ adds security to all video conferencing tools and runs in conjunction with other applications on the same computer. We anticipate, but cannot guarantee, increased revenues from SafeVchat™ and PrivacyLoK™ in 2021 and beyond.$193,000, respectively.
Our executive office is located at 1090 King Georges Post Road, Suite 603, Edison, NJ 08837. Our telephone number is (732) 661-9641. We have 10At March 31, 2022, we had 14 employees. Our Company’s website is www.strikeforcetech.com (we are not including the information contained in our website as part of, nor should the information be relied upon or incorporated by reference into, this report on Form 10-Q).
Results of Operations
FOR THE THREE MONTHS ENDED MARCH 31, 20212022 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 20202021
Revenues for the three months ended March 31, 20212022 were $46,000$32,000 compared to $60,000$46,000 for the three months ended March 31, 2020,2021, a decrease of $14,000 or 23.3%30.4%. The decrease in revenues was primarily due to a reductiondecrease in the sales ofrevenues relating to our ProtectID®, GuardedID® and MobileTrust® products, withoffset by an increase in revenues relating to our SafeVchat™ product, despite the impairments related to the economic consequences of the COVID-19 pandemic. Revenues are derived from software key fobs and services.
Cost of revenues for the three months ended March 31, 20212022 was $3,000$10,000 compared to $3,000 for the three months ended March 31, 2020.2021, an increase of $7,000 or 233%. The increase in cost of revenues was primarily due to an increase in the fees related to our product offerings. Cost of revenues are fees and key fobs related to our revenues, and as a percentage of total revenues for the three months ended March 31, 20212022 was 6.5%31.3% compared to 4.2%6.5% for the three months ended March 31, 2020.2021.
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Research and development expenses for the three months ended March 31, 20212022 were $145,000$154,000 compared to $124,000$145,000 for the three months ended March 31, 2020,2021, an increase of $21,000$9,000 or 16.9%6.2%. The increase was primarily due to the overall increase in salaries and benefits of the personnel conducting research and development. The salaries, benefits and overhead costs of personnel conducting research and development of our software products primarily comprises our research and development expenses.
Compensation, professional fees, and selling, general and administrative (collectively, “SGA”) expenses for the three months ended March 31, 20212022 were $5,628,000$2,636,000 compared to $507,000$5,628,000 for the three months ended March 31, 2020, an increase2021, a decrease of $5,121,000$2,992,000 or 1,010%53.2%. The increasedecrease was due primarily to an increasea decrease in employee stock-based compensation, offset by an increase in compensation expenses and professional fees. SG&A expenses consist primarily of salaries, benefits and overhead costs for executive and administrative personnel, insurance, fees for professional services, including consulting, legal, and accounting fees, plus travel costs and non-cash stock compensation expense for the issuance of stock options to employees and other general corporate expenses.
For the three months ended March 31, 2021,2022, other expense was $4,216,000$99,000 as compared to other expense of $331,000$4,216,000 for the three months ended March 31, 2020, an increase2021, a decrease in other expense of $3,885,000,$4,117,000, or 1,174%9.8%. The increasedecrease was primarily due to increasesdecreases in financing expense, interest expense, debt discount amortization, and the change in the loss on extinguishmentfair value of debt and financing costs, offset by decreasesderivative liabilities. The Company’s derivative liabilities were fully extinguished in private placement costs and debt discount amortization.fiscal 2021.
Our net loss for the three months ended March 31, 20212022 was $9,946,000$2,867,000 compared to $905,000$9,946,000 for the three months ended March 31, 2020, an increase2021, a decrease of $9,041,000,$7,079,000, or 999%71.2%. The increasedecrease was primarily due to increases in the loss on extinguishment of debt,decreases in employee stock-based compensation, financing expense, interest expense, debt discount amortization, and the change in professional fees and financing costs,the fair value of derivative liabilities, offset by decreasesan increase in private placement costscompensation expenses and in debt discount amortization.professional fees.
Liquidity and Capital Resources
Our total current assets at March 31, 20212022 were $856,000,$990,000, which included cash of $816,000,$974,000, as compared with $203,000$2,121,000 in total current assets at December 31, 2020,2021, which included cash of $162,000.$2,084,000. Additionally, we had a stockholders’ deficit in the amount of $13,231,000$12,814,000 at March 31, 20212022 compared to a stockholders’ deficit of $14,342,000$11,589,000 at December 31, 2020.2021. We have historically incurred recurring losses and have financed our operations through loans, principally from affiliated parties such as our directors, and from the proceeds of debt and equity financing. We financed our operations during the three months ended March 31, 20212022 primarily from the salecash balance from the year ended December 31, 2021.
Concentrations
For the three months ended March 31, 2022, sales to four customers comprised 38%, 26%, 11% and 10% of subscriptions for $1,449,000, forrevenues. For the issuancethree months ended March 31, 2021, sales to two customers comprised 72% and 15% of 38,116,450 sharesrevenues. At March 31, 2022, two customers comprised 59% and 18% of our common stock in an offering under Regulation A (from November 2020), and we received the second draw SBA Paycheck Protection assistance loan for $177,000.accounts receivable.
Going Concern
We have yet to establish any history of profitable operations. During the three months ended March 31, 2021,2022, the Company incurred a net loss of $9,946,000$2,867,000 and used cash in operating activities of $585,000,$1,060,000, and at March 31, 2021,2022, the Company had a stockholders’ deficit of $13,231,000.$12,814,000. In addition, we are in default on notes payable and convertible notes payable in the aggregate amount of $3,432,000.$2,861,000. These factors raise substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued. In addition, the Company’s independent registered public accounting firm, in its report published on our December 31, 20202021 year-end financial statements, and Note 1 in our unaudited financial statements, raised substantial doubt about the Company’s ability to continue as a going concern. The Company’s financial statements do not include any adjustments that might result from the outcome of this uncertainty should we be unable to continue as a going concern.
Management estimates that the current funds on hand will be sufficient to continue operations through the next six months. Our ability to continue as a going concern is dependent upon our ability to continue to implement our business plan. Currently, management is attempting to increase revenues by selling through a channel of distributors, value added resellers, strategic partners and original equipment manufacturers. While we believe in the viability of its strategy to increase revenues, there can be no assurances to that effect. Our ability to continue as a going concern is dependent upon our ability to increase our customer base and realize increased revenues. No assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing, if needed, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing.
Reverse Stock Split and Changes in Authorized Shares
In December 2020, a decrease of the authorized shares of our common stock from fourteen billion (14,000,000,000) to four billion (4,000,000,000), $0.0001 par value, was ratified, effective upon the filing of an amendment to our Certificate of Incorporation with the Wyoming Secretary of State. The amendment was adopted in December 2020.
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Cybersecurity Risk Solutions, LLC
On April 15, 2021, StrikeForce formally closed a Member Interest Purchase Agreement in which StrikeForce acquired the entire Member Interests of Cybersecurity Risk Solutions, LLC, a New Jersey limited liability company. Subsequent to March 31,In April 2021, we issued 500,000 shares of common stock with a fair value of $36,000, for the purchase of Cybersecurity Risk Solutions, LLC. At the date of acquisition, Cybersecurity Risk Solutions, LLC had nominal assets and liabilities, no revenues and limited operating history. Furthermore, the Company also determined that the acquisition did not meet the requirement of a significant acquisition pursuant to the regulations of the Securities and Exchange Commission.
Cybersecurity Risk Solutions, LLC is a cybersecurity firm offering cyber, privacy & data protection services including a personal cyber risk assessment, the industry’s first cyber health score, report and custom action plan, as well as ongoing vulnerability scanning, hack monitoring and dark web intelligence monitoring. For more information, go to https://SecureCyberID.com (which website is expressly not included in this filing). Will Lynch, the prior sole member of Cybersecurity Risk Solutions, LLC was hired by StrikeForce as the Director of Channel Distribution and not as a Named Executive Officer. A Director of Channel Distribution develops, services, and grows relationships with clients. Mr. Lynch will havehas an annual salary of $100,000 and will also receive 2% net of all Channel sales. Mr. Lynch reports to our Executive Vice President and Marketing Director.
Subsequent Events
Subsequent to March 31, 2022, the Company issued 50,000,000 shares of common stock for the exercise of 50,000,000 common stock purchase warrants at $0.02 per share for total proceeds of $1,000,000.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, result of operations, liquidity or capital expenditures.
Critical Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include those related to accounting for financing obligations, assumptions used in valuing stock instruments issued for services, assumptions used in valuing derivative liabilities, the valuation allowance for deferred tax assets, and the accrual of potential liabilities. Actual results could differ from those estimates.
Revenue Recognition
The Company follows the guidance of Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.
The Company’s revenue consists of revenue from sales and support of our software products. Revenue primarily consists of sales of software licenses and subscriptions of our ProtectID®, GuardedID®, MobileTrust®, PrivacyLoK™ and SafeVchat™ products. We recognize revenue from these arrangements ratably over the contractual service period. For service contracts, the Company’s performance obligations are satisfied, and the related revenue is recognized, as services are rendered.
The Company offers no discounts, rebates, rights of return, or other allowances to clients which would result in the establishment of reserves against service revenue. Additionally, to date, the Company has not incurred incremental costs in obtaining a client contract.
Cost of revenue includes direct costs and fees related to the sale of our products.
Share-Based Payments
The Company periodically issues stock options, warrants, and shares of common stock as share-based compensation to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for such grants issued and vesting based on FASB ASC 718, Compensation – Stock Compensation (Topic 718) whereby the value of the award is measured on the date of grant and recognized as compensation expense on the straight-line basis over the vesting period. The Company recognizes the fair value of stock-based compensation within its Statements of Operations with classification depending on the nature of the services rendered.
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Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The Company evaluates embedded conversion features within its convertible debt to determine whether the embedded conversion features should be bifurcated from the host instrument and accounted for as a derivative. The fair value of the embedded derivatives are determined using Monte Carlo simulation method at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.
Recently Issued Accounting Pronouncements
Refer to Note 1 in the accompanying consolidated financial statements.
Additional Information
You are advised to read this Form 10-Q in conjunction with other reports and documents that we file from time to time with the SEC. In particular, please read our Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K, and Current Reports on Form 8-K that we file from time to time. You may obtain copies of these reports directly from us or from the SEC at the SEC’s Public Reference Room at 100 F. Street, N.E. Washington, D.C. 20549, and you may obtain information about obtaining access to the Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains information for electronic filers at its website http://www.sec.gov.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a smaller reporting company, we are not required to provide the information required by this Item.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures.
Regulations under the Securities Exchange Act of 1934 (the “Exchange Act”) require public companies to maintain “disclosure controls and procedures,” which are defined as controls and other procedures that are designed to ensure that 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 Securities and Exchange Commission'sCommission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer'sissuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
We carried out an evaluation, with the participation of our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (CFO) of the effectiveness our disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of March 31, 2021.2022. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are not effective at the reasonable assurance level due to the following material weaknesses:
1. We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us as of and for the interim period ended March 31, 2021.2022. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
2. Our board of directors has no independent director or member with financial expertise which causes ineffective oversight of our external financial reporting and internal control over financial reporting.
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3. We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.
Remediation of Material Weaknesses
We intend to remediate the material weaknesses in our disclosure controls and procedures identified above by adding an independent director or member with financial expertise or hiring a full-time CFO with SEC reporting experience in the future when working capital permits and by working with our independent registered public accounting firm to refine our internal procedures.
(b) Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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None.
The risk factors required pursuant to Regulation S-K, Item 503(c) are not required for smaller reporting companies. Accordingly, the Company has determined to provide particular risk factors at this time. The risks and uncertainties described below are not the only ones facing us. Other events that we do not currently anticipate or that we currently deem immaterial also may affect our results of operations and financial condition. If any events described in the risk factors actually occur, our business, operating results, prospects and financial condition could be materially harmed. In connection with the forward lookingforward-looking statements that appear in our Annual Report on Form 10-K for the year ended December 31, 2020,2021, which was filed with the Securities and Exchange Commission on April 13, 2021,14, 2022, you should also carefully review the cautionary statement referred to under “Special Note Regarding Forward Looking Statements.” The forward-looking statements made in this report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.
COVID-19.
We cannot, at this point, determine the extent to which COVID-19 outbreak will impact business or the economy as both are highly uncertain and cannot be predicted.
THE OUTBREAK OF THE CORONAVIRUS MAY NEGATIVELY IMPACT SOURCING AND MANUFACTURING OF THE PRODUCTS THAT WE SELL AS WELL AS CONSUMER SPENDING, WHICH COULD ADVERSELY AFFECT OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic”. The significant outbreak of COVID-19 has resulted in a widespread health crisis that could adversely affect the economies and financial markets worldwide, and could adversely affect our business, results of operations and financial condition.
In addition, we applied for funding pursuant to the Small Business Administration program. The Paycheck Protection Program providesprovided forgivable funding for payroll and related costs as well as some non-payroll costs. We applied for funding and we received (on April 17, 2020) first draw funding in the amount of $313,000. In June 2021, the April 2020 PPP loan of $313,000 was forgiven by the SBA. Pursuant to ASC 470, Debt, we recorded a gain of $313,000 to extinguish the PPP loan and we received (on March 16, 2021) second draw funding in the amountaccrued interest of $177,000.$4,000. The Economic Injury Disaster Loan provides low-interest, long-term financing. We applied for funding and received (on May 18, 2020) funding in the amount of $150,000. No assurances can be provided asIn March 2021, we applied for funding and were approved for a second round of Paycheck Protection Program forgivable financing in the amount of $177,000. In November 2021, the March 2021 PPP loan of $177,000 was forgiven by the SBA. Pursuant to ASC 470, Debt, the adequacyCompany recorded a gain of $177,000 to extinguish the funds received for ongoing operations in 2021 or if additional funding will be subsequently available.PPP loan and accrued interest of $1,000.
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THE OUTBREAK OF THE COVID-19 MAY ADVERSELY AFFECT OUR CUSTOMERS.
Further, such risks as described above could also adversely affect our customers'customers’ financial condition, resulting in reduced spending for the merchandise we sell. Risks related to an epidemic, pandemic or other health crisis, such as COVID-19, could also lead to the complete or partial closure of one or more of our facilities or operations of our sourcing partners. The ultimate extent of the impact of any epidemic, pandemic or other health crisis on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic or other health crisis and actions taken to contain or prevent their further spread, among others. These and other potential impacts of an epidemic, pandemic or other health crisis, such as COVID-19, could therefore materially and adversely affect our business, financial condition and results of operations.
An economic recession had set in from the pandemic in 2020 and continued into 2021. Some companies are not receiving payments and in turn, as a consequence of limited cash flow, are not prepared to purchase our products. COVID-19 has led to some of our customers and potential customers being stricken with the virus causing them to not be able to work for many weeks and therefore causing delays for us in our marketing decisions. This outbreak could decrease spending, adversely affect demand for our products, and harm our business and results of operations. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak or the timing and the degree to which economic recovery will be realized post-pandemic and, consequently, its effects on our business or results of operations, financial condition, or liquidity, at this time.
The global impact of COVID-19 and actions taken to reduce its spread continues to rapidly evolve and we will continue to monitor the situation and the effects on our business and operations closely. We cannot anticipatedo not yet know the effect thatfull extent of potential impacts on our business or operations or on the impairments caused byglobal economy as a whole, particularly if the COVID-19 pandemic orcontinues and persists for an extended period of time. The length of time it may take for global vaccine distribution and more normal economic and operating conditions to resume remains uncertain and the degree to whicheconomic recovery period could continue for a prolonged period even after the economy rebounds post-pandemic will havehealth risks of the pandemic subside. Given the uncertainty, we cannot reasonably estimate the impact on our fiscalfuture results of operations, cash flows or financial condition. To the extent the ongoing COVID-19 pandemic adversely affects our business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties described in this “Risk Factors” section of our Annual Report for December 31, 2021 results, orfiled with the effectiveness and distributions of recently announced vaccines and changes to mask mandate policies.SEC on April 14, 2022. We will continue to evaluate the nature and extent of COVID-19’s impact to our business, consolidated results of operations, financial condition and liquidity, and our results presented herein are not necessarily indicative of the results to be expected for future years.
THE OUTBREAK OF COVID-19 HAS RESULTED IN A WIDESPREAD HEALTH CRISIS THAT COULD ADVERSELY AFFECT THE ECONOMIES AND FINANCIAL MARKETS WORLDWIDE AND COULD EXPONENTIALLY INCREASE THE RISK FACTORS DESCRIBED IN OUR PRIOR FILINGS.
SHOULD ONE OR MORE OF THE FOREGOING RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD THE UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED, INTENDED OR PLANNED.
ITEM 2. RECENT ISSUANCES OF UNREGISTERED SECURITIES
In January 2021, we sold subscriptions for $1,525,000 and issued 38,116,450 shares of our common stock relating to the November 2020 Offering Circular.
In January 2021, a convertible note holder converted $20,000 of principal and $3,000 of accrued interest/fees into 14,743,589 shares of common stock at a conversion price of $0.00156 per share.
In January 2021,2022, we issued a total of 33,33449,383 shares of restricted common stock, valued at $1,983,$2,000, to a consultant for services provided relating to a consultant agreement.
In February 2021, we issued 460,829 shares of common stock upon conversion of debt settlement.
In February 2021,2022, we issued a total of 66,00085,470 shares of restricted common stock, valued at $10,263,$4,000, to a consultanttwo consultants for services provided relating to a consultant agreement.
In February 2021, we issued 17,208,335 shares of common stock upon the cashless exercise of options.
In March 2021, a convertible note holder converted $25,000 of principal and $3,500 of accrued interest/fees into 1,425,000 shares of common stock at a conversion price of $0.02 per share.
In March 2021, we issued a total of 7,500 shares of restricted common stock, valued at $844, relating to a December 2009 retainer agreement with our SEC attorney.
In March 2021, we issued a total of 21,693 shares of restricted common stock, valued at $3,324, to a consultant for services provided relating to a consultant agreement.
In March 2021, we issued 16,931,437 shares of common stock with a fair value of $3,239,000 for financing services rendered and cancellation of warrants to purchase 50,000 shares of common stock that was granted in fiscal 2020. The common shares issued were valued at the date of issuance.
Subsequent issuances:
Subsequent to March 31, 2021,2022, we issued 500,000 shares of common stock with a fair value of $36,000, for the purchase of a complimentary business, Cybersecurity Risk Solutions, LLC.
Subsequent to March 31, 2021, we issued 32,68096,083 shares of common stock for services with a fair value of $2,000.$4,000.
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On May 5, 2022, we entered into Inducement Offer to Exercise Common Stock Purchase Warrants letter Agreements (the “Exercise Agreements”) with certain of the holders of the Existing Warrants to purchase an aggregate of 50,000,000 shares of Common Stock (the “Exercising Holders”). Pursuant to the Exercise Agreements, the Exercising Holders and the Company agreed that, subject to any applicable beneficial ownership limitations, the Exercising Holders would exercise their Existing Warrants (the “Investor Warrants”) for shares of Common Stock underlying such Existing Warrants (the “Exercised Shares”) at a reduced exercise price of $0.02 per share of Common Stock. In order to induce the Exercising Holders to cash exercise the Investor Warrants, the Exercise Agreements provide for the issuance of new warrants to purchase up to an aggregate of 50,000,000 shares of Common Stock (the “New Warrants”), with such New Warrants to be issued in an amount equal to the number of the Exercised Shares underlying any Investor Warrants. The New Warrants are exercisable after issuance, provide for a cashless exercise provision if the shares of Common Stock underlying the New Warrants are not registered and terminate on the date that is five years following the issuance of the New Warrants. The New Warrants have an exercise price per share of $0.05.
The New Warrants and the shares of Common Stock issuable upon the exercise of the New Warrants are not being registered under the Securities Act of 1933 and are being offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act of 1933. The Exercised Shares are registered for resale on effective registration statements previously filed with the Securities and Exchange Commission.
Subsequent to March 31, 2021,2022, we issued 28,219,06350,000,000 shares of common stock with a fair valuefor the conversion of $3,330,000 in connection with the cancellation of warrants to purchase 83,333 shares of50,000,000 common stock that were granted in fiscal 2019 as part of a financing transaction.
Subsequent to March 31, 2021, we issued 12,349,726purchase warrant shares of common stock upon a cashless exercise of 13,333,333 warrants.
Subsequent to March 31, 2021, we issued 5,000,000 shares of common stock to investorsat $0.02 per share for cashtotal proceeds of $250,000 pursuant to the May 2021 Offering Circular.$1,000,000.
The above offering wasofferings, apart from the offerings registered pursuant to the Securities Act of 1933, were made in reliance upon the exemption from registration under Rule 506 of Regulation D promulgated under the Securities Act of 1933 and/or Section 4(2) of the Securities Act of 1933, based on the following: (a) the investors confirmed to us that they were “accredited investors,” as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933 and had such background, education and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the securities; (b) there was no public offering or general solicitation with respect to the offering; (c) the investors were provided with certain disclosure materials and all other information requested with respect to our company; (d) where applicable, the investors acknowledged that all securities being purchased were “restricted securities” for purposes of the Securities Act of 1933, and agreed to transfer such securities only in a transaction registered under the Securities Act of 1933 or exempt from registration under the Securities Act; and (e) where applicable, a legend was placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequent registered under the Securities Act of 1933 or transferred in a transaction exempt from registration under the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
At March 31, 2021,2022, the Company is in default on notes payable and convertible notes payable in the aggregate amount of $3,432,000.$2,861,000. We have not made various principal and interest payments on many of our debt obligations. We continue to seek work-out arrangements and applicable refinancing with new or revised debt or equity instruments. See Notes 2 and 4 to the condensed consolidated financial statements.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
None.
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ITEM 6. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Exhibit Number | Description | |
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| Amended and Restated Certificate of Incorporation of StrikeForce Technologies, Inc. (1) | |
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| Irrevocable Waiver of Conversion Rights of Ramarao Pemmaraju (4) | |
| Irrevocable Waiver of Conversion Rights of George Waller (4) | |
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| BlockSafe Technologies, Inc. Intellectual Property License Agreement (21) | |
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| BlockSafe Technologies, Inc. Amended Management Agreement (21) | |
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| Cybersecurity Risk Solutions LLC Member Interest Purchase Agreement, dated April 15, 2021 (27) | |
Inducement Offer to Exercise Common Stock Purchase Warrants, dated May 5, 2022 (29) | ||
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101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). (30) | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document. (30) | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document. (30) | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document. (30) | |
101.LAB | Inline XBRL Taxonomy Extension Labels Linkbase Document. (30) | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document. (30) | |
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). (30) |
Table of Contents |
(1) | Filed as an exhibit to the Registrant’s Form SB-2 dated as of May 11, 2005 and incorporated herein by reference. |
(2) | Filed as an exhibit to the Registrant’s Form 8-K dated February 4, 2011 and incorporated herein by reference. |
(3) | Filed as an exhibit to the Registrant’s Form 10-Q dated December 13, 2010 and incorporated herein by reference. |
(4)
Filed as an exhibit to the Registrant’s Form S-1/A dated July 31, 2012 and incorporated herein by reference.
(5)
Filed in conjunction withthe Registrant’s Form 14A filed October 5, 2012 and incorporated herein by reference.
(6)
Filed as an exhibit to the Registrant’s Form 8-K dated February 5, 2013 and incorporated herein by reference.
(7)
Filed as an exhibit to the Registrant’s Form 8-K dated May 14, 2013 and incorporated herein by reference.
(8)
Filed as an exhibit to the Registrant’s Form 8-A dated July 29, 2013 and incorporated herein by reference.
(9)
Filed as an exhibit to the Registrant’s Form 8-K dated August 22, 2013 and incorporated herein by reference.
(10)
Filed as an exhibit to the Registrant’s Form 8-A dated October 3, 2013 and incorporated herein by reference.
(11)
Filed as an exhibit to the Registrant’s Form 8-K dated October 3, 2013 and incorporated herein by reference.
(12)
Filed as an exhibit to the Registrant’s Form 8-A dated December 31, 2013 and incorporated herein by reference.
(13)
Filed as an exhibit to the Registrant’s Form 8-K dated December 31, 2013 and incorporated herein by reference.
(14)
Filed as an exhibit to the Registrant’s Form 8-K dated March 18, 2014 and incorporated herein by reference.
(15)
Filed as an exhibit to the Registrant’s Form 8-K dated December 22, 2014 and incorporated herein by reference.
(16)
Filed as an exhibit to the Registrant’s Form 8-K dated February 13, 2015 and incorporated herein by reference.
(17)
Filed as an exhibit to the Registrant’s Form 8-K dated August 4, 2015 and incorporated herein by reference.
(18)
Filed as an exhibit to the Registrant’s Form 8-K dated August 24, 2015 and incorporated herein by reference.
(19)
Filed as an exhibit to the Registrant’s Form 8-K dated February 2, 2016 and incorporated herein by reference.
(20)
Filed as an exhibit to the Registrant’s Form 8-K dated September 11, 2017 and incorporated herein by reference.
(21)
Filed as an exhibit to the Registrant’s Form 10-Q dated June 30, 2018 and incorporated herein by reference.
(22)
Filed as an exhibit to the Registrant’s Form 8-K dated June 25, 2020 and incorporated herein by reference.
(23)
Filed as an exhibit to the Registrant’s Form 1-A dated July 13, 2020 and incorporated herein by reference.
(24)
Filed as an exhibit to the Registrant’s Form 1-A.1 dated September 11, 2020 and incorporated herein by reference.
(25)
Filed as an exhibit to the Registrant’s Form 1-A.1 dated November 12, 2020 and incorporated herein by reference.
(26)
Filed as an exhibit to the Registrant’s Form 8-K dated February 8, 2021 and incorporated herein by reference.
(27)
Filed as an exhibit to the Registrant’s Form 8-K dated April 19, 2021 and incorporated herein by reference.
(28)
Filed as an exhibit to the Registrant’s Form 1A/A- dated April 26, 2021 and incorporated herein by reference.
(29)
Filed as an exhibit to the Registrant’s Form 8-K dated May 10, 2022 and incorporated herein by reference
(30)
_________
(1) Filed as an exhibit to the Registrant’s Form SB-2 dated as of May 11, 2005 and incorporated herein by reference.
(2) Filed as an exhibit to the Registrant’s Form 8-K dated February 4, 2011 and incorporated herein by reference.
(3) Filed as an exhibit to the Registrant's Form 10-Q dated December 13, 2010 and incorporated herein by reference.
(4) Filed as an exhibit to the Registrant’s Form S-1/A dated July 31, 2012 and incorporated herein by reference.
(5) Filed in conjunction with the Registrant’s Form 14A filed October 5, 2012 and incorporated herein by reference.
(6) Filed as an exhibit to the Registrant’s Form 8-K dated February 5, 2013 and incorporated herein by reference.
(7) Filed as an exhibit to the Registrant’s Form 8-K dated May 14, 2013 and incorporated herein by reference.
(8) Filed as an exhibit to the Registrant’s Form 8-A dated July 29, 2013 and incorporated herein by reference.
(9) Filed as an exhibit to the Registrant’s Form 8-K dated August 22, 2013 and incorporated herein by reference.
(10) Filed as an exhibit to the Registrant’s Form 8-A dated October 3, 2013 and incorporated herein by reference.
(11) Filed as an exhibit to the Registrant’s Form 8-K dated October 3, 2013 and incorporated herein by reference.
(12) Filed as an exhibit to the Registrant’s Form 8-A dated December 31, 2013 and incorporated herein by reference.
(13) Filed as an exhibit to the Registrant’s Form 8-K dated December 31, 2013 and incorporated herein by reference.
(14) Filed as an exhibit to the Registrant’s Form 8-K dated March 18, 2014 and incorporated herein by reference.
(15) Filed as an exhibit to the Registrant’s Form 8-K dated December 22, 2014 and incorporated herein by reference.
(16) Filed as an exhibit to the Registrant’s Form 8-K dated February 13, 2015 and incorporated herein by reference.
(17) Filed as an exhibit to the Registrant’s Form 8-K dated August 4, 2015 and incorporated herein by reference.
(18) Filed as an exhibit to the Registrant’s Form 8-K dated July 16, 2019 and incorporated herein by reference.
(19) Filed as an exhibit to the Registrant’s Form 8-K dated February 2, 2016 and incorporated herein by reference.
(20) Filed as an exhibit to the Registrant’s Form 8-K dated September 11, 2017 and incorporated herein by reference.
(21) Filed as an exhibit to the Registrant’s Form 10-Q dated June 30, 2018 and incorporated herein by reference.
(22) Filed as an exhibit to the Registrant’s Form 8-K dated June 25, 2020 and incorporated herein by reference.
(23) Filed as an exhibit to the Registrant’s Form 1-A dated July 13, 2020 and incorporated herein by reference.
(24) Filed as an exhibit to the Registrant’s Form 1-A.1 dated September 11, 2020 and incorporated herein by reference.
(25) Filed as an exhibit to the Registrant’s Form 1-A.1 dated November 12, 2020 and incorporated herein by reference.
(26) Filed as an exhibit to the Registrant’s Form 8-K dated February 8, 2021 and incorporated herein by reference.
(27) Filed as an exhibit to the Registrant’s Form 8-K dated April 19, 2021 and incorporated herein by reference.
(28) Filed as an exhibit to the Registrant’s Form 1A/A- dated April 26, 2021 and incorporated herein by reference.
(29) Filed herewith.
Table of Contents |
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
STRIKEFORCE TECHNOLOGIES, INC. | |||
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Dated: May | By: | /s/ Mark L. Kay | |
Mark L. Kay | |||
Chief Executive Officer |
Dated: May 23, 2022 | By: | /s/ Philip E. Blocker |
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| Philip E. Blocker | ||
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| Chief Financial Officer and Principal Accounting Officer |
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