Proxy Statement - Other Information (preliminary) (pre 14c)

Date : 10/16/2019 @ 5:23PM
Source : Edgar (US Regulatory)
Stock : Strikeforce Technologies, Inc. (PC) (SFOR)
Quote : 0.0017  0.0001 (6.25%) @ 8:59PM

Proxy Statement - Other Information (preliminary) (pre 14c)

 

SCHEDULE 14C

 

Information Required in Proxy Statement

Pursuant to Section 14(a) of the Securities Exchange Act of 1934

 

Check the appropriate box:

 

x Preliminary Information Statement

  

 

¨

Definitive Information Statement

 

StrikeForce Technologies, Inc.

(Name of Company As Specified In Charter)

 

Not Applicable

(Name of Person(s) Filing the Information Statement if other than Company)

 

Payment of Filing Fee (Check the appropriate box):

 

x No fee required.

 

 

¨ Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.

  

 

1) Title of each class of securities to which transaction applies:

 

 

 

 

Common Stock, par value $0.0001 per share

 

 

 

 

2) Aggregate number of securities to which transaction applies:

 

 

 

 

 

2,789,476,112 Common Stock; 3 Class A Preferred Stock; 36,667 Class B Preferred Stock

 

 

3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11:

 

 

 

 

4) Proposed maximum aggregate value of transaction:

  

¨ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

  

 

1) Amount Previously Paid:

 

2) Form, Schedule or Registration Statement No.:

 

3) Filing Party:

 

4) Date Filed:

  

 
 
 
 

 

StrikeForce Technologies, Inc.

1090 King Georges Post Road

Suite #603

Edison, NJ 08837

(732) 661 9641

Facsimile: (732) 661-9647

Email: marklkay@strikeforcetech.com

 

INFORMATION STATEMENT

PURSUANT TO SECTION 14 OF THE SECURITIES EXCHANGE ACT OF 1934,

AS AMENDED, AND REGULATION 14C AND SCHEDULE 14C THEREUNDER

 

WE ARE NOT ASKING YOU FOR A PROXY

AND YOU ARE REQUESTED NOT TO SEND US A PROXY

 

INTRODUCTION

 

This notice and information statement (the “Information Statement”) will be mailed on or about October 26, 2019 to the stockholders of record, a Wyoming corporation (the “Company”) pursuant to: Section 14(c) of the Exchange Act of 1934, as amended. This Information Statement is circulated to advise the shareholders of action already approved and taken without a meeting by written consent of three stockholders (management) holding a total of three Series A Preferred Shares (The three shares of Series A Preferred Shares held by management equals 80% of the current and outstanding preferred shares, (which are converted to common shares strictly for voting rights purposes only and are calculated by multiplying the number of current outstanding preferred and common shares times four (4)), (The 36,667 shares of Series B preferred that are at $1.50 and convert into common shares) and the outstanding preferred and common shares for voting purposes only; thus, combined with 2,789.513,112 issued and outstanding shares of common stock and outstanding preferred shares, there would be a total of 13,947,565,560 11,498,8762,625 voting capital shares of which 11,158,052,448 shares have voted in favor of the action. Pursuant to Rule 14c-2 under the Securities Exchange Act of 1934, as amended, the corporate actions described in this Notice can be taken no sooner than 10 calendar days after the accompanying Information Statement is first sent or given to the Company’s stockholders, which is on October 26, 2019. Since the accompanying Information Statement is first being sent or given to security holders on or about October 26, 2019 the corporate action described will then be effective.

 

Please review the Information Statement included with this Notice for a more complete description of this matter. This Information Statement is being sent to you for informational purposes only.

 

WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT

TO SEND US A PROXY.

 

 
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The actions to be effective twenty days after the mailing of this Information Statement are as follows:

 

(1) to increase the authorized shares from seven billion five hundred million (7,500,000,000) up to twelve billion (12,000,000,000).

 

The Increase in Authorized described in the accompanying Information Statement, effective as of the filing of amendment to the Company’s Certificate of Incorporation with the Wyoming Secretary of State, have been duly authorized and approved by the written consent of the holders of a majority of the voting capital shares of the Company’s issued and outstanding voting securities, your vote or consent is not requested or required. The accompanying Information Statement is provided solely for your information. The accompanying Information Statement also serves as the notice required by the Section 17-16-724 of the Wyoming Statutes of the taking of a corporate action without a meeting by less than unanimous written consent of the Company’s stockholders.

 

By order of the Board of Directors,

Mark L. Kay

Chief Executive Officer

 

October 16th, 2019

 

The elimination of the need for a meeting of stockholders to approve this action is made possible by Wyoming Statutes which provides that the written consent of the holders of outstanding shares of voting capital stock, having not less than the minimum number of votes which would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted, may be substituted for such a meeting. In order to eliminate the costs involved in holding a special meeting of our stockholders, our Board of Directors voted to utilize the written consent of the holders of a majority in interest of our voting securities. This Information Statement is circulated to advise the shareholders of action already approved by written consent of the shareholders who collectively hold a majority of the voting power of our capital stock.

 

THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 PROVIDES A “SAFE HARBOR” FOR FORWARD LOOKING STATEMENTS.

 

This Information Statement contains statements that are not historical facts. These statements are called “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. These statements involve important known and unknown risks, uncertainties and other factors and can be identified by phrases using “estimate,” “anticipate,” “believe,” “project,” “expect,” “intend,” “predict,” “potential,” “future,” “may,” “should” and similar expressions or words. Our future results, performance or achievements may differ materially from the results, performance or achievements discussed in the forward-looking statements. There are numerous factors that could cause actual results to differ materially from the results discussed in forward-looking statements, including:

 

 

· Changes in relationships and market for the development of the business of the Company that would affect our earnings and financial position.

 

 

 

 

· Considerable financial uncertainties that could impact the profitability of our business.

 

 

 

 

· Factors that we have discussed in previous public reports and other documents filed with the Securities and Exchange Commission.

 

This list provides examples of factors that could affect the results described by forward-looking statements contained in this Information Statement. However, this list is not intended to be exhaustive; many other factors could impact our business and it is impossible to predict with any accuracy which factors could result in which negative impacts. Although we believe that the forward-looking statements contained in this Information Statement are reasonable, we cannot provide you with any guarantee that the anticipated results will be achieved. All forward-looking statements in this Information Statement are expressly qualified in their entirety by the cautionary statements contained in this section and you are cautioned not to place undue reliance on the forward-looking statements contained in this Information Statement. In addition to the risks listed above, other risks may arise in the future, and we disclaim any obligation to update information contained in any forward-looking statement.

 

 
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TABLE OF CONTENTS

 

 

Page

 

ABOUT THIS INFORMATION STATEMENT

 

5

 

 

 

 

Board Approval of the Increase of Authorized Shares

 

5

 

 

 

 

The Action by Written Consent

 

5

 

 

 

 

No Further Voting Required

 

6

 

 

 

 

Notice Pursuant to Section the Wyoming Statutes

 

6

 

 

 

 

 

General

21

 

 

 

 

 

INFORMATION ON CONSENTING SHAREHOLDERS

 

23

 

 

 

 

DELIVERY OF INFORMATION STATEMENT

 

24

 

 

 
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StrikeForce Technologies, Inc.

1090 King Georges Post Road

Suite #603

Edison, NJ 08837

(732) 661-9641

Facsimile: (732) 661-9647

Email: marklkay@strikeforcetech.com

 

This Information Statement is being furnished by StrikeForce Technologies, Inc., a Wyoming corporation (“we,” “us,” “our” or the “Company”), in connection with action taken by the holders of a majority of the voting power of the Company’s issued and outstanding voting securities. By written consent dated October 25th, 2019, the holders of a majority of the voting power approved a resolution to effectuate an increase in authorized Shares of Common Stock from seven billion five hundred million (7,500,000,000) shares of common stock up to twelve billion (12,000,000,000) shares of common stock, $0.0001 par value, of the Company. We are first sending or giving this Information Statement on or about October 26th, 2019 to our stockholders of record as of the close of business on October 25th, 2019 (the “Record Date”). Our principal executive offices are located at 1090 King Georges Post Road, Suite #603, Edison, NJ 08837 and our main telephone number is (732) 661-9641.

 

BOARD AND SHAREHOLDER APPROVAL OF THE INCREASE IN AUTHORIZED STOCK

 

On October 25th, 2019, the Board of Directors and the holders of a majority of the voting power approved a resolution to effectuate an increase in authorized Shares of Common Stock from seven billion five hundred million (7,500,000,000) shares of common stock up to twelve billion (12,000,000,000) shares of common stock, $0.0001 par value.

 

SUMMARY OF THE INCREASE IN AUTHORIZED STOCK

 

The Board of Directors and the holders of the majority of the voting shares increased the number of authorized Common Stock from seven billion five hundred million (7,500,000,000) shares of common stock up to twelve billion (12,000,000,000) shares of common stock, $0.0001 par value.

 

We have no present understandings or agreements that will involve the issuance of capital stock. However, we are engaged in negotiations with respect to transactions, including financings and acquisitions, which could involve the issuance of capital stock. As of the date herein, there are no definitive agreements, letters of intent of memorandums of understanding with respect to any transactions, financings or acquisition.

 

In addition, we have convertible securities, if exercised, may require the issuance of an amount greater than the current number of authorized share. We do not expect such an exercise of convertible securities but proper corporate governance requires us to reserve sufficient shares in the event of this unlikely contingency.

 

The Action by Written Consent

 

On October 25th, 2019, Board of Directors and the holders of a majority of the voting power approved the following:

 

 

· a resolution for an Increase in Authorized from seven billion five hundred million (7,500,000,000) Common Stock up to twelve billion (12,000,000,000) Common Stock, $0.0001 par value, of the Company.

 

The holders of a majority of the votes of the Company’s outstanding voting securities are comprised of three shares of Series A Preferred Shares which equals 80% of the current and outstanding preferred shares (calculated by multiplying the number of current outstanding preferred and common shares by four (4)), for voting purposes only, held by management, added to the current outstanding common and preferred shares; thus, combined with the 2,789,513,112 issued and outstanding shares of common stock and 36,667 Series B preferred shares, there would be a total of 13,947,565,560 voting capital shares of which 11,158,052,448 have voted in favor of the action. These Preferred Series ‘A’ Shares are not convertible to shares of Common Stock.

 

 
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No Further Voting Required

 

We are not seeking consent, authorizations, or proxies from you. Section 17-16-724 of the Wyoming Statutes and our bylaws provide that actions requiring a vote of the stockholders may be approved by written consent of the holders of outstanding shares of voting capital stock having not less than the minimum number of votes which would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. The approval by at least a majority of the outstanding voting power of our voting securities is required to approve the reverse split and the decrease in the authorized shares of common stock.

 

Notice Pursuant to the Wyoming Statutes

 

Pursuant to the Wyoming Statutes, we are required to provide prompt notice of the taking of corporate action by written consent to our stockholders who have not consented in writing to such action. This Information Statement serves as the notice required by the Wyoming Statutes.

 

Dissenters’ Rights of Appraisal

 

The Wyoming Statutes does not provide dissenters’ rights of appraisal to our stockholders in connection with the matters approved by the Written Consent.

 

“Company,” “our company,” “us,” “SFT,” “StrikeForce,” “we” and “our” refer to StrikeForce Technologies, Inc. unless the context requires otherwise

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Included in this Information Statement interim report are “forward-looking” statements, within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”) as well as historical information. Some of our statements constitute “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 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,” 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 ability to attract and retain qualified personnel; rules and regulation related to cryptocurrency, both domestic and foreign; liquidity of cyrptocurrency; the development of the cyrptocurrency market; international regulations on cyrptocurrency; impact and marketplace perception as a result of enforcement matters promulgated by the Securities and Exchange Commission against bad actors in the cyrptocurrency field and policy papers by the Securities and Exchange Commission on cyrptocurrency; the ability to protect technology; and other factors referenced in this filing.

 

 
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Consequently, all the forward-looking statements made in this Information Statement 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.

 

Additional information concerning these and other risks and uncertainties is contained in our filings with the Securities and Exchange Commission, including the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2018.

 

Unless otherwise noted, references in this Information Statement to “StrikeForce”, “we”, “us”, “our”, “SFT”, “our company”, and the “Company” means StrikeForce Technologies, Inc., a Wyoming corporation.

 

Corporate History and Business

 

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 globally expanding sales channel and internally generated sales, rather than by acquisitions. Apart from our 49% holding in BlockSafe Technologies, Inc., we have no other subsidiaries and we conduct our operations from our corporate office in Edison, New Jersey.

 

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 10 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).

 

Intellectual Property

 

Starting in 2016, we worked with one patent attorney firm to aggressively enforce our patent rights. As of May 1, 2019, we are currently searching for a new firm that will handle the pending enforcement cases.

 

We successfully settled our first major patent lawsuit in January 2016.

 

Our patent attorneys filed our fourth “Out of Band” continuation patents. We currently have three patents granted to us for Out-of-Band ProtectID® (Patent Nos.: 7,870,599, 8,484,698 and 8,713,701). In March 2013, our patent attorneys submitted a new “Methods and Apparatus for securing user input in a mobile device” Patent, which is no longer being pursued because of our inability of moving it forward. MobileTrust® is also covered by our GuardedID® patents. We cannot provide assurances that the latter patents will be granted in fiscal 2019 or 2020.

 

We plan to continue our strategy to aggressively enforce the patent rights relating to our granted Keystroke Encryption patents that help protect our GuardedID® and MobileTrust® products. We were granted three related keystroke encryption patents for which we received the most recent patent on March 3, 2015 (Patent Nos.: 8,566,608, 8,732,483 and 8,973,107).

 

We have four trademarks that have been approved and registered: ProtectID®, GuardedID®, MobileTrust® and CryptoColor®. A portion of our software is licensed from third parties and the remainder is developed by our own team of developers while leveraging some external consultant expertise as necessitated. We rely upon confidentiality agreements signed by our employees, consultants, and third parties to protect the intellectual property rights.

 

On September 6, 2017, we entered into a Litigation Funding Agreement with two parties for the purpose of funding the enforcement of certain patents relating to the process of providing dual channel authentication against several infringers. These patent infringement cases are still in process. Our management believes, but cannot guarantee, that this Litigation Funding Agreement will allow us to pursue litigation against any infringement on our patents.

 

 
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Recently Executed Distribution Agreements

 

In November 2018, we executed two distribution agreements for our security products in the insurance and hospitality marketplaces, respectively. We anticipate that both agreements will result in a substantial increase in revenues in the latter of 2019 or in 2020, although there can be no assurances of the anticipated results.

 

Capitalization

 

On July 15, 2019, we amended our Certificate of Incorporation to increase the number of authorized shares of common stock from 5,000,000,000 to 7,500,000,000.

 

BlockSafe Technologies, Inc.

 

BlockSafe Technologies, Inc. (“BlockSafe”) was formed on December 1, 2017 in the State of Wyoming. BlockSafe is intended to be developed as an enterprise focusing on using our licensed technology in the field of cryptocurrency and its use of blockchains. Small revenues have been generated to date as BlockSafe is still in the developmental stage. There can be no assurances on the success of this project or any profitability arising from BlockSafe.

 

As of June 30, 2019, no tokens have been developed. There is no assurance as to whether, or at what amount, or on what terms, tokens will be available, if ever. Moreover, there can be no assurance how such technology will function, which could expose us to legal and regulatory issues. In addition, legal and regulatory developments could render the technology impermissible, which could have a material adverse effect on BlockSafe and us.

 

At present, we hold 49% of the issued and outstanding BlockSafe common stock, with Mark L. Kay, Ramarao Pemmaraju, and, George Waller, our Directors, each a member of the BlockSafe Board of Directors and individually holding 10.3% of the issued and outstanding common stock of BlockSafe, each, for a combined total of 31%. As a result of our 49% ownership and our Directors’ combined 31% ownership of the issued and outstanding BlockSafe common stock, we are effectively able to influence all matters requiring BlockSafe shareholder action, including significant corporate transactions. Therefore, BlockSafe’s financial results have been consolidated with our financial results.

 

DESCRIPTION OF PROPERTY

 

We operate from leased offices located at 1090 King Georges Post Road, Suite #603, Edison, New Jersey 08837. We do not hold any material investments in other real or personal property other than office equipment. We anticipate these facilities will be adequate for the immediate future but that if we are successful in introducing our products, we will need to seek larger or additional office quarters. In January 2019, we entered into a noncancelable operating lease for our headquarters office requiring payments of $4,409 per month, payments increasing 3% each year, and ending on January 31, 2024. At June 30, 2019, the remaining lease term was 4.58 years. The landlord holds $8,684 as our security deposit. The lease requires us to pay costs such as maintenance and insurance.

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

 

Management’s Discussion and Analysis of Financial Condition is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. When preparing our financial statements, we 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, along with the amounts of revenues and expenses during the reported period. Significant estimates include, but are not limited to, the estimated useful lives of property and equipment and website development costs. Actual results could differ from those estimates.

 

 
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Results of Operations

 

FOR THE THREE MONTHS ENDED JUNE 30, 2019 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2018

 

Revenues for the three months ended June 30, 2019 were $307,739 compared to $170,951 for the three months ended June 30, 2018, an increase of $136,788 or 80.0%. The increase in revenues was primarily due to an increase in our software and service revenues. Revenues are derived from software, keyfobs and services.

 

Cost of revenues for the three months ended June 30, 2019 was $2,210 compared to $2,703 for the three months ended June 30, 2018, a decrease of $493, or 18.2%. The decrease resulted from the decrease in fees resulting from efficiencies implemented related to our revenues. Cost of revenues as a percentage of total revenues for the three months ended June 30, 2019 was 0.8% compared to 1.6% for the three months ended June 30, 2018.

 

Gross profit for the three months ended June 30, 2019 was $305,529 compared to $168,248 for the three months ended June 30, 2018, an increase of $137,281, or 81.6%. The increase in gross profit was due to the increase in our revenues.

 

Research and development expenses for the three months ended June 30, 2019 were $123,750 compared to $123,750 for the three months ended June 30, 2018. 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 June 30, 2019 were $378,541 compared to $728,982 for the three months ended June 30, 2018, a decrease of $350,441 or 48.1%. The decrease was due primarily to the decrease in employee stock-based compensation in the form of stock options. 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 June 30, 2019, other expense was ($986,223) as compared to other expense of ($238,489) for the three months ended June 30, 2018, representing an increase in other expense of $747,734, or 314%. The increase was primarily due to increases in the change in the fair value of derivative liabilities, the loss on debt extinguishment and an increase in debt discount amortization, offset by gains from the extinguishment of derivative liabilities.

 

Our net loss for the three months ended June 30, 2019 was $1,182,985 compared to $922,973 for the three months ended June 30, 2018, an increase of $260,012, or 28.2%. The increase was primarily due to increases in the change in the fair value of derivative liabilities, the loss on debt extinguishment and an increase in debt discount amortization, offset by gains from the extinguishment of derivative liabilities and the increase in revenues.

 

The net loss attributable to the non-controlling interest in our subsidiary for the three months ended June 30, 2019 was $66,589 compared to $189,576 for the three months ended June 30, 2018, a decrease of $122,987, or 64.9%. These results are due to the net loss recorded by our subsidiary, BlockSafe, which began operations in December 2017.

 

 
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FOR THE SIX MONTHS ENDED JUNE 30, 2019 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2018

 

Revenues for the six months ended June 30, 2019 were $439,426 compared to $235,644 for the six months ended June 30, 2018, an increase of $203,782 or 86.5%. The increase in revenues was primarily due to an increase in our software and service revenues. Revenues are derived from software, keyfobs and services.

 

Cost of revenues for the six months ended June 30, 2019 was $6,081 compared to $9,457 for the six months ended June 30, 2018, a decrease of $3,376, or 35.7%. The decrease resulted from the decrease in fees resulting from efficiencies implemented related to our revenues. Cost of revenues as a percentage of total revenues for the six months ended June 30, 2019 was 1.4% compared to 4.0% for the six months ended June 30, 2018.

 

Gross profit for the six months ended June 30, 2019 was $433,345 compared to $226,187 for the six months ended June 30, 2018, an increase of $207,158, or 91.6%. The increase in gross profit was due to the increase in our revenues.

 

Research and development expenses for the six months ended June 30, 2019 were $250,212 compared to $247,500 for the six months ended June 30, 2018, a nominal increase of $2,712, or 1.1%. 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 six months ended June 30, 2019 were $825,983 compared to $1,341,660 for the six months ended June 30, 2018, a decrease of $515,677 or 38.4%. The decrease was due primarily to the decrease in employee stock-based compensation in the form of stock options. 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 six months ended June 30, 2019, other expense was ($1,854,710) as compared to other expense of ($297,768) for the six months ended June 30, 2018, representing an increase in other expense of $1,556,942, or 523%. The increase was primarily due to increases in the change in the fair value of derivative liabilities, the loss on debt extinguishment and an increase in debt discount amortization, offset by gains from the extinguishment of derivative liabilities.

 

Our net loss for the six months ended June 30, 2019 was $2,497,560 compared to $1,660,741 for the six months ended June 30, 2018, an increase of $836,819, or 50.4%. The increase was primarily due to increases in the change in the fair value of derivative liabilities, the loss on debt extinguishment and an increase in debt discount amortization, offset by gains from the extinguishment of derivative liabilities and the increase in revenues.

 

The net loss attributable to the non-controlling interest in our subsidiary for the six months ended June 30, 2019 was $178,378 compared to $307,878 for the six months ended June 30, 2018, a decrease of $129,500, or 42.1%. These results are due to the net loss recorded by our subsidiary, BlockSafe, which began operations in December 2017.

  

 
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Liquidity and Capital Resources

 

Our total current assets at June 30, 2019 were $233,057, which included cash of $89,870, as compared with $111,339 in total current assets at December 31, 2018, which included cash of $86,160. Additionally, we had a stockholders’ deficit in the amount of $15,272,797 at June 30, 2019 compared to a stockholders’ deficit of $13,802,504 at December 31, 2018. 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 six months ended June 30, 2019 primarily from the issuance of convertible debentures of $578,000 and the proceeds from financing obligations of $112,500.

 

Going Concern

 

We have yet to establish any history of profitable operations. During the six months ended June 30, 2019, the Company incurred a net loss of $2,497,560 and used cash in operating activities of $681,790, and at June 30, 2019, the Company had a stockholders’ deficit of $15,272,797. In addition, we are in default on notes payable and convertible notes payable in the aggregate amount of $3,076,924 and BlockSafe is in default on notes payable in the aggregate amount of $365,000. 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, 2018 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.

 

Our ability to continue as a going concern is dependent upon our ability to raise additional funds and implement our business plan. Management is currently seeking additional funds, primarily through the issuance of debt and equity securities for cash to operate our business. Management anticipates, but cannot provide assurances, that additional financing will arise from the license granted to BlockSafe once BlockSafe becomes revenue producing. Currently, management is attempting to increase revenues and improve gross margins by a revised sales strategy. We are redirecting our sales focus from direct sales to domestic and international sales channel, where we are primarily selling through a channel of Distributors, Value Added Resellers, Strategic Partners and Original Equipment Manufacturers. While we believe in the viability of our strategy to increase revenues and in our ability to raise additional funds, there can be no assurances to that effect. Our ability to continue as a going concern is dependent upon our ability to continually increase our customer base and realize increased revenues from recently signed contracts. No assurance can be given that any future financing 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, it may contain undue restrictions on our operations, in the case of debt financing or cause substantial dilution for our stock holders, in the case of equity financing.

 

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 potential liabilities and the assumptions made in valuing stock instruments issued for services and derivative liabilities. Actual results could differ from those estimates.

 

 
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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® and MobileTrust® 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.

 

The Company adopted the guidance of ASC 606 on January 1, 2018, and the implementation of ASC 606 did not have a material impact on the Company’s consolidated financial statements.

 

Cost of revenue includes direct costs and fees related to the sale of our products.

 

Share-Based Payments

 

The Company issues stock options and warrants, shares of common stock, and equity interests as share-based compensation to employees and non-employees. The Company accounts for its share-based compensation to employees in accordance with FASB ASC 718, Compensation – Stock Compensation . Stock-based compensation cost is measured at the grant date, based on the estimated fair value of the award, and is recognized as expense over the requisite service period.

 

In prior periods through December 31, 2018, the Company accounted for share-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50, Equity - Based Payments to Non-Employees . Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The final fair value of the share-based payment transaction is determined at the performance completion date. For interim periods, the fair value is estimated, and the percentage of completion is applied to that estimate to determine the cumulative expense recorded.

 

In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting . The guidance was issued to simplify the accounting for share-based transactions by expanding the scope of Topic 718 from only being applicable to share-based payments to employees to also include share-based payment transactions for acquiring goods and services from nonemployees. As a result, nonemployee share-based transactions will be measured by estimating the fair value of the equity instruments at the grant date, taking into consideration the probability of satisfying performance conditions. The Company adopted ASU 2018-07 on January 1, 2019. The adoption of the standard did not have a material impact on our financial statements for the three months and six months ended June 30, 2019 or the previously reported financial statements.

 

 
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Derivative Financial Instruments

 

We evaluate our 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 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. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date.

 

To determine the number of authorized but unissued shares available to satisfy outstanding convertible securities, we use a sequencing method to prioritize its convertible securities as prescribed by ASC 815-40-35. At each reporting date, we review our convertible securities to determine their classification is appropriate.

 

Additional Information

 

You are advised to read this Information Statement 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.

 

MARKET INFORMATION

 

Our Small Business registration statement on Form SB-2 was declared effective by the SEC in August 2005 and our shares were approved for listing on the OTC Bulletin Board by the Financial Industry Regulatory Authority (FINRA in December 2005. Prior to December 2005, there was no public market for the common stock. Our common stock is currently quoted on the OTC Electronic Bulletin Board maintained by OTCMarkets.com under the symbol “SFOR.PK”. It has been traded in the over-the-counter market on a limited basis.

 

Quarter Ended:

 

Low:

 

 

High:

 

March 31, 2017

 

$ 0.0170

 

 

$ 0.0189

 

June 30, 2017

 

$ 0.0120

 

 

$ 0.0130

 

September 30, 2017

 

$ 0.0071

 

 

$ 0.0080

 

December 31, 2017

 

$ 0.0053

 

 

$ 0.0064

 

March 31, 2018

 

$ 0.0130

 

 

$ 0.0157

 

June 30, 2018

 

$ 0.0158

 

 

$ 0.0169

 

September 30, 2018

 

$ 0.0175

 

 

$ 0.0195

 

December 31, 2018

 

$ 0.0139

 

 

$ 0.0149

 

March 31, 2019

 

$ 0.0045

 

 

$ 0.0051

 

June 30, 2019

 

$ 0.0017

 

 

$ 0.0034

 

 

The closing bid price for our shares of common stock on October 15, 2019 was $0.0022.

 

Our common stock is considered a low priced security under the “Penny Stock” rules promulgated by the Securities and Exchange Commission. Under these rules, broker-dealers participating in transactions in these securities must first deliver a risk disclosure document which describes risks associated with these stocks, broker-dealers’ duties, customers’ rights and remedies, market and other information, and make suitability determinations approving the customers for these stock transactions based on financial situation, investment experience and objectives. Broker-dealers must also disclose these restrictions in writing, provide monthly account statements to customers, and obtain specific written consent of each customer. With these restrictions, the likely effect of designation as a low priced stock is to decrease the willingness of broker-dealers to make a market for the stock, to decrease the liquidity of the stock and increase the transaction cost of sales and purchases of these stocks compared to other securities.

 

 
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HOLDERS

 

As of October 15, 2019, there were approximately 461 holders of the common stock on record with our transfer agent (several holders of record are brokerage firms often through CEDE & Co., which handle accounts for individual investors).

 

DIVIDENDS

 

We have not previously paid any cash dividends on common stock and do not anticipate or contemplate paying dividends on common stock in the foreseeable future. Our present intention is to utilize all available funds to develop and expand our business. The only restrictions that limit the ability to pay dividends on common equity, or that are likely to do so in the future, are those restrictions imposed by law and those restrictions imposed under contractual obligation. Under Wyoming corporate law, no dividends or other distributions may be made which would render a company insolvent or reduce assets to less than the sum of liabilities plus the amount needed to satisfy outstanding liquidation preferences.

 

Any future determination to pay cash dividends will be at the discretion of our board of directors, and will be dependent upon our financial condition, results of operations, capital requirements and other factors as our board may deem relevant at that time.

 

DIRECTORS AND EXECUTIVE OFFICERS

 

The following sets forth our executive officers and/or Directors, their ages, and all offices and positions held with us.

 

Name

 

Age

 

Position

Mark Kay

 

70

Chief Executive Officer and Chairman of the Board of Directors

Philip E. Blocker

 

62

 

Chief Financial Officer

Ramarao Pemmaraju

 

58

 

Chief Technical Officer and Director

George Waller

 

61

 

Executive Vice President and Marketing Director

 

Our Directors hold their offices until the next annual meeting of the shareholders and until their successors have been duly elected and qualified or until their earlier resignation, removal of office or death. Our executive officers are elected by the Board of Directors to serve until their successors are elected and qualified.

 

The following is a brief description of the business experience of our executive officers who are also the Directors and significant employees:

 

Mark L. Kay, Chief Executive Officer and Chairman of the Board of Directors

 

Mr. Kay joined StrikeForce as our CEO in May 2003 following his retirement at JPMorganChase & Co. In December 2008, a majority of the Board of Directors, by written consent, eliminated the position of our President, with those responsibilities being assumed by Mr. Kay. A majority of the Board of Directors also appointed Mr. Kay as the Chairman of the Board in December 2008. Prior to joining StrikeForce Mr. Kay was employed by JPMorganChase & Co. from August of 1977 until his retirement in December 2002, at which time he was a Managing Director of the firm. During his tenure with JPMorganChase & Co. Mr. Kay led strategic and corporate business groups with global teams up to approximately 1,000 people. His responsibilities also included Chief Operations Officer, Chief Information Officer, and Global Technology Auditor. Mr. Kay’s business concentrations were in securities (fixed income and equities), proprietary trading and treasury, global custody services, audit, cash management, corporate business services and web services. Prior to his employment with JPMorganChase & Co., Mr. Kay was a systems engineer at Electronic Data Services (EDS) for approximately five years from September 1972 through to August 1977. He holds a B.A. in Mathematics from CUNY.

 

 
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Philip E. Blocker, Chief Financial Officer

 

Mr. Blocker was CFO of MediaServ, a NYC based Internet software development company, in 2001. Prior to MediaServ, Mr. Blocker was a partner in POLARIS, a $25 million technology reseller, specializing in storage and high availability solutions. He is a Certified Public Accountant and has practical experience with taking private company’s public.

 

Ramarao Pemmaraju, Chief Technology Officer

 

Mr. Pemmaraju Joined StrikeForce in July 2002 as our Chief Technology Officer (CTO) and the inventor of the ProtectID® product. In May 1999 Mr. Pemmaraju co-founded NetLabs, which developed security software products. Mr. Pemmaraju concentrated his time on NetLabs from July 2001 through to July 2002. From June 2000 to July 2001 Mr. Pemmaraju was a systems architect and project leader for Coreon, an operations service provider in telecommunications. From October 1998 through May 2000, Mr. Pemmaraju was a systems engineer with Nexgen systems, an engineering consulting firm. Mr. Pemmaraju has over eighteen years’ experience in systems engineering and telecommunications. His specific expertise is in systems architecture, design and product development. Mr. Pemmaraju holds a M.S.E.E. from Rutgers University and a B.E. from Stevens Tech.

 

George Waller, Executive Vice President and Head of Marketing

 

Mr. Waller joined StrikeForce in June 2002 as a Vice President in charge of sales and marketing. In July 2002, Mr. Waller became the CEO of StrikeForce, a position he held until Mr. Kay joined us in May 2003. Since May 2003, Mr. Waller has been the Executive Vice President overseeing Sales, Marketing, Business Development and product development. From 2000 through June 2002, Mr. Waller was Vice President of business development for Infopro, an outsourcing software development firm. From 1999 to 2001, Mr. Waller was Vice President of sales and Marketing for Teachmeit.com-Incubation systems, Inc., a multifaceted computer company and sister company to Infopro. From 1997 through 1999, Mr. Waller was the Vice President of Internet Marketing for RX Remedy, an aggregator of medical content for online services. Previously, Mr. Waller was a Vice President of Connexus Corporation, a software integrator.

 

Family Relationships

 

There are no family relationships between any two or more of our directors or executive officers. There is no arrangement or understanding between any of our directors or executive officers and any other person pursuant to which any director or officer was or is to be selected as a director or officer, and there is no arrangement, plan or understanding as to whether non-management shareholders will exercise their voting rights to continue to elect the current board of directors. There are also no arrangements, agreements or understandings to our knowledge between non-management shareholders that may directly or indirectly participate in or influence the management of our affairs.

 

Involvement in Certain Legal Proceedings

 

To the best of our knowledge, during the past five years, none of the following occurred with respect to a present or former director or executive officer of our Company: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of any competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the commodities futures trading commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

 

 
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Board of Directors

 

Our By-laws provide that there must be no less than one and no more than seven directors, as determined by the Board of Directors. Our Board of Directors currently consists of three directors.

 

Directors need not be our stockholders or residents of the State of Wyoming. Directors are elected for an annual term and generally hold office until the next Directors have been duly elected and qualified. A vacancy on the Board may be filled by the remaining Directors even though less than a quorum remains. A Director appointed to fill a vacancy remains a Director until his successor is elected by the Stockholders at the next annual meeting of Shareholder or until a special meeting is called to elect Directors.

 

Our executive officers are appointed by the Board of Directors.

 

During fiscal 2018, our Board of Directors met twelve times. The Board of Directors also uses written resolutions to deal with certain matters and, during fiscal 2018 nineteen written resolutions were signed by a majority of the Directors.

 

Compensation of Directors

 

Our bylaws provide that, unless otherwise restricted by our certificate of incorporation, our Board of Directors has the authority to fix the compensation of directors. The directors may be paid their expenses, if any, related to attendance at each meeting of the board of directors and may be paid a fixed sum for attendance at each meeting of the board of directors or a stated salary as our director. Our bylaws further provide that no such payment will preclude any director from serving our company in any other capacity and receiving compensation therefore. Further, members of special or standing committees may be given compensation for attending committee meetings.

 

Committees

 

We have two committees: the Audit Committee and the Compensation Committee. At this time, there are no members of either Committee and the Board of Directors performs the acts of the Committees. None of our current directors are deemed “independent” directors as that term is used by the national stock exchanges or have the requisite public company accounting background or expertise to be considered an “audit committee financial expert” as that term is defined under Regulation S-K promulgated under the Securities Act of 1933, as amended.

 

It is anticipated that the principal functions of the Audit Committee will be to recommend the annual appointment of our auditors, the scope of the audit and the results of their examination, to review and approve any material accounting policy changes affecting our operating results and to review our internal control procedures.

 

It is anticipated that the Compensation Committee will develop a Company-wide program covering all employees and that the goals of such program will be to attract, maintain, and motivate our employees. It is further anticipated that one of the aspects of the program will be to link an employee’s compensation to his or her performance, and that the grant of stock options or other awards related to the price of the common shares will be used in order to make an employee’s compensation consistent with shareholders’ gains. It is expected that salaries will be set competitively relative to the technology development industry and that individual experience and performance will be considered in setting salaries.

 

At present, executive and director compensation matters are determined by a majority vote of the board of directors.

 

 
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We do not have a nominating committee. Historically our entire Board has selected nominees for election as directors. The Board believes this process has worked well thus far particularly since it has been the Board’s practice to require unanimity of Board members with respect to the selection of director nominees. In determining whether to elect a director or to nominate any person for election by our stockholders, the Board assesses the appropriate size of the Board of Directors, consistent with our bylaws, and whether any vacancies on the Board are expected due to retirement or otherwise. If vacancies are anticipated, or otherwise arise, the Board will consider various potential candidates to fill each vacancy. Candidates may come to the attention of the Board through a variety of sources, including from current members of the Board, stockholders, or other persons. The Board of Directors has not yet had the occasion to, but will, consider properly submitted proposed nominations by stockholders who are not our directors, officers, or employees on the same basis as candidates proposed by any other person.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than ten percent (10%) of our outstanding Common Stock, or the Reporting Persons, to file with the SEC initial reports of ownership on Form 3 and reports of changes in ownership of Common Stock on Forms 4 or 5. Such persons are required by SEC regulation to furnish us with copies of all such reports they file. Based solely on a review of Forms 3 and 4 furnished to us by the Reporting Persons or prepared on behalf of the Reporting Persons by the Company, the Company believes that the Reporting Persons have complied with reporting requirements applicable to them.

 

Involvement in Certain Legal Proceedings

 

None of the following events have occurred during the past ten years and are material to an evaluation of the ability or integrity of any director or officer of the Company:

 

 

1.

A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;

 

2.

Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);

 

3.

Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:

 

 

 

 

 

 

 

 

 

 

 

a.

Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;

 

b.

Engaging in any type of business practice; or

 

c.

Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;

 

 

4.

Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;

 

5.

Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;

 

6.

Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;

 

7.

Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:

 

 
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a.

Any Federal or State securities or commodities law or regulation; or

 

b.

Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or

 

c.

Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

 

 

8.

Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29)), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

Code of Ethics.

 

We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Our code of ethics contains standards that are reasonably designed to deter wrongdoing and to promote:

 

o

Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

 

o

Full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submits to, the Commission and in other public communications made by us;

 

o

Compliance with applicable governmental laws, rules and regulations;

 

o

The prompt internal reporting of violations of the code to the board of directors or another appropriate person or persons; and

 

o

Accountability for adherence to the code.

 

Indemnification of Officers and Directors

 

As permitted by Wyoming law, our Articles of Incorporation provide that we will indemnify our directors and officers against expenses and liabilities they incur to defend, settle, or satisfy any civil or criminal action brought against them on account of their being or having been our directors or officers unless, in any such action, they are adjudged to have acted with gross negligence or willful misconduct.

 

Pursuant to the foregoing provisions, we have been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in that Act and is, therefore, unenforceable.

 

Stockholder Communications with the Board

 

Stockholders who wish to communicate with the Board of Directors should send their communications to the Chairman of the Board at the address listed below. The Chairman of the Board is responsible for forwarding communications to the appropriate Board members.

 

StrikeForce Technologies, Inc.

1090 King George’s Post Road

Suite #603

Edison, NJ 08837

Attn: Mark L. Kay, Chairman

 

 
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth certain information as of December 31, 2018 with respect to the shares of common stock beneficially owned by: (i) each director; (ii) each executive officer; (iii) all current executive officers (regardless of salary and bonus level) and directors as a group; and (iv) each person or entity known by us to beneficially own more than 5% of our outstanding common stock. The address for each director and executive officer is 1090 King Georges Post Road, Suite 603, Edison, New Jersey 08837. Unless otherwise indicated, the shareholders listed in the table below have sole voting and investment powers with respect to the shares indicated:

 

This table is based upon information obtained from our stock records.

 

NAME OF BENEFICIAL OWNER

 

AMOUNT OF OWNERSHIP(1)

 

PERCENTAGE OF CLASS(2) (excluding Preferred Stock (11))

Mark L. Kay

 

46,000,008 (3),(11)

 

1.6943%

Ramarao Pemmaraju

 

81,000,007 (4),(5),(11)

 

2.9834%

George Waller

 

62,000,002 (6),(7),(11)

 

2.2836%

All directors and executive officers as a group (3 persons)

 

189,000,017 (8)

 

6.9612%

NetLabs.com, Inc.

 

2 (9),(10)

 

0.00000007%

 

 

(1)

A person is deemed to be the beneficial owner of securities that can be acquired by such person within 90 days from the date hereof.

 

(2)

Based on 2,539,637,850 shares of common stock outstanding as of December 31, 2018; also including 78,318,710 shares of common stock available upon the conversion of certain convertible loans, 36,667 shares of common stock available upon the conversion of Series B Preferred stock and 259,500,002 shares of common stock underlying options.

 

(3)

Includes 6 shares of common stock available upon the conversion of certain convertible loans valued at $9,750,000,000 per share for $240,000 of convertibles and $7,312,500,000 per share for $28,000 of convertibles, 1 share of common stock underlying vested ten-year options valued at $2,242,500 per share, 36,000,000 shares of common stock underlying vested ten-year options valued at $0.00625 per share and 10,000,000 shares of common stock underlying vested ten-year options valued at $0.0057 per share. Mark L. Kay, along with Ramarao Pemmaraju and George Waller each hold one share of Series A Preferred Shares which, collectively, allow the holders to vote up to 80% of the issued and outstanding shares of common and preferred stock; Mark Kay, along with Ramarao Pemmaraju and George Waller have irrevocably waived any conversion rights.

 

(4)

Includes 4 shares of common stock available upon the conversion of certain convertible loans valued at $9,750,000,000 per share for $25,000 of convertibles and $7,312,500,000 per share for $5,000 of convertibles 2 shares of common stock underlying vested ten-year options valued at $2,242,500 per share, 58,000,000 shares of common stock underlying vested ten-year options valued at $0.00625 per share and 23,000,000 shares of common stock underlying vested ten-year options valued at $0.0057 per share. Of the total shares, 27,000,005 shares, consisting of 4 shares of common stock available upon the conversion of certain convertible loans valued at $9,750,000,000 per share for $25,000 of convertibles and $7,312,500,000 per share for $5,000 of convertibles, 1 share of common stock underlying vested ten-year options valued at $2,242,500 per share, 22,000,000 shares of common stock underlying vested ten-year options valued at $0.00625 per share and 5,000,000 shares of common stock underlying vested ten-year options valued at $0.0057 per share, are in the name of Sunita Pemmaraju who is a family member of Ramarao Pemmaraju. Of the total shares, 8,000,000 shares, consisting of shares of common stock underlying vested ten-year options valued at $0.0057 per share, are in the name of Bhavani Pemmaraju who is a family member of Ramarao Pemmaraju. Mark L. Kay, along with Ramarao Pemmaraju and George Waller each hold one share of Series A Preferred Shares which, collectively, allow the holders to vote up to 80% of the issued and outstanding shares of common stock; Mark Kay, along with Ramarao Pemmaraju and George Waller have irrevocably waived any conversion rights.

 

 
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(5)

Excludes shares owned by NetLabs.com, Inc. which is controlled by Ramarao Pemmaraju and another individual.

 

(6)

Shares are listed in the name of Katherine LaRosa who is a family member of George Waller.

 

(7)

Includes 1 share of common stock underlying vested ten-year options valued at $2,242,500 per share, 47,000,000 shares of common stock underlying vested ten-year options valued at $0.00625 per share and 15,000,000 shares of common stock underlying vested ten-year options valued at $0.0057 per share. Of the total shares, 11,300,546 shares, consisting of 11,000,000 shares of common stock underlying vested ten-year options valued at $0.00625 per share and 5,000,000 shares of common stock underlying vested ten-year options valued at $0.0057 per share, are in the name of Michael Waller who is a family member of George Waller. Mark Kay, along with Ramarao Pemmaraju and George Waller each hold one share of Series A Preferred Shares which, collectively, allow the holders to vote up to 80% of the issued and outstanding shares of common stock; Mark Kay, along with Ramarao Pemmaraju and George Waller have irrevocably waived any conversion rights.

 

(8)

Includes 10 shares of common stock available upon the conversion of certain convertible loans valued at $9,750,000,000 per share for $265,000 of convertibles and $7,312,500,000 per share for $33,000 of convertibles, 4 shares of common stock underlying vested ten-year options valued at $2,242,500 per share, 141,000,000 shares of common stock underlying vested ten-year options valued at $0.00625 per share and 48,000,000 shares of common stock underlying vested ten-year options valued at $0.0057 per share. Excludes the Series A Preferred Shares: Mark L. Kay, along with Ramarao Pemmaraju and George Waller, each hold one share of Series A Preferred Shares which, collectively, allow the holders to vote up to 80% of the issued and outstanding shares of common stock; Mark Kay, along with Ramarao Pemmaraju and George Waller, have irrevocably waived any conversion rights.

 

(9)

Ramarao Pemmaraju controls NetLabs.com, Inc. along with another individual.

 

(10)

Includes 1 share of common stock underlying vested ten-year options valued at $1,950,000 per share.

 

(11)

Mark Kay, along with Ramarao Pemmaraju and George Waller hold 3 shares of preferred stock. The Series A Preferred Stock collectively has voting rights equal to eighty percent of the total current issued and outstanding shares of common stock

 

Equity Incentive Plan Information

 

The following table sets forth as of December 31, 2018, the total number of shares of our common stock which may be issued upon the exercise of outstanding stock options and other rights under compensation plans approved by the shareholders, and under compensation plans not approved by the shareholders. The table also sets forth the weighted average purchase price per share of the shares subject to those options, and the number of shares available for future issuance under those plans.

 

Plan Category

 

Number of securities to be issued upon exercise of outstanding options

 

 

Weighted-average exercise price of outstanding options

 

 

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

 

Equity compensation plans approved by security holders

 

 

259,500,002

 

 

$ 0.00625

 

 

 

140,499,998

 

Equity compensation plans not approved by security holders

 

 

N/A

 

 

$ N/A

 

 

 

N/A

 

Total

 

 

259,500,002

 

 

$ 0.00625

 

 

 

140,499,998

 

 

 
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2012 Stock Option Plan

 

In November 2012, the stockholders approved the 2012 Stock Option Plan for our employees, effective January 3, 2013. The number of shares authorized for issuance under the plan is 100,000,000.

 

The number of shares authorized for issuance under the Incentive Plan was increased to 200,000,000 in September 2016 by unanimous consent of the Board of Directors.

 

The number of shares authorized for issuance under the Incentive Plan was increased to 400,000,000 in November 2017 by unanimous consent of the Board of Directors.

 

In August 2015, we awarded options to purchase 1,000,000 shares of our common stock to an unrelated consultant, exercisable at $0.0005 per share, expiring two years from the date of grant, and vesting over a four-month period. In December 2016, the consultant processed an exercise of 1,000,000 stock option shares into 1,000,000 shares of our common stock, valued at $4,000, for a $500 payment, received in January 2017.

 

In September 2016, we awarded options to purchase 196,000,000 shares of our common stock to our management team and employees, exercisable at $0.00625 per share, expiring ten (10) years from the date of grant and vesting over a six-month period.

 

In December 2017, we awarded options to purchase 63,000,000 shares of our common stock to our management team and employees, exercisable at $0.0057 per share, expiring ten (10) years from the date of grant and vesting over a six-month period.

 

In July 2018, we awarded options to purchase 500,001 shares of our common stock to an unrelated consultant, exercisable at $0.016 per share, expiring one year from the date of grant, and vesting over a one year period.

 

General

 

Common Stock

 

The shares of our common stock presently outstanding, and any shares of our common stock issues upon exercise of stock options and/or common stock purchase warrants, will be fully paid and non-assessable. Each holder of common stock is entitled to one vote for each share owned on all matters voted upon by shareholders, and a majority vote is required for all actions to be taken by shareholders. In the event we liquidate, dissolve or wind-up our operations, the holders of the common stock are entitled to share equally and ratably in our assets, if any, remaining after the payment of all our debts and liabilities and the liquidation preference of any shares of preferred stock that may then be outstanding. The common stock has no preemptive rights, no cumulative voting rights, and no redemption, sinking fund, or conversion provisions. Since the holders of common stock do not have cumulative voting rights, holders of more than 50% of the outstanding shares can elect all of our Directors, and the holders of the remaining shares by themselves cannot elect any Directors. Holders of common stock are entitled to receive dividends, if and when declared by the Board of Directors, out of funds legally available for such purpose, subject to the dividend and liquidation rights of any preferred stock that may then be outstanding.

 

Each holder of Common Stock is entitled to one vote for each share of Common Stock held on all matters submitted to a vote of stockholders.

 

Preferred Stock

 

On October 21, 2010, we amended our Articles of Incorporation in New Jersey to authorize 10,000,000 shares of preferred stock, par value $0.10. The designations, rights, and preferences of such preferred stock are to be determined by the Board of Directors. On November 15, 2010, we changed our domicile from the state of New Jersey to the state of Wyoming.

 

 
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In addition to the 10,000,000 shares of preferred stock authorized, on January 10, 2011, 100 shares of preferred stock were designated as Series A Preferred Stock and 100,000,000 shares were designated as Series B Preferred Stock. The bylaws under the Wyoming Incorporation were amended to reflect the rights and preferences of each additional new designation.

 

The Series A Preferred Stock collectively has voting rights equal to eighty percent of the total current issued and outstanding shares of common stock. If at least one share of Series A Preferred Stock is outstanding, the aggregate shares of Series A Preferred Stock shall have voting rights equal to the number of shares of common stock equal to four times the sum of the total number of shares of common stock issued and outstanding, plus the number of shares of Series B Preferred Stock (or other designated preferred stock) which are issued and outstanding.

 

The Series B Preferred Stock have preferential liquidation rights in the event of any liquidation, dissolution or winding up of the Company, such liquidation rights to be paid from our assets not delegated to parties with greater priority at $1.00 per share or, in the event an aggregate subscription by a single subscriber of the Series B Preferred Stock is greater than $100,000,000, $0.997 per share. The Series B Preferred Stock shall be convertible to a number of shares of common stock equal to the price of the Series B Preferred Stock divided by the par value of the Series B Preferred Stock, par value $0.10. The option to convert the shares of Series B Preferred Stock may not be exercised until three months following the issuance of the Series B Preferred Stock to the recipient shareholder. The Series B Preferred Stock has ten votes on matters presented to our shareholders for one share of Series B Preferred Stock held.

 

All of the above offerings and sales, except the afore-mentioned shares issued pursuant to a conversion of convertible notes, 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 1933or transferred in a transaction exempt from registration under the Securities Act of 1933.

 

Voting Rights

 

Each holder of Common Stock is entitled to one vote for each share of Common Stock held on all matters submitted to a vote of stockholders.

 

Each share of the issued and outstanding shares of the Series A preferred stock have voting rights equal to eighty percent of the total issued and outstanding shares of our common stock

 

Amendment of our Bylaws

 

Our bylaws may be adopted, amended or repealed by the affirmative vote of a majority of our outstanding shares. Subject to applicable law, our bylaws also may be adopted, amended or repealed by our Board of Directors.

 

Transfer Agent

 

Our transfer agent is Worldwide Stock Transfer, LLC. Their address is One University Plaza, Suite 505, Hackensack, NJ 07601.

 

 
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INFORMATION ON CONSENTING STOCKHOLDERS

 

Pursuant to the Company’s Bylaws and the Wyoming Articles of Incorporation, a vote by the holders of at least a majority of the outstanding shares of the Company entitled to vote (the “Voting Shares”) is required to effect the action described herein. The Company’s Articles of Incorporation does not authorize cumulative voting for this matter. As of the Record Date, the Company had 2,529,637,850 issued and outstanding shares of common stock 3 shares of Series A preferred shares and 36,667 Series B preferred shares, with a total of 12,648,335,930 voting shares (10,118,668,744 voting shares representing, for voting purposes the Series A preferred shares which equate to 80% of the total voting shares and is entitled to one vote per share). The consenting stockholders are the record and beneficial owners of 10,118,668,744 shares of the Company’s preferred and common stock, which represents approximately 80% of the total number of Voting Shares. Pursuant to Section 17-16-724 of the Wyoming Statutes, the consenting stockholders voted in favor of the actions described herein in a written consent, dated June 6, 2019. No consideration was paid for the consent. The consenting stockholder’s names, affiliations with the Company and their beneficial holdings are as follows:

 

Name

 

Affiliation

 

Voting Shares

 

 

Percentage (4)

 

 

 

 

 

 

 

 

 

 

Mark L. Kay (1)

 

Director, Officer and Stockholder

 

 

3,719,350,816

 

 

 

26.66 %

Ram Pemmaraju (2)

 

Director, Officer and Stockholder

 

 

3,719,350,816

 

 

 

26.67 %

George Waller (3)

 

Director, Officer and Stockholder

 

 

3,719,350,816

 

 

 

26.67 %

 

 

 

 

 

 

 

 

 

 

 

TOTAL (4)

 

 

 

 

11,158,052,448

 

 

 

80 %

 

(1)

Mr. Mark L. Kay is the Chief Executive Officer, Chairman of the Board of Directors and a director of the Company.

(2)

Mr. Ram Pemmaraju is Chief Technical Officer, Secretary and a director of the Company.

(3)

Mr. George Waller is Executive Vice President and a director of the Company.

(4)

Based upon 2,529,637,850 issued and outstanding shares of common stock 3 shares of Series A preferred shares and 36,667 Series B preferred shares (6, “Voting Shares” outstanding as of June 126, 2019). Includes shares of common stock held by the consenting shareholders as the preferred shares represented the voting majority of capital shares.

 

DELIVERY OF INFORMATION STATEMENT

 

To reduce the expenses of delivering duplicate materials to our stockholders, we are taking advantage of householding rules that permit us to deliver only one Information Statement to stockholders who share the same address unless otherwise requested.

 

If you share an address with another stockholder and have received only one Information Statement, you may write or call us to request a separate copy at no cost to you. For future mailings, you may request separate materials or, if you are receiving multiple copies you may request that we only send one set of materials, by writing to us at StrikeForce Technologies, Inc., 1090 King Georges Post Road, Suite #603, Edison, NJ 08837.

 

 
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WHERE YOU CAN FIND MORE INFORMATION

 

We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read or copy any document we file at the public reference room maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. Copies of this information may also be obtained by mail from the SEC’s Public Reference Branch at 100 F Street, N.E., Washington, D.C. 20549. In addition, our filings with the SEC are also available to the public on the SEC’s internet website at http://www.sec.gov.

 

INFORMATION INCORPORATED BY REFERENCE

 

The following documents are incorporated herein by reference and are deemed to be a part hereof from the date of filing of such documents:

 

Annual Report on Form 10-K for the fiscal year ended December 31, 2018

Quarterly Reports on Form 10-Q for the quarters ended June 30, 2019, March 31, 2019, September 30, 2018, June 30, 2018, March 31, 2018.

Reports in Form 8-K

 

All documents filed by the Company with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Information Statement and prior to the effective date of the action taken described herein.

 

Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Information Statement to the extent that a statement contained herein, or in any other subsequently filed document that also is, or is deemed to be, incorporated by reference herein, modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Information Statement.

 

This Information Statement incorporates, by reference, certain documents that are not presented herein or delivered herewith. Copies of any such documents, other than exhibits to such documents which are not specifically incorporated by reference herein, are available without charge to any person, including any stockholder, to whom this proxy statement is delivered, upon written or oral request to our Secretary at our address and telephone number set forth herein.

 

DISTRIBUTION OF INFORMATION STATEMENT

 

The cost of distributing this Information Statement has been borne by us and certain shareholders that consented to the action taken herein. The distribution will be made by mail.

 

Pursuant to the requirements of the Exchange Act of 1934, as amended, the Registrant has duly caused this Information Statement to be signed on its behalf by the undersigned hereunto authorized.

 

STRIKEFORCE TECHNOLOGIES, INC.

   

By /s/ Mark L Kay                                         

Mark L Kay, Chief Executive Officer

October 16th, 2019

 

 

 
24

 

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