Filed pursuant to rule 253(g)(2)
File Number: 024-11267
OFFERING CIRCULAR DATED JANUARY 7, 2021
STRIKEFORCE TECHNOLOGIES, INC.
1090 King Georges Post Road, Suite 603
Edison, NJ 08837
PLEASE REVIEW ALL RISK FACTORS STARTING ON PAGE 12 BEFORE MAKING AN
INVESTMENT IN THIS COMPANY. AN INVESTMENT IN THIS COMPANY SHOULD
ONLY BE MADE IF YOU ARE CAPABLE OF EVALUATING THE RISKS AND MERITS
OF THIS INVESTMENT AND IF YOU HAVE SUFFICIENT RESOURCES TO BEAR THE
ENTIRE LOSS OF YOUR INVESTMENT.
Because these securities are being offered on a “best efforts”
basis, the following disclosures are hereby made:
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Number of
Shares
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Price to
Public
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Underwriting
Discounts and Commissions (1)(2)
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Proceeds Before
Expenses to Company (2)
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Price Per Share (Minimum Investment)
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125,000
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$
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5,000
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$
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250
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$
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4,750
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Total Maximum
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38,116,450
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$
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1,524,658
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$
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136,233
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$
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1,388,425
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________
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(1)
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The Company shall pay
Spencer Clarke LLC, a broker-dealer placement agent fee
equivalent to 5% on funds raised in the Offering (See “Plan of
Distribution”)
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(2)
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Does not reflect
payment of expenses of this offering, which are estimated to not
exceed $60,000 and which include, among other things, legal fees,
accounting costs, reproduction expenses, due diligence, marketing,
consulting, administrative services other costs of blue sky
compliance, and actual out-of-pocket expenses incurred by the
Company selling the Shares. This amount represents the proceeds of
the offering to the Company, which will be used as set out in “USE
OF PROCEEDS TO ISSUER”.
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The shares are being offered pursuant to Regulation A of Section
3(b) of the Securities Act of 1933, as amended, for Tier 2
offerings. The shares are only issued to purchasers who satisfy the
requirements set forth in Regulation A.
This Offering Circular contains all of the representations
by us concerning this Offering, and no person shall make different
or broader statements than those contained herein. Investors are
cautioned not to rely upon any information not expressly set forth
in this Offering Circular.
PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THE CONTENTS OF THIS
OFFERING CIRCULAR, OR OF ANY PRIOR OR SUBSEQUENT COMMUNICATIONS
FROM THE COMPANY OR ANY OF ITS EMPLOYEES, AGENTS OR AFFILIATES, AS
INVESTMENT, LEGAL, FINANCIAL OR TAX ADVICE. EACH INVESTOR SHOULD
CONSULT HIS OWN COUNSEL, ACCOUNTANT AND OTHER PROFESSIONAL ADVISORS
AS TO LEGAL, TAX AND OTHER RELATED MATTERS CONCERNING HIS
INVESTMENT.
StrikeForce Technologies, Inc. is a Wyoming corporation, (the
“Company,” “we,” “us,” “our” or “:SFOR”) reserves the right to
change the fixed Price Per Share to Public during the Offering and
will file a post-qualification amendment to the Offering Statement
at the time of any such change.
The Company is Offering, on a best-efforts, a number of shares of
our common stock at a price per share of $0.04 to be sold up to a
maximum of 38,116,450 shares. Upon qualification by the Securities
and Exchange Commission (“SEC” or the “Commission”) and the filing
of a final Offering circular by the Company with the Commission,
all of the Shares registered in this Offering will be without
restriction or further registration under Rule 251m unless such
Shares are purchased by “affiliates” as that term is defined in
Rule 144 under the Securities Act.
Prior to this Offering, there has been a thinly traded public
market for our common shares in the OTC Markets pink tier. Our
ticker symbol is “SFOR” and the closing price of our common stock
on November 23, 2020, $0.004.
It is currently estimated that the direct public Offering price per
share will be $0.04 with a maximum Offering amount of up to
$1,524,658. No assurances can be provided that the full
Offering will be achieved.
The Company expects that the amount of expenses of the Offering
that it will pay will be approximately $60,000.
The Offering will terminate at the earlier of: (1) the date at
which the maximum Offering amount has been sold, (2) the date that
is 12 months from the date this Offering Statement is qualified by
the Securities and Exchange Commission, (unless extended by the
Company, in its own discretion, for up to another 90 days) or (3)
the date at which the Offering is earlier terminated by the Company
in its sole discretion, which may occur at any time. The Offering
is being conducted on a best-efforts basis without any minimum
aggregate investment target. The Company may undertake one or more
closings on a rolling basis. After each closing, funds tendered by
investors will be available to the Company.
INVESTMENT IN SMALL BUSINESSES INVOLVES A HIGH DEGREE OF RISK, AND
INVESTORS SHOULD NOT INVEST ANY FUNDS IN THIS OFFERING UNLESS THEY
CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. SEE THE SECTION
ENTITLED “RISK FACTORS.”
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING
THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN
RECOMMENDED OR APPROVED BY ANY FEDERAL OR STATE SECURITIES
COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THESE AUTHORITIES
HAVE NOT PASSED UPON THE ACCURACY OR ADEQUACY OF THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION DOES NOT PASS
UPON THE MERITS OR GIVE ITS APPROVAL OF ANY SECURITIES OFFERED OR
THE TERMS OF THE OFFERING, NOR DOES IT PASS UPON THE ACCURACY OR
COMPLETENESS OF ANY OFFERING CIRCULAR OR OTHER SOLICITATION
MATERIALS. THESE SECURITIES ARE OFFERED PURSUANT TO AN EXEMPTION
FROM REGISTRATION WITH THE COMMISSION; HOWEVER, THE COMMISSION HAS
NOT MADE AN INDEPENDENT DETERMINATION THAT THE SECURITIES OFFERED
ARE EXEMPT FROM REGISTRATION.
GENERALLY, NO SALE MAY BE MADE TO YOU IN THIS OFFERING IF THE
AGGREGATE PURCHASE PRICE YOU PAY IS MORE THAN 10% OF THE GREATER OF
YOUR ANNUAL INCOME OR NET WORTH. DIFFERENT RULES APPLY TO
ACCREDITED INVESTORS AND NON-NATURAL PERSONS. BEFORE MAKING ANY
REPRESENTATION THAT YOUR INVESTMENT DOES NOT EXCEED APPLICABLE
THRESHOLDS, WE ENCOURAGE YOU TO REVIEW RULE 251(d)(2)(i)(C) OF
REGULATION A. FOR GENERAL INFORMATION ON INVESTING, WE ENCOURAGE
YOU TO REFER TO www.investor.gov (WHICH IS NOT INCORPORATED BY
REFERENCE INTO THIS OFFERING CIRCULAR).
This Offering is inherently risky. See “Risk Factors” beginning on
page 12.
Sales of these securities will commence three calendar days of the
qualification date and the filing of a Form 253(g)(2) Offering
Circular AND it will be a continuous Offering pursuant to Rule
251(d)(3)(i)(F).
The Company is following the “Offering Circular” format of
disclosure under Regulation A.
AN OFFERING STATEMENT PURSUANT TO REGULATION A RELATING TO
THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION. INFORMATION CONTAINED IN THIS PRELIMINARY OFFERING
CIRCULAR IS SUBJECT TO COMPLETION OR AMENDMENT. THESE SECURITIES
MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE
OFFERING STATEMENT FILED WITH THE COMMISSION IS QUALIFIED. THIS
PRELIMINARY OFFERING CIRCULAR SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR MAY THERE BE ANY SALES
OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION
OR SALE WOULD BE UNLAWFUL BEFORE REGISTRATION OR QUALIFICATION
UNDER THE LAWS OF SUCH STATE. THE COMPANY MAY ELECT TO SATISFY ITS
OBLIGATION TO DELIVER A FINAL OFFERING CIRCULAR BY SENDING YOU A
NOTICE WITHIN TWO BUSINESS DAYS AFTER THE COMPLETION OF THE
COMPANY’S SALE TO YOU THAT CONTAINS THE URL WHERE THE FINAL
OFFERING CIRCULAR OR THE OFFERING STATEMENT IN WHICH SUCH FINAL
OFFERING CIRCULAR WAS FILED MAY BE OBTAINED.
As of November 23, 2020, there were 470 shareholders of record of
our common stock. The Company has not paid any dividends on its
common stock. The Company currently intends to retain any earnings
for use in its business, and therefore does not anticipate paying
cash dividends in the foreseeable future.
This Offering consists of Common Stock (the "Shares" or
individually, each a "Share") that is being offered on a "best
efforts" basis, which means that there is no guarantee that any
minimum amount will be sold. The Shares are being offered and sold
by the Company management and offered through Spencer Clarke LLC
who is registered with the Financial Industry Regulatory Authority
(“FINRA”). There are 38,116,450 Shares being offered at a price of
$0.04 per Share. There is a minimum investment of $5,000
per investor. The maximum aggregate amount of the Shares offered is
38,116,450 (the "Maximum Offering"). There is no minimum number of
Shares that needs to be sold for funds to be released to the
Company and for this Offering to close. For additional
information regarding the methods of sale, you should refer to the
section entitled “Plan of Distribution” in this Offering. Our
Officers and Directors will not receive any commissions or proceeds
for selling the shares on our behalf but Spencer Clarke LLC will
receive 5% cash of the monies raised on our behalf by Spencer
Clarke LLC and no other compensation. Our Officers and Directors,
the Officers and Directors will rely on the safe harbor from
broker-dealer registration set out in Rule 3a4-1 under the
Securities Exchange Act of 1934, as amended (the “Exchange Act’).
This Offering Circular shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sales of
these securities in any state or jurisdiction in which such offer,
solicitation or sale would be unlawful, prior to registration or
qualification under the laws of any such state.
No sale may be made to you in this offering if the
aggregate purchase price you pay is more than 10% of the greater of
your annual income or your net worth. Different rules apply to
accredited investors and non-natural persons. Before making any
representation that your investment does not exceed applicable
thresholds, we encourage you to review Rule 251(d)(2)(i)(C) of
Regulation A. For general information on investing, we encourage
you to refer to www.investor.gov.
NASAA UNIFORM LEGEND
FOR RESIDENTS OF ALL STATES: THE PRESENCE OF A LEGEND FOR ANY GIVEN
STATE REFLECTS ONLY THAT A LEGEND MAY BE REQUIRED BY THAT STATE AND
SHOULD NOT BE CONSTRUED TO MEAN AN OFFER OR SALE MAY BE MADE IN A
PARTICULAR STATE. IF YOU ARE UNCERTAIN AS TO WHETHER OR NOT OFFERS
OR SALES MAY BE LAWFULLY MADE IN ANY GIVEN STATE, YOU ARE HEREBY
ADVISED TO CONTACT THE COMPANY. THE SECURITIES DESCRIBED IN THIS
OFFERING CIRCULAR HAVE NOT BEEN REGISTERED UNDER ANY STATE
SECURITIES LAWS (COMMONLY CALLED 'BLUE SKY' LAWS).
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON
THEIR OWN EXAMINATION OF THE PERSON OR ENTITY CREATING THE
SECURITIES AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND
RISKS INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY
FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY.
FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED
UNDER THE SECURITIES ACT, AS AMENDED, AND THE APPLICABLE STATE
SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF
TIME.
PATRIOT ACT RIDER
The Investor hereby represents and warrants that Investor
is not, nor is it acting as an agent, representative, intermediary
or nominee for, a person identified on the list of
blocked persons maintained by the Office of Foreign Assets Control,
U.S. Department of Treasury. In addition, the Investor has
complied with all applicable U.S. laws, regulations,
directives, and executive orders relating to anti-money
laundering , including but not limited to the following laws: (1)
the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001,
Public Law 107-56, and (2) Executive Order 13224 (Blocking Property
and Prohibiting Transactions with Persons Who Commit, Threaten to
Commit, or Support Terrorism) of September 23, 2001.
NO DISQUALIFICATION EVENT (“BAD BOY”
DECLARATION)
NONE OF THE COMPANY, ANY OF ITS PREDECESSORS, ANY
AFFILIATED ISSUER, ANY DIRECTOR, EXECUTIVE OFFICER, OTHER OFFICER
OF THE COMPANY PARTICIPATING IN THE OFFERING CONTEMPLATED HEREBY,
ANY BENEFICIAL OWNER OF 20% OR MORE OF THE COMPANY'S OUTSTANDING
VOTING EQUITY SECURITIES, CALCULATED ON THE BASIS OF VOTING POWER,
NOR ANY PROMOTER (AS THAT TERM IS DEFINED IN RULE 405 UNDER THE
SECURITIES ACT OF 1933) CONNECTED WITH THE COMPANY IN ANY CAPACITY
AT THE TIME OF SALE (EACH, AN “ISSUER COVERED PERSON”) IS
SUBJECT TO ANY OF THE “BAD ACTOR” DISQUALIFICATIONS DESCRIBED IN
RULE 506(D)(1)(I) TO (VIII) UNDER THE SECURITIES ACT OF 1933 (A
“DISQUALIFICATION EVENT”), EXCEPT FOR A DISQUALIFICATION
EVENT COVERED BY RULE 506(D)(2) OR (D)(3) UNDER THE SECURITIES ACT.
THE COMPANY HAS EXERCISED REASONABLE CARE TO DETERMINE WHETHER ANY
ISSUER COVERED PERSON IS SUBJECT TO A DISQUALIFICATION
EVENT.
About This Form 1-A and Offering Circular
In making an investment decision, you should rely only on the
information contained in this Form 1-A and Offering Circular. The
Company has not authorized anyone to provide you with information
different from that contained in this Form 1-A and Offering
Circular. We are Offering to sell and seeking offers to buy the
Shares only in jurisdictions where offers and sales are permitted.
You should assume that the information contained in this Form 1-A
and Offering Circular is accurate only as of the date of this Form
1-A and Offering Circular, regardless of the time of delivery of
this Form 1-A and Offering Circular. Our business, financial
condition, results of operations, and prospects may have changed
since that date. Statements contained herein as to the content of
any agreements or other documents are summaries and, therefore, are
necessarily selective and incomplete and are qualified in their
entirety by the actual agreements or other documents.
Continuous Offering
Under Rule 251(d)(3) to Regulation A, the following types of
continuous or delayed Offerings are permitted, among others: (1)
securities offered or sold by or on behalf of a person other than
the issuer or its subsidiary or a person of which the issuer is a
subsidiary; (2) securities issued upon conversion of other
outstanding securities; or (3) securities that are part of an
Offering which commences within two calendar days after the
qualification date. These may be offered on a continuous basis and
may continue to be offered for a period in excess of 30 days from
the date of initial qualification. They may be offered in an amount
that, at the time the Offering statement is qualified, is
reasonably expected to be offered and sold within one year from the
initial qualification date. No securities will be offered or sold
“at the market.” The supplement will not, in the aggregate,
represent any change from the maximum aggregate Offering price
calculable using the information in the qualified Offering
statement. This information will be filed no later than two
business days following the earlier of the date of determination of
such pricing information or the date of first use of the Offering
circular after qualification.
Sale of these shares will commence within three calendar days
of the qualification date and it will be a continuous Offering
pursuant to Rule 251(d)(3)(i)(F).
Subscriptions are irrevocable and the purchase price is
non-refundable as expressly stated in this Offering Circular. The
Company, by determination of the Board of Directors, in its sole
discretion, may issue the Securities under this Offering for cash,
promissory notes, services, and/or other consideration without
notice to subscribers. All proceeds received by the Company from
subscribers for this Offering will be available for use by the
Company upon acceptance of subscriptions for the Securities by the
Company.
TABLE
OF CONTENTS
USE OF MARKET AND INDUSTRY DATA
This Offering Circular includes market and industry data that we
have obtained from third-party sources, including industry
publications, as well as industry data prepared by our management
on the basis of its knowledge of and experience in the industries
in which we operate (including our management’s estimates and
assumptions relating to such industries based on that knowledge).
Management has developed its knowledge of such industries through
its experience and participation in these industries. While our
management believes the third-party sources referred to in this
Offering Circular are reliable, neither we nor our management have
independently verified any of the data from such sources referred
to in this Offering Circular or ascertained the underlying economic
assumptions relied upon by such sources. Furthermore, internally
prepared and third-party market prospective information, in
particular, are estimates only and there will usually be
differences between the prospective and actual results, because
events and circumstances frequently do not occur as expected, and
those differences may be material. Also, references in this
Offering Circular to any publications, reports, surveys or articles
prepared by third parties should not be construed as depicting the
complete findings of the entire publication, report, survey or
article. The information in any such publication, report, survey or
article is not incorporated by reference in this Offering
Circular.
We are offering to sell, and seeking offers to buy, our securities
only in jurisdictions where such offers and sales are permitted.
You should rely only on the information contained in this Offering
Circular. We have not authorized anyone to provide you with any
information other than the information contained in this Offering
Circular. The information contained in this Offering Circular is
accurate only as of its date, regardless of the time of its
delivery or of any sale or delivery of our securities. Neither the
delivery of this Offering Circular nor any sale or delivery of our
securities shall, under any circumstances, imply that there has
been no change in our affairs since the date of this Offering
Circular. This Offering Circular will be updated and made available
for delivery to the extent required by the federal securities
laws.
In this Offering Circular, unless the context indicates otherwise,
references to "StrikeForce Technologies, Inc.", are referred to
herein as "we", our" "us", “SFOR”, “StrikeForce” or the Company
OFFERING CIRCULAR
SUMMARY
This summary highlights selected information contained elsewhere in
this Offering Circular. This summary is not complete and does not
contain all the information that you should consider before
deciding whether to invest in our Common Stock. You should
carefully read the entire Offering Circular, including the risks
associated with an investment in the company discussed in the "Risk
Factors" section of this Offering Circular, before making an
investment decision. Some of the statements in this Offering
Circular are forward-looking statements. See the section entitled
"Cautionary Statement Regarding Forward-Looking Statements."
Corporate Information
StrikeForce Technical Services Corporation was incorporated in
August 2001 under the laws of the State of New Jersey. On September
3, 2004, we changed our name to StrikeForce Technologies, Inc. On
November 15, 2010, we redomiciled under the laws of the State of
Wyoming. Our fiscal year-end date is December 31. Our office is
located at 1090 King Georges Post Road, Suite 603, Edison, NJ
08837. Our telephone number is (732) 661-9641. Our Company’s
website is www.strikeforcetech.com. No information contained in
this document is incorporated in or is accessible through our
website into this Offering Circular, and you should not consider
any information on, or that can be accessed through our website as
part of this Offering Circular.
Mission Statement
We are a software development and services company that offers a
suite of integrated computer network security products using
proprietary technology.
Going Concern
We have yet to establish any history of profitable operations.
During the nine months ended September 30, 2020, the Company
incurred a net loss of $2,942,000 and used cash in operating
activities of $1,329,000, and at September 30, 2020, the Company
had a stockholders’ deficit of $15,607,000. In addition, we are in
default on notes payable and convertible notes payable in the
aggregate amount of $3,555,000. 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 on the Company’s December 31, 2019, 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. Currently, management
is also 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 stockholders, in the case of equity
financing.
Trading Market
Our Common Stock trades in the OTC Market under the symbol
“SFOR”.
We
are Offering, on a best-efforts, a number of shares of our common
stock at a per share price of $0.04 to be sold up to a maximum of
38,116,450 shares. The fixed price per share determined upon
qualification shall be fixed for the duration of the Offering
unless a post-effective amendment is filed to reset the price per
share and approved by the Securities and Exchange Commission. There
is a minimum investment of $5,000 per investor. The shares are
intended to be sold directly through the efforts of our officer and
director.
We
have fourteen billion (14,000,000,000) authorized common stock
shares, of which there are 718,263,338 issued and outstanding as of
December 28, 2020. We have 10,000,000 authorized Preferred Shares,
of which 100 shares of preferred stock were designated as Series A
Preferred Stock (3 shares are outstanding) and 10,000,000 shares
were designated as Series B Preferred Stock (36,667 were issued and
outstanding).
We are quoted on the OTC Pink Sheet Market and there is a limited
established market for our stock. The Offering price of the Shares
has been determined arbitrarily by us. The price does not bear any
relationship to our assets, book value, earnings, or other
established criteria for valuing a privately held company. In
determining the number of shares to be offered and the Offering
price, we took into consideration our capital structure and the
amount of money we would need to implement our business plans.
Accordingly, the Offering price should not be considered an
indication of the actual value of our securities.
The Offering
This is a public Offering of securities of StrikeForce
Technologies, Inc., a Wyoming corporation. We are
offering 38,116,450 shares of our Common Stock at an
Offering price of $0.04 per share, the Offering Price of
which will be set upon Qualification by the SEC of this Offering
(the “Offered Shares” or “Shares”). This Offering will terminate on
twelve months from the day the Offering is qualified, (except that
the Company may extend the Offering by an additional 90 days) or
the date on which the maximum Offering amount is sold (such earlier
date, the “Termination Date”). The minimum purchase requirement per
investor is $5,000. Subsequent to the qualification of the Form 1-A
on November 13, 2020, and prior to the filing of this Post
Qualification Offering Circular Amendment No. 6, the Company
received gross proceeds of $975,342 upon sale of 436,337,203 shares
of its common stock to 27 investors.
These securities are speculative securities. Investment in the
Company’s stock involves significant risk. You should purchase
these securities only if you can afford a complete loss of your
investment. See “Risk Factors” on page 14 to read about factors you
should consider before buying shares of Common Stock.
Our Common Stock currently trades on the OTC Market under the
symbol “SFOR” and the closing price of our Common Stock on December
23, 2020 was $0.049.
We are offering our shares without the use of an exclusive
placement agent. We expect to commence the sale of the shares as of
the date on which the Offering Statement is Qualified by the
SEC.
As there is no minimum Offering, upon the approval of any
subscription to this Offering Circular, we shall immediately
deposit said proceeds into our bank account and may dispose of the
proceeds in accordance with the Use of Proceeds.
This Offering will be conducted on a “best-efforts” basis, which
means our Officers and Spencer Clarke LLC will use their
commercially reasonable best efforts to offer and sell the Shares.
Our Officers will not receive any commission or any other
remuneration for these sales but Spencer Clarke LLC who is
registered with the Financial Industry Regulatory Authority
(“FINRA”) will receive 5% of the revenues raised and no other
compensation. In Officer offering the securities on our behalf,
will rely on the safe harbor from broker-dealer registration set
out in Rule 3a4-1 under the Securities Exchange Act of 1934, as
amended.
This Offering Circular shall not constitute an offer to sell or the
solicitation of an offer to buy, nor shall there be any sales of
these securities in any state or jurisdiction in which such offer,
solicitation or sale would be unlawful, prior to registration or
qualification under the laws of any such state.
As there is no minimum Offering, upon the approval of any
subscription to this Offering Circular, the Company shall
immediately deposit said proceeds into the bank account of the
Company and may dispose of the proceeds in accordance with the Use
of Proceeds.
Completion of this Offering is not subject to us raising a minimum
Offering amount. We do not have an arrangement to place the
proceeds from this Offering in an escrow, trust or similar account.
Any funds raised from the Offering will be immediately available to
us for our immediate use. We have provided an estimate below of the
gross proceeds to be received by the Company if 25%, 50%, 75%, and
100% of the Shares registered in the Offering are sold.
In order to subscribe to purchase the shares, a prospective
investor must complete a subscription agreement and send payment by
check, wire transfer or ACH. We have not currently engaged any
party for the public relations or promotion of this Offering. As of
the date of this filing, there are no additional offers for shares,
nor any options, warrants, or other rights for the issuance of
additional shares except those described herein.
We are Offering to sell, and seeking offers to buy, our securities
only in jurisdictions where such offers and sales are permitted.
You should rely only on the information contained in this Offering
Circular. We have not authorized anyone to provide you with any
information other than the information contained in this Offering
Circular. The information contained in this Offering Circular is
accurate only as of its date, regardless of the time of its
delivery or of any sale or delivery of our securities. Neither the
delivery of this Offering Circular nor any sale or delivery of our
securities shall, under any circumstances, imply that there has
been no change in our affairs since the date of this Offering
Circular. This Offering Circular will be updated and made available
for delivery to the extent required by the federal securities
laws.
Section 15(g) of the Securities Exchange Act of
1934
Our shares are covered by section 15(g) of the Securities Exchange
Act of 1934, as amended that imposes additional sales practice
requirements on broker/dealers who sell such securities to persons
other than established customers and accredited investors
(generally institutions with assets in excess of $5,000,000 or
individuals with net worth in excess of $1,000,000, excluding their
primary residences or annual income exceeding $200,000 or $300,000
jointly with their spouses). For transactions covered by the Rule,
the broker/dealer must make a special suitability determination for
the purchase and have received the purchaser’s written agreement to
the transaction prior to the sale. Consequently, the Rule may
affect the ability of broker/dealers to sell our securities and may
affect your ability to sell your shares in the secondary
market.
Section 15(g) also imposes additional sales practice requirements
on broker/dealers who sell penny securities. These rules require a
one-page summary of certain essential items. The items include the
risk of investing in penny stocks in both public Offerings and
secondary marketing; terms important to in understanding of the
function of the penny stock market, such as bid and offer quotes, a
dealers spread and broker/dealer compensation; the broker/dealer
compensation, the broker/dealers’ duties to its customers,
including the disclosures required by any other penny stock
disclosure rules; the customers’ rights and remedies in cases of
fraud in penny stock transactions; and, FINRA’s toll free telephone
number and the central number of the North American Administrators
Association, for information on the disciplinary history of
broker/dealers and their associated persons.
The Offering
This Offering Circular relates to the sale of up to 38,116,450
shares of our Common Stock, through the efforts of our executive
officer and directors, at a price of $0.04 per share, for total
Offering proceeds of up to $1,524,658, if all Offered Shares are
sold. The minimum amount established for investors is $5,000 unless
such minimum is waived by the Company, in its sole discretion, on a
case-by-case basis. There is no minimum aggregate Offering amount
and the Company will not escrow or return investor funds if any
minimum number of shares is not sold. All money we receive from the
Offering will be immediately available to us for the uses set forth
in the “Use of Proceeds” section of this Offering
Circular.
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Issuer in this Offering:
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StrikeForce Technologies, Inc.
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Securities
offered:
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Common Stock
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Common Stock to be outstanding before this
Offering:
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718,263,338
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Common Stock to be outstanding after this
Offering:
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756,379,788
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Price per share:
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$0.04
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Maximum Offering
amount:
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$1,524,658 assuming the maximum amount of
shares are sold.
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Use of proceeds:
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The Company has previously sold 10,000,000
shares pursuant to the Form 1-A and 426,337,203 shares pursuant to
the Form 1-A POS for aggregate gross proceeds of $975,342. We
estimate that the net proceeds to us from the remainder of this
Offering, after deducting estimated Offering expenses, will be
approximately $1,388,425 assuming the maximum amount of shares of
Common Stock are sold.
Assuming the maximum
amount of shares of Common Stock are sold, we intend to use the net
proceeds from this Offering for the growth of our new product
“SafeVchat” video product and operations. Notwithstanding the
foregoing, our management will have broad discretion over how these
proceeds are used. For additional information, see “Use of
Proceeds.” Except for commission as disclosed herein, Spencer
Clarke, LLC, the broker-dealer placement agent, will only receive a
commission of 5% of the revenues. For additional information, see
“Plan of Distribution” and “Use of Proceeds to Issuer.”
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Dividend policy:
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Holders of our Common Stock are only entitled
to receive dividends when, as and if declared by our board of
directors out of funds legally available for dividends. We do not
intend to pay dividends for the foreseeable future. Our ability to
pay dividends to our stockholders in the future will depend on
regulatory restrictions, liquidity and capital requirements, our
earnings and financial condition, the general economic climate, our
ability to service any equity or debt obligations senior to our
Common Stock and other factors deemed relevant by our board of
directors. For additional information, see “Dividend Policy.”
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Risk factors:
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Investing in our Common Stock involves risks.
See “Risk Factors” for a discussion of certain factors that you
should carefully consider before making an investment decision.
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ABOUT THIS CIRCULAR
We have prepared this Offering Circular to be filed with the
Securities and Exchange Commission for our Offering of securities.
The Offering Circular includes exhibits that provide more detailed
descriptions of the matters discussed in this circular. You should
rely only on the information contained in this circular and its
exhibits. The Company has not authorized any person to provide you
with any information different from that contained in this Offering
Circular. The information contained in this Offering Circular is
complete and accurate only as of the date of this Offering
Circular, regardless of the time of delivery of this circular or
sale of our Shares. This Offering Circular contains summaries of
certain other documents, but reference is hereby made to the full
text of the actual documents for complete information concerning
the rights and obligations of the parties thereto. All documents
relating to this Offering and related documents and agreements, if
readily available to us, will be made available to a prospective
investor or its representatives upon request.
TAX CONSIDERATIONS
No information contained herein, nor in any prior, contemporaneous
or subsequent communication should be construed by a prospective
investor as legal or tax advice. We are not providing any tax
advice as to the acquisition, holding or disposition of the
securities offered herein. In making an investment decision,
investors are strongly encouraged to consult their own tax advisor
to determine the U.S. Federal, state and any applicable foreign tax
consequences relating to their investment in our securities. This
written communication is not intended to be “written advice,” as
defined in Circular 230 published by the U.S. Treasury
Department.
RISK FACTORS
An investment in our Common Stock involves a high degree of risk.
You should carefully consider the following risk factors, together
with the other information contained in this Offering Circular,
before purchasing our Common Stock. Any of the following factors
could harm our business, financial condition, results of operations
or prospects, and could result in a partial or complete loss of
your investment. Some statements in this Offering Circular,
including statements in the following risk factors, constitute
forward-looking statements. Please refer to the section entitled
"Cautionary Statement Regarding Forward-Looking Statements".
SHOULD ONE OR MORE OF THE FOREGOING RISKS OR UNCERTAINTIES
MATERIALIZE, OR SHOULD THE UNDERLYING ASSUMPTIONS OF OUR BUSINESS
PROVE INCORRECT, ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THOSE
ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED, INTENDED OR
PLANNED.
OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM HAS EXPRESSED
SUBSTANTIAL DOUBT ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN,
WHICH MAY HINDER OUR ABILITY TO OBTAIN FUTURE FINANCING.
We have yet to establish any history of profitable operations.
During the nine months ended September 30, 2020, the Company
incurred a net loss of $2,942,000 and used cash in operating
activities of $1,329,000, and at September 30, 2020, the Company
had a stockholders’ deficit of $15,607,000. In addition, we are in
default on notes payable and convertible notes payable in the
aggregate amount of $3,555,000. 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 on the Company’s December 31, 2019 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 total current assets at September 30, 2020 were $54,000, which
included cash of $8,000, as compared with $99,000 in total current
assets at December 31, 2019, which included cash of $75,000.
Additionally, we had a stockholders’ deficit in the amount of
$15,607,000 at September 30, 2020 compared to a stockholders’
deficit of $15,464,000 at December 31, 2019. 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 nine months ended September 30, 2020
primarily from the issuance of various debentures with proceeds of
$1,495,000 which includes the receipt of the SBA-Payroll Protection
Program loan funds of $313,000 and the SBA-Economic Injury Disaster
Loan funds of $150,000. In addition, subsequent to September 30,
2020, the Company issued its notes payable in the aggregate of
$246,000, in exchange for cash. Additionally, subsequent to the
qualification of the Form 1-A on November 13, 2020, and prior to
the filing of this Post Qualification Offering Circular Amendment
No. 6, the Company received gross proceeds of $975,342 from the
sale of 436,337,203 shares of its common stock to 27 investors.
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 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 and proceeds
relating to our patent lawsuits to operate our business. 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 stockholders, in the case of
equity financing.
POTENTIAL IMPACT OF DEFAULTS ON NOTES PAYABLE AND CONVERTIBLE NOTES
PAYABLE
At September 30, 2020, we were in default on notes payable and
convertible notes payable in the aggregate amount of $3,555,000. If
we were required to repay the secured and unsecured convertible
debentures and promissory notes, we would be required to use our
limited working capital and raise additional funds. The note
holders could commence legal action against us and foreclose on all
of our assets to recover the amounts due. Any such actions would
require us to severely limit operations or to file for protection
under United States Bankruptcy laws.
THE PATENT APPLICATION MOBILETRUST® TECHNOLOGY IS PENDING AND THERE
IS NO ASSURANCE THAT THIS APPLICATION WILL BE GRANTED. FAILURE TO
OBTAIN THE PATENT FOR THE APPLICATION COULD PREVENT US FROM
SECURING REVENUES IN THE FUTURE. THREE PATENT APPLICATIONS FOR THE
PROTECTID® TECHNOLOGY AND THREE FOR GUARDEDID® HAVE BEEN GRANTED.
TWO PATENT APPLICATIONS FOR THE PROTECTID® TECHNOLOGIES ARE
PENDING.
In November 2010, we received notice that the United States Patent
and Trademark Office (“USPTO”) had issued an official Notice of
Allowance for the patent application for the technology relating to
our ProtectID® product, titled "Multi-Channel Device Utilizing a
Centralized Out-of-Band Authentication System". In January 2011, we
received notice that the USPTO issued to us Patent No. 7,870,599.
This “Out-of-Band” Patent went through a USPTO Re-Examination
process starting on August 16, 2011 and concluded on December 27,
2011, with all of our patent claims remaining intact and eight
additional patent claims being added. Since 2011, we submitted
additional continuation patents on the “Out-of-Band” Patent. The
keystroke encryption technology we developed and use in our
GuardedID® product is protected by three patents and one
continuation pending.
In January 2013, we were assigned the entire right, title and
interest in the “Out-of-Band” Patent from NetLabs, with the
agreement of the developer, and the assignment was recorded with
the USPTO.
In
February 2013, we executed a retainer agreement with our patent
attorneys to aggressively enforce our patent rights as “Out-of-Band
Authentication” was becoming the standard for authenticating
consumers in the financial market and for many SaaS application
users (e.g., SalesForce, Quickbooks, etc.). In February 2013, our
patent attorneys submitted a new “Out-of-Band” Patent continuation,
which was granted.
In March 2013, our patent attorneys submitted a new “Methods and
Apparatus for securing user input in a mobile device” Patent, which
is now patent pending. Our MobileTrust® product is the invention
supporting the patent pending.
In July 2013, we received notice that the USPTO had added 54
additional patent claims for our Out-of-Band patent we received in
January 2011, by issuing to us Patent No. 8,484,698 thereby
strengthening our position with clients and our current and
potential lawsuits.
In October 2013, we received notice that the USPTO issued to us
Patent No. 8,566,608 “Methods and apparatus for securing keystrokes
from being intercepted between the keyboard and a browser.” This
protects our GuardedID® product and the keystroke encryption
portion of our MobileTrust® products.
In
February 2014, we received a Notice of Allowance from the USPTO for
our third patent relating to our “Multi-Channel Device Utilizing a
Centralized Out-of-Band Authentication System” Patent No.
7,870,599. Upon receipt of this Out-of-Band patent we filed another
continuation patent.
In March 2014, we received Notice of Allowance from the USPTO for
our second patent and first continuation of our Keystroke
Encryption patent, which only furthers our protection for all
mobile devices when utilizing any keyboard for data entry. Upon
receipt of this Notice, we also filed another continuation patent
for Patent No. 8,566,608.
In April 2014, we were granted our third patent relating to our
“Multi-Channel Device Utilizing a Centralized Out-of-Band
Authentication System” Patent No. 8,713,701.
In September 2014, we filed an International Patent for
MobileTrust® (PCT/US20114/029905).
In March 2015, we received our third patent from the USPTO, Patent
No. 8,973,107, of our Keystroke Encryption patent. This enhances
our position for our Keystroke Encryption product, GuardedID®, and
our MobileTrust® product.
In December 2016, we executed a retainer agreement with a second
patent attorney to aggressively enforce our patent rights as
“Out-of-Band Authentication” has become the standard for
authenticating consumers in the financial market and for many Saas
application users (e.g., SalesForce, Quickbooks, etc.). As of March
1, 2019, we no longer retain that particular firm and we are
currently searching for a new firm that will pick up the pending
enforcement cases.
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.
We completed the development of our ProtectID® platform at the end
of June 2006, we completed the core development of our keyboard
encryption and anti-keylogger product, GuardedID®, in December 2006
and commenced deployment of our new mobile product, MobileTrust®
into the mobile stores in 2015. All are currently being sold and
distributed. Our suite of products is targeted to the financial,
e-commerce, corporate, government, healthcare, legal, insurance,
technology and retail markets. We seek to locate customers in a
variety of ways. These primarily include contracts with value added
resellers and distributors (both inside the United States and
internationally), direct sales calls initiated by our internal
staff, exhibitions at security and technology trade shows, through
the media, through consulting agreements, and through our agent
relationships. Our sales generate revenue either as an Original
Equipment Manufacturer (“OEM”) model, through a Hosting/License
agreement, bundled with other company’s products or through direct
purchase by distributors and resellers. We price our products for
cloud consumer transactions based on the number of transactions in
which our software products are utilized. We also price our
products for business applications based on the number of users.
These pricing models provide our company with one-time, monthly,
quarterly and annual recurring revenues with volume discounts. We
are also generating revenues from annual maintenance contracts,
renewal fees and expect, but cannot guarantee, an increase in
revenues based upon the execution of various agreements that we
have recently concluded and implemented during the fourth quarter
of 2014, primarily in the retail and insurance sectors. To date the
MobileTrust® patent application has not yet been granted. We cannot
be certain that this patent will be granted nor can we be certain
that other companies have not filed for patent protection for these
technologies. In the event the patents were granted for the
MobileTrust® technology, there is no assurance that we will be in a
position to enforce the patent rights. Failure to be granted patent
protection for the technology could result in greater competition
or in limited payments. This could result in inadequate revenue and
cause us to cease operations.
WE WILL FACE INTENSE COMPETITION FROM COMPETITORS THAT HAVE GREATER
FINANCIAL, TECHNICAL AND MARKETING RESOURCES. THESE COMPETITIVE
FORCES MAY IMPACT OUR PROJECTED GROWTH AND ABILITY TO GENERATE
REVENUES AND PROFITS, WHICH WOULD HAVE A NEGATIVE IMPACT ON OUR
BUSINESS AND THE VALUE OF YOUR INVESTMENT.
We likely will face competition from alternate security software
programs and services. As is typical of a new industry, demand and
market acceptance for recently introduced services are subject to a
high level of uncertainty and risk. In addition, the software
industry is characterized by frequent innovation. As the market for
computer security products evolves, it will be necessary for us to
continually modify and enhance our existing products and develop
new products. We believe that our competitors will enhance existing
product lines and introduce new products. If we are unable to
update our software to compete or to meet announced schedules for
improvements and enhancements, it is likely that our sales will
suffer and that potential customers will be lost to a competing
company’s product.
Because the market for our services is new and evolving, it is
difficult to predict the future growth rate, if any, and the size
of this market. Substantial marketing activities have been
implemented and will continue to be required to meet our revenue
and profit goals. There can be no assurance we will be successful
in such marketing efforts. There can be no assurance either that
the market for our services will develop or become sustainable.
Further, other companies may decide to provide services similar to
ours. These companies may be better capitalized than us and we
could face significant competition in pricing and services
offered.
IF WE DO NOT ADEQUATELY PROTECT THE INTELLECTUAL PROPERTY RIGHTS,
WE MAY EXPERIENCE A LOSS OF REVENUE AND OUR OPERATIONS MAY BE
MATERIALLY IMPAIRED.
We rely upon confidentiality agreements signed by our employees,
consultants and third parties to protect the intellectual property.
These agreements generally provide that the individual must keep
confidential and not disclose to other parties any confidential
information developed or learned by the individual during the
course of the individual’s relationship with us except in limited
circumstances. These agreements generally also provide that we
shall own all inventions conceived by the individual in the course
of rendering services to us. These agreements may not effectively
prevent disclosure of confidential information or result in the
effective assignment to us of intellectual property, and may not
provide an adequate remedy in the event of unauthorized disclosure
of confidential information or other breaches of the agreements. In
addition, others may independently discover trade secrets and
proprietary information that have been licensed to us or that we
own, and in such case we could not assert any trade secret rights
against such party.
We cannot assure that we can adequately protect the intellectual
property or successfully prosecute potential infringement of the
intellectual property rights. Also, we cannot assure that others
will not assert rights in, or ownership of, trademarks and other
proprietary rights of ours or that we will be able to successfully
resolve these types of conflicts to our satisfaction. Failure to
protect the intellectual property rights would result in a loss of
revenue and could adversely affect our operations and financial
condition. In December 2011, we executed an exclusive agreement
with a firm to defend and protect our “Out-of-Band” Patent No.
7,870,599, which now includes Patent No. 8,484,698 and
8,713,701. In January 2013, we were assigned the entire right,
title and interest in the “Out-of-Band” patent by NetLabs, with
approval by the developer, and the assignment was recorded with the
USPTO. We are working to aggressively enforce our Out-of-Band
Authentication patent rights.
OUR INABILITY TO RETAIN OUR KEY EXECUTIVE OFFICERS WOULD IMPEDE OUR
BUSINESS PLAN AND GROWTH STRATEGIES, WHICH COULD HAVE A NEGATIVE
IMPACT ON OUR BUSINESS AND THE VALUE OF YOUR INVESTMENT.
Our success depends, to a critical extent, on the continued efforts
and services of our Chief Executive Officer, Mark L. Kay, our Chief
Technical Officer and Inventor, Ramarao Pemmaraju, and our
Executive Vice President and Head of Marketing, George Waller. Were
we to lose two or more of these key executive officers, we would be
forced to expend significant time and money in the pursuit of a
replacement, which would result in both a delay in the
implementation of our business plan and the diversion of limited
working capital. We can give you no assurance that we can find
satisfactory replacements for these key executive officers at all,
or on terms that are not unduly expensive or burdensome to our
Company. We do not currently carry key-man life insurance policies
on any of our employees, which would assist us in recouping our
costs in the event of the loss of those officers.
BECAUSE OUR MANAGEMENT CONTROLS A MAJORITY OF OUR
OUTSTANDING VOTING STOCK (SPECIFICALLY THE SUPER MAJORITY VOTING
RIGHTS OF THE SERIES A PREFERRED STOCK, INVESTORS MAY FIND THAT
CORPORATE DECISIONS CONTROLLED BY OUR MANAGEMENT ARE INCONSISTENT
WITH THE INTERESTS OF OTHER STOCKHOLDERS.
Our directors and officers, directly or indirectly, control
(through ownership of common stock and voting through preferred
stock) of the majority (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 eighty percent
(80%) of the issued and outstanding shares of common stock) of
voting stock. Accordingly, in accordance with our Articles of
Incorporation and Bylaws, our management has control on who is
elected to our Board of Directors and thus could act, or could have
the power to act, as our management. Since our management are not
passive investors but are also our active executives and directors,
their interests as executives and directors may, at times, be
adverse to those of passive investors. Where those conflicts exist,
our shareholders will be dependent upon our management exercising,
in a manner fair to all of our shareholders, their fiduciary duties
as an officer or as a member of our Board of Directors. Also, due
to their stock ownership and voting position, our management will
have: (i) the ability to control the outcome of most corporate
actions requiring stockholder approval, including amendments to our
Articles of Incorporation; (ii) the ability to control corporate
combinations or similar transactions that might benefit minority
stockholders which may be rejected by our management to their
detriment, and (iii) control over transactions between them and our
Company.
THE INABILITY TO MANAGE OUR GROWTH COULD IMPEDE OUR ABILITY TO
GENERATE REVENUES AND PROFITS AND TO OTHERWISE IMPLEMENT OUR
BUSINESS PLAN AND GROWTH STRATEGIES, WHICH WOULD HAVE A NEGATIVE
IMPACT ON OUR BUSINESS AND THE VALUE OF YOUR INVESTMENT.
We plan to grow rapidly, which will place strains on our management
team and other Company resources to both implement more
sophisticated managerial, operational and financial systems,
procedures and controls and to hire, train and manage the personnel
necessary to implement those functions. Our staff is currently
comprised of seven people and we believe that in order for us to
achieve our goals, it will be necessary to further expand our
personnel, particularly in the area of sales, support services,
technology development and client support. As we grow, we also
expect to increase detailed and pertinent internal and
administrative controls and procedures, require further product
enhancements and customization of our existing products for
specific clients, as well as enter new geographic markets. We do
not presently have in place the corporate infrastructure common to
larger organizations. We do not, for example, have a separate human
resources department or purchasing department designed for a larger
organization. Some of our key personnel do not have experience
managing large numbers of personnel. Substantial expansion of our
organization will require the acquisition of additional information
systems and equipment, a larger physical space and formal
management of human resources. It will require that we expand the
number of people within our organization providing additional
administrative support (or consider outsourcing) and to develop and
implement additional internal controls appropriate for a larger
organization. Our experience to date in managing the minimal growth
of our Company has been positive, without product failures or
breakdowns of internal controls.
The time and costs to effectuate our business development process
may place a significant strain on our management personnel, systems
and resources, particularly given the limited amount of financial
resources and skilled employees that may be available at the time.
There can be no assurance that we will integrate and manage
successfully new systems, controls and procedures for our business,
or that our systems, controls, procedures, facilities and
personnel, even if successfully integrated, will be adequate to
support our projected future operations. There can be no assurance
that any expenditure incurred during this expansion will ever be
recouped. Any failure to implement and maintain such changes could
have a material adverse effect on our business, financial condition
and results of operations.
OUR SUBSCRIPTION AGREEMENT PROVIDES THAT WYOMING WILL BE THE
GOVERNING LAW AND FORUM FOR SUBSTANTIALLY ALL DISPUTES BETWEEN US
AND OUR INVESTORS, WHICH COULD LIMIT AN INVESTORS’ ABILITY TO
OBTAIN A FAVORABLE JUDICIAL FORUM FOR DISPUTES WITH US OR OUR
DIRECTORS, OFFICERS OR EMPLOYEES BUT DOES NOT PRECLUDE THE INVESTOR
FOR FEDERAL OR STATE SECURITIES LAW LITIGATION.
By becoming an investor in this Offering, you are deemed to have
notice of and have consented to the provisions of our Subscription
Agreement related to governing law and choice of forum. This forum
provision may limit an investor’s ability to bring a claim in a
judicial forum that it finds favorable for disputes with us or our
directors, officers, or other employees, which may discourage
lawsuits against us and our directors, officers and other
employees. This provision does not apply to claims arising under
the Securities Act of 1933, the Securities Exchange Act of 1934, or
other federal securities laws for which there is exclusive federal
or concurrent federal and state jurisdiction. In addition,
investors cannot waive compliance with the federal securities laws
and the rules and regulations thereunder. In that regard, we note
that Section 22 of the Securities Act of 1933 creates concurrent
jurisdiction for federal and state courts over all suits brought to
enforce any duty or liability created by the Securities Act or the
rules and regulations thereunder. Exchange Act 27 creates exclusive
federal jurisdiction over all suits brought to enforce any duty or
liability created by the Exchange Act or the rules and regulations
thereunder. If a court were to find the exclusive forum provision
in our Subscription Agreement to be inapplicable or unenforceable
in an action, we may incur additional costs associated with
resolving the dispute in other jurisdictions, which could seriously
harm our business. In addition, an Investors’ ability to seek
relief in the state courts as a more favorable jurisdiction, will
likely fail because the Courts will defer to federal
jurisdiction.
THE REGULATION OF PENNY STOCKS BY SEC AND FINRA (FINANCIAL INDUSTRY
REGULATORY AUTHORITY, INC.) MAY DISCOURAGE THE TRADABILITY OF OUR
SECURITIES AND THEREBY MAKE IT HARD FOR INVESTORS TO SELL THEIR
SHARES AT THE TIME AND PRICES THEY MIGHT OTHERWISE EXPECT.
We are a "penny stock" company. We are subject to a Securities and
Exchange Commission rule that imposes special sales practice
requirements upon broker-dealers who sell such securities to
persons other than established customers or accredited investors.
For purposes of the rule, the phrase "accredited investors" means,
in general terms, institutions with assets in excess of $5,000,000,
or individuals having a net worth in excess of $1,000,000 or having
an annual income that exceeds $200,000 (or that, when combined with
a spouse's income, exceeds $300,000). For transactions covered by
the rule, the broker-dealer must make a special suitability
determination of the purchaser and receive the purchaser's written
agreement to the transaction prior to the sale. Effectively, this
discourages broker-dealers from executing trades in penny stocks.
Consequently, the rule will affect the ability of purchasers in
this offering to sell their securities in any market that might
develop, because it imposes additional regulatory burdens on penny
stock transactions.
In
addition, the Securities and Exchange Commission has adopted a
number of rules to regulate "penny stocks". Such rules include
Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, and 15g-9
under the Securities and Exchange Act of 1934, as amended. Because
our securities constitute “penny stocks” within the meaning of the
rules, the rules would apply to us and to our securities. The rules
will further affect the ability of owners of shares to sell their
securities in a market that might develop for them because it
imposes additional regulatory burdens on penny stock
transactions.
Shareholders should be aware that, according to the Securities and
Exchange Commission Release No. 34-29093, the market for penny
stocks has suffered in recent years from patterns of fraud and
abuse. Such patterns include (i) control of the market for the
security by one or a few broker-dealers that are often related to
the promoter or issuer; (ii) manipulation of prices through
prearranged matching of purchases and sales and false and
misleading press releases; (iii) “boiler room” practices involving
high-pressure sales tactics and unrealistic price projections by
inexperienced sales persons; (iv) excessive and undisclosed bid-ask
differentials and markups by selling broker-dealers; and (v) the
wholesale dumping of the same securities by promoters and
broker-dealers after prices have been manipulated to a desired
level, leaving investors with losses. Our management is aware of
the abuses that have occurred historically in the penny stock
market. Although we do not expect to be in a position to dictate
the behavior of the market or of broker-dealers who participate in
the market, management will strive within the confines of practical
limitations to prevent the described patterns from being
established with respect to our securities.
RULE 144 SALES IN THE FUTURE MAY HAVE A DEPRESSIVE EFFECT ON OUR
STOCK PRICE AS AN INCREASE IN SUPPLY OF SHARES FOR SALE, WITH NO
CORRESPONDING INCREASE IN DEMAND WILL CAUSE PRICES TO FALL.
All of the outstanding shares of common stock held by the present
officers, directors, and affiliate stockholders are "restricted
securities" within the meaning of Rule 144 under the Securities Act
of 1933, as amended. As restricted shares, these shares may be
resold only pursuant to an effective registration statement or
under the requirements of Rule 144 or other applicable exemptions
from registration under the Act and as required under applicable
state securities laws. Rule 144 provides in essence that a person
who is an affiliate or officer or director who has held restricted
securities for six months may, under certain conditions, sell every
three months, in brokerage transactions, a number of shares that
does not exceed the greater of 1.0% of a company's outstanding
common stock. There is no limit on the amount of restricted
securities that may be sold by a non-affiliate after the owner has
held the restricted securities for a period of six months if the
company is a current reporting company under the 1934 Act. A sale
under Rule 144 or under any other exemption from the Act, if
available, or pursuant to subsequent registration of shares of
common stock of present stockholders, may have a depressive effect
upon the price of the common stock in any market that may
develop.
FINRA SALES PRACTICE REQUIREMENTS MAY ALSO LIMIT A STOCKHOLDER'S
ABILITY TO BUY AND SELL OUR STOCK.
In addition to the “penny stock” rules described above, the
Financial Industry Regulatory Authority (FINRA) has adopted rules
that require that in recommending an investment to a customer, a
broker-dealer must have reasonable grounds for believing that the
investment is suitable for that customer. Prior to recommending
speculative low-priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain
information about the customer's financial status, tax status,
investment objectives and other information. Under interpretations
of these rules, FINRA believes that there is a high probability
that speculative low-priced securities will not be suitable for at
least some customers. FINRA requirements make it more difficult for
broker-dealers to recommend that their customers buy our common
stock, which may limit your ability to buy and sell our stock and
have an adverse effect on the market for our shares.
BECAUSE WE ARE QUOTED ON THE OTCMARKETS.COM INSTEAD OF AN EXCHANGE
OR NATIONAL QUOTATION SYSTEM, OUR INVESTORS MAY HAVE A MORE
DIFFICULT TIME SELLING THEIR STOCK OR EXPERIENCE NEGATIVE
VOLATILITY ON THE MARKET PRICE OF OUR STOCK.
Our common stock is traded on the OTCMarkets.com. The
OTCMarkets.com is often highly illiquid. There is a greater chance
of volatility for securities that trade on the OTCMarkets.com as
compared to a national exchange or quotation system. This
volatility may be caused by a variety of factors, including the
lack of readily available price quotations, the absence of
consistent administrative supervision of bid and ask quotations,
lower trading volume, and market conditions. Investors in our
common stock may experience high fluctuations in the market price
and volume of the trading market for our securities. These
fluctuations, when they occur, have a negative effect on the market
price for our securities. Accordingly, for the reasons above, our
stockholders may not be able to realize a fair price from their
shares when they determine to sell them or may have to hold them
for a substantial period of time until the market for our common
stock improves.
WE HAVE IDENTIFIED MATERIAL WEAKNESSES IN OUR DISCLOSURE CONTROLS
AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL REPORTING.
Maintaining effective internal control over financial reporting and
effective disclosure controls and procedures are necessary for us
to produce reliable financial statements. We have evaluated our
internal control over financial reporting and our disclosure
controls and procedures and concluded that they were not effective
as of September 30, 2020 and December 31, 2019.
A material weakness is defined as a deficiency, or a combination of
deficiencies, in internal control over financial reporting such
that there is a reasonable possibility that a material misstatement
of our annual or interim financial statements will not be prevented
or detected on a timely basis. The material weaknesses we
identified are (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 year ended December 31, 2019. 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; (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.
The Company is committed to remediating its material weaknesses as
promptly as possible. Implementation of the Company’s remediation
plans has commenced and is being overseen by the board. However,
there can be no assurance as to when these material weaknesses will
be remediated or that additional material weaknesses will not arise
in the future. Even effective internal control can provide only
reasonable assurance with respect to the preparation and fair
presentation of financial statements. Any failure to remediate the
material weaknesses, or the development of new material weaknesses
in our internal control over financial reporting, could result in
material misstatements in our financial statements, which in turn
could have a material adverse effect on our financial condition and
the trading price of our common stock and we could fail to meet our
financial reporting obligations. We have identified weaknesses in
our internal controls, and we cannot provide assurances that these
weaknesses will be effectively remediated or that additional
material weaknesses will not occur in the future.
If not remediated, our failure to establish and maintain effective
disclosure controls and procedures and internal control over
financial reporting could result in material misstatements in our
financial statements and a failure to meet our reporting and
financial obligations, each of which could have a material adverse
effect on our financial condition and the trading price of our
common stock.
VOLATILITY IN OUR COMMON SHARE PRICE MAY SUBJECT US TO SECURITIES
LITIGATION, THEREBY DIVERTING OUR RESOURCES THAT MAY HAVE A
MATERIAL EFFECT ON OUR PROFITABILITY AND RESULTS OF OPERATIONS.
As discussed in the preceding risk factors, the market for our
common shares is characterized by significant price volatility when
compared to seasoned issuers, and we expect that our share price
will continue to be more volatile than a seasoned issuer for the
indefinite future. In the past, plaintiffs have often initiated
securities class action litigation against a company following
periods of volatility in the market price of its securities. We may
in the future be the target of similar litigation. Securities
litigation could result in substantial costs and liabilities and
could divert management’s attention and resources.
COMPLIANCE WITH CHANGING REGULATION OF CORPORATE GOVERNANCE AND
PUBLIC DISCLOSURE WILL RESULT IN ADDITIONAL EXPENSES AND POSE
CHALLENGES FOR OUR MANAGEMENT TEAM.
Changing laws, regulations and standards relating to corporate
governance and public disclosure, including the Dodd-Frank Wall
Street Reform and Consumer Protection Act and the rules and
regulations promulgated thereunder, the Sarbanes-Oxley Act
and SEC regulations, have created uncertainty for public
companies and significantly increased the costs and risks
associated with accessing the U.S. public markets. In addition, the
current federal administration has indicated significant regulatory
modifications and we cannot foresee the impact of any revised
regulations. Our management team will need to devote significant
time and financial resources to comply with both existing and
evolving standards for public companies, including the policies of
the recently appointed Chairman of the SEC, which will lead to
increased general and administrative expenses and a diversion
of management time and attention from revenue generating activities
to compliance activities.
Risks Related to this Offering and Our
Securities
THE OFFERING PRICE OF OUR SHARES HAS BEEN ARBITRARILY
DETERMINED.
Our management has determined the number and price of shares
offered by the Company. The price of the shares we are offering was
arbitrarily determined based upon the current market value,
illiquidity and volatility of our Common Stock, our current
financial condition and the prospects for our future cash flows and
earnings, and market and economic conditions at the time of the
Offering. The Offering price for the Common Stock sold in this
Offering may be than the fair market value for our Common
Stock.
WE HAVE BROAD DISCRETION IN THE USE OF THE NET PROCEEDS FROM THIS
OFFERING AND MAY NOT USE THEM EFFECTIVELY.
We
intend to use up to $1,524,658 gross proceeds from this Offering
(if we sell all the shares being offered) for the growth of our new
product “SafeVchat” video product and operations. Our
management will have broad discretion in the application of the net
proceeds and may spend or invest these proceeds in a way with which
our stockholders disagree. The failure by our management to apply
these funds effectively could harm our business and financial
condition. Pending their use, we may invest the net proceeds from
this Offering in a manner that does not produce income or that
loses value.
PURCHASERS OF OUR COMMON STOCK MAY EXPERIENCE IMMEDIATE DILUTION
AND/OR FUTURE DILUTION.
We
are authorized to issue up to 14,000,000,000 shares of Common
Stock, of which 718,263,338 shares were issued and outstanding as
of December 28, 2020. We plan to issue
approximately 38,116,450 common stock shares in
connection with this Offering if fully subscribed. Our board of
directors has the authority to cause us to issue additional shares
of Common Stock without consent of any of our stockholders. In
addition, at December 28, 2020, there were other securities
convertible or exercisable into 98,937,043 shares of
common stock made up of 12,645,184 shares of common stock
available upon the conversion of convertible
loans, 753,383 shares of common stock available upon the
conversion of Series B Preferred stock, options exercisable
into 58,133,000 shares of common stock, and warrants
exercisable into 27,405,476 shares of common stock. Consequently,
common stockholders may experience dilution in their ownership of
our stock in the future and as a result of this Offering. If the
Offering is fully subscribed, the non-subscribing common stock
shareholders will hold less than 10% of our issued and outstanding
stock collectively.
SHARES ELIGIBLE FOR FUTURE SALE MAY HAVE ADVERSE EFFECTS ON OUR
SHARE PRICE.
We
are offering 38,116,450 shares of our Common Stock, as described in
this Offering Circular. We cannot predict the effect, if any, of
future sales of our shares, or the availability of shares for
future sales, on the market price of our shares. The market price
of our shares may decline significantly when the restrictions on
resale by certain of our stockholder’s lapse. Sales of substantial
amounts of shares or the perception that such sales could occur may
adversely affect the prevailing market price for our shares. After
the completion of this Offering, we may issue additional shares in
subsequent public Offerings or private placements to make new
investments or for other purposes. We are not required to offer any
such shares to existing stockholders on a preemptive basis.
Therefore, it may not be possible for existing stockholders to
participate in such future share issuances, which may dilute the
existing stockholders’ interests in us.
OUR MANAGEMENT HAS DISCRETION AS TO THE USE OF CERTAIN OF THE NET
PROCEEDS FROM THIS OFFERING.
We
intend to use up to $1,524,658 gross proceeds from this Offering
and the prior funds received from the earlier Form 1-A and Form 1-A
POS offering, (if we sell all the shares being offered) for
the growth of our new product “SafeVchat” video product and
operations. Our management will have discretion in the application
of the net proceeds. Accordingly, you will have to rely upon the
judgment of our management with respect to the use of these
proceeds. Our management may use a portion of the net proceeds from
this Offering in ways that holders of our Common Stock may not
desire or that may not yield a significant return or any return at
all. The failure by our management to apply these funds effectively
could harm our business. Please see "Use of Proceeds" below for
more information.
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 provides forgivable funding for payroll and
related costs as well as some non-payroll costs. We applied
for funding and, to date, have received (on April 17, 2020) funding
in the amount of $313,212. No assurances can be provided as
to the adequacy of the funds received for ongoing operations in
2020 or if additional funding will be subsequently available.
THE OUTBREAK OF THE COVID-19 MAY ADVERSELY AFFECT OUR
CUSTOMERS.
Further, such risks as described above could also adversely affect
our 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.
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.
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
This Form 1-A, Offering Circular, and any documents incorporated by
reference herein or therein contain forward-looking statements and
are subject to risks and uncertainties. All statements other than
statements of historical fact or relating to present facts or
current conditions included in this Form 1-A, Offering Circular,
and any documents incorporated by reference are forward-looking
statements. Forward-looking statements give the Company's current
reasonable expectations and projections relating to its financial
condition, results of operations, plans, objectives, future
performance and business. You can identify forward-looking
statements by the fact that they do not relate strictly to
historical or current facts. These statements may include words
such as ‘anticipate,’ ‘estimate,’ ‘expect,’ ‘project,’ ‘plan,’
‘intend,’ ‘believe,’ ‘may,’ ‘should,’ ‘can have,’ ‘likely’ and
other words and terms of similar, meaning in connection with any
discussion of the timing or nature of future operating or financial
performance or other events. The forward-looking statements
contained in this Form 1-A, Offering Circular, and any documents
incorporated by reference herein or therein are based on reasonable
assumptions the Company has made in light of its industry
experience, perceptions of historical trends, current conditions,
expected future developments and other factors it believes are
appropriate under the circumstances. As you read and consider this
Form 1-A, Offering Circular, and any documents incorporated by
reference, you should understand that these statements are not
guarantees of performance or results. They involve risks,
uncertainties (many of which are beyond the Company’s control) and
assumptions. Although the Company believes that these
forward-looking statements are based on reasonable assumptions, you
should be aware that many factors could affect its actual operating
and financial performance and cause its performance to differ
materially from the performance anticipated in the forward-looking
statements. Should one or more of these risks or uncertainties
materialize or should any of these assumptions prove incorrect or
change, the Company's actual operating and financial performance
may vary in material respects from the performance projected in
these forward- looking statements. Any forward-looking statement
made by the Company in this Form 1-A, Offering Circular or any
documents incorporated by reference herein speaks only as of the
date of this Form 1-A, Offering Circular or any documents
incorporated by reference herein. Factors or events that could
cause our actual operating and financial performance to differ may
emerge from time to time, and it is not possible for the Company to
predict all of them. The Company undertakes no obligation to update
any forward-looking statement, whether as a result of new
information, future developments or otherwise, except as may be
required by law.
Although the forward-looking statements in this Offering Circular
are based on our beliefs, assumptions and expectations, taking into
account all information currently available to us, we cannot
guarantee future transactions, results, performance, achievements
or outcomes. No assurance can be made to any investor by anyone
that the expectations reflected in our forward-looking statements
will be attained, or that deviations from them will not be material
and adverse. We undertake no obligation, other than as maybe be
required by law, to re-issue this Offering Circular or otherwise
make public statements updating our forward-looking
statements.
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 our products,
and harm our business and results of operations. In the nine months
ended September 30, 2020, we believe the COVID-19 pandemic did
impact our operating results as sales to customers in the second
and third quarters were down 17% and 15%, respectively, from the
first quarter of the year. However, we have not observed any
impairments of our assets or a significant change in the 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 magnitude of the adverse
results of the outbreak and its effects on our business or results
of operations, financial condition, or liquidity.
As
of (and subsequent to) September 30, 2020, we have been following
the recommendations of local health authorities to minimize
exposure risk for our team members for the past several weeks,
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.
Because the risk factors referred to above, as well as other
risks not mentioned above, could cause actual results or outcomes
to differ materially from those expressed in any forward-looking
statements made by us, you should not place undue reliance on any
such forward-looking statements. Further, any forward-looking
statement speaks only as of the date on which it is made. We
undertake no obligation to update any forward-looking statement to
reflect events or circumstances after the date on which such
statement is made or reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not
possible for us to predict which ones will arise. In addition, we
cannot assess the impact of each factor on our business or the
extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any
forward-looking statements.
DETERMINATION OF OFFERING PRICE
This Offering is a self-underwritten offering, which means that it
does not involve the participation of an underwriter to market. Our
Offering Price is arbitrary with no relation to value of the
Company. The Company has engaged Spencer Clarke LLC,, a
broker-dealer registered with the SEC and a member of the Financial
Industry Regulatory Authority (“FINRA”),as a placement agent.
DILUTION
Investors in this Offering will experience immediate dilution from
the sale of Shares by the Company. If you invest in our Shares,
your interest will be diluted to the extent of the difference
between the public Offering price per share of our Common Stock and
the as adjusted net tangible book value per share of our capital
stock after this Offering. Net tangible book value per share
represents our total tangible assets less total liabilities,
divided by the number of shares of Common Stock outstanding. Net
tangible book value dilution per share of Common Stock to new
investors represents the difference between the amount per share
paid by purchasers in this Offering and the as adjusted net
tangible book value per share of Common Stock immediately after
completion of this Offering.
As
of September 30, 2020, our net tangible book value was
approximately ($15,607,000), or approximately ($0.254) per share.
After giving effect to our sale of the maximum Offering amount of
$1,524,658 in securities and after deducting an aggregate of
$136,233 in estimated underwriter fee and offering expenses and
assuming no other changes since October 1st, 2020, our
as-adjusted net tangible book value would be approximately
($14,218,575), or ($0.143) per share. At an Offering price of
$0.04 per share, this represents an immediate dilution in net
tangible book value of $0.051 per share to investors of this
Offering, as illustrated in the following table:
|
Assumed Public Offering
price per share
|
|
|
|
|
$ |
0.040
|
|
|
Net tangible book value
per share as of September 30, 2020
|
|
$ |
(0.254
|
) |
|
|
|
|
|
Change in net tangible
book value per share attributable to new investors
|
|
$ |
0.243 |
|
|
|
|
|
|
Adjusted net tangible
book value per share
|
|
|
|
|
|
$ |
(0.011
|
) |
|
Dilution per share to
new investors in the Offering
|
|
|
|
|
|
$ |
0.051
|
|
The following table illustrates the per share dilution to new
investors discussed above, assuming the sale of, respectively,
100%, 75%, 50% and 25% of the Shares offered for sale in this
Offering (after deducting our estimated underwriter fee and
offering expenses):
|
|
|
100%
|
|
|
75%
|
|
|
50%
|
|
|
25%
|
|
|
Funding Level
|
|
$
|
1,524,658
|
|
|
$
|
1,143,494
|
|
|
$
|
762,329
|
|
|
$
|
381,165
|
|
|
Offering Price
|
|
$
|
0.040
|
|
|
$
|
0.040
|
|
|
$
|
0.040
|
|
|
$
|
0.040
|
|
|
Net tangible book value per share of Common
Stock before this Offering
|
|
$
|
(0.254
|
)
|
|
$
|
(0.254
|
)
|
|
$
|
(0.254
|
)
|
|
$
|
(0.254
|
)
|
|
Increase in net tangible book value per share
attributable to new investors in this Offering
|
|
$
|
0.243
|
|
|
$
|
0.239
|
|
|
$
|
0.231
|
|
|
$
|
0.210
|
|
|
Net tangible book value per share of Common
Stock, after this Offering
|
|
$
|
(0.011
|
)
|
|
$
|
(0.015
|
)
|
|
$
|
(0.023
|
)
|
|
$
|
(0.044
|
)
|
|
Dilution to investors in the Offering
|
|
$
|
0.051
|
|
|
$
|
0.055
|
|
|
$
|
0.063
|
|
|
$
|
0.084
|
|
PLAN OF
DISTRIBUTION
We are Offering up to 38,116,450 shares of our Common
Stock for $0.04 per share, for a total of up to
$1,524,658 in gross Offering proceeds, assuming all securities
are sold. The minimum investment for any investor is $5,000, unless
such minimum is waived by the Company, which may be done in its
sole discretion on a case-by-case basis. There is no minimum
Offering amount or provision to escrow or return investor funds if
any minimum number of shares is not sold, and we may sell
significantly fewer shares of Common Stock than those offered
hereby. In fact, there can be no assurances that the Company will
sell any or all the Offered shares. All funds received from the
Company will be immediately available for its use.
Our Common Stock is listed on any national securities exchange;
however, the Company’s Common Stock is quoted on OTC Markets.
Upon this Offering Circular being qualified by the Securities and
Exchange Commission, the Offering will be conducted as a continuous
Offering (and not on a delay basis) pursuant to Rule 251(d)(3)(f)
of the Regulation A under the Securities Act, however, this
Offering will terminate one year from the initial qualification
date of this Offering Circular, unless extended or terminated by
the Company. The Company may terminate this Offering at any time
and may also extend, in our sole discretion, the Offering term by
90 days.
Currently, we plan to have our directors and executive officers
sell the shares offered hereby on a best-efforts basis and have
engaged Spencer Clarke LLC who is registered with the Financial
Industry Regulatory Authority (“FINRA”) for a commission of 5% of
the revenues. Spencer Clarke LLC will not receive any other
compensation, including but not limited to cash, non-accountable
expense allowance, equity, or warrants, other than the commission
of 5% of the revenues. Our directors and executive officers will
receive no discounts or commissions. Our executive officers or
Spencer Clarke LLC will deliver this Offering Circular to those
persons who they believe might have interest in purchasing all or a
part of this Offering. The Company may generally solicit investors;
however, it must abide by the “blue sky” regulations relating to
investor solicitation in the states where it will solicit
investors. There can be no assurances that our Offering Circular
and this Offering will be available in any particular State. All
Shares will be offered on a “best efforts” basis.
Spencer Clarke LLC has received a general engagement fee of $5,000
(not related to this offering) and is entitled, as a result of
prior debt financing, to $19,200 cash, of which the cash remains
outstanding. No proceeds from this offering will used to satisfy
the outstanding obligations, nor are monthly advisory fees or
retainer stock to be paid to Spencer Clarke LLC. The maximum and
only fees that Spencer Clarke LLC can earn from this offering is
$125,000 (equaling 5% of the revenues if this offering is fully
subscribed).
The Company, if the full offering is subscribed, anticipates
proceeds, estimated to be $1,388,425 after
|
|
•
|
deducting estimated
offering expenses of $60,000; and
|
|
|
•
|
including paying Spencer Clarke LLC, a
placement fee equal to 5% on all funds raised in the Offering
($76,233 as discussed above).
|
Our directors and officers will not register as broker-dealers
under Section 15 of the Exchange Act in reliance upon Rule 3a4-1.
Rule 3a4-1 sets forth those conditions under which a person
associated with an issuer may participate in the Offering of the
issuer’s securities and not be deemed to be a broker-dealer. The
conditions are that:
|
|
•
|
the person is not statutorily
disqualified, as that term is defined in Section 3(a)(39) of the
Securities Act of 1933 (the “Securities Act”), at the time of his
participation; and |
|
|
|
|
|
|
•
|
the person is not at the time of
their participation an associated person of a broker-dealer;
and |
|
|
|
|
|
|
•
|
the person meets the conditions of
paragraph (a)(4)(ii) of Rule 3a4-1 of the Exchange Act, in that he
(i) primarily performs, or is intended primarily to perform at the
end of the Offering, substantial duties for or on behalf of the
issuer otherwise than in connection with transactions in
securities; and (ii) is not a broker or dealer, or an associated
person of a broker or dealer, within the preceding 12 months; and
(iii) does not participate in selling and Offering of securities
for any issuer more than once every 12 months other than in
reliance on paragraphs (a)(4)(i) or (a)(4)(iii) of Rule 3a4-1 of
the Exchange Act. |
Our officers and directors are not statutorily disqualified, are
not being compensated, and are not associated with a broker-dealer.
They are and will continue to hold their positions as officers or
directors following the completion of the Offering and have not
been during the past 12 months and are currently not brokers or
dealers or associated with brokers or dealers. They have not nor
will they participate in the sale of securities of any issuer more
than once every 12 months.
All subscription agreements and checks received by the Company for
the purchase of shares are irrevocable until accepted or rejected
by the Company and should be delivered to the Company as provided
in the subscription agreement. A subscription agreement executed by
a subscriber is not binding on the Company until it is accepted on
our behalf by the Company’s Chief Executive Officer or by specific
resolution of our board of directors. Any subscription not accepted
within 30 days will be automatically deemed rejected. Once
accepted, the Company will deliver a stock certificate to a
purchaser within five days from request by the purchaser;
otherwise, purchasers’ shares will be noted and held on the book
records of the Company.
In various states, the securities may not be sold unless these
securities have been registered or qualified for sale in such state
or an exemption from registration or qualification is available and
is complied with. We have not yet applied for “blue sky”
registration in any state, and there can be no assurance that we
will be able to apply, or that our application will be approved and
our securities will be registered, in any state in the United
States. We intend to sell the shares only in the states in which
this Offering has been qualified or an exemption from the
registration requirements is available and purchases of shares may
be made only in those states.
Should any fundamental change occur regarding the status of this
Offering or other matters concerning the Company, we will file an
amendment to this Offering Circular disclosing such matters.
Investors should be aware that our subscription agreement provides
for exclusive forum in the federal courts of the state of Wyoming
and is governed by the state laws of Wyoming and the laws of the
United States for any claims arising from the Securities Act of
1933. This may limit an Investors’ ability to seek relief in a more
favorable jurisdiction. We advise that you seek the advice of
counsel prior to subscribing as it may pose a risk relate to the
underlying investment.
OTC Markets Considerations
The OTC Markets is separate and distinct from the New York Stock
Exchange and Nasdaq stock market or other national exchange.
Neither the New York Stock Exchange nor Nasdaq has a business
relationship with issuers of securities quoted on the OTC Markets.
The SEC’s order handling rules, which apply to New York Stock
Exchange and Nasdaq-listed securities, do not apply to securities
quoted on the OTC Markets.
Although other national stock markets have rigorous listing
standards to ensure the high quality of their issuers and can
delist issuers for not meeting those standards; the OTC Markets has
no listing standards. Rather, it is the market maker who chooses to
quote a security on the system, files the application, and is
obligated to comply with keeping information about the issuer in
its files.
Investors may have greater difficulty in getting orders filled than
if we were on Nasdaq or other exchanges. Trading activity in
general is not conducted as efficiently and effectively on OTC
Markets as with exchange-listed securities. Also, because OTC
Markets stocks are usually not followed by analysts, there may be
lower trading volume than New York Stock Exchange and Nasdaq-listed
securities.
USE OF PROCEEDS TO
ISSUER
The following Use of Proceeds is based on estimates made by
management. The Company planned the Use of Proceeds after deducting
estimated offering expenses of $60,000 (and including paying
Spencer Clarke LLC, a placement fee equal to 5% on all funds raised
in the Offering and no other compensation pursuant to this
Offering), for anticipated proceeds, estimated to be
$1,524,658.
Management prepared the milestones based on four levels of Offering
raise success. The costs associated with operating as a public
company are included in all our budgeted scenarios and management
is responsible for the preparation of the required documents to
keep the costs to a minimum.
The Company intends to use the proceeds from this offering as
follows:
The following table illustrates the amount of net proceeds to be
received by the Company on the sale of shares by the Company and
the intended uses of such proceeds, over an approximate 12-month
period.
If 25% of the Shares offered are sold:
|
Percentage of Offering Sold
|
|
|
Offering Proceeds
|
|
|
Approximate Offering Expenses
|
|
|
Total Net Offering Proceeds
|
|
|
Principal Uses of Net Proceeds
|
|
|
|
25
|
% |
|
$ |
381,165
|
|
|
$ |
79,058
|
|
|
$ |
302,106
|
|
|
For our new product, SafeVchat
which is a video system for the industry.
|
|
If 50% of the Shares offered are sold:
|
Percentage of Offering Sold
|
|
|
Offering Proceeds
|
|
|
Approximate Offering Expenses
|
|
|
Total Net Offering Proceeds
|
|
|
Principal Uses of Net Proceeds
|
|
|
|
50
|
% |
|
$ |
762,329
|
|
|
$ |
98,116
|
|
|
$ |
664,213
|
|
|
For our new product,
SafeVchat
|
|
If 75% of the Shared offered are sold:
|
Percentage of Offering Sold
|
|
|
Offering Proceeds
|
|
|
Approximate Offering Expenses
|
|
|
Total Net Offering Proceeds
|
|
|
Principal Uses of Net Proceeds
|
|
|
|
75
|
% |
|
$ |
1,143,494
|
|
|
$ |
117,175
|
|
|
$ |
1,026,319
|
|
|
For our new product,
SafeVchat
|
|
If 100% of the Shares offers are sold:
|
Percentage of Offering Sold
|
|
|
Offering Proceeds
|
|
|
Approximate Offering Expenses
|
|
|
Total Net Offering Proceeds
|
|
|
Principal Uses of Net Proceeds
|
|
|
100
|
% |
|
$ |
1,524,658
|
|
|
$ |
136,233
|
|
|
$ |
1,388,425
|
|
|
For our new product,
SafeVchat
|
|
Capital Sources and Uses
|
|
|
100 |
% |
|
Gross Offering Proceeds
|
|
$ |
1,524,658 |
|
|
Offering Expenses
|
|
$ |
60,000 |
* |
|
Placement Agent Fee
|
|
$ |
76,233 |
|
|
Net Offering Proceeds
|
|
$ |
1,388,425 |
|
|
Use of Proceeds:
|
|
|
|
|
|
For our new product, SafeVchat
|
|
$ |
1,388,425 |
|
|
·
|
Includes costs Form 1-A and Form
1-A POS offering. |
Subsequent to the qualification of the Form 1-A on November 13,
2020, and prior to the filing of this Post Qualification Offering
Circular Amendment No. 6, the Company accepted subscriptions for an
aggregate gross proceeds of $975,342 and issued an aggregate of
436,337,203 shares of its common stock to 27 investors. The Company
compensated the Placement Agent with $48,661 in placement agent
fees.
The precise amounts that we will devote to our new product,
SafeVchat, and the timing of expenditures, will vary depending on
numerous factors.
No portion of the proceeds will be used to compensate or otherwise
make payments to our officers or directors.
As indicated in the table above, if we sell only 75%, or 50%, or
25% of the shares offered for sale in this Offering, we would
expect to use the resulting net proceeds for the same purposes as
we would use the net proceeds from a sale of 100% of the shares,
and in approximately the same proportions, until such time as such
use of proceeds would leave us without working capital reserve. At
that point we would expect to modify our use of proceeds by
limiting our expansion, leaving us with the working capital reserve
indicated.
The expected use of net proceeds from this Offering represents our
intentions based upon our current plans and business conditions,
which could change in the future as our plans and business
conditions evolve and change. The amounts and timing of our actual
expenditures, specifically with respect to working capital, may
vary significantly depending on numerous factors. The precise
amounts that we will devote to each of the foregoing items, and the
timing of expenditures, will vary depending on numerous factors. As
a result, our management will retain broad discretion over the
allocation of the net proceeds from this Offering.
In the event we do not sell all the shares being offered, we may
seek additional financing from other sources in order to support
the intended use of proceeds indicated above. If we secure
additional equity funding, investors in this Offering would be
diluted. In all events, there can be no assurance that additional
financing would be available to us when wanted or needed and, if
available, on terms acceptable to us.
The allocation of the use of proceeds among the categories of
anticipated expenditures represents management’s best estimates
based on the current status of the Company’s proposed operations,
plans, investment objectives, capital requirements, and financial
conditions. No assurances can be provided that any milestone
represented herein will be achieved. Future events, including
changes in economic or competitive conditions of our business plan
or the completion of less than the total Offering amount, may cause
the Company to modify the above-described allocation of proceeds.
The Company’s use of proceeds may vary significantly in the event
any of the Company’s assumptions prove inaccurate. We reserve the
right to change the allocation of net proceeds from the Offering as
unanticipated events or opportunities arise. Additionally, the
Company may from time to time need to raise more capital to address
future needs.
DESCRIPTION OF
BUSINESS
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. Apart from
our 49% holding in BlockSafe Technologies, Inc., we have no other
subsidiaries.
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 our products,
and harm our business and results of operations. In the nine months
ended September 30, 2020, we believe the COVID-19 pandemic did
impact our operating results as sales to customers in the second
and third quarters were down 17% and 15%, respectively, from the
first quarter of the year. However, we have not observed any
impairments of our assets or a significant change in the 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 magnitude of the adverse
results of the outbreak and its effects on our business or results
of operations, financial condition, or liquidity.
As of (and subsequent to) September 30, 2020, we have been
following the recommendations of local health authorities to
minimize exposure risk for our team members for the past several
weeks, 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.
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 9 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 Offering
Circular).
Reverse Stock Split and Changes in Authorized
Shares
In April 2020, our Board of Directors approved a 1:500 reverse
stock split that was approved by stockholders controlling 80% of
our common stock. The reverse stock split was effectuated on June
25, 2020 and all share and per share amounts on the accompanying
financial statements are presented in post-split amounts as if the
split occurred at the beginning of the earliest period
presented.
In April 2020, an increase of our common stock from 12,000,000,000
to 17,000,000,000 shares was authorized.
In April 2020, a decrease of our common stock from 17,000,000,000
to 14,000,000,000 shares was authorized.
Business
We are a software development and services company that offers a
suite of integrated computer network security products using
proprietary technology. StrikeForce Technical Services Corporation
was incorporated in August 2001 under the laws of the State of New
Jersey. On September 3, 2004, we changed our name to StrikeForce
Technologies, Inc. On November 15, 2010, we redomiciled under the
laws of the State of Wyoming. We initially conducted operations as
an integrator and reseller of computer hardware and
telecommunications equipment and services until December 2002. In
December 2002, and formally memorialized in September 2003, we
acquired certain intellectual property rights and patent pending
technology from NetLabs.com, Inc. (“NetLabs”) including the rights
to further develop and sell their principal technology. In
addition, certain officers of NetLabs joined our company as
officers and directors of our company. 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.
We began our operations in 2001 as a reseller and integrator of
computer hardware and iris biometric technology. From the time we
started our operations through the first half of 2003, we derived
the majority of our revenues as an integrator. In December 2002,
upon the acquisition of the licensing rights to certain
intellectual property and patent pending technology from NetLabs,
we shifted the focus of our business to developing and marketing
our own suite of security products. Based upon our acquired
licensing rights and additional research and development, we have
developed various identification protection software products to
protect computer networks from unauthorized access and to protect
users from identity theft.
We completed the development of our ProtectID® platform at the end
of June 2006, we completed the core development of our keyboard
encryption and anti-keylogger product, GuardedID®, in December 2006
and commenced deployment of our new mobile product, MobileTrust®
into the mobile stores in 2015. All are currently being sold and
distributed. ProtectID® patent titled "Multi-Channel Device
Utilizing a Centralized Out-of-Band Authentication System" is
protected by three patents. The keystroke encryption technology we
developed and use in our GuardedID® product is protected by three
patents. MobileTrust® has a patent pending, as of March 2013.
In November 2010, we received notice that the United States Patent
and Trademark Office (“USPTO”) had issued an official Notice of
Allowance for the patent application for the technology relating to
our ProtectID® product. In January 2011, we received notice that
the USPTO issued to us Patent No. 7,870,599. This “Out-of-Band”
Patent went through a USPTO Re-Examination process starting on
August 16, 2011 and concluded on December 27, 2011, with all of our
patent claims remaining intact and eight additional patent claims
being added. Since 2011, we submitted additional continuation
patents on the “Out-of-Band” Patent, two additional patents granted
and a fourth pending.
In January 2013, we were assigned the entire right, title and
interest in the “Out-of-Band” Patent from NetLabs, with the
agreement of the developer, and the assignment was recorded with
the USPTO.
In February 2013, we executed a retainer agreement with our patent
attorneys to aggressively enforce our patent rights as “Out-of-Band
Authentication” was becoming the standard for authenticating
consumers in the financial market and for many Saas application
users (e.g., SalesForce, Quickbooks, etc.). In February 2013, our
patent attorneys submitted a new “Out-of-Band” Patent continuation,
which was granted.
In March 2013, our patent attorneys submitted a new “Methods and
Apparatus for securing user input in a mobile device” Patent, which
is now patent pending. Our MobileTrust® product is the invention
supporting the patent pending.
In July 2013, we received notice that the USPTO had added
approximately sixty additional patent claims for our Out-of-Band
patent we received in January 2011, by issuing to us Patent No.
8,484,698 thereby strengthening our position with clients and our
current and potential lawsuits.
In October 2013, we received notice that the USPTO issued to us
Patent No. 8,566,608 “Methods and apparatus for securing keystrokes
from being intercepted between the keyboard and a browser.” This
protects our GuardedID® product and the keystroke encryption
portion of our MobileTrust® products.
In February 2014, we received a Notice of Allowance from the USPTO
for our third patent relating to our "Multi-Channel Device
Utilizing a Centralized Out-of-Band Authentication System" Patent
No. 7,870,599. Upon receipt of this “Out-of-Band” patent we filed
another continuation patent.
In March 2014, we received Notice of Allowance from the USPTO for
our second patent and first continuation of our Keystroke
Encryption patent, which only furthers our protection for all
mobile devices when utilizing any keyboard for data entry. Upon
receipt of this Notice, we also filed another continuation patent
for Patent No. 8,566,608.
In April 2014, we were granted our third patent relating to our
“Multi-Channel Device Utilizing a Centralized Out-of-Band
Authentication System” Patent No. 8,713,701.
In September 2014, we filed an International Patent for
MobileTrust® (PCT/US20114/029905).
In March 2015, we received our third patent from the USPTO, Patent
No. 8,973,107, of our Keystroke Encryption patent. This enhances
our position for our Keystroke Encryption product, GuardedID®, and
our MobileTrust® product.
In December 2016, we executed a retainer agreement with a second
patent attorney, to aggressively enforce our patent rights as
“Out-of-Band Authentication” has become the standard for
authenticating consumers in the financial market and for many Saas
application users (e.g., SalesForce, Quickbooks, etc.).
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.
Our suite of products is targeted to the financial, e-commerce,
corporate, government, healthcare, legal, insurance, technology and
retail markets. We seek to locate customers in a variety of ways.
These primarily include contracts with value added resellers and
distributors (both inside the United States and internationally),
direct sales calls initiated by our internal staff, exhibitions at
security and technology trade shows, through the media, through
consulting agreements, and through our agent relationships. Our
sales generate revenue either as an Original Equipment Manufacturer
(“OEM”) model, through a Hosting/License agreement, bundled with
other company’s products or through direct purchase by distributors
and resellers. We price our products for cloud consumer
transactions based on the number of transactions in which our
software products are utilized. We also price our products for
business applications based on the number of users. These pricing
models provide our company with one-time, monthly, quarterly and
annual recurring revenues with volume discounts. We are also
generating revenues from a licensing agreement we executed with
Cyber Safety in 2015, which was modified in 2019.
We generated all of our revenues of $768,000 for the year ended
December 31, 2019 (compared to $234,000 for the year ended December
31, 2018), from the sales of our security products. The increase in
revenues was due to the increase in our software, hardware,
services, maintenance, and support sales. Revenues for the nine
months ended September 30, 2020 were $162,000 compared to $611,000
for the nine months ended September 30, 2019, a decrease of
$449,000 or 73.5%. The decrease in revenues was primarily due to
impairments caused by the COVID-19 pandemic that resulted in a
decrease in our software and service revenues. Revenues are derived
from software, key fobs and services. We have realized delays in
revenues from some of our new distributor’s that, although there
can be no assurances, we anticipate will appear in fiscal 2020
and/or 2021 but may be reduced due to the impairments caused by
COVID-19. Additionally, we believe we have opportunities through
our sales distribution channels, including current pilots, which we
anticipate, but cannot guarantee, should increase revenues in 2020
and/or 2021 (subject to the impairments caused by COVID-19 or the
effectiveness and distributions of recently announced vaccines
which may be introduced starting in 2020), especially with the
addition of our mobile security products and new multi-marketing
partners.
We market our products globally to financial service firms,
healthcare related companies, legal services companies, e-commerce
companies, automotive, government agencies, multi-level marketing
groups, the enterprise market in general, and with virtual private
network companies, as well as technology service companies and
retail distributors that service all the above markets. We seek
such sales through our own direct efforts, with emphasis on retail,
through distributors, resellers and third-party agents
internationally. We are also seeking to license the technology as
original equipment with computer hardware and software
manufacturers. We are engaged in multiple production installations
and pilot projects with various distributors, resellers and direct
customers primarily in the United States. Our GuardedID® product is
also being sold directly to consumers, primarily through the
Internet as well as distributors, resellers, third party agents,
affiliates and potential OEM agreements by bundling GuardedID® with
their products (providing a value-add and competitive advantage to
their own products and offerings). Currently this is the most
active market for us with multiple programs in production. We
anticipate, but cannot guarantee, increases in revenues in fiscal
2020 and/or 2021 (subject to the impairments caused by COVID-19),
from these programs. In addition, we have completed the development
and testing of our new mobile products, MobileTrust® and GuardedID®
Mobile Software Development Kit (SDK), which is in now available in
the Apple Store and the Android Play Store. The mobile products
play a major role in our anticipated, but not guaranteed (due to
the impairments caused by COVID-19), fiscal 2020 and/or 2021
revenue projections.
BlockSafe Technologies, Inc. (“BlockSafe”) was formed on December
1, 2017 in the State of Wyoming. BlockSafe is in the business of
providing total cyber security solutions and is the licensee from
our company of our desktop anti-malware product
GuardedID® and our one of a kind mobile application
called “MobileTrust®”. 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. BlockSafe’s products
include CryptoDefender® and ProtectID®. BlockSafe also owns the
patent for a product entitled BlockchainDefender™.
We have incurred substantial losses since our inception. Our
management believes that our products provide a cost-effective and
technologically competitive solution to address the problems of
network security and identity theft in general. Guidance for the
Federal Financial Institutions Examination Council
(“FFIEC”) regulations include the requirement for solutions that
have Two-Factor Out-of-Band Authentication and products that stop
keylogging malware, real time, which our management believes our
proprietary products uniquely and directly address. This guidance
went into effect as of January 1, 2012. Based on this requirement
in the FFIEC update (published in June 2011 with enforcement
commencing in January 2012), we have experienced a growing increase
in sales orders and inquiries every year. However, there can be no
assurance that our products will continue to gain acceptance and
continue to grow in the commercial marketplace or that one of our
competitors will not introduce technically superior
products.
Because we anticipate, but cannot guarantee, a continual growing
market demand, we are developing a sizeable global reseller and
distribution channel as a strategy to generate, manage and fulfill
the anticipated demand for our products across market segments,
minimizing the requirement for an increase in our staff as we grow
our distributor market. We have minimized the concentration on our
initial direct sales efforts as our distribution and reseller
channels continue to grow internationally and will require
appropriate levels of support. Management believes that Cyber
Security is a growing requirement as the pandemic continues, 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 Company is also
experiencing the impact of the pandemic. Currently our management
is not working from our office location and this impairs our
ability coordinate growth and impedes our ability to take advantage
of the increasing market demand. Instead, like many businesses, we
are focused in maintaining our business, in contrast to the prior
business plan of continued growth. Most, if not all, of our
business continues from home where it is difficult to operate under
normal conditions. Many of our current clients also have
experienced a dramatic slowdown in their business, limiting their
ability to have the resources to pay for our services. We
still produce revenues and through this Offering, we anticipate,
but cannon guarantee, we will have the resources to advance our
video conferencing tool that will we believe will provide
authentication and encryption (using our products already built),
for which we believe will have a great interest in the market.
Currently, we have companies already interested in our beta that we
will be starting in the fourth quarter of 2020.
On
August 24, 2015, we 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 our GuardedID® patent
for $9,000,000 that expires on September 30, 2020. In March 2019,
the option to purchase was modified to increase the purchase price
to $10,000,000 and extend the expiration date to 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. We
anticipate, but cannot guarantee, Cyber Safety will complete the
purchase by September 30, 2021. Management believes, but cannot
provide assurances, that Cyber Safety will exercise this option.
Management believes 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 in regards to some of their large contracts,
such as with Fiserv/First Data and AON Insurance. The option
remains open until September 30, 2022 and Cyber Safety, to our
knowledge, is still contemplating the exercise of the option. In
the event the option is exercised, StrikeForce will have no patent
rights for GuardedID and MobileTrust’s products and patents but
will retain the exclusive ability to sell these products in the
retail market. Cyber Safety will also resell our GuardedID® and
MobileTrust® products, for which we will receive a royalty, while
we retain an unlimited license to resell those products. Cyber
Safety also licensed the Malware Suite until September 30, 2020 and
agreed to pay us 15% to 20% of the net amount Cyber Safety receives
from this product. During the nine months ended September 30, 2020
and 2019, the Company recorded revenue of $380 and $280,000,
respectively, from Cyber Safety.
Our executive office is located at 1090 King Georges Post Road,
Suite 603, Edison, NJ 08837. Our telephone number is (732)
661-9641. 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 Offering Circular).
Our Products
StrikeForce is a software development and services company. We own
and are seeking to commercially exploit various identification
protection software products that we developed to protect computer
networks from unauthorized access, real time, and to protect
network owners and users from cyber security attacks and data
breaches. Our principal products ProtectID®, GuardedID®, inclusive
of our unique CryptoColor® technology and MobileTrust®, are
proprietary authentication and keystroke encryption technologies
that are intended to eliminate unauthorized access to computer
networks and all mobile devices, and to prevent unauthorized
individuals from copying (logging) keystrokes. We are increasing
our market for our suite of products in the financial services,
e-commerce, corporate, healthcare, government and consumer sectors.
Our cyber security products are as follows:
|
|
•
|
ProtectID®
is our multi-patented authentication platform that uses
“Out-of-Band” multi-factor in-house installation, cloud service
technology, a hybrid to authenticate computer network users by a
variety of methods including traditional passwords combined with a
telephone, iPhone, Droid, Blackberry, PDA, multiple computer secure
sessions, or a Push Authentication method which was implemented in
the fourth quarter of 2017, biometric identification and encrypted
devices such as tokens or smartcards as examples. The
authentication procedure separates authentication information such
as usernames from the pin/passwords or biometric information, which
are then provided to or from the network’s host server across
separate communication channels. The platform allows for corporate
control and client choices, per their company’s security policies,
which evolves over time with newly available and customer requested
technologies. (Patent Nos:7,870,599, 8,484,698, and 8,713,701 and
one patent pending for Out-of-Band Authentication)
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GuardedID® creates a
256-bit AES encrypted real time separate pathway for information
delivery from a keyboard to a targeted application on a local
computer, preventing the use of spyware/malware to collect user
information. This product provides keyboard encryption and helps
prevent keylogging from occurring in real time, which helps prevent
the number one threat to consumers and businesses in today’s
market: keylogging software, which is stealth software embedded in
web sites, emails, pictures, MP3 files, videos, USB’s or other
software and hardware that, once unknowingly launched, secretly
monitors and records all of a user's keystrokes on the computer and
sends the data to the cyber thief without the user’s awareness.
Keylogging has been reported as the one of the major causes of
major data breaches that occurred from 2010 to 2016, as reported in
the 2010-2016 Verizon Data Breach Reports. (Patent No: 8,566,608,
8,732,483 and 8,973,107).
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MobileTrust® is an
advanced iPhone/iPad and Android device password vault that
includes a strong password generator. MobileTrust® also provides
for Mobile Multi-Factor One Time Password authentication, a secured
browser and keystroke encryption between its virtual keyboard and
secured browser, which is critical to all confidential online
transactions and other features, which is now in production. This
new feature for mobile devices, which helps prevent data breaches
and stolen credentials is a critical and vital addition to all
enterprise mobile users, as enterprises transition to “Bring Your
Own Devices” (BYOD).
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GuardedID® Mobile SD••K
is a software development kit that provides developers our patent
protected keystroke encryption protection for all Apple and Android
mobile device’s secure keyboards, allowing our keystroke encryption
software to be embedded in any mobile applications, utilizing DES
256 Encryption.
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Our products sometimes include software and hardware that we
contractually license from other vendors. These products include
VASCO (an authentication and e-signature solutions company) tokens,
as well as additional authentication and telecommunication software
devices. We also purchase tokens and devices from HyperSecurity
Solutions in Vancouver, Canada.
The ProtectID® Cloud Service can be hosted by our service provider
(we have a strategic arrangement with a third party SSAE 16 hosting
service) as well as the ProtectID® Out-of-Band and Multi-Factor
Platform, which can be installed internally in a customer’s
infrastructure or as a hybrid implementation. With the exception of
our free redistributable Microsoft software components and our
reseller agreements with VASCO and HyperSecurity Solutions, none of
our contracts for hardware or software are with a sole supplier of
that feature or product.
Factors that are considered important to our success include, but
are not limited to, the following:
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Our products address the needs of a
broad variety of customers for authentication and cyber security
overall. One of the biggest problems facing the world is Cyber
Theft, the effects of which, our management contends, total an
estimated $221 billion per year in business losses and more
recently, based on anecdotal evidence provided to management,
stated to be in the trillions going forward (with effects of the
increase use in remote access due to COVID-19 still
undeterminable). |
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Symantec reported there were over
401 million new pieces of Spyware found over the past year. |
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48% of all data breaches were
caused by key loggers (malware copying keystrokes), as reported by
the Verizon 2012 Data Breach Report. Similar percentages are
reported in the Verizon 2014 report, recently published. All of the
companies breached, per these reports, had an anti-virus program
installed. |
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For illustration (while historic),
in 2011, it was reported that RSA Security’s data was breached from
which Lockheed Martin and others were affected and lost millions of
dollars. This event caused many companies to look to other means of
two-factor authentication, such as Out-of-Band. The RSA Data Breach
started with a keylogging virus which our GuardedID® product,
management believes, would most likely would have prevented. |
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In respect to the latest version of
our keyboard encryption and anti-keylogger Product, GuardedID®, a
recent report from a government security group known as CERT states
that minimally 80% of the malicious keylogging programs are
undetected by the major anti-virus software suites. Our Guarded ID®
is designed, we believe, to render the malicious programs useless,
in real time. |
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The 2015 Verizon Data Breach
report, published in April 2016, stated that 80% of all the data
breaches they reported would not have occurred if the corporations
used two factor authentication |
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In February 2015, the New York
Times reported that a Global Bank heist occurred in banks around
the globe from a keylogger. This was the first known time that a
large hack was reported with the details which included a keylogger
that our management believes GuardedID® would have most likely
prevented. The article was noted as caused by keystroke encryption
in a picture on the front page of the New York Times. |
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The Effectiveness of Our
Products: Our products have been designed to provide, we
believe, a high available level of security for computer networks
and individual users. In particular, we believe that the now
Patented “Out-of-Band” authentication process is an innovative
technology that will greatly prevent unauthorized access to
computer networks and will provide effective security products to
drastically reduce the incidence of identity fraud for our
customers. We have contractually commenced implementation of our
products on a large global scale, yet there can be no assurance
that they will function in all aspects as intended. Likewise, a
high level of innovation characterizes the software industry and
there can be no assurance that our competitors will not develop and
introduce a superior product. The effective functioning of our
products once deployed is an important factor in our future
success. To date and our knowledge, all of our clients have
reported, per a report by Research 2.0, that our products work as
described. |
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Ability to Integrate our
Software with Customer Environments: There are numerous
operating systems that are used by computer networks. The ability
of a software product to integrate with multiple operating systems
is likely to be a significant factor in customer acceptance of
particular products. Our ProtectID® operates on an independent
Cloud Service platform and is also able to integrate with multiple
operating systems and user interfaces for an in-house
implementation. ProtectID® has been designed to use multiple
authentication devices that are currently on the market (including,
but not limited to, biometrics, key-fob tokens, iPhones, iPads,
Androids, PDA’s, smart cards and other mobile devices). Our ability
to integrate our products with multiple existing and future
technologies is currently a key factor in the growth of our
product’s acceptance and is demonstrated by our success with recent
clients and installations. . Our GuardedID® product currently
operates with Windows Internet Explorer (IE), Firefox, Chrome and
Safari browsers and our upgraded Premium version works with almost
all applications running on a Windows desktop platform, inclusive
of Microsoft Office and the MAC. New features and functions for
both products continue to be developed via our research and
development. We are also now live with our MobileTrust® and
GuardedID® Mobile SDK products, which work on all Apple and Android
devices. |
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Relative Cost: We
have attempted to design our products to provide a cost-effective
suite of products for financial services, e-commerce, commercial,
healthcare, government and direct-consumer customers. Our ability
to offer our products at a competitive price and to add to existing
installations is likely in our opinion, to be a key factor in the
acceptance of our product as we have seen with many of our
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Business Model
We
are focusing primarily on developing sales through “channel”
relationships in which our products are offered by other
manufacturers, distributors, value-added resellers and agents,
internationally. In 2016, we added and publicly announced additions
to our global distribution sales channel, which provides additional
presence for us in the United States, Canada, Europe and Africa. We
continue to add additional channel partners, especially on the
consumer side and developed a new retail business. We also sell our
suite of security products directly from our Edison, New Jersey
office, which also augments our channel partner relationships. It
is our strategy that these “channel” relationships will provide the
greater percentage of our revenues ongoing, as was the case in the
past two years. Examples of the channel relationships that we are
seeking include already established original equipment
manufacturer (“OEM”) and bundled relationships with other security
technology and software providers that would integrate or bundle
the enhanced security capabilities of ProtectID®, GuardedID® and/or
MobileTrust® into their own product lines, including our
MobileTrust® SDK, thereby providing greater value to their clients.
These would include providers of networking software and
manufacturers of computer and telecommunications hardware and
software that provide managed services, and multi-level marketing
groups, as well as all markets interested in increasing the value
of their products and packages, such as financial services
software, anti-virus, government integrators and identity theft
product companies. We signed various new distributors during 2018
and 2019, and we anticipate, but cannot guarantee, an increase in
revenues in 2020 and/or 2021 (subject to the impairments caused by
COVID-19). Additionally, Cyber Safety originally purchased
their option to buy our GuardedID® patent for nine million dollars
($9,000,000) to be paid by September 30, 2020, and will resell our
GuardedID® and MobileTrust® products, for which we will receive a
royalty, while we retain a perpetual license to resell those
products (this transaction subject to the impairments caused by
COVID-19) . In March 2019, the option to purchase agreement was
modified to increase the purchase price to $10,000,000 and extend
the expiration date to September 30, 2021. Also, if the note as
modified is not paid in full by the extended due date, then the
purchase price shall increase to $11,000,000 with a due date of
September 30, 2022. We anticipate, but cannot guarantee, Cyber
Safety will make the purchase by September 30, 2021(subject to the
impairments caused by COVID-19). Management believes, but cannot
provide assurances, that Cyber Safety will exercise this
option. In the event the option is exercised, StrikeForce
will have no patent rights for GuardedID and MobileTrust’s products
and patents, but will retain the exclusive ability to sell these
products in the retail market. The distributors have already
obtained new clients and we expect, but cannot guarantee, that more
clients will be obtained in fiscal 2020 and thereafter. There is no
guarantee as to the timing and success of these business
relationships or reaching our self-imposed expectations.
From our MobileTrust® security application, built with our sCloud
registration process, we have created and announced two new
products: our new ProtectID® Mobile OTP (One Time Password) to be
used with ProtectID®; and our new GuardedID® Mobile keystroke
encryption software development kit (SDK). Both new products are
now in production. With the creation of this new GuardedID® Mobile
SDK, we now focus the sales of this software product to the
development groups of our target markets for it to be added to
their mobile applications. We are in discussions with many
large-scale parties that are interested in this software.
Management has already received requests for this software, as
keystroke encryption malware grows and remains a major problem for
the mobile-cyber security market, particularly with anti-virus
products being viewed as non-effective against malware threats.
Our primary target markets include financial services such as banks
and insurance companies, healthcare providers, legal services,
government agencies through integrators, technology platforms,
e-commerce based services companies, telecommunications and
cellular carriers, technology software companies, government
agencies and consumers, especially for our mobile and keystroke
encryption products. We are focusing our concentration on cyber
security and data breach strategic problem areas, such as where
compliance with financial, healthcare, legal and government
regulations are key and stolen passwords are used to acquire
private information illegally. In 2018 and 2019, several of our
channel partners had pilots and client implementations in place
that are expected, although no assurances can be provided, to
increase our revenues in 2020 and/or 2021(subject to the
impairments caused by COVID-19). Our mobile products went into
production during the first quarter of 2016 and the revenues
related to those products are increasing, primarily as results of
the efforts of our channel partners, Cyber Safety and others. There
is no guarantee as to the timing and continued success of these
efforts.
Because we are now expecting a continual, recurring growing market
demand, especially in the mobility and encryption retail markets,
we continue to develop an increasing global reseller and
distribution channel as a strategy to generate, manage and fulfill
demand for our products across market segments, minimizing the
requirement for an increase in our staff as we grow our distributor
market. We continue to minimize the concentration on our initial
direct sales efforts as our distribution and reseller channels
continue to grow internationally and provide appropriate levels of
sales and support to the growing Cyber Security market.
We seek to generate revenue through fees for ProtectID® based on
client consumer usage in the financial, healthcare services and
legal services markets, as well as enterprises in general, through
our Cloud Service, plus one-time and annual per person fees in the
enterprise markets which often are for in-house installations of
our products, and set-up and recurring transaction fees when the
product is accessed in our Cloud Service, along with annual
maintenance fees, and other one-time and recurring fees. We have
also implemented our new ProtectID® v4.01, which includes our
Mobile One-Time-Password. We also intend to generate revenues
through sales of our GuardedID® product. GuardedID® pricing is for
an annual license and we discount for volume purchases. GuardedID®
pricing models, especially when bundling through OEM contracts,
include monthly and quarterly recurring revenues. As more
agreements are reached by our distributors, we are experiencing
monthly increasing sales growth, through the execution of
GuardedID® bundled OEM agreements. We also provide our clients a
choice of operating our ProtectID® software internally by licensing
it or through our hosted Cloud Service or a hybrid that some
clients have implemented and none of our competitors presently
offer. GuardedID® requires a download on each and every computer it
protects, whether for employees or consumers. We have four
GuardedID® products, (i) a standard version which protects browser
data entry only, (ii) a premium version which protects almost all
the applications running under Microsoft Windows on the desktop,
including Microsoft Office Suite and almost all applications
running on the desktop, (iii) an Enterprise version which, in
addition, provides the Enterprise administrative rights and the use
of Microsoft’s Enterprise tools for the product’s deployment, and
(iv) an Apple version for all the latest MAC operating systems and
for the browsers and entire desktop. Our MobileTrust® mobile
product will be priced for the consumer through the appropriate
mobile phone stores, as well as direct, distribution and OEM sales
for higher volume enterprises, including volume discounts to the
degree allowed by the telecommunications providers. Our GuardedID®
Mobile SDK (software development kit) went to the open market in
the second quarter of 2016. We anticipate, but cannot guarantee,
steadily increasing revenues from this product offering.
Our management believes that our products provide a cost-effective
and technologically competitive solution to address the increasing
problems of network security and cyber security in general.
Guidance for the Federal Financial Institutions Examination
Council (“FFIEC”) regulations include the requirement for
solutions that have Two-Factor Out-of-Band Authentication and
products that stop keylogging malware, real time, which our
management believes our proprietary products uniquely and directly
address. This guidance went into effect as of January 1, 2012.
Additionally, the 2015 Verizon Data Breach report, published in
April 2016, stated that 80% of all the data breaches they reported
would not have occurred if the corporations used two factor
authentication, which our management believes would have been
prevented with products such as our ProtectID® system. The report
also indicates that over 79% of the data breaches would most likely
not have occurred if the corporations breached used anti-keylogging
software, such as our GuardedID® system in addition to the typical
anti-virus programs. Based on the FFIEC requirement, the latest
Verizon Data Breach Report and the new articles from the White
House urging law firms and legal services firms to add two factor
authentication, we have recently experienced a growing increase in
pilots and sales orders and inquiries specifically in the financial
and legal markets. In January 2014, PCI Compliance
published an update that includes the requirement for not only
encrypting data at rest, but also to encrypt data in motion
including the keystrokes users enter in their device. Additionally,
Symantec's senior vice-president for information security, Brian
Dye, told the Wall Street Journal that anti-virus "is
dead", in an article published in May 2014. However, there can be
no assurance that our products will continue to gain acceptance and
continue to grow in the commercial marketplace or that one of our
competitors will not introduce technically superior
products.
Marketing
Our multi-channel marketing strategy includes:
1. Direct sales to enterprise and commercial customers. In this
effort, we joined ACS at the RSA Security Show, as well as
attending other security related shows and we are looking at other
sales alternatives in order to respond aggressively to inquiries
related to our products.
2. The global addition of resellers, agents & distributors (our
strategic sales channel) who distribute and resell our products and
services to enterprise and commercial customers globally
(technology and software product distributors, systems integrators,
managed service companies, other security technology and software
vendors, telecom companies, cyber security related product
companies, etc.). Presently, our most active channel partner is
ACS.
3. Application Service Provider (ASP) Partners: Our third-party
service provides a hosting platform that facilitates faster
implementations at competitive prices for our Cloud Service
option.
4. Original Equipment Manufacturers (OEM): SFT products are sold to
other security technology vendors that integrate ProtectID®,
GuardedID® and now GuardedID® Mobile SDK into their products
(bundling) and services providing for monthly/annual increasing
recurring revenues.
5. Internet sites and retail stores, such as Target, Office Depot,
Amazon, and HSN (US), that sell GuardedID® and MobileTrust®, to
consumers and small enterprises online and in the stores.
6. Technology and other providers and resellers, agents and
distributors interested in purchasing and or selling our new
MobileTrust® cyber solution for all mobile devices, initially for
all Apple and Android devices.
7. Outside Independent consultants selling our products for
commission only, focusing on the healthcare, legal, travel and
consumer markets.
Our Cloud service provider, Hosting.com, was purchased by Ntirety
in 2019. We have been under contract Hosting.com since December
2007 when we executed an agreement with a nationwide premier data
center and co-location services provider who functions as an
Application Service Provider for our ProtectID®, GuardedID® and
MobileTrust® products, which require a secondary server used for
the “Out-of-Band” two-factor authentication technology. We believe
that this relationship improves the implementation time, reduces
the cost and training requirements, and allows for ease of
scalability, with hot backups in multiple locations across the
U.S., on an as needed basis. Our sCloud site is also SSAE 16
certified, which is critical to providing a secure compliant
service that is required by most of our clients. Our agreement with
the services provider was for a one-year (1) term, initially ending
in December 2008 and renewing automatically for one-year (1) terms,
and is still in effect. The relationship can be terminated by
either party on sixty days’ written notice. The cloud service is
based on a flat monthly fee per the terms of the contract that can
increase as we require additional services.
Intellectual Property
Starting in 2016, we worked with one patent attorney firm to
aggressively enforce our patent rights. As of March 1, 2019, we no
longer retain that particular firm (Ropes & Gray LLP) and we
are currently searching for a new firm that will pick up their
pending enforcement cases.
We successfully settled our first major patent lawsuit in January
2016.
Our patent attorneys filed our fourth, fifth and sixth “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®. Also,
BlockSafe Technologies, Inc. has one registered trademark:
CyberDefender®. 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.
Business Strategy
Our primary strategy throughout 2019 and into 2020 is to focus on
the growth and support of our channel partners, including
distributors, resellers and original equipment manufacturers
(OEMs). Our internal sales team targets potential direct sales in
industries that management believes provides the greatest potential
for short term sales. These include small to medium sized financial
institutions, government agencies, e-commerce, healthcare, legal
and enterprise businesses. We are also executing agreements with
strategic resellers and distributors for marketing, selling and
supporting our products internationally. We primarily work with
distributors, resellers and agents to generate the bulk of our
sales internationally, realizing that this strategy takes longer to
nurture, however it is progressing well. We are starting to realize
positive results, however slowly, with our sales channel and
anticipate, but cannot guarantee, a successful fiscal 2019, through
the sales channel and from our new mobile and GuardedID® MAC
products with a concentration of sales already contracted. There
can be no assurances, however, that we will succeed in implementing
our sales strategy. Although management believes that there is an
increasingly strong market for our products as the need for cyber
security solutions increases globally, we have not generated
substantial revenue from the sale of our products and there is no
assurance we can secure a market sufficient to permit us to achieve
profitability in fiscal 2020.
Most of the costs that we incur are related to salaries,
professional fees, marketing, sales and research & design. We
increased our support and technology staff in 2018. Our operations
presently require funding of approximately $150,000 per month. We
expect that our monthly cash usage for operations will increase
slightly due to contracted and anticipated increased volumes and
adding some targeted channel marketing programs. We anticipate that
the areas in which we will experience the greatest increase in
operating expenses is in marketing, selling, product support,
product research and new technology development in the growing
cyber security market. We are committed to maintaining our current
level of operating costs until we reach the level of revenues
needed to absorb any potential increase in costs.
BlockSafe Technologies, Inc.
BlockSafe Technologies, Inc. (“BlockSafe”) was formed on December
1, 2017 in the State of Wyoming. BlockSafe is in the business of
providing total cyber security solutions and is the licensee from
our company of our desktop anti-malware product called
“GuardedID®” and a one of a kind mobile application
called “MobileTrust®”. 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 December 31, 2019, no tokens have been developed or issued.
There is no assurance as to whether, or at what amount, or on what
terms, tokens will be available. Moreover, there can be no
assurance how such technology will function, which could expose us
to legal and regulatory issues. Cryptocurrency and its use of
blockchains is still in the development stage and receiving mixed
results. The Securities and Exchange Commission has, in its
dissemination of information to the public, expressed that tokens
in the United States would be treated as securities pursuant to the
Howey Test. This standard has been adopted, in various
forms, in numerous other jurisdictions. The European Union and
China are contemplating their own form of cryptocurrency and
Facebook Libra cryptocurrency recently lost the support of PayPal
(see https://www.independent.co.uk/topic/cryptocurrency, which
article is not incorporated by reference to this filing). 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%. BlockSafe meets the definition of a variable interest
entity and based on the determination that the Company is the
primary beneficiary of BlockSafe, BlockSafe’s operating results,
assets and liabilities are consolidated by the Company.
In June 2018, two members of our management team, George Waller,
our Executive Vice President and Ramarao Pemmaraju, our Chief
Technical Officer, were appointed to BlockSafe to serve as the
Chief Executive Officer and Chief Technical Officer, respectively.
Additionally, our Chief Executive Officer of StrikeForce, Mark L.
Kay, also an appointee to the Board of Directors of BlockSafe, was
appointed as Chairman and President of BlockSafe.
In 2018, the Company’s consolidated subsidiary BlockSafe issued
promissory notes to investors in the aggregate of $775,500. As part
of each promissory note agreement BlockSafe 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
December 2018, BlockSafe agreed to issue 200,000 cryptocurrency
tokens to an unrelated party for receipt of $50,000. In February
2019, the agreement was amended and the unrelated party is to
receive an additional 100,000 tokens. No such tokens have been
developed or issued as of September 30, 2020.
From February 2019 to March 2019, BlockSafe agreed to issue 450,000
cryptocurrency tokens and 56,250 restricted shares of BlockSafe
common stock to four unrelated parties for receipt of $122,500. The
tokens or restricted stock of BlockSafe have not been issued as of
September 30, 2020.
From March to April 2019, five of the BlockSafe noteholders agreed
to convert $295,500 of principal and $19,700 of accrued interest
into 1,845,041 cryptocurrency tokens to be issued by BlockSafe. The
tokens have not been issued as of September 30, 2020.
We have used the funds received from investors pursuant to the
promissory notes for the efforts mentioned below to develop the
Tokens and to develop an additional product and prepare it for
sale. We currently don’t require additional funds for
the development efforts.
The steps we have taken to date in our efforts to develop tokens
include completing a formal plan for the Tokens, obtaining
professional advice regarding the legal implications of developing
tokens, and we have a blockchain for our Tokens (BSAFE®). We
have not yet finalized a budget for the development of Tokens, we
have not yet hired a full development team, we have not yet
completed the development of Tokens, and we have not yet developed
any payment, trading, or custody platform or infrastructure related
to the Tokens. The failure to develop or issue these Tokens as of
September 30, 2020 does not constitute an event of default under
the promissory notes. It should be noted however that the
promissory notes were not repaid pursuant to their terms, and are
currently in default.
At December 31, 2019 and September 30, 2020, the Company’s
consolidated subsidiary, BlockSafe Technologies, Inc. had recorded
a financing obligation of $1,263,000 to be paid in tokens, as
defined. At September 30, 2020 and through the date of this
filing, BlockSafe Technologies, Inc. has not completed
the development or issued any tokens. At September
30, 2020, as the development of the tokens has not been completed
and 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
BlockSafe Technologies, Inc., through the issuance of tokens, or
through other means if tokens are never issued.
We have stated to the note holders that once StrikeForce has the
funds or BlockSafe sells the Tokens, the intent is to satisfy the
outstanding balances as soon as possible. In the event that we are
unable to satisfy the outstanding balances of the Notes, it could
have a material adverse effect on our business, financial condition
and results of operations.
In March 2019, an increase of the authorized shares of BlockSafe’s
common stock from one thousand (1,000) to one hundred million
(100,000,000), $0.0001 par value, was ratified, effective upon the
filing of an amendment to BlockSafe’s Certificate of Incorporation
with the Wyoming Secretary of State. The amendment was adopted in
March 2019.
In March 2019, a 1:15,000 forward stock split of BlockSafe’s issued
and outstanding shares of common stock was ratified, effective upon
the filing of an amendment to BlockSafe's Certificate of
Incorporation with the Wyoming Secretary of State. The amendment
was adopted in March 2019.
SafeVchat
Our company has expanded our product line recently with the
addition of SafeVchat. Video conferencing has become the “new
normal” way for businesses and consumers to meet. However, the
current video conferencing solutions in the marketplace, in our
opinion, were not designed to protect people, data, or,
confidential information. They were designed with one single task,
allow people to see & hear each other. Since, to our knowledge,
none of the existing solutions were designed by a cyber security
company they are, we believe, suffering from high churn rates and
bad publicity due to the lack of security and numerous breaches. We
believe that we are building the Industry’s most secure video
conferencing solution which will include authenticated access,
encrypted video, encrypted audio, encrypted keystrokes, and
protection for your camera, microphone & speakers from hackers.
StrikeForce is leveraging its existing patented cyber security
solutions to create, in our estimation, the world’s most secure
video conferencing solution, SafeVchat. There can be no assurances
as to the success or profitability of this product.
Competition
The software development and services market is characterized by
innovation and competition. There are several well-established
companies within the authentication market that offer network
security systems in our product market and newer companies with
emerging technologies. We believe that our multi-patented
“Out-of-Band” multi-factor identity authentication platform is an
innovative, secure, adaptable, competitively priced, integrated
network authentication platform. The main features of ProtectID®
include: an open architecture “Out-of-Band” platform for user
authentication; operating system independence; biometric layering;
soft mobile tokens; mobile authentication; secure website logon;
Virtual Private Network (“VPN”) access; domain authentication;
newly added Office 365 authentication and multi-level
authentication. Unlike other techniques for increased network
security, ProtectID® does not rely on a specific authentication
device or method (e.g., phone, tokens, smart cards, digital
certificates, soft mobile tokens, or biometrics, such as a retinal
or fingerprint scan). Rather ProtectID® has been developed as an
“open platform” that incorporates an unlimited number of
authentication devices and methods. For example, once a user has
been identified to a computer network, a system deploying our
ProtectID® authentication system permits the “Out-of-Band”
authentication of that user by a telephone, iPhone, iPad, PDA,
email, hard token, SSL client software, a biometric device such as
a voice biometric, or others, before that user is permitted to
access the network. By using “Out-of-Band” authentication methods,
management believes that ProtectID®, now patented and protected
through our ongoing litigation, with plans for additional
litigation, provides a competitive product for customers with
security requirements greater than typical name and password
schemes for virtual private networks and computer systems with
multiple users at remote locations, as examples. We also believe
that our multi-patented keystroke encryption product, GuardedID®,
offers an additional competitive edge for network security and
e-commerce applications that should provide greater levels of
security and the ability to evolve over time based on newer
technologies when made available. There is less competition for the
keystroke encryption product and there are no well-established
companies in this space, which explains our current growth in
pilots and sales for GuardedID®, especially relating to bundled
channel partner programs. GuardedID® is critical to help prevent
key logging viruses, one of the largest sources of cyberattacks and
data breaches. GuardedID® also is protected with three patents. Our
newest product, MobileTrust®, is ideal for bringing the
functionality of our other two products, especially including
keystroke encryption, to all mobile devices, with initial focus on
all Apple and Android devices. This product is also protected with
our GuardedID® patents and some of its features and functions are
covered by the Out-of-Band Authentication patent. . Our other new
mobile product is GuardedID® Mobile SDK, which allows our secured
keyboard function as a software development kit for developers to
purchase and integrate as part of their secured applications.
Considering the features and functions, all our cyber solutions
have limited competition based on our products’ ability to protect
individual identities and computers/devices against some of the
most dangerous and increasing threats. We also have great demand
for the mobile products, which are being marketed to all potential
new clients.
Although we believe that our suite of products offers competitive
advantages, there is no assurance that any of these products will
continue to increase its market share in the marketplace. Our
competitors include established software and hardware companies
that are likely to be better financed and to have established sales
channels. Due to the high level of innovation in the software
development industry, it is also possible that a competitor will
introduce a product that provides a higher level of security than
our products or which can be offered at prices that are more
advantageous to the customer.
Concentrations
For the nine months ended September 30, 2020, sales to two
customers comprised 72% and 14% of revenues, respectively. Our
primary customer is Intersections, Inc., a provider of consumer and
corporate identity risk management services, under which we operate
pursuant to a Software License and Development Agreement.
Intersections, based on a worldwide license granted pursuant to the
Software License and Development Agreement, bundles our keyboard
encryption and antikey-logging software, as a value add component
into its premium identity theft protection service, IDENTITY GUARD®
Total Protection for which we are compensated. The license is
perpetual and becomes royalty free upon certain events (such as our
filing for bankruptcy or similar protection or our failure to
provide support). Our second largest customer is Digital River.
Digital River is a reseller of certain software products
(ProtectID®, GuardedID® and MobileTrust®) provided by the Company
pursuant to a Reseller Agreement that has been in place since
September 26, 2006. ProtectID® is an Out-of-Band Authentication
product that provides application security. GuardedID® is a
keystroke encryption product that stops keylogging in real time and
MobileTrust® is an Android and Apple phone application, with its
own keyboard to stop keylogging. The Reseller Agreement is
perpetually renewed on a year by year basis unless terminated in
writing sixty (60) days prior to each annual renewal date or, in
general, for a breach of the Reseller Agreement. Upon termination,
any outstanding obligation will be accelerated to thirty days from
the termination date.
Legal Proceedings
On March 14, 2017, we initiated additional patent litigation
against two major competitors in the U.S. District Court for the
Eastern District of Virginia, for infringement of United States
Patent Nos. 7,870,599, 8,484,698 and 8,713,701. This
litigation is ongoing. On June 13, 2017, one of the competitors
initiated a lawsuit against us in the U.S. District Court for the
District of New Jersey for patent infringement (which we believe is
without merit and will defend vigorously). This litigation is
ongoing.
On December 1, 2017, The United States District Court for the
Central District of California issued an opinion in the
StrikeForce Technologies, Inc. v. SecureAuth Corp. case,
which invalidated claims of U.S. Patent Nos. 7,870,599, 8,484,698
and 8,713,701 under 35 U.S.C. §101. We strongly disagreed with the
Court’s decision and an appeal was filed by our attorney in July
2019. In October 2019, the Supreme Court of the United States
denied our petition for a writ of certiorari in StrikeForce
Technologies, Inc. v. SecureAuth Corp (19-103). Thus, the
claims asserted against SecureAuth in the Central District of
California, case no. 2:17-cv-04314-JAK-SK, remain invalid under 35
U.S.C. 101. Our three patents contain a total of 108 claims, 43
claims were deemed invalid, however, 65 claims are still valid.
Despite the Supreme Court’s decision, our Protect ID® products
still retain patent protection and our management intends to
further expand those protections with new patents in the coming
months. In the meantime, we continue to monitor the Federal Courts
because there are several cases (i.e. Berkheimer v. HP), whereby a
decision for Berkheimer could change the appellate landscape for
101 motion cases. Additionally, U.S. Senators Thom Tillis (R-NC)
and Chris Coons (D-DE), along with several other Senators have
released a bipartisan, bicameral draft bill that would reform
Section 101 of the Patent Act in a manner we believe would be
beneficial to us although the attainment of such reform may have
been affected by the 2020 election results and incoming/outgoing
Senators (although both sponsoring Senators won re-election).
Management cannot guarantee that any pending claims or legislation
will result in favorable decisions.
On
May 13, 2020, a complaint was filed, specifically Continuation
Capital, v StrikeForce Technologies, Inc., Case Number
2020-CA-002113NC, in the Twelfth Circuit Court in and for Sarasota
County, Florida in a matter involving outstanding debt in the
principal amount of $197,738.81. The complaint was settled and an
order, following a fairness hearing, granted Continuation Capital
90,909 (post-split) shares, as a fee, and that number of common
shares required to satisfy the debt, as converted, the valuation
based as a forty five percent (45%) discount to market, with a
shares issued pursuant to the exemption from registration set forth
in Section 3(a)(10) thereof, of the Securities Act of 1933, as
amended. On May 13, 2020, the Company entered into a settlement
agreement with Continuation Capital, Inc. (“Continuation”).
Continuation agreed to pay $197,738 owed to Company creditors,
including $139,712 of convertible debt and accrued interest due to
a related party (see Note 3), $29,400 of secured notes payable and
accrued interest (see Note 4) and $28,626 of accounts payable. In
exchange, the Company agreed to issue shares of its common stock to
Continuation as consideration for the extinguishment of the debt,
accrued interest, and accounts payables. The shares to be issued
will be determined at a discount based on 45% of the lowest closing
price of the Company common stock for the 30 trading days prior to
the date of any issuance for payment. The Company determined that
the settlement agreement with Continuation was a contract to settle
debt with a variable number of shares based on a fixed monetary
amount known at inception, and in accordance with ASC 480-10, the
obligation was measured at fair value. The Company determined the
fair value of the settlement obligation was $360,000 and recorded
this as a liability. During the nine months ended September 30,
2020, the Company issued 11,585,725 shares of its common stock to
Continuation for the payment of $284,119 of the settlement
obligation. At September 30, 2020, the balance of the debt
settlement obligation liability was $75,881.
When the Company initially recorded the obligation, the difference
between the $360,000 fair value and $197,738 of debt and accounts
payables assumed by Continuation was recorded as a loss on
extinguishment of debt of $162,262. The fair value of the
444,459 shares issued for payment of $72,000 of the settlement
obligation was determined to be $98,000 based on the closing price
of the shares on the date issued, and the difference of $26,000 was
recorded as interest expense. As part of the transaction, the
Company also issued 90,909 shares of common stock to Continuation
as a fee. The fair value of the shares issued for fees was
determined to be $18,182 and is included in general and
administrative expenses.
Subsequent to September 30, 2020, the Company issued 24,381,509
shares of common stock with a fair value of $127,424 to pay off
$75,881 of the debt settlement obligation.
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. We paid a monthly base rent of $3,807 which
commenced on July 1, 2009, with an initial extended lease
termination date of January 31, 2016. In November 2015, the lease
was extended for three years to January 31, 2019. In August 2018,
the lease was extended for five years to January 31, 2024. We paid
a monthly base rent of $4,067 from February 2016 thru January 2017,
$4,190 from February 2017 through January 2018, $4,316 from
February 2018 thru January 2019. We paid a monthly base rent of
$4,409 from February 2019 thru January 2020. We will pay a monthly
base rent of $4,542 from February 2020 through January 2021, $4,678
from February 2021 thru January 2022, $4,818 from February 2022
thru January 2023 and $4,963 from February 2023 thru January 2024.
The landlord holds $8,684 as our security deposit. The lease
requires us to pay costs such as maintenance and insurance.
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 our obligation to make lease payments arising from the
lease. Generally the implicit rate of interest in arrangements is
not readily determinable and we utilize our 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.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking Statements
The following is management’s discussion and analysis (|MD&A”)
of certain significant factors that have affected our financial
position and operating results during the periods included in the
accompanying financial statements, as well as information relating
to the plans of our current management. This report includes
forward-looking statements. Generally, the words “believes,”
“anticipates,” “may,” “will,” “should,” “expect,” “intend,”
“estimate,” “continue,” and similar expressions or the negative
thereof or comparable terminology are intended to identify
forward-looking statements. Such statements are subject to certain
risks and uncertainties, including the matters set forth in this
report or other reports or documents we file with the Securities
and Exchange Commission from time to time, which could cause actual
results or outcomes to differ materially from those projected.
Undue reliance should not be placed on these forward-looking
statements which speak only as of the date hereof. We undertake no
obligation to update these forward-looking statements.
The following discussion and analysis should be read in conjunction
with our financial statements and the related notes thereto and
other financial information contained elsewhere in this Offering
Circular
Our MD&A is comprised of significant accounting estimates made
in the normal course of its operations, overview of our business
conditions, results of operations, liquidity and capital resources
and contractual obligations. We did not have any off balance sheet
arrangements as of September 30, 2019 or 2020.
The discussion and analysis of our financial condition and results
of operations is based upon its financial statements, which have
been prepared in accordance with generally accepted accounting
principles generally accepted in the United States (or "GAAP"). The
preparation of those financial statements requires us to make
estimates and judgments that affect the reported amount of assets
and liabilities at the date of its financial statements. Actual
results may differ from these estimates under different assumptions
or conditions.
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. Apart from
our 49% holding in BlockSafe Technologies, Inc., we have no other
subsidiaries.
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 our products,
and harm our business and results of operations. In the nine months
ended September 30, 2020, we believe the COVID-19 pandemic did
impact our operating results as sales to customers in the second
and third quarters were down 17% and 15%, respectively, from the
first quarter of the year. However, we have not observed any
impairments of our assets or a significant change in the 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 magnitude of the adverse
results of the outbreak and its effects on our business or results
of operations, financial condition, or liquidity.
As of (and subsequent to) September 30, 2020, we have been
following the recommendations of local health authorities to
minimize exposure risk for our team members for the past several
weeks, 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.
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 9 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 Offering
Circular).
Results of Operations
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2020 COMPARED TO
THE THREE MONTHS ENDED SEPTEMBER 30, 2019
Revenues for the three months ended September 30, 2020 were $51,000
compared to $171,000 for the three months ended September 30, 2019,
a decrease of $120,000 or 70.2%. The decrease in revenues was
primarily due to impairments caused by the COVID-19 pandemic that
resulted in a decrease in our software and service
revenues. Revenues are derived from software, key fobs and services.
Cost of revenues for the three months ended September 30, 2020 was
$2,000 compared to $2,000 for the three months ended September 30,
2019. Cost of revenues are fees and key fobs related to our
revenues, and as a percentage of total revenues for the three
months ended September 30, 2020 was 4.4% compared to 1.2% for the
three months ended September 30, 2019.
Research and development expenses for the three months ended
September 30, 2020 were $126,000 compared to $126,000 for the three
months ended September 30, 2019. 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 September 30, 2020 were $430,000 compared to $427,000 for the
three months ended September 30, 2019, an increase of $3,000 or
less than 1.0%. The increase was due primarily to an increase in
professional fees, offset by a decrease in employee stock-based
compensation. 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 September 30, 2020, other expense was
$365,000 as compared to other expense of $1,172,000 for the three
months ended September 30, 2019, representing a decrease in other
expense of $807,000, or 68.9%. The decrease was primarily due to
decreases in the change in the fair value of derivative liabilities
and in private placement costs.
Our net loss for the three months ended September 30, 2020 was
$872,000 compared to $1,555,000 for the three months ended
September 30, 2019, a decrease of $683,000, or 43.9%. The decrease
was primarily due to decreases in employee stock-based
compensation, in the change in the fair value of derivative
liabilities and in private placement costs.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 COMPARED TO
THE NINE MONTHS ENDED SEPTEMBER 30, 2019
Revenues for the nine months ended September 30, 2020 were $162,000
compared to $611,000 for the nine months ended September 30, 2019,
a decrease of $449,000 or 73.5%. The decrease in revenues was
primarily due to impairments caused by the COVID-19 pandemic that
resulted in a decrease in our software and service
revenues. Revenues are derived from software, key fobs and services.
Cost of revenues for the nine months ended September 30, 2020 was
$11,000 compared to $8,000 for the nine months ended September 30,
2019, an increase of $3,000, or 37.5%. The increase resulted from
the increased fees related to certain revenues. Cost of revenues
are fees and key fobs related to our revenues, and as a percentage
of total revenues for the nine months ended September 30, 2020 was
7.0% compared to 1.3% for the nine months ended September 30,
2019.
Research and development expenses for the nine months ended
September 30, 2020 were $373,000 compared to $376,000 for the nine
months ended September 30, 2019, a nominal decrease of $3,000 or
less than 1.0%. 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 nine months
ended September 30, 2020 were $1,477,000 compared to $1,253,000 for
the nine months ended September 30, 2019, an increase of $224,000
or 17.9%. The increase was due primarily to an increase in employee
stock-based compensation 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 nine months ended September 30, 2020, other expense was
$1,242,000 as compared to other expense of $3,027,000 for the nine
months ended September 30, 2019, representing a decrease in other
expense of $1,785,000, or 59.0%. The decrease was primarily due to
decreases in the change in the fair value of derivative
liabilities, in private placement costs and in debt discount
amortization, offset by increases in interest expense and the loss
on extinguishment of debt.
Our net loss for the nine months ended September 30, 2020 was
$2,942,000 compared to $4,053,000 for the nine months ended
September 30, 2019, a decrease of $1,111,000, or
27.4%. The decrease was primarily due to
decreases in the change in the fair value of derivative
liabilities, in private placement costs and in debt discount
amortization, offset by increases in employee stock-based
compensation, professional fees, interest expense and the loss on
extinguishment of debt.
Liquidity and Capital Resources
Our total current assets at September 30, 2020 were $54,000, which
included cash of $8,000, as compared with $99,000 in total current
assets at December 31, 2019, which included cash of $75,000.
Additionally, we had a stockholders’ deficit in the amount of
$15,607,000 at September 30, 2020 compared to a stockholders’
deficit of $15,464,000 at December 31, 2019. 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 nine months ended September 30, 2020
primarily from the issuance of various debentures with proceeds of
$1,495,000 which includes the receipt of the SBA-Payroll Protection
Program loan funds of $313,000 and the SBA-Economic Injury Disaster
Loan funds of $150,000.
Going Concern
We have yet to establish any history of profitable operations.
During the nine months ended September 30, 2020, the Company
incurred a net loss of $2,942,000 and used cash in operating
activities of $1,329,000, and at September 30, 2020, the Company
had a stockholders’ deficit of $15,607,000. In addition, we are in
default on notes payable and convertible notes payable in the
aggregate amount of $3,555,000. 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 on the Company’s December 31, 2019 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. Currently, management is also
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 stockholders, in the case of equity financing.
As of September 30, 2020 we had cash balance of $8,000. In
addition, subsequent to September 30, 2020, the Company issued its
notes payable in the aggregate of $246,000, in exchange for cash.
Additionally, subsequent to the qualification of the Form 1-A POS
on November 13, 2020, and prior to the filing of this Post
Qualification Offering Circular Amendment No. 6 herein, the Company
received gross proceeds of $975,342 upon sale of 436,337,203 shares
of its common stock to 27 investors. We believe we have sufficient
cash and available working capital to sustain operations through
August 2021. We believe the minimum funding required to remain in
business for at least the next 12 months averages to about $150,000
a month. There can be no assurance that we can achieve such level
or operations, or will be able to obtain such debt and equity
financing.
Reverse Stock Split and Changes in Authorized
Shares
In April 2020, our Board of Directors approved a 1:500 reverse
stock split that was approved by stockholders controlling 80% of
our common stock. The reverse stock split was effectuated on June
25, 2020 and all share and per share amounts on the accompanying
financial statements are presented in post-split amounts as if the
split occurred at the beginning of the earliest period
presented.
In April 2020, an increase of our common stock from 12,000,000,000
to 17,000,000,000 shares was authorized.
In April 2020, a decrease of our common stock from 17,000,000,000
to 14,000,000,000 shares was authorized.
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 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.
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.
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 condensed consolidated
financial statements.
Additional Information
You are advised to read our 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.
DIRECTORS, EXECUTIVE OFFICERS AND
SIGNIFICANT EMPLOYEES
The following sets forth our executive officers and/or Directors,
their ages, and all offices and positions held with us.
|
Name
|
|
Age
|
|
Position
|
|
Mark L. Kay
|
|
71
|
|
Chief Executive Officer and
Chairman of the Board of Directors
|
|
Philip E. Blocker
|
|
63
|
|
Chief Financial Officer
|
|
Ramarao Pemmaraju
|
|
59
|
|
Chief Technical Officer and
Director
|
|
George Waller
|
|
62
|
|
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.
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
companies 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.
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 2019, our Board of Directors met twelve times. The
Board of Directors also uses written resolutions to deal with
certain matters and, during fiscal 2019 twenty-four 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.
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:
|
|
|
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:
|
|
•
|
Honest and
ethical conduct, including the ethical handling of actual or
apparent conflicts of interest between personal and professional
relationships;
|
|
|
•
|
Full, fair,
accurate, timely, and understandable disclosure in reports and
documents that we file with, or submits to, the Securities and
Exchange Commission and in other public communications made by
us;
|
|
|
•
|
Compliance
with applicable governmental laws, rules and regulations;
|
|
|
•
|
The prompt
internal reporting of violations of the code to the board of
directors or another appropriate person or persons; and
|
|
|
•
|
Accountability for adherence to the code.
|
Indemnification of Officers and Directors
Wyoming corporation law provides that:
|
|
•
|
a corporation may
indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the
corporation, by reason of the fact that he is or was a director,
officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust
or other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with the action, suit or
proceeding if he acted in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful;
|
|
|
•
|
a corporation may indemnify any
person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise against expenses, including amounts paid in settlement
and attorneys' fees actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if
he acted in good faith and in a manner which he reasonably believed
to be in or not opposed to the best interests of the corporation.
Indemnification may not be made for any claim, issue or matter as
to which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be
liable to the corporation or for amounts paid in settlement to the
corporation, unless and only to the extent that the court in which
the action or suit was brought or other court of competent
jurisdiction determines upon application that in view of all the
circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper;
and |
|
|
|
|
|
|
•
|
to the extent that a director,
officer, employee or agent of a corporation has been successful on
the merits or otherwise in defense of any action, suit or
proceeding, or in defense of any claim, issue or matter therein,
the corporation shall indemnify him against expenses, including
attorneys' fees, actually and reasonably incurred by him in
connection with the defense. |
Our articles of incorporation require us to indemnify our directors
and officers against all damages incurred in connection with our
business to the fullest extent provided or allowed by law.
Our bylaws provide that we will advance all expenses incurred to
any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suite or
proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was our director
or officer, or is or was serving at our request as a director or
executive officer of another company, partnership, joint venture,
trust or other enterprise, prior to the final disposition of the
proceeding, promptly following request. This advancement of
expenses is to be made upon receipt of an undertaking by or on
behalf of such person to repay said amounts should it be ultimately
determined that the person was not entitled to be indemnified under
our bylaws or otherwise.
Our bylaws also provide that no advance shall be made by us to any
officer in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, if a determination is reasonably
and promptly made: (a) by the board of directors by a majority vote
of a quorum consisting of directors who were not parties to the
proceeding; or (b) if such quorum is not obtainable, or, even if
obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, that the facts
known to the decision-making party at the time such determination
is made demonstrate clearly and convincingly that such person acted
in bad faith or in a manner that such person did not believe to be
in or not opposed to our best interests.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers or
controlling persons pursuant to the foregoing provisions, or
otherwise, we have been advised that in the opinion of the
Securities and Exchange Commission this indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
Transfer Agent
Our transfer agent is Worldwide Stock Transfer, LLC. Their address
is One University Plaza, Suite 505, Hackensack, NJ 07601. Our
transfer agent is registered with the Securities and Exchange
Commission.
COMPENSATION OF DIRECTORS AND
EXECUTIVE OFFICERS
Summary Compensation Table
The following table sets forth certain compensation information
for: (i) the person who served as the Chief Executive Officer of
StrikeForce during the years ended December 31, 2019 and 2018,
regardless of the compensation level, and (ii) each of our other
executive officers, serving as an executive officer at any time
during 2019 and 2018. The foregoing persons are collectively
referred to in this Offering Circular as the “Named Executive
Officers.” Compensation information is shown for the years ended
December 31, 2019 and 2018:
| Name/
Principal |
|
|
|
Salary
|
|
|
Bonus
|
|
|
Stock
Awards
|
|
|
Incentive Plan
Option Awards (Vested)
|
|
|
Securities Underlying Options/SARs |
|
|
Nonqualified Deferred
Compensation Earnings
|
|
|
All
Other Compensation |
|
|
Total |
|
|
Position
|
|
Year
|
|
($)
|
|
|
($)
|
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
Mark L. Kay
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief
|
|
2019
|
|
$ |
150,000 |
|
|
|
- |
|
|
|
- |
|
|
|
3,279 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
153,279 |
|
|
Executive Officer
|
|
2018
|
|
|
150,000 |
|
|
|
- |
|
|
|
- |
|
|
|
56,393 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
206,393 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George Waller
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
2019
|
|
|
150,000 |
|
|
|
5,769 |
|
|
|
- |
|
|
|
3,279 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
159,048 |
|
|
Vice President
|
|
2018
|
|
|
150,000 |
|
|
|
5,769 |
|
|
|
- |
|
|
|
56,393 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
212,162 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ramarao Pemmeraju
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief
|
|
2019
|
|
|
150,000 |
|
|
|
5,769 |
|
|
|
- |
|
|
|
3,279 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
159,048 |
|
|
Technology Officer
|
|
2018
|
|
|
150,000 |
|
|
|
5,769 |
|
|
|
- |
|
|
|
56,393 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
212,162 |
|
On July 31, 2010, Philip E. Blocker was appointed our Chief
Financial Officer. Mr. Blocker is not our employee. He received fee
payments of $1,000 in 2019 and $0 in 2018. Mr. Blocker received no
option awards in 2019 or 2018.
Outstanding Option Awards at Year End
The following table provides certain information regarding
unexercised options to purchase common stock, stock options that
have not vested, and equity-incentive plan awards outstanding at
December 31, 2019 for each Named Executive Officer and/or
Director:
|
Outstanding Equity Awards At
Fiscal Year-End Table
|
|
|
|
|
|
|
|
Option
Awards
|
|
|
Stock
Awards
|
|
|
Name
|
|
Number of
Securities Underlying Unexercised Options
(#)
Exercisable
|
|
|
Number of
Securities Underlying Unexercised Options
(#)
Unexercisable
|
|
|
Equity Incentive
Plan Awards: Number of Securities Underlying Unexercised Unearned
Options (#)
|
|
|
Option Exercise
Price ($)
|
|
|
Option
Expiration Date
|
|
Number of Shares
or Units of Stock That Have Not Vested (#)
|
|
|
Market Value of
Shares or Units of Stock That Have Not Vested ($)
|
|
|
Equity Incentive
Plan Awards: Number of Unearned Shares, Units or Other Rights That
Have Not Vested (#)
|
|
|
Equity Incentive
Plan Awards: Market or Payout Value of Unearned Shares, Units or
Other Rights That Have Not Vested ($)
|
|
|
Mark L. Kay
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
$ |
1,121,250,500 |
|
|
01/03/23
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
72,000 |
|
|
|
- |
|
|
|
- |
|
|
$ |
3.125 |
|
|
09/28/26
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
20,000 |
|
|
|
- |
|
|
|
- |
|
|
$ |
2.85 |
|
|
12/21/27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,639 |
|
|
|
18,361 |
|
|
|
- |
|
|
$ |
2.05 |
|
|
12/17/29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
George Waller
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
$ |
1,121,250,500 |
|
|
01/03/23
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
72,000 |
|
|
|
- |
|
|
|
- |
|
|
$ |
3.125 |
|
|
09/28/26
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
20,000 |
|
|
|
- |
|
|
|
- |
|
|
$ |
2.85 |
|
|
12/21/27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,639 |
|
|
|
18,361 |
|
|
|
- |
|
|
$ |
2.05 |
|
|
12/17/29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ramarao Pemmaraju
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
$ |
1,121,250,500 |
|
|
01/03/23
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
72,000 |
|
|
|
- |
|
|
|
- |
|
|
$ |
3.125 |
|
|
09/28/26
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
20,000 |
|
|
|
- |
|
|
|
- |
|
|
$ |
2.85 |
|
|
12/21/27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,639 |
|
|
|
18,361 |
|
|
|
- |
|
|
$ |
2.05 |
|
|
12/17/29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Exercises and Stock Vested Table
None.
Pension Benefits Table
None.
Non-Qualified Deferred Compensation
Table
None.
All Other Compensation Table
None.
Perquisites Table
None.
Broker Dealer Agreements
The Company has agreed to pay Spencer Clarke LLC, a placement fee
equal to 5% on all funds raised in the Offering and no other
compensation pursuant to this Offering.
Director Compensation
All three of our directors were also our executive officers through
December 31, 2019. Our directors did not receive any separate
compensation for serving as such during fiscal 2019.
SECURITY OWNERSHIP OF MANAGEMENT AND
CERTAIN SECURITYHOLDERS
The following table sets forth certain information as of December
28, 2020, 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:
The tables are based upon information obtained from our stock
records. The first table excludes the Series A Preferred
Stock and the second table below is limited to the Series A
Preferred Stock.
|
NAME OF BENEFICIAL OWNER
|
|
AMOUNT OF
OWNERSHIP(1)
|
|
|
PERCENTAGE OF CLASS(2)
(excluding Series A Preferred Stock (11))
|
|
|
Mark L. Kay
|
|
|
10,093,640
|
(3),(11)
|
|
|
1.23515
|
%
|
|
Ramarao Pemmaraju
|
|
|
24,239,367
|
(4),(5),(11)
|
|
|
2.96615
|
%
|
|
George Waller
|
|
|
12,366,367
|
(6),(7),(11)
|
|
|
1.51326
|
%
|
|
All directors and executive officers as a
group (3 persons)
|
|
|
46,699,374
|
(8)
|
|
|
5.71456
|
%
|
|
NetLabs.com, Inc.
|
|
|
1
|
(9),(10)
|
|
|
0.000000001
|
%
|
________
|
(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 718,263,338 shares of common stock outstanding as of
December 28, 2020; also including 12,645,184 shares of common
stock available upon the conversion of certain convertible
loans, 753,383 shares of common stock available upon the
conversion of Series B Preferred stock, 58,133,000 shares of common
stock underlying options and 27,405,476 shares of common stock
underlying warrants. This does include the current reverse
stock split.
|
|
(3)
|
Includes 1 share 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, 72,000 shares of common
stock underlying vested ten-year options valued at $3.125 per
share, 20,000 shares of common stock underlying vested ten-year
options valued at $2.85 per share, 1,640 shares of common stock
underlying vested ten-year options valued at $2.05 per share and
10,000,000 shares of common stock underlying vested ten-year
options valued at $0.005 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 9,090,908
shares of common stock, 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 shares of common stock underlying
vested ten-year options valued at $2,242,500 per share, 116,000
shares of common stock underlying vested ten-year options valued at
$3.125 per share, 46,000 shares of common stock underlying vested
ten-year options valued at $2.85 per share, 2,460 shares of common
stock underlying vested ten-year options valued at $2.05 per share
and 15,000,000 shares of common stock underlying vested ten-year
options valued at $0.005 per share. Of the total shares, 9,600.276
shares, consisting of 4,545,454 shares of common stock, 1share 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, 44,000 shares of common
stock underlying vested ten-year options valued at $3.125 per
share, 10,000 shares of common stock underlying vested ten-year
options valued at $2.85 per share, 820 shares of common stock
underlying vested ten-year options valued at $2.05 per share and
5,000,000 shares of common stock underlying vested ten-year options
valued at $0.005 per share are in the name of Sunita 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.
|
|
(5)
|
Excludes
shares owned by NetLabs.com, Inc. which is controlled by Ramarao
Pemmaraju and another individual.
|
|
(6)
|
Includes one share of common stock listed in
the name of Katherine LaRosa who is a family member of George
Waller.
|
|
(7)
|
Includes 2,272,728
shares of common stock, 1 share of common stock underlying vested
ten-year options valued at $2,242,500 per share, shares of common
stock underlying vested ten-year options valued at $3.125 per
share, 20.000 shares of common stock underlying vested ten-year
options valued at $2.85 per share, 1,640 shares of common stock
underlying vested ten-year options valued at $2.05 per share and
10,000,000 shares of common stock underlying vested ten-year
options valued at $0.005 per share. 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 1
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, 1 shares of common stock underlying vested ten-year
options valued at $2,242,500 per share, 26,000 shares of common
stock underlying vested ten-year options valued at $3.125 per
share, 86,000 shares of common stock underlying vested ten-year
options valued at $2.85 per share and 5,738 shares of common stock
underlying vested ten-year options valued at $2.05 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.
|
Series A Preferred Stock
|
NAME OF BENEFICIAL OWNER
|
|
AMOUNT OF OWNERSHIP(1)
|
|
|
PERCENTAGE OF CLASS OF SERIES A
PREFERRED STOCK(1)
|
|
|
Mark L. Kay
|
|
|
1 |
(1) |
|
|
33.333 |
% |
|
Ramarao Pemmaraju
|
|
|
1 |
(1) |
|
|
33.333 |
% |
|
George Waller
|
|
|
1 |
(1) |
|
|
33.333 |
% |
___________
|
(1)
|
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 (80%) of the total current issued and
outstanding shares of common stock. There is no formal written
arrangement between Mark L. Kay, Ramarao Pemmaraju, and, George
Waller but they rely upon a long standing oral agreement between
the parties to vote in concert.
|
INTERESTS OF MANAGEMENT AND OTHERS IN
CERTAIN TRANSACTIONS
None of the following parties has, since our date of incorporation,
had any material interest, direct or indirect, in any transaction
with us or in any presently proposed transaction that has or will
materially affect us:
|
|
•
|
Any of our directors or officers,
except as described below;
|
|
|
•
|
Any person proposed as a nominee
for election as a director;
|
|
|
•
|
Any person
who beneficially owns, directly or indirectly, shares carrying more
than 5% of the voting rights attached to our outstanding shares of
common stock;
|
|
|
•
|
Any relative or spouse of any of
the foregoing persons who has the same house address as such
person.
|
BlockSafe Technologies, Inc.
BlockSafe Technologies, Inc. (“BlockSafe”) was formed on December
1, 2017 in the State of Wyoming. BlockSafe is in the business of
providing total cyber security solutions and is the licensee from
our company of our desktop anti-malware product called
“GuardedID®” and a one of a kind mobile application
called “MobileTrust®”. 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 December 31, 2019, no tokens have been developed or issued.
There is no assurance as to whether, or at what amount, or on what
terms, tokens will be available. Moreover, there can be no
assurance how such technology will function, which could expose us
to legal and regulatory issues. Cryptocurrency and its use of
blockchains is still in the development stage and receiving mixed
results. The Securities and Exchange Commission has, in its
dissemination of information to the public, expressed that tokens
in the United States would be treated as securities pursuant to the
Howey Test. This standard has been adopted, in various
forms, in numerous other jurisdictions. The European Union and
China are contemplating their own form of cryptocurrency and
Facebook Libra cryptocurrency recently lost the support of PayPal
(see https://www.independent.co.uk/topic/cryptocurrency, which
article is not incorporated by reference to this filing). 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. There is no formal written arrangement
between Mark L. Kay, Ramarao Pemmaraju, and, George Waller but they
rely upon a long standing oral agreement between the parties to
vote in concert. Therefore, BlockSafe’s financial results have been
consolidated with our financial results.
In June 2018, two members of our management team, George Waller,
our Executive Vice President and Ramarao Pemmaraju, our Chief
Technical Officer, were appointed to BlockSafe to serve as the
Chief Executive Officer and Chief Technical Officer, respectively.
Additionally, our Chief Executive Officer of StrikeForce, Mark L.
Kay, also an appointee to the Board of Directors of BlockSafe, was
appointed as Chairman and President of BlockSafe.
RELATED PARTY CONVERTIBLE NOTES
At December 31, 2019, convertible notes payable - related parties
totaled $355,500. During the nine months ended September 30, 2020,
two notes aggregating $57,500 held by the Company’s VP of
Technology were extinguished as part of a debt settlement
obligation transaction (see Note 8). At September 30, 2020, the
balance of convertible notes payable-related parties totaled
$298,000. The notes are made up of ten convertible note payables,
are unsecured, and have extended due dates of December 31, 2020.
Six notes totaling $268,000 are due to the Company’s Chief
Executive Officer, at a compounded interest rate of 8% per annum;
and four notes totaling $30,000 are due to the spouse of the
Company’s Chief Technology Officer at a compounded interest rate of
8% per annum. The aggregate notes are convertible into less than
one share of the Company’s common stock at fixed conversion prices
adjusted for applicable reverse stock splits.
At December 31, 2019, accrued interest due for the convertible
notes – related parties was $636,272. During the nine months ended
September 30, 2020, interest of $54,651 was accrued, and accrued
interest of $83,273 due to the Company’s VP of Technology was
extinguished as part of a debt settlement obligation transaction
(see Note 8 of the quarterly financial statements for the nine
months ended September 30, 2020). At September 30, 2020, accrued
interest due for the convertible notes – related parties was
$607,650.
The related party convertible notes are attached as Exhibits to
this Offering.
RELATED PARTY PROMISSORY NOTES
At December 31, 2019, the balance of notes payable-related parties
totaled $742,513. During the nine months ended September 30, 2020,
the Company issued eight notes payable for $263,254 to its Chief
Executive Officer. Also, during the nine months ended September 30,
2020, $4,223 of the notes were repaid. At September 30, 2020, the
balance of notes payable-related parties totaled $1,001,544. The
notes are made up of twenty-six notes payable due to the Company’s
Chief Executive Officer, are non-interesting bearing or bear
interest at rates ranging from 8% per annum to 10.49% per annum,
are unsecured. Notes totaling $752,513 are due on December 31, 2020
and notes totaling $249,031 have no specified due date.
At
December 31, 2019, accrued interest due for the notes was $760,024.
During the nine months ended September 30, 2020, interest of
$43,559 was accrued. At September 30, 2020, accrued interest due
for the notes was $803,583.
SECURITIES BEING
OFFERED
The following is a summary of the rights of our capital stock as
provided in our articles of incorporation and bylaws. For more
detailed information, please see our articles of incorporation and
bylaws, which have been filed as exhibits to the Offering Statement
of which this Offering Circular is a part.
General
Our authorized capital stock consists of 14,000,000,000 shares of
common stock, par value $0.0001 per share, of which approximately
718,263,338 shares are issued and outstanding as of December 28,
2020. Our authorized capital stock also includes 10,000,000
authorized Preferred Shares, of which 100 shares of preferred stock
were designated as Series A Preferred Stock (3 shares are
outstanding) and 10,000,000 shares were designated as Series B
Preferred Stock (36,667 were issued and outstanding).
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.
On
March 18, 2014, we effected a 1:500 reverse stock split of our
issued and outstanding shares of common stock. On February 13,
2015, we effected a 1:650 reverse stock split of our issued and
outstanding shares of common stock. On August 4, 2015, we effected
a 1:1,000 reverse stock split of our issued and outstanding shares
of common stock.
In June 2015, an increase of the authorized shares of our common
stock from three billion (3,000,000,000) to five billion
(5,000,000,000), $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 July
2015.
In March 2019, an increase of the authorized shares of BlockSafe’s
common stock from one thousand (1,000) to one hundred million
(100,000,000), $0.0001 par value, was ratified, effective upon the
filing of an amendment to BlockSafe’s Certificate of Incorporation
with the Wyoming Secretary of State. The amendment was adopted in
March 2019.
In March 2019, a 15,000:1 forward stock split of BlockSafe’s issued
and outstanding shares of common stock was ratified, effective upon
the filing of an amendment to BlockSafe's Certificate of
Incorporation with the Wyoming Secretary of State. The amendment
was adopted in March 2019.
In June 2019, an increase of the authorized shares of the Company’s
common stock from five billion (5,000,000,000) to seven billion
five hundred million (7,500,000,000), $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 July 2019.
In October 2019, an increase of the authorized shares of the
Company’s common stock from seven billion five hundred million
(7,500,000,000) to twelve billion (12,000,000,000), $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 November 2019.
In April 2020, an increase of the authorized shares of the
Company’s common stock from twelve billion (12,000,000,000) to
seventeen billion (17,000,000,000), $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 April 2020.
On April 13, 2020, Board of Directors and the holders of a majority
of the voting power approved a resolution to effectuate a 1:500
Reverse stock split and a resolution for a reduction in authorized
shares of Common Stock from seventeen billion (17,000,000,000)
shares of Common Stock down to fourteen billion (14,000.000.000)
shares of Common Stock, $0.0001 par value, of the Company. The
reverse split was effectuated on June 25, 2020.
All shares and per share amounts in the financial statements have
been adjusted to give retroactive effect to the reverse stock
splits adopted by us as if the reverse had occurred at the
beginning of the earliest period presented.
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.
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.
In February 2011, we issued three shares of non-convertible Series
A preferred stock valued at $329,000 per share, or $987,000 in
aggregate, for voting purposes only, to the three members of our
management team at one share each. 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. This effectively provided them, upon retention of
their Series A Preferred Stock, voting control on matters presented
to our shareholders. They have each irrevocably waived their
conversion rights relating to the Series A preferred shares
issued.
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.
In February 2014, our Board of Directors amended the conversion
feature of the Series B Preferred Stock, to permit conversion to
common shares at a 40% market discount to current market value at
the time we receive a conversion request. Current market value is
defined as the average of the immediately prior five trading day's
closing prices. Additionally, when Series B Preferred Stock shares
convert to our common stock, the minimum price discount floor level
is set at $0.005, as decided by our Board of Directors.
In September 2016, four holders of our Series B Preferred Stock
converted 125,337 Series B Preferred Stock into 35,703,979 shares
of our common stock at conversion prices ranging from $0.00383 to
$0.00532 per share.
As of December 31, 2016, there were 50,001 shares of Series B
Preferred Stock issued and outstanding, 16,667 of which convert to
common shares at a 30% market discount and 33,334 of which convert
to common shares at a 40% market discount.
In January 2017, we sold subscriptions to two individuals for the
purchase of 53,334 shares of its Series B Preferred Stock at $1.50
per share, or an aggregate of $80,000. The shares of Series B
Preferred Stock are convertible into shares of our common stock at
a 25% discount to current market value, as defined, with a minimum
conversion price set by our Board of Directors of $0.001 per share.
The Series B Preferred Stock can be converted at any time into
shares of common stock after twelve months from acceptance by us of
the subscription agreements, but only once every 30 days. For the
year ended December 31, 2017, we recorded a deemed dividend for the
beneficial conversion feature of $17,778 relating to the issuance
of the Series B Preferred Stock.
In October 2017, one holder of our Series B Preferred Stock
converted 33,334 series B preferred shares into 16,129,355 shares
of our common stock at a conversion price of $0.00207 per
share.
As of December 31, 2017, there were 70,001 shares of Series B
Preferred Stock issued and outstanding, 53,334 of which convert to
common shares at a 25% market discount and 16,667 of which convert
to common shares at a 30% market discount.
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.
The three shares 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.
Equity Incentive Plan Information
The following table sets forth as of September 30, 2020, 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
|
|
|
633,000
|
|
|
$ |
2.93
|
|
|
|
82,999,998 |
|
|
Equity compensation plans not
approved by security holders
|
|
|
N/A |
|
|
$ |
N/A |
|
|
|
N/A |
|
|
Total
|
|
|
633,000
|
|
|
$ |
2.93
|
|
|
|
82,999,998 |
|
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 2,000 shares of our common stock to an
unrelated consultant, exercisable at $0.25 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 2,000
stock option shares into 2,000 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 392,000 shares of our common stock to
our management team and employees, exercisable at $3.125 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 126,000 shares of our common stock to
our management team and employees, exercisable at $2.85 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
1,000 shares of our common stock to an unrelated consultant,
exercisable at $8.00 per share, expiring one year from the date of
grant, and vesting over a one year period.
|
DIVIDEND POLICY
Subject to preferences that may be applicable to any
then-outstanding shares of Preferred Stock, if any, and any other
restrictions, holders of Common Stock are entitled to receive
ratably those dividends, if any, as may be declared from time to
time by our board of directors out of legally available funds. We
and our predecessors have not declared any dividends in the past.
Further, we do not presently contemplate that there will be any
future payment of any dividends on Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been a limited market for our
Common Stock on the OTC Markets. Future sales of substantial
amounts of our Common Stock, or securities or instruments
convertible into our Common Stock, in the public market, or the
perception that such sales may occur, could adversely affect the
market price of our Common Stock prevailing from time to time.
Furthermore, because there will be limits on the number of shares
available for resale shortly after this Offering due to contractual
and legal restrictions described below, there may be resales of
substantial amounts of our Common Stock in the public market after
those restrictions lapse. This could adversely affect the market
price of our Common Stock prevailing at that time.
Upon completion of this Offering, assuming the maximum amount of
shares of Common Stock offered in this Offering are sold, there
will be 756,379,788 shares of our Common Stock
outstanding.
Rule 144
In general, a person who has beneficially owned restricted shares
of our Common Stock for at least twelve months, in the event we are
a reporting company under Regulation A, or at least six months, in
the event we have been a reporting company under the Exchange Act
for at least 90 days before the sale, would be entitled to sell
such securities, provided that such person is not deemed to be an
affiliate of ours at the time of sale or to have been an affiliate
of ours at any time during the 90 days preceding the sale. A person
who is an affiliate of ours at such time would be subject to
additional restrictions, by which such person would be entitled to
sell within any three-month period only a number of shares that
does not exceed the greater of the following:
|
|
•
|
1% of the
number of shares of our Common Stock then outstanding; or
|
|
|
•
|
the average
weekly trading volume of our Common Stock during the four calendar
weeks preceding the filing by such person of a notice on Form 144
with respect to the sale;
|
provided that, in each case, we are subject to the periodic
reporting requirements of the Exchange Act for at least 90 days
before the sale. Rule 144 trades must also comply with the manner
of sale, notice and other provisions of Rule 144, to the extent
applicable.
ADDITIONAL INFORMATION ABOUT THE OFFERING
Investment Limitations
Generally, no sale may be made to you in this Offering if the
aggregate purchase price you pay is more than 10% of the greater of
your annual income or net worth (please see below on how to
calculate your net worth). Different rules apply to accredited
investors and non-natural persons. Before making any representation
that your investment does not exceed applicable thresholds, we
encourage you to review Rule 251(d)(2)(i)(C) of Regulation A+. For
general information on investing, we encourage you to refer
to www.investor.gov.
Because this is a Tier 2, Regulation A+ offering, most investors
must comply with the 10% limitation on investment in the Offering.
The only investor in this Offering exempt from this limitation is
an “accredited investor” as defined under Rule 501 of
Regulation D under the Securities Act. If you meet one of the
following tests you should qualify as an accredited investor:
|
|
(i)
|
You are a natural
person who has had individual income in excess of $200,000 in each
of the two most recent years, or joint income with your spouse
in excess of $300,000 in each of these years, and have a reasonable
expectation of reaching the same income level in the current
year;
|
|
|
|
|
|
|
(ii)
|
You are a natural
person and your individual net worth, or joint net worth with your
spouse, exceeds $1,000,000 at the time you purchase Shares (please
see below on how to calculate your net worth);
|
|
|
|
|
|
|
(iii)
|
You are an executive
officer or general partner of the issuer or a manager or executive
officer of the general partner of the issuer;
|
|
|
|
|
|
|
(iv)
|
You are an organization
described in Section 501(c)(3) of the Internal Revenue Code of
1986, as amended, or the Code, a corporation, a Massachusetts or
similar business trust or a partnership, not formed for the
specific purpose of acquiring the Shares, with total assets in
excess of $5,000,000;
|
|
|
(v)
|
You are a
bank or a savings and loan association or other institution as
defined in the Securities Act, a broker or dealer registered
pursuant to Section 15 of the Exchange Act, an insurance company as
defined by the Securities Act, an investment company registered
under the Investment Company Act of 1940 (Investment Company Act),
or a business development company as defined in that act, any Small
Business Investment Company licensed by the Small Business
Investment Act of 1958 or a private business development company as
defined in the Investment Advisers Act of 1940;
|
|
|
(v)
|
You are an entity
(including an Individual Retirement Account trust) in which each
equity owner is an accredited
|
|
|
|
|
|
|
(vii)
|
You are a trust with
total assets in excess of $5,000,000, your purchase of Shares is
directed by a person who either alone or with his purchaser
representative(s) (as defined in Regulation D promulgated under the
Securities Act) has such knowledge and experience in financial and
business matters that he is capable of evaluating the merits and
risks of the prospective investment, and you were not formed for
the specific purpose of investing in the Shares; or
|
|
|
|
|
|
|
(viii)
|
You are a plan
established and maintained by a state, its political subdivisions,
or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, if such plan has
assets in excess of $5,000,000.
|
Offering Period and Expiration Date
This Offering will start on the date on which the SEC initially
qualifies this Offering Statement (the Qualification Date) and will
terminate on the Termination Date.
Procedures for Subscribing
If you decide to subscribe for our Common Stock shares in this
Offering, you should:
|
1.
|
Electronically receive, review, execute and deliver to us a
Subscription Agreement; and
|
|
|
|
|
2.
|
Deliver funds directly
to the Company’s designated bank account via bank wire
transfer (pursuant to the wire transfer instructions set forth
in our Subscription Agreement) or electronic funds transfer via
wire transfer or via personal check mailed to the Company, at 1090
King Georges Post Road, Suite 603, Edison, NJ 08837.
|
Any potential investor will have ample time to review the
subscription agreement, along with their counsel, prior to making
any final investment decision. We shall only deliver such
subscription agreement upon request after a potential investor has
had ample opportunity to review this Offering Circular.
Right to Reject Subscriptions. After we
receive your complete, executed subscription agreement and the
funds required under the subscription agreement have been
transferred to our designated account, we have the right to review
and accept or reject your subscription in whole or in part, for any
reason or for no reason. We will return all monies from rejected
subscriptions immediately to you, without interest or
deduction.
Acceptance of Subscriptions. Upon our
acceptance of a subscription agreement, we will countersign the
subscription agreement and issue the shares subscribed at closing.
Once you submit the subscription agreement, you may not revoke or
change your subscription or request your subscription funds. All
submitted subscription agreements are irrevocable.
Under Rule 251 of Regulation A+, non-accredited, non-natural
investors are subject to the investment limitation and may only
invest funds which do not exceed 10% of the greater of the
purchaser’s revenue or net assets (as of the purchaser’s most
recent fiscal year end). A non-accredited, natural person may only
invest funds which do not exceed 10% of the greater of the
purchaser’s annual income or net worth (please see below on how to
calculate your net worth).
NOTE: For the purposes of calculating your
net worth, it is defined as the difference between total assets and
total liabilities. This calculation must exclude the value of your
primary residence and may exclude any indebtedness secured by your
primary residence (up to an amount equal to the value of your
primary residence). In the case of fiduciary accounts, net worth
and/or income suitability requirements may be satisfied by the
beneficiary of the account or by the fiduciary, if the fiduciary
directly or indirectly provides funds for the purchase of the
Shares.
In order to purchase our Common Stock shares and prior to the
acceptance of any funds from an investor, an investor will be
required to represent, to the Company’s satisfaction, that such
investor is either an accredited investor or is in compliance with
the 10% of net worth or annual income limitation on investment in
this Offering.
LEGAL MATTERS
Certain legal matters with respect to the shares of common stock
offered hereby will be passed upon by Joseph I. Emas, P. A.
EXPERTS
The consolidated financial statements of StrikeForce Technologies,
Inc. as of and for the years ended December 31, 2019 and 2018
appearing in this Regulation A Offering Circular have been audited
by Weinberg & Company, P.A., an independent registered public
accounting firm, as stated in its report thereon, included therein,
and are included in reliance upon such report and upon the
authority of such firm as experts in accounting and auditing.
REPORTS
Following this Tier II, Regulation A offering, we will be required
to comply with certain ongoing disclosure requirements under Rule
257 of Regulation A which will be incorporated into our filings
under the Securities Exchange Act of 1934, as amended.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a Regulation A Offering Statement on
Form 1-A under the Securities Act with respect to the shares of
common stock offered hereby. This Offering Circular, which
constitutes a part of the Offering Statement, does not contain all
of the information set forth in the Offering Statement or the
exhibits and schedules filed therewith. For further information
about us and the common stock offered hereby, we refer you to the
Offering Statement and the exhibits and schedules filed therewith.
Statements contained in this Offering Circular regarding the
contents of any contract or other document that is filed as an
exhibit to the Offering Statement are not necessarily complete, and
each such statement is qualified in all respects by reference to
the full text of such contract or other document filed as an
exhibit to the Offering Statement. Upon the completion of this
Offering, we will be required to file periodic reports, proxy
statements, and other information with the SEC pursuant to the
Securities Exchange Act of 1934. You may read and copy this
information at the SEC's Public Reference Room, 100 F Street, N.E.,
Room 1580, Washington, D.C. 20549. You may obtain information on
the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC also maintains an Internet website that
contains reports, proxy statements and other information about
issuers, including us, that file electronically with the SEC. The
address of this site is www.sec.gov.
FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTH PERIODS ENDED SEPTEMBER 30, 2020 AND SEPTEMBER 30,
2019
YEARS ENDED DECEMBER 31, 2019 AND DECEMBER 31, 2018
|
|
|
September
30,
2020
|
|
|
December
31,
2019
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
Cash (includes VIE balances of
$635 and $1,332, respectively)
|
|
$ |
8,387 |
|
|
$ |
74,648 |
|
|
Accounts receivable, net
|
|
|
22,224 |
|
|
|
19,686 |
|
|
Prepaid expenses
|
|
|
22,896 |
|
|
|
4,557 |
|
|
|
|
|
|
|
|
|
|
|
|
Total current
assets
|
|
|
53,507 |
|
|
|
98,891 |
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
3,062 |
|
|
|
5,448 |
|
|
Operating lease right-of-use asset
|
|
|
169,538 |
|
|
|
205,970 |
|
|
Other assets
|
|
|
14,835 |
|
|
|
16,376 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$ |
240,942 |
|
|
$ |
326,685 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS'
DEFICIT
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued
expenses (includes VIE balances of $13,284 and $27,431,
respectively)
|
|
$ |
1,244,982 |
|
|
$ |
1,115,995 |
|
|
Convertible notes payable (net
of discount of $317,813 and $422,705,
respectively; including $1,438,100 and $1,438,100 in default, respectively)
|
|
|
1,681,237 |
|
|
|
1,860,395 |
|
|
Convertible notes payable -
related parties
|
|
|
298,000 |
|
|
|
355,500 |
|
|
Notes payable (including
$2,117,073 and $2,113,824 in default, respectively) (includes VIE
balances of $475,000 and $475,000, respectively)
|
|
|
2,260,763 |
|
|
|
2,237,484 |
|
|
Notes payable - related
parties
|
|
|
1,001,544 |
|
|
|
742,513 |
|
|
Accrued interest (including
$1,411,233 and $1,396,296 due to related parties, respectively)
(includes VIE balances of $99,071 and $70,545, respectively)
|
|
|
5,095,128 |
|
|
|
4,842,215 |
|
|
Contingent payment
obligation
|
|
|
1,500,000 |
|
|
|
1,500,000 |
|
|
Debt settlement
obligation
|
|
|
75,881 |
|
|
|
- |
|
|
Financing obligation (includes
VIE balance of $1,263,200 and $1,263,200, respectively)
|
|
|
1,263,200 |
|
|
|
1,263,200 |
|
|
Operating lease liability,
current portion
|
|
|
49,622 |
|
|
|
46,952 |
|
|
Derivative liabilities
|
|
|
790,000 |
|
|
|
1,516,435 |
|
|
|
|
|
|
|
|
|
|
|
|
Total current
liabilities
|
|
|
15,260,357 |
|
|
|
15,480,689 |
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable, long term portion
|
|
|
463,212 |
|
|
|
147,890 |
|
|
Operating lease liability, long term
portion
|
|
|
124,581 |
|
|
|
162,289 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
15,848,150 |
|
|
|
15,790,868 |
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and
Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' Deficit
|
|
|
|
|
|
|
|
|
|
Series A Preferred stock, no par
value; 100 shares authorized; 3 shares issued and outstanding
|
|
|
987,000 |
|
|
|
987,000 |
|
|
Series B Preferred stock par
value $0.10: 100,000,000 shares authorized; 36,667 shares issued
and outstanding
|
|
|
3,667 |
|
|
|
3,667 |
|
|
Preferred stock series not
designated par value $0.10: 10,000,000 shares authorized; none
issued or outstanding
|
|
|
- |
|
|
|
- |
|
|
Common stock par value $0.0001:
14,000,000,000 shares authorized; 61,554,604 and 5,905,388 shares
issued and outstanding, respectively
|
|
|
6,155 |
|
|
|
591 |
|
|
Additional paid-in capital
|
|
|
31,467,928 |
|
|
|
28,674,569 |
|
|
Accumulated deficit
|
|
|
(47,264,460 |
) |
|
|
(44,352,595 |
) |
|
Total StrikeForce Technologies,
Inc. stockholders' deficit
|
|
|
(14,799,710 |
) |
|
|
(14,686,768 |
) |
|
Noncontrolling interest in
consolidated subsidiary
|
|
|
(807,498 |
) |
|
|
(777,415 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders'
Deficit
|
|
|
(15,607,208 |
) |
|
|
(15,464,183 |
) |
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders'
Deficit
|
|
$ |
240,942 |
|
|
$ |
326,685 |
|
See accompanying notes to the condensed consolidated financial
statements.
|
|
|
For the Three
Months Ended
|
|
|
For the Nine
Months Ended
|
|
|
|
|
September
30,
2020
|
|
|
September
30,
2019
|
|
|
September
30,
2020
|
|
|
September
30,
2019
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$ |
50,845 |
|
|
$ |
171,284 |
|
|
$ |
161,689 |
|
|
$ |
610,709 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
|
2,236 |
|
|
|
2,129 |
|
|
|
11,251 |
|
|
|
8,211 |
|
|
Compensation
|
|
|
165,122 |
|
|
|
200,741 |
|
|
|
496,340 |
|
|
|
572,828 |
|
|
Professional fees
|
|
|
178,441 |
|
|
|
141,658 |
|
|
|
514,551 |
|
|
|
427,697 |
|
|
Selling, general and administrative expenses
|
|
|
86,469 |
|
|
|
84,320 |
|
|
|
466,124 |
|
|
|
252,176 |
|
|
Research and development
|
|
|
125,654 |
|
|
|
125,654 |
|
|
|
373,154 |
|
|
|
375,866 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
557,922 |
|
|
|
554,502 |
|
|
|
1,861,420 |
|
|
|
1,636,778 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(507,077 |
) |
|
|
(383,218 |
) |
|
|
(1,699,731 |
) |
|
|
(1,026,069 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (including $98,210 and $95,799 to related parties, respectively)
|
|
|
(176,526 |
) |
|
|
(122,354 |
) |
|
|
(510,024 |
) |
|
|
(368,348 |
) |
|
Debt discount amortization
|
|
|
(178,789 |
) |
|
|
(192,440 |
) |
|
|
(586,751 |
) |
|
|
(787,604 |
) |
|
Private placement costs
|
|
|
(36,667 |
) |
|
|
(234,960 |
) |
|
|
(140,167 |
) |
|
|
(577,518 |
) |
|
Change in fair value of derivative liabilities
|
|
|
(47,200 |
) |
|
|
(620,664 |
) |
|
|
165,235 |
|
|
|
(1,302,374 |
) |
|
Gain/(loss) on extinguishment of debt
|
|
|
64,539 |
|
|
|
528 |
|
|
|
(222,837 |
) |
|
|
(21,773 |
) |
|
Other income (expense)
|
|
|
9,682 |
|
|
|
(1,993 |
) |
|
|
52,327 |
|
|
|
31,025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net
|
|
|
(364,961 |
) |
|
|
(1,171,883 |
) |
|
|
(1,242,217 |
) |
|
|
(3,026,592 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(872,038 |
) |
|
|
(1,555,101 |
) |
|
|
(2,941,948 |
) |
|
|
(4,052,661 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to noncontrolling interest
|
|
|
9,386 |
|
|
|
32,284 |
|
|
|
30,083 |
|
|
|
210,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to StrikeForce Technologies, Inc.
|
|
$ |
(862,652 |
) |
|
$ |
(1,522,817 |
) |
|
$ |
(2,911,865 |
) |
|
$ |
(3,841,999 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-Basic and diluted
|
|
$ |
(0.04 |
) |
|
$ |
(0.28 |
) |
|
$ |
(0.24 |
) |
|
$ |
(0.76 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-Basic and diluted
|
|
|
22,280,807 |
|
|
|
5,345,631 |
|
|
|
12,169,639 |
|
|
|
5,045,785 |
|
See accompanying notes to the condensed consolidated financial
statements.
|
STRIKEFORCE
TECHNOLOGIES, INC.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
DEFICIT
|
|
FOR THE THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(Unaudited)
|
|
Three months
ended September 30, 2020
|
|
|
|
|
|
Series A
Preferred stock, no par value
|
|
|
Series B
Preferred stock, par value $0.10
|
|
|
Common stock,
par value $0.0001
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Noncontrolling
|
|
|
Total
Stockholders'
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Interest
|
|
|
Deficit
|
|
|
Balance at July 1, 2020
|
|
|
3 |
|
|
$ |
987,000 |
|
|
|
36,667 |
|
|
$ |
3,667 |
|
|
|
9,363,610 |
|
|
$ |
936 |
|
|
$ |
30,563,874 |
|
|
$ |
(46,401,808 |
) |
|
$ |
(798,112 |
) |
|
$ |
(15,644,443 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of common stock issued for
services
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
10,526 |
|
|
|
1 |
|
|
|
188 |
|
|
|
- |
|
|
|
- |
|
|
|
189 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of vested options
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued with convertible notes
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
34,706 |
|
|
|
- |
|
|
|
- |
|
|
|
34,706 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued upon conversion of notes
and interest
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
41,039,202 |
|
|
|
4,104 |
|
|
|
635,252 |
|
|
|
- |
|
|
|
- |
|
|
|
639,356 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued upon conversion of debt
settlement
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
11,141,266 |
|
|
|
1,114 |
|
|
|
233,908 |
|
|
|
- |
|
|
|
- |
|
|
|
235,022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(862,652 |
) |
|
|
(9,386 |
) |
|
|
(872,038 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2020 (unaudited)
|
|
|
3 |
|
|
$ |
987,000 |
|
|
|
36,667 |
|
|
$ |
3,667 |
|
|
|
61,554,604 |
|
|
$ |
6,155 |
|
|
$ |
31,467,928 |
|
|
$ |
(47,264,460 |
) |
|
$ |
(807,498 |
) |
|
$ |
(15,607,208 |
) |
|
Nine months
ended September 30, 2020
|
|
|
|
|
|
Series A
Preferred stock, no par value
|
|
|
Series B
Preferred stock, par value $0.10
|
|
|
Common
stock, par value $0.0001
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Noncontrolling
|
|
|
Total
Stockholders'
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Interest
|
|
|
Deficit
|
|
|
Balance at January 1, 2020
|
|
|
3 |
|
|
$ |
987,000 |
|
|
|
36,667 |
|
|
$ |
3,667 |
|
|
|
5,905,388 |
|
|
$ |
591 |
|
|
$ |
28,674,569 |
|
|
$ |
(44,352,595 |
) |
|
$ |
(777,415 |
) |
|
$ |
(15,464,183 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of common stock issued for
services
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
109,406 |
|
|
|
11 |
|
|
|
20,200 |
|
|
|
- |
|
|
|
- |
|
|
|
20,211 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of vested options
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
216,426 |
|
|
|
- |
|
|
|
- |
|
|
|
216,426 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants issued with convertible notes
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
52,667 |
|
|
|
- |
|
|
|
- |
|
|
|
52,667 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued upon conversion of notes
and interest
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
43,954,085 |
|
|
|
4,395 |
|
|
|
2,172,199 |
|
|
|
- |
|
|
|
- |
|
|
|
2,176,594 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued upon conversion of debt
settlement
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
11,585,725 |
|
|
|
1,158 |
|
|
|
331,867 |
|
|
|
- |
|
|
|
- |
|
|
|
333,025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(2,911,865 |
) |
|
|
(30,083 |
) |
|
|
(2,941,948 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2020 (unaudited)
|
|
|
3 |
|
|
$ |
987,000 |
|
|
|
36,667 |
|
|
$ |
3,667 |
|
|
|
61,554,604 |
|
|
$ |
6,155 |
|
|
$ |
31,467,928 |
|
|
$ |
(47,264,460 |
) |
|
$ |
(807,498 |
) |
|
$ |
(15,607,208 |
) |
See accompanying notes to the condensed consolidated financial
statements.
|
STRIKEFORCE
TECHNOLOGIES, INC.
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS'
DEFICIT
|
|
FOR THE THREE
AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019
(Unaudited)
|
|
Three months
ended September 30, 2019
|
|
|
|
|
|
Series A
Preferred stock, no par value
|
|
|
Series B
Preferred stock, par value $0.10
|
|
|
Common stock,
par value $0.0001
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Noncontrolling
|
|
|
Total
Stockholders'
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Interest
|
|
|
Deficit
|
|
|
Balance at July 1, 2019
|
|
|
3 |
|
|
|
987,000 |
|
|
|
36,667 |
|
|
|
3,667 |
|
|
|
5,132,365 |
|
|
|
513 |
|
|
|
27,613,933 |
|
|
|
(43,143,792 |
) |
|
|
(734,118 |
) |
|
|
(15,272,797 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of common stock issued for
services
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
15 |
|
|
|
1 |
|
|
|
15 |
|
|
|
- |
|
|
|
- |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of vested options
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
105 |
|
|
|
- |
|
|
|
- |
|
|
|
105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued upon conversion of notes
and interest
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
399,924 |
|
|
|
40 |
|
|
|
462,997 |
|
|
|
- |
|
|
|
- |
|
|
|
463,037 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,522,817 |
) |
|
|
(32,284 |
) |
|
|
(1,555,101 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2019 (Unaudited)
|
|
|
3 |
|
|
$ |
987,000 |
|
|
|
36,667 |
|
|
$ |
3,667 |
|
|
|
5,532,305 |
|
|
$ |
554 |
|
|
$ |
28,077,050 |
|
|
$ |
(44,666,609 |
) |
|
$ |
(766,402 |
) |
|
$ |
(16,364,740 |
) |
|
Nine months
ended September 30, 2019
|
|
|
|
|
|
Series A
Preferred stock, no par value
|
|
|
Series B
Preferred stock, par value $0.10
|
|
|
Common stock,
par value $0.0001
|
|
|
Additional
Paid-in
|
|
|
Accumulated
|
|
|
Noncontrolling
|
|
|
Total
Stockholders'
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Interest
|
|
|
Deficit
|
|
|
Balance at January 1, 2019
|
|
|
3 |
|
|
|
987,000 |
|
|
|
36,667 |
|
|
|
3,667 |
|
|
|
4,747,499 |
|
|
|
475 |
|
|
|
26,586,704 |
|
|
|
(40,824,610 |
) |
|
|
(555,740 |
) |
|
|
(13,802,504 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of common stock issued for
services
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
45 |
|
|
|
1 |
|
|
|
111 |
|
|
|
- |
|
|
|
- |
|
|
|
112 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of vested options
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,017 |
|
|
|
- |
|
|
|
- |
|
|
|
2,017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of warrants issued with
convertible notes
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock issued upon conversion of notes
and interest
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
784,761 |
|
|
|
78 |
|
|
|
1,488,218 |
|
|
|
- |
|
|
|
- |
|
|
|
1,488,296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,841,999 |
) |
|
|
(210,662 |
) |
|
|
(4,052,661 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2019 (Unaudited)
|
|
|
3 |
|
|
$ |
987,000 |
|
|
|
36,667 |
|
|
$ |
3,667 |
|
|
|
5,532,305 |
|
|
$ |
554 |
|
|
$ |
28,077,050 |
|
|
$ |
(44,666,609 |
) |
|
$ |
(766,402 |
) |
|
$ |
(16,364,740 |
) |
See accompanying notes to the condensed consolidated financial
statements.
|
|
|
For
the
Nine
Months
|
|
|
For
the
Nine
Months
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
September
30,
2020
|
|
|
September
30,
2019
|
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
Cash flows from operating
activities:
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(2,941,948 |
) |
|
$ |
(4,052,661 |
) |
|
Adjustments to reconcile net
loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
5,486 |
|
|
|
5,549 |
|
|
Amortization of discount on
notes payable
|
|
|
586,751 |
|
|
|
787,604 |
|
|
Amortization of right-of-use
asset
|
|
|
36,432 |
|
|
|
23,672 |
|
|
Fair value of common stock
issued for services
|
|
|
20,211 |
|
|
|
112 |
|
|
Fair value of vested options
|
|
|
216,426 |
|
|
|
2,017 |
|
|
Change in fair value of
derivative liabilities
|
|
|
(165,235 |
) |
|
|
1,302,374 |
|
|
Private placement costs
|
|
|
140,167 |
|
|
|
577,518 |
|
|
Loss on extinguishment of
debt
|
|
|
222,836 |
|
|
|
21,773 |
|
|
Interest expense from debt settlement obligation
|
|
|
48,906 |
|
|
|
|
|
|
Changes in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(2,538 |
) |
|
|
(4,762 |
) |
|
Prepaid expenses
|
|
|
(18,339 |
) |
|
|
(1,980 |
) |
|
Accounts payable and accrued
expenses
|
|
|
157,613 |
|
|
|
3,316 |
|
|
Accrued interest
|
|
|
399,436 |
|
|
|
369,878 |
|
|
Operating lease liability
|
|
|
(35,038 |
) |
|
|
(21,488 |
) |
|
Net cash used in operating
activities
|
|
|
(1,328,834 |
) |
|
|
(987,078 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing
activities:
|
|
|
|
|
|
|
|
|
|
Purchases of property and
equipment
|
|
|
(1,559 |
) |
|
|
(1,532 |
) |
|
Net cash used in
investing activities
|
|
|
(1,559 |
) |
|
|
(1,532 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing
activities:
|
|
|
|
|
|
|
|
|
|
Proceeds from convertible notes
payable
|
|
|
688,500 |
|
|
|
792,000 |
|
|
Proceeds from notes payable
|
|
|
543,161 |
|
|
|
- |
|
|
Proceeds from notes
payable-related parties
|
|
|
263,254 |
|
|
|
- |
|
|
Repayment of convertible note
payable
|
|
|
(43,000 |
) |
|
|
- |
|
|
Repayment of notes payable
|
|
|
(183,560 |
) |
|
|
(5,000 |
) |
|
Repayment of notes
payable-related parties
|
|
|
(4,223 |
) |
|
|
- |
|
|
Proceeds from finance
obligation
|
|
|
- |
|
|
|
122,500 |
|
|
Net cash provided by financing
activities
|
|
|
1,264,132 |
|
|
|
909,500 |
|
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash
|
|
|
(66,261 |
) |
|
|
(79,110 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash at beginning of the
period
|
|
|
74,648 |
|
|
|
86,160 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of the
period
|
|
$ |
8,387 |
|
|
$ |
7,050 |
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow
information:
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$ |
69,223 |
|
|
$ |
- |
|
|
Income tax paid
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash
investing and financing transactions
|
|
|
|
|
|
|
|
|
|
Fair value of derivative upon issuance of convertible debt recorded as debt discount
|
|
$ |
635,833 |
|
|
$ |
792,000 |
|
|
Right-of-use assets obtained in exchange for operating lease obligations
|
|
$ |
- |
|
|
$ |
214,272 |
|
|
Common stock issued for conversion of notes and accrued interest
|
|
$ |
2,176,594 |
|
|
$ |
1,488,296 |
|
|
Convertible note, accrued interest, and accounts payable assumed by debt settlement obligation
|
|
$ |
197,738 |
|
|
$ |
- |
|
|
Common stock issued for payment of debt settlement obligation
|
|
$ |
333,025 |
|
|
$ |
- |
|
|
Convertible note and accrued interest exchanged for common stock
|
|
$ |
985,461 |
|
|
$ |
- |
|
|
Notes payable and accrued
interest exchanged for financing obligation
|
|
$ |
- |
|
|
$ |
315,200 |
|
|
Warrants issued with convertible notes
|
|
$ |
52,667 |
|
|
$ |
- |
|
See accompanying notes to the condensed consolidated financial
statements.
StrikeForce Technologies, Inc.
Notes to the Condensed Consolidated Financial
Statements
Three and nine months ended September 30, 2020 and
2019
(Unaudited)
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 Presentation-Unaudited Interim Financial
Information
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 nine months ended September 30, 2020 are not necessarily
indicative of the results of operations to be expected for the full
fiscal year ending December 31, 2020. These financial statements
should be read in conjunction with the financial statements of the
Company for the year ended December 31, 2019 and notes thereto
contained in the Annual Report on Form 10-K of the Company as filed
with the SEC on May 1, 2020.
The 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 BST, BST’s operating results, assets and
liabilities are consolidated by the Company. Intercompany balances
and transactions have been eliminated in consolidation. At December
31, 2019, noncontrolling interests represents 51% of BST that the
Company does not directly own. The Company and BST have a
management agreement pursuant to which BST shall remit a management
fee of $36,000 per month to the Company, and when BST reaches a
milestone of $1,000,000 in financing, an additional management fee
of $5,000,000 shall be owed to the Company, payable monthly over
three years. The management fee is currently eliminated in
consolidation. At September 30, 2020 and December 31, 2019, the
amount of VIE cash on the accompanying consolidated balance cash
can be used only to settle obligations of BST, and the amounts of
VIE accounts payable, VIE Notes Payable, VIE Accrued Interest, and
VIE Financing Obligation have no recourse to the general credit of
the Company.
Reverse Stock Split
Effective June 25, 2020, the Company completed a 1:500 reverse
stock split of the Company's issued and outstanding shares of
common stock and all fractional shares will be rounded up. All
share and per share amounts in the accompanying financial
statements have been adjusted retroactively to reflect the reverse
stock split as if it had occurred at the beginning of the earliest
period presented.
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. In the period ended September 30, 2020, the Company
believes the COVID-19 pandemic did impact its operating results as
sales to customers in the second and third quarters were down 17%
and 15%, respectively, from the first quarter of the year. However,
the Company has not observed any impairments of its assets or a
significant change in the fair value of its assets due to the
COVID-19 pandemic. At this time, it is not possible for the Company
to predict the duration or magnitude of the adverse results of the
outbreak and its effects on the Company’s business or results of
operations, financial condition, or liquidity.
As of (and subsequent to) September 30, 2020, the Company has been
following the recommendations of local health authorities to
minimize exposure risk for its team members for the past several
weeks, including the temporary closure of its corporate office and
having team members work remotely. Most customers and vendors have
transitioned to electronic submission of invoices and payments.
Going Concern
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
settlement of liabilities and commitments in the normal course of
business. As reflected in the accompanying financial statements,
for the nine months ended September 30, 2020, the Company incurred
a net loss of $2,941,948 and used cash in operating activities of
$1,328,834 and at September 30, 2020, the Company had a
stockholders’ deficit of $15,607,208. Also, at September 30, 2020,
the Company is in default on notes payable and convertible notes
payable in the aggregate amount of $3,555,173. These factors, among
others, raise substantial doubt about the Company’s ability to
continue as a going concern within one year of the date that these
financial statements are issued. In addition, the Company’s
independent registered public accounting firm, in its report on the
Company’s December 31, 2019 financial statements, raised
substantial doubt about the Company’s ability to continue as a
going concern. The accompanying financial statements do not include
any adjustments that might be necessary if the Company is unable to
continue as a going concern.
At
September 30, 2020, the Company had cash on hand in the amount of
$8,387. Subsequent to September 30, 2020, the Company received cash
upon issuance of our notes payable of $246,000 and sale of our
common stock of $975,342 for a total of proceeds of $1,221,342.
Management estimates that the current funds on hand will be
sufficient to continue operations through August 2021. We believe
the minimum funding required to remain in business for at least the
next 12 months averages to about $150,000 a month. The Company’s
ability to continue as a going concern is dependent upon its
ability to continue to implement its business plan to increase its
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 the
Company. Even if the Company is able to obtain additional
financing, if needed, it may contain undue restrictions on its
operations, in the case of debt financing, or cause substantial
dilution for its stockholders, in the case of equity
financing.
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® and MobileTrust®
products. The Company usually recognizes subscription revenue over
a one-month period based on a typical monthly renewal cycle in
accordance with its customer agreement terms. 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 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:
|
|
|
Three months
ended
|
|
|
|
|
September
30,
2020
|
|
|
September
30,
2019
|
|
|
Software
|
|
$ |
48,937 |
|
|
$ |
123,023 |
|
|
Service
|
|
|
1,908 |
|
|
|
48,261 |
|
|
Total revenue
|
|
$ |
50,845 |
|
|
$ |
171,284 |
|
|
|
|
Nine months
ended
|
|
|
|
|
September
30,
2020
|
|
|
September
30,
2019
|
|
|
Software
|
|
$ |
156,226 |
|
|
$ |
513,813 |
|
|
Service
|
|
|
5,463 |
|
|
|
96,896 |
|
|
Total revenue
|
|
$ |
161,689 |
|
|
$ |
610,709 |
|
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 Company's assumptions.
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.
As of September 30, 2020 and December 31, 2019, the Company’s
balance sheet includes Level 2 liabilities comprised of the fair
value of embedded derivative liabilities of $790,000 and
$1,516,435, respectively (see Note 9).
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.
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 Option Pricing model,
which uses certain assumptions related to risk-free interest rates,
expected volatility, expected life of the stock options or
restricted stock, and future dividends. Compensation expense is
recorded based upon the value derived from the Black-Scholes-Merton
Option Pricing model and based on actual experience. The
assumptions used in the Black-Scholes-Merton Option Pricing model
could materially affect compensation expense recorded in future
periods.
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:
|
|
|
Nine months
ended
|
|
|
|
|
September
30,
2020
|
|
|
September
30,
2019
|
|
|
Options to purchase common stock
|
|
|
633,000 |
|
|
|
519,000 |
|
|
Warrants to purchase common stock
|
|
|
738,810 |
|
|
|
- |
|
|
Convertible notes
|
|
|
229,203,829 |
|
|
|
466,183 |
|
|
Convertible Series B Preferred stock
|
|
|
12,619,167 |
|
|
|
48,073 |
|
|
Total
|
|
|
243,194,806 |
|
|
|
1,033,256 |
|
Concentrations
For the nine months ended September 30, 2020, sales to two
customers comprised 72% and 14% of revenues, respectively. For the
nine months ended September 30, 2019, sales to three customers
comprised 57%, 20% and 16% of revenues, respectively. At September
30, 2020, three customers comprised 46%, 29% and 12% of accounts
receivable, respectively.
The Company maintains the majority of its cash balances with one
financial institution, in the form of demand deposits. At September
30, 2020, the Company did not have cash deposits that exceeded the
federally insured limit of $250,000 per account. The Company
believes that no significant concentration of credit risk exists
with respect to its cash balances because of its assessment of the
creditworthiness and financial viability of the financial
institution.