StrikeForce Technologies Inc. (Form: 10-Q, Received: 05/24/2021 13:47:13)

UNITED STATES

SECURITIES EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

	For the quarterly period ended March 31, 2021

☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

	For the transition period from ________ to ________

STRIKEFORCE TECHNOLOGIES, INC.

(Exact name of registrant as specified in its Charter)

WYOMING

000-55012

22-3827597

(State or other jurisdiction of

incorporation or organization)

(Commission

file number)

(I.R.S. Employer

Identification No.)

1090 King Georges Post Road, Suite 603

Edison, NJ 08837

(Address of Principal Executive Offices)

(732) 661-9641

(Issuer’s telephone number)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class		Name of each exchange on which registered
N/A		N/A

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	SFOR	OTCQB

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such a shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b–2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act.) Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding at May 21, 2021
Common stock, $0.0001 par value		853,378,974

Indicate the number of shares outstanding of each of the issuer’s classes of preferred stock, as of the latest practicable date.

Class		Outstanding at May 21, 2021
Preferred stock, Series A, no par value		3

Class		Outstanding at May 21, 2021
Preferred stock, Series B, $0.10 par value		36,667

Transitional Small Business Disclosure Format Yes ☐ No ☒

Documents Incorporated By Reference

None

STRIKEFORCE TECHNOLOGIES, INC.

INDEX TO FORM 10-Q FILING

MARCH 31, 2021

TABLE OF CONTENTS

		Page Number
PART I Financial Information

Item 1.	Financial Information	3

	Condensed Consolidated Balance Sheets at March 31, 2021 (unaudited) and December 31, 2020	3

	Condensed Consolidated Statements of Operations for the Three months ended March 31, 2021 and 2020 (unaudited)	4

	Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the Three months ended March 31, 2021 and 2020 (unaudited)	5-6

	Condensed Consolidated Statements of Cash Flows for the Three months ended March 31, 2021 and 2020 (unaudited)	7

	Notes to the Condensed Consolidated Financial Statements for the Three months ended March 31, 2021 and 2020 (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23

Item 4.	Controls and Procedures	23

PART II Other Information

Item 1.	Legal Proceedings	25

Item 1A.	Risk Factors	25

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 3.	Defaults Upon Senior Securities	27

Item 4.	Mine Safety Disclosures	27

Item 5.	Other Information	27

Item 6.	Exhibits	28

SIGNATURES		30

EX-31.1	Management Certification

EX-32.1	Sarbanes-Oxley Act

Table of Contents

PART I

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

STRIKEFORCE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2021			December 31, 2020
	(Unaudited)
ASSETS
Current Assets:
Cash (includes VIE balances of $635 and $2,000, respectively)	$	816,000		$	162,000
Accounts receivable, net		17,000			20,000
Prepaid expenses		23,000			21,000

Total current assets		856,000			203,000

Property and equipment, net		1,000			2,000
Operating lease right-of-use asset		145,000			157,000
Other assets		14,000			14,000

Total Assets	$	1,016,000		$	376,000

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable and accrued expenses (includes VIE balances of $3,000 and $3,000, respectively)	$	1,002,000		$	1,010,000
Convertible notes payable (net of discount of $0 and $14,000, respectively;
including $1,438,000 and $1,435,000 in default, respectively)		1,438,000			1,469,000
Convertible notes payable - related parties		268,000			298,000
Notes payable (net of discount of $29,000 and $52,000, respectively; including $1,994,000 and $2,146,000 in default, respectively) (includes VIE balances of $350,000 and $475,000, respectively)		2,076,000			2,250,000
Notes payable - related parties		693,000			952,000
Accrued interest (including $1,408,000 and $1,448,000 due to related parties, respectively) (includes VIE balances of $111,000 and $109,000, respectively)		5,217,000			5,187,000
Contingent payment obligation		1,500,000			1,500,000
Financing obligation (includes VIE balance of $1,263,000 and $1,263,000, respectively)		1,263,000			1,263,000
Operating lease liability, current portion		51,000			38,000
Derivative liabilities		-			163,000

Total current liabilities		13,508,000			14,130,000

Notes payable, long term portion		640,000			463,000
Operating lease liability, long term portion		99,000			125,000

Total Liabilities		14,247,000			14,718,000

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		4,000			4,000
Preferred stock series not designated par value $0.10: 10,000,000 shares authorized;
none issued or outstanding		-			-
Common stock par value $0.0001: 4,000,000,000 shares authorized;
807,277,505 and 718,263,338 shares issued and outstanding, respectively		81,000			72,000
Additional paid-in capital		50,862,000			39,814,000
Accumulated deficit		(64,335,000	)		(54,396,000	)
Total StrikeForce Technologies, Inc. stockholders' deficit		(12,401,000	)		(13,519,000	)
Noncontrolling interest in consolidated subsidiary		(830,000	)		(823,000	)

Total Stockholders' Deficit		(13,231,000	)		(14,342,000	)

Total Liabilities and Stockholders' Deficit	$	1,016,000		$	376,000

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

STRIKEFORCE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Three Months Ended
	March 31, 2021			March 31, 2020
	(Unaudited)			(Unaudited)

Revenue	$	46,000		$	60,000

Operating expenses:
Cost of revenue		3,000			3,000
Selling, general and administrative expenses		5,628,000			507,000
Research and development		145,000			124,000

Total operating expenses		5,776,000			634,000

Loss from operations		(5,730,000	)		(574,000	)

Other income (expense):
Interest expense (including $31,000 and $33,000 to related parties, respectively)		(128,000	)		(172,000	)
Debt discount amortization		(23,000	)		(220,000	)
Financing costs		(3,239,000	)		-
Private placement costs		-			(103,000	)
Change in fair value of derivative liabilities		(219,000	)		199,000
Loss on extinguishment of debt, net		(607,000	)		(35,000	)
Other income		-			-

Other income (expense), net		(4,216,000	)		(331,000	)

Net loss		(9,946,000	)		(905,000	)

Net loss attributable to noncontrolling interest		7,000			9,000

Net loss attributable to StrikeForce Technologies, Inc.	$	(9,939,000	)	$	(896,000	)

Net loss per common share
-Basic and diluted	$	(0.01	)	$	(0.14	)

Weighted average common shares outstanding
-Basic and diluted		777,075,644			6,305,106

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

STRIKEFORCE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020 (Unaudited)

Three months ended March 31, 2021

	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			Non controlling			Total Stockholders'
	Shares		Amount		Shares		Amount		Shares		Amount		Capital			Deficit			Interest			Deficit
Balance at January 1, 2021		3	$	987,000		36,667	$	4,000		718,263,338	$	72,000	$	39,814,000		$	(54,396,000	)	$	(823,000	)	$	(14,342,000	)

Common stock issued for cash		-		-		-		-		38,116,450		4,000		1,445,000			-			-			1,449,000

Fair value of common stock issued for services		-		-		-		-		128,527		-		16,000			-			-			16,000

Fair value of vested options		-		-		-		-		-		-		5,230,000			-			-			5,230,000

Common stock issued and recognized as a financing cost										16,931,437		1,000		3,238,000									3,239,000

Common stock issued upon cashless exercise of options		-		-		-		-		17,208,335		2,000		(2,000	)		-			-			-

Common stock issued upon conversion of notes payable and accrued interest		-		-		-		-		16,168,589		2,000		1,033,000			-			-			1,035,000

Common stock issued upon conversion of debt settlement		-		-		-		-		460,829		-		88,000			-			-			88,000

Net loss		-		-		-		-		-		-		-			(9,939,000	)		(7,000	)		(9,946,000	)

Balance at March 31, 2021 (unaudited)		3	$	987,000		36,667	$	4,000		807,277,505	$	81,000	$	50,862,000		$	(64,335,000	)	$	(830,000	)	$	(13,231,000	)

Table of Contents

STRIKEFORCE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020 (Unaudited)

Three months ended March 31, 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			Non controlling			Total Stockholders'
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Interest			Deficit
Balance at January 1, 2020		3	$	987,000		36,667	$	4,000		5,905,388	$	1,000	$	28,675,000	$	(44,353,000	)	$	(778,000	)	$	(15,464,000	)

Fair value of common stock issued for services		-		-		-		-		15		-		-		-			-			-

Fair value of vested options		-		-		-		-		-		-		114,000		-			-			114,000

Fair value of warrants issued with convertible notes		-		-		-		-		-		-		37,000		-			-			37,000

Common stock issued upon conversion of notes payable and accrued interest		-		-		-		-		846,506		-		932,000		-			-			932,000

Net loss		-		-		-		-		-		-		-		(896,000	)		(9,000	)		(905,000	)

Balance at March 31, 2020 (Unaudited)		3	$	987,000		36,667	$	4,000		6,751,909	$	1,000	$	29,758,000	$	(45,249,000	)	$	(787,000	)	$	(15,286,000	)

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

STRIKEFORCE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Three Months			For the Three Months
	Ended			Ended
	March 31, 2021			March 31, 2020
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net loss	$	(9,946,000	)	$	(905,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,000			2,000
Amortization of discount		23,000			220,000
Amortization of right-of-use asset		12,000			12,000
Fair value of common stock issued for services		16,000			-
Fair value of vested options		5,230,000			114,000
Fair value of common stock issued for financing services		3,239,000			-
Change in fair value of derivative liabilities		219,000			(199,000	)
Private placement costs		-			104,000
Loss on extinguishment of debt		607,000			35,000
Changes in operating assets and liabilities:
Accounts receivable		3,000			(3,000	)
Prepaid expenses		(2,000	)		2,000
Accounts payable and accrued expenses		(8,000	)		18,000
Accrued interest		34,000			122,000
Operating lease liability		(13,000	)		(12,000	)
Net cash used in operating activities		(585,000	)		(490,000	)

Cash flows from financing activities:
Proceeds from sale of common stock		1,449,000			-
Proceeds from convertible notes payable		-			471,000
Proceeds from notes payable		177,000			80,000
Proceeds from notes payable-related parties		-			10,000
Repayment of notes payable		(97,000	)		(133,000	)
Repayment of convertible notes payable-related parties		(30,000	)		-
Repayment of notes payable-related parties		(260,000	)		-
Net cash provided by financing activities		1,239,000			428,000

Net decrease in cash		654,000			(62,000	)

Cash at beginning of the period		162,000			75,000

Cash at end of the period	$	816,000		$	13,000

Supplemental disclosure of cash flow information:
Interest paid	$	76,000		$	-
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	$	-		$	469,000
Common stock issued for conversion of notes and accrued interest	$	1,035,000		$	932,000
Common stock issued upon conversion of debt settlement	$	88,000		$	478,000
Notes payable and accrued interest exchanged for financing obligation	$	-		$	38,000

See accompanying notes to the condensed consolidated financial statements.

Table of Contents

StrikeForce Technologies, Inc.

Notes to the Condensed Consolidated Financial Statements

Three months ended March 31, 2021 and 2020

(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 three months ended March 31, 2021 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2021. These financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2020 and notes thereto contained in the Annual Report on Form 10-K of the Company as filed with the SEC on April 13, 2021.

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 March 31, 2021, 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 March 31, 2021 and December 31, 2020, 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.

COVID-19

In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, has adversely affected workforces, customers, economies, and financial markets globally. It has also disrupted the normal operations of many businesses. This outbreak could decrease spending, adversely affect demand for the Company’s products, and harm the Company’s business and results of operations.

During the three months ended March 31, 2021 and the year ended December 31, 2020, the Company believes the COVID-19 pandemic did impact its operating results as sales to customers were down 23% and 73%, respectively, as compared to the prior period. 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.

The Company has been following the recommendations of health authorities to minimize exposure risk for its team members, 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 three months ended March 31, 2021, the Company incurred a net loss of $9,946,000 and used cash in operating activities of $585,000 and at March 31, 2021, the Company had a stockholders’ deficit of $13,231,000. Also, at March 31, 2021, the Company is in default on notes payable and convertible notes payable in the aggregate amount of $3,432,000. 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, 2020 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.

Table of Contents

At March 31, 2021, the Company had cash on hand in the amount of $816,000. Management estimates that the current funds on hand will be sufficient to continue operations through the next six months. The Company’s ability to continue as a going concern is dependent upon its ability to continue to implement its business plan. Currently, management is attempting to increase revenues by selling through a channel of distributors, value added resellers, strategic partners and original equipment manufacturers. While the Company believes in the viability of its strategy to increase revenues, there can be no assurances to that effect. The Company’s ability to continue as a going concern is dependent upon its ability 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®, MobileTrust® and SafeVchat™ 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
	March 31, 2021		March 31, 2020
Software	$	45,000	$	58,000
Service		1,000		2,000
Total revenue	$	46,000	$	60,000

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.

Table of Contents

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 December 31, 2020, the Company’s balance sheet includes Level 2 liabilities comprised of the fair value of embedded derivative liabilities of $163,000 (see Note 8).

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:

	Three months ended
	March 31, 2021		March 31, 2020
Options to purchase common stock		40,633,001		633,001
Warrants to purchase common stock		27,355,475		150,575
Convertible notes		21		3,669,138
Convertible Series B Preferred stock		492,455		126,192
Total		68,480,952		4,578,906

Concentrations

For the three months ended March 31, 2021, sales to two customers comprised 62% and 20% of revenues, respectively. For the three months ended March 31, 2020, sales to two customers comprised 65% and 12% of revenues, respectively. At March 31, 2021, two customers comprised 53% and 26% of accounts receivable, respectively.

Table of Contents

The Company maintains the majority of its cash balances with one financial institution, in the form of demand deposits. At March 31, 2021, the Company had 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.

Segments

The Company operates in one segment for the development and distribution of our software products. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying financial statements.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments ("ASC 326"). ASU 2016-13 requires entities to use a forward-looking approach based on current expected credit losses (“CECL”) to estimate credit losses on certain types of financial instruments, including trade receivables. This may result in the earlier recognition of allowances for losses. ASU 2016-13 is effective for the Company beginning January 1, 2023, and early adoption is permitted. The Company does not believe the potential impact of the new guidance and related codification improvements will be material to its financial position, results of operations and cash flows.

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 will simplify the accounting for convertible instruments by reducing the number of accounting models for convertible debt instruments and convertible preferred stock. Limiting the accounting models will result in fewer embedded conversion features being separately recognized from the host contract as compared with current GAAP. Convertible instruments that continue to be subject to separation models are (1) those with embedded conversion features that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that do not qualify for a scope exception from derivative accounting and (2) convertible debt instruments issued with substantial premiums for which the premiums are recorded as paid-in capital. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions. ASU 2020-06 will be effective January 1, 2024, for the Company. Early adoption is permitted, but no earlier than January 1, 2021, including interim periods within that year. Management is currently evaluating the effect of the adoption of ASU 2020-06 on the consolidated financial statements, but currently does not believe ASU 2020-06 will have a significant impact on the Company’s accounting for its convertible debt instruments as they are not considered indexed to the Company’s own stock. The effect will largely depend on the composition and terms of the financial instruments at the time of adoption.

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

Note 2 - Convertible Notes Payable

Convertible notes payable consisted of the following:

	March 31, 2021		December 31, 2020
Secured
(a) DART/Citco Global, in default	$	543,000	$	543,000

Unsecured
(b) Convertible notes with fixed conversion prices, in default		895,000		895,000
(c) Convertible notes with adjustable conversion prices		-		45,000
Total convertible notes principal outstanding		1,438,000		1,483,000
Debt discount	-			(14,000	)
Convertible notes, net of discount	$	1,438,000	$	1,469,000

Table of Contents

_________

(a)	During fiscal 2005, the Company issued notes payable to DART/Citco Global in the aggregate of $543,000. The notes bear interest at an average rate of 7.5% per annum, matured in December 2010, convertible to common shares at a fixed conversion price of $3.25 per share, as adjusted for applicable reverse stock splits, and secured by all of the Company’s assets. In fiscal 2009, the note holders agreed to the forbearance of any interest on the notes payable to DART/Citco Global.

	At March 31, 2021 and December 31, 2020, the outstanding balance of convertible notes payable amounted to $543,000, respectively.

(b)	During fiscals 2005 through 2007, the Company issued notes payable in the aggregate of $895,000. The notes are unsecured, bear interest at a rate starting at 8% up to 18% per annum, were due on various dates from March 2008 to March 2015, and are currently in default. The aggregate notes are convertible into less than one share of the Company’s common stock based on fixed conversion prices adjusted for applicable reverse stock splits.

	At March 31, 2021 and December 31, 2020, the outstanding balance of convertible notes payable amounted to $895,000, respectively.

(c)	During fiscal 2020, the Company issued convertible notes payable with adjustable conversion prices for aggregate proceeds of $803,000. The notes bear interest at 8% to 10% per annum, unsecured, and maturing between October 2020 and December 2021. At the option of the holder, the notes are convertible into shares of common stock of the Company at a price per share discount of 58% to 70% of the market price of the Company’s common stock, as defined, for 15 to 25 days preceding a conversion notice. The Company determined that the conversion options of the convertible notes were not considered indexed to the Company’s own stock and characterized the conversion features as derivative liabilities upon issuance (see Note 10). The Company also granted warrants to certain note holders to purchase 638,000 shares of the Company’s common stock. As a result, the Company recorded debt discount of $803,000, to account the fair value of the derivative liabilities of $742,000, the relative fair value of the warrants granted of $53,000 and direct fees incurred of $8,000. At December 31, 2020, the outstanding balance of the notes payable amounted to $45,000 and unamortized discount was $14,000.

	During the three months ended March 31, 2021, notes payable totaling $45,000 plus unpaid interest and fees of $4,000, for a total of $49,000, were converted into 16,168,589 shares of the Company’s common stock with a fair value of $1,035,000. The Company followed the general extinguishment model to record the conversion and settlement of the debt. Notes payable, accrued interest and fees converted totaled $49,000, the related unamortized debt discount totaled ($14,000), and the derivative liability related to the conversion option of these notes, after final valuation, amounted to $382,000. The fair value of the common shares issued amounted to $1,035,000 and the difference between the total debt settled and fair value of the common shares issued amounted to $618,000 and was recorded as loss on extinguishment of debt. At March 31, 2021, the Company has no more convertible notes with adjustable conversion prices outstanding.

Note 3 - Convertible Notes Payable – Related Parties

In previous years, the Company issued convertible notes to related parties/officers in exchange for cash and/or services rendered. The notes are unsecured and are due on December 31, 2021. The notes are unsecured, and have due dates of December 31, 2021, as amended. Certain notes payable are due to the Company’s Chief Executive Officer and have a compounded interest rate of 8% per annum. 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. As of December 31, 2020, the outstanding balance of the notes payable amounted to $298,000.

During the three months ended March 31, 2021, notes payable aggregating $30,000 were repaid. At March 31, 2021, the balance of convertible notes payable-related parties totaled $268,000.

Table of Contents

Note 4 - Notes Payable

Notes payable consisted of the following:

	March 31, 2021			December 31, 2020
Unsecured notes
(a) Notes payable-$1,639,000 in default	$	1,699,000		$	1,699,000
(b) Notes payable issued by BST-in default		350,000			475,000
(c) Note payable-PPP loans		490,000			313,000
(d) Note payable-EID loan		150,000			150,000

Secured notes payable
(e) Notes payable ($5,000 in default at March 31, 2021)		56,000			128,000
Total notes payable principal outstanding		2,745,000			2,765,000
Debt discount		(29,000	)		(52,000	)
Less current portion of notes payable, net of discount		(2,076,000	)		(2,250,000	)
Long term notes payable	$	640,000		$	463,000

________

(a)	In previous years, the Company issued notes payable in exchange for cash. The notes are unsecured, bear interest at a rate of 8% through 14% per annum and matured starting in fiscal 2011 up to November 2021. As of December 31, 2020, the outstanding balance of these notes payable amounted to $1,699,000 and unamortized debt discount of $52,000.

	During the three months ended March 31, 2021, the Company amortized the debt discount of $23,000. At March 31, 2021, the outstanding balance of the notes payable was $1,699,000 and unamortized debt discount of $29,000. As of March 31, 2021, total notes payable of $1,639,000 are past due and deemed in default.

(b)	In fiscal 2018, the Company’s consolidated subsidiary BlockSafe, issued promissory notes in exchange for cash. The notes are unsecured, bearing interest at a rate of 8% per annum, and matured in September 2019. At December 31, 2020, the outstanding balance of the notes payable amounted to $475,000.

	During the three months ended March 31, 2021, $25,000 of the notes were paid, and a note holder agreed to exchange $100,000 of notes payable for 460,829 shares of the Company’s common stock with a fair value of $88,000 (see Note 10). As a result, the Company recognized a gain of $12,000 to account the difference between the note payable settled and fair value of the common stock issued. At March 31, 2021, the outstanding balance of the notes payable amounted to $350,000 and are deemed in default.

(c)	At December 31, 2020, the balance of the first draw Paycheck Protection Program (the “PPP”) loan was $313,000. The first draw PPP loan matures on April 7, 2022, bears interest at a rate of 1% per annum, with the first six months of interest deferred, is payable monthly commencing on October 2020, and is unsecured and guaranteed by the U.S. Small Business Administration (“SBA”). The loan term may be extended to April 7, 2025, if mutually agreed to by the Company and lender.

	On March 16, 2021, the Company was granted a second draw PPP loan from Chase Bank in the aggregate amount of $177,000. The second draw PPP loan matures on March 16, 2023, bears interest at a rate of 1% per annum, with the first six months of interest deferred, is payable monthly commencing on January 2022, and is unsecured and guaranteed by the U.S. Small Business Administration (“SBA”). The loan term may be extended to March 16, 2026, if mutually agreed to by the Company and lender. The Company applied ASC 470, Debt, to account for the second draw PPP loan. The PPP loans may be prepaid at any time prior to maturity with no prepayment penalties. Funds from the PPP loans may only be used for qualifying expenses as described in the CARES Act, including qualifying payroll costs, qualifying group health care benefits, qualifying rent and debt obligations, and qualifying utilities. The Company has used and is continuing to use the loan amounts for qualifying expenses. Under the terms of the PPP, certain amounts of the loan may be forgiven if they are used for qualifying expenses. The Company applied for forgiveness of the first draw PPP loan in April 2021 and intends to apply for forgiveness of the second draw PPP loan with respect to these qualifying expenses, however, the Company cannot assure that such forgiveness of any portion of the PPP loans will occur. As for the potential loan forgiveness, once the PPP loans are, in part or wholly, forgiven and a legal release is received, the liability would be reduced by the amount forgiven and a gain on extinguishment would be recorded. The terms of the PPP loans provide for customary events of default including, among other things, payment defaults, breach of representations and warranties, and insolvency events. The Company was in compliance with the terms of the PPP loan as of March 31, 2021.

(d)	On May 15, 2020, the Company received a $150,000 loan (the “EID Loan”) from the SBA under the SBA’s Economic Injury Disaster Loan program. The EID Loan has a thirty-year term and bears interest at a rate of 3.75% per annum. Monthly principal and interest payments of $0.7 per month are deferred for twelve months and commence in May 2021. The EID Loan may be prepaid at any time prior to maturity with no prepayment penalties. The proceeds from the EID Loan must be used for working capital. The EID Loan contains customary events of default and other provisions customary for a loan of this type. The Company was in compliance with the terms of the EID loan as of March 31, 2021.

Table of Contents

(e)

In fiscal 2019 and 2020, the Company issued notes payable aggregating $468,000. The notes bear interest at a rate starting from 8% to 148% per annum, each agreement secured by substantially all of the assets of the Company, maturing between March 2020 and July 2021. The Company also made principal payments of $319,000, and one secured note of $21,000 was extinguished as part of a debt settlement obligation transaction. At December 31, 2020, the outstanding balance of the secured note agreements was $128,000.

During the three months ended March 31, 2021, the Company made principal payments of $72,000.

At March 31, 2021, the outstanding balance of the secured notes payable was $56,000. One note for $5,000 was due in July 2020 and is past due. The Company and the note holders are in negotiations to extend the due date of the note.

Note 5 - Notes Payable – Related Parties

Notes payable-related parties notes represent notes payable to the Company’s Chief Executive Officer ranging in interest rates of 0% per annum to 10% per annum. The notes are unsecured and the outstanding balance of these notes payable at December 31, 2020 amounted to $952,000.

During the three months ended March 31, 2021, the Company made payments of $259,000.

At March 31, 2021, the balance of notes payable-related parties totaled $693,000 which are all due to the Company’s Chief Executive Officer. The notes are due on December 31, 2021.

Note 6 - Financing Obligation

The Company is in the process of developing Coins or Tokens which are an envisioned virtual currency. In fiscal 2018, the Company’s consolidated subsidiary BlockSafe (BST), issued promissory notes to unrelated parties aggregating $776,000. As part of issuance, the Company agreed to pay a financing obligation to the note holders equal to the note principal in tokens, as defined, to be issued by BlockSafe. In addition, the Company also agreed to issue tokens to an unrelated party in exchange for cash of $50,000. As of December 31, 2018, outstanding balance of the financing obligation amounted to $826,000 to be paid by tokens to be issued by BlockSafe.

During the year ended December 31, 2019, BlockSafe agreed to issue tokens to unrelated parties in exchange for cash of $122,000. In addition, certain note holders of promissory notes issued by BlockSafe agreed to exchange $315,000 of outstanding principal and accrued interest into the financing obligation to be paid by tokens to be issued by BlockSafe.

At March 31, 2021 and December 31, 2020, the outstanding balance of financing obligations amounted to $1,263,000, respectively, to be paid in tokens, as defined. At March 31, 2021 and through the date of filing, BST has not developed or issued any tokens and there is no assurance as to whether, or at what amount, or on what terms, tokens will be available to be issued, if ever. At March 31, 2021, as the tokens do not exist, and any amounts received for tokens are not considered equity or revenue, management determined that 100% of the obligation of $1,263,000 is a liability to be settled by BST, through the issuance of tokens, or through other means if tokens are never issued.

Note 7 - Contingent Payment Obligation

On September 6, 2017, the Company entered into a litigation funding agreement with Therium Inc. (subsequently Therium Luxembourg) and VGL Capital, LLC (collectively the “Funders”). Under the agreement, the Company received $1,500,000 from the Funders to allow the Company to pursue patent enforcement actions against infringements of its patents. In exchange, the Funders are entitled to receive, after the payment of legal fees, the first $1,500,000 from the gross proceeds of any claims awarded, 10% of any additional claim proceeds until the Funders have received an additional $7,500,000, and 2.5% of any claim proceeds thereafter. The Funders shall be paid only in the event that the Company achieves recoveries of claim proceeds.

At December 31, 2020 and March 31, 2021, the Company has reflected the $1,500,000 received from the Funders as a contingent payment obligation to be paid only if claim proceeds are recovered.

Note 8 - Derivative Financial Instruments

In prior years, the Company issued convertible notes payable whose conversion shares were not explicitly limited. As a result, the Company was unable to conclude that it had enough authorized and unissued shares available to settle the conversion option. The result was that the conversion option was bifurcated from the debt host and accounted for as a derivative liability in accordance with ASC 815, and re-measured at the end of every reporting period with the change in value reported in the statement of operations. Furthermore, since the number of shares to be issued to settle the conversion option was potentially unlimited, the Company would be unable to conclude that it has sufficient authorized and available shares to satisfy other commitments to issue shares if it did not have a sequencing policy. The Company has not adopted, documented and disclosed a sequencing approach that allows its other equity linked financial instruments and conversion options to be classified as equity if they meet the requirements of ASC 815.

Table of Contents

The derivative liability was valued using a Monte Carlo valuation method through the assistance of a valuations specialist. The Monte Carlo valuation method uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the conversion features, and future dividends. The Monte Carlo method is used in corporate finance and mathematical finance to value and analyze (complex) instruments, portfolios and investments by simulating the various sources of uncertainty affecting their value, and then determining the distribution of their value over the range of resultant outcomes. This is usually done by help of stochastic asset models. At December 31, 2020, the balance of the derivative liabilities was $163,000.

During the three months ended March 31, 2021, the corresponding convertible notes payable were converted to equity (see Note 2 and 10). Pursuant to current accounting guidelines, the Company determined the fair value of the derivative liability one last time which amounted to $382,000 and as a result, the Company recorded a change in fair value of $219,000. The Company also extinguished the derivative liability of $382,000 as part of loss on debt extinguishment. At March 31, 2021, the Company has no more instruments accounted as derivative liabilities.

The fair value of the embedded derivative was determined using the following average assumptions:

	January 2021 to March 2021			December 31, 2020
Conversion feature:
Risk-free interest rate		0.08	%		0.09	%
Expected volatility		424	%	495%-691%
Expected life (in years)	0.41 year			0.25 to 0.57 year
Expected dividend yield		-			-

Fair Value:
Conversion feature	$	382,000		$	163,000

The risk-free interest rate was based on rates established by the Federal Reserve Bank. The expected volatility is based on the historical volatility of the Company’s stock. The expected life of the conversion feature of the notes was based on the remaining terms of the related notes. The expected dividend yield was based on the fact that the Company has not customarily paid dividends to its common stockholders in the past and does not expect to pay dividends to its common stockholders in the future.

The following table sets forth a summary of the changes in the estimated fair value of our embedded derivative during the three months ended March 31, 2021 and 2020:

	Three months ended March 31, 2021			Three months ended March 31, 2020
Fair value at beginning of period	$	163,000		$	1,516,000
Recognition of derivative liabilities upon initial valuation		-			535,000
Extinguishment of derivative liabilities		(382,000	)		(545,000	)
Net change in the fair value of derivative liabilities		219,000			(199,000	)
Fair value at end of period	$	-		$	1,307,000

Note 9 - Operating Lease

In January 2019, the Company entered into a noncancelable operating lease for its headquarters office requiring payments of approximately $4,000 per month, payments increasing 3% each year, and ending on January 31, 2024. At March 31, 2021, the remaining lease term was 2.83 years. The Company does not have any other leases.

Operating lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The operating lease ROU asset includes any lease payments made and excludes lease incentives.

Table of Contents

The components of lease expense and supplemental cash flow information related to leases for the period are as follows:

	Three months ended March 31, 2021			Three months ended March 31, 2020
Lease Cost
Operating lease cost (included in general and administration in the Company’s statement of operations)	$	14,000		$	14,000

Other Information
Cash paid for amounts included in the measurement of lease liabilities for the three months ended March 31, 2021 and 2020	$	14,000		$	13,000
Weighted average remaining lease term – operating leases (in years)		2.8			3.8
Average discount rate – operating leases		10.0	%		10.0	%

The supplemental balance sheet information related to leases for the period is as follows:

	At March 31, 2021
Operating leases
Long-term right-of-use assets	$	145,000

Short-term operating lease liabilities	$	51,000
Long-term operating lease liabilities		99,000
Total operating lease liabilities	$	150,000

Maturities of the Company’s lease liabilities are as follows:

Year Ending	Operating Leases
2021 (9 months)		42,000
2022		58,000
2023		59,000
2024		5,000
Total lease payments		164,000
Less: Imputed interest/present value discount		(14,000	)
Present value of lease liabilities	$	150,000

Lease expenses were $14,000 and $14,000 during the three months ended March 31, 2021 and 2020, respectively.

Note 10 – Stockholders’ Deficit

Common Stock

During the three months ended March 31, 2021, the Company issued an aggregate of 89,014,167 shares of its common stock as follows:

	·	In January 2021, the Company sold 38,116,450 shares of common stock for net proceeds of $1,449,000, net of fees and commission, in an offering under Regulation A.

	·	The Company issued 128,527 shares of its common stock for services, with a fair value of $16,000. The common shares were valued at the respective date of issuances.

	·	The Company issued 16,168,589 shares of common stock upon conversion of convertible notes payable and accrued interest (see Note 2).

	·	The Company issued 460,829 shares of common stock upon conversion of debt settlement (see Note 4).

Table of Contents

Warrants

The table below summarizes the Company’s warrant activities for the three months ended March 31, 2021:

	Number of Warrant Shares			Exercise Price Range Per Share		Weighted Average Exercise Price

Balance, January 1, 2021		27,405,475		$	0.0045-2.90	$	0.011676
Granted		-			-		-
Canceled/Expired		(50,000	)		-		-
Exercised		-			-		-
Balance outstanding, March 31, 2021		27,355,475		$	0.0045-2.90	$	0.010327

Balance exercisable, March 31, 2021		27,355,475		$	0.0045-2.90	$	0.010327

In March 2021, the Company issued 16,931,437 shares of common stock with a fair value of $3,239,000 in connection with the cancellation of warrants to purchase 50,000 shares of common stock that were granted in fiscal 2020 as part of a financing transaction. The common shares issued were valued at the date of issuance and recorded as a finance cost.

At March 31, 2021, intrinsic value of the warrants amounted to $2,623,000.

The following table summarizes information concerning outstanding and exercisable warrants as of March 31, 2021:

		Warrants Outstanding and Exercisable
Range of Exercise Prices		Number Outstanding		Average Remaining Contractual Life (in years)		Weighted Average Exercise Price

$	0.0045		26,666,665		5.00	$	0.0045

$	0.085		588,235		5.00	$	0.085

$	0.75		83,333		5.00	$	0.75

$	2.90		17,242		5.00	$	2.90

$	0.0045 - $2.90		27,355,475		5.00	$	0.010327

Note 11 - Stock Options

The table below summarizes the Company’s stock option activities for the period January 1, 2021 to March 31, 2021:

Number of

Options Shares

Exercise Price Range

Per Share

Weighted Average Exercise Price

Balance, January 1, 2021

58,133,001

0.005-1,121,250,000

0.03704

Granted	-			-		-
Exercised	(17,500,000	)	$	0.005	$	0.005
Expired	-			-		-
Balance outstanding, March 31, 2021	40,633,001		$	0.005-1,121,250,000	$	0.05084
Balance exercisable, March 31, 2021	23,365,241		$	0.005-1,121,250,000	$	0.05084

At March 31, 2021, the intrinsic value of outstanding options was $4,000,000.

In February 2021, 12,250,000 unvested options granted in fiscal 2020 were modified and such options became fully vested. Pursuant to current accounting guidelines, the Company remeasured the fair value of these options and determined their fair value to be $3,675,000 and was recorded as stock compensation expense.

During the period ended March 31, 2021, the Company recorded additional stock compensation expense of $1,555,000 to account for options granted in the prior year that vested. In addition, the Company also issued 17,208,335 shares of the Company’s common stock upon cashless exercise of 17,500,000 options. As of March 31, 2021, the unamortized stock compensation amounted to approximately $1,157,000 which will be recognized during the remainder of fiscal 2021.

Table of Contents

The following table summarizes information concerning the Company’s stock options as of March 31, 2021:

		Options Outstanding						Options Exercisable
Range of Exercise Prices		Number Outstanding		Average Remaining Contractual Life (in years)		Weighted Average Exercise Price		Number Exercisable		Average Remaining Contractual Life (in years)		Weighted Average Exercise Price

$	1,121,250,000		1		2	$	1,121,250,000		1		2	$	1,121,250,000
$	0.005		40,000,000		10	$	0.005		22,732,240		10	$	0.005
$	2.85		126,000		7	$	2.85		126,000		7	$	2.85
$	2.05		115,000		9	$	2.05		115,000		9	$	2.05
$	3.125		392,000		6	$	3.125		392,000		6	$	3.125
$	0.0041 - 975,000,000		40,633,001		6.8	$	0.05084		23,365,241		6.8	$	0.05084

Note 12 - Commitments and Contingencies

Asset Sale and Licensing Agreement

On August 24, 2015, the Company entered into an agreement with Cyber Safety, Inc., a New York corporation (“Cyber Safety”) for Cyber Safety to license, and retain an option to purchase, the patents and intellectual property related to the GuardedID® and MobileTrust® software. Cyber Safety had the option to buy the Company’s GuardedID® patent for $10,000,000 that expires on September 30, 2021. If the purchase price is not paid by September 30, 2021, it will increase to $11,000,000 and be due September 30, 2022. The Company believes, but cannot guarantee, Cyber Safety will exercise its option to purchase GuardedID® based on ongoing constructive discussions with Cyber Safety. There have been no new negotiations with them in regard to the exercise of the option, but there are continuing discussions with them regarding some of their large contracts. The option remains open until September 30, 2022 and Cyber Safety, to the Company’s knowledge, is still contemplating the exercise of the option. Cyber Safety also licensed the Malware Suite until September 30, 2020 and agreed to pay the Company 15% to 20% of the net amount Cyber Safety receives from this product. During the three months ended March 31, 2021 and 2020, the Company recorded revenue of $0 and $0, respectively, from Cyber Safety.

Note 13 - Subsequent Events

Subsequent to March 31, 2021, notes payable and accrued interest aggregating $67,200 were repaid.

Subsequent to March 31, 2021, the Company issued 500,000 shares of common stock with a fair value of $36,000, for the purchase of a complimentary business, Cybersecurity Risk Solutions, LLC. At the date of acquisition, Cybersecurity Risk Solutions, LLC had nominal assets and liabilities, no revenues and limited operating history. Furthermore, the Company also determined that the acquisition did not meet the requirement of a significant acquisition pursuant to the regulations of the Securities and Exchange Commission.

Subsequent to March 31, 2021, the Company issued 32,680 shares of common stock for services with a fair value of $2,000.

Subsequent to March 31, 2021, the Company issued 28,219,063 shares of common stock with a fair value of $3,330,000 in connection with the cancellation of warrants to purchase 83,333 shares of common stock that were granted in fiscal 2019 as part of a financing transaction.

Subsequent to March 31, 2021, the Company issued 12,349,726 shares of common stock upon a cashless exercise of 13,333,333 warrants.

On May 11, 2021, the Company’s filing of an Offering Circular on Form 1-A, pursuant to Regulation A (File Number: 024-11512) was qualified by the Securities and Exchange Commission. The Company registered 150,000,000 shares of common stock maximum proceeds of $7,065,000 (after deducting the maximum broker discount and costs of the offering). As a result, the Company issued 5,000,000 shares of its common stock to investors for cash proceeds of $250,000 pursuant to the May 2021 Offering Circular.

Table of Contents

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Included in this interim report are "forward-looking" statements, within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA") as well as historical information. Some of our statements under "Business”, "Properties”, "Legal Proceedings”, "Management's Discussion and Analysis of Financial Condition and Results of Operations”," the Notes to Condensed Consolidated Financial Statements” and elsewhere in this report constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot assure you that the expectations reflected in these forward-looking statements will prove to be correct. Our actual results could differ materially from those anticipated in forward-looking statements as a result of certain factors, including matters described in the section titled "Risk Factors." Forward-looking statements include those that use forward-looking terminology, such as the words "anticipate," "believe," "estimate," "expect," "intend," "may," "project," "plan," "will," "shall," "should," and similar expressions, including when used in the negative. Although we believe that the expectations reflected in these forward-looking statements are reasonable and achievable, these statements involve risks and uncertainties and we cannot assure you that actual results will be consistent with these forward-looking statements. We claim the protection afforded by the safe harbor for forward-looking statements provided by the PSLRA.

Such risks include, among others, the following: international, national and local general economic and market conditions: our ability to sustain, manage or forecast our growth; material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the implications and consequences of the COVID-19 pandemic on our business and on our clients’ business and on the effectiveness and distributions of recently announced vaccines and changes to mask mandate policies; the ability to attract and retain qualified personnel; the ability to protect technology; and other factors referenced in this filing.

Consequently, all the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results anticipated by management will be realized or, even if substantially realized, that they will have the expected consequences to or effects on our business operations. We undertake no obligation to update or revise these forward-looking statements, whether to reflect events or circumstances after the date initially filed or published, to reflect the occurrence of unanticipated events or otherwise.

Unless otherwise noted, references in this Form 10-Q to “StrikeForce”, “we”, “us”, “our”, “SFT”, “our company”, and the “Company” means StrikeForce Technologies, Inc., a Wyoming corporation.

Background

We are a software development and services company that offers a suite of integrated computer network security products using proprietary technology. Our ongoing strategy is developing and marketing our suite of network security products to the corporate, financial, healthcare, legal, government, technology, insurance, e-commerce and consumer sectors. We plan to continue to grow our business primarily through our expanding sales channel and internally generated sales, rather than by acquisitions. We hold a 49% interest in BlockSafe Technologies, Inc., and, as of April 2021, we hold a 100% interest in Cybersecurity Risk Solutions, LLC.

Table of Contents

In March 2020, the World Health Organization declared the spread of COVID-19 a pandemic. This outbreak continues to spread throughout the U.S. and around the world. As a result, authorities continue to implement numerous measures to try to contain the virus, including restrictions on travel, quarantines, shelter-in-place orders, business restrictions and complete shutdowns. We are not considered an “essential business” due to the industries and customers we serve. As of, and subsequent to, March 31, 2021, we have been following the recommendations of the CDC and state/local health authorities to minimize exposure risk for our team members for the past several months, including the temporary closure of our corporate office and having our team members work remotely. Most customers and vendors have transitioned to electronic submission of invoices and payments. The COVID-19 pandemic has resulted in longer response times from potential new customers and certain existing customers. We cannot anticipate the effect that the impairments caused by the COVID-19 pandemic will have on our fiscal 2021 results, or the effectiveness and distributions of vaccines and their distribution in 2021 and changes to mask mandate policies. The pandemic has significantly impacted the economic conditions both in the United States and worldwide, with accelerated effects through the date of this Quarterly Report, as federal, state and local governments react to the public health crisis, creating significant uncertainties in both the worldwide and the United States economies. The situation is rapidly changing and additional impacts to our business may arise that we are not aware of currently. We cannot predict whether, when or the manner in which, the conditions surrounding COVID-19 will change including the timing of lifting any restrictions or office closure requirements. We will continue to evaluate the nature and extent of COVID-19’s impact to our business, consolidated results of operations, financial condition and liquidity, and our results presented herein are not necessarily indicative of the results to be expected for future periods in 2021 or beyond.

Management believes that cyber security is a growing requirement as the pandemic continues and 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 impedes our ability to take full advantage of the increasing market demand. Many of our current clients have experienced a dramatic slowdown in their business, limiting their ability to have the resources to pay for our services. We still produce revenues and we anticipate, but cannot guarantee, our video conferencing tool, SafeVchat™, which provides authentication and security (using our existing products), will have gained acceptance in the market. Currently, we have companies doing beta testing which is continuing into 2021. During the three months ended March 31, 2021, we earned revenues of $500 from SafeVchat™ and PrivacyLoK™.

On November 13, 2020, our filing of an Offering Circular on Form 1-A, pursuant to Regulation A (File Number: 024-11267) was qualified by the Securities and Exchange Commission. We registered 668,449,198 shares of common stock for maximum proceeds of $2,315,000 (after deducting the maximum broker discount and costs of the offering). As of March 31, 2021, the offering was fully subscribed as we accepted the subscriptions for an aggregate of 474,453,653 shares of common stock for full satisfaction of the entire offering of $2,500,000 (of which we received $2,315,000). We announced the closing of the offering on our Current Report on Form 8-K as filed on February 8, 2021.

On May 11, 2021, our filing of an Offering Circular on Form 1-A, pursuant to Regulation A (File Number: 024-11512) was qualified by the Securities and Exchange Commission. We registered 150,000,000 shares of common stock for maximum proceeds of $7,065,000 (after deducting the maximum broker discount and costs of the offering). Subsequent to March 31, 2021, we issued 5,000,000 shares of common stock to investors for cash proceeds of $250,000 pursuant to the May 2021 Offering Circular.

We finished development of our SafeVchat™ Secure Video Conferencing and PrivacyLoK™ products at the end of 2020 and deployed SafeVchat™ beta testing by some by our clients and individuals through our resellers. SafeVchat™, in management’s estimation, is one of the most secure video conferencing products on the market. PrivacyLoK™ adds security to all video conferencing tools and runs in conjunction with other applications on the same computer. We anticipate, but cannot guarantee, increased revenues from SafeVchat™ and PrivacyLoK™ in 2021 and beyond.

Our executive office is located at 1090 King Georges Post Road, Suite 603, Edison, NJ 08837. Our telephone number is (732) 661-9641. We have 10 employees. Our Company’s website is www.strikeforcetech.com (we are not including the information contained in our website as part of, nor should the information be relied upon or incorporated by reference into, this report on Form 10-Q).

Results of Operations

FOR THE THREE MONTHS ENDED MARCH 31, 2021 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2020

Revenues for the three months ended March 31, 2021 were $46,000 compared to $60,000 for the three months ended March 31, 2020, a decrease of $14,000 or 23.3%. The decrease in revenues was primarily due to a reduction in the sales of our products with impairments related to the economic consequences of the COVID-19 pandemic. Revenues are derived from software, key fobs and services.

Cost of revenues for the three months ended March 31, 2021 was $3,000 compared to $3,000 for the three months ended March 31, 2020. Cost of revenues are fees and key fobs related to our revenues, and as a percentage of total revenues for the three months ended March 31, 2021 was 6.5% compared to 4.2% for the three months ended March 31, 2020.

Table of Contents

Research and development expenses for the three months ended March 31, 2021 were $145,000 compared to $124,000 for the three months ended March 31, 2020, an increase of $21,000 or 16.9%. The increase was primarily due to the increase in salaries and benefits of the personnel conducting research and development. The salaries, benefits and overhead costs of personnel conducting research and development of our software products primarily comprises our research and development expenses.

Compensation, professional fees, and selling, general and administrative (collectively, “SGA”) expenses for the three months ended March 31, 2021 were $5,628,000 compared to $507,000 for the three months ended March 31, 2020, an increase of $5,121,000 or 1,010%. 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 three months ended March 31, 2021, other expense was $4,216,000 as compared to other expense of $331,000 for the three months ended March 31, 2020, an increase in other expense of $3,885,000, or 1,174%. The increase was primarily due to increases in the loss on extinguishment of debt and financing costs, offset by decreases in private placement costs and debt discount amortization.

Our net loss for the three months ended March 31, 2021 was $9,946,000 compared to $905,000 for the three months ended March 31, 2020, an increase of $9,041,000, or 999%. The increase was primarily due to increases in the loss on extinguishment of debt, in employee stock-based compensation, in professional fees and financing costs, offset by decreases in private placement costs and in debt discount amortization.

Liquidity and Capital Resources

Our total current assets at March 31, 2021 were $856,000, which included cash of $816,000, as compared with $203,000 in total current assets at December 31, 2020, which included cash of $162,000. Additionally, we had a stockholders’ deficit in the amount of $13,231,000 at March 31, 2021 compared to a stockholders’ deficit of $14,342,000 at December 31, 2020. We have historically incurred recurring losses and have financed our operations through loans, principally from affiliated parties such as our directors, and from the proceeds of debt and equity financing. We financed our operations during the three months ended March 31, 2021 primarily from the sale of subscriptions for $1,449,000, for the issuance of 38,116,450 shares of our common stock in an offering under Regulation A (from November 2020), and we received the second draw SBA Paycheck Protection assistance loan for $177,000.

Going Concern

We have yet to establish any history of profitable operations. During the three months ended March 31, 2021, the Company incurred a net loss of $9,946,000 and used cash in operating activities of $585,000, and at March 31, 2021, the Company had a stockholders’ deficit of $13,231,000. In addition, we are in default on notes payable and convertible notes payable in the aggregate amount of $3,432,000. These factors raise substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued. In addition, the Company’s independent registered public accounting firm, in its report published on our December 31, 2020 year-end financial statements, and Note 1 in our unaudited financial statements, raised substantial doubt about the Company’s ability to continue as a going concern. The Company’s financial statements do not include any adjustments that might result from the outcome of this uncertainty should we be unable to continue as a going concern.

Management estimates that the current funds on hand will be sufficient to continue operations through the next six months. Our ability to continue as a going concern is dependent upon our ability to continue to implement our business plan. Currently, management is attempting to increase revenues by selling through a channel of distributors, value added resellers, strategic partners and original equipment manufacturers. While we believe in the viability of its strategy to increase revenues, there can be no assurances to that effect. Our ability to continue as a going concern is dependent upon our ability to increase our customer base and realize increased revenues. No assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing, if needed, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing.

Reverse Stock Split and Changes in Authorized Shares

In December 2020, a decrease of the authorized shares of our common stock from fourteen billion (14,000,000,000) to four billion (4,000,000,000), $0.0001 par value, was ratified, effective upon the filing of an amendment to our Certificate of Incorporation with the Wyoming Secretary of State. The amendment was adopted in December 2020.

Table of Contents

Cybersecurity Risk Solutions, LLC

On April 15, 2021, StrikeForce formally closed a Member Interest Purchase Agreement in which StrikeForce acquired the entire Member Interests of Cybersecurity Risk Solutions, LLC, a New Jersey limited liability company. Subsequent to March 31, 2021, we issued 500,000 shares of common stock with a fair value of $36,000, for the purchase of Cybersecurity Risk Solutions, LLC. At the date of acquisition, Cybersecurity Risk Solutions, LLC had nominal assets and liabilities, no revenues and limited operating history. Furthermore, the Company also determined that the acquisition did not meet the requirement of a significant acquisition pursuant to the regulations of the Securities and Exchange Commission.

Cybersecurity Risk Solutions, LLC is a cybersecurity firm offering cyber, privacy & data protection services including a personal cyber risk assessment, the industry’s first cyber health score, report and custom action plan, as well as ongoing vulnerability scanning, hack monitoring and dark web intelligence monitoring. For more information, go to https://SecureCyberID.com (which website is expressly not included in this filing). Will Lynch, the prior sole member of Cybersecurity Risk Solutions, LLC was hired by StrikeForce as the Director of Channel Distribution and not as a Named Executive Officer. A Director of Channel Distribution develops, services, and grows relationships with clients. Mr. Lynch will have an annual salary of $100,000 and will also receive 2% net of all Channel sales. Mr. Lynch reports to our Executive Vice President and Marketing Director.

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

Revenue Recognition

The Company’s revenue consists of revenue from sales and support of our software products. Revenue primarily consists of sales of software licenses and subscriptions of our ProtectID®, GuardedID®, MobileTrust®, PrivacyLoK™ and SafeVchat™ products. We recognize revenue from these arrangements ratably over the contractual service period. For service contracts, the Company’s performance obligations are satisfied, and the related revenue is recognized, as services are rendered.

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.

Table of Contents

Derivative Financial Instruments

Recently Issued Accounting Pronouncements

Refer to Note 1 in the accompanying consolidated financial statements.

Additional Information

You are advised to read this Form 10-Q in conjunction with other reports and documents that we file from time to time with the SEC. In particular, please read our Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K, and Current Reports on Form 8-K that we file from time to time. You may obtain copies of these reports directly from us or from the SEC at the SEC’s Public Reference Room at 100 F. Street, N.E. Washington, D.C. 20549, and you may obtain information about obtaining access to the Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains information for electronic filers at its website http://www.sec.gov.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a smaller reporting company, we are not required to provide the information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures.

Regulations under the Securities Exchange Act of 1934 (the “Exchange Act”) require public companies to maintain “disclosure controls and procedures,” which are defined as controls and other procedures that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Table of Contents

We carried out an evaluation, with the participation of our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (CFO) of the effectiveness our disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of March 31, 2021. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are not effective at the reasonable assurance level due to the following material weaknesses:

1. We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us as of and for the interim period ended March 31, 2021. 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.

To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented.

Remediation of Material Weaknesses

We intend to remediate the material weaknesses in our disclosure controls and procedures identified above by adding an independent director or member with financial expertise or hiring a full-time CFO with SEC reporting experience in the future when working capital permits and by working with our independent registered public accounting firm to refine our internal procedures.

(b) Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Table of Contents

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

The risk factors required pursuant to Regulation S-K, Item 503(c) are not required for smaller reporting companies. Accordingly, the Company has determined to provide particular risk factors at this time. The risks and uncertainties described below are not the only ones facing us. Other events that we do not currently anticipate or that we currently deem immaterial also may affect our results of operations and financial condition. If any events described in the risk factors actually occur, our business, operating results, prospects and financial condition could be materially harmed. In connection with the forward looking statements that appear in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the Securities and Exchange Commission on April 13, 2021, you should also carefully review the cautionary statement referred to under “Special Note Regarding Forward Looking Statements.” The forward-looking statements made in this report relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

COVID-19.

We cannot, at this point, determine the extent to which COVID-19 outbreak will impact business or the economy as both are highly uncertain and cannot be predicted.

THE OUTBREAK OF THE CORONAVIRUS MAY NEGATIVELY IMPACT SOURCING AND MANUFACTURING OF THE PRODUCTS THAT WE SELL AS WELL AS CONSUMER SPENDING, WHICH COULD ADVERSELY AFFECT OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which has and is continuing to spread throughout China and other parts of the world, including the United States. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020 the World Health Organization characterized the outbreak as a “pandemic”. The significant outbreak of COVID-19 has resulted in a widespread health crisis that could adversely affect the economies and financial markets worldwide, and could adversely affect our business, results of operations and financial condition.

In addition, we applied for funding pursuant to the Small Business Administration program. The Paycheck Protection Program provides forgivable funding for payroll and related costs as well as some non-payroll costs. We applied for funding and we received (on April 17, 2020) first draw funding in the amount of $313,000 and we received (on March 16, 2021) second draw funding in the amount of $177,000. The Economic Injury Disaster Loan provides low-interest, long-term financing. We applied for funding and received (on May 18, 2020) funding in the amount of $150,000. No assurances can be provided as to the adequacy of the funds received for ongoing operations in 2021 or if additional funding will be subsequently available.

Table of Contents

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.

An economic recession had set in from the pandemic in 2020 and into 2021. Some companies are not receiving payments and in turn, as a consequence of limited cash flow, are not prepared to purchase our products. COVID-19 has led to some of our customers and potential customers being stricken with the virus causing them to not be able to work for many weeks and therefore causing delays for us in our marketing decisions. This outbreak could decrease spending, adversely affect demand for our products, and harm our business and results of operations. It is not possible for us to predict the duration or magnitude of the adverse results of the outbreak or the timing and the degree to which economic recovery will be realized post-pandemic and, consequently, its effects on our business or results of operations, financial condition, or liquidity, at this time. We cannot anticipate the effect that the impairments caused by the COVID-19 pandemic or the degree to which the economy rebounds post-pandemic will have on our fiscal 2021 results, or the effectiveness and distributions of recently announced vaccines and changes to mask mandate policies. We will continue to evaluate the nature and extent of COVID-19’s impact to our business, consolidated results of operations, financial condition and liquidity, and our results presented herein are not necessarily indicative of the results to be expected for future years.

THE OUTBREAK OF COVID-19 HAS RESULTED IN A WIDESPREAD HEALTH CRISIS THAT COULD ADVERSELY AFFECT THE ECONOMIES AND FINANCIAL MARKETS WORLDWIDE AND COULD EXPONENTIALLY INCREASE THE RISK FACTORS DESCRIBED IN OUR PRIOR FILINGS.

SHOULD ONE OR MORE OF THE FOREGOING RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD THE UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED, EXPECTED, INTENDED OR PLANNED.

ITEM 2. RECENT ISSUANCES OF UNREGISTERED SECURITIES

In January 2021, we sold subscriptions for $1,525,000 and issued 38,116,450 shares of our common stock relating to the November 2020 Offering Circular.

In January 2021, a convertible note holder converted $20,000 of principal and $3,000 of accrued interest/fees into 14,743,589 shares of common stock at a conversion price of $0.00156 per share.

In January 2021, we issued a total of 33,334 shares of restricted common stock, valued at $1,983, to a consultant for services provided relating to a consultant agreement.

In February 2021, we issued 460,829 shares of common stock upon conversion of debt settlement.

In February 2021, we issued a total of 66,000 shares of restricted common stock, valued at $10,263, to a consultant for services provided relating to a consultant agreement.

In February 2021, we issued 17,208,335 shares of common stock upon the cashless exercise of options.

In March 2021, a convertible note holder converted $25,000 of principal and $3,500 of accrued interest/fees into 1,425,000 shares of common stock at a conversion price of $0.02 per share.

Table of Contents

In March 2021, we issued a total of 7,500 shares of restricted common stock, valued at $844, relating to a December 2009 retainer agreement with our SEC attorney.

In March 2021, we issued a total of 21,693 shares of restricted common stock, valued at $3,324, to a consultant for services provided relating to a consultant agreement.

In March 2021, we issued 16,931,437 shares of common stock with a fair value of $3,239,000 for financing services rendered and cancellation of warrants to purchase 50,000 shares of common stock that was granted in fiscal 2020. The common shares issued were valued at the date of issuance.

Subsequent issuances:

Subsequent to March 31, 2021, we issued 500,000 shares of common stock with a fair value of $36,000, for the purchase of a complimentary business, Cybersecurity Risk Solutions, LLC.

Subsequent to March 31, 2021, we issued 32,680 shares of common stock for services with a fair value of $2,000.

Subsequent to March 31, 2021, we issued 28,219,063 shares of common stock with a fair value of $3,330,000 in connection with the cancellation of warrants to purchase 83,333 shares of common stock that were granted in fiscal 2019 as part of a financing transaction.

Subsequent to March 31, 2021, we issued 12,349,726 shares of common stock upon a cashless exercise of 13,333,333 warrants.

Subsequent to March 31, 2021, we issued 5,000,000 shares of common stock to investors for cash proceeds of $250,000 pursuant to the May 2021 Offering Circular.

The above offering was made in reliance upon the exemption from registration under Rule 506 of Regulation D promulgated under the Securities Act of 1933 and/or Section 4(2) of the Securities Act of 1933, based on the following: (a) the investors confirmed to us that they were “accredited investors,” as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933 and had such background, education and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the securities; (b) there was no public offering or general solicitation with respect to the offering; (c) the investors were provided with certain disclosure materials and all other information requested with respect to our company; (d) where applicable, the investors acknowledged that all securities being purchased were “restricted securities” for purposes of the Securities Act of 1933, and agreed to transfer such securities only in a transaction registered under the Securities Act of 1933 or exempt from registration under the Securities Act; and (e) where applicable, a legend was placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequent registered under the Securities Act of 1933 or transferred in a transaction exempt from registration under the Securities Act of 1933.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

At March 31, 2021, the Company is in default on notes payable and convertible notes payable in the aggregate amount of $3,432,000. We have not made various principal and interest payments on many of our debt obligations. We continue to seek work-out arrangements and applicable refinancing with new or revised debt or equity instruments. See Notes 2 and 4 to the condensed consolidated financial statements.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

Table of Contents

ITEM 6. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

Exhibit Number		Description
1.1		Placement Agreement dated July 7, 2020, by and between StrikeForce Technologies, Inc. and Spencer Clarke LLC (23)
1.2		Addendum to Placement Agreement dated November 11, 2020, by and between StrikeForce Technologies, Inc. and Spencer Clarke LLC (25)
1.3		Addendum to Placement Agreement dated April 20, 2021, by and between StrikeForce Technologies, Inc. and Spencer Clarke LLC (28)
3.1		Amended and Restated Certificate of Incorporation of StrikeForce Technologies, Inc. (1)
3.2		By-laws of StrikeForce Technologies, Inc. (1)
3.3		Amended By-laws of StrikeForce Technologies, Inc. (2)
3.4		Amended By-laws of StrikeForce Technologies, Inc. (3)
3.5		Articles of Amendment of StrikeForce Technologies, Inc. (2)
3.6		Amendments to Articles of Incorporation (6)
3.7		Amendments to Articles of Incorporation (7)
3.8		Registration of Classes of Securities (8)
3.9		Amendments to Articles of Incorporation (9)
3.10		Registration of Classes of Securities (10)
3.11		Amendments to Articles of Incorporation (11)
3.12		Registration of Classes of Securities (12)
3.13		Amendments to Articles of Incorporation (13)
3.14		Amendments to Articles of Incorporation (14)
3.15		Amendments to Articles of Incorporation (15)
3.16		Amendments to Articles of Incorporation (16)
3.17		Amendments to Articles of Incorporation (17)
3.18		Amendments to Articles of Incorporation (18)
3.19		Amendments to Articles of Incorporation (22)
3.20		Amendments to Articles of Incorporation (26)
4.1		Form of Subscription Agreement (25)
4.2		Form of Convertible Promissory Note-Related Party (24)
4.3		Form of Promissory Note-Related Party (24)
10.1		Employment Agreement dated as of May 20, 2003, by and between StrikeForce Technologies, Inc. and Mark L. Kay (1)
10.2		Irrevocable Waiver of Conversion Rights of Mark L. Kay (4)
10.3		Irrevocable Waiver of Conversion Rights of Ramarao Pemmaraju (4)
10.4		Irrevocable Waiver of Conversion Rights of George Waller (4)
10.5		CFO Consultant Agreement with Philip E. Blocker (4)
10.6		2012 Stock Option Plan (5)
10.7		Asset Purchase Agreement between StrikeForce Technologies, Inc. and Cyber Safety, Inc., dated August 24, 2015 (18)
10.8		Amendment to the Asset Purchase Agreement and Distributor and Reseller Agreement between StrikeForce Technologies, Inc. and Cyber Safety, Inc. (19)
10.9		Execution of Litigation Funding Agreement (20)
10.10		BlockSafe Technologies, Inc. Intellectual Property License Agreement (21)
10.11		BlockSafe Technologies, Inc. Management Agreement (21)
10.12		BlockSafe Technologies, Inc. Amended Management Agreement (21)
10.13		Software License and Development Agreement, amendment two, by and between StrikeForce Technologies, Inc. and Intersections, Inc., dated October 1, 2010 (24)
10.14		Form of Settlement and Exchange Agreement (26)
10.15		Cybersecurity Risk Solutions LLC Member Interest Purchase Agreement, dated April 15, 2021 (27)
31.1		Certification by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act, promulgated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (29)
31.2		Certification by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act, promulgated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (29)
32.1		Certification by Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code, promulgated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (29)
32.2		Certification by Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code, promulgated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (29)

Table of Contents

_________

(1) Filed as an exhibit to the Registrant’s Form SB-2 dated as of May 11, 2005 and incorporated herein by reference.

(2) Filed as an exhibit to the Registrant’s Form 8-K dated February 4, 2011 and incorporated herein by reference.

(3) Filed as an exhibit to the Registrant's Form 10-Q dated December 13, 2010 and incorporated herein by reference.

(4) Filed as an exhibit to the Registrant’s Form S-1/A dated July 31, 2012 and incorporated herein by reference.

(5) Filed in conjunction with the Registrant’s Form 14A filed October 5, 2012 and incorporated herein by reference.

(6) Filed as an exhibit to the Registrant’s Form 8-K dated February 5, 2013 and incorporated herein by reference.

(7) Filed as an exhibit to the Registrant’s Form 8-K dated May 14, 2013 and incorporated herein by reference.

(8) Filed as an exhibit to the Registrant’s Form 8-A dated July 29, 2013 and incorporated herein by reference.

(9) Filed as an exhibit to the Registrant’s Form 8-K dated August 22, 2013 and incorporated herein by reference.

(10) Filed as an exhibit to the Registrant’s Form 8-A dated October 3, 2013 and incorporated herein by reference.

(11) Filed as an exhibit to the Registrant’s Form 8-K dated October 3, 2013 and incorporated herein by reference.

(12) Filed as an exhibit to the Registrant’s Form 8-A dated December 31, 2013 and incorporated herein by reference.

(13) Filed as an exhibit to the Registrant’s Form 8-K dated December 31, 2013 and incorporated herein by reference.

(14) Filed as an exhibit to the Registrant’s Form 8-K dated March 18, 2014 and incorporated herein by reference.

(15) Filed as an exhibit to the Registrant’s Form 8-K dated December 22, 2014 and incorporated herein by reference.

(16) Filed as an exhibit to the Registrant’s Form 8-K dated February 13, 2015 and incorporated herein by reference.

(17) Filed as an exhibit to the Registrant’s Form 8-K dated August 4, 2015 and incorporated herein by reference.

(18) Filed as an exhibit to the Registrant’s Form 8-K dated July 16, 2019 and incorporated herein by reference.

(19) Filed as an exhibit to the Registrant’s Form 8-K dated February 2, 2016 and incorporated herein by reference.

(20) Filed as an exhibit to the Registrant’s Form 8-K dated September 11, 2017 and incorporated herein by reference.

(21) Filed as an exhibit to the Registrant’s Form 10-Q dated June 30, 2018 and incorporated herein by reference.

(22) Filed as an exhibit to the Registrant’s Form 8-K dated June 25, 2020 and incorporated herein by reference.

(23) Filed as an exhibit to the Registrant’s Form 1-A dated July 13, 2020 and incorporated herein by reference.

(24) Filed as an exhibit to the Registrant’s Form 1-A.1 dated September 11, 2020 and incorporated herein by reference.

(25) Filed as an exhibit to the Registrant’s Form 1-A.1 dated November 12, 2020 and incorporated herein by reference.

(26) Filed as an exhibit to the Registrant’s Form 8-K dated February 8, 2021 and incorporated herein by reference.

(27) Filed as an exhibit to the Registrant’s Form 8-K dated April 19, 2021 and incorporated herein by reference.

(28) Filed as an exhibit to the Registrant’s Form 1A/A- dated April 26, 2021 and incorporated herein by reference.

(29) Filed herewith.

Table of Contents

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	STRIKEFORCE TECHNOLOGIES, INC.

Dated: May 24, 2021	By:	/s/ Mark L. Kay
		Mark L. Kay
		Chief Executive Officer


Dated: May 24, 2021	By:	/s/ Philip E. Blocker
		Philip E. Blocker
		Chief Financial Officer and
		Principal Accounting Officer

EXHIBIT 31.1

CERTIFICATION

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO RULES 13A-14 AND 15D-14

OF THE SECURITIES EXCHANGE ACT OF 1934

I, Mark L. Kay, certify that:

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

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Dated: May 24, 2021	By:	/s/ Mark L. Kay
		Mark L. Kay,
		Chief Executive Officer

EXHIBIT 31.2

CERTIFICATION

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO RULES 13A-14 AND 15D-14

OF THE SECURITIES EXCHANGE ACT OF 1934

I, Philip E. Blocker, certify that:

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

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d.	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.	The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.


Dated: May 24, 2021	By:	/s/ Philip E. Blocker
		Philip E. Blocker,
		Chief Financial Officer

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT

TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of StrikeForce Technologies, Inc. (the "Company") on Form 10-Q for the quarter ended March 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Mark L. Kay, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2001, that:

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Dated: May 24, 2021	By:	/s/ Mark L. Kay
		Mark L. Kay,
		Chief Executive Officer

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT

TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of StrikeForce Technologies, Inc. (the "Company") on Form 10-Q for the quarter ended March 31, 2021, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Philip E. Blocker, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2001, that:

The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Dated: May 24, 2021	By:	/s/ Philip E. Blocker
		Philip E. Blocker
		Chief Financial Officer