Cover
Cover - shares | 9 Months Ended | |
Sep. 30, 2022 | Nov. 14, 2022 | |
Cover [Abstract] | ||
Entity Registrant Name | ZERIFY, INC. | |
Entity Central Index Key | 0001285543 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Small Business | true | |
Entity Shell Company | false | |
Entity Emerging Growth Company | false | |
Entity Current Reporting Status | Yes | |
Document Period End Date | Sep. 30, 2022 | |
Entity Filer Category | Non-accelerated Filer | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2022 | |
Entity Common Stock Shares Outstanding | 1,064,942,572 | |
Document Quarterly Report | true | |
Document Transition Report | false | |
Entity Incorporation State Country Code | WY | |
Entity File Number | 000-55012 | |
Entity Tax Identification Number | 22-3827597 | |
Entity Address Address Line 1 | 1090 King Georges Post Road | |
Entity Address Address Line 2 | Suite 603 | |
Entity Address City Or Town | Edison | |
Entity Address State Or Province | NJ | |
Entity Address Postal Zip Code | 08837 | |
City Area Code | 732 | |
Local Phone Number | 661-9641 | |
Trading Symbol | ZRFY | |
Security 12b Title | Common Stock, $0.0001 par value | |
Entity Interactive Data Current | Yes |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Current Assets: | ||
Cash (includes VIE balances of $1,000 and $1,000, respectively) | $ 263,000 | $ 2,084,000 |
Accounts receivable, net | 14,000 | 24,000 |
Prepaid expenses | 4,000 | 13,000 |
Total current assets | 281,000 | 2,121,000 |
Property and equipment, net | 37,000 | 0 |
Operating lease right-of-use asset | 67,000 | 107,000 |
Other assets | 11,000 | 12,000 |
Total Assets | 396,000 | 2,240,000 |
Current Liabilities: | ||
Accounts payable and accrued expenses (includes VIE balances of $2,000 and $2,000, respectively) | 1,087,000 | 996,000 |
Convertible notes payable (including $895,000 and $895,000 in default) | 1,308,000 | 1,398,000 |
Convertible notes payable - related parties | 268,000 | 268,000 |
Notes payable (including $1,930,000 and $1,972,000 in default, respectively) (includes VIE balances of $285,000 and $310,000, respectively) | 2,105,000 | 1,972,000 |
Notes payable - related parties | 693,000 | 693,000 |
Accrued interest (including $1,557,000 and $1,497,000 due to related parties, respectively) (includes VIE balances of $125,000 and $120,000, respectively) | 5,787,000 | 5,477,000 |
Contingent payment obligation | 1,500,000 | 1,500,000 |
VIE Financing obligation | 1,263,000 | 1,263,000 |
Operating lease liability, current portion | 56,000 | 39,000 |
Total current liabilities | 14,067,000 | 13,606,000 |
Notes payable, long-term portion | 226,000 | 150,000 |
Operating lease liability, long-term portion | 15,000 | 73,000 |
Total Liabilities | 14,308,000 | 13,829,000 |
Stockholders' Deficit | ||
Preferred stock, Value | 0 | 0 |
Common stock par value $0.0001: 4,000,000,000 shares authorized; 1,059,942,572 and 955,380,225 shares issued and outstanding, respectively | 106,000 | 96,000 |
Additional paid-in capital | 64,435,000 | 59,788,000 |
Accumulated deficit | (78,559,000) | (71,595,000) |
Total Zerify, Inc. stockholders' deficit | (13,027,000) | (10,720,000) |
Noncontrolling interest in consolidated subsidiary | (885,000) | (869,000) |
Total Stockholders' Deficit | (13,912,000) | (11,589,000) |
Total Liabilities and Stockholders' Deficit | 396,000 | 2,240,000 |
Series A Preferred Stock [Member] | ||
Stockholders' Deficit | ||
Preferred stock, Value | 987,000 | 987,000 |
Series B Preferred Stock [Member] | ||
Stockholders' Deficit | ||
Preferred stock, Value | $ 4,000 | $ 4,000 |
CONDENSED CONSOLIDATED BALANC_2
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Cash VIE | $ 1,000 | $ 1,000 |
Current Liabilities | ||
Accounts payables (includes VIE balances) | 2,000 | 2,000 |
Convertible notes payable, default | 895,000 | 895,000 |
Notes payable, default | 1,930,000 | 1,972,000 |
Notes payable VIE | 285,000 | 310,000 |
Accrued interest due to related parties | 1,557,000 | 1,497,000 |
Accrued Interest VIE | $ 125,000 | $ 120,000 |
Stockholders' Deficit | ||
Preferred Stock, share par value | $ 0.10 | $ 0.10 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, shares par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 4,000,000,000 | 4,000,000,000 |
Common stock, shares issued | 1,059,942,572 | 955,380,225 |
Common stock, shares outstanding | 1,059,942,572 | 955,380,225 |
Preferred Stock Series B [Member] | ||
Stockholders' Deficit | ||
Preferred Stock, share par value | $ 0.10 | $ 0.10 |
Preferred stock, shares authorized | 100,000,000 | 100,000,000 |
Preferred stock, shares issued | 36,667 | 36,667 |
Preferred stock, shares outstanding | 36,667 | 36,667 |
Preferred Stock Series A [Member] | ||
Stockholders' Deficit | ||
Preferred Stock, share par value | $ 0 | $ 0 |
Preferred stock, shares authorized | 100 | 100 |
Preferred stock, shares issued | 3 | 3 |
Preferred stock, shares outstanding | 3 | 3 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) | ||||
Revenue | $ 22,000 | $ 40,000 | $ 78,000 | $ 153,000 |
Operating expenses: | ||||
Cost of revenue | 11,000 | 7,000 | 33,000 | 18,000 |
Selling, general and administrative expenses | 1,137,000 | 672,000 | 6,224,000 | 8,120,000 |
Research and development | 135,000 | 112,000 | 447,000 | 386,000 |
Total operating expenses | 1,283,000 | 791,000 | 6,704,000 | 8,524,000 |
Loss from operations | (1,261,000) | (751,000) | (6,626,000) | (8,371,000) |
Other expense: | ||||
Interest and financing expenses (including $92,000 and $91,000 to related parties, respectively) | (12,000) | (102,000) | (352,000) | (6,913,000) |
Debt discount amortization | 0 | 0 | 0 | (52,000) |
Change in fair value of derivative liabilities | 0 | 0 | 0 | (219,000) |
Loss on extinguishment of debt, net | 0 | 0 | 0 | (286,000) |
Other expense | (1,000) | (2,000) | (1,000) | |
Total other expense, net | 11,000 | (102,000) | (354,000) | (7,471,000) |
Net loss | (1,250,000) | (853,000) | (6,980,000) | (15,842,000) |
Net loss attributable to noncontrolling interest | 3,000 | 20,000 | 16,000 | 37,000 |
Net loss attributable to Zerify, Inc. | $ (1,247,000) | $ (833,000) | $ (6,964,000) | $ (15,805,000) |
Net loss per common share | ||||
-Basic and diluted | $ 0 | $ 0 | $ (0.01) | $ (0.02) |
Weighted average common shares outstanding -Basic and diluted | 1,039,538,614 | 894,767,114 | 993,424,764 | 840,258,105 |
CONDENSED CONSOLIDATED STATEM_2
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT (Unaudited) - USD ($) | Total | Series A Preferred Stock,no par value [Member] | Series B Preferred Stock par value $0.10 [Member] | Common Stock,par value $0.0001 [Member] | Additional Paid-In Capital | Accumulated Deficit | Noncontrolling Interest |
Balance, shares at Dec. 31, 2020 | 3 | 36,667 | 718,263,338 | ||||
Balance, amount at Dec. 31, 2020 | $ (14,342,000) | $ 987,000 | $ 4,000 | $ 72,000 | $ 39,814,000 | $ (54,396,000) | $ (823,000) |
Common stock issued for cash, shares | 119,666,450 | ||||||
Common stock issued for cash, amount | 5,368,000 | $ 12,000 | 5,356,000 | ||||
Fair value of common stock issued for services, shares | 881,550 | ||||||
Fair value of common stock issued for services, amount | 66,000 | 66,000 | |||||
Fair value of vested options | 6,387,000 | 6,387,000 | |||||
Fair value of common stock issued as a financing cost, shares | 45,150,500 | ||||||
Fair value of common stock issued as a financing cost, amount | 6,569,000 | $ 5,000 | $ 6,564,000 | ||||
Common stock issued upon cashless exercise of warrants, shares | 12,349,726 | (1,000) | |||||
Common stock issued upon cashless exercise of warrants, amount | $ 1,000 | ||||||
Common stock issued upon cashless exercise of options, shares | 39,955,655 | ||||||
Common stock issued upon cashless exercise of options, amount | 3,000 | $ 3,000 | |||||
Common stock issued upon conversion of notes and accrued interest, shares | 16,168,589 | ||||||
Common stock issued upon conversion of notes and accrued interest, amount | 1,035,000 | $ 2,000 | $ 1,033,000 | ||||
Common stock issued upon conversion of debt settlement, shares | 460,829 | ||||||
Common stock issued upon conversion of debt settlement, amount | 88,000 | 88,000 | |||||
Net loss | (15,842,000) | (15,805,000) | (37,000) | ||||
Balance, shares at Sep. 30, 2021 | 3 | 36,667 | 952,896,637 | ||||
Balance, amount at Sep. 30, 2021 | (10,668,000) | $ 987,000 | $ 4,000 | $ 95,000 | 59,307,000 | (70,201,000) | (860,000) |
Balance, shares at Jun. 30, 2021 | 3 | 36,667 | 876,169,478 | ||||
Balance, amount at Jun. 30, 2021 | (12,428,000) | $ 987,000 | $ 4,000 | $ 88,000 | 56,701,000 | (69,368,000) | (840,000) |
Common stock issued for cash, shares | 53,800,000 | ||||||
Common stock issued for cash, amount | 2,601,000 | 0 | 0 | $ 5,000 | 2,596,000 | 0 | 0 |
Common stock issued upon cashless exercise of options, shares | 22,747,320 | ||||||
Common stock issued upon cashless exercise of options, amount | 3,000 | 0 | 0 | $ 2,000 | 1,000 | 0 | 0 |
Net loss | (853,000) | 0 | 0 | $ 0 | 0 | (833,000) | (20,000) |
Fair value of common stock issued for services, shares | 179,839 | ||||||
Fair value of common stock issued for services, amount | 9,000 | $ 0 | $ 0 | $ 0 | 9,000 | 0 | 0 |
Balance, shares at Sep. 30, 2021 | 3 | 36,667 | 952,896,637 | ||||
Balance, amount at Sep. 30, 2021 | (10,668,000) | $ 987,000 | $ 4,000 | $ 95,000 | 59,307,000 | (70,201,000) | (860,000) |
Balance, shares at Dec. 31, 2021 | 3 | 36,667 | 955,380,225 | ||||
Balance, amount at Dec. 31, 2021 | (11,589,000) | $ 987,000 | $ 4,000 | $ 96,000 | 59,788,000 | (71,595,000) | (869,000) |
Common stock issued for cash, shares | 100,000,000 | ||||||
Common stock issued for cash, amount | 1,440,000 | 0 | 0 | $ 10,000 | 1,430,000 | 0 | 0 |
Fair value of vested options | 2,959,000 | 2,959,000 | |||||
Net loss | $ (6,980,000) | (6,964,000) | (16,000) | ||||
Fair value of common stock issued for services, shares | 20,730,936 | ||||||
Fair value of common stock issued for services, amount | $ 360,000 | ||||||
Fair value of warrants granted for services | 63,000 | 0 | 0 | $ 0 | 63,000 | 0 | 0 |
Fair value of common stock issued for services, shares | 20,730,936 | ||||||
Fair value of common stock issued for services, amount | 360,000 | $ 0 | $ 0 | $ 2,000 | 358,000 | ||
Repurchase of common stock and warrants, shares | 16,168,589 | ||||||
Repurchase of common stock and warrants, amount | (165,000) | $ (2,000) | (163,000) | ||||
Balance, shares at Sep. 30, 2022 | 3 | 36,667 | 1,059,942,572 | ||||
Balance, amount at Sep. 30, 2022 | (13,912,000) | $ 987,000 | $ 4,000 | $ 106,000 | 64,435,000 | (78,559,000) | (885,000) |
Balance, shares at Jun. 30, 2022 | 3 | 36,667 | 1,013,111,161 | ||||
Balance, amount at Jun. 30, 2022 | (13,252,000) | $ 987,000 | $ 4,000 | $ 101,000 | 63,850,000 | (77,312,000) | (882,000) |
Fair value of common stock issued for services, shares | 13,000,000 | ||||||
Net loss | (1,250,000) | 0 | 0 | $ 0 | 0 | (1,247,000) | (3,000) |
Fair value of common stock issued for services, shares | 16,168,589 | ||||||
Fair value of warrants granted for services | 63,000 | 0 | 0 | 63,000 | 0 | 0 | |
Common stock issued upon exercise of warrants for cash, shares | 50,000,000 | ||||||
Common stock issued upon exercise of warrants for cash, amount | 500,000 | $ 5,000 | 495,000 | ||||
Fair value of common stock issued for services, amount | 192,000 | $ 0 | $ 0 | 2,000 | 190,000 | 0 | 0 |
Repurchase of common stock and warrants, amount | (165,000) | $ (2,000) | (163,000) | ||||
Balance, shares at Sep. 30, 2022 | 3 | 36,667 | 1,059,942,572 | ||||
Balance, amount at Sep. 30, 2022 | $ (13,912,000) | $ 987,000 | $ 4,000 | $ 106,000 | $ 64,435,000 | $ (78,559,000) | $ (885,000) |
CONDENSED CONSOLIDATED STATEM_3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Cash flows from operating activities: | ||
Net loss | $ (6,980,000) | $ (15,842,000) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Depreciation and amortization | 2,000 | 4,000 |
Amortization of discount | 0 | 52,000 |
Amortization of right-of-use asset | 40,000 | 38,000 |
Fair value of common stock issued for services | 360,000 | 69,000 |
Fair value of vested options and warrants | 3,022,000 | 6,387,000 |
Fair value of common stock issued for financing services | 0 | 6,569,000 |
Change in fair value of derivative liabilities | 0 | 219,000 |
Loss on extinguishment of debt, net | 0 | 286,000 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 10,000 | 8,000 |
Prepaid expenses and other asset | 10,000 | 10,000 |
Accounts payable and accrued expenses | 92,000 | 19,000 |
Accrued interest | 310,000 | 205,000 |
Operating lease liability | (41,000) | (38,000) |
Net cash used in operating activities | (3,175,000) | (2,014,000) |
Cash flows from investing activities: | ||
Purchases of property and equipment | (39,000) | 0 |
Net cash used in investing activities | (39,000) | 0 |
Cash flows from financing activities: | ||
Proceeds from issuance of common stock | 1,440,000 | 5,368,000 |
Proceeds from notes payable | 275,000 | 177,000 |
Repayment of notes payable | (67,000) | (224,000) |
Repayment of convertible note payable | (90,000) | 0 |
Repayment of convertible notes payable-related parties | 0 | (30,000) |
Repurchase of common stock and warrants | (165,000) | 0 |
Repayment of notes payable-related parties | 0 | (259,000) |
Net cash provided by financing activities | 1,393,000 | 5,032,000 |
Net increase (decrease) in cash | (1,821,000) | 3,018,000 |
Cash at beginning of the period | 2,084,000 | 162,000 |
Cash at end of the period | 263,000 | 3,180,000 |
Supplemental disclosure of cash flow information: | ||
Interest paid | 42,000 | 113,000 |
Income tax paid | 0 | 0 |
Supplemental disclosure of non-cash investing and financing transactions | ||
Common stock issued for conversion of notes and accrued interest | 0 | 1,035,000 |
Common stock issued upon conversion of debt settlement | $ 0 | $ 88,000 |
Organization and Summary of Sig
Organization and Summary of Significant Accounting Policies | 9 Months Ended |
Sep. 30, 2022 | |
Organization and Summary of Significant Accounting Policies | |
Organization and Summary of Significant Accounting Policies | Note 1 - Organization and Summary of Significant Accounting Policies Zerify, Inc. (formerly known as 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. On April 26, 2022, the Company applied for the Zerify trademark. ZERIFY™ which is intended to cover the categories of downloadable or recorded computer software for encryption; downloadable or recorded computer software for cyber security assessment and protection; anti-spyware software; downloadable or recorded computer application software for mobile devices, namely, software for protecting people from identity theft; downloadable or recorded computer software for guarding users of computers and remote access devices from identity theft, featuring various software tools, namely, anti-keyboard logger and keyboard stroke encryption. On June 14, 2022, the Board of Directors and holders of a majority of the voting power approved a resolution to change the Company’s name from StrikeForce Technologies, Inc. to Zerify, Inc. The Board of Directors believes that the name change will better reflect the business plans of the Company reflected in the current cyber security software products and in the name Zerify which emphasizes the Company’s mission to ensure Zero-Trust for the most secure collaborative communications and that every participant is verified prior to entering a video conference. On August 1, 2022, pursuant to the approval from FINRA, our Common Stock is now quoted on the OTCQB Market under the symbol “ZRFY” (formerly “SFOR”). Basis of presentation and principles of consolidation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods have been included. The results of operations for the nine months ended September 30, 2022 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2022. These financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2021 and notes thereto contained in the Annual Report on Form 10-K of the Company as filed with the SEC on April 14, 2022 (and amended for non-financial matters on July 18, 2022). The condensed consolidated financial statements include the accounts of the Company and its subsidiary, BlockSafe Technologies, Inc. (“BST”). BST is owned 49% by the Company and 31% by three executive officers of the Company. BST meets the definition of a variable interest entity (“VIE”) and based on the determination that the Company is the primary beneficiary of BST. BST’s operating results, assets and liabilities are consolidated by the Company. Intercompany balances and transactions have been eliminated in consolidation. At September 30, 2022, 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 eliminated in consolidation. At September 30, 2022 and December 31, 2021, the amount of VIE cash on the accompanying condensed consolidated balance sheets 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 creditors of the Company. Going Concern We have yet to establish any history of profitable operations. During the nine months ended September 30, 2022, the Company incurred a net loss of $6,980,000 and used cash in operating activities of $3,175,000 and at September 30, 2022, the Company had a stockholders’ deficit of $13,912,000. In addition, we are in default on notes payable and convertible notes payable in the aggregate amount of $2,829,000. These factors raise substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued. In addition, the Company’s independent registered public accounting firm, in its report published on our December 31, 2021 year-end financial statements, raised substantial doubt about the Company’s ability to continue as a going concern. The Company’s financial statements do not include any adjustments that might result from the outcome of this uncertainty should we be unable to continue as a going concern. Management estimates that the current funds on hand will be sufficient to continue operations through the next six months. Our ability to continue as a going concern is dependent upon our ability to continue to implement our business plan. Currently, management is attempting to increase revenues by selling through a channel of distributors, value added resellers, strategic partners and original equipment manufacturers. While we believe in the viability of its strategy to increase revenues, there can be no assurances to that effect. Our ability to continue as a going concern is dependent upon our ability to increase our customer base and realize increased revenues. No assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing, if needed, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing. COVID-19 In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, has adversely affected workforces, customers, economies, and financial markets globally. It has also disrupted the normal operations of many businesses. This outbreak could decrease spending, adversely affect demand for the Company’s products, and harm the Company’s business and results of operations. During the Nine months ended September 30, 2022 and the year ended December 31, 2021, the Company believes the COVID-19 pandemic did impact its operating results. For the Nine months ended September 30, 2022 and the year ended December 31, 2021, sales to customers decreased by 55% respectively, as compared to the prior year. However, the Company has not observed any impairments of its assets or a significant change in the fair value of its assets due to the COVID-19 pandemic. At this time, it is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or results of operations, financial condition, or liquidity. 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. Management bases these estimates and assumptions upon historical experience, existing and known circumstances, and other factors that management believes to be reasonable. In addition, the Company has considered the potential impact of the pandemic, as well as certain macroeconomic factors, including inflation, rising interest rates, and recessionary concerns, on its business and operations. Significant estimates include those related to accounting for financing obligations, assumptions used in valuing equity 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 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 recognizes subscription revenue over a one-month period based on a typical monthly renewal cycle in accordance with its customer agreement terms. For service contracts, the Company’s performance obligations are satisfied, and the related revenue is recognized, as services are rendered. The Company offers no discounts, rebates, rights of return, or other allowances to clients which would result in the establishment of reserves against service revenue. Additionally, to date, the Company has not incurred incremental costs in obtaining customer contracts. Cost of revenue includes direct costs and fees related to the sale of our products. The following tables present our revenue disaggregated by major product and service lines: Three months ended September 30, 2022 September 30, 2021 Software $ 22,000 $ 39,000 Service - 1,000 Total revenue $ 22,000 $ 40,000 Nine months ended September 30, 2022 September 30, 2021 Software $ 78,000 $ 148,000 Service - 5,000 Total revenue $ 78,000 $ 153,000 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. The Company is required to use observable market data if such data is available without undue cost and effort. The Company believes the carrying amounts reported in the balance sheet for accounts receivable, accounts payable, accrued expenses, convertible notes, and notes payables approximate fair values because of the short-term nature of these financial instruments. Derivative Financial Instruments The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The Company evaluates embedded conversion features within its convertible debt to determine whether the embedded conversion features should be bifurcated from the host instrument and accounted for as a derivative. The fair value of the embedded derivatives are determined using the trinomial/binomial valuation 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. All outstanding derivative financial instruments were extinguished during fiscal year 2021. 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 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. Dilutive potential shares of common stock consist of incremental shares of common stock issuable upon exercise or conversion. Diluted loss per share excludes all potential common shares if their effect is anti-dilutive. The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive: Nine months ended September 30, 2022 September 30, 2021 Options to purchase common stock 83,133,001 15,633,001 Warrants to purchase common stock 21,375,757 68,981,234 Convertible notes 21 21 Convertible Series B Preferred stock 5,047,667 608,886 Total 109,556,446 85,223,142 Concentrations For the Nine months ended September 30, 2022, sales to two customers comprised 37% and 32% of revenues. For the Nine months ended September 30, 2021, sales to three customers comprised 35%, 14% and 16% of revenues. At September 30, 2022, two customers comprised 59% and 16% of accounts receivable. The Company maintains the majority of its cash balances with one financial institution, in the form of demand deposits. At September 30, 2022, 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, single sales team, marketing department, customer service department, operations department, finance and accounting department to support its operations and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying financial statements. Recent Accounting Pronouncements In June 2016, the FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASC 326”). In May 2021, the FASB issued ASU 2021-04, “Earnings Per Share (Topic 260), Debt - Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity – Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force).” 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. |
Convertible Notes Payable
Convertible Notes Payable | 9 Months Ended |
Sep. 30, 2022 | |
Convertible Notes Payable | |
Convertible Notes Payable | Note 2 - Convertible Notes Payable Convertible notes payable consisted of the following: September 30, 2022 December 31, 2021 Unsecured (a) Convertible notes due to AL-Bank $ 413,000 $ 503,000 Unsecured (b) Convertible notes with fixed conversion features, in default 895,000 895,000 Total Convertible notes payable $ 1,308,000 $ 1,398,000 (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 and matured in December 2010. The aggregate notes are convertible by the note holder into approximately less than one share of the Company’s common stock based on a fixed conversion price adjusted for applicable reverse stock splits that occurred in prior fiscal years. In fiscal 2009, the note holders agreed to the forbearance of any interest on the notes payable to DART/Citco Global. In August 2021, the notes were assigned to Aktieselskabet Arbejdernes Landsbank (“AL-Bank”), a financing institution based in Denmark. In September 2021, the Company executed a repayment agreement with AL-Bank whereby the Company shall make monthly payments of $10,000 to AL-Bank, starting in October 2021 and ending in January 2025, for a total of $400,000. Once the payments are made in full in accordance with the repayment agreement, the remaining balance of $143,000 shall be forgiven and will be accounted at that time. At December 31, 2021, the outstanding balance of convertible notes payable amounted to $503,000. During the nine months ended September 30, 2022, the Company made principal payments of $90,000. At September 30, 2022, the outstanding balance of the Unsecured convertible notes payable amounted to $413,000. The convertible notes payable, including accrued interest are convertible to approximately two shares of the Company’s common stock. (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 by the note holders into approximately less than one share of the Company’s common stock based on fixed conversion prices adjusted for applicable reverse stock splits that occurred in prior fiscal years. At September 30, 2022 and December 31, 2021, the outstanding balance of unsecured convertible notes payable amounted to $895,000, respectively and are deemed in default. The convertible notes payable, including accrued interest are convertible to approximately thirteen shares of the Company’s common stock. |
Convertible Notes Payable Relat
Convertible Notes Payable Related Parties | 9 Months Ended |
Sep. 30, 2022 | |
Convertible Notes Payable Related Parties | |
Convertable Notes Payable - Related Parties | Note 3 - Convertible Notes Payable – Related Parties In prior years, the Company issued unsecured convertible notes to its Chief Executive Officer (CEO) in exchange for cash and/or services rendered. The notes have a compounded interest rate of 8% per annum and will mature on December 31, 2022, as amended. The aggregate notes are convertible by the note holders into less than one share of the Company’s common stock at fixed conversion prices adjusted for applicable reverse stock splits. As of September 30, 2022 and December 31, 2021, the outstanding balance of the notes payable amounted to $268,000. |
Notes Payable
Notes Payable | 9 Months Ended |
Sep. 30, 2022 | |
Notes Payable | |
Notes Payable | Note 4 - Notes Payable Notes payable consisted of the following: September 30, 2022 December 31, 2021 Unsecured notes payable (a) Notes payable- $1,639,000 - in default $ 1,639,000 $ 1,639,000 (b) Notes payable issued by BST - in default 285,000 310,000 (c) Note payable-EID loan 150,000 150,000 Secured notes payable (d) Notes payable - in default 6,000 23,000 (e) Notes payable – July 2022 251,000 - Total notes payable principal outstanding 2,331,000 2,122,000 Less current portion of notes payable, net of discount (2,105,000 ) (1,972,000 ) Long term notes payable $ 226,000 $ 150,000 (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. At September 30, 2022 and December 31, 2021, the outstanding balance of the notes payable was $1,639,000, respectively, and are 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, 2021, the outstanding balance of the notes payable amounted to $310,000. During the Nine months ended September 30, 2022, the Company made principal payments of $25,000. At September 30, 2022, the outstanding balance of the BlockSafe notes payable amounted to $285,000, and are in default. (c) On May 15, 2020, the Company received a $150,000 loan (the “EID Loan”) from the Small Business Administration (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 $250 per month are deferred for twenty-four months and will commence in June 2022. 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. Outstanding balance of the note payable as of September 30, 2022 and December 31, 2021 amounted to $150,000, respectively. The Company was in compliance with the terms of the EID loan as of September 30, 2022. (d) In fiscal 2019 and 2020, the Company issued notes payable aggregating $468,000. The notes bear interest at a rate starting from 8% to 37% 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 unsecured note of $21,000 was extinguished as part of a debt settlement obligation transaction. At December 31, 2021, the outstanding balance of the unsecured note agreements was $23,000. During the nine months ended September 30, 2022, the Company made principal payments of $17,000. At September 30, 2022, the outstanding balance of the secured notes payable was $6,000 and is in default. (e) In July 2022, the Company issued notes payable aggregating $275,000. The notes bear average interest rate of 51% per annum, each agreement secured by substantially all of the assets of the Company and maturing in January 2024. During the nine months ended September 30, 2022, the Company made principal payments of $24,000. At September 30, 2022, the outstanding balance of the secured notes payable was $251,000. |
Notes Payable Related Parties
Notes Payable Related Parties | 9 Months Ended |
Sep. 30, 2022 | |
Notes Payable Related Parties | |
Notes Payable - Related Parties | Note 5 - Notes Payable – Related Party Notes payable-related party notes represent unsecured notes payable to the Company’s Chief Executive Officer (CEO) ranging in interest rates of 0% per annum to 10% per annum and will mature on December 31, 2022, as amended. The outstanding balance of these notes payable at September 30, 2022 and December 31, 2021 amounted to $693,000. |
VIE Financing Obligation
VIE Financing Obligation | 9 Months Ended |
Sep. 30, 2022 | |
VIE Financing Obligation | |
VIE Financing Obligation | Note 6 - VIE 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, 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. 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 September 30, 2022 and December 31, 2021, the outstanding balance of financing obligations amounted to $1,263,200, respectively, to be paid in tokens, as defined. At September 30, 2022 and through the date of filing, BlockSafe 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 September 30, 2022, as the tokens do not exist, and any amounts received for tokens are not considered equity or revenue, management determined that 100% of the obligation of $1,263,200 is a liability to be settled by BlockSafe, through the issuance of tokens, or through other means if tokens are never issued. |
Contingent Payment Obligation
Contingent Payment Obligation | 9 Months Ended |
Sep. 30, 2022 | |
Contingent Payment Obligation | |
Contingent Payment Obligation | 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 September 30, 2022 and December 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. |
Operating Lease
Operating Lease | 9 Months Ended |
Sep. 30, 2022 | |
Operating Lease | |
Operating Lease | Note 8 - Operating Lease In January 2019, the Company entered into a noncancelable operating lease for its office headquarters office requiring payments of approximately $4,000 per month, payments increasing 3% each year, and ending on January 31, 2024. We determine if an arrangement is a lease at inception. Lease assets are presented as operating lease right-of-use assets and the related liabilities are presented as lease liabilities in our consolidated balance sheets pursuant to ASC 842, Leases. Operating lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The operating lease ROU asset includes any lease payments made and excludes lease incentives. The components of lease expense and supplemental cash flow information related to leases for the period are as follows: Nine months ended September 30, 2022 Nine months ended September 30, 2021 Lease Cost Operating lease cost (included in general and administration in the Company’s statement of operations) $ 42,000 $ 42,000 Other Information Cash paid for amounts included in the measurement of lease liabilities for the Nine months ended September 30, 2022 and 2021 $ 42,000 $ 42,000 Weighted average remaining lease term – operating leases (in years) 1.3 2.3 Average discount rate – operating leases 10.0 % 10.0 % The supplemental balance sheet information related to leases for the period is as follows: At September 30, 2022 Operating leases Long-term right-of-use assets $ 67,000 Short-term operating lease liabilities $ 56,000 Long-term operating lease liabilities 15,000 Total operating lease liabilities $ 71,000 Maturities of the Company’s lease liabilities are as follows: Year Ending Operating Leases 2022 (3 months) 16,000 2023 59,000 2024 5,000 Total lease payments 80,000 Less: Imputed interest/present value discount (9,000 ) Present value of lease liabilities $ 71,000 Lease expenses were $42,000 and $42,000 during the Nine months ended September 30, 2022 and 2021. |
Stockholders Deficit
Stockholders Deficit | 9 Months Ended |
Sep. 30, 2022 | |
Stockholders Deficit | |
Stockholders' Deficit | Note 9 - Stockholders’ Deficit Common Stock During the Nine months ended September 30, 2022, the Company issued an aggregate of 20,730,936 shares of its common stock for consulting services, with a fair value of $360,000. These shares of common stock were valued based on the closing price of the Company’s common stock on the date of the issuance or the date the Company entered into the agreement related to the issuance. Warrants The table below summarizes the Company’s warrant activities for the Nine months ended September 30, 2022: Number of Warrant Shares Exercise Price Range Per Share Weighted Average Exercise Price Balance, January 1, 2022 68,981,234 $ 0.0045-2.90 $ 0.042647 Granted 53,000,000 0.05 0.05 Canceled/Expired (605,477 ) 0.085-2.90 1.49 Exercised (100,000,000 ) 0.02 0.02 Balance outstanding and exercisable, September 30, 2022 21,375,757 $ 0.0045-0.75 $ 0.041562 At September 30, 2022, the intrinsic value of the warrants amounted to $60,000. The following table summarizes information concerning outstanding and exercisable warrants as of September 30, 2022: Warrants Outstanding and Exercisable Range of Exercise Prices Number Outstanding Average Remaining Contractual Life (in years) Weighted Average Exercise Price $ 0.0045 13,333,333 3.00 $ 0.0045 $ 0.05-0.02 8,000,000 4.00 $ 0.04 $ 0.75 42,424 2.00 $ 0.75 $ 0.0045 - $0.75 21,375,757 2.00 $ 0.26 A. Modification, Exercise and Grant of Warrants On May 5, 2022, we entered into Inducement Offer to Exercise Common Stock Purchase Warrants Letter Agreements (the “Exercise Agreements”) with certain of the holders of the Existing Warrants, The Special Equities Opportunity Fund, LLC and Gregory Castaldo, to exercise existing warrants to purchase an aggregate of 50,000,000 shares of Common Stock (the “Exercising Holders”). Pursuant to the Exercise Agreements, the Exercising Holders and the Company agreed that, subject to any applicable beneficial ownership limitations, the Exercising Holders would exercise their Existing Warrants (the “Investor Warrants”) for shares of Common Stock underlying such Existing Warrants (the “Exercised Shares”) at a reduced exercise price of $0.02 per share of Common Stock. In order to induce the Exercising Holders to cash exercise the Investor Warrants, the Exercise Agreements provide for the issuance of new warrants to purchase up to an aggregate of 50,000,000 shares of Common Stock (the “New Warrants”), with such New Warrants to be issued in an amount equal to the number of the Exercised Shares underlying any Investor Warrants. The New Warrants are exercisable after issuance, provide for a cashless exercise provision if the shares of Common Stock underlying the New Warrants are not registered and terminate on the date that is five years following the issuance of the New Warrants. The New Warrants have an exercise price per share of $0.05. The New Warrants and the shares of Common Stock issuable upon the exercise of the New Warrants are not being registered under the Securities Act of 1933 and are being offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act of 1933. The Exercised Shares are registered for resale on effective registration statements previously filed with the Securities and Exchange Commission. As a result, these warrant holders exercised their warrants and the Company issued 50 million shares of common stock for cash proceeds of $940,000, net of direct fees and commission. In August 2022, the Company modified the exercise price of the warrants granted to the two investors/warrant holders in May 2022 from $0.05 per share to $0.01 per share. As a result of this modification, the warrant holders exercised 50,000,000 shares of warrants and the Company received $500,000 in cash and issued 50,000,000 shares of common stock. As a result of these transactions, the Company issued a total of 100 million shares of common stock and received cash of $1,440,000, net of direct costs. B. Grant of Warrants For Services On July 1, 2022, the Company granted warrants to a consultant, to purchase 3,000,000 shares of common stock for financing services rendered. The warrants are fully vested, exercisable at of $0.02 per share, will expire in 5 years and with an estimated fair value $63,000 using the Black-Scholes-Merton option pricing model with the assumptions as set forth in the table below: Assumptions Exercise Price $ 0.02 Share Price $ 0.02 Volatility % 233 % Risk Free Rate 2.88 % Expected Term (yrs.) 5 Dividend Rate 0 % |
Stock Options
Stock Options | 9 Months Ended |
Sep. 30, 2022 | |
Stock Options | |
Stock Options | Note 10 – Stock Options The table below summarizes the Company’s stock option activities for the Nine months ended September 30, 2022: Number of Options Shares Exercise Price Range Per Share Weighted Average Exercise Price Balance, January 1, 2022 83,133,001 0.005-1,121,250,000 $ 0.0274 Granted - - - Exercised - - - Expired - - - Balance outstanding, September 30, 2022 83,133,001 $ 0.005-1,121,250,000 $ 0.0274 Balance exercisable, September 30, 2022 83,133,001 $ 0.005-1,121,250,000 $ 0.0274 At September 30, 2022, the intrinsic value of outstanding options was $70,000. During the periods ended September 30, 2022 and 2021, the Company recognized stock compensation expense of $2,959,000 and $6,387,000, respectively, to account for the fair value of stock options that vested during the period. The following table summarizes information concerning the Company’s stock options as of September 30, 2022: 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 0.3 $ 1,121,250,000 1 0.3 $ 1,121,250,000 $ 2.85 126,000 7 2.85 126,000 7 2.85 $ 3.125 392,000 5 3.125 392,000 5 3.125 $ 2.05 115,000 7 2.05 115,000 7 2.05 $ 0.0375 65,000,000 9 0.0375 65,000,000 9 0.0375 $ 0.005 17,500,000 8 0.005 17,500,000 8 0.005 $ 0.005 – 1,121,250,000 83,133,001 6 $ 0.03704 83,133,001 6 $ 0.0274 |
Subsequent Events
Subsequent Events | 9 Months Ended |
Sep. 30, 2022 | |
Subsequent Events | |
Subsequent Events | Note 11 – Subsequent Events A. Issuance of Note Payable On October 26, 2022, we finalized a Securities Purchase Agreement (the “Agreement”) with Walleye Opportunities Master Fund Ltd., a Cayman Islands company (“Walleye”), whereby Walleye purchased a promissory note of the Company, in the aggregate principal amount of One Million Dollars ($1,000,000) (the “Note”), which is convertible by Walleye into shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) upon an Event of Default (as defined therein) in accordance with the terms and conditions set forth therein. On the Closing Date (specifically October 26, 2022), we received $800,000 which represented the principal of $1,000,000 less an original issue discount in the amount of $200,000 paid to Walleye. In addition, we wired $12,500 from the Purchase Price to cover the Walleye’s legal fees in connection with the transactions contemplated by this Agreement. Walleye received a seven (7) month note, with no interest and, only in the event of a default (after the Maturity Date) of twelve percent (12%) per annum. The Company shall have the right, exercisable on seven (7) Trading Days prior written notice to Walleye, to prepay the outstanding Principal Amount then due under this Note prior to any default. Walleye may demand immediate repayment in the event of a certain events, including a financing. In the event of default, Walleye shall have, as of and after any event of default, the option to cover the outstanding obligation of the Note time 120% at 90% of the lowest VWAP of the Common Stock on the date of the applicable conversion (the “Conversion Date”) or at any point during the four (4) Trading Day period immediately prior to the date of the applicable conversion. In addition, on the Closing Date, Walleye received a five year Fifty Million (50,000,000) common stock purchase warrants, exercisable at $0.01 per share, pursuant to the terms of contained therein, which shall be earned in full as of the Closing Date of October 26, 2022. This common stock purchase warrant shall have a cashless exercise provision (unless there is a registration statement registering the underlying shares to the common stock purchase warrants). From October 26, 2022 until the Note is extinguished in its entirety, Walleye shall receive a right of participation and first right of refusal on subsequent financings as described in the Agreement. On October 26, 2022, through a Security Agreement of the same date, our Subsidiaries (specifically BlockSafe Technologies, Inc. and Cyber Security Risk Solutions, LLC) agreed to guarantee and act as surety for payment of the Note. We agreed to use the proceeds for business development, and not for (i) the repayment of any indebtedness owed to officers, directors or employees of the Company or their affiliates, (ii) any loan to or investment in any other corporation, partnership, enterprise or other person (except in connection with the Company’s currently existing operations), (iii) any loan, credit, or advance to any officers, directors, employees, or affiliates of the Company, or (iv) in violation or contravention of any applicable law, rule or regulation. B. Issuance of Common Stock In October 2022, the Company issued 5 million shares of common stock with a fair market value of $38,000 for services rendered. |
Organization and Summary of S_2
Organization and Summary of Significant Accounting Policies (Policies) | 9 Months Ended |
Sep. 30, 2022 | |
Organization and Summary of Significant Accounting Policies | |
Basis of presentation and principles of consolidation | The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods have been included. The results of operations for the nine months ended September 30, 2022 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2022. These financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2021 and notes thereto contained in the Annual Report on Form 10-K of the Company as filed with the SEC on April 14, 2022 (and amended for non-financial matters on July 18, 2022). The condensed consolidated financial statements include the accounts of the Company and its subsidiary, BlockSafe Technologies, Inc. (“BST”). BST is owned 49% by the Company and 31% by three executive officers of the Company. BST meets the definition of a variable interest entity (“VIE”) and based on the determination that the Company is the primary beneficiary of BST. BST’s operating results, assets and liabilities are consolidated by the Company. Intercompany balances and transactions have been eliminated in consolidation. At September 30, 2022, 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 eliminated in consolidation. At September 30, 2022 and December 31, 2021, the amount of VIE cash on the accompanying condensed consolidated balance sheets 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 creditors of the Company. |
Going Concern | We have yet to establish any history of profitable operations. During the nine months ended September 30, 2022, the Company incurred a net loss of $6,980,000 and used cash in operating activities of $3,175,000 and at September 30, 2022, the Company had a stockholders’ deficit of $13,912,000. In addition, we are in default on notes payable and convertible notes payable in the aggregate amount of $2,829,000. These factors raise substantial doubt about our ability to continue as a going concern within one year after the date the financial statements are issued. In addition, the Company’s independent registered public accounting firm, in its report published on our December 31, 2021 year-end financial statements, raised substantial doubt about the Company’s ability to continue as a going concern. The Company’s financial statements do not include any adjustments that might result from the outcome of this uncertainty should we be unable to continue as a going concern. Management estimates that the current funds on hand will be sufficient to continue operations through the next six months. Our ability to continue as a going concern is dependent upon our ability to continue to implement our business plan. Currently, management is attempting to increase revenues by selling through a channel of distributors, value added resellers, strategic partners and original equipment manufacturers. While we believe in the viability of its strategy to increase revenues, there can be no assurances to that effect. Our ability to continue as a going concern is dependent upon our ability to increase our customer base and realize increased revenues. No assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to us. Even if we are able to obtain additional financing, if needed, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing. |
COVID-19 | In March 2020, the World Health Organization declared coronavirus COVID-19 a global pandemic. This contagious disease outbreak, which has continued to spread, has adversely affected workforces, customers, economies, and financial markets globally. It has also disrupted the normal operations of many businesses. This outbreak could decrease spending, adversely affect demand for the Company’s products, and harm the Company’s business and results of operations. During the Nine months ended September 30, 2022 and the year ended December 31, 2021, the Company believes the COVID-19 pandemic did impact its operating results. For the Nine months ended September 30, 2022 and the year ended December 31, 2021, sales to customers decreased by 55% respectively, as compared to the prior year. However, the Company has not observed any impairments of its assets or a significant change in the fair value of its assets due to the COVID-19 pandemic. At this time, it is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or results of operations, financial condition, or liquidity. |
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. Management bases these estimates and assumptions upon historical experience, existing and known circumstances, and other factors that management believes to be reasonable. In addition, the Company has considered the potential impact of the pandemic, as well as certain macroeconomic factors, including inflation, rising interest rates, and recessionary concerns, on its business and operations. Significant estimates include those related to accounting for financing obligations, assumptions used in valuing equity 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 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 recognizes subscription revenue over a one-month period based on a typical monthly renewal cycle in accordance with its customer agreement terms. For service contracts, the Company’s performance obligations are satisfied, and the related revenue is recognized, as services are rendered. The Company offers no discounts, rebates, rights of return, or other allowances to clients which would result in the establishment of reserves against service revenue. Additionally, to date, the Company has not incurred incremental costs in obtaining customer contracts. Cost of revenue includes direct costs and fees related to the sale of our products. The following tables present our revenue disaggregated by major product and service lines: Three months ended September 30, 2022 September 30, 2021 Software $ 22,000 $ 39,000 Service - 1,000 Total revenue $ 22,000 $ 40,000 Nine months ended September 30, 2022 September 30, 2021 Software $ 78,000 $ 148,000 Service - 5,000 Total revenue $ 78,000 $ 153,000 |
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. The Company is required to use observable market data if such data is available without undue cost and effort. The Company believes the carrying amounts reported in the balance sheet for accounts receivable, accounts payable, accrued expenses, convertible notes, and notes payables approximate fair values because of the short-term nature of these financial instruments. |
Derivative Financial Instruments | The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The Company evaluates embedded conversion features within its convertible debt to determine whether the embedded conversion features should be bifurcated from the host instrument and accounted for as a derivative. The fair value of the embedded derivatives are determined using the trinomial/binomial valuation 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. All outstanding derivative financial instruments were extinguished during fiscal year 2021. |
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 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. Dilutive potential shares of common stock consist of incremental shares of common stock issuable upon exercise or conversion. Diluted loss per share excludes all potential common shares if their effect is anti-dilutive. The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive: Nine months ended September 30, 2022 September 30, 2021 Options to purchase common stock 83,133,001 15,633,001 Warrants to purchase common stock 21,375,757 68,981,234 Convertible notes 21 21 Convertible Series B Preferred stock 5,047,667 608,886 Total 109,556,446 85,223,142 |
Concentrations | For the Nine months ended September 30, 2022, sales to two customers comprised 37% and 32% of revenues. For the Nine months ended September 30, 2021, sales to three customers comprised 35%, 14% and 16% of revenues. At September 30, 2022, two customers comprised 59% and 16% of accounts receivable. The Company maintains the majority of its cash balances with one financial institution, in the form of demand deposits. At September 30, 2022, 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, single sales team, marketing department, customer service department, operations department, finance and accounting department to support its operations and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying financial statements. |
Recent Accounting Pronouncements | In June 2016, the FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASC 326”). In May 2021, the FASB issued ASU 2021-04, “Earnings Per Share (Topic 260), Debt - Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity – Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force).” 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. |
Organization and Summary of S_3
Organization and Summary of Significant Accounting Policies (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Organization and Summary of Significant Accounting Policies | |
Schedule of Revenue Recognition | Three months ended September 30, 2022 September 30, 2021 Software $ 22,000 $ 39,000 Service - 1,000 Total revenue $ 22,000 $ 40,000 Nine months ended September 30, 2022 September 30, 2021 Software $ 78,000 $ 148,000 Service - 5,000 Total revenue $ 78,000 $ 153,000 |
Schedule of revenue disaggregated by major product and service lines | Nine months ended September 30, 2022 September 30, 2021 Options to purchase common stock 83,133,001 15,633,001 Warrants to purchase common stock 21,375,757 68,981,234 Convertible notes 21 21 Convertible Series B Preferred stock 5,047,667 608,886 Total 109,556,446 85,223,142 |
Convertible Notes Payable (Tabl
Convertible Notes Payable (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Convertible Notes Payable (Tables) | |
Schedule of convertible notes payable | September 30, 2022 December 31, 2021 Unsecured (a) Convertible notes due to AL-Bank $ 413,000 $ 503,000 Unsecured (b) Convertible notes with fixed conversion features, in default 895,000 895,000 Total Convertible notes payable $ 1,308,000 $ 1,398,000 |
Notes Payable (Tables)
Notes Payable (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Notes Payable (Tables) | |
Schedule of notes payable | September 30, 2022 December 31, 2021 Unsecured notes payable (a) Notes payable- $1,639,000 - in default $ 1,639,000 $ 1,639,000 (b) Notes payable issued by BST - in default 285,000 310,000 (c) Note payable-EID loan 150,000 150,000 Secured notes payable (d) Notes payable - in default 6,000 23,000 (e) Notes payable – July 2022 251,000 - Total notes payable principal outstanding 2,331,000 2,122,000 Less current portion of notes payable, net of discount (2,105,000 ) (1,972,000 ) Long term notes payable $ 226,000 $ 150,000 |
Operating Lease (Tables)
Operating Lease (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Operating Lease (Tables) | |
Schedule of lease expense and supplemental cash flow information | Nine months ended September 30, 2022 Nine months ended September 30, 2021 Lease Cost Operating lease cost (included in general and administration in the Company’s statement of operations) $ 42,000 $ 42,000 Other Information Cash paid for amounts included in the measurement of lease liabilities for the Nine months ended September 30, 2022 and 2021 $ 42,000 $ 42,000 Weighted average remaining lease term – operating leases (in years) 1.3 2.3 Average discount rate – operating leases 10.0 % 10.0 % |
Schedule of supplemental balance sheet information | At September 30, 2022 Operating leases Long-term right-of-use assets $ 67,000 Short-term operating lease liabilities $ 56,000 Long-term operating lease liabilities 15,000 Total operating lease liabilities $ 71,000 |
Schedule of maturities | Year Ending Operating Leases 2022 (3 months) 16,000 2023 59,000 2024 5,000 Total lease payments 80,000 Less: Imputed interest/present value discount (9,000 ) Present value of lease liabilities $ 71,000 |
Stockholders Deficit (Tables)
Stockholders Deficit (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Stockholders Deficit | |
Schedule of stock warrants activity | Number of Warrant Shares Exercise Price Range Per Share Weighted Average Exercise Price Balance, January 1, 2022 68,981,234 $ 0.0045-2.90 $ 0.042647 Granted 53,000,000 0.05 0.05 Canceled/Expired (605,477 ) 0.085-2.90 1.49 Exercised (100,000,000 ) 0.02 0.02 Balance outstanding and exercisable, September 30, 2022 21,375,757 $ 0.0045-0.75 $ 0.041562 |
Schedule of warrants outstanding and exercisable | Warrants Outstanding and Exercisable Range of Exercise Prices Number Outstanding Average Remaining Contractual Life (in years) Weighted Average Exercise Price $ 0.0045 13,333,333 3.00 $ 0.0045 $ 0.05-0.02 8,000,000 4.00 $ 0.04 $ 0.75 42,424 2.00 $ 0.75 $ 0.0045 - $0.75 21,375,757 2.00 $ 0.26 Assumptions Exercise Price $ 0.02 Share Price $ 0.02 Volatility % 233 % Risk Free Rate 2.88 % Expected Term (yrs.) 5 Dividend Rate 0 % |
Stock Options (Tables)
Stock Options (Tables) | 9 Months Ended |
Sep. 30, 2022 | |
Stock Options (Tables) | |
Schedule of stock options plan | Number of Options Shares Exercise Price Range Per Share Weighted Average Exercise Price Balance, January 1, 2022 83,133,001 0.005-1,121,250,000 $ 0.0274 Granted - - - Exercised - - - Expired - - - Balance outstanding, September 30, 2022 83,133,001 $ 0.005-1,121,250,000 $ 0.0274 Balance exercisable, September 30, 2022 83,133,001 $ 0.005-1,121,250,000 $ 0.0274 |
Schedule of stock option outstanding and exercisable | 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 0.3 $ 1,121,250,000 1 0.3 $ 1,121,250,000 $ 2.85 126,000 7 2.85 126,000 7 2.85 $ 3.125 392,000 5 3.125 392,000 5 3.125 $ 2.05 115,000 7 2.05 115,000 7 2.05 $ 0.0375 65,000,000 9 0.0375 65,000,000 9 0.0375 $ 0.005 17,500,000 8 0.005 17,500,000 8 0.005 $ 0.005 – 1,121,250,000 83,133,001 6 $ 0.03704 83,133,001 6 $ 0.0274 |
Organization and Summary of S_4
Organization and Summary of Significant Accounting Policies (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | |
Revenue | $ 22,000 | $ 40,000 | $ 78,000 | $ 153,000 |
Software [Member] | ||||
Revenue | 22,000 | 39,000 | 78,000 | 148,000 |
Service [Member] | ||||
Revenue | $ 0 | $ 1,000 | $ 0 | $ 5,000 |
Organization and Summary of S_5
Organization and Summary of Significant Accounting Policies (Details 1) - shares | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Organization and Summary of Significant Accounting Policies | ||
Options to purchase common stock | 83,133,001 | 15,633,001 |
Warrants to purchase common stock | 21,375,757 | 68,981,234 |
Convertible notes | 21 | 21 |
Convertible Series B Preferred stock | 5,047,667 | 608,886 |
Total | 109,556,446 | 85,223,142 |
Organization and Summary of S_6
Organization and Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 3 Months Ended | 9 Months Ended | ||||||
Sep. 30, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | Sep. 30, 2021 | Jun. 30, 2022 | Dec. 31, 2021 | Jun. 30, 2021 | Dec. 31, 2020 | |
Net loss | $ (1,250,000) | $ (853,000) | $ (6,980,000) | $ (15,842,000) | ||||
Net cash used in operating activities | 3,175,000 | |||||||
Total Stockholders' Deficit | (13,912,000) | $ (10,668,000) | (13,912,000) | $ (10,668,000) | $ (13,252,000) | $ (11,589,000) | $ (12,428,000) | $ (14,342,000) |
Notes payable aggregate amount | 2,829,000 | 2,829,000 | ||||||
FDIC insured limit | $ 250,000 | $ 250,000 | ||||||
One customer [Member] | Revenues [Member] | ||||||||
Concentration Risk, Percentage | 37% | 35% | ||||||
One customer [Member] | Accounts Receivable [Member] | ||||||||
Concentration Risk, Percentage | 59% | |||||||
Two customer [Member] | Revenues [Member] | ||||||||
Concentration Risk, Percentage | 32% | 14% | ||||||
Two customer [Member] | Accounts Receivable [Member] | ||||||||
Concentration Risk, Percentage | 16% | |||||||
Three customer [Member] | Revenues [Member] | ||||||||
Concentration Risk, Percentage | 16% | |||||||
BST [Member] | ||||||||
Ownership interest held by company | 49% | 49% | ||||||
Ownership interest held by three executive officers | 31% | 31% | ||||||
Noncontrolling interest percentage | 51% | 51% | ||||||
Management fee per month | $ 36,000 | $ 36,000 | ||||||
Financing milestone reached amount | 1,000,000 | |||||||
Additional management fee owed amount | $ 5,000,000 | |||||||
Management fee description | 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 $5,000,000 shall be owed to the Company, payable monthly over three years |
Convertible Notes Payable (Deta
Convertible Notes Payable (Details) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Secured | ||
Convertible notes due to AL-Bank | $ 413,000 | $ 503,000 |
Unsecured | ||
Convertible notes with fixed conversion features, in default | 895,000 | 895,000 |
Convertible notes, net of discount | $ 1,308,000 | $ 1,398,000 |
Convertible Notes Payable (De_2
Convertible Notes Payable (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Dec. 31, 2021 | |
Principal payments | $ 90,000 | |
Convertible notes payable, outstanding balance | 413,000 | $ 503,000 |
2005 [Member] | ||
DART/Citco Global, in default | $ 543,000 | 543,000 |
Interest rate | 7.50% | |
Total | $ 400,000 | |
Monyhly payment | 10,000 | |
Remaining balance | $ 143,000 | |
2005 Through 2007 [Member] | ||
Maturity date description | notes are unsecured, bear interest at a rate starting at 8% up to 18% per annum | |
Convertible notes payable, outstanding balance | $ 895,000 | $ 895,000 |
Proceeds from convertible notes payable | $ 895,000 | |
Interest rate decriptions | due on various dates from March 2008 to March 2015 |
Convertible Notes Payable Rel_2
Convertible Notes Payable Related Parties (Details Narrative) - Series A Preferred Stock [Member] - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Dec. 31, 2021 | |
Convertible notes payable - related parties | $ 268,000 | $ 268,000 |
Compound interest | 8% |
Notes Payable (Details)
Notes Payable (Details) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Unsecured notes payable-in default | ||
Notes payable- $1,639,000 in default | $ 1,639,000 | $ 1,639,000 |
Notes payable issued by BST-in default | 285,000 | 310,000 |
Note payable-EID loan | 150,000 | 150,000 |
Secured notes payable | ||
Notes payable-in default | 6,000 | 23,000 |
Notes payable - July 2022 | 251,000 | 0 |
Total notes payable principal outstanding | 2,331,000 | 2,122,000 |
Less current portion of notes payable | (2,105,000) | (1,972,000) |
Long term notes payable | $ 226,000 | $ 150,000 |
Notes Payable (Details Narrativ
Notes Payable (Details Narrative) - USD ($) | 1 Months Ended | 9 Months Ended | 12 Months Ended | ||
May 15, 2020 | Jul. 31, 2022 | Sep. 30, 2022 | Dec. 31, 2019 | Dec. 31, 2021 | |
Notes payable, outstanding balance | $ 285,000 | $ 23,000 | |||
Principal payments | 25,000 | ||||
Notes payable, outstanding balance | $ 6,000 | 23,000 | |||
One Note [Member] | |||||
Notes payable, outstanding balance | $ 310,000 | ||||
Principal payments | $ 319,000 | ||||
Interest rate decriptions | The notes are unsecured, bear interest at a rate of 8% through 14% per annum | ||||
Outstanding secured notes payable | $ 6,000 | ||||
Note issued | $ 468,000 | ||||
Interest rate of notes | 8% | 37% | |||
Amount payables | $ 17,000 | ||||
Notes Payable [Member] | |||||
Interest rate decriptions | The notes are unsecured, bearing interest at a rate of 8% per annum | ||||
Notes payable, outstanding balance | $ 1,639,000 | $ 1,639,000 | |||
Note Payable Two [Member] | |||||
Principal payments | 24,000 | ||||
Interest rate of notes | 51% | ||||
Notes payable issue | $ 275,000 | ||||
Notes payable issue maturity date | January 2024 | ||||
Notes payable, outstanding balance | 251,000 | ||||
EID Loan [Member] | |||||
Notes payable, outstanding balance | $ 150,000 | $ 150,000 | |||
Loan borrowed amount | $ 150,000 | ||||
Interest rate on loan | 3.75% | ||||
Monthly payment on loan, description | Monthly principal and interest payments of $250 per month |
Notes Payable Related Parties (
Notes Payable Related Parties (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Dec. 31, 2021 | |
Notes payable - related parties | $ 693,000 | $ 693,000 |
Chief Executive Officer [Member] | ||
Due date | Dec. 31, 2022 | |
Minimum [Member] | Chief Executive Officer [Member] | ||
Interest rate | 0% | |
Maximum [Member] | Chief Executive Officer [Member] | ||
Interest rate | 10% |
VIE Financing Obligation (Detai
VIE Financing Obligation (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | ||
Sep. 30, 2022 | Dec. 31, 2019 | Dec. 31, 2018 | Dec. 31, 2021 | |
Financing obligation | $ 1,263,200 | |||
Unsecured Convertible Notes Payable [Member] | ||||
Tokens issued to unrelated parties | $ 50,000 | |||
Promissory note issued to unrelated parties | $ 776,000 | |||
BST [Member] | ||||
Financing obligation | $ 1,263,200 | $ 1,263,200 | ||
Financing obligation description | as the tokens do not exist, and any amounts received for tokens are not considered equity or revenue, management determined that 100 | |||
Promissory note - various parties [Member] | Related Party [Member] | ||||
Financing obligation | $ 315,000 | |||
Tokens issued to unrelated parties | $ 122,000 |
Contingent Payment Obligation (
Contingent Payment Obligation (Details Narrative) - USD ($) | 9 Months Ended | 12 Months Ended | |
Sep. 06, 2017 | Sep. 30, 2022 | Dec. 31, 2021 | |
Contingent payment obligation | $ 1,500,000 | $ 1,500,000 | |
Litigation funding agreement [Member] | Therium Inc. and VGL Capital, LLC [Member] | |||
Contingent payment obligation | $ 1,500,000 | ||
Gross proceeds | $ 1,500,000 | ||
Contingent obligation, description | the gross proceeds of any claims awarded, 10% of any additional claim proceeds until the Funders have received an additional $7,500,000, and 2.5% of any claim proceeds thereafter |
Operating Lease (Details)
Operating Lease (Details) - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Lease Cost | ||
Operating lease cost (included in general and administration in the Company's statement of operations) | $ 42,000 | $ 42,000 |
Other Information | ||
Cash paid for amounts included in the measurement of lease liabilities for the Nine months ended September 30, 2022 and 2021 | $ 42,000 | $ 42,000 |
Weighted average remaining lease term - operating leases (in years) | 1 year 3 months 18 days | 2 years 3 months 18 days |
Average discount rate - operating leases | 10% | 10% |
Operating Lease (Details 1)
Operating Lease (Details 1) - USD ($) | Sep. 30, 2022 | Dec. 31, 2021 |
Operating leases | ||
Long-term right-of-use assets | $ 67,000 | $ 107,000 |
Short-term operating lease liabilities | 56,000 | 39,000 |
Long-term operating lease liabilities | 15,000 | $ 73,000 |
Total operating lease liabilities | $ 71,000 |
Operating Lease (Details 2)
Operating Lease (Details 2) | Sep. 30, 2022 USD ($) |
Operating Lease (Details) | |
2022 (3 months) | $ 16,000 |
2023 | 59,000 |
2024 | 5,000 |
Total lease payment | 80,000 |
Less: Imputed interest/present value discount | (9,000) |
Present value of lease liabilities | $ 71,000 |
Operating Lease (Details Narrat
Operating Lease (Details Narrative) - USD ($) | 1 Months Ended | 9 Months Ended | |
Jan. 31, 2019 | Sep. 30, 2022 | Sep. 30, 2021 | |
Operating Lease (Details) | |||
Operating lease payments, monthly | $ 4,000 | ||
Operating lease, description | payments increasing 3% each year, and ending on January 31, 2024 | ||
Lease expenses | $ 42,000 | $ 42,000 |
Stockholders Deficit (Details)
Stockholders Deficit (Details) | 9 Months Ended |
Sep. 30, 2022 $ / shares shares | |
Weighted Average Exercise Price | |
Weighted Average Exercise Price, Beginning Balance | $ 0.0274 |
Weighted Average Exercise Price, Ending Balance | $ 0.0274 |
Warrants [Member] | |
Number of Warrant Shares | |
Number of warrants, Beginning balance | shares | 68,981,234 |
Number of warrant shares, Granted | shares | 53,000,000 |
Number of warrant shares, Exercised | shares | (100,000,000) |
Number of warrant shares, Canceled/Expired | shares | (605,477) |
Number of warrants, Ending balance | shares | 21,375,757 |
Weighted Average Exercise Price | |
Weighted Average Exercise Price, Beginning Balance | $ 0.042647 |
Weighted Average Exercise Price, Granted | 0.05 |
Weighted Average Exercise Price, Canceled/Expired | 1.49 |
Weighted Average Exercise Price, Exercised | 0.02 |
Weighted Average Exercise Price, Ending Balance | 0.041562 |
Exercise Price Range Per Share | |
Exercise Price Range Per Share, Granted | 0.05 |
Exercise Price Range Per Share, Exercised | 0.02 |
Warrants [Member] | Maximum [Member] | |
Exercise Price Range Per Share | |
Exercise Price Range Per Share, Beginning balance | 2.90 |
Exercise Price Range Per Share, Canceled/Expired | 2.90 |
Exercise Price Range Per Share, Ending balance | 0.0045 |
Warrants [Member] | Minimum [Member] | |
Exercise Price Range Per Share | |
Exercise Price Range Per Share, Beginning balance | 0.0045 |
Exercise Price Range Per Share, Canceled/Expired | 0.085 |
Exercise Price Range Per Share, Ending balance | $ 0.75 |
Stockholders Deficit (Details 1
Stockholders Deficit (Details 1) | 9 Months Ended |
Sep. 30, 2022 $ / shares shares | |
Warrant One [Member] | |
Average Remaining Contractual Life (in years) | 3 years |
Weighted Average Exercise Price | $ 0.0045 |
Number Outstanding | shares | 13,333,333 |
Range of Exercise Prices | $ 0.0045 |
Warrant Two [Member] | |
Average Remaining Contractual Life (in years) | 4 years |
Weighted Average Exercise Price | $ 0.04 |
Number Outstanding | shares | 8,000,000 |
Warrant Two [Member] | Minimum [Member] | |
Range of Exercise Prices | $ 0.05 |
Warrant Two [Member] | Maximum [Member] | |
Range of Exercise Prices | $ 0.02 |
Warrant Three [Member] | |
Average Remaining Contractual Life (in years) | 2 years |
Weighted Average Exercise Price | $ 0.75 |
Number Outstanding | shares | 42,424 |
Range of Exercise Prices | $ 0.75 |
Warrant Four [Member] | |
Average Remaining Contractual Life (in years) | 2 years |
Weighted Average Exercise Price | $ 0.26 |
Number Outstanding | shares | 21,375,757 |
Warrant Four [Member] | Minimum [Member] | |
Range of Exercise Prices | $ 0.0045 |
Warrant Four [Member] | Maximum [Member] | |
Range of Exercise Prices | $ 0.75 |
Stockholders Deficit (Details 2
Stockholders Deficit (Details 2) - Warrant Services [Member] | 9 Months Ended |
Sep. 30, 2022 $ / shares | |
Exercise Prices | $ 0.02 |
Share price | $ 0.02 |
Volatility | 233% |
Risk Free Rate | 2.88% |
Expected term (yrs.) | 5 years |
Dividend Rate | 0% |
Stockholders Deficit (Details N
Stockholders Deficit (Details Narrative) - USD ($) | 1 Months Ended | 3 Months Ended | 9 Months Ended | ||
May 05, 2022 | Aug. 31, 2022 | Jul. 31, 2022 | Sep. 30, 2021 | Sep. 30, 2022 | |
Common Shares issued for cash | 50,000,000 | 50,000,000 | |||
Shares issued for cash value | $ 1,440,000 | ||||
Cash recieved | $ 500,000 | ||||
Issued shares of common stock for consulting services, Shares | 20,730,936 | ||||
Issued shares of common stock for consulting services, Value | $ 9,000 | $ 360,000 | |||
Issued shares of stock warrants granted | 100,000,000 | ||||
Warrant Total [Member] | |||||
Issued shares of stock warrants granted | 50,000,000 | ||||
Shares issued for cash value, direct fees and commission | $ 940,000 | ||||
Warrants exercisable price | $ 0.02 | $ 0.01 | $ 0.05 | ||
Warrants issued to purchase common shares | 0 | 50,000,000 | |||
Intrinsic value of warrants | $ 60,000 | ||||
Grant of Warrants For Servicesl [Member] | |||||
Vested, exercisable price | $ 0.02 | ||||
Purchase shares of common stock for financing services | 3,000,000 | ||||
Estimated fair value | $ 63,000 | ||||
Warrants exercisable expire term | 5 years |
Stock Options (Details)
Stock Options (Details) | 9 Months Ended |
Sep. 30, 2022 $ / shares shares | |
Stock options | |
Number of Options Shares, Beginning balance | shares | 83,133,001 |
Number of Options Shares, Ending balance | shares | 83,133,001 |
Number of warrants exercisable, Ending balance | shares | 83,133,001 |
Weighted Average Exercise Price | |
Weighted Average Exercise Price, Beginning Balance | $ 0.0274 |
Weighted Average Exercise Price, Ending Balance | 0.0274 |
Weighted Average Exercise Price, Exercisable Ending Balance | 0.0274 |
Minimum [Member] | |
Weighted Average Exercise Price | |
Exercise Price Range Per Share, Beginning balance | 0.005 |
Exercise Price Range Per Share, Ending balance | 0.005 |
Exercise Price Range Per Share Exercisable Ending balance | 0.005 |
Maximum [Member] | |
Weighted Average Exercise Price | |
Exercise Price Range Per Share, Beginning balance | 1,121,250,000 |
Exercise Price Range Per Share, Ending balance | 1,121,250,000 |
Exercise Price Range Per Share Exercisable Ending balance | $ 1,121,250,000 |
Stock Options (Details 1)
Stock Options (Details 1) | 9 Months Ended |
Sep. 30, 2022 $ / shares shares | |
Options Outstanding [Member] | |
Weighted average remaining contractual life (years) | 6 years |
Number of warrants outstanding | shares | 83,133,001 |
Weighted average exercise price | $ / shares | $ 0.03704 |
Options Outstanding [Member] | Exercise Prices [Member] | |
Weighted average exercise price | $ / shares | $ 1,121,250,000 |
Weighted average remaining contractual life (years) | 3 months 18 days |
Number of warrants outstanding | shares | 1 |
Options Outstanding [Member] | Exercise Prices Two [Member] | |
Weighted average remaining contractual life (years) | 5 years |
Number of warrants outstanding | shares | 392,000 |
Weighted average exercise price | $ / shares | $ 3.125 |
Options Outstanding [Member] | Exercise Prices Three [Member] | |
Weighted average remaining contractual life (years) | 7 years |
Number of warrants outstanding | shares | 115,000 |
Weighted average exercise price | $ / shares | $ 2.05 |
Options Outstanding [Member] | Exercise Prices Four [Member] | |
Weighted average exercise price | $ / shares | $ 0.0375 |
Weighted average remaining contractual life (years) | 8 years |
Number of warrants outstanding | shares | 65,000,000 |
Options Outstanding [Member] | Exercise Prices Five [Member] | |
Weighted average exercise price | $ / shares | $ 0.005 |
Weighted average remaining contractual life (years) | 8 years |
Number of warrants outstanding | shares | 17,500,000 |
Options Outstanding [Member] | Exercise Prices One [Member] | |
Weighted average remaining contractual life (years) | 7 years |
Number of warrants outstanding | shares | 126,000 |
Weighted average exercise price | $ / shares | $ 2.85 |
Option Exercisable [Member] | |
Weighted average exercise price | $ / shares | $ 0.0274 |
Weighted average remaining contractual life (years) | 6 years |
Number of warrants exercisable | shares | 83,133,001 |
Option Exercisable [Member] | Exercise Prices [Member] | |
Weighted average exercise price | $ / shares | $ 1,121,250,000 |
Weighted average remaining contractual life (years) | 3 months 18 days |
Number of warrants exercisable | shares | 1 |
Option Exercisable [Member] | Exercise Prices Two [Member] | |
Weighted average exercise price | $ / shares | $ 3.125 |
Weighted average remaining contractual life (years) | 5 years |
Number of warrants exercisable | shares | 392,000 |
Option Exercisable [Member] | Exercise Prices Three [Member] | |
Weighted average exercise price | $ / shares | $ 2.05 |
Weighted average remaining contractual life (years) | 7 years |
Number of warrants exercisable | shares | 115,000 |
Option Exercisable [Member] | Exercise Prices Four [Member] | |
Weighted average exercise price | $ / shares | $ 0.0375 |
Weighted average remaining contractual life (years) | 9 years |
Number of warrants exercisable | shares | 65,000,000 |
Option Exercisable [Member] | Exercise Prices One [Member] | |
Weighted average remaining contractual life (years) | 7 years |
Number of warrants exercisable | shares | 126,000 |
Weighted average exercise price | $ / shares | $ 2.85 |
Option Exercisable [Member] | Exercise Prices Five [Member] | |
Weighted average remaining contractual life (years) | 9 years |
Number of warrants exercisable | shares | 17,500,000 |
Weighted average exercise price | $ / shares | $ 0.005 |
Stock Options (Details Narrativ
Stock Options (Details Narrative) - USD ($) | 9 Months Ended | |
Sep. 30, 2022 | Sep. 30, 2021 | |
Stock Options (Tables) | ||
Share based compensation | $ 2,959,000 | $ 6,387,000 |
Intrinsic value of outstanding options | $ 70,000 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | 1 Months Ended | |||
Oct. 31, 2022 | Oct. 26, 2022 | Sep. 30, 2022 | Dec. 31, 2021 | |
Common stock, par value | $ 0.0001 | $ 0.0001 | ||
Subsequent Event [Member] | Common Stocks [Member] | ||||
Issue of common stock | 5,000,000 | |||
Fair market value of common stock | $ 38,000 | |||
Subsequent Event [Member] | Minimum [Member] | ||||
Volume weighted average price of common stock | 90% | |||
Subsequent Event [Member] | Maximum [Member] | ||||
Volume weighted average price of common stock | 120% | |||
Subsequent Event [Member] | Walleye Opportunities Master Fund Ltd [Member] | ||||
Sale of company promissory note | $ 1,000,000 | |||
Legal fee | $ 12,500 | |||
Description about issuance of note payable | Walleye received a seven (7) month note, with no interest and, only in the event of a default (after the Maturity Date) of twelve percent (12%) per annum | |||
Common stock purchase of warrant | 50,000,000 | |||
Common stock, par value | $ 0.0001 | |||
Discount amount | $ 200,000 | |||
Warrant exercisble price | $ 0.01 |