10-Q

UNITED STATES

SECURITIES EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
	For the quarterly period ended March 31, 2023

☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
	For the transition period from _________ to _________

ZERIFY, INC.

(Exact name of registrant as specified in its Charter)

Wyoming	000-55012	22-3827597
(State or other jurisdiction of  incorporation or organization)	(Commission file number)	(I.R.S. Employer Identification No.)

1090 King Georges Post Road, Suite 603

Edison, NJ 08837

(Address of Principal Executive Offices)

(732) 661-9641

(Issuer’s telephone number)

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

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

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

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

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

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

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

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

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

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

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

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

Class	Outstanding at May 3, 2023
Common stock, $0.0001 par value	1,366,017,570

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

Class	Outstanding at May 3, 2023
Preferred stock, Series A, no par value	3

Class	Outstanding at May 3, 2023
Preferred stock, Series B, $0.10 par value	36,667

Transitional Small Business Disclosure Format Yes ☐   No ☒

Documents Incorporated By Reference

None

ZERIFY, INC.

INDEX TO FORM 10-Q FILING

MARCH 31, 2023

TABLE OF CONTENTS

PART I	Financial Information	Page Number
Item 1.	Financial Information	3
	Condensed Consolidated Balance Sheets at March 31, 2023 (unaudited) and December 31, 2022	3
	Condensed Consolidated Statements of Operations for the Three months ended March 31, 2023 and 2022 (unaudited)	4
	Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the Three months ended March 31, 2023 and 2022 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Three months ended March 31, 2023 and 2022 (unaudited)	6
	Notes to the Condensed Consolidated Financial Statements for the Three months ended March 31, 2023 and 2022 (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24
PART II	Other Information	26
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	28
SIGNATURES		30
EX-31.1	Management Certification
EX-32.1	Sarbanes-Oxley Act

2

PART I

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

ZERIFY, INC.

CONDENSED CONSOLIDATED BALANCE SHEET

	March 31, 2023			December 31, 2022
	(Unaudited)
ASSETS
Current Assets:
Cash (includes VIE balances of $0 and $1,000, respectively)	$	229,000		$	192,000
Accounts receivable, net		20,000			20,000
Total current assets		249,000			212,000
Property and equipment, net		34,000			36,000
Operating lease right-of-use asset		41,000			54,000
Other assets		10,000			11,000
Total Assets	$	334,000		$	313,000
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current Liabilities:
Accounts payable and accrued expenses (includes VIE balances of $4,000 and $2,000, respectively)	$	1,336,000		$	1,160,000
Convertible notes payable, net of discount of $204,000 and $96,000, respectively (including $895,000 and $895,000 in default)		1,318,000			1,282,000
Convertible notes payable – related parties		268,000			268,000
Notes payable, net of discount of $136,000 and $323,000, respectively (including $1,930,000 and $1,930,000 in default, respectively) (includes VIE balances of $285,000 and $285,000, respectively)		2,966,000			2,826,000
Notes payable – related parties		693,000			693,000
Accrued interest (including $1,648,000 and $1,557,000 due to related parties, respectively) (includes VIE balances of $155,000 and $134,000, respectively)		5,958,000			5,865,000
Contingent payment obligation		1,500,000			1,500,000
VIE Financing obligation		1,263,000			1,263,000
Operating lease liability, current portion		44,000			56,000
Derivative liability		265,000			112,000
Total current liabilities		15,611,000			15,025,000
Notes payable, long-term portion		142,000			142,000
Operating lease liability, long-term portion		-			1,000
Total Liabilities		15,753,000			15,168,000
Commitments and Contingencies
Stockholders’ Deficit
Series A Preferred stock, no par value; 100 shares authorized; 3 shares issued and outstanding		987,000			987,000
Series B Preferred stock par value $0.10: 100,000,000 shares authorized; 36,667 shares issued and outstanding		4,000			4,000
Preferred stock series not designated par value $0.10: 10,000,000 shares authorized; none issued or outstanding		-			-
Common stock par value $0.0001: 4,000,000,000 shares authorized; 1,109,417,572 and 955,380,225 shares issued and outstanding, respectively		128,000			110,000
Additional paid-in capital		68,211,000			67,124,000
Accumulated deficit		(83,837,000	)		(82,190,000	)
Total Zerify, Inc. stockholders’ deficit		(14,507,000	)		(13,965,000	)
Noncontrolling interest in consolidated subsidiary		(912,000	)		(890,000	)
Total Stockholders’ Deficit		(15,419,000	)		(14,855,000	)
Total Liabilities and Stockholders’ Deficit	$	334,000		$	313,000

See accompanying notes to the condensed consolidated financial statements.

3

ZERIFY, INC.

 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

(UNAUDITED)

	For the Three Months Ended March 31,
	2023			2022
	(Unaudited)			(Unaudited)
Revenue	$	22,000		$	32,000
Operating expenses:
Cost of revenue		17,000			10,000
Selling, general and administrative expenses		1,166,000			2,636,000
Research and development		157,000			154,000
Total operating expenses		1,340,000			2,800,000
Loss from operations		(1,318,000	)		(2,768,000	)
Other income (expense):
Interest  and financing expenses (including $30,000 and $30,000 to related parties)		(140,000	)		(99,000	)
Debt discount amortization		(233,000	)		-
Change in fair value of derivative liabilities		22,000			-
Other income (expense), net		(351,000	)		(99,000	)
Net loss		(1,669,000	)		(2,867,000	)
Net loss attributable to noncontrolling interest		22,000			7,000
Net loss attributable to Zerify, Inc.	$	(1,647,000	)	$	(2,860,000	)
Net loss per common share
-Basic and diluted	$	(0.00	)	$	(0.00	)
Weighted average common shares outstanding
-Basic and diluted		1,176,808,681			955,465,906

See accompanying notes to the condensed consolidated financial statements.

4

ZERIFY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

(UNAUDITED)

Three months ended March 31, 2023
	Series A Preferred stock, no par value				Series B Preferred  stock, par value $0.10				Common stock, par value $0.0001				Additional Paid-in		Accumulated			Non controlling			Total Stockholders'
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Interest			Deficit
Balance at December 31, 2022		3	$	987,000		36,667	$	4,000		1,109,417,572	$	110,000	$	67,124,000	$	(82,190,000	)	$	(890,000	)	$	(14,855,000	)
Vested stock options														292,000								292,000
Sale of common shares and warrants		-		-		-		-		176,599,998		18,000		777,000		-			-			795,000
Proceeds on the sale of warrants		-		-		-		-		-		-		18,000		-			-			18,000
Net loss		-		-		-		-		-		-		-		(1,647,000	)		(22,000	)		(1,669,000	)
Balance at March 31, 2023  (unaudited)		3	$	987,000		36,667	$	4,000		1,286,017,570	$	128,000	$	68,211,000	$	(83,837,000	)	$	(912,000	)	$	(15,419,000	)

Three months ended March 31, 2022
	Series A Preferred stock, no per value				Series B Preferred stock, par value $0.10				Common stock, par value $0.0001				Additional Paid-in		Accumulated			Non controlling			Total Stockholders’
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Interest			Deficit
Balance at December 31, 2021		3	$	987,000		36,667	$	4,000		955,380,225	$	96,000	$	59,788,000	$	(71,595,000	)	$	(869,000	)	$	(11,589,000	)
Fair value of common stock issued for services		-		-		-		-		134,853		-		6,000								6,000
Fair value of vested options														1,636,000								1,636,000
Net loss																(2,860,000	)		(7,000	)		(2,867,000	)
Balance at March 31, 2022 (unaudited)		3	$	987,000		36,667	$	4,000		955,515,078	$	96,000	$	61,430,000		(74,455,000	)	$	(876,000	)	$	(12,814,000	)

See accompanying notes to the condensed consolidated financial statements.

5

 ZERIFY, INC.

CONSENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022

(UNAUDITED)

	Three Months Ended March 31,
	2023			2022
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net loss	$	(1,669,000	)	$	(2,867,000	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		2,000			-
Amortization of discount		233,000			-
Financing costs		21,000			-
Right-of-use asset		13,000			13,000
Fair value of common stock issued for services		-			6,000
Fair value of vested options and warrants		292,000			1,636,000
Change in fair value of derivative liabilities		(22,000	)		-
Changes in operating assets and liabilities:
Accounts receivable		-			10,000
Prepaid expenses and other assets		1,000			11,000
Accounts payable and accrued expenses		176,000			46,000
Accrued interest		93,000			99,000
Operating lease liability		(13,000	)		(14,000	)
Net cash used in operating activities		(873,000	)		(1,060,000	)
Cash flows from investing activities:
Purchases of property and equipment		-			(24,000	)
Net cash used in investing  activities		-			(24,000	)
Cash flows from financing activities:
Proceeds from sale of common stock		795,000			-
Proceeds from sale warrants		18,000			-
Proceeds from notes payable		154,000			-
Repayment of convertible note payable		(10,000	)		(20,000	)
Repayment of notes payable		(47,000	)		(6,000	)
Net cash provided by (used in) financing activities		910,000			(26,000	)
Net increase (decrease) in cash		37,000			(1,110,000	)
Cash at beginning of the year		192,000			2,084,000
Cash at end of the year	$	229,000		$	974,000
Supplemental disclosure of cash flow information:
Interest paid	$	-		$	-
Income tax paid	$	-		$	-
Supplemental disclosure of non-cash investing and financing transactions
Fair value of derivative upon issuance of convertible debt recorded as debt discount	$	176,000		$	-

See accompanying notes to the condensed consolidated financial statements. 

6

ZERIFY, INC.

NOTES TO THE CONDENSED CONSOLIDATD FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2023 AND 2022

Note 1 - Organization and Summary of Significant Accounting Policies

Zerify, Inc. (formerly known as StrikeForce Technologies, Inc.) (the “Company”), a software development and services company, 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 Company’s Board of Directors and by consent majority shareholder vote  approved  changing the Company’s name from StrikeForce Technologies, Inc. to Zerify, Inc.  The name change was made to  better reflect  the Company’s business plans centered around its   cyber security software products.  

On August 1, 2022,  FINRA approved the Company’s  Common Stock being 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 three months ended March 31, 2023 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2023. These financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2022 and notes thereto contained in the Annual Report on Form 10-K of the Company as filed with the SEC on April 14, 2023.

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.

The Company and BST have a management agreement pursuant to which BST shall remit a monthly management fee of $36,000 to the Company; when BST reaches $1,000,000 in financing, BST will owe the Company an additional monthly management fee of approximately $140,000 for a three-year period. The management fee is eliminated in consolidation. At March 31, 2023 and December 31, 2022, the amount of VIE cash on the accompanying condensed consolidated balance sheets can be used only to settle obligations of BST. The amounts of VIE accounts payable, VIE Notes Payable, VIE Accrued Interest, and VIE Financing Obligation have no recourse to the Company’s general creditors.

7

Going Concern

The Company has yet to establish any history of profitable operations. During the three months ended March 31, 2023, the Company incurred a net loss of $1,669,000 and used cash in operating activities of $873,000 and at March 31, 2023, the Company had a stockholders’ deficit of $15,419,000.  In addition, the Company is in default on notes payable and convertible notes payable in the aggregate amount of $2,825,000. 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, 2022 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 few 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 new 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. The Company’s ability to continue as a going concern is dependent upon its ability to increase its customer base and realize increased revenues. No assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, if needed, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution to its stockholders, in the case of equity financing.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. 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.

8

Revenue Recognition

The Company follows the guidance of Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.

The Company’s revenue consists of revenue from sales and support of our software products. Revenue primarily consists of sales of software licenses of our ProtectID®, GuardedID®, MobileTrust®, Zerify Meet™ and Zerify Defender™ 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. 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 the Company’s products.

The following tables present our revenue disaggregated by major product and service lines:

	Three Months Ended  March 31,
	2023		2022
Software	$	19,000	$	32,000
Service		3,000		-
Total revenue	$	22,000	$	32,000

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.

As of March 31, 2023 and December 31, 2022, the Company’s balance sheet includes Level 3 liabilities comprised of the fair value of embedded derivative liabilities of $265,000 and $112,000, respectively (see Note 8).

9

Derivative Financial Instruments

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The Company evaluates embedded conversion features within its convertible debt to determine whether the embedded conversion features should be bifurcated from the host instrument and accounted for as a derivative. The fair value of the embedded derivatives are determined using 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.

Stock-Based Compensation

The Company periodically issues stock options, warrants, and shares of common stock as share-based compensation to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for such grants issued and vesting based on FASB ASC 718, Compensation – Stock Compensation (Topic 718) whereby the value of the award is measured on the date of grant and recognized as compensation expense on the straight-line basis over the vesting period. The Company recognizes the fair value of stock-based compensation within its Statements of Operations with classification depending on the nature of the services rendered.

The fair value of the Company’s stock options and warrants are estimated using the Black-Scholes-Merton Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or restricted stock, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model and based on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense recorded in future periods.

Loss per Share

Basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding, plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued using the treasury stock method. Diluted loss per share excludes all potential common shares if their effect is anti-dilutive. The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive:

	Three Months Ended March 31,
	2023		2022
Options to purchase common stock		150,633,000		83,133,001
Warrants to purchase common stock		476,049,076		68,981,234
Convertible notes		101,745,573		21
Convertible Series B Preferred stock		1,255,638		1,284,394
Total		729,683,287		153,398,650

Concentrations

For the three months ended March 31, 2023, sales to two customers comprised 40% and 35% of revenues.  For the three months ended March 31, 2022, sales to four customers comprised 40%, 35%, 17% and 4% of revenues. At March 31, 2023, only two customers comprised more than 10% of accounts receivable.

The Company maintains the majority of its cash balances with one financial institution, in the form of demand deposits. At March 31, 2023, 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.

10

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”). The standard significantly changes how entities will measure credit losses for most financial assets, including accounts and notes receivable. The standard will replace today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. As a small business filer, ASU 2020-06 will be effective January 1, 2024, for the Company and the provisions of this update can be adopted using either the modified retrospective method or a fully retrospective method. Management is currently assessing the impact of adopting this standard on the Company’s financial statements and related disclosures.

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).” The ASU addresses how an issuer should account for modifications or an exchange of freestanding written call options classified as equity that is not within the scope of another Topic. For both public and private companies, the ASU is effective for fiscal years beginning after December 15, 2021. Transition is prospective. The Company has elected adoption of ASU 2021-04.

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.

11

Note 2 – Convertible Notes Payable

Convertible notes payable consisted of the following:

	March 31, 2023			December 31, 2022
Unsecured
(a) Convertible notes due to AL-Bank	$	373,000		$	383,000
(b) Convertible note with Diagonal Lending		254,000			100,000
Unsecured
(c) Convertible notes with fixed conversion features, in default		895,000			895,000
Convertible notes payable		1,522,000			1,378,000
Less debt discount		(204,000	)		(96,000	)
Total Convertible notes payable	$	1,318,000		$	1,282,000

(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 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 Denmark based financing institution. In September 2021, the Company executed a repayment agreement with AL-Bank requiring the Company to  make monthly payments of $10,000 to AL-Bank, starting in October 2021 and ending in March 2025, for a total of $400,000. Once the payments are made in full pursuant to  the repayment agreement, the remaining balance of $143,000 will  be forgiven and will be accounted for at that time. At December 31, 2022, the outstanding balance of the unsecured convertible notes payable amounted to $383,000. During the three months ended March 31, 2023, the Company made principal payments of $10,000. At March 31, 2023, the outstanding balance of the unsecured convertible notes payable amounted to $373,000. The convertible notes payable, including accrued interest are convertible to approximately two shares of the Company’s common stock.

(b) On December 15, 2022, the Company issued a convertible note payable to 1800 Diagonal Lending LLC (“Diagonal Lending”) for  $100,000.  The note is unsecured, bears interest at a rate of 12%, or 22% on default, is due on December 15, 2023, and has a repayment penalty of 120% of the unpaid principal and unpaid interest if prepaid within 180 days of December 15, 2022. The convertible note payable is convertible into shares of the Company’s common stock at a conversion price of 65% of the two lowest daily volume weighted average price (“VWAP”) of the Company’s common stock during the 15 trading days immediately preceding the conversion date.  At December 31, 2022, the outstanding balance of the unsecured convertible notes payable amounted to $100,000.  On January 19, 2023, February 6, 2023, and March 4, 2023, the Company issued additional convertible notes payable to Diagonal Lending for $45,000, $55,000, and $54,000, on comparable terms, respectively.  At March 31, 2023, the outstanding balance of the unsecured convertible notes payable amounted to $254,000.  The convertible notes payable, including accrued interest, are convertible to approximately 101,745,558 shares of the Company’s common stock. 

As the ultimate determination of shares of common stock to be issued upon conversion of these debentures can exceed the current number of available authorized shares, the Company determined that the conversion features of these debentures are not considered indexed to the Company’s own stock and characterized the fair value of the conversion features as a derivative liability (see Note 8).  During the three months ended March 31, 2023, of the incurred derivative liability of $175,000 related to the conversion feature of the debentures, $154,000 was accounted as debt discount and the remaining $21,000 as financing costs. The debt discount is being amortized to interest expense over the term of the corresponding debentures. As of December 31, 2022, the unamortized debt discount was $96,000. During the three months ended March 31,2023, $154,000 was added related to the convertible notes issued during the period, and $46,000 was recorded to interest expense. As of March 31, 2023, the unamortized debt discount was $204,000.

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(c) 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 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 March 31, 2023 and December 31, 2022, the outstanding balance of unsecured convertible notes payable amounted to $895,000 and $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.

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, 2023, as amended. The aggregate notes are convertible by the note holder into less than one share of the Company’s common stock at fixed conversion prices adjusted for applicable reverse stock splits. As of March 31, 2023 and December 31, 2022, the outstanding balance of the notes payable amounted to $268,000.

Note 4 – Notes Payable

Notes payable consisted of the following:

	March 31, 2023			December 31, 2022
Unsecured
(a) Notes payable - in default	$	1,639,000		$	1,639,000
(b) Notes payable issued by BST - in default		286,000			286,000
(c) Note payable - EID loan		148,000			149,000
Secured
(d) Notes payable – October 2022		1,000,000			1,000,000
(e) Notes payable - in default		6,000			6,000
(f) Notes payable – July 2022		165,000			211,000
Total notes payable principal outstanding		3,244,000			3,291,000
Less debt discount		(136,000	)		(323,000	)
Total notes payable		3,108,000			2,968,000
Less current portion of notes payable, net of discount		(2,966,000	)		(2,826,000	)
Long term notes payable	$	142,000		$	142,000

(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 March 31, 2023 and December 31, 2022, the outstanding balance of the notes payable was $1,639,000, respectively, and are in default.

(b) In 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 year ended December 31, 2022, the Company made principal payments of $24,000. At December 31, 2022 and March 31, 2023 the outstanding balance of the BlockSafe notes payable amounted to $286,000, 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 were deferred for twenty-four months and commenced 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.  As of December 31, 2022, the outstanding balance of the EID loan amounted to $149,000.  During the three months ended March 31, 2023, the Company made principal payments of $1,000. At March 31, 2023, the outstanding balance of the EID loan amounted to $148,000. The Company was in compliance with the terms of the EID loan as of March 31, 2023.

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(d) On October 26, 2022, the Company entered into a Securities Purchase 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 .

On the Closing Date (specifically October 26, 2022), the Company 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. 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 certain events, including a financing event. 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 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 $0.0045 per share which shall be earned in full as of the Closing Date of October 26, 2022. The  common stock purchase warrant has  a cashless exercise provision (unless there is a registration statement registering the underlying shares to the common stock purchase warrants).  As a result of these issuances and grants, the Company incurred the following (a) relative fair value of the warrants granted of $260,000; and (b) original issue discounts of $200,000 of the debentures for a total of $460,000 which was allocated as debt discount. The debt discount is being amortized to interest expense over the term of the corresponding debentures. As of December 31, 2022, the unamortized debt discount was $323,000.  During the three-month ended March 31, 2023, the Company recorded $187,000 as interest expense, leaving an unamortized debt discount balance of $136,000 at March 31, 2023. 

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, the Company’s Subsidiaries (specifically BlockSafe Technologies, Inc. and Cyber Security Risk Solutions, LLC) agreed to guarantee and act as surety for payment of the Note.

At March 31, 2023 and December 31, 2022, the outstanding balance of the note payable was $1,000,000, respectively.    

(e) In fiscal 2019 and 2020, the Company issued notes payable aggregating $468,000. The notes bear interest at a rate starting from 8% to 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 March 31, 2023 and December 31, 2022, the outstanding balance of the secured notes payable was $6,000 and $6,000, respectively, and is in default.

(f) In July 2022, the Company issued notes payable aggregating $275,000. The notes bear an average interest rate of 51% per annum, each agreement secured by substantially all of the assets of the Company and maturing in January 2024.  At December 31, 2022, the outstanding balance of the secured notes payable was $211,000.  During the three months ended March 31, 2023, the Company made principal payments of $46,000.  At March 31, 2023, the outstanding balance of the secured notes payable was $165,000.

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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, 2023, as amended. The outstanding balance of these notes payable at March 31, 2023 and December 31, 2022 amounted to $693,000.

Note 6 – VIE Financing Obligation

The Company is in the process of developing Coins or Tokens which are envisioned as 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 by promissory notes and subscription agreements that would be controlling with respect to any offer or sale of tokens 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 March 31, 2023 and December 31, 2022, the outstanding balance of financing obligations amounted to $1,263,000, respectively, to be paid in tokens.  At March 31, 2023 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 March 31, 2023, as the tokens do not exist, and any amounts received for tokens are not considered equity or revenue, management determined that 100% of the obligation of $1,263,000 is a liability to be settled by BlockSafe, through the issuance of tokens, or through other means if tokens are never issued.

Note 7 – Contingent Payment Obligation

On September 6, 2017, the Company entered into a litigation funding agreement with Therium Inc. (subsequently Therium Luxembourg) and VGL Capital, LLC (collectively the “Funders”) for financing of $1,500,000 from the Funders to allow the Company to pursue patent enforcement actions against alleged infringements of its patents. In exchange for the financing, 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 are to be paid only if the Company achieves recoveries of claim proceeds.  At March 31, 2023 and December 31, 2022, the Company has reflected the $1,500,000 received from the Funders as a contingent payment obligation to be paid only if patent enforced claim proceeds are recovered.

Note 8 – Derivative Financial Instruments

The FASB has issued authoritative guidance whereby instruments which do not have fixed settlement provisions are deemed to be derivative instruments. The Company has issued convertible debentures, and in accordance with the FASB authoritative guidance, the conversion features have been characterized as derivative liabilities to be re-measured at the end of every reporting period with the change in value reported in the statement of operations.

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The derivative liabilities were valued using the Binomial pricing model and/or Black Scholes pricing model with the following assumptions:

	At March 31, 2023			Issued 2023			At December 31, 2022
Stock Price	$	0.0026		$	0.0054		$	0.0055
Exercise Price	$	0.0034		$	0.0034		$	0.0034
Expected Life (Years)		0.79			1.00			0.80
Volatility		163	%		162	%		165	%
Dividend Yield		0	%		0	%		0	%
Risk-Free Interest Rate		4.64	%		4.84	%		4.73	%
Fair value:
Conversion feature	$	265,000		$	175,000		$	112,000

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

At December 31, 2022, the balance of the derivative liabilities was $112,000.  During the three months ended March 31, 2023, the Company recognized derivative liabilities of $175,000 upon issuance of additional secured convertible debentures (see Note 2). Pursuant to current accounting guidelines, the Company determined the fair value of the derivative liability on March 31, 2023 was $265,000, and as a result, recorded a change in fair value of $22,000 as a component of other income and expenses in the consolidated statements of operations. 

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Note 9 - Stockholders’ Deficit

Common Stock

During the three months ended March 31, 2023, pursuant to the Company’s Qualified Regulation A Offering, the Company issued 176,599,998 shares of common stock in exchange for cash of $795,000, net of direct fees and commissions. As part of the offering, the Company also issued warrants to certain investors and placement agent to purchase 35,319,999 shares of common stock. The warrants are fully vested, exercisable at $0.02 per share and will expire in five years.

Warrants

The table below summarizes the Company’s warrant activities for the three months ended March 31, 2023:

	Number of Warrant Shares		Exercise Price Range Per Share		Weighted Average Exercise Price
Balance, January 1, 2023		362,729,077	$ 0.0045-0.75		$	0.006
Granted		113,319,999		0.02		0.02
Canceled/Expired		-		-		-
Exercised		-		-		-
Balance outstanding and exercisable, March 31, 2023		476,049,076	$	0.0045 – 0.75	$	0.009

At March 31, 2023, the warrants had no intrinsic value.

The following table summarizes information concerning outstanding and exercisable warrants as of March 31, 2023:

		Warrants Outstanding and Exercisable
Range of Exercise Prices		Number Outstanding		Average Remaining Contractual Life (in years)		Weighted Average Exercise Price
$	0.0045		346,666,653		4.47	$	0.0045
	0.02		124,339,999		4.90		0.02
	0.05		5,000,000		3.48		0.50
	0.75		42,424		1.68		0.75
$	0.0045 - $0.75		476,049,076		4.46	$	0.009

During the three months ended March 31, 2023, pursuant to our private placement under Rule 506(b) of Regulation D, the Company sold 78,000,000 warrants to purchase shares of common stock in exchange for cash of $18,000, net of direct fees and commissions. The warrants are fully vested, exercisable at $0.02 per share, and expire in five years.

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Note 10 – Stock Options

The table below summarizes the Company’s stock option activities for the three months ended March 31, 2023:

	Number of Options Shares			Exercise Price  Range Per Share		Weighted Average Exercise Price
Balance, January 1, 2023		150,633,001		$	0.0045- 1,121,250,000	$	0.0307
Granted		-			-		-
Exercised		(1	)	$	1,121,250,000		1,121,250,000
Expired		-			-		-
Balance outstanding, March 31, 2023		150,633,000		$	0.0045-3.00	$	0.0306
Balance exercisable, March 31, 2023		120,591,791		$	0.0045-3.00	$	0.0371

The following table summarizes information concerning the Company’s stock options as of March 31, 2023:

		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
$	3.0000		518,000		3.80	$	3.0000		518,000		3.80	$	3.000
	2.0000		115,000		6.72		2.0000		115,000		6.72		2.0000
	0.0375		65,000,000		8.73		0.0375		65,000,000		8.73		0.0375
	0.005		17,500,000		7.84		0.0050		17,500,000		7.84		0.0050
	0.0045		67,500,000		9.72		0.0045		37,458,791		9.97		0.0045
$	0.0045 – 3.000		150,633,000		6.18	$	0.0307		120,591,791		6.18	$	0.0371

At March 31, 2023 and December 31, 2022, the intrinsic value of outstanding options was $0 and $76,000, respectively.

Note 11 – Commitment and Contingencies

Constantino Zanfardino, Derivatively on Behalf of Nominal Defendant Zerify, Inc., formerly known as Strikeforce Technologies, Inc. v. Mark L. Kay, Ramarao Pemmaraju and George Waller, Defendants, and Zerify, Inc. formerly known as Strikeforce Technologies, Inc., Nominal Defendant (U.S. District Court, District of New Jersey, Civil Action No. 2:22-cv-07258-MCA-AME)

On December 13, 2022, a claimed stockholder, Constantino Zanfardino (“Plaintiff”), filed a stockholder derivative Complaint against the Company’s directors, Mark L. Kay, Ramarao Pemmaraju and George Waller (collectively, “Defendants”). Plaintiff asserts claims against each of the Defendants for breach of fiduciary duty, waste of corporate assets and unjust enrichment resulting from Defendants’ alleged wrongdoing in their management of the Company. Through the litigation, Plaintiff seeks judgment against each of the Defendants in favor of the Company. On March 3, 2023, the Defendants’ filed a Memorandum of Law in Support of their Motion to Dismiss Plaintiff’s Complaint.  On March 10, 2023, the Defendants served a motion to dismiss the complaint upon the Plaintiff.  The Plaintiff’s opposition to the Defendants’ motion to dismiss is due on May 9, 2023.   Defendants are vigorously defending this litigation. At this time, it is not possible to estimate the ultimate outcome of this litigation.

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Onstream Media Corporation

The Company is currently engaged in several patent litigations brought by Onstream Media Corporation in the United States District Court, District of Wyoming. The parties are currently in negotiations to resolve all of the pending cases.

The cases and their filing dates follow:

Case	Date Filed
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00191 (DWY)	September 9, 2022
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00192 (DWY)	September 9, 2022
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00193 (DWY)	September 9, 2022
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00194 (DWY)	September 9, 2022
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00195 (DWY)	September 9, 2022
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00196 (DWY)	September 9, 2022
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00197 (DWY)	September 9, 2022

Note 12 – Subsequent Events

On May 2, 2023, The Company issued Supplemental No. 1 dated May 2, 2023 to the Offering Circular qualified on December 31, 2022.  The Company elected to affect the Qualified Offering of December 21, 2022 by: (a) reducing the Per Unit Price from $0.0225 to $0.018; and (b) reducing the per share price of each of the 5 shares from $0.0045 to $0.0036 that comprise each 1 Unit. The warrant that is also a part of each Unit as previously disclosed in the Qualified Offering remains with a $0.02 cent exercise price. The Unit Price and the Per Share Price are being made pursuant to Rule 253(g)(2) of the Securities Act of 1933, as amended (the “Securities Act’), which allows an up to 20% price change in a qualified offering statement. 

Subsequent to March 31, 2023, pursuant to the Company’s Qualified  Regulation A Offering, the Company issued 70,000,000 shares of common stock in exchange for cash of $261,000, net of direct fees and commissions. As part of the offering, the Company also issued warrants to certain investors and placement agent to purchase 14,000,000 shares of common stock. The warrants are fully vested, exercisable at $0.02 per share and will expire in five years.

On April 18, 2023, the Company entered into a consulting agreement for corporate advisory services.  The agreement is for a period of six months for which the Company agreed to issue 10,000,000 shares of common stock for the services. 

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

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

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

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

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

Background

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

On April 26, 2022, the Company applied for the Zerify trademark. ZERIFY™.  The trademark registration 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.   

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On June 14, 2022, the Board of Directors and holders of a majority of the voting power approved a resolution to change our 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 as reflected in the current cyber security software 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”).

Our executive office is located at 1090 King Georges Post Road, Suite 603, Edison, NJ 08837. Our telephone number is (732) 661-9641. At March 31, 2023, we had 14 employees. Our Company’s website is www.zerify.com (we are not including the information contained in our website as part of, nor should the information be relied upon or incorporated by reference into, this report on Form 10-Q).

Downturns in economic conditions, or other macroeconomic factors more generally, including inflation, could have adverse effects on our results of operations.

While we make our strategic planning decisions based on the assumption that the markets we are targeting will grow in the long term, our business is dependent, in large part on, and directly affected by, business cycles and other factors affecting the economy generally. Our industry depends on general economic conditions and other factors, including consumer spending and preferences, changes in inflation rates, supply chain issues and impediments should they arise for us, as the U.S. and various other major economies are now experiencing, consumer confidence, fuel costs, fuel availability, environmental impact, any consequences arising from the COVID 19 endemic governmental incentives and regulatory requirements, and political volatility, especially in cybersecurity growth markets.

In addition, the outbreak of hostilities between Russia and Ukraine and global reactions thereto have increased U.S. domestic and global energy prices. Oil supply disruptions related to the Russia-Ukraine conflict, and sanctions and other measures taken by the U.S. and its allies, could lead to higher costs for gas, food, and goods in the U.S. and other geographies and exacerbate the inflationary pressures on the worldwide economy, with potentially adverse impacts on our customers and on our business, results of operations and financial condition.

Results of Operations

FOR THE THREE MONTHS ENDED MARCH 31, 2023 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2022

Revenues for the three months ended March 31, 2023 were $22,000 compared to $32,000 for the three months ended March 31, 2022, a decrease of $10,000 or 31%. The decrease in revenues was primarily due to a decrease in revenues relating to our ProtectID®, GuardedID® and MobileTrust® and Zerify™ Meet products, as affected by impairments related to the economic consequences of the COVID-19 pandemic, and several of our clients changing their strategy. Revenues are derived from software and services.

Cost of revenues for the three months ended March 31, 2023 was $17,000 compared to $10,000 for the three months  ended March 31, 2022, an increase of $7,000 or 70%. The increase in cost of revenues was primarily due to an increase in the software fees related to our product offerings. Cost of revenues are fees and key fobs related to our revenues, and as a percentage of total revenues for the three months ended March 31, 2023 was 77.3% compared to 31.3% for the three months ended March 31, 2022.

Compensation, professional fees, and selling, general and administrative (collectively, “SGA”) expenses for the three months ended March 31, 2023 were $1,166,000 compared to $2,636,000 for the three months ended March 31, 2022, a decrease of $1,470,000. The decrease was due primarily to a decrease in stock-based compensation, offset by an increase in compensation/benefits expenses and professional fees. SG&A expenses consist primarily of salaries, benefits and overhead costs for executive and administrative personnel, insurance, fees for professional services, including consulting, legal, and accounting fees, plus travel costs and non-cash stock compensation expense for the issuance of stock options to employees and other general corporate expenses.

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Research and development expenses for the three months ended March 31, 2023 were $157,000 compared to $154,000 for the three months ended March 31, 2022, an increase of $3,000 or 2%. The increase was primarily due to a slight  increase in salaries and benefit expenses as compared to the prior year period.  The salaries, benefits and overhead costs of personnel conducting research and development of our software products primarily comprise our research and development expenses.

For the three months ended March 31, 2023, other expense was $351,000 as compared to other expense of $99,000 for the three months ended March 31, 2022, an increase in other expense of $252,000 or 255%. The increase was primarily due to debt discount amortization of $233,000 and financing expenses of $21,000, offset by the change in the fair value of derivative liabilities of 22,000, all of which did not occur in the prior year period.  Interest expenses increased $21,000, or 21%, due to our increased debt levels. 

Our net loss for the three months ended March 31, 2023 was $1,669,000 compared to $2,867,000 for three months ended March 31, 2022, a decrease of $1,198,000, or 42%. The decrease was primarily due to decreased revenue and increased other expenses, offset by decreased operating expense discussed above.     

Liquidity and Capital Resources

Our total current assets at March 31, 2023 were $249,000, as compared with $212,000 in total current assets at December 31, 2022. Additionally, we had a stockholders’ deficit in the amount of $15,419,000 at March 31, 2023 compared to a stockholders’ deficit of $14,855,000 at December 31, 2022. We have historically incurred recurring losses and have financed our operations through loans, principally from affiliated parties such as our directors, and from the proceeds of debt and equity financing. We financed our operations during the three months ended March 31, 2023 primarily from the cash balance from the year ended December 31, 2022 and from proceeds of equity instruments and notes payable issued during the three months ended March 31, 2023.

During the three months ended March 31, 2023, pursuant to our Qualified Regulation A Offering, we issued 176,599,998 shares of common stock in exchange for cash of $795,000, net of direct fees and commissions. As part of the offering, we also issued warrants to certain investors and placement agent to purchase 35,319,999 shares of common stock. The warrants are fully vested, exercisable at $0.02 per share and will expire in five years.

During the three months ended March 31, 2023, pursuant to our private placement under Rule 506(b) of Regulation D, we sold 78,000,000 warrants to purchase shares of common stock in exchange for cash of $18,000, net of direct fees and commissions. The warrants are fully vested, exercisable at $0.02 per share and will expire in five years.

Going Concern

We have yet to establish any history of profitable operations. During the three months ended March 31, 2023, the Company incurred a net loss of $1,669,000 and used cash in operating activities of $873,000 and at March 31, 2023, the Company had a stockholders’ deficit of $15,419,000.  In addition, we are in default on notes payable and convertible notes payable in the aggregate amount of $2,825,000. 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, 2022 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.

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Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, result of operations, liquidity or capital expenditures.

Critical Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  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 stock instruments issued for services, assumptions used in valuing derivative liabilities, the valuation allowance for deferred tax assets, and the accrual of potential liabilities. Actual results could differ from those estimates.

Revenue Recognition

The Company follows the guidance of Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.

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

The Company offers no discounts, rebates, rights of return, or other allowances to clients which would result in the establishment of reserves against service revenue. Additionally, to date, the Company has not incurred incremental costs in obtaining a client contract.

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

Share-Based Payments

The Company periodically issues stock options, warrants, and shares of common stock as share-based compensation to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for such grants issued and vesting based on FASB ASC 718, Compensation – Stock Compensation (Topic 718) whereby the value of the award is measured on the date of grant and recognized as compensation expense on the straight-line basis over the vesting period. The Company recognizes the fair value of stock-based compensation within its Statements of Operations with classification depending on the nature of the services rendered. 

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Derivative Financial Instruments

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The Company evaluates embedded conversion features within its convertible debt to determine whether the embedded conversion features should be bifurcated from the host instrument and accounted for as a derivative. The fair value of the embedded derivatives are determined using 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.

Recently Issued Accounting Pronouncements

Refer to Note 1 in the accompanying condensed consolidated financial statements.

Additional Information

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

ITEM 4. CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures.

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

We carried out an evaluation, with the participation of our management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (CFO) of the effectiveness our disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of March 31, 2023. Based upon that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are not effective at the reasonable assurance level due to the following material weaknesses:

1. We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act which is applicable to us as of and for the interim period ended March 31, 2023.  Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

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2. Our board of directors has no independent director or member with financial expertise which causes ineffective oversight of our external financial reporting and internal control over financial reporting.

3. We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

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

Remediation of Material Weaknesses

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

(b) Changes in Internal Control over Financial Reporting

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

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Constantino Zanfardino, Derivatively on Behalf of Nominal Defendant Zerify, Inc., formerly known as Strikeforce Technologies, Inc. v. Mark L. Kay, Ramarao Pemmaraju and George Waller, Defendants, and Zerify, Inc. formerly known as Strikeforce Technologies, Inc., Nominal Defendant (U.S. District Court, District of New Jersey, Civil Action No. 2:22-cv-07258-MCA-AME)

On December 13, 2022, a claimed stockholder, Constantino Zanfardino (“Plaintiff”),  filed a stockholder derivative Complaint against our directors, Mark L. Kay, Ramarao Pemmaraju and George Waller (collectively, “Defendants”). Plaintiff asserts claims against each of the Defendants for breach of fiduciary duty, waste of corporate assets and unjust enrichment resulting from Defendants’ alleged wrongdoing in their management of the Company.   Through the litigation, Plaintiff seeks judgment against each of the Defendants in favor of the Company. On March 3, 2023, the Defendants’ filed a Memorandum of Law in Support of their Motion to Dismiss Plaintiff’s Complaint.  On March 10, 2023, the Defendants served a motion to dismiss the complaint  upon the Plaintiff.  The Plaintiff’s opposition to the Defendants’ motion to dismiss is due on May 9, 2023.   Defendants are vigorously defending this litigation. At this time, it is not possible to estimate the ultimate outcome of this litigation.

Onstream Media Corporation

We are currently engaged in several patent litigations brought by Onstream Media Corporation in the United States District Court, District of Wyoming. The parties are currently in negotiations to resolve all of the pending cases.

The cases and their filing dates follow:

Case	Date Filed
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00191 (DWY)	September 9, 2022
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00192 (DWY)	September 9, 2022
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00193 (DWY)	September 9, 2022
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00194 (DWY)	September 9, 2022
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00195 (DWY)	September 9, 2022
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00196 (DWY)	September 9, 2022
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00197 (DWY)	September 9, 2022

ITEM 1A. RISK FACTORS

The risk factors required pursuant to Regulation S-K, Item 503(c) are not required for smaller reporting companies.

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ITEM 2. RECENT ISSUANCES OF UNREGISTERED SECURITIES

During the three months ended March 31, 2023, pursuant to the Company’s Qualified Regulation A Offering, the Company issued 176,599,998 shares of common stock in exchange for cash of $795,000, net of direct fees and commissions. As part of the offering, the Company also issued warrants to certain investors and placement agent to purchase 35,319,999 shares of common stock. The warrants are fully vested, exercisable at $0.02 per share and will expire in five years.

During the three months ended March 31, 2023, pursuant to our private placement under Rule 506(b) of Regulation D, the Company sold 78,000,000 warrants to purchase shares of common stock in exchange for cash of $18,000, net of direct fees and commissions. The warrants are fully vested, exercisable at $0.02 per share, and expire in five years.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

At March 31, 2023, the Company is in default on notes payable and convertible notes payable in the aggregate amount of $2,825,000.  We have not made various principal and interest payments on many of our debt obligations. We continue to seek work-out arrangements and applicable refinancing with new or revised debt or equity instruments. See Notes 2 and 4 to the condensed consolidated financial statements.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

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ITEM 6. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

Exhibit Number	Description
1.1	Placement Agreement dated July 7, 2020, by and between StrikeForce Technologies, Inc. and Spencer Clarke LLC (23)
1.2	Addendum to Placement Agreement dated November 11, 2020, by and between StrikeForce Technologies, Inc. and Spencer Clarke LLC (25)
1.3	Addendum to Placement Agreement dated April 20, 2021, by and between StrikeForce Technologies, Inc. and Spencer Clarke LLC (28)
3.1	Amended and Restated Certificate of Incorporation of StrikeForce Technologies, Inc. (1)
3.2	By-laws of StrikeForce Technologies, Inc. (1)
3.3	Amended By-laws of StrikeForce Technologies, Inc. (2)
3.4	Amended By-laws of StrikeForce Technologies, Inc. (3)
3.5	Articles of Amendment of StrikeForce Technologies, Inc. (2)
3.6	Amendments to Articles of Incorporation (6)
3.7	Amendments to Articles of Incorporation (7)
3.8	Registration of Classes of Securities (8)
3.9	Amendments to Articles of Incorporation (9)
3.10	Registration of Classes of Securities (10)
3.11	Amendments to Articles of Incorporation (11)
3.12	Registration of Classes of Securities (12)
3.13	Amendments to Articles of Incorporation (13)
3.14	Amendments to Articles of Incorporation (14)
3.15	Amendments to Articles of Incorporation (15)
3.16	Amendments to Articles of Incorporation (16)
3.17	Amendments to Articles of Incorporation (17)
3.18	Amendments to Articles of Incorporation (18)
3.19	Amendments to Articles of Incorporation (22)
3.20	Amendments to Articles of Incorporation (26)
4.1	Form of Subscription Agreement (25)
4.2	Form of Convertible Promissory Note-Related Party (24)
4.3	Form of Promissory Note-Related Party (24)
10.1	Employment Agreement dated as of May 20, 2003, by and between StrikeForce Technologies, Inc. and Mark L. Kay (1)
10.2	Irrevocable Waiver of Conversion Rights of Mark L. Kay (4)
10.3	Irrevocable Waiver of Conversion Rights of Ramarao Pemmaraju (4)
10.4	Irrevocable Waiver of Conversion Rights of George Waller (4)
10.5	CFO Consultant Agreement with Philip E. Blocker (4)
10.6	2012 Stock Option Plan (5)
10.7	Asset Purchase Agreement between StrikeForce Technologies, Inc. and Cyber Safety, Inc., dated August 24, 2015 (18)
10.8	Amendment to the Asset Purchase Agreement and Distributor and Reseller Agreement between StrikeForce Technologies, Inc. and Cyber Safety, Inc. (19)
10.9	Execution of Litigation Funding Agreement (20)
10.10	BlockSafe Technologies, Inc. Intellectual Property License Agreement (21)
10.11	BlockSafe Technologies, Inc. Management Agreement (21)
10.12	BlockSafe Technologies, Inc. Amended Management Agreement (21)
10.13	Software License and Development Agreement, amendment two, by and between StrikeForce Technologies, Inc. and Intersections, Inc., dated October 1, 2010 (24)
10.14	Form of Settlement and Exchange Agreement (26)
10.15	Cybersecurity Risk Solutions LLC Member Interest Purchase Agreement, dated April 15, 2021 (27)
21.1	List of Ownership Interests
31.1	Certification by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act, promulgated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (29)
31.2	Certification by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a) of the Exchange Act, promulgated pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (29)
32.1	Certification by Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code, promulgated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (29)
32.2	Certification by Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b) of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the United States Code, promulgated pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (29)
101.INS	Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document). (29)
101.SCH	Inline XBRL Taxonomy Extension Schema Document. (29)
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document. (29)
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document. (29)
101.LAB	Inline XBRL Taxonomy Extension Labels Linkbase Document. (29)
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document. (29)
104	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). (29)

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(1)	Filed as an exhibit to the Registrant’s Form SB-2 dated as of May 11, 2005 and incorporated herein by reference.
(2)	Filed as an exhibit to the Registrant’s Form 8-K dated February 4, 2011 and incorporated herein by reference.
(3)	Filed as an exhibit to the Registrant’s Form 10-Q dated December 13, 2010 and incorporated herein by reference.
(4)	Filed as an exhibit to the Registrant’s Form S-1/A dated July 31, 2012 and incorporated herein by reference.
(5)	Filed in conjunction with the Registrant’s Form 14A filed October 5, 2012 and incorporated herein by reference.
(6)	Filed as an exhibit to the Registrant’s Form 8-K dated February 5, 2013 and incorporated herein by reference.
(7)	Filed as an exhibit to the Registrant’s Form 8-K dated May 14, 2013 and incorporated herein by reference.
(8)	Filed as an exhibit to the Registrant’s Form 8-A dated July 29, 2013 and incorporated herein by reference.
(9)	Filed as an exhibit to the Registrant’s Form 8-K dated August 22, 2013 and incorporated herein by reference.
(10)	Filed as an exhibit to the Registrant’s Form 8-A dated October 3, 2013 and incorporated herein by reference.
(11)	Filed as an exhibit to the Registrant’s Form 8-K dated October 3, 2013 and incorporated herein by reference.
(12)	Filed as an exhibit to the Registrant’s Form 8-A dated December 31, 2013 and incorporated herein by reference.
(13)	Filed as an exhibit to the Registrant’s Form 8-K dated December 31, 2013 and incorporated herein by reference.
(14)	Filed as an exhibit to the Registrant’s Form 8-K dated March 18, 2014 and incorporated herein by reference.
(15)	Filed as an exhibit to the Registrant’s Form 8-K dated December 22, 2014 and incorporated herein by reference.
(16)	Filed as an exhibit to the Registrant’s Form 8-K dated February 13, 2015 and incorporated herein by reference.
(17)	Filed as an exhibit to the Registrant’s Form 8-K dated August 4, 2015 and incorporated herein by reference.
(18)	Filed as an exhibit to the Registrant’s Form 8-K dated August 24, 2015 and incorporated herein by reference.
(19)	Filed as an exhibit to the Registrant’s Form 8-K dated February 2, 2016 and incorporated herein by reference.
(20)	Filed as an exhibit to the Registrant’s Form 8-K dated September 11, 2017 and incorporated herein by reference.
(21)	Filed as an exhibit to the Registrant’s Form 10-Q dated June 30, 2018 and incorporated herein by reference.
(22)	Filed as an exhibit to the Registrant’s Form 8-K dated June 25, 2020 and incorporated herein by reference.
(23)	Filed as an exhibit to the Registrant’s Form 1-A dated July 13, 2020 and incorporated herein by reference.
(24)	Filed as an exhibit to the Registrant’s Form 1-A.1 dated September 11, 2020 and incorporated herein by reference.
(25)	Filed as an exhibit to the Registrant’s Form 1-A.1 dated November 12, 2020 and incorporated herein by reference.
(26)	Filed as an exhibit to the Registrant’s Form 8-K dated February 8, 2021 and incorporated herein by reference.
(27)	Filed as an exhibit to the Registrant’s Form 8-K dated April 19, 2021 and incorporated herein by reference.
(28)	Filed as an exhibit to the Registrant’s Form 1A/A- dated April 26, 2021 and incorporated herein by reference.
(29)	Filed herewith.

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SIGNATURES

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

	ZERIFY, INC.
Dated: May 15, 2023	By:	/s/ Mark L. Kay
		Mark L. Kay
		Chief Executive Officer

Dated: May 15, 2023	By:	/s/ Philip E. Blocker
		Philip E. Blocker
		Chief Financial Officer and Principal Accounting Officer

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EX-31.1

EXHIBIT 31.1

CERTIFICATION

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

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

OF THE SECURITIES EXCHANGE ACT OF 1934

I, Mark L. Kay, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Zerify, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: May 15, 2023	/s/ Mark L. Kay
	Mark L. Kay,
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

CERTIFICATION OF CHIEF FINANCIAL OFFICER

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

OF THE SECURITIES EXCHANGE ACT OF 1934

I, Philip E. Blocker, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Zerify, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: May 15, 2023	/s/ Philip E. Blocker
	Philip E. Blocker,
	Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT

TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

—————————————

In connection with the Quarterly Report of Zerify, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mark L. Kay, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2001, that:

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

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

Dated: May 15, 2023	By:	/s/ Mark L. Kay
		Mark L. Kay,
		Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT

TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

————————————

In connection with the Quarterly Report of Zerify, Inc. (the “Company”) on Form 10-Q for the quarter ended March 31, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Philip E. Blocker, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2001, that:

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

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

Dated: May 15, 2023	By:	/s/ Philip E. Blocker
		Philip E. Blocker
		Chief Financial Officer

XML

Cover - shares	3 Months Ended
	Mar. 31, 2023	May 03, 2023
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	Mar. 31, 2023
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2023
Entity Common Stock Shares Outstanding		1,366,017,570
Document Quarterly Report	true
Document Transition Report	false
Entity Incorporation State Country Code	WY
Entity Tax Identification Number	22-3827597
Entity Interactive Data Current	Yes
Entity File Number	000-55012
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
Security 12b Title	Common Stock, $0.0001 par value
Trading Symbol	ZRFY

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Current Assets:
Cash (includes VIE balances of $0 and $1,000, respectively)	$ 229,000	$ 192,000
Accounts receivable, net	20,000	20,000
Total current assets	249,000	212,000
Property and equipment, net	34,000	36,000
Operating lease right-of-use asset	41,000	54,000
Other assets	10,000	11,000
Total Assets	334,000	313,000
Current Liabilities:
Accounts payable and accrued expenses (includes VIE balances of $4,000 and $2,000, respectively)	1,336,000	1,160,000
Convertible notes payable, net of discount of $204,000 and $96,000, respectively (including $895,000 and $895,000 in default)	1,318,000	1,282,000
Convertible notes payable - related parties	268,000	268,000
Notes payable, net of discount of $136,000 and $323,000, respectively (including $1,930,000 and $1,930,000 in default, respectively) (includes VIE balances of $285,000 and $285,000, respectively)	2,966,000	2,826,000
Notes payable - related parties	693,000	693,000
Accrued interest (including $1,648,000 and $1,557,000 due to related parties, respectively) (includes VIE balances of $155,000 and $134,000, respectively)	5,958,000	5,865,000
Contingent payment obligation	1,500,000	1,500,000
VIE Financing obligation	1,263,000	1,263,000
Operating lease liability, current portion	44,000	56,000
Derivative liability	265,000	112,000
Total current liabilities	15,611,000	15,025,000
Notes payable, long-term portion	142,000	142,000
Operating lease liability, long-term portion	0	1,000
Total Liabilities	15,753,000	15,168,000
Stockholders' Deficit
Preferred stock, value	0	0
Common stock par value $0.0001: 4,000,000,000 shares authorized; 1,109,417,572 and 955,380,225 shares issued and outstanding, respectively	128,000	110,000
Additional paid-in capital	68,211,000	67,124,000
Accumulated deficit	(83,837,000)	(82,190,000)
Total Zerify, Inc. stockholders' deficit	(14,507,000)	(13,965,000)
Noncontrolling interest in consolidated subsidiary	(912,000)	(890,000)
Total Stockholders' Deficit	(15,419,000)	(14,855,000)
Total Liabilities and Stockholders' Deficit	334,000	313,000
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

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Cash VIE	$ 0	$ 1,000
Current Liabilities
Accounts payables (includes VIE balances)	4,000	2,000
Convertible notes payable, default	204,000	96,000
Convertible notes payable, default (Including )	895,000	895,000
Notes payable, default	136,000	323,000
Notes payable, default including	1,930,000	1,930,000
Notes payable, Including VIE	285,000	285,000
Accrued interest Including	1,648,000	1,557,000
Accrued interest Includin VIE	$ 155,000	$ 134,000
Stockholders' Deficit
Preferred Stock, share par value	$ 0.10	$ 0.10
Preferred stock, shares not designated	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	1,109,417,572	955,380,225
Common stock, shares outstanding	1,109,417,572	955,380,225
Preferred Stock Series A [Member]
Stockholders' Deficit
Preferred Stock, share par value	$ 0	$ 0
Preferred stock, shares not designated	100	100
Preferred stock, shares issued	3	3
Preferred stock, shares outstanding	3	3
Preferred Stock Series B [Member]
Stockholders' Deficit
Preferred Stock, share par value	$ 0.10	$ 0.10
Preferred stock, shares not designated	100,000,000	100,000,000
Preferred stock, shares issued	36,667	36,667
Preferred stock, shares outstanding	36,667	36,667

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Revenue	$ 22,000	$ 32,000
Operating expenses:
Cost of revenue	17,000	10,000
Selling, general and administrative expenses	1,166,000	2,636,000
Research and development	157,000	154,000
Total operating expenses	1,340,000	2,800,000
Loss from operations	(1,318,000)	(2,768,000)
Other income (expense):
Interest and financing expenses (including $30,000 and $30,000 to related parties)	(140,000)	(99,000)
Debt discount amortization	(233,000)	0
Change in fair value of derivative liabilities	22,000	0
Other income (expense), net	(351,000)	(99,000)
Net loss	(1,669,000)	(2,867,000)
Net loss attributable to noncontrolling interest	22,000	7,000
Net loss attributable to Zerify, Inc.	$ (1,647,000)	$ (2,860,000)
Net loss per common share
-Basic and diluted	$ (0.00)	$ (0.00)
Weighted average common shares outstanding
-Basic and diluted	1,176,808,681	955,465,906

XML

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT (UNAUDITED) - USD ($)	Total	Series A Preferred Stock	Series B Preferred Stock	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Noncontrolling Interest
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)
Fair value of common stock issued for services, shares				134,853
Fair value of common stock issued for services, amount	6,000				6,000
Fair value of vested options	1,636,000				1,636,000
Net loss	(2,867,000)					(2,860,000)	(7,000)
Balance, shares at Mar. 31, 2022		3	36,667	955,515,078
Balance, amount at Mar. 31, 2022	(12,814,000)	$ 987,000	$ 4,000	$ 96,000	61,430,000	(74,455,000)	(876,000)
Balance, shares at Dec. 31, 2022		3	36,667	1,109,417,572
Balance, amount at Dec. 31, 2022	(14,855,000)	$ 987,000	$ 4,000	$ 110,000	67,124,000	(82,190,000)	(890,000)
Net loss	(1,669,000)	0	0	$ 0	0	(1,647,000)	(22,000)
Vested stock options	292,000				292,000
Sale of common shares and warrants, shares				176,599,998
Sale of common shares and warrants, amount	795,000	0	0	$ 18,000	777,000	0	0
Proceeds on the sale of warrants	18,000	$ 0	$ 0	$ 0	18,000	0	0
Balance, shares at Mar. 31, 2023		3	36,667	1,286,017,570
Balance, amount at Mar. 31, 2023	$ (15,419,000)	$ 987,000	$ 4,000	$ 128,000	$ 68,211,000	$ (83,837,000)	$ (912,000)

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Cash flows from operating activities:
Net loss	$ (1,669,000)	$ (2,867,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	2,000	0
Amortization of discount	233,000	0
Financing costs	21,000	0
Right-of-use asset	13,000	13,000
Fair value of common stock issued for services	0	6,000
Fair value of vested options and warrants	292,000	1,636,000
Change in fair value of derivative liabilities	(22,000)	0
Changes in operating assets and liabilities:
Accounts receivable	0	10,000
Prepaid expenses and other assets	1,000	11,000
Accounts payable and accrued expenses	176,000	46,000
Accrued interest	93,000	99,000
Operating lease liability	(13,000)	(14,000)
Net cash used in operating activities	(873,000)	(1,060,000)
Cash flows from investing activities:
Purchases of property and equipment	0	(24,000)
Cash flows from investing activities	0	(24,000)
Cash flows from financing activities:
Proceeds from sale of common stock	795,000	0
Proceeds from sale warrants	18,000	0
Proceeds from notes payable	154,000	0
Repayment of convertible note payable	(10,000)	(20,000)
Repayment of notes payable	(47,000)	(6,000)
Net cash provided by (used in) financing activities	910,000	(26,000)
Net increase (decrease) in cash	37,000	(1,110,000)
Cash at beginning of the year	192,000	2,084,000
Cash at end of the year	229,000	974,000
Supplemental disclosure of cash flow information:
Interest paid	0	0
Income tax paid	0	0
Supplemental disclosure of non-cash investing and financing transactions
Fair value of derivative upon issuance of convertible debt recorded as debt discount	$ 176,000	$ 0

XML

Organization and Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2023

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”), a software development and services company, 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 Company’s Board of Directors and by consent majority shareholder vote  approved  changing the Company’s name from StrikeForce Technologies, Inc. to Zerify, Inc.  The name change was made to  better reflect  the Company’s business plans centered around its   cyber security software products.  

On August 1, 2022,  FINRA approved the Company’s  Common Stock being 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 three months ended March 31, 2023 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2023. These financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2022 and notes thereto contained in the Annual Report on Form 10-K of the Company as filed with the SEC on April 14, 2023.

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.

The Company and BST have a management agreement pursuant to which BST shall remit a monthly management fee of $36,000 to the Company; when BST reaches $1,000,000 in financing, BST will owe the Company an additional monthly management fee of approximately $140,000 for a three-year period. The management fee is eliminated in consolidation. At March 31, 2023 and December 31, 2022, the amount of VIE cash on the accompanying condensed consolidated balance sheets can be used only to settle obligations of BST. The amounts of VIE accounts payable, VIE Notes Payable, VIE Accrued Interest, and VIE Financing Obligation have no recourse to the Company’s general creditors.

Going Concern

The Company has yet to establish any history of profitable operations. During the three months ended March 31, 2023, the Company incurred a net loss of $1,669,000 and used cash in operating activities of $873,000 and at March 31, 2023, the Company had a stockholders’ deficit of $15,419,000.  In addition, the Company is in default on notes payable and convertible notes payable in the aggregate amount of $2,825,000. 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, 2022 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 few 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 new 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. The Company’s ability to continue as a going concern is dependent upon its ability to increase its customer base and realize increased revenues. No assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, if needed, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution to its stockholders, in the case of equity financing.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. 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. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.

The Company’s revenue consists of revenue from sales and support of our software products. Revenue primarily consists of sales of software licenses of our ProtectID®, GuardedID®, MobileTrust®, Zerify Meet™ and Zerify Defender™ 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. 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 the Company’s products.

The following tables present our revenue disaggregated by major product and service lines:

	Three Months Ended  March 31,
	2023		2022
Software	$	19,000	$	32,000
Service		3,000		-
Total revenue	$	22,000	$	32,000

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.

As of March 31, 2023 and December 31, 2022, the Company’s balance sheet includes Level 3 liabilities comprised of the fair value of embedded derivative liabilities of $265,000 and $112,000, respectively (see Note 8).

Derivative Financial Instruments

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The Company evaluates embedded conversion features within its convertible debt to determine whether the embedded conversion features should be bifurcated from the host instrument and accounted for as a derivative. The fair value of the embedded derivatives are determined using 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.

Stock-Based Compensation

The Company periodically issues stock options, warrants, and shares of common stock as share-based compensation to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for such grants issued and vesting based on FASB ASC 718, Compensation – Stock Compensation (Topic 718) whereby the value of the award is measured on the date of grant and recognized as compensation expense on the straight-line basis over the vesting period. The Company recognizes the fair value of stock-based compensation within its Statements of Operations with classification depending on the nature of the services rendered.

The fair value of the Company’s stock options and warrants are estimated using the Black-Scholes-Merton Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or restricted stock, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model and based on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense recorded in future periods.

Loss per Share

Basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding, plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued using the treasury stock method. Diluted loss per share excludes all potential common shares if their effect is anti-dilutive. The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive:

	Three Months Ended March 31,
	2023		2022
Options to purchase common stock		150,633,000		83,133,001
Warrants to purchase common stock		476,049,076		68,981,234
Convertible notes		101,745,573		21
Convertible Series B Preferred stock		1,255,638		1,284,394
Total		729,683,287		153,398,650

Concentrations

For the three months ended March 31, 2023, sales to two customers comprised 40% and 35% of revenues.  For the three months ended March 31, 2022, sales to four customers comprised 40%, 35%, 17% and 4% of revenues. At March 31, 2023, only two customers comprised more than 10% of accounts receivable.

The Company maintains the majority of its cash balances with one financial institution, in the form of demand deposits. At March 31, 2023, 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”). The standard significantly changes how entities will measure credit losses for most financial assets, including accounts and notes receivable. The standard will replace today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. As a small business filer, ASU 2020-06 will be effective January 1, 2024, for the Company and the provisions of this update can be adopted using either the modified retrospective method or a fully retrospective method. Management is currently assessing the impact of adopting this standard on the Company’s financial statements and related disclosures.

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).” The ASU addresses how an issuer should account for modifications or an exchange of freestanding written call options classified as equity that is not within the scope of another Topic. For both public and private companies, the ASU is effective for fiscal years beginning after December 15, 2021. Transition is prospective. The Company has elected adoption of ASU 2021-04.

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.

XML

Convertible Notes Payable

3 Months Ended

Mar. 31, 2023

Convertible Notes Payable

Convertible Notes Payable

Note 2 – Convertible Notes Payable

Convertible notes payable consisted of the following:

	March 31, 2023			December 31, 2022
Unsecured
(a) Convertible notes due to AL-Bank	$	373,000		$	383,000
(b) Convertible note with Diagonal Lending		254,000			100,000
Unsecured
(c) Convertible notes with fixed conversion features, in default		895,000			895,000
Convertible notes payable		1,522,000			1,378,000
Less debt discount		(204,000	)		(96,000	)
Total Convertible notes payable	$	1,318,000		$	1,282,000

(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 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 Denmark based financing institution. In September 2021, the Company executed a repayment agreement with AL-Bank requiring the Company to  make monthly payments of $10,000 to AL-Bank, starting in October 2021 and ending in March 2025, for a total of $400,000. Once the payments are made in full pursuant to  the repayment agreement, the remaining balance of $143,000 will  be forgiven and will be accounted for at that time. At December 31, 2022, the outstanding balance of the unsecured convertible notes payable amounted to $383,000. During the three months ended March 31, 2023, the Company made principal payments of $10,000. At March 31, 2023, the outstanding balance of the unsecured convertible notes payable amounted to $373,000. The convertible notes payable, including accrued interest are convertible to approximately two shares of the Company’s common stock.

(b) On December 15, 2022, the Company issued a convertible note payable to 1800 Diagonal Lending LLC (“Diagonal Lending”) for  $100,000.  The note is unsecured, bears interest at a rate of 12%, or 22% on default, is due on December 15, 2023, and has a repayment penalty of 120% of the unpaid principal and unpaid interest if prepaid within 180 days of December 15, 2022. The convertible note payable is convertible into shares of the Company’s common stock at a conversion price of 65% of the two lowest daily volume weighted average price (“VWAP”) of the Company’s common stock during the 15 trading days immediately preceding the conversion date.  At December 31, 2022, the outstanding balance of the unsecured convertible notes payable amounted to $100,000.  On January 19, 2023, February 6, 2023, and March 4, 2023, the Company issued additional convertible notes payable to Diagonal Lending for $45,000, $55,000, and $54,000, on comparable terms, respectively.  At March 31, 2023, the outstanding balance of the unsecured convertible notes payable amounted to $254,000.  The convertible notes payable, including accrued interest, are convertible to approximately 101,745,558 shares of the Company’s common stock. 

As the ultimate determination of shares of common stock to be issued upon conversion of these debentures can exceed the current number of available authorized shares, the Company determined that the conversion features of these debentures are not considered indexed to the Company’s own stock and characterized the fair value of the conversion features as a derivative liability (see Note 8).  During the three months ended March 31, 2023, of the incurred derivative liability of $175,000 related to the conversion feature of the debentures, $154,000 was accounted as debt discount and the remaining $21,000 as financing costs. The debt discount is being amortized to interest expense over the term of the corresponding debentures. As of December 31, 2022, the unamortized debt discount was $96,000. During the three months ended March 31,2023, $154,000 was added related to the convertible notes issued during the period, and $46,000 was recorded to interest expense. As of March 31, 2023, the unamortized debt discount was $204,000.

(c) 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 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 March 31, 2023 and December 31, 2022, the outstanding balance of unsecured convertible notes payable amounted to $895,000 and $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.

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Convertible Notes Payable Related Parties

3 Months Ended

Mar. 31, 2023

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, 2023, as amended. The aggregate notes are convertible by the note holder into less than one share of the Company’s common stock at fixed conversion prices adjusted for applicable reverse stock splits. As of March 31, 2023 and December 31, 2022, the outstanding balance of the notes payable amounted to $268,000.

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Notes Payable

3 Months Ended

Mar. 31, 2023

Notes Payable

Notes Payable

Note 4 – Notes Payable

Notes payable consisted of the following:

	March 31, 2023			December 31, 2022
Unsecured
(a) Notes payable - in default	$	1,639,000		$	1,639,000
(b) Notes payable issued by BST - in default		286,000			286,000
(c) Note payable - EID loan		148,000			149,000
Secured
(d) Notes payable – October 2022		1,000,000			1,000,000
(e) Notes payable - in default		6,000			6,000
(f) Notes payable – July 2022		165,000			211,000
Total notes payable principal outstanding		3,244,000			3,291,000
Less debt discount		(136,000	)		(323,000	)
Total notes payable		3,108,000			2,968,000
Less current portion of notes payable, net of discount		(2,966,000	)		(2,826,000	)
Long term notes payable	$	142,000		$	142,000

(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 March 31, 2023 and December 31, 2022, the outstanding balance of the notes payable was $1,639,000, respectively, and are in default.

(b) In 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 year ended December 31, 2022, the Company made principal payments of $24,000. At December 31, 2022 and March 31, 2023 the outstanding balance of the BlockSafe notes payable amounted to $286,000, 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 were deferred for twenty-four months and commenced 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.  As of December 31, 2022, the outstanding balance of the EID loan amounted to $149,000.  During the three months ended March 31, 2023, the Company made principal payments of $1,000. At March 31, 2023, the outstanding balance of the EID loan amounted to $148,000. The Company was in compliance with the terms of the EID loan as of March 31, 2023.

(d) On October 26, 2022, the Company entered into a Securities Purchase 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 .

On the Closing Date (specifically October 26, 2022), the Company 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. 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 certain events, including a financing event. 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 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 $0.0045 per share which shall be earned in full as of the Closing Date of October 26, 2022. The  common stock purchase warrant has  a cashless exercise provision (unless there is a registration statement registering the underlying shares to the common stock purchase warrants).  As a result of these issuances and grants, the Company incurred the following (a) relative fair value of the warrants granted of $260,000; and (b) original issue discounts of $200,000 of the debentures for a total of $460,000 which was allocated as debt discount. The debt discount is being amortized to interest expense over the term of the corresponding debentures. As of December 31, 2022, the unamortized debt discount was $323,000.  During the three-month ended March 31, 2023, the Company recorded $187,000 as interest expense, leaving an unamortized debt discount balance of $136,000 at March 31, 2023. 

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, the Company’s Subsidiaries (specifically BlockSafe Technologies, Inc. and Cyber Security Risk Solutions, LLC) agreed to guarantee and act as surety for payment of the Note.

At March 31, 2023 and December 31, 2022, the outstanding balance of the note payable was $1,000,000, respectively.    

(e) In fiscal 2019 and 2020, the Company issued notes payable aggregating $468,000. The notes bear interest at a rate starting from 8% to 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 March 31, 2023 and December 31, 2022, the outstanding balance of the secured notes payable was $6,000 and $6,000, respectively, and is in default.

(f) In July 2022, the Company issued notes payable aggregating $275,000. The notes bear an average interest rate of 51% per annum, each agreement secured by substantially all of the assets of the Company and maturing in January 2024.  At December 31, 2022, the outstanding balance of the secured notes payable was $211,000.  During the three months ended March 31, 2023, the Company made principal payments of $46,000.  At March 31, 2023, the outstanding balance of the secured notes payable was $165,000.

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Notes Payable Related Parties

3 Months Ended

Mar. 31, 2023

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, 2023, as amended. The outstanding balance of these notes payable at March 31, 2023 and December 31, 2022 amounted to $693,000.

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VIE Financing Obligation

3 Months Ended

Mar. 31, 2023

VIE Financing Obligation

VIE Financing Obligation

Note 6 – VIE Financing Obligation

The Company is in the process of developing Coins or Tokens which are envisioned as 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 by promissory notes and subscription agreements that would be controlling with respect to any offer or sale of tokens 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 March 31, 2023 and December 31, 2022, the outstanding balance of financing obligations amounted to $1,263,000, respectively, to be paid in tokens.  At March 31, 2023 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 March 31, 2023, as the tokens do not exist, and any amounts received for tokens are not considered equity or revenue, management determined that 100% of the obligation of $1,263,000 is a liability to be settled by BlockSafe, through the issuance of tokens, or through other means if tokens are never issued.

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Contingent Payment Obligation

3 Months Ended

Mar. 31, 2023

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”) for financing of $1,500,000 from the Funders to allow the Company to pursue patent enforcement actions against alleged infringements of its patents. In exchange for the financing, 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 are to be paid only if the Company achieves recoveries of claim proceeds.  At March 31, 2023 and December 31, 2022, the Company has reflected the $1,500,000 received from the Funders as a contingent payment obligation to be paid only if patent enforced claim proceeds are recovered.

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Derivative Financial Instruments

3 Months Ended

Mar. 31, 2023

Derivative Financial Instruments

Derivative Financial Instruments

Note 8 – Derivative Financial Instruments

The FASB has issued authoritative guidance whereby instruments which do not have fixed settlement provisions are deemed to be derivative instruments. The Company has issued convertible debentures, and in accordance with the FASB authoritative guidance, the conversion features have been characterized as derivative liabilities to be re-measured at the end of every reporting period with the change in value reported in the statement of operations.

The derivative liabilities were valued using the Binomial pricing model and/or Black Scholes pricing model with the following assumptions:

	At March 31, 2023			Issued 2023			At December 31, 2022
Stock Price	$	0.0026		$	0.0054		$	0.0055
Exercise Price	$	0.0034		$	0.0034		$	0.0034
Expected Life (Years)		0.79			1.00			0.80
Volatility		163	%		162	%		165	%
Dividend Yield		0	%		0	%		0	%
Risk-Free Interest Rate		4.64	%		4.84	%		4.73	%
Fair value:
Conversion feature	$	265,000		$	175,000		$	112,000

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

At December 31, 2022, the balance of the derivative liabilities was $112,000.  During the three months ended March 31, 2023, the Company recognized derivative liabilities of $175,000 upon issuance of additional secured convertible debentures (see Note 2). Pursuant to current accounting guidelines, the Company determined the fair value of the derivative liability on March 31, 2023 was $265,000, and as a result, recorded a change in fair value of $22,000 as a component of other income and expenses in the consolidated statements of operations. 

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Stockholders Deficit

3 Months Ended

Mar. 31, 2023

Stockholders Deficit

Stockholders' Deficit

Note 9 - Stockholders’ Deficit

Common Stock

During the three months ended March 31, 2023, pursuant to the Company’s Qualified Regulation A Offering, the Company issued 176,599,998 shares of common stock in exchange for cash of $795,000, net of direct fees and commissions. As part of the offering, the Company also issued warrants to certain investors and placement agent to purchase 35,319,999 shares of common stock. The warrants are fully vested, exercisable at $0.02 per share and will expire in five years.

Warrants

The table below summarizes the Company’s warrant activities for the three months ended March 31, 2023:

	Number of Warrant Shares		Exercise Price Range Per Share		Weighted Average Exercise Price
Balance, January 1, 2023		362,729,077	$ 0.0045-0.75		$	0.006
Granted		113,319,999		0.02		0.02
Canceled/Expired		-		-		-
Exercised		-		-		-
Balance outstanding and exercisable, March 31, 2023		476,049,076	$	0.0045 – 0.75	$	0.009

At March 31, 2023, the warrants had no intrinsic value.

The following table summarizes information concerning outstanding and exercisable warrants as of March 31, 2023:

		Warrants Outstanding and Exercisable
Range of Exercise Prices		Number Outstanding		Average Remaining Contractual Life (in years)		Weighted Average Exercise Price
$	0.0045		346,666,653		4.47	$	0.0045
	0.02		124,339,999		4.90		0.02
	0.05		5,000,000		3.48		0.50
	0.75		42,424		1.68		0.75
$	0.0045 - $0.75		476,049,076		4.46	$	0.009

During the three months ended March 31, 2023, pursuant to our private placement under Rule 506(b) of Regulation D, the Company sold 78,000,000 warrants to purchase shares of common stock in exchange for cash of $18,000, net of direct fees and commissions. The warrants are fully vested, exercisable at $0.02 per share, and expire in five years.

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Stock Options

3 Months Ended

Mar. 31, 2023

Stock Options

Stock Options

Note 10 – Stock Options

The table below summarizes the Company’s stock option activities for the three months ended March 31, 2023:

	Number of Options Shares			Exercise Price  Range Per Share		Weighted Average Exercise Price
Balance, January 1, 2023		150,633,001		$	0.0045- 1,121,250,000	$	0.0307
Granted		-			-		-
Exercised		(1	)	$	1,121,250,000		1,121,250,000
Expired		-			-		-
Balance outstanding, March 31, 2023		150,633,000		$	0.0045-3.00	$	0.0306
Balance exercisable, March 31, 2023		120,591,791		$	0.0045-3.00	$	0.0371

The following table summarizes information concerning the Company’s stock options as of March 31, 2023:

		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
$	3.0000		518,000		3.80	$	3.0000		518,000		3.80	$	3.000
	2.0000		115,000		6.72		2.0000		115,000		6.72		2.0000
	0.0375		65,000,000		8.73		0.0375		65,000,000		8.73		0.0375
	0.005		17,500,000		7.84		0.0050		17,500,000		7.84		0.0050
	0.0045		67,500,000		9.72		0.0045		37,458,791		9.97		0.0045
$	0.0045 – 3.000		150,633,000		6.18	$	0.0307		120,591,791		6.18	$	0.0371

At March 31, 2023 and December 31, 2022, the intrinsic value of outstanding options was $0 and $76,000, respectively.

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Commitment and Contingencies

3 Months Ended

Mar. 31, 2023

Commitment and Contingencies

Commitment and Contingencies

Note 11 – Commitment and Contingencies

Constantino Zanfardino, Derivatively on Behalf of Nominal Defendant Zerify, Inc., formerly known as Strikeforce Technologies, Inc. v. Mark L. Kay, Ramarao Pemmaraju and George Waller, Defendants, and Zerify, Inc. formerly known as Strikeforce Technologies, Inc., Nominal Defendant (U.S. District Court, District of New Jersey, Civil Action No. 2:22-cv-07258-MCA-AME)

On December 13, 2022, a claimed stockholder, Constantino Zanfardino (“Plaintiff”), filed a stockholder derivative Complaint against the Company’s directors, Mark L. Kay, Ramarao Pemmaraju and George Waller (collectively, “Defendants”). Plaintiff asserts claims against each of the Defendants for breach of fiduciary duty, waste of corporate assets and unjust enrichment resulting from Defendants’ alleged wrongdoing in their management of the Company. Through the litigation, Plaintiff seeks judgment against each of the Defendants in favor of the Company. On March 3, 2023, the Defendants’ filed a Memorandum of Law in Support of their Motion to Dismiss Plaintiff’s Complaint.  On March 10, 2023, the Defendants served a motion to dismiss the complaint upon the Plaintiff.  The Plaintiff’s opposition to the Defendants’ motion to dismiss is due on May 9, 2023.   Defendants are vigorously defending this litigation. At this time, it is not possible to estimate the ultimate outcome of this litigation.

Onstream Media Corporation

The Company is currently engaged in several patent litigations brought by Onstream Media Corporation in the United States District Court, District of Wyoming. The parties are currently in negotiations to resolve all of the pending cases.

The cases and their filing dates follow:

Case	Date Filed
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00191 (DWY)	September 9, 2022
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00192 (DWY)	September 9, 2022
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00193 (DWY)	September 9, 2022
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00194 (DWY)	September 9, 2022
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00195 (DWY)	September 9, 2022
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00196 (DWY)	September 9, 2022
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00197 (DWY)	September 9, 2022

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Subsequent Events

3 Months Ended

Mar. 31, 2023

Subsequent Events

Subsequent Events

Note 12 – Subsequent Events

On May 2, 2023, The Company issued Supplemental No. 1 dated May 2, 2023 to the Offering Circular qualified on December 31, 2022.  The Company elected to affect the Qualified Offering of December 21, 2022 by: (a) reducing the Per Unit Price from $0.0225 to $0.018; and (b) reducing the per share price of each of the 5 shares from $0.0045 to $0.0036 that comprise each 1 Unit. The warrant that is also a part of each Unit as previously disclosed in the Qualified Offering remains with a $0.02 cent exercise price. The Unit Price and the Per Share Price are being made pursuant to Rule 253(g)(2) of the Securities Act of 1933, as amended (the “Securities Act’), which allows an up to 20% price change in a qualified offering statement. 

Subsequent to March 31, 2023, pursuant to the Company’s Qualified  Regulation A Offering, the Company issued 70,000,000 shares of common stock in exchange for cash of $261,000, net of direct fees and commissions. As part of the offering, the Company also issued warrants to certain investors and placement agent to purchase 14,000,000 shares of common stock. The warrants are fully vested, exercisable at $0.02 per share and will expire in five years.

On April 18, 2023, the Company entered into a consulting agreement for corporate advisory services.  The agreement is for a period of six months for which the Company agreed to issue 10,000,000 shares of common stock for the services. 

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Organization and Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2023

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 three months ended March 31, 2023 are not necessarily indicative of the results of operations to be expected for the full fiscal year ending December 31, 2023. These financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2022 and notes thereto contained in the Annual Report on Form 10-K of the Company as filed with the SEC on April 14, 2023.

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.

The Company and BST have a management agreement pursuant to which BST shall remit a monthly management fee of $36,000 to the Company; when BST reaches $1,000,000 in financing, BST will owe the Company an additional monthly management fee of approximately $140,000 for a three-year period. The management fee is eliminated in consolidation. At March 31, 2023 and December 31, 2022, the amount of VIE cash on the accompanying condensed consolidated balance sheets can be used only to settle obligations of BST. The amounts of VIE accounts payable, VIE Notes Payable, VIE Accrued Interest, and VIE Financing Obligation have no recourse to the Company’s general creditors.

Going Concern

The Company has yet to establish any history of profitable operations. During the three months ended March 31, 2023, the Company incurred a net loss of $1,669,000 and used cash in operating activities of $873,000 and at March 31, 2023, the Company had a stockholders’ deficit of $15,419,000.  In addition, the Company is in default on notes payable and convertible notes payable in the aggregate amount of $2,825,000. 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, 2022 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 few 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 new 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. The Company’s ability to continue as a going concern is dependent upon its ability to increase its customer base and realize increased revenues. No assurance can be given that any future financing, if needed, will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company is able to obtain additional financing, if needed, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution to its stockholders, in the case of equity financing.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. 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. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1) identifying the contracts or agreements with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients.

The Company’s revenue consists of revenue from sales and support of our software products. Revenue primarily consists of sales of software licenses of our ProtectID®, GuardedID®, MobileTrust®, Zerify Meet™ and Zerify Defender™ 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. 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 the Company’s products.

The following tables present our revenue disaggregated by major product and service lines:

	Three Months Ended  March 31,
	2023		2022
Software	$	19,000	$	32,000
Service		3,000		-
Total revenue	$	22,000	$	32,000

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.

As of March 31, 2023 and December 31, 2022, the Company’s balance sheet includes Level 3 liabilities comprised of the fair value of embedded derivative liabilities of $265,000 and $112,000, respectively (see Note 8).

Derivative Financial Instruments

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The Company evaluates embedded conversion features within its convertible debt to determine whether the embedded conversion features should be bifurcated from the host instrument and accounted for as a derivative. The fair value of the embedded derivatives are determined using 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.

Stock-Based Compensation

The Company periodically issues stock options, warrants, and shares of common stock as share-based compensation to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for such grants issued and vesting based on FASB ASC 718, Compensation – Stock Compensation (Topic 718) whereby the value of the award is measured on the date of grant and recognized as compensation expense on the straight-line basis over the vesting period. The Company recognizes the fair value of stock-based compensation within its Statements of Operations with classification depending on the nature of the services rendered.

The fair value of the Company’s stock options and warrants are estimated using the Black-Scholes-Merton Option Pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the stock options or restricted stock, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes-Merton Option Pricing model and based on actual experience. The assumptions used in the Black-Scholes-Merton Option Pricing model could materially affect compensation expense recorded in future periods.

Loss per Share

Basic loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding, plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued using the treasury stock method. Diluted loss per share excludes all potential common shares if their effect is anti-dilutive. The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive:

	Three Months Ended March 31,
	2023		2022
Options to purchase common stock		150,633,000		83,133,001
Warrants to purchase common stock		476,049,076		68,981,234
Convertible notes		101,745,573		21
Convertible Series B Preferred stock		1,255,638		1,284,394
Total		729,683,287		153,398,650

Concentrations

For the three months ended March 31, 2023, sales to two customers comprised 40% and 35% of revenues.  For the three months ended March 31, 2022, sales to four customers comprised 40%, 35%, 17% and 4% of revenues. At March 31, 2023, only two customers comprised more than 10% of accounts receivable.

The Company maintains the majority of its cash balances with one financial institution, in the form of demand deposits. At March 31, 2023, 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”). The standard significantly changes how entities will measure credit losses for most financial assets, including accounts and notes receivable. The standard will replace today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. As a small business filer, ASU 2020-06 will be effective January 1, 2024, for the Company and the provisions of this update can be adopted using either the modified retrospective method or a fully retrospective method. Management is currently assessing the impact of adopting this standard on the Company’s financial statements and related disclosures.

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).” The ASU addresses how an issuer should account for modifications or an exchange of freestanding written call options classified as equity that is not within the scope of another Topic. For both public and private companies, the ASU is effective for fiscal years beginning after December 15, 2021. Transition is prospective. The Company has elected adoption of ASU 2021-04.

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.

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Organization and Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2023

Organization and Summary of Significant Accounting Policies

Schedule of Revenue Recognition

	Three Months Ended  March 31,
	2023		2022
Software	$	19,000	$	32,000
Service		3,000		-
Total revenue	$	22,000	$	32,000

Schedule of Loss per Share

	Three Months Ended March 31,
	2023		2022
Options to purchase common stock		150,633,000		83,133,001
Warrants to purchase common stock		476,049,076		68,981,234
Convertible notes		101,745,573		21
Convertible Series B Preferred stock		1,255,638		1,284,394
Total		729,683,287		153,398,650

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Convertible Notes Payable (Tables)

3 Months Ended

Mar. 31, 2023

Convertible Notes Payable

Schedule of convertible notes payable

	March 31, 2023			December 31, 2022
Unsecured
(a) Convertible notes due to AL-Bank	$	373,000		$	383,000
(b) Convertible note with Diagonal Lending		254,000			100,000
Unsecured
(c) Convertible notes with fixed conversion features, in default		895,000			895,000
Convertible notes payable		1,522,000			1,378,000
Less debt discount		(204,000	)		(96,000	)
Total Convertible notes payable	$	1,318,000		$	1,282,000

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Notes Payable (Tables)

3 Months Ended

Mar. 31, 2023

Notes Payable

Schedule of notes payable

	March 31, 2023			December 31, 2022
Unsecured
(a) Notes payable - in default	$	1,639,000		$	1,639,000
(b) Notes payable issued by BST - in default		286,000			286,000
(c) Note payable - EID loan		148,000			149,000
Secured
(d) Notes payable – October 2022		1,000,000			1,000,000
(e) Notes payable - in default		6,000			6,000
(f) Notes payable – July 2022		165,000			211,000
Total notes payable principal outstanding		3,244,000			3,291,000
Less debt discount		(136,000	)		(323,000	)
Total notes payable		3,108,000			2,968,000
Less current portion of notes payable, net of discount		(2,966,000	)		(2,826,000	)
Long term notes payable	$	142,000		$	142,000

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Derivative Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2023

Derivative Financial Instruments

Schedule of derivative liabilities

	At March 31, 2023			Issued 2023			At December 31, 2022
Stock Price	$	0.0026		$	0.0054		$	0.0055
Exercise Price	$	0.0034		$	0.0034		$	0.0034
Expected Life (Years)		0.79			1.00			0.80
Volatility		163	%		162	%		165	%
Dividend Yield		0	%		0	%		0	%
Risk-Free Interest Rate		4.64	%		4.84	%		4.73	%
Fair value:
Conversion feature	$	265,000		$	175,000		$	112,000

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Stockholders Deficit (Tables)

3 Months Ended

Mar. 31, 2023

Stockholders Deficit

Schedule of stock warrants activity

	Number of Warrant Shares		Exercise Price Range Per Share		Weighted Average Exercise Price
Balance, January 1, 2023		362,729,077	$ 0.0045-0.75		$	0.006
Granted		113,319,999		0.02		0.02
Canceled/Expired		-		-		-
Exercised		-		-		-
Balance outstanding and exercisable, March 31, 2023		476,049,076	$	0.0045 – 0.75	$	0.009

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		346,666,653		4.47	$	0.0045
	0.02		124,339,999		4.90		0.02
	0.05		5,000,000		3.48		0.50
	0.75		42,424		1.68		0.75
$	0.0045 - $0.75		476,049,076		4.46	$	0.009

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Stock Options (Tables)

3 Months Ended

Mar. 31, 2023

Stock Options

Schedule of stock options plan

	Number of Options Shares			Exercise Price  Range Per Share		Weighted Average Exercise Price
Balance, January 1, 2023		150,633,001		$	0.0045- 1,121,250,000	$	0.0307
Granted		-			-		-
Exercised		(1	)	$	1,121,250,000		1,121,250,000
Expired		-			-		-
Balance outstanding, March 31, 2023		150,633,000		$	0.0045-3.00	$	0.0306
Balance exercisable, March 31, 2023		120,591,791		$	0.0045-3.00	$	0.0371

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
$	3.0000		518,000		3.80	$	3.0000		518,000		3.80	$	3.000
	2.0000		115,000		6.72		2.0000		115,000		6.72		2.0000
	0.0375		65,000,000		8.73		0.0375		65,000,000		8.73		0.0375
	0.005		17,500,000		7.84		0.0050		17,500,000		7.84		0.0050
	0.0045		67,500,000		9.72		0.0045		37,458,791		9.97		0.0045
$	0.0045 – 3.000		150,633,000		6.18	$	0.0307		120,591,791		6.18	$	0.0371

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Commitment and Contingencies (Tables)

3 Months Ended

Mar. 31, 2023

Commitment and Contingencies

Schedule of Onstream Media Corporation

Case	Date Filed
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00191 (DWY)	September 9, 2022
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00192 (DWY)	September 9, 2022
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00193 (DWY)	September 9, 2022
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00194 (DWY)	September 9, 2022
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00195 (DWY)	September 9, 2022
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00196 (DWY)	September 9, 2022
Onstream Media Corporation v. Zerify Inc. Case No. 22-cv-00197 (DWY)	September 9, 2022

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Organization and Summary of Significant Accounting Policies (Details) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Total revenue	$ 22,000	$ 32,000
Software [Member]
Total revenue	19,000	32,000
Service [Member]
Total revenue	$ 3,000	$ 0

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Organization and Summary of Significant Accounting Policies (Details 1) - shares	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022
Organization and Summary of Significant Accounting Policies
Options to purchase common stock	150,633,000	83,133,001
Warrants to purchase common stock	476,049,076	68,981,234
Convertible notes	101,745,573	21
Convertible Series B Preferred stock	1,255,638	1,284,394
Total	729,683,287	153,398,650

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Organization and Summary of Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 31, 2022	Dec. 31, 2022	Dec. 31, 2021
Net loss	$ (1,669,000)	$ (2,867,000)
Net cash used in operating activities	(873,000)	(1,060,000)
Total Stockholders' Deficit	(15,419,000)	$ (12,814,000)	$ (14,855,000)	$ (11,589,000)
Notes payable aggregate amount	2,825,000
Derivative liabilities	265,000		$ 112,000
FDIC insured limit	$ 250,000
BlockSafe Technologies, Inc. [Member]
Ownership interest held by company	49.00%
Ownership interest held by three executive officers	31.00%
Management fee per month	$ 36,000
Financing milestone, amount	1,000,000
Monthly management fee	$ 140,000
One customer [Member] | Revenues [Member]
Concentration Risk, Percentage	40.00%	40.00%
One customer [Member] | Accounts Receivable [Member]
Concentration Risk, Percentage	10.00%
Two customer [Member] | Revenues [Member]
Concentration Risk, Percentage	35.00%	35.00%
Two customer [Member] | Accounts Receivable [Member]
Concentration Risk, Percentage	10.00%
Three customer [Member] | Revenues [Member]
Concentration Risk, Percentage		17.00%
Four customer [Member] | Revenues [Member]
Concentration Risk, Percentage		4.00%

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Convertible Notes Payable (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Secured
(a) Convertible notes due to AL-Bank	$ 373,000	$ 383,000
(b) Convertible note with Diagonal Lending	254,000	100,000
Unsecured
(c) Convertible notes with fixed conversion features, in default	895,000	895,000
Total convertible notes principal outstanding	1,522,000	1,378,000
Debt discount	(204,000)	(96,000)
Convertible notes, net of discount	$ 1,318,000	$ 1,282,000

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Convertible Notes Payable (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2023	Mar. 04, 2023	Feb. 06, 2023	Jan. 19, 2023	Dec. 31, 2022	Dec. 31, 2021
Unamortized debt discount	$ 323,000
Interest expense	187,000
Debt discount	(136,000)				$ (323,000)
Derivative liability	$ 265,000				112,000
2005 Through 2007 [Member]
Maturity date description	due on various dates from March 2008 to March 2015, and are currently in default
Convertible notes payable, outstanding balance	$ 895,000
Proceeds from convertible notes payable	$ 895,000
Interest rate decriptions	notes are unsecured, bear interest at a rate starting at 8% up to 18% per annum
2005 [Member]
Convertible notes payable, outstanding balance	$ 373,000				383,000	$ 143,000
DART/Citco Global, in default	$ 543,000
Interest rate	7.50%
Total						$ 400,000
Monyhly payment	$ 10,000
Remaining balance	143,000
Principal payments	10,000
Convertible Notes Payable [Member]
Unamortized debt discount	204,000				96,000
Interest expense	46,000
Debt discount	100,000
Issued additional convertible notes payable		$ 54,000	$ 55,000	$ 45,000
Convertible notes payable, outstanding balance	254,000				$ 100,000
Proceeds from convertible notes payable	$ 154,000
Common stock shares issued upon conversion of debt	101,745,558
Derivative liability	$ 175,000
Financing costs	$ 21,000
Repayment penalty percentage	120.00%
Conversion price percentage	65.00%
Interest rate decriptions	The note is unsecured, bears interest at a rate of 12%, or 22% on default
Conversion feature of debentures, debt discount	$ 154,000

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Convertible Notes Payable Related Parties (Details Narrative) - Chief Executive Officer [Member] - USD ($)	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Due date	Dec. 31, 2023
Interest rate	8.00%
Convertible notes payable, outstanding balance	$ 268,000	$ 268,000

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Notes Payable (Details) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Unsecured notes payable-in default
(a) Notes payable - in default	$ 1,639,000	$ 1,639,000
(b) Notes payable issued by BST - in default	286,000	286,000
(c) Note payable-EID loan	148,000	149,000
Secured notes payable
(d) Notes payable - October 2022	1,000,000	1,000,000
(e) Notes payable - in default	6,000	6,000
(f) Notes payable - July 2022	165,000	211,000
Total notes payable principal outstanding	3,244,000	3,291,000
Less debt discount	(136,000)	(323,000)
Notes payable	3,108,000	2,968,000
Less current portion of notes payable	(2,966,000)	(2,826,000)
Long term notes payable	$ 142,000	$ 142,000

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Notes Payable (Details Narrative) - USD ($)		1 Months Ended		3 Months Ended	12 Months Ended
	May 15, 2020	Oct. 26, 2022	Jul. 31, 2022	Mar. 31, 2023	Dec. 31, 2022	Dec. 31, 2019	Dec. 31, 2020
Warrants granted		$ 260,000
Original issue discounts		200,000
Total debentures		460,000
Unamortized debt discount				$ 323,000
Common stock, par value				$ 0.0001	$ 0.0001
Interest expense				$ 187,000
Leaving unamortized debt discount				136,000
Notes payable				3,108,000	$ 2,968,000
EID Loan [Member]
Principal payment				1,000
Notes payable, outstanding balance				148,000	149,000
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 [Member]
Notes payable, outstanding balance				$ 1,639,000
Interest rate decriptions				The notes are unsecured, bear interest at a rate of 8% through 14% per annum
One Note [Member]
Notes payable, outstanding balance							$ 310,000
Principal payment						$ 319,000
Interest rate decriptions				The notes are unsecured, bearing interest at a rate of 8% per annum
Outstanding secured notes payable					286,000
Note issued						$ 468,000
Interest rate of notes						8.00%	37.00%
Amount payables					24,000
One Note [Member] | Unsecured [Member]
Outstanding secured notes payable				$ 6,000	6,000
Amount payables				17,000
Extinguished as debt settlement obligation transaction						$ 21,000
Note Payable Two [Member]
Principal payment				46,000
Interest rate of notes			51.00%
Notes payable issue			$ 275,000
Notes payable issue maturity date			January 2024
Notes payable				165,000	$ 211,000
Walleye Opportunities Master Fund Ltd [Member]
Original issue discounts		200,000
Notes payable, outstanding balance				$ 1,000,000
Principal payments of promissory notes		1,000,000
Amount recieved		$ 800,000
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
Warrant exercisble price		$ 0.0045
Walleye Opportunities Master Fund Ltd [Member] | Promissory Note [Member] | Securities Purchase Agreement [Member]
Purchased promissory note aggregate principal amount		$ 1,000,000
Common stock, par value		$ 0.0001

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Notes Payable Related Parties (Details Narrative) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Notes payable - related parties	$ 693,000	$ 693,000
Chief Executive Officer [Member]
Interest rate	8.00%
Maximum [Member] | Chief Executive Officer [Member]
Interest rate	10.00%
Minimum [Member] | Chief Executive Officer [Member]
Interest rate	0.00%

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VIE Financing Obligation (Details Narrative) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2023	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2022
Financing obligation	$ 1,263,000			$ 1,263,000
Unsecured Convertible Notes Payable [Member]
Tokens issued to unrelated parties			$ 50,000
Promissory note issued to unrelated parties			$ 776,000
Promissory note - various parties [Member] | Related Party [Member]
Financing obligation		$ 315,000
Tokens issued to unrelated parties		$ 122,000
BST [Member]
Financing obligation	$ 1,263,000
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%

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Contingent Payment Obligation (Details Narrative) - USD ($)		3 Months Ended
	Sep. 06, 2017	Mar. 31, 2023
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

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Derivative Financial Instruments (Details) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Stock Price	$ 0.0026	$ 0.0055
Exercise Price	$ 0.0034	$ 0.0034
Expected life (in years)	9 months 14 days	9 months 18 days
Volatility	163.00%	165.00%
Dividend Yield	0.00%	0.00%
Risk-free interest rate	4.64%	4.73%
Fair Value:
Conversion feature	$ 265,000	$ 112,000
Issued 2023 [Member]
Stock Price	$ 0.0054
Exercise Price	$ 0.0034
Expected life (in years)	1 year
Volatility	162.00%
Dividend Yield	0.00%
Risk-free interest rate	4.84%
Fair Value:
Conversion feature	$ 175,000

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Derivative Financial Instruments (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2023	Dec. 31, 2022
Derivative Financial Instruments
Derivative liability		$ 112,000
Change in fair value of component of other income and expenses	$ 22,000
Recognized derivative liabilities upon issuance of additional secured convertible debentures	175,000
Extinguishment of derivative liabilities	$ 265,000

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Stockholders Deficit (Details)	3 Months Ended
	Mar. 31, 2023 $ / shares shares
Number of Warrant Shares
Number of warrants Beginning balance | shares	362,729,077
Number of warrants Granted | shares	113,319,999
Number of warrant shares, Canceled/Expired | shares	0
Number of warrants Outstsnding Ending | shares	476,049,706
Number of warrants exercisable Ending | shares	476,049,076
Exercise price range per share, Granted	$ 0.02
Weighted Average Exercise Price
Weighted Average Exercise Price Beginning Balance	0.006
Weighted Average Exercise Price, Granted	0.02
Weighted Average Exercise Price, Canceled/Expired	0
Weighted Average Exercise Price, Exercised	0
Weighted Average Exercise Price Outstanding Ending Balacce	0.0045
Weighted Average Exercise Price Exercisable Ending Balacce	0.009
Minimum [Member]
Weighted Average Exercise Price
Exercise Price Range Per Share, Beginning balance	0.0045
Exercise Price Range Per Share Outstanding Ending	0.0045
Exercise Price Range Per Share Exercisable Ending balance	0.0045
Maximum [Member]
Weighted Average Exercise Price
Exercise Price Range Per Share, Beginning balance	0.75
Exercise Price Range Per Share Outstanding Ending	0.75
Exercise Price Range Per Share Exercisable Ending balance	$ 0.75

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Stockholders Deficit (Details 1)	3 Months Ended
	Mar. 31, 2023 $ / shares shares
Warrant [Member]
Average Remaining Contractual Life (in years)	4 years 5 months 19 days
Weighted Average Exercise Price	$ 0.0045
Number Outstanding | shares	346,666,653
Range of Exercise Prices	$ 0.0045
Warrant One [Member]
Average Remaining Contractual Life (in years)	3 years 5 months 23 days
Weighted Average Exercise Price	$ 0.50
Number Outstanding | shares	5,000,000
Range of Exercise Prices	$ 0.05
Warrant Two [Member]
Average Remaining Contractual Life (in years)	4 years 10 months 24 days
Weighted Average Exercise Price	$ 0.02
Number Outstanding | shares	124,339,999
Range of Exercise Prices	$ 0.02
Warrant Four [Member]
Average Remaining Contractual Life (in years)	1 year 8 months 4 days
Weighted Average Exercise Price	$ 0.75
Number Outstanding | shares	42,424
Range of Exercise Prices	$ 0.75
Warrant Total [Member]
Average Remaining Contractual Life (in years)	4 years 5 months 15 days
Weighted Average Exercise Price	$ 0.009
Number Outstanding | shares	476,049,076
Warrant Total [Member] | Maximum [Member]
Range of Exercise Prices	$ 0.75
Warrant Total [Member] | Minimum [Member]
Range of Exercise Prices	$ 0.0045

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Stockholders Deficit (Details Narrative) - USD ($)	1 Months Ended	3 Months Ended
	Apr. 30, 2023	Mar. 31, 2023	Dec. 31, 2022
Qualified Regulation A Offering [Member] | Certain Investors [Member]
Issued warrants to purchase shares of common stock	14,000,000		35,319,999
Warrants fully vested, exercisable	$ 0.0045		$ 0.02
Qualified Regulation A Offering [Member] | Common Stocks [Member]
Issued shares of common stock in exchange for cash	$ 261,000	$ 795,000
Issued shares of common stock	70,000,000	176,599,998
Private Placement Under Rule Regulation D [Member] | Certain Investors [Member]
Warrants fully vested, exercisable	$ 0.0036		$ 0.02
Private Placement Under Rule Regulation D [Member] | Common Stocks [Member]
Issued shares of common stock in exchange for cash		$ 18,000
Issued shares of common stock	10,000,000	78,000,000

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Stock Options (Details)	3 Months Ended
	Mar. 31, 2023 $ / shares shares
Stock options
Number of Options Shares, Beginning balance | shares	150,633,000
Number of Options Shares, Exercised | shares	1
Number of Options Shares, Expired | shares	(1)
Number of Options Shares, Ending balance | shares	150,633,001
Number of Options Shares exercisable Ending | shares	120,591,791
Weighted Average Exercise Price
Weighted Average Exercises Price Beginning Balance	$ 0.0307
Weighted Average Exercise Price, Granted	1,121,250,000
Weighted Average Exercise Price Outstanding Ending Balacce	0.0306
Weighted Average Exercise Price Exercisable Ending Balacce	0.0371
Exercise Price Range Per Share. Exercised	1,121,250,000
Minimum [Member]
Weighted Average Exercise Price
Exercise Price Range Per Share Exercisable Ending balance	0.0045
Minimum [Member] | Stock Option [Member]
Weighted Average Exercise Price
Exercise Price Range Per Share, Beginning balance	0.0045
Exercise Price Range Per Share, Ending balance	0.0045
Exercise Price Range Per Share Exercisable Ending balance	0.0045
Maximum [Member]
Weighted Average Exercise Price
Exercise Price Range Per Share Exercisable Ending balance	0.75
Maximum [Member] | Stock Option [Member]
Weighted Average Exercise Price
Exercise Price Range Per Share, Beginning balance	1,121,250,000
Exercise Price Range Per Share, Ending balance	3.00
Exercise Price Range Per Share Exercisable Ending balance	$ 3.00

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Stock Options (Details 1)	3 Months Ended
	Mar. 31, 2023 $ / shares shares
Option Exercisable [Member]
Weighted average exercise price	$ 0.0371
Weighted average remaining contractual life (years)	6 years 2 months 4 days
Number of warrants exercisable | shares	120,591,791
Option Exercisable [Member] | Exercise Prices Two [Member]
Weighted average exercise price	$ 2.0000
Weighted average remaining contractual life (years)	6 years 8 months 19 days
Number of warrants exercisable | shares	115,000
Option Exercisable [Member] | Exercise Prices One [Member]
Weighted average remaining contractual life (years)	3 years 9 months 18 days
Number of warrants exercisable | shares	518,000
Weighted average exercise price	$ 3.000
Option Exercisable [Member] | Exercise Prices Three [Member]
Weighted average exercise price	$ 0.0375
Weighted average remaining contractual life (years)	8 years 8 months 23 days
Number of warrants exercisable | shares	65,000,000
Option Exercisable [Member] | Exercise Prices Four [Member]
Weighted average exercise price	$ 0.0050
Weighted average remaining contractual life (years)	7 years 10 months 2 days
Number of warrants exercisable | shares	17,500,000
Options Outstanding [Member]
Weighted average exercise price	$ 0.0307
Weighted average remaining contractual life (years)	6 years 2 months 4 days
Number of warrants outstanding | shares	150,633,000
Options Outstanding [Member] | Mimimum [Member]
Range of exercise prices	$ 0.0045
Options Outstanding [Member] | Maximum [Member]
Range of exercise prices	$ 3.000
Options Outstanding [Member] | Exercise Prices Two [Member]
Weighted average remaining contractual life (years)	6 years 8 months 19 days
Number of warrants outstanding | shares	115,000
Range of exercise prices	$ 2.0000
Weighted average exercise price	$ 2.0000
Options Outstanding [Member] | Exercise Prices One [Member]
Weighted average remaining contractual life (years)	3 years 9 months 18 days
Number of warrants outstanding | shares	518,000
Range of exercise prices	$ 3.0000
Weighted average exercise price	$ 3.0000
Options Outstanding [Member] | Exercise Prices Three [Member]
Weighted average remaining contractual life (years)	8 years 8 months 23 days
Number of warrants outstanding | shares	65,000,000
Range of exercise prices	$ 0.0375
Weighted average exercise price	0.0375
Options Outstanding [Member] | Exercise Prices Five [Member]
Weighted average exercise price	$ 0.0045
Weighted average remaining contractual life (years)	9 years 8 months 19 days
Range of exercise prices	$ 0.0045
Number of warrants exercisable | shares	67,500,000
Options Outstanding [Member] | Exercise Prices Four [Member]
Weighted average exercise price	$ 0.0050
Weighted average remaining contractual life (years)	7 years 10 months 2 days
Number of warrants outstanding | shares	17,500,000
Range of exercise prices	$ 0.005
Option Exercisable [Member] | Exercise Prices Five [Member]
Weighted average remaining contractual life (years)	9 years 11 months 19 days
Number of warrants outstanding | shares	37,458,791
Weighted average exercise price	$ 0.0045

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Stock Options (Details Narrative) - USD ($)	Mar. 31, 2023	Dec. 31, 2022
Stock Options
Intrinsic value of outstanding options	$ 0	$ 76,000

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Commitment and Contingencies (Details)	3 Months Ended
	Mar. 31, 2023
Onstream Media Corporation V Zerify Inc [Member]
Date of filing	Sep. 09, 2022
Onstream Media Corporation V Zerify Inc Four [Member]
Date of filing	Sep. 09, 2022
Onstream Media Corporation V Zerify Inc Five [Member]
Date of filing	Sep. 09, 2022
Onstream Media Corporation V Zerify Inc Six [Member]
Date of filing	Sep. 09, 2022
Onstream Media Corporation V Zerify Inc One [Member]
Date of filing	Sep. 09, 2022
Onstream Media Corporation V Zerify Inc Two [Member]
Date of filing	Sep. 09, 2022
Onstream Media Corporation V Zerify Inc Three [Member]
Date of filing	Sep. 09, 2022

XML

Subsequent Events (Details Narrative) - USD ($)	1 Months Ended	3 Months Ended
	Apr. 30, 2023	Mar. 31, 2023	Dec. 31, 2022
Qualified Regulation A Offering [Member] | Certain Investors [Member]
Issued warrants to purchase shares of common stock	14,000,000		35,319,999
Range of exercise prices	$ 0.0045		$ 0.02
Warrant per unit price	$ 0.0225
Qualified Regulation A Offering [Member] | Common Stocks [Member]
Issued shares of common stock in exchange for cash	$ 261,000	$ 795,000
Issued shares of common stock	70,000,000	176,599,998
Private Placement Under Rule Regulation D [Member] | Certain Investors [Member]
Range of exercise prices	$ 0.0036		$ 0.02
Warrant per unit price	$ 0.018
Private Placement Under Rule Regulation D [Member] | Common Stocks [Member]
Issued shares of common stock in exchange for cash		$ 18,000
Issued shares of common stock	10,000,000	78,000,000