UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark one)

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

 

For the quarterly period ended September 30, 2019

 

OR

 

[  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from __________ to __________

 

Commission file number 000-53046

 

GTX Corp

(Exact name of registrant as specified in its charter)

 

Nevada   98-0493446
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

117 W. 9th Street, Suite 1214, Los Angeles, CA, 90015
(Address of principal executive offices) (Zip Code)

 

(213) 489-3019
(Registrant’s telephone number, including area code)

 

 

(Former name, former address and former fiscal year, if changed since last report.)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 [X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [  ]

 

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

 

Large accelerated filer [  ] Accelerated filer [  ]
Non-accelerated filer [  ] (Do not check if a smaller reporting company) Smaller reporting company [X]
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 13(a) of the Exchange Act. [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [  ] No [X]

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 68,850,246 common shares issued and outstanding as of November 13, 2019.

 

 

 

 
 

 

GTX CORP AND SUBSIDIARIES

For the quarter ended September 30, 2019

FORM 10-Q

 

    PAGE NO.
PART I. FINANCIAL INFORMATION  
     
Item 1. Condensed Financial Statements: 3
     
  Condensed Consolidated Balance Sheets at September 30, 2019 (unaudited) and December 31, 2018 3
     
  Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018 (unaudited) 4
     
  Condensed Consolidated Statements of Stockholders’ Deficit for the nine months ended September 30, 2019 and 2018 (unaudited) 5
     
  Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (unaudited) 7
     
  Notes to Condensed Consolidated Financial Statements (unaudited) 8
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 20
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 26
     
Item 4. Controls and Procedures 26
     
PART II. OTHER INFORMATION  
     
Item 1. Legal Proceedings 27
     
Item 1A. Risk Factors 27
     
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 27
     
  Signatures 28

 

2
 

 

PART I

 

ITEM 1. FINANCIAL STATEMENTS

 

GTX CORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

    September 30,
2019 		    December 31,
2018 		 
      (Unaudited)          
ASSETS                
Current assets:                
Cash and cash equivalents   $ 76,221     $ 69,856  
Accounts receivable, net     80,611       97,572  
Inventory     41,514       22,567  
Investment in marketable securities     116,850       344  
Other current assets     10,500       3,479  
Total current assets     325,696       193,818  
                 
Property and equipment, net     23,749       58,388  
Intangible assets     15,315       16,260  
Total assets   $ 364,760     $ 268,466  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
Current liabilities:                
Accounts payable   $ 201,004     $ 246,551  
Accrued expenses     421,852       438,552  
Accrued expenses – related parties     608,729       332,174  
Deferred revenues     155,100       26,000  
Convertible promissory notes, net of discount     1,177,588       1,293,109  
Convertible notes, related parties     884,546       884,546  
Revolving line of credit     107,000       65,000  
Notes payable     217,000       200,000  
Derivative liabilities     659       232,162  
Total current liabilities     3,773,478       3,718,094  
                 
Commitments and contingencies                
                 
Stockholders’ deficit:                
Preferred stock, $0.001 par value; 10,000,000 shares authorized; 1,000,000 shares issued and outstanding at September 30, 2019 and December 31, 2018     100       100  
Common stock, $0.0001 par value; 2,071,000,000 shares authorized; 59,619,795 and 63,363,436 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively     5,962       6,336  
Additional paid-in capital     19,850,587       19,367,130  
Accumulated deficit     (23,265,367 )     (22,823,194 )
Total stockholders’ deficit     (3,408,718 )     (3,449,628 )
Total liabilities and stockholders’ deficit   $ 364,760     $ 268,466  

 

See accompanying notes to condensed consolidated financial statements.

 

3
 

 

GTX CORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

 

    Three Months Ended
September 30, 		    Nine Months Ended
September 30, 		 
    2019     2018     2019     2018  
Product sales   $ 198,588     $ 132,517     $ 302,697     $ 409,677  
Service income     102,103       50,497       250,255       146,647  
Licensing income     39,375       12,500       732,125       37,500  
Total revenues     340,066       195,514       1,285,077       593,824  
                                 
Cost of products sold     7,727       30,420       55,871       124,028  
Cost of service revenue     8,466       15,510       41,296       37,380  
Cost of licensing revenue     21,342       -       44,487       -  
Total cost of goods sold     37,535       45,930       141,654       161,408  
                                 
Gross margin     302,531       149,584       1,143,423       432,416  
                                 
Operating expenses:                                
Wages and benefits     150,743       174,047       514,125       559,523  
Sales and marketing     3,281       12,008       6,701       35,435  
Professional fees     20,627       108,411       375,858       236,835  
General and administrative     55,157       82,340       179,269       228,256  
                                 
Total operating expenses     229,808       376,806       1,075,953       1,060,049  
                                 
Income / (loss) from operations     72,723       (227,222 )     67,470       (627,633 )
                                 
Other income/(expenses):                                
Noncash financing costs on related party notes     -       -       (11,250 )     (247,147 )
Unrealized loss on marketable securities     (518,000 )     -       (517,494 )     -  
Amortization of debt discount     -       (133,524 )     (20,024 )     (389,379 )
Derivative income     226,764       196,953       231,503       188,389  
Interest expense and financing costs     (37,911 )     (90,025 )     (192,378 )     (175,535 )
                                 
Total other income/(expenses)     (329,147 )     (26,596 )     (509,643 )     (623,672 )
                                 
Net loss     (256,424 )     (253,818 )     (442,173 )     (1,251,305 )
                                 
Components of comprehensive loss:                                
Unrealized loss on available for sale investment     -       -       -       (1,845 )
                                 
Comprehensive loss   $ (256,424 )   $ (253,818 )   $ (442,173 )   $ (1,253,150 )
                                 
Weighted average number of common shares outstanding - basic and diluted     54,788,352       13,669,504       69,882,441       11,503,097  
                                 
Net income/(loss) per common share - basic and diluted   $ (0.00 )   $ (0.02 )   $ (0.01 )   $ (0.11 )

 

See accompanying notes to condensed consolidated financial statements.

 

4
 

 

GTX CORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

Three and Nine Months Ended September 30, 2019 (Unaudited)

 

For the Three Months Ended September 30, 2019 (Unaudited)
                            Additional              
    Preferred Stock     Common Stock     Paid-In     Accumulated        
    Shares     Amount     Shares     Amount     Capital     Deficit     Total  
                                           
Balance, June 30, 2019     1,000,000     $ 100       86,887,406     $ 8,689     $ 19,804,683     $ (23,008,943 )   $ (3,195,472 )
Issuance of common stock for conversion of debt     -       -       8,732,389       873       34,285       -       35,158  
Fair Value of common stock issued to management     -       -       -       -       8,021       -       8,021  
Cancellation of retention bonus shares     -       -       (36,000,000 )     (3,600 )     3,600       -       -  
Net income     -       -       -       -       -       (256,424 )     (256,424 )
Balance, September 30, 2019     1,000,000     $ 100       59,619,795     $ 5,962     $ 19,850,589     $ (23,265,367 )   $ (3,408,717 )

 

For the Nine Months Ended September 30, 2019 (Unaudited)
                            Additional              
    Preferred Stock     Common Stock     Paid-In     Accumulated        
    Shares     Amount     Shares     Amount     Capital     Deficit     Total  
                                           
Balance, January 31, 2019     1,000,000     $ 100       63,363,436     $ 6,336     $ 19,367,130     $ (22,823,194 )   $ (3,449,628 )
Issuance of common stock for services     -       -       6,200,000       620       76,260       -       76,880  
Issuance of common stock for financings     -       -       250,000       25       3,075       -       3,100  
Issuance of common stock for conversion of debt     -       -       25,806,359       2,581       124,464       -       127,045  
Issuance of warrants for financings     -       -       -       -       49,992       -       49,992  
Issuance of warrants for services     -       -       -       -       4,799       -       4,799  
Fair Value of common stock issued to management     -       -       -       -       221,267       -       221,267  
Cancellation of retention bonus shares     -       -       (36,000,000 )     (3,600 )     3,600       -       -  
Net loss     -       -       -       -       -       (442,173 )     (442,173 )
Balance, September 30, 2019     1,000,000     $ 100       59,619,795     $ 5,962     $ 19,850,587     $ (23,265,367 )   $ (3,408,718 )

 

See accompanying notes to condensed consolidated financial statements.

 

5
 

 

GTX CORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

For the Three and Nine Months Ended September 30, 2018 (Unaudited)

 

Three Months Ended September 30, 2018 (Unaudited)
                                  Accumulated              
                            Additional     Other              
    Preferred Stock     Common Stock     Paid-In     Comprehensive     Accumulated        
    Shares     Amount     Shares     Amount     Capital     Loss     Deficit     Total  
                                                 
Balance, June 30, 2018     1,000,000     $ 100       12,036,294     $ 1,204     $ 19,250,114     $          -     $ (22,111,342 )   $ (2,859,924 )
Issuance of common stock for services     -       -       653,636       65       53,935       -       -       54,000  
Issuance of common stock for conversion of debt     -       -       642,000       64       12,776       -       -       12,840  
Issuance of preferred stock for services     -       -       1,766,325       177       (177 )     -       -       -  
BCF for shares issued     -       -       -       -       35,000       -       -       35,000  
Cumulative effect of adopting ASU 2016-01     -       -       -       -       -       -       46,998       46,998  
Net loss     -       -       -       -       -       -       (253,818 )     (253,818 )
Balance, September 30, 2018     1,000,000     $ 100       15,098,255     $ 1,510     $ 19,351,648     $ -     $ (22,318,162 )   $ (2,964,904 )

 

Nine Months Ended September 30, 2018 (Unaudited)
                                  Accumulated              
                            Additional     Other              
    Preferred Stock     Common Stock     Paid-In     Comprehensive     Accumulated        
    Shares     Amount     Shares     Amount     Capital     Loss     Deficit     Total  
                                                 
Balance, January 1, 2018     -       -       9,389,976     $ 939     $ 18,855,596     $ (59,249 )   $ (21,005,763 )   $ (2,208,477 )
Issuance of common stock for services     -       -       734,303       73       71,697       -       -       71,770  
Issuance of common stock for conversion of debt     -       -       3,207,651       321       162,019       -       -       162,340  
Issuance of preferred stock for services     1,000,000       100                       46,263                       46,363  
Exercise of warrants     -       -       1,766,325       177       (177 )                     -  
BCF for shares issued     -       -       -       -       216,250       -       -       216,250  
Cumulative effect of adopting ASU 2016-01     -       -       -       -       -       59,249       (59,249 )     -  
Net loss     -       -       -       -       -       -       (1,253,150 )     (1,253,150 )
Balance, September 30, 2018     1,000,000     $ 100       15,098,255     $ 1,510     $ 19,351,648     $ -     $ (22,318,162 )   $ (2,964,904 )

 

See accompanying notes to condensed consolidated financial statements.

 

6
 

 

GTX CORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

    Nine Months Ended September 30,  
    2019     2018  
Cash flows from operating activities:                
Net loss   $ (442,173 )   $ (1,253,150 )
Adjustments to reconcile net loss to net cash used in operating activities:                
Depreciation and amortization     35,584       55,847  
Change in fair value of marketable securities     517,494       2,333  
Gain on receipt of marketable securities from license agreement     (634,000 )     -  
Equity-based compensation     81,679       71,770  
Change in fair value of derivative liabilities     (231,503 )     (188,389 )
Amortization of debt discount     20,024       389,379  
Fair value of common stock issued to management     221,267       46,363  
Non-cash interest and financing expense     53,092       214,499  
Increase in accrued interest on convertible notes     11,250       207,075  
Changes in operating assets and liabilities:                
Accounts receivable     16,961       (88,919 )
Inventory     (18,947 )     8,627  
Other current and non-current assets     (7,021 )     45,456  
Accounts payable and accrued expenses     (62,247 )     122,818  
Accrued expenses - related parties     276,555       (45,669 )
Accrued liability     -       47,250  
Deferred revenues     129,100       (16,934 )
                 
Net cash used in operating activities     (32,885 )     (381,644 )
                 
Cash flows from investing activities:                
Purchase of property and equipment     -       (31,500 )
Net cash used in investing activities     -       (31,500 )
                 
Cash flows from financing activities:                
Proceeds from convertible promissory notes     -       485,000  
Proceeds from term loans and line of credit     145,000       -  
Payments on terms loans and lines of credit     (86,000 )     -  
Payments on convertible promissory notes     (19,750 )     (58,000 )
                 
Net cash provided by financing activities     39,250       427,000  
                 
Net change in cash and cash equivalents     6,365       13,856  
                 
Cash and cash equivalents, beginning of period     69,856       1,454  
                 
Cash and cash equivalents, end of period   $ 76,221     $ 15,310  
                 
Supplemental disclosure of cash flow information:                
Income taxes paid   $ -     $ -  
Interest paid   $ 19,681     $ 5,655  
                 
Supplementary disclosure of noncash financing activities:                
Issuance of common stock for accrued expenses   $ -     $ -  
Debt discount on convertible promissory notes   $ -     $ 216,250  
Issuance of common stock for conversion of debt   $ 127,045     $ 162,340  
Debt discount related to derivative liabilities   $ -     $ 47,250  

 

See accompanying notes to condensed consolidated financial statements.

 

7
 

 

GTX CORP AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019

(Unaudited)

 

1. ORGANIZATION AND BASIS OF PRESENTATION

 

During the periods covered by these financial statements, GTX Corp and its subsidiaries (the “Company” or “GTX”) were engaged in business operations that design, manufacture and sell various interrelated and complementary products and services in the wearable technology and Personal Location Services marketplace, along with licensing of its intellectual property GTX owns 100% of the issued and outstanding capital stock of its two subsidiaries - Global Trek Xploration, Inc. and LOCiMOBILE, Inc.

 

Global Trek Xploration, Inc. (“Global Trek”) designs, manufactures, sells and distributes, hardware, software, and connectivity, using Global Positioning System (“GPS”), Bluetooth Low Energy (“BLE”), Radio Frequency (“RF”) and Near Field Communication (“NFC”) technologies for monitoring and tracking of people and high value assets. Supported through a proprietary IoT enterprise monitoring platform and intellectual property portfolio, our award-winning patented GPS SmartSole® — is the world’s first wearable technology tracking device created for those at risk of wandering due to Alzheimer’s, dementia, autism and traumatic brain injury. The product platform can be customized and integrated into numerous products whose location and movement can be monitored in real time through our 24x7 tracking portal. Our core products and services are supported by an IP portfolio of patents, patents pending, registered trademarks, copyrights, URLs and a library of software source code, all of which is also managed by Global Trek, along with IP licensing.

 

LOCiMOBILE, Inc. (“LOCiMOBILE”), is the Company’s digital platform which has been at the forefront of Smartphone application (“App”) development since 2009. With a suite of mobile applications, we are able to turn the iPhone, iPad, Android and other GPS enabled handsets into a tracking device which can be tracked from handset to handset, through our tracking portal or on any connected device with internet access. LOCiMOBILE has launched over 20 Apps across multi mobile device operating systems and continues to launch consumer and enterprise apps.

 

Through a proprietary enterprise IoT monitoring platform and licensing subscription business model, the Company offers a complete end to end solution of hardware, middleware, Apps, connectivity, licensing and professional services, letting you know where or how someone or something is at the touch of a button, delivering safety, security and peace of mind in real-time.

 

Basis of Presentation

 

The accompanying unaudited condensed consolidated financial statements of GTX have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and applicable regulations of the U.S. Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to such rules and regulations. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of financial position and results of operations have been included. Our operating results for the nine months ended September 30, 2019 are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2018, which are included in our Annual Report on Form 10-K.

 

The accompanying consolidated financial statements reflect the accounts of GTX Corp and its wholly-owned subsidiaries. All significant inter-company balances and transactions have been eliminated.

 

On June 22, 2018, the Company effected a 1-for-75 reverse stock split of its common stock. All references to shares of common stock outstanding, average number of shares outstanding and per share amounts in these consolidated financial statements and notes to consolidated financial statements have been restated to reflect as if the reverse stock split occurred as of the earliest period presented.

 

8
 

 

Going Concern

 

The consolidated financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company incurred a net loss of $442,173 during the period ended September 30, 2019, has incurred losses since inception resulting in an accumulated deficit of $23,265,367 and a stockholders’ deficit of $3,408,718 as of September 30, 2019. The Company anticipates further losses in the development of its business. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan until such time as revenues and related cash flows are sufficient to fund our operations.

 

The Company’s independent registered public accounting firm has also included explanatory language in their opinion accompanying the Company’s audited financial statements for the year ended December 31, 2018. The Company’s financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.

 

The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. The Company’s ability to raise additional capital through the future issuances of debt or equity is unknown. The ability to obtain additional financing, the successful development of the Company’s contemplated plan of operations, or its ability to achieve profitable operations are necessary for the Company to continue operations, and there is no assurance that these can be achieved. The ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

Revenue Recognition

 

We account for revenue in accordance with ASC 606. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC 606. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. The contract transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. We do not have any significant payment terms, as payment is received shortly after goods are delivered or services are provided.

 

We derive our revenues primarily from hardware sales, subscription services fees, IP licensing and professional services fees. Hardware includes our SmartSole, Military and other Stand-Alone Devices. Subscription services revenues consist of fees from customers accessing our cloud-based software solutions and subscription or license fees for our platform. Professional services and other revenues consist primarily of fees from implementation services, configuration, data services, training and managed services related to our solutions. IP licensing is related to our agreement with Inventergy whereby we have partnered in order to monetize our IP portfolio (see Note 3).

 

Product sales

 

At the inception of each contract, we assess the goods and services promised in our contracts and identify each distinct performance obligation. The Company recognizes revenue upon the transfer of control of promised products or services to the customer in an amount that depicts the consideration the Company expects to be entitled to for the related products or services. For the large majority of the Company’s sales, transfer of control occurs once product has shipped and title and risk of loss have transferred to the customer.

 

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Services Income

 

The Company’s software solutions are available for use as hosted application arrangements under subscription fee agreements without licensing perpetual rights to the software. Subscription fees from these applications are recognized over time on a ratable basis over the customer agreement term beginning on the date the Company’s solution is made available to the customer. Our subscription contracts are generally one to three months in length. Amounts that have been invoiced are recorded in accounts receivable and deferred revenues or revenues, depending on whether the revenue recognition criteria have been met.

 

The majority of our professional services arrangements are recognized on a time and materials basis. Professional services revenues recognized on a time and materials basis are measured monthly based on time incurred and contractually agreed upon rates. Certain professional services revenues are based on fixed fee arrangements and revenues are recognized based on the proportional performance method. In some cases, the terms of our time and materials and fixed fee arrangements may require that we defer the recognition of revenue until contractual conditions are met. Data services and training revenues are generally recognized as the services are performed.

 

IP Licensing Revenue

 

Beginning in 2019 we began our transition into an outbound licensing model whereby revenue recorded by the Company includes revenue for our License and Partnership agreement with Inventergy which provides for ongoing royalties based on monetization of IP licenses. The Company recognizes revenue for these licenses upon execution of the licensing agreement. During the period ended September 30, 2019 eleven licensing agreements were entered into for $182,500 of which our share is 45% or $82,125. In addition, the company entered into a new licensing agreement with Inpixon, for which the Company recognized revenue of $650,000 during the period ended September 30, 2019 (see Note 3).

 

Disaggregation of Net Sales

 

During the period ended September 30, 2019, the Company’s customer base and revenue streams were comprised of approximately 33% B2B (Wholesale Distributors and Enterprise Institutions), 9% B2C (consumers and government agencies who bought on the behalf of consumers, through our online ecommerce platform and through Amazon, Google and iTunes), 57% IP (our monetization campaign from consulting, licensing and asserting our patents) and 1% Military and Law Enforcement.

 

During the period ended September 30, 2018, the Company’s customer base and revenue streams were comprised of approximately 52% B2B (Wholesale Distributors and Enterprise Institutions), 21% B2C (consumers and government agencies who bought on the behalf of consumers, through our online ecommerce platform and through Amazon, Google and iTunes), 6% IP (our monetization campaign from consulting, licensing and asserting our patents) and 21% Military and Law Enforcement.

 

The following table shows the Company’s disaggregated net sales by customer type for the nine months ended September 30, 2019 and 2018:

 

    September 30,
2019 		    September 30,
2018 		 
B2B   $ 430,430     $ 306,189  
B2C     110,117       123,690  
Military     12.405       126,445  
IP     732,125       37,500  
Total   $ 1,285,077     $ 593,824  

 

Use of Estimates

 

The preparation of the accompanying unaudited 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. These estimates include, but are not limited to, estimates related to revenue recognition, allowance for doubtful accounts, inventory valuation, tangible and intangible long-term asset valuation, warranty and other obligations and commitments. Estimates are updated on an ongoing basis and are evaluated based on historical experience and current circumstances. Changes in facts and circumstances in the future may give rise to changes in these estimates which may cause actual results to differ from current estimates.

 

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Fair Value Estimates

 

Pursuant to the Accounting Standards Codification (“ASC”) No. 820, “Disclosures About Fair Value of Financial Instruments”, the Company records its financial assets and liabilities at fair value. ASC No. 820 provides a framework for measuring fair value, clarifies the definition of fair value and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. ASC No. 820 establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

 

  Level 1 - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
     
  Level 2 - Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the asset/liability’s anticipated life.
     
  Level 3 - Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

 

The carrying values for cash and cash equivalents, investments in marketable securities, accounts receivable, other current assets, accounts payable and accrued liabilities approximate their fair value due to their short maturities. The Company uses Level 3 inputs for its valuation methodology for the derivative liabilities.

 

Concentrations

 

We currently rely on one manufacturer to supply us with our GPS SmartSole and two manufacturers to supply us with the GPS device included in the GPS SmartSole. The loss of either of these manufacturers could severely impede our ability to manufacture the GPS SmartSole.

 

During the nine months ended September 30, 2019, the Company had two customers that each represented 77% and 8% of our sales on an individual basis, or approximately 85% in the aggregate, and during the nine months ended September 30, 2018, the Company had three major customers that each represented more than 39%, 23% and 10% of our sales on an individual basis, or approximately 71% in the aggregate.

 

During the three months ended September 30, 2019, the Company had three customers that each represented 55% and 17% and 8%, of our sales on an individual basis, or approximately 80% in the aggregate, and during the three months ended September 30, 2018, the Company had four major customers that each represented more than 42%, 21%, 7% and 7% of our sales on an individual basis, or approximately 77% in the aggregate.

 

Share-based Compensation

 

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

 

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In prior periods up to March 31, 2019, the Company accounted for share-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50, Equity - Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The final fair value of the share-based payment transaction is determined at the performance completion date. For interim periods, the fair value is estimated, and the percentage of completion is applied to that estimate to determine the cumulative expense recorded.

 

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

 

Derivative Instruments

 

Our debt or equity instruments may contain embedded derivative instruments, such as conversion options, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability.

 

Our derivative instrument liabilities are re-valued at the end of each reporting period, with changes in the fair value of the derivative liability recorded as charges or credits to income, in the period in which the changes occur. For bifurcated conversion options that are accounted for as derivative instrument liabilities, we determine the fair value of these instruments using the Black-Scholes option pricing model. This model requires assumptions related to the remaining term of the instrument and risk-free rates of return, our current Common Stock price and expected dividend yield, and the expected volatility of our Common Stock price over the life of the option.

 

Investments in Marketable Securities

 

The Company’s securities investments that are acquired and held principally for the purpose of selling them in the near term are classified as trading securities. Trading securities are recorded at fair value based on quoted market price (level 1) on the balance sheet in current assets, with the change in fair value during the period included in earnings.

 

Net Loss Per Common Share

 

Basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. There were no dilutive shares outstanding as of September 30, 2019 and 2018. Common stock equivalents, totaling 15,190,000 and 11,321,667 at September 30, 2019 and 2018, respectively, were not included in the computation of diluted earnings per share in 2019 and 2018 in the unaudited consolidated statements of operations as inclusion of such shares would be anti-dilutive.

 

Segments

 

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

 

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Recently Issued Accounting Pronouncements

 

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

 

3. LICENSE AGREEMENTS

 

IP Monetization Agreement

 

On June 16, 2016, the Company entered into a Definitive Agreement with Inventergy Innovations, LLC (“Inventergy”), a subsidiary of INVT. The Company partnered with Inventergy to monetize three (3) GTX Patents, which now due to ongoing continuations has grown to 5 Patents, were assigned to an Inventergy subsidiary (“Inventergy LBS, LLC”), and Inventergy assigned a 45% revenue share in net revenue collected on these patents to GTX. Pursuant to a non-exclusive license back to GTX, GTX will still retain all use rights of the 5 patents. The agreement provides for ongoing royalties based on monetization of IP licenses. The Company recognizes revenue for these licenses upon execution of the licensing agreement. During the period ended September 30, 2019 eleven licensing agreements were entered into for $182,500 of which our share is 45% or $82,125.

 

During the periods ended September 30, 2019 and 2018, the Company provided IP consulting services to INVT in the amounts of $0 and $37,500, respectively

 

Inpixon Agreement

 

On June 27, 2019 the Company completed its sale and licensing of certain assets and patents of GTX to Inpixon, consisting of a portfolio of global positioning system (“GPS”) technologies and intellectual property, including, but not limited to the following:

 

(a) an intellectual property portfolio that includes a registered patent, along with more than 20 pending patent applications or licenses to registered patents or pending applications relating to GPS technologies;

 

(b) a smart school safety network (“SSSN”) solution that consists of a combination of wristbands, gateways and proprietary backend software, which rely on the Bluetooth Low-Energy (“BLE”) protocol and a low-power enterprise wireless 2.4Ghz platform, to help school administrators identify the geographic location of students or other people or things (e.g., equipment, vehicles, tools, etc.) in order to, among other things, ensure the safety and security of students while at school;

 

(c) a personnel equipment tracking system (“P.E.T.S.”) and ground personnel safety system (“GPSS”), which includes a combination of hardware and software components, for a GPS and radio frequency (“RF”) based personnel, vehicle and asset-tracking solution designed to provide ground situational awareness and near real-time surveillance of personnel and equipment traveling within a designated area for, among other things, government and military applications; and,

 

(d) a right to 30% of royalty payments that may be received by GTX in connection with its ownership interest in Inventergy LBS, LLC (“Inventergy”) which is the owner of certain patents related to methods and systems for communication with a tracking device.

 

The Assets were sold for aggregate consideration of $884,000 consisting of (i) $250,000 in cash delivered at the closing (the “Cash Consideration”) and (ii) 1,000,000 shares of Inpixon’s restricted common stock, par value $0.001 per share (the “Shares”) valued at $634,000 at the date of the sale. 100,000 of the Shares are subject to certain holdback restrictions and forfeiture for the purpose of satisfying indemnification claims. In addition, the Company and Inpixon entered into a six month consulting agreement, pursuant to which the Company will provide services to assist Inpixon with the transition of the assets acquired under the Agreement. Under the consulting agreement, the Company will receive a monthly fee of $15,000 over the 6-month term of the consulting agreement commencing on July 1, 2019.

 

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The Company analyzed and performed an assessment of the terms of the Agreement with Inpixon pursuant to the provisions of ASC 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the objective when allocating the transaction price is for an entity to allocate the transaction price to each performance obligation (or distinct good or service) in an amount that depicts the amount of consideration to which the entity expects to be entitled in exchange for transferring the promised goods or services to the customer. Based on the provisions of ASC 606, the Company determined $650,000 of the purchase price represented the value from the licensing agreements and was recognized as revenue at the date of the agreement as all performance obligations had been met; and $234,000 represented the fair value of the consulting services that will be amortized as revenue as the services will be provided over 6 month period. During the nine month period ended September 30, 2019, $95,125 of this amount was amortized and reflected as service income.

 

4. RELATED PARTY TRANSACTIONS

 

Convertible notes payable to related parties - In 2017, management elected to transfer the existing accrued salaries into long-term convertible promissory notes. As of September 30, 2019 and December 31, 2018, these notes total $884,546. The notes bear a 10% annual interest rate. Management shall have the right, but not the obligation to convert up to 50% of the amount advanced and accrued interest into shares, warrants or options of common or preferred stock of the Company at $0.01 per share (see Note 8). Accrued interest on the notes was $200,198 and $134,039 as of September 30, 2019 and December 31, 2018, respectively, and is included in the accrued expenses – related parties on the accompanying balance sheet.

 

Accrued wages and costs - In order to preserve cash for other working capital needs, various officers, members of management, employees and Board Members agreed to accrue portions of their wages and sometimes various out-of pocket expenses since 2011. As of September 30, 2019, and December 31, 2018, the Company owed $408,531 and $198,135, respectively, for such accrued wages and other expenses owed for other services which are included in the accrued expenses – related parties on the accompanying balance sheet.

 

5. INVENTORY

 

Inventories consist of the following:

 

    September 30, 2019     December 31, 2018  
Raw materials   $ 678     $ 717  
Finished goods     40,836       21,850  
Total Inventories   $ 41,514     $ 22,567  

 

6. PROPERTY AND EQUIPMENT

 

Property and equipment, net, consists of the following:

 

    September 30, 2019     December 31, 2018  
Software   $ 25,890     $ 25,890  
Website development     91,622       91,622  
Software development     294,751       294,751  
Equipment     1,750       1,750  
Less: accumulated depreciation     (390,264 )     (355,625 )
Total property and equipment, net   $ 23,749     $ 58,388  

 

Depreciation expense for the period ended September 30, 2019 and 2018 was $34,639 and $35,126, respectively, and is included in general and administrative expenses.

 

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7. INVESTMENTS IN MARKETABLE EQUITY SECURITIES

 

The Company’s equity investments represented investments of purchased shares of stock of two (2) entities with ownership percentages of less than 5%. The Company accounted for these investments pursuant to ASU 2016-01, Financial Instruments – Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. As such, these investments were recorded at their market value as of September 30, 2019, with the change in fair value being reflected in the statement of operations. These investments consisted of the following:

 

As of December 31, 2018, the Company owned 42,500 shares of Inventergy’s common stock with fair value of $344 as of the year then ended. During the current period ended September 30, 2019, the Company was able to obtain observable evidence that the investment had a market value of $0.02 per share, or an aggregate value of $850 as of the period then ended. As such, the Company recorded an unrealized gain from the change in market value of $506 during the current period ended September 30, 2019 in its condensed statement of operations.

 

In June 2019, the Company acquired 1,000,000 shares of Inpixon’s restricted common stock valued at $634,000, as consideration for the assets sold to Inpixon (see Note 3), and which accounted for less than 5% in equity of Inpixon. During the current period ended September 30, 2019, the Company was able to obtain observable evidence that the investment had a market value of $0.116 per share, or an aggregate value of $116,000 as of the period then ended. As such, the Company recorded an unrealized loss from the change in market value of $518,000 during the current period ended September 30, 2019 in its condensed statement of operations.

 

8. NOTES PAYABLE

 

The following table summarizes the components of our short-term borrowings:

 

    September 30, 2019     December 31, 2018  
(a) Term loans   $ 217,000     $ 200,000  
(b) Revolving lines of credit     107,000       65,000  
                 
Total   $ 324,000     $ 265,000  

 

(a) Term loans

 

In 2015, the Company entered into an unsecured term loan agreement with a third party for an aggregate principal balance of $200,000 at an interest rate of 5% per annum. The term loan became due on April 14, 2017, however the maturity date has been extended to October 1, 2019 and the Company issued the lender warrants to purchase 2,500,000 shares of the Company’s common stock valued at $22,492 as consideration for the extension of the loan which has been recorded as a financing cost during the period ended September 30, 2019. The principal balance outstanding on the note as of December 31, 2018 was $200,000. During the period ended September 30, 2019 the Company repaid $33,000, resulting in a balance due of $167,000 as of September 30, 2019.

 

On September 29, 2019, the Company entered into a term loan agreement with Inpixon for an aggregate principal balance of $50,000 at an interest rate of 14% per annum. This note is tied to the Asset Purchase Agreement with Inpixon, dated as of June 27, 2019, whereby Inpixon agrees to fund the Company $50,000 a month until their S1 registration for the shares due to the Inpixon sale is effective. The principal balance outstanding on the note as of September 30, is $50,000.

 

(b) Lines of Credit

 

The Company obtained a line of credit agreement with an accredited investor of $500,000 during 2018. The line bears interest of 17%. The line is based upon GTXO providing the investor with purchase orders and use of proceeds, including production of goods schedules and loan repayment timelines. These loans/drawdowns are specifically for product, inventory and/or purchase order financing.

 

Upon completion of the terms of the Line of Credit, GTX Corp. will issue to the investor 7,500,000 shares of GTXO common stock or $75,000 of GTXO common stock, whichever is greater.

 

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As of December 31, 2018 the Company had received $ $65,000 in advances, under the line of credit. During the nine months ended September 30, 2019, the Company was advanced $65,000, and repaid $23,000 resulting in a balance due of $ $107,000 as of September 30, 2019.

 

The Company also has line of credit with its business bank, Union Bank, whereby funds can be borrowed at 2 points over prime. During the period ended September 30, 2019 had borrowed $30,000 and had repaid the entire balance. As such there is no balance outstanding as of September 30, 2019.

 

9. CONVERTIBLE NOTES

 

As of September 30, 2019 and December 31, 2018, the Company had a total of $1,177,588 and $1,313,133, respectively, of outstanding convertible notes payable, which consisted of the following:

 

    September 30, 2019     December 31, 2018  
a) Convertible Notes – with fixed conversion terms   $ 941,250     $ 967,000  
b) Convertible Notes – with variable conversion     236,338       346,133  
Total     1,177,588       1,313,133  
Less: Debt discount     -       (20,024 )
Total convertible notes, net of debt discount   $ 1,177,588     $ 1,293,109  

 

  a) Included in Convertible Notes - with fixed conversion terms, are loans provided to the Company from various investors with principal balances totaling $941,250 as of September 30, 2019. These notes carry simple interest at a rate ranging from 0% to 14% per annum and with terms ranging from 1 to 2 years. In lieu of the repayment of the principal and accrued interest, the outstanding amounts are convertible, at the option of the note holder, generally at any time on or prior to maturity and automatically under certain conditions, into the Company’s common shares at $0.015 to $0.30 per share. These notes became due in 2017 and prior, and are currently past due.
     
    At December 31, 2018, balance of the Convertible Notes was $967,000. During the nine months ended September 30, 2019, we issued 3,000,000 shares of common stock to convert $6,000 of these outstanding convertible notes (see Note 9) and made payments of $19,750. As of September 30, 2019, balance of the Convertible Notes was $941,250. These notes are currently past due.

 

    On certain of these notes the conversion price embedded in the note agreements was below the trading price of the common stock on the dates of issuance, and a beneficial conversion feature (BCF) was recognized at the date of issuance as a note discount. As of December 31, 2018, the unamortized discount was $20,024 and was fully amortized during the period ended September 30, 2019.
     
  b) Convertible notes payable with principal balance of $236,338 as of September 30, 2019 consists of loans provided to the Company from various investors. These notes are non-interest bearing and with terms ranging from 1 to 2 years. In lieu of the repayment of the principal and accrued interest, the outstanding amounts are convertible, at the option of the note holder, generally at any time on or prior to maturity and automatically under certain conditions, into the Company’s common shares at 60% of the lowest trading price in the prior 30 days. The Company determined that since the conversion floor of these notes had no limit to the conversion price, the Company could no longer determine if it had enough authorized shares to fulfil its conversion obligation. As such, pursuant to current accounting guidelines, the Company determined that the conversion feature of these notes created a derivative at the date of issuance which was recorded as a valuation discount that was fully amortized as of December 31, 2018.
     
    At December 31, 2018, balance of the loans was $346,133. During the nine months ended September 30, 2019, we issued 22,806,359 shares of common stock to convert $121,045 of outstanding convertible notes (see Note 9). In addition, certain of the notes included a penalty provision for non-payment which resulted in an additional finance charge of $11,250 being added to the principal balance. As of September 30, 2019, balance of the Convertible Notes was $238,338.

 

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Derivative liabilities

 

Under authoritative guidance used by the FASB on determining whether an instrument (or embedded feature) is indexed to an entity’s own stock, instruments which do not have fixed settlement provisions are deemed to be derivative instruments. The Company has issued certain convertible notes whose conversion price is based on a future market price. However, since the number of shares to be issued is not explicitly limited, the Company is unable to conclude that enough authorized and unissued shares are available to share settle the conversion option.

 

As a result, the conversion option is classified as a liability and bifurcated from the debt host and accounted for as a derivative liability in accordance with ASC 815 and will be re-measured at the end of every reporting period with the change in value reported in the statement of operations.

 

At December 31, 2018, the balance of the derivative liabilities was $232,162. During the period ended September 30, 2019, the Company recorded an increase in derivative liability of $15,710 and recorded an extinguishment of $247,213 related to convertible notes that were converted into shares of the Company’s common stock during the current period then ended. At September 30, 2019, the balance of the derivative liabilities was $659.

 

At September 30, 2019 and December 31, 2018, the derivative liabilities were valued using a Black-Scholes-Merton pricing model with the following assumptions:

 

    September 30, 2019     December 31, 2018  
Conversion feature:                
Risk-free interest rate     1.784 %     2.57 %
Expected volatility     309.45 %     504.95 %
Expected life (in years)     .1 to .773 years       .1 to .773 years  
Expected dividend yield     -       -  
Fair Value:                
Conversion feature   $ 659     $ 232,162  

 

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 contractual term of the notes. The expected dividend yield was based on the fact that the Company has not paid dividends to its common stockholders in the past and does not expect to pay dividends to its common stockholders in the future.

 

10. EQUITY

 

Common Stock

 

The Company issued the following shares of common stock during the nine months ended September 30, 2019:

 

    Value of Shares     Number of Shares  
Shares issued for conversion of debt   $ 127,045       25,806,359  
Shares issued for financings   $ 3,100       250,000  
Shares issued for services rendered     76,880       6,200,000  
Total shares issued   $ 207,025       32,256,359  

 

Shares issued for services rendered were to various members of management, the Board of Directors, employees and consultants and are expensed as Stock-Based Compensation in the accompanying condensed consolidated statement of operations. Shares issued for financings was to an accredited investor in relation to their convertible note. Shares issued for conversion of debt relate to conversion of the convertible note discussed in Note 9.

 

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On October 16, 2018, the Company created a long-term employment retention bonus plan and issued 39,500,000 of restricted common shares to the plan. The shares have a 3-year vesting period and those eligible, employees, directors and advisors must have been with the Company for at least 7 years with an additional 2 years necessary in order to participate in the plan and 3 to become fully vested. The shares will vest with a mandatory 2-year minimum requirement for such vesting to become valid with 33.4% in year two and 66.66% at the end of year three. If the individual leaves the Company prior to vesting the Company or its assignee retains the option to repurchase the unvested shares at par. The shares had a fair value of $1,086,250 at the date of grant, which cost will be amortized over the three-year vesting period. The unamortized balance of the award was $1,043,021 as of December 31, 2018.

 

For the period ending September 30, 2019, we cancelled 36 million shares of management’s stock, which was part of a three-year employee retention plan. All non-vested shares were returned to treasury, thereby reducing quarterly non-cash expense by approximately $90,000. The board is evaluating a new, less costly, employee stock option plan (ESOP) and intends to select a new plan by the end of the year. As a result, for the period ending September 30, 2019, the Company had amortized expense of $221,267 related to the retention plan, and the remaining/adjusted balance of $65,503 in unamortized expense that will be recognized as compensation cost as the shares vest.

 

Common Stock Warrants

 

Since inception, the Company has issued warrants to purchase shares of the Company’s common stock to shareholders, consultants and employees as compensation for services rendered and/or through private placements.

 

A summary of the Company’s warrant activity and related information is provided below

 

    Exercise Price $     Number of
Warrants 		 
Outstanding and exercisable at December 31, 2018     2.25 - 0.0125       11,555,000  
Warrants exercised     -       -  
Warrants granted     0.01       5,250,000  
Warrants expired     2.25 - 0.015       (1,615,000 )
Outstanding and exercisable at September 30, 2019     2.25 - .01       15,190,000  

 

Stock Warrants as of September 30, 2019  
Exercise     Warrants     Remaining     Warrants  
Price     Outstanding     Life (Years)     Exercisable  
$ 0.011       2,500,000       1.51       2,500,000  
$ 0.015       4,190,000       0.38       4,190,000  
$ 0.01       3,000,000       1.53       3,000,000  
$ 0.020       5,000,000       0.38       5,000,000  
$ 0.040       500,000       0.73       500,000  
          15,190,000               15,190,000  

 

During the period ended September 30, 2019, 5,000,000 of the warrants issued were related to financings with total fair value at grant date of $49,992, and 250,000 warrants were issued related to an advisory agreement with total fair value at grant date of $4,799, 3,000,000 have a 2-year term and have a strike price of $0.01, and 2,500,000 has a 1.7-year term with a strike price of $0.011.

 

The outstanding and exercisable warrants at September 30, 2019 had no intrinsic value.

 

Common Stock Options

 

Under the Company’s 2008 Equity Compensation Plan (the “2008 Plan”), we are authorized to grant stock options intended to qualify as Incentive Stock Options, “ISO”, under Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified options, restricted and unrestricted stock awards and stock appreciation rights to purchase up to 7,000,000 shares of common stock to our employees, officers, directors and consultants, with the exception that ISOs may only be granted to employees of the Company and its subsidiaries, as defined in the 2008 Plan.

 

18
 

 

The Plan provides for the issuance of a maximum of 7,000,000 shares of which, after adjusting for estimated pre-vesting forfeitures and expired options, approximately 2,235,000 were available for issuance as of September 30, 2019.

 

There are no options outstanding as of September 30, 2019.

 

11. COMMITMENTS & CONTINGENCIES

 

From time to time, we may be involved in routine legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business. The ultimate amount of liability, if any, for any claims of any type (either alone or in the aggregate) may materially and adversely affect our financial condition, results of operations and liquidity. In addition, the ultimate outcome of any litigation is uncertain. Any outcome, whether favorable or unfavorable, may materially and adversely affect us due to legal costs and expenses, diversion of management attention and other factors. We expense legal costs in the period incurred. We cannot assure you that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against us in the future, and these matters could relate to prior, current or future transactions or events.

 

12. SUBSEQUENT EVENTS

 

On October 3, 2019, we issued 2,900,000 shares of common stock to an investor for converting $9,902 in debt from a convertible note that was issued in the third quarter of 2017.

 

On October 4, 2019, we issued 2,500,000 shares of common stock to an investor for converting $5,950 in debt from a convertible note that was issued in the third quarter of 2017.

 

On October 11, 2019, we issued 1,900,000 shares of common stock to an investor for converting $4,522 in debt from a convertible note that was issued in the third quarter of 2017.

 

On November 11, 2019, we issued 1,900,000 shares of common stock to an investor for converting $5,054 in debt from a convertible note that was issued in the third quarter of 2017.

 

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

 

FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I of this report include forward-looking statements. These forward looking statements are based on our management’s current expectations and beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “proposed,” “intended,” or “continue” or the negative of these terms or other comparable terminology. You should read statements that contain these words carefully, because they discuss our expectations about our future operating results or our future financial condition or state other “forward-looking” information. Many factors could cause our actual results to differ materially from those projected in these forward-looking statements, including but not limited to: variability of our revenues and financial performance; risks associated with product development and technological changes; the acceptance our products in the marketplace by existing and potential future customers; general economic conditions. You should be aware that the occurrence of any of the events described in this Quarterly Report could substantially harm our business, results of operations and financial condition, and that upon the occurrence of any of these events, the trading price of our securities could decline. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, growth rates, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements after the date of this Quarterly Report to conform these statements to actual results.

 

Introduction

 

Unless otherwise noted, the terms “GTX Corp”, the “Company”, “we”, “us”, and “our” refer to the ongoing business operations of GTX Corp and our wholly-owned subsidiaries, Global Trek Xploration, and LOCiMOBILE, Inc.

 

Organization and Presentation

 

During the periods covered by these financial statements, GTX Corp and subsidiaries (collectively, the “Company,” “GTX,” “we” or “our”) is in the in the field of wearable GPS, people and asset tracking Location-Based Services (LBS) and Real-Time Location Systems (RTLS). GTX Corp owns 100% of the issued and outstanding capital stock of Global Trek Xploration and LOCiMOBILE, Inc.

 

Global Trek Xploration, Inc. (“Global Trek”) designs, manufactures, sells and distributes, hardware, software, and connectivity, using Global Positioning System (“GPS”), Bluetooth Low Energy (“BLE”), Radio Frequency (“RF”) and Near field Communication (“NFC”) technologies for monitoring and tracking of people and high value assets. Supported through a proprietary Internet of Things (“IoT”) enterprise monitoring platform and intellectual property (“IP”) portfolio. Known for its game-changing and award-winning patented GPS SmartSole® — think Dr. Scholl’s meets LoJack, the world’s first invisible wearable technology tracking device created for those at risk of wandering due to Alzheimer’s, dementia, autism and traumatic brain injury. The product platform can be customized and integrated into numerous products whose location and movement can be monitored in real time through our 24x7 tracking portal. Our core products and services are supported by an IP portfolio of patents, patents pending, registered trademarks, copyrights, URLs and a library of software source code, all of which is also managed by Global Trek, along with IP licensing.

 

LOCiMOBILE, Inc. develops Smartphone application (“App”) for both consumer and enterprise deployment. With a suite of mobile applications that turn the iPhone, iPad, Android and other GPS enabled handsets into a tracking device which can be tracked from handset to handset or through our tracking portal or on any connected device with internet access. LOCiMOBILE has launched numerous Apps across multiple mobile device operating systems and continues to launch consumer and enterprise apps. LOCiMOBILE apps have over 2 million downloads across 50 plus countries and have been ranked in the iTunes top 10 downloads and highest grossing App category.

 

Operations

 

The Company designs, develops, manufactures, distributes and sells related tracking products and services, using GPS, BLE, RF and NFC technology, through a global B2B and B2C network of resellers, affiliates, distributors, nonprofit organizations, government agencies, police departments, manufacturers reps and retailers. Offering a variety of hardware devices, a proprietary enterprise (“IoT”) monitoring platform and a licensing subscription business model, the Company provides a complete end to end solution of hardware, middleware, apps, connectivity, licensing and professional services, letting our customers know where or how someone, or something, is at the touch of a button, delivering safety, security and peace of mind in real-time. With the exception of our military products, all of our consumer and enterprise tracking products funnel into the GTX Corp IoT monitoring platform which supports end user customers in over 35 countries. The Company is also in the business of licensing intellectual property and monetizing its patent portfolio.

 

Overview

 

As the Company continues to focus on building channels of distribution and expanding its product line of embedded smart wearable tracking devices, Stand-Alone GPS devices, Digital Apps, NFC solutions and government agency human and asset tracking solutions, beginning in the first quarter of 2019 we also started recognizing IP licensing revenues from granting non-exclusive intellectual property licenses to companies that are using or want to use our patented technology in the market place. This new licensing revenue in the quarter ending September 30, 2019 represented approximately 12% of our revenues, which were approximately $39,375 up 215% from the same period in 2018.

 

The GTX IP portfolio addresses the following core areas: Footwear and wearables, Communication to and from a device to a server and Backend Server process related to people and asset tracking Location-Based Services (“LBS”) and Real-Time Location Systems (“RTLS”).

 

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GTX’s IP portfolio not only supports the Company’s core product lines by creating barriers of entry to competitors but also underscores the Company’s intrinsic value. During the three quarters ending September 30, 2019 the Company and the Inventergy, LLC signed 12 agreements so far this year, starting with four during the first quarter of 2019, two during the second quarter and six in the third quarter, these twelve non-exclusive license agreements generated approximately $732,000 in top line IP licensing income, a 1852% increase over the comparable period in 2018. As we expand and continue negotiations with other companies, we can expect to sign additional agreements this year, however it is important to note there is no way for us to predict outcomes or timelines. Every company we engage moves at its own pace, has different strategies, legal team, budget, etc. IP licensing is also not our core business, it is a business unit we have been cultivating for years and working with different partners such as Inventergy LLC ( INVT) and several different legal teams across the country, all of which contribute to the process, direction, strategy and final decision making.

 

In addition to a 215% increase in IP licensing in the third quarter, our B2B business, which represented approximately 33% of our total third quarter revenues had an 50% increase over the comparable period in 2018, our military business also had a slight increase over the same period in 2018, we saw an overall 11% increase in total subscribers with a 37% increase in international subscribers compared to the same period in 2018, however our B2C SmartSole sales saw a slight decline of 8% over the same period in 2018. We did not allocate a lot of resources in B2C advertising or social media promotion this quarter which may have been a contributing factor.

 

Coming off a very strong second quarter, we took the opportunity to invest in our future, by ramping up our NFC development projects, whereby we are integrating our NFC tags with Blockchain technology and started developing a secured, scalable middleware layer that sits in-between our NFC devices and third-party backend platforms. We are now working with several partners that provide various vertical specific Block chain, IoT and AI backend platforms but needed a secure and seamless flow of data from hardware to backend. We expect to begin pilots of our middleware layer in the coming months and launch in early 2020. This middleware lawyer is industry agnostic and is designed to help drive NFC hardware business and other IoT device sales. We also continued testing our Near Field Communication (NFC) Temperature Trackers, which provide real-time temperature sensing and data logging across the supply chain necessary with transportation of perishables; food, drinks, pharmaceuticals and other temperature sensitive products that can be negatively affected by conditions in transit. This is still a new business silo that has not begun generating revenues but we see this new technology as a natural extension into the world of asset tracking, taking us beyond humans to tracking and monitoring of perishable shipments of food, beverages, biopharmaceuticals, live organs and many other temperature sensitive shipments. In addition to temperature sensing we are now looking into NFC tags that can authenticate products, addressing the multibillion dollar worldwide counterfeit market.

 

We also have begun working on a next generation miniaturized GPS tracking device, utilizing a host of new technologies, including, CatM1, NB-IoT, and enhanced Wifi, and Bluetooth, for better accuracy, faster location requests and less power consumption. This new hardware platform will be small enough to be embedded into our line of wearable technology and offered as a licensed hardware platform as well. We expect to have prototypes by end of year and go into certification and production in 2020. This new hardware platform should enable us to open new markets both in terms of geography and verticals and will help drive our ongoing subscription model. We also expect this platform to be used in our project with Flint Rehab.

 

During the quarter ending September 30, 2019 we also took the opportunity to start cleaning up our balance sheet, by paying down some long term debt and accounts payable. In addition, as part of an overall plan to lower expenses, we repatriated 36 million shares of management stock which was part of a three-year employee retention plan. All non-vested shares were returned to treasury and thereby reducing quarterly non-cash expense by approximately $90,000. The board is evaluating new less costly employee stock option plans (ESOP) and intends to select a new plan by the end of the year. Adding to our ongoing effort to enhance our balance sheet, the Company did not take on any new convertible debt making this the 4th quarter in a row of no new convertible debt.

 

On June 27th the Company closed an IP licensing and asset sale transaction with Inpixon (NASDAQ: INPX). As per the agreement the Company deferred $50,000 over a 4-year period for the non-compete clause ($3,125 over 16 quarters) and deferred $184,000 over a 6 month period ($92,000 per each quarter) for the sale and licensing of certain technology and IP. Both those deferred streams of income ($3,125 and $92,000) were recognized in the third quarter.

 

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Results of Operations

 

The following discussion should be read in conjunction with our interim consolidated financial statements and the related notes that appear elsewhere in this Quarterly Report.

 

Three Months Ended September 30, 2019 (“Q3 2019”) Compared to the Three Months Ended September 30, 2018 (“Q3 2018”)

 

    Three Months Ended September 30,  
    2019     2018  
    $     % of
Revenues 		    $     % of
Revenues 		 
                         
Product sales     198,588       58 %     132,517       68 %
Service income     102,103       30 %     50,497       26 %
Licensing income     39,375       12 %     12,500       6 %
Total revenues     340,066       100 %     195,514       100 %
Cost of products sold     7,727       2 %     30,420       16 %
Cost of service revenue     8,466       22 %     15,510       8 %
Cost of licensing revenue     21,342       6 %     -       0 %
Cost of goods sold     37,535       11 %     45,930       23 %
Gross profit     302,531       89 %     149,584       77 %
                                 
Operating expenses:                                
Wages and benefits     150,743       44 %     174,047       89 %
Professional fees     20,627       6 %     108,411       55 %
Sales and marketing expenses     3,281       1 %     12,008       6 %
General and administrative     55,157       16 %     82,340       42 %
Total operating expenses     229,808       68 %     376,806       193 %
                                 
Profit/(loss) from operations     72,723       21 %     (227,222 )     -116 %
                                 
Other expense, net     (329,147 )     -97 %     (26,596 )     -14 %
Net profit/(loss)     (256,424 )     -75 %     (253,818 )     -130 %

 

Revenues

 

Revenues as a whole in Q3 2019 increased by 74% or $144,552 in comparison to Q3 2018, primarily because of the increase in sales related to IP license fee income. Services income increased 102%, which included an increase in professional fees. Product revenues increased in Q3 2019 by 50% or $66,070 over Q3 2018 primarily due to the revenue we received from our military sales. IP licensing income from Inventergy in Q3 2019 continued with 5 licensing and settlement agreement executed.

 

The Company’s goal is to generate recurring subscription revenues from the use of all of our tracking products.

 

We had a 37% increase in international subscribers and an 11% increase in total subscribers for Q3 2019 compared to Q3 2018.

 

Cost of goods sold

 

Cost of goods sold decreased by 18% or $8,395 during Q3 2019 in comparison to Q3 2018 primarily due to sales to the military and from IP revenues which has lower costs associated with them. The total gross margin increased from 76.51% in Q3 of 2018 to 88.96% in Q3 of 2019 primarily from the high margin sales related to military and IP licensing revenues.

 

22
 

 

Wages and benefits

 

Wages and benefits during Q3 2019 decreased by 13% or $23,304 in comparison to Q3 2018, primarily on lower staffing expenses.

 

Professional fees

 

Professional fees consist of costs attributable to consultants and contractors who primarily spend their time on legal, accounting, product development, business development, corporate advisory services and investor relations. Such costs decreased $87,784 or 81% during Q3 2019 as compared to Q3 2018, primarily IP transaction legal services, the issuance of non-cash stock-based compensation to advisors, and non-cash related retention bonuses. We expect these costs to decline as a result of the cancellation of the non-vested retention bonus shares.

 

Sales and marketing expenses

 

Sales and marketing expenses decreased by 73% or $8,727 during Q3 2019 in comparison to Q3 2018. These costs are expected to ramp up as we begin to launch new products.

 

General and administrative

 

General and administrative costs during Q3 2019 decreased by $27,183 or 33% in comparison to Q3 2018 due to a reduction in travel and entertainment expenses, a reduction in D&O insurance and a slight reduction in R&D expenses.

 

Other expense, net

 

Other expense, net increased 1138% or $302,551 from Q3 2018 to Q3 2019 primarily as a result of a $518,000 non-cash adjustment to the stock price of marketable securities held for sale. As of September 30, 2019, the Company had $659 in derivative liabilities. Other expense, net also includes interest expenses related to notes.

 

Net loss

 

Net loss increased by 1% or $2,606 from Q3 2018 to Q3 2019 primarily as a result of the $518,000 non-cash adjustment to marketable securities, on an operating income basis we recognized a net profit of $302,531.

 

Nine Months Ended September 30, 2019 (“9 months 2019”) Compared to the Nine Months Ended September 30, 2018 (“9 months 2018”)

 

    Nine Months Ended September 30,  
    2019     2018  
    $     % of
Revenues 		    $     % of
Revenues 		 
                         
Product sales     302,697       24 %     409,677       69 %
Service income     250,255       19 %     146,647       25 %
Licensing income     732,125       57 %     37,500       6 %
Total revenues     1,285,077       100 %     593,824       100 %
Cost of products sold     55,871       4 %     124,028       21 %
Cost of service revenue     41,296       3 %     37,380       6 %
Cost of licensing revenue     44,487       3 %     -       0 %
Cost of goods sold     141,654       11 %     161,408       27 %
Gross profit     1,143,423       89 %     432,416       73 %
                                 
Operating expenses:                                
Wages and benefits     514,125       40 %     559,523       94 %
Professional fees     375,858       29 %     236,835       40 %
Sales and marketing expenses     6,701       1 %     35,435       6 %
General and administrative     179,269       14 %     228,256       39 %
Total operating expenses     1,075,953       84 %     1,060,049       179 %
                                 
Income/(loss) from operations     67,470       5 %     (627,633 )     -106 %
                                 
Other expense, net     (509,643 )     -40 %     (625,517 )     -105 %
Net loss     (442,173 )     -34 %     (1,253,150 )     -211 %

 

23
 

 

Revenues

 

Revenues as a whole for the 9 months 2019 increased by 116% or $691,253 in comparison to the 9 months 2018, primarily because of the increase in sales related to IP license fee income. Product revenues decreased in the 9 months 2019 by 26% or $106,980 over the 9 months 2018 primarily due to the decrease in revenue we received from our military and Smartsole sales. Service income increased by 71% or $103,608 as a result of increases in professional services and recurring fees. IP licensing revenues increased 1852% or $694,625, with $650,000 from the Inpixon sale and additional IP licensing income from 11 licensing and settlement agreements being executed with Inventergy.

 

The Company’s goal is to generate recurring subscription revenues from the use of all of our tracking products.

 

We had a 37% increase in international subscribers and an 11% increase in total subscribers for the 9 months 2019 compared to the 9 months 2018.

 

Cost of goods sold

 

Cost of goods sold decreased by 12% or $19,754 during the 9 months 2019 in comparison to the 9 months 2018 primarily due to the costs related to the large increase in sales for higher margin military and IP licensing fees. The total gross margin increased from 73% in the 9 months of 2018 to 89% in the 9 months of 2019 as we had large sales in high margin revenue.

 

Wages and benefits

 

Wages and benefits during the 9 months 2019 decreased by 8% or $45,398 in comparison to the 9 months 2018, primarily from non-cash accruals of retention bonus.

 

Professional fees

 

Professional fees consist of costs attributable to consultants and contractors who primarily spend their time on legal, accounting, product development, business development, corporate advisory services and investor relations. Such costs increased $139,023 or 59% during the 9 months 2019 as compared to the 9 months 2018, primarily due to IP transaction legal services, the issuance of non-cash stock-based compensation to advisors, and non-cash related retention bonuses. We expect these costs to decline as a result of the cancellation of the non-vested retention bonus shares.

 

Sales and marketing expenses

 

Sales and marketing expenses decreased by 81% or $28,734 during the 9 months 2019 in comparison to the 9 months 2018. These costs are expected to ramp up as we begin to launch new products.

 

General and administrative

 

General and administrative costs during the 9 months 2019 decreased by $48,987 or 21% in comparison to the 9 months 2018 primarily due to a reduction in travel and entertainment expenses, a reduction in D&O insurance and a slight reduction in R&D expenses.

 

24
 

 

Other expense, net

 

Other expense, net decreased 18% or $114,029 from the 9 months 2018 to the 9 months 2019 primarily as a result of not adding any new debt instruments that carry non-cash derivative liabilities or increasing the amortization of debt discounts related to debt financings. As of September 30, 2019, we recognized a reduction of $231,503 in derivative liabilities, leaving the Company a $659 balance in derivative liabilities, and a reduction in amortization expense of $369,355. Other expense, net also includes interest expenses related to notes.

 

Net loss

 

Net loss decreased by 65% or $809,132 from the 9 months 2018 to the 9 months 2019 primarily as a result of higher margin sales related to IP licenses and patents, on an operating income basis we recognized a net profit of $67,470.

 

Liquidity and Capital Resources

 

As of September 30, 2019, we had $76,221 of cash and cash equivalents, and a working capital deficit of $3,447,782, compared to $69,856 of cash and cash equivalents and a working capital deficit of $3,524,276 as of December 31, 2018. A part of our negative working capital position at September 30, 2019 consisted of $659 of derivative liabilities related to unsecured convertible promissory notes and $1,177,588 related to the principal balance of unsecured convertible promissory notes.

 

During the nine months ended September 30, 2019, our net loss was $442,173 compared to a net loss of $1,253,150 for the nine months ended September 30, 2018. Net cash used in operating activities for the 9 months 2019 and the 9 months 2018 was $32,885 and $381,644, respectively. Net cash used in operations decreased in the 9 months 2019 as compared to the 9 months 2018 by 91%, primarily due to the net change in non-cash items of $723,990 and the net change in operating assets and liabilities of $545,985.

 

Net cash provided by financing activities during the nine months ended September 30, 2019 was $39,250 and represents $95,000 in draws upon our lines of credit, a $50,000 term loan and $105,750, in payments on convertible notes and the lines of credit. During the nine months ended September 30, 2018, net cash provided by financing activities was $427,000 and consists of proceeds totaling $485,000 received from advances under a convertible note payable agreement as well as a $58,000 debt reduction payment on a Convertible Note. This reduction of 91% in additional financings is directly related to the Company not relying on convertible notes for financings, and thus, no new convertible notes were issued in the nine months ended September 30, 2019.

 

Because revenues from our operations have, to date, been insufficient to fund our working capital needs, we currently rely on the cash we receive from our financing activities to fund our growth, capital expenditures and to support our working capital requirements. The sale of our product and services is expected to enhance our liquidity in 2019, although the amount of revenues we receive in 2019 still cannot be estimated.

 

Until such time as our products and services can support our working capital requirement, we expect to continue to generate revenues from our other licenses, subscriptions, international distributors, hardware sales, professional services and new customers in the pipeline. However, the amount of such revenues is unknown and is not expected to be sufficient to fund our working capital needs. For our internal budgeting purposes, we have assumed that such revenues will not be sufficient to fund all of our planned operating and other expenditures during 2019. In addition, our actual cash expenditures may exceed our planned expenditures, particularly if we invest in the development of improved versions of our existing products and technologies, and if we increase our marketing expenses. Accordingly, we anticipate that we will have to continue to raise additional capital in order to fund our operations in 2019. No assurance can be given that we will be able to obtain the additional funding we need to continue our operations.

 

In order to continue funding our growth, IP and working capital needs and new product development costs, during the first quarter of 2019 we continued to draw down on our credit line to fund purchase orders. However, no assurance can be given that the investor will provide the funding, if and when requested by us.

 

25
 

 

Going Concern

 

The consolidated financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred net losses of $442,173 and $1,253,150 for the period ended September 30, 2019 and 2018, respectively, has incurred losses since inception resulting in an accumulated deficit of $23,265,367 as of September 30, 2019, and has negative working capital of $3,447,782 as of September 30, 2019. A significant part of our negative working capital position at September 30, 2019 consisted of $1,501,588, of amounts due to various accredited investors of the Company for convertible promissory notes, loans and a letter of credit. The Company anticipates further losses in the development of its business. Please see the section entitled “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2018 for more information regarding risks associated with our business.

 

Off-Balance Sheet Arrangements

 

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

Inflation

 

We do not believe our business and operations have been materially affected by inflation.

 

Critical Accounting Policies and Estimates

 

There are no material changes to the critical accounting policies and estimates described in the section entitled “Critical Accounting Policies and Estimates” under Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2018.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a “smaller reporting company”, we are not required to provide the information under this Item 3.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 as of the end of the period covered by this report (the “Evaluation Date”). Based upon the evaluation, our principal executive officer and principal financial officer concluded as of the Evaluation Date that our disclosure controls and procedures were effective. Disclosure controls are controls and procedures designed to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls include controls and procedures designed to reasonably ensure that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

Changes in Internal Controls Over Financial Reporting

 

There were no changes in our internal controls over financial reporting that occurred during the quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

26
 

 

PART II - OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS.

 

None.

 

ITEM 1A. RISK FACTORS.

 

None.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

The issuance of the above shares was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

ITEM 5. OTHER INFORMATION.

 

None.

 

ITEM 6. EXHIBITS.

 

(a) Exhibits

 

10.1   Inpixon Promissory Note(1)
     
31.1   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
     
31.2   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
     
32.1   Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act
     
32.2   Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act
     
101.INS   XBRL Instance Document
     
101.SCH   XBRL Taxonomy Extension Schema
     
101.CAL   XBRL Taxonomy Extension Calculation
     
101.DEF   XBRL Taxonomy Extension Definition
     
101.LAB   XBRL Taxonomy Extension Label
     
101.PRE   XBRL Taxonomy Extension Presentation

 

  (1) Incorporated by reference to the Registrant’s Current Report on Form 8-K dated July 2, 2019.

 

27
 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  GTX CORP
     
Date: November 13, 2019 By: /s/ ALEX MCKEAN
    Alex McKean,
    Chief Financial Officer (Principal Financial Officer)

 

Date: November 13, 2019 By: /s/ PATRICK BERTAGNA
    Patrick Bertagna,
    Chief Executive Officer

 

28
 

 

 

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