We have audited the accompanying consolidated balance
sheets of GBT Technologies, Inc. the “Company”) as of December 31, 2020 and 2019, the related statement of operations, stockholders’
equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).
In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December
31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles
generally accepted in the United States.
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our
audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards
of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
The accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s significant
operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
The accompanying footnotes are an integral part of
these consolidated financial statements.
The accompanying footnotes are an integral part of
these consolidated financial statements.
GBT TECHNOLOGIES INC.
|
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
|
|
|
Series
B Convertible Preferred Stock
|
|
Series
C Convertible Preferred Stock
|
|
Series
D Convertible Preferred Stock
|
|
Series
G Convertible Preferred Stock
|
|
Series
H Convertible Preferred Stock
|
|
Common
Stock
|
|
Treasury
Stock
|
|
Stock
Loan
|
|
Additional
Paid-in
|
|
Accumulated
|
|
Total
Stockholders’ Equity/
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
Receivable
|
|
Capital
|
|
Deficit
|
|
(Deficit)
|
Balance,
December 31, 2018
|
|
|
45,000
|
|
|
$
|
—
|
|
|
|
700
|
|
|
$
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
1,822,243
|
|
|
$
|
3,822
|
|
|
$
|
1,040
|
|
|
$
|
(643,059
|
)
|
|
$
|
—
|
|
|
$
|
81,306,958
|
|
|
$
|
(66,151,332
|
)
|
|
$
|
14,516,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for services
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,500
|
|
|
|
10
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
235,890
|
|
|
|
|
|
|
|
235,900
|
|
Common
stock issued for conversion of convertible debt and accrued interest
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
74,762
|
|
|
|
75
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,420,059
|
|
|
|
—
|
|
|
|
1,420,134
|
|
Common
stock issued for stock loan
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
200,267
|
|
|
|
200
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(7,610,147
|
)
|
|
|
7,609,947
|
|
|
|
—
|
|
|
|
—
|
|
Common
stock issued for penalty
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
59,820
|
|
|
|
59
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
975,006
|
|
|
|
|
|
|
|
975,065
|
|
Common
stock issued for joint venture
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,000,000
|
|
|
|
100
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
17,899,900
|
|
|
|
|
|
|
|
17,900,000
|
|
Common
stock issued for cashless exercise of warrants
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,566,214
|
|
|
|
46
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(46
|
)
|
|
|
|
|
|
|
—
|
|
Cancellation
of shares for exchange of Mobiquity shares
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(200,000
|
)
|
|
|
(2
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(797,998
|
)
|
|
|
|
|
|
|
(798,000
|
)
|
Series
H preferred stock issued for acquisition
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
8,400,000
|
|
|
|
—
|
|
|
|
8,400,000
|
|
Stock
options issued for services
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
766,804
|
|
|
|
—
|
|
|
|
766,804
|
|
Fair
value of beneficial conversion feature of converted/debt repaid
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,264,578
|
|
|
|
—
|
|
|
|
2,264,578
|
|
Relative
fair value of warrants issued with convertible debt
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,634,760
|
|
|
|
—
|
|
|
|
1,634,760
|
|
Fair
value of warrants issued
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
120,476,603
|
|
|
|
—
|
|
|
|
120,476,603
|
|
Rounding
of shares due to stock split
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,545
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
—
|
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(186,505,119
|
)
|
|
|
(186,505,119
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2019
|
|
|
45,000
|
|
|
|
—
|
|
|
|
700
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
20,000
|
|
|
|
—
|
|
|
|
16,536,351
|
|
|
|
4,310
|
|
|
|
1,040
|
|
|
|
(643,059
|
)
|
|
|
(7,610,147
|
)
|
|
|
242,192,461
|
|
|
|
(252,656,451
|
)
|
|
|
(18,712,886
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stock issued for conversion of convertible debt
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
140,138,107
|
|
|
|
1,401
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,309,678
|
|
|
|
—
|
|
|
|
1,311,079
|
|
Common
stock issued for joint venture
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
100,000,000
|
|
|
|
1,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
5,499,000
|
|
|
|
|
|
|
|
5,500,000
|
|
Fair
value of beneficial conversion feature of converted
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,038,392
|
|
|
|
—
|
|
|
|
2,038,392
|
|
Net
loss
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(17,994,888
|
)
|
|
|
(17,994,888
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance,
December 31, 2020
|
|
|
45,000
|
|
|
$
|
—
|
|
|
|
700
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
—
|
|
|
$
|
—
|
|
|
|
20,000
|
|
|
$
|
—
|
|
|
|
256,674,458
|
|
|
$
|
6,711
|
|
|
$
|
1,040
|
|
|
$
|
(643,059
|
)
|
|
$
|
(7,610,147
|
)
|
|
$
|
251,039,531
|
|
|
$
|
(270,651,339
|
)
|
|
$
|
(27,858,303
|
)
|
The accompanying footnotes are an integral part of
these consolidated financial statements.
GBT TECHNOLOGIES INC.
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
Years Ended December 31,
|
|
|
2020
|
|
2019
|
Cash Flows From Operating Activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(17,994,888
|
)
|
|
$
|
(186,505,119
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation of property and equipment
|
|
|
46,363
|
|
|
|
107,095
|
|
Amortization of intangible assets
|
|
|
—
|
|
|
|
358,266
|
|
Amortization of debt discount
|
|
|
4,197,550
|
|
|
|
6,821,453
|
|
Change in fair value of derivative liability
|
|
|
1,533,610
|
|
|
|
(7,290,867
|
)
|
Financing cost
|
|
|
1,343,847
|
|
|
|
4,356,699
|
|
Shares issued for services
|
|
|
—
|
|
|
|
235,900
|
|
Shares issued for penalty
|
|
|
—
|
|
|
|
975,065
|
|
Convertible note issued for penalty
|
|
|
242,712
|
|
|
|
—
|
|
Warrants issued for services
|
|
|
—
|
|
|
|
766,804
|
|
Fair value of warrants issued in accordance with anti-dilution
|
|
|
—
|
|
|
|
120,476,603
|
|
Impairment of assets
|
|
|
5,600,000
|
|
|
|
48,631,534
|
|
Unrealized (gain) loss on market equity security
|
|
|
621,000
|
|
|
|
6,525,317
|
|
Realized gain on disposal of market equity security
|
|
|
474,830
|
|
|
|
90,683
|
|
Loss on exchange of assets
|
|
|
1,430,000
|
|
|
|
—
|
|
Equity income in investment
|
|
|
—
|
|
|
|
(631,534
|
)
|
Gain on disposition of discontinued operations
|
|
|
(1,001,711
|
)
|
|
|
(1,381,803
|
)
|
Convertible note receivable exchanged for services
|
|
|
200,000
|
|
|
|
1,000,000
|
|
Gain on settlement of debt
|
|
|
|
|
|
|
(1,375,556
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
1,674
|
|
|
|
(616,084
|
)
|
Cash held in trust
|
|
|
172,638
|
|
|
|
—
|
|
Prepaid expenses
|
|
|
—
|
|
|
|
16,000
|
|
Accounts payable and accrued expenses
|
|
|
2,137,949
|
|
|
|
1,720,799
|
|
Unearned revenue
|
|
|
—
|
|
|
|
(257,848
|
)
|
Accrued settlement
|
|
|
—
|
|
|
|
55,613
|
|
Due to Guardian, LLC
|
|
|
—
|
|
|
|
(702,483
|
)
|
Net cash used in operating activities
|
|
|
(994,426
|
)
|
|
|
(6,623,463
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities:
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(4,200
|
)
|
|
|
(17,471
|
)
|
Cash paid for investment
|
|
|
—
|
|
|
|
(1,200,000
|
)
|
Cash of discontinued operations
|
|
|
(227,571
|
)
|
|
|
(270,947
|
)
|
Cash from the sale of marketable equity security
|
|
|
—
|
|
|
|
336,000
|
|
Net cash used in investing activities
|
|
|
(231,771
|
)
|
|
|
(1,152,418
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities:
|
|
|
|
|
|
|
|
|
Issuance of convertible notes
|
|
|
820,958
|
|
|
|
3,000,000
|
|
Issuance of notes payable
|
|
|
458,639
|
|
|
|
3,071,261
|
|
Payments on notes payable
|
|
|
—
|
|
|
|
(99,256
|
)
|
Net cash provided by financing activities
|
|
|
1,279,597
|
|
|
|
5,972,005
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
|
|
|
53,400
|
|
|
|
(1,803,876
|
)
|
|
|
|
|
|
|
|
|
|
Cash, beginning of period
|
|
|
59,634
|
|
|
|
1,863,510
|
|
|
|
|
|
|
|
|
|
|
Cash, end of period
|
|
$
|
113,034
|
|
|
$
|
59,634
|
|
|
|
|
|
|
|
|
|
|
Cash paid for:
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
—
|
|
|
$
|
744
|
|
Income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Supplemental non-cash investing and financing activities
|
|
|
|
|
|
|
|
|
Debt discount
|
|
$
|
4,511,883
|
|
|
$
|
3,636,000
|
|
Transfer of derivative liability to equity
|
|
$
|
1,899,557
|
|
|
$
|
2,264,578
|
|
Convertible notes issued for notes payable and accrued interest
|
|
$
|
3,738,171
|
|
|
$
|
—
|
|
Common stock issued for convertible notes and accrued interest
|
|
$
|
1,311,079
|
|
|
$
|
—
|
|
The accompanying footnotes are an integral part of
these consolidated financial statements.
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
Note 1 – Organization and Basis of Presentation
Organization and Line of Business
GBT Technologies Inc. (formerly Gopher Protocol Inc.)
(the “Company”, “GBT”, or “GTCH”) was incorporated on July 22, 2009 under the laws of the State of
Nevada. The Company is targeting growing markets such as development of Internet of Things (IoT) and Artificial Intelligence (AI) enabled
networking and tracking technologies, including wireless mesh network technology platform and fixed solutions, development of an intelligent
human body vitals device, asset-tracking IoT, and wireless mesh networks. Effective August 5, 2019, the Company changed its name from
Gopher Protocol Inc. to GBT Technologies Inc. The Company derived revenues from (i) the provision of IT services; and (ii) from the licensing
of its technology.
Basis of Presentation
The accompanying consolidated financial statements
were prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Stock Split
On August 5, 2019, the Company effectuated a 1 for
100 reverse stock split. The share and per share information has been retroactively restated to reflect this reverse stock split.
Going Concern
The accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a going concern. The Company has an accumulated deficit
of $270,651,339 and has a working capital deficit of $27,710,040 as of December 31, 2020, which raises substantial doubt about its ability
to continue as a going concern.
The Company’s ability to continue as a going
concern is dependent upon its ability to generate profitable operations in the future and/or obtain the necessary financing to meet its
obligations and repay its liabilities arising from normal business operations when they come due. Management has plans to seek additional
capital through some private placement offerings of debt and equity securities. These plans, if successful, will mitigate the factors
which raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements
do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification
of liabilities that might result from this uncertainty.
Note 2 – Summary of Significant Accounting Policies
Use of Estimates
The preparation of consolidated financial statements
in conformity with U.S. GAAP 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 consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and
assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs
and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and
adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results,
future results of operations will be affected. Significant estimates in the accompanying financial statements include valuation of derivatives
and valuation allowance on deferred tax assets.
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
Principles of Consolidation
The accompanying consolidated financial statements
include the accounts of the Company and its subsidiaries; the Company’s 50% owned subsidiaries GBT BitSpeed Corp. and GBT Tokenize
Corp; the Company’s 50% owned subsidiary, Gopher Protocol Costa Rica Sociedad De Responsabilidad Limitada (currently inactive),
a wholly owned AltCorp Trading LLC, a Costa Rica company (“AltCorp”) and Greenwich International Holdings, a Costa Rica corporation
(“Greenwich”). All significant intercompany transactions and balances have been eliminated.
Cash Equivalents
For the purpose of the statement of cash flows, cash
equivalents include time deposits, certificate of deposits, and all highly-liquid debt instruments with original maturities of three months
or less. As of December 31, 2020, and 2019, the Company did not have any cash equivalents.
Cash Held in Trust
Cash held in trust consists of proceeds from the sale of investments. The
proceeds less the payment of certain expenses are being held in AltCorp’s (the Company’s wholly owned subsidiary) attorney
trust account. (See Note 4)
Long-Lived Assets
The Company applies the provisions of Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360, Property, Plant, and Equipment,
which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses
to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount
by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined
in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review at December 31, 2020 and 2019,
the Company believes there was no impairment of its long-lived assets.
Marketable Equity Securities
The Company accounts for marketable equity securities
in accordance with ASC Topic 321, Investments – equity securities. Marketable equity securities are reported at fair value
based on quotations available on securities exchanges with any unrealized gain or loss being reported as a component of other income (expense)
on the statement of operations. The portion of marketable equity security expected to be sold within twelve months of the balance sheet
date is reported as a current asset.
Note Receivable
Note receivable consists of a promissory note received
in connection with the sale of Ugopherservices (see Notes 3, 4 and 17). The note is due on December 31, 2021 and accrues interest at 6%
per annum. At December 31, 2020, the Company determined that this note receivable was not collectible and took an impairment charge of
$100,000.
Derivative Financial Instruments
The Company evaluates all of its agreements to determine
if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that
are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting
date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company
uses a weighted-average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation
dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity,
is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or
non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance
sheet date. As of December 31, 2020, the Company’s only derivative financial instrument was an embedded conversion feature associated
with convertible notes payable due to certain provisions that allow for a change in the conversion price based on a percentage of the
Company’s stock price at the date of conversion. During the year ended December 31, 2019, the convertible notes with embedded conversion
features were settled; therefore, there was no derivative liability at December 31, 2019.
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
Fair Value of Financial Instruments
For certain of the Company’s financial instruments,
including cash, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their
short maturities.
FASB ASC Topic 820, Fair Value Measurements and
Disclosures, requires disclosure of the fair value of financial instruments held by the Company. FASB ASC Topic 825, Financial
Instruments, defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that
enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables
and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short
period of time between the origination of such instruments and their expected realization and their current market rate of interest. The
three levels of valuation hierarchy are defined as follows:
|
●
|
Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
|
|
|
|
|
●
|
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
|
|
|
|
|
●
|
Level 3 inputs to the valuation methodology us one or more unobservable inputs which are significant to the fair value measurement.
|
The Company analyzes all financial instruments with
features of both liabilities and equity under FASB ASC Topic 480, Distinguishing Liabilities from Equity, and FASB ASC Topic 815,
Derivatives and Hedging.
For certain financial instruments, the carrying amounts
reported in the balance sheets for cash and current liabilities, including convertible notes payable, each qualify as a financial instrument,
and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and
their expected realization and their current market rate of interest.
The Company uses Level 2 inputs for its valuation
methodology for derivative liabilities as their fair values were determined by using the Black-Scholes-Merton pricing model based on various
assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease
in the fair value being recorded in results of operations as adjustments to fair value of derivatives.
At December 31, 2020 and 2019, the Company identified
the following liabilities that are required to be presented on the balance sheet at fair value:
|
|
Fair Value
|
|
Fair Value Measurements at
|
|
|
As of
|
|
December 31, 2020
|
Description
|
|
December 31, 2020
|
|
Using Fair Value Hierarchy
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Marketable equity security - Surge Holdings, Inc.
|
|
$
|
649,000
|
|
|
$
|
—
|
|
|
$
|
649,000
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion feature on convertible notes
|
|
$
|
5,262,448
|
|
|
$
|
—
|
|
|
$
|
5,262,448
|
|
|
$
|
—
|
|
|
|
Fair Value
|
|
Fair Value Measurements at
|
|
|
As of
|
|
December 31, 2019
|
Description
|
|
December 31, 2019
|
|
Using Fair Value Hierarchy
|
|
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Marketable equity security - Surge Holdings, Inc.
|
|
$
|
1,000,000
|
|
|
$
|
—
|
|
|
$
|
1,000,000
|
|
|
$
|
—
|
|
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
Treasury Stock
Treasury stock is recorded at cost. The re-issuance
of treasury shares is accounted for on a first in, first-out basis and any difference between the cost of treasury shares and the re-issuance
proceeds are charged or credited to additional paid-in capital.
Stock Loan Receivable
On January 8, 2019, the Company entered into a Stock
Pledge Agreement with Latin American Exchange Latinex Casa de Cambio, S.A., a Costa Rica corporation (“Latinex”), to provide
that Latinex may maintain its required regulatory capital as required by various regulators. The Company has pledged 200,267 restricted
shares of its common stock valued at $7,610,147 (based on the closing price on the grant date) for a term of three years in consideration
of an annual payment of $375,000 paid in quarterly installments of $93,750. In lieu of cash payment, Latinex may pay the Company in virtual
currency of WISE Network S.A. valued at a 50% discount of its offering price of $10 per token. In the event that Latinex’s required
capital has decreased below $5,000,000, Latinex is permitted to sell the pledged shares of common stock only in an amount to ensure that
Latinex can satisfy the required capital levels. The Company must consent to such sale of the shares of common stock, which may not be
unreasonably withheld. Upon expiration of the agreement, the remaining shares of common stock shall be returned to the Company free and
clear of all liens. The Company has recorded the value of these shares of common stock as a stock loan receivable which is presented as
a contra-equity account in the accompanying consolidated balance sheets. At December 31, 2019, the Company wrote off the accrued interest
income as Latinex did not perform any payment and the Company has no mean to enforce this payment. Latinex agreed in principal to return
the pledged 200,267 restricted shares to the Company for cancellation. The 200,267 restricted shares have not yet been returned to the
Company as of December 31, 2020.
Revenue Recognition
Accounting Standards Update (“ASU”) No.
2014-09, Revenue from Contracts with Customers (“Topic 606”), became effective for the Company on
January 1, 2018. The Company’s revenue recognition disclosure reflects its updated accounting policies that are affected by this
new standard. The Company applied the “modified retrospective” transition method for open contracts for the implementation
of Topic 606. The Company had no significant post-delivery obligations, this new standard did not result in a
material recognition of revenue on the Company’s accompanying consolidated financial statements for the cumulative impact of applying
this new standard. The Company made no adjustments to its previously-reported total revenues, as those periods continue to be presented
in accordance with its historical accounting practices under Topic 605, Revenue Recognition.
Revenue is recognized under Topic 606 as
follows:
|
●
|
executed contracts with the Company’s customers that it believes are legally enforceable;
|
|
●
|
identification of performance obligations in the respective contract;
|
|
●
|
determination of the transaction price for each performance obligation in the respective contract;
|
|
●
|
allocation the transaction price to each performance obligation; and
|
|
●
|
recognition of revenue only when the Company satisfies each performance obligation.
|
These five elements, as applied to each of the Company’s revenue
category, is summarized below:
|
●
|
IT services - revenue is recorded on a monthly basis as services are provided; and
|
|
●
|
License fees and Royalties – revenue is recognized based on the terms of the agreement with its customer.
|
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
Unearned revenue
Unearned revenue represents the net amount received
for the purchase of products that have not seen shipped to the Company’s customers. In 2018, the Company ran pre-sales efforts for
its pet tracker product and received prepayments for its product. In addition, during 2018, the Company received $200,000 in connection
with an intellectual property license and royalty agreement. At December 31, 2019, the Company determined that the unearned revenue would
not likely result in the recognition of revenue; therefore, $249,094 of unearned revenue was reclassified to accrued expenses at December
31, 2020 and 2019.
Income Taxes
The Company accounts for income taxes in accordance
with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes,
whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some
portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects
of changes in tax laws and rates on the date of enactment.
Under ASC 740, a tax position is recognized as a benefit
only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination
being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized
on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company has
no material uncertain tax positions for any of the reporting periods presented.
Basic and Diluted Earnings Per Share
Earnings per share is calculated in accordance with
ASC Topic 260, Earnings Per Share. Basic earnings per share (“EPS”) is based on the weighted average number of common
shares outstanding. Diluted EPS assumes that all dilutive securities are converted. Dilution is computed by applying the treasury stock
method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance,
if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Due to the
net loss incurred potentially dilutive instruments would be anti-dilutive. Accordingly, diluted loss per share is the same as basic loss
for all periods presented. The following potentially-dilutive shares were excluded from the shares used to calculate diluted earnings
per share as their inclusion would be anti-dilutive.
|
|
December 31,
|
|
December 31,
|
|
|
2020
|
|
2019
|
Series B preferred stock
|
|
|
30
|
|
|
|
30
|
|
Series C preferred stock
|
|
|
8
|
|
|
|
8
|
|
Series H preferred stock
|
|
|
1,000,000
|
|
|
|
1,000,000
|
|
Warrants
|
|
|
19,643,500
|
|
|
|
19,654,167
|
|
Convertible notes
|
|
|
481,351,062
|
|
|
|
1,100,000
|
|
Total
|
|
|
501,994,600
|
|
|
|
21,754,205
|
|
Management’s Evaluation of Subsequent
Events
The Company evaluates events
that have occurred after the balance sheet date of December 31, 2020, through the date which the consolidated financial statements are
issued. Based upon the review, other than described in Note 17 – Subsequent Events, the Company did not identify any recognized
or non-recognized subsequent events that would have required adjustment or disclosure in the consolidated financial statements.
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
Recent Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, Simplifying
the Accounting for Income Taxes which amends ASC 740 Income Taxes (ASC 740). This update is intended to simplify accounting
for income taxes by removing certain exceptions to the general principles in ASC 740 and amending existing guidance to improve consistent
application of ASC 740. This update is effective for fiscal years beginning after December 15, 2021. The guidance in this update has various
elements, some of which are applied on a prospective basis and others on a retrospective basis with earlier application permitted. The
Company is currently evaluating the effect of this ASU on the Company’s consolidated financial statements and related disclosures.
Management does not believe that any recently issued,
but not yet effective, accounting standards could have a material effect on the accompanying consolidated financial statements. As new
accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.
Note 3 – Discontinued Operations; Note Receivable
On September 18, 2020, the Company entered into a
Purchase and Sale Agreement with Mr. LightHouse LTD., an Israeli corporation (“MLH”) pursuant to which the Company
agreed to sell and assign to MLH, effective July 1, 2020 all the shares, and certain specified liabilities, of Ugopherservices Corp. (“UGO”),
a wholly owned subsidiary of the Company, in consideration of $100,000 to be paid through the delivery of a promissory note payable to
the Company (the “Note”), upon the terms and subject to the limitations and conditions set forth in the Note. There is no
material relationship between the Company, on one hand, and MLH, on the other hand. At December 31, 2020, the Company determined that
this note receivable was not collectible and took an impairment charge of $100,000.
On September 30, 2019, the Company entered into an
Asset Purchase Agreement with Surge Holdings, Inc., a Nevada corporation (“SURG”) pursuant to which the Company agreed to
sell and assign to SURG all the assets and certain specified liabilities of its ECS Prepaid, Electronic Check Services and the Central
State Legal Services businesses in consideration of $5,000,000 to be paid through the issuance of 3,333,333 shares of SURG’s common
stock and a convertible promissory note in favor of the Company in the principal amount of $4,000,000. The 3,333,333 shares of SURG’s
common stock have been pledged to a third party for providing working capital needs of the Company (See Note 8).
UGO, ECS Prepaid, Electronic Check Services and the
Central State Legal Services businesses have been presented as discontinued operations on the accompanying financial statements.
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
The operating results for UGO, ECS Prepaid, Electronic
Check Services and the Central State Legal Services have been presented in the accompanying consolidated statements of operations for
the years ended December 31, 2020 and 2019 as discontinued operations and are summarized below:
|
|
Years Ended December 31,
|
|
|
2020
|
|
2019
|
Revenue
|
|
$
|
8,291,842
|
|
|
$
|
42,998,336
|
|
Cost of revenue
|
|
|
7,900,122
|
|
|
|
41,596,118
|
|
Gross Profit
|
|
|
391,720
|
|
|
|
1,402,218
|
|
Operating expenses
|
|
|
408,644
|
|
|
|
2,477,084
|
|
Loss from operations
|
|
|
(16,924
|
)
|
|
|
(1,074,866
|
)
|
Other income (expenses)
|
|
|
—
|
|
|
|
(3
|
)
|
Net loss
|
|
$
|
(16,924
|
)
|
|
$
|
(1,074,869
|
)
|
The assets and liabilities of the discontinued operations
at December 31, 2020 and 2019 are summarized below:
|
|
December 31,
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
Current assets
|
|
$
|
—
|
|
|
$
|
89,123
|
|
Property and equipment
|
|
|
—
|
|
|
|
117,686
|
|
Total assets
|
|
$
|
—
|
|
|
$
|
206,809
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
—
|
|
|
$
|
1,151,073
|
|
Total liabilities
|
|
$
|
—
|
|
|
$
|
1,151,073
|
|
Note 4 – Investment in Surge Holdings, Inc.
and Mobiquity Technologies, Inc.; Convertible Note Receivable
Surge Holdings, Inc.
On September 30, 2019, the Company entered into an
Asset Purchase Agreement with Surge Holdings, Inc., a Nevada corporation (“SURG”) pursuant to which the Company agreed to
sell and assign to SURG, all the assets and certain specified liabilities, of its ECS Prepaid, Electronic Check Services and the Central
State Legal Services businesses in consideration of $5,000,000 to be paid through the issuance of 3,333,333 shares of SURG’s common
stock (See Note 8 for pledge to third party) and a convertible promissory note in favor of the Company in the principal amount of $4,000,000 (the
“SURG Note”), convertible into SURG’s shares of common stock following the six-month anniversary of the issuance date.
The conversion price of the SURG Note is the volume weighted-average price of SURG’s common stock over the 20 trading days prior
to the conversion; provided, however, the conversion price shall never be lower than $0.10 or higher than $0.70. The Company has agreed
to restrict its ability to convert the SURG Note and receive shares of common stock such that the number of shares of common stock held
by it in the aggregate and its affiliates after such conversion does not exceed 4.99% of the then issued and outstanding shares of common
stock. The SURG Note is payable by SURG to the Company on the 18-month anniversary of the issuance date and does not bear interest.
On or about June 23, 2020, the Company and AltCorp
entered into agreements with SURG and Glen Eagles Acquisition LP (“Glen”) regarding the $4,000,000 SURG Note for which the
SURG Note has been converted in full into 5,500,000 restricted stock of SURG (“Issued Shares”) along with an additional 22,000,000
SURG shares reserved for the benefit of the Company’s subsidiary as a true up of shares to secure the value of the Issued Shares
as $2,750,000. Additional shares will be issued if the original 5,500,000 are worth less than $2,750,000 on June 23, 2021. The Company
agreed that the Issued Shares will be restricted for a year. As a result of the exchange of $2,750,000 of the SURG Note for 5,500,000
shares of SURG common stock, the Company recognized a loss of $1,430,000. See additional settlement entered into with SURG on January
1, 2021 in Note 17.
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
Glen converted in full its $1,000,000 convertible
note that was issued by the Company on July 8, 2019, plus $50,000 of accrued interest into $1,050,000 of a SURG Note via an assignment
of a portion ($1,050,000 of a $4,000,000 face value) of the $4,000,000 SURG Note. In addition, the Company entered into a consulting agreement
with Glen for which the Company shall pay to Glen $200,000 via an assignment of a portion ($200,000 of a $4,000,000 face value) of the
$4,000,000 SURG Note. (See Note 8).
On or about June 23, 2020, Stanley Hills LLC (“Stanley”)
which holds a pledge of 3,333,333 shares of SURG common stock (See Note 8) via its manager/member (“Stanley’s Member”),
acting as an agent for the Company, entered into an agreement with SURG, its transfer agent and an escrow officer for which it was agreed
that 3,333,333 SURG shares will be cancelled for consideration of up to $700,000. Between sales to SURG and to a third party, the amount
of $575,170 was received into a lawyer’s trust account for the benefit of AltCorp, and 3,333,333 of SURG shares have been sent for
cancelation. The lawyer’s trust account balance is $402,532 as of December 31, 2020.
On August 12, 2020, the Company and its subsidiary,
AltCorp, entered into a new pledge agreement with Stanley, where 5,500,000 SURG shares been pledged to Stanley to secure the debt payable
by the Company to Stanley as well as mitigate the damages allegedly created by SURG.
On November 4, 2020, Altcorp and Stanley filed an
Ex Parte Motion In the District Court, Clark County, Nevada (Case No: A-20-823039-B, in Dep No: 43) to appoint receiver and issue a temporary
restraining Order against Surge and its transfer agent for alleged defaults on prior exchange agreement. As court entered an order minute
granting in part AltCorp motion, the parties entered on December 4, 2020 an interim agreement which set the material terms of the settlement.
A final settlement was achieved per the interim agreement terms on January 1, 2021.
As of December 31, 2020, the Company’s investment
in SURG consisted of 5,500,000 shares of SURG common stock which was valued at $649,000. (See Note 17 for Subsequent Events)
Mobiquity Technologies, Inc (Divested in 2019).
On September 4, 2018, the Company and Mobiquity Technologies,
Inc., a New York corporation (“Mobiquity”) entered an agreement pursuant to which the parties exchanged equity interest in
each of the companies. In accordance with the agreement, the Company received 1,000 shares of Mobiquity’s restricted Series AAAA
Preferred Stock (the “Mobiquity Preferred Stock”) in consideration of Company’s concurrent sale and issuance to Mobiquity
of 10,000,000 shares of Company’s common stock. The shares of Mobiquity Preferred Stock are convertible into an aggregate of up
to 100,000,000 shares of Mobiquity common stock (the “Mobiquity Common Stock”) and 150,000,000 common stock purchase warrants
(the “Mobiquity Warrants”). The Mobiquity Warrants shall have a term of 5 years from the date of grant and shall be exercisable
at a price of $0.12 per share and the shares of Mobiquity Preferred Stock shall not be convertible into shares of Mobiquity Common Stock
and the Mobiquity Warrants shall not be contemporaneously granted until after Mobiquity’s Board of Directors and stockholders shall
have increased the authorized number of shares of Mobiquity’s common stock to a number sufficient to accommodate a reserve in the
Company’s favor of 250,000,000 shares of Mobiquity’s common stock. The Mobiquity Preferred Stock shall have immediate voting
rights equal to the number of shares of Mobiquity Common Stock into which they may be converted, not including the shares of Mobiquity’s
common stock underlying the Mobiquity Warrants.
On November 19, 2018, the Company and Mobiquity entered
into an Amendment and Exercise Letter waiving the requirement that Mobiquity’s Board of Directors and stockholders increase the
authorized number of shares of Mobiquity’s common stock to a number sufficient to accommodate a reserve in the Company’s favor
of 250,000,000 shares of Mobiquity’s common stock prior to the conversion of the Mobiquity Preferred Stock or exercise of the Mobiquity
Warrants. In addition, the Company converted 200 shares of Mobiquity Preferred Stock resulting in the issuance to the Company by Mobiquity
of 20,000,000 shares of Mobiquity Common Stock and 30,000,000 Mobiquity Warrants. The Company exercised the 30,000,000 Mobiquity Warrants
at an exercise price of $0.12 per share of common stock, payable through of the issuance to Mobiquity of 10,000,000 shares of common stock
of the Company.
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
In addition, the Company issued 20,000 shares of common
stock to Glen Eagles Acquisition LP (“Glen”) in consideration of its consulting services associated with the negotiation of
the number of shares of common stock to be delivered to Mobiquity upon exercise of the Mobiquity Warrants.
As a result of the transaction on September 4, 2018,
the Company had an approximate 21% interest in Mobiquity and began to account for its investment in Mobiquity using the equity method
of accounting. During the fourth quarter of 2018, Mobiquity issued additional shares of common stock resulting in the Company’s
ownership in Mobiquity dropping to approximately 18% at December 31, 2018. The Company determined that during the fourth quarter of 2018
that it did not exercise significant influence over Mobiquity due to its decreased ownership percentage and the Company’s intent
to begin selling shares of Mobiquity common stock that will further decrease its ownership percentage. As a result, during the fourth
quarter of 2018 the Company began accounting for its investment in Mobiquity as a marketable equity security.
On May 10, 2019, the Company entered into a Membership
Interest Purchase Agreement with Glen pursuant to which the Company acquired 49% of the membership interest in Advangelists, LLC (the
“AVNG Interest”) in consideration of the assumption of a Promissory Note payable by Glen to the former owners of the AVGN
Interest with an outstanding balance of $7,475,000 (the “AVNG Note”) and cancellation of an outstanding Promissory Note payable
by Glen to the Company in the amount of $1,200,000 originally issued on March 1, 2019. Concurrently, the Company entered into a Membership
Interest Purchase Agreement with Mobiquity pursuant to which the Company sold the AVNG Interest to Mobiquity in consideration of Mobiquity
assuming the AVNG Note and Mobiquity amending the terms of the Remaining Mobiquity Warrant providing for cashless exercise.
The Company paid 60,000,000 of its Mobiquity shares
as partial consideration for the purchase of GBT Technologies, S. A. (see Note 5).
On August 6, 2019, Mobiquity
delivered a counter signed letter agreement dated August 2, 2019 pursuant to which the Company exchanged 120,000,000 Mobiquity Warrants
into 20,000,000 shares of Mobiquity common stock, which resulted in the Company holding 60,000,000 shares of Mobiquity common stock.
On September 10, 2019, the
Company entered into (i) a Stock Purchase Agreement with Mobiquity pursuant to which the Company agreed to return 15,000,000 shares of
Mobiquity common stock to Mobiquity in exchange for 110,000 shares of common stock of the Company, (ii) a Stock Purchase Agreement with
Marital Trust GST Subject U/W/O Leopold Salkind (“Salkind Trust”) pursuant to which the Company agreed to sell 7,000,000 shares
of Mobiquity common stock to Salkind Trust in consideration of $67,200, (iii) Stock Purchase Agreement with Dr. Gene Salkind (“Salkind”)
pursuant to which the Company agreed to sell 28,000,000 shares of Mobiquity common stock to Salkind in consideration of $268,000 and (iv)
a Stock Purchase Agreement with Deepanker Katyal (“Katyal”) pursuant to which the Company agreed to sell 10,000,000 shares
of Mobiquity common stock to Katyal in consideration of 90,000 shares of common stock of the Company. The closing of the agreements occurred
on September 13, 2019. As a result of these transactions, the Company realized a loss on the sale of Mobiquity common stock of $3,673,595.
At December 31, 2020 and December 31, 2019, the Company owned no shares of Mobiquity common stock.
Note 5 – Equity Investment in GBT Technologies,
S.A.
On June 17, 2019, the Company, AltCorp Trading LLC,
a Costa Rica company and a wholly-owned subsidiary of the Company (“AltCorp”), GBT Technologies, S.A., a Costa Rica company
(“GBT-CR”) and Pablo Gonzalez, a shareholder’s representative of GBT-CR (“Gonzalez”), entered into and closed
an Exchange Agreement (the “GBT Exchange Agreement”) pursuant to which the parties exchanged certain securities. In accordance
with the Exchange Agreement, AltCorp acquired 625,000 shares of GBT-CR representing 25% of its issued and outstanding shares of common
stock from Gonzalez in exchange for the issuance of 20,000 shares of Series H Convertible Preferred Stock of the Company and a Convertible
Note in the principal amount of $10,000,000 issued by the Company (the “Gopher Convertible Note”) as well as the transfer
and assignment of a Promissory Note payable by Gopher Protocol Costa Rica Sociedad De Responsabilidad Limitada to the Company in the principal
amount of $5,000,000 dated February 6, 2019 (of which the underlying security for this Promissory Note is 30,000,000 restricted shares
of common stock of Mobiquity) and 60,000,000 restricted shares of common stock of Mobiquity.
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
The Gopher Convertible Note bears interest of 6% per
annum and is payable at maturity on December 31, 2021. At the election of Gonzalez, the Gopher Convertible Note can be converted into
a maximum of 20,000 shares of Series H Preferred Stock. Each share of Series H Preferred Stock is convertible, at the option of the holder
but subject to the Company increasing its authorized shares of common stock, into such number of shares of common stock of the Company
as determined by dividing the Stated Value ($500 per share) by the conversion price ($10.00 per share). The Series H Preferred Stock has
no liquidation preference, does not pay dividends and the holder of Series H Preferred Stock shall be entitled to one vote for each share
of common stock that the Series H Preferred Stock may be convertible into. Upon conversion of the Gopher Convertible Note and the
20,000 shares of Series H Preferred Stock, Gonzalez would be entitled to less than 50% of the resulting outstanding shares of common stock
of the Company following conversion in full and, as a result, such transaction is not considered a change of control.
GBT-CR is in the business of the strategic management
of BPO (Business Process Outsourcing) digital communications processing for enterprises and startups, distributed ledger technology development,
AI development and fintech software development and applications.
The Company accounted for its investment in GBT-CR
using the equity method of accounting; however, in 2020, the Company owned less than 20% of and exercised no control over GBT-CR; therefore,
this investment is currently accounted for under the cost method. Moreover, on March 19, 2020, California Governor Gavin Newsom issued
a stay at home order to protect the health and well-being of all Californians and to establish consistency across the state in order to
slow the spread of COVID-19. California was therefore under strict quarantine control and travel has been severely restricted, resulting
in disruptions to work, communications, and access to files (due to limited access to facilities). The stay at home order was lifted in
California only on January 25, 2021. As such, the Company was unable to access or to contact GBT-CR on an on-going basis, and cannot get
information about GBT-CR.
At December 31, 2019, the Company evaluated the carrying
amount of this equity investment and determined that this investment was fully impaired and as a result an impairment charge of $30,731,534
was taken.
Note 6 – Investment in Joint Venture
On March 6, 2020, the Company through Greenwich, entered
into a Joint Venture and Territorial License Agreement (the “Tokenize Agreement”) with Tokenize-It, S.A. (“Tokenize”),
which is owned by a Costa Rica Trust represented by Pablo Gonzalez (“Gonzalez”). Gonzalez also represents Gonzalez Costa Rica
Trust, which holds a note in the principal amount of $10,000,000 and is also a shareholder of the Company. Under the Tokenize Agreement,
the parties formed GBT Tokenize Corp., a Nevada corporation (“GBT Tokenize”). The purpose of GBT Tokenize is to develop, maintain
and support source codes for its proprietary technologies including advanced mobile chip technologies, tracking, radio technologies, AI
core engine, electronic design automation, mesh, games, data storage, networking, IT services, business process outsourcing development
services, customer service, technical support and quality assurance for business, customizable and dedicated inbound and outbound calls
solutions, as well as digital communications processing for enterprises and startups (“Technology Portfolio”), throughout
the State of California. Upon generating any revenue from the Technology Portfolio, the Joint Venture will earn the first right of refusal
for other territories.
Tokenize shall contribute the services and resources
for the development of the Technology Portfolio to GBT Tokenize. The Company shall contribute 100,000,000 shares of common stock of the
Company (“GBT Shares”) to GBT Tokenize. Tokenize and the Company will each own 50% of GBT Tokenize. The Company pledged its
50% ownership in GBT Tokenize and its 100% ownership of Greenwich to Tokenize to secure its Technology Portfolio investment. The Company
shall appoint two directors and Tokenize shall appoint one director of GBT Tokenize.
In addition, GBT Tokenize and Gonzalez entered into
a Consulting Agreement in which Gonzalez is engaged to provide services in consideration of $33,333 per month payable quarterly which
may be paid in shares of common stock calculated by the amount owed divided by the Company’s 10-day VWAP. Gonzalez will provide
services in connection with the development of the business as well as GBT Tokenize’s capital raising efforts. The term of the Consulting
Agreement is two years. The closing of the Tokenize Agreement occurred on March 9, 2020.
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
Via this Joint Venture the parties commenced development
of a development of an intelligent human vital signs’ device, suggested named qTerm. The platform is an expansion of the existing
license agreement with GBT Tokenize Corp., which provided GBT Tokenize Corp. with an exclusive territory of California to develop certain
of the Company’s technology. As the nature of the platform cannot be restricted only to California, the Company’s joint venture
GBT Tokenize Corp. will be compensated with additional two hundred million shares of the Company to strengthen its funding, subject to
board approval. A provisional patent application for the qTerm Medical Device was filed on March 30, 2020 with the USPTO. The application
has been assigned serial number 63001564. The Joint Venture completed successfully the first prototype. There is no guarantee that the
Company will be successful in researching, developing or implementing this product into the market. In order to successfully implement
this concept, the Company will need to raise adequate capital to support its research and, if successfully researched, developed and granted
regulatory approval, the Company would need to enter into a strategic relationship with a third party that has experience in manufacturing,
selling and distributing this product. There is no guarantee that the Company will be successful in any or all of these critical steps.
At March 31, 2020, the Company evaluated the carrying
amount of this joint venture investment and determined that this investment was fully impaired and as a result an impairment charge of
$5,500,000 was taken. Although the investment was impaired, the product development is still ongoing.
Note 7 – Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses at December 31, 2020 and 2019 consist
of the following:
|
|
2020
|
|
2019
|
Accounts payable
|
|
$
|
1,045,778
|
|
|
$
|
535,481
|
|
Accrued interest
|
|
|
1,876,005
|
|
|
|
980,034
|
|
Deposits
|
|
|
249,675
|
|
|
|
249,094
|
|
Other
|
|
|
182,200
|
|
|
|
50,000
|
|
|
|
$
|
3,353,658
|
|
|
$
|
1,814,609
|
|
Note 8 – Convertible Notes Payable
Convertible notes payable at December 31, 2020 and 2019 consist of the
following:
|
|
December 31,
|
|
December 31,
|
|
|
2020
|
|
2019
|
Convertible note payable to GBT Technologies
|
|
$
|
10,000,000
|
|
|
$
|
10,000,000
|
|
Convertible note payable to Glen Eagle
|
|
|
—
|
|
|
|
1,000,000
|
|
Convertible note payable to Power Up
|
|
|
—
|
|
|
|
—
|
|
Convertible notes payable to Redstart Holdings
|
|
|
347,400
|
|
|
|
—
|
|
Convertible note payable to Stanley Hills
|
|
|
1,009,469
|
|
|
|
—
|
|
Convertible note payable to Iliad
|
|
|
2,431,841
|
|
|
|
—
|
|
Total convertible notes payable
|
|
|
13,788,710
|
|
|
|
11,000,000
|
|
Unamortized debt discount
|
|
|
(362,004
|
)
|
|
|
—
|
|
Convertible notes payable
|
|
|
13,426,706
|
|
|
|
11,000,000
|
|
Less current portion
|
|
|
(13,426,706
|
)
|
|
|
—
|
|
Convertible notes payable, long-term portion
|
|
$
|
—
|
|
|
$
|
11,000,000
|
|
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
$10,000,000 for GBT Technologies S. A. acquisition
In accordance with the acquisition of GBT-CR the Company
issued a convertible note in the principal amount of $10,000,000. The convertible note bears interest of 6% per annum and is payable at
maturity on December 31, 2021. At the election of the holder, the convertible note can be converted into a maximum of 20,000 shares of
Series H Preferred Stock. Each share of Series H Preferred Stock is convertible, at the option of the holder but subject to the Company
increasing its authorized shares of common stock, into such number of shares of common stock of the Company as determined by dividing
the Stated Value ($500 per share) by the conversion price ($10.00 per share). The convertible note is convertible into common stock at
a fixed price that was higher than the Company’s common stock on the date of grant, therefore, this convertible note does not contain
a beneficial conversion feature. Due to stock split (See Note 1) the conversion feature is substantially not in the money. The parties
are in negotiations to address the issue per the Note holder demands to mitigate its damages. There is no guarantee that the Company will
be successful in resolving this issue.
Glen Eagles Acquisition LP
On July 8, 2019, the Company entered a Consulting
Agreement with Glen Eagles Acquisition LP (“Glen”) as consultant to provide services in connection with the Company’s
acquisition of 25% of GBT Technologies, S.A., a Costa Rican corporation (“GBT-CR”). Consultant will provide analysis, interaction
with related professional and other services as requested by the Company to integrate and expand capabilities between GBT-CR and the Company.
The Company shall pay Glen $1,000,000 through the issuance of a 6% Convertible Note. At the election of Glen, the Convertible Note can
be converted into a maximum of 2,000 shares of Series H Preferred Stock. Each share of Series H Preferred Stock is convertible, at the
option of the holder but subject to the Company increasing its authorized shares of common stock, into such number of shares of common
stock of the Company as determined by dividing the Stated Value ($500 per share) by the conversion price ($10.00 per share). The Series
H Preferred Stock has no liquidation preference, does not pay dividends and the holder of Series H Preferred Stock shall be entitled to
one vote for each share of common stock that the Series H Preferred Stock may be convertible into. In addition, the Company entered into
an Amendment of a Common Stock Purchase Warrant held by Glen to acquire nine million shares of common stock that had been assigned to
Glen by Guardian Patch LLC. Pursuant to the amendment, the Company agreed to provide that the Common Stock Purchase Warrant may be exercised
on a cashless basis and provided a beneficial ownership limitation of 4.99%. On or about June 23, 2020, the Company and AltCorp entered
into agreements with SURG and Glen Eagles Acquisition LP (“Glen”) into series of agreements regarding the $4,000,000 SURG
Note. (See Note 4) Glen converted in full its $1,000,000 convertible note that was issued by the Company on July 8, 2019 plus $50,000
of accrued interest, into $1,050,000 of a SURG Note via an assignment of a portion ($1,050,000 of a $4,000,000 face value) of the $4,000,000
SURG Note. In addition, the Company entered into a consulting agreement with Glen for which the Company shall pay to Glen $200,000 via
an assignment of a portion ($200,000 of a $4,000,000 face value) of the $4,000,000 SURG Note. Glen in turn will convert all its $1,250,000
considerations received into 2,500,000 SURG shares (See Note 17).
Power Up Lending Group Ltd.
On February 18, 2020, the Company entered into a
Securities Purchase Agreement with Power Up Lending Group Ltd., an accredited investor (“Power Up”) pursuant to which the
Company issued to Power Up a Convertible Promissory Note (the “Power Note”) in the aggregate principal amount of $183,600
for a purchase price of $153,000. The Power Note has a maturity date of May 15, 2021 and the Company has agreed to pay interest on the
unpaid principal balance of the Power Note at the rate of six percent (6%) per annum from the date on which the Power Note is issued
(the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise.
The Company shall have the right to prepay the Power Note, provided it makes a payment including a prepayment to Power Up as set forth
in the Power Note. The transactions described above closed on February 19, 2020. The outstanding principal amount of the Power Note may
not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Power
Up may convert the Power Note into shares of the Company’s common stock at a conversion price equal to 85% of the
lowest trading price with a 15-day look back immediately preceding the date of conversion. In addition, upon the occurrence and during
the continuation of an Event of Default (as defined in the Power Note), the Power Note shall become immediately due and payable and the
Company shall pay to Power Up, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Power Note.
During 2020, the full amount of the Power Note ($183,600) plus $4,590 of accrued interest was converted into shares of the Company’s
common stock.
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
Redstart Holdings Corp.
On August 4, 2020, the Company entered into a Securities
Purchase Agreement with Redstart Holdings Corp., an accredited investor (“Redstart”) pursuant to which the Company issued
to Redstart a Convertible Promissory Note (the “Redstart Note No. 1”) in the aggregate principal amount of $153,600 for a
purchase price of $128,000. The Redstart Note No. 1 has a maturity date of November 3, 2021 and the Company has agreed to pay interest
on the unpaid principal balance of the Redstart Note No. 1 at the rate of six percent (6%) per annum from the date on which the Redstart
Note No. 1 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or
by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 1, provided it makes a payment including
a prepayment to Redstart as set forth in the Redstart Note No. 1. The transactions described above closed on August 5, 2020.
The outstanding principal amount of the Redstart Note
No. 1 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th
day, Redstart may convert the Redstart Note No. 1 into shares of the Company’s common stock at a conversion price
equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price
will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a
derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart
Note No. 1), the Redstart Note No. 1 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction
of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 1 (In February 2021 Note No. 1 was converted into
shares in full – See Note 17).
On September 15, 2020, the Company entered into a
Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart
Note No. 2”) in the aggregate principal amount of $93,600 for a purchase price of $78,000. The Redstart Note No. 2 has a maturity
date of September 15, 2021 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 2 at the
rate of six percent (6%) per annum from the date on which the Redstart Note No. 2 is issued (the “Issue Date”) until the same
becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay
the Redstart Note No. 2, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 2. The transactions
described above closed on September 16, 2020. The outstanding principal amount of the Redstart Note No. 2 may not be converted prior to
the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the
Redstart Note No. 2 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading
price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s
stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon
the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 2), the Redstart Note No. 2 shall
become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional
amounts as set forth in the Redstart Note No. 2. (In March 2021 Note No. 2 was converted into shares in full – See Note 17).
On December 9, 2020, the Company entered into a Securities
Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note
No. 3”) in the aggregate principal amount of $100,200 for a purchase price of $83,500. The Redstart Note No. 3 has a maturity date
of December 9, 2021 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 3 at the rate
of six percent (6%) per annum from the date on which the Redstart Note No. 3 is issued (the “Issue Date”) until the same becomes
due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the
Redstart Note No. 3, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 3. The transactions
described above closed on December 11, 2020. The outstanding principal amount of the Redstart Note No. 3 may not be converted prior to
the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the
Redstart Note No. 3 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading
price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s
stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon
the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 3), the Redstart Note No. 3 shall
become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional
amounts as set forth in the Redstart Note No. 3.
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
Stanley Hills LLC
The Company entered into a series of loan agreements
with Stanley Hills LLC (“Stanley”) pursuant to which it received more than $1,000,000 in loans (the “Debt”) since
May 2019 up to December 2019. On February 26, 2020, in order to induce Stanley to continue to provide funding, the Company and Stanley
entered into a letter agreement providing that the current note payable balance due to Stanley (See Note 9) in the amount of $1,214,900
may be converted into shares of common stock of the Company at a conversion price equal to 85% multiplied by the lowest one trading price
for the common stock during the 20 trading day period ending on the latest complete trading day prior to the conversion date. Since the
conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted
for as a derivative liability. Stanley has agreed to restrict its ability to convert the Debt and receive shares of common stock
such that the number of shares of common stock held by it and its affiliates after such conversion or exercise
does not exceed 4.99% of the then issued and outstanding shares of common stock. During 2020, Stanley converted $583,889 of its convertible
note into 67,282,583 shares of the Company’s common stock, and during 2020, Stanley loaned the Company an additional $547,097. The
balance of the Stanley debt at December 31, 2020 was $1,009,469. The Stanley debt is secured via a pledge agreement on the SURG shares
(See Note 4).
Iliad Research and Trading, L.P.
On February 27, 2019, the Company entered into a note
purchase agreement with a third-party investor - Iliad Research and Trading, L.P.(“Iliad”), pursuant to which the Company
issued a promissory note for the original principal amount of $2,325,000. The promissory note had an original issue discount of $300,000
and the inventor paid consideration of $2,025,000 to the Company, of which $25,000 was paid for legal expenses. The outstanding balance
of the promissory note is to be paid on the one-year anniversary of the issuance of the note. Interest on the note accrues at the rate
of 10% per annum compounding daily. Subject to the terms and conditions set forth in the note, the Company may prepay all or any portion
of the outstanding balance of the note at any time in an amount in cash equal to 120% of the amount repaid. In connection with transactions
that generate less than $1,000,000 in proceeds, the Company has agreed to not issue any debt instrument or incurrence of any debt other
than trade payables in the ordinary course of business, any securities or agreements to sell common stock with anti-dilution or price
reset/reduction features or any securities that are or may be become convertible or exercisable into common stock with a price that varies
with the market price of the common stock (collectively, “Restricted Issuance Transaction”). The outstanding balance of the
Note will be increased by 5% in the event the Company enters into a Restricted Issuance Transaction that is approved by Iliad. The original
issue discount is being amortized to interest expense over the term of the promissory note.
On February 27, 2020, the Company and Iliad entered
into an Amendment to the Iliad Note (See Note 9) pursuant to which the maturity date of the Iliad Note was extended to August 27, 2020,
provided that the Debt may be converted into shares of common stock of the Company at a conversion price equal to 80% multiplied by the
lowest trading daily VWAP for the common stock during the 20 trading day period ending on the latest complete trading day prior to the
conversion date, provided for the payment by the Company to Iliad of an extension fee equal to 7.5% of the outstanding balance of the
Iliad Note resulting in a new balance of the Iliad Note of $2,765,983 and provided that the Company’s failure to deliver shares
of common stock within three trading days of a conversion would result in an event of default. Since the conversion price will vary based
on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability.
Iliad has agreed to restrict its ability to convert the Iliad Note and receive shares of common stock such that the number of shares
of common stock held by it and its affiliates after such conversion or exercise does not exceed 9.99% of the
then issued and outstanding shares of common stock. On July 20, 2020 the Company and Iliad entered into agreement to extend the maturity
of the Iliad Note until February 27, 2021 in consideration of an extension fee of $1,000. During 2020, Iliad converted $539,000 of its
convertible note to 53,175,795 shares of the Company’s common stock. The balance of the Iliad debt at December 31, 2020 was $2,446,746,
including accrued interest of $14,905. (See Note 17 for additional extension of this note)
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
Discounts on convertible notes
The Company recognized interest expense of $4,149,879
and $6,569,124 during the years ended December 31, 2020 and 2019, respectively, related to the amortization of the debt discount on convertible
notes. The unamortized debt discount at December 31, 2020 was $362,004.
A roll-forward of the convertible notes payable
and debt discount from December 31, 2018 to December 31, 2020 is below:
|
|
Principal
|
|
Debt
|
|
|
|
|
Balance
|
|
Discount
|
|
Net
|
Convertible notes payable, December 31, 2018
|
|
$
|
3,431,200
|
|
|
$
|
(3,233,124
|
)
|
|
$
|
198,076
|
|
Issued for cash
|
|
|
3,000,000
|
|
|
|
—
|
|
|
|
3,000,000
|
|
Issued for acquisition
|
|
|
10,000,000
|
|
|
|
—
|
|
|
|
10,000,000
|
|
Issued for services
|
|
|
1,000,000
|
|
|
|
—
|
|
|
|
1,000,000
|
|
Original issue discount
|
|
|
336,000
|
|
|
|
—
|
|
|
|
336,000
|
|
Conversion to common stock
|
|
|
(1,357,200
|
)
|
|
|
—
|
|
|
|
(1,357,200
|
)
|
Debt discount related to new convertible notes
|
|
|
—
|
|
|
|
(3,336,000
|
)
|
|
|
(3,336,000
|
)
|
Reduction in convertible note due to legal settlement
|
|
|
(5,410,000
|
)
|
|
|
—
|
|
|
|
(5,410,000
|
)
|
Amortization of debt discounts
|
|
|
—
|
|
|
|
6,569,124
|
|
|
|
6,569,124
|
|
Convertible notes payable, December 31, 2019
|
|
|
11,000,000
|
|
|
|
—
|
|
|
|
11,000,000
|
|
Issued for cash
|
|
|
820,958
|
|
|
|
—
|
|
|
|
820,958
|
|
Accrued interest added to convertible note
|
|
|
204,858
|
|
|
|
—
|
|
|
|
204,858
|
|
Exchange of convertible note for other company assets
|
|
|
(1,000,000
|
)
|
|
|
—
|
|
|
|
(1,000,000
|
)
|
Notes payable converted to convertible notes
|
|
|
3,980,883
|
|
|
|
—
|
|
|
|
3,980,883
|
|
Original issue discount
|
|
|
88,500
|
|
|
|
—
|
|
|
|
88,500
|
|
Conversion to common stock
|
|
|
(1,306,489
|
)
|
|
|
—
|
|
|
|
(1,306,489
|
)
|
Debt discount related to new convertible notes
|
|
|
—
|
|
|
|
(4,511,883
|
)
|
|
|
(4,511,883
|
)
|
Amortization of debt discounts
|
|
|
—
|
|
|
|
4,149,879
|
|
|
|
4,149,879
|
|
Convertible notes payable, December 31, 2020
|
|
$
|
13,788,710
|
|
|
$
|
(362,004
|
)
|
|
$
|
13,426,706
|
|
Note 9 – Notes Payable
Notes payable at December 31, 2020 and December 31,
2019 consist of the following:
|
|
December 31,
|
|
December 31,
|
|
|
2020
|
|
2019
|
RWJ acquisition note
|
|
$
|
2,600,000
|
|
|
$
|
2,600,000
|
|
Promissory note to Iliad
|
|
|
—
|
|
|
|
2,325,000
|
|
Promissory note to Stanley Hills
|
|
|
—
|
|
|
|
1,046,261
|
|
SBA loan
|
|
|
150,000
|
|
|
|
—
|
|
Promissory note to Alpha Eda
|
|
|
140,000
|
|
|
|
—
|
|
Total notes payable
|
|
|
2,890,000
|
|
|
|
5,971,261
|
|
Unamortized debt discount
|
|
|
—
|
|
|
|
(47,671
|
)
|
Notes payable
|
|
|
2,890,000
|
|
|
|
5,923,590
|
|
Less current portion
|
|
|
(2,741,737
|
)
|
|
|
—
|
|
Notes payable, long-term portion
|
|
$
|
148,263
|
|
|
$
|
5,923,590
|
|
RWJ Acquisition Note
In connection with the acquisition of RWJ in September
2017, the Company issued a note payable. The note accrues interest at 3.5% per annum, was due on December 31, 2019 and is secured by the
assets purchased in the acquisition. The Company contests the validity of the note, as such the note has not been repaid as of December
31, 2020. (See Note 15). The balance of the note at December 31, 2020 is $2,600,000 plus accrued interest of $307,631.
SBA Loan
On June 22, 2020, the Company received a loan from
the Small Business Administration under the Economic Injury Disaster Loan program related to the COVID-19 relief efforts. The loan bears
interest at 3.75% per annum, requires monthly principal and interest payments of $731 after 12 months from funding and is due 30 years
from the date of issuance. The balance of the note at December 31, 2020 is $150,000 plus accrued interest of $3,067.
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
Alpha Eda
On November 15, 2020, the Company issued a promissory
note to Alpha Eda, LLC for $140,000. The note accrues interest at 10% per annum, is unsecured and is due on June 30, 2021. The balance
of the note at December 31, 2020 is $140,000 plus accrued interest of $1,803.
Iliad
On February 27, 2019, the Company entered into a note
purchase agreement with a third-party investor, pursuant to which the Company issued a promissory note for the original principal amount
of $2,325,000. The promissory note had an original issue discount of $300,000 and the inventor paid consideration of $2,025,000 to the
Company, of which $25,000 was paid for legal expenses. The outstanding balance of the promissory note is to be paid on the one-year anniversary
of the issuance of the note. Interest on the note accrues at the rate of 10% per annum compounding daily. Subject to the terms and conditions
set forth in the note, the Company may prepay all or any portion of the outstanding balance of the note at any time in an amount in cash
equal to 120% of the amount repaid. In connection with transactions that generate less than $1,000,000 in proceeds, the Company has agreed
to not issue any debt instrument or incurrence of any debt other than trade payables in the ordinary course of business, any securities
or agreements to sell common stock with anti-dilution or price reset/reduction features or any securities that are or may be become convertible
or exercisable into common stock with a price that varies with the market price of the common stock (collectively, “Restricted Issuance
Transaction”). For every Restricted Issuance Transaction that the Company was funded during 2020, Iliad consent and approval was
obtained. The outstanding balance of the Note will be increased by 5% in the event the Company enters into a Restricted Issuance Transaction
that is approved by Iliad. The original issue discount in being amortized to interest expense over the term of the promissory note.
On February 27, 2020, the Company and Iliad entered
to an Amendment to the Iliad Note pursuant to which the maturity date of the Iliad Note was extended to August 27, 2020, provided that
the Debt may be converted into shares of common stock of the Company at a conversion price equal to 80% multiplied by the lowest trading
daily VWAP for the common stock during the 20 trading day period ending on the latest complete trading day prior to the conversion date,
provided for the payment by the Company to Iliad of an extension fee equal to 7.5% of the outstanding balance of the Iliad Note resulting
in a new balance of the Iliad Note of $2,765,983 which has been reclassified to convertible notes payable. (See Note 8). On July 20, 2020
the Company and Iliad entered into agreement to extend the maturity of the Iliad Note until February 27, 2021 in consideration of an extension
fee of $1,000. During 2020, Iliad converted $539,000 of its convertible note to 53,175,795 shares of the Company’s common stock.
The balance of the Iliad debt at December 31, 2020 was $$2,446,746, including accrued interest of $14,905. (See Note 17 for additional
extension of this note)
Stanley Hills
The Company issued promissory notes with Stanley Hills
for funds received as working capital. The notes accrue interest at 10% per annum and were due on February 9, 2020. On February 26, 2020,
in order to induce Stanley to continue to provide funding, the Company and Stanley entered into a letter agreement (See Note 8) providing
that the debt in the amount of $1,214,900 may be converted into shares of common stock of the Company at a conversion price equal to 85%
multiplied by the lowest one trading price for the common stock during the 20 trading day period ending on the latest complete trading
day prior to the conversion date. The Stanley Hills note was reclassified from notes payable to convertible notes payable (See Note 8).
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
Discounts on Promissory Note
The Company recognized interest expense of $47,671
and $252,329 during the years ended December 31, 2020 and 2019, respectively, related to the amortization of the debt discount on promissory
notes. The unamortized debt discount at December 31, 2020 was $0.
A roll-forward of the promissory notes and debt discount
from December 31, 2018 to December 31, 2020 is below:
|
|
Principal
|
|
Debt
|
|
|
|
|
Balance
|
|
Discount
|
|
Net
|
Notes payable, December 31, 2018
|
|
$
|
2,699,256
|
|
|
$
|
—
|
|
|
$
|
2,699,256
|
|
Issued for cash
|
|
|
3,071,261
|
|
|
|
—
|
|
|
|
3,071,261
|
|
Original issue discount
|
|
|
300,000
|
|
|
|
—
|
|
|
|
300,000
|
|
Repayment of note payable
|
|
|
(99,256
|
)
|
|
|
—
|
|
|
|
(99,256
|
)
|
Debt discount related to new convertible notes
|
|
|
—
|
|
|
|
(300,000
|
)
|
|
|
(300,000
|
)
|
Amortization of debt discounts
|
|
|
—
|
|
|
|
252,329
|
|
|
|
252,329
|
|
Notes payable, December 31, 2019
|
|
|
5,971,261
|
|
|
|
(47,671
|
)
|
|
|
5,923,590
|
|
Issued for cash
|
|
|
458,639
|
|
|
|
—
|
|
|
|
458,639
|
|
Accrued interest and penalties added to notes payable
|
|
|
440,983
|
|
|
|
—
|
|
|
|
440,983
|
|
Notes payable converted to convertible notes
|
|
|
(3,980,883
|
)
|
|
|
—
|
|
|
|
(3,980,883
|
)
|
Amortization of debt discounts
|
|
|
—
|
|
|
|
47,671
|
|
|
|
47,671
|
|
Notes payable, December 31, 2020
|
|
$
|
2,890,000
|
|
|
$
|
—
|
|
|
$
|
2,890,000
|
|
Note 10 – Accrued Settlement
In connection with a legal matter filed by the Investor
of the $8,340,000 Senior Secured Redeemable Convertible Debenture, on December 23, 2019, in the pending arbitration between the Company
and the Investor, an Interim Award was entered in favor of the Investor. On January 31, 2020, the Company was informed that a final award
was entered (the “Final Award”). The Final Award affirms that certain sections of the Senior Secured Redeemable Convertible
Debenture (the “Debenture”) constitute unenforceable liquidated damages penalties and were stricken. Further, it was
determined that the Investor was entitled to recovery of their attorney’s fees. Consequently, the arbitrator awarded Investor an
award of $4,034,444 plus interest of 7.25% accrued from May 15, 2019 (presented separately in accounts payable and accrued expenses) and
costs in the amount of $55,613. (See Note 15). In connection with this settlement, the Company recognized a gain on the settlement of
debt of $1,375,556 in 2019 as the difference between the carrying amount of the debt and the amount awarded by the arbitrator (See Note
15).
Note 11 – Derivative Liability
Certain of the convertible notes payable discussed
in Note 8 have a conversion price that can be adjusted based on the Company’s stock price which results in the conversion feature
being recorded as a derivative liability.
The fair value of the derivative liability is recorded
and shown separately under current liabilities. Changes in the fair value of the derivative liability is recorded in the statement of
operations under other income (expense).
The Company uses a weighted average Black-Scholes
option pricing model with the following assumptions to measure the fair value of derivative liability at December 31, 2020 and 2019:
|
|
December 31,
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
Stock price
|
|
$
|
0.017
|
|
|
$
|
3.080
|
|
Risk free rate
|
|
|
0.10
|
%
|
|
|
1.75
|
%
|
Volatility
|
|
|
275
|
%
|
|
|
650
|
%
|
Conversion/ Exercise price
|
|
$
|
.008-.0085
|
|
|
$
|
0.800
|
|
Dividend rate
|
|
|
0
|
%
|
|
|
0
|
%
|
The following table represents the Company’s
derivative liability activity for the years ended December 31, 2019 and 2020:
Derivative liability balance, December 31, 2018
|
|
$
|
3,833,506
|
|
Issuance of derivative liability during the period
|
|
|
5,721,939
|
|
Fair value of beneficial conversion feature of debt converted
|
|
|
(2,264,578
|
)
|
Change in derivative liability during the period
|
|
|
(7,290,867
|
)
|
Derivative liability balance, December 31, 2019
|
|
|
—
|
|
Issuance of derivative liability during the period
|
|
|
5,767,230
|
|
Fair value of beneficial conversion feature of debt converted
|
|
|
(2,038,392
|
)
|
Change in derivative liability during the period
|
|
|
1,533,610
|
|
Derivative liability balance, December 31, 2020
|
|
$
|
5,262,448
|
|
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
Note 12 – Stockholders’ Equity
Common Stock
The Board of Directors of the Company approved, on
April 13, 2020, a reverse stock split of all of the Company’s Common Stock, pursuant to which every 50 shares of Common Stock of
the Company shall be reverse split, reconstituted and converted into one (1) share of Common Stock of the Company (the “Reverse
Stock Split”). The Company submitted an Issuer Company Related Action Notification regarding the Reverse Stock Split to FINRA on
April 14, 2020. To effectuate the Reverse Stock Split, the Company filed on April 21, 2020 a Certificate of Change Pursuant to Nevada
Revised Statutes (“NRS”) Section 78.209 (the “Certificate of Change”) with the Secretary of State of the State
of Nevada subject to FINRA approval. Since this reverse stock split has not yet been approved by the State of Nevada, the financial statements
have not been retroactively restated to reflect this reverse stock split. On June 8, 2020 FINRA advised the Company that such request
is deficient due to the fact that a holder of an outstanding convertible note of the Company had entered into two settlements with the
Securities and Exchange Commission that related to securities laws violations but were in no way related to the Company. As a result,
FINRA advised that it is necessary for the protection of investors, the public interest, and to maintain fair and orderly markets that
documentation related to the Reverse Stock Split not be processed. The Company appealed the decision made by FINRA on June 15, 2020. On
August 4, 2020, FINRA notified the Company that its appeal had been denied.
During the year ended December 31, 2020, the Company
had the following transactions in its common stock:
|
●
|
issued an aggregate of 140,138,107 for the conversion of convertible notes of $1,306,489 and accrued interest of $4,590; and
|
|
|
|
|
●
|
issued 100,000,000 shares to GBT Tokenize for a joint venture agreement. The value of the common stock of $5,500,000 was determined based on the closing stock price of the Company’s common stock on the grant date.
|
During the year ended December 31, 2019, the Company
had the following transactions in its common stock:
|
●
|
issued an aggregate of 9,500 shares to employees and board members as part of their compensation agreements with the Company. The value of the common stock of $235,900 was determined based on the closing stock price of the Company’s common stock on the grant date;
|
|
|
|
|
●
|
issued 74,762 shares to an investor for the conversion of $1,357,200 in convertible notes and $62,934 in accrued interest;
|
|
|
|
|
●
|
issued 59,820 shares to an investor for disputed penalties on a convertible debenture. The value of the common stock of $975,065 was determined based on the closing stock price of the Company’s common stock on the grant date;
|
|
|
|
|
●
|
issued 200,267 shares to Latinex in order to provide that Latinex may maintain its required regulatory capital as required by various regulators. The Company has recorded the value ($7,610,147) of these shares of common stock as a stock loan receivable which is presented as a contra-equity account in the accompanying consolidated balance sheets. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the grant date;
|
|
|
|
|
●
|
issued 10,000,000 shares in connection with a joint venture with BitSpeed. The value of the common stock of $17,900,000 was based on the closing price of the Company’s common stock on the closing date;
|
|
|
|
|
●
|
issued 4,566,214 shares in connection with the cashless exercise of 6,120,000 warrants; and
|
|
|
|
|
●
|
canceled 200,000 shares that were returned in connection with the Company’s sale of its investment with Mobiquity. (See Note 4). The shares were valued based on the Company’s stock price on the date of the agreement.
|
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
Series B Preferred Shares
On November 1, 2011, the Company and certain creditors
entered into a Settlement Agreement (the “Settlement Agreement”) whereby without admitting any wrongdoing on either part,
the parties settled all previous agreements and resolved any existing disputes. Under the terms of the Settlement Agreement, the Company
agreed to issue the creditors 45,000 shares of Series B Preferred Stock of the Company on a pro-rata basis. Following the issuance and
delivery of the shares of Series B Preferred Stock to said creditors, as well as surrendering the undelivered shares, the Settlement Agreement
resulted in the settlement of all debts, liabilities and obligations between the parties.
The Series B Preferred Stock has a stated value of
$100 per share and is convertible into the Company’s common stock at a conversion price of $30.00 per share representing 30 posts
split common shares. Furthermore, the Series B Preferred Stock votes on an as converted basis and carries standard anti-dilution rights.
These rights were subsequently removed, except in cases of stock dividends or splits.
As of December 31, 2020, and 2019, there were 45,000
Series B Preferred Shares outstanding.
Series C Preferred Shares
On April 29, 2011, GV Global Communications, Inc.
(“GV”) provided funding to the Company in the aggregate principal amount of $111,000 (the “Loan”). On September
25, 2012, the Company and GV entered into a Conversion Agreement pursuant to which the Company agreed to convert the Loan into 10,000
shares of Series C Preferred Stock of the Company, which was approved by the Board of Directors.
Each share of Series C Preferred Stock is convertible,
at the option of GV, into such number of shares of common stock of the Company as determined by dividing the Stated Value (as defined
below) by the Conversion Price (as defined below). The Conversion Price for each share is equal to a 50% discount to the average of the
lowest three lowest closing bid prices of the Company’s common stock during the 10-day trading period prior to the conversion with
a minimum conversion price of $0.02. The stated value is $11.00 per share (the “Stated Value”). The Series C Preferred Stock
has no liquidation preference, does not pay dividends and the holder of Series C Preferred Stock shall be entitled to one vote for each
share of common stock that the Series C Preferred Stock shall be convertible into. GV has contractually agreed to restrict its ability
to convert the Series C Preferred Stock and receive shares of the Company’s common stock such that the number of shares of the Company’s
common stock held by it and its affiliates after such conversion does not exceed 4.9% of the then issued and outstanding shares of the
Company’s common stock.
During the year ended December 31, 2014, GV Global
Communications, Inc. converted 7,770 of its Series C Preferred Stock into 120 post-splits. During the third quarter of 2014, the Company
received 42 post-split common shares to adjust the shares issued to reflect the amount that both they and the Company believed that they
were owed. At December 31, 2020 and 2019, GV owns 700 Series C Preferred Shares.
The issuance of the Series C Preferred Stock was made
in reliance upon exemptions from registration pursuant to Section 4(a)(2) under the Securities Act of 1933 and Rule 506 promulgated under
Regulation D thereunder. GV is an accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933.
As of December 31, 2020, and 2019, there were 700
Series C Preferred Shares outstanding.
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
Series D Preferred Shares
As of December 31, 2020, and 2019, there are 0 and
0 shares of Series D Preferred Shares outstanding, respectively.
Series G Preferred Shares
As of December 31, 2020, and 2019, there are 0 and
0 shares of Series G Preferred Shares outstanding, respectively.
Series H Preferred Shares
On June 17, 2019, the Company, AltCorp Trading LLC,
a Costa Rica company and a wholly-owned subsidiary of the Company (“AltCorp”), GBT Technologies, S.A., a Costa Rica company
(“GBT-CR”) and Pablo Gonzalez, a shareholder’s representative of GBT-CR (“Gonzalez”), entered into and closed
an Exchange Agreement (the “GBT Exchange Agreement”) pursuant to which the parties exchanged certain securities. In accordance
with the Exchange Agreement, AltCorp acquired 625,000 shares of GBT-CR representing 25% of its issued and outstanding shares of common
stock from Gonzalez in exchange for the issuance of 20,000 shares of Series H Convertible Preferred Stock of the Company and a Convertible
Note in the principal amount of $10,000,000 issued by the Company (the “Gopher Convertible Note”) as well as additional consideration.
The Gopher Convertible Note bears interest of 6% per annum and is payable at maturity on December 31, 2021. At the election of Gonzalez,
the Gopher Convertible Note can be converted into a maximum of 20,000 shares of Series H Preferred Stock. Each share of Series H Preferred
Stock is convertible, at the option of the holder but subject to the Company increasing its authorized shares of common stock, into such
number of shares of common stock of the Company as determined by dividing the Stated Value ($500 per share) by the conversion price ($10.00
per share). The Series H Preferred Stock has no liquidation preference, does not pay dividends and the holder of Series H Preferred Stock
shall be entitled to one vote for each share of common stock that the Series H Preferred Stock may be convertible into. On July 8,
2019, the Company entered a Consulting Agreement with Glen Eagles Glen Eagles Acquisition LP (“Glen”) as consultant to provide
services in connection with the Company’s acquisition of 25% of GBT-CR. Consultant will provide analysis, interaction with related
professional and other services as requested by the Company to integrate and expand capabilities between GBT-CR and the Company. (See
Note 14 for further details.)
As of December 31, 2020, and 2019, there are 20,000
shares of Series H Preferred Shares outstanding.
Warrants
The following is a summary of warrant activity.
|
|
Warrants
Outstanding
|
|
Weighted
Average Exercise Price
|
|
Weighted
Average Remaining Contractual Life
|
|
Aggregate
Intrinsic Value
|
Outstanding, December 31, 2018
|
|
|
|
419,167
|
|
|
$
|
61.00
|
|
|
|
3.48
|
|
|
$
|
—
|
|
Granted
|
|
|
|
25,355,000
|
|
|
|
0.97
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
(6,120,000
|
)
|
|
|
0.50
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2019
|
|
|
|
19,654,167
|
|
|
$
|
1.57
|
|
|
|
2.76
|
|
|
$
|
1,111,600
|
|
Granted
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
(10,667
|
)
|
|
|
256.25
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2020
|
|
|
|
19,643,500
|
|
|
$
|
1.50
|
|
|
|
1.76
|
|
|
$
|
—
|
|
Exercisable, December 31, 2020
|
|
|
|
19,643,500
|
|
|
$
|
1.50
|
|
|
|
1.76
|
|
|
$
|
—
|
|
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
The exercise price for warrant outstanding and exercisable
at December 31, 2020:
Outstanding
|
|
Exercisable
|
Number of
|
|
Exercise
|
|
Number of
|
|
Exercise
|
Warrants
|
|
Price
|
|
Warrants
|
|
Price
|
|
15,880,000
|
|
|
$
|
0.50
|
|
|
|
15,880,000
|
|
|
$
|
0.50
|
|
|
3,000,000
|
|
|
|
1.85
|
|
|
|
3,000,000
|
|
|
|
1.85
|
|
|
500,000
|
|
|
|
2.70
|
|
|
|
500,000
|
|
|
|
2.70
|
|
|
20,000
|
|
|
|
31.90
|
|
|
|
20,000
|
|
|
|
31.90
|
|
|
100,000
|
|
|
|
50.00
|
|
|
|
100,000
|
|
|
|
50.00
|
|
|
75,000
|
|
|
|
75.00
|
|
|
|
75,000
|
|
|
|
75.00
|
|
|
50,000
|
|
|
|
100.00
|
|
|
|
50,000
|
|
|
|
100.00
|
|
|
10,000
|
|
|
|
235.00
|
|
|
|
10,000
|
|
|
|
235.00
|
|
|
7,500
|
|
|
|
250.00
|
|
|
|
7,500
|
|
|
|
250.00
|
|
|
1,000
|
|
|
|
280.00
|
|
|
|
1,000
|
|
|
|
280.00
|
|
|
19,643,500
|
|
|
|
|
|
|
|
19,643,500
|
|
|
|
|
|
The fair value of the warrants listed above was determined
using the Black-Scholes option pricing model with the following assumptions:
|
|
December 31,
|
|
|
2019
|
Risk-free interest rate
|
|
|
1.55
|
%
|
Expected life of the options
|
|
|
3.1 to 3.6 years
|
|
Expected volatility
|
|
|
185
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
As a result of the above-mentioned reverse stock split,
the Company issued 25,245,000 warrants to purchase shares of the Company’s common stock with exercise prices ranging from $0.50
to $2.70 per share as a result of an anti-dilutive clause in certain of the Company’s outstanding warrants. The fair value of these
warrants was $120,476,603 which is shown as a charge to earnings on the accompanying financial statements for the year ended December
31, 2019.
Note 13 – Income Taxes
At December 31, 2020 and 2019, the significant components of the deferred
tax assets are summarized below:
|
|
December 31,
|
|
December 31,
|
|
|
2020
|
|
2019
|
Deferred income tax asset
|
|
|
|
|
|
|
|
|
Net operation loss carryforwards
|
|
$
|
8,232,796
|
|
|
$
|
7,424,074
|
|
Total deferred income tax asset
|
|
|
8,232,796
|
|
|
|
7,424,074
|
|
Less: valuation allowance
|
|
|
(8,232,796
|
)
|
|
|
(7,424,074
|
)
|
Total deferred income tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
The valuation allowance increased by $808,722 and
$1,606,154 in 2020 and 2019, respectively, as a result of the Company generating additional net operating losses. The Company’s
net operating loss carryforward of approximately $28,390,000 begin to expire in 2024.
No income tax expense reflected in the consolidated
statements of income for the years 2020 and 2019.
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
The reconciliation of the effective income tax rate to the federal statutory
rate for the years ended December 31, 2020 and 2019 is as follows:
|
|
2020
|
|
2019
|
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
|
|
|
|
|
|
|
|
|
Federal statutory rates
|
|
$
|
(3,757,564
|
)
|
|
|
21.0
|
%
|
|
$
|
(39,166,075
|
)
|
|
|
21.0
|
%
|
State income taxes
|
|
|
(1,431,453
|
)
|
|
|
8.0
|
%
|
|
|
(14,920,410
|
)
|
|
|
8.0
|
%
|
Permanent differences
|
|
|
4,380,295
|
|
|
|
-24.5
|
%
|
|
|
52,480,331
|
|
|
|
-28.1
|
%
|
Valuation allowance against net deferred tax assets
|
|
|
808,722
|
|
|
|
-4.5
|
%
|
|
|
1,606,154
|
|
|
|
-0.9
|
%
|
Effective rate
|
|
$
|
—
|
|
|
|
0.0
|
%
|
|
$
|
—
|
|
|
|
0.0
|
%
|
The Company periodically evaluates the likelihood
of the realization of deferred tax assets, and adjusts the carrying amount of the deferred tax assets by the valuation allowance to the
extent the future realization of the deferred tax assets is not judged to be more likely than not. The Company considers many factors
when assessing the likelihood of future realization of its deferred tax assets, including its recent cumulative earnings experience by
taxing jurisdiction, expectations of future taxable income or loss, the carryforward periods available to the Company for tax reporting
purposes, and other relevant factors.
Future changes in the unrecognized tax benefit will
have no impact on the effective tax rate due to the existence of the valuation allowance. The Company estimates that the unrecognized
tax benefit will not change significantly within the next twelve months. The Company will continue to classify income tax penalties and
interest as part of general and administrative expense in its consolidated statements of operations. There were no interest or penalties
accrued as of December 31, 2020 and 2019.
Note 14 – Related Parties
Related parties are natural persons or other entities
that have the ability, directly or indirectly, to control another party or exercise significant influence over the party in making financial
and operating decisions. Related parties include other parties that are subject to common control or that are subject to common significant
influences.
For the year ended December 31, 2020 and 2019, the
Company paid a law firm owned by the Company’s chairman $10,000 and $90,000, respectively, for legal services. On June 5, 2019,
said chairman Mr. Robert Yaspan resigned as Director of the Company to pursue other interests.
On April 6, 2018, the Company and Danny Rittman, Chief
Technology Officer and a Director of the Company, agreed to amend his employment agreement pursuant to which he will receive salary at
the rate of $250,000 annually payable in equal increments of $15,000 per month with an additional $70,000 to be paid within 15 days of
the end of the calendar year.
On September 14, 2018, the Company and Dr. Rittman
entered into a letter agreement confirming that the Company is the owner of all intellectual property developed by Dr. Rittman relating
to the Internet of Things (IoT) and Artificial Intelligence enabled mobile technologies, including a global platform with both mobile
and fixed solutions, commencing June 16, 2015 and continuing until Dr. Rittman’s employment agreement is terminated.
On September 1, 2017, the Company entered into and
closed an Asset Purchase Agreement with a third party, RWJ Advanced Marketing, LLC (“RWJ”), a Georgia corporation, pursuant
to which the Company purchased certain assets from RWJ, including inventory, terminals, licenses and permits and intangible assets. At
closing, the Company and Mr. Greg Bauer entered into an Employment Agreement pursuant to which Mr. Bauer was retained as Chief Executive
Officer for a term of one year, subject to an automatic extension, unless terminated, in consideration of a base salary of $250,000 and
a bonus of 10% of net profit generated by the assets acquired. Mr. Bauer was also appointed to the Board of Directors of the Company.
As of the closing date, Mr. Murray resigned as Chief Executive Officer of the Company but will remain as a director of the Company. Mr.
Bauer, since 2004 through present, has served as executive director with W.L. Petrey Wholesale, Inc. where he was in charge of the UGO/Preway
operations. The Company is in litigations in connection with RWJ transaction – See Note 15 - Contingencies.
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
On January 1, 2019, the Company and Douglas Davis
entered into an Amended and Restated Employment Agreement pursuant to which Mr. Davis was retained as Chief Executive Officer. Mr. Davis
served as Interim Chief Executive Officer since July 2018 until his resignation on April 11, 2020. The term of Mr. Davis’ employment
was for two years through January 1, 2021. Mr. Davis was entitled to an annual base salary of $250,000, which was to be increased to $400,000
upon the Company up-listing to a national exchange. Mr. Davis was also entitled to the issuance of Stock Options to acquire an aggregate
of 50,000 shares of common stock of the Company, exercisable for five years, subject to vesting. The options were to be earned and vested
(i) with respect to 20,000 shares of common stock on the date hereof, (ii) 5,000 shares of common stock upon the successful dual list
of the Company on an international exchange such as SIX Zurich Stock Exchange or Euronext, (iii) 15,000 shares of common stock upon the
successful up listing to a national exchange such as the Nasdaq, NYSE Euronext, TSX, AMEX or other, and (iv) with respect to 5,000 shares
of common stock at each of the six (6) month anniversaries (July 1, 2019 and January 1, 2020). The exercise price of such options shall
be the closing price of the Company on the date prior to such event.
On October 10, 2019, the Company entered into a Joint
Venture Agreement (the “BitSpeed Agreement”) with BitSpeed LLC, which is owned by Douglas Davis, the Company’s Chief
Executive Officer, to form GBT BitSpeed Corp., a Nevada company (“GBT BitSpeed”). The purpose of GBT BitSpeed is to develop,
maintain and support its proprietary Extreme Transfer Software Application Concurrency, a software application to transfer secure, accelerated
transmission of large file data over networks, and connection to cloud storage, Network-Attached Storage (NAS) and Storage Area Networks
(SANs) (“Concurrency”). BitSpeed shall contribute the services and resources for the development of Concurrency to GBT BitSpeed.
The Company shall contribute 10 million shares of common stock (valued at $17,900,000) of the Company to GBT BitSpeed. BitSpeed and the
Company will each own 50% of GBT BitSpeed. The Company shall appoint two directors and BitSpeed shall appoint one director of GBT BitSpeed.
In addition, GBT BitSpeed and Mr. Davis entered into a Consulting Agreement in which Mr. Davis is engaged to provide services in consideration
of $10,000 per month payable quarterly which may be paid in shares of common stock calculated by the amount owed divided by the Company’s
20-day VWAP. Mr. Davis will provide services in connection with the development of the business as well as GBT BitSpeed’s capital
raising efforts. The term of the Consulting Agreement is two years. The closing of the BitSpeed Agreement occurred on October 14, 2019.
On April 11, 2020, Douglas Davis resigned as Chief Executive Officer of the Company so that he may fully devote all of his efforts to
GBT Tokenize Corp., the Company’s joint venture, which intends to develop a new product. Mr. Davis’ resignation was not the
result of any disagreements with management or board of directors of the Company.
On March 6, 2020, the Company through Greenwich, entered
into the Tokenize Agreement with Tokenize, which is owned by a Costa Rica Trust represented by Gonzalez. Gonzalez also represents Gonzalez
Costa Rica Trust, which holds a note in the principal amount of $10,000,000 and is also a shareholder of the Company. Under the Tokenize
Agreement, the parties formed GBT Tokenize. The purpose of GBT Tokenize is to develop Technology Portfolio, throughout the State of California.
Upon generating any revenue from the Technology Portfolio, the Joint Venture will earn the first right of refusal for other territories.
Tokenize shall contribute the services and resources for the development of the Technology Portfolio to GBT Tokenize. The Company contributed
100,000,000 GBT Shares to GBT Tokenize. Tokenize and the Company will each own 50% of GBT Tokenize. The Company pledged its 50% ownership
in GBT Tokenize and its 100% ownership of Greenwich to Tokenize to secure its Technology Portfolio investment. The Company shall appoint
two directors and Tokenize shall appoint one director of GBT Tokenize. In addition, GBT Tokenize and Gonzalez entered into a Consulting
Agreement in which Gonzalez is engaged to provide services in consideration of $33,333.33 per month payable quarterly which may be paid
in shares of common stock calculated by the amount owed divided by the Company’s 10-day VWAP. Gonzalez will provide services in
connection with the development of the business as well as GBT Tokenize’s capital raising efforts. The term of the Consulting Agreement
is two years. The closing of the Tokenize Agreement occurred on March 9, 2020. Via this Joint Venture the parties commenced development
of a development of an intelligent human vital signs’ device, suggested named qTerm. The platform is an expansion of the existing
license agreement with GBT Tokenize Corp., which provided GBT Tokenize Corp. with an exclusive territory of California to develop certain
of the Company’s technology. As the nature of the platform cannot be restricted only to California, the Company’s joint venture
GBT Tokenize Corp. will be compensated with additional two hundred million shares of the Company to strengthen its funding, subject to
board approval. A provisional patent application for the qTerm Medical Device was filed on March 30, 2020 with the USPTO. The application
has been assigned serial number 63001564. The Joint Venture completed successfully the first prototype. There is no guarantee that the
Company will be successful in researching, developing or implementing this product into the market. In order to successfully implement
this concept, the Company will need to raise adequate capital to support its research and, if successfully researched, developed and granted
regulatory approval, the Company would need to enter into a strategic relationship with a third party that has experience in manufacturing,
selling and distributing this product. There is no guarantee that the Company will be successful in any or all of these critical steps.
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
Note 15 – Contingencies
Legal Proceedings
From time to time, the Company may be involved in
various litigation matters, which arise in the ordinary course of business. There is currently no litigation that management believes
will have a material impact on the financial position of the Company.
On or around January 30, 2019, RWJ Advanced Marketing,
LLC, Greg Bauer, and Warren Jackson sued the Company and multiple third and related parties in Superior Court of the State of California
- County of Los Angeles, General District in connection with the acquisition of UGO in September 2017. The case number is 19STCV03320
(the “Original Lawsuit”). The complaint in the Original Lawsuit alleges breach of contract, among other causes of action.
The Company answered the complaint and filed a cross-complaint against the plaintiffs in the case and third parties on or around February
15, 2019. On or about September 10, 2020, the Company through its agent of service was “served” with a complaint (the Company
contested service) that was recently filed against the Company and third parties by Robert Warren Jackson and Gregory Bauer in Los Angeles
Superior Court Case No.: 20STCV32709 (“Second Lawsuit”). In the Original Lawsuit filed, the court rejected the plaintiff’s
claims that they were filing a purported quasi-derivative lawsuit. As such, in this current litigation, the plaintiff is now again claiming
the action is a derivative lawsuit. On October 13, 2020, the Second Lawsuit was removed by other defendants into Central District of California
(CASE NO. 2:20−cv−09399−RGK−AGR). On February 2, 2021 The Central District of California dismissed the entire
Second Lawsuit based on “demand futility”. In the Original lawsuit, the Company filed a cross complaint against the plaintiff
and other third parties. Recently, the court has scheduled various hearings and a trial date set for December 27, 2021. It was the Company’s
intention to dividend its holdings of its wholly owned subsidiary Ugopherservices Corp. (“UGO”). As UGO is the main dispute
in the litigations described above, the Company has elected to sell UGO to a third-party effective July 1, 2020 (See Note 3). On September
17, 2020, the Company terminated Greg Bauer as consultant (resulting from the sale of UGO), which he confirmed in writing.
Following the sale of UGO (See Note 3), the Company noticed third parties
(including SURG, via its asset manager) to wire the UGO funds to its new bank account. SURG never answered the notice. The Company noticed
certain third parties that it intends to take legal actions to resolve this issue. On November 12, 2020 the Company filed a complaint
in the United States District Court – District of Nevada - Case 2:20-cv-02078 against RWJ, Mr. Bauer, Mr. Jackson and against W.L.
Petrey Wholesale Company Inc for fraud, breach of contract, Unjust Enrichment and other claims.
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
On December 3, 2018, the Company entered into a Securities
Purchase Agreement (the “SPA”) with Discover Growth Fund, LLC (the “Investor”) pursuant to which the Company issued
a Senior Secured Redeemable Convertible Debenture (the “Debenture”) in the aggregate face value of $8,340,000. In connection
with the issuance of the Debenture and pursuant to the terms of the SPA, the Company issued a Common Stock Purchase Warrant to acquire
up to 225,000 shares of common stock for a term of three years (the “Warrant”) on a cash-only basis at an exercise price of
$100.00 per share with respect to 50,000 Warrant Shares, $75.00 with respect to 75,000 Warrant Shares and $50.00 with respect to 100,000
Warrant Shares. The holder may not exercise any portion of the Warrants to the extent that the holder would own more than 4.99% of the
Company’s outstanding common stock immediately after exercise. The outstanding principal amount may be converted at any time into
shares of the Company’s common stock at a conversion price equal to 95% of the Market Price less $5.00 (the conversion
price is lowered by 10% upon the occurrence of each Triggering Event – the current conversion price is 75% of the Market Price less
$5.00). The Market Price is the average of the 5 lowest individual daily volume weighted average prices during the period the Debenture
is outstanding. On May 28, 2019, the Investor delivered to the Company a “Notice of Default and Notice of Sale of Collateral”
(the “Notice”). On December 23, 2019, in arbitration between the Company and the Investor, an Interim Award was entered in
favor of the Investor. On January 31, 2020, the Company was informed that a final award was entered (the “Final Award”). The
Final Award affirms that certain sections of the Debenture constitute unenforceable liquidated damages penalties and were stricken.
Further, it was determined that the Investor was entitled to recovery of their attorney’s fees. Consequently, the arbitrator awarded
Investor an award of $4,034,444 plus interest of 7.25% accrued from May 15, 2019 and costs in the amount of $55,613. On February 18, 2020,
the Company filed a motion with the United States District Court District of Nevada (the “Nevada Court”) to confirm the Final
Award and a motion to consolidate Investor’s application to confirm the Final Award filed in the U.S. District Court of the Virgin
Islands (Case No: 3 :20-cv-00012-CVG-RM) (the “Virgin Island Court”). On February 27, 2020, the Nevada Court denied the Company’s
motion to confirm the Final Award and motion to consolidate and further decided that the confirmation of the Final Award should be litigated
in the Virgin Island Court. As such, on February 27, 2020, the Company filed a Notice of Entry of Order as well as a Motion to Confirm
the Arbitration Award, address the outstanding issues regarding whether Investor’s rights are subordinated to other creditors and,
thereafter, oversee a commercially reasonable foreclosure sale (Case No: 3 :20-cv-00012-CVG-RM). It was the Company’s position that
the Final Award must first be confirmed and all questions regarding the rights of Investor relative to those of other creditors must be
determined before any foreclosure sale can proceed. It is further the position of the Company that the previously disclosed foreclosure
sale scheduled by Investor is being conducted in a commercially unreasonable manner and that if Discover proceeded forward with the foreclosure
sale it did so at its own risk. Nevertheless, on February 28, 2020, Investor advised that it conducted a sale of the Company’s assets.
As the date of this report Investor failed to present a deed of sale for the alleged sale that allegedly took place as noticed. The Company
filed with Virgin Island Court the motions disputing the validity of the alleged sale. On July 28, 2020, Investor filed in the State of
Nevada a motion for attorneys $48,844 and costs $716. The Company filed an answer on August 11, 2020. On October 16, 2020, Investor
motion for attorneys $48,844 and costs $716 was denied.
GBT Technologies, S.A.
On September 14, 2018, the
Company entered into an Exclusive Intellectual Property License and Royalty Agreement (the “GBT License Agreement”) with GBT-CR,
a fully compliant and regulated crypto currency exchange platform that currently operates in Costa Rica as a decentralized crypto currency
platform, pursuant to which, among other things, the Company granted to GBT-CR an exclusive, royalty-bearing right and license relating
intellectual property relating to systems and methods of converting electronic transmissions into digital currency as reflected in that
certain patent filed with the United Stated Patent and Trademark Office on or about June 14, 2018 (EFS ID: 32893586; Application Number:
16008069; Type: Utility under 35 USC 111(a); Confirmation Number: 6787)(collectively, the “Digital Currently Technology”).
Pursuant to the GBT License Agreement, the Company granted GBT-CR an exclusive worldwide license to use the Digital Currency Technology
to make, use, sell, lease or otherwise commercialize and dispose of products and devices utilizing the Digital Currently Technology. Under
the terms of the GBT License Agreement, the Company is entitled to receive a royalty payment of 2% of gross revenue of each licensed product
sold by GBT-CR during the period starting in which revenue is first generated using the licensed products and continuing for five years
thereafter. Upon signing the GBT-CR License Agreement, GBT-CR paid the Company $300,000 which is nonrefundable. The Company has recognized
the $300,000 as revenue during the years ended December 31, 2018. Upon GBT-CR making available for sale (the “Commercial Event”)
an ICO (Initial Coin Offering) (the “Coin”), GBT-CR will make a payment to the Company in the amount of $5,000,000. Further,
upon the Commercial Event, GBT-CR will grant the Company the ability to acquire 30% of the Coin at a 30% discount of such offering price
of the Coin. The GBT License Agreement commenced as of the signing date and, unless terminated in accordance with the termination provisions
of the GBT License Agreement, shall remain in force until the expiration of the patent pertaining to the Digital Currency Technology;
provided that the right to use trade secrets shall survive the expiration of the GBT License Agreement provided the Company has not terminated.
Prior to the signing of the GBT License Agreement, GBT-CR advanced $200,000 to the Company, which the parties have agreed will be applied
toward the $5,000,000 fee when it becomes due. The $200,000 is recorded as unearned revenue at December 31, 2018 and reclassified to accrued
expense at December 31, 2019. On February 27, 2020 GBT Technologies, S.A., as successor in interest to Hermes Roll, LLC had notified the
Company that it was in default on its Amended and Restated Territorial License Agreement (“ARTLA”) dated June 15, 2015 and
that the ARTLA had been cancelled and rescinded.
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
In connection with SURG Exchange Agreement (see Note
4) - On November 4, 2020, Altcorp and Stanley filed an Ex Parte Motion In the District Court, Clark County, Nevada (Case No: A-20-823039-B,
in Dep No: 43) to appoint receiver and issue a temporary restraining Order against SURG and its transfer agent for alleged defaults on
prior exchange agreement. On December 4, 2020, the parties entered an interim agreement which set the material terms of the settlement.
A final settlement was achieved per the interim agreement terms on January 1, 2021 (see Note 17). On March 4, 2021 the Company filed a
motion to enforce settlement agreements, as the Company alleged that SURG owes an additional $240,000 which is due and owing under the
settlement agreements.
Note 16 – Concentrations
Concentration of Credit Risk
Financial instruments, which potentially subject the
Company to a concentration of credit risk, consist principally of temporary cash investments. There have been no losses in these accounts
through December 31, 2020.
Note 17 – Subsequent Events
Management has evaluated events that occurred subsequent
to the end of the reporting period shown herein:
On January 1, 2021 SURG, AltCorp and Stanley entered
into a Mutual Release and Settlement Agreement (“Settlement Agreement”). Pursuant to the terms of the Settlement Agreement,
SURG agreed to amend the AltCorp Exchange Agreement where SURG acknowledged a debt of $3,300,000 (the “Debt”) to be paid via
33 monthly payments of $100,000 payable in shares of common stock of SURG at a per share price equal the volume weighted average price
of SURG’s common stock during the ten (10) trading days immediately preceding the issuance. At the end of the 33rd month, if AltCorp
has not realized gross, pre-tax proceeds at least equal to the amount of the Debt, SURG shall transfer to AltCorp and/or its designee
additional shares of SURG’s common stock necessary to satisfy the Debt. To the date of this report, SURG has made three payments
per the settlement agreements.
On February 10, 2021, the Company entered into a Securities
Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note
No. 4”) in the aggregate principal amount of $184,200 for a purchase price of $153,500. The Redstart Note No. 4 has a maturity date
of February 5, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 4 at the rate
of six percent (6%) per annum from the date on which the Redstart Note No. 4 is issued (the “Issue Date”) until the same becomes
due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the
Redstart Note No. 4, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 4. The transactions
described above closed on February 10, 2021. The outstanding principal amount of the Redstart Note No. 4 may not be converted prior to
the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the
Redstart Note No. 4 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading
price with a 20-day look back immediately preceding the date of conversion. In addition, upon the occurrence and during the continuation
of an Event of Default (as defined in the Redstart Note No. 4), the Redstart Note No. 4 shall become immediately due and payable and the
Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note
No. 4.
On March 15, 2021, the Company entered into a Securities
Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note
No. 5”) in the aggregate principal amount of $106,200 for a purchase price of $88,500. The Redstart Note No. 5 has a maturity date
of June 15, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 5 at the rate of
six percent (6%) per annum from the date on which the Redstart Note No. 5 is issued (the “Issue Date”) until the same becomes
due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the
Redstart Note No. 5, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 5. The transactions
described above closed on March 17, 2021. The outstanding principal amount of the Redstart Note No. 5 may not be converted prior to the
period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart
Note No. 5 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price
with a 20-day look back immediately preceding the date of conversion. In addition, upon the occurrence and during the continuation of
an Event of Default (as defined in the Redstart Note No. 5), the Redstart Note No. 5 shall become immediately due and payable and the
Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note
No. 5.
GBT TECHNOLOGIES INC.
|
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
For the Years Ended December 31, 2020 and 2019
|
On January 19, 2021 the Company entered into consulting
agreements with two third-party consultants. The executive officers of the Company conducted an extensive search and has explored all
possible avenues of financing and in order to fully-implement its business plan it has determined that for its best interest to engage
two outside consultants to identify investors as an accredited investor, under Section 4(a)(2) of the Securities Act of 1933, as amended
(the “Private Offering”) is in the best interest of the Company. The terms of the agreements are for one consultant a 12,000,000
Company one-time new shares issuance and $1,000 cash monthly payment, and to the second consultant 250,000 Company one-time new shares
issuance, along with additional 30,000 new issuance per quarter, and $500 cash monthly payment. The company issued to the consultants
the 12,250,000 restricted stock on February 11, 2021.
On February 28, 2021 the Company and Iliad entered
into agreement to further extend the maturity of the Iliad Note until May 31, 2021 in consideration of an extension fee of $1,000 representing
the third extension of the original note. (See Note 8)
Subsequent to December 31, 2020, the Company issued
224,185,847 shares of common stock in exchange for $3,116,668 of convertible notes payable and $6,180 of accrued interest. Included in
these amounts are the conversions of the Redstart Note No. 1 and Redstart Note No. 2)
GBT TECHNOLOGIES, INC.
2,000,000,000 Shares of Common Stock
PROSPECTUS
,
2021
PART II- INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses
payable by the Company in connection with the issuance and distribution of the securities being registered hereunder. All amounts are
estimates except the SEC registration fee.
SEC registration fees
|
|
$
|
265.20
|
|
Printing expenses
|
|
$
|
10,000
|
|
Accounting fees and expenses
|
|
$
|
5,000
|
|
Legal fees and expenses
|
|
$
|
15,000
|
|
Blue sky fees
|
|
$
|
1,500
|
|
Miscellaneous
|
|
$
|
500
|
|
Total
|
|
$
|
32,265.20
|
|
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.7502(1) of the Nevada Revised Statutes
provides that a corporation may indemnify any person who was or is a party, or is threatened to be made a party, to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (except in an action brought by or on
behalf of the corporation) if that person is or was a director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of another corporation or enterprise, against expenses, including
attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by that person in connection with
such action, suit or proceeding, if that person acted in good faith and in a manner which that person reasonably believed to be in, or
not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceedings, had no reasonable cause
to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon
a plea of nolo contendere or its equivalent, alone, does not create a presumption that the person did not act in good faith and in a manner
which the person reasonably believed to be in, or not opposed to, the best interests of the corporation, and that, with respect to any
criminal action or proceeding, the person had reasonable cause to believe his action was unlawful.
Section 78.7502(2) of the Nevada Revised Statutes
provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending
or completed action or suit brought by or on behalf of the corporation to procure a judgment in its favor because the person acted in
any of the capacities set forth above, against expenses, including amounts paid in settlement and attorneys’ fees, actually and
reasonably incurred by that person in connection with the defense or settlement of such action or suit, if the person acted in accordance
with the standard set forth above, except that no indemnification may be made in respect of any claim, issue or matter as to which such
person shall have been adjudged by a court of competent jurisdiction after exhaustion of all appeals therefrom to be liable to the corporation
or for amounts paid in settlement to the corporation unless and only to the extent that the court in which such action or suit was brought
or other court of competent jurisdiction determines that, in view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses as the court deems proper.
Section 78.7502(3) of the Nevada Revised Statutes
further provides that, to the extent a director or officer of a corporation has been successful on the merits or otherwise in the defense
of any action, suit or proceeding referred to in subsections 1 and 2 thereof, or in the defense of any claim, issue or matter therein,
that person shall be indemnified by the corporation against expenses (including attorneys’ fees) actually and reasonably incurred
by that person in connection therewith.
Section 78.751 of the Nevada Revised Statutes provides
that unless indemnification is ordered by a court, the determination to provide indemnification must be made by the stockholders, by a
majority vote of a quorum of the board of directors who were not parties to the action, suit or proceeding, or in specified circumstances
by independent legal counsel in a written opinion. In addition, the articles of incorporation, bylaws or an agreement made by the corporation
may provide for the payment of the expenses of a director or officer of the expenses of defending an action as incurred upon receipt of
an undertaking to repay the amount if it is ultimately determined by a court of competent jurisdiction that the person is not entitled
to indemnification. Section 78.751 of the Nevada Revised Statutes further provides that the indemnification provided for therein shall
not be deemed exclusive of any other rights to which the indemnified party may be entitled and that the scope of indemnification shall
continue as to directors, officers, employees or agents who have ceased to hold such positions, and to their heirs, executors and administrators.
Section 78.752 of the Nevada Revised Statutes provides
that a corporation may purchase and maintain insurance on behalf of a director, officer, employee or agent of the corporation against
any liability asserted against him or incurred by him in any such capacity or arising out of his status as such whether or not the corporation
would have the authority to indemnify him against such liabilities and expenses.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
During the year ended December
31, 2020, the Company had the following transactions in its common stock:
|
●
|
issued an aggregate of 140,138,107 for the conversion of convertible notes of $1,306,489 and accrued interest of $4,590; and
|
|
|
|
|
●
|
issued 100,000,000 shares to GBT Tokenize for a joint venture agreement. The value of the common stock of $5,500,000 was determined based on the closing stock price of the Company’s common stock on the grant date.
|
During the year ended December
31, 2019, the Company had the following transactions in its common stock:
|
●
|
issued an aggregate of 9,500 shares to employees and board members as part of their compensation agreements with the Company. The value of the common stock of $235,900 was determined based on the closing stock price of the Company’s common stock on the grant date;
|
|
|
|
|
●
|
issued 74,762 shares to an investor for the conversion of $1,357,200 in convertible notes and $62,934 in accrued interest;
|
|
|
|
|
●
|
issued 59,820 shares to an investor for disputed penalties on a convertible debenture. The value of the common stock of $975,065 was determined based on the closing stock price of the Company’s common stock on the grant date;
|
|
|
|
|
●
|
issued 200,267 shares to Latinex in order to provide that Latinex may maintain its required regulatory capital as required by various regulators. The Company has recorded the value ($7,610,147) of these shares of common stock as a stock loan receivable which is presented as a contra-equity account in the accompanying consolidated balance sheets. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the grant date;
|
|
|
|
|
●
|
issued 10,000,000 shares in connection with a joint venture with BitSpeed. The value of the common stock of $17,900,000 was based on the closing price of the Company’s common stock on the closing date;
|
|
|
|
|
●
|
issued 4,566,214 shares in connection with the cashless exercise of 6,120,000 warrants; and
|
|
|
|
|
●
|
canceled 200,000 shares that were returned in connection with the Company’s sale of its investment with Mobiquity. (See Note 4). The shares were valued based on the Company’s stock price on the date of the agreement.
|
During the years ended December 31, 2018, the Company had the following transactions in its common stock:
|
●
|
issued 66,000,000 shares in connection with the conversion of 66,000 shares of Series D Preferred Stock;
|
|
|
|
|
●
|
issued 2,000,000 shares in connection with the conversion of 2,000,000 shares of Series G Preferred Stock;
|
|
|
|
|
●
|
issued 250,000 shares to a consultant for professional services rendered valued at $123,725. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the dates that the shares earned based on the agreement;
|
|
|
|
|
●
|
issued 1,800,000 shares to employees and board members as part of their agreements with the Company. The value of the common stock of $4,404,500 was determined based on the closing stock price of the Company’s common stock on the date of the respective agreements;
|
|
|
|
|
●
|
issued 3,000,000 to a consultant for services related to assisting the Company with the acquisition of the RWJ assets. The 3,000,000 shares were earned when the operations of the RWJ assets produced revenue in excess of $10,000,000. The value of the common stock of $4,590,000 was determined based on the closing stock price of the Company’s common stock on the date of the shares were earned.
|
|
|
|
|
●
|
issued aggregate of 1,250,000 shares to a consultant for services rendered valued at $2,715,000. The services, which include business development, analysis, and interaction with professionals, were principally related to assisting the Company with the acquisition of the ECS and Electronic Check assets (see Note 3). The value of the common stock was determined based on the closing stock price of the Company’s common stock on the closing date of acquisition of ECS and Electronic Check;
|
|
|
|
|
●
|
issued 500,000 shares for the acquisition of the ECS assets valued at $1,010,000. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the acquisition date;
|
|
|
|
|
●
|
issued 250,000 shares for the acquisition of the Electronic Check valued at $695,000. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the acquisition date;
|
|
|
|
|
●
|
issued 10,000,000 shares in connection with its equity interest in Mobiquity valued at $9,980,000 (See Note 6). The value of the common stock was determined based on the closing stock price of the Company’s common stock on the closing date of the Mobiquity transaction;
|
|
|
|
|
●
|
issued an additional 10,000,000 shares to Mobiquity valued at $3,90,000 for payment of the exercise price for 20,000,000 warrants previously granted to the Company. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the date of issuance;
|
|
|
|
|
●
|
issued 1,000,000 shares to a consultant for services rendered valued at $998,000. The services, which include business development, analysis, and interaction with professionals, were principally related to assisting the Company with the acquisition of its equity interest in Mobiquity. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the closing date of Mobiquity transaction;
|
|
|
|
|
●
|
issued 12,500,000 shares to Guardian LLC in connection the termination of its 50% interest in the profits of certain of the Company’s products (See Note 11). The shares were valued at $11,750,000 which was determined based on the closing stock price of the Company’s common stock at the date of the agreement;
|
|
|
|
|
●
|
issued 324,528 shares to Bellridge for the conversion of $275,000 in convertible notes and $17,075 in accrued interest;
|
|
|
|
|
●
|
issued 9,499,274 shares to an unaffiliated third party institutional investor for the conversion of $2,000,000 in convertible notes and $6,521 in accrued interest;
|
|
|
|
|
●
|
issued 318,583 shares to Bellridge pursuant to the limited price protection. The shares were valued at $213,451 which was charged to financing cost was determined based on the closing stock price of the Company’s common stock on the date of issuance;
|
|
●
|
issued 2,000,000 shares to a consultant for services rendered in connection with the issuance of the Company’s common stock as payment of the exercise price for the Mobiquity warrants valued at $780,000. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the date of issuance;
|
|
|
|
|
●
|
issued 2,000,000 shares to a consultant for services rendered in connection with the issuance of the Company’s common stock as payment of the exercise price for the Mobiquity warrants valued at $780,000.
|
|
|
|
|
●
|
issued 2,000,000 shares to Eagle Equities LLC as a result of the Company issuing shares of common stock for less than $0.30 pursuant to an agreement with Eagle Equities. The shares were valued at $670,000, which was charged to financing cost was determined based on the closing stock price of the Company’s common stock on the date the Company issued shares for less than $0.30;
|
|
|
|
|
●
|
a consultant for services rendered valued at $30,000. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the date of issuance;
|
|
|
|
|
●
|
issued 1,272,726 shares of common stock to an investor for cash proceeds of $1,500,000; and
|
|
|
|
|
●
|
canceled 50,000 shares pursuant to the settlement of a legal matter.
|
The foregoing offers, sales and issuances were exempt
from registration under Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D thereunder.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
The exhibit index attached hereto is incorporated herein by reference.
(b) Financial Statement Schedule
All schedules have been omitted because the information required to be
set forth in the schedules is either not applicable or is shown in the financial statements or notes thereto.
No.
|
|
Description
|
3.1
|
|
Certificate of Incorporation
of Forex International Trading Corp. (6)
|
3.2
|
|
Bylaws of Forex International
Trading Corp. (6)
|
3.3
|
|
Certificate of Designation
for Series A Preferred Stock (14)
|
3.4
|
|
Certificate of Designation
for Series B Preferred Stock (21)
|
3.5
|
|
Certificate of Designation
– Series C Preferred Stock (22)
|
3.6
|
|
Amendment to the Certificate
of Designation for the Series B Preferred Stock (25)
|
3.7
|
|
Amendment to the Certificate
of Designation for the Series C Preferred Stock(25)
|
3.8
|
|
Certificate of Change
filed pursuant to NRS 78.209 (31)
|
3.9
|
|
Articles of Merger
filed pursuant to NRS 92.A.200 (31)
|
3.10
|
|
Certificate of Amendment
to the Articles of Incorporation of Gopher Protocol Inc. (34)
|
3.11
|
|
Certificate of Change
dated July 10, 2019 (67)
|
3.12
|
|
Articles
of Merger by and between Gopher Protocol Inc. and GBT Technologies Inc. dated July 10, 2019(67)
|
3.13
|
|
Certificate of Correction
to the Certificate of Change (68)
|
3.14
|
|
Certificate
of Correction to the Articles of Merger by and between Gopher Protocol Inc. and GBT Technologies Inc. dated July 10, 2019 (68)
|
3.15
|
|
Certificate
of Amendment to the Articles of Incorporation of GBT Technologies Inc. dated September 23, 2019 (72)
|
4.1
|
|
Convertible Promissory
Note issued by the Company to ATL dated July 8, 2010 (3)
|
4.2
|
|
Secured and Collateralized
Promissory Note issued by ATL to the Company dated July 8, 2010 (3)
|
4.3
|
|
Collateral
and Security Agreement by and between Forex International Trading Group and ATL dated July 7, 2010 (3)
|
4.4
|
|
Promissory
Note issued to Rasel Ltd. Dated October 6, 2009(7)
|
4.5
|
|
Promissory Note issued
to Rasel Ltd. Dated October 20, 2009 (7)
|
4.6
|
|
Letter Agreement between
Rasel Ltd. and Forex International Trading Corp. dated January 22, 2011 (8)
|
4.7
|
|
Letter
Agreement by and between Forex International Trading Group and ATL dated November 8, 2010 (9)
|
4.8
|
|
6% Convertible Note
issued to APH (11)
|
4.9
|
|
6% Convertible Debenture
issued to HAM dated April 5, 2011 (14)
|
4.10
|
|
Promissory Note dated
November 30, 2011 issued to Cordellia dioxo. in the amount of $1,000,000 (18)
|
4.11
|
|
$500,000 Convertible
Promissory Note issued by Forex International Trading Corp. (23)
|
4.12
|
|
$400,000 Secured and
Collateralized Promissory Note issued by Vulcan Oil & Gas Inc. (23)
|
4.13
|
|
Securities Purchase
Agreement dated July 24, 2013 entered with Asher Enterprise Inc. (26)
|
4.14
|
|
Convertible Promissory
Note issued to Asher Enterprises Inc. (26)
|
4.15
|
|
10% Convertible Debenture
issued to GV Global Communications Inc. (30)
|
4.16
|
|
Amendment to 10% Convertible
Promissory Debenture held by GV Global Communications, Inc. (32)
|
4.17
|
|
Series D Preferred
Stock Certificate of Designation (32)
|
4.18
|
|
Common Stock Purchase
Warrant (40)
|
4.19
|
|
6% Convertible Promissory
Note issued by the Company to Guardian Patch LLC dated May 23, 2017 (41)
|
4.20
|
|
Securities Purchase
Agreement entered with Crown Bridge Partners, LLC dated June 9, 2017 (42)
|
4.21
|
|
Convertible Promissory
Note dated June 9, 2017 issued to Crown Bridge Partners LLC (42)
|
4.22
|
|
Convertible
Promissory Note Back End Note dated June 9, 2017 issued to Crown Bridge Partners LLC (42)
|
4.23
|
|
Collateralized
Secured Promissory Note Back End Note dated June 9, 2017 issued to Crown Bridge Partners LLC (42)
|
4.24
|
|
Securities Purchase
Agreement entered with Eagle Equities, LLC dated June 9, 2017 (42)
|
4.25
|
|
Convertible Promissory
Note issued to Eagle Equities, LLC dated June 9, 2017 (42)
|
4.26
|
|
Convertible Promissory
Note issued to Eagle Equities, LLC dated June 9, 2017 (Back End Note) (42)
|
4.27
|
|
Form of Collateralized
Secured Promissory Note dated June 9, 2017 issued by Eagle Equities, LLC (42)
|
4.28
|
|
Convertible
Promissory Note dated June 7, 2017 issued to JSJ Investments Inc. (42)
|
4.29
|
|
Convertible Promissory
Note dated June 29, 2017 issued to JSJ Investments Inc. (44)
|
4.30
|
|
Form
of Warrant issued to Robert Warren Jackson, Gregory Bauer, Michael Murray and Guardian Patch, LLC dated September 1, 2017 (45)
|
4.31
|
|
Balloon
Note payable by Gopher Protocol Inc. to RWJ Advanced Marketing, LLC dated September 1, 2017 (45)
|
4.32
|
|
Securities Purchase
Agreement entered with Eagle Equities, LLC dated September 13, 2017 (46)
|
4.33
|
|
Convertible Promissory
Note issued to Eagle Equities, LLC dated September 13, 2017(46)
|
4.34
|
|
Convertible
Promissory Note issued to Eagle Equities, LLC dated September 13, 2017 (Back End Note) (46)
|
4.35
|
|
Form
of Collateralized Secured Promissory Note dated September 13, 2017 issued by Eagle Equities, LLC(46)
|
4.36
|
|
Securities
Purchase Agreement dated October 2, 2017 between Gopher Protocol Inc. and Power Up Lending Group Ltd. (47)
|
4.37
|
|
Convertible Promissory
Note dated October 2, 2017 issued to Power Up Lending Group Ltd. (47)
|
4.38
|
|
Securities Purchase
Agreement entered with Labrys Fund, LP dated October 26, 2017 (49)
|
4.39
|
|
Convertible Promissory
Note issued to Labrys Fund, LP dated October 26, 2017 (49)
|
4.40
|
|
Rescission
Agreement entered between Gopher Protocol Inc. and Crown Bridge Partners, LLC dated October 23, 2017 (49)
|
4.41
|
|
Securities
Purchase Agreement by and between Gopher Protocol Inc. and Eagle Equities, LLC dated December 29, 2017 (50)
|
4.42
|
|
Common Stock Purchase
Warrant issued to Eagle Equities, LLC dated December 29, 2017 (50)
|
4.43
|
|
Certificate
of Designation of the Preferences, Rights and Limitations of the Series G Convertible Preferred Stock (51)
|
4.44
|
|
Form of Securities
Purchase Agreement entered with Bellridge Capital, LLC (52)
|
4.45
|
|
10% Convertible
Debenture issued to Bellridge Capital, LLC dated March 2, 2018 (52)
|
4.46
|
|
Common Stock Purchase
Warrant issued to Bellridge Capital, LLC dated March 2, 2018 (52)
|
4.47
|
|
Form
of Warrant issued to Derron Winfrey, Dennis Winfrey, Mark Garner and JIL Venture dated March 1, 2018 (53)
|
4.48
|
|
Note payable by
Gopher Protocol Inc. to ECS, LLC dated March 1, 2018 (53)
|
4.49
|
|
10% Convertible
Debenture issued to Bellridge Capital, LP dated April 9, 2018 (54)
|
4.50
|
|
Common Stock Purchase
Warrant issued to Bellridge Capital, LP dated April 9, 2018 (54)
|
4.51
|
|
Stock
Option issued to Kevin Pickard dated April 16, 2018 (55)
|
4.52
|
|
Stock Option issued
to Muhammad Khilji dated April 25, 2018 (56)
|
4.53
|
|
Securities
Purchase Agreement by and between Gopher Protocol Inc. and Eagle Equities, LLC dated May 4, 2018 (57)
|
4.54
|
|
Series
H Convertible Preferred Stock Certificate of Designation (65)
|
4.55
|
|
6%
Convertible Note payable to Pablo Gonzalez dated June 17, 2019 (65)
|
4.56
|
|
Convertible
Note payable to Glen Eagles Acquisition LP (66)
|
4.57
|
|
Amendment
to Common Stock Purchase Warrant between Gopher Protocol Inc. and Glen Eagles Acquisition LP (66)
|
4.58
|
|
Second
Amendment to Promissory Note between GBT Technologies Inc. and Ilaid Research and Trading LP dated July 20, 2020 (76)
|
4.59
|
|
Convertible
Promissory Note August 4, 2020 issued to Redstart Holdings Corp. (77)
|
5.1*
|
|
Opinion
of FlemingPLLC
|
10.1
|
|
Software
Licensing Agreement dated April 12, 2010, by and between Forex International Trading Corp and Triple (1)
|
10.2
|
|
Employment
Agreement dated April 23, 2010, by and between Forex International Trading Corp and Darren Dunckel (2)
|
10.3
|
|
Letter Agreement
by and between Forex International Trading Corp. and Anita Atlas, dated July 29, 2010 (4)
|
10.4
|
|
Letter
Agreement by and between Forex International Trading Corp. and Stewart Reich, dated July 29, 2010 (4)
|
10.5
|
|
Letter
Agreement by and between Forex International Trading Corp. and Mr. William Glass, dated August 6, 2010 (5)
|
10.6
|
|
Share Exchange
Agreement by and between Forex International Trading Corp. and APH (10)
|
10.7
|
|
Letter Agreement
by and between Forex International Trading Corp., APH, Medirad Inc. and Rasel Ltd. (11)
|
10.8
|
|
Letter
Amendment by and between Forex International Trading Corp. and William Glass, dated March 4, 2011 (13)
|
10.9
|
|
Letter
Amendment by and between Forex International Trading Corp. and Stewart Reich, dated March 4, 2011 (13)
|
10.10
|
|
Employment
Agreement by and between Forex International Trading Corp. and Liat Franco, dated March 7, 2011 (13)
|
10.11
|
|
Agreement between
Forex International Trading Corp. and APH dated April 5, 2011 (14)
|
10.12
|
|
Conversion Agreement
between MP and Forex International Trading Corp. dated April 5, 2011 (14)
|
10.13
|
|
Share Exchange
Agreement between Forex International Trading Corp. and dated April 5, 2011 (14)
|
10.14
|
|
Agreement
to Unwind and Mutual Release dated as of July 11, 2011 by and between Forex International Trading Corp., Forex NYC and Wheatley Investment
Agreement by and between Forex International Trading Corp. and Centurion Private Equity, LLC dated June 27, 2011 (16)
|
10.15
|
|
Registration
Rights Agreement with Centurion by and between Forex International Trading Corp. and Centurion Private Equity, LLC dated June 27,
2011 (16)
|
10.16
|
|
Intentionally Left
Blank
|
10.17
|
|
Settlement
Agreement by and between Forex International Trading Corp., A.T. Limited, Watford Holding Inc. and James Bay Holdings, Inc. dated
November 1, 2011 (17)
|
10.18
|
|
Settlement
and Foreclosure Agreement between Forex International Trading Corp., AP Holdings Limited, H.A.M Group Limited and Cordellia d.o.o.(18)
|
10.19
|
|
Annulment
of Share Purchase Agreement dated December 5, 2011 between Triple 8 Limited, AP Holdings Limited, H.A.M Group Limited and 888 Markets
(Jersey) Limited (18)
|
10.20
|
|
Promissory Note
issued to Forex International Trading Corp. dated December 13, 2011 (19)
|
10.21
|
|
Stock
Pledge Agreement executed by Fortune Market Media Inc. dated December 13, 2011 (19)
|
10.22
|
|
Conversion Agreement
between the Company and GV Global Communications, Inc. (22)
|
10.23
|
|
Agreement
by and between and Direct JV Investments Inc., Forex International Trading Corporation and Vulcan Oil & Gas Inc. dated January
7, 2013 (23)
|
10.24
|
|
Evaluation
License Agreement dated September 2, 2013, by and between Forex International Trading Corp and Micrologic Design Automation, Inc.
(27)
|
10.25
|
|
Letter
Agreement dated January 2, 2014, by and between Forex International Trading Corp and Micrologic Design Automation, Inc. (28)
|
10.26
|
|
Settlement
Agreement by and between Forex International Trading Corp. and Leova Dobris dated November 14, 2014 (29)
|
10.27
|
|
Exchange
Agreement by and between Forex International Trading Corp. and Vladimir Kirish dated January 22, 2015 (30)
|
10.28
|
|
Exchange
Agreement by and between Forex International Trading Corp. and GV Global Communications Inc. dated January 22, 2015 (30)
|
10.29
|
|
Agreement by and
between Forex International Trading Corp. and Fleming PLLC dated January 22, 2015 (30)
|
10.30
|
|
Territorial
License Agreement dated March 4, 2015, by and between Gopher Protocol Inc. and Hermes Roll LLC (32)
|
10.31
|
|
Amended
and Restated Territorial License Agreement dated June 16, 2015 by and between Gopher Protocol Inc. and Hermes Roll LLC (35)
|
10.32
|
|
Letter Agreement
dated August 20, 2015 by and between Gopher Protocol Inc. and Dr. Danny Rittman (36)
|
10.33
|
|
Consulting
Agreement dated August 11, 2015, by and between Gopher Protocol Inc. and Michael Korsunsky (37)
|
10.34
|
|
Letter Agreement
dated March 14, 2016 by and between Gopher Protocol Inc. and Dr. Danny Rittman. (38)
|
10.35
|
|
Amended
and Restated Employment Agreement by and between Gopher Protocol Inc. and Dr. Danny Rittman dated April 19, 2016 (39)
|
10.36
|
|
Consulting
Agreement dated September 10, 2016, by and between Gopher Protocol Inc. and Waterford Group LLC (40)
|
10.37
|
|
Conversion Agreement
between the Company and Guardian Patch LLC dated May 23, 2017 (41)
|
10.38
|
|
Lock-Up and Leak-Out
Agreement between the Company and Guardian Patch LLC dated June 26, 2017 (43)
|
10.39
|
|
Lock-Up and Leak-Out
Agreement between the Company and Stanley Hills LLC dated June 29, 2017 (43)
|
10.40
|
|
Letter Agreement
between the Company and Danny Rittman dated June 29, 2017 (43)
|
10.41
|
|
Asset
Purchase Agreement between Gopher Protocol Inc. and RWJ Advanced Marketing, LLC dated September 1, 2017 (45)
|
10.42
|
|
Addendum
to Asset Purchase Agreement between Gopher Protocol Inc. and RWJ Advanced Marketing, LLC dated September 1, 2017 (45)
|
10.43
|
|
Employment Agreement
between Gopher Protocol Inc. and Gregory Bauer dated September 1, 2017 (45)
|
10.44
|
|
Consulting Agreement
between Gopher Protocol Inc. and Guardian Patch, LLC dated September 1, 2017 (45)
|
10.45
|
|
Rescission Agreement
between Gopher Protocol Inc. and Eagle Equities LLC dated December 31, 2017 (51)
|
10.46
|
|
Amendment
of Lock-Up and Leak-Out Agreement between Gopher Protocol Inc. and Stanley Hills, LLC dated December 29, 2017(51)
|
10.47
|
|
Amendment
of Lock-Up and Leak-Out Agreement between Gopher Protocol Inc. and Guardian Patch, LLC dated December 29, 2017(51)
|
10.48
|
|
Asset Purchase
Agreement between Gopher Protocol Inc. and ECS Prepaid LLC dated March 1, 2018 (53)
|
10.49
|
|
Employment Agreement
between Gopher Protocol Inc. and Derron Winfrey dated March 1, 2018(53)
|
10.50
|
|
Employment Agreement
between Gopher Protocol Inc. and Mark Garner dated March 1, 2018(53)
|
10.51
|
|
Consulting Agreement
between Gopher Protocol Inc. and J.I.L. Venture LLC dated March 1, 2018(53)
|
10.52
|
|
Executive
Retention Agreement by and between Gopher Protocol Inc. and Kevin Pickard dated April 16, 2018 (55)
|
10.53
|
|
Indemnification
Agreement by and between Gopher Protocol Inc. and Kevin Pickard dated April 16, 2018 (55)
|
10.54
|
|
Director Agreement
by and between Gopher Protocol Inc. and Muhammad Khilji dated April 25, 2018 (56)
|
10.55
|
|
Indemnification
Agreement by and between Gopher Protocol Inc. and Muhammad Khilji dated April 25, 2018 (56)
|
10.56
|
|
Director
Agreement by and between Gopher Protocol Inc. and Robert Yaspan dated May 17, 2018 (58)
|
10.57
|
|
Director Agreement
by and between Gopher Protocol Inc. and Judit Nagypal dated May 17, 2018 (58)
|
10.58
|
|
Director Agreement
by and between Gopher Protocol Inc. and Ambassador Siegel dated May 17, 2018 (58)
|
10.59
|
|
Director Agreement
by and between Gopher Protocol Inc. and Eva Bitter dated June 18, 2018 (59)
|
10.60
|
|
Employment
Agreement by and between Gopher Protocol Inc. and Douglas L. Davis dated July 23, 2018 (60)
|
10.61
|
|
Director Agreement
by and between Gopher Protocol Inc. and Mitchell K. Tavera dated July 31, 2018 (61)
|
10.62
|
|
Agreement between
Gopher Protocol Inc. and Mobiquity Technologies, Inc. dated September 4, 2018 (62)
|
10.63
|
|
Consulting
Agreement between Gopher Protocol Inc. and Consul Group RE 2021, SRL dated September 5, 2018 (62)
|
10.64
|
|
Exclusive
Intellectual Property License and Royalty Agreement between Gopher Protocol Inc. and GBT Technologies, S.A. dated September 14, 2018
(63)
|
10.65
|
|
Letter
Agreement between Gopher Protocol Inc. and Dr. Danny Rittman dated September 14, 2018 (63)
|
10.66
|
|
Exchange
Agreement entered into between Gopher Protocol Inc., Altcorp Trading LLC, GBT Technologies, S.A., a Costa Rica company and Pablo
Gonzalez dated June 17, 2019 (65)
|
10.67
|
|
Consulting
Agreement entered into between Gopher Protocol Inc. and Glen Eagles Acquisition LP (66)
|
10.68
|
|
Letter
Agreement between Mobiquity Technologies, Inc. and GBT Technologies Inc. executed August 2, 2019 Delivered August 6, 2019 (69)
|
10.69
|
|
Stock
Purchase Agreement between Mobiquity Technologies, Inc. and GBT Technologies Inc. Dated September 10, 2019 (71)
|
1070
|
|
Stock
Purchase Agreement between Marital Trust GST Subject U/W/O Leopold Salkind and GBT Technologies Inc. dated September 10, 2019 (71)
|
10.71
|
|
Stock
Purchase Agreement between Dr. Gene Salkind and GBT Technologies Inc. dated September 10, 2019 (71)
|
10.72
|
|
Stock
Purchase Agreement between Deepanker Katyal and GBT Technologies Inc. dated September 10, 2019 (71)
|
10.73
|
|
Joint
Venture Agreement by and between GBT Technologies Inc. and BitSpeed LLC dated October 10, 2019 (73)
|
10.74
|
|
Consulting
Agreement by and between Douglas L. Davis and GBT BitSpeed Corp. dated October 10, 2019 (73)
|
10.75
|
|
Letter
Agreement between GBT Technologies Inc. and Stanley Hills LLC dated February 26, 2020 (74)
|
10.76
|
|
Amendment
to Promissory Note between GBT Technologies Inc. and Iliad Research and Trading, L.P. dated February 27, 2020 (74)
|
10.77
|
|
Order
dated February 27, 2020 issued by the United States District Court District of Nevada (74)
|
10.78
|
|
Joint
Venture and Territorial License Agreement by and between GBT Technologies Inc. and Tokenize-It S.A. dated March 6, 2020 (75)
|
10.79
|
|
Consulting
Agreement by and between Pablo Gonzalez and GBT Tokenize Corp. dated March 6, 2020 (75)
|
10.80
|
|
Pledge Agreement
by and between GBT Tokenize Corp. and Tokenize-It S.A., dated March 6, 2020 (75)
|
10.81
|
|
Securities Purchase
Agreement dated August 4, 2020 between GBT Technologies Inc. and Redstart Holdings Corp. (77)
|
10.82
|
|
Common Stock Purchase
Agreement, dated April 27, 2021
|
10.83
|
|
Registration Rights
Agreement, dated April 27, 2021
|
16.1
|
|
Letter from Alan
R. Swift, CPA, P.A. (33)
|
16.2
|
|
Letter
from Anton & Chia, LLP (48)
|
(1)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 20, 2010
|
(2)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 28, 2010
|
(3)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 13, 2010
|
(4)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 3, 2010
|
(5)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 9, 2010
|
(6)
|
Incorporated
by reference to the Form S-1 Registration Statement filed with the SEC on September 9, 2009.
|
(7)
|
Incorporated
by reference to the Form S-1 Registration Statement filed with the SEC on November 2, 2009.
|
(8)
|
Incorporated
by reference to the Form S-1 Registration Statement filed with the SEC on January 29, 2010.
|
(9)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 22, 2010
|
(10)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 17, 2010
|
(11)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 3, 2011
|
(12)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 2, 2011
|
(13)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 9, 2011
|
(14)
|
Incorporated
by reference to the Form 10-K Annual Report filed with the Securities and Exchange Commission on April 6, 2011
|
(15)
|
Incorporated
by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on May 20, 2011
|
(16)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 29, 2011
|
(17)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 9, 2011
|
(18)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 12, 2011
|
(19)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 16, 2011
|
(20)
|
Incorporated
by referenced to the Form 10-K Annual Report filed with the Securities and Exchange Commission on April 13, 2012
|
(21)
|
Incorporated
by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on May 14, 2012
|
(22)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 27, 2012.
|
(23)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 9, 2013.
|
(24)
|
Incorporated
by reference to the Form 10-K Annual Report filed with the Securities and Exchange Commission on April 15, 2013.
|
(25)
|
Incorporated
by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on November 20, 2012.
|
(26)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 1, 2013.
|
(27)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 4, 2013.
|
(28)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 3, 2014.
|
(29)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 20, 2014
|
(30)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 27, 2015
|
(31)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 18, 2015
|
(32)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 12, 2015
|
(33)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 24, 2015
|
(34)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 1, 2015
|
(35)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 16, 2015
|
(36)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 21, 2015
|
(37)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 28, 2015
|
(38)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 20, 2016
|
(39)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 20, 2016
|
(40)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 13, 2016
|
(41)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 26, 2017
|
(42)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 13, 2017
|
(43)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 30, 2017
|
(44)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 7, 2017
|
(45)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 7, 2017
|
(46)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 22, 2017
|
(47)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 10, 2017
|
(48)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 27, 2017
|
(49)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 30, 2017
|
(50)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 2, 2018
|
(51)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 3, 2018
|
(52)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 6, 2018
|
(53)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 21, 2018
|
(54)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 13, 2018
|
(55)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 18, 2018
|
(56)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 26, 2018.
|
(57)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 8, 2018.
|
(58)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 22, 2018.
|
(59)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 22, 2018.
|
(60)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 24, 2018.
|
(61)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 31, 2018.
|
(62)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 9, 2018.
|
(63)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 18, 2018.
|
(64)
|
Incorporated
by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on November 13, 2018.
|
(65)
|
Incorporated
by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on June 19, 2019.
|
(66)
|
Incorporated
by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on July 12, 2019.
|
(67)
|
Incorporated
by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on July 15, 2019.
|
(68)
|
Incorporated
by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on August 5, 2019.
|
(69)
|
Incorporated
by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on August 7, 2019.
|
(70)
|
Incorporated
by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on May 15, 2019.
|
(71)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 16, 2019.
|
(72)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 25, 2019.
|
(73)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 16, 2019.
|
(74)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 2, 2020.
|
(75)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 11, 2020.
|
(76)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 24, 2020.
|
(77)
|
Incorporated
by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 10, 2020.
|
* Filed herewith.
** To be filed
by amendment.
+ Indicates a management
contract or any compensatory plan, contract or arrangement.
Financial Statement Schedules
Schedules have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.
[ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent
change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration
statement.
(iii) To include any material information with respect
to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration
statement;
Provided, however, that:
Paragraphs (1)(i), (1)(ii) and (1)(iii) of this section
do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed
with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that
are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under
the Securities Act of 1933 to any purchaser:
(i) Each prospectus filed by the registrant pursuant
to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and
included in the registration statement; and
(ii) Each prospectus required to be filed pursuant
to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant
to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act
of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus
is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus.
As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be
deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that
prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Provided,
however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a
document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration
statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that
was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately
prior to such effective date.
(5) If the registrant is subject to Rule 430C, each
prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements
relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or
prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale
prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of
the registration statement or made in any such document immediately prior to such date of first use.
(6) That, for purposes of determining any liability
under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of
the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(7) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.