NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020
(Unaudited)
1.
ORGANIZATION AND BASIS OF PRESENTATION
During
the periods covered by these financial statements, GTX Corp and its subsidiaries (the “Company”, “GTX”,
“we”, “us”, and “our”) were engaged in business operations that design, manufacture and sell
various interrelated and complementary products and services in the wearable technology and Personal Location Services marketplace.
GTX owns 100% of the issued and outstanding capital stock of its two subsidiaries - Global Trek Xploration, Inc. and LOCiMOBILE,
Inc.
Global
Trek Xploration, Inc. focuses on the design, manufacturing and sales distribution of its hardware, software, and connectivity,
Global Positioning System (“GPS”) and Bluetooth Low Energy (“BLE”) monitoring and tracking platform, which
provides real-time tracking and monitoring of people and high valued assets. Utilizing a miniature quad-band GPRS transceiver,
antenna, circuitry, battery and inductive charging pad our solutions can be customized and integrated into numerous products whose
location and movement can be monitored in real time over the Internet through our 24x7 tracking portal or on a web enabled cellular
telephone. Our core products and services are supported by an intellectual property (“IP”) portfolio of patents, patents
pending, registered trademarks, copyrights, URLs and a library of software source code, all of which is also managed by Global
Trek.
LOCiMOBILE,
Inc., is the Companies digital platform which has been at the forefront of Smartphone application (“App”) development
since 2008. With a suite of mobile applications that turn the iPhone, iPad, Android and other GPS enabled handsets into a tracking
device which can be tracked from handset to handset or through our tracking portal or on any connected device with internet access.
LOCiMOBILE has launched over 20 Apps across multi mobile device operating systems and continues to launch consumer and enterprise
apps.
Basis
of Presentation
The
accompanying unaudited consolidated financial statements of GTX have been prepared in accordance with accounting principles generally
accepted in the United States for interim financial information and applicable regulations of the U.S. Securities and Exchange
Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States have been omitted pursuant to such rules and regulations. In the
opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement
of financial position and results of operations have been included. Our operating results for the three months ended March 31,
2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The accompanying
unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements for
the year ended December 31, 2020, which are included in our Annual Report on Form 10-K.
The
accompanying consolidated financial statements reflect the accounts of GTX Corp and its wholly-owned subsidiaries. All significant
inter-company balances and transactions have been eliminated.
Going
Concern
The
consolidated financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets
and discharge its liabilities in the normal course of business for the foreseeable future. The Company has a stockholders’ deficit
of $2,598,550 and negative working capital of $2,393,850 as of March 31, 2021 and used cash in operations during the period
then ended. The Company anticipates further losses in the development of its business. These factors raise substantial doubt about the
Company’s ability to continue as a going concern within one year after the date the financial statements are issued. The ability
of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its
business plan until such time as revenues and related cash flows are sufficient to fund our operations.
The
Company’s independent registered public accounting firm has also included explanatory language in their opinion accompanying
the Company’s audited financial statements for the year ended December 31, 2020. The Company’s financial statements
do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the
amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
The
ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining
the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come
due. The Company’s ability to raise additional capital through the future issuances of debt or equity is unknown. The ability
to obtain additional financing, the successful development of the Company’s contemplated plan of operations, or its ability
to achieve profitable operations are necessary for the Company to continue operations, and there is no assurance that these can
be achieved. The ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue
as a going concern. The consolidated financial statements of the Company do not include any adjustments that may result from the
outcome of these aforementioned uncertainties.
2.
SIGNIFICANT ACCOUNTING POLICIES
Revenue
Recognition
The
Company recognizes revenue in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASC 606”).
The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount
expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms
of contract(s), which include (1) identifying the contract or agreement with a customer, (2) identifying our performance obligations
in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance
obligations, and (5) recognizing revenue as each performance obligation is satisfied.
The
Company does not have any significant contracts with customers requiring performance beyond delivery, and contracts with customers
contain no incentives or discounts that could cause revenue to be allocated or adjusted over time. Shipping and handling activities
are performed before the customer obtains control of the goods and therefore represent a fulfillment activity rather than a promised
service to the customer. Revenue and costs of sales are recognized when control of the products transfers to our customer, which
generally occurs upon shipment from our facilities. The Company’s performance obligations are satisfied at that time.
All
of the Company’s products are offered for sale as finished goods only, and there are no performance obligations required
post-shipment for customers to derive the expected value from them.
The
Company does not allow for returns, except for damaged products when the damage occurred pre-fulfillment. Damaged product returns
have historically been insignificant. Because of this, the stand-alone nature of our products, and our assessment of performance
obligations and transaction pricing for our sales contracts, we do not currently maintain a contract asset or liability balance
for obligations. We assess our contracts and the reasonableness of our conclusions on a quarterly basis.
We
derive our revenues primarily from hardware sales, subscription services fees, IP licensing and professional services fees. Hardware
includes our SmartSole, Military and other Stand-Alone Devices. Subscription services revenues consist of fees from customers
accessing our cloud-based software solutions and subscription or license fees for our platform. Professional services and other
revenues consist primarily of fees from implementation services, configuration, data services, training and managed services related
to our solutions. IP licensing is related to our agreement with Inventergy whereby we have partnered in order to monetize our
IP portfolio.
Product
sales
At
the inception of each contract, we assess the goods and services promised in our contracts and identify each distinct performance
obligation. The Company recognizes revenue upon the transfer of control of promised products or services to the customer in an
amount that depicts the consideration the Company expects to be entitled to for the related products or services. For the large
majority of the Company’s sales, transfer of control occurs once product has shipped and title and risk of loss have transferred
to the customer.
Services
Income
The
Company’s software solutions are available for use as hosted application arrangements under subscription fee agreements
without licensing perpetual rights to the software. Subscription fees from these applications are recognized over time on a ratable
basis over the customer agreement term beginning on the date the Company’s solution is made available to the customer. Our
subscription contracts are generally one to three months in length. Amounts that have been invoiced are recorded in accounts receivable
and deferred revenues or revenues, depending on whether the revenue recognition criteria have been met.
The
majority of our professional services arrangements are recognized on a time and materials basis. Professional services revenues
recognized on a time and materials basis are measured monthly based on time incurred and contractually agreed upon rates. Certain
professional services revenues are based on fixed fee arrangements and revenues are recognized based on the proportional performance
method. In some cases, the terms of our time and materials and fixed fee arrangements may require that we defer the recognition
of revenue until contractual conditions are met. Data services and training revenues are generally recognized as the services
are performed.
IP
Licensing Revenue
Licensing
revenue recorded by the Company relates exclusively to the Company’s License and Partnership agreement with Inventergy which
provides for ongoing royalties based on monetization of IP licenses. The Company recognizes revenue for royalties under ASC 606,
which provides revenue recognition constraints by requiring the recognition of revenue at the later of the following: 1) sale
or usage of the products or 2) satisfaction of the performance obligations. The Company has satisfied its performance obligations
and therefore recognizes licensing revenue when the sales to which the license(s) relate are completed. During the periods ended
March 31, 2021 and March 31, 2020, the Company did not recognize any licensing revenue.
Disaggregation
of Net Sales
The
following table shows the Company’s disaggregated net sales by product type:
|
|
March 31, 2021
|
|
|
March 31, 2020
|
|
Product sales
|
|
$
|
172,333
|
|
|
$
|
31,607
|
|
Service income
|
|
|
58,188
|
|
|
|
65,109
|
|
IP and consulting income
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
230,521
|
|
|
$
|
96,716
|
|
The
following table shows the Company’s disaggregated net sales by customer type:
|
|
March 31, 2021
|
|
|
March 31, 2020
|
|
B2B
|
|
$
|
52,009
|
|
|
$
|
52,735
|
|
B2C
|
|
|
177,395
|
|
|
|
43,981
|
|
Military
|
|
|
1,117
|
|
|
|
-
|
|
IP
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
230,521
|
|
|
$
|
96,716
|
|
Use
of Estimates
The
preparation of the accompanying unaudited financial statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. These estimates include, but are not limited to, estimates related to revenue recognition, allowance for doubtful accounts,
inventory valuation, tangible and intangible long-term asset valuation, warranty and other obligations and commitments. Estimates
are updated on an ongoing basis and are evaluated based on historical experience and current circumstances. Changes in facts and
circumstances in the future may give rise to changes in these estimates which may cause actual results to differ from current
estimates.
Fair
Value Estimates
Pursuant
to the Accounting Standards Codification (“ASC”) No. 820, “Disclosures About Fair Value of Financial Instruments”,
the Company records its financial assets and liabilities at fair value. ASC No. 820 provides a framework for measuring fair value,
clarifies the definition of fair value and expands disclosures regarding fair value measurements. Fair value is defined as the
price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between
market participants at the reporting date. ASC No. 820 establishes a three-tier hierarchy, which prioritizes the inputs used in
the valuation methodologies in measuring fair value:
|
Level
1 -
|
Inputs
are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
|
|
|
|
|
Level
2 -
|
Inputs
(other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through
correlation with market data at the measurement date and for the duration of the asset/liability’s anticipated life.
|
|
|
|
|
Level
3 -
|
Inputs
reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement
date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
|
The
carrying values for cash and cash equivalents, accounts receivable, investment in marketable securities, other current assets,
accounts payable and accrued liabilities approximate their fair value due to their short maturities. The carrying values of notes
payable and other financing obligations approximate their fair values because interest rates on these obligations are based on
prevailing market interest rates.
The
Company uses Level 2 inputs for its valuation methodology for the derivative liabilities.
Concentrations
We
currently rely on one manufacturer to supply us with our GPS SmartSole and one manufacturer to supply us with the GPS device included
in the GPS SmartSole. The loss of either of these manufacturers could severely impede our ability to manufacture the GPS SmartSole.
As
of March 31, 2021, the Company had three customers representing approximately 22%, 13% and 12% of sales, respectively, and two
customers representing approximately 75% and 8% of total accounts receivable, respectively (of the 75% this represents all sales
made through our online store and consists of approximately 2,000 different customers). The Company had four customers representing
approximately 45%, 14%, 10% and 9% of sales, respectively, and three customers representing approximately 36%, 13%, and 11% of
total accounts receivable, respectively, for the three months ended March 31, 2020.
Stock-based
Compensation
The
Company accounts for share-based awards to employees and nonemployees directors and consultants in accordance with the provisions
of ASC 718, Compensation—Stock Compensation., and under the recently issued guidance following FASB’s pronouncement,
ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.
Under ASC 718, and applicable updates adopted, share-based awards are valued at fair value on the date of grant and that fair
value is recognized over the requisite service, or vesting, period. The Company values its equity awards using the Black-Scholes
option pricing model, and accounts for forfeitures when they occur.
Marketable
Securities
The
Company’s securities investments that are acquired and held principally for the purpose of selling them in the near term
are classified as trading securities. Trading securities are recorded at fair value based on quoted market price (level 1) on
the balance sheet in current assets, with the change in fair value during the period included in earnings. As of March 31, 2021
and December 31, 2020 the fair value of our investment in marketable securities was $4,676 and $4,166.
Derivative
Liabilities
Our
derivative instrument liabilities are re-valued at the end of each reporting period, with changes in the fair value of the derivative
liability recorded as charges or credits to income, in the period in which the changes occur. For bifurcated conversion options that
are accounted for as derivative instrument liabilities, we determine the fair value of these instruments using the Black-Scholes option
pricing model. This model requires assumptions related to the remaining term of the instrument and risk-free rates of return, our current
Common Stock price and expected dividend yield, and the expected volatility of our Common Stock price over the life of the option.
At March 31, 2021 and December 31, 2020, the balance
of the derivative liabilities was $0. It was determined at December 31, 2020 that the Preferred A shareholders having the majority vote,
can agree to increase the number of authorized shares, if needed, to settle any convertible debt, and thus the liability is $0.
Net
Loss Per Common Share
Basic
loss per share is computed by dividing the net loss applicable to common stockholders by the weighted average number of outstanding
common shares during the period. Shares of restricted stock are included in the basic weighted average number of common shares
outstanding from the time they vest. Diluted loss per share is computed by dividing net loss applicable to common stockholders
by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding
if all dilutive potential common shares had been issued. Shares of restricted stock are included in the diluted weighted average
number of common shares outstanding from the date they are granted unless they are antidilutive. Diluted loss per share excludes
all potential common shares if their effect is anti-dilutive. The following potentially dilutive shares were excluded from the
shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive:
|
|
March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Warrants
|
|
|
40,916,667
|
|
|
|
40,500,000
|
|
Preferred B shares
|
|
|
100,000,000
|
|
|
|
80,000,000
|
|
Preferred C shares
|
|
|
13,333,333
|
|
|
|
-
|
|
Conversion shares upon conversion of notes
|
|
|
32,909,131
|
|
|
|
66,909,812
|
|
Total
|
|
|
187,159,131
|
|
|
|
187,409,812
|
|
Segments
The
Company operates in one segment for the manufacture and distribution of its products. In accordance with the “Segment Reporting”
Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President,
who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing
guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information
quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which
the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment
Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services;
and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information
required by “Segment Reporting” can be found in the accompanying financial statements.
Recently
Issued Accounting Pronouncements
In
June 2016, the FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASC
326”). The standard significantly changes how entities will measure credit losses for most financial assets, including accounts
and notes receivables. The standard will replace today’s “incurred loss” approach with an “expected loss”
model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the
standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting
period in which the guidance is effective. As small business filer, the standard will be effective for us for interim and annual
reporting periods beginning after December 15, 2022. The Company is currently assessing the impact of adopting this standard on
the Company’s financial statements and related disclosures.
Other
recent accounting pronouncements issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public
Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on
the Company’s present or future consolidated financial statements.
3.
INVESTMENT IN MARKETABLE SECURITIES
The Company’s investments in marketable
securities is comprised of shares of stock of two (2) entities with ownership percentages of less than 5%. The Company accounted for
these investments pursuant to ASU 320, Investments – Debt and Equity Securities. As such, these investments were recorded at their
market value as of December 31, 2019, with the change in fair value being reflected in the statement of operations. These investments
consisted of the following:
As of December 31, 2020, the Company owned 42,500
shares of Inventergy Global, Inc. common stock with a fair value of $1,275. The Company was able to obtain observable evidence that the
investment had a market value of $0.03 per share, or an aggregate value of $1,275 as of the period ended March 31, 2021. As such, the
Company recorded no change in market value during the three months ended March 31, 2021, in its statement of operations.
In
June 2019, the Company acquired 22,222 shares of Inpixon’s restricted common stock (after giving effect to a 1:45 stock
split) valued at $634,000. As of December 31, 2019, after the sale of 10,889 Inpixon shares, the Company owned 11,333 Inpixon
shares with a fair value of $58,374. During the period ended March 31, 2020, the Company sold 8,500 of its Inpixon shares for
total proceeds of $146,201 and recognized a gain from the sale of these shares of $102,420.
During
the three months ended March 31, 2021, the Company sold 834 shares of its Inpixon shares for total proceeds of $1,334 and recognized
a gain from the sale of these shares of $1,258.
The
Company was able to obtain observable evidence that the remaining 2,000 shares had a market value of $2,400 as of March 31, 2021,
as such, the Company recorded a gain from the increase in the fair value of the shares of $510, resulting in a net gain from the
investment in Inpixon shares of $510 during the current period ended March 31, 2021.
4.
INVENTORY
Inventories
consist of the following:
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
Raw materials
|
|
$
|
537
|
|
|
$
|
9
|
|
Finished goods
|
|
|
53,182
|
|
|
|
114,128
|
|
Total Inventories
|
|
$
|
53,719
|
|
|
$
|
114,137
|
|
5.
PROPERTY AND EQUIPMENT
Property
and equipment, net, consists of the following:
|
|
March
31, 2021
|
|
|
December
31, 2020
|
|
Software
|
|
$
|
25,890
|
|
|
$
|
25,890
|
|
Website
development
|
|
|
91,622
|
|
|
|
91,622
|
|
Software
development
|
|
|
301,231
|
|
|
|
294,751
|
|
Equipment
|
|
|
1,750
|
|
|
|
1,750
|
|
Less:
accumulated depreciation
|
|
|
(407,323
|
)
|
|
|
(406,135
|
)
|
Total
property and equipment, net
|
|
$
|
13,170
|
|
|
$
|
7,878
|
|
Depreciation
expense for the period ended March 31, 2021 and 2020 was $1,188 and $4,076, respectively, and is included in general and administrative
expenses.
6.
NOTES PAYABLE
The
following table summarizes the components of our short-term borrowings:
|
|
March
31, 2021
|
|
|
December
31, 2020
|
|
(a)
Term loan
|
|
$
|
-
|
|
|
$
|
400
|
|
(b)
Term loan
|
|
|
45,905
|
|
|
|
50,000
|
|
(c)
Revolving line of credit
|
|
|
12,000
|
|
|
|
22,000
|
|
(d)
Revolving line of credit
|
|
|
(285
|
)
|
|
|
(285
|
|
Total
|
|
$
|
57,620
|
|
|
$
|
72,115
|
|
(a)
Term loan
In
2015, the Company entered into an unsecured term loan agreement with a third party for an aggregate principal balance of $200,000 at
an interest rate of 14% per annum, with the interest adjusted as of December 2019 to 8.5%. The term loan became due on April 14, 2017
and as such, currently past due. At December 31, 2020, balance of the term loan was $400. During the three months ended March 31, 2021,
we settled the balance on the term loan for 6,000,000 shares of common stock to settle the balance. This was broken into two parts,
3,000,000 due immediately and the other 3,000,000 due 45 days thereafter. We issued the first 3,000,000 shares of common stock to
convert $22,500 of interest on the term loan, resulting in a gain on the forgiveness of accrued interest of $65,700 and a
loss on the conversion of $131,375. The Company also paid down in cash the principal balance by $400, which brought the principal
balance outstanding on the term loan as of March 31, 2021 to be $0. The remaining $22,500 in accrued interest will be converted with
the issuance of the second 3,000,000 common shares. As of March 31, 2021, there is $22,500 in accrued interest on this term loan.
(b)
Term loan
In
September of 2019, the Company entered into an unsecured term loan agreement with a third party for an aggregate principal balance of
$50,000 at an interest rate of 5% per annum in relation to an Asset Purchase Agreement. The term loan becomes due on December
31, 2021.
The
Company reached an agreement with the lender to apply sublet space the lender uses in the Company office and apply those payments against
the term loan balance. The monthly credit of $585 has been applied to seven (7) months or a total of $4,095 of the loan through the three
months ended March 31, 2021, and thus the principal balance outstanding on the note as of March 31, 2021 and December 31, 2020 was $45,905
and $50,000, respectively, and accrued interest of $3,165 as of March 31, 2021.
(c)
Lines of Credit
The
Company obtained a revolving line of credit agreement with an accredited investor of $500,000 during 2018. There were three borrowings
against the line as of December 31, 2018 for aggregate borrowings of $65,000 and two borrowing in 2019 for $65,000 for a total of $130,000.
During the period ended December 31, 2020, the Company repaid $76,000 in principal and all of its accrued interest of $4,204, resulting
in a balance due of $22,000 as of December 31, 2020. During the period ended March 31, 2021, the Company repaid $10,000 in principal
and all of its interest of $560, as incurred, resulting in a balance due of $12,000 as of March 31, 2021.
The
line bears interest of 8.5%. The line is based upon GTX providing the investor with purchase orders and use of proceeds, including
production of goods schedules and loan repayment timelines. These loans/drawdowns are specifically for product, inventory and/or
purchase order financing. Upon completion of the terms of the Line of Credit, GTX Corp. will issue to the investor 7,500,000 shares
of GTX common stock or $75,000 of GTX common stock, whichever is greater.
(d)
Line of Credit
The
Company also has an unsecured line of credit, guaranteed by its CEO, with its business bank, Union Bank, whereby funds can be
borrowed at a revolving adjustable rate of 2 points over prime, currently 3.25%, with a max borrowing amount of $100,000. The
balance at December 31, 2020 was $(285) while during the period ended March 31, 2021 the Company was advanced a total of $0 of
the balance. As such the balance outstanding as of March 31, 2021 is $(285).
7.
CONVERTIBLE PROMISSORY NOTES – PAST DUE
As
of March 31, 2021 and December 31, 2020, the Company had a total of $689,780 and $840,673, respectively, of outstanding convertible
notes payable, which consisted of the following:
|
|
March
31, 2021
|
|
|
December
31, 2020
|
|
a)
Convertible Notes – with fixed conversion terms
|
|
$
|
688,000
|
|
|
$
|
713,750
|
|
b)
Convertible Notes – with variable conversion
|
|
|
1,780
|
|
|
|
126,923
|
|
Total
convertible notes, net of debt discount
|
|
$
|
689,780
|
|
|
$
|
840,673
|
|
|
a)
|
Included
in Convertible Notes - with fixed conversion terms, are loans provided to the Company from various investors These notes carry
simple interest rates ranging from 0% to 14% per annum and with terms ranging from 1 to 2 years. In lieu of the repayment
of the principal and accrued interest, the outstanding amounts are convertible, at the option of the note holder, generally
at any time on or prior to maturity and automatically under certain conditions, into the Company’s common shares at
$0.015 to $0.30 per share. These notes became due in 2017 and prior, and are currently past due.
|
|
|
|
|
|
At
December 31, 2020, balance of the convertible notes was $713,750. During the three months ended March 31, 2021, we issued 1,616,667
shares of common stock to convert $24,250 and issued an additional 250,000 shares of common stock as bonus shares due on of these
outstanding convertible notes for a value of $3,750. Additionally, we paid down $1,500 of the debt with cash. As of March 31,
2021, the balance of the outstanding convertible notes was $688,000. These notes are currently past due.
|
|
b)
|
Convertible
notes payable with principal balance of $1,780 as of March 31, 2021 consist of loans provided to the Company from various investors.
These notes are non-interest bearing and with terms ranging from 1 to 2 years. In lieu of the repayment of the principal and accrued
interest, the outstanding amounts are convertible, at the option of the note holder, generally at any time on or prior to maturity
and automatically under certain conditions, into the Company’s common shares at 60% of the lowest trading price in the prior
30 days. The Company determined that since the conversion floor of these notes had no limit to the conversion price, the Company
could no longer determine if it had enough authorized shares to fulfil its conversion obligation. As such, pursuant to current
accounting guidelines, the Company determined that the conversion feature of these notes created a derivative at the date of
issuance which was recorded as a valuation discount that was fully amortized as of December 31, 2020. At December 31, 2020, the
balance of the loans was $126,923. These notes became due in 2019 and prior, and are currently past due. As explained in Note 11,
there is no derivative liability needed for the balance remaining on these variable notes, as the common stock shares will be
increased as needed.
|
8.
CARE Loans
|
|
March 31, 2021
|
|
|
December
31, 2020
|
|
a) PPP loan
|
|
$
|
67,870
|
|
|
$
|
67,870
|
|
b) EIDL loan
|
|
|
150,000
|
|
|
|
150,000
|
|
Total CARE loans
|
|
$
|
217,870
|
|
|
$
|
217,870
|
|
Paycheck
Protection Program Loan
On
April 30, 2020, the Company executed a note (the “PPP Note”) for the benefit of MUFG Union Bank, NA (the “Lender”)
in the aggregate amount of $67,870 under the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief, and Economic
Security Act (“CARES Act”). The PPP is administered by the U.S. Small Business Administration (the “SBA”). The
interest rate of the loan is 1.00% per annum and accrues on the unpaid principal balance computed on the basis of the actual number of
days elapsed in a year of 360 days. Commencing seven months after the effective date of the PPP Note, GTX is required to pay the Lender
equal monthly payments of principal and interest as required to fully amortize any unforgiven principal balance of the loan by the two-year
anniversary of the effective date of the PPP Note (the “Maturity Date”). The Maturity Date can be extended to five years
if mutually agreed upon by both the Lender and GTX. The PPP Note contains customary events of default relating to, among other things,
payment defaults, making materially false or misleading representations to the SBA or the Lender, or breaching the terms of the PPP Note.
The occurrence of an event of default may result in the repayment of all amounts outstanding under the PPP Note, collection of all amounts
owing from GTX, or filing suit and obtaining judgment against GTX. Under the terms of the CARES Act, PPP loan recipients can apply for
and be granted forgiveness for all or a portion of the loan granted under the PPP. Such forgiveness will be determined, subject to limitations,
based on the use of loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities. Recent modifications
to the PPP by the U.S. Treasury and Congress have extended the time period for loan forgiveness beyond the original eight-week period,
making it possible for GTX to apply for forgiveness of its PPP loan. No assurance can be given that GTX will be successful in obtaining
forgiveness of the loan in whole or in part. As of March 31, 2021 the Company has not made any payments on the loan due to the fact
that GTX has applied for the $45,000 loan forgiveness program adjustment, for which the Company has not received a new balance payment
schedule.
Economic
Injury Disaster Loan
On
June 10, 2020, the Company executed a secured loan with the U.S. Small Business Administration (SBA) under the Economic Injury
Disaster Loan program in the amount of $150,000. The loan is secured by all tangible and intangible assets of the Company and
payable over 30 years at an interest rate of 3.75% per annum. Installment payments, including principal and interest, will begin
June 10, 2021. As part of the loan, the Company also received an advance of $10,000 from the SBA. While the SBA refers to this
program as an advance, it was written into law as a grant. This means that the amount given through this program does not need
to be repaid and has been recognized as Other Income.
9.
RELATED PARTY TRANSACTIONS
Convertible
Notes Due to Related Parties
Convertible
Notes to Related Parties represent amounts due to members of Management for past services that were converted to notes payable
in prior years. Under the note agreement, the holder shall have the right, but not the obligation, to convert up to 50% of the
amount advanced and accrued interest into shares, warrants or options of common or preferred stock of the Company at $0.01 per
security.
As
of March 31, 2021 and December 31, 2020, the outstanding balance on the convertible promissory notes was $884,546. As of March
31, 2021 and December 31, 2020, interest of $255,646 and $249,102 respectively, is deferred on the above notes and included in
accrued expenses to related parties.
Accrued
wages and costs - In order to preserve cash for other working capital needs, various officers, members of management, employees
and directors agreed to defer portions of their wages and sometimes various out-of-pocket expenses since 2011. As of March 31,
2021, and December 31, 2020, the Company owed $526,458 and $503,007, respectively, for such deferred wages and other expenses
owed for other services which are included in the accrued expenses – related parties on the accompanying balance sheet.
10.
DERIVATIVE LIABILITIES
Under
authoritative guidance used by the FASB on determining whether an instrument (or embedded feature) is indexed to an entity’s
own stock, instruments which do not have fixed settlement provisions are deemed to be derivative instruments. The Company has
issued certain convertible notes which conversion prices are based on a future market price. However, since the number of shares
to be issued is not explicitly limited, the Company is unable to conclude that enough authorized and unissued shares are available
to share settle the conversion option. As a result, the conversion option is classified as a liability and bifurcated from the
debt host and accounted for as a derivative liability in accordance with ASC 815 and will be re-measured at the end of every reporting
period with the change in value reported in the statement of operations.
At
March 31, 2021 and December 31, 2020, the balance of the derivative liabilities was $0. It was determined at December 31, 2020
that the Preferred A shareholders having the majority vote, can agree to increase the number of authorized shares, if needed,
to settle any convertible debt, and thus the liability is $0.
11.
EQUITY
The
Company has 10,000,000 shares of preferred stock authorized. From this pool the following preferred shares have been classified
as:
Preferred
Stock – Series A
During
the year ended December 31, 2018, the Company authorized 1,000,000 of Series A preferred shares, which shares have voting rights equal
to two-thirds of all the issued and outstanding shares of common stock, shall be entitled to vote on all matters of the corporation,
and shall have the majority vote of the board of directors. The subject preferred stock lacks any dividend rights, does not have liquidation
preference, and is not convertible into common stock. During the year ended December 31, 2018, the Company issued one million Series
A preferred shares to certain officers and board members. The shares remain outstanding as of March 31, 2021.
At December 31, 2020 is was determined that the
Preferred A shareholders having the majority vote, can agree to increase the number of authorized shares, if needed, to settle any convertible
debt, and thus any derivative liabilities are not necessary to reserve for this.
Preferred
Stock – Series B
During
the year ended December 31, 2019, the Company authorized 10,000 shares of preferred stock to be designated available for Series
B preferred shares that have a value of $1,000 each and are convertible into common shares at fixed price of $0.0025. Holders
shall be entitled to receive, and the Company shall pay, dividends on shares of Series B Preferred Stock equal (on an as-if-converted-to-Common-Stock
basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid
on shares of the Company’s Common Stock. No other dividends shall be paid on shares of Series B Preferred Stock, and they
shall have no voting rights and have liquidation preference. During the year ended December 31, 2019, the Company issued 150 Series
Preferred B shares and 30,000,000 warrants to an accredited investor for their financings for an aggregate value of $150,000.
During
the period ended December 31, 2020, the Company issued 100 Series B preferred shares and 20,000,000 warrants to an accredited
investor for their financings for an aggregate value of $50,000. The Series B preferred shares and warrants shall have a fixed
conversion price equal to $0.0025 of common stock, subject to adjustment for reverse and forward stock splits, stock dividends,
stock combinations and other similar transactions of the Common Stock. The warrants are exercisable at a price of $0.0025 per
share through March 2025. The Company considered the accounting effects of the existence of the conversion feature of the Series
B Preferred Stock, and the issuance of warrants at the date of issuance. In accordance with the current accounting standards,
the Company determined that it should account for the fair value of the conversion feature and relative fair value of the issued
warrants (up to the face amount of the Series B Preferred Stock) as a deemed dividend of $50,000 and a charge to paid in capital.
Preferred
Stock – Series C
During
the period ended December 31, 2020, the Company authorized 1,000 shares of preferred stock to be designated available for Series
C preferred shares that have a stated value of $1,000 each and are convertible into common shares at fixed price of $0.015. Holders
shall be entitled to receive, and the Company shall pay, dividends on shares of Series C Preferred Stock equal (on an as-if-converted-to-Common-Stock
basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid
on shares of the Company’s Common Stock. No other dividends shall be paid on shares of Series C Preferred Stock, and they
shall have no voting rights and have liquidation preference. During the year ended December 31, 2019, the Company had no Preferred
C shares.
During
the period ended December 31, 2020, the Company issued 150 Series C preferred shares and 10,000,000 warrants to two accredited
investors for their financings for an aggregate value of $150,000.
During
the period ended March 31, 2021, the Company issued 425 Series C preferred shares and 14,166,667 warrants to four accredited investors
for their financings for an aggregate value of $425,000. The Series C preferred shares and warrants shall have a fixed conversion price
equal to $0.015 per share of common stock, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations
and other similar transactions of the Common Stock. The warrants are exercisable through April 2023. The Company considered the accounting
effects of the existence of the conversion feature of the Series C Preferred Stock, and the issuance of warrants at the date of issuance.
In accordance with the current accounting standards, the Company determined that it should account for the fair value of the conversion
feature and relative fair value of the issued warrants (up to the face amount of the Series C Preferred Stock) as a deemed dividend of
$425,000 and a charge to paid in capital.
During the period ended March 31, 2021, 150 Series
C preferred shares were converted into 10,000,002 common shares, leaving the balance in the Series C preferred shares at 425.
Common
Stock
During the period ending March 31, 2021, we issued
13,661,664 of common shares for converting $171,873 of debt and accrued interest.
During the period ending March 31, 2021, the Company
issued 1,300,000 shares of its common stock to various consultants for services rendered, with a fair value of $61,750 based on the quoted
market price of the shares at time of issuance.
During the period ended March 31, 2021, the Company
issued 10,250,002 shares of common stock with a fair value of $153,275 at the date grant for financing costs.
During the period ended March 31, 2021, the Company
issued 22,708,333 shares of common stock with a fair value of $56,771 at the date grant for the cashless conversion of 23,500,000 warrants.
During the period ended March 31, 2020, the
Company issued 1,500,000 shares of common stock with a fair value of $23,600 at the date of grant for services.
Common
Stock Warrants
Since
inception, the Company has issued numerous warrants to purchase shares of the Company’s common stock to shareholders, consultants
and employees as compensation for services rendered.
A
summary of the Company’s warrant activity and related information is provided below (the exercise price and the number of
shares of common stock issuable upon the exercise of outstanding warrants have been adjusted to reflect a 1-for-75 reverse stock
split.):
|
|
Exercise Price
$
|
|
|
Number of Warrants
|
|
Outstanding and exercisable at December 31, 2020
|
|
|
0.0025 – 0.011
|
|
|
|
50,500,000
|
|
Warrants exercised
|
|
|
0.0025
|
|
|
|
(23,500,000
|
)
|
Warrants granted
|
|
|
0.015
|
|
|
|
14,166,667
|
|
Warrants expired
|
|
|
0.01
|
|
|
|
(250,000
|
)
|
Outstanding and exercisable at March 31, 2021
|
|
|
0.0025 - 0.015
|
|
|
|
40,916,667
|
|
Stock
Warrants as of March 31, 2021
|
|
Exercise
|
|
|
Warrants
|
|
|
Remaining
|
|
|
Warrants
|
|
Price
|
|
|
Outstanding
|
|
|
Life
(Years)
|
|
|
Exercisable
|
|
$
|
0.0025
|
|
|
|
16,500,000
|
|
|
|
3.89
|
|
|
|
16,500,000
|
|
$
|
0.015
|
|
|
|
24,416,667
|
|
|
|
2.78
|
|
|
|
24,416,667
|
|
During the period ended March 31, 2021, the Company
issued 22,708,333 shares of common stock with a fair value of $56,771 at the date grant for the cashless conversion of 23,500,000 warrants.
During
the period ended March 31, 2021, 14,166,667 of the warrants issued in connection with the issuance of our preferred stock. The
warrants have a 3-year term and have a strike price of $0.015.
The
outstanding and exercisable warrants at March 31, 2021 had an intrinsic value of approximately $1,571,200.
Common
Stock Options
Under
the Company’s 2008 Equity Compensation Plan (the “2008 Plan”), we are authorized to grant stock options intended
to qualify as Incentive Stock Options, “ISO”, under Section 422 of the Internal Revenue Code of 1986, as amended,
non-qualified options, restricted and unrestricted stock awards and stock appreciation rights to purchase up to 7,000,000 shares
of common stock to our employees, officers, directors and consultants, with the exception that ISOs may only be granted to employees
of the Company and its subsidiaries, as defined in the 2008 Plan.
The
2008 Plan provides for the issuance of a maximum of 7,000,000 shares, of which, after adjusting for estimated pre-vesting forfeitures
and expired options, approximately 2,235,000 were available for issuance as of March 31, 2021.
No
options were granted during the period ending March 31, 2021.
12.
COMMITMENTS & CONTINGENCIES
Contingencies
From
time to time, we may be involved in routine legal proceedings, as well as demands, claims and threatened litigation that arise in the
normal course of our business. The ultimate amount of liability, if any, for any claims of any type (either alone or in the aggregate)
may materially and adversely affect our financial condition, results of operations and liquidity. In addition, the ultimate outcome of
any litigation is uncertain. Any outcome, whether favorable or unfavorable, may materially and adversely affect us due to legal costs
and expenses, diversion of management attention and other factors. We expense legal costs in the period incurred. We cannot assure you
that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against us in the future,
and these matters could relate to prior, current or future transactions or events. As of March 31, 2021, there were no pending or
threatened litigation against the Company.
COVID-19
The
Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic
on the Company’s business is highly uncertain and difficult to predict, as the responses that the Company, other businesses
and governments are taking continue to evolve. Furthermore, capital markets and economies worldwide have also been negatively
impacted by the COVID-19 pandemic, and it is possible that it could cause a local and/or global economic recession. Policymakers
around the globe have responded with fiscal policy actions to support the healthcare industry and economy as a whole. The magnitude
and overall effectiveness of these actions remain uncertain.
To
date, we have not experienced any significant changes in our business that would have a significant negative impact on our consolidated
statements of operations or cash flows.
The
severity of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including,
but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company’s
customers, service providers and suppliers, all of which are uncertain and cannot be predicted. As of the date of issuance of
Company’s financial statements, the extent to which the COVID-19 pandemic may in the future materially impact the Company’s
financial condition, liquidity or results of operations is uncertain.
13.
SUBSEQUENT EVENTS
On
April 8, 2021, we issued 5,000,000 in warrants with a strike price of $0.015 and a 3-year term and 150 preferred Series C shares,
to two investors as part of their Securities Purchase Agreement, for $150,000 in
proceeds.
On April14, 2021, we issued 7,350,000 in restricted
common stock to various consultants and advisors as part of their agreements.
May
12, 2021, we issued the remaining 3,000,000 common shares for the retirement of $75,000 in accrued interest. The was issued
as equity in the form of common stock of 6,000,000 shares, 3,000,000 issued on March 4, 2021 and another 3,000,000 due after 45
days, which resulted in a total of $45,000 of accrued interest being settled and a gain on the settlement of debt of $65,700, and a loss on conversion of $131,736.