NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021 AND 2020
NOTE
1: ORGANIZATION AND DESCRIPTION OF BUSINESS
GZ6G
Technologies Corp. (formerly Green Zebra International Corp.) (the “Company” or “GZ6G”) is a complete enterprise
smart solutions provider for large venues and cities. Focused on acquiring smart city solutions, developing innovative products, and
overseeing smart cities and smart venues, GZ6G also assists in modernizing clients with innovative wireless IoT technology for the emerging
5G and Wi-Fi 6 marketplaces. Target markets include stadiums, airports, universities, and smart city projects. The Company is organized
under the laws of the State of Nevada and has offices in California and Nevada.
In
November 2018, the Company changed its name from NanoSensors, Inc. to Green Zebra International Corp. following a merger with Green Zebra
Media Corp., a Delaware corporation, under common control.
The
Board of Directors approved a name change and a reverse stock split of the Company’s issued and outstanding common shares at a
ratio of 200 to 1 on December 18, 2019. The accompanying financial statements, and all share and per share information contained herein
has been retroactively restated to reflect the reverse stock split. On December 20, 2019, the Company changed its name from Green Zebra
International Corp. to GZ6G Technologies Corp.
On
August 6, 2021 Mr. William Ray Procniak and Mr. Brian Scott Hale were appointed to the Company’s board of directors and concurrently
the Company formed an audit committee, which each of Mr. Hale and Mr. Procniak joined, serving as independent board members. Concurrently
the Company completed an application for an uplist to the OTCQB and submitted the required disclosure through OTCMarkets. The Company
was approved for trading on the OTCQB Venture Market on October 25, 2021.
Going
Concern
These
unaudited consolidated financial statements have been prepared on a going concern basis, which implies that the Company will
continue to realize its assets and discharge its liabilities in the normal course of business. As of September 30, 2021, the Company
had a working capital deficit of $6,989,723
with approximately $118,000 of cash on hand
and an accumulated deficit of $11,235,555.
In December 2020, the Company signed a convertible promissory note with a third party to provide an aggregate amount of $450,000
in $25,000
increments weekly, which was sufficient to meet operational needs and has been funded in full. During the nine months ended
September 30, 2021, this note was amended to include an additional $1,000,000
in funding, payable over 90 business days commencing April 16, 2021, of which an amount of $600,000
has been received against the $1,000,000 funding as of November 15, 2021. The Company anticipates a need for a further $5,000,000
in fiscal 2021 to meet its upgraded infrastructure requirements and has filed a registration statement on Form S-1 to facilitate
this requirement, which was deemed effective on September 24, 2021. The continuation of the Company as a going concern is dependent
upon the ability to raise additional equity and/or debt financing and the attainment of profitable operations from the
Company’s future business. If the Company is unable to obtain adequate capital as needed, the Company may be required to
reduce the scope, delay, or eliminate some or all of its planned operations. These factors, among others, raise substantial doubt
about the Company’s ability to continue as a going concern.
The
financial statements reflect all adjustments consisting of normal recurring adjustments, which, in the opinion of management, are necessary
for a fair presentation of the results for the periods shown. The financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in
the event the Company cannot continue in existence.
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021 AND 2020
NOTE
1: ORGANIZATION AND DESCRIPTION OF BUSINESS
Covid-19
Pandemic (continued)
Covid-19
Pandemic: The recent COVID-19 pandemic could have a continuing adverse impact on our existing sponsorship and revenue agreements.
To date, the implementation of services under certain of these agreements have experienced delays as a result of the pandemic. COVID-19
has caused significant disruptions to the global financial markets, which may also impact our ability to raise additional capital. During
March 2020, we gave notice of furlough to our administrative support employees in an effort to conserve resources as we evaluated our
business development efforts during that period. In April 2020, the Company received a grant of $6,000 and in May 2020 we received
a PPP loan and an SBA loan in the approximate cumulative amount of $90,000 for operations. With the recently negotiated financing the
Company is currently reopening offices and has commenced the hiring of additional staff as well as the upgrading of infrastructure requirements
to meet anticipated customer needs. While recent progress in the battle against COVID leads us to believe that the worst
of the effects of the pandemic are past, we cannot say with certainty that the situation will not change. The full impact of the
COVID-19 outbreak continues to evolve as of the date of this report, is highly uncertain and still subject to change. While significant
uncertainty remains, despite the fact that the Company has been able to source financing, it remains that the COVID-19 outbreak
may have a negative impact on continuing funding and its ability to work through its collaborative development efforts with industry
partners, and in acquiring venues due to the continuing impact of COVID 19.To mitigate impact the Company is currently focusing its efforts
on contracts in the wireless and cellular telecommunications segment, as well as the infrastructure components of its existing contracts
to allow for continuity and forward momentum.
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with accounting
principles generally accepted in the United States (“GAAP”), and pursuant to the rules and regulations of the Securities
and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in financial
statements prepared in accordance with GAAP have been condensed or omitted from the statements pursuant to such rules and
regulations and accordingly, they do not include all the information and notes necessary for comprehensive financial statements and
should be read in conjunction with our audited financial statements.
Consolidation
These
condensed consolidated financial statements include the accounts of GZ6G Technology Corp. and its 60% controlled
subsidiary, Green Zebra Media Corp. (“GZMC’) as of September 30, 2021. All significant intercompany accounting
transactions have been eliminated as a result of consolidation.
Use
of Estimates
The
preparation of these consolidated financial statements in conformity with United States 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. The Company regularly evaluates estimates and assumptions related to long-lived assets and deferred income tax asset valuation
allowances. 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.
Cash
and Cash Equivalents
For
financial accounting purposes, cash and cash equivalents are considered to be all highly liquid investments with a maturity of three
(3) months or less at the time of purchase.
Property
and Equipment
Property
and equipment are recorded at cost. Depreciation on property and equipment are determined using the straight-line method over the three
to five year estimated useful lives of the assets.
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021 AND 2020
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue
Recognition
The
Company recognizes revenue in accordance with ASC 606 — Revenue from Contracts with Customers. The core principle of this standard
is that a company should record revenue to depict the transfer of promised goods or services to customers in an amount that reflects
the consideration to which the company expects to be entitled in exchange for those goods or services. Further under ASC 606, the Company
recognizes revenue from licensing agreements and service-based contracts by applying the following steps: (1) identify the contract with
a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction
price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
We
earn revenue from both digital marketing and the sale of WiFi and communication solutions to customers around the world. Revenue
is earned from sales of our WiFi media platform and our WiFi monetization hardware (GZ Media hub) embedded with GZ software to create
monetization and communication solutions for our customers. Our sales can consist of any one or a combination of items required by our
customer including hardware, technology platforms and related support. We also enter into licensing contracts which provide for revenue
based on licensing fees and revenue sharing with our licensees.
As
we expand, we expect a large portion of our revenue from our digital communication solutions to be derived from service-based contracts
where we expect to recognize a significant portion of our contracts over time, as there is a continuous delivery of services to the customer
over the contractual period of performance. These contracts may or may not include fixed payments for services over time and/or
commission-based fees.
Direct
costs are expected to include materials, labor and overhead to be charged to work-in-progress (including our contracts-in-progress) inventory
or cost of sales. Indirect costs relating to long-term contracts, are expected to include expenses such as general and administrative
charges, and other costs will be charged to expense as incurred and will not be included in our work-in-process (including our contracts-in-progress)
inventory or cost of sales. Total estimates are expected to be reviewed and revised periodically throughout the lives of the contracts,
and adjustments to profits resulting from such revisions are made cumulative to the date of the change. Estimated losses on long-term
contracts are recorded in the period in which the losses become evident. If we do not accurately estimate the total sales, related
costs and progress towards completion on our long-term contracts, the estimated gross margins may be significantly impacted, or losses
may need to be recognized in future periods. Any such resulting changes in margins or contract losses could be material to our results
of operations and financial condition.
In
addition, certain of our contracts will include termination for convenience or non-performance clauses that provide the customer with
the right to terminate the contract. Such terminations could impact the assumptions regarding total contract revenues and expenses utilized
in recognizing profit under those contracts where we apply the percentage-of-completion method of accounting. Changes to these assumptions
could materially impact our results of operations and financial condition. As we fully implement our business model, our inability to
perform on our long-term contracts could materially impact our results of operations and financial condition.
Research
and Development Costs
We
charge research and development costs to operations as incurred in accordance with ASC 730-Research and Development, except in those
cases in which such costs are reimbursable under customer funded contracts. These amounts are not reflected in the reported research
and development expenses in each of the respective periods but are included in net sales with the related costs included in cost of sales
in each of the respective periods. During each of the nine months ended September 30, 2021 and 2020 we expended $7,800 on research and
development costs.
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021 AND 2020
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Stock-Based
Compensation
We
account for stock-based transactions in which the Company receives services from employees, non-employees, directors or others in exchange
for equity instruments based on the fair value of the award at the grant date in accordance with ASC 718 – Compensation-Stock Compensation.
Stock-based compensation cost for stock options or warrants is estimated at the grant date based on each instrument’s fair value
as calculated by the Black-Scholes option pricing model. We recognize stock-based compensation cost as expense ratably on a straight-line
basis over the requisite service period for the award.
Debt
Issue Costs
The
Company may pay debt issue costs in connection with raising funds through the issuance of debt whether convertible or not or with other
consideration. These costs are recorded as debt discounts and are amortized over the life of the debt to the statement of operations
as interest expense.
Original
Issue Discount
If
debt is issued with an original issue discount, the original issue discount is recorded to debt discount, reducing the face amount of
the note and is amortized over the life of the debt to the statement of operations as interest expense. If a conversion of the underlying
debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Stock
Settled Debt
In
certain instances, the Company will issue convertible notes which contain a provision in which the price of the conversion feature is
priced at a fixed discount to the trading price of the Company’s common shares as traded in the over-the-counter market. In
these instances, the Company records a liability, in addition to the principal amount of the convertible note, as stock-settled debt
for the fixed value transferred to the convertible note holder from the fixed discount conversion feature. As of September 30,
2021, and December 31, 2020, the Company had recorded within Convertible Notes, net of discount, the amount of $9,874,778 and $164,104
for the value of the stock settled debt for certain convertible notes (see Note 6).
Leases
In
February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02 – Topic 842
Leases. ASU 2016-02 requires that most leases be recognized on the financial statements, specifically the recognition of
right-to-use assets and related lease liabilities, and enhanced disclosures about leasing arrangements. ASU 2016-02 is effective for
fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The standard requires using the
modified retrospective transition method and the application of ASU 2016-02 either at (i) latter of the earliest comparative period
presented in the financial statements or commencement date of the lease, or (ii) the beginning of the period of adoption. The
Company has elected to apply the standard at the beginning period of adoption, December 31, 2019 which resulted in no cumulative
adjustment to retained earnings. On July 30, 2018, the FASB issued ASU 2018-11 to provide entities with relief from the costs of
implementing certain aspects of the new leasing standard, ASU 2016-02 (codified as ASC 842). Specifically, under the amendments in
ASU 2018-11: (i) Entities may elect not to recast the comparative periods presented when transitioning to ASC 842 (Issue 1), and
(ii) Lessors may elect not to separate lease and non-lease components when certain conditions are met (Issue 2). The
Company has elected to apply the short-term scope exception for leases with terms of 12 months or less at the inception of the lease
and will continue to recognize rent expense on a straight-line basis.
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021 AND 2020
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair
Value of Financial Instruments
FASB
ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid
to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction
between market participants on the measurement date. FASB ASC 820 also establishes a fair value hierarchy which requires an entity to
maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. FASB ASC 820 describes three
levels of inputs that may be used to measure fair value:
Level
1 – Quoted prices in active markets for identical assets or liabilities.
Level
2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs
that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level
3 – Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values
are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the
determination of fair value requires significant judgment or estimation.
If
the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is
based on the lowest level of input that is significant to the fair value measurement of the instrument.
Income
Taxes
The
Company has adopted ASC Topic 740 – Income Taxes, which requires the use of the asset and liability method of accounting for income
taxes. Under the asset and liability method of ASC Topic 740, deferred tax assets and liabilities are recognized for the future tax consequences
attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective
tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled.
Basic
and Diluted Net Income (Loss) Per Share
In
accordance with ASC Topic 260 – Earnings Per Share, the basic loss per common share is computed by dividing net loss available
to common stockholders by the weighted average number of shares of common stock outstanding. Diluted loss per common share is computed
similar to basic loss per common share except that the denominator is increased to include the number of additional shares of common
stock that would have been outstanding if the potential common stock had been issued and if the additional shares of common stock were
dilutive.
Potential
common stock consists of the incremental common stock issuable upon convertible notes, classes of shares with conversion features. The
computation of basic loss per share for the nine months ended September 30, 2021 and 2020 excludes potentially dilutive securities of underlying
share purchase warrants, convertible notes, stock options and preferred shares, because their inclusion would be antidilutive. As a result,
the computations of net loss per share for each period presented is the same for both basic and fully diluted.
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021 AND 2020
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Basic
and Diluted Net Income (Loss) Per Share (continued)
The
table below reflects the potentially dilutive securities at each reporting period which have been excluded from the computation of diluted
net loss per share:
Schedule
of Antidilutive Securities Excluded from Computation of Earnings Per Share
|
|
September 30,
2021,
|
|
|
September 30,
2020
|
|
Convertible Notes
|
|
|
4,871,812
|
|
|
|
1,283,184
|
|
Series A Preferred shares (convertible to common at a ratio of 10 common for each 1 preferred)
|
|
|
50,000,000
|
|
|
|
50,000,000
|
|
Total
|
|
|
54,871,812
|
|
|
|
51,283,184
|
|
|
|
|
|
|
|
|
|
|
Recently
Issued Accounting Pronouncements
In
August 2020, the FASB issued ASU 2020-06 to simplify the current guidance for convertible instruments and the derivatives scope exception
for contracts in an entity’s own equity. Additionally, the amendments affect the diluted EPS calculation for instruments that may
be settled in cash or shares and for convertible instruments. The update also provides for expanded disclosure requirements to increase
transparency. For SEC filers, excluding smaller reporting companies, this update is effective for fiscal years beginning after December
15, 2021 including interim periods within those fiscal years. For all other entities, this Update is effective for fiscal years beginning
after December 15, 2023, including interim periods therein.
NOTE
3: PROPERTY AND EQUIPMENT
Property
and equipment, net consists of the following:
|
|
|
|
|
|
|
|
|
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Office equipment
|
|
$
|
116,600
|
|
|
$
|
23,618
|
|
Leaseholder improvement
|
|
|
33,038
|
|
|
|
-
|
|
Software
|
|
|
45,680
|
|
|
|
-
|
|
Less: accumulated depreciation and amortization
|
|
|
(34,957
|
)
|
|
|
(15,016
|
)
|
Total property and equipment, net
|
|
$
|
160,361
|
|
|
$
|
8,602
|
|
|
|
|
|
|
|
|
|
|
Depreciation
expense amounted to $17,752 and $487 for the three months ended September 30, 2021 and 2020, respectively.
Depreciation
expense amounted to $19,941 and $1,461 for the nine months ended September 30, 2021 and 2020, respectively.
During
the nine months ended September 30, 2021, the Company reclassified certain assets in the amount of $4,990 into advertising expense.
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021 AND 2020
NOTE
4: PREPAID EXPENSES
Prepaid
expenses at September 30, 2021 and December 31, 2020 consist of the following:
Schedule
of Prepaid Expenses
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Reseller agreement
|
|
$
|
3,467
|
|
|
$
|
11,267
|
|
Other expenses
|
|
|
3,293
|
|
|
|
-
|
|
Prepaid
expense
|
|
$
|
6,760
|
|
|
$
|
11,267
|
|
|
|
|
|
|
|
|
|
|
On
January 31, 2017, GZMC entered into a white label reseller agreement with Purple Wifi Limited, a company based in the UK that provides
a hosted software solution as a Wifi hotspot platform for use on a company’s Wifi hardware and also provides customer analytics
services and marketing opportunities along with ancillary support services. The reseller agreement had an initial term of three years, and was subsequently amended to reflect a five (5) year term.
Under the terms of the agreement GZMC was required to pay a fee of $52,000 of which a total of $6,450 was unpaid and is included in accounts
payable as of September 30, 2021 and December 31, 2020. The total amount expended under the reseller agreement has been recorded as prepaid
expenses on the Company’s Balance Sheets and is amortized over the term of the agreement on a five-year straight-line basis as
part of general and administrative expense.
NOTE
5: OTHER CURRENT ASSETS
Other
current assets consist of the following at September 30, 2021 and December 31, 2020:
Schedule
of Other Current Assets
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Security deposits
|
|
$
|
14,691
|
|
|
$
|
4,255
|
|
Other deposits and receivables
|
|
|
1,258
|
|
|
|
1,258
|
|
Other
assets
|
|
$
|
15,949
|
|
|
$
|
5,513
|
|
|
|
|
|
|
|
|
|
|
NOTE
6: DEBT
SBA
On
May 19, 2020, the Company received a long-term loan from U.S. Small Business Administration (SBA) in the amount of $44,000, upon the
following conditions:
Payment:
Installment payments, including principal and interest, of $215 monthly, will begin twenty-four (24) months from the date of the promissory
note. The balance of principal and interest will be payable Thirty (30) years from the date of the promissory note.
Interest:
Interest accrues at the rate of 3.75% per annum and will accrue only on funds actually advanced from the date(s) of each advance.
Payment
terms: Each payment will be applied first to interest accrued to the date of receipt of each payment, and the balance, if any,
will be applied to principal; each payment will be made when due even if at that time the full amount of the loan has not yet been advanced
or the authorized amount of the Loan has been reduced.
As
at September 30, 2021, the Company had accrued interest payable of $2,256 in respect of this loan. (December 31, 2020 - $1,022).
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021 AND 2020
NOTE
6: DEBT (Continued)
PPP
funds
The
Paycheck Protection Program (“PPP”) is a loan designed to provide a direct incentive for small businesses to keep their workers
on the payroll. SBA will forgive loans if all employee retention criteria are met, and the funds are used for eligible expenses.
The
loan may be forgiven in full if the funds are used for payroll costs, interest on mortgages, rent, and utilities (with at least
60% of the forgiven amount having been required to be used for payroll). Additional terms include:
|
●
|
An
interest rate of 1% per annum;
|
|
●
|
Loans
issued prior to June 5, 2020 have a maturity of 2 years, with loans issued thereafter having
a maturity of 5 years;
|
|
●
|
Loan
payments are deferred for six months;
|
|
●
|
No
collateral or personal guarantees are required; and,
|
|
●
|
Neither
the government nor lenders will charge small businesses any fees.
|
On
May 14, 2020, the Company received PPP proceeds of $45,450.
As
of September 30, 2021, the Company had accrued total interest payable of $625 in respect of this loan ($288 – December 31, 2020).
The Company has not commenced repayments under this PPP loan and is currently in the process of applying for forgiveness of the loan
in full. While the Company is applying for forgiveness of the loan in full the Company has estimated minimum forgiveness of 60% of the
gross PPP proceeds and has included the remaining portion as “Current portion of long-term debt” in the current period.
A
schedule of the total long-term debt is below:
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
SBA Loan
|
|
$
|
44,000
|
|
|
$
|
44,000
|
|
PPP Loan
|
|
|
45,450
|
|
|
|
45,450
|
|
Total
|
|
|
89,450
|
|
|
|
89,450
|
|
Current portion
|
|
|
(45,450
|
)
|
|
|
-
|
|
Debt, long term
|
|
$
|
44,000
|
|
|
$
|
89,450
|
|
|
|
|
|
|
|
|
|
|
Interest accrued, reflected as accounts payable
|
|
$
|
2,880
|
|
|
$
|
1,310
|
|
|
|
|
|
|
|
|
|
|
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021 AND 2020
NOTE
6: DEBT (Continued)
Loan
Treaty Agreement
On
December 21, 2020, the Company entered into a Loan Treaty Agreement with a third party (“Treaty Agreement”) whereby the
lender agreed to provide a loan in the amount of up to $450,000 to the Company in $25,000 tranches, deposited weekly, memorialized
by promissory notes in increments of $100,000. Each amount deposited has a term of 12 months for repayment and shall bear an
interest rate of 8% per annum. In addition, at the option of the Lender, each $25,000 loaned to the Company may be converted into
common shares at a 25% discount to the market price at the close of business on November 23, 2020 ($0.26 x 75% = $0.195); or $0.195
per share. Each $25,000 may be converted at the one-year anniversary of the date of the weekly deposit, unless the Company becomes a
fully reporting company, at which time the holder may convert such debt to common shares in six months, or if the underlying shares
are registered, conversion may occur upon Notice of Effect from the Securities and Exchange Commission. On April 1, 2021, the
Company entered into an amendment to a Loan Treaty Agreement originally executed on December 21, 2020. On
April 1, 2021, the Company entered into an amendment to the Treaty Agreement. Under the terms of the amendment the lender has agreed
to fund an additional $1 million dollars over 90 business days in equal weekly tranches of $55,556. Each tranche may be converted
under the same terms as the original loan treaty, or $0.195 per share, commencing the one-year anniversary of the date of the weekly
deposit, unless the Company becomes a fully reporting company, at which time the holder may convert such debt to common shares in
six months, or if the underlying shares are registered, conversion may occur upon Notice of Effect from the Securities and Exchange
Commission. On April 21, 2021, the Company entered into a further amendment agreement whereby the payment schedule as amended is as
follows: April 23, 2021 - $250,000; June 4, 2021 - $250,000; July 16, 2021 - $250,000; and August 27, 2021 -
$250,000.
During
the fiscal year ended December 31, 2020, the Company received weekly tranche deposits for an aggregate of $50,000. The Company recorded
$164,104 as the liability on stock settled debt associated with the tranches which amount is amortized over the terms of the notes.
During
the nine months ended September 30, 2021, the Company received weekly tranche deposits for an aggregate of $900,000. The Company recorded
$9,710,674 as the liability on stock settled debt associated with the tranches which amount is amortized over the terms of the notes.
The
carrying value of tranches is as follows:
Schedule
of Debt
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Principal issued
|
|
$
|
950,000
|
|
|
$
|
50,000
|
|
Stock-settled liability
|
|
|
9,874,778
|
|
|
|
164,104
|
|
Deferred finance Costs
|
|
|
10,824,778
|
|
|
|
214,104
|
|
Unamortized debt discount
|
|
|
(5,498,761
|
)
|
|
|
(161,364
|
)
|
Debt carrying value
|
|
$
|
5,326,017
|
|
|
$
|
52,740
|
|
The
interest expenses of traches are as follows:
Summary
of Interest Expenses of Traches
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
Interest expense on notes
|
|
$
|
19,157
|
|
|
$
|
-
|
|
|
$
|
35,551
|
|
|
$
|
-
|
|
Amortization of debt discount
|
|
|
2,488,984
|
|
|
|
-
|
|
|
|
4,373,277
|
|
|
|
-
|
|
Total:
|
|
$
|
2,508,141
|
|
|
$
|
-
|
|
|
$
|
4,408,828
|
|
|
$
|
-
|
|
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021 AND 2020
NOTE
6: DEBT (Continued)
Loan
Treaty Agreement (continued)
The
accrued interest payable is as follows:
Summary
of Accrued Interest Payable
Balance, December 31, 2020
|
|
$
|
66
|
|
Interest expense on the convertible notes
|
|
|
35,551
|
|
Balance, September 30, 2021
|
|
$
|
35,617
|
|
|
|
|
|
|
Other
Short-term loans
On
January 5, 2018, GZMC entered into a loan agreement with National Funding Inc. whereby the Company acquired funding in the amount of
$20,625. The terms of the loan called for the Company to pay an origination fee of $412 and to repay $26,400 by way of 176
daily payments of $150. As of September 30, 2021 and December 31, 2020, there was an outstanding amount of $3,768 due and
payable on the loan, and the loan was in default at the year ended December 31, 2020 and remains in default.
NOTE
7: CUSTOMER DEPOSITS, CONTRACT RECEIVABLES AND CONTRACT LIABILITIES
The
Company generates revenue from contracts which, among other services, provide wireless and digital promotion rights for certain events
including WiFi media network advertising rights, and the development of smart venue wireless networks and software engagement technology
products for airports, stadiums, campuses, cities and other venues in the United States and International markets. In general, our contracts
require several months of implementation which is charged at a fixed rate, followed by monthly maintenance and management services, ad
hoc fixed rate services, and a share in advertising revenue, when applicable. As a result, the Company will accept deposits from
customers, which deposits are applied as each stage of our implementation is complete or under the terms of the service contract.
Invoices issued to customers for the implementation phase of our contracts are due and payable when issued, however, as the associated
scope of services have not yet been concluded, these invoices do not yet meet the revenue recognition criteria required to report these
amounts as earned revenue (ref: Note 2 – Revenue Recognition). As a result, deposits when received from customers are included
as liabilities on our balance sheets.
The
following table provides balances of customer receivables and contract liabilities as of September 30, 2021 and December 31, 2020:
Schedule
of Contract With Customer Assets and Liability
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Customer receivables (1)
|
|
$
|
-
|
|
|
$
|
-
|
|
Contract liabilities (Customer deposits) (2), (a), (b), (c)
|
|
$
|
155,000
|
|
|
$
|
287,000
|
|
|
(1)
|
While
the Company has outstanding customer invoices for a total of $1,395,000 and $1,460,000 (net
of customer deposits received of $155,000 and $287,000, respectively as at September 30,
2021 and December 31, 2020), these amounts are not yet earned under revenue recognition criteria
provided by ASC 606 and therefore, they are not reflected as accounts receivable on the Company’s
balance sheets.
|
Contract liabilities are consideration we have received from our customers billed in advance of providing goods or services promised in the future or for work in progress. We defer recognizing this consideration as revenue until we have satisfied the related performance obligation to the customer. Contract liabilities include installation and maintenance charges that are deferred and recognized when the installation is complete or with respect to deposits for maintenance, over the actual or expected contract term, which typically ranges from one to five years depending on the service. Contract liabilities may be included as customer deposits or deferred revenue in our consolidated balance sheets, based on the specifics of the contract. As of September 30, 2021 and December 31, 2020, we have recognized $132,000 in revenue from customer deposits on hand. The Company and certain customers are currently in negotiations to determine the best way to proceed with the delayed implementation of certain prior period contracts for which we have received deposits but have not completed the scope of work.
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021 AND 2020
NOTE
7: CUSTOMER DEPOSITS, CONTRACT RECEIVABLES AND CONTRACT LIABILITIES (Continued)
Performance
Obligations
As
of September 30, 2021, our estimated revenue expected to be recognized in the future related to performance obligations associated
with certain customer contracts that have been invoiced but remain unsatisfied (or partially satisfied) is
approximately $1,550,000. While we had originally expected to recognize approximately 30% of this revenue
through 2020, with the balance recognized thereafter, the impact of COVID-19 has had a significant impact on these
contracts. The Company is currently in negotiations to determine the best way to proceed with the delayed implementation of
these contracts, or their termination.
(a) We
executed a license agreement for the country of Spain in fiscal 2016 and the Company received an initial deposit of $25,000 against the
total licensing fee payable. This amount has been recorded on the Company’s balance sheets as deferred income.
While the Company and the customer attempted to negotiate an amendment to the terms of the agreement in late fiscal 2019, the onset of
COVID-19 resulted in further delays which are ongoing. As a result, the Company is currently in negotiation for a formal termination
of the agreement with this customer.
(b) On
July 11, 2019, GZMC entered into an Airport WiFi Sponsorship Marketing Agreement with a third party whereunder GZMC will secure
long-term, exclusive and non-exclusive smart venues for WiFi marketing, digital marketing and data analytics for various brand
sponsors at various airports across the United States. There were several venues anticipated under the terms of the agreement with
installations commencing on various schedules. GZMC generated invoices for $
for each of 13 venues, whereby $
per venue is due on receipt of the invoice and the remaining $35,000
is due sixty days thereafter. As at September 30, 2021 and December 31, 2020, the Company had received partial payments of $
against the initial deposit required. Previously the Company expected revenue recognition under these contracts to commence in
fiscal 2020, however, as a result of the impact of the COVID-19 pandemic, the project has been delayed indefinitely. Funds
originally provided for the implementation of this project are anticipated to be applied as a deposit on a project yet to be
identified or otherwise, repaid.
(c) On
October 6, 2020, the Company received a purchase order in the amount of $132,000 in regard to a Media Agreement. As the installation
had not yet been fully performed under the purchase order as of December 31, 2020, $132,000 was reflected as Deferred Revenue on the
balance sheet. During the three months ended September 30, 2021, the Company completed the terms of the purchase order and as a result
$132,000 has been reflected as revenue as at September 30, 2021.
NOTE
8: RELATED PARTY TRANSACTIONS
Terrence
Flowers
On
December 31, 2019, a total of $11,110 was payable to Mr. Terrence Flowers, who ceased to be a shareholder, officer and director on July
9, 2018. During the year ended December 31, 2020, the Company repaid $11,000 to Mr. Flowers leaving a balance due of $110 at December
31, 2020. The Company did not make any further payments and the amount due to Mr. Flowers as at September 30, 2021 is $110. The
amount is reflected on the balance sheet in related party payables.
Coleman
Smith and ELOC Holdings Corp.
On
July 9, 2018, Mr. William Coleman Smith was appointed to the Board of Directors of the Company and as President, Secretary and Treasurer
of the Company. Subsequently, on July 10, 2018, the Company executed a consulting agreement with ELOC Holdings Corp. whereby ELOC
will provide the services of Mr. Smith for a fee of $10,000 per month. ELOC Holdings Corp is a company controlled by Mr. Smith.
On
April 29, 2014, our controlled subsidiary, GZMC, entered into a management and consulting agreement with Mr. Smith, the sole officer
and director of GZMC whereunder GZMC was required to pay an annual salary of $120,000 to Mr. Smith.
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021 AND 2020
NOTE
8: RELATED PARTY TRANSACTIONS (Continued)
Coleman
Smith and ELOC Holdings Corp. (continued)
During
the year ended December 31, 2020, Mr. Smith and ELOC Holdings Corp made short term loans with interest at 1.5% per month to the Company
to pay various expenses.
As
of December 31, 2020, Mr. Smith, ELOC Holdings Corp. and the Company agreed to retroactively allocate interest in the amount of 5% per
annum to loans, advances, wages and management fees payable by each of GZMC and the Company from January 1, 2020 forward. The parties
entered into a single consolidated promissory note for all amounts payable to each of ELOC and Smith, with a principal amount of $1,217,579
payable to ELOC.
The
Company recorded associated interest expenses of $13,908 and $200 for the three months ended September 30, 2021 and 2020, respectively.
The Company recorded associated interest expenses of $42,282 and $427 for the nine months ended September 30, 2021, and 2020, respectively.
During
the nine months ended September 30, 2021, the Company paid a total of $151,854 to ELOC to pay down the principal balance on the loan.
The
following amounts were included in debt to related party on our Balance Sheets:
Schedule
of Related Party Transactions
Balance at December 31, 2020, Debt, related party
|
|
$
|
1,217,579
|
|
Payments on loan
|
|
|
(151,854
|
)
|
Balance at September 30, 2021, Debt, related party.
|
|
$
|
1,065,725
|
|
During
the three months ended September 30, 2021, the Company accrued $30,000 in management fees due to ELOC and paid management fees to Coleman
Smith of $60,000. During the nine months ended September 30, 2021, the Company accrued $90,000 in management fees to ELOC and paid
management fees to Coleman Smith of $150,000. Further, Mr. Smith received payments for expenses and invoiced the Company for expenses
paid on behalf of the Company leaving a net amount due for expenses of $17,085.
The
following amounts were included in related party payables on our Balance Sheets:
Schedule
of Related Party Payables Transactions
|
|
September 30,
2021
|
|
|
December 31,
2020
|
|
Coleman Smith, President
|
|
$
|
17,085
|
|
|
$
|
-
|
|
Interest payable
|
|
|
42,282
|
|
|
|
|
|
ELOC Holdings Corp.
|
|
|
90,000
|
|
|
|
-
|
|
Terrence Flowers
|
|
|
110
|
|
|
|
110
|
|
|
|
$
|
149,477
|
|
|
$
|
110
|
|
Securities
Purchase Agreement – William Coleman Smith
On
April 8, 2021, the Company and William Coleman Smith, officer and director entered into a securities purchase agreement whereunder Mr.
Smith sold an additional 9% interest in GZMC to the Company for consideration of 10 million unregistered, restricted shares of common
stock. On the conclusion of the transaction, the Company controlled 60% of GZMC.
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021 AND 2020
NOTE
9: COMMITMENTS
|
(1)
|
On
April 2, 2019, a vendor of the Company, the “Plaintiff” filed a complaint against
the Company’s 60% controlled subsidiary, Green Zebra, in the Superior Court of California,
Orange County for unpaid invoices related to services and products sold in fiscal 2017, including
reasonable value in the amount of $61,899.62.
The Court approved a default judgement on January 23, 2020 with respect to the aforementioned
claim, including the following:
|
Schedule
of Default Judgement
|
|
|
|
|
Damages
|
|
$
|
61,890
|
|
Prejudgment interest at the annual rate of 10%
|
|
|
9,835
|
|
Attorney fees
|
|
|
1,200
|
|
Other costs
|
|
|
505
|
|
Total judgement value
|
|
$
|
73,430
|
|
As of December 31,
2020 and March 31, 2021, the Company was unaware of the judgement. In April 2021, the Plaintiff perfected the judgement and
obtained a hold against a bank account controlled by Green Zebra in the approximate amount of $16,282,
which amount was subsequently released to the Plaintiff and has been recorded as a reduction to the balance owing to the Plaintiff.
At September 30, 2021 a total of $57,158
remained outstanding. Subsequent to September 30, 2021 Company remitted a further $2,420
towards the outstanding balance. The Company and the Plaintiff are currently in discussions regarding the claimed amount.
|
(2)
|
On
August 10, 2019, the Company’s CEO, Mr. William Coleman Smith, entered into a lease
agreement with IAC Apartment Development JV LLC to lease space at 861 Tularosa, Irvine, California
for a one-year term at a rental rate of $3,455 per month, plus utilities, for the Company’s
subsidiary, Green Zebra Media Corp. Green Zebra will use the space for its operations. On
April 1, 2020, the landlord and the Company agreed to a rental deferment agreement to defer
the rental costs by 50% as a result of COVID-19. The monthly rent commencing April
1, 2020 was $1,727 plus utilities. The rental deferment ended on June 1, 2020. The
original lease expired on August 9, 2020 and was renewed on expiry for another one-year term
at a reduced rate of $3,350 per month. On August 16, 2021 the Company renewed a lease for
a further one-year term at a rental rate of $3,620 per month, plus utilities, for the Company’s
subsidiary, Green Zebra Media Corp. The Company has elected to apply the short-term scope
exception for leases with terms of 12 months or less at the inception of the lease and will
continue to recognize rent expense on a straight-line basis
|
|
(3)
|
On
September 14, 2020, GZMC entered into a WiFi Media Solution Agreement (the “Media Agreement”)
with a city in Iowa in regard to a city owned location (“venue location”) whereby
GZMC was granted rights to provide sponsorship advertising, performance marketing and professional
services. Under the terms of the Media Agreement, GZMC must pay fees to the city commencing
in 2021 at an annual rate of $94,000 per annum for a period of 5 years. The parties
will review the initial payment due in 2021 based on the utilization of the venue location
due to COVID-19 restrictions. GZMC is anticipating the start date for this project
to occur before close of fiscal 2021 based on acquiring the various bonds and licenses as
may be required and completion of the required services and equipment under the terms of
the agreement.
|
|
(4)
|
On
May 19, 2021, the Company signed an 18-month lease for office premises in California located
at 1 Technology Drive, Bldg B, Irvine, CA 92618, Suite no. B123 occupying approximately 6,498
square feet of usable space. The terms of the lease provide for basic monthly rent
in the first year of approximately $9,097 per month, and $9,487 for each of the remaining
six months. In addition, the tenant is responsible for their share of operating expenses,
utilities and services. As a result of the adoption ASU
No. 2016-02 – Topic 842 Leases, the Company recognized a lease liability
and right-to-use asset of approximately $157,462, which represented the present value of
the remaining minimum lease payments using an estimated incremental borrowing rate of 6.75%
on June 1, 2021. Total future payments are $156,992 and imputed interest is $7,741,
leaving lease liabilities of $124,338 as at September 30, 2021.
|
|
(5)
|
On
April 25, 2021, the Company entered into an Equity Purchase Agreement with World Amber Corp.,
whereby the Company agreed to sell to World Amber Corp up to 16,666,667 shares of the Company’s
common stock for a maximum commitment amount of $5,000,000 at $0.30 per share. The Company
has submitted a registration statement on Form S-1 to the Securities and Exchange Commission
in order facilitate this funding agreement which was deemed effective on September 24, 2021.
|
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2021 AND 2020
NOTE
10: CAPITAL STOCK
The
Company has authorized 500,000,000 common shares with a par value of $0.001, 10,000,000 shares of Series A Preferred Stock, par value
$0.004 and 1 share of Series B Preferred Stock, par value $0.001. The shares of Series A Preferred Stock are convertible into shares
of Common Stock on the basis of 10 shares of Common Stock for every 1 share of Series A Preferred Stock and have voting rights of one
vote for each share of Series A Preferred Stock held. The Series B Preferred Stock is not convertible but has voting rights granting
the holder 51% of all votes (including common and preferred stock) entitled to vote at any meeting of the stockholders of the Company.
Neither the Series A nor Series B Preferred Stockholders have any rights to dividends or proceeds of the assets of the Company upon any
liquidation or winding up of the Company.
On
April 8, 2021, the Company and William Coleman Smith, officer and director entered into a securities purchase agreement whereunder Mr.
Smith sold an additional 9% interest in GZMC to the Company for consideration of 10 million unregistered, restricted shares of common
stock. On the conclusion of the transaction, the Company controls 60% of GZMC. The transaction occurred between parties under common
control and the value of the shares was recorded at par value or $0.001 per share, in addition as a result of the change in ownership
percentage to account for the additional 9% interest the Company recorded a reduction to additional paid in capital of $142,649 as of
the acquisition date.
As
of September 30, 2021 and December 31, 2020, there were 22,793,357 and 12,793,357 shares of common stock issued and outstanding, respectively.
Series
A Preferred Stock
The
total number of Series A Preferred stock that may be issued by the Company is 10,000,000 shares with a par value of $0.004.
On
September 30, 2021 and December 31, 2020, there are a total of 5,000,000 shares of Series A Preferred Stock issued and outstanding.
Series
B Preferred Stock
The
total number of Series B Preferred Stock that may be issued by the Company is 1 share with a par value of $0.001.
On
September 30, 2021 and December 31, 2020, there is 1 share of Series B Preferred stock issued and outstanding.
NOTE
11: SUBSEQUENT EVENTS
On October 6, 2021, eSilkroad
provided a further $100,000 against the Loan Treaty entered into with the Company.
On November 2, 2021, and
November 3, 2021, the Company presented a Put to World Amber Corporation, pursuant to the Effective S-1 Registration Statement for $50,000
each Put.
On November 3, 2021, the
Company entered into a Promissory Note with Mast Hill Fund, L.P., a Delaware limited partnership in which Mast Hill has agreed to lend
the Company the principal amount of $560,000; the purchase price of $504,000. The Term of the Note is twelve months with an interest rate
of 12%. The conversion rate of the Note is $1.00 per share.
Subsequent to September
30, 2021 the Company issued 2,051,282 shares of common stock to lender eSilkroad Network Ltd. in consideration for $400,000 in loans
previously provided under ther terms of a convertible note agreement convertible at $0.195 per share.
The
Company has evaluated subsequent events from the balance sheet date through the date that the financial statements were issued and determined
that there are no additional subsequent events requiring disclosure.