Notes
to Condensed Consolidated Financial Statements
For
the Nine Months Ended September 30, 2021 and 2020
(Unaudited)
NOTE
1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Organization
and Description of Business
GEX
Management, Inc. was originally formed in 2004 as Group Excellence Management, LLC. d/b/a MyEasyHQ. In March of 2016, it was converted
from a limited liability company into a C corporation and changed its name to GEX Management, Inc.
GEX
Management initially began operations as a Professional Services Company providing back office support to third-party clients. In 2016
GEX Management revised its business model to provide staffing and back-office services to a wide variety of industries in order to expand
the Company’s footprint, thereby building on the previous 12-year history of exceptional client service. Over the next few years,
GEX Management experienced tremendous growth in sales and customer pipeline - staffing business grew by over 1600%+ from 2016 to 2017
with the firm being named among the “fastest growing public companies in the North Texas region” by the Dallas Morning News,
while also significantly expanding its client footprints across multiple staffing, business consulting and PEO opportunities.
In
2019, the current management of GEX set strategic goals to revise the business model to expand into areas of higher margin and growth
particularly in the area of Technology and Strategy Consulting Services. As a result of management efforts, GEX Management was invited
in February 2019 to be a Preferred Supplier to Insight Global (www.insightglobal.com), one of the world’s largest Managed Service
Providers (MSPs) to Fortune 100 Companies in the Enterprise Technology Consulting space. The first consultant that GEX hired through
this Preferred Supplier initiative was successfully placed at a large PA based financial services firm to provide Business and Quality
Analysis professional services to the client. Subsequently, GEX placed its second enterprise consultant at the world’s leading
Fortune 100 CRM Company at its headquarters in San Francisco and subsequently several more highly skilled Enterprise Technology Consultants
at leading Fortune 500 retail, healthcare, manufacturing and technology clients across the country . As a direct result of the high market
demand for experienced technology consultants via its multiple supplier programs, the GEX team has interviewed and is in the process
of procuring 45 highly experienced enterprise technology consultants with expertise across a wide array of functions (Enterprise Architects,
Project Managers, Systems Integration Developers, Quality Assurance Specialists and Business Systems Analysts) who have been identified
for various short to long term projects. Additionally, GEX plans to hire and place more than 100 enterprise consultants over the next
18 - 24 month period to satisfy its growing pipeline of future contracts. As a result of these market initiatives, GEX forecasts to potentially
achieve approximately $20- $25M in gross billings over the next 18-24 month period, assuming all projected contracts are fully placed
on projects that have been currently identified by the GEX supplier program pipeline and businesses begin to re-open globally as the
pandemic related restrictions are removed.
In
Q4 2019, GEX signed a contract with one of the fastest growing, VC backed social video platform to provide key corporate and strategy
consulting services – an initiative that the CEO was personally involved with in developing and growing the strategic business
relationship over the last two years. This contract has resulted in enormous growth opportunities for GEX and is expected to significantly
expand growth in future periods as well. GEX has also signed additional contracts to provide interim “CFO” and “CEO”
consulting services to various high growth public and private companies, resulting in doubling of sales within a year and achieving an
astounding double digit expansion in gross margins despite the pandemic related recessionary business environment. Furthermore, GEX is
in talks with multiple companies to identify synergistic acquisition opportunities to fuel organic and inorganic growth and fulfil the
corporate objective of becoming a top tier business and technology focused firm while also developing a long term and sustainable technology
centric business model. Management expects these growth initiatives to help the firm eventually achieve strong and stable revenue growth
while also achieving sustainable long term profitability by targeting a higher margin, lower cost model and relying on less expensive
debt instruments to help reduce the burden across the firm’s capital structure.
In
addition to these planned strategic growth initiatives which had started to build momentum in 2019 and are expected to gain significant
traction in 2021 and beyond, management has been focusing on materially improving its balance sheet by significantly reducing or eliminating
the debt or debt like instruments related to convertible notes and asset related liens introduced in 2018 while simultaneously exploring
opportunities to reduce or eliminate the high interest MCA related toxic debt instruments that resulted in significant interest expenses
to the company and a burden to operating capital. As part of this balance sheet “clean-up” initiative, on February 8 2019,
GEXM and the G&C Family LLC executed a “Deed in Lieu of Foreclosure” agreement the terms of which would allow GEXM to
release ownership of the Arkansas building under AMAST LLC to the G&C Family Group, LLC in return for cancellation of the $1,300,000
real estate lien note secured by the building along with any and all accrued interest payable on the note as of the date of the agreement.
Additionally, on March 5, 2019, one of GEX’s promissory note holders proceeded to execute its rights to enforce the liens on the
Setco property through a foreclosure process which resulted in the note holder taking possession of the Setco property resulting in the
elimination of a $500,000 note and any accrued interest on the principal amount and the elimination of $1,125,000 Setco real estate lien
note made to Setco along with any accrued interests from the Company books. Furthermore, GEX has been able to significantly reduce the
overall debt and debt like instruments on the balance sheet through strategic conversions of convertible notes to common equity initiated
by the convertible note issuers throughout 2019 and 2020 and settlement or elimination of certain MCA and debt like instruments. This
focus on balance sheet cleanup and to stay significantly “asset-lite” is expected to achieve material results by Q4 2021,
at which point GEX would be primed for its next phase of strategic growth initiatives by deploying equity and non-toxic debt instruments
towards organic and inorganic opportunities. Finally, management believes that the material elimination of MCA and related debt like
instruments will be a critical first step prior to rebuilding a robust revenue pipeline as this will require strong working capital and
favorable leverage covenants to sustain operations in the long term as well as reduce liabilities related to attachment to future receivables.
While management efforts to settle these instruments are aggressively underway, the inability or failure by the firm to completely address
any toxic debt instruments could result in management pursuing a restructuring program or similar initiatives to bring the balance sheet
within reasonable covenant parameters to allow the firm to continue operating efficiently in the coming years without exposing future
customers to significant business risks associated with these toxic instruments. As part of this long term strategy, management has already
begin putting processes in place to protect the company via a robust internal restructuring program and will be announcing the outcome
of these intra-company restructuring efforts that will protect the interests of investors and shareholders alike over the long term and
also streamline the corporate structure to be synergistic with the management’s long term vision for the company.
Material
Definitive Agreements
No
Material Agreements have been executed by the Company during this reporting period.
Basis
of Presentation
Our
financial statements have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”),
as well as the applicable regulations and rules of the Securities and Exchange Commission (“SEC”). This requires management
to make estimates and assumptions that affect the amounts reported in the financial statements and their accompanying notes. The actual
results could differ from those estimates.
The
accompanying interim, unaudited consolidated financial statements and related financial information should be read in conjunction with
the audited financial statements and the related notes thereto for the year ended December 31, 2020 included in the Company’s Annual
Report on Form 10-K, filed with the SEC on April 15, 2021. All adjustments necessary for a fair statement of the results for the interim
periods have been made. All adjustments are of a normal and recurring nature.
Principles
of Consolidation
The
consolidated financial statements include the accounts of GEX Management, Inc. and its wholly owned subsidiaries. Intercompany accounts
and transactions have been eliminated in consolidation.
There
have been no significant changes to our accounting policies that have a material impact on our financial statements and accompanying
notes.
Use
of Estimates
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Cash
and Cash Equivalents
Cash
and cash equivalents include cash in banks and short-term investments with original maturities of three months or less.
Accounts
Receivable
Accounts
receivable consists of accrued services and consulting receivables due from customers and are unsecured. The receivables are generally
due within 30 to 45 days after the date of the invoice. Accounts receivable is carried at their face amount, less an allowance for doubtful
accounts. GEX’s policy is not to charge interest on receivables after the invoice becomes past due. Write-offs are recorded at
the time when a customer receivable is deemed uncollectible.
Property
and Equipment
Property
and Equipment, net is carried at the cost of purchase, acquisition or construction, and is depreciated over the estimated useful lives
of the assets. Assets acquired in a business combination are stated at estimated fair value. Costs associated with repair and maintenance
are expensed as they are incurred. Costs associated with improvements which extend the life, increase the capacity or improve the efficiency
of our property and equipment are capitalized and depreciated over the remaining life of the related asset. Depreciation and amortization
are provided using the straight-line methods over the useful lives of the assets as follows:
SCHEDULE OF ESTIMATED USEFUL LIVES OF PROPERTY AND EQUIPMENT
|
|
|
Useful
Life
|
|
Buildings
|
|
30
Years
|
|
Office
Furniture & Equipment
|
|
5
Years
|
Impairment
of Long-Lived Assets
The
Company records an impairment of long-lived assets used in operations, other than goodwill, and its equity method investments when events
or circumstances indicate that the asset might be impaired and the estimated undiscounted cash flows to be generated by those assets
over their remaining lives are less than the carrying amount of those items. The net carrying value of assets not recoverable is reduced
to fair value, which is typically calculated using the discounted cash flow method.
Revenue
Recognition
Effective
on January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers
(Topic 606). ASU No. 2014-09 outlines a single, comprehensive revenue recognition model for revenue derived from contracts with customers
and it supersedes the prior revenue recognition guidance, including prior guidance that is industry-specific. Under ASU No. 2014-09,
an entity recognizes revenue for the transfer of promised goods or services to customers in an amount that reflects the consideration
for which the entity expects to be entitled in exchange for those goods or services. The Company adopted ASU No. 2014-09 using the modified
retrospective method, which applies to only the most current period presented in the financial statements. There were no significant
changes to the Company’s existing revenue recognition policies as a result of adopting ASU 2014-09.
GEX
enters into contracts with its clients for professional services. GEX’s contract stipulates the rate and price charged to each
client. GEX’s contracts for these services are generally cancellable at any time by either party with 30-days’ written notice.
GEX fulfills its performance obligations each month, and the contracts generally have a term of one year with an automatic renewal after
12 months. The duration between invoicing and when GEX completes its contractual, performance obligations are satisfied is not significant.
For staffing and professional services payment is generally due 30 days after the invoice is sent to the client. GEX does not have significant
financing components or significant payment terms.
Staffing
Services and Professional Services
Staffing
services revenue is derived from supplying temporary staff to clients. Temporary staff generally consists of temporary workers working
under a contract for a fixed period of time, or on a specific client project. The temporary staff includes both GEX employees and third-parties
contracted by GEX.
Temporary
staff are provided to clients through a Staffing Service Agreement (‘SSA’) involving a specified service that the temporary
staff will provide to the client. When GEX is the principal or primary obligor for the temporary staff, GEX records the gross amount
of the revenue and expense from the SSA.
GEX
is generally the primary obligor when GEX is responsible for the fulfilment of services under the SSA, even if the temporary staff are
not employees of GEX. This typically occurs when GEX contracts third-parties to fulfil all or part of the SSA with the client, but GEX
remains the holder of the credit risk associated with the SSA, and GEX has total discretion in establishing the pricing under the SSA.
All
other Professional Services revenues are recognized in the period the services are performed as stipulated in the client’s Outsourcing
Agreement, when the client is invoiced, and collectability is reasonably assured. Revenue recognition for arrangements with multiple
deliverables constituting a single unit of accounting is recognized generally over the greater of the term of the arrangement or the
expected period of performance.
Income
Taxes
The
Company uses the liability method in the computation of income tax expense and the current and deferred income taxes payable. A valuation
allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized.
Fair
Value Measurements
ASC
Topic 820 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and requires
certain disclosures about fair value measurements. In general, fair value of financial instruments is based upon quoted market prices,
where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily
use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instruments are recorded
at fair value. These adjustments may include amounts to reflect counterparty credit quality and the Company’s credit worthiness,
among other things, as well as unobservable parameters.
Earnings
Per Share
Earnings
per share are calculated in accordance with ASC 260 “Earnings per Share”. Basic income (loss) per share is computed by dividing
the period income (loss) available to common shareholders by the weighted average number of common shares outstanding. Diluted earnings
(loss) per share is computed by dividing the income (loss) available to common share-holders by the weighted average number of common
shares outstanding plus additional common shares that would have been outstanding if dilutive potential common shares had been issued.
For purposes of this calculation, common stock dividends, warrants and options to acquire common stock, would be considered common stock
equivalents in periods in which they have a dilutive effect and are excluded from this calculation in periods in which these are anti-dilutive
to the net loss per share.
Earnings
per share information for the three months ended September 30, 2021 has been retroactively adjusted to reflect the stock split that occurred
in December 2017 and the reverse stock split that occurred in September 2020.
Reclassifications
Certain
prior year amounts have been reclassified to conform to the current year presentation. Such reclassifications have had no effect on the
financial position as of December 31, 2020 or operations or cash flows for the periods ended September 30, 2021.
Going
Concern
To
date, the Company has funded its operations primarily through public and private offerings of common stock, our line of credit, short-
term discounted and convertible notes payable. The Company has identified several potential financing sources in order to raise the capital
necessary to fund operations through June 30, 2022.
In
addition to the aforementioned current sources of capital that will provide additional short-term liquidity, the Company is currently
exploring various other alternatives including debt and equity financing vehicles, strategic partnerships, government programs that may
be available to the Company, as well as trying to generate additional sales and increase margins. However, at this time the Company has
no commitments to obtain any additional funds, and there can be no assurance such funds will be available on acceptable terms or at all.
If the Company is unable to obtain additional funding and improve its operations, the Company’s financial condition and results
of operations may be materially adversely affected and the Company may not be able to continue operations, which raises substantial doubt
about its ability to continue as a going concern. Additionally, even if the Company raises sufficient capital through additional equity
or debt financing, strategic alternatives or otherwise, there can be no assurances that the revenue or capital infusion will be sufficient
to enable it to develop its business to a level where it will be profitable or generate positive cash flow. If the Company raises additional
funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could be significantly
diluted, and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders. If the
Company incurs additional debt, a substantial portion of its operating cash flow may be dedicated to the payment of principal and interest
on such indebtedness, thus limiting funds available for business activities. The terms of any debt securities issued could also impose
significant restrictions on the Company’s operations. Broad market and industry factors may seriously harm the market price of
our common stock, regardless of our operating performance, and may adversely impact our ability to raise additional funds. Similarly,
if the Company’s common stock is delisted from the public exchange markets, it may limit its ability to raise additional funds.
The
consolidated financial statements for the nine months ended September 30, 2021 and were prepared on the basis of a going concern which
contemplates that the Company will be able to realize assets and discharge liabilities in the normal course of business. Accordingly,
they do not give effect to adjustments that would be necessary should the Company be required to liquidate its assets. The ability of
the Company to meet its total liabilities of $4,991,823 and to continue as a going concern is dependent upon the availability of future
funding, continued growth in billings and sales contracts, and the Company’s ability to profitably meet its after-sale service
commitments with its existing customers. The financial statements do not include any adjustments that might result from the outcome of
these uncertainties.
In
addition, at this time we cannot predict the impact of COVID-19 on our ability to obtain financing necessary for the Company to fund
its working capital requirements. Also, it may hamper our efforts to comply with our filing obligations with the Securities and Exchange
Commission.
NOTE
2. OTHER CURRENT ASSETS
At
September 30, 2021 and December 31, 2020, Other Current Assets were $114,132 and $107,289 respectively. Current Assets primarily comprised
of Debt Fees and Debt Discounts related to Debt and Debt like instruments.
At
September 30, 2021 and December 31, 2020, Other Assets were $3,026,045 and $3,131,545 respectively. Other Assets primarily comprised
of long-term Consulting Contracts that had been capitalized on the Balance Sheet and Amortized over their lives over a period of 3-5
years depending on the length of the specific contract.
NOTE
3. STOCKHOLDERS’ EQUITY
General
The
Company filed Form S-1 with the Securities & Exchange Commission and it was declared effective on November 14, 2016 under which the
Company sold 188,059 shares for $282,089 in the first quarter under this registration statement. The Company effected a 4 for 3 stock
split in December 2017 and a 1 for 10,000 reverse stock split in September 2020. All transaction have been adjusted to reflect this split.
The
Company issued 47,781 shares for services for a total of $74,750 during 2017.
On
May 15, 2017, GEX entered into a Conversion Agreement with two consultants that had a $45,000 balance with the Company. In accordance
with the terms and conditions of the Conversion Agreement, GEX issued a total of 40,000 shares of the Company’s common stock, at
a cost basis of $1.125 per share. The two consultants were issued 20,000 shares each of the total 40,000 shares issued by the Company.
On
June 7, 2017, GEX entered into a Debt Conversion Agreement with the Company that purchased the Line of Credit Promissory Note from the
Company’s Chief Executive Officer. Under the terms and conditions of the Debt Conversion Agreement GEX issued 153,664 shares of
its common stock, for the extinguishment of $345,745 in debt and accrued interest owed by GEX under the Line of Credit as of the date
of the Debt Conversion Agreement. The shares were valued at $1.125 per share. GEX recorded a gain on extinguishment of debt in the amount
of $172,872.
On
June 20, 2017, GEX entered into a Stock Purchase Agreement (“SPA”) with a third-party investor. Under the terms and conditions
of the SPA, GEX issued 19,003 shares of its common stock, for a total of $120,000.
On
June 20, 2017, GEX entered into an Advisory Agreement with a third-party advisory firm. Under the terms and conditions of the Advisory
Agreement, GEX paid a non-refundable retainer in the amount of $24,750 through the issuance of 3,334 shares of the Company’s common
stock.
On
July 20, 2017, GEX entered into a Stock Purchase Agreement with a third-party investor. Under the terms and conditions of the SPA, GEX
issued 12,668 shares of its common stock restricted pursuant to Rule 144 of the Securities Act of 1933 for a total of $80,000.
On
September 20, 2017, GEX entered into Stock Purchase Agreements with two advisory board members. Under the terms and conditions of the
SPA’s, GEX issued 6,564 shares of its common stock, for a total of $32,000.
On
October 18, 2017, GEX entered into a Stock Purchase Agreements with one advisory board member. Under the terms and conditions of the
SPA, GEX issued 2,667 shares of its common stock restricted pursuant to Rule 144 of the Securities Act of 1933, as amended, for a total
of $13,000.
On
October 31, 2017 GEX entered into a Lease Agreement for office space in Fayetteville, Arkansas for 1,067 shares of its common stock,
restricted pursuant to Rule 144 of the Securities Act of 1933, as amended.
On
December 29, 2017 GEX entered into a SPA with a shareholder. Under the terms of the SPA, GEX issued 75,000 shares of its common stock
for a total of $300,000.
On
December 29, 2017 the Company acquired a 12,223 square foot, multi-use office building in Lowell, Arkansas through the purchase of 100%
of the member interest in AMAST Consulting, LLC for 200,000 shares of the Company’s common stock and assumption of the outstanding
mortgage.
During
the twelve-month periods ended December 31, 2018, 2019 and 2020 respectively, the Company issued the following unregistered securities.
The issuance of securities in connection with these transactions was exempt from registration under Section 4(a)(2) and/or Rule 506 of
Regulation D as promulgated by the Securities and Exchange Commission (the “SEC”) under of the Securities Act of 1933, as
amended (the Securities Act”), as transactions by an issuer not involving a public offering.
On
July 9, 2018, the Company issued 58,500 shares of common stock at no cost basis for consulting services. On July 19, 2018, the Company
issued 206,500 shares of common stock at no cost basis for consulting services. On July 25, 2018, the Company issued 12,668 shares of
common stock at no cost basis for consulting services. On July 30, 2018, the Company issued 100,000 shares of common stock at no cost
basis for consulting services. On August 2, 2018, the Company issued 207,339 shares of common stock at no cost basis in connection with
issuance of a convertible note payable as a commitment fee. On August 7, 2018, the Company issued 50,000 shares of common stock at no
cost basis for consulting services. On August 27, 2018, the Company issued 15,000 shares of common stock at no cost basis for consulting
services. On September 10, 2018, the Company issued 220,000 shares of common stock at no cost basis for consulting services. On September
14, 2018, the Company issued 50,000 shares of common stock at no cost basis for consulting services. On September 25, 2018, the Company
issued 1,436 shares of common stock at no cost basis for consulting services. On September 26, 2018, the Company issued 15,000,000 shares
of common stock at no cost basis related to a real property purchase acquisition transaction. On January 16, 2019, the Company issued
60,000 shares of common stock related to a convertible note conversion. On January 21, 2019, the Company issued 538,095 shares of common
stock related to a convertible note conversion. On January 29, 2019, the Company issued 120,000 shares of common stock related to a convertible
note conversion. On February 13, 2019, the Company issued 1,000,000 shares of common stock related to a convertible note conversion.
On February 13, 2019, the Company issued 400,000 shares of common stock related to a convertible note conversion. On February 14, 2019,
the Company issued 400,000 shares of common stock related to a convertible note conversion. On February 19, 2019, the Company issued
670,000 shares of common stock related to a convertible note conversion. On February 20, 2019, the Company issued 1,000,000 shares of
common stock related to a convertible note conversion. On February 20, 2019, the Company issued 1,000,000 shares of common stock related
to a convertible note conversion. On February 21, 2019, the Company issued 847,458 shares of common stock related to a convertible note
conversion. On February 22, 2019, the Company issued 677,966 shares of common stock related to a convertible note conversion. On February
22, 2019, the Company issued 1,129,944 shares of common stock related to a convertible note conversion. On February 22, 2019, the Company
issued 300,000 shares of common stock related to a convertible note conversion. On February 25, 2019, the Company issued 2,300,000 shares
of common stock related to a convertible note conversion. On February 25, 2019, the Company issued 2,000,000 shares of common stock related
to a convertible note conversion. On February 26, 2019, the Company issued 1,140,000 shares of common stock related to a convertible
note conversion. On February 26, 2019, the Company issued 1,250,000 shares of common stock related to a convertible note conversion.
On February 27, 2019, the Company issued 2,535,211 shares of common stock related to a convertible note conversion. On February 28, 2019,
the Company issued 3,400,000 shares of common stock related to a convertible note conversion. On February 28, 2019, the Company issued
2,900,000 shares of common stock related to a convertible note conversion. In March 2019, the Company issued a total of 253,428,115 shares
of common stock related to a convertible note conversion. In April 2019, the Company issued a total of 131,889,069 shares of common stock
related to convertible note conversions. In May 2019, the Company issued a total of 1,060,050,879 shares of common stock related to convertible
note conversions. In June 2019, the Company issued a total of 1,598,790,735 shares of common stock related to convertible note conversions.
In July 2019, the Company issued a total of 1,865,042,736 shares of common stock related to convertible note conversions. In August 2019,
the Company issued a total of 913,654,084 shares of common stock related to convertible note conversions. On September 21, 2020, the
Company issued 30,409 shares of common stock related to a convertible note conversion. On September 23, 2020, the Company issued 31,872
shares of common stock related to a convertible note conversion. On September 24, 2020, the Company issued 336,134 shares of common stock
related to a convertible note conversion. On September 25, 2020, the Company issued 39,085 shares of common stock related to a convertible
note conversion. On September 29, 2020, the Company issued 57,808 shares of common stock related to a convertible note conversion. On
October 6, 2020, the Company issued 60,693 shares of common stock related to a convertible note conversion. On October 16, 2020, the
Company issued 51,170 shares of common stock related to a convertible note conversion. On November 2, 2020, the Company issued 66,294
shares of common stock related to a convertible note conversion. On December 3, 2020, the Company issued 69,583 shares of common stock
related to a convertible note conversion. On December 8, 2020, the Company issued 72,860 shares of common stock related to a convertible
note conversion. On December 10, 2020, the Company issued 76,691 shares of common stock related to a convertible note conversion. On
December 10, 2020, the Company issued 72,860 shares of common stock related to a convertible note conversion. On December 14, 2020, the
Company issued 72,700 shares of common stock related to a convertible note conversion. On December 15, 2020, the Company issued 84,153
shares of common stock related to a convertible note conversion. On December 17, 2020, the Company issued 81,481 shares of common stock
related to a convertible note conversion. On December 21, 2020, the Company issued 84,153 shares of common stock related to a convertible
note conversion. On December 15, 2020, the Company issued 100,636 shares of common stock related to a convertible note conversion. On
December 24, 2020, the Company issued 105,658 shares of common stock related to a convertible note conversion. On December 24, 2020,
the Company issued 209,643 shares of common stock related to a convertible note conversion. On December 28, 2020, the Company issued
81,633 shares of common stock related to a convertible note conversion. On December 29, 2020, the Company issued 240,884 shares of common
stock related to a convertible note conversion. On December 30, 2020, the Company issued 272,828 shares of common stock related to a
convertible note conversion. On December 31, 2020, the Company issued 121,391 shares of common stock related to a convertible note conversion.
In January 2021, the Company issued a total of 9,775,136 shares of common stock related to a convertible note conversions. In February
2021, the Company issued a total of 13,778,844 shares of common stock related to a convertible note conversions. In March 2021, the Company
issued a total of 19,758,900 shares of common stock related to a convertible note conversions. In April 2021, the Company issued a total
of 12,075,941 shares of common stock related to convertible notes. In May 2021, the Company issued a total of 3,162,717 shares of common
stock related to convertible notes. In June 2021, the Company issued a total of 1,295,828 shares of common stock related to convertible
notes.
NOTE
4. NOTES PAYABLE
On
April 26, 2018, the Company entered into two Securities Purchase Agreements, pursuant to which the Company issued Convertible Promissory
Notes (“the Notes”) with principal amounts totalling up to $1,000,000, bearing interest at 10% per annum. The total amounts
of the Notes that can be funded (consideration that can be loaned to the Company) is up to $887,500, after discounts of $112,500 prorated
over the term of the Notes. Amounts borrowed by the Company mature in twelve months after the date of funding and can be prepaid up to
six months after issuance subject to prepayment penalties and approval by the Note holders. Any amounts outstanding on the Notes can
be converted into Common Stock at a conversion price of $2.50 per share for the first six months and at a discount of up to 50% thereafter
to the then current market value of the Company’s stock commencing six months after issuance. Conversion is at the sole discretion
of the holders of the Notes. In May 2018, the Company borrowed $200,000 under the Notes, and received $175,000 after giving effect to
discounts of 10% for each note and origination fees. The Company incurred a total of $5,000 related to origination fees on the Notes.
Additionally, the Company issued 50,000 warrant shares for debt issuance costs at an exercise price of $4.00 per share. The warrants
are exercisable for five years and had a fair market value of $31,852 on the date of issuance. The Notes bear interest at 10% per annum.
On April 26, 2018, the Company entered into a convertible note payable for $146,681 bearing interest at 10% per annum.
On
April 26, 2018, the Company entered into two Securities Purchase Agreements, pursuant to which the Company issued Convertible Promissory
Notes (“the Notes”) with principal amounts totaling up to $1,000,000, bearing interest at 10% per annum. The total amounts
of the Notes that can be funded (consideration that can be loaned to the Company) is up to $887,500, after discounts of $112,500 prorated
over the term of the Notes. Amounts borrowed by the Company mature in twelve months after the date of funding and can be prepaid up to
six months after issuance subject to prepayment penalties and approval by the Note holders. Any amounts outstanding on the Notes can
be converted into Common Stock at a conversion price of $2.50 per share for the first six months and at a discount of up to 50% thereafter
to the then current market value of the Company’s stock commencing six months after issuance. Conversion is at the sole discretion
of the holders of the Notes. In May 2018, the Company borrowed $200,000 under the Notes, and received $175,000 after giving effect to
discounts of 10% for each note and origination fees. The Company incurred a total of $5,000 related to origination fees on the Notes.
Additionally, the Company issued 50,000 warrant shares for debt issuance costs at an exercise price of $4.00 per share. The warrants
are exercisable for five years and had a fair market value of $31,852 on the date of issuance. The Notes bear interest at 10% per annum.
On April 26, 2018, the Company entered into a convertible note payable for $146,681 bearing interest at 10% per annum. All principal
and interest is due on April 26, 2019.
On
April 26, 2018, the Company entered into a convertible note payable for $146,681 bearing interest at 10% per annum. All principal and
interest is due on April 26, 2019. On August 1, 2018, the Company entered into a convertible note payable for $226,000 bearing interest
at 12% per annum. All principal and interest is due on January 27, 2019.
On
August 8, 2018, the Company entered into a convertible note payable for $85,000 bearing interest at 10% per annum. All principal and
interest is due on August 8, 2019. On August 14, 2018, the Company entered into a convertible note payable for $250,000 bearing interest
at 10% per annum. All principal and interest is due on May 6, 2019. On August 24, 2018, the Company entered into a convertible note payable
for $85,000 bearing interest at 10% per annum. All principal and interest is due on August 24, 2019. On August 29, 2018, the Company
entered into a convertible note payable for $112,750 bearing interest at 10% per annum. All principal and interest is due on August 29,
2019. On January 18 2019, the Company entered into a convertible note payable for $226,000 bearing interest at 12% per annum. All principal
and interest is due on July 18, 2019. On February 15, 2019, the Company entered into a convertible note payable for $43,000 bearing interest
at 10% per annum. All principal and interest is due on February 15, 2020. On April 16, 2019, the Company entered into a convertible note
payable for $38,000 bearing interest at 10% per annum. All principal and interest is due on April 16, 2020. On March 25, 2019, the Company
entered into a convertible note payable for $50,000 bearing interest at 12% per annum. All principal and interest is due on March 25,
2020. On September 27, 2019, the Company entered into a convertible note payable for $45,000 bearing interest at 10% per annum. All principal
and interest is due on March 27, 2020. On October 12, 2019, the Company entered into a convertible note payable for $100,000 bearing
interest at 10% per annum. All principal and interest is due on October 12, 2020. On February 8, 2021, the Company entered into a convertible
note payable for $53,500 bearing interest at 10% per annum. All principal and interest is due on February 8, 2022. On March 19, 2021,
the Company entered into a convertible note payable for $38,500 bearing interest at 10% per annum. All principal and interest is due
on March 19, 2022. On April 20, 2021, the Company entered into a convertible note payable for $43,750 bearing interest at 10% per annum.
All principal and interest is due on April 20, 2022. On June 9, 2021, the Company entered into a convertible note payable for $43,750
bearing interest at 10% per annum. All principal and interest is due on June 9, 2022. On June 9, 2021, the Company entered into a convertible
note payable for $88,000 bearing interest at 12% per annum. All principal and interest is due on June 9, 2022. On June 25, 2021, the
Company entered into a convertible note payable for $110,000 bearing interest at 12% per annum. All principal and interest is due on
June 25, 2022.
NOTE
5. ACCOUNTS RECEIVABLE AND CONCENTRATION OF CREDIT RISK
As
of September 30, 2021, the company had $89,000 outstanding accounts receivable balance with its customers. As of December 31, 2020, the
company had $211,222 outstanding accounts receivable balance with its customers.
NOTE
6. PROPERTY AND EQUIPMENT
The
Company did not own significantly material fixed assets as of September 30, 2021
NOTE
7. RELATED PARTY TRANSACTIONS
Policy
on Related Party Transactions
The
Company has a formal, written policy that includes procedures intended to ensure compliance with the related party provisions in common
practice for public companies. For purposes of the policy, a “related party transaction” is a transaction in which the Company
participates and in which a related party (including all of GEX’s directors and executive officers) has a direct or indirect material
interest. Any transaction exceeding the 1% threshold, and any transaction involving consulting, financial advisory, legal or accounting
services that could impair a director’s independence, must be approved by the Board of Directors. Any related party transaction
in which an executive officer or a Director has a personal interest, must be approved by the Board of Directors, following appropriate
disclosure of all material aspects of the transaction.
Related
Party Transactions
The
Company did not have any related party transactions during this reporting period.
Revenues
For
the three months ended September 30, 2021 and 2020, the Company had no revenues from related parties.
NOTE
8: COMMITMENTS AND CONTINGENCIES
The
Company did not have any material contingent obligations during this reporting period.
NOTE
9. ACQUISITIONS AND DIVESTITURES
The
Company has not been involved in any material acquisition or divestiture activity during the reporting period.