UNITED
STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14C
(RULE
14C-101)
Information
Statement Pursuant to Section 14(c) of the Securities Exchange Act
of 1934
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appropriate box:
☒ Preliminary
Information Statement
☐ Definitive
Information Statement
☐ Confidential, for Use
of the Commission Only (as permitted by Rule
14c-5(d)(2))
GBT
TECHNOLOGIES INC.
(Name of Registrant As Specified In Its Charter)
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computed on table below per Exchange Act Rules 14c-5(g) and
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(2)
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(3)
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paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
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Filed:
GBT
TECHNOLOGIES INC.
2450
Colorado Avenue, Suite 100F
Santa
Monica, CA 90404
INFORMATION
STATEMENT
PURSUANT
TO SECTION 14
OF THE
SECURITIES EXCHANGE ACT OF 1934
AND
REGULATION 14C AND SCHEDULE 14C THEREUNDER
WE ARE
NOT ASKING YOU FOR A PROXY
AND YOU ARE
NOT REQUESTED TO SEND US A PROXY
Santa
Monica, California
*,
2022
This
information statement has been mailed on or about *, 2022 to the
stockholders of record on *, 2022 (the “Record Date”) of
GBT
Technologies Inc., a Nevada corporation (the “Company”) in
connection with certain actions to be taken by the written consent
by stockholders holding a majority of the voting stock of the
Company, dated as of June 28, 2022. The actions to be taken
pursuant to the written consent shall be taken on or about *, 2022,
20 days after the mailing of this information statement.
THIS IS NOT
A NOTICE OF A SPECIAL MEETING OF STOCKHOLDERS AND NO STOCKHOLDER
MEETING WILL BE HELD TO CONSIDER ANY MATTER WHICH WILL BE DESCRIBED
HEREIN.
|
|
By Order of
the Board of Directors, |
|
|
|
|
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/s/ Mansour
Khatib |
|
|
Chief
Executive Officer |
NOTICE OF
ACTIONS TO BE TAKEN PURSUANT TO THE WRITTEN CONSENT OF STOCKHOLDERS
HOLDING A MAJORITY OF THE VOTING SHARES OF THE COMPANY IN LIEU OF A
SPECIAL MEETING OF THE STOCKHOLDERS, DATED JUNE 28,
2022
To Our
Stockholders:
NOTICE IS
HEREBY GIVEN that the following actions will be taken pursuant to a
written consent of stockholders holding a majority of the issued
and outstanding voting shares of the Company dated June 28, 2022,
in lieu of a special meeting of the stockholders. Such actions will
be taken on or about *, 2022:
|
● |
To amend the
Company’s Articles of Incorporation, (the “Articles of
Incorporation”) to increase the number of authorized shares of
common stock, par value $0.00001 per share (the “Common Stock”), of
the Company from 2,000,000,000 shares to 10,000,000,000
shares. |
|
● |
(i)
authorize the Company’s Board of Directors to effect, in its sole
discretion, a reverse stock split of the Common Stock in a ratio of
up to 1-for-500 (the “Reverse Stock Split”), and (ii) authorize the
filing of an amendment to the Company’s Articles of Incorporation
to implement the Reverse Stock Split and any other action deemed
necessary to effectuate the Reverse Stock Split, without further
approval or authorization of stockholders, at any time prior to
December 31, 2023. |
OUTSTANDING
SHARES AND VOTING RIGHTS
As of the
Record Date, the Company’s authorized capitalization consisted of
2,000,000,000 shares of Common Stock, of which 977,741,469 shares
were issued and outstanding. Holders of Common Stock of the Company
have no preemptive rights to acquire or subscribe to any of the
additional shares of Common Stock. In addition, the Company has
authorized 20,000,000 shares of preferred shares of which 45,000 of
Series B Preferred Shares, 700 Series C Preferred Shares and 20,000
Series H Preferred Shares are presently outstanding.
Series B
Preferred Shares
On November
1, 2011, the Company and certain creditors entered into a
Settlement Agreement (the “Settlement Agreement”) whereby without
admitting any wrongdoing on either part, the parties settled all
previous agreements and resolved any existing disputes. Under the
terms of the Settlement Agreement, the Company agreed to issue the
creditors 45,000 shares of Series B Preferred Stock of the Company
on a pro-rata basis. Following the issuance and delivery of the
shares of Series B Preferred Stock to said creditors, as well as
surrendering the undelivered shares, the Settlement Agreement
resulted in the settlement of all debts, liabilities and
obligations between the parties.
The Series B
Preferred Stock has a stated value of $100 per share and is
convertible into the Company’s common stock at a conversion price
of $30.00 per share representing 30 posts split common shares.
Furthermore, the Series B Preferred Stock votes on an as converted
basis and carries standard anti-dilution rights. These rights were
subsequently removed, except in cases of stock dividends or
splits.
As of March
31, 2022 and December 31, 2021, there were 45,000 Series
B Preferred Shares outstanding.
Series C
Preferred Shares
On April 29,
2011, GV Global Communications, Inc. (“GV”) provided funding to the
Company in the aggregate principal amount of $111,000 (the “Loan”).
On September 25, 2012, the Company and GV entered into a Conversion
Agreement pursuant to which the Company agreed to convert the Loan
into 10,000 shares of Series C Preferred Stock of the Company,
which was approved by the Board of Directors.
Each share
of Series C Preferred Stock is convertible, at the option of GV,
into such number of shares of common stock of the Company as
determined by dividing the Stated Value (as defined below) by the
Conversion Price (as defined below). The Conversion Price for each
share is equal to a 50% discount to the average of the lowest three
lowest closing bid prices of the Company’s common stock during the
10-day trading period prior to the conversion with a minimum
conversion price of $0.02. The stated value is $11.00 per share
(the “Stated Value”). The Series C Preferred Stock has no
liquidation preference, does not pay dividends and the holder of
Series C Preferred Stock shall be entitled to one vote for each
share of common stock that the Series C Preferred Stock shall be
convertible into. GV has contractually agreed to restrict its
ability to convert the Series C Preferred Stock and receive shares
of the Company’s common stock such that the number of shares of the
Company’s common stock held by it and its affiliates after such
conversion does not exceed 4.9% of the then issued and outstanding
shares of the Company’s common stock.
During the
year ended December 31, 2014, GV Global Communications, Inc.
converted 7,770 of its Series C Preferred Stock
into 120 post-splits. During the third quarter of 2014,
the Company received 42 post-split common shares to
adjust the shares issued to reflect the amount that both they and
the Company believed that they were owed. At December 31, 2021 and
2020, GV owns 700 Series C Preferred Shares.
As of March
31, 2022 and December 31, 2021, there were 700 Series C
Preferred Shares outstanding.
Series H
Preferred Shares
On June 17,
2019, the Company, AltCorp Trading LLC, a Costa Rica company and a
wholly-owned subsidiary of the Company (“AltCorp”), GBT
Technologies, S.A., a Costa Rica company (“GBT-CR”) and Pablo
Gonzalez, a shareholder’s representative of GBT-CR (“Gonzalez”),
entered into and closed an Exchange Agreement (the “GBT Exchange
Agreement”) pursuant to which the parties exchanged certain
securities. In accordance with the Exchange Agreement, AltCorp
acquired 625,000 shares of GBT-CR representing 25% of its
issued and outstanding shares of common stock from Gonzalez in
exchange for the issuance of 20,000 shares of Series H
Convertible Preferred Stock of the Company and a Convertible Note
in the principal amount of $10,000,000 issued by the Company
(the “Gopher Convertible Note”) as well as additional
consideration. The Gopher Convertible Note bears interest of 6% per
annum and is payable at maturity on December 31, 2021. At the
election of Gonzalez, the Gopher Convertible Note can be converted
into a maximum of 20,000 shares of Series H Preferred Stock. Each
share of Series H Preferred Stock is convertible, at the option of
the holder but subject to the Company increasing its authorized
shares of common stock, into such number of shares of common stock
of the Company as determined by dividing the Stated Value
($500 per share) by the conversion price ($10.00 per share).
The Series H Preferred Stock has no liquidation preference, does
not pay dividends and the holder of Series H Preferred Stock shall
be entitled to one vote for each share of common stock that the
Series H Preferred Stock may be convertible into.
Each share
of Common Stock entitles its holder to one vote on each matter
submitted to the stockholders.
Pursuant to
Rule 14c-2 under the Securities Exchange Act of 1934, as amended,
the actions will not be adopted until a date at least 20 days after
the date on which this Information Statement has been mailed to the
stockholders. The Company anticipates that the actions contemplated
herein will be effected on or about the close of business on *,
2022.
The Company
has asked brokers and other custodians, nominees and fiduciaries to
forward this Information Statement to the beneficial owners of the
Common Stock held of record by such persons and will reimburse such
persons for out-of-pocket expenses incurred in forwarding such
material.
This
Information Statement will serve as written notice to stockholders
pursuant to Section 78.320 of the Nevada Revised Statutes of the
State of Nevada.
ABOUT THE
INFORMATION STATEMENT
WHAT IS
THE PURPOSE OF THE INFORMATION STATEMENT?
This
Information Statement is being furnished to you pursuant to Section
14 of the Securities Exchange Act of 1934 to notify the Company’s
shareholders as of the close of business on the Record Date of
corporate action expected to be taken pursuant to the consents or
authorizations of shareholders representing a majority of the
Company’s Common Stock.
Shareholders
holding a majority of the Company’s outstanding voting stock voted
in favor of the corporate matters outlined in this Information
Statement, which actions are expected to take place on or before *,
2022. The matter relates to the approval to authorize an increase
in the number of authorized shares of the Company’s Common Stock
from 2,000,000,000 shares to 10,000,000,000 shares and the Reverse
Stock Split and the associated filing of the amendment to the
Company’s Articles of Incorporation to implement the Reverse Stock
Split and any other action deemed necessary to effectuate the
Reverse Stock Split, without further approval or authorization of
stockholders, at any time prior to December 31, 2023.
WHO IS
ENTITLED TO NOTICE?
Each
outstanding share of Common Stock and Preferred Stock as of record
on the Record Date will be entitled to notice of each matter to be
voted upon pursuant to consents or authorizations. Shareholders as
of the close of business on the Record Date that held in excess of
fifty percent (50%) of the Company’s outstanding voting shares
voted in favor of the actions. Under Nevada corporate law, all the
activities requiring shareholder approval may be taken by obtaining
the written consent and approval of more than 50% of the holders of
voting stock in lieu of a meeting of the shareholders. No action by
the minority shareholders in connection with the action is
required.
WHAT
CONSTITUTES THE VOTING SHARES OF THE COMPANY?
The voting
power entitled to vote on the actions consists of the vote of the
holders of a majority of the voting power of the Common Stock, each
of whom is entitled to one vote per share. The Series B Preferred
Shares, Series C Preferred Shares and Series H Preferred
Shares will be
entitled to vote on all matters submitted to shareholders of the
Company on an as-converted basis.As of the Record Date,
977,741,469 shares of Common Stock were issued and
outstanding.
WHAT
CORPORATE MATTERS WILL THE SHAREHOLDERS VOTE FOR, AND HOW WILL THEY
VOTE?
Shareholders
holding a majority of our voting stock have voted in favor of the
following actions:
● To
amend the Company’s Articles of Incorporation to increase the
number of authorized shares of common stock of the Company from
2,000,000,000 shares to 10,000,000,000 shares.
● To
amend the Company’s Articles of Incorporation to implement the
Reverse Stock Split and any other action deemed necessary to
effectuate the Reverse Stock Split, without further approval or
authorization of stockholders, at any time prior to December 31,
2023.
WHAT VOTE
IS REQUIRED TO APPROVE THE ACTIONS?
The
affirmative vote of a majority of the shares of our voting stock
outstanding on the Record Date, is required for approval of the
actions. A majority of the outstanding voting shares of voting
stock voted in favor of the actions.
STOCK
OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS
The
following table sets forth information with respect to the
beneficial ownership of the Common Stock as of July 5, 2022 by (i)
each person known by the Company to own beneficially more than 5%
of the outstanding Common Stock; (ii) each director of the Company;
(iii) each officer of the Company and (iv) all executive officers
and directors as a group. Except as otherwise indicated below, each
of the entities or persons named in the table has sole voting and
investment powers with respect to all shares of Common Stock
beneficially owned by it or him as set forth opposite its or his
name.
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Name of
Beneficial Owner
|
Common
Stock Beneficially
Owned
(1)
|
Percentage of Common
Stock (1)
|
|
Dr. Danny
Rittman (2) |
1,980 |
* |
|
Mansour
Khatib (2) |
0 |
-- |
|
GBT
Tokenize Corp. (3) |
166,000,000 |
16.98% |
|
MetaVerse
Kit Corp.(4) |
500,000,000 |
51.14% |
|
|
|
|
|
All
Officers and Directors as a Group |
1,980 |
* |
* Less than
1%.
|
(1) |
Beneficial
ownership is determined in accordance with the Rule 13d-3(d)(1) of
the Exchange Act, as amended and generally includes voting or
investment power with respect to securities. Pursuant to the rules
and regulations of the Securities and Exchange Commission, shares
of common stock that an individual or group has a right to acquire
within 60 days pursuant to the exercise of options or warrants are
deemed to be outstanding for the purposes of computing the
percentage ownership of such individual or group, but are not
deemed to be outstanding for the purposes of computing the
percentage ownership of any other person shown in the table. The
above is based on 977,741,469 shares of common stock outstanding as of July 5,
2022. |
|
(2) |
Current
Officer and/or Director of the Company. |
|
(3) |
GBT
Tokenize Corp is a 50/50 joint venture between the Company and
Tokenize-It S.A. which was assigned on June 30, 2021 to
Magic International Argentina F.C, S.L. controlled by
Sergio Fridman, a third party. Michael Murray is the
director of the joint venture and have voting and dispositive
control over the securities held by GBT Tokenize Corp. |
|
(4) |
MetaVerse
Kit Corp. is a 50/50 joint venture between the Company and Ildar
Gainulin and Maria Belova. Ildar Gainulin is the director of the
joint venture and have voting and dispositive control over the
securities held by MetaVerse Kit Corp. |
No Director,
executive officer, affiliate or any owner of record or beneficial
owner of more than 5% of any class of voting securities of the
Company is a party adversary to the Company or has a material
interest adverse to the Company.
AMENDMENT
OF THE CERTIFICATE OF INCORPORATION TO
INCREASE
OF AUTHORIZED SHARES
On June
28, 2022, the majority
stockholders holding a majority of the issued and outstanding
voting shares of the Company approved an amendment to the Company’s
Articles of Incorporation, to increase the number of authorized
shares of Common Stock from 2,000,000,000 shares to 10,000,000,000
shares. The Company currently has authorized capital stock of
2,000,000,000 shares of Common Stock and approximately 977,741,469 shares
of Common Stock are outstanding as of July 5, 2022. The Company’s Board of Directors (the
“Board”) believes that the increase in authorized common shares
would provide the Company greater flexibility with respect to the
Company’s capital structure for such purposes as additional equity
financings, and stock based acquisitions.
The terms of
the additional shares of Common Stock will be identical to those of
the currently outstanding shares of Common Stock. However, because
holders of Common Stock have no preemptive rights to purchase or
subscribe for any unissued stock of the Company, the issuance of
additional shares of Common Stock will reduce the current
stockholders’ percentage ownership interest in the total
outstanding shares of Common Stock. This amendment and the creation
of additional shares of authorized Common Stock will not alter the
current number of issued shares. The relative rights and
limitations of the shares of Common Stock will remain unchanged
under this amendment.
As of
*, 2022, a total of 977,741,469 shares
of the Company’s currently authorized 2,000,000,000 shares of
Common Stock are issued and outstanding. The increase in the number
of authorized but unissued shares of Common Stock would enable the
Company, without further stockholder approval, to issue shares from
time to time as may be required for proper business purposes, such
as raising additional capital for ongoing operations, business and
asset acquisitions, stock splits and dividends, present and future
employee benefit programs and other corporate purposes.
The proposed
increase in the authorized number of shares of Common Stock could
have a number of effects on the Company’s stockholders depending
upon the exact nature and circumstances of any actual issuances of
authorized but unissued shares. The increase could have an
anti-takeover effect, in that additional shares could be issued
(within the limits imposed by applicable law) in one or more
transactions that could make a change in control or takeover of the
Company more difficult. For example, additional shares could be
issued by the Company so as to dilute the stock ownership or voting
rights of persons seeking to obtain control of the Company, even if
the persons seeking to obtain control of the Company offer an
above-market premium that is favored by a majority of the
independent shareholders. Similarly, the issuance of additional
shares to certain persons allied with the Company’s management
could have the effect of making it more difficult to remove the
Company’s current management by diluting the stock ownership or
voting rights of persons seeking to cause such removal. The Company
does not have any other provisions in its certificate or
incorporation, by-laws, employment agreements, credit agreements or
any other documents that have material anti-takeover consequences.
Additionally, the Company has no plans or proposals to adopt other
provisions or enter into other arrangements, except as disclosed
below, that may have material anti-takeover consequences. The Board
is not aware of any attempt, or contemplated attempt, to acquire
control of the Company, and this proposal is not being presented
with the intent that it be utilized as a type of anti- takeover
device.
Stockholders
should recognize that, as a result of this proposal, they will own
a fewer percentage of shares with respect to the total authorized
shares of the Company, than they presently own, and will be diluted
as a result of any issuances contemplated by the Company in the
future.
Except as
set forth below, there are currently no plans, arrangements,
commitments or understandings for the issuance of the additional
shares of Common Stock which are proposed to be
authorized:
Series B
Preferred Shares
On November
1, 2011, the Company and certain creditors entered into a
Settlement Agreement (the “Settlement Agreement”) whereby without
admitting any wrongdoing on either part, the parties settled all
previous agreements and resolved any existing disputes. Under the
terms of the Settlement Agreement, the Company agreed to issue the
creditors 45,000 shares of Series B Preferred Stock of the Company
on a pro-rata basis. Following the issuance and delivery of the
shares of Series B Preferred Stock to said creditors, as well as
surrendering the undelivered shares, the Settlement Agreement
resulted in the settlement of all debts, liabilities and
obligations between the parties.
The Series B
Preferred Stock has a stated value of $100 per share and is
convertible into the Company’s common stock at a conversion price
of $30.00 per share representing 30 posts split common shares.
Furthermore, the Series B Preferred Stock votes on an as converted
basis and carries standard anti-dilution rights. These rights were
subsequently removed, except in cases of stock dividends or
splits.
As of March
31, 2022 and December 31, 2021, there were 45,000 Series
B Preferred Shares outstanding.
Series C
Preferred Shares
On April 29,
2011, GV Global Communications, Inc. (“GV”) provided funding to the
Company in the aggregate principal amount of $111,000 (the “Loan”).
On September 25, 2012, the Company and GV entered into a Conversion
Agreement pursuant to which the Company agreed to convert the Loan
into 10,000 shares of Series C Preferred Stock of the Company,
which was approved by the Board of Directors.
Each share
of Series C Preferred Stock is convertible, at the option of GV,
into such number of shares of common stock of the Company as
determined by dividing the Stated Value (as defined below) by the
Conversion Price (as defined below). The Conversion Price for each
share is equal to a 50% discount to the average of the lowest three
lowest closing bid prices of the Company’s common stock during the
10-day trading period prior to the conversion with a minimum
conversion price of $0.02. The stated value is $11.00 per share
(the “Stated Value”). The Series C Preferred Stock has no
liquidation preference, does not pay dividends and the holder of
Series C Preferred Stock shall be entitled to one vote for each
share of common stock that the Series C Preferred Stock shall be
convertible into. GV has contractually agreed to restrict its
ability to convert the Series C Preferred Stock and receive shares
of the Company’s common stock such that the number of shares of the
Company’s common stock held by it and its affiliates after such
conversion does not exceed 4.9% of the then issued and outstanding
shares of the Company’s common stock.
During the
year ended December 31, 2014, GV Global Communications, Inc.
converted 7,770 of its Series C Preferred Stock
into 120 post-splits. During the third quarter of 2014,
the Company received 42 post-split common shares to
adjust the shares issued to reflect the amount that both they and
the Company believed that they were owed. At December 31, 2021 and
2020, GV owns 700 Series C Preferred Shares.
As of March
31, 2022 and December 31, 2021, there were 700 Series C
Preferred Shares outstanding.
Series H
Preferred Shares
On June 17,
2019, the Company, AltCorp Trading LLC, a Costa Rica company and a
wholly-owned subsidiary of the Company (“AltCorp”), GBT
Technologies, S.A., a Costa Rica company (“GBT-CR”) and Pablo
Gonzalez, a shareholder’s representative of GBT-CR (“Gonzalez”),
entered into and closed an Exchange Agreement (the “GBT Exchange
Agreement”) pursuant to which the parties exchanged certain
securities. In accordance with the Exchange Agreement, AltCorp
acquired 625,000 shares of GBT-CR representing 25% of its
issued and outstanding shares of common stock from Gonzalez in
exchange for the issuance of 20,000 shares of Series H
Convertible Preferred Stock of the Company and a Convertible Note
in the principal amount of $10,000,000 issued by the Company
(the “Gopher Convertible Note”) as well as additional
consideration. The Gopher Convertible Note bears interest of 6% per
annum and is payable at maturity on December 31, 2021. At the
election of Gonzalez, the Gopher Convertible Note can be converted
into a maximum of 20,000 shares of Series H Preferred Stock. Each
share of Series H Preferred Stock is convertible, at the option of
the holder but subject to the Company increasing its authorized
shares of common stock, into such number of shares of common stock
of the Company as determined by dividing the Stated Value
($500 per share) by the conversion price ($10.00 per share).
The Series H Preferred Stock has no liquidation preference, does
not pay dividends and the holder of Series H Preferred Stock shall
be entitled to one vote for each share of common stock that the
Series H Preferred Stock may be convertible into.
$10,000,000 for Igor
1 Corp (Prior year - GBT Technologies S. A.)
In
accordance with the acquisition of GBT-CR the Company issued a
convertible note in the principal amount of $10,000,000. The
convertible note bears interest of 6% per annum and is payable at
maturity on December 31, 2021. At the election of the holder,
the convertible note can be converted into a maximum
of 20,000 shares of Series H Preferred Stock. Each share
of Series H Preferred Stock is convertible, at the option of the
holder but subject to the Company increasing its authorized shares
of common stock, into such number of shares of common stock of the
Company as determined by dividing the Stated Value ($500 per
share) by the conversion price ($500.00 per share). This
convertible note may convert into shares of the Company’s common
stock at a conversion price equal to 85% of the lowest trading
price with a 20-day look back immediately preceding the date of
conversion and therefore recorded as derivative
liability.
On May 19,
2021, the Company, Gonzalez, GBT-CR and IGOR 1 Corp entered into a
Mutual Release and Settlement Agreement and Irrevocable Assignment
of outstanding balance plus accrued interest (the “Gonzalez
Agreement”). Pursuant to the Gonzalez Agreement, without any party
admission of liability and to avoid litigation, the parties has
agreed to (i) extend the GBT convertible note maturity date to
December 31, 2022, (ii) amend the GBT convertible note terms to
include a beneficial ownership blocker of 4.99% and a modified
conversion feature to the GBT convertible note with 15% discount to
the market price during the 20 trading day period ending on the
latest complete trading day prior to the conversion date and (iii)
provided for an assignment of the GBT convertible note by Gonzalez
to a third party. As a result of the change in terms of this
convertible note, the Company took a charge related to the
modification of debt of $13,777,480 during the year ended
December 31, 2021. This convertible note is recorded as derivative
liability because of the discounted price on conversion.
During the
year ended December 31, 2021, IGOR 1 converted $1,284,600 of
the convertible note into 4,185,650 shares of the Company’s common
stock. Also, on June 24, 2021, the Company transferred 5,500,000
SURG shares received as repayment of $660,000 of this convertible
note.
As of March
31, 2022, the note had an outstanding balance of
$8,055,400 and accrued interest of $1,664,447.
Redstart
Holdings Corp
On September
21, 2021, the Company entered into a Securities Purchase Agreement
with Redstart pursuant to which the Company issued to Redstart a
Convertible Promissory Note (the “Redstart Note No. 7”) in the
aggregate principal amount of $244,500 for a purchase price of
$203,750. The Redstart Note No. 7 has a maturity date
of December 22, 2022 and the Company has agreed to pay
interest on the unpaid principal balance of the Redstart Note No. 7
at the rate of two and a half percent (2.5%) per annum from the
date on which the Redstart Note No. 7 is issued (the “Issue Date”)
until the same becomes due and payable, whether at maturity or upon
acceleration or by prepayment or otherwise. The Company shall have
the right to prepay the Redstart Note No. 7, provided it makes a
payment including a prepayment to Redstart as set forth in the
Redstart Note No. 7. The transactions described above closed on
September 28, 2021. The outstanding principal amount of the
Redstart Note No. 7 may not be converted prior to the period
beginning on the date that is 180 days following the Issue Date.
Following the 180th day, Redstart may convert the
Redstart Note No. 7 into shares of the Company’s common
stock at a conversion price equal to 85% of the lowest trading
price with a 20-day look back immediately preceding the date of
conversion. Since the conversion price will vary based on the
Company’s stock price, the beneficial conversion feature associated
with this note is accounted for as a derivative liability. In
addition, upon the occurrence and during the continuation of an
Event of Default (as defined in the Redstart Note No. 7), the
Redstart Note No. 7 shall become immediately due and payable and
the Company shall pay to Redstart, in full satisfaction of its
obligations hereunder, additional amounts as set forth in the
Redstart Note No. 7. During the three months ended March 31, 2022,
Redstart converted $35,000 of its convertible note
into 369,198 shares of the Company’s common stock. As of
March 31, 2022, the note had an outstanding balance of
$209,500 and accrued interest of $3,091. As of filing of this
report, the Redstart Note No. 7 was fully paid off by converting
into the Company’s common shares.
Sixth
Street Lending LLC
On November
8, 2021, the Company entered into a Securities Purchase Agreement
with Sixth Street Lending LLC (“Sixth Street”) pursuant to which
the Company issued to Sixth Street a Convertible Promissory Note
(the “Sixth Street Note”) in the aggregate principal amount of
$124,200 for a purchase price of $103,500. The Sixth Street
Note has a maturity date of February 8, 2023 and the
Company has agreed to pay interest on the unpaid principal balance
of the note at the rate of six percent (6%) per annum from the date
on which the note is issued (the “Issue Date”) until the same
becomes due and payable, whether at maturity or upon acceleration
or by prepayment or otherwise. The Company shall have the right to
prepay the note, provided it makes a payment including a prepayment
to Sixth Street as set forth in the Sixth Street Note. The
outstanding principal amount of the note may not be converted prior
to the period beginning on the date that is 180 days following the
Issue Date. Following the 180th day, Sixth Street
may convert the note into shares of the Company’s common
stock at a conversion price equal to 85% of the average of the
two lowest trading prices with a 20-day look back immediately
preceding the date of conversion. Since the conversion price will
vary based on the Company’s stock price, the beneficial conversion
feature associated with this note is accounted for as a derivative
liability. In addition, upon the occurrence and during the
continuation of an Event of Default (as defined in the Sixth Street
Note), the note shall become immediately due and payable and the
Company shall pay to Sixth Street, in full satisfaction of its
obligations hereunder, additional amounts as set forth in the Sixth
Street Note. As of March 31, 2022, the note had an outstanding
balance of $124,200 and accrued interest of $2,899. As of
filing of this report, the Sixth Street Note was fully paid off by
converting into the Company’s common shares.
On May 5,
2022, the Company entered into a Securities Purchase Agreement with
1800 Diagonal Lending LLC (former name Sixth Street Lending, LLC),
an accredited investor (“DL”), pursuant to which the Company issued
to DL a Convertible Promissory Note (the “DL Note”) in the
aggregate principal amount of $244,500 for a purchase price of
$203,500. The DL Note has a maturity date of August 4, 2023 and the
Company has agreed to pay interest on the unpaid principal balance
of the DL Note at the rate of six percent (6.0%) per annum from the
date on which the DL Note is issued (the “Issue Date”) until the
same becomes due and payable, whether at maturity or upon
acceleration or by prepayment or otherwise. The Company shall have
the right to prepay the DL Note at any time from the Issue Date and
continuing through 180 days following the Issue Date, provided it
makes a payment including a prepayment premium to DL as set forth
in the DL Note. The transactions described above funded on May 9,
2022. The outstanding principal amount of the DL Note may not be
converted prior to the period beginning on the date that is 180
days following the Issue Date. Following the 180th day,
DL may convert the DL Note into shares of the Company’s common
stock at a conversion
price equal to 85% of the lowest trading price during the
20-day period immediately preceding the date of conversion. In
addition, upon the occurrence and during the continuation of an
Event of Default (as defined in the DL Note), the DL Note shall
become immediately due and payable and the Company shall pay to DL,
in full satisfaction of its obligations hereunder, additional
amounts as set forth in the DL Note. In no event shall DL be
allowed to effect a conversion if such conversion, along with all
other shares of Company common stock beneficially owned by DL and
its affiliates would exceed 4.99% of the outstanding shares of the
common stock of the Company. Unless the Company shall have first
delivered to DL, at least 48 hours prior to the closing of any
equity (or debt with an equity component) financing in an amount
less than $150,000 (“Future Offering”), written notice describing
the proposed Future Offering and providing the Buyer an option
during the 48 hour period following delivery of such notice to DL
the securities being offered in the Future Offering on the same
terms as contemplated by such Future Offering then the Company is
restricted from conducting the Future Offering during the period
beginning on the Issue Date and ending nine months following the
Issue Date.
Stanley
Hills LLC
The Company
entered into a series of loan agreements with Stanley Hills LLC
(“Stanley”) pursuant to which it received more than
$1,000,000 in loans (the “Debt”) since May 2019 up to December
2019. On February 26, 2020, in order to induce Stanley to continue
to provide funding, the Company and Stanley entered into a letter
agreement providing that the current note payable balance due to
Stanley in the amount of $1,214,900 may be converted into
shares of common stock of the Company at a conversion price equal
to 85% multiplied by the lowest one trading price for the common
stock during the 20-trading day period ending on the latest
complete trading day prior to the conversion date. Since the
conversion price will vary based on the Company’s stock price, the
beneficial conversion feature associated with this note is
accounted for as a derivative liability. Stanley has agreed to
restrict its ability to convert the Debt and receive shares of
common stock such that the number of shares of common stock
held by it and its affiliates after
such conversion or exercise does not exceed 4.99% of the
then issued and outstanding shares of common stock. During the year
ended December 31, 2021, Stanley converted $1,231,466 of its
convertible note plus interest into 4,420,758 shares of
the Company’s common stock, and during the year ended December 31,
2021, Stanley loaned the Company an additional $325,000. Also,
during the year ended December 31, 2021, the Company transferred
the SURG shares received as repayment of $800,000 of this
convertible note and also converted $126,003 of accrued
interest into the principal balance. During the year ended December
31, 2021, Gonzalez assigned all his accrued balances of
$424,731 to Stanley in a private transaction. The balance of
the Stanley debt at March 31, 2022 and December 31, 2021 was
$116,605 and $116,605, respectively. The unpaid interest of
the Stanley debt at March 31, 2022 and December 31, 2021 was
$11,247 and $8,372, respectively. The Stanley debt was secured
via a pledge agreement on the SURG shares.
$8,340,000 Senior
Secured Redeemable Convertible Debenture
On December
3, 2018, the Company entered into a Securities Purchase Agreement
(the “SPA”) with Discover Growth Fund, LLC (the “Investor”)
pursuant to which the Company issued a Senior Secured Redeemable
Convertible Debenture (the “Debenture”) in the aggregate face value
of $8,340,000. In connection with the issuance of the Debenture and
pursuant to the terms of the SPA, the Company issued a Common Stock
Purchase Warrant to acquire up to 225,000 shares of
common stock for a term of three years (the “Warrant”) on a
cash-only basis at an exercise price of $100.00 per share with
respect to 50,000 Warrant Shares, $75.00 with respect to 75,000
Warrant Shares and $50.00 with respect to 100,000 Warrant Shares.
The holder may not exercise any portion of the Warrants to the
extent that the holder would own more than 4.99% of the Company’s
outstanding common stock immediately after exercise. The
outstanding principal amount may be converted at any time into
shares of the Company’s common stock at a conversion
price equal to 95% of the Market Price less $5.00 (the conversion
price is lowered by 10% upon the occurrence of each Triggering
Event – the current conversion price is 75% of the Market Price
less $5.00). The Market Price is the average of the 5 lowest
individual daily volume weighted average prices during the period
the Debenture is outstanding. On May 28, 2019, the Investor
delivered to the Company a “Notice of Default and Notice of Sale of
Collateral” (the “Notice”). On December 23, 2019, in arbitration
between the Company and the Investor, an Interim Award was entered
in favor of the Investor. On January 31, 2020, the Company was
informed that a final award was entered (the “Final Award”). The
Final Award affirms that certain sections of the
Debenture constitute unenforceable liquidated damages
penalties and were stricken. Further, it was determined that the
Investor was entitled to recovery of their attorney’s fees.
Consequently, the arbitrator awarded Investor an award of
$4,034,444 plus interest of 7.25% accrued from May 15,
2019 and costs in the amount of $55,613. On February 18, 2020, the
Company filed a motion with the United States District Court
District of Nevada (the “Nevada Court”) to confirm the Final Award
and a motion to consolidate Investor’s application to confirm the
Final Award filed in the U.S. District Court of the Virgin Islands
(Case No: 3 :20-cv-00012-CVG-RM) (the “Virgin Island Court”). On
February 27, 2020, the Nevada Court denied the Company’s motion to
confirm the Final Award and motion to consolidate and further
decided that the confirmation of the Final Award should be
litigated in the Virgin Island Court. As such, on February 27,
2020, the Company filed a Notice of Entry of Order as well as a
Motion to Confirm the Arbitration Award, address the outstanding
issues regarding whether Investor’s rights are subordinated to
other creditors and, thereafter, oversee a commercially reasonable
foreclosure sale (Case No: 3 :20-cv-00012-CVG-RM). It was the
Company’s position that the Final Award must first be confirmed and
all questions regarding the rights of Investor relative to those of
other creditors must be determined before any foreclosure sale can
proceed. It is further the position of the Company that the
previously disclosed foreclosure sale scheduled by Investor is
being conducted in a commercially unreasonable manner and that if
Discover proceeded forward with the foreclosure sale it did so at
its own risk. Nevertheless, on February 28, 2020, Investor advised
that it conducted a sale of the Company’s assets. As the date of
this report Investor failed to present a deed of sale for the
alleged sale that allegedly took place as noticed. The Company
filed with Virgin Island Court the motions disputing the validity
of the alleged sale. On July 28, 2020, Investor filed in the State
of Nevada a motion for attorneys $48,844 and costs $716. The
Company filed an answer on August 11, 2020. On October 16,
2020, Investor motion for attorneys $48,844 and costs
$716 was denied. The balance was included in accounts payable
for the unearned settlement. As of March 31, 2022, this case is
still pending with the Federal court and the Court has not taken
any substantive action in the matter as of the date
hereof.
APPROVAL
OF REVERSE STOCK SPLIT
On June 28,
2022, the majority stockholders holding a majority of the issued
and outstanding voting shares of the Company approved an amendment
to the Certificate of Incorporation to effectuate a Reverse Stock
Split at an exchange ratio of up to 1-for-500 (or more plainly
stated, up to every 500 existing shares would be exchanged for one
new share) as the Board may determine in its sole
discretion.
The Reverse
Stock Split will have no effect on the par value of the Company’s
Common Stock. No fractional shares will be issued in connection
with the Reverse Stock Split.
The
Company’s Common Stock is currently quoted on the Pink Current
Information tier of the OTC Market Group, Inc. under the symbol
“GTCH”.
The Board
may elect not to implement the approved Reverse Stock Split at its
sole discretion. The Board has the maximum flexibility to react to
current market conditions and to therefore achieve the purposes of
the Reverse Stock Split, if implemented, and to act in the best
interests of and its stockholders.
The Board
intends to effectuate the Reverse Stock Split at any time prior to
December 31, 2023 (the “Effective Split Time”).
Purpose
of the Reverse Stock Split
The Board
believes that a Reverse Stock Split is desirable for a number of
reasons, including:
Improve the
marketability and liquidity of the Common Stock. The
reason to pursue the Reverse Stock Split is because the Company
believes that the increased market price of its Common Stock
expected as a result of implementing the Reverse Stock Split may
improve the marketability and liquidity of its Common Stock and may
encourage interest and trading in its Common Stock. The Reverse
Stock Split could allow a broader range of institutions to invest
in Common Stock (namely, funds that are prohibited from buying
stocks whose price is below a certain threshold), potentially
increasing the liquidity of its Common Stock. The Reverse Stock
Split could help increase analyst and broker interest in Common
Stock as their policies can discourage them from following or
recommending companies with low stock prices. Because of the
trading volatility often associated with low-priced stocks, many
brokerage firms and institutional investors have internal policies
and practices that either prohibit them from investing in
low-priced stocks or tend to discourage individual brokers from
recommending low-priced stocks to their customers. Some of those
policies and practices may function to make the processing of
trades in low-priced stocks economically unattractive to brokers.
Additionally, because brokers’ commissions on low-priced stocks
generally represent a higher percentage of the stock price than
commissions on higher-priced stocks, the current average price per
share of the Company’s Common Stock can result in individual
stockholders paying transaction costs representing a higher
percentage of their total share value than would be the case if the
share price were substantially higher. However, the liquidity of
the Common Stock may in fact be adversely affected by the proposed
Reverse Stock Split given the reduced number of shares that would
be outstanding after the Reverse Stock Split.
Risks of
the Reverse Stock Split
The
Reverse Stock Split may not increase the Company’s market
capitalization, which would prevent the Company from realizing some
of the anticipated benefits of the Reverse Stock
Split. The immediate effect of the Reverse Stock Split
would be to reduce the number of shares of outstanding Common Stock
and to potentially increase the trading price of the Company’s
Common Stock. However, the effect of any effected Reverse Stock
Split upon the market price of the Common Stock cannot be
predicted, and the history of reverse stock splits for companies in
similar circumstances sometimes improves stock performance, but in
many cases does not. There can be no assurance that the trading
price of the Common Stock after the Reverse Stock Split will rise
in proportion to the reduction in the number of shares of the
Company’s Common Stock outstanding as a result of the Reverse Stock
Split or remain at an increased level for any period. Also, there
is no assurance that the stock price would not decline below the
anticipated stock price following the Reverse Stock Split. The
trading price of the Common Stock may change due to a variety of
other factors, including’s operating results, other factors related
to the Company’s business and general market conditions. In
addition, the fewer number of shares that will be available to
trade will possibly cause the trading market of the Common Stock to
become less liquid, which could have an adverse effect on the price
of the Common Stock.
Effects of the
Reverse Stock Split
Reduction of
Shares Held by Individual Stockholders. After the Effective
Split Time, each Common Stockholder will own fewer shares of the
Company’s Common Stock. However, the Reverse Stock Split will
affect all of the Common Stockholders uniformly and will not affect
any Common Stockholder’s percentage ownership interests in the
Company, except to the extent that the Reverse Stock Split results
in any of its stockholders owning a fractional share as described
below. Any fractional share shall be rounded up to the nearest
whole share.
Authorized Shares
of Common Stock. The Reverse Stock Split, if
implemented, would not change the number of authorized shares of
the Common Stock as designated by the Articles. Therefore, because
the number of issued and outstanding shares of Common Stock would
decrease, the number of shares remaining available for issuance
under ‘s authorized shares of Common Stock would
increase.
The
additional shares of Common Stock that would become available for
issuance if the Reverse Stock Split is implemented could also be
used by the Company’s management to oppose a hostile takeover
attempt or delay or prevent changes of control or changes in or
removal of management, including transactions that are favored by a
majority of the stockholders or in which the stockholders might
otherwise receive a premium for their shares over then-current
market prices or benefit in some other manner. Although the
proposed Reverse Stock Split has been prompted by business and
financial considerations, stockholders nevertheless should be aware
that this action could facilitate future efforts by Company’s
management to deter or prevent a change in control.
Other
Effects on Outstanding Shares. If the Reverse Stock
Split is implemented, the rights and preferences of the outstanding
shares of the Common Stock would remain the same after the Reverse
Stock Split. Each share of Common Stock issued pursuant to the
Reverse Stock Split would be fully paid and
non-assessable.
In addition
to the above, the Reverse Stock Split will have the following
effects upon the Company’s Common Stock:
|
● |
The number
of shares owned by each holder of Common Stock will be
reduced; |
|
|
|
|
● |
The per
share loss and net book value of the Common Stock will be increased
because there will be a lesser number of shares of Common Stock
outstanding; |
|
|
|
|
● |
The par
value of the Common Stock will remain $0.00001 per
share; |
|
|
|
|
● |
The stated
capital on the Company’s balance sheet attributable to the Common
Stock will be decreased and the additional paid-in capital account
will be credited with the amount by which the stated capital is
decreased; and |
|
|
|
|
● |
All
outstanding options, warrants, Preferred Stock and convertible
securities entitling the holders thereof to purchase shares of
Common Stock, if any, will enable such holders to purchase, upon
exercise thereof, fewer of the number of shares of Common Stock
which such holders would have been able to purchase upon exercise
thereof immediately preceding the Reverse Stock Split, at the same
total price (but a higher per share price) required to be paid upon
exercise or conversion thereof immediately preceding the Reverse
Stock Split. The voting rights of the Preferred Stock will also be
proportionally adjusted. |
Shares of
Common Stock after the Reverse Stock Split will be fully paid and
non-assessable. The amendment will not change any of the other the
terms of the Common Stock. The shares of Common Stock after the
Reverse Stock Split will have the same voting rights and rights to
dividends and distributions and will be identical in all other
respects to the shares of Common Stock prior to the Reverse Stock
Split.
Once the
Reverse Stock Split is implemented, share certificates representing
shares of Common Stock will continue to be valid. In the future,
new share certificates will be issued reflecting the Reverse Stock
Split, but this in no way will affect the validity of your current
share certificates. The Reverse Stock Split will occur without any
further action on the part of the Company’s stockholders. After the
Effective Split Time, each share certificate representing the
Common Stock prior to the Reverse Stock Split will be deemed to
represent a smaller number of shares than the number presently
shown on any such certificate.
The actual
number of outstanding shares of the Company’s Common Stock after
giving effect to the Reverse Stock Split, if and when effected will
depend on the number of issued and outstanding shares at the time
the Reverse Stock Split is effected and the Reverse Stock Split
ratio that is ultimately determined by the Board. The table below
shows the Reverse Stock Split ratio and the approximate number of
authorized shares of Common Stock to be outstanding for various
reverse split ratios:
|
Reverse
Stock Split Ratio |
Outstanding Shares of
Common Stock Before the Reverse Split |
Outstanding Shares of
Common Stock Before the Reverse Split |
|
1 for
100 |
977,741,469 |
9,777,415 |
|
1 for
250 |
977,741,469 |
3,910,966 |
|
1 for
500 |
977,741,469 |
1,955,483 |
___________
|
|
(1) |
Does not
account for the additional issuance of shares of Common Stock after
the date hereof as the result of future financings, conversion of
outstanding derivative securities or other issuances, which may be
substantial. |
|
|
|
|
|
|
(2) |
Does not
account for fractional share rounding. |
Certificates
representing the shares after the Reverse Stock Split will be
issued in due course as share certificates representing shares
prior to the Reverse Stock Split are tendered for exchange or
transfer to the Company’s transfer agent. The Company requests
that stockholders not send in any of their stock certificates at
this time.
As
applicable, new share certificates evidencing new shares following
the Reverse Stock Split that are issued in exchange for share
certificates issued prior to the Reverse Stock Split representing
old shares that are restricted shares will contain the same
restrictive legend as on the old certificates. Also, for purposes
of determining the term of the restrictive period applicable to the
new shares after the Reverse Stock Split, the time period during
which a stockholder has held their existing pre-Reverse Stock Split
old shares will be included in the total holding period.
Procedure
for Implementing the Reverse Stock Split
The Reverse
Stock Split will become effective upon the filing of the amendment
to the Articles with the Nevada Secretary of State. The timing of
the filing of the amendment that will effectuate the Reverse Stock
Split will be determined by the Board, at any time prior to
December 31, 2023, based on its evaluation as to when such action
will be the most advantageous to the Company and its stockholders.
In addition, the Board reserves the right, notwithstanding
stockholder approval and without further action by the
stockholders, to elect not to proceed with the Reverse Stock Split
if, at any time prior to filing the amendment, the Board, in its
sole discretion, determines that it is no longer in the Company’s
best interest and the best interests of its stockholders to proceed
with the Reverse Stock Split. If the amendment effectuating the
Reverse Stock Split has not been filed with the Secretary of State
of Nevada by the close of business December 31, 2023, the Board
will abandon the Reverse Stock Split.
As soon as
practicable after the Reverse Stock Split, the Company’s transfer
agent will act as exchange agent for purposes of implementing the
exchange of stock certificates for record holders (i.e.,
stockholders who hold their shares directly in their own name and
not through a broker). Record holders of pre-Reverse Stock Split
shares will be asked to surrender to the transfer agent
certificates representing pre-Reverse Stock Split shares in
exchange for a book entry with the transfer agent or certificates
representing post-Reverse Stock Split shares in accordance with the
procedures to be set forth in a letter of transmittal to be sent by
the Company. No new certificates will be issued to a stockholder
until such stockholder has surrendered such stockholder’s
outstanding certificate(s) together with the properly completed and
executed letter of transmittal to the exchange agent.
For street
name holders of pre-Reverse Stock Split shares (i.e., stockholders
who hold their shares through a broker), your broker will make the
appropriate adjustment to the number of shares held in your account
following the Effective Split Time.
STOCKHOLDERS
SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT
ANY CERTIFICATE(S) UNTIL REQUESTED TO DO SO.
No service
charges, brokerage commissions or transfer taxes will be payable by
any stockholder, except that if any new stock certificates are to
be issued in a name other than that in which the surrendered
certificate(s) are registered it will be a condition of such
issuance that (1) the person requesting such issuance pays all
applicable transfer taxes resulting from the transfer (or prior to
transfer of such certificate, if any) or establishes to ‘s
satisfaction that such taxes have been paid or are not payable, (2)
the transfer complies with all applicable federal and state
securities laws, and (3) the surrendered certificate is properly
endorsed and otherwise in proper form for transfer.
Fractional
Shares
No
fractional shares of Common Stock will be issued as a result of the
Reverse Stock Split. Instead, stockholders who otherwise would be
entitled to receive fractional shares, upon surrender to the
exchange agent of such certificates representing such fractional
shares, will receive a number of shares rounded up to the nearest
whole share.
Accounting
Matters
The par
value per share of the Company’s Common Stock will remain unchanged
at $0.00001 per share after the Reverse Stock Split. As a result,
at the Effective Split Time, the stated capital on the Company’s
consolidated balance sheet attributable to Common Stock will be
reduced and the additional paid-in-capital account will be
increased by the amount by which the stated capital is reduced. Per
share net income or loss will be increased because there will be
fewer shares of Common Stock outstanding. The Company does not
anticipate that any other accounting consequences, including
changes to the amount of stock-based compensation expense to be
recognized in any period, will arise as a result of the Reverse
Stock Split.
Certain
Federal Income Tax Consequences
Each
stockholder is advised to consult their own tax advisor as the
following discussion may be limited, modified or not apply based on
your own particular situation.
The
following is a summary of important tax considerations of the
Reverse Stock Split. It addresses only stockholders who hold the
pre-Reverse Stock Split shares and post-Reverse Stock Split shares
as capital assets. It does not purport to be complete and does not
address stockholders subject to special rules, such as financial
institutions, tax-exempt organizations, insurance companies,
dealers in securities, mutual funds, foreign stockholders,
stockholders who hold the pre-Reverse Stock Split shares as part of
a straddle, hedge, or conversion transaction, stockholders who hold
the pre-Reverse Stock Split shares as qualified small business
stock within the meaning of Section 1202 of the Internal Revenue
Code of 1986, as amended (the “Code”), stockholders who are
subject to the alternative minimum tax provisions of the Code, and
stockholders who acquired their pre-Reverse Stock Split shares
pursuant to the exercise of employee stock options or otherwise as
compensation. This summary is based upon current law, which may
change, possibly even retroactively. It does not address tax
considerations under state, local, foreign, and other laws.
Furthermore, the Company has not obtained a ruling from the
Internal Revenue Service or an opinion of legal or tax counsel with
respect to the consequences of the Reverse Stock Split.
The Reverse
Stock Split is intended to constitute a reorganization within the
meaning of Section 368 of the Code. Assuming the Reverse Stock
Split qualifies as reorganization, a stockholder generally will not
recognize gain or loss on the Reverse Stock Split. The aggregate
tax basis of the post-Reverse Stock Split shares received will be
equal to the aggregate tax basis of the pre-Reverse Stock Split
shares exchanged (excluding any portion of the holder’s basis
allocated to fractional shares), and the holding period of the
post-Reverse Stock Split shares received will include the holding
period of the pre-Reverse Stock Split shares exchanged.
PLEASE
CONSULT YOUR OWN TAX ADVISOR REGARDING THE U.S. FEDERAL, STATE,
LOCAL, AND FOREIGN INCOME AND OTHER TAX CONSEQUENCES OF THE REVERSE
STOCK SPLIT IN YOUR PARTICULAR CIRCUMSTANCES UNDER THE INTERNAL
REVENUE CODE AND THE LAWS OF ANY OTHER TAXING
JURISDICTION.
To ensure
compliance with Treasury Department Circular 230, each holder of
Common Stock is hereby notified that: (a) any discussion of U.S.
federal tax issues in this information statement is not intended or
written to be used, and cannot be used, by such holder for the
purpose of avoiding penalties that may be imposed on such holder
under the Code; (b) any such discussion has been included by in
furtherance of the Reverse Stock Split on the terms described
herein and (c) each such holder should seek advice based on its
particular circumstances from an independent tax
advisor.
No
Appraisal Rights
Under the
NRS, stockholders are not entitled to appraisal rights with respect
to the proposed amendment to the Articles to effectuate the Reverse
Stock Split.
Anti-Takeover Effects
of the Reverse Stock Split
The overall
effect of the Reverse Stock Split may be to render more difficult
the accomplishment of mergers or the assumption of control by a
principal stockholder and thus make the removal of management more
difficult.
The
effective increase in the Company’s authorized and unissued shares
as a result of the Reverse Stock Split could potentially be used by
the Board to thwart a takeover attempt. The over-all effects of
this might be to discourage, or make it more difficult to engage
in, a merger, tender offer or proxy contest, or the acquisition or
assumption of control by a holder of a large block of the Company’s
securities and the removal of incumbent management. The Reverse
Stock Split could make the accomplishment of a merger or similar
transaction more difficult, even if it is beneficial to
stockholders. The Board might use the additional shares to resist
or frustrate a third-party transaction, favored by a majority of
the independent stockholders that would provide an above-market
premium, by issuing additional shares to frustrate the takeover
effort.
As discussed
above, the reasons for the Reverse Stock Split include the
potential increase of the ability of institutions to purchase the
Company’s Common Stock and the interest in its Common Stock by
analysts and brokers. This Reverse Stock Split is not the result of
management’s knowledge of an effort to accumulate securities or to
obtain control of the Company by means of a merger, tender offer,
solicitation or otherwise.
Additionally, the
Reverse Stock Split is not being conducted in an effort to take the
Company private.
ANNUAL AND QUARTERLY REPORTS
Our Annual
Report on Form 10-K for the fiscal year ended December 31, 2021 and
our Quarterly Report on Form 10-Q for the quarter ended March 31,
2022, as filed with the SEC, excluding exhibits, is being mailed to
shareholders with this Information Statement. We will furnish any
exhibit to our Annual Report on Form 10-K or Quarterly Report on
Form 10-Q free of charge to any shareholder upon written request to
the Company at 2450 Colorado Avenue, Suite 100F, Santa Monica, CA
90404. The Annual Report and Quarterly Report are incorporated in
this Information Statement. You are encouraged to review the Annual
Report and Quarterly Report together with subsequent information
filed by the Company with the SEC and other publicly available
information.
|
|
By Order of
the Board of Directors, |
|
|
|
|
|
/s/ Mansour
Khatib |
|
|
Chief
Executive Officer |
Santa
Monica, California
*,
2022
16
GBT Technologies (PK) (USOTC:GTCH)
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