NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021
(Unaudited)
1.
ORGANIZATION AND BASIS OF PRESENTATION
During
the periods covered by these financial statements, GTX Corp and its subsidiaries (the “Company”, “GTX”, “we”,
“us”, and “our”) were engaged in business operations that design, manufacture and sell various interrelated and
complementary products and services in the wearable technology and Personal Location Services marketplace. GTX owns 100% of the issued
and outstanding capital stock of its two subsidiaries - Global Trek Xploration, Inc. and LOCiMOBILE, Inc.
Global
Trek Xploration, Inc. focuses on the design, manufacturing and sales distribution of its hardware, software, and connectivity, Global
Positioning System (“GPS”) and Bluetooth Low Energy (“BLE”) monitoring and tracking platform, which provides
real-time tracking and monitoring of people and high valued assets. Utilizing a miniature quad-band GPRS transceiver, antenna, circuitry,
battery and inductive charging pad our solutions can be customized and integrated into numerous products whose location and movement
can be monitored in real time over the Internet through our 24x7 tracking portal or on a web enabled cellular telephone. Our core products
and services are supported by an intellectual property (“IP”) portfolio of patents, patents pending, registered trademarks,
copyrights, URLs and a library of software source code, all of which is also managed by Global Trek.
LOCiMOBILE,
Inc., is the Companies digital platform which has been at the forefront of Smartphone application (“App”) development since
2008. With a suite of mobile applications that turn the iPhone, iPad, Android and other GPS enabled handsets into a tracking device which
can be tracked from handset to handset or through our tracking portal or on any connected device with internet access. LOCiMOBILE has
launched over 20 Apps across multi mobile device operating systems and continues to launch consumer and enterprise apps.
Basis
of Presentation
The
accompanying unaudited consolidated financial statements of GTX have been prepared in accordance with accounting principles generally
accepted in the United States for interim financial information and applicable regulations of the U.S. Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles
generally accepted in the United States have been omitted pursuant to such rules and regulations. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) considered necessary for a fair statement of financial position and results of operations
have been included. Our operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that
may be expected for the year ending December 31, 2022. The accompanying unaudited consolidated financial statements should be read in
conjunction with our audited consolidated financial statements for the year ended December 31, 2021, which are included in our Annual
Report on Form 10-K.
The
accompanying consolidated financial statements reflect the accounts of GTX Corp and its wholly-owned subsidiaries. All significant inter-company
balances and transactions have been eliminated.
Going
Concern
The
consolidated financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets
and discharge its liabilities in the normal course of business for the foreseeable future. The Company has a stockholders’ deficit
of $3,009,406 and negative working capital of $2,952,685 as of March 31, 2022 and used cash in operations during the period
then ended. The Company anticipates further losses in the development of its business. These factors raise substantial doubt about the
Company’s ability to continue as a going concern within one year after the date the financial statements are issued. The ability
of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its
business plan until such time as revenues and related cash flows are sufficient to fund our operations.
The
Company’s independent registered public accounting firm has also included explanatory language in their opinion accompanying the
Company’s audited financial statements for the year ended December 31, 2021. The Company’s financial statements do not include
any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications
of liabilities that may result from the possible inability of the Company to continue as a going concern.
The
ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining
the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.
The Company’s ability to raise additional capital through the future issuances of debt or equity is unknown. The ability to obtain
additional financing, the successful development of the Company’s contemplated plan of operations, or its ability to achieve profitable
operations are necessary for the Company to continue operations, and there is no assurance that these can be achieved. The ability to
successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated
financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
2.
SIGNIFICANT ACCOUNTING POLICIES
Revenue
Recognition
The
Company recognizes revenue in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASC 606”).
The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected
to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s),
which include (1) identifying the contract or agreement with a customer, (2) identifying our performance obligations in the contract
or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and
(5) recognizing revenue as each performance obligation is satisfied.
The
Company does not have any significant contracts with customers requiring performance beyond delivery, and contracts with customers contain
no incentives or discounts that could cause revenue to be allocated or adjusted over time. Shipping and handling activities are performed
before the customer obtains control of the goods and therefore represent a fulfillment activity rather than a promised service to the
customer. Revenue and costs of sales are recognized when control of the products transfers to our customer, which generally occurs upon
shipment from our facilities. The Company’s performance obligations are satisfied at that time.
All
of the Company’s products are offered for sale as finished goods only, and there are no performance obligations required post-shipment
for customers to derive the expected value from them.
The
Company does not allow for returns, except for damaged products when the damage occurred pre-fulfillment. Damaged product returns have
historically been insignificant. Because of this, the stand-alone nature of our products, and our assessment of performance obligations
and transaction pricing for our sales contracts, we do not currently maintain a contract asset or liability balance for obligations.
We assess our contracts and the reasonableness of our conclusions on a quarterly basis.
We
derive our revenues primarily from hardware sales, subscription services fees, IP licensing and professional services fees. Hardware
includes our SmartSole, Military and other Stand-Alone Devices. Subscription services revenues consist of fees from customers accessing
our cloud-based software solutions and subscription or license fees for our platform. Professional services and other revenues consist
primarily of fees from implementation services, configuration, data services, training and managed services related to our solutions.
IP licensing is related to our agreement with Inventergy whereby we have partnered in order to monetize our IP portfolio.
Product
sales
At
the inception of each contract, we assess the goods and services promised in our contracts and identify each distinct performance obligation.
The Company recognizes revenue upon the transfer of control of promised products or services to the customer in an amount that depicts
the consideration the Company expects to be entitled to for the related products or services. For the large majority of the Company’s
sales, transfer of control occurs once product has shipped and title and risk of loss have transferred to the customer.
Services
Income
The
Company’s software solutions are available for use as hosted application arrangements under subscription fee agreements without
licensing perpetual rights to the software. Subscription fees from these applications are recognized over time on a ratable basis over
the customer agreement term beginning on the date the Company’s solution is made available to the customer. Our subscription contracts
are generally one to three months in length. Amounts that have been invoiced are recorded in accounts receivable and deferred revenues
or revenues, depending on whether the revenue recognition criteria have been met.
The
majority of our professional services arrangements are recognized on a time and materials basis. Professional services revenues recognized
on a time and materials basis are measured monthly based on time incurred and contractually agreed upon rates. Certain professional services
revenues are based on fixed fee arrangements and revenues are recognized based on the proportional performance method. In some cases,
the terms of our time and materials and fixed fee arrangements may require that we defer the recognition of revenue until contractual
conditions are met. Data services and training revenues are generally recognized as the services are performed.
IP
Licensing Revenue
Licensing
revenue recorded by the Company relates exclusively to the Company’s License and Partnership agreement with Inventergy which provides
for ongoing royalties based on monetization of IP licenses. The Company recognizes revenue for royalties under ASC 606, which provides
revenue recognition constraints by requiring the recognition of revenue at the later of the following: 1) sale or usage of the products
or 2) satisfaction of the performance obligations. The Company has satisfied its performance obligations and therefore recognizes licensing
revenue when the sales to which the license(s) relate are completed. During the periods ended March 31, 2022 and March 31, 2021, the
Company did not recognize any licensing revenue.
Disaggregation
of Net Sales
The
following table shows the Company’s disaggregated net sales by product type:
SCHEDULE
OF DISAGGREGATION OF NET SALES
| | |
March 31, 2022 | | |
March 31, 2021 | |
| Product sales | |
$ | 132,681 | | |
$ | 172,333 | |
| Service income | |
| 35,836 | | |
| 58,188 | |
| IP and consulting income | |
| - | | |
| - | |
| Total | |
$ | 168,516 | | |
$ | 230,521 | |
The
following table shows the Company’s disaggregated net sales by customer type:
| | |
March 31, 2022 | | |
March 31, 2021 | |
| B2B | |
$ | 120,680 | | |
$ | 52,009 | |
| B2C | |
| 47,836 | | |
| 177,395 | |
| Military | |
| - | | |
| 1,117 | |
| IP | |
| - | | |
| - | |
| Total | |
$ | 168,516 | | |
$ | 230,521 | |
Allowance
for Doubtful Accounts
We
extend credit based on our evaluation of the customer’s financial condition. We carry our accounts receivable at net realizable
value. We monitor our exposure to losses on receivables and maintain allowances for potential losses or adjustments. We determine these
allowances by (1) evaluating the aging of our receivables; and (2) reviewing high-risk customers financial condition. Past due receivable
balances are written off when our internal collection efforts have been unsuccessful in collecting the amount due. Our allowance for
doubtful accounts was $40,351 as of March 31, 2022 and as of December 31, 2021. The allowance fully reserves our accounts receivable
balances over 90 days.
Shipping
and Handling Costs
Shipping
and handling costs are included in cost of goods sold in the accompanying consolidated statements of operations.
Product
Warranty
The
Company’s warranty policy provides repair or replacement of products (excluding GPS Shoe devices) returned for defects within ninety
days of purchase. The Company’s warranties are of an assurance-type and come standard with all Company products to cover repair
or replacement should product not perform as expected. Provisions for estimated expenses related to product warranties are made at the
time products are sold. These estimates are established using historical information about the nature, frequency and average cost of
warranty claim settlements as well as product manufacturing and recovery from suppliers. Management actively studies trends of warranty
claims and takes action to improve product quality and minimize warranty costs. The Company estimates the actual historical warranty
claims coupled with an analysis of unfulfilled claims to record a liability for specific warranty purposes. As of March 31, 2022 and
2021, products returned for repair or replacement have been immaterial. Accordingly, a warranty liability has not been deemed necessary.
Use
of Estimates
The
preparation of the accompanying unaudited financial statements in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These
estimates include, but are not limited to, estimates related to revenue recognition, allowance for doubtful accounts, inventory valuation,
tangible and intangible long-term asset valuation, warranty and other obligations and commitments. Estimates are updated on an ongoing
basis and are evaluated based on historical experience and current circumstances. Changes in facts and circumstances in the future may
give rise to changes in these estimates which may cause actual results to differ from current estimates.
Fair
Value Estimates
Pursuant
to the Accounting Standards Codification (“ASC”) No. 820, “Disclosures About Fair Value of Financial Instruments”,
the Company records its financial assets and liabilities at fair value. ASC No. 820 provides a framework for measuring fair value, clarifies
the definition of fair value and expands disclosures regarding fair value measurements. Fair value is defined as the price that would
be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at
the reporting date. ASC No. 820 establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies
in measuring fair value:
| |
Level
1 - |
Inputs
are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. |
| |
|
|
| |
Level
2 - |
Inputs
(other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation
with market data at the measurement date and for the duration of the asset/liability’s anticipated life. |
| |
|
|
| |
Level
3 - |
Inputs
reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement
date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. |
The
carrying values for cash and cash equivalents, accounts receivable, investment in marketable securities, other current assets, accounts
payable and accrued liabilities approximate their fair value due to their short maturities. The carrying values of notes payable and
other financing obligations approximate their fair values because interest rates on these obligations are based on prevailing market
interest rates.
Concentrations
We
currently rely on one manufacturer to supply us with our GPS SmartSole and one manufacturer to supply us with the GPS device included
in the GPS SmartSole. The loss of either of these manufacturers could severely impede our ability to manufacture the GPS SmartSole.
As of March 31, 2022, the Company had
three customers representing approximately 40%, 26% and 13% of sales, respectively, and four customers representing approximately
15%, 14%, 12% and 10% of total accounts receivable, respectively (the 26% in sales and 14% in receivables represents
all sales made through our online store and consists of approximately 2,000 different customers). As of March 31, 2021, the Company had
three customers representing approximately 22%, 13% and 12% of sales, respectively, and two customers representing approximately 75%
and 8% of total accounts receivable, respectively (of the 75% this represents all sales made through our online store and consists of
approximately 2,000 different customers).
Stock-based
Compensation
The
Company accounts for share-based awards to employees and nonemployees directors and consultants in accordance with the provisions of
ASC 718, Compensation—Stock Compensation., and under the recently issued guidance following FASB’s pronouncement,
ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. Under
ASC 718, and applicable updates adopted, share-based awards are valued at fair value on the date of grant and that fair value is recognized
over the requisite service, or vesting, period. The Company values its equity awards using the Black-Scholes option pricing model, and
accounts for forfeitures when they occur.
Marketable
Securities
The
Company’s securities investments that are acquired and held principally for the purpose of selling them in the near term are classified
as trading securities. Trading securities are recorded at fair value based on quoted market price (level 1) on the balance sheet in current
assets, with the change in fair value during the period included in earnings. As of March 31, 2022 and December 31, 2021 the fair value
of our investment in marketable securities was $1,370 and $2,465.
Derivative
Liabilities
Our
derivative instrument liabilities are re-valued at the end of each reporting period, with changes in the fair value of the derivative
liability recorded as charges or credits to income, in the period in which the changes occur. For bifurcated conversion options that
are accounted for as derivative instrument liabilities, we determine the fair value of these instruments using the Black-Scholes option
pricing model. This model requires assumptions related to the remaining term of the instrument and risk-free rates of return, our current
Common Stock price and expected dividend yield, and the expected volatility of our Common Stock price over the life of the option.
At
March 31, 2022 and December 31, 2021, the balance of the derivative liabilities was $0. It was determined at December 31, 2020 that the
Preferred A shareholders having the majority vote, can agree to increase the number of authorized shares, if needed, to settle any convertible
debt, and thus the liability is $0.
Net
Loss Per Common Share
Basic
loss per share is computed by dividing the net loss applicable to common stockholders by the weighted average number of outstanding common
shares during the period. Shares of restricted stock are included in the basic weighted average number of common shares outstanding from
the time they vest. Diluted loss per share is computed by dividing net loss applicable to common stockholders by the weighted average
number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential
common shares had been issued. Shares of restricted stock are included in the diluted weighted average number of common shares outstanding
from the date they are granted unless they are antidilutive. Diluted loss per share excludes all potential common shares if their effect
is anti-dilutive. The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share
as their inclusion would be anti-dilutive:
SCHEDULE
OF ANTIDILUTIVE SECURITIES EXCLUDED FROM CALCULATION OF DILUTED EARNINGS PER SHARE
| | |
2022 | | |
2021 | |
| | |
March 31, | |
| | |
2022 | | |
2021 | |
| Warrants | |
| 39,250,000 | | |
| 40,916,667 | |
| Preferred B shares | |
| 72,000,000 | | |
| 100,000,000 | |
| Preferred C shares | |
| 25,208,333 | | |
| 13,333,333 | |
| Conversion shares upon conversion of notes | |
| 32,783,333 | | |
| 32,909,131 | |
| Total | |
| 169,241,667 | | |
| 187,159,131 | |
Segments
The
Company operates in one segment for the manufacture and distribution of its products. In accordance with the “Segment Reporting”
Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President,
who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing
guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information
quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the
entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting”
due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing
and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting”
can be found in the accompanying financial statements.
Recently
Issued Accounting Pronouncements
In
June 2016, the FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASC 326”).
The standard significantly changes how entities will measure credit losses for most financial assets, including accounts and notes receivables.
The standard will replace today’s “incurred loss” approach with an “expected loss” model, under which companies
will recognize allowances based on expected rather than incurred losses. Entities will apply the standard’s provisions as a cumulative-effect
adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. As small business
filer, the standard will be effective for us for interim and annual reporting periods beginning after December 15, 2022. The Company
is currently assessing the impact of adopting this standard on the Company’s financial statements and related disclosures.
Other
recent accounting pronouncements issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants,
and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s
present or future consolidated financial statements.
3.
INVESTMENT IN MARKETABLE SECURITIES
The
Company’s investments in marketable securities is comprised of shares of stock of two (2) entities with ownership percentages of
less than 5%. The Company accounted for these investments pursuant to ASU 320, Investments – Debt and Equity Securities. As such,
these investments were recorded at their market value as of December 31, 2019, with the change in fair value being reflected in the statement
of operations. These investments consisted of the following:
As
of December 31, 2020, the Company owned 42,500 shares of Inventergy Global, Inc. common stock with a fair value of $1,275. The Company
was able to obtain observable evidence that the investment had a market value of $0.02 per share, or an aggregate value of $850 as of
the period ended March 31, 2022. As such, the Company recorded no change in market value during the three months ended March 31, 2022,
in its statement of operations.
In
June 2019, the Company acquired 22,222 shares of Inpixon’s restricted common stock (after giving effect to a 1:45 stock split)
valued at $634,000. As of December 31, 2019, after the sale of 10,889 Inpixon shares, the Company owned 11,333 Inpixon shares with a
fair value of $58,374. During the period ended March 31, 2020, the Company sold 8,500 of its Inpixon shares for total proceeds of $146,201
and recognized a gain from the sale of these shares of $102,420.
During
the period ended December 31, 2021, the Company sold 834 of its Inpixon shares for total net proceeds of $1,258. The Company was able
to obtain observable evidence that the remaining 2,000 shares had a market value of $2,040 as of December 31, 2021, as such, the Company
recorded a loss from the decrease in the fair value of the shares of $851, resulting in a net loss from their investment in Inpixon shares
during the current period ended December 31, 2021.
During
the three months ended March 31, 2022, the Company sold 834 shares of its Inpixon shares for total proceeds of $1,334 and recognized
a gain from the sale of these shares of $1,258.
The
Company was able to obtain observable evidence that the remaining 2,000 shares had a market value of $520 as of March 31, 2022, as such,
the Company recorded a change in the fair value of the shares, resulting in a net loss from the investment in Inpixon shares of $1,520
during the current period ended March 31, 2022.
4.
INVENTORY
Inventories
consist of the following:
SCHEDULE OF INVENTORY
| | |
March 31, 2022 | | |
December 31, 2021 | |
| Raw materials | |
$ | 58,511 | | |
$ | 71,936 | |
| Finished goods | |
| 25,850 | | |
| 25,322 | |
| Total Inventories | |
$ | 84,361 | | |
$ | 98,258 | |
5.
PROPERTY AND EQUIPMENT
Property
and equipment, net, consists of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT
| | |
March 31, 2022 | | |
December 31, 2021 | |
| Software | |
$ | 25,890 | | |
$ | 25,890 | |
| Website development | |
| 91,622 | | |
| 91,622 | |
| Software development | |
| 394,772 | | |
| 394,772 | |
| Equipment | |
| 1,750 | | |
| 1,750 | |
| Less: accumulated depreciation | |
| (429,908 | ) | |
| (421,573 | ) |
| Total property and equipment, net | |
$ | 84,126 | | |
$ | 92,461 | |
Depreciation
expense for the period ended March 31, 2022 and 2021 was $8,335 and $1,188, respectively, and is included in general and administrative
expenses.
6.
NOTES & LOANS PAYABLE
The
following table summarizes the components of our short-term borrowings:
SUMMARY OF COMPONENTS OF OUR SHORT-TERM BORROWINGS
| | |
March 31, 2022 | | |
December 31, 2021 | |
| (a) Term loan | |
$ | 63,885 | | |
$ | 40,640 | |
| (b) Revolving line of credit | |
| 7,000 | | |
| 7,000 | |
| (c) CARE loans | |
| 9,153 | | |
| 74,953 | |
| Total | |
$ | 80,038 | | |
$ | 122,593 | |
(a)
Term loans
In
2022, the Company entered into an unsecured short-term loan agreement with a third party for an aggregate principal balance
of $25,000
at an interest rate of 3%
per annum, with the interest adjusted to 10%
in the case of a default. The term loan becomes
due on May
30, 2022.
In
September of 2019, the Company entered into an unsecured term loan agreement with a third party for an aggregate principal balance of
$50,000
at an interest rate of 5%
per annum in relation to an Asset Purchase Agreement. The term loan became due on December
31, 2020, and is currently past due. The principal
balance outstanding on the note as of December 31, 2021 was $40,640,
which included $4,806
in interest and reductions of $9,360
due to sublet fees for office space. As of March
31, 2022 the principal balance outstanding on the note was $38,885,
which included $5,322
in interest and reductions of $11,115
due to sublet fees for office space.
(b)
Lines of Credit
The
Company obtained a revolving line of credit agreement with an accredited investor of $500,000 during 2018. There were three borrowings
against the line as of December 31, 2018 for aggregate borrowings of $65,000 and two borrowing in 2019 for $65,000 for a total of $130,000.
During the period ended December 31, 2020, the Company repaid $76,000 in principal and all of its accrued interest of $4,204, resulting
in a balance due of $22,000 as of December 31, 2020. During the period ended December 31, 2021, the Company repaid $10,000 in principal
and all of its interest of $560, as incurred, resulting in a balance due of $7,000 as of March 31, 2022.
The
line bears interest of 8.5%. The line is based upon GTX providing the investor with purchase orders and use of proceeds, including production
of goods schedules and loan repayment timelines. These loans/drawdowns are specifically for product, inventory and/or purchase order
financing. Upon completion of the terms of the Line of Credit, GTX Corp. will issue to the investor 7,500,000 shares of GTX common stock
or $75,000 of GTX common stock, whichever is greater.
The
Company also has an unsecured line of credit, guaranteed by its CEO, with its business bank, Union Bank, whereby funds can be borrowed
at a revolving adjustable rate of 2 points over prime, currently 5.25%, with a max borrowing amount of $100,000. The balance at December
31, 2021 and March 31, 2022 was $0, with $9,180 having been borrowed and paid back in the March 31, 2022 period.
(c)
CARE Loans
As
of December 31, 2021, the Company has assumed, due to lack of correspondence, until otherwise received, that twelve months
of its EIDL loan (see Note 8(b)), or $7,083
of the $150,000
30-year
loan and the entire PPP loan (see Note 8(a)) for $67,870,
should be considered short-term, or due in less than a year. As of March 31, 2022, the PPP loan was forgiven, and the balance
in the short-term on the EIDL loan was considered to be 22 months or $9,153.
7.
CONVERTIBLE PROMISSORY NOTES – PAST DUE
As
of March 31, 2022 and December 31, 2021, the Company had a total of $758,000 and $758,000, respectively, of outstanding convertible notes
payable, which consisted of the following:
SCHEDULE OF CONVERTIBLE NOTES PAYABLE
| | |
March 31, 2022 | | |
December 31, 2021 | |
| Convertible Notes – with fixed conversion | |
$ | 758,000 | | |
$ | 758,000 | |
| Less: Debt discount | |
| - | | |
| - | |
| Total convertible notes, net of debt discount | |
$ | 758,000 | | |
$ | 758,000 | |
| |
a) |
Included
in Convertible Notes - with fixed conversion terms, are loans provided to the Company from various investors These notes carry simple
interest rates ranging from 0% to 14% per annum and with terms ranging from 1 to 2 years. In lieu of the repayment of the principal
and accrued interest, the outstanding amounts are convertible, at the option of the note holder, generally at any time on or prior
to maturity and automatically under certain conditions, into the Company’s common shares at $0.015 to $0.30 per share. These
notes became due in 2017 and prior, and are currently past due. |
| |
|
|
| |
|
At
December 31, 2020, balance of the convertible notes was $713,750. During the twelve months ended December 21, 2021, we issued 1,616,667
shares of common stock to convert $24,250 of principal of these outstanding convertible notes. The Company also paid down $8,750
of the principal balance of the convertible notes and the Company’s executives transferred $70,000 of their outstanding employee
notes for cash to a third party, which lowered the related party notes and increased the convertible promissory notes by $70,000.
The transferred notes had no change in terms thus no resulting gain or loss on the extinguishment and transfer. As per the original
terms the notes bear a 10% annual interest rate, gives the holder the right, but not the obligation to convert up to 50% of the amount
advanced and accrued interest into shares, warrants or options of common or preferred stock of the Company at $0.01 per share. As
of December 31, 2021, and March 31, 2022 $758,000 of these convertible notes are currently past due, with no associated penalties. |
8.
CARE Loans
SCHEDULE OF LOANS PAYABLE
| | |
March 31, 2022 | | |
December
31, 2021 | |
| a) PPP loan – short term | |
$ | - | | |
$ | 67,870 | |
| b) EIDL loan – short term | |
| 9,153 | | |
| 7,083 | |
| b) EIDL loan – long term | |
| 140,847 | | |
| 142,917 | |
| Total CARE loans | |
$ | 150,000 | | |
$ | 217,870 | |
(a)
Paycheck Protection Program Loan
On
April 30, 2020, the Company executed a note (the “PPP Note”) for the benefit of MUFG Union Bank, NA (the “Lender”)
in the aggregate amount of $67,870 under the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief, and Economic
Security Act (“CARES Act”). The PPP is administered by the U.S. Small Business Administration (the “SBA”). The
interest rate of the loan is 1.00% per annum and accrues on the unpaid principal balance computed on the basis of the actual number of
days elapsed in a year of 360 days. Commencing seven months after the effective date of the PPP Note, GTX is required to pay the Lender
equal monthly payments of principal and interest as required to fully amortize any unforgiven principal balance of the loan by the two-year
anniversary of the effective date of the PPP Note (the “Maturity Date”). The Maturity Date can be extended to five years
if mutually agreed upon by both the Lender and GTX. The PPP Note contains customary events of default relating to, among other things,
payment defaults, making materially false or misleading representations to the SBA or the Lender, or breaching the terms of the PPP Note.
The occurrence of an event of default may result in the repayment of all amounts outstanding under the PPP Note, collection of all amounts
owing from GTX, or filing suit and obtaining judgment against GTX. Under the terms of the CARES Act, PPP loan recipients can apply for
and be granted forgiveness for all or a portion of the loan granted under the PPP. Such forgiveness will be determined, subject to limitations,
based on the use of loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities. Recent modifications
to the PPP by the U.S. Treasury and Congress have extended the time period for loan forgiveness beyond the original eight-week period,
making it possible for GTX to apply for forgiveness of its PPP loan. No assurance can be given that GTX will be successful in obtaining
forgiveness of the loan in whole or in part, as such the Company has moved the PPP Loan into short-term liabilities, until further instructions
are received. The Company was in compliance with the terms of the PPP loan as of December 31, 2021, and has accrued interest on the loan
of $1,160 as of December 31, 2021.
During
the period ended March 31, 2022, the Company received notification that the loan was forgiven, and as such, $68,870 of principal has
been recognized on the income statement under other income, as of March 31, 2022.
(b)
Economic Injury Disaster Loan
On
June 10, 2020, the Company executed a secured loan with the U.S. Small Business Administration (SBA) under the Economic Injury Disaster
Loan program in the amount of $150,000. The loan is secured by all tangible and intangible assets of the Company and payable over 30
years at an interest rate of 3.75% per annum. Installment payments, including principal and interest, were supposed to start on June
10, 2021, but as of December 31, 2021 there has been no formal indication on whether this loan will be forgiven and no specific instructions
have been received to-date from the SBA on how to proceed. As part of the loan, the Company also received an advance of $10,000 from
the SBA. While the SBA refers to this program as an advance, it was written into law as a grant. This means that the amount given through
this program does not need to be repaid and has been recognized as Other Income.
As
of March 31, 2022, the Company calculated that 22 months of the 360 periods on the 30-year
loans should be considered short-term, and as such moved $9,153
to short-term liabilities, and has accrued
interest on the loan of $10,658
as of March 31, 2022, or until the Company
has received more definitive correspondence related to any potential forgiveness.
9.
RELATED PARTY TRANSACTIONS
Convertible
Notes Due to Related Parties
During
the period ended December 31, 2021, the Company relieved the outstanding payables due to related parties by $200,000 and converted those
amounts into additional notes with an aggregate amount of $200,000. As the conversion price embedded in the note agreements was below
the trading price of the common stock on the dates of issuance, a beneficial conversion feature (BCF) was recognized at the date of issuance.
The Company recognized a debt discount at the date of issuance in the aggregate amount of $38,000 related to the intrinsic value of beneficial
conversion feature. Additionally, the Company’s executives transferred $70,000 of their outstanding employee notes for cash to
a third party, which lowered the related party notes and increased the convertible note balance by $70,000. The transferred notes had
no change in terms, thus resulting in no gain or loss on the extinguishment related to the transfer of debt, making the outstanding balance
on the related party notes on December 31, 2021 as $976,546, net of debt discounts. As of March 31, 2022, the outstanding balance on
the convertible promissory notes was $982,792, net of debt discounts.
During
2020, management elected to reduce the 10% annual interest rate to 3% because of the affects COVID-19 had on the U.S. economy. As such,
on December 31, 2020 interest of $249,102 is deferred on the above notes and included in accrued expenses to related parties. The other
7% was considered imputed interest and is included as a separate line item on the equity statement accordingly.
On
July 1, 2021, the annual interest on the notes was re-established to 10%, and as such, on December 31, 2021 the interest of $306,852,
and on March 31, 2022 the interest on the notes was $330,484.
Accrued
wages and costs - In order to preserve cash for other working capital needs, various officers, members of management, employees and directors
agreed to defer portions of their wages and sometimes various out-of pocket expenses since 2011. As of March 31, 2022, and December 31,
2021, the Company owed $421,197 and $391,743, respectively, for such deferred wages and other expenses owed for other services which
are included in the accrued expenses – related parties on the accompanying balance sheet.
10.
DERIVATIVE LIABILITIES
Under
authoritative guidance used by the FASB on determining whether an instrument (or embedded feature) is indexed to an entity’s own
stock, instruments which do not have fixed settlement provisions are deemed to be derivative instruments. The Company has issued certain
convertible notes which conversion prices are based on a future market price. However, since the number of shares to be issued is not
explicitly limited, the Company is unable to conclude that enough authorized and unissued shares are available to share settle the conversion
option. As a result, the conversion option is classified as a liability and bifurcated from the debt host and accounted for as a derivative
liability in accordance with ASC 815 and will be re-measured at the end of every reporting period with the change in value reported in
the statement of operations.
At
March 31, 2022 and December 31, 2021, the balance of the derivative liabilities was $0. It was determined at December 31, 2020 that the
Preferred A shareholders having the majority vote, can agree to increase the number of authorized shares, if needed, to settle any convertible
debt, and thus the liability is $0.
11.
EQUITY
The
Company has 10,000,000 shares of preferred stock authorized. From this pool the following preferred shares have been classified as:
Preferred
Stock – Series A
During
the year ended December 31, 2018, the Company authorized 1,000,000 of Series A preferred shares, which shares have voting rights equal
to two-thirds of all the issued and outstanding shares of common stock, shall be entitled to vote on all matters of the corporation,
and shall have the majority vote of the board of directors. The subject preferred stock lacks any dividend rights, does not have liquidation
preference, and is not convertible into common stock. During the year ended December 31, 2018, the Company issued one million Series
A preferred shares to certain officers and board members. The shares remain outstanding as of March 31, 2022.
At
December 31, 2020 is was determined that the Preferred A shareholders having the majority vote, can agree to increase the number of authorized
shares, if needed, to settle any convertible debt, and thus any derivative liabilities are not necessary to reserve for this.
Preferred
Stock – Series B
During
the year ended December 31, 2019, the Company authorized 10,000 shares of preferred stock to be designated available for Series B preferred
shares that have a value of $1,000 each and are convertible into common shares at fixed price of $0.0025. Holders shall be entitled to
receive, and the Company shall pay, dividends on shares of Series B Preferred Stock equal (on an as-if-converted-to-Common-Stock basis)
to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of
the Company’s Common Stock. No other dividends shall be paid on shares of Series B Preferred Stock, and they shall have no voting
rights and have liquidation preference. During the year ended December 31, 2019, the Company issued 150 Series Preferred B shares and
30,000,000 warrants to an accredited investor for their financings for an aggregate value of $150,000.
During
the period ended December 31, 2020, the Company issued 100 Series B preferred shares and 20,000,000 warrants to an accredited investor
for their financings for an aggregate value of $50,000. The Series B preferred shares and warrants shall have a fixed conversion price
equal to $0.0025 of common stock, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and
other similar transactions of the Common Stock. The warrants are exercisable at a price of $0.0025 per share through March 2025. The
Company considered the accounting effects of the existence of the conversion feature of the Series B Preferred Stock, and the issuance
of warrants at the date of issuance. In accordance with the current accounting standards, the Company determined that it should account
for the fair value of the conversion feature and relative fair value of the issued warrants (up to the face amount of the Series B Preferred
Stock) as a deemed dividend of $50,000 and a charge to paid in capital.
During
the period ended December 31, 2021, the two accredited investors converted 70 Series B preferred shares into 28,000,000 common shares
at the conversion price of $0.0025.
Preferred
Stock – Series C
During
the period ended December 31, 2020, the Company authorized 1,000 shares of preferred stock to be designated available for Series C preferred
shares that have a stated value of $1,000 each and are convertible into common shares at fixed price of $0.015. Holders shall be entitled
to receive, and the Company shall pay, dividends on shares of Series C Preferred Stock equal (on an as-if-converted-to-Common-Stock basis)
to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of
the Company’s Common Stock. No other dividends shall be paid on shares of Series C Preferred Stock, and they shall have no voting
rights and have liquidation preference. During the year ended December 31, 2019, the Company had no Preferred C shares.
During
the period ended December 31, 2020, the Company issued 150 Series C preferred shares and 10,000,000 warrants to two accredited investors
for their financings for an aggregate value of $150,000.
During
the period ended December 31, 2021, the Company issued 675 Series C preferred shares and 22,500,000 warrants to an accredited investor
for their financings for an aggregate value of $675,000. The Series C preferred shares and warrants shall have a fixed conversion price
equal to $0.004 per share of common stock, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations
and other similar transactions of the Common Stock. The warrants are exercisable through May 2024. The Company considered the accounting
effects of the existence of the conversion feature of the Series C Preferred Stock, and the issuance of warrants at the date of issuance.
In accordance with the current accounting standards, the Company determined that it should account for the fair value of the conversion
feature and relative fair value of the issued warrants (up to the face amount of the Series C Preferred Stock) as a deemed dividend of
$675,000 and a charge to paid in capital.
During
the period ended December 31, 2021, the two accredited investors converted 150 Series C preferred shares into 10,000,000 common shares
at the conversion price of $0.015.
Common
Stock
During
the period ending March 31, 2022, the Company issued 4,000,000 shares of its common stock to a firm for services rendered, with a fair
value of $39,600 based on the quoted market price of the shares at time of issuance.
During
the period ended March 31, 2022, the Company issued 10,000,000 shares of common stock with a fair value of $25,000 at the date grant
for the cash conversion of 10,000,000 warrants.
Common
Stock Warrants
Since
inception, the Company has issued numerous warrants to purchase shares of the Company’s common stock to shareholders, consultants
and employees as compensation for services rendered.
A
summary of the Company’s warrant activity and related information is provided below (the exercise price and the number of shares
of common stock issuable upon the exercise of outstanding warrants have been adjusted to reflect a 1-for-75 reverse stock split.):
SCHEDULE
OF WARRANT ACTIVITY
| | |
Exercise
Price $ | | |
Number of Warrants | |
| Outstanding and exercisable at December 31, 2021 | |
| 0.0025 – 0.04 | | |
| 49,250,000 | |
| Warrants exercised | |
| 0.0025 | | |
| (10,000,000 | ) |
| Warrants granted | |
| - | | |
| - | |
| Warrants expired | |
| - | | |
| - | |
| Outstanding and exercisable at March 31, 2022 | |
| 0.0025 - 0.04 | | |
| 39,250,000 | |
SCHEDULE
OF STOCK WARRANT EXERCISE PRICE RANGE
| Stock Warrants as of March 31, 2022 | |
| Exercise | | |
Warrants | | |
Remaining | | |
Warrants | |
| Price | | |
Outstanding | | |
Life (Years) | | |
Exercisable | |
| $ | 0.0025 | | |
| 6,500,000 | | |
| 2.89 | | |
| 6,500,000 | |
| $ | 0.015 | | |
| 10,250,000 | | |
| 1.84 | | |
| 10,250,000 | |
| $ | 0.04 | | |
| 22,500,000 | | |
| 2.53 | | |
| 22,500,000 | |
During
the period ended March 31, 2022, the Company issued 10,000,000 shares of common stock with a fair value of $25,000 at the date grant
for the cash conversion of 10,000,000 warrants with a strike price of $0.0025.
The
outstanding and exercisable warrants at March 31, 2022 had an intrinsic value of approximately $388,575.
Common
Stock Options
Under
the Company’s 2008 Equity Compensation Plan (the “2008 Plan”), we are authorized to grant stock options intended to
qualify as Incentive Stock Options, “ISO”, under Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified
options, restricted and unrestricted stock awards and stock appreciation rights to purchase up to 7,000,000 shares of common stock to
our employees, officers, directors and consultants, with the exception that ISOs may only be granted to employees of the Company and
its subsidiaries, as defined in the 2008 Plan.
The
2008 Plan provides for the issuance of a maximum of 7,000,000 shares, of which, after adjusting for estimated pre-vesting forfeitures
and expired options, approximately 2,235,000 were available for issuance as of March 31, 2022.
No
options were granted during the period ending March 31, 2022.
12.
COMMITMENTS & CONTINGENCIES
Bonuses
The
Company has an employment agreement with its CEO which, among other provisions, provide for the payment of a bonus, as determined by
the Board of Directors, in amounts ranging from 15% to 50% of the executive’s yearly compensation, to be paid in cash or stock
at the Company’s sole discretion, if the Company has an increase in year over year revenues and the Executive performs his duties
(i) within the time frame budgeted for such duties and (ii) at or below the cost budgeted for such duties. No such bonuses were declared
or accrued during the periods ending March 31, 2022 or 2021.
Contingencies
From
time to time, we may be involved in routine legal proceedings, as well as demands, claims and threatened litigation that arise in the
normal course of our business. The ultimate amount of liability, if any, for any claims of any type (either alone or in the aggregate)
may materially and adversely affect our financial condition, results of operations and liquidity. In addition, the ultimate outcome of
any litigation is uncertain. Any outcome, whether favorable or unfavorable, may materially and adversely affect us due to legal costs
and expenses, diversion of management attention and other factors. We expense legal costs in the period incurred. We cannot assure you
that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against us in the future,
and these matters could relate to prior, current or future transactions or events. As of March 31, 2022, there was no pending or threatened
litigation against the Company.
COVID-19
The
Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic
on the Company’s business is highly uncertain and difficult to predict, as the responses that the Company, other businesses and
governments are taking continue to evolve. Furthermore, capital markets and economies worldwide have also been negatively impacted by
the COVID-19 pandemic, and it is possible that it could cause a local and/or global economic recession. Policymakers around the globe
have responded with fiscal policy actions to support the healthcare industry and economy as a whole. The magnitude and overall effectiveness
of these actions remain uncertain.
Due
to COVID-19, we have experienced some changes in our business, that have been both positive and negative. Specifically, the Company’s
IP licensing business has been negatively impacted by the global financial slowdown and many courts, judges and law firms are not working
at full capacity, which is creating delays in finalizing licensing agreements or litigation. We have also experienced a small percentage
of subscriptions being either cancelled or requested to be put on pause, due to financial hardships. On the positive side we saw an increase
in product sales specifically with medical supplies and equipment. Overall, our revenues have not been materially impacted as a whole,
however there have been some shifts with certain revenue streams doing better post COVID and others doing worse.
The
severity of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including, but not
limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company’s customers, service
providers and suppliers, all of which are uncertain and cannot be predicted. As of the date of issuance of Company’s financial
statements, the extent to which the COVID-19 pandemic may in the future materially impact the Company’s financial condition, liquidity
or results of operations is uncertain.
13.
SUBSEQUENT EVENTS
On
April 12, 2021, we issued in restricted common stock to a firm as part of their agreement with a value of $11,400 on
the date of the agreement.