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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
one)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For
the quarterly period ended
June 30, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For
the transition period from __________ to __________
Commission
file number
000-53046
GTX Corp
(Exact
name of registrant as specified in its charter)
Nevada |
|
98-0493446 |
(State
or other jurisdiction of |
|
(I.R.S.
Employer |
incorporation
or organization) |
|
Identification
No.) |
117 W. 9th Street,
Suite 1214,
Los Angeles,
CA,
90015 |
(Address
of principal executive offices) (Zip Code) |
(213)
489-3019 |
(Registrant’s
telephone number, including area code) |
(Former
name, former address and former fiscal year, if changed since last
report.)
Title
of each class registered: |
|
Trading
Symbol(s) |
|
Name
of each exchange on which registered: |
None |
|
GTXO |
|
None |
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes ☒ No ☐
Indicate
by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).
Yes ☒ No ☐
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act. (Check one):
Large
accelerated filer |
☐ |
|
Accelerated
filer |
☐ |
Non-accelerated
filer |
☐ (Do
not check if a smaller reporting company) |
|
Smaller
reporting company |
☒ |
Emerging
growth company |
☐ |
|
|
|
If an
emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant has filed a report on and
attestation to its management’s assessment of the effectiveness of
its internal control over financial reporting under Section 404(b)
of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
☐
Indicate
by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act).
Yes ☐
No ☒
Indicate
the number of shares outstanding of each of the issuer’s classes of
common stock, as of the latest practicable date:
247,107,241 common shares issued and outstanding as of
August 12, 2022.
GTX
CORP AND SUBSIDIARIES
For
the quarter ended June 30, 2022
FORM
10-Q
PART I
ITEM 1. FINANCIAL STATEMENTS
GTX CORP AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
See
accompanying notes to condensed consolidated financial
statements.
GTX CORP AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
See
accompanying notes to condensed consolidated financial
statements.
GTX CORP AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’
DEFICIT
Three
Months Ended June 30, 2022 and June 30, 2021
(Unaudited)
For
the Three Months Ended June 30, 2022 (Unaudited)
For
the Three Months Ended June 30, 2021 (Unaudited)
|
|
Series A Preferred |
|
|
Series B Preferred |
|
|
Series C Preferred |
|
|
Common Shares |
|
|
Additional |
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
|
Shares |
|
|
|
|
|
Shares |
|
|
|
|
|
Shares |
|
|
|
|
|
Paid-In |
|
|
Accumulated |
|
|
Equity |
|
|
|
Issued |
|
|
Amount |
|
|
Issued |
|
|
Amount |
|
|
Issued |
|
|
Amount |
|
|
Issued |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
(Deficit) |
|
Balance March 31,
2021 |
|
|
1,000,000 |
|
|
$ |
100 |
|
|
|
250 |
|
|
$ |
1 |
|
|
|
425 |
|
|
$ |
- |
|
|
|
185,952,481 |
|
|
$ |
18,595 |
|
|
$ |
22,276,107 |
|
|
$ |
(24,893,353 |
) |
|
$ |
(2,598,550 |
) |
Issuance of common stock for
services |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7,350,000 |
|
|
|
735 |
|
|
|
175,665 |
|
|
|
- |
|
|
|
176,400 |
|
Loss on stock compensation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
14,075 |
|
|
|
- |
|
|
|
14,075 |
|
Issuance of common stock for
conversion of debt |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,000,000 |
|
|
|
300 |
|
|
|
22,200 |
|
|
|
- |
|
|
|
22,500 |
|
Issuance of preferred stock for
financings |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
250 |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
249,999 |
|
|
|
- |
|
|
|
250,000 |
|
Issuance of common stock for the
conversion of preferred shares |
|
|
- |
|
|
|
- |
|
|
|
(46 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
18,400,000 |
|
|
|
1,840 |
|
|
|
(1,840 |
) |
|
|
- |
|
|
|
- |
|
Deemed dividend on fair value of
warrants & conversion feature |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
250,000 |
|
|
|
(250,000 |
) |
|
|
- |
|
Imputed interest – related
parties |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
30,705 |
|
|
|
- |
|
|
|
30,705 |
|
Net income (loss) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(255,488 |
) |
|
|
(255,488 |
) |
Balance June 30, 2021 |
|
|
1,000,000 |
|
|
$ |
100 |
|
|
|
204 |
|
|
$ |
1 |
|
|
|
675 |
|
|
$ |
1 |
|
|
|
214,702,481 |
|
|
$ |
21,470 |
|
|
$ |
23,016,911 |
|
|
$ |
(25,398,841 |
) |
|
$ |
(2,360,358 |
) |
GTX
CORP AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’
DEFICIT
Six
Months Ended June 30, 2022 and June 30, 2021
(Unaudited)
For
the Six Months Ended June 30, 2022 (Unaudited)
|
|
Series A
Preferred |
|
|
Series B
Preferred |
|
|
Series C
Preferred |
|
|
Common Shares |
|
|
Additional |
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
|
Shares |
|
|
|
|
|
Shares |
|
|
|
|
|
Shares |
|
|
|
|
|
Paid-In |
|
|
Accumulated |
|
|
Equity |
|
|
|
Issued |
|
|
Amount |
|
|
Issued |
|
|
Amount |
|
|
Issued |
|
|
Amount |
|
|
Issued |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
(Deficit) |
|
Balance December 31,
2021 |
|
|
1,000,000 |
|
|
$ |
100 |
|
|
|
180 |
|
|
$ |
- |
|
|
|
675 |
|
|
$ |
1 |
|
|
|
224,502,479 |
|
|
$ |
22,450 |
|
|
$ |
23,151,212 |
|
|
$ |
(26,053,384 |
) |
|
$ |
(2,879,621 |
) |
Issuance of common stock for
services |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
7,604,762 |
|
|
|
760 |
|
|
|
72,166 |
|
|
|
- |
|
|
|
72,926 |
|
Issuance of common stock for
financings |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
5,000,000 |
|
|
|
500 |
|
|
|
149,500 |
|
|
|
- |
|
|
|
150,000 |
|
Issuance of common stock for the
conversion of warrants |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
10,000,000 |
|
|
|
1,000 |
|
|
|
24,000 |
|
|
|
- |
|
|
|
25,000 |
|
Net income
(loss) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(420,608 |
) |
|
|
(420,608 |
) |
Balance June
30, 2022 |
|
|
1,000,000 |
|
|
$ |
100 |
|
|
|
180 |
|
|
$ |
1 |
|
|
|
675 |
|
|
$ |
- |
|
|
|
247,107,241 |
|
|
$ |
24,710 |
|
|
$ |
23,396,878 |
|
|
$ |
(26,473,992 |
) |
|
$ |
(3,052,303 |
) |
For
the Six Months Ended June 30, 2021 (Unaudited)
|
|
Series A Preferred |
|
|
Series B Preferred |
|
|
Series C Preferred |
|
|
Common Shares |
|
|
Additional |
|
|
|
|
|
|
|
|
|
Shares |
|
|
|
|
|
Shares |
|
|
|
|
|
Shares |
|
|
|
|
|
Shares |
|
|
|
|
|
Paid-In |
|
|
Accumulated |
|
|
Equity |
|
|
|
Issued |
|
|
Amount |
|
|
Issued |
|
|
Amount |
|
|
Issued |
|
|
Amount |
|
|
Issued |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
(Deficit) |
|
Balance December 31,
2020 |
|
|
1,000,000 |
|
|
$ |
100 |
|
|
|
250 |
|
|
$ |
1 |
|
|
|
150 |
|
|
$ |
- |
|
|
|
138,032,482 |
|
|
$ |
13,803 |
|
|
$ |
21,059,925 |
|
|
$ |
(24,177,926 |
) |
|
$ |
(3,104,097 |
) |
Issuance of common stock for
services |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
8,650,000 |
|
|
|
865 |
|
|
|
237,285 |
|
|
|
- |
|
|
|
238,150 |
|
Loss on stock compensation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
14,075 |
|
|
|
- |
|
|
|
14,075 |
|
Issuance of common stock for
conversion of debt |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
16,661,660 |
|
|
|
1,666 |
|
|
|
192,707 |
|
|
|
- |
|
|
|
194,373 |
|
Issuance of preferred stock for
financings |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
675 |
|
|
|
1 |
|
|
|
- |
|
|
|
- |
|
|
|
674,999 |
|
|
|
- |
|
|
|
675,000 |
|
Issuance of common stock for
financings |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
250,000 |
|
|
|
25 |
|
|
|
3,250 |
|
|
|
- |
|
|
|
3,275 |
|
Issuance of common stock for the
conversion of warrants |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
22,708,335 |
|
|
|
2,271 |
|
|
|
(2,271 |
) |
|
|
- |
|
|
|
- |
|
Issuance of common stock for the
conversion of preferred shares |
|
|
- |
|
|
|
- |
|
|
|
(46 |
) |
|
|
- |
|
|
|
(150 |
) |
|
|
- |
|
|
|
28,400,004 |
|
|
|
2,840 |
|
|
|
(2,840 |
) |
|
|
- |
|
|
|
- |
|
Loss on shares issued for conversion
of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
131,736 |
|
|
|
|
|
|
|
131,736 |
|
Deemed dividend on fair value of
warrants & conversion feature |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
675,000 |
|
|
|
(675,000 |
) |
|
|
- |
|
Imputed interest – related
parties |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
30,705 |
|
|
|
- |
|
|
|
30,705 |
|
Inpixon loan reduction correction |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,340 |
|
|
|
- |
|
|
|
2,340 |
|
Net income
(loss) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(545,915 |
) |
|
|
(545,915 |
) |
Balance June
30, 2021 |
|
|
1,000,000 |
|
|
$ |
100 |
|
|
|
204 |
|
|
$ |
1 |
|
|
|
675 |
|
|
$ |
1 |
|
|
|
214,702,481 |
|
|
$ |
21,470 |
|
|
$ |
23,016,911 |
|
|
$ |
(25,398,841 |
) |
|
$ |
(2,360,358 |
) |
See
accompanying notes to condensed consolidated financial
statements.
GTX CORP AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
See
accompanying notes to condensed consolidated financial
statements.
GTX
CORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
FOR
THE SIX MONTHS ENDED JUNE 30, 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 six months ended June 30, 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 $3,052,303 and negative working
capital of $2,983,441 as of June 30, 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 June
30, 2022 and June 30, 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
|
|
June 30, 2022 |
|
|
June 30, 2021 |
|
Product sales |
|
$ |
163,925 |
|
|
$ |
284,989 |
|
Service income |
|
|
68,992 |
|
|
|
105,135 |
|
IP and
consulting income |
|
|
- |
|
|
|
- |
|
Total |
|
$ |
232,917 |
|
|
$ |
390,124 |
|
The
following table shows the Company’s disaggregated net sales by
customer type:
|
|
June 30, 2022 |
|
|
June 30, 2021 |
|
B2B |
|
$ |
205,450 |
|
|
$ |
98,184 |
|
B2C |
|
|
27,467 |
|
|
|
290,823 |
|
Military |
|
|
- |
|
|
|
1,117 |
|
IP |
|
|
- |
|
|
|
- |
|
Total |
|
$ |
232,917 |
|
|
$ |
390,124 |
|
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 $38,920 as of
June 30, 2022 and $40,351
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
June 30, 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
June 30, 2022, the Company had four customers representing
approximately 38%, 14%, 10% and 9% of sales,
respectively (of the 38% in receivables
represents, this represents sales made through our online store and
consists of approximately 2,000 different customers), and four
customers representing approximately 23%, 7%, 7% and 6% of total accounts
receivable, respectively (excluding related party
payables).
As of
June 30, 2021, the Company had three customers representing
approximately
80%,
7% and
2% of sales, respectively, and three customers representing
approximately
22%,
19% and
9% of total accounts receivable, respectively (of the
80% 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 June 30, 2022 and December 31,
2021 the fair value of our investment in marketable securities was
$1,190 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
June 30, 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 |
|
|
|
June
30, |
|
|
|
2022 |
|
|
2021 |
|
Warrants |
|
|
39,250,001 |
|
|
|
49,250,001 |
|
Preferred B shares |
|
|
72,000,000 |
|
|
|
13,600,000 |
|
Preferred C shares |
|
|
25,208,333 |
|
|
|
270,000,000 |
|
Conversion
shares upon conversion of notes |
|
|
32,783,333 |
|
|
|
32,783,333 |
|
Total |
|
|
169,241,667 |
|
|
|
365,633,334 |
|
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 June
30, 2022. As such, the Company recorded no change in market value
during the six months ended June 30, 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 six months ended June 30, 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
$340 as of June 30, 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 $1,700 during the
current period ended June 30, 2022.
4.
INVENTORY
Inventories
consist of the following:
SCHEDULE OF INVENTORY
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
Raw materials |
|
$ |
38,820 |
|
|
$ |
71,936 |
|
Finished
goods |
|
|
41,697 |
|
|
|
25,322 |
|
Total
Inventories |
|
$ |
80,517 |
|
|
$ |
98,258 |
|
5.
PROPERTY AND
EQUIPMENT
Property
and equipment, net, consists of the following:
SCHEDULE OF PROPERTY AND
EQUIPMENT
|
|
June 30, 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 |
|
|
(438,243 |
) |
|
|
(421,573 |
) |
Total
property and equipment, net |
|
$ |
75,791 |
|
|
$ |
92,461 |
|
Depreciation
expense for the period ended June 30, 2022 and 2021 was $16,670 and $1,728, 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
|
|
June 30,
2022 |
|
|
December 31, 2021 |
|
(a) Term loan |
|
$ |
33,130 |
|
|
$ |
40,640 |
|
(b) Revolving line of credit |
|
|
7,000 |
|
|
|
7,000 |
|
(b) Revolving line of credit |
|
|
25,000
|
|
|
|
-
|
|
(c) CARE
loans |
|
|
10,417 |
|
|
|
74,953 |
|
Total |
|
$ |
75,547 |
|
|
$ |
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. The loan was paid in full on April 14,
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 June 30, 2022 the
principal balance outstanding on the note was $33,130,
which included $4,000
in principal and interest and reductions of $12,870
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 June 30, 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 June 30, 2022 was $0
and $25,000,
with $25,000 having been
borrowed and $0 paid back in the June
30, 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
June 30, 2022, the PPP loan was forgiven, and the balance in the
short-term on the EIDL loan is considered to be 25 months or
$10,417.
7.
CONVERTIBLE PROMISSORY
NOTES – PAST DUE
As of
June 30, 2022 and December 31, 2021, the Company had a total of
$858,000 and $758,000, respectively, of
outstanding convertible notes payable, which consisted of the
following:
SCHEDULE OF CONVERTIBLE NOTES
PAYABLE
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
Convertible Notes – with fixed conversion |
|
$ |
858,000 |
|
|
$ |
758,000 |
|
Less: Debt
discount |
|
|
- |
|
|
|
- |
|
Total
convertible notes, net of debt discount |
|
$ |
858,000 |
|
|
$ |
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
12% 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 third parties, which
lowered the related party notes and increased the convertible
promissory notes by $70,000.
During the six months ended June 30, 2022, an additional $100,000
of the Company’s executive notes were transferred to third parties
for cash. 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 fixed rate
of $0.01
per
share. As of December 31, 2021, and June 30, 2022 $688,000
of
these convertible notes are currently past due, with no associated
penalties.
|
8.
CARE
Loans
SCHEDULE OF LOANS PAYABLE
|
|
June 30, 2022 |
|
|
December 31, 2021 |
|
a) PPP loan – short
term |
|
$ |
- |
|
|
$ |
67,870 |
|
b) EIDL loan – short term |
|
|
10,417 |
|
|
|
7,083 |
|
b) EIDL loan –
long term |
|
|
139,583 |
|
|
|
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 June 30, 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 June 30, 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 June 30, 2022, the Company calculated that 13 months of the
360 periods on the
30-year loans should be considered short-term (months since
installment plan was supposed to begin), and as such $5,347
is considered short-term liabilities, has accrued interest on the
loan of $12,188
as of June 30, 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 $170,000 of their outstanding
employee notes for cash to third parties, which lowered the related
party notes and increased the convertible note balance by
$170,000. 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 $1,014,546, net of debt
discounts. As of June 30, 2022, the outstanding balance on the
convertible promissory notes was $914,546, 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 June 30, 2022 the
interest on the notes was $353,301.
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 June 30,
2022, and December 31, 2021, the Company owed $449,773 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 June 30, 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, giving the
Board of Directors of this corporation the authorization to (A)
determine the number of series into which shares of Preferred Stock
may be divided, (B) to determine the designations, powers,
preferences, voting and other rights, and the qualifications,
limitations and restrictions granted to or imposed upon the
Preferred Stock or any series thereof or any holders thereof, (C)
to determine and alter the designations, powers, preferences and
rights, and the qualifications, limitations and restrictions
granted to or imposed upon any wholly unissued series of Preferred
Stock or the holders thereof, (D) to fix the number of shares of
that series, and (E) to increase or decrease, within the limits
stated in any resolutions of the Board of Directors originally
fixing the number of the shares constituting any series (but not
below the number of such shares then outstanding), the number the
shares of any such series subsequent to the issuance of shares of
that series.
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, the Series A Preferred Stock shall,
collectively, at all times have super-majority voting power equal
to two-thirds (2/3rds) of the votes available to be cast on any
matter subject to a shareholder vote. 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.
Effective January 31, 2020, Chris Walsh resigned from the Board of
Directors and returned his Preferred A shares to Treasury,
resulting in 900,000 Preferred
shares being outstanding currently.
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 June 30, 2022, the Company issued
7,604,762
shares of its common stock to various firms for services rendered,
with a fair value of $72,926 based
on the quoted market price of the shares at time of issuance.
During the period ended June 30, 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.
On October 15, 2021, the Company initiated a financing for gross
proceeds of up to $2,000,250
through the issuance of
66,675,000 units at $.03
per unit, utilizing a Regulation A Offering Memorandum under the US
Securities Act of 1933. The financing became effective on October
27, 2021. Each unit consists of one share of the Company’s common
stock for a period beginning one year after the offering statement
was qualified by the Securities and Exchange Commission. For the
period ended June 30, 2022, gross proceeds of $150,000
were received and
5,000,000 common shares have been issued related to this
offering. The Company spent $50,000 in total for legal
and accounting fees to file and make the Regulation A
effective.
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 June 30, 2022 |
|
|
0.0025 -
0.04 |
|
|
|
39,250,000 |
|
SCHEDULE OF STOCK WARRANT EXERCISE PRICE
RANGE
Stock Warrants as of June 30, 2022 |
|
Exercise |
|
|
Warrants |
|
|
Remaining |
|
|
Warrants |
|
Price |
|
|
Outstanding |
|
|
Life (Years) |
|
|
Exercisable |
|
$ |
0.0025 |
|
|
|
6,500,000 |
|
|
|
2.64 |
|
|
|
6,500,000 |
|
$ |
0.015 |
|
|
|
10,250,000 |
|
|
|
1.59 |
|
|
|
10,250,000 |
|
$ |
0.04 |
|
|
|
22,500,000 |
|
|
|
2.28 |
|
|
|
22,500,000 |
|
During the period ended June 30, 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 June 30, 2022 had an
intrinsic value of approximately $321,850.
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 June 30, 2022.
No options were granted during
the period ending June 30, 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 June 30, 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 June 30,
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
None.
ITEM 2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” in Item 2 of Part I of this report include
forward-looking statements. These forward looking statements are
based on our management’s current expectations and beliefs and
involve numerous risks and uncertainties that could cause actual
results to differ materially from expectations. In some cases, you
can identify forward-looking statements by terminology such as
“may,” “should,” “expects,” “plans,” “anticipates,” “believes,”
“estimates,” “predicts,” “potential,” “proposed,” “intended,” or
“continue” or the negative of these terms or other comparable
terminology. You should read statements that contain these words
carefully, because they discuss our expectations about our future
operating results or our future financial condition or state other
“forward-looking” information. Many factors could cause our actual
results to differ materially from those projected in these
forward-looking statements, including but not limited to:
variability of our revenues and financial performance; risks
associated with product development and technological changes; the
acceptance our products in the marketplace by existing and
potential future customers; general economic conditions. You should
be aware that the occurrence of any of the events described in this
Quarterly Report could substantially harm our business, results of
operations and financial condition, and that upon the occurrence of
any of these events, the trading price of our securities could
decline. Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee
future results, growth rates, levels of activity, performance or
achievements. We are under no duty to update any of the
forward-looking statements after the date of this Quarterly Report
to conform these statements to actual results.
Introduction
Unless otherwise noted, the terms “GTX Corp”, the “Company”,
“we”, “us”, and “our” refer to the ongoing business operations of
GTX Corp and our wholly-owned subsidiaries, Global Trek Xploration,
and LOCiMOBILE, Inc.
Organization and Presentation
During the periods covered by the accompanying financial
statements, GTX Corp and its subsidiaries 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 is a California corporation which engages in
the business of design, development, manufacturing, and sales of
health and safety wearable technology solutions. Utilizing Global
Positioning Satellite (“GPS”), Cellular, Radio Frequency (“RF”),
Near Field Communications (“NFC”), WiFi, and Bluetooth low energy
(“BLE”) as core technologies for monitoring and tracking assets.
GTX is vertically integrated and provides hardware, software, and
connectivity, delivering a complete end to end location-based
platform that enables subscribers to track in real time the
whereabouts of people, pets, or high valued assets. Our proprietary
GPS devices, which consist of a miniature quad-band General Packet
Radio Service (“GPRS”) transceiver, custom antenna, circuitry,
battery, and inductive charging pad can be customized and
integrated into numerous form factors. The finished products are
then placed or worn so that their location and movement can be
monitored in real time over the Internet through our 24x7 tracking
portal or on a web-enabled cellular telephone.
Many of our core products and services are supported by an
intellectual property 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 Company’s 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.
Operations
The Company designs, develops, manufactures, sells, and distributes
health and safety products and services, and other related medical
supplies and equipment, through a global business to business
(“B2B”) network of resellers, affiliates, distributors, nonprofit
organizations, local, state, and federal government agencies,
police departments, manufacturers reps and retailers, and direct
business to consumer (“B2C”). Offering a variety of electronic and
non-electronic devices and equipment, a proprietary Internet of
things (“IoT”) enterprise monitoring platform and a licensing
subscription business model. The Company provides a complete end to
end solution of hardware, middleware, apps, connectivity,
licensing, and professional services, letting our customers know
where or how someone, or something, is at the touch of a button,
delivering safety, security, and peace of mind in real-time. Except
for our military products and medical protective equipment, all of
our consumer and enterprise tracking products funnel into the GTX
Corp IoT monitoring platform which supports end user customers in
over 35 countries. The Company is also in the business of licensing
intellectual property and monetizing its patent portfolio.
Overview
During the second quarter of 2022, we focused on ramping up
production for our GPS SmartSoles, getting all of our international
distributors back online and fulfilling their backorders, finishing
our new NFC product which we expect to launch in Q3 2022, continued
to support the Endstate NFC/NFT rollout, and attended the LD Micro
conference to meet with investors and discuss our REG A, which is
priced above market at $.03.
Revenues were not as anticipated for the second quarter 2022,
mostly due to a significant spike in COVID cases, ongoing supply
chain disruptions, looming worries about the overall health of the
economy, and general market volatilities, hence we did not meet our
revenue expectations and revenues were down by 40% compared to the
comparable previous quarter. Under these challenging circumstances,
we did however see continued demand for our SmartSoles, with orders
to fulfill throughout the rest of the year. More domestic product
sales will subsequently increase our higher margin subscription
business which saw a 12% increase over the comparable previous
quarter. Also, our Endstate NFC/NFT business increased, with now
close to 2,400 units on order for delivery in Q3, 2022. And on the
cash flow and balance sheet side, we continued to keep a low burn
rate and reduced our net losses by 23% from the comparable previous
quarter, took on no new convertible debt, management continued to
defer and accrue 34% of our salary and we raised from our Reg A,
$150,000.00 during the second quarter 2022, and subsequently raised
an additional $30,000.00 in July.
With the recent spike in COVID cases across the country we did
continue to see demand for protective medical supplies and fulfill
orders daily. With the continued demand for our SmartSoles we
increased our production commitment for an additional 1,000 units.
And we released a new version of our tracking app along with a new
ecommerce store on the Shopify platform, which enables us to have
more capabilities to sell through social media platforms such as
Facebook and Instagram, along with having better accounting and
inventory management capabilities as we start ramping up domestic
sales. We also implemented Wi-Fi capabilities on the SmartSole
platform which will enable us to track indoors and gets us one step
closer to implementing the Bluetooth feature which will then
convert the SmartSole from a tracking device to a mobile hub
capable of interacting with other wearable medical devices.
We remain optimistic that COVID-19 pandemic is behind us. However,
we still have some inventory on hand and solid relationships with
our vendors so as long as there is demand we will be ready to serve
our customers. Our focus continues to be on ramping up sales of the
new SmartSoles, NFC products, other medical wearable devices, A.I.
and IP licensing. Health & Safety, Track & Trace. Everyone
wants to be healthy, live better and longer, and know where someone
or something is and has been. We believe we are in a position to
monetize from these trends and keep hearing from many of our B2B
customers and international distributors that they want more
wearable solutions and technology to serve the medical
community.
Results of Operations
The following discussion should be read in conjunction with our
interim consolidated financial statements and the related notes
that appear elsewhere in this Quarterly Report.
Three Months Ended June 30, 2022 (“Q2 2022”) Compared to the
Three Months Ended June 30, 2021 (“Q2 2021”)
|
|
Three Months Ended June 30, |
|
|
|
2022 |
|
|
2021 |
|
|
|
$ |
|
|
% of Revenues |
|
|
$ |
|
|
% of Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
|
31,245 |
|
|
|
49 |
% |
|
|
112,656 |
|
|
|
71 |
% |
Service income |
|
|
33,156 |
|
|
|
51 |
% |
|
|
46,947 |
|
|
|
29 |
% |
IP
royalties |
|
|
- |
|
|
|
0 |
% |
|
|
- |
|
|
|
0 |
% |
Total revenues |
|
|
64,401 |
|
|
|
100 |
% |
|
|
159,603 |
|
|
|
100 |
% |
Cost of products sold |
|
|
35,989 |
|
|
|
56 |
% |
|
|
29,959 |
|
|
|
19 |
% |
Cost of service revenue |
|
|
5,973 |
|
|
|
9 |
% |
|
|
18,360 |
|
|
|
12 |
% |
Cost of
licensing revenue |
|
|
- |
|
|
|
0 |
% |
|
|
- |
|
|
|
0 |
% |
Cost of goods
sold |
|
|
41,962 |
|
|
|
65 |
% |
|
|
48,319 |
|
|
|
30 |
% |
Gross
profit |
|
|
22,440 |
|
|
|
35 |
% |
|
|
111,284 |
|
|
|
70 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wages and benefits |
|
|
131,323 |
|
|
|
204 |
% |
|
|
120,160 |
|
|
|
75 |
% |
Professional fees |
|
|
77,177 |
|
|
|
120 |
% |
|
|
97,790 |
|
|
|
61 |
% |
Sales and marketing expenses |
|
|
5,058 |
|
|
|
8 |
% |
|
|
59,802 |
|
|
|
37 |
% |
General and
administrative |
|
|
27,292 |
|
|
|
42 |
% |
|
|
41,650 |
|
|
|
26 |
% |
Total operating
expenses |
|
|
240,850 |
|
|
|
374 |
% |
|
|
319,402 |
|
|
|
200 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain/(loss) from operations |
|
|
(218,410 |
) |
|
|
-339 |
% |
|
|
(208,118 |
) |
|
|
-130 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
(expense)/income, net |
|
|
(7,813 |
) |
|
|
-12 |
% |
|
|
(47,370 |
) |
|
|
-30 |
% |
Net
income/(loss) |
|
|
(226,223 |
) |
|
|
-351 |
% |
|
|
(255,488 |
) |
|
|
-160 |
% |
Revenues
Revenues were $64,401 for the Q2 2022 as compared to $159,603 for
the Q2 2021, representing a decrease of 60%, This decrease was
primarily driven from transitioning out of direct-to-consumer PPE
sales during Covid into our core B2B business.
During Q2 2022, the Company’s customer base and revenue streams
were comprised of approximately 88.21% B2B (Wholesale Distributors
and Enterprise Institutions), 11.79% B2C (consumers and government
agencies who bought on the behalf of consumers, through our online
ecommerce platform and through Amazon, Google and iTunes), 0% IP
(our monetization campaign from consulting, licensing and asserting
our patents) and 0% Military and Law Enforcement.
During Q2 2021, the Company’s customer base and revenue streams
were comprised of approximately 22.47% B2B (Wholesale Distributors
and Enterprise Institutions), 77.05% B2C (consumers and government
agencies who bought on the behalf of consumers, through our online
ecommerce platform and through Amazon, Google and iTunes), 0% IP
(our monetization campaign from consulting, licensing and asserting
our patents) and 0.48% Military and Law Enforcement.
Cost of goods sold
Cost of goods sold were $41,962 for the Q2 2022 compared to $48,319
for the Q2 2021, representing a decrease of 13%. This decrease was
primarily due to the shift from COVID related PPE’s with less
margins, to the higher margin 4G SmartSoles and the increase in
recurring fees.
We expect our margins to increase in 2022 once we start ramping up
our subscriptions and licensing and sell more of our proprietary
products like our SmartSoles, where we have no competition. Our
overall gross margin was slightly lower in 2021, predominately
because most of our revenues came from product sales which require
competitive pricing, and that includes shipping charges. In order
to be competitive with the major online retailers (many of them
include free shipping) we had to reduce our shipping charges to be
in line with competitors.
Wages and benefits
Wages and benefits increased $11,163, or 9%, in Q2 2022 as compared
to Q2 2021. This increase was primarily the result of one of our
executive sales staff taking on more duties as we transition back
into our core GPS and SmartSole business.
Professional fees
Professional fees consist of costs attributable to consultants and
contractors who primarily spend their time on legal, accounting,
product development, business development, corporate advisory
services and shareholder communications. Such costs decreased
$20,611 or 21% in Q2 2022 as compared to in Q2 2021. Even though
some professional fees have decreased as more responsibilities were
transferred from outside contractors and consultants to in-house
personnel. Those fees related to investor relations and business
development have increased due to new products lines and the
impending release of the company’s updated SmartSole products.
Sales and marketing expenses
Sales and marketing expenses decreased by 92% or $54,744 in Q2 2022
in comparison to Q2 2021. This decrease was primarily due to a
large Company awareness campaign in 2021 compared to 2022.
General and administrative
General and administrative costs in Q2 2022 decreased by $14,358 or
34% in comparison to Q2 2021, mostly due to adjustments to prior
period accruals.
Other income/(expense), net
Other expense, net decreased 84% or $39,556 in Q2 2022 compared to
Q2 2021. This decrease was primarily as a result of decrease in the
amortization of debt discounts and $34,191 in recovery of EDD
payments during Covid.
Net income/(loss)
Net loss decreased by 11% or $29,260 from Q2 2022 to Q2 2021
primarily as a result of the decrease in the amortization of debt
discounts and $34,191 in recovery of EDD payments during Covid.
Six Months Ended June 30, 2022 (“Q1 and Q2 2022”) Compared to
the Six Months Ended June 30, 2021 (“Q1 and Q2 2021”)
|
|
Six Months Ended June 30, |
|
|
|
2022 |
|
|
2021 |
|
|
|
$ |
|
|
% of Revenues |
|
|
$ |
|
|
% of Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales |
|
|
163,925 |
|
|
|
70 |
% |
|
|
284,989 |
|
|
|
73 |
% |
Service income |
|
|
68,992 |
|
|
|
30 |
% |
|
|
105,135 |
|
|
|
27 |
% |
IP
royalties |
|
|
- |
|
|
|
0 |
% |
|
|
- |
|
|
|
0 |
% |
Total revenues |
|
|
232,917 |
|
|
|
100 |
% |
|
|
390,124 |
|
|
|
100 |
% |
Cost of products sold |
|
|
123,934 |
|
|
|
53 |
% |
|
|
142,054 |
|
|
|
36 |
% |
Cost of service revenue |
|
|
12,891 |
|
|
|
6 |
% |
|
|
53,427 |
|
|
|
14 |
% |
Cost of
licensing revenue |
|
|
- |
|
|
|
0 |
% |
|
|
- |
|
|
|
0 |
% |
Cost of goods
sold |
|
|
136,824 |
|
|
|
59 |
% |
|
|
195,481 |
|
|
|
50 |
% |
Gross
profit |
|
|
96,092 |
|
|
|
41 |
% |
|
|
194,643 |
|
|
|
50 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wages and benefits |
|
|
246,962 |
|
|
|
110 |
% |
|
|
246,962 |
|
|
|
63 |
% |
Professional fees |
|
|
197,960 |
|
|
|
75 |
% |
|
|
197,960 |
|
|
|
51 |
% |
Sales and marketing expenses |
|
|
69,738 |
|
|
|
7 |
% |
|
|
69,738 |
|
|
|
18 |
% |
General and
administrative |
|
|
88,399 |
|
|
|
38 |
% |
|
|
89,701 |
|
|
|
23 |
% |
Total operating
expenses |
|
|
534,425 |
|
|
|
229 |
% |
|
|
604,361 |
|
|
|
155 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain/(loss) from operations |
|
|
(438,333 |
) |
|
|
-188 |
% |
|
|
(409,718 |
) |
|
|
-105 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
(expense)/income, net |
|
|
17,725 |
|
|
|
8 |
% |
|
|
(136,197 |
) |
|
|
-35 |
% |
Net
income/(loss) |
|
|
(420,608 |
) |
|
|
-181 |
% |
|
|
(545,915 |
) |
|
|
-140 |
% |
Revenues
Revenues as a whole in Q1 and Q2 2022 decreased by 40% or $157,207
in comparison to Q1 and Q2 2021, a result of the reduction in
demand for PPP’s and the inability to ship any SmartSoles during
the 1st quarter due to supply chain delays. We continue
to fulfill pre-sale orders daily and expect SmartSole production to
catch up with orders over the next few quarters. Additionally, we
are seeing an uptick in PPE demand and increased sales as a result
of the new COVID spike.
Cost of goods sold
Cost of goods sold increased by 30% or $58,658 during Q1 and Q2
2022 in comparison to Q1 and Q2 2021 primarily due to the shift
from purchases of low margin health and safety inventories to the
higher margin SmartSoles.
Wages and benefits
Wages and benefits during Q1 and Q2 2022 increased by 3% or $8,126
in comparison to Q1 and Q2 2021, primarily due to employee benefits
and conferences.
Professional fees
Professional fees consist of costs attributable to consultants and
contractors who primarily spend their time on legal, accounting,
product development, business development, corporate advisory
services and investor relations. Such costs decreased $22,621 or
11% during Q1 and Q2 2022 as compared to Q1 and Q2 2021, primarily
due to the Company’s decreased need for outside consultants.
Sales and marketing expenses
Sales and marketing expenses decreased by 78% or $54,150 during Q1
and Q2 2022 in comparison to Q1 and Q2 2021. Primarily due to costs
related to the ramp up of increased health and safety products and
the associated advertising in 2021.
General and administrative
General and administrative costs during Q1 and Q2 2022 decreased by
$1,300 or 1% in comparison to Q1 and Q2 2021, thus remaining
constant with reductions in insurance fees and corporate expenses
being offset with increased product development and general
occupancy costs.
Other income/(expense), net
Other expense, net decreased 113% or $153,922 from Q1 and Q2 2022
to Q1 and Q2 2021 primarily as a result of a $67,870 from the
forgiveness of a CARE loan, the decrease in the amortization of
debt discounts and $34,191 in recovery of EDD payments during
Covid. These gains offset the increase in interest expense and
financing cots related to debt and the Reg A.
Net income/(loss)
Net loss decreased by 22% or $118,284 from Q1 and Q2 2022 to Q1 and
Q2 2021 primarily as a result of $67,870 from the forgiveness of a
CARE loan, the decrease in the amortization of debt discounts and
$34,191 in recovery of EDD payments during Covid, all while
operating expenses remaining fairly stable during the transition
from health and safety products back to our core GPS and SmartSole
business.
Liquidity and Capital Resources
As of June 30, 2022, we had $61,135 of cash and cash equivalents,
and a working capital deficit of $2,983,441, compared to $138,342
of cash and cash equivalents and a working capital deficit of
$2,829,165 as of December 31, 2021.
During the six months ended June 30, 2022, our net loss was
$420,608 compared to a net loss of $545,915 for the six months
ended June 30, 2021. Net cash used in operating activities in the
six months ended June 30, 2022 and in the six months ended June 30,
2021 was $269,697 and $243,364, respectively.
Net cash used in investing activities during the six months ended
June 30, 2022 was $0, as compared to net cash used in investing
activities during the six months ended June 30, 2021 which was
$63,242 which consisted of proceeds totaling $1,258 received from
the sale of marketable securities and $64,500 in developments cost
assets.
Net cash provided by financing activities during the six months
ended June 30, 2022 was $192,490 and consisted of $150,000 received
form the purchase of 5,000,000 shares of common stock at $0.03 per
share, $25,000 received for the conversion of warrants, $25,000
from the issuance of debt and $34,180 from draws upon our line of
credit. This was offset by payments on debt of $32,510 and $9,180
on the line of credit. Net cash used by financing activities during
the six months ended June 30, 2021 was $658,707 and consisted of
$16,293 in upon our lines of credit and a term loan, and $675,000
received from financings. This represents a decrease of 88%. This
reduction in additional financings is directly related to the
Company not relying on convertible notes for financings, with no
new convertible notes being issued.
Because revenues from our operations have, to date, been
insufficient to fund our working capital needs, we currently rely
on the cash we receive from our financing activities to fund our
growth, capital expenditures and to support our working capital
requirements. The sale of our products and services is expected to
enhance our liquidity in 2022, although the amount of revenues we
receive in 2022 still cannot be estimated.
Until such time as our products and services can support our
working capital requirement, we expect to continue to generate
revenues from our other licenses, subscriptions, international
distributors, hardware sales, professional services and new
customers in the pipeline. However, the amount of such revenues is
unknown and is not expected to be sufficient to fund our working
capital needs. For our internal budgeting purposes, we have assumed
that such revenues will not be sufficient to fund all of our
planned operating and other expenditures during 2022. In addition,
our actual cash expenditures may exceed our planned expenditures,
particularly if we invest in the development of improved versions
of our existing products and technologies, and if we increase our
marketing expenses. Accordingly, we anticipate that we will have to
continue to raise additional capital in order to fund our
operations in 2022 No assurance can be given that we will be able
to obtain the additional funding we need to continue our
operations.
In order to continue funding our growth, IP and working capital
needs and new product development costs, during the second quarter
of 2022 we continued to draw down on our credit line to fund
purchase orders. However, no assurance can be given that the
investor will provide the funding, if and when requested by us.
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 stockholders’
deficit of $3,052,303 and negative working capital of $2,983,441 as
of June 30, 2022 and used cash in operations of $269,697 during the
current period then ended. A significant part of our negative
working capital position at June 30, 2022 consisted of $923,130, of
amounts due to various accredited investors of the Company for
convertible promissory notes, loans and a letter of credit. The
Company anticipates further losses in the development of its
business. Please see the section entitled “Risk Factors” included
in our Annual Report on Form 10-K for the year ended December 31,
2021 for more information regarding risks associated with our
business.
Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our
financial condition, changes in financial condition, revenues or
expenses, results of operations, liquidity, capital expenditures or
capital resources that is material to investors.
Inflation
We do not believe our business and operations have been materially
affected by inflation.
Critical Accounting Policies and Estimates
There are no material changes to the critical accounting policies
and estimates described in the section entitled “Critical
Accounting Policies and Estimates” under Item 7 in our Annual
Report on Form 10-K for the year ended December 31, 2021.
ITEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company”, we are not required to provide
the information under this Item 3.
ITEM 4. CONTROLS AND
PROCEDURES.
Evaluation of Disclosure Controls and Procedures
Our management is responsible for establishing and maintaining a
system of disclosure controls and procedures (as defined in Rule
13a-15(e)) under the Exchange Act) that is designed to ensure that
information required to be disclosed by the Company in the reports
that we file or submit under the Exchange Act is recorded,
processed, summarized and reported, within the time specified in
the Commission’s rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by an
issuer in the reports that it files or submits under the Exchange
Act is accumulated and communicated to the issuer’s management,
including its principal executive officer or officers and principal
financial officer or officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding
required disclosure.
Our management, including our chief executive officer and chief
financial officer, evaluated the effectiveness of our disclosure
controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e)
under the Exchange Act) as of the end of the period covered by this
report. There are inherent limitations to the effectiveness of any
system of disclosure controls and procedures. In designing and
evaluating the disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of
achieving the desired control objectives.
Based on the evaluation as of June 30, 2022, for the reasons set
forth below, our chief executive officer and chief financial
officer concluded that our disclosure controls and procedures were
effective to provide reasonable assurance that information we are
required to disclose in reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC’s rules and forms, and that
such information is accumulated and communicated to our management,
including our chief executive officer and chief financial officer,
as appropriate, to allow timely decisions regarding required
disclosure.
PART II - OTHER
INFORMATION
ITEM 1. LEGAL
PROCEEDINGS.
None.
ITEM 1A. RISK
FACTORS.
These are not all of the risks associated with the Company and must
be used in conjunction with those disclosed in the most recent
December 31, 2021 10K filing.
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.
ITEM 2.(a). UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On January 14, 2022, we issued 4,000,000 in common stock, valued at
$39,600 to a firm as part of their agreement.
On January 21, 2022, an investor converted 10,000,000 of warrants
into 10,000,000 shares of common stock at a strike of $0.0025 for
$25,000 in cash.
On April 1, 2022, we issued 1,200,000 in common stock, valued at
$11,400 to a firm as part of their agreement.
On April 6, 2022, an investor invested $150,000 in the Company’s
Reg A and received 5,000,000 of shares of common stock at a price
of $0.03.
On April 12, 2021, we issued 1,904,762 in restricted common stock
to a firm as part of their agreement with a value of $18,476 on the
date of the agreement.
On April 1, 2022, we issued 1,200,000 in common stock, valued at
$11,400 to a firm as part of their agreement.
On May 12, 2022, we issued 500,000 in common stock, valued at
$3,450 to a firm as part of their agreement.
The issuance of the above shares was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933, as
amended.
ITEM 3. DEFAULTS UPON
SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY
DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
(a) Exhibits
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
|
GTX
CORP |
|
|
|
Date:
August 12, 2022 |
By: |
/s/
ALEX MCKEAN |
|
|
Alex
McKean, |
|
|
Chief
Financial Officer (Principal Financial Officer) |
Date:
August 12, 2022 |
By: |
/s/
PATRICK BERTAGNA |
|
|
Patrick
Bertagna, |
|
|
Chief
Executive Officer |
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