8-K

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, DC 20549

FORM 8-K

CURRENT REPORT 

Pursuant to Section 13 OR 15(d) of the Securities and Exchange Act of 1934

Date of Report (Date of earliest event reported): September 30, 2019

Commission File Number 000-54530

GBT TECHNOLOGIES INC. 

(Exact name of registrant as specified in its charter)

Nevada	27-0603137
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

2500 Broadway, Suite F-125, Santa Monica, CA 90404 

(Address of principal executive offices)

424-238-4589 

(Issuer’s telephone number)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

/_/ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

/_/ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

/_/ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

/_/ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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.  /_/

Securities registered pursuant to Section 12(b) of the Act: Not applicable.

Title of each class	Trading Symbol	Name of each exchange on which registered
Not applicable.

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Item 1.01 – Entry Into a Material Definitive Agreement.

Item 2.01 – Completion of Acquisition or Disposition of Assets.

On September 30, 2019, GBT Technologies Inc. (the “Company”) entered into an Asset Purchase Agreement with Surge Holdings, Inc., a Nevada corporation (“SURG”) pursuant to which the Company agreed to sell and assign to SURG, all the assets and certain specified liabilities, of its ECS Prepaid, Electronic Check Services and the Central State Legal Services businesses in consideration of $5,000,000 to be paid through the issuance of 3,333,333 shares of SURG’s common stock and a convertible promissory note in favor of the Company in the principal amount of $4,000,000 (the “SURG “Note”), convertible into SURG’s shares of common stock following the six month anniversary of the issuance date. The conversion price of the SURG Note is the volume weighted average price of SURG’s common stock over the 20 trading days prior to the conversion; provided, however, the conversion price shall never be lower than $0.10 or higher than $0.70. The Company has agreed to restrict its ability to convert the SURG Note and receive shares of common stock such that the number of shares of common stock held by it in the aggregate and its affiliates after such conversion does not exceed 4.99% of the then issued and outstanding shares of common stock. . There is no material relationship between the Company and SURG. The SURG Note is payable by SURG to the Company on the 18 month anniversary of the issuance date and does not bear interest. The SURG Note is convertible

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
10.1	Asset Purchase Agreement between Surge Holding In. and GBT Technologies Inc. executed September 30, 2019
10.2 99.1	Convertible Promissory Note Issued by Surge Holding Inc. to GBT Technologies Inc. dated September 27, 2019, Counter Signed September 30, 2019 GBT Technologies Inc. Pro Forma Consolidated Financial Statements as of June 30, 2019; for the six months ended June 30, 2019 and for the year ended December 31, 2018.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		GBT TECHNOLOGIES INC.
		By:	/s/ Douglas Davis
		Name:	Douglas Davis
		Title:	Chief Executive Officer
Date:	October 3, 2019
	Santa Monica, California

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EX-10.1

Exhibit 10.1

ASSET PURCHASE AGREEMENT

This Asset Purchase Agreement (this “Agreement”), dated as of September 27, 2019, is entered into by and between GBT TECHNOLOGIES INC., a Nevada corporation (“Seller”), whose principal address is 2500 Broadway, Suite F-125, Santa Monica, CA 90404, and Surge Holdings, Inc., a Nevada corporation (“Buyer”), whose principal address is 3124 Brother Blvd, Suite 104, Bartlett, TN 38133.

RECITALS

WHEREAS, Seller wishes to sell and assign to Buyer, and Buyer wishes to purchase and assume from Seller, substantially all the assets (including or even in specific intellectual properties that “form” a software), and certain specified liabilities, of its ECS Prepaid business, Electronic Check Services business, and the Central State Legal Services business (collectively the “Business”), subject to the terms and conditions set forth herein. The purchase and sale of the assets and all related transactions are referred to herein as the “Transaction”.

NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.             Purchase and Sale of Assets. Subject to the terms and conditions of this Agreement, Seller agrees to sell, transfer, assign and deliver to Buyer, and Buyer agrees to purchase, acquire and take assignment and delivery of the properties and assets (the “Assets”), as more particularly described on Exhibit “A”, attached hereto and incorporated herein by this reference:

(a)           Inventory. All of the inventory of the Seller used or consumed by Seller in the operation of the Business, wherever located, including all finished goods, work in process, raw materials, spare parts and all other materials and supplies to be used or consumed by Seller in the production of finished goods in the operation of the Business, (collectively, the “Inventory”).

(b)          Contracts. All of the rights, titles, interests and benefits accruing to Seller under those rental, sales, supply, purchase order, service, sign, maintenance, equipment, any and all telephone and other contracts or leases relating to the Business, all of Seller’s rights accruing under any so-called Non-Compete Agreements in favor of Seller in relation to the Business, and any other contracts or leases relating to the operation of the Business (“Contracts”);

(c)           Licenses and Permits. Any and all transferable consents, authorizations, variances or waivers, licenses, permits, registrations, certificates, approvals and similar rights from any governmental or quasi-governmental agency, department, board, commission, bureau or other entity or instrumentality with respect to the Business (collectively, the “Licenses”) held by or granted to Seller;

(d)           Intangible Assets. All of Seller’s goodwill associated with the Business, including the telephone number, domain name and web page, if any, customer lists, employee lists, supplier lists, and prospect lists associated with the Business, all trademarks, service marks and their associated goodwill, trade secrets and confidential information, to the extent transferable (collectively the “Intangible Assets”).

(e)           All Intellectual Properties which include codes and keys that compile a software which allow “processing” prepaid platform of ACH funds from merchant bank account to providers of the purchased service (“IP”) .

2.             Purchase Price; Payment; Assumed Liabilities; Allocations.

(a)           Purchase Price; Payment and Other Consideration. The purchase price for the Assets shall be FIVE MILLION DOLLARS ($5,000,000.00) (the “Purchase Price”). Payment of the Purchase Price shall be made as follows:

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At Closing, Buyer shall transfer THREE MILLION THREE HOUNDRED THIRTY-THREE THOUSAND THREE HUNDRED THIRTY THREE (3,333,333) shares of Buyer’s common stock and execute a convertible promissory note in favor of the Seller in the amount of FOUR MILLION and 00/100 DOLLARs ($4,000,000.00) (the “Note”), convertible into Buyer’s shares of common stock, $0.001 par value per share (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in the Note;

(b)          Assumption of Liabilities. At Closing, in addition to payment of the Purchase Price, Buyer shall assume and agree to pay, discharge, and perform the following, and only the following and no other, obligations and liabilities of Seller (the “Assumed Liabilities”):

Seller’s liabilities incurred after the “Effective Date” (hereafter defined) by Buyer pursuant to the Contracts, but only to the extent such obligations and liabilities accrue and arise after the Effective Date and are not caused by or related to any action or inaction by Sellers, or any other party occurring prior to the Effective Date.

Except for the specific Assumed Liabilities as defined above, Buyer shall not assume, pay or otherwise be liable for any other obligations, liabilities or debts of Seller of any nature whatsoever.

(c)           Retained Liabilities. The “Retained Liabilities” as set forth in this section (d) shall remain the sole responsibility of and shall be retained, paid, performed and discharged solely by Seller. “Retained Liabilities” shall mean every obligation and liability of Seller other than the Assumed Liabilities, including, without limitation:

A.       any obligation or liability of any nature whatsoever arising out of or relating to products sold or distributed by Seller to the extent manufactured, sold, or distributed sold prior to the Effective Date;

B.       any obligation or liability of any nature whatsoever under any Contract that arises after the Effective Date but that arises out of or relates to any breach that occurred prior to the Effective Date;

C.       any obligation or liability of any nature whatsoever for taxes, fees, or assessments of any nature, whether deferred or not, (A) arising as a result of Seller’s operation of its Business or ownership of the Assets prior to the Effective Date, or (B) that will arise as a result of the sale of the Assets pursuant to this Agreement;

D.       any obligation or liability of any nature whatsoever under any employee benefit plans of Seller or relating to payroll, vacation, sick leave, workers’ compensation, unemployment benefits, pension benefits, employee stock option or profit-sharing plans, health care plans or benefits or any other employee plans or benefits of any kind for Seller’s employees or former employees or both;

E.       any obligation or liability of any nature whatsoever under any employment, severance, retention or termination agreement with any employee of Seller;

F.       any obligation or liability of any nature whatsoever arising out of or relating to any employee grievance whether or not the affected employees are hired by Buyer;

G.       any obligation or liability of any nature whatsoever arising out of any litigation, action, arbitration, audit, hearing, investigation, or suit pending as of the Effective Date;

H.       any obligation or liability of any nature whatsoever arising out of any litigation, action, arbitration, audit, hearing, investigation, or suit involving Seller’s operation of the Business or ownership of the Assets commenced after the Effective Date and arising out of or relating to any occurrence or event happening prior to the Effective Date;

I.       any obligation or liability of any nature whatsoever arising out of or resulting from Seller’s compliance or noncompliance with any legal requirement or order of any governmental body;

J.       any obligation or liability of any nature whatsoever of Seller under this Agreement or any other document executed in connection herewith and

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K.       any obligation or liability of any nature whatsoever of Seller based upon Seller’s acts or omissions occurring after the Effective Date.

(d)  Closing Date. The consummation of the transaction contemplated under this Agreement (herein referred to as the “Closing”) shall occur on or before September 27, 2019 (the “Closing Date”); provided, however, that the Parties may mutually agree to extend the Closing Date. Notwithstanding anything to the contrary contained herein, the Closing shall be effective as of 11:59 PM on the Closing Date (the “Effective Date”).

(e)       Preparation of Closing Documents. Counsel for Buyer shall prepare the documents to be executed and delivered at the Closing (the “Closing Documents”), including the Bill of Sale (as hereinafter defined), and other Assignments (as hereinafter defined), all of which must be satisfactory to Seller and its legal counsel.

3.            Delivery of Documents.

(a)       Seller’s Deliveries. At Closing, upon payment of the Purchase Price by Buyer, Seller shall deliver to Buyer the following:

A.       such good and sufficient instruments of sale, conveyance, transfer and assignment as shall be required or as may be appropriate to effectively vest in Buyer good title to the Assets, free and clear of all liens, security interests and encumbrances of whatever nature, properly executed and acknowledged, including a limited warranty bill of sale (the “Bill of Sale”), and assignment and assumption instruments (the “Assignments”);

B.       copies of the resolutions by the board of directors of Seller approving the Transaction, together with a certificate of good standing from Buyer’s jurisdiction of organization;

C.       physical possession of all Assets including all records, keys and items of entry to the Business and the Assets;

D.       all required or necessary consents, waivers and approvals with respect to the Contracts, and assignment thereof, in such form as is satisfactory to Buyer and its counsel;

E.       such other instruments and documents as may be reasonably required by Buyer or its counsel as to the performance of all covenants and satisfaction of all conditions required of Seller, or as to any other matter required or necessitated by this Agreement, including evidence reasonably satisfactory to Buyer that the person(s) executing the Closing Documents for Seller has full right, power and authority to do so; and

(b)          Buyer’s Deliveries. At Closing, Buyer shall deliver to Seller, as applicable:

A.        the fully executed promissory note in favor of the Seller;

B.       copies of the resolutions by of the board of directors of Buyer approving the Transaction, together with a certificate of good standing from Buyer’s jurisdiction of organization;

C.       such other instruments and documents as may be reasonably required by Seller or their counsel as to the performance of all covenants and satisfaction of all conditions required of Buyer, or as to any other matter required or necessitated by this Agreement, including evidence reasonably satisfactory to Seller that the person(s) executing the Closing Documents for Buyer has full right, power and authority to do so;

4.            Warranties and Representations.

(a)          Warranties and Representations to Buyer. As an inducement to Buyer entering into this Agreement, Seller hereby covenants, represents and warrants to Buyer as follows:

A.       Good Standing. Seller is a duly organized and validly existing corporation and is in good standing under the laws of the State of Nevada.

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B.       Authority. Seller has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder, and the execution, delivery and performance of this Agreement by Seller does not and will not violate any provisions of Seller’s governing corporate instruments, or any order, judgment or award of any court or administrative agency or any contract to which Seller is a party or require the consent of any third party, or violate any law or governmental or regulatory rule or regulation.

C.       Authorization and Execution. This Agreement has been duly authorized by all necessary action on the part of Seller, has been duly executed and delivered by Seller, constitutes the valid and binding agreement of Seller and is enforceable in accordance with its terms. The person executing this Agreement on behalf of Seller has the authority to do so.

D.       Ownership and Condition of Assets, Status of Contracts. (A) Seller possesses all licenses and required governmental or official approvals, permits or authorizations necessary for the operation of the Business; and (B) with respect to the Contracts, each is in full force and effect, there have been no material defaults or breaches of same, no assignment of rights in or relating to same have been made, and to the best of Seller’s knowledge no event has occurred which would cause a material breach or default under same.

E.       Sufficiency of Assets. The Assets (a) constitute all of the material assets necessary to operate the Business in substantially the manner presently operated by Seller and (b) include all of the material operating assets of the Business.

F.       Warranty of Title. Seller is the lawful owner of the Assets, and has the full right, power, and authority to sell, transfer and convey the Assets to Buyer and that the Assets are not subject to any liens, claims, security interests, encumbrances, taxes, or assessments, however described or denominated.

G.       Actions or Proceedings. There is no action, suit or proceeding pending against Seller or known to Seller to be threatened against or affecting the Business in any court, before any arbitrator or before or by any governmental authority. Seller has not been cited, fined, held liable or in violation of, or otherwise received notification of any asserted past or present failure or alleged failure to comply with any federal, state or local laws, and is not aware of any action or occurrence which would give rise to a violation with regard to the Business.

H.       Payment of Taxes. Seller has paid in full all applicable sales, occupancy, ad valorem, employment and other applicable taxes relating to the ownership and operation of all Business or otherwise relating to the Assets, except for accrued taxes not yet due.

I.       Brokers; Finders. Buyer shall not be obligated to pay any broker or finder in connection with the Transaction.

J.       No Material Adverse Change. Since the date of the most recent Quarterly Report on Form 10-Q filed by the Seller, there has not been any material adverse change in the business, operations, prospects, assets, results of operations or condition (financial or other) of Seller, and no event has occurred or circumstance exists that may result in such a material adverse change.

K.       Independent Evaluation.  Seller conducted its own independent evaluation, made its own analysis and consulted with advisors (including legal, accounting, and tax advisors) as it has deemed necessary, prudent or advisable in order for Seller to make its own determination and decision to enter into the transactions contemplated by this Agreement and to execute and deliver this Agreement.

(b)           Buyer’s Warranties and Representations. Buyer covenants, warrants and represents as follows:

A.       Good Standing. Buyer is a duly organized and validly existing corporation and is in good standing under the laws of the State of Nevada.

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B.       Authority. Buyer has all requisite power and authority to execute and deliver this Agreement and to perform the obligations of Buyer hereunder. The execution, delivery and performance of this Agreement by Buyer does not and will not violate any provisions of Buyer’s governing corporate instruments, or any order, judgment or award of any court or administrative agency or any contract to which Buyer is a party or, except as otherwise acknowledged herein, require the consent of any third party, or to Buyer’s knowledge, violate any law or governmental or regulatory rule or regulation.

C.       Authorization and Execution. This Agreement has been duly authorized by all necessary action on the part of Buyer, has been duly executed and delivered by Buyer, constitutes the valid and binding agreement of Buyer and is enforceable in accordance with its terms. The person executing this Agreement on behalf of Buyer has the authority to do so.

D.       Brokers; Finders. Seller has no obligation to pay any broker or finder in connection with the Transaction.

(c)           Effect of Representations and Warranties. The foregoing representations of the parties hereto set forth in this Section are true, and the foregoing warranties and covenants are in full force and effect and binding on same, as of the date hereof, and shall be in full force and effect and deemed to have been automatically reaffirmed and restated by the parties hereto in their entirety as of the date and time of Closing.

5.             Further Acts. In addition to the acts and deeds stated herein and contemplated to be performed, executed and delivered by the respective parties hereto, each of the parties hereto agrees to perform, execute and deliver or cause to be performed, executed and delivered at Closing and after Closing any and all such further acts, deeds and assurances as may be reasonably necessary to consummate the Transaction.

6.            Confidentiality; Publicity. Except as may be required by law or regulation, no party hereto or their respective affiliates, employees, agents or representatives shall disclose to any third party the subject matter or terms of this Agreement without the prior written consent of the other parties; provided however, that any party may discuss the same with its legal counsel and other engaged professionals. No press release or other public announcement related to this Agreement or the transaction contemplated hereby will be issued by any party without the prior written approval of the Seller and Buyer. Buyer and Seller understand that within four (4) business days of the Closing, Buyer is obligated by regulation to file a Current Report on Form 8-K with the Securities and Exchange Commission e along with copies of all agreements with Seller and their respective exhibits.

7.             Survival. All representations, warranties, covenants and agreements set forth in this Agreement shall survive the Closing of the Transaction indefinitely.

8.             Notices. All notices permitted or required to be given hereunder shall be in writing and sent by registered or certified mail, return receipt requested, postage prepaid, by overnight courier (such as Federal Express) or hand delivered, addressed as follows:

To Seller:       GBT Technologies Inc.

2500 Broadway, Suite F-125

Santa Monica, CA 90404

Attention: Douglas Davis

With Copy to:

To Buyer:      Surge Holdings, Inc.

3124 Brother Blvd, Suite 104

Bartlett, TN 38133

Attention: Kevin Brian Cox

With Copy to: Lucosky Brookman LLP

          101 Wood Avenue South, 5th Floor

          Woodbridge, NJ 08830

           Attention: Joseph Lucosky, Esq.

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Any party may designate a different address from time to time by notice given in accordance with the provisions of this paragraph. Any such notice shall be deemed given on the date of delivery.

9.              Miscellaneous. This Agreement shall be construed and interpreted under the laws of the State of Nevada. Seller and Buyer hereby irrevocably submit in any suit, action or proceeding arising out of or related to this Agreement or to the Transaction contemplated hereby or thereby to the exclusive jurisdiction and venue of any state or federal court having jurisdiction over Clark County, Nevada and waive any and all objections to jurisdiction and venue that they may have under the laws of the State of Nevada or the United States and any claim or objection that any such court is an inconvenient forum. If any provision of this Agreement or the application thereof to any person or circumstance shall be invalid or unenforceable to any extent, the remainder of this Agreement or other affected document, and the application of such provisions to other persons or circumstances shall not be affected thereby and shall be enforced to the greatest extent permitted by law. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, legal representatives, successors and permitted assigns, whether voluntary by act of the parties or involuntary by operation of law, as the case may be. This Agreement is solely for the benefit of the parties hereto and their respective successors and permitted assigns. There shall be no third party beneficiaries hereof, intended or otherwise. Neither Party may assign this Agreement without the written consent of the other party, provided, however, Buyer may assign this Agreement to a wholly owned subsidiary. In the event of such assignment by Buyer it shall remain obligated and liable under the terms and conditions of this Agreement. The titles of sections and subsections herein have been inserted as a matter of convenience of reference only and shall not control or affect the meaning or construction of any of the terms or provisions herein. All references herein to the singular shall include the plural, and vice versa. Should any provision of this Agreement require interpretation in any judicial, administrative or other proceeding or circumstance, it is agreed that the court, administrative body, or other entity interpreting or construing the same shall not apply a presumption that the terms hereof shall be more strictly construed against one party by reason of the rule of construction that a document is to be construed more strictly against the party who by itself or through its agents prepared the same, it being agreed that the agents of both parties hereto have fully participated in the preparation of this Agreement. Except as otherwise expressly provided herein, all rights, powers, and privileges conferred hereunder upon the parties hereto shall be cumulative and in addition to those other rights, powers, and remedies hereunder and those available at law or in equity. All such rights, powers, and remedies may be exercised separately or at once, and no exercise of any right, power, or remedy shall be construed to be an election of remedies or shall preclude the future exercise of any or all other rights, powers, and remedies granted hereunder or available at law or in equity, except as expressly provided herein. Buyer shall have no right of assignment of this agreement without the express written permission of Seller. Neither the failure of either party to exercise any power given such party hereunder or to insist upon strict compliance by the other party with its obligations hereunder, nor any custom or practice of the parties at variance with the terms hereof shall constitute a waiver of either party’s right to demand exact compliance with the terms hereof. No amendment to this Agreement shall be binding on any of the parties hereto unless such amendment is in writing and is executed by the party against whom enforcement of such amendment is sought. Time is of the essence with respect to each and every covenant, agreement, and obligation of the parties hereto. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one agreement, and the signatures of any party to any counterpart shall be deemed to be a signature to, and may be appended to, any other counterpart. This Agreement constitutes the entire agreement of the parties with respect to the subject matter contained herein and supersedes and/or revokes any prior agreements not included within this Agreement, including prior drafts of documents, prior proposals, counterproposals and correspondence, whether written or oral. As used in this Agreement, the term “including” will always be deemed to mean “including, without limitation”.

[SIGNATURES BEGIN ON NEXT PAGE]

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above

BUYER:

Surge Holdings, Inc., a Nevada corporation

By: /s/ Kevin Brian Cox

Name: Kevin Brian Cox

Title: Chief Executive Officer

SELLER:

GBT TECHNOLOGIES INC., a Nevada corporation

By: /s/ Mansour Khatib 09-30-2019

Name:   Mansour Khatib

Title: Board of Directors Member

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EXHIBIT A

GBT TECHNOLOGIES INC.

ASSETS RELATED TO THE ECS PREPAID BUSINESS

OFFICE COMPUTER EQUIPMENT – SERVERS	POS TERMINALS
Cisco 1900 series switch	158 Verifone POS terminals (570 – 3750) in field
Cisco ASA Firewall	13 Verifone POS terminals (570 – 3750) in inventory
Cisco ASA Firewall	PROCESSING SOFTWARE PROGRAM
Cisco ASA Firewall – Redundant Pair	Platform managing software program
Cisco Managed Switch
Cisco Managed Switch – Redundant Pair
ECS-LB1 – Loadbalancer
ECS-LB2 – Loadbalancer
ECS test
ECS – Utility Server
ECS – Backup – Data/Backup Storage
ECS – Main – Domain Server
ECS – wwwl – APT Server
ECS – www2 – Web Server
ECS – www3 – Web Server
ECS – www4 – API Server
ECS – www5 – Web Server
ECS – www6 – Web Server
ECS - sp5 – Primary DB – ECS Prepaid
ECS – spl - Backup DB – ECS Prepaid
ECS – sp4 – Backup DB – ECS Prepaid

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ASSETS RELATED TO THE ELECTRONIC CHECK SERVICES BUSINESS

OFFICE COMPUTER EQUIPMENT – SERVERS	POS CHECK SCANNERS – MICR READERS
Debian – master – Primary DB	50 RDM Scanners
Debian2 – Backup DB	11 RDM Scanners in inventory
ECS – db3 – Backup DB	12 Magteck Micr Readers
IP Server1 – Process Checks	PROCESSING SOFTWARE PROGRAM
IP Server2 – Process Checks	ACH software processing program

ASSETS RELATED TO THE CENTRAL STATE LEGAL SERVICES BUSINESS

COLLECTION SOFTWARE PROGRAM

Computerized Legal Collection Software Program

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EX-10.2

Exhibit 10.2

NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 (THE “SECURITIES ACT”), AND ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT

CONVERTIBLE PROMISSORY NOTE

Effective Date: September 27, 2019 U.S. $4,000,000

FOR VALUE RECEIVED, Surge Holdings, Inc., a Nevada corporation (“Borrower” or “Company”), promises to pay to GBT Technologies Inc., or their successors or assigns (“Lender”), $4,000,000 (four million dollars) and any amounts accrued hereunder on the date that is eighteen (18) months after the Effective Date (the “Maturity Date”) in accordance with the terms set forth herein. This Convertible Promissory Note (this “Note”) is issued and made effective as of September 27, 2019 (the “Effective Date”). This Note shall not bear interest. This Note is issued as the consideration for those certain assets being bought by the Borrower from the Lender pursuant to that certain Asset Purchase Agreement dated September 27, 2019, by and between Borrower and Lender (the “APA”). Certain capitalized terms used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference.

1.                  Payment; Prepayment.

1.1.            Payment. All payments owing hereunder shall be in lawful money of the United States of America or shares of Common Stock, as provided for herein, and delivered to Lender at the address or bank account furnished to Borrower for that purpose. All payments shall be applied first to (a) costs of collection, if any, then to (b) fees and charges, if any, and thereafter, to (c) principal.

1.2.            Prepayment. Notwithstanding the foregoing, Borrower shall have the right to prepay all or any portion of the principal without any prepayment penalty.

2.                  Lender Conversion.

2.1.            Lender Conversion. Following the six month anniversary of the Effective Date, at the option of the Lender (subject to the right of the Borrower to prepay the principal), the Lender may convert the Conversion Amount into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified (the “Conversion Shares”). The term “Conversion Amount” means, with respect to any conversion of this Note, the portion of the principal amount of this Note to be converted into Conversion Shares in such conversion. The Conversion Amount shall be divided by the Conversion Price (as defined in Section 2.2) determined as provided herein in order to determine the number of Conversion Shares to be issued in connection with said conversion (each a “Conversion”). In no event, however, shall the Lender be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Lender and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Lender and its affiliates of more than 4.99% of the outstanding shares of Common Stock. For purposes of the proviso to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, further, however, that the limitations on conversion may be waived by the Lender upon, at the election of the Lender, not less than 61 calendar days’ prior notice to the Borrower, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by the Lender, as may be specified in such notice of waiver).

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2.2.Conversion Price. Subject to the adjustments described herein, and provided that no Event of Default (as defined in Section 3.1) has occurred, the conversion price (the “Conversion Price”) shall equal (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events) the volume weighted average price of the Common Stock on the OTCQX, OTCQB, or the OTC Pink marketplaces, Nasdaq, NYSE, or other trading market on which the Common Stock is then trading over the previous twenty (20) Trading Days prior to the conversion date in question (the “VWAP”); provided, however, the Conversion Price shall never be lower than $0.10 (the “Floor Price”) or higher than $0.70 (the “Ceiling Price”). By way of example only, if the VWAP for a conversion date equals $0.08, the Conversion Price shall equal the Floor Price and if the VWAP for a conversion date equals $0.78, the Conversion Price shall equal the Ceiling Price.

3.Defaults and Remedies.

3.1.Defaults. The following are events of default under this Note (each, an “Event of Default”): (a) Borrower fails to pay any principal, fees, charges, or any other amount when due and payable hereunder; (b) a receiver, trustee or other similar official shall be appointed over Borrower or a material part of its assets and such appointment shall not be dismissed or discharged within sixty (60) calendar days; (c) Borrower makes a general assignment for the benefit of creditors; (d) Borrower files a petition for relief under any bankruptcy, insolvency or similar law (domestic or foreign); and (e) an involuntary bankruptcy proceeding is commenced or filed against Borrower and is not dismissed within sixty (60) calendar days.

3.2.Remedies. At any time and from time to time after Lender becomes aware of the occurrence of any Event of Default, Lender may accelerate this Note by written notice to Borrower, with the principal becoming immediately due and payable in cash at the Mandatory Default Amount. Notwithstanding the foregoing, at any time following the occurrence of any Event of Default, Lender may, at its option, elect to increase the principal by applying the Default Effect (subject to the limitation set forth below) via written notice to Borrower without accelerating the principal, in which event the principal shall be increased as of the date of the occurrence of the applicable Event of Default pursuant to the Default Effect, but the principal shall not be immediately due and payable. For the avoidance of doubt, Lender may continue engaging in Conversions at any time following an Event of Default until such time as the principal is paid in full. Such acceleration may be rescinded and annulled by Lender at any time prior to payment hereunder and Lender shall have all rights as a holder of the Note until such time, if any, as Lender receives full payment pursuant to this Section 3.2. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

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4.Unconditional Obligation; No Offset. Borrower acknowledges that this Note is an unconditional, valid, binding and enforceable obligation of Borrower not subject to offset, deduction or counterclaim of any kind. Borrower hereby waives any rights of offset it now has or may have hereafter against Lender, its successors and assigns, and agrees to make the payments or Conversions called for herein in accordance with the terms of this Note.

5.Waiver. No waiver of any provision of this Note shall be effective unless it is in the form of a writing signed by the party granting the waiver. No waiver of any provision or consent to any prohibited action shall constitute a waiver of any other provision or consent to any other prohibited action, whether or not similar. No waiver or consent shall constitute a continuing waiver or consent or commit a party to provide a waiver or consent in the future except to the extent specifically set forth in writing.

6.Adjustment of Conversion Price upon Subdivision or Combination of Common Stock. Without limiting any provision hereof, if Borrower at any time on or after the Effective Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision will be proportionately reduced. Without limiting any provision hereof, if Borrower at any time on or after the Effective Date combines (by combination, reverse stock split or otherwise) one or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination will be proportionately increased. Any adjustment pursuant to this Section 6 shall become effective immediately after the effective date of such subdivision or combination. If any event requiring an adjustment under this Section 6 occurs during the period that a Conversion Price is calculated hereunder, then the calculation of such Conversion Price shall be adjusted appropriately to reflect such event.

7.Method of Conversion Shares Delivery. On or before the close of business on the third (3^rd) Trading Day following a Conversion, as applicable (the “Delivery Date”), Borrower shall, provided it is DWAC Eligible at such time, deliver or cause its transfer agent to deliver the applicable Conversion Shares electronically via DWAC to the account designated by Lender. If Borrower is not DWAC Eligible, it shall deliver to Lender or its broker (as designated by Lender, via reputable overnight courier, certificates representing the number of shares of Common Stock to which Lender shall be entitled, registered in the name of Lender or its designee. Moreover, and notwithstanding anything to the contrary herein or in the APA, in the event Borrower or its transfer agent refuses to deliver any shares of Common Stock to Lender on grounds that such issuance is in violation of Rule 144 under the Securities Act of 1933, as amended (“Rule 144”), Borrower shall deliver or cause its transfer agent to deliver the applicable shares of Common Stock to Lender with a restricted securities legend, but otherwise in accordance with the provisions of this Section 7. In conjunction therewith, Borrower will also deliver to Lender a written explanation from its counsel or its transfer agent’s counsel opining as to why the issuance of the applicable shares of Common Stock violates Rule 144.

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8.Leak-Out Agreement. Lender will not, for the eighteen (18) calendar months following the Effective Date, for the purpose of open market trades, offer, pledge, sell, contract to sell, grant, lend, or otherwise transfer or dispose of shares of Common Stock, directly or indirectly, in an amount greater than seven and one-half percent (7.5%) of the trading volume of the Common Stock during the previous month on the OTCQX, OTCQB, or the OTC Pink marketplaces, Nasdaq, NYSE, or other trading market on which the Common Stock is then trading. Other than via open market trades, Lender may not offer, pledge, sell, contract to sell, grant, lend, or otherwise transfer or dispose of the Conversion Shares without the prior written consent of the Borrower. Borrower’s consent to a transfer or disposal of the Conversion Shares by Lender shall be specifically conditioned on the transferee of the Conversion Shares signing a Leak-Out Agreement with the Company with substantially the same terms as this Section 8. For the avoidance of doubt, open market trades by the Lender do not require Borrower’s consent.

9.No Illegal Transactions. Lender has not, directly or indirectly, and no person acting on behalf of or pursuant to any understanding with it has, engaged in any transactions in the securities of the Company (including, without limitation, any Short Sales (as defined below) involving any of the Company’s securities) since the time that Lender was first contacted by the Company or any other person regarding the transactions contemplated herein or in the APA. Lender covenants that neither it nor any person acting on its behalf or pursuant to any understanding with it will engage, directly or indirectly, in any transactions in the securities of the Company (including Short Sales) prior to the time the transactions contemplated herein or in the APA are publicly disclosed. “Short Sales” include, without limitation, all “short sales” as defined in Rule 200 of Regulation SHO promulgated under the Exchange Act, and all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, short sales, swaps, derivatives and similar arrangements (including on a total return basis), and sales and other transactions through non-U.S. broker-dealers or foreign regulated brokers. The Lender covenants and agrees that, for the eighteen (18) calendar months following the Effective Date, it will not be in a net short position with respect to the shares of Common Stock. For purposes of this Section 9, a “net short position” means a sale of Common Stock by the Lender that is marked as a short sale and that is made at a time when there is no equivalent offsetting long position in Common Stock held by the Lender. Borrower’s consent to a transfer or disposal of the Conversion Shares by Lender shall be specifically conditioned on the transferee of the Conversion Shares signing an agreement with the Company to not be in a net short position with respect to the shares of Common Stock for the eighteen (18) calendar months following the Effective Date.

10.Opinion of Counsel. In the event that an opinion of counsel is needed for any matter related to this Note, Lender has the right to have any such opinion provided by its counsel.

11.Governing Law; Venue. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Nevada, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Nevada or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Nevada. The provisions set forth in the APA to determine the proper venue for any disputes are incorporated herein by this reference.

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12.Cancellation. After repayment or conversion of the entire principal, this Note shall be deemed paid in full, shall automatically be deemed canceled, and shall not be reissued.

13.Amendments. The prior written consent of both parties hereto shall be required for any change or amendment to this Note.

14.Assignments. Borrower and Lender may not assign this Note without the prior written consent of the other party. If at the time of any transfer of this Note or any shares of Common Stock issued upon conversion of this Note, the transfer of such securities shall not be either (i) registered pursuant to an effective registration statement under the 1933 Act and under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions or current public information requirements pursuant to Rule 144, the Company may require, as a condition of allowing such transfer, that Lender or transferee, as the case may be, comply with the transfer restrictions set forth on the restrictive legend on the face of such security.

15.Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with the subsection of the APA titled “Notices.”

16.Severability. If any part of this Note is construed to be in violation of any law, such part shall be modified to achieve the objective of Borrower and Lender to the fullest extent permitted by law and the balance of this Note shall remain in full force and effect.

[Remainder of page intentionally left blank; signature page follows]

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IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of the Effective Date.

BORROWER:

Surge Holdings, Inc.

By: /s/ Brian Cox

Name: Brian Cox

Title: CEO

ACKNOWLEDGED, ACCEPTED AND AGREED:

LENDER:

GBT Technologies Inc.

By: /s/Mansour Khatib 9/30/19

Name: Mansour Khatib

Title: CMO, Officer and Director

[Signature Page to Convertible Promissory Note]

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ATTACHMENT 1

DEFINITIONS

For purposes of this Note, the following terms shall have the following meanings:

A1.“Common Stock” means the Borrower’s common stock par value $0.001 per share.

A2. “Default Effect” means multiplying the principal as of the date the applicable Event of Default occurred by fifteen percent (15%) and then adding the resulting product to the principal as of the date the applicable Event of Default occurred, with the sum of the foregoing then becoming the principal under this Note as of the date the applicable Event of Default occurred; provided that the Default Effect may only be applied three (3) times hereunder.

A3.“DTC” means the Depository Trust Company or any successor thereto.

A4.“DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm servicing Lender’s brokerage firm for the benefit of Lender.

A5.“DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.

A6.“DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.

A7.“DWAC Eligible” means that (a) Borrower’s Common Stock is eligible at DTC for full services pursuant to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system; (b) Borrower has been approved (without revocation) by DTC’s underwriting department; (c) Borrower’s transfer agent is approved as an agent in the DTC/FAST Program; (d) the Conversion Shares are otherwise eligible for delivery via DWAC; (e) Borrower has previously delivered all Conversion Shares to Lender via DWAC; and (f) Borrower’s transfer agent does not have a policy prohibiting or limiting delivery of the Conversion Shares via DWAC.

A8.“Mandatory Default Amount” means the principal following the application of the Default Effect.

A9. “Trading Day” means any day on which the OTCQX, OTCQB, or the OTC Pink marketplaces, Nasdaq, NYSE, or other trading market on which the Common Stock is then trading is open for trading.

[Remainder of page intentionally left blank]

Attachment 1 to Convertible Promissory Note, Page 1

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EXHIBIT A

Date: __________________

CONVERSION NOTICE

Surge Holdings, Inc., a Nevada corporation (the “Borrower”), hereby consents to GBT Technologies Inc. (the “Lender”) converting, pursuant to that certain Convertible Promissory Note made by Borrower in favor of Lender on September __, 2019 (the “Note”), the portion of the Note balance set forth below into shares of Common Stock of Borrower as of the date of conversion specified below. Such conversion shall be based on the Conversion Price set forth below.

In the event of a conflict between this Conversion Notice and the Note, the Note shall govern. Capitalized terms used in this notice without definition shall have the meanings given to them in the Note.

A. Date of Conversion: ____________

B. Principal Being Converted: ____________

C. Conversion Price: _______________

D. Shares of Common Stock: _______________ (B divided by C)

E. Remaining Principal of Note: ____________

Please transfer the Shares of Common Stock electronically (via DWAC) to the following account:

Broker:________________	Address:___________
DTC#:________________
Account #:_____________
Account Name:_________

To the extent the shares of Common Stock are not able to be delivered to Lender electronically via the DWAC system, deliver all such certificated shares of Common Stock to Lender via reputable overnight courier after receipt of this Conversion Notice (by facsimile transmission or otherwise) to:

_____________________________________

_____________________________________

_____________________________________

Exhibit A to Convertible Promissory Note, Page 1

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[Signature Page to Conversion Notice]

LENDER:

GBT Technologies Inc.

By: ___________________

Name: ________________

Title: __________________

BORROWER:

Surge Holdings, Inc.

By: ___________________

Name: ________________

Title: __________________

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EX-99.1

Exhibit 99.1

The accompanying pro forma consolidated balance sheet presents the accounts of GBT Technologies, Inc. as if the asset purchase agreement with Surge Holdings, Inc. occurred June 30, 2019.  The accompanying pro forma consolidated statements of operations present the accounts of GBT Technologies, Inc. for the six months ended June 30, 2019 and for the year ended December 31, 2018 as if the asset purchase agreement with Surge Holdings, Inc. occurred on January 1, 2018. 

The adjustments reflect the removal of the assets and liabilities, and operations of the ECS Prepaid, Electronic Check Services and the Central State Legal Services businesses as if the transaction occurred as indicated above.

The unaudited consolidated pro forma financial information is presented for informational purposes only and is subject to a number of uncertainties and assumptions and do not purport to represent what the company’s actual performance or financial position would have been had the transaction occurred on the dates indicated and does not purport to indicate the financial position or results of operations as of any future date or for any future period.

GBT TECHNOLOGIES INC.
PRO FORMA CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2019
ASSETS
		As Filed			Adjustments			As Adjusted
Current Assets:
Cash	$	454,407		$	(216,046	)	$	238,361
Accounts receivable		670,914			(670,914	)		—
Prepaid expenses and other current assets		187,500						187,500
Marketable equity security		5,600,000			1,000,000			6,600,000
Total current assets		6,912,821			113,040			7,025,861
Property and equipment, net		192,327			(36,590	)		155,737
Intangible assets, net		2,912,208			(2,912,208	)		—
Marketable equity security		—						—
Equity investment		31,663,441						31,663,441
Note receivable					4,000,000			4,000,000
Goodwill		925,877			(925,877	)		—
Total assets	$	42,606,674		$	238,365		$	42,845,039
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable and accrued expenses (including related parties of $574,542)	$	2,889,897		$	(880,719	)	$	2,009,178
Unearned revenue		253,429						253,429
Due to Guardian LLC (related party)		33,356						33,356
Convertible notes payable, net of discount of $4,090,099		1,319,901						1,319,901
Note payable, net of discount of $198,904		4,866,096						4,866,096
Derivative liability		109,181,600						109,181,600
Total current liabilities		118,544,279			(880,719	)		117,663,560
Convertible note payable		10,000,000						10,000,000
Total liabilities		128,544,279			(880,719	)		127,663,560
Contingencies		—						—
								—
Stockholders' Deficit:								—
Series B Preferred stock		—						—
Series C Preferred stock		—						—
Series D Preferred stock		—						—
Series G Preferred stock		—						—
Series H Preferred stock		—						—
Common stock		4,166						4,166
Treasury stock		(643,059	)					(643,059	)
Stock loan receivable		(7,610,147	)					(7,610,147	)
Additional paid in capital		106,214,002						106,214,002
Accumulated deficit		(183,902,567	)		1,119,084			(182,783,483	)
Total stockholders' deficit		(85,937,605	)		1,119,084			(84,818,521	)
Total liabilities and stockholders' deficit	$	42,606,674		$	238,365		$	42,845,039

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GBT TECHNOLOGIES INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2019
		As Filed			Adjustments			As Adjusted
Sales:
Sales	$	25,735,087		$	(15,977,126	)	$	9,757,961
Related party sales		90,000						90,000
Total sales		25,825,087			(15,977,126	)		9,847,961
Cost of goods sold		24,910,141			(15,561,275	)		9,348,866
Gross profit		914,946			(415,851	)		499,095
Operating expenses:
General and administrative expenses		5,454,206			(696,010	)		4,758,196
Marketing expenses		717,824						717,824
Acquisition costs		150,000						150,000
Total operating expenses		6,322,030			(696,010	)		5,626,020
Loss from operations		(5,407,084	)		280,159			(5,126,925	)
Other income (expense):
Amortization of debt discount		(2,580,121	)					(2,580,121	)
Change in fair value of derivative liability		(101,890,733	)					(101,890,733	)
Interest expense and financing costs		(5,924,238	)		3			(5,924,235	)
Unrealized loss on marketable equity security		(5,682,912	)					(5,682,912	)
Realized gain on disposal of marketable equity security		3,582,912						3,582,912
Equity loss in investment		(36,559	)					(36,559	)
Interest income		187,500						187,500
Total other income (expense)		(112,344,151	)		3			(112,344,148	)
Loss before income taxes		(117,751,235	)		280,162			(117,471,073	)
Income tax expense		—			—			—
Net loss	$	(117,751,235	)	$	280,162		$	(117,471,073	)
Weighted average common shares outstanding		2,076,625						2,076,625
Loss per share	$	(56.70	)				$	(56.57	)

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GBT TECHNOLOGIES INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2018
		As Filed			Adjustments			As Adjusted
Sales:
Sales	$	51,389,605		$	(37,061,736	)	$	14,327,869
Related party sales		180,000						180,000
Total sales		51,569,605			(37,061,736	)		14,507,869
Cost of goods sold		49,676,764			(36,299,003	)		13,377,761
Gross profit		1,892,841			(762,733	)		1,130,108
Operating expenses:
General and administrative expenses		17,346,725			(1,159,304	)		16,187,421
Marketing expenses		502,539						502,539
Acquisition costs		10,966,791						10,966,791
Buyout of joint venture agreement (related party)		11,750,000						11,750,000
Impairment of assets		7,132,286						7,132,286
Total operating expenses		47,698,341			(1,159,304	)		46,539,037
Loss from operations		(45,805,500	)		396,571			(45,408,929	)
Other income (expense):
Amortization of debt discount		(3,740,794	)					(3,740,794	)
Change in fair value of derivative liability		(734,540	)					(734,540	)
Interest expense and financing costs		(5,808,836	)		(5,170	)		(5,814,006	)
Unrealized gain on marketable equity security		6,475,317						6,475,317
Equity loss in investment		(2,155,317	)					(2,155,317	)
Total other income (expense)		(5,964,170	)		(5,170	)		(5,969,340	)
Loss before income taxes		(51,769,670	)		391,401			(51,378,269	)
Income tax expense		—			—			—
Net loss	$	(51,769,670	)	$	391,401		$	(51,378,269	)
Weighted average common shares outstanding		1,306,204						1,306,204
Loss per share	$	(39.63	)				$	(39.33	)

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