United States
Securities and Exchange Commission
Washington, D.C. 20549
Form
| (Mark One) | |
| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
| For the quarterly
period ended | |
| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commissions file number:
(Exact name of registrant as specified in its charter)
| State or other jurisdiction of | I.R.S. Employer Identification Number | |
| incorporation or organization |
(Address of principal executive offices)
| Issuer ’s telephone number: |
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.
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted 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 such files).
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.
| Large accelerated filer ☐ | Accelerated filer ☐ | ||
| 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 is a
shell company (as defined in Rule 12b-2 of Exchange Act). Yes ☐
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 |
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:
| Common Stock, $0.00001 par value | Common Shares |
| (Class) | (Outstanding at November 5, 2021) |
GBT TECHNOLOGIES INC.
TABLE OF CONTENTS
| 1 |
Item 1: Condensed consolidated financial statements
| GBT TECHNOLOGIES INC. |
| CONDENSED CONSOLIDATED BALANCE SHEETS |
| ASSETS | September 30, | December 31, | ||||||
| 2021 | 2020 | |||||||
| (unaudited) | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Cash held in trust | ||||||||
| Marketable equity security | ||||||||
| Other receivable | ||||||||
| Total current assets | ||||||||
| Other receivable, net of current portion | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued expenses (including related parties of $ | $ | $ | ||||||
| Accrued settlement | ||||||||
| Deferred judgment award | ||||||||
| Convertible notes payable, net of discount of $ | ||||||||
| Notes payable, net of discount of $ | ||||||||
| Derivative liability | ||||||||
| Total current liabilities | ||||||||
| Convertible note payable | ||||||||
| Note payable | ||||||||
| Total liabilities | ||||||||
| Contingencies | ||||||||
| Stockholders’ Deficit: | ||||||||
| Series B Preferred stock, $ par value; shares authorized; and shares issued and outstanding at September 30, 2021 and December 31, 2020 | ||||||||
| Series C Preferred stock, $ par value; shares authorized; and shares issued and outstanding at September 30, 2021 and December 31, 2020 | ||||||||
| Series D Preferred stock, $ par value; shares authorized and shares issued and outstanding at September 30, 2021 and December 31, 2020 | ||||||||
| Series G Preferred stock, $ par value; shares authorized; and shares issued and outstanding at September 30, 2021 and December 31, 2020 | ||||||||
| Series H Preferred stock, $ par value ($500.00 stated value); shares authorized; and shares issued and outstanding at September 30, 2021 and December 31, 2020 | ||||||||
| Common stock, $ par value; shares authorized; and shares issued and outstanding at September 30, 2021 and December 31, 2020 | ||||||||
| Treasury stock, at cost; shares at September 30, 2021 and December 31, 2020 | ( | ) | ( | ) | ||||
| Stock loan receivable | ( | ) | ( | ) | ||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
| 2 |
| GBT TECHNOLOGIES INC. |
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
| (unaudited) |
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Sales - related party | $ | $ | $ | $ | ||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Marketing expenses | ||||||||||||||||
| Impairment of assets | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Amortization of debt discount | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Change in fair value of derivative liability | ( | ) | ||||||||||||||
| Interest expense and financing costs | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Unrealized gain (loss) on marketable equity security | ( | ) | ( | ) | ||||||||||||
| Realized gain (loss) on disposal of marketable equity security | ( | ) | ( | ) | ||||||||||||
| Loss on exchange of assets | ( | ) | ||||||||||||||
| Loss on debt modification | ( | ) | ||||||||||||||
| Other income | ||||||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| Loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Discontinued operations: | ||||||||||||||||
| Loss from operations of discontinued operations | ( | ) | ||||||||||||||
| Gain on disposition of discontinued operations | ||||||||||||||||
| Total Discontinued operations | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
| Net loss per share (basic and diluted): | ||||||||||||||||
| Continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Discontinued operations | ||||||||||||||||
| Net loss per share | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
| 3 |
| GBT TECHNOLOGIES INC. |
| CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT |
| (unaudited) |
| Series B Convertible Preferred Stock | Series C Convertible Preferred Stock | Series D Convertible Preferred Stock | Series G Convertible Preferred Stock | Series H Convertible Preferred Stock | Common Stock | Treasury Stock | Stock Loan | Additional Paid-in | Accumulated | Total . Stockholders' Equity/ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Receivable | Capital | Deficit | (Deficit) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2020 | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of convertible debt and accrued interest | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value of beneficial conversion feature of converted | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2021 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of convertible debt and accrued interest | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for joint venture | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value of beneficial conversion feature of converted | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2021 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of convertible debt and accrued interest | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value of beneficial conversion feature of converted | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2021 | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2019 | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of convertible debt | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for joint venture | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value of beneficial conversion feature of converted | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2020 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of convertible debt | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value of beneficial conversion feature of converted | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2020 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for conversion of convertible debt | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair value of beneficial conversion feature of converted | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2020 | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
| GBT TECHNOLOGIES INC. |
| CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS |
| (unaudited) |
| Nine Months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation of property and equipment | ||||||||
| Amortization of debt discount | ||||||||
| Change in fair value of derivative liability | ( | ) | ||||||
| Financing cost | ||||||||
| Shares issued for services | ||||||||
| Convertible note issued for penalty | ||||||||
| Loss on modification of debt | ||||||||
| Impairment of assets | ||||||||
| Unrealized (gain) loss on market equity security | ||||||||
| Realized gain on disposal of market equity security | ( | ) | ||||||
| Loss on exchange of assets | ||||||||
| Gain on disposition of discontinued operations | ( | ) | ||||||
| Convertible note receivable exchanged for services | ||||||||
| Payment of other income with marketable securities | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Other receivable | ||||||||
| Cash held in trust | ||||||||
| Accounts payable and accrued expenses | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows From Investing Activities: | ||||||||
| Purchase of property and equipment | ( | ) | ||||||
| Cash of discontinued operations | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash Flows From Financing Activities: | ||||||||
| Issuance of convertible notes | ||||||||
| Issuance of notes payable | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase in cash | ||||||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Cash paid for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Supplemental non-cash investing and financing activities | ||||||||
| Debt discount | $ | $ | ||||||
| Transfer of derivative liability to equity | $ | $ | ||||||
| Convertible notes issued for notes payable and accrued interest | $ | $ | ||||||
| Common stock issued for convertible notes and accrued interest | $ | $ | ||||||
| Repayment of convertible notes with marketable equity securities | $ | $ | ||||||
| Transfer of accounts payable to convertible note | $ | $ | ||||||
| Transfer of accounts payable to convertible note | $ | $ | ||||||
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
GBT Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2021 and 2020 (unaudited)
Note 1 - Organization and Basis of Presentation
Organization and Line of Business
GBT Technologies Inc. (the “Company”, “GBT”, or “GTCH”) was incorporated on July 22, 2009 under the laws of the State of Nevada. The Company is targeting growing markets such as development of Internet of Things (“IoT”) and Artificial Intelligence (“AI”) enabled networking and tracking technologies, including wireless mesh network technology platform and fixed solutions, development of an intelligent human body vitals device, asset-tracking IoT. The Company has historically derived revenues from (i) the provision of IT services; and (ii) from the licensing of its technology.
The unaudited condensed consolidated financial statements are prepared by the Company, pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). The information furnished herein reflects all adjustments, consisting only of normal recurring adjustments, which in the opinion of management, are necessary to fairly state the Company’s financial position, the results of its operations, and cash flows for the periods presented. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America were omitted pursuant to such rules and regulations. The results of operations for the nine months ended September 30, 2021 are not necessarily indicative of the results expected for the year ending December 31, 2021.
Basis of Presentation
The accompanying condensed consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Stock Splits
On August 5, 2019, the Company effectuated a
Going Concern
The accompanying condensed consolidated financial
statements have been prepared assuming that the Company will continue as a going concern. The Company has an accumulated
deficit of $
The Company’s ability to continue as a going concern is dependent upon its ability to generate profitable operations in the future and/or obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has plans to seek additional capital through some private placement offerings of debt and equity securities. These plans, if successful, will mitigate the factors which raise substantial doubt about the Company’s ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
Note 2 – Summary of Significant Accounting Policies
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates in the accompanying financial statements include valuation of derivatives and valuation allowance on deferred tax assets.
| 6 |
GBT Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2021 and 2020 (unaudited)
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiaries; the Company’s 50% owned subsidiaries GBT BitSpeed Corp. and GBT Tokenize Corp; the Company’s 50% owned subsidiary, Gopher Protocol Costa Rica Sociedad De Responsabilidad Limitada (currently inactive), a wholly owned AltCorp Trading LLC, a Costa Rica company (“AltCorp”) and Greenwich International Holdings, a Costa Rica corporation (“Greenwich”). All significant intercompany transactions and balances have been eliminated.
Cash Equivalents
For the purpose of the statement of cash flows, cash
equivalents include time deposits, certificate of deposits, and all highly-liquid debt instruments with original maturities of three months
or less. As of September 30, 2021, and December 31, 2020, the Company did
Cash Held in Trust
Cash held in trust consists of proceeds from the sale of investments. The proceeds less the payment of certain expenses are being held in AltCorp’s (the Company’s wholly owned subsidiary) attorney trust account. (See Note 4)
Long-Lived Assets
The Company applies the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review at September 30, 2021 and December 31, 2020, the Company believes there was no impairment of its long-lived assets.
Marketable Equity Securities
The Company accounts for marketable equity securities in accordance with ASC Topic 321, Investments – equity securities. Marketable equity securities are reported at fair value based on quotations available on securities exchanges with any unrealized gain or loss being reported as a component of other income (expense) on the statement of operations. The portion of marketable equity security expected to be sold within twelve months of the balance sheet date is reported as a current asset.
Note Receivable
Note receivable consists of a promissory note received
in connection with the sale of Ugopherservices (see Note 3). The note is due on
Derivative Financial Instruments
The Company evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a weighted-average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. As of September 30, 2021, and December 31, 2020, the Company’s only derivative financial instrument was an embedded conversion feature associated with convertible notes payable due to certain provisions that allow for a change in the conversion price based on a percentage of the Company’s stock price at the date of conversion.
| 7 |
GBT Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2021 and 2020 (unaudited)
Fair Value of Financial Instruments
For certain of the Company’s financial instruments, including cash, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities.
FASB ASC Topic 820, Fair Value Measurements and Disclosures, requires disclosure of the fair value of financial instruments held by the Company. FASB ASC Topic 825, Financial Instruments, defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
| ● | Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. |
| ● | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
| ● | Level 3 inputs to the valuation methodology us one or more unobservable inputs which are significant to the fair value measurement. |
The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic 480, Distinguishing Liabilities from Equity, and FASB ASC Topic 815, Derivatives and Hedging.
For certain financial instruments, the carrying amounts reported in the balance sheets for cash and current liabilities, including convertible notes payable, each qualify as a financial instrument, and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.
The Company uses Level 2 inputs for its valuation methodology for derivative liabilities as their fair values were determined by using the Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.
At September 30, 2021 and December 31, 2020, the Company identified the following liabilities that are required to be presented on the balance sheet at fair value:
| Fair Value | Fair Value Measurements at\ | |||||||||||||||
| As of | September 30, 2021 | |||||||||||||||
| Description | September 30, 2021 | Using Fair Value Hierarchy | ||||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||||||
| Conversion feature on convertible notes | $ | $ | $ | $ | ||||||||||||
| 8 |
GBT Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2021 and 2020 (unaudited)
| Fair Value | Fair Value Measurements at | |||||||||||||||
| As of | December 31, 2020 | |||||||||||||||
| Description | December 31, 2020 | Using Fair Value Hierarchy | ||||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||||||
| Marketable equity security - Surge Holdings, Inc. | $ | $ | $ | $ | ||||||||||||
| Conversion feature on convertible notes | $ | $ | $ | $ | ||||||||||||
Treasury Stock
Treasury stock is recorded at cost. The re-issuance of treasury shares is accounted for on a first in, first-out basis and any difference between the cost of treasury shares and the re-issuance proceeds are charged or credited to additional paid-in capital.
Stock Loan Receivable
On January 8, 2019, the Company entered into a Stock
Pledge Agreement with Latin American Exchange Latinex Casa de Cambio, S.A., a Costa Rica corporation (“Latinex”), to provide
that Latinex may maintain its required regulatory capital as required by various regulators. The Company has pledged restricted
shares of its common stock valued at $
Revenue Recognition
Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), became effective for the Company on January 1, 2018. The Company’s revenue recognition disclosure reflects its updated accounting policies that are affected by this new standard. The Company applied the “modified retrospective” transition method for open contracts for the implementation of Topic 606. The Company had no significant post-delivery obligations, this new standard did not result in a material recognition of revenue on the Company’s accompanying consolidated financial statements for the cumulative impact of applying this new standard. The Company made no adjustments to its previously-reported total revenues, as those periods continue to be presented in accordance with its historical accounting practices under Topic 605, Revenue Recognition.
Revenue from providing IT services are recognized under Topic 606 in a manner that reasonably reflects the delivery of its services to customers in return for expected consideration and includes the following elements:
| ● | executed contracts with the Company’s customers that it believes are legally enforceable; | |
| ● | identification of performance obligations in the respective contract; | |
| ● | determination of the transaction price for each performance obligation in the respective contract; | |
| ● | allocation the transaction price to each performance obligation; and | |
| ● | recognition of revenue only when the Company satisfies each performance obligation. |
These five elements, as applied to each of the Company’s revenue category, is summarized below:
| ● | IT services - revenue is recorded on a monthly basis as services are provided; and | |
| ● | License fees and Royalties – revenue is recognized based on the terms of the agreement with its customer. |
| 9 |
GBT Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2021 and 2020 (unaudited)
Unearned revenue
Unearned revenue represents the net amount received
for the purchase of products that have not seen shipped to the Company’s customers. In 2018, the Company ran pre-sales efforts for
its pet tracker product and received prepayments for its product. In addition, during 2018, the Company received $
Income Taxes
The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company has no material uncertain tax positions for any of the reporting periods presented.
Earnings per share is calculated in accordance with ASC Topic 260, Earnings Per Share. Basic earnings per share (“EPS”) is based on the weighted average number of common shares outstanding. Diluted EPS assumes that all dilutive securities are converted. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Due to the net loss incurred potentially dilutive instruments would be anti-dilutive. Accordingly, diluted loss per share is the same as basic loss for all periods presented. The following potentially-dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive.
| September 30, | September 30, | |||||||
| 2021 | 2020 | |||||||
| Series B preferred stock | ||||||||
| Series C preferred stock | ||||||||
| Series H preferred stock | ||||||||
| Warrants | ||||||||
| Convertible notes | ||||||||
| Total | ||||||||
Management’s Evaluation of Subsequent Events
The Company evaluates events that have occurred after the balance sheet date of September 30, 2021, through the date which the condensed consolidated financial statements are issued. Based upon the review, other than described in Note 16 – Subsequent Events, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements.
| 10 |
GBT Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2021 and 2020 (unaudited)
Recent Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes which amends ASC 740 Income Taxes (ASC 740). This update is intended to simplify accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and amending existing guidance to improve consistent application of ASC 740. This update is effective for fiscal years beginning after December 15, 2021. The guidance in this update has various elements, some of which are applied on a prospective basis and others on a retrospective basis with earlier application permitted. The Company is currently evaluating the effect of this ASU on the Company’s consolidated financial statements and related disclosures.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock. For convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital, the embedded conversion features no longer are separated from the host contract. ASU 2020-06 also removes certain conditions that should be considered in the derivatives scope exception evaluation under Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and clarify the scope and certain requirements under Subtopic 815-40. In addition, ASU 2020-06 improves the guidance related to the disclosures and earnings-per-share (EPS) for convertible instruments and contract in entity’s own equity. ASU 2020-06 is effective for public business entities that meet the definition of a SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Board specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The Company is currently evaluation the impact this ASU will have on its consolidated financial statements.
Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying consolidated financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.
Note 3 – Discontinued Operations
On September 18, 2020, the Company entered into a
Purchase and Sale Agreement with Mr. LightHouse LTD., an Israeli corporation (“MLH”) pursuant to which the Company
agreed to sell and assign to MLH, effective July 1, 2020 all the shares, and certain specified liabilities, of Ugopherservices Corp. (“UGO”),
a wholly owned subsidiary of the Company, in consideration of $
UGO has been presented as discontinued operations on the accompanying financial statements.
The operating results for UGO have been presented in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020 as discontinued operations and are summarized below:
| Three Months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Revenue | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross Profit | ||||||||
| Operating expenses | ||||||||
| Loss from operations | ||||||||
| Other income (expenses) | ||||||||
| Net income | $ | $ | ||||||
| 11 |
GBT Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2021 and 2020 (unaudited)
| Nine months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Revenue | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross Profit | ||||||||
| Operating expenses | ||||||||
| Loss from operations | ( | ) | ||||||
| Other income (expenses) | ||||||||
| Net loss | $ | $ | ( | ) | ||||
Note 4 – Investment in Surge Holdings, Inc.
Surge Holdings, Inc.
On September 30, 2019, 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 Central State
Legal Services businesses in consideration of $5,000,000 to be paid through the issuance of shares of SURG’s common stock
and a convertible promissory note in favor of the Company in the principal amount of $
On or about June 23, 2020, the Company and AltCorp entered into agreements with SURG and Glen Eagles Acquisition LP (“Glen”) regarding the $4,000,000 SURG Note for which the SURG Note has been converted in full into 5,500,000 restricted stock of SURG (“Issued Shares”) along with an additional 22,000,000 SURG shares reserved for the benefit of the Company’s subsidiary as a true up of shares to secure the value of the Issued Shares as $2,750,000. Additional shares will be issued if the original 5,500,000 are worth less than $2,750,000 on June 23, 2021. The Company agreed that the Issued Shares will be restricted for a year. As a result of the exchange of $2,750,000 of the SURG Note for 5,500,000 shares of SURG common stock, the Company recognized a loss of $1,430,000 during the nine months ended September 30, 2020. On June 24, 2021, in accordance with the Agreement entered June 23, 2020, the Company together with AltCorp, via registered mail to SURG and its transfer agent, sent a demand for a true-up share in an additional amount of 14,870,370 SURG shares as calculated per the Agreement. As of September 30, 2021, SURG’s transfer agent did not answer to the Company request.
Glen converted in full its $1,000,000 convertible note that was issued by the Company on July 8, 2019, plus $50,000 of accrued interest into $1,050,000 of a SURG Note via an assignment of a portion ($1,050,000 of a $4,000,000 face value) of the $4,000,000 SURG Note. In addition, the Company entered into a consulting agreement with Glen for which the Company shall pay to Glen $200,000 via an assignment of a portion ($200,000 of a $4,000,000 face value) of the $4,000,000 SURG Note.
On or about June 23, 2020, Stanley Hills LLC (“Stanley”)
which holds a pledge of 3,333,333 shares of SURG common stock via its manager/member (“Stanley’s Member”), acting as
an agent for the Company, entered into an agreement with SURG, its transfer agent and an escrow officer for which it was agreed that 3,333,333
SURG shares will be cancelled for consideration of up to $700,000. Between sales to SURG and to a third party, the amount of $575,170
was received into a lawyer’s trust account for the benefit of AltCorp, and 3,333,333 of SURG shares have been sent for cancelation.
The lawyer’s trust account balance was $
On August 12, 2020, the Company and its subsidiary, AltCorp, entered into a new pledge agreement with Stanley, where SURG shares been pledged to Stanley to secure the debt payable by the Company to Stanley as well as mitigate the damages allegedly created by SURG.
| 12 |
GBT Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2021 and 2020 (unaudited)
On November 4, 2020, Altcorp and Stanley filed an Ex Parte Motion in the District Court, Clark County, Nevada (Case No: A-20-823039-B, in Dep No: 43) to appoint receiver and issue a temporary restraining Order against SURG and its transfer agent for alleged defaults on prior exchange agreement. As court entered an order granting in part AltCorp’s motion, the parties entered on December 4, 2020 an interim agreement which set the material terms of the settlement. A final settlement was entered into as per the terms of the interim agreement entered on January 1, 2021.
On January 1, 2021 SURG, AltCorp and Stanley entered
into a Mutual Release and Settlement Agreement (“Settlement Agreement”). Pursuant to the terms of the Settlement Agreement,
SURG agreed to amend the AltCorp Exchange Agreement where SURG acknowledged a debt of $3,300,000 (the “Debt”) to be paid via
33 monthly payments of $100,000 payable in shares of common stock of SURG at a per share price equal the volume weighted average price
of SURG’s common stock during the ten (10) trading days immediately preceding the issuance. At the end of the 33rd month, if AltCorp
has not realized gross, pre-tax proceeds at least equal to the amount of the Debt, SURG shall transfer to AltCorp and/or its designee
additional shares of SURG’s common stock necessary to satisfy the Debt. As of September 30, 2021, SURG has made nine payments per
the settlement agreements and has recognized other income of $900,000. The Company recognizes as other income, the $100,000 monthly installment
payments as received. The Company has recorded the amount due from SURG of $2,400,000 at September 30, 2021 as other receivable ($
The shares received for the eight-monthly installments
in 2021 (with the September payment of $
Note 5 – Impaired Investments
Investment in GBT Technologies, S.A.
On June 17, 2019, the Company, AltCorp Trading LLC,
a Costa Rica company and a wholly-owned subsidiary of the Company (“AltCorp”), GBT Technologies, S.A., a Costa Rica company
(“GBT-CR”) and Pablo Gonzalez, a shareholder’s representative of GBT-CR (“Gonzalez”), entered into and closed
an Exchange Agreement (the “GBT Exchange Agreement”) pursuant to which the parties exchanged certain securities. In accordance
with the Exchange Agreement, AltCorp acquired shares of GBT-CR representing 25% of its issued and outstanding shares of common
stock from Gonzalez in exchange for the issuance of shares of Series H Convertible Preferred Stock of the Company and a Convertible
Note in the principal amount of $
The Gopher Convertible Note bears interest of
On May 19, 2021, the Company, Gonzalez, GBTCR and IGOR 1 Corp entered into a Mutual Release and Settlement Agreement and Irrevocable Assignment of Note Balance Principal and Accrued Interest (the “Gonzalez Agreement”). Pursuant to the Gonzalez Agreement, without any party admission of liability and to avoid litigation, the parties has agreed to (i) extend the GBT Convertible Note maturity date to December 31,2022, (ii) amend the GBT Convertible Note terms to include a beneficial ownership blocker of 4.99% and a modified conversion feature to the GBT Convertible Note with 15% discount to the market price during the 20 trading day period ending on the latest complete trading day prior to the conversion date and (iii) provided for an assignment of the GBT Convertible Note by Gonzalez to a third party.
| 13 |
GBT Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2021 and 2020 (unaudited)
GBT-CR is in the business of the strategic management of BPO (Business Process Outsourcing) digital communications processing for enterprises and startups, distributed ledger technology development, AI development and fintech software development and applications.
The Company accounted for its investment in GBT-CR using the equity method of accounting; however, in 2020, the Company owned less than 20% of and exercised no control over GBT-CR; therefore, this investment is currently accounted for under the cost method. Moreover, on March 19, 2020, California Governor Gavin Newsom issued a stay at home order to protect the health and well-being of all Californians and to establish consistency across the state in order to slow the spread of COVID-19. California was therefore under strict quarantine control and travel has been severely restricted, resulting in disruptions to work, communications, and access to files (due to limited access to facilities). The stay at home order was lifted in California only on January 25, 2021. As such, the Company was unable to access or to contact GBT-CR on an on-going basis, and cannot get information about GBT-CR.
At December 31, 2019, the Company evaluated the carrying
amount of this equity investment and determined that this investment was fully impaired and as a result an impairment charge of $
Investment in Joint Venture
On March 6, 2020, the Company through Greenwich, entered into a Joint Venture and Territorial License Agreement (the “Tokenize Agreement”) with Tokenize-It, S.A. (“Tokenize”), which is owned by a Costa Rica Trust represented by Pablo Gonzalez (“Gonzalez”). Gonzalez also represents Gonzalez Costa Rica Trust, which holds a note in the principal amount of $10,000,000 and is also a shareholder of the Company. Under the Tokenize Agreement, the parties formed GBT Tokenize Corp., a Nevada corporation (“GBT Tokenize”). The purpose of GBT Tokenize is to develop, maintain and support source codes for its proprietary technologies including advanced mobile chip technologies, tracking, radio technologies, AI core engine, electronic design automation, mesh, games, data storage, networking, IT services, business process outsourcing development services, customer service, technical support and quality assurance for business, customizable and dedicated inbound and outbound calls solutions, as well as digital communications processing for enterprises and startups (“Technology Portfolio”), throughout the State of California. Upon generating any revenue from the Technology Portfolio, the Joint Venture will earn the first right of refusal for other territories.
Tokenize shall contribute the services and resources for the development of the Technology Portfolio to GBT Tokenize. The Company shall contribute 2,000,000 shares of common stock of the Company (“GBT Shares”) to GBT Tokenize. Tokenize and the Company will each own 50% of GBT Tokenize. The shares were valued at $5,500,000.
In addition, GBT Tokenize and Gonzalez entered into a Consulting Agreement in which Gonzalez is engaged to provide services in consideration of $33,333 per month payable quarterly which may be paid in shares of common stock calculated by the amount owed divided by the Company’s 10-day VWAP. Gonzalez will provide services in connection with the development of the business as well as GBT Tokenize’s capital raising efforts. The term of the Consulting Agreement is two years. During the nine months ended September 30, 2021, Gonzalez assigned all his accrued balances of $424,731 to Stanley Hills in a private transaction that the Company is not part to. The closing of the Tokenize Agreement occurred on March 9, 2020.
Through this Joint Venture the parties commenced development of an intelligent human vital signs’ device, which we currently refer to as the qTerm. The platform is an expansion of the existing license agreement with GBT Tokenize Corp., which provided GBT Tokenize Corp. with an exclusive territory of California to develop certain of the Company’s technology. As the nature of the platform cannot be restricted only to California, the Company’s joint venture GBT Tokenize Corp. will be compensated with additional two hundred million shares of the Company to strengthen its funding, subject to board approval. A provisional patent application for the qTerm Medical Device was filed on March 30, 2020 with the USPTO. The application has been assigned serial number 63001564. The Joint Venture completed successfully the first prototype. There is no guarantee that the Company will be successful in researching, developing or implementing this product into the market. In order to successfully implement this concept, the Company will need to raise adequate capital to support its research and, if successfully researched, developed and granted regulatory approval, the Company would need to enter into a strategic relationship with a third party that has experience in manufacturing, selling and distributing this product. There is no guarantee that the Company will be successful in any or all of these critical steps.
| 14 |
GBT Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2021 and 2020 (unaudited)
At March 31, 2020, the Company evaluated the carrying amount of this joint venture investment and determined that this investment was fully impaired and as a result an impairment charge of $5,500,000 was taken. At September 30, 2021, the Company evaluated the carrying amount of this joint venture investment and determined that this investment was fully impaired and as a result an impairment charge of $15,400,000 was taken.
Although the investment was impaired, the product development is still ongoing. The carrying amount of this investment at September 30, 2021 and December 2020, was $0 and $0, respectively.
On May 28, 2021, the parties agreed to amend the Tokenize Agreement to expand territory granted for the Technology Portfolio under the license to GBT Tokenize to include the entire continental United States. The Company has further agreed to issue GBT Tokenize an additional 14,000,000 shares of common stock of the Company. The shares were valued at $15,400,000.
The Company pledged its 50% ownership in GBT Tokenize and its 100% ownership of Greenwich to Tokenize to secure its Technology Portfolio investment. The Company shall appoint two directors and Tokenize shall appoint one director of GBT Tokenize.
On September 30, 2021 Tokenize, in an agreement that the Company is not a party to, irrevocably assigned all its rights in GBT Tokenize, including all its rights per the Tokenize Agreement, The Gonzalez Consulting agreement and the pledge agreement, to the benefit of Magic International Argentina FC, S.L a third party (“Magic”). On June 30, 2021 Magic irrevocably assigned to Stanley Hills, LLC its credit balance accrued until June 30, 2021 per the consulting agreement.
Note 6 – Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses at September 30, 2021 and December 31, 2020 consist of the following:
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued interest on notes | ||||||||
| Deposits | ||||||||
| Other | ||||||||
| $ | $ | |||||||
Note 7 – Convertible Notes Payable
Convertible notes payable at September 30, 2021 and December 31, 2020 consist of the following:
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Convertible note payable to GBT Technologies (IGOR 1) | $ | $ | ||||||
| Convertible notes payable to Redstart Holdings | ||||||||
| Convertible note payable to Stanley Hills | ||||||||
| Convertible note payable to Iliad | ||||||||
| Total convertible notes payable | ||||||||
| Unamortized debt discount | ( | ) | ( | ) | ||||
| Convertible notes payable | ||||||||
| Less current portion | ( | ) | ( | ) | ||||
| Convertible notes payable, long-term portion | $ | $ | ||||||
| 15 |
GBT Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2021 and 2020 (unaudited)
$10,000,000 for GBT Technologies S. A. acquisition
In accordance with the acquisition of GBT-CR the Company
issued a convertible note in the principal amount of $
On May 19, 2021, the Company, Gonzalez, GBT-CR and
IGOR 1 Corp entered into a Mutual Release and Settlement Agreement and Irrevocable Assignment of outstanding balance plus accrued interest
(the “Gonzalez Agreement”). Pursuant to the Gonzalez Agreement, without any party admission of liability and to avoid litigation,
the parties has agreed to (i) extend the GBT convertible note maturity date to December 31, 2022, (ii) amend the GBT convertible note
terms to include a beneficial ownership blocker of 4.99% and a modified conversion feature to the GBT convertible note with 15% discount
to the market price during the 20 trading day period ending on the latest complete trading day prior to the conversion date and (iii)
provided for an assignment of the GBT convertible note by Gonzalez to a third party. As a result of the change in terms of this convertible
note, the Company took a charge related to the modification of debt of $
During the nine months ended September 30, 2021,
Redstart Holdings Corp.
Paid Off Notes/Converted Notes
On August 4, 2020, the Company entered into a Securities
Purchase Agreement with Redstart Holdings Corp., an accredited investor (“Redstart”) pursuant to which the Company issued
to Redstart a Convertible Promissory Note (the “Redstart Note No. 1”) in the aggregate principal amount of $
On September 15, 2020, the Company entered into a
Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart
Note No. 2”) in the aggregate principal amount of $93,600 for a purchase price of $
| 16 |
GBT Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2021 and 2020 (unaudited)
On December 9, 2020, the Company entered into a Securities
Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note
No. 3”) in the aggregate principal amount of $100,200 for a purchase price of $
On February 10, 2021, the Company entered into a Securities
Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note
No. 4”) in the aggregate principal amount of $184,200 for a purchase price of $
On March 15, 2021, the Company entered into a Securities
Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note
No. 5”) in the aggregate principal amount of $106,200 for a purchase price of $
| 17 |
GBT Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2021 and 2020 (unaudited)
Outstanding Notes
On May 26, 2021, the Company entered into a Securities
Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note
No. 6”) in the aggregate principal amount of $106,200 for a purchase price of $
On September 21, 2021, the Company entered into a
Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart
Note No. 7”) in the aggregate principal amount of $244,500 for a purchase price of $
Stanley Hills LLC
The Company entered into a series of loan agreements
with Stanley Hills LLC (“Stanley”) pursuant to which it received more than $1,000,000 in loans (the “Debt”) since
May 2019 up to December 2019. On February 26, 2020, in order to induce Stanley to continue to provide funding, the Company and Stanley
entered into a letter agreement providing that the current note payable balance due to Stanley in the amount of $
| 18 |
GBT Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2021 and 2020 (unaudited)
Iliad Research and Trading, L.P.
On February 27, 2019, the Company entered into a note
purchase agreement with a third-party investor - Iliad Research and Trading, L.P.(“Iliad”), pursuant to which the Company
issued a promissory note for the original principal amount of $
On February 27, 2020, the Company and Iliad entered
into an Amendment to the Iliad Note (See Note 8) pursuant to which the maturity date of the Iliad Note was extended to August 27, 2020,
provided that the Debt may be converted into shares of common stock of the Company at a conversion price equal to 80% multiplied by the
lowest trading daily VWAP for the common stock during the 20 trading day period ending on the latest complete trading day prior to the
conversion date, provided for the payment by the Company to Iliad of an extension fee equal to 7.5% of the outstanding balance of the
Iliad Note resulting in a new balance of the Iliad Note of $2,765,983 and provided that the Company’s failure to deliver shares
of common stock within three trading days of a conversion would result in an event of default. Since the conversion price will vary based
on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability.
Iliad has agreed to restrict its ability to convert the Iliad Note and receive shares of common stock such that the number of shares
of common stock held by it and its affiliates after such conversion or exercise does not exceed 9.99% of the
then issued and outstanding shares of common stock. On July 20, 2020 the Company and Iliad entered into agreement to extend the maturity
of the Iliad Note until February 27, 2021 in consideration of an extension fee of $
Discounts on convertible notes
The Company recognized interest expense of $686,732
and $3,833,752 during the nine months ended September 30, 2021 and 2020, respectively, related to the amortization of the debt discount
on convertible notes. The unamortized debt discount at September 30, 2021 and December 31, 2020 was $
A roll-forward of the convertible notes payable from December 31, 2020 to September 30, 2021 is below:
| Debt discount related to new convertible notes | Principal | Debt | ||||||||||
| Amortization of debt discounts | Balance | Discount | Net | |||||||||
| Convertible notes payable, December 31, 2020 | $ | $ | ( | ) | $ | |||||||
| Issued for cash | ||||||||||||
| Convertible note issued for accounts payable | ||||||||||||
| Accrued interest added to convertible note | ||||||||||||
| Payment with marketable securities | ( | ) | ( | ) | ||||||||
| Original issue discount | ||||||||||||
| Conversion to common stock | ( | ) | ( | ) | ||||||||
| Debt discount related to new convertible notes | ( | ) | ( | ) | ||||||||
| Amortization of debt discounts | ||||||||||||
| Convertible notes payable, September 30, 2021 | $ | $ | ( | ) | $ | |||||||
| 19 |
GBT Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2021 and 2020 (unaudited)
Note 8 - Notes Payable
Notes payable at September 30, 2021 and December 31, 2020 consist of the following:
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| RWJ acquisition note | $ | $ | ||||||
| SBA loan | ||||||||
| Promissory note to Alpha Eda | ||||||||
| Total notes payable | ||||||||
| Unamortized debt discount | ||||||||
| Notes payable | ||||||||
| Less current portion | ( | ) | ( | ) | ||||
| Notes payable, long-term portion | $ | $ | ||||||
RWJ Acquisition Note
In connection with the acquisition of RWJ in September
2017, the Company issued a note payable. The note accrues interest at
SBA Loan
On June 22, 2020, the Company received a loan from
the Small Business Administration under the Economic Injury Disaster Loan (“EIDL”) program related to the COVID-19 relief
efforts. The loan bears interest at
Alpha Eda
On November 15, 2020, the Company issued a promissory
note to Alpha Eda, LLC (“Alpha”) for $
Discounts on Promissory Note
The Company recognized interest expense of $
| 20 |
GBT Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2021 and 2020 (unaudited)
Note 9 – Accrued Settlement
In connection with a legal matter filed by the Investor
of the $
Note 10 - Derivative Liability
Certain of the convertible notes payable discussed in Note 7 have a conversion price that can be adjusted based on the Company’s stock price which results in the conversion feature being recorded as a derivative liability.
The fair value of the derivative liability is recorded and shown separately under current liabilities. Changes in the fair value of the derivative liability is recorded in the statement of operations under other income (expense).
The Company uses a weighted average Black-Scholes option pricing model with the following assumptions to measure the fair value of derivative liability at September 30, 2021 and December 31, 2020:
| September 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Stock price | $ | $ | ||||||
| Risk free rate | % | % | ||||||
| Volatility | % | % | ||||||
| Conversion/ Exercise price | $ | $ | ||||||
| Dividend rate | % | % | ||||||
The following table represents the Company’s derivative liability activity for the nine months ended September 30, 2021:
| Schedule of Derivative Liabilities at Fair Value | ||||
| Derivative liability balance, December 31, 2020 | $ | |||
| Debt modification | ||||
| Issuance of derivative liability during the period | ||||
| Fair value of beneficial conversion feature of debt converted | ( | ) | ||
| Change in derivative liability during the period | ||||
| Derivative liability balance, September 30, 2021 | $ |
Note 11- Stockholders’ Equity
Common Stock
The Board of Directors of the Company approved, on
April 13, 2020, a reverse stock split of all of the Company’s Common Stock, pursuant to which every 50 shares of Common Stock of
the Company shall be reverse split, reconstituted and converted into one (1) share of Common Stock of the Company (the “Reverse
Stock Split”). The Company submitted an Issuer Company Related Action Notification regarding the Reverse Stock Split to FINRA on
April 14, 2020. To effectuate the Reverse Stock Split, the Company filed on April 21, 2020 a Certificate of Change Pursuant to Nevada
Revised Statutes (“NRS”) Section 78.209 (the “Certificate of Change”) with the Secretary of State of the State
of Nevada subject to FINRA approval. Since this reverse stock split has not yet been approved by the State of Nevada, the financial statements
have not been retroactively restated to reflect this reverse stock split. On June 8, 2020 FINRA advised the Company that such request
is deficient due to the fact that a holder of an outstanding convertible note of the Company had entered into two settlements with the
Securities and Exchange Commission that related to securities laws violations but were in no way related to the Company. As a result,
FINRA advised that it is necessary for the protection of investors, the public interest, and to maintain fair and orderly markets that
documentation related to the Reverse Stock Split not be processed. The Company appealed the decision made by FINRA on June 15, 2020. On
August 4, 2020, FINRA notified the Company that its appeal had been denied. On October 25, 2021 FINRA approved the Reverse Stock Split
and on October 26, 2021, the Company effectuated a
| 21 |
GBT Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2021 and 2020 (unaudited)
During the nine months ended September 30, 2021, the Company had the following transactions in its common stock:
| ● | issued an aggregate of shares for the conversion of convertible notes of $ | |
| ● | issued shares to consultants for services rendered. The value of
the shares of $ | |
| ● | issued shares to GBT Tokenize for a joint venture agreement. The value of the common stock of $ was determined based on the closing stock price of the Company’s common stock on the grant date |
During the nine months ended September 30, 2020, the Company had the following transactions in its common stock:
| ● | issued an aggregate of for the conversion of convertible notes of $ | |
| ● | issued shares to GBT Tokenize for a joint venture agreement. The value of the common stock of $ was determined based on the closing stock price of the Company’s common stock on the grant date. |
Series B Preferred Shares
On November 1, 2011, the Company and certain creditors entered into a Settlement Agreement (the “Settlement Agreement”) whereby without admitting any wrongdoing on either part, the parties settled all previous agreements and resolved any existing disputes. Under the terms of the Settlement Agreement, the Company agreed to issue the creditors shares of Series B Preferred Stock of the Company on a pro-rata basis. Following the issuance and delivery of the shares of Series B Preferred Stock to said creditors, as well as surrendering the undelivered shares, the Settlement Agreement resulted in the settlement of all debts, liabilities and obligations between the parties.
The Series B Preferred Stock has a stated value of
$100 per share and is convertible into the Company’s common stock at a conversion price of $
As of September 30, 2021, and December 31, 2020, there were Series B Preferred Shares outstanding.
Series C Preferred Shares
On April 29, 2011, GV Global Communications, Inc. (“GV”) provided funding to the Company in the aggregate principal amount of $111,000 (the “Loan”). On September 25, 2012, the Company and GV entered into a Conversion Agreement pursuant to which the Company agreed to convert the Loan into 10,000 shares of Series C Preferred Stock of the Company, which was approved by the Board of Directors.
Each share of Series C Preferred Stock is convertible, at the option of GV, into such number of shares of common stock of the Company as determined by dividing the Stated Value (as defined below) by the Conversion Price (as defined below). The Conversion Price for each share is equal to a 50% discount to the average of the lowest three lowest closing bid prices of the Company’s common stock during the 10-day trading period prior to the conversion with a minimum conversion price of $0.02. The stated value is $11.00 per share (the “Stated Value”). The Series C Preferred Stock has no liquidation preference, does not pay dividends and the holder of Series C Preferred Stock shall be entitled to one vote for each share of common stock that the Series C Preferred Stock shall be convertible into. GV has contractually agreed to restrict its ability to convert the Series C Preferred Stock and receive shares of the Company’s common stock such that the number of shares of the Company’s common stock held by it and its affiliates after such conversion does not exceed 4.9% of the then issued and outstanding shares of the Company’s common stock.
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GBT Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2021 and 2020 (unaudited)
During the year ended December 31, 2014, GV Global
Communications, Inc. converted
The issuance of the Series C Preferred Stock was made in reliance upon exemptions from registration pursuant to Section 4(a)(2) under the Securities Act of 1933 and Rule 506 promulgated under Regulation D thereunder. GV is an accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933.
As of September 30, 2021, and December 31, 2020, there were Series C Preferred Shares outstanding.
Series D Preferred Shares
As of September 30, 2021, and December 31, 2020, there are and shares of Series D Preferred Shares outstanding, respectively.
Series G Preferred Shares
As of September 30, 2021, and December 31, 2020, there are and shares of Series G Preferred Shares outstanding, respectively.
Series H Preferred Shares
On June 17, 2019, the Company, AltCorp Trading LLC,
a Costa Rica company and a wholly-owned subsidiary of the Company (“AltCorp”), GBT Technologies, S.A., a Costa Rica company
(“GBT-CR”) and Pablo Gonzalez, a shareholder’s representative of GBT-CR (“Gonzalez”), entered into and closed
an Exchange Agreement (the “GBT Exchange Agreement”) pursuant to which the parties exchanged certain securities. In accordance
with the Exchange Agreement, AltCorp acquired shares of GBT-CR representing 25% of its issued and outstanding shares of common
stock from Gonzalez in exchange for the issuance of shares of Series H Convertible Preferred Stock of the Company and a Convertible
Note in the principal amount of $
As of September 30, 2021, and December 31, 2020, there are shares of Series H Preferred Shares outstanding.
Warrants
The following is a summary of warrant activity.
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GBT Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2021 and 2020 (unaudited)
| Weighted | |||||||||||||||||
| Weighted | Average | ||||||||||||||||
| Average | Remaining | Aggregate | |||||||||||||||
| Warrants | Exercise | Contractual | Intrinsic | ||||||||||||||
| Outstanding | Price | Life | Value | ||||||||||||||
| Outstanding, December 31, 2020 | $ | $ | |||||||||||||||
| Granted | |||||||||||||||||
| Forfeited | |||||||||||||||||
| Exercised | |||||||||||||||||
| Outstanding, September 30, 2021 | $ | $ | |||||||||||||||
| Exercisable, September 30, 2021 | $ | $ | |||||||||||||||
The exercise price for warrant outstanding and exercisable at September 30, 2021:
| Outstanding | Exercisable | ||||||||||||
| Number of | Exercise | Number of | Exercise | ||||||||||
| Warrants | Price | Warrants | Price | ||||||||||
| $ | $ | ||||||||||||
Note 12 - Related Parties
Related parties are natural persons or other entities that have the ability, directly or indirectly, to control another party or exercise significant influence over the party in making financial and operating decisions. Related parties include other parties that are subject to common control or that are subject to common significant influences.
On April 6, 2018, the Company and Danny Rittman,
Chief Technology Officer and a Director of the Company, agreed to amend his employment agreement pursuant to which he will receive
salary at the rate of $
On September 14, 2018, the Company and Dr. Rittman entered into a letter agreement confirming that the Company is the owner of all intellectual property developed by Dr. Rittman relating to the Internet of Things (IoT) and Artificial Intelligence enabled mobile technologies, including a global platform with both mobile and fixed solutions, commencing June 16, 2015 and continuing until Dr. Rittman’s employment agreement is terminated.
On September 1, 2017, the Company entered into and
closed an Asset Purchase Agreement with a third party, RWJ Advanced Marketing, LLC (“RWJ”), a Georgia corporation, pursuant
to which the Company purchased certain assets from RWJ, including inventory, terminals, licenses and permits and intangible assets. At
closing, the Company and Mr. Greg Bauer entered into an Employment Agreement pursuant to which Mr. Bauer was retained as Chief Executive
Officer for a term of one year, subject to an automatic extension, unless terminated, in consideration of a base salary of $
On January 1, 2019, the Company and Douglas Davis
entered into an Amended and Restated Employment Agreement pursuant to which Mr. Davis was retained as Chief Executive Officer. Mr. Davis
served as Interim Chief Executive Officer since July 2018 until his resignation on April 11, 2020. The term of Mr. Davis’ employment
was for two years through January 1, 2021. Mr. Davis was entitled to an annual base salary of $250,000, which was to be increased to $
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GBT Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2021 and 2020 (unaudited)
On October 10, 2019, the Company entered into a Joint
Venture Agreement (the “BitSpeed Agreement”) with BitSpeed LLC, which is owned by Douglas Davis, the Company’s former
Chief Executive Officer, to form GBT BitSpeed Corp., a Nevada company (“GBT BitSpeed”). The purpose of GBT BitSpeed is to
develop, maintain and support its proprietary Extreme Transfer Software Application Concurrency, a software application to transfer secure,
accelerated transmission of large file data over networks, and connection to cloud storage, Network-Attached Storage (NAS) and Storage
Area Networks (SANs) (“Concurrency”). BitSpeed shall contribute the services and resources for the development of Concurrency
to GBT BitSpeed. The Company shall contribute
On March 6, 2020, the Company through Greenwich, entered
into the Tokenize Agreement with Tokenize, which is owned by a Costa Rica Trust represented by Gonzalez. Gonzalez also represents Gonzalez
Costa Rica Trust, which holds a note in the principal amount of $
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.
GBT Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2021 and 2020 (unaudited)
Note 13 - Contingencies
Legal Proceedings
From time to time, the Company may be involved in various litigation matters, which arise in the ordinary course of business. There is currently no litigation that management believes will have a material impact on the financial position of the Company.
On or around January 30, 2019, RWJ Advanced Marketing, LLC, Greg Bauer, and Warren Jackson sued the Company and multiple third and related parties in Superior Court of the State of California - County of Los Angeles, General District in connection with the acquisition of UGO in September 2017. The case number is 19STCV03320 (the “Original Lawsuit”). The complaint in the Original Lawsuit alleges breach of contract, among other causes of action. The Company answered the complaint and filed a cross-complaint against the plaintiffs in the case and third parties on or around February 15, 2019. On or about September 10, 2020, the Company through its agent of service was “served” with a complaint (the Company contested service) that was recently filed against the Company and third parties by Robert Warren Jackson and Gregory Bauer in Los Angeles Superior Court Case No.: 20STCV32709 (“Second Lawsuit”). In the Original Lawsuit filed, the court rejected the plaintiff’s claims that they were filing a purported quasi-derivative lawsuit. As such, in this current litigation, the plaintiff is now again claiming the action is a derivative lawsuit. On October 13, 2020, the Second Lawsuit was removed by other defendants into Central District of California (CASE NO. 2:20−cv−09399−RGK−AGR). On February 2, 2021 The Central District of California dismissed the entire Second Lawsuit based on “demand futility”. In the Original lawsuit, the Company filed a cross complaint against the plaintiff and other third parties. Recently, the court has scheduled various hearings and a trial date set for December 27, 2021 which was later continued by the Court to September 28, 2022. It was the Company’s intention to dividend its holdings of its wholly owned subsidiary Ugopherservices Corp. (“UGO”). As UGO is the main dispute in the litigations described above, the Company has elected to sell UGO to a third-party effective July 1, 2020 (See Note 3). On September 17, 2020, the Company terminated Greg Bauer as consultant (resulting from the sale of UGO), which he confirmed in writing. On or about June 14, 2021 the Company stipulated with plaintiff that all third parties will be released and plaintiff may file a new first amendment complaint that will name only the Company. As such, all third parties other than prior transfer agent of the Company have been dismissed from this litigation.
Following the sale of UGO (See Note 3), the Company noticed third parties (including SURG, via its asset manager) to wire the UGO funds to its new bank account. SURG never answered the notice. The Company noticed certain third parties that it intends to take legal actions to resolve this issue. On November 12, 2020 the Company filed a complaint in the United States District Court – District of Nevada - Case 2:20-cv-02078 against RWJ, Mr. Bauer, Mr. Jackson and against W.L. Petrey Wholesale Company Inc for fraud, breach of contract, Unjust Enrichment and other claims.
On December 3, 2018, the Company entered into a Securities
Purchase Agreement (the “SPA”) with Discover Growth Fund, LLC (the “Investor”) pursuant to which the Company issued
a Senior Secured Redeemable Convertible Debenture (the “Debenture”) in the aggregate face value of $
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GBT Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2021 and 2020 (unaudited)
GBT Technologies, S.A.
On September 14, 2018, the
Company entered into an Exclusive Intellectual Property License and Royalty Agreement (the “GBT License Agreement”) with GBT-CR,
a fully compliant and regulated crypto currency exchange platform that currently operates in Costa Rica as a decentralized crypto currency
platform, pursuant to which, among other things, the Company granted to GBT-CR an exclusive, royalty-bearing right and license relating
intellectual property relating to systems and methods of converting electronic transmissions into digital currency as reflected in that
certain patent filed with the United Stated Patent and Trademark Office on or about June 14, 2018 (EFS ID: 32893586; Application Number:
16008069; Type: Utility under 35 USC 111(a); Confirmation Number: 6787)(collectively, the “Digital Currently Technology”).
Pursuant to the GBT License Agreement, the Company granted GBT-CR an exclusive worldwide license to use the Digital Currency Technology
to make, use, sell, lease or otherwise commercialize and dispose of products and devices utilizing the Digital Currently Technology. Under
the terms of the GBT License Agreement, the Company is entitled to receive a royalty payment of 2% of gross revenue of each licensed product
sold by GBT-CR during the period starting in which revenue is first generated using the licensed products and continuing for five years
thereafter. Upon signing the GBT-CR License Agreement, GBT-CR paid the Company $300,000 which is nonrefundable. The Company has recognized
the $
In connection with SURG Exchange Agreement (see Note 4) - On November 4, 2020, Altcorp and Stanley filed an Ex Parte Motion in the District Court, Clark County, Nevada (Case No: A-20-823039-B, in Dep No: 43) to appoint receiver and issue a temporary restraining Order against SURG and its transfer agent for alleged defaults on prior exchange agreement. On December 4, 2020, the parties entered an interim agreement which set the material terms of the settlement. A final settlement was achieved per the interim agreement terms on January 1, 2021. On March 4, 2021 the Company filed a motion to enforce settlement agreements, as the Company alleged that SURG owes an additional $240,000 which is due and owing under the settlement agreements.
On June 24, 2021 per the June 23, 2020 Agreement, the Company together with AltCorp issued sent SURG and its transfer agent via registered mail, a true-up shares demand for an additional 14,870,370 SURG shares as calculated per the Agreement. As of the filing date of this report, SURG’s transfer agent did not answer the Company’s request.
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GBT Technologies, Inc.
Notes to Condensed Consolidated Financial Statements
For the Nine Months Ended September 30, 2021 and 2020 (unaudited)
Note 14 – Concentrations
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to a concentration of credit risk, consist principally of temporary cash investments. There have been no losses in these accounts through September 30, 2021.
Note 15 – Loss on Debt Modification
On May 19, 2021, the Company, Gonzalez, GBT-CR and
IGOR 1 Corp entered into a Mutual Release and Settlement Agreement and Irrevocable Assignment of outstanding balance plus accrued interest
(the “Gonzalez Agreement”). Pursuant to the Gonzalez Agreement, without any party admission of liability and to avoid litigation,
the parties has agreed to (i) extend the GBT convertible note maturity date to December 31, 2022, (ii) amend the GBT convertible note
terms to include a beneficial ownership blocker of 4.99% and a modified conversion feature to the GBT convertible note with 15% discount
to the market price during the 20 trading day period ending on the latest complete trading day prior to the conversion date and (iii)
provided for an assignment of the GBT convertible note by Gonzalez to a third party. As a result of the change in terms of this convertible
note, the Company took a charge related to the modification of debt of $
Note 16 - Subsequent Events
Management has evaluated events that occurred subsequent to the end of the reporting period shown herein:
On June 22, 2020, the Company received a $
On September 14, 2021, the Company reported in its Form 8-K that it had filed an Issuer Company-Related Action Notification Form with the Financial Industry Regulatory Authority (“FINRA”) for processing a 1-for-50 reverse stock split of its authorized and issued and outstanding common stock. On October 25, 2021, the Company received notice from FINRA that the reverse stock split described above will take effect at the open of business on Tuesday, October 26, 2021. The Company’s symbol on the OTC Pink will be GTCHD for 20 business days from October 26, 2021 and the CUSIP will be changed to 361548308.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion should be read in conjunction with our financial statements and related notes included elsewhere in this report. In addition to historical information, this discussion includes forward-looking information that involves risks and assumptions, which could cause actual results to differ materially from management’s expectations. See “Forward-Looking Statements” included in this report.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward looking statements, including without limitation, statements related to our plans, strategies, objectives, expectations, intentions and adequacy of resources. Investors are cautioned that such forward-looking statements involve risks and uncertainties including without limitation the following: (i) our plans, strategies, objectives, expectations and intentions are subject to change at any time at our discretion; (ii) our plans and results of operations will be affected by our ability to manage growth; and (iii) other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission.
In some cases, you can identify forward-looking statements by terminology such as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘could,’’ ‘‘expects,’’ ‘‘plans,’’ ‘‘intends,’’ ‘‘anticipates,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘predicts,’’ ‘‘potential,’’ or ‘‘continue’’ or the negative of such terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We are under no duty to update any of the forward-looking statements after the date of this Report.
This section of the report should be read together with Footnotes of the Company audited financials for the year ended December 31, 2020, the unaudited statements of operations for the three and nine months ended September 30, 2021 and 2020 are compared in the sections below.
General Overview
GBT Technologies Inc. (the “Company”, “we”, “us”, “our”, “GBT”, “Gopher”, “Gopher Protocol”, “GOPH”, “GTCH”, or “GBT”) was incorporated on July 22, 2009 under the laws of the State of Nevada and is headquartered in Santa Monica, California. The Company is targeting growing markets such as development of Internet of Things (“IoT”) and Artificial Intelligence (“AI”) enabled networking and tracking technologies, including wireless mesh network technology platform and fixed solutions, development of an intelligent human body vitals device, asset-tracking IoT, and wireless mesh networks. The Company has historically derived revenues from (i) the provision of IT services; and (ii) from the licensing of its technology.
GBT Tokenize Joint Venture
On March 6, 2020, the Company through Greenwich, entered into a Joint Venture and Territorial License Agreement (the “Tokenize Agreement”) with Tokenize-It, S.A. (“Tokenize”), which is owned by a Costa Rica Trust represented by Pablo Gonzalez (“Gonzalez”). Gonzalez also represents Gonzalez Costa Rica Trust, which holds a note in the principal amount of $10,000,000 and is also a shareholder of the Company. Under the Tokenize Agreement, the parties formed GBT Tokenize Corp., a Nevada corporation (“GBT Tokenize”). The purpose of GBT Tokenize is to develop, maintain and support source codes for its proprietary technologies including advanced mobile chip technologies, tracking, radio technologies, AI core engine, electronic design automation, mesh, games, data storage, networking, IT services, business process outsourcing development services, customer service, technical support and quality assurance for business, customizable and dedicated inbound and outbound calls solutions, as well as digital communications processing for enterprises and startups (“Technology Portfolio”), throughout the State of California. Upon generating any revenue from the Technology Portfolio, the Joint Venture will earn the first right of refusal for other territories.
Tokenize shall contribute the services and resources for the development of the Technology Portfolio to GBT Tokenize. The Company shall contribute 2,000,000 shares of common stock of the Company (“GBT Shares”) to GBT Tokenize. Tokenize and the Company will each own 50% of GBT Tokenize. The shares were valued at $5,500,000.
In addition, GBT Tokenize and Gonzalez entered into a Consulting Agreement in which Gonzalez is engaged to provide services in consideration of $33,333 per month payable quarterly which may be paid in shares of common stock calculated by the amount owed divided by the Company’s 10-day VWAP. Gonzalez will provide services in connection with the development of the business as well as GBT Tokenize’s capital raising efforts. The term of the Consulting Agreement is two years. During the nine months ended September 30, 2021, Gonzalez assigned all his accrued balances of $424,731 to Stanley Hills in a private transaction that the Company is not part to. The closing of the Tokenize Agreement occurred on March 9, 2020.
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Through this Joint Venture the parties commenced development of an intelligent human vital signs’ device, which we currently refer to as the qTerm. The platform is an expansion of the existing license agreement with GBT Tokenize Corp., which provided GBT Tokenize Corp. with an exclusive territory of California to develop certain of the Company’s technology. As the nature of the platform cannot be restricted only to California, the Company’s joint venture GBT Tokenize Corp. will be compensated with additional two hundred million shares of the Company to strengthen its funding, subject to board approval. A provisional patent application for the qTerm Medical Device was filed on March 30, 2020 with the USPTO. The application has been assigned serial number 63001564. The Joint Venture completed successfully the first prototype. There is no guarantee that the Company will be successful in researching, developing or implementing this product into the market. In order to successfully implement this concept, the Company will need to raise adequate capital to support its research and, if successfully researched, developed and granted regulatory approval, the Company would need to enter into a strategic relationship with a third party that has experience in manufacturing, selling and distributing this product. There is no guarantee that the Company will be successful in any or all of these critical steps.
At March 31, 2020, the Company evaluated the carrying amount of this joint venture investment and determined that this investment was fully impaired and as a result an impairment charge of $5,500,000 was taken. At September 30, 2021, the Company evaluated the carrying amount of this joint venture investment and determined that this investment was fully impaired and as a result an impairment charge of $15,400,000 was taken.
Although the investment was impaired, the product development is still ongoing. The carrying amount of this investment at September 30, 2021 and December 2020, was $0 and $0, respectively.
On May 28, 2021, the parties agreed to amend the Tokenize Agreement to expand territory granted for the Technology Portfolio under the license to GBT Tokenize to include the entire continental United States. The Company has further agreed to issue GBT Tokenize an additional 14,000,000 shares of common stock of the Company. The shares were valued at $15,400,000.
The Company pledged its 50% ownership in GBT Tokenize and its 100% ownership of Greenwich to Tokenize to secure its Technology Portfolio investment. The Company shall appoint two directors and Tokenize shall appoint one director of GBT Tokenize.
On September 30, 2021 Tokenize, in an agreement that the Company is not a party to, irrevocably assigned all its rights in GBT Tokenize, including all its rights per the Tokenize Agreement, The Gonzalez Consulting agreement and the pledge agreement, to the benefit of Magic International Argentina FC, S.L a third party (“Magic”). On June 30, 2021 Magic irrevocably assigned to Stanley Hills, LLC its credit balance accrued until June 30,2021 per the consulting agreement.
COVID-19 Pandemic
The Company operates in a high-tech marketplace and relies on professionals and partnerships all over the world, which is impacted by the global pandemic, causing the Company’s resources to be affected. Our business operations have been and may continue to be materially and adversely affected by the coronavirus disease COVID-19.
An outbreak of respiratory illness caused by COVID-19 emerged in Wuhan city, Hubei province, PRC, in late 2019 and expanded globally. COVID-19 is considered to be highly contagious and poses a serious public health threat.
On March 19, 2020, California Governor Gavin Newsom issued a stay at home order to protect the health and well-being of all Californians and to establish consistency across the state in order to slow the spread of COVID-19. California was therefore under strict quarantine control and travel has been severely restricted, resulting in disruptions to work, communications, and access to files (due to limited access to facilities). Since then, other measures have been imposed in other countries and major cities in the USA, including Los Angeles, and throughout the world in an effort to contain the COVID-19 outbreak. The World Health Organization (the “WHO”) is closely monitoring and evaluating the situation. On March 11, 2020, the WHO declared the outbreak of COVID-19 a pandemic, expanding its assessment of the threat beyond the global health emergency it had announced in January. Any outbreak of such epidemic illness or other adverse public health developments in the USA or elsewhere in the world may materially and adversely affect the global economy, our markets and our business. The stay at home order was lifted in California only on January 25, 2021.
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In the first quarter of 2020, the COVID-19 outbreak caused disruptions in our development operations, which resulted in delays on exiting projects. The State of California and the economy in general has begun to slowly re-open following the introduction of the COVID-19 vaccine. However, in the event COVID-19 or other variant is to again surface any further unforeseen delay in our operations of the development, delivery and assembly process within any of our activities could continue to result in, increased costs and reduced revenue.
We cannot foresee whether the outbreak of COVID-19 and its variants will continue to be effectively contained. If the outbreak of COVID-19 is not effectively and timely controlled, our business operations and financial condition may be materially and adversely affected as a result of the deteriorating market outlook for sales, the slowdown in regional and national economic growth, weakened liquidity and financial condition of our customers and vendors or other factors that we cannot foresee. Any of these factors and other factors beyond our control could have an adverse effect on the overall business environment, cause uncertainties, cause our business to suffer in ways that we cannot predict and materially and adversely impact our business, financial condition and results of operations.
Results of Operations:
Three Months ended September 30, 2021 and 2020
A comparison of the statements of operations for the three months ended September 30, 2021 and 2020 is as follows:
| Three Months Ended September 30 | Change | |||||||||||||||
| 2021 | 2020 | $ | % | |||||||||||||
| Sales - related party | $ | 45,000 | $ | 45,000 | $ | — | 0.0 | % | ||||||||
| Operating expenses | 906,398 | 452,790 | 453,608 | 100.2 | % | |||||||||||
| Loss from operations | (861,398 | ) | (407,790 | ) | (453,608 | ) | 111.2 | % | ||||||||
| Other expense | 431,467 | (919,220 | ) | 1,350,687 | -146.9 | % | ||||||||||
| Loss before provision for income taxes | (429,931 | ) | (1,327,010 | ) | 897,079 | -67.6 | % | |||||||||
| Provision for income taxes | — | — | — | |||||||||||||
| Loss from continued operations | (429,931 | ) | (1,327,010 | ) | 897,079 | -67.6 | % | |||||||||
| Discontinued operations | — | 1,001,711 | (1,001,711 | ) | -100.0 | % | ||||||||||
| Net loss | $ | (429,931 | ) | $ | (325,299 | ) | $ | (104,632 | ) | 32.2 | % | |||||
Sales for both the three months ended September 30, 2021 and 2020 were $45,000. Sales are derived from providing IT consulting services to a related party.
Operating expenses for the three months ended September 30, 2021 were $906,398, compared to $452,790 for the same period in 2020. The increase of $453,608 or 100.2% was principally due to an increase in development costs.
Other income (expense) for the three months ended September 30, 2021 was $431,467, an increase of $1,350,687 or 146.9% from $(919,220) for the same period in 2020. The change is principally due to a decrease in amortization of debt discount and a decrease in realized and unrealized loss on marketable equity securities; offset by a decrease in the change in fair value of derivative liability.
Net loss for the three months ended September 30, 2021 was $429,931 compared to $325,299 for the same period in 2020 due to the factors described above.
Nine months ended September 30, 2021 and 2020
A comparison of the statements of operations for the nine months ended September 30, 2021 and 2020 is as follows:
| Nine Months Ended September 30, | Change | |||||||||||||||||
| 2021 | 2020 | $ | % | |||||||||||||||
| Sales - related party | $ | 135,000 | $ | 135,000 | $ | — | 0.0 | % | ||||||||||
| Operating expenses | 17,846,869 | 6,904,664 | 10,942,205 | 158.5 | % | |||||||||||||
| Loss from operations | (17,711,869 | ) | (6,769,664 | ) | (10,942,205 | ) | 161.6 | % | ||||||||||
| Other expense | (15,142,326 | ) | (8,144,625 | ) | (6,997,701 | ) | 85.9 | % | ||||||||||
| Loss before provision for income taxes | (32,854,195 | ) | (14,914,289 | ) | (17,939,906 | ) | 120.3 | % | ||||||||||
| Provision for income taxes | — | — | — | |||||||||||||||
| Loss from continued operations | (32,854,195 | ) | (14,914,289 | ) | (17,939,906 | ) | 120.3 | % | ||||||||||
| Discontinued operations | — | 984,787 | (984,787 | ) | -100.0 | % | ||||||||||||
| Net loss | $ | (32,854,195 | ) | $ | (13,929,502 | ) | $ | (18,924,693 | ) | 135.9 | % | |||||||
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Sales for both the nine months ended September 30, 2021 and 2020 were $135,000. Sales are derived from providing IT consulting services to a related party.
Operating expenses for the nine months ended September 30, 2021 were $17,846,869, compared to $6,904,664 for the same period in 2020. The increase of $10,942,205 or 158.5% was principally due to an impairment charge of $15,400,000 in 2021 compared to an impairment charge of $5,500,000 in 2020.
Other expense for the nine months ended September 30, 2021 was $15,142,326, an increase of $6,997,701 or 85.9% from $8,114,625 for the same period in 2020. The increase is principally due to a loss on debt modification and change in fair value of derivative liability; offset by a decrease in amortization of debt discount and by a decrease in loss on exchange of assets.
The operating results of our discontinued operations for Ugopherservices for the nine months ended September 30, 2021 and 2020 is summarized below:
| Nine months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Revenue | $ | — | $ | 8,291,842 | ||||
| Cost of revenue | — | 7,900,122 | ||||||
| Gross Profit | — | 391,720 | ||||||
| Operating expenses | — | 408,644 | ||||||
| Loss from operations | — | (16,924 | ) | |||||
| Other income (expenses) | — | — | ||||||
| Net loss | $ | — | $ | (16,924 | ) | |||
As a result of the disposition of Ugopherservices, the Company recognized a gain on the disposition of discontinued operations of $1,001,711 for the nine months ended September 30, 2020.
Net loss for the nine months ended September 30, 2021 was $32,854,195 compared to $13,929,502 for the same period in 2020 due to the factors described above.
Liquidity and Capital Resources
Our cash and restricted cash were $386,659 and $178,016, respectively, at September 30, 2021 and $113,034 and $402,532, respectively, at December 31, 2020. Cash used in operating activities during the nine months ended September 30, 2021 was $958,011, compared to $542,913 during the same period in 2020. Significant differences exist between the periods, including, loss on debt modification, impairment of assets, loss on exchange of assets and amortization of debt discount. Our working capital position improved going from a working capital deficit of $27,710,040 at December 31, 2020 to a working capital deficit of $21,704,420 at September 30, 2021, principally as a result modification of debt terms for a convertible note to extend the due date beyond one year. Cash flows used in investing activities were $0 during the nine months ended September 30, 2021, compared to $231,771 for the same period in 2020. The decrease is due to cash of discontinued operations in 2020. Cash from financing activities for the nine months ended September 30, 2021 was $1,231,636, compared to $967,099 for the same period in 2020. The increase is due to the issuance of convertible notes in 2021.
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We sustained net losses of $32,854,195 for the nine months ended September 30, 2021. In addition, we had a working capital deficit of $21,704,420 and accumulated deficit of $303,505,534 at September 30, 2021. We have historically financed our operations with proceeds from the sale of convertible notes. There is no guarantee that convertible note financing or other sources of capital will be available to the Company going forward.
In September of 2017 we purchased the assets of RWJ Advanced Marketing, LLC, and then after ECS Prepaid LLC, Electronic Check Services, Inc. and Central States Legal Services, Inc. in 2018. RWJ and ECS have historically generated significant revenues which we do not expect to continue in the future, as the Company divested its investment in ECS Prepaid LLC, Electronic Check Services, Inc. and Central States Legal Services, Inc. on or around September 2019, left only with the acquired assets from RWJ Advanced Marketing, LLC which in litigation, as disclosed in this report. In addition, during the last half of 2018 and the first few months of 2019, the Company has raised approximately $9,500,000 of net proceeds through the issuance of convertible debt and notes payable (see discussion below).
We intend to continue to make investments to support our business growth and we will require additional funds to respond to business challenges, including the need to develop new features and products or enhance our existing products, improve our operating infrastructure or acquire complementary businesses and technologies. Further, we need additional capital to continue operations. Accordingly, we need to engage in equity or debt financings to secure additional funds. We expect that we have sufficient capital to maintain operations through the end of 2021. In order to fully implement our business plan, we will need to raise $10,000,000. The Company will need to raise additional capital in the future of which there is no guarantee that the Company will be able to successfully raise such capital on acceptable terms. With the current cash on hand, cash in our attorney’s trust account and additional cash anticipated to be raised in the future, we believe we will have sufficient cash to meet our obligations for the next 12 months.
$10,000,000 for GBT Technologies S. A. acquisition
In accordance with the acquisition of GBT-CR the Company issued a convertible note in the principal amount of $10,000,000. The convertible note bears interest of 6% per annum and is payable at maturity on December 31, 2021. At the election of the holder, the convertible note can be converted into a maximum of 20,000 shares of Series H Preferred Stock. Each share of Series H Preferred Stock is convertible, at the option of the holder but subject to the Company increasing its authorized shares of common stock, into such number of shares of common stock of the Company as determined by dividing the Stated Value ($500 per share) by the conversion price ($10.00 per share).
On May 19, 2021, the Company, Gonzalez, GBT-CR and IGOR 1 Corp entered into a Mutual Release and Settlement Agreement and Irrevocable Assignment of outstanding balance plus accrued interest (the “Gonzalez Agreement”). Pursuant to the Gonzalez Agreement, without any party admission of liability and to avoid litigation, the parties has agreed to (i) extend the GBT convertible note maturity date to December 31, 2022, (ii) amend the GBT convertible note terms to include a beneficial ownership blocker of 4.99% and a modified conversion feature to the GBT convertible note with 15% discount to the market price during the 20 trading day period ending on the latest complete trading day prior to the conversion date and (iii) provided for an assignment of the GBT convertible note by Gonzalez to a third party.
During the nine months ended September 30, 2021, IGOR 1 converted $1,084,600 of the convertible note into 1,600,000 shares of the Company’s common stock. Also, on June 24, 2021, the Company transferred 5,500,000 SURG shares received as repayment of $660,000 of this convertible note.
Glen Eagles Acquisition LP
On July 8, 2019, the Company entered a Consulting Agreement with Glen Eagles Acquisition LP (“Glen”) as consultant to provide services in connection with the Company’s acquisition of 25% of GBT Technologies, S.A., a Costa Rican corporation (“GBT-CR”). Consultant will provide analysis, interaction with related professional and other services as requested by the Company to integrate and expand capabilities between GBT-CR and the Company. The Company shall pay Glen $1,000,000 through the issuance of a 6% Convertible Note. At the election of Glen, the Convertible Note can be converted into a maximum of 2,000 shares of Series H Preferred Stock. Each share of Series H Preferred Stock is convertible, at the option of the holder but subject to the Company increasing its authorized shares of common stock, into such number of shares of common stock of the Company as determined by dividing the Stated Value ($500 per share) by the conversion price ($10.00 per share). The Series H Preferred Stock has no liquidation preference, does not pay dividends and the holder of Series H Preferred Stock shall be entitled to one vote for each share of common stock that the Series H Preferred Stock may be convertible into. In addition, the Company entered into an Amendment of a Common Stock Purchase Warrant held by Glen to acquire nine million shares of common stock that had been assigned to Glen by Guardian Patch LLC. Pursuant to the amendment, the Company agreed to provide that the Common Stock Purchase Warrant may be exercised on a cashless basis and provided a beneficial ownership limitation of 4.99%. On or about June 23, 2020, the Company and AltCorp entered into agreements with SURG and Glen Eagles Acquisition LP (“Glen”) into series of agreements regarding the $4,000,000 SURG Note. Glen converted in full its $1,000,000 convertible note that was issued by the Company on July 8, 2019 plus $50,000 of accrued interest, into $1,050,000 of a SURG Note via an assignment of a portion ($1,050,000 of a $4,000,000 face value) of the $4,000,000 SURG Note. In addition, the Company entered into a consulting agreement with Glen for which the Company shall pay to Glen $200,000 via an assignment of a portion ($200,000 of a $4,000,000 face value) of the $4,000,000 SURG Note. Glen in turn converted all its $1,250,000 considerations received into 2,500,000 SURG shares. The open aged credit balances with Glen as of the date of this report is $237,500.
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RWJ Acquisition Note
In connection with the acquisition of RWJ in September 2017, the Company issued a note payable. The note accrues interest at 3.5% per annum, was due on December 31, 2019 and is secured by the assets purchased in the acquisition. The Company contests the validity of the note, as such the note has not been repaid as of December 31, 2020. (see Item 3 – Legal Proceedings). The balance of the note at September 30, 2021 was $2,600,000 plus accrued interest of $385,631.
Discover Growth Fund
On December 3, 2018, the Company entered into a Securities Purchase Agreement (the “SPA”) with Discover Growth Fund, LLC (the “Investor”) pursuant to which the Company issued a Senior Secured Redeemable Convertible Debenture (the “Debenture”) in the aggregate face value of $8,340,000. In connection with the issuance of the Debenture and pursuant to the terms of the SPA, the Company issued a Common Stock Purchase Warrant to acquire up to 225,000 shares of common stock for a term of three years (the “Warrant”) on a cash-only basis at an exercise price of $100.00 per share with respect to 50,000 Warrant Shares, $75.00 with respect to 75,000 Warrant Shares and $50.00 with respect to 100,000 Warrant Shares. The holder may not exercise any portion of the Warrants to the extent that the holder would own more than 4.99% of the Company’s outstanding common stock immediately after exercise. The outstanding principal amount may be converted at any time into shares of the Company’s common stock at a conversion price equal to 95% of the Market Price less $5.00 (the conversion price is lowered by 10% upon the occurrence of each Triggering Event – the current conversion price is 75% of the Market Price less $5.00). The Market Price is the average of the 5 lowest individual daily volume weighted average prices during the period the Debenture is outstanding. On May 28, 2019, the Investor delivered to the Company a “Notice of Default and Notice of Sale of Collateral” (the “Notice”). On December 23, 2019, in arbitration between the Company and the Investor, an Interim Award was entered in favor of the Investor. On January 31, 2020, the Company was informed that a final award was entered (the “Final Award”). The Final Award affirms that certain sections of the Debenture constitute unenforceable liquidated damages penalties and were stricken. Further, it was determined that the Investor was entitled to recovery of their attorney’s fees. Consequently, the arbitrator awarded Investor an award of $4,034,444 plus interest of 7.25% accrued from May 15, 2019 and costs in the amount of $55,613. On February 18, 2020, the Company filed a motion with the United States District Court District of Nevada (the “Nevada Court”) to confirm the Final Award and a motion to consolidate Investor’s application to confirm the Final Award filed in the U.S. District Court of the Virgin Islands (Case No: 3 :20-cv-00012-CVG-RM) (the “Virgin Island Court”). On February 27, 2020, the Nevada Court denied the Company’s motion to confirm the Final Award and motion to consolidate and further decided that the confirmation of the Final Award should be litigated in the Virgin Island Court. As such, on February 27, 2020, the Company filed a Notice of Entry of Order as well as a Motion to Confirm the Arbitration Award, address the outstanding issues regarding whether Investor’s rights are subordinated to other creditors and, thereafter, oversee a commercially reasonable foreclosure sale (Case No: 3 :20-cv-00012-CVG-RM). It was the Company’s position that the Final Award must first be confirmed and all questions regarding the rights of Investor relative to those of other creditors must be determined before any foreclosure sale can proceed. It is further the position of the Company that the previously disclosed foreclosure sale scheduled by Investor is being conducted in a commercially unreasonable manner and that if Discover proceeded forward with the foreclosure sale it did so at its own risk. Nevertheless, on February 28, 2020, Investor advised that it conducted a sale of the Company’s assets. As the date of this report Investor failed to present a deed of sale for the alleged sale that allegedly took place as noticed. The Company filed with Virgin Island Court the motions disputing the validity of the alleged sale. On July 28, 2020, Investor filed in the State of Nevada a motion for attorneys $48,844 and costs $716. The Company filed an answer on August 11, 2020. On October 16, 2020, Investor motion was denied. As of September 30, 2021, the amount due related to this settlement was $4,090,057.
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Redstart Holdings Corp.
Paid Off Notes/Notes Converted
On August 4, 2020, the Company entered into a Securities Purchase Agreement with Redstart Holdings Corp., an accredited investor (“Redstart”) pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 1”) in the aggregate principal amount of $153,600 for a purchase price of $128,000. The Redstart Note No. 1 has a maturity date of November 3, 2021 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 1 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 1 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 1, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 1. The transactions described above closed on August 5, 2020. The outstanding principal amount of the Redstart Note No. 1 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 1 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 1), the Redstart Note No. 1 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 1. During the nine months ended September 30, 2021, the entire amount of Redstart Note No. 1 of $153,600 plus accrued interest was converted into 226,532 shares of common stock.
On September 15, 2020, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 2”) in the aggregate principal amount of $93,600 for a purchase price of $78,000. The Redstart Note No. 2 has a maturity date of September 15, 2021 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 2 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 2 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 2, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 2. The transactions described above closed on September 16, 2020. The outstanding principal amount of the Redstart Note No. 2 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 2 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 2), the Redstart Note No. 2 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 2. During the nine months ended September 30, 2021, the entire amount of Redstart Note No. 2 of $93,600 plus accrued interest was converted into 89,169 shares of common stock.
On December 9, 2020, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 3”) in the aggregate principal amount of $100,200 for a purchase price of $83,500. The Redstart Note No. 3 has a maturity date of December 9, 2021 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 3 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 3 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 3, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 3. The transactions described above closed on December 11, 2020. The outstanding principal amount of the Redstart Note No. 3 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 3 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 3), the Redstart Note No. 3 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 3. During the nine months ended September 30, 2021, the entire amount of Redstart Note No. 3 of $100,200 plus accrued interest was converted into 135,582 shares of common stock.
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On February 10, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 4”) in the aggregate principal amount of $184,200 for a purchase price of $153,500. The Redstart Note No. 4 has a maturity date of February 5, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 4 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 4 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 4, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 4. The transactions described above closed on February 10, 2021. The outstanding principal amount of the Redstart Note No. 4 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 4 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 4), the Redstart Note No. 4 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 4. During the nine months ended September 30, 2021, the entire amount of Redstart Note No. 4 of $184,200 plus accrued interest was converted into 386,146 shares of common stock.
On March 15, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 5”) in the aggregate principal amount of $106,200 for a purchase price of $88,500. The Redstart Note No. 5 has a maturity date of June 15, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 5 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 5 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 5, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 5. The transactions described above closed on March 17, 2021. The outstanding principal amount of the Redstart Note No. 5 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 5 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 5), the Redstart Note No. 5 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 5. During the nine months ended September 30, 2021, the entire amount of Note No. 5 of $106,200 plus accrued interest was converted into 317,837 shares of common stock.
Outstanding Notes
On May 26, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 6”) in the aggregate principal amount of $106,200 for a purchase price of $88,500. The Redstart Note No. 6 has a maturity date of August 26, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 6 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 6 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 6, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 6. The transactions described above closed on May 28, 2021. The outstanding principal amount of the Redstart Note No. 6 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 6 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 6), the Redstart Note No. 6 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 6.
On September 21, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 7”) in the aggregate principal amount of $244,500 for a purchase price of $203,750. The Redstart Note No. 7 has a maturity date of December 22, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 7 at the rate of two and a half percent (2.5%) per annum from the date on which the Redstart Note No. 7 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 7, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 7. The transactions described above closed on September 28, 2021. The outstanding principal amount of the Redstart Note No. 7 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 7 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 7), the Redstart Note No. 7 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 7.
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Iliad Research and Trading
On February 27, 2019, the Company entered into a note purchase agreement with a third-party investor - Iliad Research and Trading, L.P.(“Iliad”), pursuant to which the Company issued a promissory note for the original principal amount of $2,325,000. The promissory note had an original issue discount of $300,000 and the inventor paid consideration of $2,025,000 to the Company, of which $25,000 was paid for legal expenses. The outstanding balance of the promissory note is to be paid on the one-year anniversary of the issuance of the note. Interest on the note accrues at the rate of 10% per annum compounding daily. Subject to the terms and conditions set forth in the note, the Company may prepay all or any portion of the outstanding balance of the note at any time in an amount in cash equal to 120% of the amount repaid. In connection with transactions that generate less than $1,000,000 in proceeds, the Company has agreed to not issue any debt instrument or incurrence of any debt other than trade payables in the ordinary course of business, any securities or agreements to sell common stock with anti-dilution or price reset/reduction features or any securities that are or may be become convertible or exercisable into common stock with a price that varies with the market price of the common stock (collectively, “Restricted Issuance Transaction”). The outstanding balance of the Note will be increased by 5% in the event the Company enters into a Restricted Issuance Transaction that is approved by Iliad. The original issue discount is being amortized to interest expense over the term of the promissory note. On February 27, 2020, the Company and Iliad entered into an Amendment to the Iliad Note pursuant to which the maturity date of the Iliad Note was extended to August 27, 2020, provided that the Debt may be converted into shares of common stock of the Company at a conversion price equal to 80% multiplied by the lowest trading daily VWAP for the common stock during the 20 trading day period ending on the latest complete trading day prior to the conversion date, provided for the payment by the Company to Iliad of an extension fee equal to 7.5% of the outstanding balance of the Iliad Note resulting in a new balance of the Iliad Note of $2,765,983 and provided that the Company’s failure to deliver shares of common stock within three trading days of a conversion would result in an event of default. Iliad has agreed to restrict its ability to convert the Iliad Note and receive shares of common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 9.99% of the then issued and outstanding shares of common stock. On July 20, 2020 the Company and Iliad entered into agreement to extend the maturity of the Iliad Note until February 27, 2021 in consideration of an extension fee of $1,000. During 2020, Iliad converted $539,000 of its convertible note to 53,175,795 shares of the Company’s common stock. On February 28, 2021 the Company and Iliad entered into agreement to further extend the maturity of the Iliad Note until May 31, 2021 in consideration of an extension fee of $1,000 representing the third extension of the original note. On May 19, 2021, the Company and Iliad entered into agreement to further extend the maturity of the Iliad Note until August 31, 2021 in consideration of an extension fee of $1,000 representing the fourth extension of the original note. On August 20, 2021, the Company and Iliad entered into agreement to further extend the maturity of the Iliad Note until December 31, 2021 in consideration of an extension fee of $1,000. During the nine months ended September 30, 2021, Iliad converted $2,508,737 of its convertible note into 4,053,069 shares of the Company’s common stock. The balance of the Iliad debt at September 30, 2021 and December 31, 2020 was $0 and $2,431,841.
Stanley Hills LLC
The Company entered into a series of loan agreements with Stanley Hills LLC (“Stanley”) pursuant to which it received more than $1,000,000 in loans (the “Debt”) since May 2019 up to December 2019. On February 26, 2020, in order to induce Stanley to continue to provide funding, the Company and Stanley entered into a letter agreement providing that the current note payable balance due to Stanley in the amount of $1,214,900 may be converted into shares of common stock of the Company at a conversion price equal to 85% multiplied by the lowest one trading price for the common stock during the 20 trading day period ending on the latest complete trading day prior to the conversion date. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. Stanley has agreed to restrict its ability to convert the Debt and receive shares of common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. During the nine months ended September 30, 2021, Stanley converted $1,009,468 of its convertible note into 1,550,718 shares of the Company’s common stock, and during the nine months ended September 30, 2021, Stanley loaned the Company an additional $697,386. Also, during the nine months ended September 30, 2021, the Company transferred the SURG shares received as repayment of $800,000 of this convertible note (See Note 4) and also converted $126,003 of accrued interest into the principal balance. During the six months ended June 30, 2021, Gonzalez assigned all his accrued balances of $424,731 to Stanley in a private transaction that the Company is not part to (See Note 6). The balance of the Stanley debt at September 30, 2021 and December 31, 2020 was $448,121 and $1,009,469, respectively. The Stanley debt is secured via a pledge agreement on the SURG shares.
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GBT Technologies, S.A.
On June 17, 2019, the Company, Altcorp Trading LLC, a Costa Rica company and a wholly-owned subsidiary of the Company (“Altcorp”), GBT Technologies, S.A., a Costa Rica company (“GBT-CR”) and Pablo Gonzalez, a shareholder’s representative of GBT-CR (“Gonzalez”), entered into and closed an Exchange Agreement (the “GBT Exchange Agreement”) pursuant to which the parties exchanged certain securities. In accordance with the Exchange Agreement, Altcorp acquired 625,000 shares of GBT-CR representing then 25% (and currently less than 20% per GBT-CR further issuance of shares to other parties) of its issued and outstanding shares of common stock from Gonzalez in exchange for the issuance of 20,000 shares of Series H Convertible Preferred Stock of the Company and a Convertible Note in the principal amount of $10,000,000 issued by the Company (the “Gopher Convertible Note”) as well as the transfer and assignment of a Promissory Note payable by Gopher Protocol Costa Rica Sociedad De Responsabilidad Limitada to the Company in the principal amount of $5,000,000 dated February 6, 2019 (of which the underlying security for this Promissory Note is 30,000,000 restricted shares of common stock of Mobiquity) and 60,000,000 restricted shares of common stock of Mobiquity.
On May 19, 2021, the Company, Gonzalez, GBT-CR and IGOR 1 Corp entered into a Mutual Release and Settlement Agreement and Irrevocable Assignment of outstanding balance plus accrued interest (the “Gonzalez Agreement”). Pursuant to the Gonzalez Agreement, without any party admission of liability and to avoid litigation, the parties has agreed to (i) extend the GBT convertible note maturity date to December 31, 2022, (ii) amend the GBT convertible note terms to include a beneficial ownership blocker of 4.99% and a modified conversion feature to the GBT convertible note with 15% discount to the market price during the 20 trading day period ending on the latest complete trading day prior to the conversion date and (iii) provided for an assignment of the GBT convertible note by Gonzalez to a third party. As a result of the change in terms of this convertible note, the Company took a charge related to the modification of debt of $13,777,480 during the nine months ended September 30, 2021.
During the nine months ended September 30, 2021, IGOR 1 converted $1,084,600 of the convertible note into 1,600,000 shares of the Company’s common stock. Also, on June 24, 2021, the Company transferred 5,500,000 SURG shares received as repayment of $660,000 of this convertible note (See Note 4).
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Critical Accounting Policies and Use of Estimates
Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of our financial statements in accordance with U.S. GAAP requires us to make certain estimates, judgments and assumptions that affect the reported amount of assets and liabilities as of the date of the financial statements, the reported amounts and classification of revenues and expenses during the periods presented, and the disclosure of contingent assets and liabilities. We evaluate our estimates and assumptions on an ongoing basis and material changes in these estimates or assumptions could occur in the future. Changes in estimates are recorded on the period in which they become known. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances and at that time, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily-apparent from other sources. Actual results may differ materially from these estimates if past experience or other assumptions do not turn out to be substantially accurate.
We believe that the accounting policies described below are critical to understanding our business, results of operations, and financial condition because they involve significant judgments and estimates used in the preparation of our financial statements. An accounting is deemed to be critical if it requires a judgment or accounting estimate to be made based on assumptions about matters that are highly uncertain, and if different estimates that could have been used, or if changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our financial statements. Other significant accounting policies, primarily those with lower levels of uncertainty than those discussed below, are also critical to understanding our financial statements. The notes to our financial statements contain additional information related to our accounting policies and should be read in conjunction with this discussion.
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Presentation of Financial Statements
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Marketable Equity Securities
The Company accounts for marketable equity securities in accordance with ASC Topic 321, Investments – equity securities. Marketable equity securities are reported at fair value based on quotations available on securities exchanges with any unrealized gain or loss being reported as a component of other income (expense) on the statement of operations. The portion of marketable equity security expected to be sold within twelve months of the balance sheet date is reported as a current asset.
Revenue Recognition
Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), became effective for the Company on January 1, 2018. The Company’s revenue recognition disclosure reflects its updated accounting policies that are affected by this new standard. The Company applied the “modified retrospective” transition method for open contracts for the implementation of Topic 606. The Company had no significant post-delivery obligations, this new standard did not result in a material recognition of revenue on the Company’s accompanying consolidated financial statements for the cumulative impact of applying this new standard. The Company made no adjustments to its previously-reported total revenues, as those periods continue to be presented in accordance with its historical accounting practices under Topic 605, Revenue Recognition.
Revenue is recognized under Topic 606 as follows:
| ● | executed contracts with the Company’s customers that it believes are legally enforceable; | |
| ● | identification of performance obligations in the respective contract; | |
| ● | determination of the transaction price for each performance obligation in the respective contract; | |
| ● | allocation the transaction price to each performance obligation; and | |
| ● | recognition of revenue only when the Company satisfies each performance obligation. |
These five elements, as applied to each of the Company’s revenue category, is summarized below:
| ● | IT services - revenue is recorded on a monthly basis as services are provided; and | |
| ● | License fees and Royalties – revenue is recognized based on the terms of the agreement with its customer. |
Derivative Financial Instruments
The Company evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a weighted average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. As of September 30, 2021, the Company’s only derivative financial instrument was an embedded conversion feature associated with convertible notes payable due to certain provisions that allow for a change in the conversion price based on a percentage of the Company’s stock price at the date of conversion.
Fair Value of Financial Instruments
For certain of the Company’s financial instruments, including cash, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities.
FASB ASC Topic 820, Fair Value Measurements and Disclosures, requires disclosure of the fair value of financial instruments held by the Company. FASB ASC Topic 825, Financial Instruments, defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
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| ● | Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets. |
| ● | Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. |
| ● | Level 3 inputs to the valuation methodology us one or more unobservable inputs which are significant to the fair value measurement. |
The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic 480, Distinguishing Liabilities from Equity, and FASB ASC Topic 815, Derivatives and Hedging.
For certain financial instruments, the carrying amounts reported in the balance sheets for cash and current liabilities, including convertible notes payable, each qualify as a financial instrument, and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.
The Company uses Level 2 inputs for its valuation methodology for derivative liabilities as their fair values were determined by using the Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.
Dividends
The Company has not yet adopted any policy regarding payment of dividends. No cash dividends have been paid or declared since the Date of Inception.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a Smaller Reporting Company, the Company is not required to include the disclosure under this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including Mansour Khatib, who serves as our Chief Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our Chief Executive Officer and Principal Financial Officer has concluded that our disclosure controls and procedures were not effective as of the end of the applicable period to ensure that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer, as appropriate to allow timely decisions regarding required disclosures.
As a smaller reporting company, with revenues stemming from recent acquisitions and a lack of profitability, the Company does not have the resources to install dedicated staff with deep expertise in all facets of SEC disclosure and GAAP compliance, and does not employ enough accounting staff to have proper separation of duties. As is the case with many smaller reporting companies, the Company will continue to consult with its external auditors and attorneys as it relates to new accounting principles and changes to SEC disclosure requirements. In order to correct this material weakness, the Company engaged a consultant with expertise in SEC disclosure and GAAP compliance. The Company has found that this approach worked well in the past and believes it to be the most cost-effective solution available for the foreseeable future. The Company will conduct a review of existing sign-off and review procedures as well as document control protocols for critical accounting spreadsheets. The Company will also increase management’s review of key financial documents and records.
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As a smaller reporting company, the Company does not have the resources to fund sufficient staff to ensure a complete segregation of responsibilities within the accounting function. However, Company management does review, and will increase the review of, financial statements on a monthly basis, and the Company’s external auditor conducts reviews on a quarterly basis. These actions, in addition to the improvements identified above, will minimize any risk of a potential material misstatement occurring.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal controls over financial reporting during the quarter ended September 30, 2021, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Legal Proceedings
From time to time, the Company may be involved in various litigation matters, which arise in the ordinary course of business. There is currently no litigation that management believes will have a material impact on the financial position of the Company.
On or around January 30, 2019, RWJ Advanced Marketing, LLC, Greg Bauer, and Warren Jackson sued the Company and multiple third and related parties in Superior Court of the State of California - County of Los Angeles, General District in connection with the acquisition of UGO in September 2017. The case number is 19STCV03320 (the “Original Lawsuit”). The complaint in the Original Lawsuit alleges breach of contract, among other causes of action. The Company answered the complaint and filed a cross-complaint against the plaintiffs in the case and third parties on or around February 15, 2019. On or about September 10, 2020, the Company through its agent of service was “served” with a complaint (the Company contested service) that was recently filed against the Company and third parties by Robert Warren Jackson and Gregory Bauer in Los Angeles Superior Court Case No.: 20STCV32709 (“Second Lawsuit”). In the Original Lawsuit filed, the court rejected the plaintiff’s claims that they were filing a purported quasi-derivative lawsuit. As such, in this current litigation, the plaintiff is now again claiming the action is a derivative lawsuit. On October 13, 2020, the Second Lawsuit was removed by other defendants into Central District of California (CASE NO. 2:20−cv−09399−RGK−AGR). On February 2, 2021 The Central District of California dismissed the entire Second Lawsuit based on “demand futility”. In the Original lawsuit, the Company filed a cross complaint against the plaintiff and other third parties. Recently, the court has scheduled various hearings and a trial date set for December 27, 2021. It was the Company’s intention to dividend its holdings of its wholly owned subsidiary Ugopherservices Corp. (“UGO”). As UGO is the main dispute in the litigations described above, the Company has elected to sell UGO to a third-party effective July 1, 2020. On September 17, 2020, the Company terminated Greg Bauer as consultant (resulting from the sale of UGO), which he confirmed in writing. On or about June 14, 2021 the Company stipulated with plaintiff that all third parties will be released and plaintiff is to file a new first amendment complaint that will name only the Company. As such all third parties other than prior transfer agent of the Company bee dismissed from this litigation.
Following the sale of UGO, the Company noticed third parties (including SURG, via its asset manager) to wire the UGO funds to its new bank account. SURG never answered the notice. The Company noticed certain third parties that it intends to take legal actions to resolve this issue. On November 12, 2020 the Company filed a complaint in the United States District Court – District of Nevada - Case 2:20-cv-02078 against RWJ, Mr. Bauer, Mr. Jackson and against W.L. Petrey Wholesale Company Inc for fraud, breach of contract, Unjust Enrichment and other claims.
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On December 3, 2018, the Company entered into a Securities Purchase Agreement (the “SPA”) with Discover Growth Fund, LLC (the “Investor”) pursuant to which the Company issued a Senior Secured Redeemable Convertible Debenture (the “Debenture”) in the aggregate face value of $8,340,000. In connection with the issuance of the Debenture and pursuant to the terms of the SPA, the Company issued a Common Stock Purchase Warrant to acquire up to 225,000 shares of common stock for a term of three years (the “Warrant”) on a cash-only basis at an exercise price of $100.00 per share with respect to 50,000 Warrant Shares, $75.00 with respect to 75,000 Warrant Shares and $50.00 with respect to 100,000 Warrant Shares. The holder may not exercise any portion of the Warrants to the extent that the holder would own more than 4.99% of the Company’s outstanding common stock immediately after exercise. The outstanding principal amount may be converted at any time into shares of the Company’s common stock at a conversion price equal to 95% of the Market Price less $5.00 (the conversion price is lowered by 10% upon the occurrence of each Triggering Event – the current conversion price is 75% of the Market Price less $5.00). The Market Price is the average of the 5 lowest individual daily volume weighted average prices during the period the Debenture is outstanding. On May 28, 2019, the Investor delivered to the Company a “Notice of Default and Notice of Sale of Collateral” (the “Notice”). On December 23, 2019, in arbitration between the Company and the Investor, an Interim Award was entered in favor of the Investor. On January 31, 2020, the Company was informed that a final award was entered (the “Final Award”). The Final Award affirms that certain sections of the Debenture constitute unenforceable liquidated damages penalties and were stricken. Further, it was determined that the Investor was entitled to recovery of their attorney’s fees. Consequently, the arbitrator awarded Investor an award of $4,034,444 plus interest of 7.25% accrued from May 15, 2019 and costs in the amount of $55,613. On February 18, 2020, the Company filed a motion with the United States District Court District of Nevada (the “Nevada Court”) to confirm the Final Award and a motion to consolidate Investor’s application to confirm the Final Award filed in the U.S. District Court of the Virgin Islands (Case No: 3 :20-cv-00012-CVG-RM) (the “Virgin Island Court”). On February 27, 2020, the Nevada Court denied the Company’s motion to confirm the Final Award and motion to consolidate and further decided that the confirmation of the Final Award should be litigated in the Virgin Island Court. As such, on February 27, 2020, the Company filed a Notice of Entry of Order as well as a Motion to Confirm the Arbitration Award, address the outstanding issues regarding whether Investor’s rights are subordinated to other creditors and, thereafter, oversee a commercially reasonable foreclosure sale (Case No: 3 :20-cv-00012-CVG-RM). It was the Company’s position that the Final Award must first be confirmed and all questions regarding the rights of Investor relative to those of other creditors must be determined before any foreclosure sale can proceed. It is further the position of the Company that the previously disclosed foreclosure sale scheduled by Investor is being conducted in a commercially unreasonable manner and that if Discover proceeded forward with the foreclosure sale it did so at its own risk. Nevertheless, on February 28, 2020, Investor advised that it conducted a sale of the Company’s assets. As the date of this report Investor failed to present a deed of sale for the alleged sale that allegedly took place as noticed. The Company filed with Virgin Island Court the motions disputing the validity of the alleged sale. On July 28, 2020, Investor filed in the State of Nevada a motion for attorneys $48,844 and costs $716. The Company filed an answer on August 11, 2020. On October 16, 2020, Investor motion for attorneys and costs was denied.
GBT Technologies, S.A.
On September 14, 2018, the Company entered into an Exclusive Intellectual Property License and Royalty Agreement (the “GBT License Agreement”) with GBT-CR, a fully compliant and regulated crypto currency exchange platform that currently operates in Costa Rica as a decentralized crypto currency platform, pursuant to which, among other things, the Company granted to GBT-CR an exclusive, royalty-bearing right and license relating intellectual property relating to systems and methods of converting electronic transmissions into digital currency as reflected in that certain patent filed with the United Stated Patent and Trademark Office on or about June 14, 2018 (EFS ID: 32893586; Application Number: 16008069; Type: Utility under 35 USC 111(a); Confirmation Number: 6787)(collectively, the “Digital Currently Technology”). Pursuant to the GBT License Agreement, the Company granted GBT-CR an exclusive worldwide license to use the Digital Currency Technology to make, use, sell, lease or otherwise commercialize and dispose of products and devices utilizing the Digital Currently Technology. Under the terms of the GBT License Agreement, the Company is entitled to receive a royalty payment of 2% of gross revenue of each licensed product sold by GBT-CR during the period starting in which revenue is first generated using the licensed products and continuing for five years thereafter. Upon signing the GBT-CR License Agreement, GBT-CR paid the Company $300,000 which is nonrefundable. The Company has recognized the $300,000 as revenue during the years ended December 31, 2018. Upon GBT-CR making available for sale (the “Commercial Event”) an ICO (Initial Coin Offering) (the “Coin”), GBT-CR will make a payment to the Company in the amount of $5,000,000. Further, upon the Commercial Event, GBT-CR will grant the Company the ability to acquire 30% of the Coin at a 30% discount of such offering price of the Coin. The GBT License Agreement commenced as of the signing date and, unless terminated in accordance with the termination provisions of the GBT License Agreement, shall remain in force until the expiration of the patent pertaining to the Digital Currency Technology; provided that the right to use trade secrets shall survive the expiration of the GBT License Agreement provided the Company has not terminated. Prior to the signing of the GBT License Agreement, GBT-CR advanced $200,000 to the Company, which the parties have agreed will be applied toward the $5,000,000 fee when it becomes due. The $200,000 was recorded as unearned revenue at December 31, 2018 and reclassified to accrued expense at December 31, 2020 and 2019. On February 27, 2020 GBT Technologies, S.A., as successor in interest to Hermes Roll, LLC had notified the Company that it was in default on its Amended and Restated Territorial License Agreement (“ARTLA”) dated June 15, 2015 and that the ARTLA had been cancelled and rescinded.
In connection with SURG Exchange Agreement - On November 4, 2020, Altcorp and Stanley filed an Ex Parte Motion in the District Court, Clark County, Nevada (Case No: A-20-823039-B, in Dep No: 43) to appoint receiver and issue a temporary restraining Order against SURG and its transfer agent for alleged defaults on prior exchange agreement. On December 4, 2020, the parties entered an interim agreement which set the material terms of the settlement. A final settlement was achieved per the interim agreement terms on January 1, 2021. On March 4, 2021 the Company filed a motion to enforce settlement agreements, as the Company alleged that SURG owes an additional $240,000 which is due and owing under the settlement agreements.
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On June 24, 2021 per the June 23, 2020 Agreement, the Company together with AltCorp sent to SURG and its transfer agent via registered mail to, a true-up shares demand for an additional 14,870,370 SURG shares as calculated per the Agreement. As of the filing date of this report, neither SURG nor its transfer agent answer to the Company request.
Item 1A. Risk Factors.
As a smaller reporting company, we are not required to provide the information required by this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the nine months ended September 30, 2021, the Company had the following transactions in its common stock:
| ● | issued an aggregate of 8,358,054 shares for the conversion of convertible notes of $5,240,605 and accrued interest of $15,405; | |
| ● | issued 245,000 shares to consultants for services rendered. The value of the shares of $281,750 was determined based on the closing stock price of the Company’s common stock on the grant date; and | |
| ● | issued 14,000,000 shares to GBT Tokenize for a joint venture agreement. The value of the common stock of $15,400,000 was determined based on the closing stock price of the Company’s common stock on the grant date |
On September 21, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 7”) in the aggregate principal amount of $244,500 for a purchase price of $203,750. The Redstart Note No. 7 has a maturity date of December 22, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 7 at the rate of two and a half percent (2.5%) per annum from the date on which the Redstart Note No. 7 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 7, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 7. The transactions described above closed on September 28, 2021. The outstanding principal amount of the Redstart Note No. 7 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 7 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 7), the Redstart Note No. 7 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 7.
The offer, sale and issuance of the above securities was made to accredited investors and the Company relied upon the exemptions contained in Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Rule 506 of Regulation D promulgated thereunder with regard to the sale. No advertising or general solicitation was employed in offering the securities. The offer and sales were made to accredited investors and transfer of the common stock will be restricted by the Company in accordance with the requirements of the Securities Act of 1933, as amended.
Item 3. Defaults Upon Senior Securities
On or around January 30, 2019, RWJ Advanced Marketing, LLC, Greg Bauer, and Warren Jackson sued the Company and multiple third and related parties in Superior Court of the State of California - County of Los Angeles, General District in connection with the acquisition of UGO in September 2017. The case number is 19STCV03320 (the “Original Lawsuit”). The complaint in the Original Lawsuit alleges breach of contract, among other causes of action. The Company answered the complaint and filed a cross-complaint against the plaintiffs in the case and third parties on or around February 15, 2019. On or about September 10, 2020, the Company through its agent of service was “served” with a complaint (the Company contested service) that was recently filed against the Company and third parties by Robert Warren Jackson and Gregory Bauer in Los Angeles Superior Court Case No.: 20STCV32709 (“Second Lawsuit”). In the Original Lawsuit filed, the court rejected the plaintiff’s claims that they were filing a purported quasi-derivative lawsuit. As such, in this current litigation, the plaintiff is now again claiming the action is a derivative lawsuit. On October 13, 2020, the Second Lawsuit was removed by other defendants into Central District of California (CASE NO. 2:20−cv−09399−RGK−AGR). On February 2, 2021 The Central District of California dismissed the entire Second Lawsuit based on “demand futility”. In the Original lawsuit, the Company filed a cross complaint against the plaintiff and other third parties. Recently, the court has scheduled various hearings and a trial date set for December 27, 2021. It was the Company’s intention to dividend its holdings of its wholly owned subsidiary Ugopherservices Corp. (“UGO”). As UGO is the main dispute in the litigations described above, the Company has elected to sell UGO to a third-party effective July 1, 2020 (See Note 3). On September 17, 2020, the Company terminated Greg Bauer as consultant (resulting from the sale of UGO), which he confirmed in writing. On or about June 14, 2021 the Company stipulate with plaintiff that all third parties will be released and plaintiff to file a new first amendment complaint that will name only the Company. As such all third parties other than prior transfer agent of the Company been dismissed from this litigation.
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Following the sale of UGO (See Note 3), the Company noticed third parties (including SURG, via its asset manager) to wire the UGO funds to its new bank account. SURG never answered the notice. The Company noticed certain third parties that it intends to take legal actions to resolve this issue. On November 12, 2020 the Company filed a complaint in the United States District Court – District of Nevada - Case 2:20-cv-02078 against RWJ, Mr. Bauer, Mr. Jackson and against W.L. Petrey Wholesale Company Inc for fraud, breach of contract, Unjust Enrichment and other claims.
On December 3, 2018, the Company entered into a Securities Purchase Agreement (the “SPA”) with Discover Growth Fund, LLC (the “Investor”) pursuant to which the Company issued a Senior Secured Redeemable Convertible Debenture (the “Debenture”) in the aggregate face value of $8,340,000. In connection with the issuance of the Debenture and pursuant to the terms of the SPA, the Company issued a Common Stock Purchase Warrant to acquire up to 225,000 shares of common stock for a term of three years (the “Warrant”) on a cash-only basis at an exercise price of $100.00 per share with respect to 50,000 Warrant Shares, $75.00 with respect to 75,000 Warrant Shares and $50.00 with respect to 100,000 Warrant Shares. The holder may not exercise any portion of the Warrants to the extent that the holder would own more than 4.99% of the Company’s outstanding common stock immediately after exercise. The outstanding principal amount may be converted at any time into shares of the Company’s common stock at a conversion price equal to 95% of the Market Price less $5.00 (the conversion price is lowered by 10% upon the occurrence of each Triggering Event – the current conversion price is 75% of the Market Price less $5.00). The Market Price is the average of the 5 lowest individual daily volume weighted average prices during the period the Debenture is outstanding. On May 28, 2019, the Investor delivered to the Company a “Notice of Default and Notice of Sale of Collateral” (the “Notice”). On December 23, 2019, in arbitration between the Company and the Investor, an Interim Award was entered in favor of the Investor. On January 31, 2020, the Company was informed that a final award was entered (the “Final Award”). The Final Award affirms that certain sections of the Debenture constitute unenforceable liquidated damages penalties and were stricken. Further, it was determined that the Investor was entitled to recovery of their attorney’s fees. Consequently, the arbitrator awarded Investor an award of $4,034,444 plus interest of 7.25% accrued from May 15, 2019 and costs in the amount of $55,613. On February 18, 2020, the Company filed a motion with the United States District Court District of Nevada (the “Nevada Court”) to confirm the Final Award and a motion to consolidate Investor’s application to confirm the Final Award filed in the U.S. District Court of the Virgin Islands (Case No: 3 :20-cv-00012-CVG-RM) (the “Virgin Island Court”). On February 27, 2020, the Nevada Court denied the Company’s motion to confirm the Final Award and motion to consolidate and further decided that the confirmation of the Final Award should be litigated in the Virgin Island Court. As such, on February 27, 2020, the Company filed a Notice of Entry of Order as well as a Motion to Confirm the Arbitration Award, address the outstanding issues regarding whether Investor’s rights are subordinated to other creditors and, thereafter, oversee a commercially reasonable foreclosure sale (Case No: 3 :20-cv-00012-CVG-RM). It was the Company’s position that the Final Award must first be confirmed and all questions regarding the rights of Investor relative to those of other creditors must be determined before any foreclosure sale can proceed. It is further the position of the Company that the previously disclosed foreclosure sale scheduled by Investor is being conducted in a commercially unreasonable manner and that if Discover proceeded forward with the foreclosure sale it did so at its own risk. Nevertheless, on February 28, 2020, Investor advised that it conducted a sale of the Company’s assets. As the date of this report Investor failed to present a deed of sale for the alleged sale that allegedly took place as noticed. The Company filed with Virgin Island Court the motions disputing the validity of the alleged sale. On July 28, 2020, Investor filed in the State of Nevada a motion for attorneys $48,844 and costs $716. The Company filed an answer on August 11, 2020. On October 16, 2020, Investor motion for attorneys $48,844 and costs $716 was denied.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
On June 22, 2020, the Company received a $150,000 loan from the Small Business Administration (“SBA”) under the Economic Injury Disaster Loan (“EIDL”) program related to the COVID-19 relief efforts in consideration of a note dated June 16, 2020 (the “Original Note”). The Original Note bears interest at 3.75% per annum, requires monthly principal and interest payments of $731 after 12 months from funding and is due 30 years from the date of issuance of the Original Note. The monthly payments have been extended by the SBA to all EIDL borrowers with additional 12 months. Monthly payments will be commenced on or around June 16, 2022. On October 1, 2021, the Company entered an Amended Loan Authorization and Agreement with the SBA providing for the modification of the Original Note providing for monthly principal and interest payments of $1,771 after 24 months from the Original Note commencing on or around June 22, 2022. The Modified Note will continue to bear interest at 3.75% per annum and is due 30 years from the date of issuance of the Original Note. The Modified Note is guaranteed by Douglas Davis, the former CEO of the Company and current consultant, as well as by GBT Tokenize Corp. The additional funding of $200,000 was received by the Company on October 5, 2021.
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On September 14, 2021, the Company reported in its Form 8-K that it had filed an Issuer Company-Related Action Notification Form with the Financial Industry Regulatory Authority (“FINRA”) for processing a 1-for-50 reverse stock split of its authorized and issued and outstanding common stock. On October 25, 2021, the Company received notice from FINRA that the reverse stock split described above will take effect at the open of business on Tuesday, October 26, 2021. The Company’s symbol on the OTC Pink will be GTCHD for 20 business days from October 26, 2021 and the CUSIP will be changed to 361548308.
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
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| (1) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 20, 2010 |
| (2) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 28, 2010 |
| (3) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 13, 2010 |
| (4) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 3, 2010 |
| (5) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 9, 2010 |
| (6) | Incorporated by reference to the Form S-1 Registration Statement filed with the SEC on September 9, 2009. |
| (7) | Incorporated by reference to the Form S-1 Registration Statement filed with the SEC on November 2, 2009. |
| (8) | Incorporated by reference to the Form S-1 Registration Statement filed with the SEC on January 29, 2010. |
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| (9) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 22, 2010 |
| (10) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 17, 2010 |
| (11) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 3, 2011 |
| (12) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 2, 2011 |
| (13) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 9, 2011 |
| (14) | Incorporated by reference to the Form 10-K Annual Report filed with the Securities and Exchange Commission on April 6, 2011 |
| (15) | Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on May 20, 2011 |
| (16) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 29, 2011 |
| (17) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 9, 2011 |
| (18) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 12, 2011 |
| (19) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 16, 2011 |
| (20) | Incorporated by referenced to the Form 10-K Annual Report filed with the Securities and Exchange Commission on April 13, 2012 |
| (21) | Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on May 14, 2012 |
| (22) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 27, 2012. |
| (23) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 9, 2013. |
| (24) | Incorporated by reference to the Form 10-K Annual Report filed with the Securities and Exchange Commission on April 15, 2013. |
| (25) | Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on November 20, 2012. |
| (26) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 1, 2013. |
| (27) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 4, 2013. |
| (28) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 3, 2014. |
| (29) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 20, 2014 |
| (30) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 27, 2015 |
| (31) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 18, 2015 |
| (32) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 12, 2015 |
| (33) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 24, 2015 |
| (34) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 1, 2015 |
| (35) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 16, 2015 |
| (36) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 21, 2015 |
| (37) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 28, 2015 |
| (38) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 20, 2016 |
| (39) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 20, 2016 |
| 50 |
| (40) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 13, 2016 |
| (41) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 26, 2017 |
| (42) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 13, 2017 |
| (43) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 30, 2017 |
| (44) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 7, 2017 |
| (45) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 7, 2017 |
| (46) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 22, 2017 |
| (47) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 10, 2017 |
| (48) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 27, 2017 |
| (49) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 30, 2017 |
| (50) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 2, 2018 |
| (51) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 3, 2018 |
| (52) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 6, 2018 |
| (53) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 21, 2018 |
| (54) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 13, 2018 |
| (55) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 18, 2018 |
| (56) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 26, 2018. |
| (57) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 8, 2018. |
| (58) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 22, 2018. |
| (59) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 22, 2018. |
| (60) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 24, 2018. |
| (61) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 31, 2018. |
| (62) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 9, 2018. |
| (63) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 18, 2018. |
| (64) | Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on November 13, 2018. |
| (65) | Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on June 19, 2019. |
| (66) | Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on July 12, 2019. |
| (67) | Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on July 15, 2019. |
| (68) | Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on August 5, 2019. |
| (69) | Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on August 7, 2019. |
| (70) | Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on May 15, 2019. |
| 51 |
| (71) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 16, 2019. |
| (72) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 25, 2019. |
| (73) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 16, 2019. |
| (74) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 2, 2020. |
| (75) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 11, 2020. |
| (76) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 24, 2020. |
| (77) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 10, 2020. |
| (78) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 21, 2021. |
| (79) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 28, 2021. |
| (80) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 1, 2021. |
| (81) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 23, 2021. |
| (82) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 29, 2021. |
| (83) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 6, 2021. |
| (84) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 25, 2021. |
| 52 |
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
| GBT TECHNOLOGIES INC. | ||
| (Registrant) | ||
| Date: November 8, 2021 | By: | /s/ Mansour Khatib |
| Mansour Khatib | ||
| Chief Executive Officer | ||
| (Principal Executive, Financial and Accounting Officer) | ||
53
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Mansour Khatib, Chief Executive Officer and Principal Financial Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of GBT Technologies Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant) and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):
a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial data information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.
| Date: November 8, 2021 | /s/ Mansour Khatib |
| Mansour Khatib, | |
| Chief Executive
Officer (Principal Executive, Financial and Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly report of GBT Technologies Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mansour Khatib, Chief Executive Officer and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities and Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
| Date: November 8, 2021 | /s/ Mansour Khatib |
| Mansour Khatib, | |
| Chief Executive
Officer (Principal Executive, Financial and Accounting Officer) |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Income Statement [Abstract] | ||||
| Sales - related party | $ 45,000 | $ 45,000 | $ 135,000 | $ 135,000 |
| Operating expenses: | ||||
| General and administrative expenses | 723,706 | 446,745 | 1,931,963 | 1,374,564 |
| Marketing expenses | 182,692 | 6,045 | 514,906 | 30,100 |
| Impairment of assets | 15,400,000 | 5,500,000 | ||
| Total operating expenses | 906,398 | 452,790 | 17,846,869 | 6,904,664 |
| Loss from operations | (861,398) | (407,790) | (17,711,869) | (6,769,664) |
| Other income (expense): | ||||
| Amortization of debt discount | (220,095) | (1,163,905) | (686,732) | (3,881,423) |
| Change in fair value of derivative liability | 627,784 | 1,653,200 | (165,402) | 612,829 |
| Interest expense and financing costs | (326,222) | (500,351) | (1,473,712) | (2,201,915) |
| Unrealized gain (loss) on marketable equity security | (683,548) | (769,500) | ||
| Realized gain (loss) on disposal of marketable equity security | (224,830) | 11,000 | (474,830) | |
| Loss on exchange of assets | (1,430,000) | |||
| Loss on debt modification | (13,777,480) | |||
| Other income | 350,000 | 214 | 950,000 | 214 |
| Total other income (expense) | 431,467 | (919,220) | (15,142,326) | (8,144,625) |
| Loss before income taxes | (429,931) | (1,327,010) | (32,854,195) | (14,914,289) |
| Income tax expense | ||||
| Loss from continuing operations | (429,931) | (1,327,010) | (32,854,195) | (14,914,289) |
| Discontinued operations: | ||||
| Loss from operations of discontinued operations | (16,924) | |||
| Gain on disposition of discontinued operations | 1,001,711 | 1,001,711 | ||
| Total Discontinued operations | 1,001,711 | 984,787 | ||
| Net loss | $ (429,931) | $ (325,299) | $ (32,854,195) | $ (13,929,502) |
| Weighted average common shares outstanding: | ||||
| Basic and diluted | 26,154,579 | 3,711,900 | 16,522,673 | 2,693,500 |
| Net loss per share (basic and diluted): | ||||
| Continuing operations | $ (0.02) | $ (0.36) | $ (1.99) | $ (5.54) |
| Discontinued operations | 0.27 | 0.37 | ||
| Net loss per share | $ (0.02) | $ (0.09) | $ (1.99) | $ (5.17) |
Organization and Basis of Presentation |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Accounting Policies [Abstract] | |
| Organization and Basis of Presentation | Note 1 - Organization and Basis of Presentation
Organization and Line of Business
GBT Technologies Inc. (the “Company”, “GBT”, or “GTCH”) was incorporated on July 22, 2009 under the laws of the State of Nevada. The Company is targeting growing markets such as development of Internet of Things (“IoT”) and Artificial Intelligence (“AI”) enabled networking and tracking technologies, including wireless mesh network technology platform and fixed solutions, development of an intelligent human body vitals device, asset-tracking IoT. The Company has historically derived revenues from (i) the provision of IT services; and (ii) from the licensing of its technology.
The unaudited condensed consolidated financial statements are prepared by the Company, pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). The information furnished herein reflects all adjustments, consisting only of normal recurring adjustments, which in the opinion of management, are necessary to fairly state the Company’s financial position, the results of its operations, and cash flows for the periods presented. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America were omitted pursuant to such rules and regulations. The results of operations for the nine months ended September 30, 2021 are not necessarily indicative of the results expected for the year ending December 31, 2021.
Basis of Presentation
The accompanying condensed consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Stock Splits
On August 5, 2019, the Company effectuated a 1 for 100 reverse stock split. In addition, on October 26, 2021, the Company effectuated a 1 for 50 reverse stock split. The share and per share information has been retroactively restated to reflect these reverse stock splits.
Going Concern
The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has an accumulated deficit of $303,505,534 and has a working capital deficit of $21,704,420 as of September 30, 2021, and is in default on a note payable and other obligations, which raises substantial doubt about its ability to continue as a going concern.
The Company’s ability to continue as a going concern is dependent upon its ability to generate profitable operations in the future and/or obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has plans to seek additional capital through some private placement offerings of debt and equity securities. These plans, if successful, will mitigate the factors which raise substantial doubt about the Company’s ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.
|
Summary of Significant Accounting Policies |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Significant Accounting Policies | Note 2 – Summary of Significant Accounting Policies
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates in the accompanying financial statements include valuation of derivatives and valuation allowance on deferred tax assets.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiaries; the Company’s 50% owned subsidiaries GBT BitSpeed Corp. and GBT Tokenize Corp; the Company’s 50% owned subsidiary, Gopher Protocol Costa Rica Sociedad De Responsabilidad Limitada (currently inactive), a wholly owned AltCorp Trading LLC, a Costa Rica company (“AltCorp”) and Greenwich International Holdings, a Costa Rica corporation (“Greenwich”). All significant intercompany transactions and balances have been eliminated.
Cash Equivalents
For the purpose of the statement of cash flows, cash equivalents include time deposits, certificate of deposits, and all highly-liquid debt instruments with original maturities of three months or less. As of September 30, 2021, and December 31, 2020, the Company did not have any cash equivalents.
Cash Held in Trust
Cash held in trust consists of proceeds from the sale of investments. The proceeds less the payment of certain expenses are being held in AltCorp’s (the Company’s wholly owned subsidiary) attorney trust account. (See Note 4)
Long-Lived Assets
The Company applies the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review at September 30, 2021 and December 31, 2020, the Company believes there was no impairment of its long-lived assets.
Marketable Equity Securities
The Company accounts for marketable equity securities in accordance with ASC Topic 321, Investments – equity securities. Marketable equity securities are reported at fair value based on quotations available on securities exchanges with any unrealized gain or loss being reported as a component of other income (expense) on the statement of operations. The portion of marketable equity security expected to be sold within twelve months of the balance sheet date is reported as a current asset.
Note Receivable
Note receivable consists of a promissory note received in connection with the sale of Ugopherservices (see Note 3). The note is due on December 31, 2021 and accrues interest at 6% per annum. At December 31, 2020, the Company determined that this note receivable was not collectible and took an impairment charge of $100,000. During July 2021, the note holder made a $50,000 payment on the note, which is recorded as other income in the accompanying condensed consolidated statements of operations.
Derivative Financial Instruments
The Company evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a weighted-average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. As of September 30, 2021, and December 31, 2020, the Company’s only derivative financial instrument was an embedded conversion feature associated with convertible notes payable due to certain provisions that allow for a change in the conversion price based on a percentage of the Company’s stock price at the date of conversion.
Fair Value of Financial Instruments
For certain of the Company’s financial instruments, including cash, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities.
FASB ASC Topic 820, Fair Value Measurements and Disclosures, requires disclosure of the fair value of financial instruments held by the Company. FASB ASC Topic 825, Financial Instruments, defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic 480, Distinguishing Liabilities from Equity, and FASB ASC Topic 815, Derivatives and Hedging.
For certain financial instruments, the carrying amounts reported in the balance sheets for cash and current liabilities, including convertible notes payable, each qualify as a financial instrument, and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.
The Company uses Level 2 inputs for its valuation methodology for derivative liabilities as their fair values were determined by using the Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.
At September 30, 2021 and December 31, 2020, the Company identified the following liabilities that are required to be presented on the balance sheet at fair value:
Treasury Stock
Treasury stock is recorded at cost. The re-issuance of treasury shares is accounted for on a first in, first-out basis and any difference between the cost of treasury shares and the re-issuance proceeds are charged or credited to additional paid-in capital.
Stock Loan Receivable
On January 8, 2019, the Company entered into a Stock Pledge Agreement with Latin American Exchange Latinex Casa de Cambio, S.A., a Costa Rica corporation (“Latinex”), to provide that Latinex may maintain its required regulatory capital as required by various regulators. The Company has pledged restricted shares of its common stock valued at $7,610,147 (based on the closing price on the grant date) for a term of three years in consideration of an annual payment of $375,000 paid in quarterly installments of $93,750. In lieu of cash payment, Latinex may pay the Company in virtual currency of WISE Network S.A. valued at a 50% discount of its offering price of $10 per token. In the event that Latinex’s required capital has decreased below $5,000,000, Latinex is permitted to sell the pledged shares of common stock only in an amount to ensure that Latinex can satisfy the required capital levels. The Company must consent to such sale of the shares of common stock, which may not be unreasonably withheld. Upon expiration of the agreement, the remaining shares of common stock shall be returned to the Company free and clear of all liens. The Company has recorded the value of these shares of common stock as a stock loan receivable which is presented as a contra-equity account in the accompanying consolidated balance sheets. At December 31, 2019, the Company wrote off the accrued interest income as Latinex did not perform any payment and the Company has no mean to enforce this payment. Latinex agreed in principal to return the pledged 4,005 restricted shares to the Company for cancellation. The 4,005 restricted shares have not yet been returned to the Company as of September 30, 2021.
Revenue Recognition
Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), became effective for the Company on January 1, 2018. The Company’s revenue recognition disclosure reflects its updated accounting policies that are affected by this new standard. The Company applied the “modified retrospective” transition method for open contracts for the implementation of Topic 606. The Company had no significant post-delivery obligations, this new standard did not result in a material recognition of revenue on the Company’s accompanying consolidated financial statements for the cumulative impact of applying this new standard. The Company made no adjustments to its previously-reported total revenues, as those periods continue to be presented in accordance with its historical accounting practices under Topic 605, Revenue Recognition.
Revenue from providing IT services are recognized under Topic 606 in a manner that reasonably reflects the delivery of its services to customers in return for expected consideration and includes the following elements:
These five elements, as applied to each of the Company’s revenue category, is summarized below:
Unearned revenue
Unearned revenue represents the net amount received for the purchase of products that have not seen shipped to the Company’s customers. In 2018, the Company ran pre-sales efforts for its pet tracker product and received prepayments for its product. In addition, during 2018, the Company received $200,000 in connection with an intellectual property license and royalty agreement. At December 31, 2019, the Company determined that the unearned revenue would not likely result in the recognition of revenue; therefore, $249,675 of unearned revenue was reclassified to accrued expenses at September 30, 2021 and December 31, 2020.
Income Taxes
The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company has no material uncertain tax positions for any of the reporting periods presented.
Earnings per share is calculated in accordance with ASC Topic 260, Earnings Per Share. Basic earnings per share (“EPS”) is based on the weighted average number of common shares outstanding. Diluted EPS assumes that all dilutive securities are converted. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Due to the net loss incurred potentially dilutive instruments would be anti-dilutive. Accordingly, diluted loss per share is the same as basic loss for all periods presented. The following potentially-dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive.
Management’s Evaluation of Subsequent Events
The Company evaluates events that have occurred after the balance sheet date of September 30, 2021, through the date which the condensed consolidated financial statements are issued. Based upon the review, other than described in Note 16 – Subsequent Events, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements.
Recent Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes which amends ASC 740 Income Taxes (ASC 740). This update is intended to simplify accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and amending existing guidance to improve consistent application of ASC 740. This update is effective for fiscal years beginning after December 15, 2021. The guidance in this update has various elements, some of which are applied on a prospective basis and others on a retrospective basis with earlier application permitted. The Company is currently evaluating the effect of this ASU on the Company’s consolidated financial statements and related disclosures.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock. For convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital, the embedded conversion features no longer are separated from the host contract. ASU 2020-06 also removes certain conditions that should be considered in the derivatives scope exception evaluation under Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and clarify the scope and certain requirements under Subtopic 815-40. In addition, ASU 2020-06 improves the guidance related to the disclosures and earnings-per-share (EPS) for convertible instruments and contract in entity’s own equity. ASU 2020-06 is effective for public business entities that meet the definition of a SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Board specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The Company is currently evaluation the impact this ASU will have on its consolidated financial statements.
Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying consolidated financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.
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Discontinued Operations |
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| Discontinued Operations and Disposal Groups [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Discontinued Operations | Note 3 – Discontinued Operations
On September 18, 2020, the Company entered into a Purchase and Sale Agreement with Mr. LightHouse LTD., an Israeli corporation (“MLH”) pursuant to which the Company agreed to sell and assign to MLH, effective July 1, 2020 all the shares, and certain specified liabilities, of Ugopherservices Corp. (“UGO”), a wholly owned subsidiary of the Company, in consideration of $100,000 to be paid through the delivery of a promissory note payable to the Company (the “Note”), upon the terms and subject to the limitations and conditions set forth in the Note. There is no material relationship between the Company, on one hand, and MLH, on the other hand. At December 31, 2020, the Company determined that this note receivable was not collectible and took an impairment charge of $100,000. During July 2021, MLH effected a $50,000 payment on the Note.
UGO has been presented as discontinued operations on the accompanying financial statements.
The operating results for UGO have been presented in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and 2020 as discontinued operations and are summarized below:
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Investment in Surge Holdings, Inc. |
9 Months Ended |
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Sep. 30, 2021 | |
| Investment In Surge Holdings Inc. | |
| Investment in Surge Holdings, Inc. | Note 4 – Investment in Surge Holdings, Inc.
Surge Holdings, Inc.
On September 30, 2019, 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 Central State Legal Services businesses in consideration of $5,000,000 to be paid through the issuance of 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. The SURG Note is payable by SURG to the Company on the 18-month anniversary of the issuance date and does not bear interest.
On or about June 23, 2020, the Company and AltCorp entered into agreements with SURG and Glen Eagles Acquisition LP (“Glen”) regarding the $4,000,000 SURG Note for which the SURG Note has been converted in full into 5,500,000 restricted stock of SURG (“Issued Shares”) along with an additional 22,000,000 SURG shares reserved for the benefit of the Company’s subsidiary as a true up of shares to secure the value of the Issued Shares as $2,750,000. Additional shares will be issued if the original 5,500,000 are worth less than $2,750,000 on June 23, 2021. The Company agreed that the Issued Shares will be restricted for a year. As a result of the exchange of $2,750,000 of the SURG Note for 5,500,000 shares of SURG common stock, the Company recognized a loss of $1,430,000 during the nine months ended September 30, 2020. On June 24, 2021, in accordance with the Agreement entered June 23, 2020, the Company together with AltCorp, via registered mail to SURG and its transfer agent, sent a demand for a true-up share in an additional amount of 14,870,370 SURG shares as calculated per the Agreement. As of September 30, 2021, SURG’s transfer agent did not answer to the Company request.
Glen converted in full its $1,000,000 convertible note that was issued by the Company on July 8, 2019, plus $50,000 of accrued interest into $1,050,000 of a SURG Note via an assignment of a portion ($1,050,000 of a $4,000,000 face value) of the $4,000,000 SURG Note. In addition, the Company entered into a consulting agreement with Glen for which the Company shall pay to Glen $200,000 via an assignment of a portion ($200,000 of a $4,000,000 face value) of the $4,000,000 SURG Note.
On or about June 23, 2020, Stanley Hills LLC (“Stanley”) which holds a pledge of 3,333,333 shares of SURG common stock via its manager/member (“Stanley’s Member”), acting as an agent for the Company, entered into an agreement with SURG, its transfer agent and an escrow officer for which it was agreed that 3,333,333 SURG shares will be cancelled for consideration of up to $700,000. Between sales to SURG and to a third party, the amount of $575,170 was received into a lawyer’s trust account for the benefit of AltCorp, and 3,333,333 of SURG shares have been sent for cancelation. The lawyer’s trust account balance was $178,016 and $402,532 as of September 30, 2021 and December 31, 2020, respectively.
On August 12, 2020, the Company and its subsidiary, AltCorp, entered into a new pledge agreement with Stanley, where SURG shares been pledged to Stanley to secure the debt payable by the Company to Stanley as well as mitigate the damages allegedly created by SURG.
On November 4, 2020, Altcorp and Stanley filed an Ex Parte Motion in the District Court, Clark County, Nevada (Case No: A-20-823039-B, in Dep No: 43) to appoint receiver and issue a temporary restraining Order against SURG and its transfer agent for alleged defaults on prior exchange agreement. As court entered an order granting in part AltCorp’s motion, the parties entered on December 4, 2020 an interim agreement which set the material terms of the settlement. A final settlement was entered into as per the terms of the interim agreement entered on January 1, 2021.
On January 1, 2021 SURG, AltCorp and Stanley entered into a Mutual Release and Settlement Agreement (“Settlement Agreement”). Pursuant to the terms of the Settlement Agreement, SURG agreed to amend the AltCorp Exchange Agreement where SURG acknowledged a debt of $3,300,000 (the “Debt”) to be paid via 33 monthly payments of $100,000 payable in shares of common stock of SURG at a per share price equal the volume weighted average price of SURG’s common stock during the ten (10) trading days immediately preceding the issuance. At the end of the 33rd month, if AltCorp has not realized gross, pre-tax proceeds at least equal to the amount of the Debt, SURG shall transfer to AltCorp and/or its designee additional shares of SURG’s common stock necessary to satisfy the Debt. As of September 30, 2021, SURG has made nine payments per the settlement agreements and has recognized other income of $900,000. The Company recognizes as other income, the $100,000 monthly installment payments as received. The Company has recorded the amount due from SURG of $2,400,000 at September 30, 2021 as other receivable ($1,200,000 as current and $1,200,000 as non-current) with a corresponding deferred judgment award liability of $2,400,000.
The shares received for the eight-monthly installments in 2021 (with the September payment of $100,000 being paid in cash) were transferred/sold by AltCorp to Stanley as payment on its outstanding balances at were valued at $800,000 (See Note 7). On June 24, 2021, the Company’s investment in shares of SURG shares were transferred/sold to IGOR 1 Corp. (“IGOR 1”) as payment on its outstanding balances. The shares were valued at $660,000 (See Note 7).
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Impaired Investments |
9 Months Ended |
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| Equity Method Investments and Joint Ventures [Abstract] | |
| Impaired Investments | Note 5 – Impaired Investments
Investment in GBT Technologies, S.A.
On June 17, 2019, the Company, AltCorp Trading LLC, a Costa Rica company and a wholly-owned subsidiary of the Company (“AltCorp”), GBT Technologies, S.A., a Costa Rica company (“GBT-CR”) and Pablo Gonzalez, a shareholder’s representative of GBT-CR (“Gonzalez”), entered into and closed an Exchange Agreement (the “GBT Exchange Agreement”) pursuant to which the parties exchanged certain securities. In accordance with the Exchange Agreement, AltCorp acquired shares of GBT-CR representing 25% of its issued and outstanding shares of common stock from Gonzalez in exchange for the issuance of shares of Series H Convertible Preferred Stock of the Company and a Convertible Note in the principal amount of $10,000,000 issued by the Company (the “Gopher Convertible Note”) as well as the transfer and assignment of a Promissory Note payable by Gopher Protocol Costa Rica Sociedad De Responsabilidad Limitada to the Company in the principal amount of $5,000,000 dated February 6, 2019 (of which the underlying security for this Promissory Note is 30,000,000 restricted shares of common stock of Mobiquity Technologies, Inc. (“Mobiquity”) and 60,000,000 restricted shares of common stock of Mobiquity.
The Gopher Convertible Note bears interest of 6% per annum and is payable at maturity on December 31, 2021. At the election of Gonzalez, the Gopher Convertible Note can be converted into a maximum of 20,000 shares of Series H Preferred Stock. Each share of Series H Preferred Stock is convertible, at the option of the holder but subject to the Company increasing its authorized shares of common stock, into such number of shares of common stock of the Company as determined by dividing the Stated Value ($ per share) by the conversion price ($500.00 per share). The Series H Preferred Stock has no liquidation preference, does not pay dividends and the holder of Series H Preferred Stock shall be entitled to one vote for each share of common stock that the Series H Preferred Stock may be convertible into. Upon conversion of the Gopher Convertible Note and the 20,000 shares of Series H Preferred Stock, Gonzalez would be entitled to less than 50% of the resulting outstanding shares of common stock of the Company following conversion in full and, as a result, such transaction is not considered a change of control.
On May 19, 2021, the Company, Gonzalez, GBTCR and IGOR 1 Corp entered into a Mutual Release and Settlement Agreement and Irrevocable Assignment of Note Balance Principal and Accrued Interest (the “Gonzalez Agreement”). Pursuant to the Gonzalez Agreement, without any party admission of liability and to avoid litigation, the parties has agreed to (i) extend the GBT Convertible Note maturity date to December 31,2022, (ii) amend the GBT Convertible Note terms to include a beneficial ownership blocker of 4.99% and a modified conversion feature to the GBT Convertible Note with 15% discount to the market price during the 20 trading day period ending on the latest complete trading day prior to the conversion date and (iii) provided for an assignment of the GBT Convertible Note by Gonzalez to a third party.
GBT-CR is in the business of the strategic management of BPO (Business Process Outsourcing) digital communications processing for enterprises and startups, distributed ledger technology development, AI development and fintech software development and applications.
The Company accounted for its investment in GBT-CR using the equity method of accounting; however, in 2020, the Company owned less than 20% of and exercised no control over GBT-CR; therefore, this investment is currently accounted for under the cost method. Moreover, on March 19, 2020, California Governor Gavin Newsom issued a stay at home order to protect the health and well-being of all Californians and to establish consistency across the state in order to slow the spread of COVID-19. California was therefore under strict quarantine control and travel has been severely restricted, resulting in disruptions to work, communications, and access to files (due to limited access to facilities). The stay at home order was lifted in California only on January 25, 2021. As such, the Company was unable to access or to contact GBT-CR on an on-going basis, and cannot get information about GBT-CR.
At December 31, 2019, the Company evaluated the carrying amount of this equity investment and determined that this investment was fully impaired and as a result an impairment charge of $30,731,534 was taken. The carrying amount of this investment at September 30, 2021 and December 2020, was $0 and $0, respectively.
Investment in Joint Venture
On March 6, 2020, the Company through Greenwich, entered into a Joint Venture and Territorial License Agreement (the “Tokenize Agreement”) with Tokenize-It, S.A. (“Tokenize”), which is owned by a Costa Rica Trust represented by Pablo Gonzalez (“Gonzalez”). Gonzalez also represents Gonzalez Costa Rica Trust, which holds a note in the principal amount of $10,000,000 and is also a shareholder of the Company. Under the Tokenize Agreement, the parties formed GBT Tokenize Corp., a Nevada corporation (“GBT Tokenize”). The purpose of GBT Tokenize is to develop, maintain and support source codes for its proprietary technologies including advanced mobile chip technologies, tracking, radio technologies, AI core engine, electronic design automation, mesh, games, data storage, networking, IT services, business process outsourcing development services, customer service, technical support and quality assurance for business, customizable and dedicated inbound and outbound calls solutions, as well as digital communications processing for enterprises and startups (“Technology Portfolio”), throughout the State of California. Upon generating any revenue from the Technology Portfolio, the Joint Venture will earn the first right of refusal for other territories.
Tokenize shall contribute the services and resources for the development of the Technology Portfolio to GBT Tokenize. The Company shall contribute 2,000,000 shares of common stock of the Company (“GBT Shares”) to GBT Tokenize. Tokenize and the Company will each own 50% of GBT Tokenize. The shares were valued at $5,500,000.
In addition, GBT Tokenize and Gonzalez entered into a Consulting Agreement in which Gonzalez is engaged to provide services in consideration of $33,333 per month payable quarterly which may be paid in shares of common stock calculated by the amount owed divided by the Company’s 10-day VWAP. Gonzalez will provide services in connection with the development of the business as well as GBT Tokenize’s capital raising efforts. The term of the Consulting Agreement is two years. During the nine months ended September 30, 2021, Gonzalez assigned all his accrued balances of $424,731 to Stanley Hills in a private transaction that the Company is not part to. The closing of the Tokenize Agreement occurred on March 9, 2020.
Through this Joint Venture the parties commenced development of an intelligent human vital signs’ device, which we currently refer to as the qTerm. The platform is an expansion of the existing license agreement with GBT Tokenize Corp., which provided GBT Tokenize Corp. with an exclusive territory of California to develop certain of the Company’s technology. As the nature of the platform cannot be restricted only to California, the Company’s joint venture GBT Tokenize Corp. will be compensated with additional two hundred million shares of the Company to strengthen its funding, subject to board approval. A provisional patent application for the qTerm Medical Device was filed on March 30, 2020 with the USPTO. The application has been assigned serial number 63001564. The Joint Venture completed successfully the first prototype. There is no guarantee that the Company will be successful in researching, developing or implementing this product into the market. In order to successfully implement this concept, the Company will need to raise adequate capital to support its research and, if successfully researched, developed and granted regulatory approval, the Company would need to enter into a strategic relationship with a third party that has experience in manufacturing, selling and distributing this product. There is no guarantee that the Company will be successful in any or all of these critical steps.
At March 31, 2020, the Company evaluated the carrying amount of this joint venture investment and determined that this investment was fully impaired and as a result an impairment charge of $5,500,000 was taken. At September 30, 2021, the Company evaluated the carrying amount of this joint venture investment and determined that this investment was fully impaired and as a result an impairment charge of $15,400,000 was taken.
Although the investment was impaired, the product development is still ongoing. The carrying amount of this investment at September 30, 2021 and December 2020, was $0 and $0, respectively.
On May 28, 2021, the parties agreed to amend the Tokenize Agreement to expand territory granted for the Technology Portfolio under the license to GBT Tokenize to include the entire continental United States. The Company has further agreed to issue GBT Tokenize an additional 14,000,000 shares of common stock of the Company. The shares were valued at $15,400,000.
The Company pledged its 50% ownership in GBT Tokenize and its 100% ownership of Greenwich to Tokenize to secure its Technology Portfolio investment. The Company shall appoint two directors and Tokenize shall appoint one director of GBT Tokenize.
On September 30, 2021 Tokenize, in an agreement that the Company is not a party to, irrevocably assigned all its rights in GBT Tokenize, including all its rights per the Tokenize Agreement, The Gonzalez Consulting agreement and the pledge agreement, to the benefit of Magic International Argentina FC, S.L a third party (“Magic”). On June 30, 2021 Magic irrevocably assigned to Stanley Hills, LLC its credit balance accrued until June 30, 2021 per the consulting agreement.
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| Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounts Payable and Accrued Expenses | Note 6 – Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses at September 30, 2021 and December 31, 2020 consist of the following:
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| Convertible Notes Payable | Note 7 – Convertible Notes Payable
Convertible notes payable at September 30, 2021 and December 31, 2020 consist of the following:
$10,000,000 for GBT Technologies S. A. acquisition
In accordance with the acquisition of GBT-CR the Company issued a convertible note in the principal amount of $10,000,000. The convertible note bears interest of 6% per annum and is payable at maturity on December 31, 2021. At the election of the holder, the convertible note can be converted into a maximum of shares of Series H Preferred Stock. Each share of Series H Preferred Stock is convertible, at the option of the holder but subject to the Company increasing its authorized shares of common stock, into such number of shares of common stock of the Company as determined by dividing the Stated Value ($500 per share) by the conversion price ($500.00 per share).
On May 19, 2021, the Company, Gonzalez, GBT-CR and IGOR 1 Corp entered into a Mutual Release and Settlement Agreement and Irrevocable Assignment of outstanding balance plus accrued interest (the “Gonzalez Agreement”). Pursuant to the Gonzalez Agreement, without any party admission of liability and to avoid litigation, the parties has agreed to (i) extend the GBT convertible note maturity date to December 31, 2022, (ii) amend the GBT convertible note terms to include a beneficial ownership blocker of 4.99% and a modified conversion feature to the GBT convertible note with 15% discount to the market price during the 20 trading day period ending on the latest complete trading day prior to the conversion date and (iii) provided for an assignment of the GBT convertible note by Gonzalez to a third party. As a result of the change in terms of this convertible note, the Company took a charge related to the modification of debt of $13,777,480 during the nine months ended September 30, 2021.
During the nine months ended September 30, 2021, IGOR 1 converted $1,084,600 of the convertible note into 1,600,000 shares of the Company’s common stock. Also, on June 24, 2021, the Company transferred 5,500,000 SURG shares received as repayment of $660,000 of this convertible note (See Note 4).
Redstart Holdings Corp.
Paid Off Notes/Converted Notes
On August 4, 2020, the Company entered into a Securities Purchase Agreement with Redstart Holdings Corp., an accredited investor (“Redstart”) pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 1”) in the aggregate principal amount of $153,600 for a purchase price of $128,000. The Redstart Note No. 1 has a maturity date of November 3, 2021 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 1 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 1 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 1, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 1. The transactions described above closed on August 5, 2020. The outstanding principal amount of the Redstart Note No. 1 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 1 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 1), the Redstart Note No. 1 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 1. During the nine months ended September 30, 2021, the entire amount of Note No. 1 of $153,600 plus accrued interest was converted into shares of common stock.
On September 15, 2020, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 2”) in the aggregate principal amount of $93,600 for a purchase price of $78,000. The Redstart Note No. 2 has a maturity date of September 15, 2021 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 2 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 2 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 2, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 2. The transactions described above closed on September 16, 2020. The outstanding principal amount of the Redstart Note No. 2 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 2 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 2), the Redstart Note No. 2 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 2. During the nine months ended September 30, 2021, the entire amount of Note No. 2 of $93,600 plus accrued interest was converted into shares of common stock.
On December 9, 2020, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 3”) in the aggregate principal amount of $100,200 for a purchase price of $83,500. The Redstart Note No. 3 has a maturity date of December 9, 2021 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 3 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 3 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 3, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 3. The transactions described above closed on December 11, 2020. The outstanding principal amount of the Redstart Note No. 3 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 3 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 3), the Redstart Note No. 3 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 3. During the nine months ended September 30, 2021, the entire amount of Note No. 3 of $100,200 plus accrued interest was converted into shares of common stock.
On February 10, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 4”) in the aggregate principal amount of $184,200 for a purchase price of $153,500. The Redstart Note No. 4 has a maturity date of February 5, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 4 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 4 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 4, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 4. The transactions described above closed on February 10, 2021. The outstanding principal amount of the Redstart Note No. 4 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 4 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 4), the Redstart Note No. 4 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 4. During the nine months ended September 30, 2021, the entire amount of Redstart Note No. 4 of $184,200 plus accrued interest was converted into shares of common stock.
On March 15, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 5”) in the aggregate principal amount of $106,200 for a purchase price of $88,500. The Redstart Note No. 5 has a maturity date of June 15, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 5 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 5 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 5, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 5. The transactions described above closed on March 17, 2021. The outstanding principal amount of the Redstart Note No. 5 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 5 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 5), the Redstart Note No. 5 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 5. During the nine months ended September 30, 2021, the entire amount of Redstart Note No. 5 of $106,200 plus accrued interest was converted into shares of common stock.
Outstanding Notes
On May 26, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 6”) in the aggregate principal amount of $106,200 for a purchase price of $88,500. The Redstart Note No. 6 has a maturity date of August 26, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 6 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 6 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 6, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 6. The transactions described above closed on May 28, 2021. The outstanding principal amount of the Redstart Note No. 6 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 6 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 6), the Redstart Note No. 6 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 6.
On September 21, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 7”) in the aggregate principal amount of $244,500 for a purchase price of $203,750. The Redstart Note No. 7 has a maturity date of December 22, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 7 at the rate of two and a half percent (2.5%) per annum from the date on which the Redstart Note No. 7 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 7, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 7. The transactions described above closed on September 28, 2021. The outstanding principal amount of the Redstart Note No. 7 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 7 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 7), the Redstart Note No. 7 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 7.
Stanley Hills LLC
The Company entered into a series of loan agreements with Stanley Hills LLC (“Stanley”) pursuant to which it received more than $1,000,000 in loans (the “Debt”) since May 2019 up to December 2019. On February 26, 2020, in order to induce Stanley to continue to provide funding, the Company and Stanley entered into a letter agreement providing that the current note payable balance due to Stanley in the amount of $1,214,900 may be converted into shares of common stock of the Company at a conversion price equal to 85% multiplied by the lowest one trading price for the common stock during the 20 trading day period ending on the latest complete trading day prior to the conversion date. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. Stanley has agreed to restrict its ability to convert the Debt and receive shares of common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. During the nine months ended September 30, 2021, Stanley converted $1,009,468 of its convertible note into shares of the Company’s common stock, and during the nine months ended September 30, 2021, Stanley loaned the Company an additional $697,386. Also, during the nine months ended September 30, 2021, the Company transferred the SURG shares received as repayment of $800,000 of this convertible note (See Note 4) and also converted $126,003 of accrued interest into the principal balance. During the nine months ended September 30, 2021, Gonzalez assigned all his accrued balances of $424,731 to Stanley in a private transaction that the Company is not part to (See Note 5). The balance of the Stanley debt at September 30, 2021 and December 31, 2020 was $448,121 and $1,009,469, respectively. The Stanley debt is secured via a pledge agreement on the SURG shares.
Iliad Research and Trading, L.P.
On February 27, 2019, the Company entered into a note purchase agreement with a third-party investor - Iliad Research and Trading, L.P.(“Iliad”), pursuant to which the Company issued a promissory note for the original principal amount of $2,325,000. The promissory note had an original issue discount of $300,000 and the inventor paid consideration of $2,025,000 to the Company, of which $25,000 was paid for legal expenses. The outstanding balance of the promissory note is to be paid on the one-year anniversary of the issuance of the note. Interest on the note accrues at the rate of 10% per annum compounding daily. Subject to the terms and conditions set forth in the note, the Company may prepay all or any portion of the outstanding balance of the note at any time in an amount in cash equal to 120% of the amount repaid. In connection with transactions that generate less than $1,000,000 in proceeds, the Company has agreed to not issue any debt instrument or incurrence of any debt other than trade payables in the ordinary course of business, any securities or agreements to sell common stock with anti-dilution or price reset/reduction features or any securities that are or may be become convertible or exercisable into common stock with a price that varies with the market price of the common stock (collectively, “Restricted Issuance Transaction”). The outstanding balance of the Note will be increased by 5% in the event the Company enters into a Restricted Issuance Transaction that is approved by Iliad. The original issue discount is being amortized to interest expense over the term of the promissory note.
On February 27, 2020, the Company and Iliad entered into an Amendment to the Iliad Note (See Note 8) pursuant to which the maturity date of the Iliad Note was extended to August 27, 2020, provided that the Debt may be converted into shares of common stock of the Company at a conversion price equal to 80% multiplied by the lowest trading daily VWAP for the common stock during the 20 trading day period ending on the latest complete trading day prior to the conversion date, provided for the payment by the Company to Iliad of an extension fee equal to 7.5% of the outstanding balance of the Iliad Note resulting in a new balance of the Iliad Note of $2,765,983 and provided that the Company’s failure to deliver shares of common stock within three trading days of a conversion would result in an event of default. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. Iliad has agreed to restrict its ability to convert the Iliad Note and receive shares of common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 9.99% of the then issued and outstanding shares of common stock. On July 20, 2020 the Company and Iliad entered into agreement to extend the maturity of the Iliad Note until February 27, 2021 in consideration of an extension fee of $1,000. On February 28, 2021 the Company and Iliad entered into agreement to further extend the maturity of the Iliad Note until May 31, 2021 in consideration of an extension fee of $1,000 representing the third extension of the original note. On May 19, 2021, the Company and Iliad entered into agreement to further extend the maturity of the Iliad Note until August 31, 2021 in consideration of an extension fee of $1,000 representing the fourth extension of the original note. On August 20, 2021, the Company and Iliad entered into agreement to further extend the maturity of the Iliad Note until December 31, 2021 in consideration of an extension fee of $1,000. During the nine months ended September 30, 2021, Iliad converted $2,508,737 of its convertible note into shares of the Company’s common stock. The balance of the Iliad debt at September 30, 2021 and December 31, 2020 was $0 and $2,431,841, respectively.
Discounts on convertible notes
The Company recognized interest expense of $686,732 and $3,833,752 during the nine months ended September 30, 2021 and 2020, respectively, related to the amortization of the debt discount on convertible notes. The unamortized debt discount at September 30, 2021 and December 31, 2020 was $316,372 and $362,004, respectively.
A roll-forward of the convertible notes payable from December 31, 2020 to September 30, 2021 is below:
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Notes Payable |
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| Notes Payable | Note 8 - Notes Payable
Notes payable at September 30, 2021 and December 31, 2020 consist of the following:
RWJ Acquisition Note
In connection with the acquisition of RWJ in September 2017, the Company issued a note payable. The note accrues interest at 3.5% per annum, was due on December 31, 2019 and is secured by the assets purchased in the acquisition. The Company contests the validity of the note, as such the note has not been repaid as of September 30, 2021. (See Note 13). The balance of the note at September 30, 2021 was $2,600,000 plus accrued interest of $385,631. The balance of the note at December 31, 2020 was $2,600,000 plus accrued interest of $307,631.
SBA Loan
On June 22, 2020, the Company received a loan from the Small Business Administration under the Economic Injury Disaster Loan (“EIDL”) program related to the COVID-19 relief efforts. The loan bears interest at 3.75% per annum, requires monthly principal and interest payments of $731 after 12 months from funding and is due 30 years from the date of issuance. The monthly payments have been extended by the SBA to all EIDL borrower with additional 12 months. Monthly payments will commence on or around June 2022. The balance of the note at September 30, 2021 was $150,000 plus accrued interest of $7,286. The balance of the note at December 31, 2020 was $150,000 plus accrued interest of $3,067.
Alpha Eda
On November 15, 2020, the Company issued a promissory note to Alpha Eda, LLC (“Alpha”) for $140,000. The note accrues interest at 10% per annum, is unsecured and is due on September 30, 2021. On June 20, 2021 Alpha and the Company extended the note maturity to December 31, 2021. The balance of the note at September 30, 2021 was $140,000 plus accrued interest of $12,302. The balance of the note at December 31, 2020 was $140,000 plus accrued interest of $1,803.
Discounts on Promissory Note
The Company recognized interest expense of $0 and $47,671 during the nine months ended September 30, 2021 and 2020, respectively related to the amortization of the debt discount on notes payable.
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Accrued Settlement |
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| Accrued Settlement | Note 9 – Accrued Settlement
In connection with a legal matter filed by the Investor of the $8,340,000 Senior Secured Redeemable Convertible Debenture, on December 23, 2019, in the pending arbitration between the Company and the Investor, an Interim Award was entered in favor of the Investor. On January 31, 2020, the Company was informed that a final award was entered (the “Final Award”). The Final Award affirms that certain sections of the Senior Secured Redeemable Convertible Debenture (the “Debenture”) constitute unenforceable liquidated damages penalties and were stricken. Further, it was determined that the Investor was entitled to recovery of their attorney’s fees. Consequently, the arbitrator awarded Investor an award of $4,034,444 plus interest of 7.25% accrued from May 15, 2019 (presented separately in accounts payable and accrued expenses) and costs in the amount of $55,613. (See Note 13). In connection with this settlement, the Company recognized a gain on the settlement of debt of $1,375,556 in 2019 as the difference between the carrying amount of the debt and the amount awarded by the arbitrator (See Note 13).
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Derivative Liability |
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| Derivative Liability | Note 10 - Derivative Liability
Certain of the convertible notes payable discussed in Note 7 have a conversion price that can be adjusted based on the Company’s stock price which results in the conversion feature being recorded as a derivative liability.
The fair value of the derivative liability is recorded and shown separately under current liabilities. Changes in the fair value of the derivative liability is recorded in the statement of operations under other income (expense).
The Company uses a weighted average Black-Scholes option pricing model with the following assumptions to measure the fair value of derivative liability at September 30, 2021 and December 31, 2020:
The following table represents the Company’s derivative liability activity for the nine months ended September 30, 2021:
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Stockholders’ Equity |
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| Stockholders’ Equity | Note 11- Stockholders’ Equity
Common Stock
The Board of Directors of the Company approved, on April 13, 2020, a reverse stock split of all of the Company’s Common Stock, pursuant to which every 50 shares of Common Stock of the Company shall be reverse split, reconstituted and converted into one (1) share of Common Stock of the Company (the “Reverse Stock Split”). The Company submitted an Issuer Company Related Action Notification regarding the Reverse Stock Split to FINRA on April 14, 2020. To effectuate the Reverse Stock Split, the Company filed on April 21, 2020 a Certificate of Change Pursuant to Nevada Revised Statutes (“NRS”) Section 78.209 (the “Certificate of Change”) with the Secretary of State of the State of Nevada subject to FINRA approval. Since this reverse stock split has not yet been approved by the State of Nevada, the financial statements have not been retroactively restated to reflect this reverse stock split. On June 8, 2020 FINRA advised the Company that such request is deficient due to the fact that a holder of an outstanding convertible note of the Company had entered into two settlements with the Securities and Exchange Commission that related to securities laws violations but were in no way related to the Company. As a result, FINRA advised that it is necessary for the protection of investors, the public interest, and to maintain fair and orderly markets that documentation related to the Reverse Stock Split not be processed. The Company appealed the decision made by FINRA on June 15, 2020. On August 4, 2020, FINRA notified the Company that its appeal had been denied. On October 25, 2021 FINRA approved the Reverse Stock Split and on October 26, 2021, the Company effectuated a 1 for 50 reverse stock split.
During the nine months ended September 30, 2021, the Company had the following transactions in its common stock:
During the nine months ended September 30, 2020, the Company had the following transactions in its common stock:
Series B Preferred Shares
On November 1, 2011, the Company and certain creditors entered into a Settlement Agreement (the “Settlement Agreement”) whereby without admitting any wrongdoing on either part, the parties settled all previous agreements and resolved any existing disputes. Under the terms of the Settlement Agreement, the Company agreed to issue the creditors shares of Series B Preferred Stock of the Company on a pro-rata basis. Following the issuance and delivery of the shares of Series B Preferred Stock to said creditors, as well as surrendering the undelivered shares, the Settlement Agreement resulted in the settlement of all debts, liabilities and obligations between the parties.
The Series B Preferred Stock has a stated value of $100 per share and is convertible into the Company’s common stock at a conversion price of $30.00 per share representing 1 posts split common shares. Furthermore, the Series B Preferred Stock votes on an as converted basis and carries standard anti-dilution rights. These rights were subsequently removed, except in cases of stock dividends or splits.
As of September 30, 2021, and December 31, 2020, there were Series B Preferred Shares outstanding.
Series C Preferred Shares
On April 29, 2011, GV Global Communications, Inc. (“GV”) provided funding to the Company in the aggregate principal amount of $111,000 (the “Loan”). On September 25, 2012, the Company and GV entered into a Conversion Agreement pursuant to which the Company agreed to convert the Loan into 10,000 shares of Series C Preferred Stock of the Company, which was approved by the Board of Directors.
Each share of Series C Preferred Stock is convertible, at the option of GV, into such number of shares of common stock of the Company as determined by dividing the Stated Value (as defined below) by the Conversion Price (as defined below). The Conversion Price for each share is equal to a 50% discount to the average of the lowest three lowest closing bid prices of the Company’s common stock during the 10-day trading period prior to the conversion with a minimum conversion price of $0.02. The stated value is $11.00 per share (the “Stated Value”). The Series C Preferred Stock has no liquidation preference, does not pay dividends and the holder of Series C Preferred Stock shall be entitled to one vote for each share of common stock that the Series C Preferred Stock shall be convertible into. GV has contractually agreed to restrict its ability to convert the Series C Preferred Stock and receive shares of the Company’s common stock such that the number of shares of the Company’s common stock held by it and its affiliates after such conversion does not exceed 4.9% of the then issued and outstanding shares of the Company’s common stock.
During the year ended December 31, 2014, GV Global Communications, Inc. converted 7,770 of its Series C Preferred Stock into post-splits. During the third quarter of 2014, the Company received post-split common shares to adjust the shares issued to reflect the amount that both they and the Company believed that they were owed. At September 30, 2021 and December 31, 2020, GV owns Series C Preferred Shares.
The issuance of the Series C Preferred Stock was made in reliance upon exemptions from registration pursuant to Section 4(a)(2) under the Securities Act of 1933 and Rule 506 promulgated under Regulation D thereunder. GV is an accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933.
As of September 30, 2021, and December 31, 2020, there were Series C Preferred Shares outstanding.
Series D Preferred Shares
As of September 30, 2021, and December 31, 2020, there are and shares of Series D Preferred Shares outstanding, respectively.
Series G Preferred Shares
As of September 30, 2021, and December 31, 2020, there are and shares of Series G Preferred Shares outstanding, respectively.
Series H Preferred Shares
On June 17, 2019, the Company, AltCorp Trading LLC, a Costa Rica company and a wholly-owned subsidiary of the Company (“AltCorp”), GBT Technologies, S.A., a Costa Rica company (“GBT-CR”) and Pablo Gonzalez, a shareholder’s representative of GBT-CR (“Gonzalez”), entered into and closed an Exchange Agreement (the “GBT Exchange Agreement”) pursuant to which the parties exchanged certain securities. In accordance with the Exchange Agreement, AltCorp acquired shares of GBT-CR representing 25% of its issued and outstanding shares of common stock from Gonzalez in exchange for the issuance of shares of Series H Convertible Preferred Stock of the Company and a Convertible Note in the principal amount of $10,000,000 issued by the Company (the “Gopher Convertible Note”) as well as additional consideration. The Gopher Convertible Note bears interest of 6% per annum and is payable at maturity on December 31, 2021. At the election of Gonzalez, the Gopher Convertible Note can be converted into a maximum of 20,000 shares of Series H Preferred Stock. Each share of Series H Preferred Stock is convertible, at the option of the holder but subject to the Company increasing its authorized shares of common stock, into such number of shares of common stock of the Company as determined by dividing the Stated Value ($ per share) by the conversion price ($500.00 per share). The Series H Preferred Stock has no liquidation preference, does not pay dividends and the holder of Series H Preferred Stock shall be entitled to one vote for each share of common stock that the Series H Preferred Stock may be convertible into. On July 8, 2019, the Company entered a Consulting Agreement with Glen Eagles Glen Eagles Acquisition LP (“Glen”) as consultant to provide services in connection with the Company’s acquisition of 25% of GBT-CR. Consultant will provide analysis, interaction with related professional and other services as requested by the Company to integrate and expand capabilities between GBT-CR and the Company. (See Note 13 for further details.)
As of September 30, 2021, and December 31, 2020, there are shares of Series H Preferred Shares outstanding.
Warrants
The following is a summary of warrant activity.
The exercise price for warrant outstanding and exercisable at September 30, 2021:
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Related Parties |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Related Party Transactions [Abstract] | |
| Related Parties | Note 12 - Related Parties
Related parties are natural persons or other entities that have the ability, directly or indirectly, to control another party or exercise significant influence over the party in making financial and operating decisions. Related parties include other parties that are subject to common control or that are subject to common significant influences.
On April 6, 2018, the Company and Danny Rittman, Chief Technology Officer and a Director of the Company, agreed to amend his employment agreement pursuant to which he will receive salary at the rate of $250,000 annually payable in equal increments of $15,000 per month with an additional $70,000 to be paid within 15 days of the end of the calendar year.
On September 14, 2018, the Company and Dr. Rittman entered into a letter agreement confirming that the Company is the owner of all intellectual property developed by Dr. Rittman relating to the Internet of Things (IoT) and Artificial Intelligence enabled mobile technologies, including a global platform with both mobile and fixed solutions, commencing June 16, 2015 and continuing until Dr. Rittman’s employment agreement is terminated.
On September 1, 2017, the Company entered into and closed an Asset Purchase Agreement with a third party, RWJ Advanced Marketing, LLC (“RWJ”), a Georgia corporation, pursuant to which the Company purchased certain assets from RWJ, including inventory, terminals, licenses and permits and intangible assets. At closing, the Company and Mr. Greg Bauer entered into an Employment Agreement pursuant to which Mr. Bauer was retained as Chief Executive Officer for a term of one year, subject to an automatic extension, unless terminated, in consideration of a base salary of $250,000 and a bonus of 10% of net profit generated by the assets acquired. Mr. Bauer was also appointed to the Board of Directors of the Company. As of the closing date, Mr. Murray resigned as Chief Executive Officer of the Company but will remain as a director of the Company. Mr. Bauer, since 2004 through present, has served as executive director with W.L. Petrey Wholesale, Inc. where he was in charge of the UGO/Preway operations. The Company is in litigations in connection with RWJ transaction – See Note 13 - Contingencies.
On January 1, 2019, the Company and Douglas Davis entered into an Amended and Restated Employment Agreement pursuant to which Mr. Davis was retained as Chief Executive Officer. Mr. Davis served as Interim Chief Executive Officer since July 2018 until his resignation on April 11, 2020. The term of Mr. Davis’ employment was for two years through January 1, 2021. Mr. Davis was entitled to an annual base salary of $250,000, which was to be increased to $400,000 upon the Company up-listing to a national exchange. Mr. Davis was also entitled to the issuance of Stock Options to acquire an aggregate of shares of common stock of the Company, exercisable for five years, subject to vesting. The options were to be earned and vested (i) with respect to 20,000 shares of common stock on the date hereof, (ii) 5,000 shares of common stock upon the successful dual list of the Company on an international exchange such as SIX Zurich Stock Exchange or Euronext, (iii) 15,000 shares of common stock upon the successful up listing to a national exchange such as the Nasdaq, NYSE Euronext, TSX, AMEX or other, and (iv) with respect to 5,000 shares of common stock at each of the six (6) month anniversaries (July 1, 2019 and January 1, 2020). The exercise price of such options shall be the closing price of the Company on the date prior to such event.
On October 10, 2019, the Company entered into a Joint Venture Agreement (the “BitSpeed Agreement”) with BitSpeed LLC, which is owned by Douglas Davis, the Company’s former Chief Executive Officer, to form GBT BitSpeed Corp., a Nevada company (“GBT BitSpeed”). The purpose of GBT BitSpeed is to develop, maintain and support its proprietary Extreme Transfer Software Application Concurrency, a software application to transfer secure, accelerated transmission of large file data over networks, and connection to cloud storage, Network-Attached Storage (NAS) and Storage Area Networks (SANs) (“Concurrency”). BitSpeed shall contribute the services and resources for the development of Concurrency to GBT BitSpeed. The Company shall contribute 10 million shares of common stock (valued at $17,900,000) of the Company to GBT BitSpeed. BitSpeed and the Company will each own 50% of GBT BitSpeed. The Company shall appoint two directors and BitSpeed shall appoint one director of GBT BitSpeed. In addition, GBT BitSpeed and Mr. Davis entered into a Consulting Agreement in which Mr. Davis is engaged to provide services in consideration of $10,000 per month payable quarterly which may be paid in shares of common stock calculated by the amount owed divided by the Company’s 20-day VWAP. Mr. Davis will provide services in connection with the development of the business as well as GBT BitSpeed’s capital raising efforts. The term of the Consulting Agreement is two years. The closing of the BitSpeed Agreement occurred on October 14, 2019. On April 11, 2020, Douglas Davis resigned as Chief Executive Officer of the Company so that he may fully devote all of his efforts to GBT Tokenize Corp., the Company’s joint venture, which intends to develop a new product. Mr. Davis’ resignation was not the result of any disagreements with management or board of directors of the Company.
On March 6, 2020, the Company through Greenwich, entered into the Tokenize Agreement with Tokenize, which is owned by a Costa Rica Trust represented by Gonzalez. Gonzalez also represents Gonzalez Costa Rica Trust, which holds a note in the principal amount of $10,000,000 and is also a shareholder of the Company. Under the Tokenize Agreement, the parties formed GBT Tokenize. The purpose of GBT Tokenize is to develop Technology Portfolio, throughout the State of California. Upon generating any revenue from the Technology Portfolio, the Joint Venture will earn the first right of refusal for other territories. Tokenize shall contribute the services and resources for the development of the Technology Portfolio to GBT Tokenize. The Company contributed 100,000,000 GBT Shares to GBT Tokenize. Tokenize and the Company will each own 50% of GBT Tokenize. The Company pledged its 50% ownership in GBT Tokenize and its 100% ownership of Greenwich to Tokenize to secure its Technology Portfolio investment. The Company shall appoint two directors and Tokenize shall appoint one director of GBT Tokenize. In addition, GBT Tokenize and Gonzalez entered into a Consulting Agreement in which Gonzalez is engaged to provide services in consideration of $33,333.33 per month payable quarterly which may be paid in shares of common stock calculated by the amount owed divided by the Company’s 10-day VWAP. Gonzalez will provide services in connection with the development of the business as well as GBT Tokenize’s capital raising efforts. The term of the Consulting Agreement is two years. During the six months ended June 30, 2021, Gonzalez assigned all his accrued balances of $424,731 to Stanley Hills in a private transaction that the Company is not part to. The closing of the Tokenize Agreement occurred on March 9, 2020. Through this Joint Venture the parties commenced development of an intelligent human vital signs’ device, which we currently refer to as the qTerm. The platform is an expansion of the existing license agreement with GBT Tokenize Corp., which provided GBT Tokenize Corp. with an exclusive territory of California to develop certain of the Company’s technology. A provisional patent application for the qTerm Medical Device was filed on March 30, 2020 with the USPTO. The application has been assigned serial number 63001564. The Joint Venture completed successfully the first prototype. There is no guarantee that the Company will be successful in researching, developing or implementing this product into the market. In order to successfully implement this concept, the Company will need to raise adequate capital to support its research and, if successfully researched, developed and granted regulatory approval, the Company would need to enter into a strategic relationship with a third party that has experience in manufacturing, selling and distributing this product. There is no guarantee that the Company will be successful in any or all of these critical steps. On June 30, 2021 Tokenize, in an agreement that the Company is not a party to, irrevocably assigned all its rights in GBT Tokenize, including all its rights per the Tokenize Agreement, The Gonzalez Consulting agreement and the pledge agreement, to the benefit of Magic International Argentina FC, S.L a third party (“Magic”).
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Contingencies |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| Contingencies | Note 13 - Contingencies
Legal Proceedings
From time to time, the Company may be involved in various litigation matters, which arise in the ordinary course of business. There is currently no litigation that management believes will have a material impact on the financial position of the Company.
On or around January 30, 2019, RWJ Advanced Marketing, LLC, Greg Bauer, and Warren Jackson sued the Company and multiple third and related parties in Superior Court of the State of California - County of Los Angeles, General District in connection with the acquisition of UGO in September 2017. The case number is 19STCV03320 (the “Original Lawsuit”). The complaint in the Original Lawsuit alleges breach of contract, among other causes of action. The Company answered the complaint and filed a cross-complaint against the plaintiffs in the case and third parties on or around February 15, 2019. On or about September 10, 2020, the Company through its agent of service was “served” with a complaint (the Company contested service) that was recently filed against the Company and third parties by Robert Warren Jackson and Gregory Bauer in Los Angeles Superior Court Case No.: 20STCV32709 (“Second Lawsuit”). In the Original Lawsuit filed, the court rejected the plaintiff’s claims that they were filing a purported quasi-derivative lawsuit. As such, in this current litigation, the plaintiff is now again claiming the action is a derivative lawsuit. On October 13, 2020, the Second Lawsuit was removed by other defendants into Central District of California (CASE NO. 2:20−cv−09399−RGK−AGR). On February 2, 2021 The Central District of California dismissed the entire Second Lawsuit based on “demand futility”. In the Original lawsuit, the Company filed a cross complaint against the plaintiff and other third parties. Recently, the court has scheduled various hearings and a trial date set for December 27, 2021 which was later continued by the Court to September 28, 2022. It was the Company’s intention to dividend its holdings of its wholly owned subsidiary Ugopherservices Corp. (“UGO”). As UGO is the main dispute in the litigations described above, the Company has elected to sell UGO to a third-party effective July 1, 2020 (See Note 3). On September 17, 2020, the Company terminated Greg Bauer as consultant (resulting from the sale of UGO), which he confirmed in writing. On or about June 14, 2021 the Company stipulated with plaintiff that all third parties will be released and plaintiff may file a new first amendment complaint that will name only the Company. As such, all third parties other than prior transfer agent of the Company have been dismissed from this litigation.
Following the sale of UGO (See Note 3), the Company noticed third parties (including SURG, via its asset manager) to wire the UGO funds to its new bank account. SURG never answered the notice. The Company noticed certain third parties that it intends to take legal actions to resolve this issue. On November 12, 2020 the Company filed a complaint in the United States District Court – District of Nevada - Case 2:20-cv-02078 against RWJ, Mr. Bauer, Mr. Jackson and against W.L. Petrey Wholesale Company Inc for fraud, breach of contract, Unjust Enrichment and other claims.
On December 3, 2018, the Company entered into a Securities Purchase Agreement (the “SPA”) with Discover Growth Fund, LLC (the “Investor”) pursuant to which the Company issued a Senior Secured Redeemable Convertible Debenture (the “Debenture”) in the aggregate face value of $8,340,000. In connection with the issuance of the Debenture and pursuant to the terms of the SPA, the Company issued a Common Stock Purchase Warrant to acquire up to 225,000 shares of common stock for a term of three years (the “Warrant”) on a cash-only basis at an exercise price of $100.00 per share with respect to 50,000 Warrant Shares, $75.00 with respect to 75,000 Warrant Shares and $50.00 with respect to 100,000 Warrant Shares. The holder may not exercise any portion of the Warrants to the extent that the holder would own more than 4.99% of the Company’s outstanding common stock immediately after exercise. The outstanding principal amount may be converted at any time into shares of the Company’s common stock at a conversion price equal to 95% of the Market Price less $5.00 (the conversion price is lowered by 10% upon the occurrence of each Triggering Event – the current conversion price is 75% of the Market Price less $5.00). The Market Price is the average of the 5 lowest individual daily volume weighted average prices during the period the Debenture is outstanding. On May 28, 2019, the Investor delivered to the Company a “Notice of Default and Notice of Sale of Collateral” (the “Notice”). On December 23, 2019, in arbitration between the Company and the Investor, an Interim Award was entered in favor of the Investor. On January 31, 2020, the Company was informed that a final award was entered (the “Final Award”). The Final Award affirms that certain sections of the Debenture constitute unenforceable liquidated damages penalties and were stricken. Further, it was determined that the Investor was entitled to recovery of their attorney’s fees. Consequently, the arbitrator awarded Investor an award of $4,034,444 plus interest of 7.25% accrued from May 15, 2019 and costs in the amount of $55,613. On February 18, 2020, the Company filed a motion with the United States District Court District of Nevada (the “Nevada Court”) to confirm the Final Award and a motion to consolidate Investor’s application to confirm the Final Award filed in the U.S. District Court of the Virgin Islands (Case No: 3 :20-cv-00012-CVG-RM) (the “Virgin Island Court”). On February 27, 2020, the Nevada Court denied the Company’s motion to confirm the Final Award and motion to consolidate and further decided that the confirmation of the Final Award should be litigated in the Virgin Island Court. As such, on February 27, 2020, the Company filed a Notice of Entry of Order as well as a Motion to Confirm the Arbitration Award, address the outstanding issues regarding whether Investor’s rights are subordinated to other creditors and, thereafter, oversee a commercially reasonable foreclosure sale (Case No: 3 :20-cv-00012-CVG-RM). It was the Company’s position that the Final Award must first be confirmed and all questions regarding the rights of Investor relative to those of other creditors must be determined before any foreclosure sale can proceed. It is further the position of the Company that the previously disclosed foreclosure sale scheduled by Investor is being conducted in a commercially unreasonable manner and that if Discover proceeded forward with the foreclosure sale it did so at its own risk. Nevertheless, on February 28, 2020, Investor advised that it conducted a sale of the Company’s assets. As the date of this report Investor failed to present a deed of sale for the alleged sale that allegedly took place as noticed. The Company filed with Virgin Island Court the motions disputing the validity of the alleged sale. On July 28, 2020, Investor filed in the State of Nevada a motion for attorneys $48,844 and costs $716. The Company filed an answer on August 11, 2020. On October 16, 2020, Investor motion for attorneys $48,844 and costs $716 was denied.
GBT Technologies, S.A.
On September 14, 2018, the Company entered into an Exclusive Intellectual Property License and Royalty Agreement (the “GBT License Agreement”) with GBT-CR, a fully compliant and regulated crypto currency exchange platform that currently operates in Costa Rica as a decentralized crypto currency platform, pursuant to which, among other things, the Company granted to GBT-CR an exclusive, royalty-bearing right and license relating intellectual property relating to systems and methods of converting electronic transmissions into digital currency as reflected in that certain patent filed with the United Stated Patent and Trademark Office on or about June 14, 2018 (EFS ID: 32893586; Application Number: 16008069; Type: Utility under 35 USC 111(a); Confirmation Number: 6787)(collectively, the “Digital Currently Technology”). Pursuant to the GBT License Agreement, the Company granted GBT-CR an exclusive worldwide license to use the Digital Currency Technology to make, use, sell, lease or otherwise commercialize and dispose of products and devices utilizing the Digital Currently Technology. Under the terms of the GBT License Agreement, the Company is entitled to receive a royalty payment of 2% of gross revenue of each licensed product sold by GBT-CR during the period starting in which revenue is first generated using the licensed products and continuing for five years thereafter. Upon signing the GBT-CR License Agreement, GBT-CR paid the Company $300,000 which is nonrefundable. The Company has recognized the $300,000 as revenue during the years ended December 31, 2018. Upon GBT-CR making available for sale (the “Commercial Event”) an ICO (Initial Coin Offering) (the “Coin”), GBT-CR will make a payment to the Company in the amount of $5,000,000. Further, upon the Commercial Event, GBT-CR will grant the Company the ability to acquire 30% of the Coin at a 30% discount of such offering price of the Coin. The GBT License Agreement commenced as of the signing date and, unless terminated in accordance with the termination provisions of the GBT License Agreement, shall remain in force until the expiration of the patent pertaining to the Digital Currency Technology; provided that the right to use trade secrets shall survive the expiration of the GBT License Agreement provided the Company has not terminated. Prior to the signing of the GBT License Agreement, GBT-CR advanced $200,000 to the Company, which the parties have agreed will be applied toward the $5,000,000 fee when it becomes due. The $200,000 is recorded as unearned revenue at December 31, 2018 and reclassified to accrued expense at December 31, 2019. On February 27, 2020 GBT Technologies, S.A., as successor in interest to Hermes Roll, LLC had notified the Company that it was in default on its Amended and Restated Territorial License Agreement (“ARTLA”) dated June 15, 2015 and that the ARTLA had been cancelled and rescinded.
In connection with SURG Exchange Agreement (see Note 4) - On November 4, 2020, Altcorp and Stanley filed an Ex Parte Motion in the District Court, Clark County, Nevada (Case No: A-20-823039-B, in Dep No: 43) to appoint receiver and issue a temporary restraining Order against SURG and its transfer agent for alleged defaults on prior exchange agreement. On December 4, 2020, the parties entered an interim agreement which set the material terms of the settlement. A final settlement was achieved per the interim agreement terms on January 1, 2021. On March 4, 2021 the Company filed a motion to enforce settlement agreements, as the Company alleged that SURG owes an additional $240,000 which is due and owing under the settlement agreements.
On June 24, 2021 per the June 23, 2020 Agreement, the Company together with AltCorp issued sent SURG and its transfer agent via registered mail, a true-up shares demand for an additional 14,870,370 SURG shares as calculated per the Agreement. As of the filing date of this report, SURG’s transfer agent did not answer the Company’s request.
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Concentrations |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Risks and Uncertainties [Abstract] | |
| Concentrations | Note 14 – Concentrations
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to a concentration of credit risk, consist principally of temporary cash investments. There have been no losses in these accounts through September 30, 2021.
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Loss on Debt Modification |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Loss On Debt Modification | |
| Loss on Debt Modification | Note 15 – Loss on Debt Modification
On May 19, 2021, the Company, Gonzalez, GBT-CR and IGOR 1 Corp entered into a Mutual Release and Settlement Agreement and Irrevocable Assignment of outstanding balance plus accrued interest (the “Gonzalez Agreement”). Pursuant to the Gonzalez Agreement, without any party admission of liability and to avoid litigation, the parties has agreed to (i) extend the GBT convertible note maturity date to December 31, 2022, (ii) amend the GBT convertible note terms to include a beneficial ownership blocker of 4.99% and a modified conversion feature to the GBT convertible note with 15% discount to the market price during the 20 trading day period ending on the latest complete trading day prior to the conversion date and (iii) provided for an assignment of the GBT convertible note by Gonzalez to a third party. As a result of the change in terms of this convertible note, the Company took a charge related to the modification of debt of $13,777,480 during the nine months ended September 30, 2021.
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Subsequent Events |
9 Months Ended |
|---|---|
Sep. 30, 2021 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | Note 16 - Subsequent Events
Management has evaluated events that occurred subsequent to the end of the reporting period shown herein:
On June 22, 2020, the Company received a $150,000 loan from the Small Business Administration (“SBA”) under the Economic Injury Disaster Loan (“EIDL”) program related to the COVID-19 relief efforts in consideration of a note dated June 16, 2020 (the “Original Note”). The Original Note bears interest at 3.75% per annum, requires monthly principal and interest payments of $731 after 12 months from funding and is due 30 years from the date of issuance of the Original Note. The monthly payments have been extended by the SBA to all EIDL borrowers with additional 12 months. Monthly payments will be commenced on or around June 16, 2022. On October 1, 2021, the Company entered an Amended Loan Authorization and Agreement with the SBA providing for the modification of the Original Note providing for monthly principal and interest payments of $1,771 after 24 months from the Original Note commencing on or around June 22, 2022. The Modified Note will continue to bear interest at 3.75% per annum and is due 30 years from the date of issuance of the Original Note. The Modified Note is guaranteed by Douglas Davis, the former CEO of the Company and current consultant, as well as by GBT Tokenize Corp. The additional funding of $200,000 was received by the Company on October 5, 2021.
On September 14, 2021, the Company reported in its Form 8-K that it had filed an Issuer Company-Related Action Notification Form with the Financial Industry Regulatory Authority (“FINRA”) for processing a 1-for-50 reverse stock split of its authorized and issued and outstanding common stock. On October 25, 2021, the Company received notice from FINRA that the reverse stock split described above will take effect at the open of business on Tuesday, October 26, 2021. The Company’s symbol on the OTC Pink will be GTCHD for 20 business days from October 26, 2021 and the CUSIP will be changed to 361548308. |
Summary of Significant Accounting Policies (Policies) |
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| Use of Estimates | Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates in the accompanying financial statements include valuation of derivatives and valuation allowance on deferred tax assets.
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| Principles of Consolidation | Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its subsidiaries; the Company’s 50% owned subsidiaries GBT BitSpeed Corp. and GBT Tokenize Corp; the Company’s 50% owned subsidiary, Gopher Protocol Costa Rica Sociedad De Responsabilidad Limitada (currently inactive), a wholly owned AltCorp Trading LLC, a Costa Rica company (“AltCorp”) and Greenwich International Holdings, a Costa Rica corporation (“Greenwich”). All significant intercompany transactions and balances have been eliminated.
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| Cash Equivalents | Cash Equivalents
For the purpose of the statement of cash flows, cash equivalents include time deposits, certificate of deposits, and all highly-liquid debt instruments with original maturities of three months or less. As of September 30, 2021, and December 31, 2020, the Company did not have any cash equivalents.
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| Cash Held in Trust | Cash Held in Trust
Cash held in trust consists of proceeds from the sale of investments. The proceeds less the payment of certain expenses are being held in AltCorp’s (the Company’s wholly owned subsidiary) attorney trust account. (See Note 4)
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| Long-Lived Assets | Long-Lived Assets
The Company applies the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360, Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review at September 30, 2021 and December 31, 2020, the Company believes there was no impairment of its long-lived assets.
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| Marketable Equity Securities | Marketable Equity Securities
The Company accounts for marketable equity securities in accordance with ASC Topic 321, Investments – equity securities. Marketable equity securities are reported at fair value based on quotations available on securities exchanges with any unrealized gain or loss being reported as a component of other income (expense) on the statement of operations. The portion of marketable equity security expected to be sold within twelve months of the balance sheet date is reported as a current asset.
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| Note Receivable | Note Receivable
Note receivable consists of a promissory note received in connection with the sale of Ugopherservices (see Note 3). The note is due on December 31, 2021 and accrues interest at 6% per annum. At December 31, 2020, the Company determined that this note receivable was not collectible and took an impairment charge of $100,000. During July 2021, the note holder made a $50,000 payment on the note, which is recorded as other income in the accompanying condensed consolidated statements of operations.
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| Derivative Financial Instruments | Derivative Financial Instruments
The Company evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a weighted-average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. As of September 30, 2021, and December 31, 2020, the Company’s only derivative financial instrument was an embedded conversion feature associated with convertible notes payable due to certain provisions that allow for a change in the conversion price based on a percentage of the Company’s stock price at the date of conversion.
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| Fair Value of Financial Instruments | Fair Value of Financial Instruments
For certain of the Company’s financial instruments, including cash, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities.
FASB ASC Topic 820, Fair Value Measurements and Disclosures, requires disclosure of the fair value of financial instruments held by the Company. FASB ASC Topic 825, Financial Instruments, defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic 480, Distinguishing Liabilities from Equity, and FASB ASC Topic 815, Derivatives and Hedging.
For certain financial instruments, the carrying amounts reported in the balance sheets for cash and current liabilities, including convertible notes payable, each qualify as a financial instrument, and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.
The Company uses Level 2 inputs for its valuation methodology for derivative liabilities as their fair values were determined by using the Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.
At September 30, 2021 and December 31, 2020, the Company identified the following liabilities that are required to be presented on the balance sheet at fair value:
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| Treasury Stock | Treasury Stock
Treasury stock is recorded at cost. The re-issuance of treasury shares is accounted for on a first in, first-out basis and any difference between the cost of treasury shares and the re-issuance proceeds are charged or credited to additional paid-in capital.
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| Stock Loan Receivable | Stock Loan Receivable
On January 8, 2019, the Company entered into a Stock Pledge Agreement with Latin American Exchange Latinex Casa de Cambio, S.A., a Costa Rica corporation (“Latinex”), to provide that Latinex may maintain its required regulatory capital as required by various regulators. The Company has pledged restricted shares of its common stock valued at $7,610,147 (based on the closing price on the grant date) for a term of three years in consideration of an annual payment of $375,000 paid in quarterly installments of $93,750. In lieu of cash payment, Latinex may pay the Company in virtual currency of WISE Network S.A. valued at a 50% discount of its offering price of $10 per token. In the event that Latinex’s required capital has decreased below $5,000,000, Latinex is permitted to sell the pledged shares of common stock only in an amount to ensure that Latinex can satisfy the required capital levels. The Company must consent to such sale of the shares of common stock, which may not be unreasonably withheld. Upon expiration of the agreement, the remaining shares of common stock shall be returned to the Company free and clear of all liens. The Company has recorded the value of these shares of common stock as a stock loan receivable which is presented as a contra-equity account in the accompanying consolidated balance sheets. At December 31, 2019, the Company wrote off the accrued interest income as Latinex did not perform any payment and the Company has no mean to enforce this payment. Latinex agreed in principal to return the pledged 4,005 restricted shares to the Company for cancellation. The 4,005 restricted shares have not yet been returned to the Company as of September 30, 2021.
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| Revenue Recognition | Revenue Recognition
Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), became effective for the Company on January 1, 2018. The Company’s revenue recognition disclosure reflects its updated accounting policies that are affected by this new standard. The Company applied the “modified retrospective” transition method for open contracts for the implementation of Topic 606. The Company had no significant post-delivery obligations, this new standard did not result in a material recognition of revenue on the Company’s accompanying consolidated financial statements for the cumulative impact of applying this new standard. The Company made no adjustments to its previously-reported total revenues, as those periods continue to be presented in accordance with its historical accounting practices under Topic 605, Revenue Recognition.
Revenue from providing IT services are recognized under Topic 606 in a manner that reasonably reflects the delivery of its services to customers in return for expected consideration and includes the following elements:
These five elements, as applied to each of the Company’s revenue category, is summarized below:
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| Unearned revenue | Unearned revenue
Unearned revenue represents the net amount received for the purchase of products that have not seen shipped to the Company’s customers. In 2018, the Company ran pre-sales efforts for its pet tracker product and received prepayments for its product. In addition, during 2018, the Company received $200,000 in connection with an intellectual property license and royalty agreement. At December 31, 2019, the Company determined that the unearned revenue would not likely result in the recognition of revenue; therefore, $249,675 of unearned revenue was reclassified to accrued expenses at September 30, 2021 and December 31, 2020.
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| Income Taxes | Income Taxes
The Company accounts for income taxes in accordance with ASC Topic 740, Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company has no material uncertain tax positions for any of the reporting periods presented.
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| Basic and Diluted Earnings Per Share |
Earnings per share is calculated in accordance with ASC Topic 260, Earnings Per Share. Basic earnings per share (“EPS”) is based on the weighted average number of common shares outstanding. Diluted EPS assumes that all dilutive securities are converted. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Due to the net loss incurred potentially dilutive instruments would be anti-dilutive. Accordingly, diluted loss per share is the same as basic loss for all periods presented. The following potentially-dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive.
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| Management’s Evaluation of Subsequent Events | Management’s Evaluation of Subsequent Events
The Company evaluates events that have occurred after the balance sheet date of September 30, 2021, through the date which the condensed consolidated financial statements are issued. Based upon the review, other than described in Note 16 – Subsequent Events, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements.
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| Recent Accounting Pronouncements | Recent Accounting Pronouncements
In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes which amends ASC 740 Income Taxes (ASC 740). This update is intended to simplify accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and amending existing guidance to improve consistent application of ASC 740. This update is effective for fiscal years beginning after December 15, 2021. The guidance in this update has various elements, some of which are applied on a prospective basis and others on a retrospective basis with earlier application permitted. The Company is currently evaluating the effect of this ASU on the Company’s consolidated financial statements and related disclosures.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock. For convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital, the embedded conversion features no longer are separated from the host contract. ASU 2020-06 also removes certain conditions that should be considered in the derivatives scope exception evaluation under Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and clarify the scope and certain requirements under Subtopic 815-40. In addition, ASU 2020-06 improves the guidance related to the disclosures and earnings-per-share (EPS) for convertible instruments and contract in entity’s own equity. ASU 2020-06 is effective for public business entities that meet the definition of a SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Board specified that an entity should adopt the guidance as of the beginning of its annual fiscal year. The Company is currently evaluation the impact this ASU will have on its consolidated financial statements.
Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying consolidated financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.
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Summary of Significant Accounting Policies (Tables) |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Fair Value Measurements |
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| Schedule of Anti dilutive Securities Excluded from Computation of Earnings Per Share |
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Discontinued Operations (Tables) |
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| Discontinued Operations |
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Accounts Payable and Accrued Expenses (Tables) |
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| Payables and Accruals [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounts Payable and Accrued Expenses |
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Convertible Notes Payable (Tables) |
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| Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of Convertible notes payable |
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| Rollfoward of convertible note |
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Notes Payable (Tables) |
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| Notes payable |
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Derivative Liability (Tables) |
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| Assumptions to measure fair value |
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| Schedule of Derivative Liabilities at Fair Value |
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Stockholders’ Equity (Tables) |
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| Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Summary of warrant activity |
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| Summary of exercise price for warrant outstanding |
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Organization and Basis of Presentation (Details Narrative) - USD ($) |
1 Months Ended | 9 Months Ended | |
|---|---|---|---|
Oct. 26, 2021 |
Sep. 30, 2021 |
Dec. 31, 2020 |
|
| Subsequent Event [Line Items] | |||
| Reverse stock split | 1 for 100 | ||
| Accumulated deficit | $ 303,505,534 | $ 270,651,339 | |
| Working capital deficit | $ 21,704,420 | ||
| Subsequent Event [Member] | |||
| Subsequent Event [Line Items] | |||
| Reverse stock split | 1 for 50 |
Summary of Significant Accounting Policies (Details 1) - Surge Holdings [Member] - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Defined Benefit Plan Disclosure [Line Items] | ||
| Conversion feature on convertible notes | $ 9,483,927 | $ 5,262,448 |
| Marketable equity security | 649,000 | |
| Fair Value, Inputs, Level 1 [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Conversion feature on convertible notes | ||
| Marketable equity security | ||
| Fair Value, Inputs, Level 2 [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Conversion feature on convertible notes | 9,483,927 | 5,262,448 |
| Marketable equity security | 649,000 | |
| Fair Value, Inputs, Level 3 [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Conversion feature on convertible notes | ||
| Marketable equity security |
Summary of Significant Accounting Policies (Details 2) - shares |
9 Months Ended | |
|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Number of potentially dilutive securities | 30,901,493 | 11,021,381 |
| Convertible note | 30,488,622 | 10,608,377 |
| Warrant [Member] | ||
| Number of potentially dilutive securities | 392,870 | 393,003 |
| Series B Preferred Stock [Member] | ||
| Preferred shares | 1 | 1 |
| Series C Preferred Stock [Member] | ||
| Preferred shares | 0 | 0 |
| Series H Preferred Stock [Member] | ||
| Preferred shares | 20,000 | 20,000 |
Summary of Significant Accounting Policies (Details Narrative) - USD ($) |
9 Months Ended | 12 Months Ended | |||
|---|---|---|---|---|---|
Jan. 08, 2019 |
Sep. 30, 2021 |
Dec. 31, 2018 |
Jul. 31, 2021 |
Dec. 31, 2020 |
|
| Debt Instrument [Line Items] | |||||
| Cash equivalents | $ 0 | $ 0 | |||
| Stockholders equity | $ 50,000 | ||||
| Number of restricted shares pledged | 4,005 | ||||
| Value of restricted shares | $ 7,610,147 | ||||
| Cash received in connection with intellectual property license and royalty agreement | $ 200,000 | ||||
| Unearned revenue | $ 249,675 | $ 249,675 | |||
| Notes Receivable [Member] | |||||
| Debt Instrument [Line Items] | |||||
| Maturity date | Dec. 31, 2021 | ||||
| Interest rate | 6.00% | ||||
| Impairment charge | $ 100,000 |
Discontinued Operations (Details) - USD ($) |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
|
| Operating expenses | $ 906,398 | $ 452,790 | $ 17,846,869 | $ 6,904,664 |
| Loss from operations | (861,398) | (407,790) | (17,711,869) | (6,769,664) |
| Other income (expenses) | 431,467 | (919,220) | (15,142,326) | (8,144,625) |
| Net income (loss) | (429,931) | (325,299) | (32,854,195) | (13,929,502) |
| Discontinued Operations [Member] | ||||
| Revenue | 8,291,842 | |||
| Cost of revenue | 7,900,122 | |||
| Gross Profit | 391,720 | |||
| Operating expenses | 408,644 | |||
| Loss from operations | (16,924) | |||
| Other income (expenses) | ||||
| Net income (loss) | $ (16,924) | |||
Discontinued Operations (Details Narrative) - USD ($) |
1 Months Ended | 9 Months Ended | |
|---|---|---|---|
Sep. 18, 2020 |
Sep. 30, 2021 |
Jul. 31, 2021 |
|
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||
| Stockholders equity | $ 50,000 | ||
| Purchase And Sale Agreement [Member] | Mr Light House L T D [Member] | |||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||
| Consideartion from sale of common stock | $ 100,000 | ||
| Impairment charge | $ 100,000 |
Impaired Investments (Details Narrative) - USD ($) |
1 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||
|---|---|---|---|---|---|---|---|---|---|
Feb. 06, 2019 |
Jun. 17, 2019 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Sep. 30, 2021 |
Sep. 30, 2020 |
Dec. 31, 2019 |
Dec. 31, 2020 |
Jun. 22, 2020 |
|
| Defined Benefit Plan Disclosure [Line Items] | |||||||||
| Debt conversion, converted instrument, Value | $ 5,240,605 | $ 958,489 | |||||||
| Interest rate | 3.75% | ||||||||
| Conversion price (in dollars per share) | $ 0.006 | $ 0.006 | |||||||
| Impairment charge | $ 15,400,000 | $ 5,500,000 | |||||||
| Investment | $ 0 | $ 0 | $ 0 | ||||||
| Altcorp [Member] | |||||||||
| Defined Benefit Plan Disclosure [Line Items] | |||||||||
| Note payable description | Note payable by Gopher Protocol Costa Rica Sociedad De Responsabilidad Limitada to the Company in the principal amount of $5,000,000 dated February 6, 2019 (of which the underlying security for this Promissory Note is 30,000,000 restricted shares of common stock of Mobiquity Technologies, Inc. (“Mobiquity”) and 60,000,000 restricted shares of common stock of Mobiquity. | ||||||||
| Impairment charge | $ 30,731,534 | ||||||||
| Altcorp [Member] | Series H Preferred Stock [Member] | |||||||||
| Defined Benefit Plan Disclosure [Line Items] | |||||||||
| Stock Issued for Acquisitions, Shares | 625,000 | ||||||||
| Number of shares converted | 20,000 | ||||||||
| Debt conversion, converted instrument, Value | $ 10,000,000 | ||||||||
| Interest rate | 6.00% | ||||||||
| Maturity date | Dec. 31, 2021 | ||||||||
| Dividend per share | $ 500 | ||||||||
| Conversion price (in dollars per share) | $ 500.00 | ||||||||
Accounts Payable and Accrued Expenses (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Payables and Accruals [Abstract] | ||
| Accounts payable | $ 1,256,042 | $ 1,045,778 |
| Accrued interest on notes | 2,522,147 | 1,876,005 |
| Deposits | 249,384 | 249,675 |
| Other | 245,089 | 182,200 |
| Accounts payable and accrued expenses | $ 4,272,662 | $ 3,353,658 |
Convertible Notes Payable (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Defined Benefit Plan Disclosure [Line Items] | ||
| Total convertible notes payable | $ 9,054,221 | $ 13,788,710 |
| Unamortized debt discount | (316,372) | (362,004) |
| Convertible note payable | 8,737,849 | 13,426,706 |
| Less current portion | (482,449) | (13,426,706) |
| Convertible notes payable, long-term portion | 8,255,400 | |
| G B T Technologies [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Total convertible notes payable | 8,255,400 | 10,000,000 |
| Redstart Holdings [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Total convertible notes payable | 350,700 | 347,400 |
| Stanley Hills [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Total convertible notes payable | 448,121 | 1,009,469 |
| Iliad [Member] | ||
| Defined Benefit Plan Disclosure [Line Items] | ||
| Total convertible notes payable | $ 2,431,841 |
Notes Payable (Details) - USD ($) |
Sep. 30, 2021 |
Dec. 31, 2020 |
|---|---|---|
| Restructuring Cost and Reserve [Line Items] | ||
| Total notes payable | $ 2,890,000 | $ 2,890,000 |
| Unamortized debt discount | ||
| Notes payable | 2,890,000 | 2,890,000 |
| Less current portion | (2,740,000) | (2,741,737) |
| Notes payable, long-term portion | 150,000 | 148,263 |
| S B A Loan [Member] | ||
| Restructuring Cost and Reserve [Line Items] | ||
| Total notes payable | 150,000 | 150,000 |
| Promissory Note To Investor [Member] | ||
| Restructuring Cost and Reserve [Line Items] | ||
| Total notes payable | 140,000 | 140,000 |
| R W J Advanced Marketing L L C [Member] | ||
| Restructuring Cost and Reserve [Line Items] | ||
| Total notes payable | $ 2,600,000 | $ 2,600,000 |
Accrued Settlement (Details Narrative) - Securities Purchase Agreement [Member] - Investor [Member] - USD ($) |
1 Months Ended | |
|---|---|---|
Dec. 23, 2019 |
May 31, 2019 |
|
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | ||
| Legal matter | $ 8,340,000 | |
| Arbitrator awarded | $ 4,034,444 | |
| Interest rate | 7.25% | |
| Interest | $ 55,613 | |
| Gain on settlement of debt | $ 1,375,556 | |
Derivative Liability (Details) - $ / shares |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2021 |
Dec. 31, 2020 |
|
| Stock price | $ 0.008 | $ 0.017 |
| Risk free rate | 0.09% | 0.10% |
| Volatility | 210.00% | 275.00% |
| Conversion/ Exercise price | $ 0.006 | |
| Dividend rate | 0.00% | 0.00% |
| Minimum [Member] | ||
| Conversion/ Exercise price | $ 0.008 | |
| Maximum [Member] | ||
| Conversion/ Exercise price | $ 0.0085 |
Derivative Liability (Details 1) |
9 Months Ended |
|---|---|
|
Sep. 30, 2021
USD ($)
| |
| Derivative Liability | |
| Derivative liability balance, Beginning | $ 5,262,448 |
| Debt modification | 13,777,480 |
| Issuance of derivative liability | 1,143,515 |
| Fair value of beneficial conversion feature of debt repaid/converted | (10,864,918) |
| Change in derivative liability during the period | 165,402 |
| Derivative liability balance, end | $ 9,483,927 |
Stockholders' Equity (Details) |
9 Months Ended |
|---|---|
|
Sep. 30, 2021
USD ($)
$ / shares
shares
| |
| Equity [Abstract] | |
| Warrants Outstanding, Beginning | 392,870 |
| Weighted Average Exercise Price Warrants Outstanding, Beginning | $ / shares | $ 74.97 |
| Weighted Average Remaining Contractual Life, Outstanding, Beginning | 1 year 9 months 3 days |
| Aggregate Intrinsic Value Outstanding, Beginning | $ | |
| Warrants Granted | |
| Warrants Forfeited | |
| Warrants Exercised | |
| Warrants Outstanding, End | 392,870 |
| Weighted Average Exercise Price Warrants Outstanding, End | $ / shares | $ 74.97 |
| Weighted Average Remaining Contractual Life, Outstanding, End | 1 year 3 days |
| Aggregate Intrinsic Value Outstanding, End | $ | |
| Warrants Exercisable, End | 392,870 |
| Weighted Average Exercise Price Warrants Exercisable at End | $ / shares | $ 74.97 |
| Weighted Average Remaining Contractual Life Exercisable at End | 1 year 3 days |
| Aggregate Intrinsic Value Outstanding, Exercisable at End | $ |
Related Parties (Details Narrative) - USD ($) |
Mar. 06, 2020 |
Oct. 10, 2019 |
Jan. 02, 2019 |
Apr. 06, 2018 |
Sep. 02, 2017 |
|---|---|---|---|---|---|
| Bit Speed Agreement [Member] | |||||
| Related Party Transaction [Line Items] | |||||
| Common stock contributed | 10,000,000 | ||||
| Value of common stock contributed | $ 17,900,000 | ||||
| Tokenize Agreement [Member] | |||||
| Related Party Transaction [Line Items] | |||||
| Consideration for services payable | $ 33,333 | ||||
| Tokenize Agreement [Member] | Greenwich [Member] | |||||
| Related Party Transaction [Line Items] | |||||
| Common stock contributed | 10,000,000 | ||||
| R W J Advanced Marketing L L C [Member] | |||||
| Related Party Transaction [Line Items] | |||||
| Base Salary | $ 250,000 | ||||
| Director [Member] | |||||
| Related Party Transaction [Line Items] | |||||
| Base Salary | $ 250,000 | ||||
| Additional salary payable | $ 70,000 | ||||
| Davis [Member] | Employment Agreement [Member] | |||||
| Related Party Transaction [Line Items] | |||||
| Base salary | $ 400,000 | ||||
| Stock option issued | 50,000 | ||||
| Option vested description | The options were to be earned and vested (i) with respect to 20,000 shares of common stock on the date hereof, (ii) 5,000 shares of common stock upon the successful dual list of the Company on an international exchange such as SIX Zurich Stock Exchange or Euronext, (iii) 15,000 shares of common stock upon the successful up listing to a national exchange such as the Nasdaq, NYSE Euronext, TSX, AMEX or other, and (iv) with respect to 5,000 shares of common stock at each of the six (6) month anniversaries (July 1, 2019 and January 1, 2020). The exercise price of such options shall be the closing price of the Company on the date prior to such event. |
Contingencies (Details Narrative) - USD ($) |
1 Months Ended | 12 Months Ended | |||||
|---|---|---|---|---|---|---|---|
Oct. 16, 2020 |
Jul. 28, 2020 |
May 31, 2019 |
Dec. 31, 2018 |
Sep. 30, 2021 |
Dec. 31, 2020 |
Dec. 03, 2018 |
|
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||
| Sought value | $ 48,844 | $ 48,844 | |||||
| Legal cost | $ 716 | $ 716 | |||||
| Unearned revenue | $ 249,675 | $ 249,675 | |||||
| G B T Technologies [Member] | |||||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||
| Revenues | $ 300,000 | ||||||
| Payment for expenses | $ 5,000,000 | ||||||
| Unearned revenue | $ 200,000 | $ 200,000 | |||||
| Securities Purchase Agreement [Member] | Investor [Member] | |||||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||
| Arbitrator awarded | $ 4,034,444 | ||||||
| Interest rate | 7.25% | ||||||
| Interest | $ 55,613 | ||||||
| Securities Purchase Agreement [Member] | Senior Secured Redeemable Convertible Debenture [Member] | |||||||
| Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||
| Note payable, principal amount | $ 8,340,000 | ||||||
| Warrants aquire | 225,000 | ||||||
Loss on Debt Modification (Details Narrative) |
9 Months Ended |
|---|---|
|
Sep. 30, 2021
USD ($)
| |
| Loss On Debt Modification | |
| Modification of debt | $ 13,777,480 |
Subsequent Events (Details Narrative) - USD ($) |
1 Months Ended | ||
|---|---|---|---|
Oct. 01, 2021 |
Jun. 22, 2020 |
Oct. 05, 2021 |
|
| Subsequent Event [Line Items] | |||
| Loan received | $ 150,000 | ||
| Interest rate | 3.75% | ||
| Principal and interest payable | $ 731 | ||
| Maturity term | 30 years | ||
| Subsequent Event [Member] | |||
| Subsequent Event [Line Items] | |||
| Maturity date | Jun. 22, 2022 | ||
| Additional fund received | $ 200,000 | ||
| Subsequent Event [Member] | |||
| Subsequent Event [Line Items] | |||
| Interest rate | 3.75% | ||
| Principal and interest payable | $ 1,771 | ||
| Maturity term | 24 months |