UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Amendment No. 1
For the fiscal year ended:
Commission File Number:
(Exact name of registrant as specified in its charter)
N/A
(Former name of registrant as specified in its charter)
| State or other jurisdiction of | I.R.S. Employer | |
| incorporation or organization | Identification Number |
(Address of principal executive offices)
Issuer’s telephone number:
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock, $0.00001 par value per share
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. Yes☐
Indicate by check mark if the registrant is not required
to file reports pursuant to Section 13 or Section 15 (d) of the Act. Yes ☐
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to
submit and post such files).
Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-KA. ☐
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 definition of “accelerated filer, large accelerated filer or smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined
in Rule 12b-2 of the Exchange Act) Yes☐
As of June 30, 2022, the market value of our common
stock held by non-affiliates was approximately $
As of April 14, 2023, shares of common stock, $.00001 par value per share, of the registrant were outstanding.
Documents incorporated by reference: None
EXPLANATORY NOTE
Pursuant to the rules of the SEC, Part IV, Item 15 of the original Form 10-K has been amended to include currently-dated certifications from our Chief Executive Officer, who serves as our principal executive officer and principal financial officer, as required by Sections 302 and 906 of the Sarbanes-Oxley Act of 2002. The certifications of the Chief Executive Officer are included in this Form 10-K/A as Exhibits 31.1 and 32.1.
Except as described above, this Amendment does not amend, modify or update the information in, or exhibits to, the Original 10-K, and we have not updated disclosures included therein to reflect any subsequent developments or events. This Amendment should be read in conjunction with the Original 10-K and with our other filings made with the SEC subsequent to the filing of the Original 10-K.
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2022
INDEX
i
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
In this annual report, references to “GBT”, “GOPH”, “GTCH” or “the Company,” or “we,” or “us,” and “our” refer to GBT Technologies Inc. or f/k/a Gopher Protocol Inc. Except for the historical information contained herein, some of the statements in this report contain forward-looking statements that involve risks and uncertainties. These statements are found in the sections entitled “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Quantitative and Qualitative Disclosures about Market Risk.” They include statements concerning: our business strategy; expectations of market and customer response; liquidity and capital expenditures; future sources of revenues; expansion of our proposed product line; and trends in industry activity generally. In some cases, you can identify forward-looking statements by words such as “may,” “will,” “should,” “expect,” “plan,” “could,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “goal,” or “continue” or similar terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including, but not limited to, the risks outlined under “Risk Factors,” that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. For example, assumptions that could cause actual results to vary materially from future results include, but are not limited to our ability to successfully develop and market our products to customers; our ability to generate customer demand for our products in our target markets; the development of our target markets and market opportunities; our ability to manufacture suitable products at a competitive cost; market pricing for our products and for competing products; the extent of increasing competition; technological developments in our target markets and the development of alternate, competing technologies in them; and sales of shares by existing shareholders. 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. Unless we are required to do so under U.S. federal securities laws or other applicable laws, we do not intend to update or revise any forward-looking statements.
Below is a summary of material factors that make an investment in our securities speculative or risky. Importantly, this summary does not address all of the risks and uncertainties that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks and uncertainties that we face, can be found under ‘Risk Factors’ in Part I, Item 1A of this Annual Report on Form 10-K/A. The below summary is qualified in its entirety by that more complete discussion of such risks and uncertainties. You should consider carefully the risks and uncertainties described under ‘Risk Factors’ in Part I, Item 1A of this Annual Report on Form 10-K/A as part of your evaluation of an investment in our securities.
| ● | We have a limited operating history in an evolving industry, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful. |
| ● | Our limited operating history makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance. |
| ● | The COVID-19 outbreak caused disruptions in our development operations, which have resulted in delays in existing projects and may have additional negative impacts on our operations. |
| ● | Our results of operations have not resulted in profitability and we may not be able to achieve profitability going forward. |
| ● | We have not generated positive cash flow from operations and our ability to generate positive cash flow is uncertain. If we are unable to generate positive cash flow or obtain sufficient capital when needed, our business and future prospects will be adversely affected and we could be forced to suspend or discontinue operations. |
| ● | We will require additional capital to support business growth and this capital might not be available on acceptable terms, if at all. |
| ● | We depend upon key personnel and need additional personnel. |
| ● | Our business requires substantial capital and if we are unable to maintain adequate cash flows from operations our profitability and financial condition will suffer and jeopardize our ability to continue operations. |
| ● | There is currently a limited public market for our common stock. Failure to further develop or maintain a trading market could negatively affect the value of our common stock and make it difficult or impossible for you to sell your stock. |
| ● | If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential stockholders could lose confidence in our financial reporting, which would harm our business and the trading price of our stock. |
| ● | Because we are quoted on the OTC PINK marketplace instead of a national securities exchange, our investors may experience significant volatility in the market price of our stock and have difficulty selling their shares. |
| ● | Our stock price and trading volume may be volatile, which could result in substantial losses for our stockholders. |
| ● | We have not paid dividends in the past and have no immediate plans to pay cash dividends. |
| ● | Shares eligible for future sale may adversely affect the market for our Common Stock. |
| ● | You may experience future dilution as a result of future equity offerings. |
| ● | Our charter documents and Nevada law may inhibit a takeover that stockholders consider favorable. |
| ● | There are limitations on director/officer liability. |
| ● | Penny stock regulations may impose certain restrictions on marketability of our securities. |
| ● | FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock. |
1
PART I
ITEM 1. DESCRIPTION OF BUSINESS
OVERVIEW
GBT Technologies Inc. (formally known as Gopher Protocol Inc., the “Company”, “GBT”, “Gopher”, “Gopher Protocol” “GOPH” or “GTCH”) was incorporated on July 22, 2009 under the laws of the State of Nevada. GBT 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. Effective August 5, 2019, the Company changed its name from Gopher Protocol Inc. to GBT Technologies Inc. The Company derived revenues from the provision of IT consulting services. The Company derived revenues from (i) the provision of IT consulting or licensing services; and (ii) from selling electronic products through e-commerce platforms like Amazon and eBay.
GBT Tokenize Joint Venture (totally Impaired in 2021)
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. 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. 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 for $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 was two years. During the year ended December 31, 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. 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. At March 31, 2020, the Company evaluated the carrying amount of this joint venture investment and determined it was fully impaired and recorded an impairment charge of $5,500,000 was taken. At December 31, 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. Although the investment was impaired, the product development is still ongoing. The carrying amount of this investment December 31, 2022 and 2021, was $0 and $0, respectively.
2
Magic Agreement
As explained above, on April 11, 2022 the Company, through its wholly owned subsidiary, Greenwich International Holdings, a Costa Rica corporation (“Greenwich”), entered into a Master Joint Venture and Territorial License Agreement (the “Tokenize Agreement”) with Magic International Argentina FC, S.L. (“Magic”) and Tokenize which replaced a prior joint venture entered between the parties.
The purpose of 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 world, which Technology Portfolio was previously licensed to the Company for the State of California.
The Tokenize Agreement provides that the Company shall contribute 150,000,000 shares of common stock of the Company (“GBT Shares”) to Tokenize. Sergio Fridman is the manager of Magic and the beneficial owner of all outstanding securities of Magic. Magic will contribute cash of $250,000 into Tokenize for a promissory note and agreed to further fund Tokenize with all funds reasonably needed for implementation of the business purposes as described in the Tokenize Agreement. The GBT Shares will not be transferable for a period of five years.
Magic and the Company each own 50% of the outstanding shares of common stock of Tokenize. The Company pledged its 50% ownership in Tokenize and its 100% ownership of Greenwich (the “Pledged Securities”) to Magic for providing that Magic may take possession of such Pledged Securities in the event the Company executes, delivers and performs any future agreement or document or judgement resulting in the creation of any lien, pledge, mortgage, claim, charge or encumbrance upon any assets of the Company. The Company shall appoint two directors and Magic shall appoint one director of Tokenize.
3
On June 16, 2022 the parties amended the Tokenize Agreement to further define the constitution of the Board of Directors. As such, Section 4.2 of the Tokenize Agreement was amended and restated to provide that the Board of GBT Tokenize Corp. shall consist of two Directors, one of whom shall be appointed by GBT Tokenize Corp. and the other shall be appointed by the Company.
MetAlert (prior name – GTX Corp)
On April 12, 2022, GBT Tokenize Corp (“GBT Tokenize”), a Nevada corporation which the Company owns 50% of the outstanding shares of common stock, entered into a series of agreements with GTX Corp (“GTX”) and various note holders of GTX pursuant to which Tokenize acquire convertible promissory notes of GTX of $100,000 (the “GTX Notes”). In addition, GBT Tokenize acquired 76,923 (GBT acquired 5,000,000 in the original deal, where GTX to perform a corporate action of 1:65 reverse split on September 20, 2022) shares of common stock of GTX for $150,000 – in total FV of $12,538 as of December 31, 2022 based on level 1 stock price in OTC markets.
The GTX Notes bear 10% interest and 50% of the principal may be converted into shares of common stock on a one-time basis at a conversion price of $0.01 per share. The remaining 50% of the principal must be paid in cash. The closing occurred on April 12, 2022.
GTX changed its name into MetAlert Inc. on or about September 20, 2022.
On September 30, 2022, GBT Tokenize, loaned MetAlert Inc., a Nevada corporation (f/k/a GTX Corp.) (“MetAlert”) $90,000. For such loan, MetAlert provided Tokenize with a promissory note of $90,000 which is due and payable together with interest of 5% upon the earlier of September 19, 2023 or when declared by Tokenize.
MetAlert designs, manufactures and sells various interrelated and complementary products and services in the wearable technology and IoMT (Internet of Medical Things) marketplace.
As of December 31, 2022 and 2021, the notes had an outstanding balance of $190,000 and $0 respectively and accrued interest of $8,475 and $0 respectively.
As of December 31, 2022 and 2021, the marketable security had a FV of $12,538 and $0, respectively.
Revenue Sharing Agreement – Variable Interest Entity (VIE)
On February 18, 2022, the Company, effective March 1, 2022 entered into a Revenue Sharing Agreement (“RSA”) with Mahaser LTD. (“Mahaser”) pursuant to which the Company acquired the opportunity to share in revenues generated by Mahaser with respect to e-commerce sales through the online retail platform in the United States of America. Mahaser owns an e-commerce platform as a store which is the legal, exclusive owner of Ravenholm Electronics. The Company will operate the e-commerce platform and will be entitled to 95% for all revenue generated by and received by Mahaser for the period from March 1, 2022 through December 31, 2022. The RSA provides that the Company will be entitled to appoint a manager to Mahaser. As consideration, the Company will pay Mahaser $100,000 no later than March 1, 2022 and issue Mahaser 1,000,000 shares of the Company’s restricted common stock. The Company shall have no obligations to make any further payments to Mahaser. For any further extensions, the Company will have the option to extend the RSA for annual payment of $200,000, which can be payable with the Company’s shares of common stock payable based on 20 days VWAP prior to issuance. On March 16, 2022 the parties entered into Amendment No. 1 to the to the RSA, where all consideration to be paid or issued to Mahaser will be deferred until such time where the e-commerce platform generated in cumulative revenue of $1,000,000. On March 31, 2022, the parties entered into Amendment No. 2 to the RSA, where Mahaser agreed to pay the Company 100% per year for all revenue generated by and received by seller from the sales by Amazon within the United States of America as follows for the period from March 1, 2022 through December 31, 2022. The Company will be responsible for 100% of the cost of goods sold as well. In addition, the Company is entitled to earn 100% revenues and cost of goods sold of the test run period from February 1, 2022 to February 28, 2022.
4
Wireless mesh networking
Wireless mesh networks consist of LAN/MAN/WAN solutions that are infrastructural-intensive, may rely on regulated frequencies and bandwidth, often have so-called “last mile” problems areas where either economics or population density make it too expensive for current solutions to cover, and difficult to manage centrally. The Company’s GopherInsight platform makes it easy to add and manage last mile capacity. The solution is easily integrated into existing networks. The Company’s AI platform is designed for easy integration with, and management of, additional coverage for customer networks.
Wireless mesh networking markets
The Company potentially will target telecommunications providers, corporate entities that run LAN or wide-area networks, universities, and government entities.
Wireless mesh networking markets competition
The competitors for wireless mesh networking solutions, and AI solutions, are the entities themselves that have their own capability. The Company’s strategy is to integrate and “wrap around” those solutions to make them more efficient, less costly, and less infrastructural-intensive, while at the same time solving last mile problems to the end user.
Prepaid services – completely disposed of in 2020 – and Final Litigation Settlement in 2022
On September 1, 2017, the Company entered into an Asset Purchase Agreement with a third party, RWJ Advanced Marketing, LLC, a Georgia corporation. The Company entered into this Asset Purchase Agreement to acquire terminals in approximately 9,400 locations by which, and at which, the Company planned to deploy its IoT/asset tracking technology. The operations consist primarily of the sale of phones and phone card products, including PINS for cell minutes, SIM cards for cell minutes, as well as gift cards and prepaid long-distance cards. The Company incorporated a wholly-owned subsidiary, UGopherServices Corp. (“UGopherServices”), to operate the acquired assets. The assets acquired in the purchase consisted of racks that contain 9-12 items per rack that are displayed in retail locations, mainly convenience stores; and payment terminals at those same points of sale.
On March 16, 2018, the Company entered into and closed an asset purchase agreement dated March 1, 2018 with ECS Prepaid, LLC (“ECS”), a Missouri limited liability company, pursuant to which the Company purchased certain assets from ECS, including, but not limited to, the processing prepaid platform, servers, POS terminals, customer list, a processing software program and goodwill, $1,100,000 of which $100,000 was paid on the Closing Date and the balance is to be paid pursuant to a secured promissory note of $1,000,000. In addition, the Company issued 500,000 shares of common stock of the Company and warrants to purchase 500,000 shares of common stock that are exercisable for a period of five years at a fixed exercise price of $1.85 per share. The note is secured by the assets acquired by the Company from ECS and the Company is required to make ten equal principal payments of $100,000 commencing on April 15, 2018. The Company may prepay the note at any time without penalty.
On April 2, 2018, the Company entered into and closed an asset purchase agreement with Electronic Check Services, Inc. (“Electronic Check”), a Missouri corporation, pursuant to which the Company purchased certain assets from Electronic Check, including, but not limited to, assets associated with software that validates written check authenticity. The purchase price was $75,000 in cash, and the Company issued 250,000 shares of common stock of the Company and warrants to purchase 250,000 shares of common stock that are exercisable for five years at $2.70 per share.
5
On April 2, 2018, the Company entered into and closed an asset purchase agreement with Central State Legal Services, Inc. (“CSLS”), a Missouri corporation, pursuant to which the Company purchased certain assets from CSLS, including, but not limited to, assets associated with a system to recover funds from returned checks, for $25,000 in cash. The Company entered into these asset purchase agreements to acquire the software needed to process transactions for its prepaid business, and to acquire additional terminal locations by which the Company will deploy its technology. On a combined basis, there are approximately 9,400 points of sale as a result of acquiring certain assets from both RWJ Advanced Marketing LLC and ECS. altcOn or around November 10, 2017, UGopherServices experienced a suspension of operations on the terminals that the Company acquired in its acquisition on September 1, 2017 from RWJ Advanced Marketing LLC. Management of the Company believes that this shutdown came as a result of the decision of Paypal Holdings Inc. (“Paypal”) decision to suspend operations of TIO Networks (“TIO”), and appears to have affected all of TIO’s customers. TIO was acquired by Paypal in or around July 2017. Prior to the suspension, the Company received no notice from TIO, or from RWJ Advanced Marketing LLC, which sold the assets to UGopherServices, that the suspension would be taking place. Although the Company worked diligently to contain the fallout from the suspension of operations by TIO, the vast majority of the customers that were acquired as part of the transaction defected as a result. The subsequent acquisition of ECS was done partly to stem the customer defections, as many of the customers of UgopherServices sought the services of ECS. In doing so, the Company got many, though not all, of the customers back.
The Company entered into the Confidential Settlement Agreement and Mutual Release (“RJW Agreement”) by and between RWJ Advanced Marketing, LLC, Robert Warren Jackson, Gregory Bauer (collectively the “RJW Parties”) and W.L. Petrey Wholesale Company, Inc., (“Petrey”) on one hand; and GBT Technologies Inc., on behalf of itself and its agents (collectively the GBT Parties”), on the other hand. The Company the RJW Agreement effective September 26, 2022 with final signatures delivered to the Company on or about October 5, 2022. Pursuant to the RJW Agreement, the parties have agreed to settle, release, and otherwise resolve all known or unknown claims between them and agreed to jointly stipulate, move, or otherwise dismiss the lawsuits filed in the United States District Court of Nevada (Case No. 2:20-cv- 02078), in the Superior Court of the State of California, County of Los Angeles, Central District (Case Nos. 19STCV03320 and 20STCV32709), and in the United States District Court of the Central District of California (Case No. 2:20-cv-09399-RGK-AGR) with prejudice. The parties agreed and stipulated to release all funds currently being held in a blocked account of $19,809 with 50% distributed to the RWJ Parties and 50% distributed the Company or its assignee. The Parties also entered into the InComm Assignment Agreement (“IAA”) which assigned, transferred and conveyed all proceeds derived from the RWJ Parties’ agreements with Interactive Communications International, Inc., and its affiliate Hi Technology Corp., including but not limited to that Master Distribution and Service Agreement between Interactive Communications International, Inc. and Petrey d/b/a UGO-HUB dated August 29, 2016, as amended (collectively referred to as the “InComm Proceeds”), and which shall divide the InComm Proceeds 90% to the Company or its assignee and 10% to the RWJ Parties or their assignee. Finally, the Company agreed to pay $40,000 to the RWJ Parties or their assignee. The Company accrued $49,847 expenses represent the final amounts due to the RJW Parties.
6
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 and the CSLS businesses for $5,000,000 to be paid through the issuance of 3,333,333 shares of SURG’s common stock and a convertible promissory note in favor of the Company for $4,000,000. The 3,333,333 shares of SURG’s common stock have been pledged to a third party for providing working capital needs of the Company. The convertible promissory note was issued to AltCorp Trading, LLC a wholly owned subsidiary of the Company. On January 7, 2022, the Company received payments from Surgepays Inc. (formerly known as Surge Holdings, Inc.) in total of $3,750,000 pursuant to the terms of the Settlement Agreement dated December 22, 2021.
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, for $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. During April 2022, MLH effected a second payment for additional $50,000 on the Note exhausting the Note balance.
On March 8, 2020, SURG filed a lawsuit against its transfer agent, Vstock with respect to the transfer of SURG common stock that is currently in possession of the Company and assigned to Stanley Hills, LLC. On January 1, 2021, SURG, AltCorp and Stanley Hills, LLC (“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 in 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 10 trading days immediately preceding the issuance. The Company paid $650,000 in cash and the remaining by shares. The SURG common stock issued to Altcorp was pledged since August 12, 2020 for the benefit of Stanley to secure Stanley’s note payable by the Company. Accordingly, the SURG Common Stock issued to AltCorp as a result of the Settlement Agreement were pledged to Stanley. As of December 31, 2021 there were no surge shares pledges after the final settlement signed on December 22, 2021 and that replaced all prior settlement agreement. The final settlement SURG agreed to make total payments of $4,200,000 to the Company on or prior to January 7, 2022. This $4.2 million amount consists of $450,000 paid by SURG in November and December 2021, $100,000 to be paid on or about January 4, 2022, and $3,650,000 to be paid on or prior to January 7, 2022 of which $375,000 will be held in escrow as described before. The $3,750,000 was recorded as other receivable as of December 31, 2021. As of December 31, 2022 and 2021, the Company recorded an outstanding payable to Stanley of $927,136 and $1,862,928, respectively, recorded under accrued expenses.
7
Subsequently, SURG was a party to two lawsuits in, the Eighth Judicial District Court for Clark County, Nevada involving AltCorp, Stanley and Glen Eagles Acquisition LP (the “AltCorp Parties.”). Each of these lawsuits were disputes relating to the total consideration SURG was to pay the Company under the APA.
On October 18, 2021, the AltCorp Parties, the Company, and SURG entered into a Memorandum of Understanding (the “MOU”) to set up a framework for an attempt to settle the two lawsuits.
On December 22, 2021 (the “Effective Date”), pursuant to the framework in the MOU, the AltCorp Parties (and an additional third party), the Company, ECS, and SURG, Kevin Brian Cox (SURG’s Chief Executive Officer) – in his individual capacity, entered into a Resolution of Purchase, Mutual Release, and Settlement Agreement (the “Final Settlement Agreement”) to settle the two lawsuits and resolve all disputes related to the consideration paid by SURG to the Company in connection with the APA.
The Final Settlement Agreement, among other resolutions, provides the following:
| (i) | From the total consideration of the Final Settlement Agreement, of $375,000 (“Escrow Amount”) will be deposited by SURG in escrow. SURG has acquired the Company’s rights to a certain Master Distribution and Service Agreement (“MDA”). Under certain circumstances, if the result of the Company’s lawsuit against a third party (the “GBT Lawsuit”) is a monetary judgment without the assignment or legal decree of ownership of the MDA, the Company shall be entitled to receive the Escrow Amount and shall assign to SURG the first $1,000,000 the Company recovers from the defendants in the GBT Lawsuit. In the event that the Company does not prevail in the GBT Lawsuit then it shall be entitled to release of the Escrow Amount but shall be responsible for any fees and costs obligation sought by the defendants in the GBT Lawsuit. |
| (ii) | SURG agreed to make total payments of $4,200,000 to Stanley on or prior to January 7, 2022. This $4.2 million consists of $450,000 paid to the Company in November and December 2021, $100,000 to be paid on or about January 4, 2022, and $3,650,000 to be paid on or prior to January 7, 2022 of which $375,000 will be held in escrow as described before. The final settlement SURG agreed to make total payments of $4,200,000 to the Company’s trust account on or prior to January 7, 2022. The $3,750,000 was recorded as other receivable as of December 31, 2021. The entire of $3,750,000 was paid in January 2022. |
| (iii) | Potential payments to third parties.
The Final Settlement Agreement replaces all prior agreements between the parties. In addition, within three trading days of the last payment related to the $4.2 million payment to Stanley being made, the parties shall make filings with the state District Court in Clark County, Nevada to dismiss both lawsuits, including, regarding the lawsuit filed by AltCorp Trading, LLC, the dismissal of the lawsuit as to VStock Transfer, LLC. The parties agreed to a full mutual release of any disputes or claims between the parties.
The final settlement of $3,750,000 was received by the Company in 2022 and paid out $3,750,000 to the third parties in 2022.
As the Company committed to assign certain revenue share agreement to SURG as part of the Company’s settlement with RWJ Agreement, on October 5, 2022 and as cumulation of all settlement agreements the Company issued a request to the SURG regarding release of certain escrow funds and the execution of an assignment of rights as contemplated in the afore referenced agreement (See Footnote 18 Contingencies). |
8
UGO, ECS Prepaid, Electronic Check Services and the Central State Legal Services businesses have been presented as discontinued operations on the accompanying financial statements.
GBT Technologies, S.A. (“GBT”) (fully impaired in 2019)
On June 17, 2019, the Company, AltCorp Trading LLC, a Costa Rica company and a wholly-owned subsidiary of the Company (“AltCorp”), GBT Technologies, S.A., a Costa Rica company (“GBT-CR”) and Pablo Gonzalez, a shareholder’s representative of GBT-CR (“Gonzalez”), entered into and closed an Exchange Agreement (the “GBT Exchange Agreement”) pursuant to which the parties exchanged certain securities. In accordance with the Exchange Agreement, AltCorp acquired 625,000 shares of GBT-CR representing 25% of its issued and outstanding shares of common stock from Gonzalez for the issuance of 20,000 shares of Series H Convertible Preferred Stock of the Company and a Convertible Note 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 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% and is payable at maturity on December 31, 2021. At the election of Gonzalez, the Gopher Convertible Note can be converted into a maximum of 20,000 shares of Series H Preferred Stock. Each share of Series H Preferred Stock is convertible, at the option of the holder but subject to the Company increasing its authorized shares of common stock, into such number of shares of common stock of the Company as determined by dividing the Stated Value ($500 per share) by the conversion price ($500 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, entered into a Mutual Release and Settlement Agreement and Irrevocable Assignment of Note Balance Principal and Accrued Interest (the “Gonzalez Agreement”) with third party, GBT-CR, IGOR 1 Corp and Gonzalez Pursuant to the Gonzalez Agreement, without any party admission of liability and to avoid litigation, the parties had agreed to (i) extend the GBT Convertible Note maturity date to December 31,2022, (ii) amend the GBT Convertible Note terms to include a beneficial ownership blocker of 4.99% and a modified conversion feature to the GBT Convertible Note with 15% discount to the market price during the 20 trading day period ending on the latest complete trading day prior to the conversion date and (iii) provided for an assignment of the GBT Convertible Note by Gonzalez to a third party. As a result of the change in terms of this convertible note, the Company took a charge related to the modification of debt of $13,777,480 during the year ended December 31, 2021. This convertible note is recorded as derivative liability because of the discounted price on conversion.
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% after GBT-CR issued additional shares to other investors therefore 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.
Joint Ventures
GBT Tokenize-It, S.A (Fully Impaired in 2021)
On March 6, 2020, the Company through its wholly owned subsidiary, Greenwich International Holdings, a Costa Rica corporation (“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 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.
9
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.
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 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 year ended December 31, 2022, 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 the Company will be successful in any or all of these critical steps.
10
At March 31, 2020, the Company evaluated the carrying amount of this joint venture investment and determined 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 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 December 31, 2022 and 2021, 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.
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
GBT Bitspeed Corp (Fully Impaired in 2019)
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 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 10,000,000 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 for $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 was 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 June 16, 2022 the parties amended the Bitspeed Agreement to further define the constitution of the Board of Directors. As such, Section 4.2 of the Bitspeed Agreement was amended and restated to provide that the Board of GBT Bitspeed Corp. shall consist of two Directors, one of whom shall be appointed by Bitspeed LLC and the other shall be appointed by the Company.
11
Latinex (contra-equity account)
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 4,006 restricted shares of its common stock valued at $7,610,147 (based on the closing price on the grant date) for three years on 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. If 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 principle to return the pledged 4,006 restricted shares to the Company for cancellation. The 4,006 restricted shares have not yet been returned to the Company as of December 31, 2022.
Regulatory
GBT Tokenize seeks approval filing for its qTerm device with the United Stated Food and Drug Administration (“FDA”). The FDA classifies medical devices from Class 1 – 3, each of which must be subjected to robust evaluations and reviews to comply with manufacturing quality control (QC) standards. The FDA regulates the marketing/sale of medical device products in the U.S. and monitors the safety of all regulated medical products. FDA Section 201(h) of the Food, Drug & Cosmetic Act (FD&C Act) defines a device as: an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a component part or accessory which is recognized in the official National Formulary, or the United States Pharmacopoeia, or any supplement to them, intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease in man or other animals, or intended to affect the structure or any function of the body of man or other animals. GBT Tokenize engaged M Squared Associates (M2) to assist with developing the FDA premarket strategy for its qTerm device. The process of filing for FDA clearance involves development of a sound regulatory strategy for pathway to market, including required preclinical and performance testing, software verification and validation activities and ensuring user needs are met. In addition, GBT/tokenize will partner with M2 to finalize technical design documentation, device labeling claims and intended use. Other aspects that will be evaluated include manufacturing processes, usability / human factors and the development of valid scientific evidence. The company will work with M2 to develop a detailed description of the device’s software and algorithm training requirements, including design specifications. qTerm computer program will be reviewed for its control functions and other required performance testing plans and criteria according to FDA guidance documentation. Even though not required by law, there is no guarantee that the Company will be successful in obtaining any regulatory approval. In order to successfully implement this concept, the Company will need to raise adequate capital to support its compliance 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.
The Company seeks to conduct business with the US government agencies and hired a consulting firm for general guidance with the GSA (General Services Administration) application process. GSA approval status describes an organization that have been approved to sell to the US Government through the U.S. General Services Administration (GSA). The GSA is an independent agency of the United States Government that was established in 1949 to help manage, approve, and facilitate government contracts, products, bids and verify that product and services properly sourced under the US Government guidelines. The GSA is the purchasing department of the US Government and lists contracts or schedules potential vendors that can bid on to get government business. To become eligible to bid on a GSA schedule, it is required to complete several important steps, among them are registering in the government’s SAM (System for Award Management), and providing previous customer contact information as a means for the GSA to perform a past performance evaluation. More information can be found on GSA web site at: https://www.gsa.gov. The Company applied and received their extension notice for SAM registration #832011626/91FW3 until May 2023. The active status makes GBT eligible to potentially contract business with US government contractors and sub-contractors, local cities or receive federal funds. SAM (www.sam.gov) is a central registration system for government contractors and suppliers. To remain eligible to do business with the federal government, an entity must renew its registration with SAM every year.
12
Intellectual Property
To date, the Company, has filed for different patents covering certain fields of its technologies, as well as trademarks. These patents and trademarks, as well as various websites and social media platforms, comprise the Company’s intellectual properties. 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.
On January 31, 2020, in the arbitration titled GBT Technologies Inc. (k/n/a Gopher Protocol, Inc. v. Discover Growth Fund, LLC (“Discover”) (JAMS Ref. No. 1260005395), 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 neither Discover nor John Kirkland, President and General Partner of Discover, were entitled to recovery of their attorney’s fees. Consequently, and consistent with the expectations of the Company, the arbitrator awarded Discover $4,034,444 plus interest of 7.25% accrued from May 15, 2019 and costs of $55,613.00. 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 Discover’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 issue regarding whether Discover’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 Discover relative to those of other creditors must be determined before any foreclosure sale can proceed. It was further the position of the Company that the previously disclosed foreclosure sale scheduled by Discover 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, Discover 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. This case is still pending with the Federal court and the Court has not taken any substantive action in the matter as of the date of this report.
13
On March 6, 2020, the Company through its newly acquired wholly owned subsidiary, Greenwich International Holdings, a Costa Rica corporation (“Greenwich”), entered into a Joint Venture and Territorial License Agreement (the “Tokenize Agreement”) with Tokenize-It, S.A. (“Tokenize”) 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”). Via this Joint Venture the parties commenced development of a development of an intelligent human vital signs’ device, suggested named qTerm. The Joint Venture completed successfully the first prototype.
The following chart represent the Company Intellectual Properties Status:
GBT Intellectual Property Status Chart
Patents
| Title | App. No. | Country | Filing Date | Status / Deadline | Patent No. | Issue Date |
| System and method for scheduling trucking service, according to demand, at the customer’s or any other location using smartphone application and/or internet web site | 62/124,320 | US | December 15, 2014 | Expired | N/A | N/A |
| System and method for scheduling categorized delivery and/or service, according to demand, to customer’s location based on smartphone and web site software application | 62/176,933 | US | March 3, 2015 | Expired and Converted to Electronic Circuit Non-provisional and PCT | N/A | N/A |
| System and method for finding possible bartering partners in both two-party and multi-party scenarios via smartphone/mobile device application | 14/545,577 | US | May 26, 2015 | Abandoned | N/A | N/A |
| System and method for scheduling gasoline or diesel fill, according to demanding, at the customer’s location | 62/231,405 | US | July 6, 2015 | Expired and Converted to Electronic Circuit Non-provisional and PCT | N/A | N/A |
| Electronic circuit or microchip with a secured BIOS system, with ROM and RAM memory, working with smartphone software application and | 62/282,593 | US | August 6, 2015 | Expired and Converted to Electronic Circuit Non-provisional and PCT | N/A | N/A |
| System and method for power saving/reduction within integrated circuits | 62/282,808 | US | August 13, 2015 | Expired | N/A | N/A |
| System and method for overseeing and monitoring user’s computerized activity to define privacy level | 62/283,915 | US | September 16, 2015 | Expired | N/A | N/A |
| System, method and computer program for remote disablement and enablement of mobile devices | 62/284,353 | US | September 28, 2015 | Expired and Converted to Electronic Circuit Non-provisional and PCT | N/A | N/A |
| System, method and computer program for real time emergency communication, beacon, location identification and tracking for mobile devices | 62/284,458 | US | October 1, 2015 | Expired and Converted to Electronic Circuit Non-provisional and PCT | N/A | N/A |
14
| System, method and a computer program for automatic and motion activity detection, activation or deactivation airplane mode for mobile devices | 62/284,744 | US | October 8, 2015 | Expired and Converted to Electronic Circuit Non-provisional and PCT | N/A | N/A |
| Monolithic multi-dimensional integrated circuits (iCs) on both sides of electronic board including utilization of all package’s planes | 62/284,880 | US | October 13, 2015 | Expired | N/A | N/A |
| System, method and software for mobile database manage and sharing over private, secured network, in real time | 62/284,884 | US | October 13, 2015 | Expired | N/A | N/A |
| Method, system and computer software for advertisement using symbols as characters interface | 62/285,055 | US | October 19, 2015 | Expired | N/A | N/A |
| Monolithic, multi-dimensional, multi-plane, memory structure for integrated circuits | 62/285,443 | US | October 30, 2015 | Expired | N/A | N/A |
| Automatic, characterized and prioritized consolidation of different credit cards into one card method, point of sale, smartphone applications and computer software | 62/285,996 | US | November 26, 2015 | Expired | N/A | N/A |
| Electronic circuit within a sticky patch package for global tracking that is working with mobile software application and other electronic circuits on a separate, secured, private network | 62/387,789 | US | January 6, 2016 | Expired and Converted to Tracking Devices Non-provisional and PCT | N/A | N/A |
| ELECTRONIC CIRCUITS FOR SECURE COMMUNICATIONS AND ASSOCIATED SYSTEMS AND METHODS | 15/015,441 | US | February 4, 2016 | Granted | U.S. Patent No. 10,521,614 | December 31, 2019 |
| ELECTRONIC CIRCUITS FOR SECURE COMMUNICATIONS AND ASSOCIATED SYSTEMS AND METHODS | PCT/US2016/016522 | PCT | February 4, 2016 | Expired and Entered National Phase in Europe | N/A | N/A |
15
| SYSTEM AND METHOD FOR POWER SAVING/REDUCTION WITH INTEGRATED CIRCUITS | 62/360,525 | US | July 11, 2016 | Expired | N/A | N/A |
| System and method for elimination of electromigration and self-heat violations during construction of a mask layout block, maintaining process design rules and layout connectivity | 62/494,199 | US | August 1, 2016 | Expired | N/A | N/A |
| ELECTRONIC CIRCUITS FOR SECURE COMMUNICATIONS AND ASSOCIATED SYSTEMS AND METHODS | 16759244.3 | EP | September 29, 2017 | Pending | N/A | N/A |
| TRACKING DEVICES, SYSTEMS AND METHODS USING PATCH PACKAGES WITH EMBEDDED ELECTRONIC CIRCUITS | 15/344,619 | US | November 7, 2016 | Granted | 10,021,522 | July 10, 2018 |
| TRACKING DEVICES, SYSTEMS AND METHODS USING PATCH PACKAGES WITH EMBEDDED ELECTRONIC CIRCUITS | PCT/US16/060763 | PCT | November 7, 2016 | Expired and Entered National Phase in Europe | N/A | N/A |
| TRACKING DEVICES, SYSTEMS AND METHODS USING PATCH PACKAGES WITH EMBEDDED ELECTRONIC CIRCUITS | 16884138.5 | EP | July 3, 2018 | Pending | N/A | N/A |
| TRACKING DEVICES, SYSTEMS AND METHODS USING PATCH PACKAGES WITH EMBEDDED ELECTRONIC CIRCUITS | 16/028,449 | US | July 6, 2018 | Granted | 10,616,715 | April 7, 2020 |
| GOPHER RADIO TOKEN | 62/631,007 | US | February 15, 2018 | Pending and Converted to GRT Non-provisional | N/A | N/A |
| SYSTEMS AND METHOD OF CONVERTING ELECTRONIC TRANSMISSIONS INTO DIGITAL CURRENCY | 16/008,069 | US | June 14, 2018 | Abandoned | N/A | N/A |
16
| SYSTEMS AND METHOD OF CONVERTING ELECTRONIC TRANSMISSIONS INTO DIGITAL CURRENCY | PCT/US19/16728 | PCT | February 6, 2019 | Expired | N/A | N/A |
| System, method and software application for mobile database management and sharing over private, secured network, in real time | 62/676,393 | US | May 25, 2018 | Pending and Converted to Mobile Database Sharing Non-provisional | N/A | N/A |
| SYSTEMS AND METHODS OF MOBILE DATABASE MANAGEMENT AND SHARING | 16/155,093 | US | October 9, 2018 | Granted | 10,853,327 | December 1, 2020 |
| SYSTEMS AND METHODS OF MOBILE DATABASE MANAGEMENT AND SHARING | 17/104,001 | US | November 25, 2020 | Pending | N/A | N/A |
| MONOLITHIC, MULTI-DIMENSIONAL, MULTI-PLANE, MEMORY STRUCTURE FOR INTEGRATED CIRCUITS | 62/732,026 | US | September 17, 2018 | Pending | N/A | N/A |
| MONOLITHIC MULTI-DIMENSIONAL INTEGRATED CIRCUITS (ICS) ON BOTH SIDES OF ELECTRONIC BOARD INCLUDING UTILIZATION OF ALL PACKAGE’S PLANES | 62/732,023 | US | September 17, 2018 | Pending | N/A | N/A |
| MULTI-DIMENSIONAL INTEGRATED CIRCUITS AND MEMORY STRUCTURE FOR INTEGRATED CIRCUITS AND ASSOCIATED SYSTEMS AND METHODS | 16/292,388 | US | March 5, 2019 | Granted | 10,854,763 | December 1, 2020 |
| MULTI-DIMENSIONAL INTEGRATED CIRCUITS AND MEMORY STRUCTURE FOR INTEGRATED CIRCUITS AND ASSOCIATED SYSTEMS AND METHODS | 17/102,928 | US | November 24, 2020 | Pending | N/A | N/A |
| MULTI-DIMENSIONAL INTEGRATED CIRCUITS AND MEMORY STRUCTURE FOR INTEGRATED CIRCUITS AND ASSOCIATED SYSTEMS AND METHODS | PCT/US19/50266 | PCT | September 10, 2019 | Expired | N/A | N/A |
| MULTI-DIMENSIONAL INTEGRATED CIRCUITS AND MEMORY STRUCTURE FOR INTEGRATED CIRCUITS AND ASSOCIATED SYSTEMS AND METHODS | 19862631.9 | EP | March 16, 2021 | Pending | N/A | N/A |
17
| MULTI-DIMENSIONAL INTEGRATED CIRCUITS AND MEMORY STRUCTURE FOR INTEGRATED CIRCUITS AND ASSOCIATED SYSTEMS AND METHODS | 10-2021-7008024 | KR | March 17, 2021 | Pending | N/A | N/A |
| GuardianLIFE Medical Device | 63/001,564 | US | March 30, 2020 | Expired | N/A | N/A |
| PROXIMITY ALERT FOR USE WITH A PUSH-BUTTON VITAL SIGNS MONITORING SYSTEM | 63/012,205 | US | April 19, 2020 | Expired | N/A | N/A |
| PUSH-BUTTON AND TOUCH-ACTIVATED VITAL SIGNS MONITORING DEVICES AND METHODS OF MAPPING DISEASE HOT SPOTS AND PROVIDING PROXIMITY ALERTS | 16/983,289 | US | August 3, 2020 | Pending | N/A | N/A |
| Automatic, characterized and prioritized consolidation of different credit cards into one card method, point of sale, smartphone applications and computer software | 63175564 | US | April 16, 2021 | Pending | N/A | N/A |
| Method, system and computer software for advertisement, using symbols as characters interface | 63177669 | US | April 21, 2021 | Pending | N/A | N/A |
| SYSTEMS AND METHODS FOR ELIMINATING ELECTROMIGRATION AND SELF-HEAT VIOLATIONS IN A MASK LAYOUT BLOCK | 17315747 | US | May 10, 2021 | Pending | N/A | N/A |
| System and method for automatic correction of geometrical design rule violations in integrated circuit mask layout data, maintaining its electrical connectivity (LVS), reliability (RV) and design for manufacturing (DFM) structural correctness | 63197635 | US | June 7, 2021 | Pending | N/A | N/A |
| REAL-TIME MOVEMENT, POSITION DETECTION, AND IMAGING USING WIRELESS TECHNOLOGY AND ARTIFICIAL INTELLIGENCE | 63211573 | US | June 17, 2021 | Pending | N/A | N/A |
| SYSTEMS AND METHODS FOR IDENTIFICATION AND ELIMINATION OF GEOMETRICAL DESIGN RULE VIOLATIONS OF A MASK LAYOUT BLOCK | 17391292 | US | August 2, 2021 | Pending | N/A | N/A |
18
| SYSTEMS AND METHODS OF REAL-TIME MOVEMENT, POSITION DETECTION, AND IMAGING | 17471213 | US | September 10, 2021 | Allowed | 11,302,032 | April 12, 2022 |
| System and method for automatic correction of electrical connectivity mismatches of a mask layout block, maintaining the process design rules (DRC Clean), connectivity (LVS Clean) correctness, obeying Reliability Verification (RV) and DFM (Design formanufacturability) constraints | 63248550 | US | September 27, 2021 | Pending | N/A | N/A |
| System and method for Automatic Generation of Integrated Circuits IP (Intellectual property) Layout Blocks | 63249150 | US | September 28, 2021 | Pending | N/A | N/A |
| Artificial Intelligence Controlled, SKIP ZONE FREE, HF Radio Communication System and Method | 63257199 | US | October 19, 2021 | Pending | N/A | N/A |
| CONSOLIDATED CREDIT CARDS, AUTOMATED BILLING SYSTEMS, AND FINANCIAL TECHNOLOGIES FOR IMPROVED CREDIT CARD ACCOUNT OPERATIONS | 17584427 | US | January 26, 2022 | Pending | N/A | N/A |
| SYSTEMS AND METHODS OF WIRELESS COMMUNICATION USING ARTIFICIAL INTELLIGENCE TO OVERCOME SKIP ZONES | 17686461 | US | March 4, 2022 | Pending | N/A | N/A |
| SYSTEMS AND METHODS OF REAL-TIME MOVEMENT, POSITION DETECTION, AND IMAGING | 17694384 | US | March 14, 2022 | Pending | N/A | N/A |
| SYSTEMS AND METHODS OF IMPROVED ADVERTISING USING SYMBOLS AS CHARACTER INTERFACE | 17723658 | US | April 19, 2022 | Pending | N/A | N/A |
| SYSTEMS AND METHODS OF WIRELESS COMMUNICATION USING ARTIFICIAL INTELLIGENCE TO OVERCOME SKIP ZONES | 17736114 | US | May 4, 2022 | Pending | N/A | N/A |
| MULTI-DIMENSIONAL INTEGRATED CIRCUITS AND MEMORY STRUCTURE FOR INTEGRATED CIRCUITS AND ASSOCIATED SYSTEMS AND METHODS | 17876981 | US | July 29, 2022 | Pending | N/A | N/A |
| Multi-Planar, IC Prediction System | 63393959 | US | July 31, 2022 | Pending | N/A | N/A |
| SYSTEMS AND METHODS OF ELIMINATING CONNECTIVITY MISMATCHES IN A MASK LAYOUT BLOCK | 17880055 | US | August 3, 2022 | Pending | N/A | N/A |
| SYSTEMS AND METHODS OF AUTOMATIC GENERATION OF INTEGRATED CIRCUIT IP BLOCKS | 17953378 | September 27, 2022 | Pending | N/A | N/A | |
| SYSTEMS AND METHODS OF PREDICTIVE MANUFACTURING OF THREE-DIMENSIONAL, MULTI-PLANAR SEMICONDUCTORS | 18098140 | US | January 18, 2023 | Pending | N/A | N/A |
| MULTI-DIMENSIONAL PHOTONIC INTEGRATED CIRCUITS AND MEMORY STRUCTURE FOR PHOTONIC INTEGRATED CIRCUITS AND ASSOCIATED SYSTEMS AND METHODS | 18109291 | US | February 14, 2023 | Pending | N/A | N/A |
| SYSTEMS AND METHODS OF ELIMINATING CONNECTIVITY MISMATCHES IN A MASK LAYOUT BLOCK | 18110644 | US | February 16, 2023 | Pending | N/A | N/A |
19
Trademarks
| Mark | App. No. | Country | Filing Date | Status / Deadline | Goods/Services/Classes | Reg. No. / Reg. Date |
| GOPHERINSIDE | 86/681,308 | US | July 1, 2015 | Abandoned | Microchips, in Class 9 | N/A |
| GOPHERINSIGHT | 86/737,146 | US | August 26, 2015 | Abandoned | Chip carriers, etc., in Class 9 | N/A |
| FRIENDINME | 86/755,543 | US | September 14, 2015 | Abandoned | Software from mobile phones, etc., in Class 9 | N/A |
| GOPHERNET | 86/811,422 | US | November 5, 2015 | Abandoned | Communications software for connecting microchips, etc., in Class 9 | N/A |
| GOPHERANTITHEFT | 86/855,191 | US | December 21, 2015 | Abandoned | Microchips, in Class 9 | N/A |
| GOPHERSKYNET | 86/858,936 | US | December 28, 2015 | Abandoned | Microchips, in Class 9 | N/A |
| PUZPIX | 87/12,1137 | US | July 29, 2016 | Registered | Game software, etc., in Class 9 | 5,356,006 / December 12, 2017 |
| GOPH GOPHER PROTOCOL (and Design) | 87/927,131 | US | May 18, 2018 | Abandoned | Software for mobile phones, microchips, etc., in Class 9 | N/A |
| G-MONEY | 88/132,574 | US | September 26, 2018 | Abandoned | Providing digital currency or digital token, in Class 36 | N/A |
| G-CASH | 88/132,592 | US | September 26, 2018 | Abandoned | Providing digital currency or digital token, in Class 36 | N/A |
Employees
As of December 31, 2022, we had 4 full time employees and 1 part time employees. We also utilize outside consultants and contractors as needed.
Clients and Customers
Sales for both the years ended December 31, 2022 and 2021 were $1,152,555 and $0. The Consulting income from related party for both the years ended December 31, 2022 and 2021 was $45,000 and $180,000. Sales are derived from providing IT consulting services to a related party and sales from amazon and Ebay.
20
On February 18, 2022, the “Company, effective March 1, 2022 entered into RSA with Mahaser LTD. (“MAHASER”) pursuant to which the Company acquired the opportunity to share in revenues generated by MAHASER with respect to e-commerce sales through the world biggest online retail platform in the United States of America. MAHASER owns an e-commerce platform as a store which is the legal, exclusive owner of Ravenholm Electronics. The Company will operate the e-commerce platform and will be entitled to 95% for all revenue generated by and received by MAHASER for the from March 1, 2022 through December 31, 2022. The RSA provides the Company will be entitled to appoint a manager to MAHASER. As consideration, the Company will pay MAHASER $100,000 on March 1, 2022 and issue MAHASER 1,000,000 shares of the Company’s restricted common stock. The Company shall have no obligations to make any further payments to MAHASER. For any further extensions, the Company will have the option to extend the RSA for annual payment of $200,000, which can be payable with the Company’s shares of common stock payable based on 20 days VWAP prior to issuance On March 16, 2022 the parties entered into Amendment No. 1 to the to the RSA, where all consideration to be paid or issued to MAHASER will be deferred until such time where the e-commerce platform generated in cumulative revenue of $1,000,000. On March 31, 2022, the parties entered into Amendment No. 2 to the RSA, where Mahaser agreed to pay the Company 100% per year for all revenue generated by and received by seller from the sales by Amazon within the United States of America as follows from March 1, 2022 through December 31, 2022. The Company will be responsible for 100% of the cost of goods sold as well. In addition, the Company is entitled to earn 100% revenues and cost of goods sold of the test run period from February 1, 2022 to February 28, 2022.
On May 17, 2022, Mahaser LLC (“Assignee”) entered into an assignment and assumption of lease agreement by and between 2819 Coldwater LLC (“Assignor”), Sunset Place Holdings LLC (“Lessor”) and Yossi Attia (“Guarantor”). Pursuant to the agreement, Lessor agreed to lease to Assignor certain Standard Industrial/Commercial Multi-Tenant Lease – Gross agreement dated February 7, 2022 (the “Lease”) and expiring on January 31, 2024, which premises commonly known as 8265 Sunset Boulevard, Suite #107, West Hollywood, CA 90046. The base rent payment shall equal $4,100 per month and share of common area operating expense shall equal $200 per month. Guarantor has guaranteed payment of Assignor’s obligations under the Lease and Assignor assigned all of its right, title and interest in the Lease to Assignee and Assignee assumed Assignor’s obligations under the Lease.
On February 22, 2022, the Company entered into an Intellectual Property License and Royalty Agreement with Touchpoint Group Holdings, Inc. (“Touchpoint” or “TGHI”) pursuant to which the Company granted TGHI a worldwide license for its technologies for five years in the domains of Internet of Things (IoT) and Artificial Intelligence enabled mobile technologies pertaining to the Company’s digital currency technology (the “Technology”). GBT will charge TGHI royalties based on actual uses by TGHI of the Technology resulting from revenue attributable to the use, performance or other exploitation of the Technology, to the extent applicable, after deducting any taxes that the Company may be required to collect, and deducting any international sales, goods and services, value added taxes or similar taxes which the Company is required to pay, if any, excluding deductions for taxes on the Company net income. TGHI agreed to issue the Company 10,000,000 shares of common stock of TGHI in the FV of $50,000 as a onetime fee for the Company entering this Intellectual Property License and Royalty Agreement, which was booked contract liabilities and amortized over the five-year term. The Company has yet to earn any royalty income in relation to this agreement as of December 31, 2022. The contract liabilities as of December 31, 2022 and 2021 was $41,444 and $0, respectively.
ITEM 1A. RISK FACTORS
As a Smaller Reporting Company, the Company is not required to include the disclosure under this Item 1A. Risk Factors. Despite the fact that we are not required to provide risk factors, we consider the following factors to be risks to our continued growth and development:
21
WE HAVE A LIMITED OPERATING HISTORY IN AN EVOLVING INDUSTRY, WHICH MAKES IT DIFFICULT TO EVALUATE OUR FUTURE PROSPECTS AND MAY INCREASE THE RISK THAT WE WILL NOT BE SUCCESSFUL.
We have a limited operating history in an evolving industry that may not develop as expected. Assessing our business and future prospects is challenging in light of the risks and difficulties we may encounter. These risks and difficulties include our ability to:
| ● | accurately forecast our revenues and plan our operating expenses; |
| ● | successfully expand our business; |
| ● | assimilate our acquisitions; |
| ● | adapt to rapidly evolving trends in the ways consumers and businesses interact with technology; |
| ● | avoid interruptions or disruptions in the offering of our products and our services; |
| ● | develop a scalable, high-performance technology infrastructure that can efficiently and reliably handle increased usage, as well as the deployment of new features and products; |
| ● | hire, integrate and retain talented sales, customer service, technology and other personnel; and |
| ● | effectively manage rapid growth in personnel and operations; and |
| ● | global COVID-19 pandemic |
If the demand for our services and/or platforms/products offered or our products under development are not finalized, our business will be harmed. We may not be able to successfully address these risks and difficulties, which could harm our business and results of operations.
OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT FOR US TO EVALUATE OUR FUTURE BUSINESS PROSPECTS AND MAKE DECISIONS BASED ON THOSE ESTIMATES OF OUR FUTURE PERFORMANCE.
We have a limited operating history and, as a consequence, it is difficult, if not impossible, to forecast our future results based upon our historical data. Reliance on the historical results may not be representative of the results we will achieve. Because of the uncertainties related to our limited historical operations, we may be hindered in our ability to anticipate and timely adapt to increases or decreases in revenues or expenses. If we make poor budgetary decisions as a result of unreliable historical data, we could be less profitable or continue to incur losses.
22
THE COVID-19 OUTBREAK HAS CAUSED DISRUPTIONS IN OUR DEVELOPMENT OPERATIONS, WHICH HAVE RESULTED IN DELAYS ON EXISTING PROJECTS AND MAY HAVE ADDITIONAL NEGATIVE IMPACTS ON OUR OPERATIONS
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 on January 25, 2021, and as such we were able to relocate our virtual offices space and resume “normal” operations.
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. During the fourth quarter of 2021, the omicron variants surfaced and has significantly impacted the United States and globally. However, in the event COVID-19, the omicron variant or other variant is to worsen or 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.
OUR RESULTS OF OPERATIONS HAVE NOT RESULTED IN PROFITABILITY AND WE MAY NOT BE ABLE TO ACHIEVE PROFITABILITY GOING FORWARD
The Company does not accrue or capitalize development costs (or any costs to this effect) and expense it to its profit and loss statements as required by US GAAP. As such, the Company incurred a net income of $5,323,856 for the year ended December 31, 2022 and net loss of $33,930,433 for the year ended December 31, 2021. If we incur additional significant operating losses, our stock price, may decline, perhaps significantly. Our management is developing plans to alleviate the negative trends and conditions described above. Our business plan is speculative and unproven. There is no assurance that we will be successful in executing our business plan or that even if we successfully implement our business plan, that we will be able to curtail our losses now or in the future. Further, as we are an emerging enterprise, we expect that net losses will continue, and our working capital deficiency will increase.
23
WE HAVE NOT GENERATED POSITIVE CASH FLOW FROM OPERATIONS, AND OUR ABILITY TO GENERATE POSITIVE CASH FLOW IS UNCERTAIN. IF WE ARE UNABLE TO GENERATE POSITIVE CASH FLOW OR OBTAIN SUFFICIENT CAPITAL WHEN NEEDED, OUR BUSINESS AND FUTURE PROSPECTS WILL BE ADVERSELY AFFECTED AND WE COULD BE FORCED TO SUSPEND OR DISCONTINUE OPERATIONS.
Our operations have not generated positive cash flow for any period since our inception, and we have funded our operations primarily through the issuance of common stock and short-term and long-term debt and convertible debt. Our limited operating history makes an evaluation of our future prospects difficult. The actual amount of funds that we will need to meet our operating needs will be determined by a number of factors, many of which are beyond our control. These factors include the timing and volume of sales transactions, the success of our marketing strategy, market acceptance of our products, the success of our manufacturing and research and development efforts (including any unanticipated delays), our manufacturing and labor costs, the costs associated with obtaining and enforcing our intellectual property rights, regulatory changes, competition, technological developments in the market, evolving industry standards and the amount of working capital investments we are required to make.
Our ability to continue to operate until we are able to generate sufficient our cash flow from operations will depend on our ability to generate sufficient positive cash flow from our operations. If we are unable to generate sufficient cash flow from our operations, our business and future prospects will be adversely affected and we could be forced to suspend or discontinue operations.
The Company sustained net income of $5,323,856 and our operating activities used in cash flows of $138,293 for the year ended December 31, 2022. The Company had a working capital deficit of $18,522,046, stockholders’ deficit of $18,830,909 and an accumulated deficit of $299,257,917 at December 31, 2022.
WE WILL REQUIRE ADDITIONAL CAPITAL TO SUPPORT BUSINESS GROWTH, AND THIS CAPITAL MIGHT NOT BE AVAILABLE ON ACCEPTABLE TERMS, IF AT ALL.
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 year of 2023. In order to fully implement our business plan, we will need to raise about $10,000,000 If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing that we secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be impaired, and our business may be harmed.
On December 17, 2021 (the “Effective Date”), the “Company entered into an equity financing agreement (the “Equity Financing Agreement”) and a registration rights agreement (the “Registration Rights Agreement”) with GHS Investments LLC (“GHS”), pursuant to which GHS may purchase from the Company, up to that number of shares of common stock of the Company (the “Shares”) for $10,000,000, subject to certain limitations and conditions set forth in the Equity Financing Agreement from time to time over the course of 24 months after an effective registration of the Shares with the Securities and Exchange Commission (the “SEC”) pursuant to the Registration Rights Agreement, is declared effective by the SEC (the “Contract Period”). The Equity Financing Agreement grants the Company the right, from time to time at its sole discretion (subject to certain conditions) during the Contract Period, to direct GHS to purchase shares of Common Stock on any business day (a “Put”), provided that at least ten trading days has passed since the most recent Put. The purchase price of the shares of Common Stock contained in a Put will be 90% of the lowest daily volume weighted average price (VWAP) of the Company’s Common Stock during the ten consecutive trading days preceding the receipt by GHS of the applicable Put notice. Such sales of Common Stock by the Company, if any, may occur from time to time, at the Company’s option, during the Contract Period. Subject to the satisfaction of certain conditions set forth in the Equity Financing Agreement, on each Put the Company will deliver a number of Shares equaling 110% of the dollar amount of each Put. The maximum dollar amount of each Put will not exceed 200% of the average daily trading dollar volume for the Company’s Common Stock during the 10 trading days preceding the Trading Day that GHS receives a Put. No Put will be made in an amount equaling less than $10,000 or greater than $500,000. Puts are further limited to GHS owning no more than 4.99% of the outstanding stock of the Company at any given time. The Equity Financing Agreement and the Registration Rights Agreement contain customary representations, obligations, rights, warranties, agreements and conditions of the parties. The Equity Financing Agreement terminates upon any of the following events: when GHS has purchased $10,000,000 in the Common Stock of the Company pursuant to the Equity Financing Agreement; on the date that is 24 calendar months from the date the Equity Financing Agreement was executed. Actual sales of shares of Common Stock to GHS under the Equity Financing Agreement will depend on a variety of factors to be determined by the Company from time to time, including, among others, market conditions, the trading price of the Common Stock and determinations by the Company as to the appropriate sources of funding for the Company and its operations. On January 12, 2022, the Company filed registration statement for the sale of 5,500,000 shares of common stock pursuant to the Equity Financing Agreement, which was declared effective on February 11, 2022. The Company issued 463,303 shares with net proceeds of $66,942 from the Equity Financing Agreement in February 2022.
For year ended December 31, 2022, the Company received $231,867 as proceeds from the equity purchase agreement for issuance of 5,500,000 registered common shares. Post this issuance The Equity Financing Agreement is exhausted and not valid anymore.
24
WE DEPEND UPON KEY PERSONNEL AND NEED ADDITIONAL PERSONNEL
Our success depends on our inability to attract and retain key personnel including Michael Murray, our President, Mansour Khatib, our CEO, and Dr. Danny Rittman, our CTO, and our inability to do so may materially and adversely affect our business operations. The loss of qualified personnel could have a material and adverse effect on our business operations. Additionally, the success of the Company’s operations will largely depend upon its ability to successfully attract and maintain competent and qualified key management personnel. As with any company with limited resources, there can be no guaranty that the Company will be able to attract such individuals or that the presence of such individuals will necessarily translate into profitability for the Company.
OUR BUSINESS REQUIRES SUBSTANTIAL CAPITAL, AND IF WE ARE UNABLE TO MAINTAIN ADEQUATE CASH FLOWS FROM OPERATIONS OUR PROFITABILITY AND FINANCIAL CONDITION WILL SUFFER AND JEOPARDIZE OUR ABILITY TO CONTINUE OPERATIONS
We require substantial capital to support our operations. If we are unable to generate adequate cash flows from our operations, maintain adequate financing or other sources of capital are not available, we could be forced to suspend, curtail or reduce our operations, which could harm our revenues, profitability, financial condition and business prospects.
THERE IS CURRENTLY A LIMITED PUBLIC MARKET FOR OUR COMMON STOCK. FAILURE TO FURTHER DEVELOP OR MAINTAIN A TRADING MARKET COULD NEGATIVELY AFFECT THE VALUE OF OUR COMMON STOCK AND MAKE IT DIFFICULT OR IMPOSSIBLE FOR YOU TO SELL YOUR STOCK.
There is a limited public market for our Common Stock, which is traded on the OTC PINK under the symbol GTCH. We cannot give any assurances that there will ever be a mature, developed market for our common stock. Failure to further develop or maintain an active trading market could negatively affect the value of our shares and make it difficult for you to sell your shares or recover any part of your investment in us. Even if a market for our common stock does develop in a material way, the market price of our common stock may be highly volatile. In addition to the uncertainties relating to our future operating performance and the profitability of our operations, factors such as variations in our interim financial results, or various, as yet unpredictable factors, many of which are beyond our control, may have a negative effect on the market price of our common stock.
IF WE FAIL TO MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL CONTROLS, WE MAY NOT BE ABLE TO ACCURATELY REPORT OUR FINANCIAL RESULTS OR PREVENT FRAUD. AS A RESULT, CURRENT AND POTENTIAL STOCKHOLDERS COULD LOSE CONFIDENCE IN OUR FINANCIAL REPORTING, WHICH WOULD HARM OUR BUSINESS AND THE TRADING PRICE OF OUR STOCK.
Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our brand and operating results could be harmed. We have in the past discovered, and may in the future discover, areas of our internal controls that need improvement. For example, for the years ended December 31, 2022 and 2021, we reported that our disclosure controls and procedures were not effective due to the lack of resources and the reliance on outside consultants. We intend to increase management’s review of our financials. We cannot be certain that these measures will ensure that we implement and maintain adequate controls over our financial processes and reporting in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.
Additional Risks Related to Our Common Stock
Because we are quoted on the OTC PINK marketplace instead of a national securities exchange, our investors may experience significant volatility in the market price of our stock and have difficulty selling their shares.
Our Common Stock is currently quoted on the OTC Market Group’s OTC PINK marketplace under the ticker symbol “GTCH”. The OTC is a regulated quotation service that displays real-time quotes and last sale prices in over-the-counter securities. Trading in shares quoted on the OTC PINK is often thin and characterized by volatility. This volatility may be caused by a variety of factors, including the lack of readily available price quotations, the absence of consistent administrative supervision of bid and ask quotations, lower trading volume and market conditions. As a result, there may be wide fluctuations in the market price of the shares of our Common Stock for reasons unrelated to operating performance, and this volatility, when it occurs, may have a negative effect on the market price for our securities. Moreover, the OTC PINK is not a stock exchange, and trading of securities on this platform is more sporadic than the trading of securities listed on a national quotation system or stock exchange. Accordingly, our stockholders may not be able to realize a fair price from their shares when they determine to sell them or may have to hold them for a substantial period of time until the market for our Common Stock improves.
25
Our stock price and trading volume may be volatile, which could result in substantial losses for our stockholders.
The equity trading markets may experience periods of volatility, which could result in highly variable and unpredictable pricing of equity securities. The market price of our Common Stock could change in ways that may or may not be related to our business, our industry or our operating performance and financial condition. In addition, the trading volume in our Common Stock has been low and may fluctuate and cause significant price variations to occur. We have experienced significant volatility in the price of our stock. In addition, the stock markets in general can experience considerable price and volume fluctuations.
We have not paid dividends in the past and have no immediate plans to pay cash dividends.
We plan to reinvest all of our earnings, to the extent we have earnings, to develop and deliver our products and cover operating costs and to otherwise become and remain competitive. We do not plan to pay any cash dividends with respect to our securities in the foreseeable future. We cannot assure you that we would, at any time, generate sufficient surplus cash that would be available for distribution to the holders of our Common Stock as a dividend. Therefore, you should not expect to receive cash dividends on our Common Stock.
Shares eligible for future sale may adversely affect the market for our Common Stock.
Of the 2,930,101,819 shares of our Common Stock outstanding as of the date of this Annual Report, approximately 766,217,939 are restricted and 2,163,883,880 shares are freely tradable without restriction pursuant to Rule 144. Any substantial sale of our Common Stock pursuant to Rule 144 or pursuant to any resale prospectus may have a material adverse effect on the market price of our Common Stock.
You may experience future dilution as a result of future equity offerings.
To raise additional capital, we may in the future offer additional shares of our Common Stock or other securities convertible into or exchangeable for our Common Stock at prices that may not be the same as the price per share in this offering. We may sell shares or other securities in any future offering at a price per share that is lower than the price per share paid by investors in this offering, which would result in those newly issued shares being dilutive. In addition, investors purchasing shares or other securities in the future could have rights superior to existing stockholders, which could impair the value of your shares. The price per share at which we sell additional shares of our Common Stock, or securities convertible or exchangeable into shares of our Common Stock, in future transactions may be higher or lower than the price per share paid by investors in this offering.
Our charter documents and Nevada law may inhibit a takeover that stockholders consider favorable.
Provisions of our certificate of incorporation and bylaws and applicable provisions of Nevada law may delay or discourage transactions involving an actual or potential change in control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. The provisions in our certificate of incorporation and bylaws:
| ● | limit who may call stockholder meetings; |
| ● | do not provide for cumulative voting rights; and |
| ● | provide that all vacancies may be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum. |
There are limitations on director/officer liability.
As permitted by Nevada law, our certificate of incorporation limits the liability of our directors for monetary damages for breach of a director’s fiduciary duty except for liability in certain instances. As a result of our charter provision and Nevada law, shareholders may have limited rights to recover against directors for breach of fiduciary duty. In addition, our certificate of incorporation provides that we shall indemnify our directors and officers to the fullest extent permitted by law.
26
Penny stock regulations may impose certain restrictions on marketability of our securities.
The SEC adopted regulations which generally define a “penny stock” to be any equity security that has a market price of less than $5 per share or an exercise price of less than $5 per share, subject to certain exceptions. A security listed on a national securities exchange is exempt from the definition of a penny stock. Our Common Stock is not currently listed on a national security exchange. Our Common Stock is therefore subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse). For transactions covered by such rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s written consent to the transaction prior to the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the SEC relating to the penny stock market. The broker-dealer must also disclose the commission payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market maker, the broker dealer must disclose this fact and the broker-dealer’s presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Broker-dealers must wait two business days after providing buyers with disclosure materials regarding a security before effecting a transaction in such security. Consequently, the “penny stock” rules restrict the ability of broker-dealers to sell our securities and affect the ability of investors to sell our securities in the secondary market and the price at which such purchasers can sell any such securities, thereby affecting the liquidity of the market for our Common Stock.
Stockholders should also be aware that, according to the SEC, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:
| ● | control of the market for the security by one or more broker-dealers that are often related to the promoter or issuer; |
| ● | manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; |
| ● | “boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons; |
| ● | excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and |
| ● | the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses. |
FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock.
The Financial Industry Regulatory Authority (referred to as FINRA) has rules requiring that, in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative or low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA has indicated its belief that there is a high probability that speculative or low-priced securities will not be suitable for at least some customers. If these FINRA requirements are applicable to us or our securities, they may make it more difficult for broker-dealers to recommend that at least some of their customers buy our Common Stock, which may limit the ability of our stockholders to buy and sell our common stock and could have an adverse effect on the market for and price of our common stock.
27
ITEM 1B. UNRESOLVED STAFF COMMENTS
As a Smaller Reporting Company, the Company is not required to include the disclosure under this Item 1B. Unresolved Staff Comments. At this time, there are no unresolved staff comments.
ITEM 2. PROPERTIES
The Company leases its virtual office space at 2450 Colorado Ave., Suite 100E, Santa Monica, CA 90404 on a month-to-month lease for $311 per month.
Assignment of lease agreement
On May 17, 2022, Mahaser LLC (“Assignee”) entered into an assignment and assumption of lease agreement by and between 2819 Coldwater LLC (“Assignor”), Sunset Place Holdings LLC (“Lessor”) and Yossi Attia (“Guarantor”). Pursuant to the agreement, Lessor agreed to lease to Assignor certain Standard Industrial/Commercial Multi-Tenant Lease – Gross agreement dated February 7, 2022 (the “Lease”) and expiring on January 31, 2024, which premises commonly known as 8265 Sunset Boulevard, Suite #107, West Hollywood, CA 90046. The base rent payment shall equal $4,100 per month and share of common area operating expense shall equal $200 per month. Guarantor has guaranteed payment of Assignor’s obligations under the Lease and Assignor assigned all of its right, title and interest in the Lease to Assignee and Assignee assumed Assignor’s obligations under the Lease.
ITEM 3. 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.
28
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 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. 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 elected to sell UGO to a third-party effective July 1, 2020 (See Note 17). 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. The Company is in default on this note.
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. SURG is the clearing house for UGO. 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 January 28, 2022 the court awarded the Company an injunction against RWJ defendants, where all fee funds generating from resale should be deposited into GBT blocked account, and therefore RWJ Defendants cannot use these funds without court order.
The Company entered into the Confidential Settlement Agreement and Mutual Release (“RJW Agreement”) by and between RWJ Advanced Marketing, LLC, Robert Warren Jackson, Gregory Bauer (collectively the “RJW Parties”) and W.L. Petrey Wholesale Company, Inc., (“Petrey”) on one hand; and GBT Technologies Inc., on behalf of itself and its agents (collectively the GBT Parties”), on the other hand. The Company the RJW Agreement effective September 26, 2022 with final signatures delivered to the Company on or about October 5, 2022. Pursuant to the RJW Agreement, the parties have agreed to settle, release, and otherwise resolve all known or unknown claims between them and agreed to jointly stipulate, move, or otherwise dismiss the lawsuits filed in the United States District Court of Nevada (Case No. 2:20-cv- 02078), in the Superior Court of the State of California, County of Los Angeles, Central District (Case Nos. 19STCV03320 and 20STCV32709), and in the United States District Court of the Central District of California (Case No. 2:20-cv-09399-RGK-AGR) with prejudice. The parties agreed and stipulated to release all funds currently being held in a blocked account of $19,809 with 50% distributed to the RWJ Parties and 50% distributed the Company or its assignee. The Parties also entered into the InComm Assignment Agreement (“IAA”) which assigned, transferred and conveyed all proceeds derived from the RWJ Parties’ agreements with Interactive Communications International, Inc., and its affiliate Hi Technology Corp., including but not limited to that Master Distribution and Service Agreement between Interactive Communications International, Inc. and Petrey d/b/a UGO-HUB dated August 29, 2016, as amended (collectively referred to as the “InComm Proceeds”), and which shall divide the InComm Proceeds 90% to the Company or its assignee and 10% to the RWJ Parties or their assignee. Finally, the Company agreed to pay $40,000 to the RWJ Parties or their assignee. The Company accrued $49,847 expenses represent the final amounts due to the RJW Parties.
The Company under a different settlement agreement with SURG, committed to assign the IAA. As such, on October 5, 2022 and as cumulation of all settlement agreements the Company issued a request to SURG regarding release of certain escrow funds and the execution of an assignment of rights as contemplated in the afore referenced agreement.
29
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”) 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 three years (the “Warrant”) on a cash-only basis at an exercise price of $100 per share with respect to 50,000 Warrant Shares, $75 with respect to 75,000 Warrant Shares and $50 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 (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). 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 $4,034,444 plus interest of 7.25% accrued from May 15, 2019 and costs fee 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 attorney’s fees $48,844 and costs $716. The Company filed an answer on August 11, 2020.
On October 16, 2020, Investor motion for attorney’s fees $48,844 and costs $716 was denied. This case is still pending with the Federal court and the Court has not taken any substantive action in the matter as of the date of this report.
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 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. On February 27, 2020 GBT Technologies, S.A., as successor in interest to Hermes Roll, LLC 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.
30
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 a 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 the settlement agreements, as the Company alleged that SURG owes an additional $240,000 which was due and owing under the settlement agreements. On June 24, 2021, per the June 23, 2020 Agreement, the Company together with AltCorp 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. Subsequently, SURG was a party to two lawsuits in state District Court, the Eighth Judicial District Court for Clark County, Nevada involving AltCorp, Stanley and Glen Eagles Acquisition LP (the “AltCorp Parties.”). Each of these lawsuits were ultimately disputes relating to the total consideration SURG was to pay the Company under the APA. On October 18, 2021, the AltCorp Parties, the Company, and SURG entered into a Memorandum of Understanding (the “MOU”) to set up a framework for an attempt to settle the two lawsuits.
On December 22, 2021 (the “Effective Date”), pursuant to the framework in the MOU, the AltCorp Parties (and an additional third party), the Company, ECS, and SURG, Kevin Brian Cox (SURG’s Chief Executive Officer) – in his individual capacity, entered into a Resolution of Purchase, Mutual Release, and Settlement Agreement (the “Final Settlement Agreement”) to settle the two lawsuits and resolve all disputes related to the consideration paid by SURG to the Company in connection with the APA. Full and complete payment under the Final Settlement Agreement was received on or about January 7, 2022 and a stipulation and order for dismissal was filed dismissing the action on or about February 1, 2022.
On or about July 9, 2021 the Company filed a lawsuit in District Court in Clack County Nevada – Department 19 (Case number A-21-837631-C) against Terry Taylor and TTSG Holdings, Inc for breach of contract, breach of covenant of Good Faith and Fair Dealing, Unjust Enrichment and declaratory relief for failure of providing consulting services per contract they entered. The Company is demanding the return of 240,000 shares issued, return of the $5,000 payments, recission of the consulting agreement, and attorney’s fees and costs. As Terry Taylor and TTSG Holdings failed to appear to a notice of deposition, the Company filed for a summary judgment. On January 20, 2023 the court issued a $708,821 writ of execution against Terry Taylor and TTSG
On or about February 2, 2022, GBT was served with a First Amended Complaint (the “Complaint”) initiated by Gregory Mancuso and Rainer AG, a Swiss corporation, Case No. 21SMCV01430, filed in the Superior Court of the State of California for the County of Los Angeles. The Complaint names a number of different parties, including GBT, and asserts, among other things, claims for conversion, unjust enrichment, breach of contract, and breach of implied covenant of fair dealing, which Plaintiffs allege arise out of a brokerage agreement entered into between Plaintiff Rainer AG and co-defendant Consul Group re Dos Mil Veintiuno S.R.L (“Consul”). GBT was sued under an alter ego theory of liability, and its only involvement in the above-referenced chain of events seems to be that its shares were deposited with Rainer by Consul upon the opening of the brokerage account. GBT’s responsive pleading is due on March 17, 2022. GBT will be filling a demurrer to the First Amended Complaint based on a variety of deficiencies with the First Amended Complaint, and will ask the Court to dismiss the claims against GBT.
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 pledged 4,006 restricted shares of its common stock valued at $7,610,147 (based on the closing price on the grant date) for three years for 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 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 principle to return the pledged 4,006 restricted shares to the Company for cancellation. The 4,006 restricted shares have not yet been returned to the Company as of December 31, 2022.
ITEM 4. MINE SAFERY DISCLOSURES
Not applicable.
31
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
The Company is authorized to issue 10,000,000,000 of its $0.00001 par value common stock and 20,000,000 shares of its $0.00001 par value preferred stock Series B and 10,000 shares of its $0.00001 par value preferred stock Series C, 100,000 shares of its $0.00001 par value preferred Series D shares, 2,000,000 of its $0.00001 par value preferred Series G shares and 40,000 of its $0.00001 par value preferred Series H shares. As of December 31, 2022, 1,535,593,440 shares of common stock, as well as 45,000 shares of preferred stock Series B, 700 shares of preferred stock Series C, zero shares of preferred stock Series D, zero shares of preferred stock Series G and 20,000 shares of preferred stock Series H were issued and outstanding. The Board of Directors reserves the right to issue shares of preferred stock in the future indicating preference or rights as appropriate.
Market Information
Our common stock commenced quotation on the OTC PINK under the symbol “GTCH”. The Company’s subsequent symbol was “GOPH”. The following table sets forth the range of high and low prices per share of our common stock for each period indicated (after given effect to reverse split of 1 for 100 split in 2019 and 1 for 50 in 2021)
| Quarters Ended | Mar 31 | Jun 30 | Sep 30 | Dec 31 | |||||||||||||||||||||||||||||
| High | Low | High | Low | High | Low | High | Low | ||||||||||||||||||||||||||
| 2022 | $ | 0.350 | $ | 0.107 | $ | 0.114 | $ | 0.002 | $ | 0.007 | $ | 0.001 | $ | 0.002 | $ | 0.001 | |||||||||||||||||
| 2021 | $ | 5.00 | $ | 0.75 | $ | 1.70 | $ | 0.75 | $ | 0.90 | $ | 0.35 | $ | 0.40 | $ | 0.09 | |||||||||||||||||
Record Holders
The number of holders of record for our common stock as of December 31, 2022 was 92.
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.
Securities Authorized for Issuance Under Equity Compensation Plans
We presently do not have equity compensation plans authorized.
32
Transfer agent change
The Company transfer agent is Nevada Agency and Transfer Company (“NATCO”) with a business address at 50 West Liberty Street, Suite 880, Reno NV 89501; NATCO’s website is www.natco.com, and their phone number is (775) 322-0626.
Penny Stock
Our common stock is considered “penny stock” under the rules of the SEC under the Securities Exchange Act of 1934. The SEC adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5, other than securities registered on certain national securities exchanges or quoted on the NASDAQ Stock Market System, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the Commission, that:
| ● | contains a description of the nature and level of risks in the market for penny stocks in both public offerings and secondary trading; |
| ● | contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of Securities’ laws; contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; |
| ● | contains a toll-free telephone number for inquiries on disciplinary actions; |
| ● | defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and |
| ● | contains such other information and is in such form, including language, type, size and format, as the Commission shall require by rule or regulation. |
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with:
| ● | bid and offer quotations for the penny stock; |
| ● | the compensation of the broker-dealer and its salesperson in the transaction; |
| ● | the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the marker for such stock; and |
| ● | monthly account statements showing the market value of each penny stock held in the customer’s account. |
33
In addition, the penny stock rules that require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgement of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitably statement.
These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock.
Recent Issuances of Unregistered Securities
For the year ended December 31, 2022, the Company issued 222,091,971 shares of Company common stock upon the conversion of the convertible promissory note and accrued interest to 1800 Diagonal Lending.
For the year ended December 31, 2022, the Company issued 150,000,000 shares of Company common stock to GBT Tokenize for joint venture agreement between Magic International Argentina FC, S.L. The value of the shares of $1,500 was determined based on the FV of the Company’s common stock.
For the year ended December 31, 2022, the Company issued 5,500,000 shares of Company common stock to GHS from the Equity Financing Agreement for gross consideration of $231,868, The value of the shares of was determined based on the Equity Financing.
For the year ended December 31, 2022, the Company issued 500,000,000 shares of Company common stock to Metaverse for certain equity method investment. The value of the shares of $5,000 was determined based on the FV of the Company’s common stock.
For the year ended December 31, 2022, the Company issued 8,580,434 shares of Company common stock upon the conversion of the convertible promissory note and accrued interest to Stanley Hills.
For the year ended December 31, 2022, the Company issued 26,343,190 shares of Company common stock upon the conversion of the convertible promissory note and accrued interest to Redstart.
For the year ended December 31, 2022, the Company issued 590,117,647 shares of Company common stock upon the conversion of the convertible promissory note and accrued interest to IGOR Corp.
34
We claimed exemption from registration under the Securities Act for the sales and issuances of these securities under Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder, in that such sales and issuances did not involve a public offering. All of the purchasers of unregistered securities for which we relied on Section 4(a)(2) and/or Regulation D represented that they were accredited investors as defined under the Securities Act. We claimed such exemption on the basis that (a) the purchasers in each case represented that they intended to acquire the securities for investment only and not with a view to the distribution thereof and that they either received adequate information about the registrant or had access, through employment or other relationships, to such information and (b) appropriate legends were affixed to the stock certificates issued in such transactions.
ITEM 6. RESERVED
ITEM 7. 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 Annual Report on Form 10-K/A 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. The audited statements of operations for the years ended December 31, 2022 and 2021 are compared in the sections below.
35
General Overview
GBT Technologies Inc. (formerly Gopher Protocol 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, and wireless mesh networks, with an AI portfolio. The Company derived revenues from (i) the provision of IT consulting services; and (ii) from selling electronic products through e-commerce platforms like Amazon and eBay.
Recent Developments
Due to litigation with Discover Fund, in April 2020, GBT was forced to make the decision of changing the Company’s direction by developing a portfolio of intellectual property within the area of microchips technology and design. The years 2019 and 2020 were compounded with recuring legal issues and COVID-19 restrictions creating extremely difficult times and challenges. GBT focused on its core competency in the area of Research & Development (“R&D”) creating an IP portfolio combined of patents, trade secrets and prototypes further defining GBT’s new mission. GBT is now developing IP in areas which will leverage its competencies and experience with the goal of diversifying in various fast-growing semiconductor industries in today’s leading, growing market segments.
GBT currently holds 10 patents and has 25 submissions within in the following domains: tracking, 3-D Microchip Design (semiconductors), EDA Software Tools and subsets with, cyber security, ID, telehealth, AI, computer vision, IoT, mesh networks and sectors which it believes are in demand. The Company has been delivering a steady stream of new IPs for portfolio expansion developing new ideas and successful patents, over the past two years.
Going forward, GBT will focus on expanding the families of various patents and concentrating on strategic potential partnerships with the goal of integrating these technologies into a broad marketplace, one that will potentially diversify the risk within these areas:
| 1. | Build a portfolio pipeline of IP related to microchip technology. |
| 2. | Seek to actively introduce this new technology to strategic partners, large companies and VC’s creating market opportunities. |
| 3. | Using market diversification to create access to new fields and future growth. |
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. 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. 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.
36
In addition, GBT Tokenize and Gonzalez entered into a Consulting Agreement in which Gonzalez is engaged to provide services for $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 year ended December 31, 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.
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. At December 31, 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.
Magic Agreement
As explained above, on April 11, 2022 the Company, through its wholly owned subsidiary, Greenwich International Holdings, a Costa Rica corporation (“Greenwich”), entered into a Master Joint Venture and Territorial License Agreement (the “Tokenize Agreement”) with Magic International Argentina FC, S.L. (“Magic”) and Tokenize which replaced a prior joint venture entered between the parties.
The purpose of 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 world, which Technology Portfolio was previously licensed to the Company for the State of California.
The Tokenize Agreement provides that the Company shall contribute 150,000,000 shares of common stock of the Company (“GBT Shares”) to Tokenize. Sergio Fridman is the manager of Magic and the beneficial owner of all outstanding securities of Magic. Magic will contribute cash of $250,000 into Tokenize for a promissory note and agreed to further fund Tokenize with all funds reasonably needed for implementation of the business purposes as described in the Tokenize Agreement. The GBT Shares will not be transferable for a period of five years.
Magic and the Company each own 50% of the outstanding shares of common stock of Tokenize. The Company pledged its 50% ownership in Tokenize and its 100% ownership of Greenwich (the “Pledged Securities”) to Magic for providing that Magic may take possession of such Pledged Securities in the event the Company executes, delivers and performs any future agreement or document or judgement resulting in the creation of any lien, pledge, mortgage, claim, charge or encumbrance upon any assets of the Company. The Company shall appoint two directors and Magic shall appoint one director of Tokenize.
37
On June 16, 2022 the parties amended the Tokenize Agreement to further define the constitution of the Board of Directors. As such, Section 4.2 of the Tokenize Agreement was amended and restated to provide that the Board of GBT Tokenize Corp. shall consist of two Directors, one of whom shall be appointed by GBT Tokenize Corp. and the other shall be appointed by the Company
MetAlert (prior name) GTX Agreement
On April 12, 2022, GBT Tokenize Corp (“GBT Tokenize”), a Nevada corporation which the Company owns 50% of the outstanding shares of common stock, entered into a series of agreements with GTX Corp (“GTX”) and various note holders of GTX pursuant to which Tokenize acquire convertible promissory notes of GTX of $100,000 (the “GTX Notes”). In addition, GBT Tokenize acquired 76,923 (GBT acquired 5,000,000 in the original deal, where GTX to perform a corporate action of 1:65 reverse split on September 20, 2022) shares of common stock of GTX for $150,000 - in total FV of $12,538 as of December 31, 2022 based on level 1 stock price in OTC markets.
The GTX Notes bear 10% interest and 50% of the principal may be converted into shares of common stock on a one-time basis at a conversion price of $0.01 per share. The remaining 50% of the principal must be paid in cash. The closing occurred on April 12, 2022.
GTX changed its name into MetAlert Inc. on or about September 20, 2022.
On September 30, 2022, GBT Tokenize, loaned MetAlert Inc., a Nevada corporation (f/k/a GTX Corp.) (“MetAlert”) $90,000. For such loan, MetAlert provided Tokenize with a promissory note of $90,000 which is due and payable together with interest of 5% upon the earlier of September 19, 2023 or when declared by Tokenize.
Surge Payment
On January 7, 2022, the Company received payments from Surgepays Inc. (formerly known as Surge Holdings, Inc.) in total of $3,750,000 pursuant to the terms of the Settlement Agreement dated December 22, 2021. The $3,750,000 was recorded as other receivable as of December 31, 2021. The entire balance of $3,750,000 was paid in January 2022.
On January 28, 2022, the Company entered into a Stock Purchase Agreement with Marko Radisic (the “Seller”) and Touchpoint pursuant to which the Company acquired 10,000 shares of Series A Convertible Preferred Stock (the “Touchpoint Preferred”) from the Seller for $125,000. The Touchpoint Preferred is convertible into 10,000,000 shares of common stock of Touchpoint. On or about February 23, 2022 Touchpoint perform automatic conversion of Series A Convertible Preferred Stock into 10,000,000 shares of common stock of TGHI.
On February 18, 2022, the Company, effective March 1, 2022 entered into a Revenue RSA with MAHASER pursuant to which the Company acquired the opportunity to share in revenues generated by MAHASER with respect to e-commerce sales through the world biggest online retail platform in the United States of America. MAHASER owns an e-commerce platform as a store which is the legal, exclusive owner of Ravenholm Electronics. The Company will operate the e-commerce platform and will be entitled to 95% for all revenue generated by and received by MAHASER for the period from March 1, 2022 through December 31, 2022. The RSA provides that the Company will be entitled to appoint a manager to MAHASER. As consideration, the Company will pay MAHASER $100,000 no later than March 1, 2022 and issue MAHASER 1,000,000 shares of the Company’s restricted common stock. The Company shall have no obligations to make any further payments to MAHASER. For any further extensions, the Company will have the option to extend the RSA for annual payment of $200,000, which can be payable with the Company’s shares of common stock payable based on 20 days VWAP prior to issuance. On March 16, 2022 the parties entered into Amendment No. 1 to the to the RSA, where all consideration to be paid or issued to MAHASER will be deferred until such time where the e-commerce platform generated in cumulative revenue of $1,000,000. The Company accounts for the RSA as a consolidated variable interest entity (“VIE”) for the period ended June 30, 2022. On March 31, 2022, the parties entered into Amendment No. 2 to the RSA, where Mahaser agreed to pay the Company 100% per year for all revenue generated by and received by seller from the sales by Amazon within the United States of America as follows for the period from March 1, 2022 through December 31, 2022. The Company will be responsible for 100% of the cost of goods sold as well. In addition, the Company is entitled to earn 100% revenues and cost of goods sold of the test run period from February 1, 2022 to February 28, 2022.
38
On February 22, 2022, the Company entered into an Intellectual Property License and Royalty Agreement with Touchpoint pursuant to which the Company granted TGHI a worldwide license for its technologies for a term of five years in the domains of Internet of Things (IoT) and Artificial Intelligence enabled mobile technologies pertaining to the Company’s digital currency technology (the “Technology”). GBT will charge TGHI earned royalties based on actual uses by TGHI of the Technology resulting from revenue attributable to the use, performance or other exploitation of the Technology, to the extent applicable, after deducting any taxes that the Company may be required to collect, and deducting any international sales, goods and services, value added taxes or similar taxes which the Company is required to pay, if any, excluding deductions for taxes on the Company net income. TGHI agreed to issue the Company 10,000,000 shares of common stock of TGHI for the Company entering this Intellectual Property License and Royalty Agreement.
Equity Purchase Agreement and Registration Rights Agreement
On December 17, 2021 (the “Effective Date”), the Company entered into an equity financing agreement (the “Equity Financing Agreement”) and a registration rights agreement (the “Registration Rights Agreement”) with GHS Investments LLC (“GHS”), pursuant to which GHS shall purchase from the Company, up to that number of shares of common stock of the Company (the “Shares”) for $10,000,000, subject to certain limitations and conditions set forth in the Equity Financing Agreement from time to time over of 24 months after an effective registration of the Shares with the Securities and Exchange Commission (the “SEC”) pursuant to the Registration Rights Agreement, is declared effective by the SEC (the “Contract Period”).
The Equity Financing Agreement grants the Company the right, from time to time at its sole discretion (subject to certain conditions) during the Contract Period, to direct GHS to purchase shares of Common Stock on any business day (a “Put”), provided that at least ten trading days has passed since the most recent Put. The purchase price of the shares of Common Stock contained in a Put will be 90% of the lowest daily volume weighted average price (VWAP) of the Company’s Common Stock during the ten consecutive trading days preceding the receipt by GHS of the applicable Put notice. Such sales of Common Stock by the Company, if any, may occur from time to time, at the Company’s option, during the Contract Period. Subject to the satisfaction of certain conditions set forth in the Equity Financing Agreement, on each Put the Company will deliver a number of Shares equaling 110% of the dollar amount of each Put. The maximum dollar amount of each Put will not exceed 200% of the average daily trading dollar volume for the Company’s Common Stock during the ten trading days preceding the Trading Day that GHS receives a Put. No Put will be made in an amount equaling less than $10,000 or greater than $500,000. Puts are further limited to GHS owning no more than 4.99% of the outstanding stock of the Company at any given time. The Equity Financing Agreement and the Registration Rights Agreement contain customary representations, obligations, rights, warranties, agreements and conditions of the parties. The Equity Financing Agreement terminates upon any of the following events: when GHS has purchased $10,000,000 in the Common Stock of the Company pursuant to the Equity Financing Agreement; on the date that is 24 calendar months from the date the Equity Financing Agreement was executed.
Actual sales of shares of Common Stock to GHS under the Equity Financing Agreement will depend on a variety of factors to be determined by the Company from time to time, including, among others, market conditions, the trading price of the Common Stock and determinations by the Company as to the appropriate sources of funding for the Company and its operations. The Company issued 463,303 shares with net proceeds of $66,942 from the Equity Financing Agreement in February 2022.
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 has been expanding globally. COVID-19 is considered to be highly contagious and poses a serious public health threat.
39
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 were 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.
In the first quarter of 2020, the COVID-19 outbreak has caused disruptions in our development operations, which have resulted in delays on exiting projects. A prolonged disruption or 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 will be effectively contained, nor can we predict the severity and duration of its impact. 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.
Risks and Uncertainties
Management is currently evaluating the impact of the COVID-19 pandemic on the Company and has concluded that while it is reasonably possible that the virus could have a negative effect on the Company’s financial position, results of its operations, and/or search for a target company, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
In February 2022, the Russian Federation and Belarus commenced a military action with the country of Ukraine. As a result of this action, various nations, including the United States, have instituted economic sanctions against the Russian Federation and Belarus. Further, the impact of this action and related sanctions on the world economy are not determinable as of the date of these financial statements. The specific impact on the Company’s financial condition, results of operations, and cash flows is also not determinable as of the date of these financial statements.
40
Consideration of Inflation Reduction Act Excise Tax
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases of stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax.
Results of Operations:
Years ended December 31, 2022 and 2021
A comparison of the statements of operations for the year ended December 31, 2022 and 2021 is as follows:
| Years Ended December 31, | Change | |||||||||||||||
| 2022 | 2021 | $ | % | |||||||||||||
| Sales | $ | 1,152,555 | — | $ | 1,152,555 | 100 | % | |||||||||
| Consulting income - related party | 45,000 | 180,000 | (135,000 | ) | (300 | %) | ||||||||||
| Total Sales | 1,197,555 | 180,000 | 1,017,555 | 85 | % | |||||||||||
| Cost of sales | 817,754 | — | 817,754 | 100 | % | |||||||||||
| Gross Profit | 379,801 | 180,000 | 199,801 | 53 | % | |||||||||||
| Operating | ||||||||||||||||
| expenses | 3,178,160 | 18,655,514 | (15,477,354 | ) | (487 | %) | ||||||||||
| Loss (income) from operations | 2,798,359 | 18,475,514 | 15,677,155 | (560 | %) | |||||||||||
| Other expense (income), net | (8,122,215 | ) | 15,454,919 | 23,577,134 | 290 | % | ||||||||||
| Loss (income) before provision for income taxes | (5,323,856 | ) | 33,930,433 | 39,254,289 | 737 | % | ||||||||||
| Provision for income taxes | — | — | — | — | ||||||||||||
| Loss (income) from continued operations | (5,323,856 | ) | 33,930,433 | 39,254,289 | 737 | % | ||||||||||
| Discontinued operations | — | — | — | |||||||||||||
| Net loss (income) | $ | (5,323,856 | ) | $ | 33,930,433 | $ | 39,254,289 | 737 | % | |||||||
41
Sales for both the years ended December 31, 2022 and 2021 were $1,152,555 and $0. The Consulting income from related party for both the years ended December 31, 2022 and 2021 was $45,000 and $180,000. Sales are derived from providing IT consulting services to a related party and sales from amazon and Ebay.
Operating expenses for the year ended December 31, 2022 were $3,178,160, compared to $18,655,514 for the same period in 2021. The decrease of $15,477,354 or 487% was principally due to no impairment of assets, decrease in marketing expenses of $477,279, increase in general and administrative expenses of $759,654, and decrease in professional expenses of $309,729 and a gain in bad debt by $50,000 for the year ended December 31, 2022.
Other expense for the year ended December 31, 2022 was $8,122,215, an increase of $23,577,134 or 290% from $15,454,919 for the same period in 2021. The increase is principally due to i) a increase of related party licensing income; ii) reduction of amortization of debt discounts by $442,247; iii) reduction of change in FV of derivative liability by $6,594,370; iv) reduction in interest expense and financing costs of $969,629; and v) gain in on RJW settlement of $3,012,355.
Net income for the year ended December 31, 2022 was $5,323,856 compared to the net loss of $33,930,433 for the same period in 2021 due to the factors described above.
Liquidity and Capital Resources
Going Concern
The accompanying CFS have been prepared assuming the Company will continue as a going concern. The Company has an accumulated deficit of $299,257,917 and has a working capital deficit of $18,522,046 as of December 31, 2022, 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 CFS 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.
Our cash was $106,639 and $155,106 at December 31, 2022 and 2021, respectively. Cash used in operating activities during the year ended December 31, 2022 was $138,293, compared to $1,369,114 during the same period in 2021. The amount used in operating activities for the year ended December 31 2022 was primarily related to a net income of $5,323,856 and offset by amortization of debt discount of $442,247, excess of debt discount and financing costs of $34,175, change in FV of derivative liability of $6,594,370, change in FV of market equity security of $308,802, change on settlement of $3,012,633, and net working capital increase of $9,866,535. Our working capital position changed by going from a working capital deficit of $28,388,581 at December 31, 2021 to a working capital deficit of $18,522,046 at December 31, 2022.
The amount used in operating activities for the year ended December 31, 2021 was primarily related to a net loss of $33,930,433 offset by amortization of debt discount of $824,238, excess of debt discount and financing costs of $136,785, change in FV of derivative liability of $1,339,117, loss on modification of debt of $13,777,480, impairment of assets of $15,400,000, realized gain on disposal of market equity security of $11,000, shares issued for services of 281,748, payment of other income with marketable securities of $800,000, and net working capital decrease of $1,612,950.
42
Cash flows used in investing activities were $275,000 during the year ended December 31, 2022, compared to $0 for the same period in 2021. The increase is due to the investment in marketable securities during the year ended December 31, 2022.
Cash from financing activities for the year ended December 31, 2022 was $364,826, compared to $1,411,186 for the same period in 2021. The increase is due to the issuance of convertible notes in 2022 of $300,000 and proceeds from sales of common stock and related party of 988,094, which is offset by the issuance of notes receivable of $190,000 and repayment of related party of $694,225 and a repayment convertible note of $39,042. Cash from financing activities for the year ended December 31, 2021 was due to the issuance of convertible notes and notes payable in 2021 of $1,517,386 and proceeds from sales of common stock of $106,200.
We obtained a net income of $5,323,856 for the year ended December 31, 2022. In addition, we had a working capital deficit of $18,522,046 and accumulated deficit of $299,257,917 at December 31, 2022.
Equity Purchase Agreement and Registration Rights Agreement
On December 17, 2021 (the “Effective Date”), the Company entered into an equity financing agreement (the “Equity Financing Agreement”) and a registration rights agreement (the “Registration Rights Agreement”) with GHS Investments LLC (“GHS”), pursuant to which GHS shall purchase from the Company, up to that number of shares of common stock of the Company (the “Shares”) for $10,000,000, subject to certain limitations and conditions set forth in the Equity Financing Agreement from time to time over the course of 24 months after an effective registration of the Shares with the Securities and Exchange Commission (the “SEC”) pursuant to the Registration Rights Agreement, is declared effective by the SEC (the “Contract Period”).
The Equity Financing Agreement grants the Company the right, from time to time at its sole discretion (subject to certain conditions) during the Contract Period, to direct GHS to purchase shares of Common Stock on any business day (a “Put”), provided that at least ten trading days has passed since the most recent Put. The purchase price of the shares of Common Stock contained in a Put will be 90% of the lowest daily volume weighted average price (VWAP) of the Company’s Common Stock during the ten consecutive trading days preceding the receipt by GHS of the applicable Put notice. Such sales of Common Stock by the Company, if any, may occur from time to time, at the Company’s option, during the Contract Period. Subject to the satisfaction of certain conditions set forth in the Equity Financing Agreement, on each Put the Company will deliver a number of Shares equaling 110% of the dollar amount of each Put. The maximum dollar amount of each Put will not exceed 200% of the average daily trading dollar volume for the Company’s Common Stock during the ten trading days preceding the Trading Day that GHS receives a Put. No Put will be made in an amount equaling less than $10,000 or greater than $500,000. Puts are further limited to GHS owning no more than 4.99% of the outstanding stock of the Company at any given time. The Equity Financing Agreement and the Registration Rights Agreement contain customary representations, obligations, rights, warranties, agreements and conditions of the parties. The Equity Financing Agreement terminates upon any of the following events: when GHS has purchased $10,000,000 in the Common Stock of the Company pursuant to the Equity Financing Agreement; on the date that is 24 calendar months from the date the Equity Financing Agreement was executed.
Actual sales of shares of Common Stock to GHS under the Equity Financing Agreement will depend on a variety of factors to be determined by the Company from time to time, including, among others, market conditions, the trading price of the Common Stock and determinations by the Company as to the appropriate sources of funding for the Company and its operations.
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 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., for $100,000 to be paid through the delivery of a promissory note payable to the Company (the “Note”), as disclosed in this report. 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 engaged GHS in equity financings to secure additional funds, as disclosed in this report. We expect that we have sufficient capital to maintain operations through the end of 2023. 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. The Company issued 463,303 shares with net proceeds of $66,942 from the Equity Financing Agreement in February 2022.
43
$10,000,000 for GBT Technologies S. A. acquisition (assigned to a third-party Igor 1 Corp)
In accordance with the acquisition of GBT-CR the Company issued a convertible note of $10,000,000. The convertible note bears interest of 6% and is payable at maturity on December 31, 2022. 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 per share). On May 19, 2021, the Company, IGOR 1 Corp, and Gonzalez GBTCR (none related parties) 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 had 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 for modification of debt of $13,777,480 during the year ended December 31, 2021
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 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 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. Per the final settlement agreement with Surge and per allocation of settlement funds agreement, Glen credit balance for the end of 2021 was $662,500 which included $425,000 credit derived from said settlement (which was paid on January 2022), where the open aged credit balance derived from the above, along with cash infusion with Glen as off the date of this report is $512,500. Effective January 2023 the Company agreed with Glen, that the Company will issue Glen a convertible note for it $512,500 entire balance. The convertible note pay interest on the unpaid principal balance hereof at the rate of 10%. Principal and interest on the outstanding balance shall be paid on or prior to December 31, 2023 (the “Maturity Date”). Interest shall be calculated on the basis of a 365-day year and actual days elapsed from the date the balance was created until actual pay-off. In no event shall the interest charged hereunder exceed the maximum permitted under the laws of the State of California. Funding was done or on behalf and order of The Company. The Note has a conversion feature whereby Glen may convert the principal and interest payable hereunder into shares of common stock of the Company at a 15% discount to the market in prior single trade in the last 20 trading days
RWJ Acquisition Note
In connection with the acquisition of RWJ in September 2017, the Company issued a note. The note accrues interest at 3.5%, was due on December 31, 2019 and was secured by the assets purchased in the acquisition. The Company contests the validity of the note, as such the note has not been repaid. The Company entered into a Confidential Settlement Agreement and Mutual Release (“RJW Agreement”) by and between RWJ Defendants and the Company effective September 26, 2022. Said RJW Agreement voided the RWJ acquisition Note in its entirely. (See ITEM 3. LEGAL PROCEEDINGS)
44
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”) 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 per share with respect to 50,000 Warrant Shares, $75 with respect to 75,000 Warrant Shares and $50 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 (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). The Market Price is the average of the five lowest individual daily VWAP 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 $4,034,444 plus interest of 7.25% from May 15, 2019 and costs 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 attorney’s fees $48,844 and cost of $716. The Company filed an answer on August 11, 2020. On October 16, 2020, Investor motion for attorney’s fees $48,844 and cost of $716 was denied. The balance was included in accounts payable for the unearned settlement. As of December 31, 2022, this case is still pending with the Federal court and the Court has not taken any substantive action in the matter as of the date of this report.
45
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”) of $153,600 for $128,000. The Redstart Note No. 1 had a maturity date of November 3, 2021 and the Company agreed to pay interest on the unpaid principal balance of the Redstart Note No. 1 at the rate of 6% 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 year ended December 31, 2021, the entire amount of 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”) of $93,600 for $78,000. The Redstart Note No. 2 had a maturity date of September 15, 2021 and the Company had agreed to pay interest on the unpaid principal balance of the Redstart Note No. 2 at the rate of 6% 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 year ended December 31, 2021, the entire amount of 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”) of $100,200 for $83,500. The Redstart Note No. 3 had a maturity date of December 9, 2021 and the Company had agreed to pay interest on the unpaid principal balance of the Redstart Note No. 3 at the rate of 6% 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 year ended December 31, 2021, the entire amount of Note No. 3 of $100,200 plus accrued interest was converted into 135,582 shares of common stock.
46
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”) of $184,200 for $153,500. The Redstart Note No. 4 had a maturity date of February 5, 2022 and the Company had agreed to pay interest on the unpaid principal balance of the Redstart Note No. 4 at the rate of 6% 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 year ended December 31, 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”) of $106,200 for $88,500. The Redstart Note No. 5 had a maturity date of June 15, 2022 and the Company had agreed to pay interest on the unpaid principal balance of the Redstart Note No. 5 at the rate of 6% 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 year ended December 31, 2021, the entire amount of Redstart Note No. 5 of $106,200 plus accrued interest was converted into 317,837 shares of common stock.
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”) of $106,200 for $88,500. The Redstart Note No. 6 had a maturity date of August 26, 2022 and the Company had agreed to pay interest on the unpaid principal balance of the Redstart Note No. 6 at the rate of 6% 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. During the year ended December 31, 2021, the entire amount of Redstart Note No. 5 of $106,200 plus accrued interest was fully repaid in total cash of $141,782.
47
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”) of $244,500 for $203,750. The Redstart Note No. 7 had a maturity date of December 22, 2022 and the Company had agreed to pay interest on the unpaid principal balance of the Redstart Note No. 7 at the rate of 2.5% from the date on which the Redstart Note No. 7 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 7, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 7. The transactions described above closed on September 28, 2021. The outstanding principal amount of the Redstart Note No. 7 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 7 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 7), the Redstart Note No. 7 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 7. During the year ended December 31, 2022, Redstart converted the principal amount and $244,500 and accrued interest of the convertible note to 8,580,434 shares of the Company’s common stock. As of December 31, 2022, the note had an outstanding balance of $0 and accrued interest of $0.
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 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 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 10% 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 had 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.
48
On February 27, 2020, the Company and Iliad entered into an Amendment to the Iliad Note (See Note 10) 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 had 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 for 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 for $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 for 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 for $1,000. During the year ended December 31, 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 December 31, 2022 and December 31, 2021 was $0 and $0, respectively.
Sixth Street Lending LLC – First Note
On November 8, 2021, the Company entered into a Securities Purchase Agreement with Sixth Street Lending LLC (“Sixth Street”) pursuant to which the Company issued to Sixth Street a Convertible Promissory Note (the “Sixth Street Note”) of $124,200 for $103,500. The Sixth Street Note had a maturity date of February 8, 2023 and the Company had agreed to pay interest on the unpaid principal balance of the note at 6% from the date on which the note is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the note, provided it makes a payment including a prepayment to Sixth Street as set forth in the Sixth Street Note. The outstanding principal amount of the note may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Sixth Street may convert the note into shares of the Company’s common stock at a conversion price equal to 85% of the average of the two lowest trading prices with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Sixth Street Note), the note shall become immediately due and payable and the Company shall pay to Sixth Street, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Sixth Street Note. As of December 31, 2022, the entire note was converted into 26,343,190 shares of the Company’s common stock.
49
Outstanding Notes
$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% and is payable at maturity on December 31, 2021. At the election of the holder, the convertible note can be converted into a maximum of 20,000 shares of Series H Preferred Stock. Each share of Series H Preferred Stock is convertible, at the option of the holder but subject to the Company increasing its authorized shares of common stock, into such number of shares of common stock of the Company as determined by dividing the Stated Value ($500 per share) by the conversion price ($500 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 had agreed to (i) extend the GBT convertible note maturity date to December 31, 2022, (ii) amend the GBT convertible note terms to include a beneficial ownership blocker of 4.99% and a modified conversion feature to the GBT convertible note with 15% discount to the market price during the 20 trading day period ending on the latest complete trading day prior to the conversion date and (iii) provided for an assignment of the GBT convertible note by Gonzalez to a third party. As a result of the change in terms of this convertible note, the Company took a charge related to the modification of debt of $13,777,480 during the year ended December 31, 2021.
During the year ended December 31, 2021, IGOR 1 converted $1,284,600 of the convertible note into 4,185,650 shares of the Company’s common stock. 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).
During the year ended December 31, 2022, IGOR 1 converted $1,659,669 of the convertible note into 590,117,647 shares of the Company’s common stock.
As of December 31, 2022, the note had an outstanding balance of $6,395,531 and accrued interest of $2,027,148.
Sixth Street Lending LLC named changed - 1800 Diagonal Lending LLC - Second Note
On May 5, 2022, the Company entered into a Securities Purchase Agreement with 1800 Diagonal Lending LLC, an accredited investor (“DL”), pursuant to which the Company issued to DL a Convertible Promissory Note (the “DL Note”) of $244,500 for $203,500. The DL Note had a maturity date of August 4, 2023 and the Company agreed to pay interest on the unpaid principal balance of the DL Note at 6.0% from the date on which the DL Note is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the DL Note at any time from the Issue Date and continuing through 180 days following the Issue Date, provided it makes a payment including a prepayment premium to DL as set forth in the DL Note. The transactions described above funded on May 9, 2022.
50
The outstanding principal amount of the DL Note may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, DL may convert the DL Note into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price during the 20-day period immediately preceding the date of conversion. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the DL Note), the DL Note shall become immediately due and payable and the Company shall pay to DL, in full satisfaction of its obligations hereunder, additional amounts as set forth in the DL Note. In no event shall DL be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by DL and its affiliates would exceed 4.99% of the outstanding shares of the common stock of the Company.
Unless the Company shall have first delivered to DL, at least 48 hours prior to the closing of any equity (or debt with an equity component) financing in an amount less than $150,000 (“Future Offering”), written notice describing the proposed Future Offering and providing the Buyer an option during the 48 hour period following delivery of such notice to DL the securities being offered in the Future Offering on the same terms as contemplated by such Future Offering then the Company is restricted from conducting the Future Offering during the period beginning on the Issue Date and ending nine months following the Issue Date.
During the year ended December 31, 2022, 1800 Diagonal lending converted $130,400 of the convertible note into 222,091,971 shares of the Company’s common stock.
As of December 31, 2022, the note had an outstanding balance of $114,100 and accrued interest of $7,674.
Sixth Street Lending LLC - Third Note
On September 13, 2022, the Company entered into a Securities Purchase Agreement (dated September 9, 2022) with 1800 Diagonal Lending LLC, an accredited investor (“DL”) pursuant to which the Company issued to DL a Promissory Note (the “DL Note”) of $116,200 with an original issue discount of $12,450 resulting in net proceeds of the Company of $103,750. The DL Note had a maturity date of September 9, 2023 and the Company agreed to pay interest on the unpaid principal balance of the DL Note at the rate of 12.0% from the date on which the DL Note is issued (the “Issue Date”). A one-time interest charge of 12% or $13,944 was applied on the Issue Date to the principal amount owed under the DL Note. Accrued, unpaid interest and outstanding principal, subject to adjustment, shall be paid in ten payments of $13,014.40 resulting in a total payback to DL of $130,144. The first payment is due October 30, 2022 with nine subsequent payments each month thereafter. The Company shall have a five-day grace period with respect to each payment. The Company has right to accelerate payments or prepay in full at any time with no prepayment penalty. This DL Note shall not be secured by any collateral or any assets of the Company. The outstanding principal amount of the DL Note may not be converted into the Company common shares except in the event of default. In the event of default on the DL Note, DL may convert the DL Note into shares of the Company’s common stock at a conversion price equal to 75% of the lowest trading price with a 10-day look back immediately preceding the date of conversion. In addition, upon the occurrence and during the continuation of an event of default (as defined in the DL Note), the DL Note shall become immediately due and payable and the Company shall pay to DL, in full satisfaction of its obligations hereunder, additional amounts as set forth in the DL Note. In no event shall DL be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by DL and its affiliates would exceed 4.99% of the outstanding shares of the common stock of the Company.
During the year ended December 31, 2022, the company paid back $39,043 to 1800 Diagonal lending.
As of December 31, 2022, the note had an outstanding balance of $77,157 and an interest of $13,944.
Sixth Street Lending LLC - Fourth Note
51
On March 1, 2023, the Company entered into a Securities Purchase Agreement, with DL pursuant to which the Company issued to DL a Promissory Note (the “DL Note”) $59,408 with an original issue discount of $6,258 resulting in net proceeds of the Company of $53,150. The DL Note ha a maturity date of June 1, 2024 and the Company agreed to pay interest on the unpaid principal balance of the DL Note at the rate of 12.0% from the date on which the DL Note is issued. A one-time interest charge of 12% or $7,128 was applied on the issuance date of the DL Note to the principal amount owed under the DL Note. Accrued, unpaid interest and outstanding principal, subject to adjustment, shall be paid in ten payments of $6,653.60 resulting in a total payback to DL of $66,536. The first payment is due April 15, 2023 with nine subsequent payments each month thereafter. The Company shall have a five-day grace period with respect to each payment. The Company has right to accelerate payments or prepay in full at any time with no prepayment penalty. This DL Note shall not be secured by any collateral or any assets of the Company. The outstanding principal amount of the DL Note may not be converted into the Company common shares except in the event of default. In the event of default on the DL Note, DL may convert the DL Note into shares of the Company’s common stock at a conversion price equal to 75% of the lowest trading price during the 10-day period immediately preceding the date of conversion. In addition, upon the occurrence and during the continuation of an event of default (as defined in the DL Note), the DL Note shall become immediately due and payable and the Company shall pay to DL, in full satisfaction of its obligations hereunder, additional amounts as set forth in the DL Note. In no event shall DL be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by DL and its affiliates would exceed 4.99% of the outstanding shares of the common stock of the Company.
Sixth Street Lending LLC - Fifth Note
On March 1, 2023, the Company entered into a Securities Purchase Agreement with DL pursuant to which the Company issued to DL a Convertible Promissory Note (the “DL Convertible Note”) of $62,680 for of $52,150. The DL Convertible Note had a maturity date of June 1, 2024 and the Company agreed to pay interest on the unpaid principal balance of the DL Convertible Note at the rate of 6.0% from the date on which the DL Convertible Note is issued until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the DL Convertible Note, provided it makes a payment including a prepayment to DL as set forth in the DL Convertible Note. The outstanding principal amount of the DL Convertible Note may not be converted prior to the period beginning on the date that is 180 days following the date the DL Convertible Note is issued. Following the 180th day, DL may convert the DL Convertible Note into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price during the 20-day period preceding the date of conversion. In addition, upon the occurrence and during the continuation of an event of default (as defined in the DL Convertible Note), the DL Convertible Note shall become immediately due and payable and the Company shall pay to DL, in full satisfaction of its obligations hereunder, additional amounts as set forth in the DL Convertible Note. In no event shall DL be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by DL and its affiliates would exceed 4.99% of the outstanding shares of the common stock of the Company.
SBA Loan
On June 22, 2020, the Company received a loan from the Small Business Administration under the Economic Injury Disaster Loan program related to the COVID-19 relief efforts. The loan bears interest at 3.75%, 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 were 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. On March 17, 2022 the SBA notified it deferred the payments to all COVID-19 EIDL loans will have the first payment due extended from 24-months to 30-months from the date of the note. The Modified Note will continue to bear interest at 3.75% 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. The balance of the note at December 31, 2022 and December 31, 2021 was $350,000 and $350,000 plus accrued interest of $23,497 and $20,399, respectively.
52
As of December 31, 2022 and 2021, the nonrelated party convertible notes had total outstanding balance of $6,397,727 and 8,145,233, net of debt discount, and accrued interest of $2,048,766 and $1,547,924, respectively.
Alpha Eda Note
On November 15, 2020, the Company issued a promissory note to Alpha Eda, LLC (“Alpha”), a related party for $140,000. The note accrues interest at 10%, is unsecured and was due on September 30, 2021. On June 20, 2021 Alpha and the Company extended the note maturity to December 31, 2022. The balance of the note at December 31, 2022 and December 31, 2021 was $140,000 and $140,000 plus accrued interest of $32,178 and $29,104, respectively.
Stanley Hills LLC Convertible Note Payable
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”) from 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 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 had agreed to restrict its ability to convert the Debt and receive shares of common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. During the year ended December 31, 2021, Stanley converted $1,231,466 of its convertible note plus interest into 4,420,758 shares of the Company’s common stock, and during the year ended December 31, 2021, Stanley loaned the Company an additional $325,000. Also, during the year ended December 31, 2021, the Company transferred the SURG shares received as repayment of $800,000 of this convertible note (See Note 5) and converted $126,003 of accrued interest into the principal balance. During the year ended December 31, 2021, Gonzalez assigned all his accrued balances of $424,731 to Stanley in a private transaction that the Company is not part to (See Note 7). The balance of the Stanley convertible note payable at December 31, 2022 and 2021 was $116,605 and $116,605, respectively. The unpaid interest of the Stanley convertible note payable at December 31, 2022 and 2021 was $20,033 and $8,372, respectively. The Stanley debt is secured via a pledge agreement on the SURG shares.
53
Stanley Hills LLC Accounts Payable
On January 1, 2021, SURG, AltCorp and Stanley entered into a Mutual Release and Settlement Agreement (“Settlement Agreement”) after Stanley sued SURG. 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 in 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. The Company paid $650,000 in cash and the remaining by shares. The SURG common stock issued to Altcorp has been pledged since August 12, 2020 for the benefit of Stanley to secure Stanley’s note payable by the Company. Accordingly, the SURG Common Stock issued to AltCorp as a result of the Settlement Agreement were pledged to Stanley. SURG paid $400,000 in cash and $800,000 by shares. The SURG common stock issued to Altcorp have been pledged since August 12, 2020 for the benefit of Stanley to secure Stanley’s note payable by the Company. Accordingly, the SURG Common Stock issued to AltCorp as a result of the Settlement Agreement were pledged to Stanley. The final settlement SURG agreed to make total payments of $4,200,000 to the Company on or prior to January 7, 2022. This $4.2 million amount consists of $450,000 paid by SURG in November and December 2021, $100,000 to be paid on or about January 4, 2022, and $3,650,000 to be paid on or prior to January 7, 2022 of which $375,000 will be held in escrow as described before. The $3,750,000 was recorded as other receivable as of December 31, 2021. As of December 31, 2022 and 2021, the Company has recorded an outstanding payable to Stanley of $927,136 and $1,862,928, respectively, recorded under accrued expenses.
Consulting income for both the years ended December 31, 2022 and 2021 were $45,000 and $180,000. Consulting income are derived from providing IT consulting services to Stanley and selling electronic products through e-commerce platforms like Amazon and eBay.
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.
Presentation of Financial Statements
The accompanying financial statements have been prepared in accordance with U.S. GAAP.
Stock Split
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 this reverse stock split.
54
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 FV 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. These publicly traded equity securities are valued using quoted prices and are included in Level 1.
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 CFS 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 consulting 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. |
E-Commerce sales –
| ● | Identify the contract(s) with a customer. ASC 606 defines a contract as “an agreement between two or more parties that creates enforceable rights and obligations”. Since this is an e-commerce sale on the Amazon of eBay websites, the Company just followed the general terms on Amazon or eBay websites and the customer entered into a contract with the Company based on the product listed on the Amazon or eBay websites; |
| ● | Identify the performance obligations in the contract. According to the contract, the Company is responsible for operation exclusively. The Company is entitled to all revenue which is being paid by Amazon or eBay into a designated bank account and the Company is responsible for all product acquisitions as well as shipments. The only performance obligations were the electronic products that were listed on Amazon or eBay websites and the Company determined each order is one single obligation; |
| ● | Determine the transaction price. The transaction price set to be the listed price on the Amazon or eBay websites.; |
| ● | Allocation the transaction price to the performance obligations in the contract.; and |
| ● | Recognize revenue when the Company satisfies a performance obligation. Sales are being recognized upon shipment. |
55
Unearned revenue
Unearned revenue represents the net amount received for the purchase of products that have not seen shipped to the Company’s customers. On January 28, 2022 awarded the Company with injunction against RWJ Defendants, where all fee funds generating from resale should be deposited into GBT blocked account, and therefore RWJ Defendants cannot use these funds without court order - $19,810 been credited as unearned revenue until court final decision. The Company has $48,921 and $249,384 of unearned revenue at December 31, 2022 and December 31, 2021, respectively.
Contract liabilities
On February 22, 2022, the Company entered into an Intellectual Property License and Royalty Agreement with Touchpoint Group Holdings, Inc. (“Touchpoint” or “TGHI”) pursuant to which the Company granted TGHI a worldwide license for its technologies for a term of five years in the domains of Internet of Things (IoT) and Artificial Intelligence enabled mobile technologies pertaining to the Company’s digital currency technology (the “Technology”). GBT will charge TGHI earned royalties based on actual uses by TGHI of the Technology resulting from revenue attributable to the use, performance or other exploitation of the Technology, to the extent applicable, after deducting any taxes that the Company may be required to collect, and deducting any international sales, goods and services, value added taxes or similar taxes which the Company is required to pay, if any, excluding deductions for taxes on the Company net income. TGHI agreed to issue the Company 10,000,000 shares of common stock of TGHI in the FV of $50,000 as a one-time fee consideration of the Company entering this Intellectual Property License and Royalty Agreement, which was booked contract liabilities and amortized over the five-year term. The Company have yet to earn any royalty income in relation to this agreement as of December 31, 2022. The contract liabilities as of December 31, 2022 and December 31, 2021 was $41,444 and $0, respectively.
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 FV and is then re-valued at each reporting date, with changes in the FV 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 December 31, 2022, 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.
56
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 FV due to their short maturities.
FASB ASC Topic 820, Fair Value Measurements and Disclosures, requires disclosure of the FV of financial instruments held by the Company. FASB ASC Topic 825, Financial Instruments, defines FV, and establishes a three-level valuation hierarchy for disclosures of FV measurement that enhances disclosure requirements for FV 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 FV 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 FV 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 FV 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 FV were determined by using the Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect FV at each period end, with any increase or decrease in the FV being recorded in results of operations as adjustments to FV of derivatives.
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 and its current on all its tax filings federal and state until 2021 inclusive.
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.
57
ITEM 7A. 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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by Item 8 appears at Page F-1, which appears after the signature page to this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Previous independent registered public accounting firm
On May 27, 2022 (the “Termination Date”), the Company terminated BF Rogers CPA PC (the “Former Auditor”) as the independent registered public accounting firm of the Company. Other than an explanatory paragraph included in the Former Auditor’s audit report for the Registrant’s fiscal years ended December 31, 2021 and 2020 relating to the uncertainty of the Company’s ability to continue as a going concern, the audit reports of the Former Auditor on the Company’s financial statements for the fiscal years ended December 31, 2021 and 2020 did not contain an adverse opinion or disclaimer of opinion, and such reports were not qualified or modified as to uncertainty, audit scope, or accounting principle. During the years ended December 31, 2021 and 2020 and through the date of this Current Report on Form 8-K, the Company has not had any disagreements with the Former Auditor on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the Former Auditor’s satisfaction, would have caused them to make reference thereto in their reports on the Company’s financial statements for such years. During the years ended December 31, 2021 and 2020 and through the date of the Termination Date, there were no reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K. The Company requested our Former Auditor furnish us with a letter addressed to the SEC stating whether it agrees with the above statements, which they did.
New independent registered public accounting firm
On May 27, 2022 (the “Engagement Date”), the Company engaged M.S. Madhava Rao (“New Auditor”) as its independent registered public accounting firm for the Company’s fiscal year ended December 31, 2022. The decision to engage the New Auditor as the Company’s independent registered public accounting firm was approved by the Company’s Board of Directors. During the two most recent fiscal years and through the Engagement Date, the Company has not consulted with the New Auditor regarding either:
1. application of accounting principles to any specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report was provided to the Company nor oral advice was provided that the New Auditor concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or
2. any matter that was either the subject of a disagreement (as defined in Regulation S-K, Item 304(a)(1) (iv) and the related instructions) or reportable event (as defined in Regulation S-K, Item 304(a)(1)(v)).
58
ITEM 9A. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We maintain a system of disclosure controls and procedures (as defined in Securities Exchange Act Rule 15d-15I) that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods required under the SEC’s rules and forms and that the information is gathered and communicated to our management, including our Chief Executive Officer (Principal Executive and Financial Officer) to allow for timely decisions regarding required disclosure.
As required by SEC Rule 15d-15(b), our Chief Executive Officer (Principal Executive and Financial Officer), carried out an evaluation under the supervision and with the participation of our management, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rule 15d-14 as of the end of the period covered by this report. Based on the foregoing evaluation, our management concluded that our disclosure controls and procedures are not effective in timely alerting management to material information required to be included in our periodic SEC filings and to ensure that information required to be disclosed in our periodic SEC filings is accumulated and communicated to our management, including our Chief Executive Officer (Principal Executive and Financial Officer) to allow timely decisions regarding required disclosure.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management, consisting of our Chief Executive Officer (Principal Executive and Financial Officer), is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f) and 15d-15(f), is a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and other personnel, 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, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and includes those policies and procedures that:
| ● | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets; |
| ● | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of our financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and |
| ● | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use of disposition of our assets that could have a material effect on the financial statements. |
59
Because of its inherent limitations, ICFR reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Our management assessed the effectiveness of our ICFR reporting as of December 31, 2022. Based on this assessment, management believes that as of December 31, 2022, our ICFR reporting is not effective based on those criteria.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the SEC to provide only management’s report in this annual report.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes during our last fiscal year that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
Not applicable
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Executive Officers and Directors
Below are the names and certain information regarding the company’s executive officers and directors.
Current Directors/Officers:
| Name | Age | Title | ||
| Dr. Danny Rittman | 60 | Chief Technology Officer and Director | ||
| Mansour Khatib | 60 | Chief Executive Officer, Chief Financial Officer and Director |
60
Dr. Danny Rittman is a veteran software architect and integrated circuit technology expert with over 20 years of experience in the technology sector. From 2014 through the present, Dr. Rittman served as the CTO and as a director of the Company, leading the Company’s technological direction and managing teams of mobile software developers. From 2012, through 2014, Dr. Rittman served as a Senior Integrated Circuit Consultant for Qualcomm / Max Linear, managing teams of integrated circuit designers within the mobile technology arena. From 2007 through 2012, Dr. Rittman served as the Founder and CTO of Micrologic Design Automation, leading the company’s technological direction, including architecture, design and development of EDA software tools. From 2002 through 2007, Dr. Rittman served as an Integrated Circuit CAD / Software Senior Consultant for IBM, managing IC back-end projects and leading back-end CAD and QA software tool development and implementation. From 1995 through 2002, Dr. Rittman served as the Founder and VP of R&D for Bind-key Technologies, leading the company’s technological direction, research and development of EDA software tools for integrated circuits and back-end design. Dr. Rittman received a BS in Electrical Engineeri–g - VLSI Design from the University of Bridgeport, graduating Magna Cum Laude in 1992; a MS in Computer Scien–e - VLSI Design, specializing in Automation Algorithms, from La Salle University, graduating Magna Cum Laude in 1996; and a PhD in Computer Scien–e - VLSI Design, specializing in EDA Concepts and Algorithms, from La Salle University, graduating Summa Cum Laude in 1998. Mr. Rittman is the Company’s CTO and director.
Mansour Khatib was appointed as the Company Chief Executive and Financial Officer on April 13, 2020, the Company’s Board of Directors appointed Mansour Khatib, who served as the Chief Marketing Officer and a director of the Company as Chief Executive Officer. Mr. Khatib has also previously served as Interim Chief Executive Officer from May 2018 to July 2018. From 2009 through 2012, Mansour Khatib served as the CEO and CFO of The Merchandise Company, located in Long Beach, California. From 2012 through the present, Mr. Khatib has served as a U.S. Business and Marketing Sales Representative for KB Racking, located in Toronto, Canada. From May 2013 through July 2014, Mr. Khatib served as VP of Marketing for Sun Energy Partners, LLC, developing solar rooftop projects. From July 2014 through the present, Mr. Khatib has served as the CTO for New Energy Ventures, LLC, a company that is developing utility scale projects in New Jersey, California, and smaller projects in Mexico, the Caribbean and Peru. Mr. Khatib received B.A. in Economics from Fachhochschule Wuppertal in Wuppertal, Germany in 1988 and a Bachelors in Electro Engineering & Computer Technology from University Aachen in Aachen, Germany in 1985. Mr. Khatib is the Company’s CEO and director.
Family Relationships
There are no family relationships among our directors and executive officers. There is no arrangement or understanding between or among our executive officers and directors pursuant to which any director or officer was or is to be selected as a director or officer. None of our directors or executive officers have had direct or indirect material interest in any transaction or proposed transaction, in which the Company was or is a proposed participant, exceeding $120,000.
61
Involvement in Certain Legal Proceedings
To our knowledge, during the last ten years, none of our directors and executive officers has:
| ● | Had a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time. |
| ● | Been convicted in a criminal proceeding or been subject to a pending criminal proceeding, excluding traffic violations and other minor offenses. |
| ● | Been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities. |
| ● | Been found by a court of competent jurisdiction (in a civil action), the SEC, or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated. |
| ● | Been the subject to, or a party to, any sanction or order, not subsequently reverse, suspended or vacated, of any self-regulatory organization, any registered entity, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Corporate governance
On December 17, 2015, the Company established a Nominating and Corporate Governance Committee, a Compensation Committee and an Audit Committee (collectively, the “Committees”) and approved and adopted charters to govern each of the Committees.
Currently, there are no members on each of the committees and the board of directors has assumed the roles of each of the committees.
Agreements with Officers and Directors
On June 30, 2015, the Company appointed Dr. Danny Rittman as Chief Technical Officer and a board member. 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. An additional $70,000 shall be payable 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 August 1, 2021, 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 $5,000 per month.
On April 16, 2016 (the “Effective Date”), Mansour Khatib and the Company entered into an Employment Agreement (the “Agreement”) pursuant to which Mr. Mansour Khatib agreed to serve as the Chief Marketing Officer of the Company. Mr. Mansour Khatib was also appointed as a director of the Company on the Effective Date. Pursuant to the terms of the Employment Agreement, Mr. Khatib will receive an annual salary of $100,000 upon the Company generating $1,000,000 in revenue during any three (3) month period. There is no understanding or arrangement between Mr. Khatib and any other person pursuant to which he was appointed as an executive officer and director. Mr. Khatib does not have any family relationship with any director, executive officer or person nominated or chosen by us to become a director or an executive officer. Mr. Khatib has not had direct or indirect material interest in any transaction or proposed transaction, in which the Company was or is a proposed participant, exceeding $120,000.
62
Effective August 15, 2016, the Employment Agreement of Mansour Khatib, our CMO, was amended and restated as follows:
Upon the Company generating $1,000,000 in revenue during any three (3) month period (the “Threshold Requirement”), the Executive will receive salary at the rate of $100,000 annually (the “Base Salary”); provided, however, that that Company shall pay to Executive $5,000 per month (the “Monthly Salary Advance”) commencing on August 15, 2016, which such Monthly Salary Advance shall be an advance on the Base Salary and shall continue to be paid to Executive until such time that the Company launches its Guardian Patch technology into the consumer markets. Once the Threshold Requirement is met, the Base Salary will be payable in equal increments not less often than monthly in arrears and in any event consistent with the Company’s payroll policy and practices. On August 1, 2021, the Company amend his employment agreement pursuant to which he will receive salary at the rate of $5,000 per month.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires the Company’s executive officers, directors, and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of the Company’s common stock. Such officers, directors, and persons are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms that they file with the SEC.
To our knowledge, based solely on review of the copies of such reports and amendments to such reports with respect to the year ended December 31, 2022 filed with the SEC, all required Section 16 reports under the Exchange Act for our directors, executive officers, principal accounting officer and beneficial owners of greater than 10% of our common stock were filed on a timely basis during the year ended December 31, 2022.
Code of Ethics
We have adopted a Code of Ethics that applies to all officers, directors and employees. The Company will provide to any person without charge a copy of such code of ethics upon written request to the Company at its registered offices.
63
ITEM 11. EXECUTIVE COMPENSATION
The following tables set forth all compensation paid to our officers for the years ended December 31, 2022 and 2021.
Summary Compensation Table
| Non-Equity | Non-Qualified | |||||||||||||||||||||||||||||||||||
| Incentive | Deferred | |||||||||||||||||||||||||||||||||||
| Name and principal | Stock | Option | Plan | Compensation | All Other | |||||||||||||||||||||||||||||||
| Position | Year | Salary | Bonus | Awards | Awards | Compensation | Earnings | Compensation | Total | |||||||||||||||||||||||||||
| Michael Murray | 2021 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 5,000 | $ | 5,000 | |||||||||||||||||||
| Former President and director(1) | 2022 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||
| Danny Rittman | 2021 | $ | 25,000 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 149,000 | $ | 174,000 | |||||||||||||||||||
| Chief Technology Officer and director | 2022 | $ | 60,000 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 3,671 | $ | 63,671 | |||||||||||||||||||
| Mansour Khatib | 2021 | $ | 25,000 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 140,000 | $ | 165,000 | |||||||||||||||||||
| Chief Executive Officer and director | 2022 | $ | 60,000 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 140,000 | $ | 200,000 | |||||||||||||||||||
| (1) | On June 17, 2022 Michael Murry Michael Murray resigned as the President and Director of the Company so that he may fully devote all of his efforts to GBT Tokenize Corp. and Metaverse Kit Corp. |
The compensation discussed herein addresses all compensation awarded to, earned by, or paid to our named executive officer.
There are no other stock option plans, retirement, pension, or profit-sharing plans for the benefit of our sole officer and director other than as described herein.
Director Compensation
During the years ended December 31, 2022 and 2021, there were 2 non-employee directors.
Outstanding Equity Awards at Fiscal Year-End
As of December 31, 2022, no new warrants was awarded to the executives.
64
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information with respect to the beneficial ownership of the Common Stock as of March 31, 2023 by (i) each person known by the Company to own beneficially more than 5% of the outstanding Common Stock; (ii) each director of the Company; (iii) each officer of the Company and (iv) all executive officers and directors as a group. Except as otherwise indicated below, each of the entities or persons named in the table has sole voting and investment powers with respect to all shares of Common Stock beneficially owned by it or him as set forth opposite its or his name.
| Common | Percentage | |||||||
| Stock | of | |||||||
| Beneficially | Common | |||||||
| Name of Beneficial Owner | Owned (1) | Stock (1) | ||||||
| Dr. Danny Rittman (2) | 1,980 | 0.00 | % | |||||
| Mansour Khatib (2) | — | 0.00 | % | |||||
| Metaverse Kit Corp (3) | 500,000,000 | 17.06 | % | |||||
| GBT Tokenize Corp (4) | 166,000,000 |
5.67 | % | |||||
| All Officers and Directors as a Group | 83,360 | 0.0 | % | |||||
| (1) | Beneficial ownership is determined in accordance with the Rule 13d-3(d)(1) of the Exchange Act, as amended and generally includes voting or investment power with respect to securities. Pursuant to the rules and regulations of the Securities and Exchange Commission, shares of common stock that an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purposes of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purposes of computing the percentage ownership of any other person shown in the table. The above is based on 2,930,101,819 shares of common stock outstanding as of March 31, 2023 |
| (2) | Current Officer and Director of the Company. |
| (3) | Metaverse Kit Corp is a 50/50 Joint venture between the Company and ldar Gainulin and Maria Belova. which was assigned on June 10, 2022 to ldar Gainulin and Maria Belova. The company contributed 500,000,000 share of the common stock to Metaverse Kit. |
| (4) | GBT Tokenize Corp is a 50/50 Joint venture between the Company and Tokenize-It S.A. which was assigned on June 30, 2021 to Magic International Argentina F.C, S.L. Controlled by Sergio Fridman, a third party GBT Tokenize Corp hold 16,000,000 shares of the Company’s common stock. On April 11, 2022 the company, through its own subsidiary, Greenwich International Holdings, entered into a Master Joint Venture and Territorial License Agreement (the “Tokenize Agreement”) with Magic Internacional Argentina FC, S.L. (“Magic”) and Tokenize which replaced a prior joint venture entered between the parties, Controlled by Sergio Fridman, a third party GBT Tokenize Corp to hold an additional 150,000,000 shares of the Company’s common stock |
No Director, executive officer, affiliate or any owner of record or beneficial owner of more than 5% of any class of voting securities of the Company is a party adversary to the Company or has a material interest adverse to the Company.
On June 10, 2022, (the Company, entered into a Joint Venture and Territorial License Agreement (the “Metaverse Agreement”) with Ildar Gainulin and Maria Belova (collectively, the “Licensor”). Under the Metaverse Agreement, the parties formed Metaverse Kit Corp., a Nevada corporation (“Metaverse Kit”). The purpose of Metaverse Kit was to develop, maintain and support source codes for its proprietary technologies and comprehensive platform that combines a core virtual reality platform and an extended set of real-world functions to provide a metaverse experience initially within the area of sports and then expanding into virtual worlds of entertainment, live events, gaming, communications and other cross over product opportunities (the “Meta Portfolio”). Under the Metaverse Agreement, Licensor agreed to provide Metaverse Kit with the licensed technology and expertise. In connection therewith, the parties entered an Asset Purchase Agreement (the “Metaverse APA”) concurrently with the Metaverse Agreement whereby Licensor sold Metaverse Kit all source codes pertaining to the Meta Portfolio. Further, Licensor provided an exclusive license to Metaverse Kit throughout the world for the invented product/service and the related platforms relating to the Meta Portfolio and to use the know how to develop, manufacture, sell, market and distribute the Meta Portfolio throughout the world. The Company was required to contribute 500,000,000 shares of common stock of the Company (“GBT Shares”) to Metaverse Kit. Licensor and the Company were to each own 50% of Metaverse Kit. The Company issued 500,000,000 shares to Metaverse for certain equity method investment. The value of the shares of $5,000 was determined based on the FV of the Company’s common stock. The Company pledged its 50% ownership in Metaverse Kit to Igor 1 Corp. to secure a convertible note held by Igor 1 Corp. The Company was to appoint two directors and Licensor was allowed to appoint one director of Metaverse Kit. In addition, Metaverse Kit, Licensor and Elentina Group, LLC (“Elentina”) entered into a Consulting Agreements in which IGBM and Elentina, each were engaged to provide services for $25,000 per month payable quarterly which Metaverse Kit has the option to pay in shares of common stock calculated by the amount owed divided by the Company’s 10-day VWAP. Licensor and Elentina were to provide services in connection with the development of the business as well as Metaverse Kit’s capital raising efforts. The term of the Consulting Agreement was two years. The closing of the Metaverse Agreement occurred on June 13, 2022.
On March 14, 2023, the Company received a counter signed Settlement Agreement and Release by Licensor dated March 2, 2023 (“Settlement Agreement”). Pursuant to the Settlement Agreement, the parties agreed that Metaverse Agreement, the Metaverse APA and the Consulting Agreement are void and cancelled. Licensor agreed to pay $5,000 to the Company as settlement payment and surrender their shares in Metaverse Kit.
65
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
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, for 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.
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 50,000 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 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 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 for $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.
66
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 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 for $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. The closing of the Tokenize Agreement occurred on March 9, 2020. Via this Joint Venture the parties commenced development of a development of an intelligent human vital signs’ device, suggested named 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.
As explained above, on April 11, 2022 the Company, through its wholly owned subsidiary, Greenwich International Holdings, a Costa Rica corporation (“Greenwich”), entered into a Master Joint Venture and Territorial License Agreement (the “Tokenize Agreement”) with Magic International Argentina FC, S.L. (“Magic”) and Tokenize which replaced a prior joint venture entered between the parties.
The purpose of 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 world, which Technology Portfolio was previously licensed to the Company for the State of California.
The Tokenize Agreement provides that the Company shall contribute 150,000,000 shares of common stock of the Company (“GBT Shares”) to Tokenize. Sergio Fridman is the manager of Magic and the beneficial owner of all outstanding securities of Magic. Magic will contribute cash of $250,000 into Tokenize for promissory note and agreed to further fund Tokenize with all funds reasonably needed for implementation of the business purposes as described in the Tokenize Agreement. The GBT Shares will not be transferable for five years. As of June 30, 2022, the Company received the $250,000 fund from Magic but the promissory note agreement has not been finalized yet. Therefore, the Company recorded the $250,000 funds as an account payable.
Magic and the Company each own 50% of the outstanding shares of common stock of Tokenize. The Company pledged its 50% ownership in Tokenize and its 100% ownership of Greenwich (the “Pledged Securities”) to Magic for providing that Magic may take possession of such Pledged Securities in the event the Company executes, delivers and performs any future agreement or document or judgement resulting in the creation of any lien, pledge, mortgage, claim, charge or encumbrance upon any assets of the Company. The Company shall appoint two directors and Magic shall appoint one director of Tokenize.
On June 16, 2022 the parties amended the Tokenize Agreement to further define the constitution of the Board of Directors. As such, Section 4.2 of the Tokenize Agreement was amended and restated to provide that the Board of GBT Tokenize Corp. shall consist of two Directors, one of whom shall be appointed by GBT Tokenize Corp. and the other shall be appointed by the Company.
67
As of December, 31, 2022 and December 31, 2021, the Company owed $505,000 and $475,000 to Yello Partners, Inc., a Company owned by the Mansour Khatib, the Company’s CEO.
Stanley Hills LLC Accounts Payable – Related Party
On March 8, 2020, SURG filed a lawsuit against its transfer agent, Vstock from transferring millions of SURG stock is currently in possession by the Company and assigned to Stanley Hills, LLC. On January 1, 2021, SURG, AltCorp and Stanley Hills, LLC (“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 in 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 trading days immediately preceding the issuance. SURG paid $400,000 in cash and $800,000 by shares. The SURG common stock issued to Altcorp have been pledged since August 12, 2020 for the benefit of Stanley to secure Stanley’s note payable by the Company. Accordingly, the SURG Common Stock issued to AltCorp as a result of the Settlement Agreement were pledged to Stanley. As of December 31, 2021 there were no surge shares pledges after the final settlement signed on December 22, 2021 and that replaced all prior settlement agreement. The final settlement SURG agreed to make total payments of $4,200,000 to the Company on or prior to January 7, 2022. This $4.2 million amount consists of $450,000 paid by SURG in November and December 2021, $100,000 to be paid on or about January 4, 2022, and $3,650,000 to be paid on or prior to January 7, 2022 of which $375,000 will be held in escrow as described before. The $3,750,000 was recorded as other receivable as of December 31, 2021. As of December, 31, 2022 and December 31, 2021, the Company recorded an outstanding payable to Stanley of $927,136 and $660,735, respectively, recorded under accrued expenses.
Sales to related party for the year ended December 31, 2022 and 2021 were $45,000 and $180,000. Sales are derived from providing IT consulting services to Stanley Hills, a related party. The Company did not provide IT services to Stanley after the quarter ended June 30, 2022.
Advanced from Related Party
During the year ended December 31, 2022, Mansour Khatib, the Company’s CEO advanced $22,658 cash to the Company for business purposes to fund the e-commerce operations.
During the year ended December 31, 2022, the Company repaid $18,384 cash to Mansour Khatib.
As of December, 31, 2022 and December 31, 2021, the Company has recorded a due from related party of $0 and $30,049, respectively.
As of December, 31, 2022 and December 31, 2021, the Company has recorded a due to related party of $62,003 and $0, respectively.
Metaverse Agreement
On June 10, 2022, the Company, entered into a Joint Venture and Territorial License Agreement (the “Metaverse Agreement”) with Ildar Gainulin and Maria Belova (collectively, the “Licensor”). Under the Metaverse Agreement, the parties formed Metaverse Kit Corp., a Nevada corporation (“Metaverse Kit”). The purpose of Metaverse Kit was to develop, maintain and support source codes for its proprietary technologies and comprehensive platform that combines a core virtual reality platform and an extended set of real-world functions to provide a metaverse experience initially within the area of sports and then expanding into virtual worlds of entertainment, live events, gaming, communications and other cross over product opportunities (the “Meta Portfolio”). Under the Metaverse Agreement, Licensor agreed to provide Metaverse Kit with the licensed technology and expertise. In connection therewith, the parties entered an Asset Purchase Agreement (the “Metaverse APA”) concurrently with the Metaverse Agreement whereby Licensor sold Metaverse Kit all source codes pertaining to the Meta Portfolio. Further, Licensor provided an exclusive license to Metaverse Kit throughout the world for the invented product/service and the related platforms relating to the Meta Portfolio and to use the know how to develop, manufacture, sell, market and distribute the Meta Portfolio throughout the world. The Company was required to contribute 500,000,000 shares of common stock of the Company (“GBT Shares”) to Metaverse Kit. Licensor and the Company were to each own 50% of Metaverse Kit. The Company pledged its 50% ownership in Metaverse Kit to Igor 1 Corp. to secure a convertible note held by Igor 1 Corp. The Company was to appoint two directors and Licensor was allowed to appoint one director of Metaverse Kit. In addition, Metaverse Kit, Licensor and Elentina Group, LLC (“Elentina”) entered into a Consulting Agreements in which IGBM and Elentina, each were engaged to provide services for $25,000 per month payable quarterly which Metaverse Kit has the option to pay in shares of common stock calculated by the amount owed divided by the Company’s 10-day VWAP. Licensor and Elentina were to provide services in connection with the development of the business as well as Metaverse Kit’s capital raising efforts. The term of the Consulting Agreement was two years. The closing of the Metaverse Agreement occurred on June 13, 2022.
68
On March 14, 2023, the Company received a counter signed Settlement Agreement and Release by Licensor dated March 2, 2023 (“Settlement Agreement”). Pursuant to the Settlement Agreement, the parties agreed that Metaverse Agreement, the Metaverse APA and the Consulting Agreement are void and cancelled. Licensor agreed to pay $5,000 to the Company as settlement payment and surrender their shares in Metaverse Kit.
On May 19, 2021, the Company entered into a Mutual Release and Settlement Agreement and Irrevocable Assignment of outstanding balance plus accrued interest (the “Gonzalez Agreement”) with third party, GBT-CR, IGOR 1 Corp and Gonzalez. Pursuant to the Gonzalez Agreement, without any party admission of liability and to avoid litigation, the parties had agreed to (i) extend the GBT convertible note maturity date to December 31, 2022, (ii) amend the GBT convertible note terms to include a beneficial ownership blocker of 4.99% and a modified conversion feature to the GBT convertible note with 15% discount to the market price during the 20 trading day period ending on the latest complete trading day prior to the conversion date and (iii) provided for an assignment of the GBT convertible note by Gonzalez to a third party. As a result of the change in terms of this convertible note, the Company took a charge related to the modification of debt of $13,777,480 during the year ended December 31, 2021.
During the year ended December 31, 2021, IGOR 1 converted $1,284,600 of the convertible note into 4,185,650 shares of the Company’s common stock. On June 24, 2021, the Company transferred 5,500,000 SURG shares received as repayment of $660,000 of this convertible note (See Note 10).
During the year ended December 31, 2022, IGOR 1 converted $1,659,869 of the convertible note into 590,117,647 shares of the Company’s common stock.
On November 15, 2020, the Company issued a promissory note to Alpha Eda, LLC (“Alpha”), a related party, for $140,000. The note accrues interest at 10%, is unsecured and was due on September 30, 2021. On June 20, 2021 Alpha and the Company extended the note maturity to December 31, 2021. On March 30, 2022 Alpha and the Company extended the note maturity to December 31, 2022. The balance of the note at December 31, 2022 and 2021 was $140,000 and $140,000 plus accrued interest of $32,633 and $16,633, respectively.
On February 9, 2022 the Board approved the employment of Ms. Rittman the spouse of Mr. Rittman, as an assistant to be paid $1,500 per month. Mr. Rittman recuse himself from voting on the matter due to a conflict.
Procedures for Approval of Related Party Transactions
Our Board of Directors is in charged with reviewing and approving all potential related party transactions. All such related party transactions must then be reported under applicable SEC rules. We have not adopted other procedures for review, or standards for approval, of such transactions, but instead review them on a case-by-case basis.
Director Independence
The Company has no outside directors as of December 31, 2022.
69
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table shows the fees that were billed for the audit and other services provided by Madhava Rao and BF Borgers CPA PC for the years ended December 31, 2022 and 2021.
| Years Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| Audit Fees | $ | 84,161 | $ | 94,636 | ||||
| Audit-Related Fees | — | — | ||||||
| Tax Fees | — | — | ||||||
| All Other Fees | — | — | ||||||
| Total | $ | 84,161 | $ | 94,636 | ||||
Audit Fees - This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the independent registered public accounting firm in connection with engagements for those years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.
Audit-Related Fees - This category consists of assurance and related services by the independent registered public accounting firm that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the SEC, other accounting consulting and other audit services.
Tax Fees - This category consists of professional services rendered by our independent registered public accounting firm for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.
All Other Fees - This category consists of fees for other miscellaneous items.
Board of Directors Pre-Approval Process, Policies and Procedures
All audit and permissible non-audit services provided by our independent registered public accounting firm must be pre-approved. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of service. The independent registered public accounting firm and management periodically report to the board of directors regarding the extent of services provided by the independent registered public accounting firm. Consistent with the board of directors’ policy, all audit and permissible non-audit services provided by our independent registered public accounting firm were pre-approved by our board of directors.
70
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
71
72
| (1) | Incorporated by reference to the Form S-1 Registration Statement filed with the SEC on September 9, 2009. |
| (2) | Incorporated by reference to the Form 10-K Annual Report filed with the Securities and Exchange Commission on April 6, 2011 |
| (3) | Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on May 14, 2012 |
| (4) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 27, 2012. |
| (5) | Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on November 20, 2012. |
| (6) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 18, 2015 |
| (7) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 12, 2015 |
| (8) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 1, 2015 |
| (9) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 16, 2015 |
| (10) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 21, 2015 |
| (11) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 20, 2016 |
| (12) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 20, 2016 |
| (13) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 30, 2017 |
| (14) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 7, 2017 |
| (15) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 3, 2018 |
| (16) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 21, 2018 |
| (17) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 18, 2018 |
| (18) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 26, 2018. |
| (19) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 9, 2018. |
| (20) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 18, 2018. |
| (21) | Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on June 19, 2019. |
| (22) | Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on July 12, 2019. |
| (23) | Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on July 15, 2019. |
| (24) | Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on August 5, 2019. |
| (39) | Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on August 7, 2019. |
| (25) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 16, 2019. |
| (26) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 25, 2019. |
| (27) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 2, 2020. |
| (28) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 11, 2020. |
| (29) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 24, 2020. |
| (30) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 10, 2020. |
| (31) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 21, 2021. |
| (32) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 1, 2021. |
| (33) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 23, 2021. |
| (34) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 29, 2021. |
| (35) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 6, 2021. |
| (36) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 11, 2021 |
| (37) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 20, 2021 |
| (38) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 28, 2021 |
| (39) | Incorporated by reference to the Form S-1 Registration Statement filed with the Securities and Exchange Commission on January 12, 2022 |
Item 16. Form 10-K Summary.
None
73
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| GBT TECHNOLOGIES INC. | ||
| Dated: April 14, 2023 | By: | /s/ Mansour Khatib |
| Name: | Mansour Khatib | |
| Title: | Chief Executive and Financial Officer (Principal Executive, Financial and Accounting Officer) | |
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated.
| Signature | Title | Date | ||
| /s/ Mansour Khatib | Chief Executive & financial Officer & Director | April 14, 2023 | ||
| Mansour Khatib | (Principal Executive, Financial and Accounting Officer) | |||
| /s/ Dr. Danny Rittman | Chief Technology Officer and Director | April 14, 2023 | ||
| Dr. Danny Rittman | ||||
74
GBT TECHNOLOGIES INC.
Consolidated Financial Statements
Contents
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the shareholders and the board of directors of GBT Technologies, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of GBT Technologies, Inc. the "Company") as of December 31, 2022, the related statement of operations, stockholders' equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has accumulated deficit of $ 299,257,917 as of December 31, 2022 and has incurred recurring operating losses. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Completeness of litigation and claims accruals
As disclosed in Note 17 to the consolidated financial statements, the Company is involved in various legal proceedings. The Company assesses the need to make a provision or to disclose a contingent liability on a case-by-case basis considering the underlying facts of each litigation. The eventual outcome of the litigations is uncertain and estimation at the balance sheet date involves extensive judgement of management including input from legal counsel due to the complexity of each litigation.
Adverse outcomes could significantly impact the Company’s reported operations and balance sheet position. Considering the judgement involved in determining the need to make a provision or disclose litigation, the matter is considered a Critical Audit Matter.
Our audit procedures included, among others, obtaining a list of litigation Company’s management and legal counsel, identifying material litigations from the aforementioned list and performing inquiries with the said counsel, obtaining and reading the underlying documents to assess the assumptions used by management in arriving at the conclusions; circulating, obtaining, and reading legal confirmations from the Company’s external legal counsels in respect of material litigations and considered that in our assessment; and verifying the disclosures related to provisions and contingent liabilities in the financial statements to assess consistency with underlying documents.
Revenue recognition
As described in Note 3 to the consolidated financial statements, management applies FASB Topic 606, Revenue from Contacts with Customers (“ASC 606”) to recognize revenue. Management recognizes revenue in a manner that reasonably reflects the delivery of its services to customers in return for expected consideration. The Company’s revenue includes resale of purchased products through Amazon and also through IT services.
The principal considerations for our determination that performing procedures over the full completion of revenue contracts and subsequent payment collections is a critical audit matter. This in turn led to significant effort in performing our audit procedures which were designed to evaluate whether the contractual terms, the timing of revenue recognition and the subsequent collections were appropriately identified and accounted for by management under ASC 606.
Our audit procedures included, among others, understanding of controls relating to management’s revenue recognition process, examining transaction related documents, confirming revenues and outstanding receivables at the balance sheet date with a sample of the customers.
April 14, 2023
Served as Auditor since 2022
F-2
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of GBT Technologies, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of GBT Technologies, Inc. the "Company") as of December 31, 2021 and 2020, the related statement of operations, stockholders' equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Completeness of litigation and claims accruals
As disclosed in Note 16 to the consolidated financial statements, the Company is involved in various legal proceedings. The Company assesses the need to make a provision or to disclose a contingent liability on a case-by-case basis considering the underlying facts of each litigation. The eventual outcome of the litigations is uncertain and estimation at the balance sheet date involves extensive judgement of management including input from legal counsel due to the complexity of each litigation.
Adverse outcomes could significantly impact the Company’s reported operations and balance sheet position. Considering the judgement involved in determining the need to make a provision or disclose litigation, the matter is considered a Critical Audit Matter.
Our audit procedures included, among others, obtaining a list of litigation Company’s management and legal counsel, identifying material litigations from the aforementioned list and performing inquiries with the said counsel, obtaining and reading the underlying documents to assess the assumptions used by management in arriving at the conclusions; circulating, obtaining, and reading legal confirmations from the Company’s external legal counsels in respect of material litigations and considered that in our assessment; and verifying the disclosures related to provisions and contingent liabilities in the financial statements to assess consistency with underlying documents.
Revenue recognition in relation to fraud
As described in Note 2 to the consolidated financial statements, management applies FASB Topic 606, Revenue from Contacts with Customers (“ASC 606”) to recognize revenue. Management recognizes revenue in a manner that reasonably reflects the delivery of its services to customers in return for expected consideration. The Company’s revenue, inclusive of related party revenue, is IT services revenue recorded on a monthly basis as services are provided.
The principal considerations for our determination that performing procedures over the full completion of revenue contracts and subsequent payment collections is a critical audit matter. This in turn led to significant effort in performing our audit procedures which were designed to evaluate whether the contractual terms, the timing of revenue recognition and the subsequent collections were appropriately identified and accounted for by management under ASC 606.
Our audit procedures included, among others, understanding of controls relating to management’s revenue recognition process, examining transaction related documents, confirming revenues and outstanding receivables at the balance sheet date with a sample of the customers, and testing collections subsequent to the balance sheet date.
/s/ BF Borgers CPA PC
Served as Auditor since 2017
Lakewood,
March 25, 2022
F-3
GBT TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS
| ASSETS | December 31, | December 31, | ||||||
| 2022 | 2021 | |||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Cash held in trust | ||||||||
| Marketable equity security | ||||||||
| Accounts Receivable | ||||||||
| Inventory | ||||||||
| Prepaid | ||||||||
| Note Receivable | ||||||||
| Inventory in Transit | ||||||||
| Investment | ||||||||
| Other receivable | ||||||||
| Total current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accounts
payable and accrued expenses (including related parties of $ |
$ | $ | ||||||
| Accrued settlement | ||||||||
| Unearned revenue | ||||||||
| Contract liabilities | ||||||||
| Convertible
notes payable, current, net of discount of $ |
||||||||
| Convertible
notes payable, related party, net of discount of $ |
||||||||
| Notes
payable, current, net of discount of $ |
||||||||
| Notes payable, current, related party | ||||||||
| Due to related party | ||||||||
| Derivative liability | ||||||||
| Total current liabilities | ||||||||
| Convertible
note payable, noncurrent, net of discount of $ |
||||||||
| Note payable, noncurrent | ||||||||
| Total liabilities | ||||||||
| Contingencies (Note 18) | ||||||||
| Stockholders’ Deficit: | ||||||||
| Series B Preferred stock, $par value; shares authorized; | ||||||||
| and shares issued respectively | ||||||||
| Series C Preferred stock, $par value; shares authorized; | ||||||||
| and shares issued and outstanding respectively | ||||||||
| Series D Preferred stock, $par value; shares authorized; | ||||||||
| and shares issued and outstanding respectively | ||||||||
| Series G Preferred stock, $par value; shares authorized; | ||||||||
| and shares issued and outstanding respectively | ||||||||
| Series H Preferred stock, $par value ($500 stated value); shares authorized; | ||||||||
| and shares issued and outstanding respectively | ||||||||
| Common stock, $par value; shares authorized; and shares issued and outstanding respectively | ||||||||
| Treasury stock, at cost; shares respectively | ( |
) | ( |
) | ||||
| 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 consolidated financial statements.
F-4
GBT TECHNOLOGIES INC.
CONSOLIDATED STATEMENT OF OPERATIONS
| Years Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| Sales | $ | |||||||
| Consulting Income – Related Party | ||||||||
| Total sales | ||||||||
| Cost of Goods Sold | ||||||||
| Gross Profit | ||||||||
| Operating expenses: | ||||||||
| General and administrative | ||||||||
| Marketing | ||||||||
| Professional | ||||||||
| Impairment of assets | ||||||||
| Gain on Bad Debt | ( |
) | ||||||
| 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 | ( |
) | ( |
) | ||||
| Realized gain (loss) on disposal of marketable equity security | ||||||||
| Gain on RJW settlement | ||||||||
| Loss on debt modification | ( |
) | ||||||
| Change in fair value of marketable securities | ( |
) | ||||||
| Other income | ||||||||
| Total other income (expense) | ( |
) | ||||||
| Profit (Loss) before income taxes | ( |
) | ||||||
| Income tax expense | ||||||||
| Profit (Loss) from continuing operations | ( |
) | ||||||
| Net Income (Loss) | $ | $ | ( |
) | ||||
| Weighted average common shares outstanding: | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
| Net Income (Loss) per share (basic and diluted): | ||||||||
| Basic | $ | $ | ( |
) | ||||
| Diluted | ( |
) | ||||||
The accompanying footnotes are an integral part of the consolidated financial statements.
F-5
GBT TECHNOLOGIES INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
| Total | ||||||||||||||||||||||||||||||||
| Stock | Additional | Stockholders’ | ||||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Loan | Paid-in | Accumulated | Equity/ | |||||||||||||||||||||||||||
| 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 | — | |||||||||||||||||||||||||||||||
| Common stock issued for joint venture | — | |||||||||||||||||||||||||||||||
| Fair value of beneficial conversion feature of converted | — | — | ||||||||||||||||||||||||||||||
| Net income (loss) | — | — | ( | ) | ( | |||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Common stock issued amount for conversion of debt and accrue interest | — | |||||||||||||||||||||||||||||||
| Fair value of derivative liability due to conversions | — | |||||||||||||||||||||||||||||||
| Common stock issued for cash | — | |||||||||||||||||||||||||||||||
| Common stock issued for- Tokenize | — | ( | ) | |||||||||||||||||||||||||||||
| Equity Method Investment - Meta | — | ( | ) | |||||||||||||||||||||||||||||
| Cancelation of shares | ( | ) | ( | ) | — | |||||||||||||||||||||||||||
| Net income (loss) | — | — | ||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||
The accompanying footnotes are an integral part of these consolidated financial statements.
F-6
| GBT TECHNOLOGIES INC. |
| CONSOLIDATED STATEMENT OF CASH FLOWS |
| Years Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| Cash Flows From Operating Activities: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income to net cash used in operating activities: | ||||||||
| Amortization of debt discount | ||||||||
| Change in fair value of derivative liability | ( | ) | ||||||
| Excess of debt discount and financing costs | ||||||||
| Shares issued for services | ||||||||
| Loss on modification of debt | ||||||||
| Impairment of assets | ||||||||
| Realized gain on disposal of market equity security | ( | ) | ||||||
| Loss on exchange of assets | ||||||||
| Change in fair value of market equity security | ||||||||
| Change on Settlement | ( | ) | ||||||
| Payment of other income with marketable securities | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Other receivable | ( | ) | ||||||
| Cash held in trust | ||||||||
| Prepaid | ( | ) | ||||||
| Inventory | ( | ) | ||||||
| Contract liabilities | ( | ) | ||||||
| Unearned revenue | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows From Investing Activities: | ||||||||
| Investment to GTX | ( | ) | ||||||
| Investment to TGHI | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash Flows From Financing Activities: | ||||||||
| Issuance of convertible notes | ||||||||
| Issuance of note receivable | ( | ) | ||||||
| Proceeds from sales of common stock | ( | ) | ||||||
| Repayment of related party | ( | ) | ||||||
| Repayment of convertible note | ( | ) | ||||||
| Proceeds from related party | ||||||||
| Issuance of notes payable | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase in cash | ( | ) | ||||||
| Cash, beginning of Year | ||||||||
| Cash, end of Year | $ | $ | ||||||
| Cash paid for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Supplemental non-cash investing and financing activities | ||||||||
| Debt discount related to convertible debt | $ | $ | ||||||
| Reduction in derivative liability due to conversion | $ | $ | ||||||
| Shares issued for conversion of convertible debt | $ | $ | ||||||
| Transfer of marketable equity security to repay convertible note | $ | $ | ||||||
| Share issuance for JV Metaverse | $ | $ | ||||||
| Share issuance for JV Tokenize | $ | $ | ||||||
| Transfer of accounts payable to convertible note | $ | $ | ||||||
| Transfer of accrued interest to convertible note | $ | $ | ||||||
| Cancellation of TTSG Shares | $ | ( | ) | |||||
The accompanying footnotes are an integral part of these consolidated financial statements.
F-7
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
Note 1 - Organization and Basis of Presentation
Organization and Line of Business
GBT Technologies Inc. (formerly Gopher Protocol 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, and wireless mesh networks. Effective August 5, 2019, the Company changed its name from Gopher Protocol Inc. to GBT Technologies Inc. The Company derived revenues from (i) the provision of IT consulting services; and (ii) from the licensing of its technology. (ii) from selling electronic products through e-commerce platforms.
On February 18, 2022 the Company, effective March 1, 2022 entered into a Revenue Sharing Agreement (“RSA”) with Mahaser LTD. (“Mahaser”) pursuant to which the Company shares revenues generated by Mahaser with respect to e-commerce sales through the online retail platform in the United States of America.
The audited condensed CFS are prepared by the Company, pursuant to the rules and regulations of the 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.
Basis of Presentation
The accompanying CFS were prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Stock Split
On October 26, 2021, the Company effectuated a
In July 2, 2022 the Company filed a preliminary information statement to the stockholders of record (the “Record Date”) in connection with certain actions to be taken by the written consent by stockholders holding a majority of the voting stock of the Company, dated as of June 28, 2022.
F-8
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
| ● | To amend the Company’s Articles of Incorporation, (the “Articles of Incorporation”) to increase the number of authorized shares of common stock, par value $ per share (the “Common Stock”), of the Company from 2,000,000,000 shares to shares. This action concluded on August 11, 2022: |
| (i) authorize the Company’s
Board of Directors to effect, in its sole discretion, a reverse stock split of the Common Stock in a ratio of up to |
Note 2 – Going Concern
The accompanying CFS have been prepared assuming 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 CFS 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 3 – Summary of Significant Accounting Policies
Use of Estimates
The preparation of CFS 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 CFS 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 CFS include valuation of derivatives and valuation allowance on deferred tax assets.
F-9
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
Principles of Consolidation
The accompanying CFS include the accounts of the Company and its subsidiaries; the Company’s 50% owned subsidiaries GBT BitSpeed Corp. (currently inactive) and GBT Tokenize Corp; the Company’s 50% owned subsidiary, Gopher Protocol Costa Rica Sociedad De Responsabilidad Limitada (currently inactive), a wholly owned subsidiary, AltCorp Trading LLC, a Costa Rica company (“AltCorp” currently inactive) and Greenwich International Holdings, a Costa Rica corporation (“Greenwich” currently inactive). All significant intercompany transactions and balances were eliminated.
For entities determined to be VIEs, an evaluation is required to determine whether the Company is the primary beneficiary. The Company evaluates its economic interests in the entity specifically determining if the Company has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance (“the power”) and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE (“the benefits”). When making the determination whether the benefits received from an entity are significant, the Company considers the total economics of the entity, and analyzes whether the Company’s share of the economics is significant. The Company utilizes qualitative factors, and, where applicable, quantitative factors, while performing the analysis.
In addition, the Company’s variable interests in Mahaser obligate the Company to absorb deficits and provide it with the right to receive benefits that could potentially be significant to Mahaser. As a result of this analysis, the Company concluded it is the primary beneficiary of Mahaser and therefore consolidates the balance sheets, results of operations and cash flows of Mahaser. The Company performs a qualitative assessment of Mahaser on an ongoing basis to determine if it continues to be the primary beneficiary.
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 December 31, 2022 and 2021, the Company did
Funds in Escrow
Restricted cash is $
Marketable Securities
The Company accounts for investment securities in accordance with ASC Topic 321, Investments – equity securities. Marketable equity securities are reported at FV 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 12 months of the balance sheet date is reported as a current asset. These publicly traded equity securities are valued using quoted prices and are included in Level 1.
F-10
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
Inventory
Inventory consists of electronic product ready for sale on Amazon.com. It is stated at the lower of cost or net realizable value and all inventories were returned product from online customers. We value our inventory using the weighted average costing method. Our Company’s policy is to include as a part of inventory any freight incurred to ship the product from our contract vendors to our warehouses. Outbound freight costs to our customers are considered period costs and reflected in selling, general and administrative expenses. We regularly review inventory and consider forecasts of future demand, market conditions and product obsolescence.
Note Receivable Paid-Off
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 for $
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 FV and is then re-valued at each reporting date, with changes in the FV 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 December 31, 2022 and 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 FV due to their short maturities.
FASB ASC Topic 820, Fair Value Measurements and Disclosures, requires disclosure of the FV of financial instruments held by the Company. FASB ASC Topic 825, Financial Instruments, defines FV, and establishes a three-level valuation hierarchy for disclosures of FV measurement that enhances disclosure requirements for FV 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 FV 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:
F-11
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
| ● | 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 use one or more unobservable inputs which are significant to the FV 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 FV 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 FV were determined by using the Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect FV at each period end, with any increase or decrease in the FV being recorded in results of operations as adjustments to FV of derivatives.
At December 31, 2022 and 2021, the Company identified the following liabilities that are required to be presented on the balance sheet at FV:
| Fair Value | Fair Value Measurements at | |||||||||||||||
| As of | December 31, 2022 | |||||||||||||||
| Description | December 31, 2021 | Using Fair Value Hierarchy | ||||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||||||
| Conversion feature on convertible notes |
|
$ |
|
|
$ |
|
|
|
$ |
|
|
$ |
|
| ||
| Fair Value | Fair Value Measurements at | |||||||||||||||
| As of | December 31, 2021 | |||||||||||||||
| Description | December 31, 2022 | Using Fair Value Hierarchy | ||||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||||||
| 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.
F-12
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
Reclassification
Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on the reported results of operations.
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 CFS 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 consulting 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 IT revenue category, is summarized below:
| ● | IT consulting services - revenue is recorded on a monthly basis as services are provided. |
These five elements, as applied to each of the Company’s license revenue category, is summarize below:
| ● | License services – the one-time related party licensing income recorded as other income upon agreement is executed and services are provided and recognized over the term of five years. |
E-Commerce sales –
| ● | Identify the contract(s) with a customer. ASC 606 defines a contract as “an agreement between two or more parties that creates enforceable rights and obligations”. Since this is an e-commerce sale on the Amazon of eBay websites, the Company just followed the general terms on Amazon or eBay websites and the customer entered into a contract with the Company based on the product listed on the Amazon or eBay websites; |
Identify the performance obligations in the contract. According to the contract, the Company is responsible for operation exclusively. The Company is entitled to all revenue which is being paid by Amazon or eBay into a designated bank account and the Company is responsible for all product acquisitions as well as shipments. The only performance obligations were the electronic products that were listed on Amazon or eBay websites and the Company determined each order is one single obligation;
F-13
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
Determine the transaction price. The transaction price set to be the listed price on the Amazon or eBay websites.;
Allocation the transaction price to the performance obligations in the contract.; and
Recognize revenue when the Company satisfies a performance obligation. Sales are being recognized upon shipment.
Unearned revenue
Unearned revenue represents the net amount received
for the purchase of products that have not seen shipped to the Company’s customers. The Company has $
Contract liabilities
On February 22, 2022, the Company entered into
an Intellectual Property License and Royalty Agreement with Touchpoint Group Holdings, Inc. (“Touchpoint” or
“TGHI”) pursuant to which the Company granted TGHI a worldwide license for its technologies for five years in the
domains of Internet of Things (IoT) and Artificial Intelligence enabled mobile technologies pertaining to the Company’s
digital currency technology (the “Technology”). GBT will charge TGHI royalties based on actual uses by TGHI of the
Technology resulting from revenue attributable to the use, performance or other exploitation of the Technology, to the extent
applicable, after deducting any taxes that the Company may be required to collect, and deducting any international sales, goods and
services, value added taxes or similar taxes which the Company is required to pay, if any, excluding deductions for taxes on the
Company net income. TGHI agreed to issue the Company shares
of common stock of TGHI in the FV of $
Variable Interest Entity
On February 18, 2022, the
Company, effective March 1, 2022 entered into a Revenue Sharing Agreement (“RSA”) with Mahaser LTD. (“Mahaser”)
pursuant to which the Company shares in revenues generated by Mahaser e-commerce sales through the online retail platform in the United
States of America. Mahaser owns an e-commerce platform as a store which is the legal, exclusive owner of Ravenholm Electronics. The Company
will operate the e-commerce platform and entitled to 95% for all revenue generated by and received by Mahaser from March 1, 2022 through
December 31, 2022. The RSA provides that the Company will be entitled to appoint a manager to Mahaser. As consideration, the Company will
pay Mahaser $
The Company evaluated whether it has a variable interest in Mahaser, whether Mahaser is a VIE and whether the Company has a controlling financial interest in Mahaser. The Company concluded that it has variable interests in Mahaser on the basis of GBT has 100% control over the JV/revenue sharing, and as such should consolidate the JV into its books and records as it assigned 100% financial responsibility. Mahaser’s equity at risk, as defined by GAAP, is considered to be insufficient to finance its activities without additional support, and, therefore, Mahaser is considered a VIE.
F-14
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
The following table summarizes the carrying amount of the assets and liabilities of Mahaser included in the Company’s consolidated balance sheets at December 31, 2022 (after elimination of intercompany transactions and balances):
| Assets of consolidated variable interest entity (“VIE”) included in the consolidated balance sheets above (after elimination of intercompany transactions and balances) consist of: | ||||
| Current assets: | ||||
| Cash and equivalents | $ | |||
| Inventory | ||||
| Due From related party | ||||
| Total current assets | $ | |||
| Liabilities of consolidated VIE included in the consolidated balance sheets above (after elimination of intercompany transactions and balances) consist of: | ||||
| Current liabilities | ||||
| Total current liabilities | $ | |||
| Statements of operations of consolidated VIE included in the consolidated statements of operations above (after elimination of intercompany transactions and balances) consist of: | ||||
| Statements of operations | ||||
| Sales | $ | |||
| Cost of goods sold | ||||
| Gross profit | ||||
| General and administrative expenses | ||||
| Net Loss | $ | |||
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 and its current on all its tax filings federal and state until 2021 inclusive.
F-15
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
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 income 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.
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| 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 December 31, 2022, through the date which the CFS are issued. Based upon the review, other than described in Note 20 – Subsequent Events, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the CFS.
Recent Accounting Pronouncements
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 adopted this ASU on the CFS in the year ended December 31, 2021. The adoption had no material impact on the CFS for the year ended December 31, 2022.
On April 2021, the FASB issued ASU 2021-04, “Earnings Per Share (Topic 260), Debt— Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options” (“ASU 2021-04”) to clarify the accounting by issuers for modifications or exchanges of equity-classified warrants. The new ASU is available here and effective for all entities in fiscal years starting after December 15, 2021. Early adoption is permitted. The Company adopted this ASU on the CFS in the year ended December 31, 2021. The adoption had no material impact on the CFS for the year ended December 31, 2022.
Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying CFS. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.
F-16
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
Note 4 – Marketable Securities
TGHI Agreement
On January 28,
2022, the Company entered into a Stock Purchase Agreement with Marko Radisic (the “Seller”) and
Touchpoint Group Holdings, Inc. (“TGHI”) pursuant to which the Company acquired shares
of Series A Convertible Preferred Stock (the “Touchpoint Preferred”) from the Seller for $
TGHI converted the Touchpoint Preferred into shares
of common stock of Touchpoint on February 23, 2022 resulting in the Company owning shares of common stock of Touchpoint
in total FV of $
MetAlert -prior name GTX Corp
On
April 12, 2022, GBT Tokenize Corp (“GBT Tokenize”), a Nevada corporation which the Company owns 50% of the outstanding shares
of common stock, entered into a series of agreements with GTX Corp (“GTX”) and various note holders of GTX pursuant to which
Tokenize acquired a convertible promissory note of GTX of $
F-17
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
The GTX Notes bear 10% interest and 50% of the principal
may be converted into shares of common stock on a one-time basis at a conversion price of $
GTX changed its name into Metalert Inc. on or about September 20, 2022.
On September 30, 2022, GBT Tokenize, loaned MetAlert
Inc., a Nevada corporation (f/k/a GTX Corp.) (“MetAlert”) $
MetAlert designs, manufactures and sells various interrelated and complementary products and services in the wearable technology and IoMT (Internet of Medical Things) marketplace.
As of December 31, 2022,
the notes had an outstanding balance of $
As of December 31, 2022 and December 31, 2021, the
marketable security had a FV of $
Note 5 – Investment in Surge Holdings, Inc.
Surge Holdings, Inc.
On September 30, 2019, GBT Technologies
Inc. (the “Company”) entered into an Asset Purchase Agreement (“APA”) with Surge Holdings, Inc., a
Nevada corporation (“SURG”) pursuant to which the Company agreed to sell and assign to SURG, all the assets and
certain specified liabilities, of its ECS Prepaid, Electronic Check Services and the Central State Legal Services businesses
for $
On June 23, 2020, SURG entered into an Exchange Agreement (the “AltCorp Exchange Agreement”) with AltCorp Trading LLC (“AltCorp”) with such AltCorp Exchange Agreement being consented and agreed to by the Company, the parent of AltCorp. At the expiration of the lock-up period, in the event the VWAP for the SURG Common Stock was, during the preceding twenty-day trading period, less than $ per share, AltCorp retained the right to reserve additional shares of SURG Common Stock equal to the True-Up Value as defined in the AltCorp Exchange Agreement.
F-18
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
On March 8, 2020, SURG filed a lawsuit against its
transfer agent from transferring millions of SURG stock that is currently in possession by the Company and assigned to Stanley Hills,
LLC. On January 1, 2021, SURG, AltCorp and Stanley Hills, LLC (“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 $
Subsequently, SURG was a party to two lawsuits in state District Court, the Eighth Judicial District Court for Clark County, Nevada involving AltCorp, Stanley and Glen Eagles Acquisition LP (the “AltCorp Parties.”). Each of these lawsuits were ultimately disputes relating to the total consideration SURG was to pay the Company under the APA.
On October 18, 2021, the AltCorp Parties, the Company, and SURG entered into a Memorandum of Understanding (the “MOU”) to set up a framework for an attempt to settle the two lawsuits.
On December 22, 2021 (the “Effective Date”), pursuant to the framework in the MOU, the AltCorp Parties (and an additional third party), the Company, ECS, and SURG, Kevin Brian Cox (SURG’s Chief Executive Office–) - in his individual capacity, entered into a Resolution of Purchase, Mutual Release, and Settlement Agreement (the “Final Settlement Agreement”) to settle the two lawsuits and resolve all disputes related to the consideration paid by SURG to the Company in connection with the APA.
| (F) | The
Final Settlement Agreement, among other resolutions, essentially provides the following:
i) From the total consideration of the Final Settlement Agreement, the amount of $ |
(ii)
(iii) Potential payments to third parties.
The Final Settlement Agreement replaces all prior
agreements between the parties. In addition, within three (3) trading days of the last payment related to the $
The final settlement of $
As the Company committed to assign certain revenue share agreement to SURG as part of the Company’s settlement with RWJ Agreement, on October 5, 2022 and as cumulation of all settlement agreements the Company issued a request to the SURG regarding release of certain escrow funds and the execution of an assignment of rights as contemplated in the aforereferenced agreement.
F-19
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
Note 6 - 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 4,006 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 for 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 principle to return the pledged 4,006 restricted shares to the Company for cancellation. The 4,006 restricted shares have not yet been returned to the Company as of December 31, 2022.
Note 7 – Impaired Investment
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 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 6% and is payable at maturity on December 31, 2021. At the election of Gonzalez, the Gopher Convertible Note can be converted into a maximum of 20,000 shares of Series H Preferred Stock. Each share of Series H Preferred Stock is convertible, at the option of the holder but subject to the Company increasing its authorized shares of common stock, into such number of shares of common stock of the Company as determined by dividing the Stated Value ($500 per share) by the conversion price ($500 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.
F-20
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
On May 19, 2021, the Company, entered into a Mutual Release and Settlement Agreement and Irrevocable Assignment of Note Balance Principal and Accrued Interest (the “Gonzalez Agreement”) with third party, GBT-CR, IGOR 1 Corp and Gonzalez. Pursuant to the Gonzalez Agreement, without any party admission of liability and to avoid litigation, the parties had 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% after GBT-CR issued additional shares to other investors therefore 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.
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.
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.
Tokenize shall contribute the services and resources for the development of the Technology Portfolio to GBT Tokenize. The Company shall contribute 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 $.
In addition, GBT Tokenize and Gonzalez
entered into a Consulting Agreement in which Gonzalez is engaged to provide services for $
F-21
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
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.
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 shares of common stock of the Company. The
shares were valued at $
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
$
Although the investment was impaired, the product
development is still ongoing. The carrying amount of this investment at December 31, 2022 and December 2021, was $
Note 8 – Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses at December 31, 2022 and 2021 consist of the following:
| 2022 | 2021 | |||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities | ||||||||
| Accrued interest | ||||||||
| Other | ||||||||
| Total | $ | $ | ||||||
Note 9 – 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 $
F-22
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
Note 10 – Convertible Notes Payable, Non-related Partied and Related Party
Convertible notes payable – non related parties at December 31, 2022 and 2021 consist of the following:
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Convertible note payable to GBT Technologies S.A | $ | $ | ||||||
| Convertible notes payable to 1800 | ||||||||
| Convertible notes payable to Redstart Holdings | ||||||||
| Total convertible notes payable, non related parties | ||||||||
| Unamortized debt discount | ( | ) | ( | ) | ||||
| Convertible notes payable – non related parties | ||||||||
| Less current portion | ( | ) | ||||||
| Convertible notes payable – non related parties, long-term portion | $ | $ | ||||||
$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 had 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 year ended December
31, 2021,
During the year ended December
31, 2022,
As of December 31, 2022,
the note had an outstanding balance of $
Redstart Holdings Corp.
F-23
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
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”) 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”) of $
F-24
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
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”) of $100,200 for $83,500. The Redstart Note No. 3 had a maturity date of December 9, 2021 and the Company had agreed to pay interest on the unpaid principal balance of the Redstart Note No. 3 at the rate of 6% 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 year ended December 31, 2021, the entire amount of Note No. 3 of $100,200 plus accrued interest was converted into 135,582 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) of $
F-25
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
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”) of $
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”) of $106,200 for $88,500. The Redstart Note No. 6 had a maturity date
of August 26, 2022 and the Company had agreed to pay interest on the unpaid principal balance of the Redstart Note No. 6 at
the rate 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”) of $
F-26
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
Iliad Research and Trading, L.P.
On February 27,
2019, the Company entered into a note purchase agreement with a third-party invest–r - 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 $
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. 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 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 for an extension fee of $
Sixth Street Lending LLC – named changed - 1800 Diagonal Lending LLC - First Note
On November 8, 2021, the
Company entered into a Securities Purchase Agreement with Sixth Street Lending LLC (“Sixth Street”) pursuant to which the
Company issued to Sixth Street a Convertible Promissory Note (the “Sixth Street Note”) of $
Outstanding Notes
F-27
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
Sixth Street Lending LLC – named changed - 1800 Diagonal Lending LLC - Second Note
On May 5, 2022, the Company entered into a Securities
Purchase Agreement with 1800 Diagonal Lending LLC, an accredited investor (“DL”), pursuant to which the Company issued to
DL a Convertible Promissory Note (the “DL Note”) of $
The outstanding principal amount of the DL Note may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, DL may convert the DL Note into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price during the 20-day period immediately preceding the date of conversion. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the DL Note), the DL Note shall become immediately due and payable and the Company shall pay to DL, in full satisfaction of its obligations hereunder, additional amounts as set forth in the DL Note. In no event shall DL be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by DL and its affiliates would exceed 4.99% of the outstanding shares of the common stock of the Company.
Unless the Company shall have first delivered to DL, at least 48 hours prior to the closing of any equity (or debt with an equity component) financing in an amount less than $150,000 (“Future Offering”), written notice describing the proposed Future Offering and providing the Buyer an option during the 48 hour period following delivery of such notice to DL the securities being offered in the Future Offering on the same terms as contemplated by such Future Offering then the Company is restricted from conducting the Future Offering during the period beginning on the Issue Date and ending nine months following the Issue Date.
During the year ended December 31, 2022,
As of December 31, 2022,
the note had an outstanding balance of $
Sixth Street Lending LLC – named changed - 1800 Diagonal Lending LLC - Third Note
On September 13, 2022, the Company entered into a
Securities Purchase Agreement (dated September 9, 2022) with 1800 Diagonal Lending LLC, an accredited investor (“DL”) pursuant
to which the Company issued to DL a Promissory Note (the “DL Note”) of $
F-28
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
During the year ended December 31, 2022, the
company paid back $
As of December 31, 2022,
the note had an outstanding balance of $
As of December 31, 2022 and
December 31, 2021, the nonrelated party convertible notes had total outstanding balance of $
Convertible notes payable – related parties at December 31, 2022 and 2021 consist of the following:
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Convertible note payable to Stanley Hills | ||||||||
| Unamortized debt discount | ||||||||
| Convertible notes payable, net, related party | ||||||||
| Less current portion | ( | ) | ( | ) | ||||
| Convertible notes payable, net, related party, long-term portion | $ | $ | ||||||
Stanley Hills LLC
The
Company entered into a series of loan agreements with Stanley Hills LLC (“Stanley”) pursuant to which it received
more than $
Discounts on convertible notes
The Company recognized interest expense of $
F-29
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
A roll-forward of the convertible notes payable from December 31, 2020 to December 31, 2022 is below:
| 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 | ( | ) | ||
| Payment with cash | ( | ) | ||
| Original issue discount | ||||
| Conversion to common stock | ( | ) | ||
| Debt discount related to new convertible notes | ( | ) | ||
| Amortization of debt discounts | ||||
| Convertible notes payable, December 31, 2021 | $ | |||
| Issued for cash | ||||
| Payment with cash | ( | ) | ||
| Original issue discount | ||||
| Conversion to common stock | ( | ) | ||
| Debt discount related to new convertible notes | ( | ) | ||
| Amortization of debt discounts | ||||
| Convertible notes payable, December 31, 2022 | $ |
Note –11 - Notes Payable, Non-related Parties and Related Party
Notes payable, non-related parties at December 31, 2022 and December 31, 2021 consist of the following:
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| RWJ acquisition note | $ | $ | ||||||
| SBA loan | ||||||||
| 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
F-30
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 and 2020
SBA Loan
On June 22, 2020, the Company received a loan from
the Small Business Administration under the Economic Injury Disaster Loan program related to the COVID-19 relief efforts. The loan bears
interest at
Notes payable, related party at December 31, 2022 and December 31, 2021 consist of the following:
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Alpha Eda note payable | $ | $ | ||||||
| Total notes payable, related party | ||||||||
| Unamortized debt discount | ||||||||
| Notes payable, net, related party | ||||||||
| Less current portion | ( | ) | ( | ) | ||||
| Notes payable, net, related party, long-term portion | $ | $ | ||||||
Alpha Eda
On November 15, 2020, the Company issued
a promissory note to Alpha Eda, LLC (“Alpha”), a related party for $140,000. The note accrues interest
at 10%, is unsecured and was 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 December 31, 2022 and 2021 was $
Discounts on Promissory Note
The Company recognized interest expense of $
Note 12 – Accrued Settlement
In connection with a legal matter filed by the Investor
of the $
F-31
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
Note 13 - Derivative Liability
Certain of the convertible notes payable discussed in Note 10 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 FV of the derivative liability is recorded and shown separately under current liabilities. Changes in the FV 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 FV of derivative liability at December 31, 2022 and 2021:
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Stock price | $ | $ | ||||||
| - | ||||||||
| Risk free rate | % | -% | ||||||
| Volatility | -% | -% | ||||||
| Conversion/ Exercise price | $ | $ | ||||||
| Dividend rate | % | % | ||||||
The following table represents the Company’s derivative liability activity for the years ended December 31, 2022 and 2021:
| Derivative liability balance, December 31, 2019 | $ | |||
| 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, 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, December 31, 2021 | $ | |||
| 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, December 31, 2022 | $ |
F-32
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
Note 14 - 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. 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.
In July 7, 2022 the Company filed a preliminary information statement to the stockholders of record (the “Record Date”) in connection with certain actions to be taken by the written consent by stockholders holding a majority of the voting stock of the Company, dated as of June 28, 2022.
| ● | To amend the Company’s Articles of Incorporation, (the “Articles of Incorporation”) to increase the number of authorized shares of common stock, par value $ per share (the “Common Stock”), of the Company from shares to 10,000,000,000 shares. This action concluded on August 11, 2022. |
| ● | (i) authorize the Company’s Board of Directors to effect, in its sole discretion, a reverse stock split of the Common Stock in a ratio of up to |
F-33
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
During the year ended December 31, 2022, the Company had the following transactions in its common stock:
| ● | Of
for cash of $ | |
| ● | Of
for the conversion of convertible notes of $ | |
| ● | cancelled for services rendered | |
| ● | Of
Shares issued to GBT Tokenize for certain joint venture agreement between Magic International Argentina FC, S.L. and the
Company. The value of the shares of $ | |
| ● | Of 500,000,000 Shares issued to Metaverse for certain equity method investment. The value of the shares of $5,000 was determined based on the FV of the Company’s common stock; and |
Series B Preferred Shares
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 December 31, 2022 and 2021, there were Series B Preferred Shares outstanding.
Series C Preferred Shares
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 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.
F-34
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
At December 31, 2022 and 2021, GV owns 700 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 December 31, 2022 and 2021, there were Series C Preferred Shares outstanding.
Series D Preferred Shares
As of December 31, 2022 and 2021, there are and shares of Series D Preferred Shares outstanding, respectively.
Series G Preferred Shares
As of December 31, 2022 and 2021, 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 for the issuance of shares of Series H Convertible Preferred Stock of the Company and a Convertible
Note of $
As of December 31, 2022 and 2021, there are shares of Series H Preferred Shares outstanding.
F-35
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
Warrants
The following is a summary of warrant activity.
| Weighted | |||||||||||||||||
| Weighted | Average | ||||||||||||||||
| Average | Remaining | Aggregate | |||||||||||||||
| Warrants | Exercise | Contractual | Intrinsic | ||||||||||||||
| Outstanding | Price | Life | Value | ||||||||||||||
| Outstanding, December 31, 2021 | $ | $ | |||||||||||||||
| Granted | |||||||||||||||||
| Forfeited | |||||||||||||||||
| Exercised | |||||||||||||||||
| Outstanding, December 31, 2022 | $ | $ | |||||||||||||||
| Exercisable, December 31, 2022 | $ | $ | |||||||||||||||
The exercise price for warrant outstanding and exercisable at December 31, 2022:
| Outstanding | Exercisable | |||||||||||||
| Number of | Exercise | Number of | Exercise | |||||||||||
| Warrants | Price | Warrants | Price | |||||||||||
| $ | $ | |||||||||||||
Equity Purchase Agreement and Registration Rights Agreement
On December 17,
2021 (the “Effective Date”), GBT Technologies Inc. (the “Company”) entered into an equity financing
agreement (the “Equity Financing Agreement”) and a registration rights agreement (the “Registration Rights
Agreement”) with GHS Investments LLC (“GHS”), pursuant to which GHS shall purchase from the Company, up to
that number of shares of common stock of the Company (the “Shares”) for $
The Equity Financing Agreement grants the Company the right, from time to time at its sole discretion (subject to certain conditions) during the Contract Period, to direct GHS to purchase shares of Common Stock on any business day (a “Put”), provided that at least ten trading days has passed since the most recent Put. The purchase price of the shares of Common Stock contained in a Put will be 90% of the lowest daily volume weighted average price (VWAP) of the Company’s Common Stock during the ten consecutive trading days preceding the receipt by GHS of the applicable Put notice. Such sales of Common Stock by the Company, if any, may occur from time to time, at the Company’s option, during the Contract Period. Subject to the satisfaction of certain conditions set forth in the Equity Financing Agreement, on each Put the Company will deliver an number of Shares equaling 110% of the dollar amount of each Put. The maximum dollar amount of each Put will not exceed 200% of the average daily trading dollar volume for the Company’s Common Stock during the ten trading days preceding the Trading Day that GHS receives a Put. No Put will be made in an amount equaling less than $10,000 or greater than $500,000. Puts are further limited to GHS owning no more than 4.99% of the outstanding stock of the Company at any given time. The Equity Financing Agreement and the Registration Rights Agreement contain customary representations, obligations, rights, warranties, agreements and conditions of the parties. The Equity Financing Agreement terminates upon any of the following events: when GHS has purchased $10,000,000 in the Common Stock of the Company pursuant to the Equity Financing Agreement; on the date that is 24 calendar months from the date the Equity Financing Agreement was executed.
F-36
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
Actual sales of shares of Common Stock to GHS under the Equity Financing Agreement will depend on a variety of factors to be determined by the Company from time to time, including, among others, market conditions, the trading price of the Common Stock and determinations by the Company as to the appropriate sources of funding for the Company and its operations.
For the year ended December 31, 2022, the Company did not receive any proceeds from the equity purchase agreement.
Note 15 - Income Taxes
At December 31, 2022 and 2021, the significant components of the deferred tax assets are summarized below:
| December 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Deferred income tax asset | ||||||||
| Net operating loss carryforwards | $ | $ | ||||||
| Total deferred income tax asset | ||||||||
| Less: valuation allowance | ( |
) | ( |
) | ||||
| Total deferred income tax asset | $ | $ | ||||||
The valuation allowance increased by $
No income tax expense reflected in the consolidated statements of income for the years 2022 and 2021.
The reconciliation of the effective income tax rate to the federal statutory rate for the years ended December 31, 2022 and 2021 is as follows:
| 2022 | 2021 | |||||||||||||||
| Amount | Percent | Amount | Percent | |||||||||||||
| Federal statutory rates | $ | % | $ | ( |
) | % | ||||||||||
| State income taxes | % | ( |
) | % | ||||||||||||
| Permanent differences | ( |
) | - |
% | - |
% | ||||||||||
| Valuation allowance against net deferred tax assets | % | - |
% | |||||||||||||
| Effective rate | $ | — | % | $ | — | % | ||||||||||
The Company periodically evaluates the likelihood of the realization of deferred tax assets, and adjusts the carrying amount of the deferred tax assets by the valuation allowance to the extent the future realization of the deferred tax assets is not judged to be more likely than not. The Company considers many factors when assessing the likelihood of future realization of its deferred tax assets, including its recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income or loss, the carryforward periods available to the Company for tax reporting purposes, and other relevant factors.
Future changes in the unrecognized tax benefit will have no impact on the effective tax rate due to the existence of the valuation allowance. The Company estimates that the unrecognized tax benefit will not change significantly within the next twelve months. The Company will continue to classify income tax penalties and interest as part of general and administrative expense in its consolidated statements of operations. There were no interest or penalties accrued as of December 31, 2022 and 2021.
F-37
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
Note 16 - 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 August 1, 2021, 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 of $5,000 per month.
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, for 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 $
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 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 for $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.
F-38
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
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 of $
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.
F-39
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
Yello Partners Inc.
As of December 31, 2022 and 2021, the Company has
$
Alpha Eda Note Payable – Related Party
On November 15, 2020, the Company issued
a promissory note to Alpha Eda, LLC (“Alpha”), a related party, for $
Stanley Hills LLC Convertible Note Payable – Related Party
The Company entered into
a series of loan agreements with Stanley Hills LLC (“Stanley”) pursuant to which it received more than $
F-40
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
Stanley Hills LLC Accounts Payable – Related Party
On March 8, 2020, SURG filed a lawsuit against its
transfer agent, Vstock from transferring millions of SURG stock that is currently in possession by the Company and assigned to Stanley
Hills, LLC. On January 1, 2021, SURG, AltCorp and Stanley Hills, LLC (“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 $
Consulting income for both the years ended December 31, 2022 and
2021 were $
Note 17 - 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 Ugopher services 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 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.
F-41
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
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. SURG is the clearing house for UGO.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 January 28, 2022 the court awarded the Company with injunction against RWJ defendants, where all fee funds generating from resale should be deposited into GBT blocked account, and therefore RWJ defendants cannot use these funds without court order.
The Company entered into
the Confidential Settlement Agreement and Mutual Release (“RJW Agreement”) by and between RWJ Advanced Marketing, LLC, Robert
Warren Jackson, Gregory Bauer (collectively the “RJW Parties”) and W.L. Petrey Wholesale Company, Inc., (“Petrey”)
on one hand; and GBT Technologies Inc., on behalf of itself and its agents (collectively the GBT Parties”), on the other hand. The
Company the RJW Agreement effective September 26, 2022 with final signatures delivered to the Company on or about October 5, 2022. Pursuant
to the RJW Agreement, the parties have agreed to settle, release, and otherwise resolve all known or unknown claims between them and agreed
to jointly stipulate, move, or otherwise dismiss the lawsuits filed in the United States District Court of Nevada (Case No. 2:20-cv- 02078),
in the Superior Court of the State of California, County of Los Angeles, Central District (Case Nos. 19STCV03320 and 20STCV32709), and
in the United States District Court of the Central District of California (Case No. 2:20-cv-09399-RGK-AGR) with prejudice. The parties
agreed and stipulated to release all funds currently being held in a blocked account of $
The Company under a different settlement agreement with SURG, committed to assign the IAA. As such, on October 5, 2022 and as cumulation of all settlement agreements the Company issued a request to SURG regarding release of certain escrow funds and the execution of an assignment of rights as contemplated in the aforereferenced agreement.
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”) of
$
F-42
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
In connection with SURG Exchange Agreement (see Note 5) - 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 sent SURG and its transfer agent via registered mail, a true-up shares demand for an additional 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.
Subsequently, SURG was a party to two lawsuits in state District Court, the Eighth Judicial District Court for Clark County, Nevada involving AltCorp, Stanley and Glen Eagles Acquisition LP (the “AltCorp Parties.”). Each of these lawsuits were ultimately disputes relating to the total consideration SURG was to pay the Company under the APA.
On October 18, 2021, the AltCorp Parties, the Company, and SURG entered into a Memorandum of Understanding (the “MOU”) to set up a framework for an attempt to settle the two lawsuits.
On December 22, 2021 (the “Effective Date”), pursuant to the framework in the MOU, the AltCorp Parties (and an additional third party), the Company, ECS, and SURG, Kevin Brian Cox (SURG’s Chief Executive Officer) - in his individual capacity, entered into a Resolution of Purchase, Mutual Release, and Settlement Agreement (the “Final Settlement Agreement”) to settle the two lawsuits and resolve all disputes related to the consideration paid by SURG to the Company in connection with the APA.
On or about July 9, 2021 the Company filed a lawsuit in District Court in Clack County Nevada – Department 19 (Case number A-21-837631-C) against Terry Taylor and TTSG Holdings, Inc for breach of contract, breach of covenant of Good Faith and Fair Dealing, Unjust Enrichment and declaratory relief for failure of providing consulting services per contract they entered. The Company is demanding the return of 240,000 shares issued, return of the $5,000 payments, recission of the consulting agreement, and attorney’s fees and costs. As Terry Taylor and TTSG Holdings failed to appear to a notice of deposition, the Company filed for a summary judgment. On January 20, 2023 the court issued a $708,821 writ of execution against Terry Taylor and TTSG
Gregory Mancuso and Rainer AG
On or about February 2, 2022, GBT was served with a First Amended Complaint (the “Complaint”) initiated by Gregory Mancuso and Rainer AG, a Swiss corporation, Case No. 21SMCV01430, filed in the Superior Court of the State of California for the County of Los Angeles. The Complaint names a number of different parties, including GBT, and asserts, among other things, claims for conversion, unjust enrichment, breach of contract, and breach of implied covenant of fair dealing, which Plaintiffs allege arise out of a brokerage agreement entered into between Plaintiff Rainer AG and co-defendant Consul Group re Dos Mil Veintiuno S.R.L (“Consul”). GBT was sued under an alter ego theory of liability, and its only involvement in the above-referenced chain of events seems to be that its shares were deposited with Rainer by Consul upon the opening of the brokerage account. GBT will be filling a demurrer to the First Amended Complaint based on a variety of deficiencies with the First Amended Complaint, and will ask the Court to dismiss the claims against GBT.
F-43
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
Note 18 - Contingencies
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 $
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 pledged 4,006 restricted shares of its common stock valued at $7,610,147 (based on the closing price on the grant date) for three years for 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 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 principle to return the pledged 4,006 restricted shares to the Company for cancellation. The 4,006 restricted shares have not yet been returned to the Company as of December 31, 2022.
Assignment of lease agreement
On May 17, 2022, Mahaser
LLC (“Assignee”) entered into an assignment and assumption of lease agreement by and between 2819 Coldwater LLC (“Assignor”),
Sunset Place Holdings LLC (“Lessor”) and Yossi Attia (“Guarantor”). Pursuant to the agreement, Lessor agreed to
lease to Assignor certain Standard Industrial/Commercial Multi-Tenant Lease – Gross agreement dated February 7, 2022 (the “Lease”)
and expiring on January 31, 2024, which premises commonly known as 8265 Sunset Boulevard, Suite #107, West Hollywood, CA 90046. The base
rent payment shall equal $4,100 per month and share of common area operating expense shall equal $
F-44
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
Note 19 – Concentrations
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to a concentration of credit risk for the years, consist principally of temporary cash investments. There have been no losses in these accounts through December 31, 2022 and 2021.
Liquidity risk
The Company has an accumulated deficit of $
Customers
Sales for both the years ended December 31, 2022 and 2021 were $
Note 20 - Subsequent Events
On January 24, 2023, the Company issued a convertible
promissory note to Glen Eagles Acquisition LP in the principal amount of $
F-45
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
On March 1,
2023, the Company entered into a Securities Purchase Agreement, with 1800 Diagonal Lending LLC, an accredited investor
(“DL”) pursuant to which the Company issued to DL a Promissory Note (the “DL Note”) of $
The outstanding principal amount of the DL Note may not be converted into the Company common shares except in the event of default. In the event of default on the DL Note, DL may convert the DL Note into shares of the Company’s common stock at a conversion price equal to 75% of the lowest trading price during the 10 day period immediately preceding the date of conversion. In addition, upon the occurrence and during the continuation of an event of default (as defined in the DL Note), the DL Note shall become immediately due and payable and the Company shall pay to DL, in full satisfaction of its obligations hereunder, additional amounts as set forth in the DL Note. In no event shall DL be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by DL and its affiliates would exceed 4.99% of the outstanding shares of the common stock of the Company.
On March 1, 2023, the Company
entered into a Securities Purchase Agreement with DL pursuant to which the Company issued to DL a Convertible Promissory Note (the “DL
Convertible Note”) of $
The outstanding principal amount of the DL Convertible Note may not be converted prior to the period beginning on the date that is 180 days following the date the DL Convertible Note is issued . Following the 180th day, DL may convert the DL Convertible Note into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price during the 20 day period preceding the date of conversion. In addition, upon the occurrence and during the continuation of an event of default (as defined in the DL Convertible Note), the DL Convertible Note shall become immediately due and payable and the Company shall pay to DL, in full satisfaction of its obligations hereunder, additional amounts as set forth in the DL Convertible Note. In no event shall DL be allowed to effect a conversion if such conversion, along with all other shares of Company common stock beneficially owned by DL and its affiliates would exceed 4.99% of the outstanding shares of the common stock of the Company.
F-46
GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022 and 2021
On June 10, 2022, GBT Technologies, Inc. (the “Company”), entered into a Joint Venture and Territorial License Agreement (the “Metaverse Agreement”) with Ildar Gainulin and Maria Belova (collectively, the “Licensor”).
Under the Metaverse Agreement, the parties formed Metaverse Kit Corp., a Nevada corporation (“Metaverse Kit”). The purpose of Metaverse Kit was to develop, maintain and support source codes for its proprietary technologies and comprehensive platform that combines a core virtual reality platform and an extended set of real-world functions to provide a metaverse experience initially within the area of sports and then expanding into virtual worlds of entertainment, live events, gaming, communications and other cross over product opportunities (the “Meta Portfolio”). Under the Metaverse Agreement, Licensor agreed to provide Metaverse Kit with the licensed technology and expertise. In connection therewith, the parties entered an Asset Purchase Agreement (the “Metaverse APA”) concurrently with the Metaverse Agreement whereby Licensor sold Metaverse Kit all source codes pertaining to the Meta Portfolio. Further, Licensor provided an exclusive license to Metaverse Kit throughout the world for the invented product/service and the related platforms relating to the Meta Portfolio and to use the know how to develop, manufacture, sell, market and distribute the Meta Portfolio throughout the world. The Company was required to contribute shares of common stock of the Company (“GBT Shares”) to Metaverse Kit. Licensor and the Company were to each own 50% of Metaverse Kit. The Company pledged its 50% ownership in Metaverse Kit to Igor 1 Corp. to secure a convertible note held by Igor 1 Corp. The Company was to appoint two directors and Licensor was allowed to appoint one director of Metaverse Kit.
In addition,
Metaverse Kit, Licensor and Elentina Group, LLC (“Elentina”) entered into a Consulting Agreements in which IGBM
and Elentina, each were engaged to provide services for $
The closing of the Metaverse Agreement occurred on June 13, 2022.
On March 14, 2023, the Company
received a counter signed Settlement Agreement and Release by Licensor dated March 2, 2023 (“Settlement Agreement”). Pursuant
to the Settlement Agreement, the parties agreed that Metaverse Agreement, the Metaverse APA and the Consulting Agreement are void and
cancelled. Licensor agreed to pay $
On February 1, 2023, the Company engaged AlKhatib Consulting Group to provide exclusive representation services in connect with managing market partners, effective on February 1, 2012 for 24 consecutive months.
On April 3, 2023, GBT Tokenize Corp. (“Seller”),
a subsidiary that is owned
In consideration of acquiring the System, TREN is required to issue to the Seller common shares of TREN (the “Shares”). The Shares will be restricted per Rule 144 as promulgated under the Securities Act of 1933, as amended (the “1933 Act”) and Seller agreed to a lock-up period of nine (9) months following closing (the “Lock Up Term”). In the event that TREN is unable to up-list to Nasdaq either through a business combination or otherwise prior to the expiration of the Lock Up Term, the Seller may request within three (3) business days of the expiration of the Lock-Up Term, that all transactions contemplated by the APA be unwound.
In addition, TREN, Seller and GBT entered into a license agreement regarding the System, granting the Seller and/or GBT a perpetual, irrevocable, non-exclusive, non-transferable license for using the System to be used in its own development, as in-house tool, where Seller or GBT may not sublicense its rights hereunder to any customer or client.
F-47