United States
Securities and Exchange Commission
Washington, D.C. 20549
Form
(Mark One) | |
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended |
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commissions file number:
(Exact name of registrant as specified in its charter)
State or other jurisdiction of | I.R.S. Employer Identification Number |
incorporation or organization |
(Address of principal executive offices)
Issuer ’s telephone number: |
Securities registered pursuant to Section 12(b) of the Act: Not applicable.
Title of each class | Trading Symbol | Name of each exchange on which registered |
Not applicable. |
Indicate by check mark whether the registrant (1)
has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically
every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ | |
Smaller reporting company |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a
shell company (as defined in Rule 12b-2 of Exchange Act). Yes ☐
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:
Common Stock, $0.00001 par value | Common Shares |
(Class) | (Outstanding at August 15, 2023) |
GBT TECHNOLOGIES INC.
TABLE OF CONTENTS
1
Item 1: Condensed consolidated financial statements
GBT TECHNOLOGIES INC. |
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS |
ASSETS | June 30, | December 31, | ||||||
2023 | 2022 | |||||||
(Unaudited) | (Audited) | |||||||
Current Assets: | ||||||||
Cash | $ | $ | ||||||
Accounts Receivable | ||||||||
Inventory | ||||||||
Prepaid | ||||||||
Note receivable | ||||||||
Other Current Assets | ||||||||
Marketable securities | ||||||||
Total current assets | ||||||||
Total assets | $ | $ | ||||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
Current Liabilities: | ||||||||
Accounts payable and accrued expenses | $ | $ | ||||||
Accrued settlement | ||||||||
Unearned revenue | ||||||||
Contract liabilities | ||||||||
Convertible notes payable, current, net | ||||||||
Convertible notes payable, related party, net | ||||||||
Notes payable, current, net | ||||||||
Notes payable, related party | ||||||||
Due to related party | ||||||||
Derivative liability | ||||||||
Total current liabilities | ||||||||
Non-Current Liabilities: | ||||||||
Convertible note payable, noncurrent, net | ||||||||
Note payable, noncurrent, net | ||||||||
Total noncurrent liabilities | ||||||||
Total liabilities | ||||||||
Stockholders’ Deficit: | ||||||||
Series B Preferred stock, $ par value; shares authorized; | ||||||||
and shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively | ||||||||
Series C Preferred stock, $ par value; shares authorized; | ||||||||
and shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively | ||||||||
Series D Preferred stock, $ par value; shares authorized; | ||||||||
and shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively | ||||||||
Series G Preferred stock, $ par value; shares authorized; | ||||||||
and shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively | ||||||||
Series H Preferred stock, $ par value ($500.00 stated value); shares authorized; | ||||||||
and shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively | ||||||||
Common
stock, $ authorized; and shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively |
par value; shares||||||||
Treasury stock, at cost; shares at June 30, 2023 and December 31, 2022, respectively | ( |
) | ( |
) | ||||
Stock loan receivable | ( |
) | ( |
) | ||||
Additional paid in capital | ||||||||
Accumulated deficit | ( |
) | ( |
) | ||||
Total stockholders’ deficit | ( |
) | ( |
) | ||||
Non-Controlling Interest | ||||||||
Total stockholders’ deficit attributable to GBT Technologies, Inc. | ( |
) | ( |
) | ||||
Total liabilities and stockholders’ deficit | $ | $ |
The accompanying footnotes are an integral part
of the unaudited condensed consolidated financial statements.
2
GBT TECHNOLOGIES INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended June 30, | Six months ended June 30, | |||||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||||
Sales | $ | $ | $ | $ | ||||||||||||
Sales - related party | ||||||||||||||||
Total sales | ||||||||||||||||
Cost of goods sold | ||||||||||||||||
Gross profit | ( |
) | ||||||||||||||
Operating expenses: | ||||||||||||||||
General and administrative expenses | ||||||||||||||||
Marketing expenses | ||||||||||||||||
Professional expenses | ||||||||||||||||
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 | ( |
) | ( |
) | ( |
) | ( |
) | ||||||||
Other expense | ||||||||||||||||
Gain on debt extinguishment | ||||||||||||||||
Gain on bad debt | ||||||||||||||||
Change in fair value of marketable securities | ( |
) | ( |
) | ( |
) | ||||||||||
Other income - related party licensing income | ||||||||||||||||
Total other income (expense) | ( |
) | ( |
) | ( |
) | ||||||||||
Income (loss) before income taxes | ( |
) | ( |
) | ( |
) | ||||||||||
Income tax expense | ||||||||||||||||
Loss from continuing operations | ( |
) | ( |
) | ( |
) | ||||||||||
Net income (loss) | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||
Less: net loss attributable to the noncontrolling interest | ( |
) | ||||||||||||||
Net loss attributable to GTB Technologies Inc. | ( |
) | ( |
) | ( |
) | ||||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | ||||||||||||||||
Diluted | ||||||||||||||||
Net loss per share (basic and diluted): | ||||||||||||||||
Basic | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ||||||
Diluted | ( |
) | ( |
) | ( |
) |
The accompanying footnotes
are an integral part of the unaudited condensed consolidated financial statements.
3
GBT TECHNOLOGIES INC. |
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT |
(unaudited) |
Stock | Additional | Total | ||||||||||||||||||||||||||||||||||
Common Stock | Treasury Stock | Loan | Paid-in | Accumulated | Noncontrolling | Stockholders’ | ||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Receivable | Capital | Deficit | Interest | Deficit | ||||||||||||||||||||||||||||
Balance, December 31, 2022 | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||
Common stock issued for conversions | — | |||||||||||||||||||||||||||||||||||
Fair value of derivative liability due to conversions | — | — | ||||||||||||||||||||||||||||||||||
Common stock issued for Service | — | |||||||||||||||||||||||||||||||||||
Net loss | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
Balance, March 31, 2023 | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||
Common stock issued for conversions | — | |||||||||||||||||||||||||||||||||||
Fair value of derivative liability due to conversions | — | — | ||||||||||||||||||||||||||||||||||
Net loss | — | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
Balance, June 30, 2023 | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) |
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
Balance, December 31, 2021 | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||
Common stock issued for conversion of convertible debt and accrued interest | — | |||||||||||||||||||||||||||||||||||
Fair value of beneficial conversion feature of converted | — | — | ||||||||||||||||||||||||||||||||||
Common stock issued for cash | — | |||||||||||||||||||||||||||||||||||
Net loss | — | — | ||||||||||||||||||||||||||||||||||
Balance, March 31, 2022 | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | |||||||||||||||||||||
Common stock issued for conversions | — | |||||||||||||||||||||||||||||||||||
Fair value of derivative liability due to conversions | — | — | ||||||||||||||||||||||||||||||||||
Common stock issued for cash | — | |||||||||||||||||||||||||||||||||||
Common stock issued for JV - Tokenize | — | ( |
) | |||||||||||||||||||||||||||||||||
Equity Method Investment - Meta | — | ( |
) | |||||||||||||||||||||||||||||||||
Net loss | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
Balance, June 30, 2022 | $ | $ | $ | ( |
) | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) |
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.
4
GBT TECHNOLOGIES INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the six months Ended June 30, | ||||||||
2023 | 2022 | |||||||
Cash Flows From Operating Activities: | ||||||||
Net loss | $ | ( |
) | $ | ||||
Adjustments to reconcile net loss 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 | ||||||||
Change in fair value of market equity security | ||||||||
Gain on debt extinguishment | ( |
) | ||||||
Changes in operating assets and liabilities: | ||||||||
Account receivable | ( |
) | ||||||
Other receivable | ||||||||
Prepaid | ( |
) | ||||||
Other assets | ( |
) | ||||||
Inventory | ( |
) | ( |
) | ||||
Unearned revenue | ( |
) | ( |
) | ||||
Contract liabilities | ( |
) | ( |
) | ||||
Accounts payable and accrued expenses | ( |
) | ||||||
Net cash (used in) provided by 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 | ||||||||
Repayments to 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 period | ||||||||
Cash, end of period | $ | $ | ||||||
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 | $ | $ | ||||||
Share issuance for JV Metaverse | $ | $ | ||||||
Share issuance for JV Tokenize | $ | $ |
The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements. |
5
GBT Technologies, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
For the Six Months Ended June 30, 2023 and 2022 (Unaudited)
Note 1 - Organization and Basis of Presentation
Organization and Line of Business
GBT Technologies Inc. (the “Company”, “GBT”, or “GTCH”) was incorporated on July 22, 2009 under the laws of the State of Nevada. The Company is targeting growing markets such as development of Internet of Things (IoT) and Artificial Intelligence (AI) enabled networking and tracking technologies, including wireless mesh network technology platform and fixed solutions, development of an intelligent human body vitals device, asset-tracking IoT, 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.
On July 20, 2023, the Company through its wholly owned subsidiary, Greenwich International Holdings, a Costa Rica corporation (“Greenwich”), entered into an Amended and Restated Joint Venture (the “2023 Tokenize Agreement”) with Magic Internacional Argentina FC, S.L. (“Magic”) and GBT Tokenize Corp (“GBT Tokenize”). GBT Tokenize has developed a vital device based on the Technology Portfolio that is ready for commercialization, as well as certain derivative technologies, which positioned GBT Tokenize to further develop or license certain code sources. On April 3, 2023, GBT Tokenize entered its first commercial transaction to date through the sale of the Avant-AI! technology that been developed by GBT Tokenize, based on the Technology Portfolio.
The unaudited condensed financial statements (“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.
● | 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 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 |
6
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.
Principles of Consolidation
The accompanying CFS include the accounts of the Company and its subsidiaries; the Company’s 50% owned subsidiaries GBT Tokenize Corp. (active) and GBT BitSpeed Corp (currently inactive); 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.
7
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 June 30, 2023 and December 31, 2022, the Company did
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.
Inventory
Inventory consists of electronic product ready for sale online on e-commerce platforms. 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.
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 June 30, 2023 and 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.
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:
8
● | 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 June 30, 2023 and December 31, 2022, the Company identified the following liabilities that are required to be presented on the balance sheet at FV:
Description | Fair
Value As of June 30, 2023 |
Fair
Value Measurements at June 30, 2023 Using Fair Value Hierarchy | ||||||||||||||
Level 1 | Level 2 | Level 3 | ||||||||||||||
Conversion feature on convertible notes | $ | $ | $ | $ |
Description | Fair
Value As of December 31, 2022 |
Fair
Value Measurements at 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.
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.
9
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;
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
10
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
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 $
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 period from February 1, 2022 to February 28, 2022. On January 1, 2023 the company extended their partnership to December 31, 2023.
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.
The following table summarizes the carrying amount of the assets and liabilities of Mahaser included in the Company’s consolidated balance sheets at June 30, 2023 and as December 31, 2022 (after elimination of intercompany transactions and balances):
11
Assets of consolidated variable interest entity (“VIE”) included in the consolidated balance sheets as of June 30, 2023 (after elimination of intercompany transactions and balances) consist of: | ||||
Current assets: | ||||
Cash and equivalents | $ | |||
Accounts Receivable | ||||
Inventory | ||||
Other current asset | ||||
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 Income | $ | ( |
) |
Assets of consolidated variable interest entity (“VIE”) included in the consolidated balance sheets as of December 31, 2022 (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.
12
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.
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.
June 30*), | December 31, | |||||||
2023 | 2022 | |||||||
Series B preferred stock | ||||||||
Series C preferred stock | ||||||||
Series H preferred stock | ||||||||
Warrants | ||||||||
Convertible notes | ||||||||
Total |
Not including
Serie I Preferred that been issued on July 20, 2023
Management’s Evaluation of Subsequent Events
The Company evaluates events that have occurred after the balance sheet date of June 30, 2023, through the date which the CFS are issued. Based upon the review, other than described in Note 18 – 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 period ended March 31, 2023.
13
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 period ended March 31, 2023.
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.
Note 3 – Cash, Restricted Cash, and Cash held in Trust
Cash consist of amounts held as bank deposits, amounts held in escrow and highly liquid debt instruments purchased with an original maturity of three months or less.
From time to time, we may
maintain bank balances in interest bearing accounts in excess of the $
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
TGHI converted the Touchpoint Preferred into
MetAlert (prior name GTX Corp)
14
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 $
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.
On or about January 31, 2023 GTB Tokenize Corp the
Company’s
As of June 30, 2023 the notes
had an outstanding balance of $ $
As of March, 31, 2023 and December 31, 2022, the marketable
security had a FV of $
Note 5 – Avant Investment
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.
On July 18, 2023 TREN changed its name into: Avant Technologies, Inc and its ticker symbol on OTC Markets was changed into AVAI.
As APA is contingent per the Lock Up Term that all transactions contemplated by the APA maybe unwound, management did not record the transaction.
Note 6 – Impaired Investment
15
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 20,000 shares of Series H Convertible Preferred Stock of the Company and a Convertible Note in the principal amount of $10,000,000 issued by the Company (the “Gopher Convertible Note”) as well as the transfer and assignment of a Promissory Note payable by Gopher Protocol Costa Rica Sociedad De Responsabilidad Limitada to the Company 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.
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 – GBT Tokenize Corp
On July 20, 2023, the Company through its wholly owned inactive subsidiary, Greenwich International Holdings, a Costa Rica corporation (“Greenwich”), entered into an Amended and Restated Joint Venture (the “2023 Tokenize Agreement”) with Magic Internacional Argentina FC, S.L. (“Magic”) and GBT Tokenize Corp (“GBT Tokenize”).
16
On March 6, 2020, the Company through Greenwich entered into a Joint Venture and Territorial License Agreement (the “2020 Tokenize Agreement”) with Tokenize-It, S.A. (“Tokenize”). Under the 2020 Tokenize Agreement, the parties formed GBT Tokenize and Tokenize contributed its technology portfolio as described in the 2020 Tokenize Agreement with each Tokenize and the Company owning 50% of 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 start-ups (“Technology Portfolio”). In addition to the Technology Portfolio, Tokenize contributed the services and resources for the development of the Technology Portfolio to GBT Tokenize. The Company contributed
shares of common stock.
On May 28, 2021, the parties agreed to amend the 2020 Tokenize Agreement to expand the territory granted for the Technology Portfolio under the license to GBT Tokenize to include the entire continental United States. The Company issued GBT Tokenize an additional
shares of common stock. On June 30, 2021, Tokenize and its shareholder assigned all their rights under the 2020 Tokenize Agreement, including the Company’s pledged 50% ownership in GBT Tokenize to Magic.
On April 11, 2022, the Company, through Greenwich, entered into a Master Joint Venture and Territorial License Agreement (the “2022 Tokenize Agreement”) with Magic and Tokenize which replaced the 2020 Tokenize Agreement. The Company issued GBT Tokenize an additional
shares of common stock of the Company.
GBT Tokenize has developed a vital device based on the Technology Portfolio that is ready for commercialization, as well as certain derivative technologies, which positioned GBT Tokenize to further develop or license certain code sources. On April 3, 2023, GBT Tokenize entered its first commercial transaction to date through the sale of the Avant-AI! technology that been developed by GBT Tokenize, based on the Technology Portfolio pursuant to which GBT Tokenize received
shares of common stock of Buyer’s shares – Avant Technologies, Inc.
The 2023 Tokenize Agreement restated and replaced
the 2022 Tokenize Agreement. Pursuant to the 2023 Tokenize Agreement, as a result of the contribution of the Technology Portfolio by Tokenize
and the subsequent contribution of services for the development of the Technology Portfolio by Tokenize and Magic, GBT Tokenize has been
able to continue in operation, which has benefited the Company despite its contribution of
The Company pledged its 50% ownership in GBT Tokenize
and its
Although the investment was impaired, the product
development is still ongoing. The carrying amount of this investment at June 30, 2023 and December 31, 2022, was $
Note 7 – Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses at June 30, 2023 and at December 31, 2022 consist of the following:
2023 | 2022 | |||||||
Accounts payable | $ | $ | ||||||
Accrued liabilities | ||||||||
Accrued interest | ||||||||
Total | $ | $ |
Note 8 – Unearned Revenue
17
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. The Company has $nil
Note 9 – Convertible Notes Payable, Non-related Partied and Related Party
Convertible notes payable – non related parties at June 30, 2023 and at December 31, 2022 consist of the following:
June 31, | December 31, | |||||||
2023 | 2022 | |||||||
Convertible note payable to GBT Technologies S.A | $ | $ | ||||||
Convertible notes payable to 1800 | ||||||||
Convertible notes payable to Glen | ||||||||
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
During the period ended June
30, 2023,
As of June, 30, 2023, the
note had an outstanding balance of $ $
Paid Off Notes/Converted Notes
Sixth Street Lending LLC – named changed - 1800 Diagonal Lending LLC -
18
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
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 period ended March 31, 2023, the entire
balance of convertible note of $
Convertible 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 $
During the period ended June 30, 2023, the company
paid back $
As of June 30, 2023, the
note had an outstanding balance of $ $
19
Outstanding Notes
Glen Eagle
The Company entered into a series of loan arrangements
with Glen Eagles Acquisition LP pursuant to which it received $
In order to include a convertible feature for
the $
As of June, 30, 2023,
the consolidated convertible note had an outstanding balance of $
Sixth Street Lending LLC – named changed - 1800 Diagonal Lending LLC
Straight Note –
with Convertible Feature - 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
As of June, 30, 2023, the note had an outstanding balance of $39,446.
Convertible 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 $
20
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
As of June, 30, 2023,
the note had an outstanding balance of $
Straight Note $47,208 - On April 24,
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”) in the aggregate principal amount 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
As of June, 30, 2023,
the note had an outstanding balance of $
Convertible Note $50,580 - On April
24, 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 Convertible Promissory Note (the “DL Note”) in the aggregate principal
amount 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
21
As of June, 30, 2023,
the note had an outstanding balance of $
Convertible notes payable – related parties at June 30, 2023 and December 31, 2022 consist of the following:
June 30, | December 31, | |||||||
2023 | 2022 | |||||||
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 $
As of June, 30, 2023
and December 31, 2022 the principal balance of Stanley debt is $
Discounts on convertible notes
The Company recognized debt discount of $
A roll-forward of the convertible notes payable from December 31, 2022 to June 30, 2023 is below:
Convertible notes payable, December 31, 2022 | $ | |||
Issued for cash | ||||
Convertible note issued for accounts payable | ||||
Payment with cash | ( |
) | ||
Conversion to common stock | ( |
) | ||
Other settlement | ( |
) | ||
Convertible notes payable, June 30, 2023 | $ |
22
Note –10 - Notes Payable, Non-related Parties and Related Party
Notes payable, non-related parties at June 30, 2023 and December 31, 2022 consist of the following:
June 30, | December 31, | |||||||
2023 | 2022 | |||||||
1800 note | $ | $ | ||||||
SBA loan | ||||||||
Total notes payable | ||||||||
Unamortized debt discount | ( |
) | ||||||
Notes payable | ||||||||
Less current portion | ( |
) | ||||||
Notes payable, long-term portion | $ | $ |
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 June 30, 2023 and December 31, 2022 consist of the following:
June 30, | December 31, | |||||||
2023 | 2022 | |||||||
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 March 31, 2023 Alpha and the Company extended the note maturity to December
31, 2023. The balance of the note at June 30, 2023 and at December 31, 2022 was $
23
Discounts on Promissory Note
The Company recognized debt discount of $
Note 11 – Accrued Settlement
In connection with a legal matter filed by
the Investor of the $
Note 12 - 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 June 30, 2023 and at December 31, 2022:
June 30, | December 31, | |||||||
2023 | 2022 | |||||||
Stock price | $ | $ | ||||||
Risk free rate | - | % | - | % | ||||
Volatility | - | % | - | % | ||||
Conversion/ Exercise price | $ | $ | ||||||
Dividend rate | % | % |
The following table represents the Company’s derivative liability activity for the period ended June 30, 2023:
Derivative liability balance, December 31, 2022 | $ | |||
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, March 31, 2023 | $ |
24
Note 13 - Stockholders’ Equity
Common Stock
On October 25, 2021 FINRA approved the Reverse
Stock Split and on October 26, 2021, the Company effectuated a
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 2,000,000,000 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 |
During the period ended June 30, 2023, the Company had the following transactions in its common stock:
● | Of | |
● | Of |
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 June 30, 2023 and as of December 31, 2022, 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.
25
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.
At June 30, 2023 and at December 31, 2022, GV owns 700 Series C Preferred Shares.
Series D Preferred Shares
As of June, 30, 2023 and as of December 31, 2022, there are
and shares of Series D Preferred Shares outstanding, respectively.
Series G Preferred Shares
As of June, 30, 2023 and as of December 31, 2022, 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
As of June, 30, 2023 and as of December 31, 2022, there are
shares of Series H Preferred Shares outstanding.
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, 2022 | $ | $ | ||||||||||||||||
Granted | ||||||||||||||||||
Forfeited | ||||||||||||||||||
Exercised | ||||||||||||||||||
Outstanding, June 30, 2023 | $ | $ | ||||||||||||||||
Exercisable, June 30, 2023 | $ | $ |
26
The exercise price for warrant outstanding and exercisable at March 31, 2023:
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 $10,000,000, subject to certain limitations and conditions set forth in the Equity Financing Agreement from time to time over 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 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.
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 period ended June 30, 2023, the Company did not receive any proceeds from the equity purchase agreement.
Note 14 - 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.
27
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 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 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 March 31, 2023 Doug Davis gave notice to the Company of termination of the consulting agreement dated October 10, 2019.
On July 20, 2023, the Company through its wholly owned subsidiary, Greenwich International Holdings, a Costa Rica corporation (“Greenwich”), entered into an Amended and Restated Joint Venture (the “2023 Tokenize Agreement”) with Magic Internacional Argentina FC, S.L. (“Magic”) and GBT Tokenize Corp (“GBT Tokenize”). On March 6, 2020, the Company through Greenwich entered into a Joint Venture and Territorial License Agreement (the “2020 Tokenize Agreement”) with Tokenize-It, S.A. (“Tokenize”). Under the 2020 Tokenize Agreement, the parties formed GBT Tokenize and Tokenize contributed its technology portfolio as described in the 2020 Tokenize Agreement with each Tokenize and the Company owning 50% of 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 start-ups (“Technology Portfolio”). In addition to the Technology Portfolio, Tokenize contributed the services and resources for the development of the Technology Portfolio to GBT Tokenize. The Company contributed
shares of common stock. On May 28, 2021, the parties agreed to amend the 2020 Tokenize Agreement to expand the territory granted for the Technology Portfolio under the license to GBT Tokenize to include the entire continental United States. The Company issued GBT Tokenize an additional shares of common stock. On June 30, 2021, Tokenize and its shareholder assigned all their rights under the 2020 Tokenize Agreement, including the Company’s pledged 50% ownership in GBT Tokenize to Magic. On April 11, 2022, the Company, through Greenwich, entered into a Master Joint Venture and Territorial License Agreement (the “2022 Tokenize Agreement”) with Magic and Tokenize which replaced the 2020 Tokenize Agreement. The Company issued GBT Tokenize an additional shares of common stock of the Company. GBT Tokenize has developed a
28
vital device based on the Technology Portfolio that is ready for commercialization,
as well as certain derivative technologies, which positioned GBT Tokenize to further develop or license certain code sources. On
April 3, 2023, GBT Tokenize entered its first commercial transaction to date through the sale of the Avant-AI! technology that
been developed by GBT Tokenize, based on the Technology Portfolio pursuant to which GBT Tokenize received
Yello Partners Inc.
As of June, 30, 2023 and as of December 31,
2022, 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 $
29
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 the period ended June
30, 2023 and for the year ended on December 31, 2022 were $
Note 15 - 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 $
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 $
30
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
Investment in 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.
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.
31
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.
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 of $
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.
As of June 30, 2023 and as of December, 31 2022 there is no balances with regard to this transactions.
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 $
32
Metaverse Agreements
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
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.
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 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.
Assets Sale - TREN
On April 3, 2023, GBT Tokenize Corp. (“Seller”),
a subsidiary that is owned
On July 18, 2023, TREN changed its name to Avant Technologies, Inc. and its ticker symbol on OTC Markets was changed to AVAI.
Potential IP’s Sale
On April 17, 2023, the Company, Bannix Acquisition Corp. (“Bannix”) and EVIE Autonomous Ltd. (“EVIE”) pursuant to which Bannix agreed to acquire EVIE. In addition, Bannix agreed to acquire from the Company the Apollo System which is intellectual property covered by patent application (publication number 2022/0405966) filed with the US Patent and Trademark Office. This patent application describes a machine learning driven technology that controls radio wave transmissions, analyzes their reflections data, and constructs 2D/3D images of stationary and moving objects. The Apollo system is based on radio waves and can detect an entity’s moving and stationary positions, enabling imaging technology to show these movements and positions on a screen in real time. This includes an AI technology that controls the radio waves transmission and analyzes the reflections. The goal is to integrate the Apollo System as an efficient driver monitoring system, detecting impaired or distracted drivers, providing audible and visual alerts. Consummation of the above transactions are subject to the execution of a mutually satisfactory definitive agreement by the Company, Bannix and EVIE (the “Definitive Agreement”).
33
Service Agreement
On February 24, 2023 the Company entered into
service agreement with Pacific Capital Markets LLC , where
Note 16 – 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 June 30, 2023 and the year ended on December 31, 2022.
Liquidity risk
The Company has an accumulated deficit
of $
Customers
Sales for both the period ended June 30, 2023
and 2022 were $
Note 17 - Subsequent Events
On July 28, 2023 the Company filed with the SEC preliminary information
statement seeking to amends the Company’s Articles of Incorporation, to increase the number of authorized shares of common stock,
par value $
On April 17, 2023, Bannix Acquisition Corp. (“Bannix”), EVIE Autonomous Group Ltd. (“EVIE”) and EVIE’s shareholders entered into a Business Combination Agreement pursuant to which Bannix agreed to acquire EVIE. In addition, Bannix agreed to acquire from the Company, the Apollo System which is intellectual property covered by patent application filed with the US Patent and Trademark Office. This patent application describes a machine learning driven technology that controls radio wave transmissions, analyzes their reflections data, and constructs 2D/3D images of stationary and moving objects. The Apollo system is based on radio waves and can detect an entity’s moving and stationary positions, enabling imaging technology to show these movements and positions on a screen in real time. This includes an AI technology that controls the radio waves transmission and analyzes the reflections. The goal is to integrate the Apollo System as an efficient driver monitoring system, detecting impaired or distracted drivers, providing audible and visual alerts (“the “Patents”).
On August 8, 2023, Bannix entered into a Patent
Purchase Agreement (“PPA”) with GBT Tokenize Corp. (“Tokenize”), a which is
Series A Preferred Stock and the shares of common stock issuable upon conversion of the Series A Preferred Stock (the “Conversion Shares”) shall be subject to a lock-up beginning on the Closing Date and ending on the earliest of (i) the six (6) months after such date, (ii) a Change in Control, or (iii) written consent of Purchaser (the “Seller Lockup Period”).
Subsequent to June 30, 2023,
34
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion should be read in conjunction with our consolidated financial statements(“CFS”) and related notes included elsewhere in this report. In addition to historical information, this discussion includes forward-looking information that involves risks and assumptions, which could cause actual results to differ materially from management’s expectations. See “Forward-Looking Statements” included in this report.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward looking statements, including without limitation, statements related to our plans, strategies, objectives, expectations, intentions and adequacy of resources. Investors are cautioned that such forward-looking statements involve risks and uncertainties including without limitation the following: (i) our plans, strategies, objectives, expectations and intentions are subject to change at any time at our discretion; (ii) our plans and results of operations will be affected by our ability to manage growth; and (iii) other risks and uncertainties indicated from time to time in our filings with the Securities and Exchange Commission.
In some cases, you can identify forward-looking statements by terminology such as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘could,’’ ‘‘expects,’’ ‘‘plans,’’ ‘‘intends,’’ ‘‘anticipates,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘predicts,’’ ‘‘potential,’’ or ‘‘continue’’ or the negative of such terms or other comparable terminology. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We are under no duty to update any of the forward-looking statements after the date of this Report.
This section of the report should be read together with Footnotes of the Company audited financials for the year ended December 31, 2022, the unaudited statements of operations for the six months ended June 31, 2023 and 2022 are compared in the sections below.
35
General Overview
Organization and Line of Business
GBT Technologies Inc. (the “Company”, “GBT”, or “GTCH”) was incorporated on July 22, 2009 under the laws of the State of Nevada. The Company is targeting growing markets such as development of Internet of Things (IoT) and Artificial Intelligence (AI) enabled networking and tracking technologies, including wireless mesh network technology platform and fixed solutions, development of an intelligent human body vitals device, asset-tracking IoT, 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.
On July 20, 2023, the Company through its wholly owned subsidiary, Greenwich International Holdings, a Costa Rica corporation (“Greenwich”), entered into an Amended and Restated Joint Venture (the “2023 Tokenize Agreement”) with Magic Internacional Argentina FC, S.L. (“Magic”) and GBT Tokenize Corp (“GBT Tokenize”). GBT Tokenize has developed a vital device based on the Technology Portfolio that is ready for commercialization, as well as certain derivative technologies, which positioned GBT Tokenize to further develop or license certain code sources. On April 3, 2023, GBT Tokenize entered its first commercial transaction to date through the sale of the Avant-AI! technology that been developed by GBT Tokenize, based on the Technology Portfolio.
The unaudited condensed financial statements (“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
Results of Operations:
Three Months Ended June 30, 2023 and 2022
A comparison of the statements of operations for the three months ended June 30, 2023 and 2022 is as follows:
Three Months Ended June 30 | Change | |||||||||||||||
2023 | 2022 | $ | % | |||||||||||||
Sales | $ | 131,419 | $ | 344,981 | $ | (213,562 | ) | -62 | % | |||||||
Consulting income – related party | — | — | — | 0 | % | |||||||||||
Total sales | 131,419 | 344,981 | (213,562 | ) | -62 | % | ||||||||||
Cost of goods sold | 148,827 | 179,471 | 30,644 | 17 | % | |||||||||||
Gross profit | (17,408 | ) | 165,510 | (182,918 | ) | -111 | % | |||||||||
Operating expenses | 334,501 | 926,342 | (591,841 | ) | -64 | % | ||||||||||
Loss from operations | (351,909 | ) | (760,832 | ) | 408,923 | -54 | % | |||||||||
Other income | (9,563,854 | ) | (2,680,306 | ) | (6,883,548 | ) | 257 | % | ||||||||
Income (Loss) before provision for income taxes | (9,915,763 | ) | (3,441,138 | ) | (6,474,625 | ) | 188 | % | ||||||||
Provision for income taxes | — | — | — | |||||||||||||
Net Income (Loss) | $ | (9,915,763 | ) | $ | (3,441,138 | ) | $ | (6,474,625 | ) | 188 | % |
For the three months period ended June 30, 2023, our Company earned net revenues of $131,419. 100% sales were derived from E-commerce sales.
36
Operating expenses for the three months ended June 30, 2023 were $334,501, compared to $926,342 for the same period in 2022. The decrease of $591,841 or 64% was principally due to a decrease in marketing and Professional expense.
Other income (expense) for the three months ended June 30, 2023 was $(9,563,854), an increase of $6,883,548 or 257% from $(2,680,306) for the same period in 2022. The change is principally due to an increase in the change in FV of derivative liability and loss from the marketable securities.
Net income (loss) for the three months ended June 30, 2023 was $(9,915,763) compared to $(3,441,138) for the same period in 2022 due to the factors described above.
Six Months Ended June 30, 2023 and 2022
A comparison of the statements of operations for the six months ended June 30, 2023 and 2022 is as follows:
Six Months Ended June 30 | Change | |||||||||||||||
2023 | 2022 | $ | % | |||||||||||||
Sales | $ | 349,204 | $ | 569,951 | $ | (220,747 | ) | -39 | % | |||||||
Consulting income related party | | 45,000 | (45,000 | ) | -100 | % | ||||||||||
Total sales | 349,204 | 614,951 | (265,747 | ) | -43 | % | ||||||||||
Cost of goods sold | 324,918 | 388,458 | (63,540 | ) | -16 | % | ||||||||||
Gross profit | 24,286 | 226,493 | (202,207 | ) | -89 | % | ||||||||||
Operating expenses | 832,730 | 1,932,744 | (1,100,014 | ) | -57 | % | ||||||||||
Loss from operations | (808,444 | ) | (1,706,251 | ) | 897,807 | -53 | % | |||||||||
Other income | (14,737,032 | ) | 2,191,353 | (16,928,385 | ) | -773 | % | |||||||||
Income (Loss) before provision for income taxes | (15,545,476 | ) | 485,102 | (16,030,578 | ) | -3305 | % | |||||||||
Provision for income taxes | | | | |||||||||||||
Net Income (Loss) | $ | (15,545,476 | ) | 485,102 | (16,030,578 | ) | -3305 | % |
For the six months period ended June 30, 2023, our Company earned net revenues of $349,204. 100% sales were derived from E-commerce sales.
For the six months period ended June 30, 2022, our Company earned net revenues of $614,951. $45,000 sales were derived from providing IT consulting services to a related party, and $569,951 sales were derived from e-commerce sales that commenced in the six months ended June 30, 2022.
Operating expenses for the six months ended June 30, 2023 were $832,730, compared to $1,932,744 for the same period in 2022. The decrease of $1,100,014 or 57% was principally due to a decrease in marketing and Professional expense.
Other income (expense) for the six months ended June 30, 2023 was $(19,285,944), an increase of $21,477,296 or 980% from $2,191,353 for the same period in 2022. The change is principally due to an increase in the change in FV of derivative liability and loss from marketable securities.
Net income (loss) for the six months ended June 30, 2023 was $(15,545,476) compared to $485,102 for the same period in 2022 due to the factors described above.
37
Liquidity and Capital Resources
Going Concern
The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has an accumulated deficit of $314,847,007 and has a working capital deficit of $30,698,032 as of June 30, 2023, 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 consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.
Our cash and cash equivalent were $44,068 and $106,639 at June 30, 2023 and December 31, 2022, respectively. Cash provided by (used in) operating activities during the period ended June 30, 2023 was $(217,196) compared to $235,328 during the same period in 2022. The amount provided by operating activities for the period ended June 30 2023 was primarily related to a net loss of $15,545,476 and offset by amortization of debt discount of $268,423, and change in FV of derivative liability of $13,028,486. Our working capital position changed by going from a working capital deficit of $18,522,046 at December 31, 2022 to a working capital deficit of $30,698,032 at June 30, 2023.
Cash flows used in investing activities were nil during the period ended June 30, 2023, compared to $275,000 for the same period in 2022. The decrease is due to the Stock Purchase Agreement with Marko Radisic and Touchpoint Group Holdings, Inc. and the Intellectual Property License and Royalty Agreement with Touchpoint Group Holdings, Inc. from last year.
Cash provided from financing activities for the period ended June 30, 2023 was $154,625, compared to $349,002 for the same period in 2022. The change was primarily due to an increase in proceeds from convertible notes of $92,150, and an increase in proceeds from related party of $578,893 and repayments to related party of $549,564 and a repayment of convertible note payable $59,004. Cash from financing activities for the period ended June 30, 2022, was due to an increase in proceeds from common stock of $231,865 and proceeds from convertible notes of $200,000 and reduce by issuance of note receivable of $100,000.
We sustained net loss of $15,545,476 for the six months ended June 30, 2023. In addition, we had a working capital deficit of $30,698,032 and accumulated deficit of $314,847,007 at June 30, 2023.
Dividends
The Company has not yet adopted any policy regarding payment of dividends. No cash dividends have been paid or declared since the Date of Inception.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a Smaller Reporting Company, the Company is not required to include the disclosure under this Item.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including Mansour Khatib, who serves as our Chief Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our Chief Executive Officer and Principal Financial Officer has concluded that our disclosure controls and procedures were not effective as of the end of the applicable period to ensure that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (ii) is accumulated and communicated to our management, including our Chief Executive Officer, as appropriate to allow timely decisions regarding required disclosures.
38
As a smaller reporting company, with revenues stemming from recent acquisitions and a lack of profitability, the Company does not have the resources to install dedicated staff with deep expertise in all facets of SEC disclosure and GAAP compliance, and does not employ enough accounting staff to have proper separation of duties. As is the case with many smaller reporting companies, the Company will continue to consult with its external auditors and attorneys as it relates to new accounting principles and changes to SEC disclosure requirements. In order to correct this material weakness, the Company engaged a consultant with expertise in SEC disclosure and GAAP compliance. The Company found that this approach worked well in the past and believes it to be the most cost-effective solution available for the foreseeable future. The Company will conduct a review of existing sign-off and review procedures as well as document control protocols for critical accounting spreadsheets. The Company will also increase management’s review of key financial documents and records.
As a smaller reporting company, the Company does not have the resources to fund sufficient staff to ensure a complete segregation of responsibilities within the accounting function. However, Company management does review, and will increase the review of, financial statements on a monthly basis, and the Company’s external auditor conducts reviews on a quarterly basis. These actions, in addition to the improvements identified above, will minimize any risk of a potential material misstatement occurring.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal controls over financial reporting during the quarter ended June 30, 2023, that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
MANAGEMENT’S INTERIM 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. |
Because of its inherent limitations, internal control over financial 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.
39
Our management assessed the effectiveness of our internal control over financial reporting as of June 30, 2023. Based on this assessment, management believes that as of June 30, 2023, our internal control over financial reporting is not effective based on those criteria.
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.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Legal Proceedings
From time to time, the Company may be involved in various litigation matters, which arise in the ordinary course of business. There is currently no litigation that management believes will have a material impact on the financial position of the Company.
On or around January 30, 2019, RWJ Advanced Marketing, LLC, Greg Bauer, and Warren Jackson sued the Company and multiple third and related parties in Superior Court of the State of California - County of Los Angeles, General District in connection with the acquisition of UGO in September 2017. The case number is 19STCV03320 (the “Original Lawsuit”). The complaint in the Original Lawsuit alleges breach of contract, among other causes of action. The Company answered the complaint and filed a cross-complaint against the plaintiffs in the case and third parties on or around February 15, 2019. On or about September 10, 2020, the Company through its agent of service was “served” with a complaint (the Company contested service) that was recently filed against the Company and third parties by Robert Warren Jackson and Gregory Bauer in Los Angeles Superior Court Case No.: 20STCV32709 (“Second Lawsuit”). In the Original Lawsuit filed, the court rejected the plaintiff’s claims that they were filing a purported quasi-derivative lawsuit. As such, in this current litigation, the plaintiff is now again claiming the action is a derivative lawsuit. On October 13, 2020, the Second Lawsuit was removed by other defendants into Central District of California (CASE NO. 2:20−cv−09399−RGK−AGR). On February 2, 2021 the Central District of California dismissed the entire Second Lawsuit based on “demand futility”. In the Original lawsuit, the Company filed a cross complaint against the plaintiff and other third parties. Recently, the court has scheduled various hearings and a trial date set for December 27, 2021 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.
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),
40
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 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 $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 $5.00). The Market Price is the average of the 5 lowest individual daily volume weighted average prices during the period the Debenture is outstanding. On May 28, 2019, the Investor delivered to the Company a “Notice of Default and Notice of Sale of Collateral” (the “Notice”). On December 23, 2019, in arbitration between the Company and the Investor, an Interim Award was entered in favor of the Investor. On January 31, 2020, the Company was informed that a final award was entered (the “Final Award”). The Final Award affirms that certain sections of the Debenture constitute unenforceable liquidated damages penalties and were stricken. Further, it was determined that the Investor was entitled to recovery of their attorney’s fees. Consequently, the arbitrator awarded Investor an award of $4,034,444 plus interest of 7.25% accrued from May 15, 2019 and costs of $55,613. On February 18, 2020, the Company filed a motion with the United States District Court District of Nevada (the “Nevada Court”) to confirm the Final Award and a motion to consolidate Investor’s application to confirm the Final Award filed in the U.S. District Court of the Virgin Islands (Case No: 3 :20-cv-00012-CVG-RM) (the “Virgin Island Court”). On February 27, 2020, the Nevada Court denied the Company’s motion to confirm the Final Award and motion to consolidate and further decided that the confirmation of the Final Award should be litigated in the Virgin Island Court. As such, on February 27, 2020, the Company filed a Notice of Entry of Order as well as a Motion to Confirm the Arbitration Award, address the outstanding issues regarding whether Investor’s rights are subordinated to other creditors and, thereafter, oversee a commercially reasonable foreclosure sale (Case No: 3 :20-cv-00012-CVG-RM). It was the Company’s position that the Final Award must first be confirmed and all questions regarding the rights of Investor relative to those of other creditors must be determined before any foreclosure sale can proceed. It is further the position of the Company that the previously disclosed foreclosure sale scheduled by Investor is being conducted in a commercially unreasonable manner and that if Discover proceeded forward with the foreclosure sale it did so at its own risk. Nevertheless, on February 28, 2020, Investor advised that it conducted a sale of the Company’s assets. As the date of this report Investor failed to present a deed of sale for the alleged sale that allegedly took place as noticed. The Company filed with Virgin Island Court the motions disputing the validity of the alleged sale. On July 28, 2020, Investor filed in the State of Nevada a motion for attorneys $48,844 and costs $716. The Company filed an answer on August 11, 2020. On October 16, 2020, Investor motion for attorneys $48,844 and costs $716 was denied. 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.
41
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.
Item 1A. Risk Factors.
As a Smaller Reporting Company, the Company is not required to include the disclosure under this Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the period ended June 30, 2023, the Company had the following transactions in its common stock:
● | Of 3,915,160,446 Shares issued for the conversion of convertible notes of $1,232,709 and accrued interest of $ $52,211; and |
● | Of 100,000,000 Shares issued to Pacific Captital Markets LLC for certain for service agreement between Pacific Captital Markets LLC. and the Company. The value of the shares of $80,000 was determined based on the FV of the Company’s common stock. The share has been cancelled in subsequent period. |
Item 3. Defaults Upon Senior Securities
On December 3, 2018, the Company entered into
a Securities Purchase Agreement (the “SPA”) with Discover Growth Fund, LLC (the “Investor”) pursuant to
which the Company issued a Senior Secured Redeemable Convertible Debenture (the “Debenture”) in the aggregate face
value of $8,340,000. In connection with the issuance of the Debenture and pursuant to the terms of the SPA, the Company issued
a Common Stock Purchase Warrant to acquire up to 225,000 shares of common stock for a term of three years (the “Warrant”)
on a cash-only basis at an exercise price of $100.00 per share with respect to 50,000 Warrant Shares, $75.00 with respect to 75,000
Warrant Shares and $50.00 with respect to 100,000 Warrant Shares. The holder may not exercise any portion of the Warrants to the
extent that the holder would own more than 4.99% of the Company’s outstanding common stock immediately after exercise. The
outstanding principal amount may be converted at any time into shares of the Company’s common stock at a conversion
price equal to 95% of the Market Price less $5.00 (the conversion price is lowered by 10% upon the occurrence of each Triggering
Event – the current conversion price is 75% of the Market Price less $5.00). The Market Price is the average of the 5 lowest
individual daily volume weighted average prices during the period the Debenture is outstanding. On May 28, 2019, the Investor delivered
to the Company a “Notice of Default and Notice of Sale of
42
Collateral” (the “Notice”). On December 23, 2019, in arbitration between the Company and the Investor, an Interim Award was entered in favor of the Investor. On January 31, 2020, the Company was informed that a final award was entered (the “Final Award”). The Final Award affirms that certain sections of the Debenture constitute unenforceable liquidated damages penalties and were stricken. Further, it was determined that the Investor was entitled to recovery of their attorney’s fees. Consequently, the arbitrator awarded Investor an award of $4,034,444 plus interest of 7.25% accrued from May 15, 2019 and costs in the amount of $55,613. On February 18, 2020, the Company filed a motion with the United States District Court District of Nevada (the “Nevada Court”) to confirm the Final Award and a motion to consolidate Investor’s application to confirm the Final Award filed in the U.S. District Court of the Virgin Islands (Case No: 3 :20-cv-00012-CVG-RM) (the “Virgin Island Court”). On February 27, 2020, the Nevada Court denied the Company’s motion to confirm the Final Award and motion to consolidate and further decided that the confirmation of the Final Award should be litigated in the Virgin Island Court. As such, on February 27, 2020, the Company filed a Notice of Entry of Order as well as a Motion to Confirm the Arbitration Award, address the outstanding issues regarding whether Investor’s rights are subordinated to other creditors and, thereafter, oversee a commercially reasonable foreclosure sale (Case No: 3 :20-cv-00012-CVG-RM). It was the Company’s position that the Final Award must first be confirmed and all questions regarding the rights of Investor relative to those of other creditors must be determined before any foreclosure sale can proceed. It is further the position of the Company that the previously disclosed foreclosure sale scheduled by Investor is being conducted in a commercially unreasonable manner and that if Discover proceeded forward with the foreclosure sale it did so at its own risk. Nevertheless, on February 28, 2020, Investor advised that it conducted a sale of the Company’s assets. As the date of this report Investor failed to present a deed of sale for the alleged sale that allegedly took place as noticed. The Company filed with Virgin Island Court the motions disputing the validity of the alleged sale. On July 28, 2020, Investor filed in the State of Nevada a motion for attorneys $48,844 and costs $716. The Company filed an answer on August 11, 2020. On October 16, 2020, Investor motion for attorneys $48,844 and costs $716 was denied. 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.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5. Other Information
On April 17, 2023, the Company, Bannix Acquisition Corp. (“Bannix”) and EVIE Autonomous Ltd. (“EVIE”) pursuant to which Bannix agreed to acquire EVIE. In addition, Bannix agreed to acquire from the Company the Apollo System which is intellectual property covered by patent application (publication number 2022/0405966) filed with the US Patent and Trademark Office. This patent application describes a machine learning driven technology that controls radio wave transmissions, analyzes their reflections data, and constructs 2D/3D images of stationary and moving objects. The Apollo system is based on radio waves and can detect an entity’s moving and stationary positions, enabling imaging technology to show these movements and positions on a screen in real time. This includes an AI technology that controls the radio waves transmission and analyzes the reflections. The goal is to integrate the Apollo System as an efficient driver monitoring system, detecting impaired or distracted drivers, providing audible and visual alerts. Consummation of the above transactions are subject to the execution of a mutually satisfactory definitive agreement by the Company, Bannix and EVIE (the “Definitive Agreement”).
On July 28, 2023 the Company filed with the SEC preliminary information statement seeking
To amend the Company’s Articles of Incorporation, to increase the number of authorized shares of common stock, par value $0.00001 per share, of the Company from 10,000,000,000 shares to 30,000,000,000 shares.
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
43
Exhibit No. |
Description |
44
46
(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. |
47
(23) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 15, 2019. |
(24) | Incorporated by reference to the Form -8-K Current 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 |
(40) | Incorporated by reference to the Form 10-K Annual Report filed with the Securities and Exchange Commission on March 25, 2022 |
(41) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 18, 2022 |
(42) | Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 10, 2022 |
48
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
GBT TECHNOLOGIES INC. | ||
(Registrant) | ||
Date: August 17, 2023 | By: | /s/ Mansour Khatib |
Mansour Khatib | ||
Chief Executive Officer | ||
(Principal Executive, Financial and Accounting Officer) |
48