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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

 

ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the fiscal year ended December 31, 2021

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number 000-53046

 

GTX Corp

(Exact name of registrant as specified in its charter)

 

Nevada   98-0493446

(State

of incorporation)

 

(I.R.S. Employer

Identification No.)

 

117 W 9th Street ; Suite 1214, Los Angeles, CA 90015   213-489-3019
(Address of principal executive offices)   (Registrant’s telephone number, including area code)

 

Securities registered under Section 12(b) of the Act:

 

Title of each class registered:   Trading Symbol(s)   Name of each exchange on which registered:
None   GTXO   None

 

Securities registered under Section 12(g) of the Act:

Common Stock, Par Value $0.0001 (Title of class)

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

 

Yes ☐ No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

 

Yes ☐ No

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and, (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer Smaller reporting company
  (Do not check if a smaller reporting company)  
  Emerging growth company  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No

 

The aggregate market value of registrant’s common stock held by non-affiliates of the registrant, based upon the closing price of a share of the registrant’s common stock on June 30, 2021 was approximately $14,852. At April 11, 2022, there were 228,502,479 shares of the registrant’s common stock outstanding.

 

Documents incorporated by reference: None

 

 

 

 
 

 

TABLE OF CONTENTS

 

    SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION CONTAINED IN THIS REPORT  
       
PART I
  ITEM 1. DESCRIPTION OF BUSINESS 3
  ITEM 1A. RISK FACTORS 11
  ITEM 1B. UNRESOLVED STAFF COMMENTS 22
  ITEM 2. DESCRIPTION OF PROPERTIES 22
  ITEM 3. LEGAL PROCEEDINGS 22
  ITEM 4. MINE SAFETY DISCLOSURES 22
PART II
  ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 23
  ITEM 6. SELECTED FINANCIAL DATA. 26
  ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 26
  ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. 33
  ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 33
  ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 33
  ITEM 9A. CONTROLS AND PROCEDURES 33
  ITEM 9B. OTHER INFORMATION 34
PART III
  ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 35
  ITEM 11. EXECUTIVE COMPENSATION 38
  ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 41
  ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 41
  ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. 42
PART IV
  ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 43
  ITEM 16. SUMMARY 43
SIGNATURES   44

 

2
 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND OTHER INFORMATION CONTAINED IN THIS REPORT

 

Information in this report contains “forward looking statements” which may be identified by the use of forward-looking terminology, such as “may”, “shall”, “will”, “could”, “expect”, “estimate”, “anticipate”, “predict”, “probable”, “possible”, “should”, “continue”, or similar terms, variations of those terms or the negative of those terms. The forward-looking statements specified in the following information have been compiled by our management on the basis of assumptions made by management and considered by management to be reasonable. Our future operating results, however, are impossible to predict and no representation, guaranty, or warranty is to be inferred from those forward-looking statements.

 

The assumptions used for purposes of the forward-looking statements specified in the following information represent estimates of future events and are subject to uncertainty as to possible changes in economic, legislative, industry, and other circumstances. As a result, the identification and interpretation of data and other information and their use in developing and selecting assumptions from and among reasonable alternatives requires the exercise of judgment. To the extent that the assumed events do not occur, the outcome may vary substantially from anticipated or projected results, and, accordingly, no opinion is expressed on the achievability of those forward-looking statements. No assurance can be given that any of the assumptions relating to the forward-looking statements specified in the following information are accurate, and we assume no obligation to update any such forward-looking statements.

 

Note Regarding Reverse Stock Split

 

The Company effected a reverse split of its outstanding common stock, par value $0.0001, at a ratio of 1-for-75, effective as of June 22, 2018 (the “Reverse Split”), for the purpose of complying with Nasdaq Listing Rule 5550(a)(2). All share and per share amounts have been restated as if the split occurred as of the earliest period presented.

 

PART 1

 

ITEM 1. DESCRIPTION OF BUSINESS

 

Unless otherwise noted, the terms “GTX Corp”, the “Company”, “we”, “us”, and “our” refer to the ongoing business operations of GTX Corp and our wholly-owned subsidiaries, Global Trek Xploration, Inc. and LOCiMOBILE, Inc.

 

BUSINESS OVERVIEW

 

GTX Corp was incorporated in the State of Nevada on April 7, 2006 under its former name “Deeas Resources Inc.” On March 14, 2008, we acquired all of the outstanding capital stock of Global Trek Xploration, a California corporation (“GTX California”), in exchange for the issuance of 18,000,001 shares of GTX Corp common stock (the “Exchange Transaction”).

 

GTX Corp (OTC: GTXO) is a technology innovator in the global $40 billion wearable technology market. The company develops, manufactures, sells and distributes wearable monitoring and tracking GPS devices, stand-alone GPS devices, digital apps, BLE/NFC solution, encrypted RF military personnel and asset tracking solutions and protective medical supplies and devices. The dominate player in GTX’s product portfolio is its award-winning, patented GPS SmartSole® tracking and monitoring solution, which is the world’s first invisible wearable technology GPS tracking device created for those at risk of wandering due to Alzheimer’s, dementia, autism, and traumatic brain injury. The GPS SmartSole is reimbursable through Medicaid or various insurance providers and government agencies in some U.S. States, Canada, Norway, and the UK. GTX management continues to expand this program to include more states, countries, insurance providers.

 

Global Trek Xploration, Inc. was founded in 2002, and as part of a reverse merger became publicly traded in 2008, as a 100% wholly owned subsidiary of GTX Corp (OTC: GTXO), a Nevada corporation with offices in Los Angeles, California, and distributors and customers in all 50 U.S. states and in over 40 countries. GTX’s, patented, end-to-end hardware, software and middleware platform delivers tracking and monitoring solutions in vertical niche markets worldwide. We answer the “where is” question: such as, where is my mother, child, employee, soldier, pet, drone, artwork, or other high value assets, through its proprietary IoT (“Internet of Things”) enterprise platform.

 

GTX Corp owns 100% of the issued and outstanding capital stock of its two subsidiaries - Global Trek Xploration, Inc. (“Global Trek Xploration”) and LOCiMOBILE, Inc. (“LOCiMOBILE”). Both subsidiaries generate revenues through various business models – tracking and monitoring solutions, medical equipment and supplies, licensing of intellectual property and technology to the consumer, enterprise, and government agencies, and professional services. Utilizing GPS, cellular, Bluetooth Low Energy (“BLE”), Near Field Communications (“NFC”), Radio Frequency (“RF”), and WiFi technologies through a proprietary enterprise monitoring platform and licensing subscription business model, the Company offers a complete end to end solution of hardware, middleware, apps, connectivity, and professional services that can track and monitor people or assets at the touch of a button in real-time. In addition to selling products and monthly service subscriptions, the Company also generates revenues through licensing its technology and intellectual property, custom development projects and the sale of OEM medical devices and supplies. Its products and services are sold and distributed through a global business to business (“B2B”) and business to consumer (“B2C”) network of resellers, affiliates, distributors, non-profit organizations, local, state, and federal government agencies, police departments, manufacturers reps and retailers. Offering a variety of electronic and non-electronic devices and equipment, a proprietary Internet of things (“IoT”) enterprise monitoring platform and a licensing, subscription business model for its technology and intellectual property.

 

Since inception, GTX has developed, sold and commercially launched numerous products, including, its GPS Smart Shoes, SmartSoles, Bluetooth Low Energy (“BLE”) SmartSoles, hand-held GPS tracking devices, a proprietary custom military personnel and asset tracking solution, a weapons tracker, pet tracker, infant tracker and more than 20 smartphone and tablet Apps, all supported by its hosted and scalable backend monitoring platform and intellectual property portfolio. The Company has multiple product lines comprising of its core wearable tech SmartSole line, Military line, OEM devices and supplies, professional services, Near Field Communications (NFC) asset tracking and intellectual property licensing. The business units generate various revenue streams, such as product sales, recurring subscriptions, software, and intellectual property (IP) licensing, fees for custom hardware and software development, along with professional consulting, support, and maintenance services. Many of its products are protected by GTX’s intellectual property portfolio of issued patents, licensed patents, patents pending, registered trademarks, copyrights, URLs and a library of proprietary hardware and software designs. GTX’s customer base ranges from the U.S. military, foreign military, public health authorities and municipalities, emergency, and law enforcement, first responders, private schools, assisted living facilities, NGOs, business enterprises, senior care homes and direct to consumer.

 

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Media recognition is an important component of GTX’s marketing strategy and over the years, the company and its GPS SmartSole have been featured on CNN, Good Morning America, The Doctors, Fox News, Discovery Channel, ABC, NBC, CBS, The New York Times, LA Times, U.S.A. Today, the LA Business Journal, AARP, Keeping up with the Kardashians and numerous other television, radio, magazine, and newspaper media outlets worldwide.

 

The Company maintains several Internet websites, blogs and social media sites including; www.gtxcorp.com, www.gtxmask.com, www.locimobile.com, www.trackmyworkforce.co, and www.gpssmartsole.com. Our annual reports, quarterly reports, current reports on Form 8-K and amendments to such reports filed or furnished pursuant to section 13(a) or 15(d) of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), and other information related to this Company, are available, free of charge, on our corporate website as soon as we electronically file those documents with, or otherwise furnish them to, the Securities and Exchange Commission. The Company’s various Internet websites and the information contained therein, or connected thereto, are not, and are not intended, to be incorporated into this Annual Report on Form 10-K. Our principal executive offices are located at 117 W 9th Street, Los Angeles, California, 90015 and our main telephone number is (213) 489-3019. The information on, or that can be accessed through, our websites is not part of this report, and you should not rely on any such information in making any investment decision relating to our common stock.

 

Our business is comprised of one reportable segment.

 

BUSINESS UNITS

 

1) Tracking and Monitoring Technology - Our SmartSole line of wearable footwear technology is designed for people with cognitive memory disorders, such as Alzheimer’s, dementia, autism, and traumatic brain injury (“TBI”). Approximately 9 million people in the U.S. and over 100 million worldwide expected to reach 277 million by 2050 fall under this umbrella of people with cognitive disorders. Typically, these people tend to wander and require some wander guard technology and remote oversight. The SmartSoles are comfortable orthotic insoles embedded with a GPS and cellular tracking module, so that a caregiver can know in real time where a loved one is at the touch of a button from any smartphone or computer. The Company also leverages its technology platform for use in high value asset tracking such as drones, small light weight cargo, and other high value mobile assets that require a robust, small footprint and low power consumption hardware and software platform. GTX has been working on expanding this unit to include Short Range and Logistics tracking, utilizing BLE and NFC technology for tracking valuable assets across the supply chain, such as expensive clothing, wines, foods, or pharmaceuticals. BLE - Bluetooth Low Energy and NFC – Near Field Communication are a short-range wireless protocol that triggers data exchange from one device to another. The chip is about the size of a nickel and can be attached, embedded, sewn, glued, embroidered, and even ironed on or otherwise affixed to just about any person or product, including print materials, packaging, and wearables.
   
2) Medical Supplies – In 2020 the Company expanded its product line from medical devices to high quality Health & Safety protective equipment and supplies, ranging from hearing assisted technology to masks, sanitizing equipment, UV sterilization equipment, and rapid test kits. With many of its products made or sourced in the U.S.
   
3) IP and Technology licensing- many of our patents were issued over the past 10 years and we continue to add new patents to our portfolio, and as GPS and wearable technology becomes more ubiquitous and used in numerous products, the GTX intellectual property portfolio is garnering interest within the tech community. GTX is currently engaged in a licensing and monetization campaign. Over 150 companies that could potentially license some or all our IP have been identified and so far, the Company has signed 14 licensing agreements and generated over $1 million dollars in license fees.

 

CORPORATE STRATEGY

 

Management’s corporate strategy is to continue to build and grow GTX as a health & safety medical and wearable technology company that provides turnkey solutions for the consumer, enterprise, and government. Most of the GTX tracking and monitoring products are sold with a monthly, quarterly, or annual subscription service plan or licensing fees ranging from $2.00 to $35.00, per month per monitored asset. In addition to product sales and recurring subscription fees, the Company also generates revenues through software and IP licensing. Many of our patents have filing dates going back to 2004, 2005 and 2006, have ongoing open continuations, with many of patent claims being used in the marketplace today, providing and opportunity for the Company to license its IP to other technology companies. Part of our strategy is to identify new companies or existing companies that launch new products that are a potential licensee candidate.

 

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As part of our long-term growth strategy, we are focused on launching new medical and tracking wearable products, either internally developed or acquired through licensing, that stand alone or can be part of our SmartSole platform that help grow our subscriber base or increase our average revenue per subscriber. New product development can lead to new IP, hence strengthening our IP portfolio creating additional licensing opportunities. Collectively this approach feeds on one another whereby we can build steady recurring revenue streams. Launching new products, new vertical sales channels and building out our patent portfolio are the key drivers for growth. The more products we develop and sell, the more subscribers we bring onboard. And, as our patent portfolio grows and evolves, so do our licensing opportunities. To date we have built a network of strategic global partners, a robust technology platform of proprietary hardware and software and a growing intellectual property (IP) portfolio. The GTX product lines of embedded smart wearable GPS devices, Stand-Alone GPS devices, Digital Apps, BLE/NFC solution, encrypted RF military personnel and asset tracking solutions and protective medical supplies and devices are sold direct to the consumer (“B2C”), to the enterprise business to business (“B2B”), and to local, state, federal and international government agencies , through our network of resellers, affiliates, distributors, non-profit organizations, military and police departments, manufacturers reps and retailers. The Company has been ramping up its product distribution and sales channels and, as of December 31, 2021, the Company had live units in the field and / or paying subscribers in over 40 countries, with customers and distributors in Canada, Mexico, Europe, Latin America, Asia, the Middle East, and parts of Africa. In the U.S. the Company sells direct to the consumer through its online ecommerce platform, a host of retailers and resellers along with hundreds of online affiliates. The Company also manages direct B2B enterprise and government sales through its business development team and advisors. The B2B initiatives comprise of supporting existing distributors along with bringing on new distributors, working with U.S. and Foreign agencies, to support existing business and secure new business, and domestically to work with local, state, and federal agencies to acquire reimbursement codes for its line of SmartSoles. To date GTX has been issued a vendor number for reimbursement in 11 U.S. states and internationally in Canada, Norway, Sweden and in the U.K. the National Health Services (“NHS”) began conducting regional pilots for the wander assistive GPS SmartSoles, in urban centers with high populations of seniors afflicted with dementia. Under these reimbursement programs, the SmartSoles are either partially (50% to 60%) or sometimes up to (100% including the monthly subscriptions) paid for or subsidized by the local, state, or federal grants or through insurance reimbursement. As additional resources become available, we plan to apply for new grants and private insurance reimbursement along with other health and municipal services both domestically and in other countries. Where granted, the subsidies lower the cost of buying and owning our tracking products, which can result in an increase in customers and revenues.

 

INDUSTRY OVERVIEW

 

Smart wearable technology is becoming ubiquitous, and it is starting to find its way into all parts of the global society. Miniature electronic devices that are worn by a person, commonly referred to as wearables, are continuing a strong upward trajectory evident by the likes of Nike, Garmin, Google, Samsung, Apple, Verizon and a host of other fortune 100 companies that have entered into this space. Wearable Technology is on the rise in personal fitness, wellness, healthcare, and business use. CCS Insight (a provider of market information, data analysis and market intelligence) recently updated its outlook on the future of wearable tech, indicating that 411 million smart wearable devices, worth a staggering $34 billion, were be sold in 2020.

 

Location-Based Services (LBS) and Real-Time Location Systems (RTLS), published by Markets and Markets, are expected to grow from USD 16.0 billion in 2019 to USD 40.0 billion by 2024, at a Compound Annual Growth Rate (“CAGR”) of 20.1%. This growth will be fueled because it is now possible for a network of physical objects (humans, vehicles, buildings, infrastructure, equipment of all shapes and types) to collect and exchange data and to communicate and work together. This enables devices, sensors and systems to operate autonomously in pursuit of goals and objectives set by the human architects of the system. We believe that accurately identifying the location of a person or assets in real time will be a key driver in many applications for the consumer, enterprise, and government sectors.

 

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The Caregiving Innovation Frontiers (“CIF”) study by the Longevity Network, used analysis and research from Parks Associates found that an estimated 117 million Americans will need assistance of some kind by 2022, but the number of unpaid caregivers is only expected to reach 45 million in the same year. This demand represents a $279 billion revenue opportunity over the coming years across six different business areas identified in the study, with 80% of spending being out-of-pocket costs. Technology solutions and remote health monitoring systems that enable family caregivers to monitor the location of elderly persons could provide key relief, according to the report. The CIF report outlined six areas for business opportunities, with huge potential for revenue grabs. Technology represents an opportunity across all the service areas, according to the Association of American Retired Persons (AARP). Most family caregivers (67% of them) want to use technology to monitor their loved one’s health and safety, but only about 10% are doing so right now, leaving a lot of room for growth.

 

In our ever-mobile society, it helps to know where we are and where we are going. Same with caregivers of seniors suffering from Alzheimer’s and dementia, freight forwarding companies wanting to know where their packages are, and employers wanting to know where their field workers are. Many parents desire to have the ability to know where their children are and where they are going. Having such information is now possible with access to real-time information delivered on-demand through miniaturized, low power consumption locator systems and technologies such as ours.

 

The rising need for real-time location systems (RTLS) and wearable location-based services (LBS) is influenced by several factors, among them:

 

  Universal awareness and expanding penetration of GPS enabled mobile smartphones & tablets (estimated 2 billion devices).
  Personal and asset security concerns affecting a greater portion of the population. This includes the increased awareness related to global terrorism, active shootings, natural disasters, and general unrest.
  Increasing numbers of elderly or memory impaired (Alzheimer’s, dementia, autism, etc. approximately 9 million in U.S. and according to the World Health Organization who estimates that Alzheimer’s will reach 135 million worldwide by 2050).
  Corporations needing to manage worker productivity, efficiency, and logistics.
  Government agencies, law enforcement and military need to track personnel and assets.
  Massive lifestyle adoption of location-based advertising and social networking.

 

GTX Management believes that more and more consumers, enterprises, and government agencies are realizing the importance of using tracking and monitoring information technology. The technology growth story has long focused on the consumer, but as enterprises in every industry sector, including the government sector, look to technology to facilitate and transform their own operations, the opportunities for technology companies have broadened considerably. The following information illustrates the ways in which various tech markets are expected to grow.

 

The LBS and RTLS market have grown considerably over the past few years and is expected to grow further with increasing portable personal digital assistant (“PDA”) based e-commerce. The overall market is expected to grow from $15.04 billion in 2016 to $77.84 billion by 2021, at a CAGR of 38.9%.

 

CORPORATE STRUCTURE

 

GTX Corp is a Nevada corporation which operates two 100% wholly owned subsidiaries Global Trek Xploration, Inc. and LOCiMobile, Inc.

 

Global Trek Xploration is a California corporation which engages in the business of, design, development, manufacturing, and sales of medical devices and supplies, and Global Positioning Satellite (“GPS”), Cellular, Radio Frequency (“RF”) Near Field Communications (“NFC”) WiFi and Bluetooth low energy (“BLE”) monitoring and tracking solutions. GTX is vertically integrated and provides hardware, software, and connectivity, delivering a location-based platform that enables subscribers to track in real time the whereabouts of people, or high valued assets. Our proprietary GPS devices, which consist of a miniature quad-band General Packet Radio Service (“GPRS”) transceiver, custom antenna, circuitry, battery, and inductive charging pad can be customized and integrated into numerous form factors. The finished products are then placed or worn so that their location and movement can be monitored in real time over the Internet through our 24x7 tracking portal or on a web-enabled cellular telephone. The tracking portal is fully scalable and has been licensed to several partners both in the U.S. and internationally. It is a secure platform equipped with a database, application-programming interface (“API”) for custom integration, and communication SMS gateway software and hardware. Subscriber internet communications are routed through GTX’s proprietary, fault-tolerant, carrier-class, and application-specific interface software. Our Location Data Center services are also offered to non-Global Trek Xploration products and hardware systems (i.e. handsets and personal electronics) of major electronics manufacturers through the offer and sale of exclusive licenses (either geographical, regional or product categories).

 

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Markets that Global Trek Xploration is currently in, or is exploring, include:

 

  Families with members who have Alzheimer’s and or dementia, including developmentally challenged adults;
  Elder care support, life-style management, and e-health applications;
  Adults and children with cognitive disorders such as Autism and TBI;
  High value asset tracking and location capability of drones, bikes, motorcycles, containers, luggage, artwork, and other mobile valuable assets that require monitoring or tracking;
  GIG Economy mobile work force;
  Security for high-level executives, field workers, first responders, journalists, government employees;
  Military and law enforcement;
  Biometrics, health, safety, and wellness; and
  Accessories and peripherals.

 

LOCiMOBILE, Inc., our other 100% wholly owned subsidiary, is a Nevada based corporation which develops and owns a suite of mobile tracking applications (“Apps”) that turn the latest Smartphones and tablets such as iPhone®, iPad, Google Android and other GPS enabled handsets into a tracking and location based real-time tracking device which can be viewed through the GTX IoT tracking portal from any internet connected device. In the enterprise market GTX is best known for the App, Track My Work Force, which allows employers to easily track and monitor the whereabouts and mileage of their employees, drivers and sales reps, through their Smartphone or tablet. The Company continues to rollout new and innovative products which will include a series of applications that will be geared for the enterprise user, by offering “private label” versions of our popular consumer Apps to companies looking for a more personalized and secure methods of keeping track of their employees. Our roadmap also consists of additional applications for the iPad, other tablets, smart TV’s, and more applications for the iPhone and Google Android operating systems. Our goal is to expand our user base community, increase the value of our brand, and generate revenues from App sales, monthly subscriptions and advertising.

 

We are a “smaller reporting company” as defined in the Exchange Act. We may take advantage of certain of the scaled disclosures available to smaller reporting companies until the fiscal year following the determination that our voting and non-voting common stock held by non-affiliates is more than $250 million measured on the last business day of our second fiscal quarter, or our annual revenues are less than $100 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700 million measured on the last business day of our second fiscal quarter. 

 

PRODUCTS and SERVICES

 

  GPS SmartSole – a wearable orthotic insole GPS tracking, monitoring and recovery solution for those at risk of wandering due to Alzheimer’s, dementia and autism.
  Take Along Tracker 4G – a stand-alone miniature tracking and SOS device that allows for GPS capabilities, plus 4G, GSM, data and voice as well as a 3-way motion sensor.
  Track My Workforce – a mobile app allowing employers to monitor mobile employees like drivers and sales representatives through their Smartphone.
  Sole Protector for GPS Smartsole – created specifically for the GPS SmartSole® in order to boost longevity, hygiene, covertness, protection and comfort. Extends the life of the SmartSole with increased shock absorption and water resistance.
  Take Along Friends & the Invisabelt - A GPS cellular tracking and monitoring device for young children and toddlers.
  Protective Medical devices and supplies – Ranging from PPE’s such as masks, sanitizers, face shields, UV wands and assorted equipment all the way to and including; Antibody and Antigen rapid test kits and hearing assisted technologies.
  VeriTap - an NFC tag and middleware application designed to monitor logistics and assets in the supply chain.

 

CUSTOMERS

 

The Company, along with its international distributors, services thousands of consumers, hundreds of businesses, and dozens of local, state, and federal government agencies, across 6 continents. GTX also sells products and services to the U.S. Military and law enforcement agencies and is an approved government contractor. Other GTX customers include public health authorities, municipalities, and Universities, in the U.S., Canada and across Europe. GTX also has a vendor number in 11 U.S. States and sells to local and state agencies supported by Medicare and Medicaid. Other customers range from retailers, healthcare facilities, private schools, assisted living facilities, NGOs, small business enterprises, senior care homes, and security companies. The Company also has several branded products and sells direct to the consumer.

 

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INTELECTUAL PROPERTY

 

GTX’s IP portfolio not only supports the Company’s core product lines by creating barriers of entry to competitors, but also underscores the Company’s intrinsic value and generates revenues from out bound licensing. Our early investment in IP dates to 2002 and demonstrates GTX’s commitment to developing innovative technology in the growing wearable GPS, LBS and RTLS space. The GTX IP portfolio underpins its business and provides support across all its business units. The portfolio addresses three core areas: Footwear, Communication and International coverage and as of December 31, 2021 we had twenty-two (22) patents and several trademark registrations. These include eighteen (18) issued U.S. utility patents, three of which are insole patents, two (2) issued U.S. design patents, and two (2) other pending U.S. utility patent applications. We also have two (2) issued Mexican utility patents and one (1) pending European foreign national patent application based on our U.S. filings. In addition to the five (5) comm protocol’s (program-to-program communications access methods), which falls under GTX U.S. Patent 8,760,286, commonly referred to as the 286 GTX patent family, GTX also has several patents on the device side. The international multi- pronged IP protection approach is part of the overall intellectual property strategy protecting all aspects of the GTX enterprise and value of its hardware and platform

 

GTX also has under license one (1) U.S. patent and twelve (12) foreign patents. Included under the IP portfolio GTX has U.S. trademark registrations including, but not limited to, registrations for the marks “LOCi” and “LOCIMOBILE.” In addition, another U.S. trademark application for “GPS SMART SOLE SATELLITE MONITORING AND REALTIME TRACKING”, “GTX CORP”, and “WITH YOU.”

 

As part of our outbound IP licensing monetization campaign in June 2016 we signed a revenue share monetization agreement with Inventergy Innovations, LLC (“Inventergy”), a subsidiary of Inventergy Global, Inc. (NASDAQ: INVT), the first licensing agreement was signed for the monetization campaign was signed in the first quarter of 2019, with last settlement in fourth quarter of 2020. Prior to December 13, 2021, when we terminated our agreement with Inventergy by not renewing their license, we had signed 14 settlements valued at approximately $250,000 in licensing fees, which represented less than what was expected in the original agreement, which led both parties to mutually dissolve the partnership.

 

Due to Covid and other resource related circumstances the GTX IP campaign stalled during 2021 and after several months of analysis on how to revamp the campaign it was mutually agreed by the BOD of Inventergy and GTX, that GTX should take back full control of its patents and the licensing strategy. Effective November 20, 2021, GTX dissolved its patent license agreement with Inventergy, LLC whereby Inventergy transferred and assigned back to GTX all rights, title and interest in each of the Patents, consistent with what was specified in Section 4.1 of the original agreement, including all (sole) responsibility for future prosecution and maintenance of the Patents, including any rights to receive any further royalties, compensation, revenue share for any past present or future monetization effort, effectively relinquishing its fifty-five (55%) ownership interest, back to GTX. Subsequently in December of 2021 the USPTO granted a notice of allowance on a patent application which covers different aspects of the GPS SmartSole product, and we expect to receive more patents covering other aspects on related applications in the future as we continue to expand our IP portfolio in the wearable technology space, especially as the global wearable medical device market continues to grow and expecting to reach $9.4 billion by 2022. This 4th patent helps solidify our portfolio with respect to wearable tracking and monitoring technologies embedded in footwear. That came on the heels of another office action from the USPT on our com protocol family of patents which allowed an additional Patent which now GTX has filed ongoing open continuations for both patents which we expect will further enhance the portfolio and strengthen our licensing strategy.

 

TECHNOLOGY

 

GTX has developed a “carrier-class” architecture and no longer needs to host the servers in a facility Data Center. Throughout 2020 most of our servers were migrated to the cloud which enables cost-efficient expansion, without the need for application code changes.

 

Our current location tracking product design utilizes quad-band GSM/GPRS telephony chip sets and can be adapted to the prevalent GSM/GPRS wireless technologies. Our modules utilize advanced “weak signal server-enhanced” technology which provide rapid location identification. Each module is programmed with a unique identification number and uses standard cellular frequencies to communicate its location. The module is also programmed with a unique subscriber identification number allowing each owner to subscribe to different services.

 

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We continue to modify and upgrade our modules for our SmartSoles and other GPS tracking products. The production and roll-out of version 4 of our SmartSole product is expected to be a benefit because, unlike the earlier versions, we will no longer have to custom make SmartSoles for our international distributors, so our manufacturing cost and timelines are reduced, and we have more flexibility to timely meet our customers’ requirements. Also, we now can bill for data charges in over 100 countries, thereby increasing our potential markets. The ability to produce a product that can be delivered to foreign market without customization and to bill for data charges in additional countries will enable us to increase our RPS (revenue per subscriber). Our core tracking products (SmartSole, Take-Along-Tracker, OEM modules and Track my Work Force App) are supported by the existing infrastructure for the worldwide cell network that provides coverage throughout the United States, Canada, Mexico and numerous other countries that operate on the global GSM Wireless networks. Our personal locator modules have the ability to operate on the networks of 290 carriers in over 210 countries.

 

STRATEGIC RELATIONSHIPS and LICENSING

 

We offer location-based hardware and/or IoT data monitoring platform to third parties for the sale and distribution of location-based products/services in various vertical markets. We begin the process by entering into a platform test agreement or pilot program with a potential partner with the intent to transition into a long-term relationship. By establishing and building partnerships, through licensing agreements, OEM, and carrier relationships, we facilitate efficient entry into new markets leveraging each third parties core competencies. We enhance the value of our distribution channels by aligning our sales and marketing efforts with strategic partners, including co-branding, distribution and marketing with telecommunication companies, wireless carriers, national retailers and major consumer branded companies. We can customize our products into different form factors for the specific needs of customers. To date, the Company has created custom solutions for the monitoring of seniors with cognitive memory disorders by installing the GPS device into specially designed shoes and insoles; the monitoring of children by installing the GPS device into specially designed toys, belts, insoles and backpacks; and the monitoring of various high value assets such as drones, long guns and other mobile assets.

 

The Company has several key strategic relationships established both on the supply side and the distribution side. Some of the key partners on the supply side are Atlantic Footcare (which manufactures our SmartSoles), Spline (our engineering firm), Nordic (which manufactures our GPS and Cellular electronics) and Telefonica (which provides our global connectivity). On the distribution side, we have numerous partnerships worldwide, ranging from distributors, health organizations, and retailers.

 

RESEARCH and DEVELOPMENT

 

As an emerging tech company our long-term growth is predicated on making investments in R&D and Intellectual Property. This year we took the opportunity to invest in our future, by ramping up NFC, BLE and 4G development projects. We are integrating our NFC tags with Blockchain technology and started developing a secured, scalable middleware layer that sits in-between our NFC devices and third-party backend platforms. We started working with several partners that provide various vertical specific Block chain, IoT and AI backend platforms but needed a secure and seamless flow of data from hardware to backend. This middleware lawyer is industry agnostic and is designed to help drive NFC hardware business and other IoT device sales. We also continued testing our Near Field Communication (NFC) Temperature Trackers, which provide real-time temperature sensing and data logging across the supply chain necessary with transportation of perishables; food, drinks, pharmaceuticals, and other temperature sensitive products that can be negatively affected by conditions in transit. This is still a new business silo that has not begun generating revenue, but we see this new technology as a natural extension into the world of asset tracking, taking us beyond humans to tracking and monitoring of perishable shipments of food, beverages, biopharmaceuticals, live organs and many other temperature sensitive shipments. In addition to temperature sensing we are now looking into NFC tags that can authenticate products, addressing the multibillion dollar worldwide counterfeit market.

 

GROWTH STRATEGY

 

We have developed a multi-prong business model approach; business-to-business (B2B), business-to-consumer (B2C), Government and Military sales, and licensing of our technology and IP. We have successfully proven out all our models in a small scale. With B2C, we continue to invest in e-commerce and once we can hit critical mass with lower pricing, we will expand into the mass consumer markets. With B2B our strategy is to establish more partners and relationships with key industry leaders who will embed our technology into their products to sell to their established customer base. In addition, we plan to continue working with the Military both in the U.S. and abroad. Lastly, we plan to continue to identify companies that can license our IP. This approach requires time and capital to grow, however it is also diversified so that all our eggs are not in one basket and once scaled can show rapid growth. As a growing underfinanced company, we have managed to prove out our business models and now need to scale. Management believes that once we have the resources to scale any of these models or all of them, we can expect to see steady and sustainable growth. We are actively raising capital to meet our growth strategies through an Offering Statement on Form 1-A, filed on October 15, 2021 and qualified on October 27, 2021.

 

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Key elements of our growth strategy include:

 

  Providing our Personal Locator hardware module to licensees to empower their products with our two-way GPS tracking capabilities;
  OEM private label manufacturing;
  A mass market retail price under $99.00 for Personal Location devices;
  A monthly service fee structure, under $20.00;
  Reduction in hardware size and cost in order to open new markets;
  Continue expanding our medical reimbursement programs;
  Rolling out bio metrics and NFC;
  Expanding distribution channels;
  Increasing the number of solutions for the military and law enforcement markets;
  Ease of use at the location interface point as well as with the device, using state-of-the-art cloud computing and cloud application development and;
  Expanding our IP monetization campaign.

 

COMPETITION

 

Personal location and asset tracking devices of various kinds are currently available from numerous vendors, and the number of competitive products is increasing rapidly in the marketplace. Furthermore, many of the location products and services are available at no cost to the user or are already included in other products. Nevertheless, we believe this rapidly growing market acceptance of the tracking solutions that we offer represents an opportunity as the intrinsic value of the tracking solutions is recognized and mass market adoption continues. The key competitive advantage for GTX in its lead SmartSole product is our innovative approach to embedding electronics inside a flexible footwear system, which advantage is protected by an extensive patent portfolio and first to market. Another key competitive advantage is our large and growing patent portfolio along with our ability, because we are a small company, to be agile and responsive while still having deep and long industry knowledge of the GPS space.

 

Key differentiators between ourselves and the competition is:

 

B2B:

 

  Providing a comprehensive fully integrated, patented end-to-end solution comprised of hardware, software, and global connectivity, that can be embedded or OEM into other companies’ product lines.
  Being small and nimble we can provide faster turnaround times and lower pricing, which has been a key advantage in our military business.

 

B2C:

 

  Our BLE & GPS SmartSole is the only non-visible, non-intrusive tracking and monitoring solution.

 

There are numerous competitors for GPS products in general, and for our LOCiMOBILE® smart phone applications, including Location Based Technologies, Inc., Google Latitude, Foursquare, Trimble Navigation, Inc., Brick House Security, Verizon, and Trackimo, Inc. Many of our competitors are better financed than we are and/or have greater marketing and scientific resources than we can provide. We are also aware of a number of domestic and foreign competitors that offer much lower quality products in order to gain market share. The U.S. Government systems integration business is intensely competitive and subject to rapid change due to new requirements and budget allocation. We compete with many military suppliers and other large and diverse companies attempting to enter or expand their presence in the U.S. Government market. Many of the existing and potential competitors have greater financial, operating, and technological resources than we have. The competitive environment may require us to make changes in our pricing, services, or marketing. The competitive bidding process involves substantial costs and a number of risks, including significant cost and managerial time to prepare bids and proposals for contracts that may not be awarded to us, or that may be awarded, but for which we do not receive meaningful revenues. Accordingly, our success depends on our ability to develop services and products that address changing needs and to provide people and technology needed to deliver these services and products. In the government services sector, our competition includes large systems integrators and defense contractors. Some of these competitors include global defense and IT service companies such as, Northrop Grumman and Raytheon. However so far being small and nibble along with our ability to deliver product and services, quickly, at a fair market price and customize products on demand, have been to our advantage, over many larger competitors.

 

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EMPLOYEES AND CONSULTANTS

 

As of December 31, 2021, the Company had ten full-time and part-time employees along with three consultants and four commission-based sales personnel. Any selling, marketing, technical, IT and/or software development work that is not handled by our employees, advisors, or sales personnel, is outsourced to qualified contractors and consultants. The Company has over a dozen active outside consultants and contractors which are hired on an as needed basis.

 

GOVERNMENT REGULATION

 

We are subject to federal, state and local laws and regulations applied to businesses generally as well as FCC, IC and CE wireless device regulations and controls. We believe that we are in conformity with all applicable laws in all relevant jurisdictions. We do not believe that our operations are subject to any environmental laws and regulations of the United States nor the states in which they operate.

 

ITEM 1A: RISK FACTORS

 

Investing in our common stock is highly speculative and involves a high degree of risk. Any potential investor should carefully consider the risks and uncertainties described below before purchasing any shares of our common stock. The risks described below are those we currently believe may materially affect us. If any of them occur, our business, financial condition, operating results or cash flow could be materially harmed. As a result, the trading price of our stock could decline, and you might lose all or part of your investment. Our business, financial condition and operating results, or the value of any investment you make in the stock of our company, or both, could be adversely affected by any of the factors listed and described below. These risks and uncertainties, however, are not the only ones that we face. Additional risks and uncertainties not currently known to us, or that we currently think are immaterial, may also impair our business operations or the value of your investment.

 

Forward-Looking Statements

 

We make forward-looking statements in Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report based on the beliefs and assumptions of our management and on information currently available to us. Forward-looking statements include information about our possible or assumed future results of operations, which follow under the headings “Business”, “Liquidity and Capital Resource”, and other statements throughout this report preceded by, followed by or include the words “believes”, “expects”, “anticipates”, “intends”, “plans”, “estimates” or similar expressions.

 

Any number of risks and uncertainties could cause actual results to differ materially from those we express in our forward=looking statements, including the risks and uncertainties we describe below and other factors we describe from time to time in our periodic filings with the SEC. We therefore caution you not to rely unduly on any forward-looking statement. The forward-looking statements in this report speak only as of the date of this report, and we undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments, or otherwise.

 

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Risks and Uncertainties

 

Risks related to the COVID-19 Pandemic

 

The COVID-19 pandemic has affected our business in many different ways, and may continue to amplify the risks and uncertainties facing our business and their potential impact on our financial position, results of operations, and cash flows.

 

The COVID-19 pandemic has significantly affected U.S. consumer shopping patterns and caused the overall health of the U.S. economy to deteriorate. In 2021 and 2022, our sales growth was most pronounced in lower margin categories with an increased percentage originated through our digital channels. While some of the changes in customer shopping patterns in connection with the COVID-19 pandemic may be temporary, others could become long-lasting. If the shifts in our category sales mix to lower-margin merchandise and fulfilling a significantly larger percentage of our sales through digital channels become long-lasting and we are unable to offset the lower margin and increased costs of fulfilling orders outside of our traditional in-store channel with efficiencies, cost-savings, or expense reductions, our results of operations could be adversely affected.

 

Shifts in shopping patterns during the COVID-19 pandemic have also significantly affected our inventory position and disrupted our supply chain. At times we have been unable to procure certain merchandise items in the quantities our customers seek, including those most in demand due to the COVID-19 pandemic. If we have additional times where we are unable to re-stock those products for an extended period, it may lead to lost sales and negatively affect our results of operations. Our vendors have been and may be affected by the COVID-19 pandemic in differing ways. Some financially distressed vendors may be unable to survive the COVID-19 pandemic, which would require us to seek alternative vendors, while others are having difficulty supplying us products in the quantities our customers seek, which could negatively affect our results of operations.

 

Our Company, digital channels, and distribution center have remained open during the COVID-19 pandemic. We have incurred significant SG&A expenses related to efforts to protect the health and well-being of our team members. Most of our headquarter’s operations have transitioned to remote working arrangements, which has amplified our already extensive reliance on computer systems and on our continued and unimpeded access to the Internet to use those systems. During parts of the COVID-19 pandemic, we have had to temporarily alter other parts of our operations, including adjusting our in-store returns process, suspending physical inventory counts. Those temporary alterations to our operations have at times negatively affected, and in the future could negatively affect, the guest experience, sales, and our results of operations. In addition, if guests or team members have negative perceptions about the cleanliness and safety of our stores in light of the COVID-19 pandemic, our reputation, the guest experience, sales, and our results of operations could be adversely affected.

 

A continued and prolonged deterioration in the health in the U.S. economy could lead to a reduction in our sales in the future, which could magnify any negative effects of the COVID-19 pandemic on our results of operations and negatively and materially affect additional areas of our business.

 

The full extent of the impact of the COVID-19 pandemic on our business, financial position, and results of operations may not be known for an extended period and will depend on future developments, many of which are outside of our control, including the duration and spread of the COVID-19 pandemic, the availability and effectiveness of the COVID-19 vaccines, and related actions taken by the U.S., state, local, and international governments, which are uncertain and cannot be predicted. If the COVID-19 pandemic continues without improvement or worsens, its impacts could be more prolonged and may become more severe. The fluidity of this situation limits our ability to predict the ultimate impact of COVID-19 on our business, financial condition, and financial performance, which could be material.

 

RISKS RELATED TO CLIMATE 

 

We may suffer climate related risks in the future

 

The industry-led Task Force on Climate-related Financial Disclosures (TCFD) establishes recommendations for disclosing clear, comparable and consistent information about the risks and opportunities presented by climate change. It is expected to help companies better demonstrate responsibility and foresight in how they consider climate change issues, make smarter, more efficient allocations of capital and facilitate the transition towards a more sustainable, low-carbon economy.

 

GTX Corp believes that decision-useful climate-related information in mainstream reports is needed more than ever. The TCFD recommendations fit well into our commitment to conduct business in a financially, environmentally and socially responsible way. We believe the TCFD recommendations will assure investors that GTX Corp takes climate change seriously and works proactively to understand the risks and opportunities to our business related to climate change.

 

We will take a step-wise approach to incorporate climate-related disclosures as per the TCFD recommendations into our Annual Report; Below is a summary of how GTX Corp addresses the risks related to climate change.

 

All our decisions are driven by the Triple Bottom Line (TBL) business principle: a commitment to do business in a way that is financially, environmentally and socially responsibility. 

 

Our risk management process is governed by our Executive Management and is designed to ensure that key business risks are effectively identified, assessed and mitigated so that they do not affect the company’s ability to achieve its business objectives.

 

Climate-related risks are identified and assessed through the risk management system. So far, neither the short-term nor the medium-term risk of climate change at company level has been material/critical in terms of potential direct impacts. The risks have therefore been identified, assessed and mitigated through individual departments or business units.

 

For the upstream production and sourcing of components GTX Corp performs an annual risk assessment of all active direct spend items and vendor combinations on the approved supplier list. The assessment includes likelihood of disruption paired with financial implications. The risk assessment serves to provide input for risk mitigation in sourcing categories, and consequently prioritise actions to prevent or minimise the impact of supply disruptions on manufacturing. The assessment includes a natural hazards risk rating of supplier locations, provided by external insurance companies. The risk rating is related to various parameters, including flooding, earthquake, wind speed, tornado, hail storm, and lightning. 

 

RISKS RELATED TO OUR BUSINESS

 

We will need additional funding in the near future to continue our current level of operations and growth.

 

As of December 31, 2021, we had a working capital deficit of $2,829,165 and an accumulated deficit of $26,053,384. In addition, for the year ended December 31, 2021, we had a loss of $1,200,458. Revenues generated from our current operations are not sufficient to pay our on-going operating expenses. In addition to product and services sales, our working capital needs in 2021 were partially funded by the sale of approximately $356,866 in “PPE’s, the sale of our preferred securities as part of a Securities Purchase Agreement (“SPA”) for $675,000. Therefore, we continue to obtain additional funding from the sale of our securities or from strategic transactions in order to fund our current level of operations.

 

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Aside from continuing these loan transactions, we have not identified the sources for additional financing that we may require, and we do not have commitments from third parties to continue to provide this financing. Being a micro-cap stock, certain investors may be unwilling to invest in our securities. There is no assurance that sufficient funding through a financing will be available to us at acceptable terms or at all. Historically, we have raised capital through the issuance of convertible debt securities or straight equity securities. However, given the risks associated with our business, the risks associated with our common stock, the worldwide financial uncertainty that has affected the capital markets, and our status as a small, unknown public company, we expect in the near future, we will have a great deal of difficulty raising capital through traditional financing sources. Therefore, we cannot guarantee that we will be able to raise capital, or if we are able to raise capital, that such capital will be in the amounts needed. Our failure to raise capital, when needed, and in sufficient amounts, will severely impact our ability to continue to develop our business as planned. In addition, if we are unable to obtain funding as, and when needed, we may have to further reduce and/or cease our future operations. Any additional funding that we obtain in an equity or convertible debt financing is likely to reduce the percentage ownership of the company held by our existing security holders.

 

Based on the above factors, our auditors have concluded that there is substantial doubt as to our ability to continue as a going concern.

 

There is substantial doubt about the entity’s ability to continue as a going concern.

 

The consolidated financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred net losses of $1,200,458 and $368,407 for the years ended December 31, 2021 and 2020, respectively, has incurred losses since inception resulting in an accumulated deficit of $26,053,384 as of December 31, 2021, and has negative working capital of $2,829,165 as of December 31, 2021. A significant part of our negative working capital position on December 31, 2021 consisted of $758,000, of amounts due to various accredited investors of the Company for convertible promissory notes, loans and a letter of credit, as well as the current portion of $74,953 in CARE loans. The Company anticipates further losses in the development of its business.

 

The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. The Company’s ability to raise additional capital through the future issuances of debt or equity is unknown. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, or its attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of these uncertainties.

 

We have had operating losses since formation and expect to continue to incur net losses for the near term.

 

We currently have a working capital deficit and our current and projected revenues are not sufficient to fund our anticipated operating needs. We have reported net losses of $1,200,458 and $368,407 for the years ended December 31, 2021 and 2020, respectively. While we anticipate that revenues will increase in 2022, unless our sales increase substantially in the near future, we will continue to incur net losses in the near term, and we may never be able to achieve profitability. In order to achieve profitable operations, we need to significantly increase our revenues from the sales of product, subscriptions and licensing fees. We cannot be certain that our business will ever be successful or that we will generate significant revenues and become profitable. As a result, an investment in our company is highly speculative and no assurance can be given that our business model will be successful and, therefore, that our stockholders will realize any return on their investment or that they will not lose their entire investment.

 

Our current sources of funding are limited, and any additional funding that we may obtain may be on unfavorable terms and may significantly dilute our existing shareholders.

 

We have not identified sources to fund our current and proposed operating activities. The amount of revenues that we currently generate is not sufficient to fund our operating expenses. As a result, unless and until our revenues increase significantly in the near future, we will have to obtain additional public or private equity financings or debt financings in order to continue our operations. Any additional funding that we obtain in a financing is likely to reduce the percentage ownership of the Company held by our existing security-holders. The amount of this dilution may be substantial based on our current stock price, and could increase if the trading price of our common stock declines at the time of any financing from its current levels. To the extent we raise additional capital by issuing equity securities, our stockholders will experience further dilution. If we raise funds through debt financings, we may become subject to restrictive covenants. We may also attempt to raise funds through corporate collaboration and licensing arrangements. To the extent that we raise additional funds through such means, we may be required to relinquish some rights to our technologies or products, or grant licenses on terms that are not favorable to us. There can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all. If we are unable to obtain the needed additional funding, we will have to reduce or even totally discontinue our operations, which would have a significant negative impact on our stockholders and could result in a total loss of their investment in our stock.

 

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Our future capital requirements, and our currently projected operating and liquidity requirements, will depend on many factors, including:

 

  The ramping and scaling of the GPS SmartSole® and BLE SmartSole;
     
  Supporting growth with advertising and marketing;
     
  Our ongoing general and administrative expenses related to our being a reporting company;
     
  The cost of developing and improving our products and technologies thru R&D and staying competitive; and
     
  The maintenance and the ongoing development of our IP portfolio.

 

Funding, especially on terms acceptable to us, may not be available to meet our future capital needs because of the state of the credit and capital markets. Global market and economic conditions have been, and continue to be, disruptive and volatile. The cost of raising money in the debt and equity capital markets for smaller companies like ours has increased substantially while the availability of funds from those markets has diminished significantly. Also, low valuations and decreased appetite for equity investments, among other factors, may make the equity markets difficult to access on acceptable terms or unavailable altogether.

 

If adequate funds are not available, we may be required to delay, scale-back or eliminate our product enhancement and new product development programs. There can be no assurance that additional financing will be available on acceptable terms or at all, if and when required.

 

Our projected revenues in 2022 rely on the scaling of the our new 4G LTE GPS SmartSole®, adding subscribers, increasing our military business, growing our OEM and IP monetization business, and continuing the sales of PPE and other related medical products and supplies.

 

Due to the financial slow down of 2021 which impacted our subscription business and launch our new 4G LTE SmartSoles, we did not generated adequate revenues in 2021 from the sales of the SmartSoles and from on-going subscription fees to cover all of our operating expenses. Our revenue projections for 2022 assume that the revenues we generate from the SmartSole, including subscriptions will increase from the amount generated in 2021 and that our other business units will grow accordingly. However, we cannot predict the future and continued market acceptance of the SmartSole product line. Accordingly, it is uncertain whether our revenues will equal our internally projected levels. Failure to reach our target revenue levels will materially, and adversely, affect our financial condition.

 

The nature of our business is speculative and dependent on a number of variables beyond our control that cannot be reliably ascertained in advance.

 

The revenues and profits of an enterprise involved in the location based business are generally dependent upon many variables. Our customer appeal depends upon factors which cannot be reliably ascertained in advance and over which we have no control, such as unpredictable customer and media reviews, industry analyst commentaries, and comparisons to competitive products. As with any relatively new business enterprise operating in a specialized and intensely competitive market, we are subject to many business risks which include, but are not limited to, unforeseen marketing difficulties, excessive research and development expenses, unforeseen negative publicity, competition, product liability issues, manufacturing and logistical difficulties, and lack of operating experience. Many of the risks may be unforeseeable or beyond our control. There can be no assurance that we will successfully implement our business plan in a timely or effective manner, that we will be able to generate sufficient interest in our products, or that we will be able to market and sell enough products and services to generate sufficient revenues to continue as a going concern.

 

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Our wireless location products and technologies have to continuously evolve and respond to market changes. If we are unable to commercially release products that are accepted in the market or that generate significant revenues, our financial results will continue to suffer.

 

Wireless technology is rapidly changing, as are the products that our customers are demanding. In order to be able to provide our customers with the products and services that they desire, we too must continuously develop and offer new and improved products and services. We have attempted to adjust our product offerings to address changing market conditions by offering products such as proprietary GPS enabled transport containers, footwear location products, and a variety of smartphone location Apps, secure backpacks, etc. These products have met with short-term or limited commercial success, and there can be no assurances that consumer or commercial demand for our future products will meet, or even approach, our expectations. In addition, our pricing and marketing strategies may not be successful. Lack of customer demand, a change in marketing strategy and changes to our pricing models could dramatically alter our financial results. Unless we are able to release location based products that meet a significant market demand, we will not be able to improve our financial condition or the results of our future operations.

 

In order for our products to be successful, we need to establish market recognition quickly, following the introduction of our products.

 

We believe it is imperative to our success that we obtain significant market recognition to compete in our various markets. Accordingly, it is important that we establish market recognition for our brands in order to be able to continue to be a material participant in the large markets that we are addressing. To date, we have utilized various marketing and free media exposure and have tried to build market recognition both directly for our products and also by tying our products to our LOCiMOBILE Apps that we own. However, because of our lack of funding and limited resources, our ability to quickly establish our brands may be severely hampered.

 

We may encounter manufacturing or assembly problems for our products, which would adversely affect our results of operations and financial condition.

 

To date, we have only manufactured a limited number of products. In addition, we are continually redesigning and enhancing our products and we are designing new products based on that technology that we hope to manufacture and market in the near future. The manufacture and assembly of our products involves complex and precise processes, some of which have subcontracted to other companies and consultants. To date, we have experienced some quality issues with the limited production of some of our initial products. Although we continue to address these issues, we have only manufactured a limited quantity of products and so we do not yet know whether we will encounter any serious problems in the production of larger quantities of our existing or new products. Any significant problems in manufacturing, assembling or testing our products could delay the sales of our products and have an adverse impact on our business and prospects. The willingness of manufacturers to make the product, or lack of availability of manufacturing capacity, may have an adverse impact on the availability of our products and on our ability to sell our products. Manufacturing difficulties will harm our ability to compete and adversely affect our results of operations and financial condition, and may hinder our ability to grow our business as we expect.

 

We primarily depend upon two manufacturers for the components of our SmartSole and if we encounter problems with these manufacturers there is no assurance that we could obtain products from other manufacturers without significant disruptions to our business.

 

The principal components and subassemblies of our products are currently manufactured for us by two manufacturers. Although we could arrange for other manufacturers to supply these components and subassemblies, there is no assurance that we could do so without undue cost, expense and delay. If our manufacturers are unable to provide us with adequate supplies of high-quality components on a timely and cost-efficient basis, our operations will be disrupted and our net revenue and profitability will suffer. Moreover, if those manufacturers cannot consistently produce high-quality products that are free of defects, we may experience a high rate of product returns, which would also reduce our profitability and may harm our reputation and brand. Although we believe that we could locate alternate contract manufacturers, our operations would be impacted until alternate manufacturers are found.

 

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Our markets are highly competitive, and our failure to compete successfully would limit our ability to sell our products, attract and retain customers and grow our business.

 

Our markets are highly competitive, and we expect that both direct and indirect competition will increase in the future. Within each of our markets, we encounter direct competition from various larger U.S. and non-U.S. competitors. The adoption of new technology in the communications industry likely will intensify the competition for improved wireless location technologies. The wireless location services market has historically been dominated by large companies, such as Siemens AG, AT&T and LoJack Corporation. In addition, a number of other companies such as Trimble Navigation, Zoomback, Verizon, FireFly, Disney, Mattel, Digital Angel Corporation, Location-Based Technologies, Inc. and WebTech Wireless Inc. either have announced plans for new products or have commenced selling products that are similar to our wireless location products, and new competitors are emerging both in the U.S. and abroad to compete with our wireless location services products. Due to the rapidly evolving markets in which we compete, additional competitors with significant market presence and financial resources may enter those markets, thereby further intensifying competition, adversely affecting our sales, and adversely affecting our business and prospects.

 

We may not be successful in developing our new products and services.

 

The market for telecommunications-based products and services is characterized by rapid technological change, changing customer needs, frequent new product introductions and evolving industry standards. These market characteristics are exacerbated by the emerging nature of this market and the fact that many companies are expected to continually introduce new and innovative products and services. Our success will depend partially on our ability to introduce new products, services, and technologies continually and on a timely basis and to continue to improve the performance, features and reliability of our products and services in response to both evolving demands of prospective customers and competitive products. There can be no assurance that any of our new or proposed products or services will maintain the limited market acceptance that we have to date established. Our failure to design, develop, test, market and introduce new and enhanced products, technologies and services successfully so as to achieve market acceptance could have a material adverse effect upon our business, operating results and financial condition.

 

There can be no assurance that we will not experience difficulties that could delay or prevent the successful development, introduction, or marketing of new or enhanced products and services, or that our new products and services will adequately satisfy the requirements of prospective customers and achieve significant acceptance by those customers. Because of certain market characteristics, including technological change, changing customer needs, frequent new product and service introductions and evolving industry standards, the continued introduction of new products and services is critical. Delays in the introduction of new products and services may result in customer dissatisfaction and may delay or cause a loss of revenue. There can be no assurance that we will be successful in developing new products or services or improving existing products and services that respond to technological changes or evolving industry standards.

 

In addition, new or enhanced products and services introduced by us may contain undetected errors that require significant design modifications. This could result in a loss of customer confidence which could adversely affect the use of our products, which in turn, could have a material adverse effect upon our business, results of operations or financial condition.

 

Our software products are complex and may contain unknown defects that could result in numerous adverse consequences, resulting in costly litigation or diverting management’s attention and resources.

 

Complex software products such as those associated with our products often contain latent errors or defects, particularly when first introduced, or when new versions or enhancements are released. We have experienced and addressed errors and defects in the software associated with our products, but do not believe these errors will have a material negative effect in the future on the functionality of the products. However, there can be no assurance that, despite testing, additional defects and errors will not be found in the current version, or in any new versions or enhancements of this software or any of our products, any of which could result in damage to our reputation, the loss of sales, a diversion of our product development resources, and/or a delay in market acceptance, and thereby materially adversely affecting our business, operating results and financial condition. Furthermore, there can be no assurance that our products will meet all of the expectations and demands of our customers. The failure of our products to perform to customer expectations could give rise to warranty claims. Any of these claims, even if not meritorious, could result in costly litigation or divert management’s attention and resources. Any product liability insurance that we may carry could be insufficient to protect us from all liability that may be imposed under any asserted claims.

 

If we are not able to take advantage of developments in technology and address changing consumer demand on a timely basis, we may experience a decline in the demand for our services, be unable to implement our business strategy and experience reduced profits.

 

Our industries are rapidly changing as new technologies are developed that offer consumers an array of choices for their location-based needs and allow new entrants into the markets we serve. In order to grow and remain competitive, we will need to adapt to future changes in technology, enhance our existing offerings and introduce new offerings to address our customers’ changing demands. If we are unable to meet future challenges from competing technologies on a timely basis or at an acceptable cost, we could lose customers to our competitors. We may not be able to accurately predict technological trends or the success of new services in the market.

 

The deployment of our 4G network is subject to a variety of risks, including those related to equipment and spectrum availability, unexpected costs, and regulatory permitting requirements that could cause deployment delays or network performance issues. These issues could result in significant costs or reduce the anticipated benefits of the enhancements to our products. If our services fail to gain acceptance in the marketplace, or if costs associated with the implementation and introduction of these services materially increase, our ability to retain and attract customers could be adversely affected.

 

In addition to introducing new offerings and technologies, we must phase out outdated and unprofitable technologies and services. If we are unable to do so on a cost-effective basis, we could experience reduced profits. In addition, there could be legal or regulatory restraints on our ability to phase out current services.

 

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We cannot accurately predict our future revenues and expenses.

 

We are currently developing various sources of revenues based on market conditions and the type of products that we are marketing. Our sales will not become stable and predictable until we either have a larger installed base of users for our tracking devices (which will provide us with predictable, monthly revenues), we enter into other license agreements that provide us with regular royalties or subscription revenues, or we consummate other large scale enterprise contracts. As such, the amount of revenues we receive from the sale and use of our products, our subscriptions, and our licensing agreements, will fluctuate and depend upon our customer’s willingness to buy our products, and for our partner’s abilities to sell the products that contain our technology. As with any developing enterprise operating in a specialized and intensely competitive market, we are subject to many business risks which include, but are not limited to, unforeseen negative publicity, competition, product liability and lack of operating experience. Many of the risks may be unforeseeable or beyond our control. There can be no assurance that we will successfully implement our business plan in a timely manner, or generate sufficient interest in our products or services, or that we will be able to market and sell enough products and services to generate sufficient revenues to continue as a going concern.

 

Our expense levels in the future will be based, in large part, on our expectations regarding future revenue, and as a result net income/loss for any quarterly period in which material orders are delayed could vary significantly. In addition, our costs and expenses may vary from period to period because of a variety of factors, including our research and development costs, our introduction of new products and services, cost increases from third-party service providers or product manufacturers, production interruptions, changes in marketing and sales expenditures, and competitive pricing pressures.

 

There are risks of international sales and operations.

 

We anticipate that a growing, and potentially substantial portion of our future revenue from the sale of our products and services may be derived from customers located outside the United States. As such, a portion of our sales and operations could be subject to tariffs and other import-export barriers, currency exchange risks and exchange controls, foreign product standards, potentially adverse tax consequences, longer payment cycles, problems in collecting accounts receivable, political instability, and difficulties in staffing and managing foreign operations. Although we intend to monitor our exposure to currency fluctuations and currently the U.S. dollar is very strong giving us a significant buying advantage, there can be no assurance that exchange rate fluctuations will not have an adverse effect on our results of operations or financial condition. In the future, we could be required to sell our products and services in other currencies, which would make the management of currency fluctuations more difficult and expose our business to greater risks in this regard.

 

Our products may be subject to numerous foreign government standards and regulations that are continually being amended. Although we will endeavor to satisfy foreign technical and regulatory standards, there can be no assurance that we will be able to comply with foreign government standards and regulations, or changes thereto, or that it will be cost effective for us to redesign our products to comply with such standards or regulations. Our inability to design or redesign products to comply with foreign standards could have a material adverse effect on our business, financial condition and results of operations.

 

Because of the global nature of the telecommunications business, it is possible that the governments of other states and foreign countries might attempt to regulate our transmissions or prosecute us for violations of their laws. There can be no assurance that violations of local laws will not be alleged by state or foreign governments, that we might not unintentionally violate such law, or that such laws will not be modified, or new laws enacted, in the future.

 

Any of the foregoing factors could have a material adverse effect on our business, results of operations, and financial condition.

 

If we fail to develop and maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, our current and potential stockholders could lose confidence in our financial reports, which could harm our business and the trading price of our common stock.

 

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal controls over financial reporting and, depending on our future growth, may require our independent registered public accounting firm to annually attest to our evaluation, as well as issue their own opinion on our internal controls over financial reporting. The process of implementing and maintaining proper internal controls and complying with Section 404 is expensive and time consuming. We cannot be certain that the measures we will undertake will ensure that we will maintain adequate controls over our financial processes and reporting in the future. Furthermore, if we are able to rapidly grow our business, the internal controls that we will need will become more complex, and significantly more resources will be required to ensure our internal controls remain effective. Failure to implement required controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. If we or our auditors discover a material weakness in our internal controls, the disclosure of that fact, even if the weakness is quickly remedied, could diminish investors’ confidence in our financial statements and harm our stock price. In addition, non-compliance with Section 404 could subject us to a variety of administrative sanctions, including the suspension of trading, ineligibility for future listing on one of the Nasdaq Stock Markets or national securities exchanges, and the inability of registered broker-dealers to make a market in our common stock, which may reduce our stock price.

 

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We may suffer from product liability claims.

 

Faulty operation of our products may result in product liability claims brought against us. Regardless of the merit or eventual outcome, product liability claims may materially adversely affect our business and further result in:

 

  decreased demand for our products or withdrawal of the products from the market;
     
  injury to our reputation and significant media attention;
     
  costs of litigation; and
     
  substantial monetary awards to plaintiffs.

 

We have purchased annual product liability insurance with liability limits of $1,000,000 per occurrence and $2,000,000 in the aggregate. This coverage may not be sufficient to fully protect us against product liability claims. We intend to expand our product liability insurance coverage as sales of our products expand. Our inability to obtain sufficient product liability insurance at an acceptable cost to protect against product liability claims could prevent or limit the commercialization of our products and expose us to liability in excess of our coverage.

 

Our ability to compete could be jeopardized and our business seriously compromised if we are unable to protect ourselves from third-party challenges or infringement of the proprietary aspects of the wireless location products and technology we develop.

 

Our products utilize a variety of proprietary rights that are critical to our competitive position. Because the technology and intellectual property associated with our wireless location products are evolving and rapidly changing, our current intellectual property rights may not adequately protect us in the future. We rely on a combination of patent, copyright, trademark and trade secret laws and contractual restrictions to protect the intellectual property utilized in our products. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our products or technology. In addition, monitoring unauthorized use of our products is difficult and we cannot be certain the steps we have taken will prevent unauthorized use of our technology. Also, it is possible that no additional patents or trademarks will be issued from our currently pending or future patent or trademark applications. Because legal standards relating to the validity, enforceability and scope of protection of patent and intellectual property rights are uncertain and still evolving, the future viability or value of our intellectual property rights is uncertain. Moreover, effective patent, trademark, copyright and trade secret protection may not be available in some countries in which we distribute or anticipate distributing our products. Furthermore, our competitors may independently develop similar technologies that limit the value of our intellectual property, design or patents. In addition, third parties may at some point claim certain aspects of our business infringe their intellectual property rights. While we are not currently subject to nor aware of any such claim, any future claim (with or without merit) could result in one or more of the following:

 

  Significant litigation costs;
     
  Diversion of resources, including the attention of management;
     
  Our agreement to pay certain royalty and/or licensing fees;
     
  Cause us to redesign those products that use such technology; or
     
  Cessation of our rights to use, market, or distribute such technology.

 

Any of these developments could materially and adversely affect our business, results of operations and financial condition. In the future, we may also need to file lawsuits to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of the proprietary rights of others. Whether successful or unsuccessful, such litigation could result in substantial costs and diversion of resources. Such costs and diversion could materially and adversely affect our business, results of operations and financial condition.

 

18
 

 

We depend on our key personnel to manage our business effectively in a rapidly changing market. If we are unable to retain our key employees, our business, financial condition and results of operations could be harmed.

 

Our future success depends to a significant degree on the skills, efforts and continued services of our executive officers and other key engineering, manufacturing, operations, sales, marketing and support personnel. If we were to lose the services of one or more of our key executive officers or other key engineering, manufacturing, operations, sales, marketing and support personnel, we may not be able to grow our business as we expect, and our ability to compete could be harmed, adversely affecting our business and prospects.

 

Our products depend on continued availability of GPS and cellular wireless telecommunications systems.

 

Our products use existing GPS and cellular wireless telecommunications systems to identify the position of our products. Any temporary or permanent change in the availability of these systems, or any material change in the existing infrastructure and our ability to access those systems, would materially and adversely affect our business, operating results and financial condition may be materially and adversely affected.

 

Rapid technological change in our market and/or changes in customer requirements could cause our products to become obsolete or require us to redesign our products, which would have a material adverse effect on our business, operating results and financial condition.

 

The market for our products is characterized by rapid technological change, frequent new product introductions and enhancements, uncertain product life cycles, changing customer demands and evolving industry standards, any of which can render existing products obsolete. We believe that our future success will depend in large part on our ability to develop new and effective products in a timely manner and on a cost-effective basis. As a result of the complexities inherent in our products, major new products and product enhancements can require long development and testing periods, which may result in significant delays in the general availability of new releases or significant problems in the implementation of new releases. In addition, if we or our competitors announce or introduce new products our current or future customers may defer or cancel purchases of our products, which could materially adversely affect our business, operating results and financial condition. Our failure to develop successfully, on a timely and cost-effective basis, new products or new product enhancements that respond to technological change, evolving industry standards or customer requirements would have a material adverse effect on our business, operating results and financial condition.

 

Changes in the government regulation of our wireless location products or wireless carriers could harm our business.

 

Our products, wireless carriers and other components of the communications industry are subject to domestic government regulation by the Federal Communications Commission (the “FCC”) and international regulatory bodies. If we are unable to satisfy all of the regulations of the FCC or any other regulatory body, we could be prevented from releasing one or more of our products, which could materially and adversely affect our future revenues. In addition, any delay in obtaining FCC and other regulatory approval could likewise have a negative impact on our business and on our relationships with our customers. These regulatory bodies could enact regulations that affect our products or the service providers which distribute our products, such as limiting the scope of the service providers’ market, capping fees for services provided by them or imposing communication technology standards which impact our products. Changes in these regulations could affect our products and, thereby, adversely affect our business and operations.

 

19
 

 

Future acquisitions or strategic investments may not be successful and may harm our operating results.

 

As part of our strategy, we have acquired or established smaller businesses, and we may do so in the future. For example, in the past we established our LOCiMOBILE, Inc. subsidiary and purchased our Code Amber News Service, Inc. subsidiary, which was discontinued in February 2015. Future acquisitions or strategic investments could have a material adverse effect on our business and operating results because of:

 

  The assumption of unknown liabilities, including employee obligations. Although we normally conduct extensive legal and accounting due diligence in connection with our acquisitions, there are many liabilities that cannot be discovered, and which liabilities could be material.
     
  We may become subject to significant expenses related to bringing the financial, accounting and internal control procedures of the acquired business into compliance with U.S. GAAP financial accounting standards and the Sarbanes Oxley Act of 2002.
     
  Our operating results could be impaired as a result of restructuring or impairment charges related to amortization expenses associated with intangible assets.
     
  We could experience significant difficulties in successfully integrating any acquired operations, technologies, customers’ products and businesses with our existing operations.
     
  Future acquisitions could divert substantial capital and our management’s attention.
     
  We may not be able to hire the key employees necessary to manage or staff the acquired enterprise operations.

 

Our executive officers and directors have the ability to significantly influence matters submitted to our stockholders for approval.

 

As of March 31, 2022, our executive officers and directors, in the aggregate, beneficially own shares representing approximately 0.003% of our common stock as well as super voting rights due to the Directors’ ownership of Preferred A shares (see Footnote #13). Beneficial ownership includes shares over which an individual or entity has investment or voting power and includes shares that could be issued upon the exercise of options and warrants within 60 days after the date of determination. On matters submitted to our stockholders for approval, holders of our common stock are entitled to one vote per share. If our executive officers and directors choose to act together, they would have significant influence over all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these individuals, if they chose to act together, would have significant influence on the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration of voting power could delay or prevent an acquisition of our company on terms that other stockholders may desire.

 

Failure to manage growth effectively could adversely affect our business, results of operations and financial condition.

 

The success of our future operating activities will depend upon our ability to expand our support system to meet the demands of our growing business. Any failure by our management to effectively anticipate, implement, and manage changes required to sustain our growth would have a material adverse effect on our business, financial condition, and results of operations. We cannot assure you that we will be able to successfully operate acquired businesses, become profitable in the future, or effectively manage any other change.

 

RISKS RELATED TO AN INVESTMENT IN OUR SECURITIES

 

The resale of shares by the holders of our convertible promissory notes and our other investors could depress the market price of our common stock.

 

We have issued a substantial amount of convertible promissory notes in the recent past to fund our working capital and other financial needs and may need to do so in the future. A number of the holders of these convertible notes have been converting these promissory notes into shares of our common stock. In addition, a substantial additional number of shares are issuable upon the conversion of currently outstanding convertible notes. The resale of a significant number of these shares into the public market by the investors could depress the market price of our common stock.

 

Our convertible notes may be converted into shares of our common stock at less than the then-prevailing market price for our common stock if the lenders chooses to convert the notes.

 

As of December 31, 2021, we had short term convertible notes with outstanding principal balances totaling $758,000 and during the first quarter of 2022 we did not enter into any additional short term convertible notes all of which can potentially be convertible into shares of the Company’s common stock at prices less than the then-prevailing market price. The lenders for these convertible notes have a financial incentive to convert the notes and realize the profit equal to the difference between the conversion price and the market price. If the convertible notes are converted, the price of our common stock could decrease. See further discussion regarding the conversion features of our convertible debentures in footnote 8 of our Financial Statements included herein.

 

20
 

 

During 2021, we converted notes payable with principal balances of approximately $149,373 owed to various investors into 10,661,660 shares of our common stock. Our average market price during 2021 was $0.0244 per share. Although our goal is to limit future issuances of such convertible notes, no assurance can be given that we will not have to raise funds from these types of investments in the future.

 

Our common stock is thinly traded and the price of our common stock may be negatively impacted by factors that are unrelated to our operations.

 

Our common stock is currently quoted on the OTCBB. Trading of our stock through the OTCBB is frequently thin and highly volatile. The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our business objectives, trading volume in our common stock, changes in general conditions in the economy and the financial markets, or other developments which affect us or our industry. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.

 

When we issue additional shares in the future, it will likely result in the dilution of our existing stockholders.

 

Our articles of incorporation authorizes the issuance of up to 2,071,000,000 shares of common stock with a $0.0001 par value, of which 224,502,481 common shares were issued and outstanding as of December 31, 2021 (we also are authorized to issue 10,000,000 preferred shares with a par value of $0.0001, 1,000,000 of which have been issued and are outstanding Series-A, 180 of which have been issued and outstanding Series-B, and 525 of which have been issued and outstanding Series-C). From time to time we may increase the number of shares available for issuance in connection with our equity compensation plans. Our board of directors may fix and determine the designations, rights, preferences or other variations of each class or series within each class of preferred stock and may choose to issue some or all of such shares to provide additional financing or acquire more businesses in the future.

 

The issuance of any shares for acquisition, licensing or financing efforts, upon conversion of any preferred stock or exercise of warrants and options, pursuant to our equity compensation plans, or otherwise may result in a reduction of the book value and market price of the outstanding shares of our common stock. If we issue any such additional shares, such issuance will cause a reduction in the proportionate ownership and voting power of all current stockholders.

 

Financial Industry Regulatory Authority (FINRA) sales practice requirements may also limit a stockholder’s ability to buy and sell our common stock.

 

The Financial Industry Regulatory Authority (“FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

 

We have never paid dividends on our common stock and do not anticipate paying any in the foreseeable future.

 

We have never declared or paid a cash dividend on our common stock and we do not expect to pay cash dividends in the foreseeable future. If we do have available cash, we intend to use it to grow our business. Our payment of any future dividends will be at the discretion of our board of directors after taking into account various factors, including but not limited to our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements that we may be a party to at that time. In addition, our ability to pay dividends on our common stock may be limited by Nevada corporate law. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize a return on their investment. Investors seeking cash dividends should not purchase our common stock.

 

21
 

 

The elimination of monetary liability against our directors, officers and employees under Nevada law and the existence of indemnification rights to our directors, officers and employees may result in substantial expenditures by us and may discourage lawsuits against our directors, officers and employees.

 

Our Amended and Restated Bylaws contain specific provisions that eliminate the liability of our directors for monetary damages to our company and stockholders, and permit indemnification of our directors and officers to the extent provided by Nevada law. We may also have contractual indemnification obligations under our employment agreements with our officers. The foregoing indemnification obligations could result in our company incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and resultant costs may also discourage our company from bringing a lawsuit against directors and officers for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our stockholders against our directors and officers even though such actions, if successful, might otherwise benefit our company and stockholders.

 

You may have difficulty selling our shares because they are deemed “penny stocks.”

 

Our common stock is currently quoted on the OTCBB under the symbol “GTXO.” Since our common stock is not listed on a national securities exchange, if the trading price of our common stock remains below $5.00 per share, trading in our common stock will be subject to the requirements of certain rules promulgated under the Exchange Act, which require additional disclosure by broker-dealers in connection with any trades involving a stock defined as a penny stock (generally, any non-national securities exchange equity security that has a market price of less than $5.00 per share, subject to certain exceptions). The additional burdens imposed upon broker-dealers could discourage broker-dealers from effecting transactions in our common stock, which could severely limit the market liquidity of the common stock and the ability of holders of the common stock to sell their shares.

 

Stockholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through pre-arranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our share price.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

On December 14, 2021, the Company received correspondence form the Securities and Exchange Commission to update it’s 10K for fiscal year ended December 31, 2020, under the Controls and Procedures in Section Item 9A. In both a verbal phone call on December 23, 2021 and in written communication on January 20, 2022, it was agreed that the Company could make its response in the current 10K for the fiscal year ended December 31, 2021, which covers both years.

 

ITEM 2. DESCRIPTION OF PROPERTIES

 

We have executive, administrative, and operating offices at 117 W 9th Street, Suite 1214, Los Angeles, California 90015. Our office space is approximately 1,600 square feet and consists of executive and administrative workspace for a base rent of $1,710 per month, plus an additional 630 square feet for inventory and storage for an additional $530 per month (that was used until April 30, 2021), both are on a month-to-month basis.

 

ITEM 3. LEGAL PROCEEDINGS

 

From time to time, we may be involved in routine legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business. The ultimate amount of liability, if any, for any claims of any type (either alone or in the aggregate) may materially and adversely affect our financial condition, results of operations and liquidity. In addition, the ultimate outcome of any litigation is uncertain. Any outcome, whether favorable or unfavorable, may materially and adversely affect us due to legal costs and expenses, diversion of management attention and other factors. We expense legal costs in the period incurred. We cannot assure you that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against us in the future, and these matters could relate to prior, current or future transactions or events.

 

We are not currently a party to any material legal proceedings. We are not aware of any pending or threatened litigation against us that we expect will have a material adverse effect on our business, financial condition, liquidity, or operating results. However, legal claims are inherently uncertain, and we cannot assure you that we will not be adversely affected in the future by legal proceedings.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable

 

22
 

 

PART II

 

ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Market Information.

 

Our common stock is quoted on the over-the-counter market on the OTCBB trading platform under the symbol “GTXO.” And first began trading on April 17, 2008. The following table sets forth the high and low sale prices for our common stock on the OTCBB for the periods indicated. The quotations below reflect inter-dealer prices, without retail mark-up, mark down, or commission, and may not necessarily represent actual transactions:

 

   Year Ended 
   December 31, 2021 
   High   Low 
Quarter ended March 31, 2021  $0.09   $0.0116 
Quarter ended June 30, 2021  $0.03421   $0.0165 
Quarter ended September 30, 2021  $0.0288   $0.0116 
Quarter ended December 31, 2021  $0.0233   $0.0105 

 

   Year Ended 
   December 31, 2020 
   High   Low 
Quarter ended March 31, 2020  $0.0214   $0.008 
Quarter ended June 30, 2020  $0.0209   $0.00985 
Quarter ended September 30, 2020  $0.0247   $0.0082 
Quarter ended December 31, 2020  $0.0157   $0.0062 

 

Holders of Record.

 

As of December 31, 2021, an aggregate of 225,502,481 shares of our common stock were issued and outstanding and were owned by approximately 279 holders of record, based on information provided by our transfer agent. The foregoing number of record holders does not include an unknown number of stockholders who hold their stock in “street name.”

 

Recent Sales of Unregistered Securities.

 

The following is a summary of transactions involving sales of our securities that were not registered under the Securities Act of 1933, as amended (the “Securities Act”). Each offer and sale were exempt from registration under either Section 4(a)(2) of the Securities Act or Rule 506(b) under Regulation D of the Securities Act.

 

On January 14, 2021, we issued 1,866,667 in shares of common stock to an investor for converting $24,250 in debt from a convertible note that was issued in the fourth quarter of 2014.

 

On January 22, 2021, we issued 1,050,000 in shares of common stock to an investor for converting $4,914 in debt from a convertible note that was issued in the fourth quarter of 2017.

 

On January 26, 2021, we issued 1,600,000 in shares of common stock to an investor who converted their preferred C shares at a strike price of $0.015.

 

On January 26, 2021, an investor converted 7,000,000 of warrants into 6,805,555 shares of common stock at a strike of $0.0025.

 

23
 

 

On January 26, 2021, an investor converted 6,500,000 of warrants into 6,319,444 shares of common stock at a strike of $0.0025.

 

On January 27, 2021, we issued 3,800,004 in shares of common stock to an investor who converted their preferred C shares at a strike price of $0.015.

 

On January 27, 2021, we issued 790,968 in shares of common stock to an investor for converting $35,000 in debt from a convertible note that was issued in the fourth quarter of 2018.

 

On February 2, 2021, we issued 3,273,702 in shares of common stock to an investor for converting $22,981.39 in debt from three convertible notes that was issued in the fourth quarter of 2017 and first quarter of 2018.

 

On February 4, 2021 we issued 14,166,667 in warrants to three investors as part of their Securities Purchase Agreement, with a strike price of $0.015 and a 5-year term.

 

On February 8, 2021, we issued 1,300,000 in restricted common stock to various consultants and advisors as part of their agreements.

 

On February 8, 2021, we issued 860,383 in shares of common stock to an investor for converting $50,000 in debt from a convertible note that was issued in the fourth quarter of 2018.

 

On February 8, 2021, we issued an additional 1,328,059 in shares of common stock to an investor related to the conversion of $35,000 on January 27, 2021 in debt from a convertible note that was issued in the fourth quarter of 2018.

 

On February 9, 2021, we issued 666,667 in shares of common stock to an investor who converted their preferred C shares at a strike price of $0.015

 

On February 15, 2021, we issued 1,424,501 in shares of common stock to an investor for converting $10,000 in debt from a convertible note that was issued in the fourth quarter of 2017.

 

On February 17, 2021, we issued 317,380 in shares of common stock to an investor for converting $2,228.01 in debt from a convertible note that was issued in the fourth quarter of 2017.

 

On February 17, 2021, we issued 666,667 in shares of common stock to an investor who converted their preferred C shares at a strike price of $0.015.

 

On February 18, 2021, we issued 1,333,334 in shares of common stock to an investor who converted their preferred C shares at a strike price of $0.015.

 

On March 3, 2021, we issued 1,933,333 in shares of common stock to an investor who converted their preferred C shares at a strike price of $0.015.

 

March 3, 2021, we retired $75,000 in accrued interest and issued equity in the form of common stock of 6,000,000 shares, 3,000,000 issued on March 3, 2021 and another 3,000,000 due in 45 days, which resulted in a gain on the settlement of debt of $34,230.

 

On March 11, 2021, an investor converted 3,500,000 of warrants into 3,354,167 shares of common stock at a strike of $0.0025.

 

On March 11, 2021, an investor converted 6,500,000 of warrants into 6,229,167 shares of common stock at a strike of $0.0025.

 

On April 8, 2021, we issued 5,000,000 in warrants with a strike price of $0.015 and a 3-year term and 150 preferred Series C shares, to two investors as part of their Securities Purchase Agreement, for $150,000 in proceeds.

 

24
 

 

On April14, 2021, we issued 7,350,000 in restricted common stock to various consultants and advisors as part of their agreements.

 

May 12, 2021, we issued the remaining 3,000,000 common shares for the retirement of $75,000 in accrued interest. The was issued as equity in the form of common stock of 6,000,000 shares, 3,000,000 issued on March 4, 2021 and another 3,000,000 due after 45 days, which resulted in a total of $45,000 of accrued interest being settled and a gain on the settlement of debt of $65,700, and a loss on conversion of $131,736.

 

On May 25, 2021, we issued 9,200,000 in shares of common stock to an investor who converted their preferred B shares at a strike price of $0.0025.

 

On May 25, 2021, we issued 9,200,000 in shares of common stock to an investor who converted their preferred B shares at a strike price of $0.0025.

 

On May 28, 2021, we issued 3,333,334 in warrants with a strike price of $0.04 and a 3-year term and 100 preferred Series C shares, to two investors as part of their Securities Purchase Agreement, for $100,000 in proceeds.

 

On September 15, 2021, we issued 200,000 in restricted common stock to a consultant as part of their agreement.

 

On October 14, 2021, we issued 4,800,000 in shares of common stock to an investor who converted their preferred B shares at a strike price of $0.0025.

 

On October 14, 2021, we issued 4,800,000 in shares of common stock to an investor who converted their preferred B shares at a strike price of $0.0025.

 

Re-Purchase of Equity Securities.

 

None

 

Dividends.

 

We have never declared or paid cash dividends on our capital stock ad we do not anticipate declaring or paying cash dividends on our capital stock in the foreseeable future. Any payments of cash dividends will be at the discretion of our board of directors, and will depend upon our results of operations, earnings, capital requirements, legal and contractual restrictions, and other factors deemed relevant by our board of directors.

 

Equity Compensation Plan Information.

 

On March 14, 2008, we adopted the 2008 Equity Compensation Plan (the “2008 Plan”) pursuant to which were authorized to grant stock options, stock awards and stock appreciation rights of up to 7,000,000 shares of common stock to our employees, officers, directors and consultants. The 2008 Plan is administered by the Board of Directors of the Company.

 

   Number of securities to be issued upon exercise of outstanding options   Weighted-
average
exercise price
of outstanding options
   Number of securities
remaining available for future issuance under equity compensation plans (excluding securities
reflected in
column (a))
 
   (a)         
2021               
Equity compensation plans approved by security holders   -   $-    2,234,877 
Equity compensation plans not approved by security holders   -    -    - 
Total   -   $-    2,234,877 

 

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ITEM 6. SELECTED FINANCIAL DATA.

 

Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of SEC Regulation S-K.

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of our financial condition and results of operations should be read together with the audited financial statements and related notes included elsewhere in this registration statement. Certain statements contained in this registration statement, including statements regarding the anticipated development and expansion of our business, our intent, belief or current expectations, primarily with respect to the future operating performance of our company and the products and services we expect to offer and other statements contained herein regarding matters that are not historical facts, are “forward-looking” statements. Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also forward-looking statements which involve risks, uncertainties, and assumptions. Because forward-looking statements are inherently subject to risks and uncertainties, our actual results may differ materially from the results discussed in the forward-looking statements.

 

Overview

 

GTX Corp and its subsidiaries (currently, Global Trek Xploration, Inc. and LOCiMOBILE, Inc.) are engaged in businesses that design, develop and sell various interrelated and complementary products and services in the Personal Location Services marketplace. Global Trek Xploration focuses on hardware and software design and development of products and services by offering a Global Positioning System (“GPS”), Bluetooth Low Energy (“BLE”) and cellular location platform that enables subscribers to track in real time the whereabouts of people, pets or high valued assets through a miniaturized transceiver module, wireless connectivity gateway, middleware and viewing portal. LOCiMOBILE, Inc. has developed and owns LOCiMobileTM, and Track My Work Force (“TMWF”), a suite of mobile tracking applications that turn the iPhone, Android, and other GPS enabled handsets into a tracking device which can then be tracked from handset to handset or through our Location Data Center tracking portal and which allows the user to send a map to the recipient’s phone showing the user’s location.

 

Year in Review

 

2021 brought us continued Covid related opportunities and setbacks. Early in the year, we stated we could not accurately predict how long the Personal Protection Equipment (“PPE”) business would remain in demand, and based on the current events and sales trends, we expected to transition out of many PPE products, focusing only on the strong sellers while ramping up for the launch of our new SmartSoles, NFC Blockchain platform and other wearable medical devices. Then came the Delta and Omnicom variants, which spiked demand for supplies and test kits, which we were able to support that demand, but that also created logistic delays in the supply chain and slowed down work productivity due to stay at home sick policies, and labor shortages, all of which impacted the launch of our 4G SmartSoles and our ongoing intellectual property licensing campaign.

 

On the medical supply side we managed to stay in front of it, had inventory on hand or great relationships with our vendors which allowed us to respond quickly to the demand and maintain our ability to ship 99% of all orders within 1-2 business days. Even during Q1 2022 we continued to sell supplies and test kits and keep enough inventory on hand to fill incoming orders. Even with the overall setbacks and restrictions due to COVID, which brought about a reduction in revenues, we still managed to maintain product sales, service our customer base, and reduced our general expenses. We sold hundreds of thousands of PPE items to a wide range of entities such as essential businesses, assisted living facilities, pharmacies, Fortune 1,000 companies, hospitals, police departments, non-profits, and local, state, and federal government agencies, in every State across the U.S. positioning GTX as a trusted health & safety supplier of high-quality products which helped increase our brand awareness.

 

However subscriptions were down for the year and lower than expected due to COVID-19 and because many of the cellular providers worldwide transitioned to 4G and 5G shutting down 2G and 3G in many parts of the world. Even though we had been planning for the 2G and 3G shutdown we had no way to plan for COVID. Most of our distributors and B2B customers stopped placing new orders in the 4th quarter of 2019, allowing for them to sell out of their existing inventory ahead of receiving our new 4G products. The 2G and 3G shutdown also had an impact on our B2C subscriptions as consumers were experiencing connectivity issues in certain geographical areas and suspended their subscriptions. In spite of these temporary setbacks, we saw and continue to see a steady flow of pre-orders for our 4G SmartSoles and expect to see subscriptions ramp up during the first quarter of 2022. Continuing throughout the year 2021, we saw significant sales coming from COVID Rapid Test Kits.  

 

26
 

 

On the business development front, we continued to look at expanding our presence in our market by signing collaboration agreements and working with new partners on selling and developing new products in the tracking, biometrics, block chain and health and wellness space. We are still in the early stage of exploring different concepts, and avenues, but we are making progress and expect to have a more detailed roadmap in the coming months. We had a lot of collaboration and partnership activity during 2021. We strengthened our partnership with KGH, which enabled us to sell product into many different government channels. We signed a distribution agreement with OPU lab which enabled us to distribute COVID Pre-screening test kits. We formed alliances with Inner Scope, and Halberd Corporation, and started selling their health and wellness products. We signed collaboration and distribution agreements with Life Connect and GBT Technologies, to add their medical devices to our SmartSole platform. That development is in progress and we expect to make some announcements in the coming months.

 

We also continued to grow our brand awareness, by being featured in CIO Magazine with a 6-page spread highlighting the Company as one of the 10 Most Innovative Companies to watch in 2021. We were also mentioned in a Smart Footwear Market Research Report, and we attended 2 LD Micro Conferences (one virtual and one in person)

 

On October 27, 2021, the Company registered an Offering Statement on a Form 1-A (“Reg A”). This offering relates to the sale of up to 86,677,500 shares of our common stock (the “Shares”) at a price of $0.03 per share, for total offering proceeds of up to $2,600,325 if all offered shares are sold. 66,675,000 of such Shares are being offered directly by the Company, for offering proceeds up to $2,000,250, and 20,002,500 Shares are being offered by selling securityholders for offering proceeds up to $600,075. There is no minimum offering amount and no provision to escrow or return investor funds if any minimum number of shares is not sold. The minimum investment amount established for each investor is $10,000. All funds raised by the Company from this offering will be immediately available for the Company’s use. All funds raised by the selling securityholders from this offering will be retained by the selling securityholders.

 

The Company intends to use the proceeds predominately in the following 5 categories:

 

  1. Inventory and raw material procurement, to offset current supply chain delays and support the current and future product demand.
  2. Marketing and advertising to promote our new 4G SmartSoles and longevity revolution rollout.
  3. R&D across all our technology – hardware, software, firmware and apps.
  4. Intellectual Property, by filing more patents and revamping our monetization licensing campaign.
  5. Grow our insurance reimbursement and 3rd party payer programs.

 

Management believes investing in these 5 categories should increase revenues, enhance its IP portfolio, bring new products to the market and strengthen the Company’s overall position in the marketplace.

 

At the end of the fourth quarter of 2021, we began production of our next generation GPS SmartSoles, which will utilize a host of new technologies, including CatM1, NB-IoT, enhanced Wifi, and Bluetooth, for better accuracy, faster location requests, less power consumption, and most importantly, the ability to connect through Bluetooth to other medical devices through our SmartSole platform, transforming our GPS footwear into a mobile hub that will not only transmit location data but also medical data. This new feature will be protected through a recent patent the company was issued which specifically addresses Bluetooth communication. This new hardware platform will also be small enough and robust enough to be embedded into a variety of other wearable technology and offered as a licensed hardware platform as well. The demand for the GPS SmartSoles continues to be strong as we begin fulfilling pre-orders orders in Q1 of 2022. Subscriptions which, as mentioned above, were affected by Covid-19 and supply chain issues, based on our pre-orders going into 2022 we expect subscriptions to start ramping up quickly as soon as we begin fulfilling pre-orders.

 

On the IP front, in December of 2021, the USPTO sent us two notices of allowance for two new patents. One for the GPS SmartSoles and the other for the Comm Protocol, both these patents have now been issued, which helps strengthen our competitive barriers and could increase the value of our outbound licensing campaign. Due to Covid and other resource related circumstances the GTX IP campaign did stall during 2021, and after several months of analysis on how to revamp the campaign it was mutually agreed by the BOD of Inventergy and GTX, that GTX would take back full control of its Comm Protocol patents which it had licensed at a 55% equity stake to Inventergy in 2016 and the outbound licensing strategy. Effective November 20, 2021, GTX dissolved its patent license agreement with Inventergy, LLC whereby Inventergy transferred and assigned back to GTX all rights, title and interest in each of the Patents, consistent with what was specified in Section 4.1 of the original agreement, including all (sole) responsibility for future prosecution and maintenance of the Patents, including any rights to receive any further royalties, compensation, revenue share for any past present or future monetization effort, effectively relinquishing its fifty-five (55%) ownership interest, back to GTX. Subsequently, in December of 2021 the USPTO granted a notice of allowance on a patent application which covers different aspects of the GPS SmartSole product, and we expect to receive more patents covering other aspects on related applications in the future as we continue to expand our IP portfolio in the wearable technology space, especially as the global wearable medical device market continues to grow and expecting to reach $9.4 billion in 2022. This fourth patent helps solidify our portfolio with respect to wearable tracking and monitoring technologies embedded in footwear. That came on the heels of another office action from the USPT for our 6th comm protocol family patent which was allowed. GTX has filed ongoing open continuations for both of these patents which we expect will further enhance the portfolio and strengthen our licensing strategy.

 

On the balance sheet front, we continued to reduce our debt and outstanding payables, took on no new debt and pre-paid close to $72,000 of SmartSole component inventory.

 

As we look over the horizon into 2022, we are optimistic and seeing encouraging signs. One thing is for certain, there is a big desire for innovation and new solutions in the wearable technology healthcare industry post COVID-19 era, along with continued demand for PPE while the pandemic is still not fully behind us. GTX has been at the forefront of many innovative technologies, we pivoted early into the PPE business at the start of the pandemic and built an entire new business unit under extremely challenging conditions, so we know we are resilient, determined, and confident and will continue to garner new opportunities in order to grow shareholder value.

 

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Sources of Revenue

 

Our main sources of revenue are product sales, recurring subscriptions, technology and intellectual property licensing, and professional services.

 

Product Sales

 

  During 2020-2021 the majority of our product sales came from medical supplies, as determined by COVID-19 demand.
  Post COVID we expect the majority of our product sales will consist of our core products lines, i.e. SmartSoles, Take-Along-Trackers and other hardware related tracking technologies.

 

Other Revenue:

 

  Subscription monitoring fees - charged to customers/subscribers for our web-based tracking and information services.
  Licensing of our patents, technology and software platforms.
  Professional fees for new product designs and support and maintenance of existing products.

 

Costs and Expenses

 

Cost of Revenue

 

  Hardware - consists primarily of manufacturing and assembly of raw materials.
  Recurring – usage fees for data and 24/7 access to our platform.
  Licensing – legal, USPTO and related filing fees and maintenance fees and engineering development costs.

 

Operating Expense

 

  Operating expenses consists primarily of SG&A, which includes, but is not limited to payroll, rent, infrastructure and communication, professional fees and other related office expenses.

 

Sales and Marketing Expense

 

  Sales and marketing expenses for the purchase of advertising time/space.

 

Other Expense

 

  Depreciation and amortization expense.

 

Research and Development Expense

 

  Consists of costs related to the development of new products.

 

Key Business Metrics

 

In addition to our GAAP financial information, we utilize several performance indicators. Below are several key metrics we use to manage and evaluate our business, measure our performance, identify trends affecting our business and make strategic decisions:

 

  # of new customers
  # of subscribers, current, new and churn
  # of new product launches
  # of new geographical territories
  # of 3rd party payers, i.e. Medicare

 

Results of Operations

 

The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this Annual Report.

 

The following table represents our statement of operations for the years ended December 31, 2021 and 2020:

 

   Years ended December 31, 
   2021   2020 
   $   % of
Revenues
   $   % of
Revenues
 
                 
Product sales   407,357    69%   830,829    78%
Service income   182,083    31%   208,441    20%
IP royalties   -    -%   20,000    2%
Total revenues   589,440    100%   1,059,270    100%
Cost of goods sold   334,184    57%   598,963    57%
Gross Margin   255,254    43%   460,307    43%
                     
Operating expenses:                    
Wages and benefits   501,544    85%   621,347    59%
Professional fees   337,627    57%   252,765    24%
Sales and marketing expenses   75,391    13%   28,091    3%
General and administrative   245,238    42%   185,315    17%
Total operating expenses   1,159,800    197%   1,087,519    103%
                     
Gain/(loss) from operations   (904,546)   -153%   (627,212)   -59%
                     
Other expense/income, net   (295,912)   -48%   258,805    24%
Net loss   (1,200,458)   -202%   (306,407)   -35%

 

Revenues

 

Revenues as a whole in fiscal 2021 decreased by 44% or $469,830 in comparison to fiscal 2020 mostly as a direct result of the overall setbacks and the restrictive lockdowns due to COVID, which in turn brought about a reduction in IP and subscription revenues, however we still managed to grow our product revenues, grow our customer base, expand our product lines, maintain good profit margins, and reduced our general expenses. Product sales decreased 51% or $423,472 in fiscal 2021 in comparison to fiscal 2020, which is a attributable to our pivot in early March 2020 to expand our health and safety product line into the Personal Protective Equipment (“PPE”) business, which though strong in 2021, was not in as much demand in 2020 as COVID restrictions were reduced. Included in product sales are related party PPE donations of $5,250.

 

We increased our customer base by at least 2,000 for fiscal 2020 compared to fiscal 2019, and again by over a 1,000 in 2021.

 

During the year ended December 31, 2021, the Company’s customer base and revenue streams were comprised of approximately 37.57% B2B (Wholesale Distributors and Enterprise Institutions), 60.70% B2C (consumers and government agencies who bought on the behalf of consumers, through our online ecommerce platform and through Amazon, Google and iTunes), 0.00% IP (our monetization campaign from consulting, licensing and asserting our patents) and 1.73% Military and Law Enforcement.

 

During the year ended December 31, 2020, the Company’s customer base and revenue streams were comprised of approximately 63.95% B2B (Wholesale Distributors and Enterprise Institutions), 33.61% B2C (consumers and government agencies who bought on the behalf of consumers, through our online ecommerce platform and through Amazon, Google and iTunes), 1.87% IP (our monetization campaign from consulting, licensing and asserting our patents) and 0.56% Military and Law Enforcement.

 

Cost of goods sold

 

Cost of goods sold decreased by 44% or $264,779 during fiscal 2021 in comparison to fiscal 2020, due to lower sales. As a result, total gross margin, remained basically steady at 44-45% in fiscal 2020 and 2021.

 

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Wages and benefits

 

Wages and benefits for fiscal 2021 decreased by $119,803 or 19% as compared to fiscal 2020, primarily to the decrease of salaries for a reduction in a senior executives’ salary and support staff.

 

Professional fees

 

Professional fees consist of costs attributable to consultants and contractors who primarily spend their time on legal, accounting, product development, business development, corporate advisory services and shareholder communications. Such costs increased $84,862 or 34% in fiscal 2021 compared to fiscal 2020. This was as a result of fees related to the registration of our Regulation A and continued IP legal fees to maintain and apply for patents and stock-based compensation related to consulting services.

 

Sale and marketing expenses

 

Sales and marketing expenses increased by 168% or $47,300 during 2021 in comparison to 2020. Primarily due to the initiation and maintenance of a PPE campaign in order to target a larger customer base.

 

General and administrative

 

General and administrative costs during fiscal 2021 increased by $59,923 or 32%, in comparison to fiscal 2020, mostly due to increases in depreciation and amortization as we amortize the development costs of developing our next gen SmartSoles, and about $80,000 in positive adjustments made in 2020. We expect these numbers to increase as we ramp up our overall business after the COVID crisis.

 

Other expense/income, net

 

Other expense/income in fiscal 2021 decreased 554,717 or 214%, in comparison to fiscal 2020. This is primarily as a result of losses from the extinguishment of debt, interest expense and financing cost and the amortization of debt discounts.

 

Net loss

 

Net loss during fiscal 2021 increased by $832,052, or 226%, in comparison to the net loss incurred during fiscal 2020 primarily as a result of the decrease in PPE related sales as the pandemic crisis ebbed and as the supply chain delays pushed the start of our SmartSole 4G launch until the first quarter of 2022, as well as non-cash related other expenses related to losses on the extinguishment of debt, financing and interest expense and the amortization of debt discounts.

 

On an earnings per share basis, we saw a reduction in share loss from ($0.01) in 2020 to ($0.01) in 2021.

 

Liquidity and Capital Resources

 

As of December 31, 2021, we had $138,342 in cash and $55,016 of other current assets, and $3,136,981 of current liabilities, resulting in a working capital deficit of $2,829,165 compared to $76,912 in cash and a working capital deficit of approximately $2,894,105 as of December 31, 2020.

 

Net cash used in operating activities was $497,684 for fiscal 2021 compared to net cash used of $556,556 for fiscal 2020. The decrease in net cash used in operating activities was largely attributed to the net change in non-cash items that includes: stock based compensation, loss on the extinguishment of debt, the elimination of derivative income and the interest and financing costs on note assignments and the net change in operating assets and liabilities that includes increased spending for inventory, the payment of accounts payable and accrued expenses, including interest expense attributable to the reduction in debt.

 

Net cash used by investing activities during fiscal 2021 was $98,763 and net cash provided by investing activities during fiscal year 2020 was $146,200, respectively and consisted of proceeds from the sale of marketable securities.

 

Net cash provided by financing activities during fiscal 2021 was $657,877 and consisted of proceeds totaling $675,000 in proceeds from the sale of preferred shares of stock with payments on debt and the lines of credit of $17,123. Net cash provided by financing activities during fiscal 2020 was $362,068 and consisted of proceeds totaling $227,870 received from advances under CARE loans, $139,319 from two lines of credit and $250,000 in proceeds from the sale of preferred shares of stock with payments on debt and the lines of credit of $255,121. Thus, reducing our borrowings through notes by $177,148 or 19% from 2020 to 2021.

 

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We expect to continue to generate revenues from all our business units from existing product sales, recurring subscriptions, software and Intellectual Property licensing, military and professional services. We also expect to see new revenues come in from recently launched products and products that are scheduled for launch throughout 2022 however, even though existing product sales and recurring subscriptions are starting to become more consistent, the amount of revenues is still unpredictable and may not be sufficient to fund all our working capital needs. Accordingly, we anticipate that we will have negative cash flow from our operations and, therefore, will have to raise additional capital in order to fund our operations in 2022.

 

In order to continue funding our working capital needs and our product development costs we continued to draw upon our Lines of Credit with an accredited investor and our bank (see Notes Payable Footnote #c & #d for more information), which resulted in $0 of draws and repayments of $15,000 against this balance in fiscal year 2021. Additionally, during 2021, we entered into a Securities Purchase Agreement (“SPA”) with three accredited investors which led to a $675,000 infusion of cash in return for Preferred B shares, Preferred C shares and Warrants. Further, the Company is actively raising capital through an Offering Statement on Form 1-A, filed on October 15, 2021 and qualified on October 27, 2021.

 

In fiscal 2021, we did not draw upon our Lines of Credit with an accredited investor or our bank (see Notes Payable Footnote #c & #d for more information), as the Company only made payments of $15,000. In fiscal 2020 we had $139,319 in draws and repayments of $215,604 against this balance. Additionally, during 2020, we entered into a Securities Purchase Agreement (“SPA”) with three accredited investors which led to a $675,000 infusion of cash in return for Preferred B shares, Preferred C shares and Warrants in 2021.

 

Subsequent to October of 2018 and through the beginning 2023, except for a government backed PPP loan and the exchange of employee payables for long-term notes, the Company has not taken any new debt.

 

In addition to continuing to incur normal operating expenses, we intend to continue our research and development efforts for our various technologies and products, including hardware, software, interface customization, and website development, and we also expect to further develop our sales, marketing and manufacturing programs associated with the commercialization, licensing and sales of our GPS devices and technology. We currently do not have sufficient capital on hand to fully fund our proposed research and development activities, which lack of product development may negatively affect our future revenues.

 

As noted above, based on budgeted revenues and expenditures, unless revenues increase significantly, we believe that our existing and projected sources of liquidity may not be sufficient to satisfy our cash requirements for the next twelve months. Using currently available capital resources, management believes we can conduct planned operations for 120 days. Accordingly, management believes we need to raise a minimum of $300,000 to remain in business for the next 12 months. The sale of additional equity securities will result in additional dilution to our existing stockholders. Sale of debt securities could involve substantial operational and financial covenants that might inhibit our ability to follow our business plan. Any additional funding that we obtain in a financing is likely to reduce the percentage ownership of the Company held by our existing security-holders. The amount of this dilution may be substantial based on our current stock price, and could increase if the trading price of our common stock declines at the time of any financing from its current levels. We may also attempt to raise funds through corporate collaboration and licensing arrangements. To the extent that we raise additional funds through collaboration and licensing arrangements, we may be required to grant licenses on terms that are not favorable to us. There can be no assurance that financing will be available in amounts or on terms acceptable to us, if at all. If we are unable to obtain the needed additional funding, we may have to further reduce our current level of operations, or, may even have to totally discontinue our operations.

 

We are subject to many risks associated with early stage businesses, including the above discussed risks associated with the ability to raise capital. Please see the section entitled “Risk Factors” for more information regarding risks associated with our business.

 

Off-Balance Sheet Arrangements

 

There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

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Inflation

 

Inflation and changing prices have had no effect on our net sales and revenues or on our income from continuing operations over our two most recent fiscal years.

 

Going Concern

 

The consolidated financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred net losses of $1,200,458 and $368,407 for the years ended December 31, 2021 and 2020, respectively, has incurred losses since inception resulting in an accumulated deficit of $26,053,384 as of December 31, 2021, and has negative working capital of $2,829,165 as of December 31, 2021. A significant part of our negative working capital position at December 31, 2021 consisted of $758,000, of amounts due to various accredited investors of the Company for convertible promissory notes, loans of $40,640, a letter of credit with a balance of $7,000 and short-term CARE loans of $74,953. The Company anticipates further losses in the development of its business.

 

The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. The Company’s ability to raise additional capital through the future issuances of debt or equity is unknown. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, or its attainment of profitable operations are necessary for the Company to continue operations. The ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

 

Critical Accounting Policies and Estimates

 

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States. Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates which have been made using careful judgment.

 

The financial statements have, in management’s opinion, been properly prepared within reasonable limits of materiality and within the framework of the significant accounting policies summarized below.

 

We have identified the following critical accounting policies that are most important to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The following is a review of the more critical accounting policies and methods used by us.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which include (1) identifying the contract or agreement with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied.

 

The Company does not have any significant contracts with customers requiring performance beyond delivery, and contracts with customers contain no incentives or discounts that could cause revenue to be allocated or adjusted over time. Shipping and handling activities are performed before the customer obtains control of the goods and therefore represent a fulfillment activity rather than a promised service to the customer. Revenue and costs of sales are recognized when control of the products transfers to our customer, which generally occurs upon shipment from our facilities. The Company’s performance obligations are satisfied at that time.

 

We derive our revenues primarily from hardware sales, subscription services fees, IP licensing and professional services fees. Hardware includes our SmartSole, Military and other Stand-Alone Devices. Subscription services revenues consist of fees from customers accessing our cloud-based software solutions and subscription or license fees for our platform. Professional services and other revenues consist primarily of fees from implementation services, configuration, data services, training and managed services related to our solutions. IP licensing is related to our agreement with Inventergy whereby we have partnered in order to monetize our IP portfolio (see Note 3, below).

 

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Product sales

 

At the inception of each contract, we assess the goods and services promised in our contracts and identify each distinct performance obligation. The Company recognizes revenue upon the transfer of control of promised products or services to the customer in an amount that depicts the consideration the Company expects to be entitled to for the related products or services. For the large majority of the Company’s sales, transfer of control occurs once product has shipped and title and risk of loss have transferred to the customer.

 

Services Income

 

The Company’s software solutions are available for use as hosted application arrangements under subscription fee agreements without licensing perpetual rights to the software. Subscription fees from these applications are recognized over time on a ratable basis over the customer agreement term beginning on the date the Company’s solution is made available to the customer. Our subscription contracts are generally one to three months in length. Amounts that have been invoiced are recorded in accounts receivable and deferred revenues or revenues, depending on whether the revenue recognition criteria have been met.

 

The majority of our professional services arrangements are recognized on a time and materials basis. Professional services revenues recognized on a time and materials basis are measured monthly based on time incurred and contractually agreed upon rates. Certain professional services revenues are based on fixed fee arrangements and revenues are recognized based on the proportional performance method. In some cases, the terms of our time and materials and fixed fee arrangements may require that we defer the recognition of revenue until contractual conditions are met. Data services and training revenues are generally recognized as the services are performed.

 

Licensing Revenue

 

Licensing revenue recorded by the Company relates exclusively to the Company’s License and Partnership agreement with Inventergy which provides for ongoing licensing based on monetization of IP licenses. The Company recognizes revenue for licensing under ASC 606, which provides revenue recognition constraints by requiring the recognition of revenue at the later of the following: 1) sale or usage of the products or 2) satisfaction of the performance obligations. The Company has satisfied its performance obligations and therefore recognizes licensing revenue when the sales to which the licensing relate are completed. During the years ended December 31, 2021 and 2020 the Company recognized 0 and 1 settlements for a total of $20,000 in licensing revenue, respectively.

 

During the year ended December 31, 2021, the Company’s customer base was comprised of approximately 37.57% B2B (Wholesale Distributors and Enterprise Institutions), 60.70% B2C (consumers and government agencies who bought on the behalf of consumers, through our online ecommerce platform and through Amazon, Google and iTunes), 0.00% IP (our monetization campaign from consulting, licensing and asserting our patents) and 1.73% Military and Law Enforcement. During the year ended December 31, 2020, the Company’s customer base was comprised of approximately 69.95% B2B (Wholesale Distributors and Enterprise Institutions), 33.61% B2C (consumers and government agencies who bought on the behalf of consumers, through our online ecommerce platform and through Amazon, Google and iTunes), 1.87% IP (our monetization campaign from consulting, licensing and asserting our patents) and 0.56% Military and Law Enforcement.

 

Product Warranty

 

The Company’s warranty policy provides repair or replacement of products (excluding GPS Shoe devices) returned for defects within ninety days of purchase. Warranty liabilities are recorded at the time of sale for the estimated costs that may be incurred under our standard warranty. As of December 31, 2021, products returned for repair or replacement have been immaterial. Accordingly, a warranty liability has not been deemed necessary.

 

Derivative Instruments

 

Our debt or equity instruments may contain embedded derivative instruments, such as conversion options, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability.

 

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Our derivative instrument liabilities are re-valued at the end of each reporting period, with changes in the fair value of the derivative liability recorded as charges or credits to income, in the period in which the changes occur. For bifurcated conversion options that are accounted for as derivative instrument liabilities, we determine the fair value of these instruments using the Black-Scholes option pricing model. This model requires assumptions related to the remaining term of the instrument and risk-free rates of return, our current Common Stock price and expected dividend yield, and the expected volatility of our Common Stock price over the life of the option.

 

On December 31, 2020, it was determined that the Company had no derivative liabilities.

 

Stock-based Compensation

 

Stock-based compensation expense is recorded for stock and stock options awarded in return for services rendered. The expense is measured at the grant-date fair value of the award and recognized as compensation expense on a straight-line basis, which is generally commensurate with the vesting period. The Company estimates forfeitures that it expects will occur and records expense based upon the number of awards expected to vest.

 

Recent Accounting Pronouncements

 

Please refer to footnote for management’s discussion of recent accounting pronouncements.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Not applicable to a “smaller reporting company” as defined in Item 10(f)(1) of SEC Regulation.

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

The financial statements required by Item 8 are submitted in a separate section of this report, beginning on page F-1, and are incorporated herein and made a part hereof.

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

ITEM 9A. CONTROLS AND PROCEDURES 

 

Evaluation of Disclosure Controls and Procedures

 

Our management is responsible for establishing and maintaining a system of disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Exchange Act) that is designed to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 

Our management, including our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

 

Based on the evaluation as of December 31, 2021, for the reasons set forth below, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. 

 

Management’s Annual Report on Internal Control Over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act, as amended). Under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, we assessed the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control—Integrated Framework (2013) to evaluate our control environment, risk assessment, information and communication, monitoring activities, and existing control activities. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

 

33
 

 

Based on our assessment, management concluded that, as of December 31, 2021, our disclosures and procedures were effective.

 

As a result, management concluded that, as of December 31, 2021, the Company’s internal control over financial reporting were effective for the size of our Company. However, there can be no assurance that implementation of any change will be completed in a timely manner or that it will be adequate once implemented. To the extent possible, we will implement procedures to assure that the initiation of transactions, the custody of assets and the recording of transactions will be performed by separate individuals.

 

No Attestation Report by Independent Registered Accountant

 

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting since one is not required.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in our internal controls over financial reporting that occurred during the annual reporting period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

 

Limitations on Effectiveness of Controls and Procedures

 

The Company’s management does not expect that its disclosure controls or its internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

 

ITEM 9B. OTHER INFORMATION

 

None.

 

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PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Executive Officers and Directors. Each of our directors was elected by the stockholders and serves until his or her successor is elected and qualified.

 

The board of directors currently has no nominating or compensation committee.

 

Our Chief Executive Officer serves pursuant to an employment agreement that was automatically extended for one year on March 14, 2022, and that will automatically be extended for successive one-year periods if not cancelled by either party. See “Item 10, Executive Compensation – Employment Agreements.”

 

The following table sets forth information regarding our executive officers and directors.

 

Name   Position Held   Age   Date First Appointed
Patrick E. Bertagna   President, Chief Executive Officer and Chairman of the Board   58   March 14, 2008
Alex McKean   Chief Financial Officer   57   October 3, 2011
Christopher M. Walsh   Director   72  

July 1, 2015, Retired

January 31, 2020

Louis Rosenbaum   VP of Operations & Finance, Director   71  

March 14, 2008

(Director)

March 1, 2015 (VP)

Andrew Duncan   Director, Audit Committee Member, Corporate Secretary and Treasurer   57   April 2, 2010

 

Biographical Information

 

The following describes the backgrounds of current executive officers and directors. The Company currently has no independent directors, as defined in the NASDAQ rules governing members of boards of directors.

 

Mr. Bertagna is the director and the Chief Executive Officer of Global Trek Xploration and LOCiMOBILE, Inc. Mr. Rosenbaum is the VP of Operations and Finance and Mr. McKean is the Chief Financial Officer of each of those subsidiaries.

 

Patrick E. Bertagna – Director, Chief Executive Officer, President and Chairman of the Board

 

Mr. Bertagna was the founder of Global Trek Xploration in September 2002 and has since served as its Chief Executive Officer, President and Chairman of the Board of Directors of GTX. He is co-inventor of our patented GPS footwear technology. His career spans over 35 years in building companies in both technology and consumer branded products.

 

Mr. Bertagna began his career in consumer products importing apparel from Europe and later went on to import and manufacture apparel, accessories and footwear in over 20 countries. In 1993, Mr. Bertagna transitioned into technology and founded Barcode World, Inc. a supply chain software company, enabling accurate tracking of consumer products from design to retail. In June 2002 after selling this company, Mr. Bertagna combined his two past careers in consumer products and tracking technology and founded GTX.

 

Mr. Bertagna was born in the South of France and is fluent in French and Spanish, has formed alliances with Fortune 500 companies such as IBM, AT&T, Sports Authority, Federated Stores, Netscape and GE. He has been a keynote speaker and has been awarded several patents (including, but not limited to U.S. Patent #’s: 8,154,401, 8,760,286, 9,219,978).

 

Mr. Bertagna has extensive knowledge of the manufacturing industry, internet software development, building intellectual property portfolios and overall experience in growing early stage high-tech companies. As a founder of Global Trek Xploration and co-inventor of the GPS Shoe, this knowledge enables Mr. Bertagna to be uniquely qualified to be CEO and on the Board of Directors.

 

Alex McKean – Chief Financial Officer

 

Mr. McKean was appointed as our Chief Financial Officer in 2015, previously he was our Interim Chief Financial Officer since October 2011. He is currently also the Chief Financial Officer of Encore Brands, Inc., a position he has held since October 2009. Previous to that, he acted as an independent management consultant under his own firm, SGT Enterprises, Inc. as well as an independent contractor with Robert Half International and Ajilon Finance. Prior to establishing his own firm, during 2004-2007 Mr. McKean was with Parson Consulting working in such areas as: strategy, financial modeling, SEC filings, process management and Sarbanes Oxley. Mr. McKean has held positions as a Controller and VP of Finance at 24:7 Film from 2002-2004, VP of Finance at InternetStudios.com from 2000-2002, Director of FP&A/SVP at Franchise Mortgage Acceptance Company from 1998-2000, as Corporate Accounting Manager/Treasurer of Polygram Filmed Entertainment from 1996-1998 and Assistant Treasurer/Controller for State Street Bank from 1989-1996.

 

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Mr. McKean holds an International MBA from Thunderbird’s School of Global Management and undergraduate degrees in Finance and Political Science from Trinity University.

 

Christopher M. Walsh - Director

 

Mr. Walsh joined this Company as its Chief Operating Officer in March 2008, as of June 30, 2015 we accepted his resignation of the position and transitioned him into a Director on July 1, 2015. Mr. Walsh began his career with Nike in 1974 and subsequently established and implemented Nike’s first manufacturing operation in the Far East. In 1989, Mr. Walsh joined Reebok International as Vice President of Production. In that role, he established the Company’s inaugural Asian organization headquartered in Hong Kong with satellite organizations across Asia, and also played a critical role on the Reebok Pump Task Force directing the manufacturing initiatives associated with the unique components of the Pump system. After Reebok, Mr. Walsh moved to LA Gear in 1992 and, as Chief Operating Officer, became a critical figure in the turnaround team assembled by LA Gear and was responsible for all research and development, design, manufacturing, sourcing, quality control, distribution and logistics.

 

Upon leaving LA Gear in 1995, Mr. Walsh founded CW Resources, a Los Angeles based firm providing design, development, manufacturing and licensing consulting services to an extensive client base, both domestic and international, within the footwear, apparel, textile, sporting goods and action sports industries. Since January 2005, he has served as an advisor to GTX spearheading their footwear research and development and marketing practices.

 

Mr. Walsh received a B.S. in Marketing from Boston College in 1973 and previously served on numerous organizational boards within the footwear and textile industries including The Two Ten International Footwear Foundation and The Footwear Distributors and Retail Association.

 

Mr. Walsh retired from the Board of Directors, effective January 31, 2020(17).

 

Louis Rosenbaum – VP of Operations and Finance, Director

 

Mr. Rosenbaum served as a member of GTX Board of Directors from September 2002 until June 2005 and then again from October 2007 until March 2008, at which time he became a director of GTX Corp. Subsequently, Mr. Rosenbaum was asked to act as the VP of Operations and Finance since March 1, 2015. Mr. Rosenbaum was a founder and early investor in Global Trek Xploration.

 

Mr. Rosenbaum has been the President of Advanced Environmental Services since July 1997. His responsibilities at Advanced Environmental Services encompass supervising all administrative and financial activities, including all contractual aspects of the business. Mr. Rosenbaum has been working in the environmental and waste disposal industry for the past eighteen years. He started with Allied Waste Services, a division of Eastern Environmental (purchased by Waste Management Inc. in 1998) in 1990.

 

Mr. Rosenbaum founded and was President of Elements, a successful clothing manufacturer that produced a line of upscale women’s clothing in Hong Kong, China, Korea and Italy, from 1978 to 1987.

 

Mr. Rosenbaum has a long history in the consumer products industry, electronics and software sales and development. Mr. Rosenbaum is a co-founder of GTX Corp, was the first large investor and has assisted in the overall vision and development of the Company since inception. Mr. Rosenbaum has served on numerous private and community public boards and this unique blend of experience and history, combined with his strategic and tactical insight, makes Mr. Rosenbaum an asset to the GTX Corp Board.

 

Andrew Duncan – Head of International Business Development, Director, Member of Audit Committee, Corporate Secretary and Treasurer

 

Mr. Duncan has been working in the consumer electronics and technology licensing business for over 20 years. Since 2006 he has been the CEO of ClearPlay International, a software licensing company. Prior thereto, he founded Global TechLink Consultants Inc., a technology consultancy company, specializing in technology licensing, multimedia, communication and application technology on a global basis, including Interactive TV, Digital downloads/streaming and Consumer Electronics. From 1994 to 2001, Mr. Duncan worked as Vice President Consumer Electronics for Gemstar TV Guide International (Los Angeles USA).

 

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Mr. Duncan earned his honors degree in Chemistry from Nottingham University and postgraduate qualifications in Marketing and Direct Marketing from London University (Kings College). He also has a Certificate of Business Management from the Anderson School of Business UCLA.

 

Mr. Duncan’s experience in global intellectual property, branding and licensing, uniquely qualifies him to serve on our Board. Mr. Duncan’s long involvement in global business development, with an extensive background working in both Europe and Asia as a business strategist for major corporations, directly assists the Board in its international strategic planning objectives and activities.

 

Director Qualifications and Diversity

 

Our Board of Directors (the “Board”) has not adopted a formal policy with regard to the consideration of diversity when evaluating candidates for election to the Board. However, our Board believes that membership should reflect diversity in its broadest sense, but should not be chosen nor excluded based on race, color, gender, national origin or sexual orientation. In this context, the Board does consider a candidate’s experience, education, industry knowledge, history with the Company, and differences of viewpoint when evaluating his or her qualifications for election to the Board. Whenever our Board evaluates a potential candidate, the Board considers that individual in the context of the composition of the Board as a whole.

 

The standards that our Board considers in selecting candidates (although candidates need not possess all of the following characteristics, and not all factors are weighted equally) include the director’s or nominee’s, Industry knowledge and contacts in industries served by the Company, independent judgment, ability to broadly represent the interests of all stockholders and other constituencies, maturity and experience in policy making decisions, business skills, background and relevant expertise that are useful to the company and its future needs, and other factors determined to be relevant by the Board.

 

Audit Committee 

 

The Company has established a standing Audit and Finance Committee (the “Audit Committee”) for purpose of overseeing accounting and financial reporting processes and audits of financial statements for the Company. The Audit Committee held one meeting in 2021. Members of the Audit Committee are the COO (Chair), CEO and CFO.

 

The Audit Committee’s responsibilities include:

 

  appointing, approving the compensation of, and assessing the independence of our independent registered public accounting firm;
     
  pre-approving auditing and permissible non-audit services, and the terms of such services, to be provided by our independent registered public accounting firm;
     
  reviewing the overall audit plan with our independent registered public accounting firm and members of management responsible for preparing our consolidated financial statements;
     
  reviewing and discussing with management and our independent registered public accounting firm our annual and quarterly financial statements and related disclosures as well as critical accounting policies and practices used by us;
     
  coordinating the oversight and reviewing the adequacy of our internal control over financial reporting;
     
  establishing policies and procedures for the receipt and retention of accounting-related complaints and concerns;
     
  recommending based upon the audit committee’s review and discussions with management and our independent registered public accounting firm whether our audited financial statements shall be included in our Annual Report on Form 10-K;
     
  monitoring the integrity of our consolidated financial statements and our compliance with legal and regulatory requirements as they relate to our consolidated financial statements and accounting matters;
     
  preparing the audit committee report required by SEC rules to be included in our annual proxy statement;
     
  reviewing all related person transactions for potential conflict of interest situations and approving all such transactions; and
     
  reviewing quarterly earnings releases.

 

All services, other than de minimis non-audit services, to be provided to us by our independent registered public accounting firm must be approved in advance by our audit committee.

 

All members of our audit committee will meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the Nasdaq listing rules. Our board of directors has determined that  the CFO qualifies as an “audit committee financial expert” within the meaning of applicable SEC regulations. In making this determination, our board of directors considered the nature and scope of experience that our CFO has had throughout his career as a financial and accounting executive. Our board of directors has determined that all of the directors that are members of our audit committee satisfy the relevant independence requirements for service on the audit committee set forth in the rules of the SEC and the Nasdaq listing rules. Both our independent registered public accounting firm and management will periodically meet privately with our audit committee.

 

Both our independent registered public accounting firm and our internal financial personnel will regularly meet with, and have unrestricted access to, the audit committee.

 

Family Relationships

 

There are no family relationships among the Company’s directors, executive officers, or persons nominated or chosen by the Company to become directors or executive officers.

 

Director or Officer Involvement in Certain Legal Proceedings

 

Our current directors and executive officers have not been involved in any legal proceedings as described in Item 401(f) of Regulation S-K in the past ten years.

 

Code of Business Conduct and Ethics.

 

We have adopted a Code of Business Conduct and Ethics (the “Code”) that applies to our directors, officers and employees, including our principal executive officer and principal financial and accounting officer. A copy of our code of ethics will be furnished without charge to any person upon written request. Requests should be sent to: Secretary, GTX Corp, 117 W. 9th Street, #1214 Los Angeles, California 90015.

 

Compliance with Section 16(a) of the Exchange Act.

 

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who own more than 10% of a registered class of the company’s equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission (“SEC”). Executive officers, directors and greater than 10% stockholders are required by SEC regulations to furnish the Company with copies of all Section 16(a) forms they file.

 

Based solely on its review of the copies of reporting forms received by the Company, the Company believes that no Forms 4’s were required to be filed as required under Section 16(a) of the Securities Exchange Act of 1934.

 

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ITEM 11. EXECUTIVE COMPENSATION

 

Summary Compensation Table. The following table sets forth the compensation for the fiscal years ended December 31, 2021 and 2020 for services rendered to us by all persons who served as our Chief Executive Officer and our Chief Financial Officer and most highly compensated executive officers other than our Chief Executive Officer and Chief Financial Officer (collectively, the “Named Executive Officers”) who received compensation in excess of $100,000 in 2021.

 

Summary Compensation Table

 

Name and Principal Position  Fiscal Year Ended 12/31   Salary ($)   Bonus ($)   Stock Awards ($)   Option Awards ($)   All Other Compensation ($)(3)   Total ($) 
Patrick Bertagna(1)   2021    150,000    -    -    -    16,000    166,000 
    2020    150,000    500    -    -    1,000    151,500 
                                    
Alex McKean(2)   2021    96,000    -    -    -    -    96,000 
    2020    96,000    500    -    -    -    96,500 

 

(1) Mr. Bertagna, our Chief Executive Officer has agreed to defer portions of his salary in an effort to preserve cash for other working capital needs of the Company. In 2021, Mr. Bertagna accrued wages, $15,000 for allowances and $1,000 for Board of Director fees thru December 31, 2021. As of December 31, 2021, Mr. Bertagna has accrued $43,850 of his 2021 salary compensation.
   
(2) Mr. McKean, our Chief Financial Officer has agreed to defer portions of his salary in an effort to preserve cash for other working capital needs of the Company. As of December 31, 2021, Mr. McKean has accrued $35,950 of his 2021 salary compensation.
   
(3) The values shown in this column include Director fees, additional employee benefits paid including travel, health insurance, auto lease payments and cellular phone service. During 2021 these expenses, other than the Director fees, where applied against previous year’s accruals.

 

Outstanding Equity Awards

 

None.

 

Severance and Change in Control Benefits

 

None.

 

Benefits upon Death or Disability

 

None.

 

Long-Term Incentive Plans

 

There are no arrangements or plans in which we provide pension, retirement or similar benefits for directors or executive officers.

 

Tax and Accounting Treatment of Compensation

 

Section 162(m) of the Internal Revenue Code places a limit of $1.0 million per person on the amount of compensation that we may deduct in any one year with respect to our Chief Executive Officer and certain of our other executive officers. While the Board of Directors considers deductibility factors when making compensation decisions, the board also looks at other considerations, such as providing our executive officers with competitive and adequate incentives to remain with us and increase our business operations, financial performance and prospects, as well as rewarding extraordinary contributions. No compensation to named executive officers exceeded this threshold in 2021.

 

We account for equity compensation paid to our employees under the rules of FASB ASC Topic 718, which requires us to estimate and record an expense for each award of equity compensation over the service period of the award. Accounting rules also require us to record cash compensation as an expense at the time the obligation is accrued. We have not tailored our executive compensation program to achieve particular accounting results.

 

Policies on Ownership, Insider Trading, Hedging And 10b5-1 Plans

 

We do not have formal stock ownership guidelines for our employees or directors, because the Board of Directors is satisfied that stock and option holdings among our employees or directors, are sufficient at this time to provide motivation and to align this group’s interests with those of our stockholders. In addition, we believe that stock ownership guidelines are rare in companies at our stage, which means that ownership requirements would put us at a competitive disadvantage when recruiting and retaining high-quality executives.

 

Our insider trading policy, which is incorporated into our Code of Business Conducts and Ethics prohibits certain actions by our Executive Officers relating to buying and selling our common stock. Our executive officers are authorized to enter into trading plans established according to Section 10b5-1 of the Exchange Act with an independent broker-dealer (“broker”) designated by us. These plans may include specific instructions for the broker to exercise vested options and sell Company stock on behalf of the executive officer at certain dates, if our stock price is above a specified level or both. Under these plans, the executive officer no longer has control over the decision to exercise and sell the securities in the plan, unless he or she amends or terminates the trading plan during a trading window. Plan modifications are not effective until the 31st day after adoption. The purpose of these plans is to enable executive officers to recognize the value of their compensation and diversify their holdings of our stock during periods in which the executive officer would be unable to sell our common stock because material information about us had not been publicly released. As of the record date, no named executive officer had a trading plan in place.

 

Director Compensation

 

We have no formal plan for compensating our directors for their service in their capacity as directors although such directors are expected to receive shares of common stock and/or options in the future to purchase common shares as awarded by our Board of Directors or (as to future options) a Compensation Committee which may be established in the future. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our Board of Directors. Our Board of Directors may award special remuneration to any director undertaking any special services on behalf of our company other than services ordinarily required of a director.

 

The following table summarizes the compensation of each of our directors who is not also a named executive officer for their service as a director for the year ended December 31, 2021. The compensation of Mr. Bertagna, who serves as a director and as our Chief Executive Officer, is described above in the Summary Compensation Table.

 

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DIRECTOR COMPENSATION

 

Name  Fees Earned or Paid in Cash ($)   Stock Awards ($)   Option Awards ($)   Non-Equity Incentive Plan Compensation ($)   Change in Pension Value and Nonqualified Deferred Compensation Earnings   All Other Compensation ($)   Total ($) 
Louis Rosenbaum(1)   -    -    -    N/A    N/A    1,000    1,000 
Andrew Duncan(2)   -    -    -    N/A    N/A    1,000    1,000 
Christopher Walsh(3)   -    -    -    N/A    N/A    -    - 

 

(1) Mr. Rosenbaum has provided executive management services to the Company in previous years. Mr. Rosenbaum earned $96,000 in 2021 relating to operations and finance services, and $1,000 for Board of Director fees. As of December 31, 2021, Mr. Rosenbaum has deferred $26,025 of his 2021 consulting compensation and $1,000 of his director’s compensation.
   
(2) Mr. Duncan also provides executive management services to the Company. Mr. Duncan earned $18,000 in 2021 for business development and intellectual property licensing services, and $1,000 for Board of Director fees. As of December 31, 2021, Mr. Duncan has deferred $0 of his 2021 consulting compensation and $1,000 of his director’s compensation.
   
(3) Mr. Walsh, retired from the Board of Directors, effective January 31, 2020 and thus did not earn any payment for his time as a director in 2020 or 2021.

 

Employment Agreements

 

The following are summaries of the employment agreements with the Company’s executive officers:

 

Patrick E. Bertagna, our Chief Executive Officer and President, is employed pursuant to a written agreement dated as of March 14, 2008. The agreement was for a term of two years, but contained a provision under which the agreement is automatically extended for additional one-year periods unless either party provides written notice to the contrary at least 60 days prior to the end of the term then in effect. As such, Mr. Bertagna receives a base salary of $150,000 per year; however, in order to preserve cash for other working capital needs, Mr. Bertagna has agreed to accrue portions of his salary in the past and he is continuing to do so in 2021. He is entitled to adjustments to his base salary based on certain performance standards, at the Company’s discretion, as follows: (i) a bonus in an amount not less than fifteen percent (15%) of yearly salary, to be paid in cash or stock, if the Company has an increase in annual revenues and Mr. Bertagna performs his duties within the time frame budgeted for such duties at or below the cost budgeted for such duties and (ii) a bonus, to be paid in cash or stock at the Company’s sole discretion, equal to $12,500 for every one million of the Company’s outstanding common stock purchase warrants that are exercised.

 

Mr. Bertagna may also participate in any and all benefits and perquisites as are generally provided for the benefit of executive employees. The agreement terminates on his death, incapacity (after 180 days), resignation or cause as defined in the agreement. If he is terminated without cause, he is entitled to base salary, including back salary owed, all bonuses otherwise applicable, and medical benefits for twelve months.

 

Alex McKean, was appointed as the Company’s Interim Chief Financial Officer from October 3, 2011 and was appointed full-time in 2015. He is not employed pursuant to a written employment agreement.

 

2008 Equity Compensation Plan

 

We have adopted an equity incentive plan, the 2008 Equity Compensation Plan (the “2008 Plan”), pursuant to which we are authorized to grant options, restricted stock, unrestricted stock, and stock appreciation rights to purchase up to 7,000,000 shares of common stock to our employees (as such term is defined in the 2008 Plan), officers, directors and consultants. Awards under the 2008 Plan may consist of stock options (both non-qualified options and options intended to qualify as “Incentive Stock Options” under Section 422 of the Internal Revenue Code of 1986, as amended), restricted and unrestricted stock awards and stock appreciation rights.

 

The 2008 Plan is administered by our Board of Directors or a committee appointed by the Board (the “Committee”). If appointed by the Board, the committee would consist of at least two members of the Board whose members shall, from time to time, be appointed by the Board. The Committee has the authority to interpret the 2008 Plan, to prescribe, amend, and rescind rules and regulations relating to it, to determine the persons to whom awards will be granted, the type of award to be granted, the number of awards to be granted, and the terms and provisions of stock options granted pursuant to the 2008 Plan, including the vesting thereof, subject to the provisions of the 2008 Plan, and to make all other determinations necessary or advisable for the administration of the 2008 Plan.

 

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The 2008 Plan provides that the purchase price of each share of common stock subject to an incentive stock option may not be less than 100% of the fair market value (as such term is defined in the 2008 Plan) of a share of our common stock on the date of grant (or not less than 110% of the fair market value in the case of a grantee holding more than 10% of our outstanding common stock). The aggregate fair market value (determined at the time the option is granted) of the common stock with respect to which incentive stock options are exercisable for the first time by the employee during any calendar year (under all such plans of the grantee’s employer corporation and its parent and subsidiary corporation) shall not exceed $100,000. No incentive stock option shall be exercisable later than the tenth anniversary of its grant; provided, however, that an incentive stock option granted to an employee holding more than 10% of our outstanding common stock shall not be exercisable later than the fifth anniversary of its grant.

 

The Committee shall determine the purchase price of each share of common stock subject to a non-qualified stock option. Such purchase price, however, shall not be less than 100% of the fair market value of the common stock on the date of grant. No non-qualified stock option shall be exercisable later than the tenth anniversary of its grant.

 

The plan also permits the grant of stock appreciation rights in connection with the grant of an incentive stock option or a non-qualified stock option, or unexercised portion thereof held by the grantee. The grant price of a stock appreciation right shall be at least at the fair market value of a share on the date of grant of the stock appreciation right, and be subject to such terms and conditions, not inconsistent with the provisions of the 2008 Plan, as shall be determined by the Committee. Each stock appreciation right may include limitations as to the time when such stock appreciation right becomes exercisable and when it ceases to be exercisable, which may be more restrictive than the limitations on the exercise of the stock option to which it relates. No stock appreciation right shall be exercisable with respect to such related stock option or portion thereof unless such stock option or portion shall itself be exercisable at that time. A stock appreciation right shall be exercised only upon surrender of the related stock option or portion thereof in respect of which the stock appreciation right is then being exercised. Upon the exercise of a stock appreciation right, a grantee shall be entitled to receive an amount equal to the product of (i) the amount by which the fair market value of a share of common stock on the date of exercise of the stock appreciation right exceeds the option price per share specified in the related incentive or non-qualified stock option and (ii) the number of shares of common stock in respect of which the stock appreciation right shall have been exercised. Further, a stock appreciation right shall be exercisable during the grantee’s lifetime only by the grantee.

 

The 2008 Plan also provides us with the ability to grant shares of common stock that are subject to certain transferability, forfeiture or other restrictions. The recipient of restricted stock grants, the type of restriction, the number of shares of restricted stock granted and other such provisions shall be determined by the Committee. The Board, in good faith and in its sole discretion, shall determine the fair market value with regards to awards of restricted stock.

 

The 2008 Plan also provides us with the ability to grant shares of unrestricted stock. The Committee shall determine and designate from time to time those persons who are to be granted unrestricted stock and number of shares of common stock subject to such grant. The Board, in good faith and in its sole discretion, shall determine the fair market value with regards to awards of unrestricted stock. The grantee shall hold common stock issued pursuant to an unrestricted stock award free and clear of all restrictions, except as otherwise provided in the 2008 Plan.

 

Unless otherwise determined by the Committee, awards granted under the 2008 Plan are not transferable other than by will or by the laws of descent and distribution.

 

The 2008 Plan provides that in the event of a merger or change of control, the Committee may substitute stock options, stock awards and stock appreciation rights of the acquired company. Alternatively, the Committee may provide that the stock options, stock awards and stock appreciation rights shall terminate following notice by the Committee.

 

The Board may, at any time, alter, amend, suspend, discontinue, or terminate the 2008 Plan; provided, however, that such action shall not adversely affect the right of grantees to stock awards or stock options previously granted and no amendment, without the approval of the stockholders of the Corporation, shall increase the maximum number of shares which may be awarded under the 2008 Plan in the aggregate, materially increase the benefits accruing to grantees under the 2008 Plan, change the class of employees eligible to receive options under the 2008 Plan, or materially modify the eligibility requirements for participation in the 2008 Plan.

 

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth certain information as of March 31, 2022, regarding the beneficial ownership of our common stock by (i) each stockholder known by us to be the beneficial owner of more than five percent of our common stock, (ii) by each of our executive officers named in the Summary Compensation Table and our directors and (iii) by all of our executive officers and directors as a group. Each of the persons named in the table has sole voting and investment power with respect to common stock beneficially owned. Unless otherwise noted in the table, the address for each of the persons identified is 117 W 9th Street; Suite 1214, Los Angeles, CA 90015. Beneficial ownership is calculated based upon 228,502,479 shares of common stock issued and outstanding as of March 31, 2022.

 

Name and Address of Beneficial Owner  Amount and Nature of Beneficial Ownership(1)  

Percent of

Common Stock

 
Patrick E. Bertagna   312,509 shares    0.001%
CEO and Chairman of the Board          
           
Alex McKean   54,489 shares    0.000%
Chief Financial Officer          
           
Louis Rosenbaum   133,901 shares    0.000%
VP of Operations & Finance, Director          
           
Andrew Duncan   205,848 shares    0.001%
Director, Corporate Secretary and Treasurer          
           
Christopher Walsh   70,830 shares    0.000%
Director          
           
All directors and named executive officers as a group (5 persons)   777,577 shares    0.003%
           

Other greater than 5% ownership Shareholders

None

   0 shares    0.000%

 

(1) Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding.

 

Changes in Control. We are not aware of any arrangements which may result in “changes in control” as that term is defined by the provisions of Item 403 of Regulation S-K.

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

Director Independence. None of our directors is independent within the definition of “independence” as defined in the Nasdaq rules governing members of boards of directors.

 

Related Party Transactions. During 2021, officers and directors accrued $105,825 of deferred back salary and $3,000 of director fees. 

 

Except as described above, there have been no related party transactions, or any other transactions or relationships required to be disclosed pursuant to Item 404 of Securities and Exchange Commission Regulation S-K.

 

41
 

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

 

The Audit Committee has appointed M&K CPAS, PLLC as our independent registered public accounting firm on January 11, 2021. The following table shows the fees that were paid or accrued by us for audit and other services provided by our current auditor M&K CPAS, PLLC:

 

   2021   2020 
Audit Fees (1)  $56,000   $49,633 
Audit-Related Fees (2)   6,500    - 
Tax Fees (3)   3,950    3,950 
All Other Fees   -    - 
Total  $66,450   $53,583 

 

(1) Audit fees represent fees for professional services provided in connection with the audit of our annual financial statements and the review of our quarterly financial statements and those services normally provided in connection with statutory or regulatory filings or engagements including comfort letters, consents and other services related to SEC matters. This information is presented as of the latest practicable date for this annual report.
   
(2) Audit-related fees represent fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and not reported above under “Audit Fees.” This category primarily includes services relating to our Registration Statement filed with the Securities Exchange Commission during 2021.
   
(3) M&K CPAS, PLLC does not provide us with tax compliance, tax advice or tax planning services. This is provided by Bessolo & Haworth, LLP.

 

All audit related services, tax services and other services rendered by M&K CPAS, PLLC were pre-approved by our Board of Directors or Audit Committee. The Audit Committee has adopted a pre-approval policy that provides for the pre-approval of all services performed for us by M&K CPAS, PLLC. The policy authorizes the Audit Committee to delegate to one or more of its members pre-approval authority with respect to permitted services. Pursuant to this policy, the Board delegated such authority to the Chairman of the Audit Committee.

 

42
 

 

PART IV

 

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

EXHIBIT INDEX

 

The Company’s financial statements and related notes thereto are listed and included in this Annual Report beginning on page F-1. The following exhibits are filed with, or are incorporated by reference into, this Annual Report.

 

Exhibit Number   Description
     
3.1   Articles of Incorporation of the Registrant filed with the State of Nevada on April 7, 2006(1)
3.2   Amended and Restated Bylaws of the Registrant(2)
4.1   Certificate of Amendment on Issuance of Preferred A shares(3)
4.2   Certificate of Designation on Issuance of Preferred B shares(4)
4.3   Certificate of Designation on Issuance of Preferred C shares(4)
10.1   Form of a Securities Purchase Agreement and Warrant Agreement(5)
10.2   2008 Equity Compensation Plan(6)
10.3   Employment Agreement between the Registrant and Patrick E. Bertagna dated March 14, 2008(7)
10.4   Form of Securities Purchase Agreement (August 2011 Private Placement)(8)
10.5   Form of Warrant Agreement (August 2011 Private Placement)(8)
10.6   Form of Subscription Application (August 2011 Private Placement)(8)
10.7   Form of Note and Share Purchase Agreement (Q4 2014 and Q1 2015)(9)
10.8   Form of Convertible Promissory Note (Q4 2014 and Q1 2015)(9)
10.9   Form of Warrant Agreement (Q1 2015)(9)
10.10   Form of Note and Warrant Purchase Agreement (Q2 2016)(10)
10.11   Form of Promissory Note (Q2 2016)(10)
10.12   Definitive Agreement, dated June 16, 2016, between the Company and Inventergy Innovations, LLC*(11)
10.13   Form of Promissory Note Issued to Officers(12)
10.14   Form of Military Purchase Order with Edwards Airforce Base(13)
10.15   Form of Convertible Note (2018)(14)
10.16   Form of Promissory Note issued to RB Capital Partners, Inc.(15)
10.17   Asset Purchase Agreement, dated June 27, 2019, by and between Inpixon and GTX Corp(16)
10.18   Patent Assignment and License-Back Agreement by and between Inpixon and GTX Corp(16)
10.19   Patent License Agreement by and between Inpixon and GTX Corp^(16)
10.20   General Conveyance, Bill of Sale and Assignment by and between Inpixon and GTX Corp(16)
10.21   Patent License Agreement, dated June 27, 2019, by and between Inpixon and Inventergy(16)
10.22   Consulting Agreement, dated June 27, 2019, by and between Inpixon and GTX Corp(16)
10.23   Form of Promissory Note to Inpixon(16)
10.24   Form of a Series B Securities Purchase Agreement and Warrant Agreement(17)
10.25   Form of Regulation A Subscription Agreement(18)
10.26   Offering Statement on Form 1-A, filed on October 15, 2021(18)
10.27   Offering Circular on Form 253(g)(2), filed on November 9, 2021(19)
14.1   Code of Business Conduct and Ethics(2)
16.1   Letter from Weinberg & Company P.A.(20)
21.1   List of Subsidiaries(9)
23.1   Report of Independent Registered Public Accounting Firm
31.1   Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
31.2   Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
32.1   Certification Pursuant To Section 906 of the Sarbanes-Oxley Act of 2002
101.INS   Inline XBRL Instance Document
101.SCH   Inline XBRL Taxonomy Extension Schema
101.CAL   Inline XBRL Taxonomy Extension Calculation
101.DEF   Inline XBRL Taxonomy Extension Definition
101.LAB   Inline XBRL Taxonomy Extension Labels
101.PRE   Inline XBRL Taxonomy Extension Presentation

 

(1) Previously filed on the Registrant’s Registration Statement on Form SB-2 as filed December 12, 2006 and incorporated herein by reference.
(2) Previously filed on the Registrant’s Current Report on Form 8-K filed with the SEC on March 20, 2008 and incorporated herein by reference.
(3) Previously filed on the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 19, 2018 and incorporated herein by reference.
(4) Previously filed on the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 14, 2020 and incorporated herein by reference.
(5) Previously filed on the Registrant’s Annual Report on Form 10-K filed with the SEC on March 30, 2020 and incorporated herein by reference.
(6) Previously filed on May 23, 2008 as an exhibit to our Registration Statement on Form S-8 (File No. 333-151114) and incorporated herein by reference.
(7) Previously filed on the Registrant’s Current Report on Form 8-K filed with the SEC on March 20, 2008 and incorporated herein by reference.
(8) Previously filed on October 3, 2011 as part of the Registrant’s Registration Statement on Form S-1 (File No. 333-177146) and incorporated herein by reference.
(9) Previously filed on the Registrant’s Annual Report on Form 10-K filed with the SEC on April 15, 2015 and incorporated herein by reference.
(10) Previously filed on the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 15, 2016 and incorporated herein by reference.
(11) Previously filed on the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 15, 2016 and incorporated herein by reference.
(12) Previously filed on the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 12, 2017 and incorporated herein by reference.
(13) Previously filed on the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2017 and incorporated herein by reference.
(14) Previously filed on the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 14, 2018 and incorporated herein by reference.
(15) Previously filed on the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on August 20, 2018 and incorporated herein by reference.
(16) Previously filed on the Registrant’s Current Report on Form 8-K filed with the SEC on July 2, 2019 and incorporated herein by reference.
(17) Previously filed on the Registrant’s Annual Report on Form 10-K filed with the SEC on March 31, 2021 and incorporated herein by reference.
(18) Previously filed on October 15, 2021 as part of the Registrant’s Offering Statement on Form 1-A (File No. 024-116681) and incorporated herein by reference.
(19) Previously filed on November 9, 2021 as part of the Registrant’s Offering Circular on Form 253(g)(2) (File No. 024-116681) and incorporated herein by reference.
(20) Previously filed on the Registrant’s Current Report on Form 8-K filed with the SEC on January 19, 2021 and incorporated herein by reference.
* Certain portions of the Exhibit have been omitted based upon a request for confidential treatment filed by us with the SEC. The omitted portions of the Exhibit have been separately filed by us with the SEC
# Certain confidential portions of this Exhibit were omitted by means of marking such portions with brackets (“[****]”) because the identified confidential portions (i) are not material and (ii) would be competitively harmful if publicly disclosed.
^ Schedules and similar attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The registrant hereby undertakes to furnish copies of such omitted materials upon request by the SEC.

 

ITEM 16. FORM 10-K SUMMARY

 

Not applicable.

 

43
 

 

Signatures

 

In accordance with Section 13 or 15(d) of the Exchange Act, the company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  GTX Corp
  (Registrant)
     
Date: April 12, 2022 By: /s/ Patrick E. Bertagna
    Patrick E Bertagna
    Chief Executive Officer

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Name   Title   Date
         
/s/ Patrick E. Bertagna   Chief Executive Officer and Director (Principal Executive Officer)   April 12, 2022
         
/s/ Alex McKean   Chief Financial Officer (Principal Financial Officer)   April 12, 2022
         
/s/ Louis Rosenbaum   Director, VP of Operations and Finance (Principal Accounting Officer)   April 12, 2022
         
/s/ Andrew Duncan   Director, Treasurer, Secretary   April 12, 2022

 

44
 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and

Stockholders of GTX Corp.

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of GTX Corp. (the Company) as of December 31, 2021 and 2020, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the two-years period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

 

Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company suffered a net loss from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

Critical Audit Matters

 

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.

 

Revenue Recognition

 

As discussed in the financial statement’s footnotes, the Company recognizes revenue upon transfer of control of promised services and goods to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company offers customers the ability to acquire services with their goods. Significant judgement is exercised by the Company in determining revenue recognition for these customers. Given these factors and due to the volume of transactions, the related audit effort in evaluating management’s judgments in determining revenue recognition for these customer agreements was extensive and required a high degree of auditor judgement.

 

/s/ M&K CPAS, PLLC  
We have served as the Company’s auditor since 2021.  
Houston, Texas  
April 12, 2022  
PCAOB ID No. 2738  

 

F-1
 

 

GTX CORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

   2021   2020 
   December 31, 
   2021   2020 
ASSETS        
         
Current assets:          
Cash and cash equivalents  $138,342   $76,912 
Accounts receivable, net   13,735    40,484 
Inventory   98,258    114,137 
Investment in marketable securities   2,465    4,166 
Other current assets   55,016    54,593 
           
Total current assets   307,816    290,292 
           
Property and equipment, net   92,461    7,878 
           
Total assets  $400,277   $298,170 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
           
Current liabilities:          
Accounts payable  $156,886   $182,610 
Accrued expenses   298,662    327,293 
Accrued expenses, related parties   787,044    839,810 
Deferred revenues   37,250    37,350 
Short-term debt – line of credit   7,000    21,715 
Short-term debt – CARE loans   74,953    - 
Convertible promissory notes, past due   758,000    840,673 
Convertible notes, related parties, net of debt discount   976,546    884,546 
Notes payable   40,640    50,400 
Total current liabilities   3,136,981    3,184,397 
           
Long-term debt - CARE loans   142,917    217,870 
           
Total liabilities   3,279,898    3,402,267 
           
Commitments and contingencies   -     -  
           
Stockholders’ deficit:          
Preferred stock series A, $0.001 par value; 10,000,000 shares authorized; 1,000,000 shares issued and outstanding at December 31, 2021 and 2020, respectively   100    100 
Preferred stock series B, $0.001 par value; 180 and 250 shares issued and outstanding at December 31, 2021 and 2020, respectively   -    1 
Preferred stock series C, $0.001 par value; 1,000 shares authorized, 675 and 150 issued and outstanding at December 31, 2021 and December 31, 2020, respectively   1    - 
Common stock, $0.0001 par value; 2,071,000,000 shares authorized; 224,502,479 and 138,032,482 shares issued and outstanding at December 31, 2021 and 2020, respectively   22,450    13,803 
Additional paid-in capital   23,151,212    21,059,925 
Accumulated deficit   (26,053,384)   (24,177,926)
           
Total stockholders’ deficit   (2,879,621)   (3,104,097)
           
Total liabilities and stockholders’ deficit  $400,277   $298,170 

 

See accompanying notes to consolidated financial statements.

 

F-2
 

 

GTX CORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

 

   2021   2020 
   Years Ended December 31, 
   2021   2020 
Product sales  $402,107   $798,061 
Product sales – related party   5,250    32,768 
Service income   182,083    208,441 
Licensing income   -    20,000 
Total revenues   589,440    1,059,270 
           
Cost of products sold   267,103    453,631 
Cost of other revenue   67,083    133,894 
Cost of licensing revenue   -    11,438 
Total cost of goods sold   334,186    598,963 
           
Gross margin   255,254    460,307 
           
Operating expenses          
Wages and benefits   501,544    621,347 
Professional fees   337,627    252,765 
Sales and marketing expenses   75,391    28,091 
General and administrative   245,238    185,316 
           
Total operating expenses   1,159,800    1,087,519 
           
Income/(loss) from operations   (904,546)   (627,212)
           
Other income (expenses)          
Gain on forgiveness of accrued interest   -   17,531 
Gain/(loss) on marketable securities   (443)   91,143 
Amortization of debt discount   (30,705)   - 
Change in fair value of derivative   -    223,536 
Loss on conversion of debt   (152,406)   - 
Interest expense and financing costs   (112,358)   (73,405)
Total other income (expenses)   (295,912)   258,805 
           
Net loss   (1,200,458)   (368,407)
           
Deemed dividend to Series-B preferred stockholders   -    (100,000)
Deemed dividend to Series-C preferred stockholders   (675,000)   (150,000)
           
Net loss attributable to common stockholders  $(1,875,458)  $(618,407)
           
Weighted average number of common shares outstanding - basic and diluted   201,353,941    109,772,603 
           
Net income/(loss) per common share - basic and diluted  $(0.01)  $(0.00)

 

See accompanying notes to consolidated financial statements.

 

F-3
 

GTX CORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

 

                                             
   Preferred Stock           Additional         
   Series A   Series B   Series C   Common Stock   Paid-In   Accumulated     
   Shares   Amount   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Total 
Balance, December 31, 2019   1,000,000   $100    150   $1    -    -    71,419,795   $7,142   $19,954,738   $(23,559,519)  $(3,597,538)
Issuance of common stock for services   -    -    -    -              13,000,000    1,300    170,283    -    171,583 
Issuance of common stock for conversion of debt   -    -    -    -              53,612,687    5,361    398,463    -    403,824 
Proceeds from issuance of preferred stock for financing             100    -    150    -              250,000         250,000 
Fair value of warrants issued for services                                 -    -    3,793    -    3,793 
Fair Value of common stock issued to management                                 -    -    (4,461)   -    (4,461)
Issuance of
preferred stock
             150    1              -    -    149,999    -    150,000 
Deemed dividend                                           250,000    (250,000)   - 
Gains from the forgiveness of debt - related party                                           32,648         32,648 
Net loss                                 -    -    -    (368,407)   (368,407)
Balance, December 31, 2020   1,000,000   $100    250   $1    150    -    138,032,482   $13,803   $21,059,925   $(24,177,926)  $(3,104,097)
Issuance of common stock for services   -    -    -    -              8,850,000    885    262,250    -    263,135 
Issuance of common stock for conversion of debt   -    -    -    -              16,661,660    1,666    192,707    -    194,373 
Proceeds from issuance of preferred stock for financing   -    -    -    -    675    1    -    -    674,999    (675,000)   - 
Issuance of common stock for financings   -    -    -    -    -    -    250,000     25    3,250     -     3,275  
Issuance of common stock for the conversion of warrants   -    -    -    -    -    -    22,708,333    2,271    (2,271)   -    - 
Issuance of common stock for preferred shares   -    -    (70)   (1)   (150)   -    38,000,004    3,800    (3,799)   -    - 
Warrants issued for services   -    -    -    -    -    -    -    -    2,340    -    2,340 
Loss on conversion of debt                                           218,106    -    218,106 
Deemed dividend                                           675,000    (675,000)   - 
Imputed interest                                           30,705         30,705 
Debt discount                                           38,000    -    38,000 
Net loss                                 -    -    -    (1,200,458)   (1,200,458)
Balance, December 31, 2021   1,000,000   $100    180   $-    675    1    224,502,479   $22,450   $23,151,212   $(26,053,384)  $(2,879,621)

 

See accompanying notes to consolidated financial statements.

 

F-4
 

 

GTX CORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

    2021       2020 
    Years Ended December 31,   
    2021       2020 
Cash flows from operating activities          
Net loss  $(1,200,458)  $(368,407)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   15,438    25,526 
Bad debt expense   28,323    11,572 
Loss / (gain) on marketable securities   443    (91,142)
Fair value of common stock issued for services   263,135    171,583 
Change in fair value of derivative   -    (223,536)
Bonus shares issued to noteholders   3,275    - 
Loss on the settlement of debt and accrued interest   152,406    (17,531)
Fair value of warrants issued for services   2,340    3,793 
Imputed interest   30,705    - 
Interest added to convertible note balance   102,040    - 
Debt discount on notes payable related parties   -   - 
Grant from CARE loans   -    (10,000)
Changes in operating assets and liabilities:          
Accounts receivable   (1,574)   (4,238)
Inventory   15,879    (77,946)
Prepaid expenses   (328)   (44,210)
Other current and non-current assets   (95)   (20,516)
Accounts payable and accrued expenses   (43,022)   (71,122)
Accrued expenses - related parties   133,909    192,340 
Deferred revenues   (100)   (32,722)
           
Net cash used in operating activities   (497,684)   (556,556)
           
Cash flows from investing activities          
Proceeds from the sale of marketable securities   1,258    146,200 
PP&E purchase   (100,021)   - 
           
Net cash provided by investing activities   (98,763)   146,200 
           
Cash flows from financing activities          
Proceeds from CARE loans   -    227,870 
Proceeds from issuance of preferred stock   675,000    250,000 
Proceeds from line of credit   -    139,319 
Payments on convertible debt   (2,123)   (39,517)
Payments on line of credit   (15,000)   (215,604)
           
Net cash provided by financing activities   657,877    362,068 
           
Net change in cash and cash equivalents   61,430    (48,288)
           
Cash and cash equivalents, beginning of period   76,912    125,200 
           
Cash and cash equivalents, end of period  $138,342   $76,912 
           
Supplemental disclosure of cash flow information:          
Income taxes paid  $-   $- 
Interest paid  $623   $11,199 
           
Supplemental disclosure of noncash investing and financing activities:          
Issuance of common stock for conversion of debt  $149,373   $253,355 
Debt discount on notes convertible   38,000    - 
Transfer of convertible related party debt   70,000    - 
Conversion of preferred stock to common stock   3,800    - 
Deemed dividend   675,000    250,000 
Conversion of accrued interest   109,230    - 
Related party accrued expenses to convertible debt related party   200,000    - 

 

See accompanying notes to consolidated financial statements.

 

F-5
 

 

GTX CORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020

 

1. ORGANIZATION AND BASIS OF PRESENTATION

 

During the periods covered by these financial statements, GTX Corp and its subsidiaries (the “Company”, “GTX”, “we”, “us”, and “our”) were engaged in business operations that design, manufacture and sell various interrelated and complementary products and services in the wearable technology and Personal Location Services marketplace. GTX owns 100% of the issued and outstanding capital stock of its two subsidiaries - Global Trek Xploration, Inc. and LOCiMOBILE, Inc.

 

Global Trek Xploration, Inc. focuses on the design, manufacturing and sales distribution of its hardware, software, and connectivity, Global Positioning System (“GPS”) and Bluetooth Low Energy (“BLE”) monitoring and tracking platform, which provides real-time tracking and monitoring of people and high valued assets. Utilizing a miniature quad-band GPRS transceiver, antenna, circuitry, battery and inductive charging pad our solutions can be customized and integrated into numerous products whose location and movement can be monitored in real time over the Internet through our 24x7 tracking portal or on a web enabled cellular telephone. Our core products and services are supported by an IP portfolio of patents, patents pending, registered trademarks, copyrights, URLs and a library of software source code, all of which is also managed by Global Trek.

 

LOCiMOBILE, Inc., is the Companies digital platform which has been at the forefront of Smartphone application (“App”) development since 2008. With a suite of mobile applications that turn the iPhone, iPad, Android and other GPS enabled handsets into a tracking device which can be tracked from handset to handset or through our tracking portal or on any connected device with internet access. LOCiMOBILE has launched over 20 Apps across multi mobile device operating systems and continues to launch consumer and enterprise apps.

 

Basis of Presentation

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The accompanying consolidated financial statements reflect the accounts of GTX Corp and its wholly owned subsidiaries. All significant inter-company balances and transactions have been eliminated.

 

On June 22, 2018, the Company effected a 1-for-75 reverse stock split of its common stock. All references to shares of common stock outstanding, average number of shares outstanding and per share amounts in these consolidated financial statements and notes to consolidated financial statements have been restated to reflect as if the reverse stock split occurred as of the earliest period presented.

 

Going Concern

 

The consolidated financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has incurred a net loss of $1,200,458 during the year ended December 31, 2021, has incurred losses since inception resulting in an accumulated deficit of $26,053,384 as of December 31, 2021 and has a stockholders’ deficit of $2,879,621 as of December 31, 2021. The Company anticipates further losses in the development of its business. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the financial statements being issued. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. The Company’s ability to raise additional capital through the future issuances of debt or equity is unknown. The ability to obtain additional financing, the successful development of the Company’s contemplated plan of operations, or its ability to achieve profitable operations are necessary for the Company to continue operations, and there is no assurance that these can be achieved. The ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

 

F-6
 

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Revenue Recognition

 

The Company recognizes revenue in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which include (1) identifying the contract or agreement with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied.

 

The Company does not have any significant contracts with customers requiring performance beyond delivery, and contracts with customers contain no incentives or discounts that could cause revenue to be allocated or adjusted over time. Shipping and handling activities are performed before the customer obtains control of the goods and therefore represent a fulfillment activity rather than a promised service to the customer. Revenue and costs of sales are recognized when control of the products transfers to our customer, which generally occurs upon shipment from our facilities. The Company’s performance obligations are satisfied at that time.

 

All of the Company’s products are offered for sale as finished goods only, and there are no performance obligations required post-shipment for customers to derive the expected value from them.

 

The Company does not allow for returns, except for damaged products when the damage occurred pre-fulfillment. Damaged product returns have historically been insignificant. Because of this, the stand-alone nature of our products, and our assessment of performance obligations and transaction pricing for our sales contracts, we do not currently maintain a contract asset or liability balance for obligations. We assess our contracts and the reasonableness of our conclusions on a quarterly basis.

 

We derive our revenues primarily from hardware sales, subscription services fees, IP licensing and professional services fees. Hardware includes our SmartSole, Military and other Stand-Alone Devices. Subscription services revenues consist of fees from customers accessing our cloud-based software solutions and subscription or license fees for our platform. Professional services and other revenues consist primarily of fees from implementation services, configuration, data services, training and managed services related to our solutions. IP licensing is related to our agreement with Inventergy whereby we have partnered in order to monetize our IP portfolio (see Note 3, below).

 

Product sales

 

At the inception of each contract, we assess the goods and services promised in our contracts and identify each distinct performance obligation. The Company recognizes revenue upon the transfer of control of promised products or services to the customer in an amount that depicts the consideration the Company expects to be entitled to for the related products or services. For the large majority of the Company’s sales, transfer of control occurs once product has shipped and title and risk of loss have transferred to the customer.

 

Services Income

 

The Company’s software solutions are available for use as hosted application arrangements under subscription fee agreements without licensing perpetual rights to the software. Subscription fees from these applications are recognized over time on a ratable basis over the customer agreement term beginning on the date the Company’s solution is made available to the customer. Our subscription contracts are generally one to three months in length. Amounts that have been invoiced are recorded in accounts receivable and deferred revenues or revenues, depending on whether the revenue recognition criteria have been met.

 

The majority of our professional services arrangements are recognized on a time and materials basis. Professional services revenues recognized on a time and materials basis are measured monthly based on time incurred and contractually agreed upon rates. Certain professional services revenues are based on fixed fee arrangements and revenues are recognized based on the proportional performance method. In some cases, the terms of our time and materials and fixed fee arrangements may require that we defer the recognition of revenue until contractual conditions are met. Data services and training revenues are generally recognized as the services are performed.

 

F-7
 

 

Licensing Revenue

 

Licensing revenue recorded by the Company relates exclusively to the Company’s License and Partnership agreement with Inventergy which provides for ongoing royalties based on monetization of IP licenses. The Company recognizes revenue for royalties under ASC 606, which provides revenue recognition constraints by requiring the recognition of revenue at the later of the following: 1) sale or usage of the products or 2) satisfaction of the performance obligations. The Company has satisfied its performance obligations and therefore recognizes licensing revenue when the sales to which the license(s) relate are completed. During the year ended December 31, 2021 the Company did not recognize any revenue on settlements, while the Company Company recognized revenue on 1 settlement for a total of $20,000 in royalty revenue in 2020.

 

Due to Covid and other resource related circumstances the GTX IP campaign stalled during 2021 and after several months of analysis on how to revamp the campaign it was mutually agreed by the BOD of Inventergy and GTX, that GTX should take back full control of its patents and the licensing strategy. Effective November 20, 2021, GTX dissolved its patent license agreement with Inventergy, LLC whereby Inventergy transferred and assigned back to GTX all rights, title and interest in each of the Patents, consistent with what was specified in Section 4.1 of the original agreement, including all (sole) responsibility for future prosecution and maintenance of the Patents, including any rights to receive any further royalties, compensation, revenue share for any past present or future monetization effort, effectively relinquishing its fifty-five (55%) ownership interest, back to GTX.

 

Disaggregation of Net Sales

 

The following table shows the Company’s disaggregated net sales by product type:

 

   December 31, 2021   December 31, 2020 
Product sales  $402,107   $798,061 
Product sales – related party   5,250    32,768 
Service income   182,083    208,441 
IP and consulting income   -    20,000 
Total  $589,440   $1,059,270 

 

The following table shows the Company’s disaggregated net sales by customer type:

 

   December 31, 2021   December 31, 2020 
B2B  $221,494   $683,840 
B2C   357,769    349,415 
Military   10,177    6,015 
IP   -    20,000 
Total  $589,440   $1,059,270 

 

Allowance for Doubtful Accounts

 

We extend credit based on our evaluation of the customer’s financial condition. We carry our accounts receivable at net realizable value. We monitor our exposure to losses on receivables and maintain allowances for potential losses or adjustments. We determine these allowances by (1) evaluating the aging of our receivables; and (2) reviewing high-risk customers financial condition. Past due receivable balances are written off when our internal collection efforts have been unsuccessful in collecting the amount due. Our allowance for doubtful accounts was $40,351 as of December 31, 2021 and $21,126 as of December 31, 2020. The allowance fully reserves our accounts receivable balances over 90 days.

 

Shipping and Handling Costs

 

Shipping and handling costs are included in cost of goods sold in the accompanying consolidated statements of operations.

 

F-8
 

 

Product Warranty

 

The Company’s warranty policy provides repair or replacement of products (excluding GPS Shoe devices) returned for defects within ninety days of purchase. The Company’s warranties are of an assurance-type and come standard with all Company products to cover repair or replacement should product not perform as expected. Provisions for estimated expenses related to product warranties are made at the time products are sold. These estimates are established using historical information about the nature, frequency and average cost of warranty claim settlements as well as product manufacturing and recovery from suppliers. Management actively studies trends of warranty claims and takes action to improve product quality and minimize warranty costs. The Company estimates the actual historical warranty claims coupled with an analysis of unfulfilled claims to record a liability for specific warranty purposes. As of December 31, 2021 and 2020, products returned for repair or replacement have been immaterial. Accordingly, a warranty liability has not been deemed necessary.

 

Use of Estimates

 

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Material estimates relate to the assumptions made in determining reserves for uncollectible receivables, inventory reserves and returns, impairment analysis of long-term assets and deferred tax assets, accruals for potential liabilities and assumptions made in valuing the fair market value of equity transactions. Estimates are updated on an ongoing basis and are evaluated based on historical experience and current circumstances. Changes in facts and circumstances in the future may give rise to changes in these estimates which may cause actual results to differ from current estimates.

 

Fair Value Estimates

 

Pursuant to the Accounting Standards Codification (“ASC”) No. 820, “Disclosures About Fair Value of Financial Instruments”, the Company records its financial assets and liabilities at fair value. ASC No. 820 provides a framework for measuring fair value, clarifies the definition of fair value and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. ASC No. 820 establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

 

  Level 1 - Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
     
  Level 2 - Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the asset/liability’s anticipated life.
     
  Level 3 - Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

 

The carrying values for cash and cash equivalents, accounts receivable, investment in marketable securities, other current assets, accounts payable and accrued liabilities approximate their fair value due to their short maturities. The carrying values of notes payable and other financing obligations approximate their fair values because interest rates on these obligations are based on prevailing market interest rates.

 

Cash and Cash Equivalents

 

Cash equivalents consist of highly liquid investments with insignificant rate risk and with original maturities of three months or less at the date of purchase.

 

F-9
 

 

Inventory

 

Inventory generally consists of raw materials and finished goods and is valued at the lower of cost (first-in, first-out) or net realizable value. The Company evaluates its inventory for excess and obsolescence on a regular basis. In preparing the evaluation the Company looks at the expected demand for the product, as well as changes in technology, in order to determine whether or not a reserve is necessary to record the inventory at net realizable value. For the years ending December 31, 2021 and 2020 the Company did not recognize any charges to expense associated with excess and obsolete inventory cost adjustments.

 

Property and Equipment

 

Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are calculated using the straight-line method over the estimated three-year useful lives of the assets. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Expenditures for maintenance and repairs are expensed as incurred.

 

Management assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If there is indication of impairment, management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value.

 

Research and Development Costs

 

Research and development costs consist primarily of fees paid to consultants and outside service providers, patent fees and costs, and other expenses relating to the acquisition, design, development and testing of the Company’s products. Research and development expenditures are expensed as incurred and totalled $1,282 and $13,643 for the years ended December 31, 2021 and 2020, respectively.

 

Concentrations

 

We currently rely on one manufacturer to supply us with our GPS SmartSole and one manufacturer to supply us with the GPS device included in the GPS SmartSole. The loss of either of these manufacturers could severely impede our ability to manufacture the GPS SmartSole.

 

As of December 31, 2021, the Company had three customers representing approximately 63%, 11% and 10% of sales and four customers representing approximately 26%, 12%, 12% and 10% of total accounts receivable, respectively. The Company had three customers representing approximately 18%, 9% and 7% of sales and four customers representing approximately 13%, 13%, 13% and 11% of total accounts receivable, respectively, for the year ended December 31, 2020.

 

Intangible Assets

 

The Company records identifiable intangible assets acquired from other enterprises or individuals at cost. Intangible assets consist of a licensing agreement enabling the Company to sell its GPS-related vehicle tracking software and services which is being amortized over the life of the licensing agreement.

 

Marketable Securities

 

The Company’s securities investments that are acquired and held principally for the purpose of selling them in the near term are classified as trading securities. Trading securities are recorded at fair value based on quoted market price (level 1) on the balance sheet in current assets, with the change in fair value during the period included in earnings.

 

Derivative Instruments

 

Our debt or equity instruments may contain embedded derivative instruments, such as conversion options, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative instrument liability.

 

F-10
 

 

Our derivative instrument liabilities are re-valued at the end of each reporting period, with changes in the fair value of the derivative liability recorded as charges or credits to income, in the period in which the changes occur. For bifurcated conversion options that are accounted for as derivative instrument liabilities, we determine the fair value of these instruments using the Black-Scholes option pricing model. This model requires assumptions related to the remaining term of the instrument and risk-free rates of return, our current Common Stock price and expected dividend yield, and the expected volatility of our Common Stock price over the life of the option. 

 

Net Loss Per Common Share

 

Basic loss per share is computed by dividing the net loss applicable to common stockholders by the weighted average number of outstanding common shares during the period. Shares of restricted stock are included in the basic weighted average number of common shares outstanding from the time they vest. Diluted loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued. Shares of restricted stock are included in the diluted weighted average number of common shares outstanding from the date they are granted unless they are antidilutive. Diluted loss per share excludes all potential common shares if their effect is anti-dilutive. The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive:

 

   2021   2020 
   December 31, 
   2021   2020 
Warrants   49,250,000    50,500,000 
Preferred B shares   81,600,000    100,000,000 
Preferred C shares   25,208,333    13,333,333 
Conversion shares upon conversion of notes   32,783,333    42,420,148 
Total   188,841,667    206,253,481 

 

Income Taxes

 

The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized by applying the statutory tax rates in effect in the years in which the differences between the financial reporting and tax filing bases of existing assets and liabilities are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

 

Stock-based Compensation

 

The Company periodically issues common stock and stock options to officers, directors, and consultants for services rendered. Options vest and expire according to terms established at the issuance date of each grant. Stock grants, which are generally time vested, are measured at the grant date fair value and charged to operations ratably over the vesting period. Through December 31, 2018, the Company accounted for stock-based payments to officers and directors by measuring the cost of services received in exchange for equity awards utilizing the grant date fair value of the awards, with the cost recognized as compensation expense on the straight-line basis in the Company’s financial statements over the vesting period of the awards. The Company accounted for stock-based payments to Scientific Advisory Committee members and consultants by determining the value of the stock compensation based upon the measurement date at either (a) the date at which a performance commitment was reached or (b) at the date at which the necessary performance to earn the equity instruments was complete.

 

In accordance with the Company’s adoption of Accounting Standards Update 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, effective January 1, 2019, stock options granted to outside consultants are now accounted for consistent with the accounting for stock-based payments to officers and directors, as described above, by measuring the cost of services received in exchange for equity awards utilizing the grant date fair value of the awards, with the cost recognized as compensation expense on the straight-line basis in the Company’s financial statements over the vesting period of the awards.

 

F-11
 

 

Segments

 

The Company operates in one segment for the manufacture and distribution of its products. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying financial statements.

 

Recently Issued Accounting Pronouncements

 

In June 2016, the FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASC 326”). The standard significantly changes how entities will measure credit losses for most financial assets, including accounts and notes receivables. The standard will replace today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. As small business filer, the standard will be effective for us for interim and annual reporting periods beginning after December 15, 2022. The Company is currently assessing the impact of adopting this standard on the Company’s financial statements and related disclosures.

 

Other recent accounting pronouncements issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

 

3. LICENSE AGREEMENTS

 

IP Monetization Agreement

 

On June 16, 2016, the Company entered into a Definitive Agreement with Inventergy Innovations, LLC (“Inventergy”), a subsidiary of Inventergy Global, Inc. (“INVT”). The Company partnered with Inventergy to monetize three (3) GTX Patents, which now due to ongoing continuations has grown to 5 Patents, were assigned to an Inventergy subsidiary (“Inventergy LBS, LLC”), and Inventergy assigned a 45% revenue share in net revenue collected on these patents to GTX.

 

As part of our outbound IP licensing monetization campaign in June 2016 we signed a revenue share monetization agreement with Inventergy Innovations, LLC (“Inventergy”), a subsidiary of Inventergy Global, Inc. (NASDAQ: INVT), the first licensing agreement was signed for the monetization campaign was signed in the first quarter of 2019, with last settlement in fourth quarter of 2020. Prior to December 13, 2021, when we terminated our agreement with Inventergy by not renewing their license., we had signed 14 settlements valued at approximately $250,000 in licensing fees, which represented less than what was expected in the original agreement, which led both parties to mutually dissolve the partnership.

 

Due to Covid and other resource related circumstances the GTX IP campaign stalled during 2021 and after several months of analysis on how to revamp the campaign it was mutually agreed by the BOD of Inventergy and GTX, that GTX should take back full control of its patents and the licensing strategy. Effective November 20, 2021, GTX dissolved its patent license agreement with Inventergy, LLC whereby Inventergy transferred and assigned back to GTX all rights, title and interest in each of the Patents, consistent with what was specified in Section 4.1 of the original agreement, including all (sole) responsibility for future prosecution and maintenance of the Patents, including any rights to receive any further royalties, compensation, revenue share for any past present or future monetization effort, effectively relinquishing its fifty-five (55%) ownership interest, back to GTX.

 

F-12
 

 

Inpixon Asset Purchase Agreement

 

On June 27, 2019 the Company completed its sale and licensing of certain assets and patents (the “Assets”) of GTX to Inpixon, consisting of a portfolio of global positioning system (“GPS”) technologies and intellectual property, including, but not limited to the following:

 

(a) an intellectual property portfolio that includes a registered patent, along with more than 20 pending patent applications or licenses to registered patents or pending applications relating to GPS technologies;

 

(b) a smart school safety network (“SSSN”) solution that consists of a combination of wristbands, gateways and proprietary backend software, which rely on the Bluetooth Low-Energy (“BLE”) protocol and a low-power enterprise wireless 2.4Ghz platform, to help school administrators identify the geographic location of students or other people or things (e.g., equipment, vehicles, tools, etc.) in order to, among other things, ensure the safety and security of students while at school;

 

(c) a personnel equipment tracking system (“P.E.T.S.”) and ground personnel safety system (“GPSS”), which includes a combination of hardware and software components, for a GPS and radio frequency (“RF”) based personnel, vehicle and asset-tracking solution designed to provide ground situational awareness and near real-time surveillance of personnel and equipment traveling within a designated area for, among other things, government and military applications; and,

 

(d) a right to 30% of royalty payments that may be received by GTX in connection with its ownership interest in Inventergy LBS, LLC (“Inventergy LBS”), which is the owner of certain patents related to methods and systems for communication with a tracking device.

 

The Assets were sold for aggregate consideration of $884,000 consisting of (i) $250,000 in cash delivered at the closing (the “Cash Consideration”) and (ii) 1,000,000 shares of Inpixon’s restricted common stock, par value $0.001 per share (the “Shares”) valued at $634,000 at the date of the sale. 100,000 of the Shares are subject to certain holdback restrictions and forfeiture for the purpose of satisfying indemnification claims. In addition, the Company and Inpixon entered into a six month consulting agreement, pursuant to which the Company will provide services to assist Inpixon with the transition of the assets acquired under the Agreement. Under the consulting agreement, the Company received monthly fees of $15,000 over the 6-month term of the consulting agreement commencing on July 1, 2019.

 

The Company analyzed and performed an assessment of the terms of the Asset Purchase Agreement with Inpixon pursuant to the provisions of ASC 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, the objective when allocating the transaction price is for an entity to allocate the transaction price to each performance obligation (or distinct good or service) in an amount that depicts the amount of consideration to which the entity expects to be entitled in exchange for transferring the promised goods or services to the customer. Based on the provisions of ASC 606, the Company determined $650,000 of the purchase price represented the value from the licensing agreements and was recognized as revenue at the date of the agreement as all performance obligations had been met; and $184,000 represented the fair value of the consulting services that amortized as revenue as the services were provided over 6 month period ending December 31, 2019. In addition, $50,000 was allotted to deferred revenue and is being amortized over a four-year service period, of which $12,500 of this amount was amortized and $31,250 remains deferred at December 31, 2020 and $12,500 was amortized and $18,750 remains deferred as of December 31, 2021.

 

4. INVESTMENTS IN MARKETABLE SECURITIES

 

The Company’s investments in marketable securities is comprised of shares of stock of two (2) entities with ownership percentages of less than 5%. The Company accounted for these investments pursuant to ASU 320, Investments – Debt and Equity Securities. As such, these investments were recorded at their market value as of December 31, 2019, with the change in fair value being reflected in the statement of operations. These investments consisted of the following:

 

As of December 31, 2020, the Company owned 42,500 shares of Inventergy Global, Inc. common stock with a fair value of $850. The Company was able to obtain observable evidence that the investment had a market value of $0.01 per share, or an aggregate value of $425 as of the period ended December 31, 2021. As such, the Company recorded an unrealized loss from the change in market value of $425 during the year ended December 31, 2021 in its statement of operations.

 

In June 2019, the Company acquired 22,222 shares of Inpixon’s restricted common stock (after giving effect to a 1:45 stock split) valued at $634,000. As of December 31, 2019, after the sale of 10,889 Inpixon shares, the Company owned 11,333 Inpixon shares with a fair value of $58,374. During the period ended December 31, 2020, the Company sold 8,500 of its Inpixon shares for total proceeds of $146,201 and recognized a gain from the sale of these shares of $102,420.

 

During the period ended December 31, 2021, the Company sold 834 of its Inpixon shares for total net proceeds of $1,258. The Company was able to obtain observable evidence that the remaining 2,000 shares had a market value of $2,040 as of December 31, 2021, as such, the Company recorded a loss from the decrease in the fair value of the shares of $851, resulting in a net loss from their investment in Inpixon shares during the current period ended December 31, 2021.

 

F-13
 

 

5. INVENTORY

 

Inventories consist of the following:

 

   2021   2020 
   December 31, 
   2021   2020 
Raw materials  $71,936   $9 
Finished goods   25,322    114,128 
Total Inventories  $98,258   $114,137 

 

6. PROPERTY AND EQUIPMENT

 

Property and equipment, net, consists of the following:

 

   2021   2020 
   December 31, 
   2021   2020 
Software  $25,890   $25,890 
Website development   91,622    91,622 
Software development   394,772    294,751 
Equipment   1,750    1,750 
Less: accumulated depreciation   (421,573)   (406,135)
           
Total property and equipment, net  $92,461   $7,878 

 

Depreciation expense for the years ended December 31, 2021 and 2020 was $15,438 and $10,526, respectively, and is included in general and administrative expenses.

 

7. NOTES & LOANS PAYABLE

 

The following table summarizes the components of our short-term borrowings:

 

   December 31, 2021   December 31, 2020 
(a) Term loan  $-   $400 
(b) Term loan   40,640    50,000 
(c) Revolving line of credit   7,000    22,000 
(d) Revolving line of credit   -    (285)
(e) CARE loans   74,953    -
Total  $122,593   $72,115 

 

(a) Term loan

 

In 2015, the Company entered into an unsecured term loan agreement with a third party for an aggregate principal balance of $200,000 at an interest rate of 14% per annum, with the interest adjusted as of December 2019 to 8.5%. The term loan became due on April 14, 2017 and as such, currently past due. At December 31, 2020, balance of the term loan was $400. During the twelve months ended December 31, 2021, we did not issue any shares of common stock to convert the term loan. The Company also paid down in cash the principal balance by $400, which brought the principal balance outstanding on the term loan as of December 31, 2021 to be $0. The balance of related accrued interest at December 31, 2021 was $0 having been paid down in 2020.

 

(b) Term loan

 

In September of 2019, the Company entered into an unsecured term loan agreement with a third party for an aggregate principal balance of $50,000 at an interest rate of 5% per annum in relation to an Asset Purchase Agreement. The term loan became due on December 31, 2020, and is currently past due. The principal balance outstanding on the note as of December 31, 2021 was $40,640, which included $4,806 in interest and reductions of $9,360 due to sublet fees for office space.

 

F-14
 

 

(c) Lines of Credit

 

The Company obtained a line of credit agreement with an accredited investor of $500,000 during 2018. There were three borrowings against the line as of December 31, 2018 for aggregate borrowings of $65,000 and two borrowing in 2019 for $65,000 for a total of $130,000. During the period ended December 31, 2020, the Company repaid $76,000 in principal and all of its accrued interest of $4,204, resulting in a balance due of $22,000 as of December 31, 2020. During the year ended December 31, 2021, the Company repaid $15,000 in principal and all of its accrued interest of $623, resulting in a balance due of $7,000 as of December 31, 2021.

 

The line bears interest of 17%. The line is based upon GTX providing the investor with purchase orders and use of proceeds, including production of goods schedules and loan repayment timelines. These loans/drawdowns are specifically for product, inventory and/or purchase order financing. Upon completion of the terms of the Line of Credit, GTX Corp. will issue to the investor 7,500,000 shares of GTX common stock or $75,000 of GTX common stock, whichever is greater.

 

(d) Line of Credit

 

The Company also has an unsecured line of credit, guaranteed by its CEO, with its business bank, Union Bank, whereby funds can be borrowed at a revolving adjustable rate of 2 points over prime, currently 5.25%, with a max borrowing amount of $100,000.The balance at December 31, 2020 was $(285) while during the period ended December 31, 2021 the Company had adjusted the balance to reflect it as banking fees. As such the balance outstanding as of December 31, 2021 is $0.

 

(e) CARE Loans

 

As of December 31, 2021, the Company has assumed, due to lack of correspondence otherwise, that twelve months of its EIDL loan (see Note 9(b)), or $7,083 of the $150,000 30-year loan and the entire PPP loan (see Note 9(a)) for $67,870, should be considered short-term, or due in less than a year.

 

8. CONVERTIBLE PROMISSORY NOTES – PAST DUE

 

As of December 31, 2021 and December 31, 2020, the Company had a total of $758,000 and $840,673, respectively, of convertible notes payable, which consisted of the following:

 

   December 31, 2021   December 31, 2020 
a) Convertible Notes – with fixed conversion  $758,000   $713,750 
b) Convertible Notes – with variable conversion   -    126,923 
Total   758,000    840,673 
Less: Debt discount   -    - 
Total convertible notes, net of debt discount  $758,000   $840,673 

 

  a) Included in Convertible Notes - with fixed conversion terms, are loans provided to the Company from various investors. These notes carry simple interest rates ranging from 0% to 14% per annum and with terms ranging from 1 to 2 years. In lieu of the repayment of the principal and accrued interest, the outstanding amounts are convertible, at the option of the note holder, generally at any time on or prior to maturity and automatically under certain conditions, into the Company’s common shares at $0.15 to $1.50 per share. These notes became due in 2017 and prior, and are currently past due.
     
    At December 31, 2020, balance of the convertible notes was $713,750. During the twelve months ended December 21, 2021, we issued 1,616,667 shares of common stock to convert $24,250 of principal of these outstanding convertible notes. The Company also paid down $8,750 of the principal balance of the convertible notes and the Company’s executives transferred $70,000 of their outstanding employee notes for cash to a third party, which lowered the related party notes and increased the convertible promissory notes by $70,000. The transferred notes had no change in terms thus no resulting gain or loss on the extinguishment and transfer. As per the original terms the notes bear a 10% annual interest rate, gives the holder the right, but not the obligation to convert up to 50% of the amount advanced and accrued interest into shares, warrants or options of common or preferred stock of the Company at $0.01 per share. As of December 31, 2021, $688,000 of these convertible notes are currently past due, with no associated penalties.

 

F-15
 

 

 

  b) Convertible notes payable with principal balance of $126,923 as of December 31, 2020 consist of loans provided to the Company from various investors. These notes are non-interest bearing and with terms ranging from 1 to 2 years. In lieu of the repayment of the principal and accrued interest, the outstanding amounts are convertible, at the option of the note holder, generally at any time on or prior to maturity and automatically under certain conditions, into the Company’s common shares at 60% of the lowest trading price in the prior 30 days. The Company determined that since the conversion floor of these notes had no limit to the conversion price, the Company could no longer determine if it had enough authorized shares to fulfil its conversion obligation. As such, pursuant to current accounting guidelines, the Company determined that the conversion feature of these notes created a derivative at the date of issuance which was recorded as a valuation discount that was fully amortized as of December 31, 2019. At December 31, 2020, balance of the loan was $126,923. During the twelve months ended December 31, 2021 we issued 9,044,993 shares of common stock to convert $125,125 of these outstanding convertible notes within the terms on the notes and were forgiven $1,799 of the remaining principle due, which brought the principal balance down to $0 as of the period then ended.

 

9. CARE Loans

 

   December 31, 2021  

December 31,

2020

 
a) PPP loan – short term  $67,870   $67,870 
b) EIDL loan – short term   7,083    - 
b) EIDL loan – long term   142,917    150,000 
Total CARE loans  $217,870   $217,870 

 

(a) Paycheck Protection Program Loan

 

On April 30, 2020, the Company executed a note (the “PPP Note”) for the benefit of MUFG Union Bank, NA (the “Lender”) in the aggregate amount of $67,870 under the Paycheck Protection Program (“PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The PPP is administered by the U.S. Small Business Administration (the “SBA”). The interest rate of the loan is 1.00% per annum and accrues on the unpaid principal balance computed on the basis of the actual number of days elapsed in a year of 360 days. Commencing seven months after the effective date of the PPP Note, GTX is required to pay the Lender equal monthly payments of principal and interest as required to fully amortize any unforgiven principal balance of the loan by the two-year anniversary of the effective date of the PPP Note (the “Maturity Date”). The Maturity Date can be extended to five years if mutually agreed upon by both the Lender and GTX. The PPP Note contains customary events of default relating to, among other things, payment defaults, making materially false or misleading representations to the SBA or the Lender, or breaching the terms of the PPP Note. The occurrence of an event of default may result in the repayment of all amounts outstanding under the PPP Note, collection of all amounts owing from GTX, or filing suit and obtaining judgment against GTX. Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of the loan granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities. Recent modifications to the PPP by the U.S. Treasury and Congress have extended the time period for loan forgiveness beyond the original eight-week period, making it possible for GTX to apply for forgiveness of its PPP loan. No assurance can be given that GTX will be successful in obtaining forgiveness of the loan in whole or in part, as such the Company has moved the PPP Loan into short-term liabilities, until further instructions are received. The Company was in compliance with the terms of the PPP loan as of December 31, 2021, and has accrued interest on the loan of $1,160 as of December 31, 2021.

 

(b) Economic Injury Disaster Loan

 

On June 10, 2020, the Company executed a secured loan with the U.S. Small Business Administration (SBA) under the Economic Injury Disaster Loan program in the amount of $150,000. The loan is secured by all tangible and intangible assets of the Company and payable over 30 years at an interest rate of 3.75% per annum. Installment payments, including principal and interest, were supposed to start on June 10, 2021, but as of December 31, 2021 there has been no formal indication on whether this loan will be forgiven and no specific instructions have been received to-date from the SBA on how to proceed. As part of the loan, the Company also received an advance of $10,000 from the SBA. While the SBA refers to this program as an advance, it was written into law as a grant. This means that the amount given through this program does not need to be repaid and has been recognized as Other Income.

 

As of December 31, 2021, the Company calculated that 17 months of the 360 periods on the 30-year loans should be considered short-term, and as such moved $7,083 to short-term liabilities, and has accrued interest on the loan of $9,159 as of December 31, 2021, or until the Company has received more definitive correspondence related to any potential forgiveness.

 

F-16
 

 

10. RELATED PARTY TRANSACTIONS

 

Convertible Notes Due to Related Parties

 

During the period ended December 31, 2021, the Company relieved the outstanding payables due to related parties by $200,000 and converted those amounts into additional notes with an aggregate amount of $200,000. As the conversion price embedded in the note agreements was below the trading price of the common stock on the dates of issuance, a beneficial conversion feature (BCF) was recognized at the date of issuance. The Company recognized a debt discount at the date of issuance in the aggregate amount of $38,000 related to the intrinsic value of beneficial conversion feature. Additionally, the Company’s executives transferred $70,000 of their outstanding employee notes for cash to a third party, which lowered the related party notes and increased the convertible note balance by $70,000. The transferred notes had no change in terms, thus resulting in no gain or loss on the extinguishment related to the transfer of debt, making the outstanding balance on the related party notes on December 31, 2021 as $976,546, net of debt discounts. As of December 31, 2020, the outstanding balance on the convertible promissory notes was $884,546.

 

During 2020, management elected to reduce the 10% annual interest rate to 3% because of the affects COVID-19 had on the U.S. economy. As such, on December 31, 2020 interest of $249,102 is deferred on the above notes and included in accrued expenses to related parties. The other 7% was considered imputed interest and is included as a separate line item on the equity statement accordingly.

 

On July 1, 2021, the annual interest on the notes was re-established to 10%, and as such, on December 31, 2021 the interest of $306,852 is deferred on the above notes and included in accrued expenses to related parties.

 

Accrued wages and costs - In order to preserve cash for other working capital needs, various officers, members of management, employees and directors agreed to defer portions of their wages and sometimes various out-of pocket expenses since 2011. As of December 31, 2021, and 2020, the Company owed $391,743 and $500,007, respectively, for such deferred wages and other expenses owed for other services which are included in the accrued expenses – related parties on the accompanying balance sheet.

 

As part of our mission statement to being a for profit for purpose company, the GTX organization and management team wanted to do its part during the pandemic to provide assistance to front line workers. Masks and other essential PPE donated to various hospitals, assisted living facilities police departments through a host of non-profit 501c3’s the Company partnered with. As we saw a continued need for more assistance throughout communities across the country the Company set up on its ecommerce site the ability for individuals to buy PPE on the behalf of any of our vetted charities and the GTX management team pledged to match 100% of each contribution. During 2020 we were able to donate approximately $46K to a variety of non-profits which in turn distributed products and supplies in their community. The $46K of revenue was recognized as part of overall product sales of which $33K was a direct contribution by the upper management team. During 2021 we were able to donate another $ k to a variety of non-profits. We do not expect there to be any ongoing business from these non-profits as the transactions were specifically related to charitable causes.

 

11. DERIVATIVE LIABILITIES

 

Under authoritative guidance used by the FASB on determining whether an instrument (or embedded feature) is indexed to an entity’s own stock, instruments which do not have fixed settlement provisions are deemed to be derivative instruments. The Company has issued certain convertible notes which conversion prices are based on a future market price. However, since the number of shares to be issued is not explicitly limited, the Company is unable to conclude that enough authorized and unissued shares are available to share settle the conversion option. As a result, the conversion option is classified as a liability and bifurcated from the debt host and accounted for as a derivative liability in accordance with ASC 815 and will be re-measured at the end of every reporting period with the change in value reported in the statement of operations.

 

F-17
 

 

At December 31, 2020 it was determined that the Preferred A shareholders having the majority vote agreed to increase the number of authorized shares, if needed, to settle any convertible debt, and thus the liability was determined to be $0.

 

12. INCOME TAXES

 

Reconciliations of the total income tax provision tax rate to the statutory federal income tax rate of 21% for the years ended December 31, 2021 and 2020, are as follows:

 

   2021   2020 
         
Federal income tax benefit calculated at statutory rate  $470,375   $104,658 
State income tax benefit, net of federal benefit   167,625    20,342 
Less: Stock based compensation expense   (73,000)   (60,000)
Effect of rate change from 34% to 21%   (2,408,000)   (2,192,000)
Change in valuation allowance   1,843,000    2,127,000 
Net tax provision  $-   $- 

 

The cumulative tax effect at the expected rate of 21% of significant items comprising our net deferred tax amount is as follows at December 31:

 

   2021   2020 
Deferred tax asset attributable to:          
Net operating losses carried forward  $3,891,095   $3,541,782 
Less: Valuation allowance   (3,891,095)   (3,541,782)
Net deferred tax asset  $-   $- 

 

At December 31, 2021, the Company had an unused net operating loss carryover approximating $18,524,289, subject to section 382 limitations, that is available to offset future taxable income, which expires beginning in 2028.

 

The Company established a full valuation allowance. The Company continually reviews the adequacy of the valuation allowance and recognizes a benefit from income taxes only when reassessment indicates that it is more likely than not that the benefits will be realized.

 

F-18
 

 

13. EQUITY

 

The Company has 10,000,000 shares of preferred stock authorized. From this pool the following preferred shares have been classified as:

 

Preferred Stock – Series A

 

During the year ended December 31, 2018, the Company authorized 1,000,000 of preferred Series A preferred shares, which shares to have voting rights equal to two-thirds of all the issued and outstanding shares of common stock, shall be entitled to vote on all matters of the corporation, and shall have the majority vote of the board of directors. The subject preferred stock lacks any dividend rights, does not have liquidation preference, and is not convertible into common stock. During the year ended December 31, 2018, the Company issued one million shares to certain officers and board members. The Company retained a third-party valuation firm whose input was utilized in determining the related per share valuation of the preferred shares. Based on Management’s assessment and the valuation report, the fair value of the preferred shares was determined to be $0.0463 per share or an aggregate of $46,363. The shares remain outstanding as of December 31, 2021.

 

Preferred Stock – Series B

 

During the year ended December 31, 2019, the Company authorized 10,000 shares of preferred stock to be designated available for Series B preferred shares that have a stated value of $1,000 each and are convertible into common shares at fixed price of $0.0025. Holders shall be entitled to receive, and the Company shall pay, dividends on shares of Series B Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Company’s Common Stock. No other dividends shall be paid on shares of Series B Preferred Stock, and they shall have no voting rights and have liquidation preference. During the year ended December 31, 2019, the Company issued 150 Series B preferred shares.

 

During the period ended December 31, 2020, the Company issued 100 Series B preferred shares and 10,000,000 warrants to an accredited investor for their financings for an aggregate value of $100,000. The Series B preferred shares and warrants shall have a fixed conversion price per share equal to $0.0025 per share of common stock, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock. The warrants are exercisable through March 2025. The Company considered the accounting effects of the existence of the conversion feature of the Series B Preferred Stock, and the issuance of warrants at the date of issuance. In accordance with the current accounting standards, the Company determined that it should account for the fair value of the conversion feature and relative fair value of the issued warrants (up to the face amount of the Series B Preferred Stock) as a deemed dividend of $100,000 and a charge to paid in capital.

 

During the period ended December 31, 2021, the two accredited investors converted 70 Series B preferred shares into 28,000,000 common shares at the conversion price of $0.0025.

 

Preferred Stock – Series C

 

During the period ended December 31, 2020, the Company authorized 1,000 shares of preferred stock to be designated available for Series C preferred shares that have a stated value of $1,000 each and are convertible into common shares at fixed price of $0.015. Holders shall be entitled to receive, and the Company shall pay, dividends on shares of Series C Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Company’s Common Stock. No other dividends shall be paid on shares of Series C Preferred Stock, and they shall have no voting rights and have liquidation preference.

 

During the period ended December 31, 2020, the Company issued 150 Series C preferred shares and 10,000,000 warrants to an accredited investor for their financings for an aggregate value of $150,000. The Series C preferred shares and warrants shall have a fixed conversion price equal to $0.015 per share of common stock, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock. The warrants are exercisable through April 2023. The Company considered the accounting effects of the existence of the conversion feature of the Series C Preferred Stock, and the issuance of warrants at the date of issuance. In accordance with the current accounting standards, the Company determined that it should account for the fair value of the conversion feature and relative fair value of the issued warrants (up to the face amount of the Series C Preferred Stock) as a deemed dividend of $150,000 and a charge to paid in capital.

 

F-19
 

 

During the period ended December 31, 2021, the Company issued 675 Series C preferred shares and 22,500,000 warrants to an accredited investor for their financings for an aggregate value of $675,000. The Series C preferred shares and warrants shall have a fixed conversion price equal to $0.004 per share of common stock, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock. The warrants are exercisable through May 2024. The Company considered the accounting effects of the existence of the conversion feature of the Series C Preferred Stock, and the issuance of warrants at the date of issuance. In accordance with the current accounting standards, the Company determined that it should account for the fair value of the conversion feature and relative fair value of the issued warrants (up to the face amount of the Series C Preferred Stock) as a deemed dividend of $675,000 and a charge to paid in capital.

 

During the period ended December 31, 2021, the two accredited investors converted 150 Series C preferred shares into 10,000,000 common shares at the conversion price of $0.015.

 

Common Stock

 

The Company issued the following shares of common stock for the years ended December 31:

 

   2021   2020 
   Value of Shares   # of shares   Value of Shares   # of shares 
Shares issued for services rendered  $263,135    8,850,000   $187,600    13,000,000 
Shares issued for conversion of debt   194,373    39,369,993    421,355    53,612,687 
Shares issued for financing   3,275    38,250,004    -    - 
                     
Total shares issued  $460,783    86,469,997   $608,955    66,612,687 

 

Shares issued for services rendered were to various members of management, employees and consultants and are generally expensed as Stock-Based Compensation in the accompanying consolidated statement of operations. Shares issued for conversion of debt relate to conversions of both short and long term debt as discussed in Note 8. Shares issued for financing in 2021 relate to shares granted to investors for their participation in the 2020 financings.

 

During the year ended December 31, 2021 the Company issued 8,850,000 shares of common stock with a fair value of $263,135 at the date of grant for services, shares issued for the conversion of debt were 39,369,993 shares of common stock with a fair value of $194,373 at the grant date and 38,250,004 of shares of common stock with a fair value of $3,275 at the grant date for shares issued related to financings. During the year ended December 31, 2020 the Company issued 13,000,000 shares of common stock with a fair value of $187,600 at the date of grant for services. Additionally, during the year, 3,500,000 were cancelled and another 3,500,000 shares were issued on November 30, 2020 for services at a fair value of $22,700.

 

On October 16, 2018, the Company created a long-term employment retention bonus plan and issued 39,500,000 of restricted common shares to the plan. The shares have a 3-year vesting period and those eligible, employees, directors and advisors must have been with the Company for at least 7 years with an additional 2 years necessary in order to participate in the plan and 3 to become fully vested. The shares will vest with a mandatory 2-year minimum requirement for such vesting to become valid with 33.4% in year two and 66.66% at the end of year three. If the individual leaves the Company prior to vesting the Company or its assignee retains the option to repurchase the unvested shares at par. The shares had a fair value of $1,086,250 at the date of grant, which cost will be amortized over the three-year vesting period.

 

During the year ending December 31, 2019, management and employees agreed to cancel 36 million shares of management’s stock and all shares were returned to treasury. As shares never vested, the Company reversed the previously recorded stock compensation costs. The remaining 3,500,000 shares continue to be amortized to expense as the shares vest. As a result, during the year ending December 31, 2019, the Company recognized net cost of ($4,461) related to the retention plan, and the remaining/adjusted balance of $57,483 in unamortized expense will be recognized as compensation cost as the remaining shares vest.

 

During the year ending December 31, 2020, two consultants agreed to cancel 3.5 million shares of retention bonus shares as the shares never vested and the Company reversed the previously recorded stock compensation costs. As a result, during the year ending December 31, 2020, the Company recognized a reduction in stock based compensation of $38,767 related to the cancellation of the rest of the retention plan, and the remaining/adjusted balance of $41,441 in unamortized expense will not need to be amortized.

 

F-20
 

 

The board is evaluating a new employee stock option plan (ESOP) and intends to select a new plan by the end of the 2021.

 

During the years ended December 31, 2021 and 2020, the Company did not issue any shares of common stock for financing costs.

 

Common Stock Warrants

 

Since inception, the Company has issued numerous warrants to purchase shares of the Company’s common stock to shareholders, consultants and employees as compensation for services rendered.

 

A summary of the Company’s warrant activity and related information is provided below (the exercise price and the number of shares of common stock issuable upon the exercise of outstanding warrants have been adjusted to reflect a 1-for-75 reverse stock split.):

 

  

Exercise Price

$

   Number of Warrants 
Outstanding and exercisable at December 31, 2019   0.0025 - 0.04     36,000,000 
Warrants exercised   -    - 
Warrants granted   0.0025 - 0.015    20,250,000 
Warrants expired   0.01 - 0.04    (5,750,000)
Outstanding and exercisable at December 31, 2020   0.0025 - 0.04     50,500,000 
Warrants exercised   0.0025    (23,500,000)
Warrants granted   0.04    22,500,000 
Warrants expired   0.01    (250,000)
Outstanding and exercisable at December 31, 2021   0.0025 - 0.04     49,250,000 

 

 

Stock Warrants as of December 31, 2021 
Exercise Price   Warrants Outstanding   Remaining Life (Years)   Warrants Exercisable 
$0.0025    16,500,000    3.13    16,500,000 
$0.015    10,250,000    2.09    10,250,000 
$0.04    22,500,000    2.77    22,500,000 

 

During the year ended December 31, 2020, 20,000,000 of the warrants issued were related to financings with total fair value at grant date of $281,489, and 250,000 warrants were issued related to an advisory agreement with total fair value at grant date of $3,793, 10,000,000 have a 5-year term with a strike price of $0.0025, 10,252,000 have a 3-year term and have a strike price of $0.015.

 

During the period ended December 31, 2020, no warrants were exercised, and 5,750,000 expired and 20,250,000 were granted. The 50,500,000 outstanding and exercisable warrants at December 31, 2020 has no intrinsic value.

 

During the year ended December 31, 2021, 22,500,000 of the warrants issued were related to financings with total fair value at grant date of $251,878, and 250,000 warrants were issued related to an advisory agreement with total fair value at grant date of $4,799. Of these warrants, 22,500,000 have a 3-year term with a strike price of $0.04,

 

During the period ended December 31, 2021, 23,500,000 warrants were exercised, and 250,000 expired and 22,500,000 were granted. The 49,250,000 outstanding and exercisable warrants at December 31, 2021 has no intrinsic value.

 

F-21
 

 

Common Stock Options

 

Under the Company’s 2008 Plan, we are authorized to grant stock options intended to qualify as Incentive Stock Options, “ISO”, under Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified options, restricted and unrestricted stock awards and stock appreciation rights to purchase up to 7,000,000 shares of common stock to our employees, officers, directors and consultants, with the exception that ISOs may only be granted to employees of the Company and its subsidiaries, as defined in the 2008 Plan.

 

The Plan provides for the issuance of a maximum of 7,000,000 shares of which, after adjusting for estimated pre-vesting forfeitures and expired options, approximately 2,235,000 were available for issuance as of December 31, 2021.

 

No options were granted during 2021 and 2020.

 

14. COMMITMENTS & CONTINGENCIES

 

Bonuses

 

The Company has an employment agreement with its CEO which, among other provisions, provide for the payment of a bonus, as determined by the Board of Directors, in amounts ranging from 15% to 50% of the executive’s yearly compensation, to be paid in cash or stock at the Company’s sole discretion, if the Company has an increase in year over year revenues and the Executive performs his duties (i) within the time frame budgeted for such duties and (ii) at or below the cost budgeted for such duties. No such bonuses were declared or accrued during the years ending December 31, 2021 or 2020.

 

Contingencies

 

From time to time, we may be involved in routine legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business. The ultimate amount of liability, if any, for any claims of any type (either alone or in the aggregate) may materially and adversely affect our financial condition, results of operations and liquidity. In addition, the ultimate outcome of any litigation is uncertain. Any outcome, whether favorable or unfavorable, may materially and adversely affect us due to legal costs and expenses, diversion of management attention and other factors. We expense legal costs in the period incurred. We cannot assure you that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against us in the future, and these matters could relate to prior, current or future transactions or events.

 

COVID-19

 

The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on the Company’s business is highly uncertain and difficult to predict, as the responses that the Company, other businesses and governments are taking continue to evolve. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a local and/or global economic recession. Policymakers around the globe have responded with fiscal policy actions to support the healthcare industry and economy as a whole. The magnitude and overall effectiveness of these actions remain uncertain.

 

Due to COVID-19, we have experienced some changes in our business, that have been both positive and negative. Specifically, the Company’s IP licensing business has been negatively impacted by the global financial slowdown and many courts, judges and law firms are not working at full capacity, which is creating delays in finalizing licensing agreements or litigation. We have also experienced a small percentage of subscriptions being either cancelled or requested to be put on pause, due to financial hardships. On the positive side we saw an increase in product sales specifically with medical supplies and equipment. Overall, our revenues have not been materially impacted as a whole, however there have been some shifts with certain revenue streams doing better post COVID and others doing worse.

 

The severity of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company’s customers, service providers and suppliers, all of which are uncertain and cannot be predicted. As of the date of issuance of Company’s financial statements, the extent to which the COVID-19 pandemic may in the future materially impact the Company’s financial condition, liquidity or results of operations is uncertain.

 

15. SUBSEQUENT EVENTS

 

On January 25, 2022, we issued 4,000,000 in shares of common stock to an outside consultant valued at $32,000.

 

F-22

 

EXHIBIT 31.1

 

CERTIFICATIONS PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION

 

I, Patrick E. Bertagna, certify that:

 

1. I have reviewed this Annual Report on Form 10-K of GTX Corp for the year ended December 31, 2021;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

 

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: April 12, 2022  
     
By: /s/ PATRICK E. BERTAGNA  
Name: Patrick E. Bertagna  
Its: Chief Executive Officer (Principal Executive Officer)  

 

 

 

 

EXHIBIT 31.2

 

CERTIFICATIONS PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002 CERTIFICATION

 

I, Alex McKean, certify that:

 

1. I have reviewed this Annual Report on Form 10-K of GTX Corp for the year ended December 31, 2021;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: April 12, 2022  
     
By: /s/ ALEX MCKEAN  
Name: Alex McKean  
Its: Chief Financial Officer (Principal Financial Officer)  

 

 

 

EXHIBIT 32.1

 

Certification
Pursuant to Section 906 of the Sarbanes-Oxley Act Of 2002

 

Pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of GTX Corp (the “Company”), does hereby certify, to such officer’s knowledge, that:

 

The Annual Report on Form 10-K for the year ended December 31, 2021 (the “Form 10-K”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and the information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

Dated: April 12, 2022 /s/ Patrick E. Bertagna
  Chief Executive Officer
   
Dated: April 12, 2022 /s/ Alex McKean
  Chief Financial Officer

 

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.