GZIC 10-K
GZ6G Technologies Corp. (GZIC)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For
the fiscal year ended
For the transition period from __________ to __________
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value
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by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
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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
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| Emerging growth company ☐ |
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most recently completed second fiscal quarter was $
As of April 14, 2023, there were shares of the registrant’s common stock outstanding.
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PART I
As used in this Annual Report on Form 10-K (this “Report”), references to the “Company,” the “registrant,” “we,” “our” or “us” refer to GZ6G Technologies Inc. unless the context otherwise indicates.
FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K contains “forward-looking statements” that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Annual Report on Form 10-K that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange Act. Such forward-looking statements include any expectation of earnings, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; factors that may affect our operating results; statements related to adding employees; statements related to potential benefits of acquisitions; statements related to future capital expenditures; statements related to future economic conditions or performance; statements as to industry trends and other matters that do not relate strictly to historical facts or statements of assumptions underlying any of the foregoing. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “will,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified and discussed in our prospectus on Form S-1/A filed with the Securities and Exchange Commission (“SEC”) on February 7, 2023 starting on page 7, “Risk Factors”, and the risks discussed in our other SEC filings. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Forward-looking statements in this Annual Report on Form 10-K may include statements about:
| ● | our ability to achieve profitability; |
| ● | our competitive position and the effect of competition in our industry; |
| ● | our ability to retain and attract new customers; |
| ● | our ability to penetrate existing markets and develop new markets for our services; |
| ● | our ability to retain or hire qualified accounting and other personnel; |
| ● | our ability to successfully integrate acquired businesses; |
| ● | our ability to protect our intellectual property and operate our business without infringing upon the intellectual property rights of others; |
| ● | our ability to maintain the security and reliability of our systems; |
| ● | our estimates with regard to our future performance and total potential market opportunity; |
| ● | our estimates regarding our anticipated results of operations, future revenue, location growth, capital requirements and our needs for additional financing; and |
| ● | our goals and strategies, including those related to revenue and location growth. |
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ITEM 1. BUSINESS
Company Overview
GZ6G Technologies Corp. (“GZ6G”, “we” or the “Company”) is an emerging smart city technology growth company that provides wireless and monetization enterprise level smart solutions to cities and large venues that require multiple types of products, services and third-party solutions to fulfil client needs. We were incorporated in Nevada on December 23, 2003, and are headquartered at 1 Technology Drive, Bldg B, Irvine, CA 92618, Suite no. B123.
GZ6G is a smart solutions technology provider focused on providing smart solutions advisory services, developing and acquiring early stage wireless 5G/6G and beyond technologies that meet certain core application requirements that deliver potential enterprise smart city solutions. Types of Products include IPTV technologies, digital displays technologies, VR, AI, data analytics software and wireless security tools for Stadiums, Airports, Universities and Smart City Projects. Our Mission: create shareholder value by creating a family of wireless technology companies specializing in vertical markets that support subsidiary business units with necessary skill sets to deliver value added smart Solutions to partners and customers.
A wireless Internet of Things (IoT) technology company and its subsidiaries and divisions, GZ6G Technologies Corp (GZ6G) is focused on acquiring, developing and overseeing innovative wireless IoT technology companies for the emerging 5G and Wi-Fi6 marketplaces, including target markets such as stadiums, airports, universities, racetracks, casinos, and smart city projects.
Our controlled subsidiary, Green Zebra Media Corp (GZMC) is one such innovative provider of wireless hardware gateways, communications, marketing and sponsorship, data analytics platforms and CRM technology. Our products are used for stadiums, cities, airports, universities and hospitality markets.
The focus of our operations are contracts which can most efficiently, and cost effectively, bring revenue generating operations through partnerships with venues and industries that must adapt to the new 5G and WiFi6 environment.
Beyond that, GZ6G and controlled entities are establishing a global command center to offer our customer base scale and agility, speed the launch of wireless, digital services and data analytics services, and seamlessly connect customers to world class experiences. It is our intent that wireless IT network managed services and data center initiative for clients and partners will monitor cutting edge Wireless IT networks with the ability to dispatch technicians as necessary to ensure continuous functionality of our Wi-Fi networks.
In June 2018 GZ6G entered into a five-year written Master Service Agreement (MSA) vendor agreement with Lumen Technologies Corp (Lumen) (F/K/A CenturyLink) wherein GZ6G will provide enterprise level smart technology sales and marketing support to help Lumen enterprise sales teams nationally. The Agreement is non-exclusive with GZ6G acting as a supplier of software, license to use the software, service of the software, packaging and shipping the software, and installation of the software, as well as hosting services for the software. Due to existing relationships Lumen has with Venues, Stadiums, and Smart City target markets we are able to leverage Lumen’s relationships for introduction and exposure into those target markets.
The first of these projects for the Company was the city of West Des Moines, Iowa’s new Recplex sport venue project. The Company finalized a wireless hardware installation to recognize $130k in revenue in the fourth quarter of 2021. IT sponsorship managed service revenue will begin as the West Des Moines Recplex opens for the public in the current year.
In July 2022, the Company signed an exclusive, strategic partnership with Major League Baseball (“MLB”) team, the Texas Rangers. In December 2022, as amended January 2023, the Company signed a sponsorship and services agreement with the Kansas City Royals Baseball Club.
Green Zebra will be managing sponsorship opportunities within the venue across IPTV (internet protocol television) and fans’ mobile devices during live games and other events. When a stadium guest logs into the venue’s Wi-Fi network, Green Zebra’s interface launches to provide fans with quick and secure Internet access on their mobile devices including relevant messaging, such as food and merchandise discounts, and urgent updates such as stadium or security information across the venue’s IPTVs.
In addition, sponsorship opportunities are provided across Wi-Fi networks operated through Green Zebra’s managed service solutions. This allows for a smart connected ecosystem and monetization prospects for sponsors to promote their brand to a captive audience. Green Zebra will manage the networks within the live event facilities and their respective Wi-Fi networks and redirect web pages enabling sponsor ads to be seen across diverse platforms.
In September 2022, the Company’s GZ Networks division entered into an engagement agreement with an Orange County, California-based real estate chain, RE/MAX, as its IT service provider. This Orange County engagement will provide an opportunity to service other RE/MAX locations as the environment is similar office to office. This new partnership is one of several opportunities GZ Networks has been cultivating for small to medium size businesses (SMBs).
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The initial focus on the Southern California region gives the GZ Networks senior management team the opportunity to train and prepare team members for enterprise accounts. With a quickly expanding roster of potential clients for enterprise accounts, GZ6G and GZ Networks are working quickly to enhance in-house expertise as an IT service provider in order to prepare for larger enterprise accounts as the opportunities arise.
Along with IT services offered to clients, GZ Networks offers a package of robust security services intended to protect sensitive customer and staff data from cyber-attacks for key service providers such as law offices, bank buildings, hotels, bars, and restaurants. The GZ Networks team of business advisors examine current business structures in place and provide analysis and suggestions to secure and optimize networks. HIPAA compliance allows further security where needed for hospitals, doctor’s offices, and healthcare facilities to safeguard patient data.
Green Zebra Smart Networks opened its new technology managed service center in Irvine, California in 2021 to support monthly recurring revenue for enterprise accounts. In addition, the office has hired staff to sell remote IT networking services to small to medium companies that require an outsourced IT networking solution. Costs for staffing and equipping this office has been approximately $1.45 million and $0.52 million in the years ended December 31, 2022 and 2021, respectively. We will continue to expand our staff as needed and as funds are available; however, the office currently is equipped with the necessary hardware and software, including state of the art security measures, in order to use this office as the Company’s showroom and headquarters.
Green Zebra Smart Networks (GZSN) Division Overview
GZ6G Technologies Corp (GZ6G), offers enterprise level IT and wireless networking services to national accounts while GZSN division, located in Irvine, CA, offers local enterprise level IT and wireless network technology consulting service, business technology infrastructure strategy and planning services, as well as IT networking hardware & security cloud software products and services. In addition, GZSN will provide businesses with monthly remote managed and monitoring service to the Orange County, California markets.
Green Zebra Smart Networks offers innovative solutions to help midsize business owners, post Covid, to upgrade, manage and provide remote work force IT technology infrastructure. GZSN services will provide opportunities to reduce IT infrastructure costs, reduce business labor costs by offering a local IT monitoring and managed service (MSP) solution that provides remote network engineering support.
Vision
Green Zebra Smart Networks plans to open the first of three IT Wireless MSP offices. We plan on revolutionizing the wireless managed service provider market (MSP) by focusing on the local business market that needs wireless IoT and remote network technology upgrades enabling businesses to grow with advanced security tools and network infrastructure technologies to operate their business much more efficiently with cloud technologies and resources.
Marketing
Starting July 5, 2021, we began aggressively advertising Green Zebra Smart Network services to small to medium size businesses that need IT infrastructure upgrades, remote networking services and cloud security solutions in Orange County, Ca. Advertising initially for lead generation through social media, email marketing, and digital marketing campaigns to drive product and service awareness to create Green Zebra Smart Networks as the IT authority in the local market.
GZSN intends to provide educational videos and blogs on cyber security technology and the benefits of having Green Zebra Smart Networks
as their trusted technology advisors, to encourage businesses to become our clients.
GZ6G Sales Methods: We intend to use the following methods to drive and increase sales:
| ● | Digital Marketing |
| ● | Social Media Marketing |
| ● | Inside Sales teams |
| ● | Channel Partners |
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Revenue Model
We are unable to provide an estimated revenue for GZ6G at this time; however, our Green Zebra Smart Network Irvine, California local office has begun generating recurring revenue in the middle of 2022. We began onboarding clients in the fourth quarter of 2021.
Clients, when they are signed up, will incur recurring $5,000 monthly fees for IT security monitoring services and Local CCNA (Cisco Certified Network Associate) engineering with remote troubleshooting support capabilities and senior IT network engineers.
Additional non-recurring business revenue would be generated from IT infrastructure network Upgrades purchased from our smart solutions advisors.
GZ6G Technology & Expertise Is Helping Build Smarter Businesses. Wireless, Managed Services, Artificial Intelligence, data analytics. Smarter Business. Developer Tools. Enterprise Technology for the federal government, stadiums, airports, universities, and the entertainment industry.
GZ6G’s Subsidiaries and Divisions will focus on 4 core areas of expertise to support the GZ6G Enterprise smart solutions: 1. Wireless networking, security managed Services; 2. Data Center Services; 3. IOT software development; 4. Marketing, advertising, sponsorship services. We expect each subsidiary or division to operate on its own until GZ6G requires the expertise to fulfil all or part of GZ6G technologies enterprise smart solutions products and services as required by contracts.
GZ6G Technologies Corp. (“Green Tech”) and its operating subsidiary, Green Zebra Media Corp work together to offer a fully integrated wireless infrastructure solution for enterprise opportunities, while Green Zebra Media focuses on innovative digital marketing, advertising sponsorship and monetization services for their clients. Green Zebra Media will provide digital marketing, monetization and marketing support services that are missing Wireless communications Networks, IoT applications, and location-based engagement types of technology.
While there are many competitors that offer Wireless Networking technology platforms, there are few that provide a on premise wireless gateway communication ad servers and digital marketing monetization support solutions together. The emerging industry requires assistant to maximize the client’s return on investment.
Green Zebra Networks (GZN) division will provide both managed services support for wireless networks hardware, software for enterprise level clients. In addition, GZN wireless technology will provide proprietary and licensed technology solutions.
Green Zebra Labs (GZSL) a new division being created to support GZ6G’s Enterprise smart solutions software integration services for Smart City Venues, in addition to creating new IoT software venue applications that support the smart city initiatives and venue specific data analytics and artificial intelligence applications. The Green Zebra Smart Labs Software team provides the client with a trusted external IoT software development team to assist with future smart city solution integration opportunities.
The mission of GZ6G’s management team is to build a family of smart solutions service companies that work together to minimizes the competition while lowering the risk to enter the 5G & Wi-Fi 6 marketplace. Venue owners need additional help using integrated technical support service, however, offering a digital marketing and monetization solution has created a competitive advantage that connects and engage communities with relevant information, offering and managing monetizing solutions will subsidize the expensive wireless technology infrastructure costs.
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Offering an integrated approach digital marketing solution, sponsorship revenue, IT wireless networking and Software expertise together expedite the decision process for all stakeholders, our telecommunication, wireless and agency partners allow us to expand our reach, capabilities and resources.
GZ6G provides an enterprise state-of-the art Wi-Fi Media and communication Platform (hardware and software) to monetize and scale to any size venue and/or audience. Our Green Zebra Networks engineering team works with the Venue’s IT engineering team to install Wireless communications platforms. Green Zebra Networks will provide an engineering team to install the Wi-Fi platform into the venue Wi-Fi network, providing WiFi monetization hardware (Green Zebra Media hub) that connects to the customer’s Wi-Fi network system. Every Wi-Fi Media server is embedded with Communication and data analytics software to create monetization and communication. This capability transforms a single location into a powerful, media-rich communications network throughout the venue location.
This WIFI Media Server platform creates user engagement when users access Wi-Fi, enabling digital marketing teams to empower businesses, engage communities and enable mobile users with relevant local information, accessed as a cloud or on-premises solution.
In addition, Green Zebra Media teams signs long term contracts to secure digital marketing and sponsorship assets monetize venue opportunities, supporting the venue team with marketing strategies, planning, and implementation services, brand & user engagement services, digital marketing and design services, communication software and Wi-Fi ad servers.
Currently, GZ6G technologies has secured two partnerships with MLB teams the Kansas City Royals and the Texas Rangers and is working on securing a number of enterprise projects that were delayed in 2020 and 2021 as a result of COVID-19 but have resumed operation in fiscal 2022. These additional projects include several NCAA universities, National Football League, and cities located in the United States.
Further, the Company has entered into a contract with US Federal Contractor Registration (USFCR), whereby the Company will be provided with assistance to qualify and help with federal contract procurement services and writing contracts for System for Award Management (SAM) projects.
GZ6G has future plans to roll up several complementary companies in the wireless, Wi-Fi security IoT and digital marketing sectors. GZ6G is able to provide wireless and digital promotion rights for certain events including WiFi media network advertising rights and the development of smart venue wireless networks and software engagement technology products for airports, stadiums, campuses and cities in the United States and International markets.
Additional revenue sources – Wi-Fi as a revenue center
The use of Wi-Fi networks in high-density areas is the most efficient manner to ensure consistent wireless connectivity. Two trends are converging today to propel upgrades and new deployments of Wi-Fi networks, including 5G and WiFi6. First, consumer demand for wireless connectivity continues to grow, overwhelming many wireless and Wi-Fi networks. Secondly, many large entities are seeking new digital media avenues to obtain exposure to target markets through online ‘impressions’, particularly when they have access to a captive audience. GZ6G is uniquely positioned to facilitate the convergence of these two trends. Additionally, GZ6G is developing future Wi-Fi networks that can integrate the Internet of Things (IoT) and significantly enhance network utility and user experiences.
The greater use of wireless devices (smartphones, tablets) and the emergence of IoT places has increased demand even further on wireless networks. Large network companies promote the 5G network deployment, but there are limitations to its effectiveness, particularly in high-density areas. Wi-Fi networks remain the best network deployment plan for airports, businesses, universities, transport hubs and city locations where there are high-density network demands.
Existing Wi-Fi technology can significantly improve wireless performance at airports, transport hubs, convention centers, resorts, and stadiums. The future of Wi-Fi is even more exciting. New developments by GZ6G will significantly enhance network throughput and allow for apps to reside on a venue’s network rather than the cloud. The result is much faster response and the ability to customize apps to serve local businesses, communities and users of the network.
The GZ6G total solution turns the Wi-Fi cost center into a revenue center by (a) deploying a state-of-the-art Wi-Fi broadcast network with customized software for enhanced user experience and (b) obtaining sponsors who desire exposure to consumers and businesses in high-density areas. This combination can easily justify Wi-Fi network deployment today.
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Additionally, GZ6G plans to vertically integrate its operational model, providing both software and hardware as well as full support services to its customer base.
GZ6G is installing Wi-Fi networks in high-density use areas and is partnering with other technology companies and host entities (stadiums, universities, airports, resorts) for the GZ6G total solution. GZ6G has established strategic relationships with (a) network companies that are pitching the GZ6G solution; (b) established Wi-Fi networks that need upgrading; and (c) a range of potential sponsors in a variety of industries.
The Company has generated limited revenue to date and has only recently entered into its first strategic partnership, sponsorship and services agreements with two large venues and one smaller Enterprise client. We expect to continue to finalize contracts throughout 2023 to expand our revenue base. Recurring revenues will not be generated from our projects until the installation of our products are complete (anticipated in 2023) and sponsorship and marketing opportunities are able to be monetized.
The Company currently has four divisions that will implement actions to correspond with the above services.
Market Opportunity
GZ6G Technologies is in a unique position to grow rapidly as a smart solution provider for strategic partners in the 5G & Wi-Fi 6 industry with strategic public partners.
We have been preparing, developing and building relationships to scale 5G & Wi-Fi 6 emerging markets since winning the New York City connectivity challenge at Governors Island in the Spring of 2018. We established a s relationship with Lumen’s smart solutions consulting team (formerly CenturyLink). GZ6G is in a unique position to grow rapidly as a smart solution provider in the 5G & Wi-Fi 6 industry.
In addition, GZ6G is seeking strategic acquisition opportunities to scale revenue, leadership and customer base by expanding the customer base and product lines in four core business areas: wireless networking and managed services locations, Smart IoT Software Applications, Data Center facilities, Digital marketing Agencies opportunities. We expect to continue creating strategic partnerships that can help scalable a diverse sales force and product offering target markets local to global.
5G & Wi-Fi 6 plus is creating what’s called the (4th) next generation industrial revolution that is going to create faster and faster high-speed internet that will create more innovations opportunities that are directed at auto, delivery, entertainment, medical industry and sensors technologies.
GZ6G has been preparing, developing and building relationships to scale 5G & Wi-Fi 6 emerging markets since winning the New York City connectivity challenge at Governors Island in the Spring of 2018. We established a relationship with Lumen’s smart solutions consulting team (formerly CenturyLink) and also have a few other trusted strategic partnership opportunities. GZ6G is in a unique position to grow rapidly as a smart solution provider in the 5G & Wi-Fi 6 industry.
GZ6G plans to take advantage of early acquisition opportunities to scale the Gz6G business model. It is our belief that most of the existing industry is not preparing for the future change that’s being created by the new high-speed capabilities coming to market.
We will continue to focus on wireless infrastructure, IoT software and marketing to scale revenue opportunities, leadership and customer base by expanding the customer base and product lines in four core business areas: wireless networking and managed services locations, Smart IoT Software Applications, Data Center facilities, Digital marketing Agencies opportunities. We expect to continue creating strategic partnerships that can help scalable a diverse sales force and product offering target markets local to global.
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Target Markets:
| ● | Cities, Airports, Stadiums, Universities, and Hospitality Markets Globally |
Target Acquisitions:
| ● | Advertising agencies, IT Network Related Companies, IoT software applications. |
Barriers to Market
With any emerging market there are any number of challenges that exist, as the market matures and flattens out. We don’t see this happening any time soon, quite the opposite over the last few years we have had a chance to figure out a few things during the development and testing periods.
Emerging Smart solutions technology Expertise –
Lack of qualified and experiences staff will number one challenge to bringing smart solutions to market.
Competitive Landscape -Telecommunication companies are talking about the 5G and Wi-Fi 6 connective speeds and required infrastructure requirements with various other technologies. Connectivity is a commodity between all of them, they are and will be looking for alternative product and service providers to differentiate themselves.
| ● | Overall Smart Solutions product offering |
| ● | Diverse teams are required |
Go-To-Market Strategies
Smart Solutions Technology
GZ6G technologies going forward marketing strategy for 2023 will primarily be focused on global strategic partners relationships where our products and services complement each other’s’ product, services and support offerings to enterprise clients.
This partnership approach reduces barriers to market lowers the risk while establishing brand value and trust with clients and customers. Access to our target markets are more receptive when working with their trusted partners at this stage of our growth.
This partnership approach reduces barriers to market lowers the risk while establishing brand value and trust with clients and customers.
The Company will look to scale up divisional offices in local markets as part of our marketing and support strategy going forward. Our plans include local and regional support centers for large venue city, stadium, airport and university accounts.
Technology Monetization Marketing Strategy
The Green Zebra Media sponsor advertising division primarily focuses on various types of brand advertisers and agencies that represent brand advertisers that are interested in reaching targeted venue or multiple venue customers.
Certain sponsors are willing to contribute more per venue to be the exclusive sponsor for particular events or for several events, or for a period of time at one venue. Sponsorship companies are in the following industries:
Types of Venue Sponsor Industry
| ● | Airline industry |
| ● | Technology Industry |
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| ● | Healthcare Industry |
| ● | Sports Industry |
| ● | Entertainment Industry |
| ● | Hospitality industry |
| ● | Beverages |
Potential Sponsorship Commitments
Potential Sponsorship opportunities are in the following industries:
Airlines
Beverages
Casinos
Hotels
Restaurants
Consumer Retail
Go-To-Market Strategies for Target Markets
GZ6G Technologies is looking at strategic acquisition opportunities that would allow for infrastructure, development and consumer target market opportunities; as well as teaming up with partnerships that can help create a diverse sales force that focuses on target markets.
University and Stadium Market
The university and stadium market is best addressed through existing commitments and partnerships; for instance, with our partner, Lumen (f/k/a CenturyLink). GZ6G Technologies total solution to Wi-Fi installations is very attractive to strategic partners. As a result, some of the strategic partners have integrated the GZ6G Technologies solutions into their product/service offerings.
Airport Market
The airport market is addressed with the direct sales force and ongoing relationships. GZ6G Technologies will leverage the relationships that key partners have with airports. The GZ6G Technologies total solution for installing, managing and monetizing Wi-Fi installations in airports is attractive to partners managing existing Wi-Fi networks.
City Market
GZ6G Technologies will address the city market with a direct sales force. GZ6G Technologies has installed a Wi-Fi network on Governors Island New York during the connectivity challenge (2018 with Fibreless). Moving forward GZ6G will continue to work alongside their partners to leverage the success of that installation to attract additional city Wi-Fi installations.
Industry Overview
Wi-Fi technology enables wireless users to use internet and telecom services in a high-density environment. Without Wi-Fi in areas where there is a high concentration of wireless users, response time degrades, phone calls get ‘dropped,’ internet connectivity may be intermittent and user experience suffers. For this reason, Wi-Fi deployment is critical for internet and telecom networks in many geographical footprints.
The market for Wi-Fi equipment worldwide was $15.6 billion in 2022, according to industry research by MarketsandMarkets, Inc. This describes a compound annual growth of 21.2% through 2022. Such growth is driven by the use of wireless devices including smart phones, tablets and development of the IoT market. Approximately 67% of the worldwide wireless equipment market is in the US. MarketWatch reports the Global Wireless Connectivity market, including chips and devices will reached $31.8 billion in 2022.
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The primary drivers for the deployment of Wi-Fi networks are increasing bandwidth demand from businesses, universities, smart city projects, and consumers. With the integration of more images and videos for internet users, demand for greater network bandwidth increases. The weakest link in broadband networks is the wireless connection to the end user. The latest Wi-Fi network technologies address this weak link in a cost-effective manner.
The primary constraints to deploying Wi-Fi networks has been poor-user experiences in high-density areas, security and privacy concerns. Users with multiple applications on smart phones, or with multiple devices (smart phone and tablet or laptop) place high demands on wireless networks. Bandwidth intensive applications that include video and GPS create greater demands on wireless networks.
How does the host/network manager (airport, smart city, business, university) of Wi-Fi decide to improve network capabilities? Wi-Fi networks provide critical connectivity services to users, and bandwidth demand from users creates the need to upgrade the networks. Security on Wi-Fi networks is improving, but bandwidth is lacking. Wi-Fi network users are demanding more bandwidth while traveling, when at sporting events, when spending time ‘downtown’ or in commercial districts, and when at resorts, or on university campuses.
Current Operations
GZ6G provides a total solution for high-density use areas with:
(1) state of the art Wi-Fi hardware deployment to address the requirements of all wireless users, in a specific venue
(2) custom software that enables an enhanced user experience and secure, easy network access
(3) ability to integrate security system or expand Wi-Fi footprint
(4) automatic portals for any device in the area
(5) the ability to monetize the Wi-Fi network deployment for the host entity.
GZ6G Technologies Target Markets
GZ6G is focusing on high-density use venues where (1) internet connectivity demand is high and likely to grow, (2) the host venue recognizes the benefit of providing Wi-Fi broadcasting service, and (3) venues where sponsors are interested in consumer exposure. The target venues include universities, professional sports stadiums and racetracks, airports, resorts and smart-city projects.
Hardware and Software Solutions Today
GZ6G Technologies installs state-of-the-art Wi-Fi equipment designed to meet the projected high-density use demands for the location. Equipment manufacturers may include Cisco, Cradle Point, D-Link, Juniper, Linksys. Software may include products that are customizable from Brick & Mobile, Cloud4Wi, Purple Wifi, Panasonic, Socifi, Tanaza.
Wi-Fi network installation is customized to ensure the correct internet connectivity and speed is available throughout the venue. GZ6G has developed the software tools that are customized for the host/network manager to easily manage the network through the use of dashboards, which may include integrating additional components such as a security system. The software tools (broadcasting system) allow for the host to create pop up notices to remind users of important items regarding safety, first aid, ancillary services and special offers. The network manager gathers data to understand characteristics of user demands on the network. The host/network venue manager may also design features which provide information to users to enhance their time while in the area, such as discounts to affiliated stores or restaurants, notices of services at the facility such as food outlets, retail items, special benefits to repeat customers, or notice of where emergency healthcare is available. The host venue can customize the user interface on the network and as new supplementary services become available, such as a new food venue or new emergency management procedures, the customer interface can be changed.
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Company Offerings
GZ6G Technologies focus on leading wireless marketing & CRM technology smart solutions provider, offering closed loop security gateways, wireless marketing and sponsorship CRM platform solutions, and deep data analytic solutions for the hospitality, stadiums, airports, universities, and cities. This customized approach to marketing will allow clients to elevate the interaction between the venue and the consumers on their platform. The second division will work with sponsors for unique marketing opportunities within the venue and for the venue.
The future vision for the Company is the inclusion of four main divisions.
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The parent company, GZ6G Technologies, provides enterprise technology and expertise consulting together to build smarter cities and venues of the future which would oversee the operational excellence of its four existing and planned complimentary subsidiaries under the publicly listed entity.
GZ6G’s Subsidiaries and Divisions will diversify its business model by establishing 4 core areas of business expertise to support the overall GZ6G Enterprise customer smart solutions:
| 1. | Green Zebra Network: Wireless networking, security managed Services; |
| 2. | Green Zebra Data Center Services: Tier 3 Enterprise center optimize for end users, managed services, cloud data |
| 3. | Green Zebra Smart Labs: Smart IOT software development services and applications |
| 4. | Green Zebra Media: Marketing, advertising, sponsorship services. |
Green Zebra Networks (GZN) operates as a stand-alone division that offers IT Wireless networking, hardware, implementation and managing services support and solutions in local to national business. GZ6G would subcontract the GZN division when Networking and managed services related products and services are required.
FiBox Pro Appliance Gateway Solution:
| ● | GZN provides a smart appliance Network gateway device called FiBoxPro gateway that creates a closed loop local communication and monetization service. GZN will provide the configuration and managed services. These IT technical teams will also provide technical support and communication with internal and external teams. |
Green Zebra Data Center (GZDC): offering Tier 3 Enterprise data center solutions to optimize end users, managed services, cloud data.
Green Zebra Media, Corp (GZMC) operates as an independent advertising company that offers traditional advertising, digital marketing, digital advertising and sponsorship GZ6G subcontracts GZMC services when advertising and sponsorship services are required to help monetize venues and the FiBox Pro Product.
Green Zebra Smart Labs (GZSL) Division
This division will offer software development services for various types of Smart Solution cloud products and services. GZSL will integration services for third party technologies. This division will be responsible for being the leading provider for in-venue wireless venue and user engagement, marketing, advertising platforms and data analytics.
The software division develops and support various API application support services for Smart solution broadcasting systems, data analytics and artificial intelligent application needs.
Data Analytics Software development and R& D support.
CRM, API software development, artificial intelligence (AI), research and development (R&D) platform integration solutions and more.
Current GZ6G development projects:
| ● | VenuTrax – an in-venue and Saas platform cloud data analytics and artificial intelligent engine used to help venue owners communicate and monetization relevant information regarding user insights. |
| ● | CastWifi – An in Venue or cloud WIFI interactive broadcasting technology that allows public venue wireless networks to broadcast live content to their user audience in a closed loop setting like a similar to IPTV technology but over Wi-Fi. |
Green Zebra Media, Corp (GZMC) operates as an independent advertising company that offers traditional advertising, digital marketing, digital advertising and sponsorship services in addition to supporting GZ6G smart solutions customers and partners with agency services that include advertising, marketing, sponsorship sales agency, and platform support team; this division will be broken into two main operations.
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GZ6G Technologies envisions the creation of wireless ‘fiber-speed’ networks to meet the demands of wireless consumers and businesses. High-speed wireless networks enable the establishment of Wi-Fi networks in any location to meet demands of wireless users, and expand the content capabilities of hosts and sponsors, regardless of the distance to fiber rings.
GZ6G is an IoT company made up of four different supportive channels:
| ● | Infrastructure |
| ● | Software Development |
| ● | Cyber Security |
| ● | Data Management |
We are in the process of developing a global command center that will allow us to monitor all of our venues in one central place. We will have technical engineers available in case any of the networks go down in any of the venues at any time. We will be able to remotely navigate any issues arising at the venues so that service will be virtually uninterrupted.
Practice areas can either function independently to address a client’s specific functional IoT needs, or be combined to provide brands with a holistic service offering that will handle all of their needs.
From banner and social media advertisements and advertorials, to website and shopping portal purchase engagements, and product procurement, we will support venues in all of their touch points and engagement opportunities with their end audience.
We will offer the following core services:
We define venue as our target client, it can be a point of interest within a city, or it could be the city itself. Venues are a specific geographical location, such as a city, airport, university, stadium, racetrack, casino, or hospitality location (trade center, hotel etc.). When a venue connects to the network it is called a closed loop communication solution.
Qualify – Our infrastructure team goes into a new venue to ensure that they have the right infrastructure or bandwidth in place. This also means the team will be looking at whether the venue has the appropriate Wi-Fi capabilities in place, so the equipment will sync. Qualify also means that an evaluation has been completed to ensure that the venue has the correct Wi-Fi speed so marketing materials such as videos, graphics and content will present itself correctly.
The new GZ6G Wi-Fi broadcast network facilitates the Internet of Things to function in a way that it was projected to do years ago. Several possibilities with Wi-Fi apps are as follows:
| ● | Instantly receive best location for emergency first aid with a selected route, walking or driving. Information on where closest drinking fountain, first aid station, among other things, is located. |
| ● | Police can receive optimal path to particular location and control any security cameras in different locations. |
| ● | Consumers receive information on where street parking is available in real time and which parking structures have spaces available. |
| ● | Travelers can be notified of flight changes, allowing more restaurant time. |
| ● | Real time information on shortest food lines at a stadium. |
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| ● | 3-D images of museum, real-time information on lines at any venue. |
| ● | Cameras showing crowd at outdoor restaurant or parks. Control of access can change. |
| ● | Security system cameras only available to certain parties such as police or other security personnel. |
| ● | Short term restaurant or store specials when customer traffic is low. |
All of this and more is possible with apps that do not require downloads from the cloud. It’s all available instantly because it is on the venue network. Each venue network can control which apps are available to which group of users, such that security cameras can be available to a select group. The possible apps are endless, and each venue network can customize its network page as it sees fit.
Our team will possess core capabilities and skill sets that help our clients execute on targeted growth plans that tap into the trillion-dollar tech market. We will serve clients across a wide range of industries and geographies.
Our growth will be through a multi-prong plan: (1) growing an in-house sales team; (2) leveraging strategic partners who are advisors to decision makers and owners of companies and will be conduits for introductions; and (3) client referrals.
We will build a core team of product developers, creative designers, sales professionals and account managers under each practice area to service existing and new clients. Our philosophy is to develop “repeatable” software platforms around common business needs that can be productized to allow for us to scale development of new projects and grow revenues without relying on building large development teams.
Our expertise is IoT; we will help companies become relevant, agile and competitive in a global consumer commerce environment. We will offer the ability for worldwide marketing and advertising through our developed software and available wifi at our venues. Consumers want to be able to shop, among other things, anytime and anywhere, and on any device; our expertise allows for us to put our brands right in front of this consumer activity.
The global information technology industry is experiencing global growth and US companies have to be prepared to be competitive on a global marketplace.
The next generation Wi-Fi broadcast networks will bring fiber-like bandwidth capabilities to a wireless network. Additional benefits of the GZ6G Wi-Fi broadcast network development is the ability to (a) wirelessly connect to fiber that may be at a distance from the facility, and (b) install high-speed bandwidth wireless to serve a community at a lower cost and much shorter deployment timeframe compared to fiber installations.
Employees and Consultants
Including our CEO, President and Director, Mr. William Coleman Smith, along with our two independent Directors, we have a total of 14 full time employees. Mr. Rohan Potange continues to act as our Interim Chief Technology Officer.
Rohan Potange, Interim Chief Technology Officer
Rohan Potange has more than 13 years of experience in technology consulting, project management, operations, finance, strategic marketing, business expansion, and innovative product development. As a software industry expert, his responsibilities at GZ6G Technologies Corp. encompass expanding and managing the teams responsible for the development of VenuTrax for GZ6G Technologies’ Green Zebra Smart Labs division. VenuTrax will be a state-of-the-art logic management solution cloud (SaaS) platform intended to provide venues the ability to directly communicate with customers using 5G & Wi-Fi 6, as well as offer business intelligence such as data analytics and artificial intelligence for monetization purposes.
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Mr. Potange is also the Chief Executive Officer for GZ6G Technologies partner, Internet Soft, a digital transformation consultancy, and software development company that provides cutting-edge engineering solutions. Internet Soft assists Fortune 500 companies and enterprise clients solve complex issues that always emerge during their digital evolution journey. Internet Soft helps Green Zebra Smart Labs scale up workforce and technologies to meet the demand for the emerging 5G & Wi-Fi 6 industry.
Mr. Potange’s strong communication and mentoring skills allows him to lead teams in a way that promotes internal and external business relationships and strengthens customer confidence.
Mr. Potange received his Master’s in Computer Science from Savitribai Phule Pune University located in Pune, India.
The Company works with legal counsel, an accounting firm and an auditing firm on an as needed basis. The Company is looking to hire technical, marketing and software development engineers/staff as soon as finances allow. We intend to add additional staff as we grow. Any such additions will be made at the discretion of management and to meet the Company’s then current needs, all subject to having available resources to attract and retain such staff.
Key Relationships
GZ6G has several strong relationships that are mutually beneficial to both partners; partners that will leverage the GZ6G capabilities to maintain and/or grow revenue streams for both entities.
Current Partnerships
Lumen Technologies/CenturyLink |
Lumen Technologies: Lumen Technologies, previously CenturyLink, is one of the largest telecommunications organizations in the country focused on using their networks at cities, stadiums and universities. As a trusted third-party solutions partner, GZ6G Technologies offers the smart solution tools and expertise required for Lumen Technology to develop long term user engagement solutions.
Brand LTD – Brand LTD is our advertising and marketing partner/creative agency.
ViTech – ViTech is one of our IPTV Solutions providers for large venues and smart cities.
Aruba Wireless – Aruba is one of the partners for which we utilize their hardware for smart venues and smart cities.
Internetsoft – Internetsoft is our software development strategic partner that works with our internal development team to scale our software development projects for smart venues and smart cities.
Marketing Strategy
We plan to market directly to sports arenas, concert venues, universities, racetracks, casinos, and to smart cities using our existing relationships as well as deploying a number of popular online marketing tactics. Additionally, we will be leveraging strategic partners who are advisors to decision makers, and owners of companies, and who will be conduits for introductions and client referrals.
GZ6G has relationships with national and regional Fortune 500 entities that are seeking targeted methods to reach existing and potential customers. These sponsors include commercial enterprises that desire to advertise or collect analytic data on users in high-density locations. National sponsors include the major network carriers, auto manufacturers, airlines, casinos, grocery stores, online retail, consumer discretionary goods and restaurant chains. Many of these seek exposure to consumers in specific areas.
With selective Wi-Fi markets, a sponsor can more effectively deploy advertising budgets. Local restaurants can advertise specials at football games. Casinos or restaurants can advertise to airport customers or smart-city users. Host entities can identify food specials at certain times when lines are low. Airports could provide flight updates in real time with notices to fliers that log in on their flight.
As the GZ6G network installation base grows, the Company will have the ability to offer sponsors a variety of venues for exposure.
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Government Contracting Opportunities/Regulation
We have registered through US Federal Contractor Registration (USFCR) which will allow us to be included in the System for Award Management (SAM) which will allow us to be included in writing government contracts. In the event we are awarded jobs through SAM, we will have to adhere to any requirements set forth by the United States Federal government.
Intellectual Property
We will regard our client lists and any intellectual property we may acquire, i.e., patents, trademarks, service marks, copyrights, and similar intellectual property that would be critical to our success, and we will rely on trademark, copyright and confidentiality and/or license agreements to protect our proprietary rights. Effective intellectual property protection may not be available in every area in which our products are made available. Furthermore, regulations governing domain names may not protect our trademarks and similar proprietary rights. We may be unable to prevent third parties from acquiring and using domain names that are similar to, infringe upon or diminish the value of our patents and other proprietary rights. We may be unable to prevent third parties from using and registering our trademarks, or trademarks that are similar to, or diminish the value of our trademark.
Competition
Telecommunication companies are talking about the 5G and Wi-Fi 6 connective speeds and required infrastructure requirements with various other technologies. Connectivity is a commodity between all of them, they are and will be looking for alternative product and service providers to differentiate themselves.
Research and Development
We charge research and development costs to operations as incurred in accordance with ASC 730-Research and Development, except in those cases in which such costs are reimbursable under customer funded contracts. These amounts are not reflected in the reported research and development expenses in each of the respective periods but are included in net sales with the related costs included in cost of sales in each of the respective periods.
Available Information
Our principal executive offices are located at 1 Technology Drive, Bldg B, Suite B123, Irvine, CA 92618.
Our telephone number is (949) 872-1965. Our website address is www.GZ6G.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge through the investor relations page of our website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. The information that is posted on or is accessible through our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this or any other report that we file with or furnish to the SEC. Alternatively, these reports may be accessed at the SEC’s website at www.sec.gov
ITEM 1A – RISK FACTORS
As a smaller reporting company, we are not required to provide the information required by this Item.
For risks relating to our operations, see “Risk Factors” contained in our prospectus filed on Form S-1/A on February 7, 2023.
ITEM 1B – UNRESOLVED STAFF COMMENTS
Not Applicable
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ITEM 2 – PROPERTIES
Our corporate headquarters is located at 1 Technology Drive, Bldg B, Suite B123, Irvine, CA 92618.
On May 19, 2021, the Company signed an 18-month lease for office premises in California located at 1 Technology Drive, Bldg. B, Irvine, CA 92618, Suite no. B123 occupying approximately 6,498 square feet of usable space. The terms of the lease provide for basic monthly rent in the first year of approximately $9,097 per month, and $9,487 for each of the remaining six months. In addition, the tenant is responsible for their share of operating expenses, utilities and services. On February 4, 2022, the Company signed a first amendment to the lease agreement to extend the lease term to November 30, 2027. The terms of the lease provide for basic monthly rent starting in December 2022 of approximately $10,592, with annually increasing around 4%. In addition, the tenant is responsible for their share of operating expenses, utilities and services.
We had a lease with IAC Apartment Development JV LLC to lease approximately 1,500 square feet of space at 861 Tularosa, Irvine, California for a one-year term expiring October 9, 2022 at a rental rate of $3,620 per month, plus utilities, for the Company’s subsidiary, Green Zebra Media Corp. Green Zebra uses the space for its operations. Upon expiry of the lease the Company continues to use the space on a month to month basis.
During fiscal 2020 the Company formed a partnership with one of its branding partners for shared office space in a 5,000 square foot office complex located at 8925 West Post Road, Suite 102, Las Vegas, NV 89148. The shared use of the space by Green Zebra staff is currently provided free of charge as part of the shared contract work between Green Zebra, the Company and the branding partner.
We believe our facilities are adequate for our current needs.
ITEM 3 – LEGAL PROCEEDING
On April 2, 2019, a vendor of the Company, the “Plaintiff” filed a complaint against the Company’s 60% controlled subsidiary, Green Zebra, in the Superior Court of California, Orange County for unpaid invoices related to services and products sold in fiscal 2017, including reasonable value in the amount of $61,899.62. The Court approved a default judgement on January 23, 2020 with respect to the aforementioned claim, including the following:
| Damages | $ | 61,890 | ||
| Prejudgment interest at the annual rate of 10% | 9,835 | |||
| Attorney fees | 1,200 | |||
| Other costs | 505 | |||
| $ | 73,430 |
As of December 31, 2020 and March 31, 2021, the Company was unaware of the judgement. In April 2021, the Plaintiff perfected the judgement and obtained a hold against a bank account controlled by Green Zebra in the approximate amount of $16,282, which amount was subsequently released to the Plaintiff and has been recorded as a reduction to the balance owing to the Plaintiff. The Company remitted a further $2,420 towards the outstanding balance. The Company has remitted a further $2,420 towards the outstanding balance. At December 31, 2022 and 2021, a total of $54,738 remained outstanding. The Company and the Plaintiff are currently in discussions regarding the claimed amount.
Other than as set out above, we know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which our director, officer or any affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
ITEM 4 – MINE SAFETY DISCLOSURE
Not Applicable
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PART II
ITEM 5 – MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
Our shares of common stock are quoted on the OTCQB under the symbol “GZIC”. Such quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
The last reported sales price of our common stock on the OTCQB on April 14, 2023 was $0.0057.
Holders
As of December 31, 2022, there were 23 stockholders of record of our common stock.
Dividends
The Company has never paid dividends on its common stock and does not anticipate that it will pay dividends in the foreseeable future. It intends to use any future earnings for the expansion of its business. Any future determination of applicable dividends will be made at the discretion of the board of directors and will depend on the results of operations, financial condition, capital requirements and other factors deemed relevant.
Securities Authorized for Issuance under Equity Compensation Plans
The Company does not have any equity compensation plans as of December 31, 2022.
Purchases of Equity Securities by the Issuer or Affiliated Purchasers
There were no repurchases of shares of common stock made during the year ended December 31, 2022.
Securities Placed on Reserve Pursuant to Convertible Notes
The Company currently has a total of 774,167,393 shares of common stock on reserve pursuant to obligations to Convertible Notes. On March 1, 2023, the Company filed a Certificate of Amendment with the state of Nevada in order to increase the number of authorized common shares to 1,000,000,000, and to ensure the number of authorized shares would accommodate the number of shares on reserve.
ITEM 6 – [RESERVED]
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ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ TOGETHER WITH OUR AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021, AND THE NOTES TO THOSE AUDITED FINANCIAL STATEMENTS.
THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOVLE RISKS AND UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS, INCLUDING, BUT NOT LIMITED TO, THOSE IDENTIFIED AND DISCUSSED IN OUR PROSPECTUS ON FORM S-1/A FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (“SEC”) ON FEBRUARY 7, 2023 STARTING ON PAGE 7, “RISK FACTORS”, AND THE RISKS DISCUSSED IN OUR OTHER SEC FILINGS.
THE MANAGEMENT’S DISCUSSION AND ANALYSIS OF OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS ARE BASED UPON OUR AUDITED FINANCIAL STATEMENTS, WHICH HAVE BEEN PREPARED IN ACCORDANCE WITH ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN THE UNITED STATES OF AMERICA (“GAAP”).
Plan of Operations
We are an emerging smart city technology growth company that provides wireless and monetization enterprise level smart solutions to cities and large venues that require multiple types of products, services and third-party solutions to fulfil client needs. To date we have generated modest revenues from operations, and while we have various contracts in place for future development, there is no assurance of future revenues.
Results of Operations
Revenue
Fiscal Year ended December 31, 2022 and 2021:
We reported revenues of $221,946 and $78,000 in the fiscal years ended December 31, 2022 and 2021, respectively. The increase in revenues in the year ended December 31, 2022 is directly related to two long term contracts entered into during the year under which the Company provides hardware installation services, professional design services and future monthly services with revenue sharing on certain sponsorship components.
Operating Expenses
Years ended December 31, 2022 and 2021
Year Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| NET REVENUES | $ | 221,946 | $ | 78,000 | ||||
| OPERATING EXPENSES | ||||||||
| Cost of revenue | 18,276 | 43,121 | ||||||
| Depreciation | 125,424 | 20,429 | ||||||
| General and administrative | 2,957,041 | 963,068 | ||||||
| General and administrative, related parties | 480,000 | 330,000 | ||||||
| Professional fees | 95,509 | 99,099 | ||||||
| Total operating expenses | 3,676,250 | 1,455,717 | ||||||
| (Loss) from operations | (3,454,304 | ) | (1,377,717 | ) | ||||
| Other income (expense) | ||||||||
| Interest expense | (7,094,839 | ) | (8,051,277 | ) | ||||
| Gain (loss) | 3,575,831 | (714,973 | ) | |||||
| PPP loan forgiveness | 46,091 | - | ||||||
| Total other income (expense) | (3,472,917 | ) | (8,766,250 | ) | ||||
| Net income (loss) | $ | (6,927,221 | ) | $ | (10,143,967 | ) | ||
| Less: net income (loss) attributable to Non-controlling interest | (56,201 | ) | (112,359 | ) | ||||
| Net income (loss) attributable to GZ6G Technologies Corp. | $ | (6,871,020 | ) | $ | (10,031,608 | ) | ||
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Total operating expenses for the year ended December 31, 2022, were $3,676,250 as compared to $1,455,717 for the year ended December 31, 2021. During the years ended December 31, 2022 and 2021, we reported costs of revenue of $18,276 and $43,121 respectively. The Company incurred $2,957,041 and $963,068 in general and administrative expenses in the years ended December 31, 2022 and 2021, respectively and general and administrative costs from related parties of $480,000 and $330,000, respectively. General and administrative expenses include staff payroll, rent, travel, office and sundry expense, transfer agent costs, consulting, marketing, advertising and promotional expenses. The substantial increase primarily relates to new employees hired in 2022 with a total of $1,453,055 in payroll expenses for the year ended December 31, 2022 as compared to $527,778 for the year ended December 31, 2021, share based compensation to officers and directors in the current year of $65,070 as compared to $0 in the prior comparative year, investor relations expenses were $754,060 for the year ended December 31, 2022 as compared to $14,225 for the year ended December 31, 2021, advertising and promotional expenses increased substantially from $55,263 in the year ended December 31, 2021 to $118,772 for the year ended December 31, 2022, transfer agent and filing fees increased period over period as a result of equity financings in the period and associated share issuance costs from $41,204 for the year ended December 31, 2021 to $83,355 for the year ended December 31, 2022, software expenses were $59,863 for the year ended December 31, 2022 as compared to only $21,785 for the year December 31, 2021 as we worked to improve our product offerings, insurance expenses, including general, health and auto insurance were $42,799 as compared to $12,252 in December 31, 2021, and rent expense increased from $129,670 for the year ended December 31, 2021 to $220,676 for the year ended December 31, 2022. General and administrative expenses incurred from related parties include management fees charged by our CEO, William Coleman Smith, and a company controlled by him. The increase in related party administrative costs is due to increases in management fees to Mr. Smith in the year ended December 31, 2022. Professional fees in the year December 31, 2022, remained fairly constant totaling $95,509 in the current year as compared to $99,099 in the year ended December 31, 2021. Depreciation increased from $20,429, during the year December 31, 2021, to $125,424 during the year ended December 31, 2022, as a result of the acquisition of a new office space and associated furnishings and equipment.
Other expense
Other expense reported for the fiscal years ended December 31, 2022, and 2021 totaled $3,472,917 and $8,766,250, respectively. During the year ended December 31, 2021 the Company reported interest expenses of $8,051,277 including amortization of debt discount and issuance costs of $7,823,512 and interest expenses of $227,765 and a loss on conversion of certain notes to common stock of $714,973. During the year ended December 31, 2022 the Company reported interest expenses of $7,094,839 including amortization of debt discount and issuance costs of $5,864,374, financing costs of $920,227, including fees paid in cash as well as the issuance of warrants and common stock to financing agents, and interest expenses of $310,238, a gain on conversion of certain notes to common stock of $3,575,831 and a gain of $46,091 upon forgiveness of PPP loans.
We had a net loss of $6,927,221 in the year ended December 31, 2022 compared to a net loss of $10,143,967 in the year ended December 31, 2021.
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Statement of Cash Flows
Years Ended December 31, 2022 and 2021
The following table summarizes our cash flows for the years presented:
| December 31, 2022 | December 31, 2021 | |||||||
| Net cash used in operating activities | $ | (2,514,937 | ) | $ | (1,369,844 | ) | ||
| Net cash used in investing activities | (77,909 | ) | (251,993 | ) | ||||
| Net cash provided by financing activities | 2,340,207 | 2,201,084 | ||||||
| Increase (decrease) in cash | (252,639 | ) | 579,247 | |||||
| Cash end of year | $ | 507,152 | $ | 759,791 | ||||
Cash Used in Operating Activities
Cash used in operating activities for the year ended December 31, 2021 was $1,369,844 as compared to $2,514,937 of cash used in operating activities in the year ended December 31, 2022.
Cash used in operating activities for the year ended December 31, 2022 was primarily the result of our net loss of $6,927,221 (December 31, 2021 – $10,143,967) offset by non-cash items including amortization of debt discount and offering costs of $5,864,374 (December 31, 2021- $7,823,512), a gain on conversion of certain notes to common stock of $3,575,831 (as compared to a loss on conversion of notes for the year ended December 31, 2021 of $714,973), depreciation of $125,424 (December 31, 2021- $20,429), and amortization of rights of use assets of $20,033 (December 31, 2021 - $910), as well as PPP loan forgiveness of $46,091, common stock issued as financing costs of $22,399, and common stock issued in satisfaction of consulting agreements of $794,070 all with no comparable transaction in fiscal 2021. In the fiscal year ended December 31, 2021 we also reported $4,990 due to a reclassification of fixed assets to advertising expense with no comparable amounts for this item in the fiscal year ended December 31, 2022.
Changes in operating activities in the year ended December 31, 2022 included an increase in prepaid expenses of $30,588 (2021 - $7,319), an increase to accounts payable of $387,972 (2021 - $100,264), an increase in related party payables of $237,382 (2021 - $179,659) and a decrease in customer deposits of $37,000 (2021 - $78,000). We also reported an increase in accounts receivable in the year ended December 31, 2022 of $57,845 (2021 - $0) and an increase in other current assets of $0 (2021 - $10,436).
Cash Used In Investing Activities
Cash used by investing activities for the years ended December 31, 2022 and 2021 related to equipment purchases and totaled $107,909 and $251,993, respectively offset by a credit for leasehold improvements in the year ended December 31, 2022 of $30,000 (2021 - $0)
Cash Provided by Financing Activities
During the year ended December 31, 2022, financing activities provided cash of $2,340,207 which was comprised of proceeds from private placements of $151,104, proceeds from the exercise of warrants of $53,751, proceeds from a related party of $450,100, PPP loan interest refund of $5,702, and proceeds from convertible notes of $1,960,550, offset by repayments of convertible notes of $281,000.
During the year ended December 31, 2021, financing activities provided cash of $2,201,084 which was comprised of proceeds from private placements of $100,000, subscriptions receivable of $150,000, and proceeds from convertible notes of $2,108,000, offset by repayment of debt of $151,854 and repayments of loans payable of $5,062.
Liquidity and Capital Resources
The Company has been in the start-up phase and has generated limited revenues from its operations, and while we have various contracts in place for future development, there is no assurance of future revenues. As of December 31, 2022, the Company had a working capital deficit of $8,906,205 with approximately $507,000 of cash on hand and an accumulated deficit of $23,078,343. While the Company received proceeds of approximately $1,960,000 from certain convertible notes, proceeds of approximately $53,000 from warrant exercises, proceeds from the sale of registered stock of approximately $151,000 and loans from its officer and director of $450,100, the Company is still not able to meet its operational overhead. The Company anticipates a need for a further $5,000,000 in fiscal 2023 to meet its upgraded infrastructure requirements and has filed a registration statement on Form S-1 to facilitate this requirement. The issuance of additional securities may continue to result in significant dilution in the equity interests of our current stockholders. Obtaining loans, assuming these loans would be available, will increase our liabilities and future cash commitments. There is no assurance that we will be able to obtain further funds required for our continued operations or that additional financing will be available for use when needed or, if available, that it can be obtained on commercially reasonable terms.
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Covid-19 Pandemic: The COVID-19 pandemic could have a continuing adverse impact on our existing sponsorship and revenue agreements. During 2021 the implementation of services under certain of our installation agreements experienced delays as a result of the pandemic. COVID-19 has caused significant disruptions to the global financial markets, which may also continue to impact our ability to raise additional capital. During March 2020, we gave notice of furlough to our administrative support employees in an effort to conserve resources as we evaluate our business development efforts in the coming months. In April 2020, the Company received a grant of $6,000 and in May 2020 we received a PPP loan and an SBA loan in the approximate cumulative amount of $90,000 for operations. During early 2022 the Company reopened its offices and continued with the hiring of additional staff as well as the upgrading of infrastructure requirements to meet anticipated customer requirements for 2022. While recent progress in the battle against COVID leads us to believe that the worst of the effects of the pandemic are past, we cannot say with certainty that the situation will not change. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report, is highly uncertain and still subject to change. While significant uncertainty remains, despite the fact that the Company has been able to source financing, it remains that the COVID-19 outbreak may have a negative impact on its ability to work through its collaborative development efforts with industry partners, and in acquiring venues due to the continuing impact of COVID 19, in particular as a result of the impact to the global supply chain.
Going Concern
These audited consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company anticipates a need for a further $5 million in fiscal 2023 to meet its upgraded infrastructure requirements. In addition to the remaining funding which may be provided to the Company under various loan agreements, the Company is in the process of filing a follow-on registration statement on Form S-1 to facilitate additional funding up to a maximum of $10,000,000. There is no guarantee the Company will continue to receive financing as required. The continuation of the Company as a going concern is dependent upon the ability to raise additional equity and/or debt financing and the attainment of profitable operations from the Company’s future business. If the Company is unable to obtain adequate capital as needed, the Company may be required to reduce the scope, delay, or eliminate some or all of its planned operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
Off Balance Sheet Arrangements
We currently have no off-balance sheet arrangements.
Critical Accounting Policies and Estimates
The financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, costs and expenses and related disclosures. We base our estimates on historical experience, as appropriate, and on various other assumptions that we believe are reasonable under the circumstances. Changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ significantly from the estimates made by our management. We evaluate our estimates and assumptions on an ongoing basis. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. See Note 2 – Summary of Significant Accounting Policies.
Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. The estimates used for, but not limited to, the collectability of accounts receivable and fair value of financial instruments could be impacted. We have assessed the impact and are not aware of any specific events or circumstances that required an update to our estimates and assumptions or materially affected the carrying value of our assets or liabilities as of the date of issuance of this Annual Report on Form 10-K. These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.
22
Policies
Revenue Recognition
We recognize revenue from installation, digital marketing, sponsorship and advertising fees and the sale of WiFi and communication solutions to customers. Our policy is to record revenue from installation services upon reaching identified milestones, “percentage of completion” as set out in our customer agreements. Revenue from marketing, sponsorship and advertising is recognized when the performance obligation is complete. Recurring revenue from WiFi and communication solutions is recognized monthly in accordance with the terms of the contract with the customer.
Research and Development Costs
Our policy is to charge research and development costs to operations as incurred in accordance with ASC 730-Research and Development, except in those cases in which such costs are reimbursable under customer funded contracts, in which case these amounts are included in net sales with the related costs included in cost of sales in each of the respective periods.
Estimates
Stock-Based Compensation
We use the fair value method to account for Stock-based compensation cost for stock options or warrants, estimated at the grant date based on each instrument’s fair value as calculated by the Black-Scholes option pricing model. We recognize stock-based compensation cost as expense ratably on a straight-line basis over the requisite service period for the award.
Stock Settled Debt
In certain instances, the Company will issue convertible notes which contain a provision in which the price of the conversion feature is priced at a fixed discount to the trading price of the Company’s common shares as traded in the over-the-counter market. In these instances, the Company records a liability, in addition to the principal amount of the convertible note, as stock-settled debt for the fixed value transferred to the convertible note holder from the fixed discount conversion feature.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06 to simplify the current guidance for convertible instruments and the derivatives scope
exception for contracts in an entity’s own equity. Additionally, the amendments affect the diluted EPS calculation for
instruments that may be settled in cash or shares and for convertible instruments. The update also provides for expanded disclosure
requirements to increase transparency. For SEC filers, excluding smaller reporting companies, this update is effective for fiscal
years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. For all
other entities, this update is effective for fiscal years beginning after December 15, 2023, including interim periods
therein. The Company adopted this ASU effective January 1, 2021.
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
Since inception, we have had no changes in or disagreements with our accountants. Our audited financial statements have been included in this prospectus in reliance upon Pinnacle Accountancy Group of Utah (a dba of Heaton & Company, PLLC), as experts in accounting and auditing.
ITEM 7A- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company and are not required to provide this information.
23
ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
FINANCIAL STATEMENTS TABLE OF CONTENTS
GZ6G TECHNOLOGIES CORP.
TABLE OF CONTENTS FOR AUDITED FINANCIAL STATEMENTS
December 31, 2022 and 2021
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
GZ6G Technologies Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of GZ6G Technologies Corp. (the Company) as of December 31, 2022 and 2021, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the years then ended, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern Considerations
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring losses and negative working capital which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are 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 consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated 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 audits to obtain reasonable assurance about whether the consolidated 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 consolidated 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 consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
F-2
Going Concern – Disclosure
The consolidated financial statements of the Company are prepared on a going concern basis, which assumes that the Company will continue in operation for the foreseeable future and, accordingly, will be able to realize its assets and discharge its liabilities in the normal course of operations. As noted in “Going Concern Considerations” above, the Company has a negative working capital and has a history of recurring net losses. The Company has contractual obligations, such as commitments for repayments of accounts payable and accrued expenses, leases, related party payables, related party debt and convertible notes payable (collectively “obligations”). Currently, management’s forecasts and related assumptions illustrate their judgements as to the Company’s ability to meet its obligations through management of expenditures, implementation of planned business operations, obtaining additional debt financing, and issuance of capital stock for additional funding to meet its operating needs. Should there be constraints on the ability to implement its planned business operations or access financing through stock issuances, the Company will continue to manage cash outflows and meet the obligations through debt financing.
We identified management’s assessment of the Company’s ability to continue as a going concern as a critical audit matter. Management made judgments regarding the Company’s ability to effectively implement its plans to provide the necessary cash flows to fund the Company’s obligations as they become due. Specifically, the judgments with the highest degree of impact and subjectivity in determining the Company’s ability to effectively implement it include its ability to manage expenditures, its ability to access funding from the capital market, its ability to obtain debt financing, and the successful implementation of its planned business operations. Auditing the judgments made by management required a high degree of auditor judgment and an increased extent of audit effort.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included the following, among others evaluating the Company’s ability and intent to: (i) access funding from the capital market; (ii) manage expenditures and (iii) obtain debt financing.
/s/ Pinnacle Accountancy Group of Utah
We have served as the Company’s auditor since 2019.
(a dba of Heaton & Company, PLLC)
April 17, 2023
F-3
GZ6G TECHNOLOGIES CORP.
CONSOLIDATED BALANCE SHEETS
| December 31, 2022 | December 31, 2021 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Prepaid expenses | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Right of use assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Related party payables | ||||||||
| Deferred revenue | ||||||||
| Debt, current portion | ||||||||
| Debt, related parties | ||||||||
| Convertible notes, net of debt discount | ||||||||
| Lease liability, current portion | ||||||||
| Total current liabilities | ||||||||
| Debt, net of current portion | ||||||||
| Lease liability, net of current portion | - | |||||||
| Total liabilities | ||||||||
| Stockholders’ deficit | ||||||||
| Series A Preferred stock, $ par, shares authorized, shares issued and outstanding | 20,000 | 20,000 | ||||||
| Series B Preferred stock, $ par, share authorized, share issued and outstanding | - | - | ||||||
| Common stock, $ par, shares authorized, and shares issued and outstanding at December 31, 2022 and 2021, respectively | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total GZ6G Technologies Corp stockholders’ deficit | ( | ) | ( | ) | ||||
| Non-controlling interest | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements
F-4
GZ6G TECHNOLOGIES CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| NET REVENUES | $ | $ | ||||||
| OPERATING EXPENSES | ||||||||
| Cost of revenue | ||||||||
| Depreciation | ||||||||
| General and administrative | ||||||||
| General and administrative, related parties | ||||||||
| Professional fees | ||||||||
| Total operating expenses | ||||||||
| (Loss) from operations | ( | ) | ( | ) | ||||
| Other income (expense) | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Gain (loss) on debt extinguishment | ( | ) | ||||||
| PPP loan forgiveness | ||||||||
| Total other income (expense) | ( | ) | ( | ) | ||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Less: net income (loss) attributable to Non-controlling interest | ( | ) | ( | ) | ||||
| Net income (loss) attributable to GZ6G Technologies Corp. | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted net loss per common share | $ | ( | ) | $ | ( | ) | ||
| Weighted average shares, basic and diluted | ||||||||
The accompanying notes are an integral part of these consolidated financial statements
F-5
GZ6G TECHNOLOGIES CORP.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
For the Years Ended December 31, 2022 and 2021
Series A Preferred Stock | Series B Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Non- controlling | Total Stockholders’ | ||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Interest | Deficit | |||||||||||||||||||||||||||||||
| Balance, December 31, 2020 | 5,000,000 | $ | 1 | $ | - | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||
| Shares issued to acquire additional interest in subsidiary | - | - | ( | ) | ||||||||||||||||||||||||||||||||||||
| Discount on debt, convertible notes issued | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Convertible note proceeds allocated to warrants | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Warrants issued as financing cost | - | - | - | - | ||||||||||||||||||||||||||||||||||||
| Issuance of common stock for debt conversion | - | - | - | |||||||||||||||||||||||||||||||||||||
| Issuance of common stock for private placement | - | - | - | |||||||||||||||||||||||||||||||||||||
| Loss during the period | - | - | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | 5,000,000 | $ | 1 | $ | - | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||
| Discount on debt, convertible notes issued | - | |||||||||||||||||||||||||||||||||||||||
| Convertible note proceeds allocated to warrants | - | |||||||||||||||||||||||||||||||||||||||
| Warrants issued as financing cost | - | |||||||||||||||||||||||||||||||||||||||
| Shares issued as financing cost | ||||||||||||||||||||||||||||||||||||||||
| Shares issued under consulting agreements | - | |||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for debt conversion | - | |||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for debt, related party | - | |||||||||||||||||||||||||||||||||||||||
| Sale of common stock under equity agreement | ||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for exercise of warrants | - | |||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for cashless exercise of warrants | - | ( | ) | |||||||||||||||||||||||||||||||||||||
| Loss during the period | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | 5,000,000 | $ | 1 | $ | - | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements
F-6
GZ6G TECHNOLOGIES CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net Loss | ( | ) | ( | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| PPP loan forgiveness | ( | ) | ||||||
| (Gain) loss upon note conversions | ( | ) | ||||||
| Amortization of debt discount and issuance cost | ||||||||
| Warrants issued as financing cost | ||||||||
| Common stock issued as financing cost | ||||||||
| Common stock issued under consulting agreement | ||||||||
| Depreciation | ||||||||
| Amortization of right of use assets | ||||||||
| Fixed assets reclassify to advertising expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Increase in accounts receivable | ( | ) | ||||||
| Increase in prepaid expenses | ( | ) | ( | ) | ||||
| Increase in other current assets | ( | ) | ||||||
| Increase in accounts payable and accrued expenses | ||||||||
| Increase in related party payables | ||||||||
| Decrease in deferred revenue | ( | ) | ( | ) | ||||
| Net cash provided by (used in) operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Proceeds from credit for leasehold improvements | ||||||||
| Purchase of equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from sale of common stock, net | ||||||||
| Proceeds from exercise of warrants | ||||||||
| Proceeds from subscription receivable | ||||||||
| Proceeds from related party | ||||||||
| Repayment of debt, related party | ( | ) | ||||||
| Refund from PPP loan | ||||||||
| Repayment of loan payable | ( | ) | ||||||
| Proceeds from convertible notes | ||||||||
| Repayments of convertible notes | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash-beginning of year | ||||||||
| Cash-end of year | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURES | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes paid | $ | $ | ||||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Stock-settled debt liability for issued convertible debt | $ | $ | ||||||
| Cashless warrant exercise | $ | $ | ||||||
| Shares issued to settle debt, related party | $ | $ | ||||||
| Shares issued under notices of conversion, principal | $ | $ | ||||||
| Shares issued under notices of conversion, accrued interest payable | $ | $ | ||||||
| Shares issued under notices of conversion, accounts payable | $ | $ | ||||||
Shares issued under notices of conversion, stock-settled debt liability | $ | 3,562,826 | ||||||
| Initial measurement of right to use assets and lease liability | $ | $ | ||||||
| Debt discount related to convertible notes and warrants | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements
F-7
GZ6G TECHNOLOGIES CORP.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2022 and 2021
NOTE 1: ORGANIZATION AND DESCRIPTION OF BUSINESS
GZ6G Technologies Corp. (formerly Green Zebra International Corp.) (the “Company” or “GZ6G”) is a complete enterprise smart solutions provider for large venues and cities. Focused on acquiring smart city solutions, developing innovative products, and overseeing smart cities and smart venues, GZ6G also assists in modernizing clients with innovative wireless IoT technology for the emerging 5G and Wi-Fi 6 marketplaces. Target markets include stadiums, airports, universities, and smart city projects. The Company is organized under the laws of the State of Nevada and has offices in California and Nevada.
In November 2018, the Company changed its name from NanoSensors, Inc. to Green Zebra International Corp. following a merger with Green Zebra Media Corp., a Delaware corporation, under common control.
The Board of Directors approved a name change and a reverse stock split of the Company’s issued and outstanding common shares at a ratio of 200 to 1 on December 18, 2019. The accompanying financial statements, and all share and per share information contained herein has been retroactively restated to reflect the reverse stock split. On December 20, 2019, the Company changed its name from Green Zebra International Corp. to GZ6G Technologies Corp.
On August 6, 2021, Mr. William Ray Procanik and Mr. Brian Scott Hale were appointed to the Company’s board of directors and concurrently the Company formed an audit committee, which each of Mr. Hale and Mr. Procanik joined, serving as independent board members. Concurrently the Company completed an application for an uplist to the OTCQB and submitted the required disclosure through OTCMarkets. The Company was approved for trading on the OTCQB Venture Market on October 25, 2021.
Going Concern
These audited consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. As of December 31, 2022, the Company had a working capital deficit of $8.9 million with approximately $0.5 million of cash on hand and an accumulated deficit of $23 million. During the year ended December 31, 2022 the Company received net cash proceeds of $1.96 million by way of a series of convertible promissory notes and $0.45 million in the form of related party loans. The Company anticipates a need for a further $5 million in fiscal 2023 to meet its upgraded infrastructure requirements. In addition to the remaining funding which may be provided to the Company under various loan agreements, the Company is in the process of filing a follow on registration statement on Form S-1 to facilitate additional funding up to a maximum of $10,000,000. There is no guarantee the Company will continue to receive financing as required. The continuation of the Company as a going concern is dependent upon the ability to raise additional equity and/or debt financing and the attainment of profitable operations from the Company’s future business. If the Company is unable to obtain adequate capital as needed, the Company may be required to reduce the scope, delay, or eliminate some or all of its planned operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
The financial statements reflect all adjustments consisting of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of the results for the periods shown. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.
Covid-19 Pandemic: The COVID-19 pandemic could have a continuing adverse impact on our existing sponsorship and revenue agreements. During 2021 the implementation of services under certain of our installation agreements experienced delays as a result of the pandemic. COVID-19 has caused significant disruptions to the global financial markets, which may also continue to impact our ability to raise additional capital. During March 2020, we gave notice of furlough to our administrative support employees in an effort to conserve resources as we evaluate our business development efforts in the coming months. In April 2020, the Company received a grant of $6,000 and in May 2020 we received a PPP loan and an SBA loan in the approximate cumulative amount of $90,000 for operations. During early 2022 the Company reopened its offices and continued with the hiring of additional staff as well as the upgrading of infrastructure requirements to meet anticipated customer requirements for 2022. While recent progress in the battle against COVID leads us to believe that the worst of the effects of the pandemic are past, we cannot say with certainty that the situation will not change. The full impact of the COVID-19 outbreak continues to evolve as of the date of this report, is highly uncertain and still subject to change. While significant uncertainty remains, despite the fact that the Company has been able to source financing, it remains that the COVID-19 outbreak may have a negative impact on its ability to work through its collaborative development efforts with industry partners, and in acquiring venues due to the continuing impact of COVID 19, in particular as a result of the impact to the global supply chain.
F-8
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).
Consolidation
These
consolidated financial statements include the accounts of GZ6G Technology Corp. and its
Use of Estimates
The preparation of these consolidated financial statements in conformity with United States 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. The Company regularly evaluates estimates and assumptions related to long-lived assets and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.
Cash and Cash Equivalents
For financial accounting purposes, cash and cash equivalents are considered to be all highly liquid investments with a maturity of three (3) months or less at the time of purchase.
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each
institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At December 31, 2022, the Company
had $
Property and Equipment
Property and equipment are recorded at cost. Depreciation on property and equipment are determined using the straight-line method over the three to five year estimated useful lives of the assets.
Research and Development Costs
We charge research and development costs to operations as incurred in accordance with ASC 730-Research and Development, except in those cases in which such costs are reimbursable under customer funded contracts. These amounts are not reflected in the reported research and development expenses in each of the respective periods but are included in net sales with the related costs included in cost of sales in each of the respective periods.
F-9
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606 — Revenue from Contracts with Customers. The core principle of this standard is that a company should record revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. Further under ASC 606, the Company recognizes revenue from licensing agreements and service-based contracts by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
We earn revenue from service and sponsorship agreements, digital marketing and the sale of WiFi and communication solutions to customers across the United States. Revenue is earned from sales of our WiFi media platform and our WiFi monetization hardware (GZ Media hub) embedded with GZ software to create monetization and communication solutions for our customers. Our sales can consist of any one or a combination of items required by our customer including hardware, technology platforms and related support. We also enter into licensing contracts which provide for revenue based on licensing fees and revenue sharing with our licensees.
As we expand, we expect a large portion of our revenue from our digital communication solutions to be derived from service-based contracts where we expect to recognize a significant portion of our contracts over time, as there is a continuous delivery of services to the customer over the contractual period of performance. These contracts may or may not include fixed payments for services over time and/or commission-based fees.
Direct costs are expected to include materials, labor and overhead to be charged to work-in-progress (including our contracts-in-progress) inventory or cost of sales. Indirect costs relating to long-term contracts, are expected to include expenses such as general and administrative charges, and other costs will be charged to expense as incurred and will not be included in our work-in-process (including our contracts-in-progress) inventory or cost of sales. Total estimates are expected to be reviewed and revised periodically throughout the lives of the contracts, and adjustments to profits resulting from such revisions are made cumulative to the date of the change. Estimated losses on long-term contracts are recorded in the period in which the losses become evident. If we do not accurately estimate the total sales, related costs and progress towards completion on our long-term contracts, the estimated gross margins may be significantly impacted, or losses may need to be recognized in future periods. Any such resulting changes in margins or contract losses could be material to our results of operations and financial condition.
In addition, certain of our contracts will include termination for convenience or non-performance clauses that provide the customer with the right to terminate the contract. Such terminations could impact the assumptions regarding total contract revenues and expenses utilized in recognizing profit under those contracts where we apply the percentage-of-completion method of accounting. Changes to these assumptions could materially impact our results of operations and financial condition. As we fully implement our business model, our inability to perform on our long-term contracts could materially impact our results of operations and financial condition.
Stock-Based Compensation
We account for stock-based transactions in which the Company receives services from employees, non-employees, directors or others in exchange for equity instruments based on the fair value of the award at the grant date in accordance with ASC 718 – Compensation-Stock Compensation. Stock-based compensation cost for stock options or warrants is estimated at the grant date based on each instrument’s fair value as calculated by the Black-Scholes option pricing model. We recognize stock-based compensation cost as expense ratably on a straight-line basis over the requisite service period for the award.
Debt Issue Costs
The Company may pay debt issue costs in connection with raising funds through the issuance of debt whether convertible or not or with other consideration. These costs are recorded as debt discounts and are amortized over the life of the debt to the statement of operations as interest expense.
Original Issue Discount
If debt is issued with an original issue discount, the original issue discount is recorded to debt discount, reducing the face amount of the note and is amortized over the life of the debt to the statement of operations as interest expense. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
F-10
Stock Settled Debt
In
certain instances, the Company will issue convertible notes which contain a provision in which the price of the conversion feature is
priced at a fixed discount to the trading price of the Company’s common shares as traded in the over-the-counter market. In
these instances, the Company records a liability, in addition to the principal amount of the convertible note, as stock-settled debt
for the fixed value transferred to the convertible note holder from the fixed discount conversion feature. As of December 31, 2022
and December 31, 2021, the Company had recorded within Convertible Notes, net of discount, the amount of $
Leases
The Company follows ASC 842 Leases, which requires recognition of most leases on the balance sheet, specifically the recognition of right-to-use assets and related lease liabilities, and enhanced disclosures about leasing arrangements. The Company elected to apply the short-term scope exception for leases with terms of 12 months or less at the inception of the lease and will continue to recognize rent expense on a straight-line basis.
Fair Value of Financial Instruments
ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. FASB ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.
If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level of input that is significant to the fair value measurement of the instrument.
Income Taxes
The Company follows ASC 740 – Income Taxes, which requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
In accordance with ASC 260 – Earnings Per Share, the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common stock outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential common stock had been issued and if the additional shares of common stock were dilutive. Potential common stock consists of the incremental common stock issuable upon convertible notes, classes of shares with conversion features.
F-11
The computation of diluted loss per share for the years ended December 31, 2020 and 2021 excludes potentially dilutive securities of underlying share purchase warrants, convertible notes, and preferred shares, because their inclusion would be antidilutive. As a result, the computation of net loss per share for the years ended December 31, 2022 and 2021 is the same for both basic and fully diluted.
| December 31, 2022 | December 31, 2021 | |||||||
| Convertible Notes | ||||||||
| Stock purchase warrants | ||||||||
| Series A Preferred shares (convertible to common at a ratio of 10 common for each 1 preferred) | ||||||||
| Total | ||||||||
Recently Issued Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06 to simplify the current guidance for convertible instruments and the derivatives scope exception for contracts in an entity’s own equity. Additionally, the amendments affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments. The update also provides for expanded disclosure requirements to increase transparency. For SEC filers, excluding smaller reporting companies, this update is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, this Update is effective for fiscal years beginning after December 15, 2023, including interim periods therein. Early adoption is permitted. The Company adopted this ASU effective January 1, 2021.
The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.
NOTE 3: PROPERTY AND EQUIPMENT
Property and equipment, net consists of the following:
| December 31, 2022 | December 31, 2021 | |||||||
| Office equipment | $ | $ | ||||||
| Leasehold improvements | ||||||||
| Software | ||||||||
| Total | ||||||||
| Less: accumulated depreciation and amortization | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
Depreciation
expense amounted to $
F-12
NOTE 4: PREPAID EXPENSES
Prepaid expenses at December 31, 2022 and 2021 consist of the following:
| December 31, 2022 | December 31, 2021 | |||||||
| Reseller agreement (1) | $ | $ | ||||||
| Other expenses (2) | ||||||||
| Total | $ | $ | ||||||
| (1) | On January 31, 2017, GZMC entered into a white label reseller agreement with Purple Wifi Limited, a company based in the UK that provides a hosted software solution as a Wifi hotspot platform for use on a company’s Wifi hardware and also provides customer analytics services and marketing opportunities along with ancillary support services. The reseller agreement had an initial term of three years and was subsequently amended to reflect a five (5) year term. Under the terms of the agreement GZMC was required to pay a fee of $. The total amount expended under the reseller agreement was initially recorded as prepaid expenses on the Company’s Balance Sheets and has been fully amortized over the term of the agreement on a five-year straight-line basis as part of general and administrative expense. |
| (2) | Other prepaid expenses include annual subscription fees for software, insurance, prepaid term marketing expenses and office security services. |
NOTE 5: OTHER CURRENT ASSETS
Other current assets consist of the following at December 31, 2022 and 2021:
| December 31, 2022 | December 31, 2021 | |||||||
| Security deposits | $ | $ | ||||||
| Other deposits and receivables | ||||||||
| Total | $ | $ | ||||||
NOTE 6: DEBT
Loan Treaty Agreement
On
December 21, 2020, the Company entered into a Loan Treaty Agreement with a third party (“Treaty Agreement”) whereby the lender
agreed to provide a loan in the amount of up to $
During
the year ended December 31, 2021, the Company received weekly tranche deposits for an aggregate of $
During
the year ended December 31, 2022, the Company received a further $
F-13
On
October 27, 2021, the Company issued shares of common stock to the lender in consideration for $
On
August 3, 2022, the Company issued shares of common stock to the lender in consideration for $
The carrying value of funding tranches is as follows:
| December 31, 2022 | December 31, 2021 | |||||||
| Principal | $ | $ | ||||||
| Stock-settled liability | ||||||||
| Total | ||||||||
| Unamortized debt discount | ( | ) | ( | ) | ||||
| Debt carrying value | $ | $ | ||||||
The interest expenses for the funding tranches are as follows:
| Year Ended | ||||||||
| December 31, | ||||||||
| 2022 | 2021 | |||||||
| Interest expense on notes | $ | $ | ||||||
| Amortization of debt discount | ||||||||
| Total: | $ | $ | ||||||
The accrued interest payable is as follows:
| Balance, December 31, 2020 | $ | |||
| Interest expense on the convertible notes | ||||
| Balance, December 31, 2021 | ||||
| Interest expense on the convertible notes | ||||
| Balance, December 31, 2022 | $ |
Gain related to extinguishment during the year ended December 31, 2022 and 2021:
| 2022 | 2021 | |||||||
| Debt principal | $ | $ | ||||||
| Stock-settled liability | ||||||||
| Total | ||||||||
| Issuance of 1,538,462 and 2,051 282 shares of common stock, respectively | ( | ) | ( | ) | ||||
| Gain (loss) on extinguishment of debt upon conversion | $ | $ | ( | ) | ||||
Convertible Debt with Warrant Agreement
On
November 11, 2021, the Company entered into a Promissory Note with an investor in which the investor agreed to lend the Company the principal
amount of $
On
December 16, 2021, the Company entered into a Promissory Note with an investor in which the investor agreed to lend the Company the principal
amount of $
F-14
In
accordance with ASC 470 – Debt, the proceeds in fiscal year 2021 of $
On
April 4, 2022, the Company entered into a Promissory Note with an investor in which the investor agreed to lend the Company the principal
amount of $
On
May 23, 2022, the Company entered into a Promissory Note with an investor in which the investor agreed to lend the Company the principal
amount of $
On
September 20, 2022, the Company entered into a Promissory Note with an investor in which the investor agreed to lend the Company the
principal amount of $
On
November 3, 2022, the Company entered into a Promissory Note with an investor in which the investor agreed to lend the Company the principal
amount of $
On
November 23, 2022, the Company entered into a Promissory Note with an investor in which the investor agreed to lend the Company the principal
amount of $
On
December 20, 2022, the Company entered into a Promissory Note with an investor in which the investor agreed to lend the Company the principal
amount of $
In
accordance with ASC 470 – Debt, the proceeds in the year ended December 31, 2022, of $
During
the year ended December 31, 2022, the Company paid $
F-15
During the year ended December 31, 2022, the Company issued an accumulated shares of common stock pursuant to Notice of Conversion from lenders to settle certain portion of principal together with accrued interest payable and fees.
The carrying value of the tranches is as follows:
| December 31, 2022 | December 31, 2021 | |||||||
| Principal | $ | $ | ||||||
| Shares issued under conversion | ( | ) | - | |||||
| Repaid to principal | ( | ) | - | |||||
| Total | ||||||||
| Unamortized debt discount | ( | ) | ( | ) | ||||
| Debt carrying value | $ | $ | ||||||
The interest expenses related to the tranches are as follows:
| Year Ended | ||||||||
| December 31, | ||||||||
| 2022 | 2021 | |||||||
| Interest expense on notes | $ | $ | ||||||
| Amortization of debt discount | ||||||||
| Total: | $ | $ | ||||||
The accrued interest payable is as follows:
| Balance, December 31, 2020 | $ | |||
| Interest expense on the convertible notes | ||||
| Balance, December 31, 2021 | ||||
| Interest expense on the convertible notes | ||||
| Shares issued under conversion | ( | ) | ||
| Repaid in cash | ( | ) | ||
| Balance, December 31, 2022 | $ |
Loss related to extinguishment during the year ended December 31, 2022:
| Debt principal | $ | |||
| Accrued interest payable | ||||
| Transfer agent fee | ||||
| Total | ||||
| Issuance of 21,990,255 shares of common stock | ( | ) | ||
| (Loss) on extinguishment of debt upon conversion | $ | ( | ) |
During the year ended December 31, 2022, the Company issued shares in respect to a Put notice (Note 10(5)) with a strike price of $0.020025 per share which triggered a dilutive issuance clause in the aforementioned Convertible Note agreements downward adjusting the conversion price per share to match the strike price.
Convertible Promissory Note
During
the year ended December 31 2022, the Company entered into several Convertible Promissory Notes with an investor in which the investor
agreed to lend the Company the accumulated principal amount of $
F-16
During the year ended December 31, 2022, the Company entered into a Convertible Promissory Notes with an investor in which the investor agreed to lend the Company the accumulated principal amount of $54,000 for the purchase price of $50,000. The Term of these Notes is twelve months with an interest rate of 10%. The conversion rate of the Note is as follows: 35% discount to the lowest bid price during the ten-day trading period prior to a notice of conversion. The funds were used for operating costs and further execution of GZ6G’s business plan. The Company recorded $33,077 as the liability on stock settled debt associated with these convertible promissory notes which amount is amortized over the terms of the notes.
The carrying value of this convertible promissory note is as follows:
| December 31, 2022 | December 31, 2021 | |||||||
| Principal | $ | $ | ||||||
| Stock-settled liability | - | |||||||
| Issuance of 8,452,680 shares of common stock issued under notice of conversion: | ||||||||
| Principal | ( | ) | ||||||
| Stock-settled liability | ( | ) | ||||||
| Total | - | |||||||
| Unamortized debt discount | ( | ) | - | |||||
| Debt carrying value | $ | $ | - | |||||
The interest expenses for the convertible promissory note are as follows:
| Year Ended | ||||||||
| December 31, | ||||||||
| 2022 | 2021 | |||||||
| Interest expense on note | $ | $ | ||||||
| Amortization of debt discount | ||||||||
| Total: | $ | $ | ||||||
The accrued interest payable is as follows:
| Balance, December 31, 2021 | $ | |||
| Interest expense on the convertible note | ||||
| Balance, December 31, 2022 | $ |
SBA
On May 19, 2020, the Company received a long-term loan from U.S. Small Business Administration (SBA) in the amount of $44,000, upon the following conditions:
Payment:
Installment payments, including principal and interest, of $
Interest:
Interest accrues at the rate of
Payment terms: Each payment will be applied first to interest accrued to the date of receipt of each payment, and the balance, if any, will be applied to principal; each payment will be made when due even if at that time the full amount of the loan has not yet been advanced or the authorized amount of the Loan has been reduced.
F-17
The interest expenses related to the SBA loan are as follows:
| Year Ended | ||||||||
| December 31, | ||||||||
| 2022 | 2021 | |||||||
| Interest expense on notes | $ | $ | ||||||
The accrued interest payable is as follows:
| Balance, December 31, 2020 | $ | |||
| Addition: Interest expense | ||||
| Balance, December 31, 2021 | ||||
| Addition: Interest expense | ||||
| Balance, December 31, 2022 | $ |
PPP funds
The Paycheck Protection Program (“PPP”) is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. SBA will forgive loans if all employee retention criteria are met, and the funds are used for eligible expenses. The loan may be forgiven in full if the funds are used for payroll costs, interest on mortgages, rent, and utilities (with at least 60% of the forgiven amount having been required to be used for payroll). Additional terms include:
| ● | An interest rate of 1% per annum; |
| ● | Loans issued prior to June 5, 2020, have a maturity of 2 years, with loans issued thereafter having a maturity of 5 years; |
| ● | Loan payments are deferred for six months; |
| ● | No collateral or personal guarantees are required; and |
| ● | Neither the government nor lenders will charge small businesses any fees. |
On
May 14, 2020, the Company received PPP proceeds of $
Other Short-term loans
On
January 5, 2018, GZMC entered into a loan agreement with National Funding Inc. whereby the Company acquired funding in the amount of
$
NOTE 7: CUSTOMER DEPOSITS, CONTRACT RECEIVABLES AND CONTRACT LIABILITIES
The Company generates revenue from contracts which, among other services, provide wireless and digital promotion rights for certain events including WiFi media network advertising rights, and the development of smart venue wireless networks and software engagement technology products for airports, stadiums, campuses, cities and other venues in the United States and International markets. In general, our contracts require several months of implementation which is charged at a fixed rate, followed by monthly maintenance and management services, ad hoc fixed rate services, and a share in advertising revenue, when applicable. As a result, the Company will accept deposits from customers, which deposits are applied as each stage of our implementation is complete or under the terms of the service contract. Invoices issued to customers for the implementation phase of our contracts are due and payable when issued, however, as the associated scope of services have not yet been concluded, these invoices do not yet meet the revenue recognition criteria required to report these amounts as earned revenue (ref: Note 2 – Revenue Recognition). As a result, deposits when received from customers are included as liabilities on our balance sheets.
F-18
The following table provides balances of customer receivables and contract liabilities as of December 31, 2022, and 2021:
| December 31, 2022 | December 31, 2021 | |||||||
| Customer receivables (1) | $ | $ | ||||||
| Contract liabilities (Customer deposits) (1), (2), (a), (b), (c) | $ | $ | ||||||
| (1) | The
Company has deposits of $ |
| (2) | Contract
liabilities are consideration we have received from our customers billed in advance of providing goods or services promised in the
future or for work in progress. We defer recognizing this consideration as revenue until we have satisfied the related performance
obligation to the customer. Contract liabilities include installation and maintenance charges that are deferred and recognized when
the installation is complete or with respect to deposits for maintenance, over the actual or expected contract term, which typically
ranges from one to five years depending on the service. Contract liabilities may be included as customer deposits
or deferred revenue in our consolidated balance sheets, based on the specifics of the contract. During the year ended December
31, 2022, we have recognized $ |
Performance Obligations
While we had originally expected to recognize revenue during fiscal 2020 with respect to contracts for which we have received customer deposits, the impact of COVID-19 had a significant impact on implementation. The Company is currently in negotiations to determine the best way to proceed with the delayed implementation of these contracts, or their termination.
(a) We executed a license agreement for the country of Spain in fiscal 2016 and the Company received an initial deposit of $25,000 against the total licensing fee payable. This amount has been recorded on the Company’s balance sheets as deferred income. While the Company and the customer attempted to negotiate an amendment to the terms of the agreement in late fiscal 2019, the onset of COVID-19 resulted in further delays which are ongoing. As a result, the Company is currently in negotiation for a formal termination of the agreement with this customer.
(b)
On July 11, 2019, GZMC entered into an Airport WiFi Sponsorship Marketing Agreement with a third party whereunder GZMC will secure long-term,
exclusive and non-exclusive smart venues for WiFi marketing, digital marketing and data analytics for various brand sponsors at various
airports across the United States. There were several venues anticipated under the terms of the agreement with installations commencing
on various schedules. GZMC generated invoices for $
(c)
On October 6, 2020, the Company received a purchase order in the amount of $
NOTE 8: RELATED PARTY TRANSACTIONS
Terrence Flowers
As
at December 31, 2019, a total of $
F-19
Coleman Smith and ELOC Holdings Corp.
On July 9, 2018, Mr. William Coleman Smith was appointed to the Board of Directors of the Company and as President, Secretary and Treasurer of the Company. Subsequently, on July 10, 2018, the Company executed a consulting agreement with ELOC Holdings Corp., a company controlled by Mr. Smith, whereby ELOC will provide the services of Mr. Smith for a fee of $10,000 per month. On April 1, 2021, the Company revised Mr. Smith’s compensation so that he also receives $10,000 per month directly as an employee in addition to accrued monthly fees for management services provided through controlled entity ELOC. On February 7, 2022, the board of directors of the Company approved and authorized a further increase of $10,000 per month in salary for Mr. Smith directly, effective January 1, 2022.
On
April 29, 2014, our 60% controlled subsidiary, GZMC, entered into a management and consulting agreement with Mr. Smith, the sole officer
and director of GZMC whereunder GZMC is required to pay an annual salary of $
During
the year ended December 31, 2020, Mr. Smith and ELOC Holdings Corp made short term loans with interest at 1.5% per month to the
Company to pay various expenses. As of December 31, 2020, Mr. Smith, ELOC Holdings Corp. and the Company agreed to retroactively
allocate interest in the amount of 5% per annum to loans, advances, wages and management fees payable by each of GZMC and the
Company from January 1, 2020 forward. The parties entered into a single consolidated promissory note at 5% per annum for all amounts
payable to each of ELOC and Smith, with a principal amount of $
During
the fiscal year ended December 31, 2021, the Company paid a total of $
During
the year ended December 31, 2022, the Company issued
During
the year ended December 31, 2022, the Company’s CEO, William Coleman Smith entered into Promissory Notes with the Company for
a total of $
The following amounts are included in debt to related party on our Balance Sheets:
| Balance at December 31, 2020, Debt, related party | $ | |||
| Payments on loan | ( | ) | ||
| Balance at December 31, 2021, Debt, related party. | ||||
| Shares issued to settle debt | ( | ) | ||
| Promissory Notes for funding provided | ||||
| Balance at December 31, 2022, Debt, related party. | $ |
The interest expenses related to above loans are as follows:
| Year Ended | ||||||||
| December 31, | ||||||||
| 2022 | 2021 | |||||||
| Interest expense on notes | $ | $ | ||||||
During
the year ended December 31, 2022 the Company accrued $
F-20
The following amounts are included in related party payables on our Balance Sheets:
| December 31, 2022 | December 31, 2021 | |||||||
| Coleman Smith, President | $ | $ | ||||||
| Interest payable | ||||||||
| ELOC Holdings Corp. | ||||||||
| Terrence Flowers | ||||||||
| $ | $ | |||||||
On
September 1, 2022, the Company issued shares of restricted common stock, with a fair value $
Stock Awards issued to independent directors
On September 1, 2022, the Company issued 100,000 shares of restricted common stock for directors’ services provided by each of Mr. Procniak and Mr. Hale, independent directors, with a fair value of $2,410, respectively.
Sale of equity in GZMC
On April 8, 2021, the Company and William Coleman Smith, officer and director entered into a securities purchase agreement whereunder Mr. Smith sold an additional 9% interest in GZMC to the Company for consideration of 10 million unregistered, restricted shares of common stock. On the conclusion of the transaction, the Company controlled 60% of GZMC.
NOTE 9: OPERATING LEASE
On
May 19, 2021, the Company signed an 18-month lease for office premises in California located at 1 Technology Drive, Bldg. B, Irvine,
CA 92618, Suite no. B123 occupying approximately 6,498 square feet of usable space. The terms of the lease provide for basic monthly
rent in the first year of approximately $
Future minimum lease payments in respect of the above leases as of December 31, 2022, as presented in accordance with ASC 842 were as follows:
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Total future minimum lease payments | ||||
| Less: imputed interest | ( | ) | ||
| Total | ||||
| Current portion of operating lease | ||||
| Long term portion of operating lease | $ |
NOTE 10: COMMITMENTS
| (1) | On April 2, 2019, a vendor of the Company, the “Plaintiff” filed a complaint against the Company’s 60% controlled subsidiary, Green Zebra, in the Superior Court of California, Orange County for unpaid invoices related to services and products sold in fiscal 2017, including reasonable value in the amount of $61,899.62. The Court approved a default judgement on January 23, 2020, with respect to the aforementioned claim, including the following: |
| Damages | $ | |||
| Prejudgment interest at the annual rate of 10% | ||||
| Attorney fees | ||||
| Other costs | ||||
| Total judgement value | $ |
F-21
In
April 2021, the Plaintiff perfected the judgement and obtained a hold against a bank account controlled by Green Zebra in the approximate
amount of $
| (2) | On August 10, 2019, the Company’s CEO, Mr. William Coleman Smith, entered into a lease agreement with IAC Apartment Development JV LLC to lease space at 861 Tularosa, Irvine, California for a one-year term at a rental rate of approximately $3,400 per month, plus utilities, for the Company’s subsidiary, Green Zebra Media Corp. Green Zebra uses this space for its operations. The Company elected to apply the short-term scope exception for leases with terms of 12 months or less at the inception of the lease and continues to recognize rent expense on a straight-line basis. The lease was renewed for two further 1-year terms expiring on October 9, 2022. Upon expiry of the lease the Company continues to use the space on a month-to-month basis at a rate of $3,620 per month plus utilities. |
| (3) | On
September 14, 2020, GZMC entered into a WiFi Media Solution Agreement (the “Media Agreement”) with a city in Iowa in
regard to a city owned location (“venue location”) whereby GZMC was granted rights to provide sponsorship advertising,
performance marketing and professional services. Under the terms of the Media Agreement, GZMC must pay fees to the city at an annual
rate of $ |
| (4) | On
April 25, 2021, the Company entered into an Equity Purchase Agreement with World Amber Corp.,
whereby the Company agreed to sell to World Amber Corp up to shares
of the Company’s common stock for a maximum commitment amount of $
On
each of November 2, 2021, and November 3, 2021, the Company presented a Put to World Amber Corp., pursuant to the Effective S-1 Registration
Statement for $50,000 each Put, as a result the cumulative $ |
| (5) | On November 10, 2021, the Company entered into a Registration Right Agreement with Mast Hill Fund, L.P. (the “Investor”), whereby the Company has agreed, upon the terms and subject to the conditions of the Purchase Agreement, to sell to the Investor up to Ten Million Dollars ($10,000,000.00) of Put Shares at an originally estimated put price of $2.00 per share, subject to adjustment in accordance with the terms of the agreement which calls for valuation of the Put price equal to 90% of the volume weighted average price of the Company’s Common Stock on the Principal Market on the Trading Day immediately preceding the respective Put Date, and subject to a valuation period of seven (7) Trading Days immediately following the Clearing Date associated with the applicable Put Notice during which the Purchase Price of the Common Stock is valued in order to establish the applicable Purchase Price. To induce the Investor to enter into the Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the “Securities Act”), and applicable state securities laws. The Registration was deemed effective on May 11, 2022. The Company issued an accumulated 4,747,662 shares of common stock under this agreement for net proceeds of $151,104 in the year ended December 31, 2022. |
| (6) | On
April 7, 2022, the Company entered into Professional Relations and Consulting Agreement (Agreement) with Acorn Management Partners,
LLC (Acorn), a Georgia Limited Liability Company, wherein the Company will pay Acorn $11,500 per month, and issue, or cause
to be issued, $ |
F-22
| (7) | On July 7, 2022, effective June 14, 2022, the Company entered into a Sponsorship & Services Agreement (Agreement) with the Texas Rangers MLB Stadium called Globe Life Field (Rangers) wherein the Rangers granted sponsorship benefits to the Company. The Agreement calls for advanced sponsorship revenue share payments of $375,000 by the Company to the Rangers during the fiscal years 2023 and 2024, pursuant to a split fee arrangement for WiFi managed services and Sponsorship opportunity. The Agreement offers the rights of the Company to place stadium ads in a shared revenue model. The Company will also manage the WiFi Network captive portal remotely, as an exclusive arrangement. Subsequent to the year ended December 31, 2022 the Company remitted the first semi-annual installment of $187,500 under the terms of the contract. |
| (8) | During the year ended December 31, 2022, the Company entered into a Sponsorship & Services Agreement (Agreement), as amended, with the Kansas City Royals Baseball club (the “Royals”) whereunder the Royals granted sponsorship benefits to the Company for a term running from December 1, 2022 until the date of the last MLB game in 2027, unless terminated earlier. The Agreement calls for annual escalating payments by the Company to the Royals during the fiscal years 2023 through 2027 of $400,000, $420,000, $441,000, $463,000 and $486,202 and annual invoices to the Royals of $400,000 payable in four equal installments during fiscal 2023 and three equal installments during fiscal 2024 through 2027. In consideration for the fees paid the Company will have sponsorship rights, within the venue, across IPTV (internet protocol television) and fans’ mobile devices during live games and other events. |
NOTE 11: CAPITAL STOCK
The Company has authorized 1,000,000,000 common shares with a par value of $0.001, 10,000,000 shares of Series A Preferred Stock, par value $0.004 and 1 share of Series B Preferred Stock, par value $0.001. The shares of Series A Preferred Stock are convertible into shares of Common Stock on the basis of 10 shares of Common Stock for every 1 share of Series A Preferred Stock and have voting rights of one vote for each share of Series A Preferred Stock held. The Series B Preferred Stock is not convertible but has voting rights granting the holder 51% of all votes (including common and preferred stock) entitled to vote at any meeting of the stockholders of the Company. Neither the Series A nor Series B Preferred Stockholders have any rights to dividends or proceeds of the assets of the Company upon any liquidation or winding up of the Company.
Common Stock
Shares of common stock issued during the year ended December 31, 2022:
On
February 8, 2022, pursuant to an Engagement Agreement with Carter, Terry & Company, an authorized, registered broker dealer, the
Company issued a total of shares of common stock as compensation. The Company recorded $
On
April 7, 2022, pursuant to an Engagement Agreement with Acorn Management Partners, LLC, the Company issued a total of shares
of common stock as compensation. The Company recorded $
On
May 23, 2022 pursuant to an Engagement Agreement with Beyond Media SEZC, the Company issued a total of shares of
common stock as compensation. The Company recorded $
On May 27, 2022 the Company issued shares of common stock as a result of the exercise of a cashless warrants.
F-23
On
July 7, 2022 the Company issued shares of common stock to Talos for total proceeds of $
On
August 3, 2022, the Company issued shares of common stock to lender eSilkroad Network Ltd. in consideration for $
On September
1, 2022, the Company issued shares of restricted common stock to William Coleman Stock in partial payment of his promissory
notes in the amount of $
On
September 1, 2022, the Company issued a cumulative shares of restricted common stock for directors’ services provided
by Mr. Smith, Mr. Procniak and Mr. Hale during the first two quarters of 2022, with a fair value of $
On December 1, 2022 the Company issued shares of common stock as a result of the exercise of a cashless warrants.
The
Company issued an accumulated shares of common stock pursuant
to Notice of Conversion from lenders in the principal amount of $
The
Company issued an accumulated shares of common stock under an Equity Purchase Agreement with Mast Hill Fund, L.P.
with net proceeds of $
Shares of common stock issued during the year ended December 31, 2021:
On April 8, 2021, the Company and William Coleman Smith, officer and director entered into a securities purchase agreement whereunder Mr. Smith sold an additional 9% interest in GZMC to the Company for consideration of 10 million unregistered, restricted shares of common stock. On the conclusion of the transaction, the Company controls 60% of GZMC. The transaction occurred between parties under common control and the value of the shares was recorded at par value or $0.001 per share, in addition as a result of the change in ownership percentage to account for the additional 9% interest the Company recorded a reduction to additional paid in capital of $142,649 as of the acquisition date.
On
October 27, 2021, the Company issued shares of common stock to lender eSilkroad Network Ltd. in consideration for $
On
each of November 2, 2021, and November 3, 2021, the Company presented a Put to World Amber Corporation, pursuant to the Effective S-1
Registration Statement for $50,000 each Put, for a cumulative $
As of December 31, 2022, and December 31, 2021, there were 70,837,511 and 25,177,973 shares of common stock issued and outstanding, respectively.
Series A Preferred Stock
The total number of Series A Preferred stock that may be issued by the Company is shares with a par value of $.
As of December 31, 2022 and December 31, 2021, there are a total of 5,000,000 shares of Series A Preferred Stock issued and outstanding.
Series B Preferred Stock
The total number of Series B Preferred Stock that may be issued by the Company is 1 share with a par value of $0.001.
As of December 31, 2022 and December 31, 2021, there is 1 share of Series B Preferred stock issued and outstanding.
F-24
Share Purchase Warrants
On
November 11, 2021, the Company entered into a Warrant Agreement with J.H. Darbie and Company, an authorized, registered broker dealer,
wherein J.H. Darbie and Company may purchase shares of common stock for $1.00 per share, as a Finder’s Fee for
introducing the Company to MHFLP. The fair value of the warrants granted was estimated at $
In
November and December 2021, the Company issued cumulative warrants to convertible note holders and subscribers for
common shares, in accordance with the terms of subscription unit agreements into with the convertible note holder and subscribers. The
fair value of the warrants granted was estimated at $
In
April and May 2022, the Company issued a total of warrants to convertible note holders and subscribers for common
shares, in accordance with the terms of subscription unit agreements entered into with the convertible note holders and subscribers.
The fair value of the warrants granted was estimated at $
In
September 2022, the Company issued a total of warrants to convertible note holders and subscribers for common shares,
in accordance with the terms of subscription unit agreements entered into with the convertible note holders and subscribers. The fair
value of the warrants granted was estimated at $
In
November and Dec 2022, the Company issued a total of warrants to convertible note holders and subscribers for common
shares, in accordance with the terms of subscription unit agreements entered into with the convertible note holders and subscribers.
The fair value of the warrants granted was estimated at $
During
the year ended December 31, 2022, the Company issued a total of warrants to J.H. Darbie under various warrants agreements
as a Finder’s Fee for introducing the Company to MHFLP. The fair value of the warrants granted was estimated at $
During
the year ended December 31, 2022, the Company issued a total of warrants to Mast Hill as financing cost. The fair value
of the warrants granted was estimated at $
During the year ended December 31, 2022, shares of common stock were issued from the exercise of cashless warrants. shares of common stock issued at $0.095985 per share pursuant to the exercise of a share purchase warrant.
Certain warrants above include dilution protection for the warrant holders, which could cause the exercise price to be reduced as a result of a financing event at a valuation below the exercise price in effect at the time. During the year ended December 31, 2022, as a result of additional share issuances below the original exercise price of certain warrants, the warrant exercise price was downward adjusted to $0.020025 per share.
| Measurement date | ||||
| Dividend yield | % | |||
| Expected volatility | ~% | |||
| Risk-free interest rate | ~% | |||
| Expected life (years) | 3.00~5.00 | |||
| Stock Price | $~$ | |||
| Exercise Price | $ ~ $ | |||
F-25
| Exercise Price | December 31, 2021 | Issued | Repricing | Exercised | December 31, 2022 | Expiration Date | ||||||||||||||||||
| $ | 1.00 | 560,000 | (560,000 | ) | - | |||||||||||||||||||
| $ | 1.00 | 560,000 | 0.095985 | (560,000 | ) | - | ||||||||||||||||||
| $ | 1.00 | 10,487 | 0.020025 | 10,487 | November 2026 | |||||||||||||||||||
| $ | 1.00 | 925,000 | 0.020025 | (560,000 | ) | 365,000 | April 2027 | |||||||||||||||||
| $ | 1.20 | 16,417 | 0.020025 | 16,417 | April 2027 | |||||||||||||||||||
| $ | 0.30 | 1,466,667 | 0.020025 | 1,466,667 | May 2025 | |||||||||||||||||||
| $ | 0.36 | 66,000 | 0.020025 | 66,000 | May 2027 | |||||||||||||||||||
| $ | 0.10 | 3,520,000 | 0.020025 | 3,520,000 | September 2027 | |||||||||||||||||||
| $ | 0.12 | 79,200 | 79,200 | September 2027 | ||||||||||||||||||||
| $ | 0.10 | 8,260,000 | 0.020025 | 8,260,000 | November 2027 | |||||||||||||||||||
| $ | 0.12 | 203,850 | 0.020025 | 203,850 | November 2027 | |||||||||||||||||||
| $ | 0.10 | 5,860,000 | 0.020025 | 5,860,000 | December 2027 | |||||||||||||||||||
| $ | 0.12 | 131,850 | 0.020025 | 131,850 | December 31, 2022 | |||||||||||||||||||
| 1,130,487 | 20,528,984 | (1,680,000 | ) | 19,979,471 | ||||||||||||||||||||
| Weighted- Average Exercise | Weighted- Contractual | Aggregate Intrinsic | ||||||||||||||
| Shares | Price | Term | Value | |||||||||||||
| Outstanding at December 31, 2021 | $ | 2.93 | $ | - | ||||||||||||
| Grants | 4.80 | - | ||||||||||||||
| Exercised | ( | ) | - | - | ||||||||||||
| Expired | - | - | ||||||||||||||
| Outstanding at December 31, 2022 | $ | 4.68 | $ | - | ||||||||||||
| Exercisable at December 31, 2022 | $ | 4.68 | $ | - | ||||||||||||
NOTE 12: SUBSEQUENT EVENTS
On
January 23, 2023 we entered into a Promissory Note with Mast Hill Fund, L.P. for the Principal Amount of $
On
March 8, 2023 we entered into a Promissory Note with 1800 Diagonal Lending LLC for the Principal Amount of $
On
March 8, 2023 we entered into a Promissory Note with Mast Hill Fund, L.P. for the Principal Amount of $
In accordance with the terms of a finder’s fee agreement with J.H. Darbie the Company issued cumulative 527,400 stock purchase warrants for exercise at $0.06 per share for a term of five years from issue date.
Subsequent to the year ended December 31, 2022 the Company increased its authorized capital from 510,000,001 to 1,010,000,001 authorized shares of which there are authorized 1,000,000,000 common shares with a par value of $0.001, 10,000,000 shares of Series A Preferred Stock, par value $0.004 and 1 share of Series B Preferred Stock, par value $0.001.
Subsequent to the year ended December 31, 2022 the Company issued 57,563,655 shares of common stock to various lenders upon receipt of notices of conversion at prices between $0.0035 and $0.195 per share.
The Company has evaluated subsequent events from the balance sheet date through the date that the financial statements were issued and determined that there are no additional subsequent events requiring disclosure.
F-26
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
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, as of December 31, 2022, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer and principal financial officer have concluded that, based on the material weaknesses discussed below, our disclosure controls and procedures were not effective as of such date to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act were recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and that our disclosure controls are not effectively designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. As defined in Rules 13a-15(f) under the Securities Exchange Act of 1934, internal control over financial reporting is a process designed by, or under the supervision of, the Company’s principal executive, principal operating and principal financial officers, or persons performing similar functions, and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.
The Company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records, that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management, including our principal executive officer and principal financial officer, assessed the effectiveness of our internal control over financial reporting at December 31, 2022. 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). Based on that assessment under those criteria, management has determined that, as of December 31, 2022, our internal control over financial reporting was not effective.
Our internal controls are not effective for the following reasons: (i) there is an inadequate segregation of duties consistent with control objectives as management is comprised of only one person who is the Company’s principal executive officer and principal financial officer and, (ii) the Company has just recently formed an audit committee with a financial expert, and thus the Company lacks the board oversight role within the financial reporting process.
24
In order to mitigate the foregoing material weaknesses, we have engaged an outside accounting consultant with significant experience in the preparation of financial statements in conformity with GAAP to assist us in the preparation of our financial statements to ensure that these financial statements are prepared in conformity with GAAP. We will continue to monitor the effectiveness of this action and make any changes that our management deems appropriate.
We would need to hire additional staff to provide greater segregation of duties. Currently, it is not feasible to hire additional staff to obtain optimal segregation of duties. Management will continue to reassess this matter to determine whether improvement in segregation of duty is feasible. In addition, we would need to expand our board to include independent members.
Going forward, we intend to evaluate our processes and procedures and, where practicable and resources permit, implement changes in order to have more effective controls over financial reporting.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting during the year ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the exemption provided to issuers that are not “large, accelerated filers” nor “accelerated filers” under the Dodd-Frank Wall Street Reform and Consumer Protection Act.
ITEM 9B – OTHER INFORMATION
None
ITEM 9C- DISCLOSURE REGARDING FOREGIN JURISDICTIONS THAT PREVENT INSPECTIONS
Not Applicable
25
PART III
ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANACE
We are dependent on the efforts and abilities of senior management. The interruption of services of senior management could have a material adverse effect on our operations, profits and future development if suitable replacements are not promptly obtained. No assurance can be given that each executive will remain with us. All of our officers and directors will hold office until their resignation or removal.
The following table sets forth the names and ages of our current directors and executive officers as well as the principal offices and positions held by each person. Our Board of Directors appoints our executive officers. Our directors serve until the earlier occurrence of the election of his or her successor at the next meeting of shareholders, death, resignation or removal by the Board of Directors. Other than Mr. Smith, we have no promoters as Rule 405 of Regulation S-K defines that term.
| NAME | AGE | POSITION | ||
| William Coleman Smith | 61 | Chief Executive Officer, Chief Financial Officer, Secretary, Treasurer and Director | ||
| Brian Scott Hale | 56 | Director | ||
| William Ray Procanik | 51 | Director |
EXECUTIVE SUMMARIES
William Coleman Smith, Founder, Sole Officer and Director, Member of Audit Committee
Coleman Smith has more than 25 years in the telecommunication industry and as a tech entrepreneur. He established two of the largest global cloud-based application networks for the media and education industry, and developed sales channel partnerships to launch a global e-learning network that sold software (SaaS) products through partner resellers worldwide, which he eventually sold in 2005. Because of his global network, in 2006 he started a digital marketing agency which was the first web-based cloud, ad network that grew to over 6,500 publishing partners, which transformed online display advertising before selling in 2010.
April 29, 2018, to Present:
Mr. Smith serves as the Chairman of the Board, Chief Executive Officer and President of Green Zebra Media Corp, the Company’s wholly owned subsidiary.
December 28, 2003, to Present:
Smith also serves as Chairman of the Board, CEO, and President of ELOC Holdings Corporation since its inception. ELOC Holdings Corporation is a digital media technology holdings company. Subsidiaries own and operate proprietary Web TV channels, social media network channels, 100’s of hours of documentaries, training and education programs, e-learning technology, digital content distribution technology, file sharing & collaboration technology, digital video production, and software development.
An experienced industry executive, Mr. Smith held numerous roles in Fortune 500 companies, including Major and National Account Representative for MCI Communications, Senior Clinical Representative for General Electric, and Senior Business Analyst for Dun and Bradstreet.
A recipient of numerous business awards such as the Ernst & Young Executive of the Year in 1999 and the Ernst & Young Entrepreneur of the Year in 1996, Smith also holds several ExecRank Certifications from “Understanding SEC Compliance” to “Translating Cybersecurity.” He’s also authored 13 Keep It Simple series books for Entrepreneurs.
In addition to his storied business career, Smith served as a military medic in the United States Navy from 1985 to 1990 and was honorably discharged.
Smith is a graduate of East Tennessee State University with a Bachelor of Science degree in Finance and also has his master’s degree in Business Administration from the University of Southern California.
26
Brian Scott Hale: August 6, 2021 – Independent Director of GZ6G Technologies Corp., Member of Audit Committee
Mr. Hale has been the owner, and operator of Anchor Commercial Development, a commercial real estate development company, since August 2003, and continues to run Anchor Commercial Development on a daily basis, responsible for the day-to-day business operations. Mr. Hale has more than 20 years of commercial real estate development experience and has successfully founded, operated, and managed over a dozen multi-million-dollar companies with a focus on shopping center construction, renovation, maintenance, and management. Mr. Hale successfully opened, and was heavily involved, in every step of construction with his first shopping center, Dayco Crossing in 2003, a 44,000 sq. feet shopping center in Dayton, Tennessee. Today, he continues to build successful centers throughout the country with his company Anchor Commercial Development. Mr. Hale is poised to assist the facilitation of development for the company through technical analysis and creative solutions.
William Ray Procanik – August 6, 2021 - Independent Director – GZ6G Technologies Corp., Member of Audit Committee
Mr. Procanik has been the owner and operation of RIS Sales, an independent manufacturing company that consults and provides sales representation, for new retail products looking to supply a Big Box Retailer, since July 2014. He continues to run RIS Sales on a daily basis, overseeing the day-to-day operations of the company. Mr. Procanik has been in sales management and business development for the past twenty-five years and has worked with Fortune 500 Companies, as well as start-up companies and family businesses. In addition to sales management and business development, Mr. Procanik has experience in strategic planning, executive recruiting, contract negotiations, public relations and public speaking, and multi-store retail management. Mr. Procanik attended college at Springfield College, in Springfield, Massachusetts from 1990-1994, and studied business and liberal arts. He participated in College Varsity Football, Big Brothers/Big Sisters of Springfield MA and was involved in student government, and Young Entrepreneurs Organization. Mr. Procanik currently resides in Connecticut.
During the past ten years, except as noted above, the officers and directors of the Company have not been the subject of the following events:
| 1. | A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing; |
| 2. | Convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses); |
| 3. | The subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities; |
| i) | Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity; | |
| ii) | Engaging in any type of business practice; or | |
| iii) | Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws; |
| 4. | The subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph 3.i in the preceding paragraph or to be associated with persons engaged in any such activity; |
27
| 5. | Was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated; |
| 6. | Was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated; |
| 7. | Was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: |
| i) | Any Federal or State securities or commodities law or regulation; or | |
| ii) | Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or | |
| iii) | Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or | |
| 8. | Was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26)), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29)), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. | |
Family Relationships
There are no family relationships among any of our officers or directors.
Committees of the Board of Directors
The Company has an audit committee comprised of two independent directors.
We have recently formed an audit committee with a “financial expert” within the meaning of the rules and regulations of the SEC.
The Company has no nominating or compensation committees at this time. The entire Board participates in the nomination and audit oversight processes and considers executive and director compensation. Given the size of the Company and its stage of development, the entire Board is involved in such decision-making processes. Thus, there is a potential conflict of interest in that our directors and officers have the authority to determine issues concerning management compensation, nominations, and audit issues that may affect management decisions. We are not aware of any other conflicts of interest with any of our executive officers or directors.
Code of Ethics
The Company has not as yet adopted a code of ethics applicable to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions as required by the Sarbanes-Oxley Act of 2002 due to our small size and limited resources and because management’s attention has been focused on matters pertaining to raising capital and the operation of the business.
Delinquent Section 16(a) Reports
Section 16 of the Securities Exchange Act requires our directors and executive officers and persons who own more than 10% of a registered class of our equity securities to file various reports with the SEC concerning their holdings of, and transactions in, our securities. Copies of these filings must be furnished to us. Based on a review of the copies of such forms furnished to us, we believe that each of Mr. William Coleman Smith, a director and our Chief Executive Officer and Chief Financial Officer, Mr. Brian Scott Hale, director and Mr. William Procanik. Director each have failed to file their initial report on Form 3 reporting his ownership of our shares of common stock and subsequently failed to file a Form 4 reporting the acquisition of additional shares during the year ended December 31, 2022.
28
Changes in Nominating Process
There are no material changes to the procedures by which security holders may recommend nominees to our Board.
ITEM 11 – EXECUTIVE COMPENSATION
Summary Compensation Table.
The table set forth below summarizes the annual and long-term compensation for services in all capacities to us payable to our CEO (William Coleman Smith) during the years ended December 31, 2022 and 2021. Mr. Smith is the sole officer and director that received compensation from us for the years ended December 31, 2021 and 2021 in excess of $100,000. Our Board of Directors may adopt an Equity Incentive Plan for us that may result in the granting stock based compensation for our CEO.
| Name and Title | Year | Salary ($) | Bonus ($) | Stock Awards ($) | Option Awards ($) | Non-Equity Incentive Plan ($) | Non-qualified Deferred ($) | All other Compensation ($) | Total ($) | |||||||||||||||||||
| William C. Smith CEO, CFO, Treasurer, Secretary | 2022 | $ | 480,000 | (1) | -0- | -0- | -0- | -0- | -0- | -0- | $ | 480,000 | (1) | |||||||||||||||
| William C. Smith CEO, CFO, Treasurer, Secretary | 2021 | 330,000 | (2) | -0- | -0- | -0- | -0- | -0- | -0- | 330,000 | ||||||||||||||||||
| (1) | Of this amount $120,000 is unpaid and accrued monthly to Mr. Smith’s controlled entity, ELOC Holdings, Corp. and a further $65,000 is accrued and unpaid to Mr. Smith directly under this employment contract. |
| (2) | Of this amount $120,000 is unpaid and accrued monthly to Mr. Smith’s controlled entity, ELOC Holdings, Corp. |
Notes to Summary Compensation Table:
On July 9, 2018, Mr. William Coleman Smith was appointed to the Board of Directors of the Company and as President, Secretary and Treasurer of the Company. Subsequently, on July 10, 2018, the Company executed a consulting agreement with ELOC Holdings Corp. whereby ELOC will provide the services of Mr. Smith for a fee of $10,000 per month. ELOC Holdings, Corp is a company controlled by Mr. Smith.
On April 29, 2014, our 60% controlled subsidiary, GZMC, entered into a management and consulting agreement with Mr. Smith, the sole officer and director of GZMC whereunder GZMC was required to pay an annual salary of $120,000 to Mr. Smith.
Effective April 1, 2021, the Company revised Mr. Smith’s compensation so that he receives $10,000 per month directly as an employee in addition to accrued monthly fees for management services provided through controlled entity ELOC of $10,000, and $10,000 in paid monthly salary from GZMC. His contract was further revised effective January 2022 so that Mr. Smith receives a total of $20,000 per month as an employee of the Company, in addition to accrued monthly fees for management services provided through controlled entity ELOC of $10,000, and $10,000 in paid monthly salary from GZMC for total paid and accrued monthly compensation of $40,000 per month.
29
Director Compensation
Currently, there is no formal compensation in any form including payments of cash or in equity paid for services rendered as Directors.
Each member of the Board of Directors received a stock award for services in fiscal 2022, however, at this time no other plan for compensation has been developed for either salary or equity compensation. It is contemplated that the registrant would develop and approve a plan as soon as it has adequate resources to do so. Any future plans would be commensurate with the service provided and not exceed any industry standard for the size and performance of comparable companies in the same industry.
Directors may be compensated for out-of-pocket expenses associated with attending Board of Directors’ meetings.
Director’s compensation for the year ended December 31, 2022 is disclosed on the Director Compensation Table below:
Director Compensation Table
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | (h) | ||||||||||||||
| Change in | |||||||||||||||||||||
| Pension Value | |||||||||||||||||||||
| Fees Earned or | Non-Equity Incentive | and Nonqualified Deferred | |||||||||||||||||||
| Paid in Cash | Stock Awards | Option Awards | Plan Compensation | Compensation Earnings | All Other Compensation | Total | |||||||||||||||
| Name | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ||||||||||||||
| William C. Smith (1) | 0 | 60,250 | 0 | 0 | 0 | 0 | 60,250 | ||||||||||||||
| William Ray Procanik (2) | 0 | 2,410 | 0 | 0 | 0 | 0 | 2,410 | ||||||||||||||
| Brian Scott Hale (3) | 0 | 2,410 | 0 | 0 | 0 | 0 | 2,410 |
| (1) | On September 1, 2022, Mr. Smith was issued 2,500,000 unregistered, restricted shares of common stock at $0.0241 per share in consideration of services provided as a director; |
| (2) | On September 1, 2022, Mr. Procanik was issued 100,000 unregistered, restricted shares of common stock at $0.0241 per share in consideration of services provided as a director; |
| (3) | On September 1, 2022, Mr. Hale was issued 100,000 unregistered, restricted shares of common stock at $0.0241 per share in consideration of services provided as a director; |
There was no compensation for Director services during the fiscal years ended December 31, 2021 and 2020.
Code of Ethics
We have not adopted a Code of Ethics and plan to do so in the future.
Conflicts of Interest
The only conflicts that we foresee are that our officers and directors will devote time to projects that do not involve us.
Family Relationships
There are no family relationships between any director or executive officer.
30
Director Independence
Our board of directors is currently composed of three members, two of whom qualify as independent directors in accordance with the published listing requirements of the NASDAQ Global Market. The NASDAQ independence definition includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director, nor any of her family members has engaged in various types of business dealings with us. In addition, our board of directors has not made a subjective determination as to each director that no relationships exist which, in the opinion of our board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, though such subjective determination is required by the NASDAQ rules. Had our board of directors made these determinations, our board of directors would have reviewed and discussed information provided by the directors and us with regard to each director’s business and personal activities and relationships as they may relate to our management and us.
Security Holders Recommendations to Board of Directors
We welcome comments and questions from our shareholders. Shareholders can direct communications to our Investor Relations team. However, while we appreciate all comments from shareholders, we may not be able to individually respond to all communications. We attempt to address shareholder questions and concerns in our press releases and documents filed with the SEC so that all shareholders have access to information about us at the same time. All communications addressed to our Director and Executive Officers will be reviewed by the appropriate Officer unless the communication is clearly frivolous.
Board Committees
We have recently formed an audit committee, consisting of our three board members, two of whom are independent. We do not have any other board committees including a nominating, compensation, or executive committee. We currently have limited operating revenues. Presently, we have two independent directors. If we are able to grow our business and increase our operations in the future, then we will likely seek out and retain additional independent directors with additional financial expertise and expect to form, compensation, and other applicable committees. Further, we do not have a policy with regard to the consideration of any director candidates recommended by security holders. Our directors perform all functions that would otherwise be performed by committees.
Our board is actively involved in our risk oversight function and collectively undertakes risk oversight as part of our monthly management meetings. This review of our risk tolerances includes, but is not limited to, financial, legal and operational risks and other risks concerning our reputation and ethical standards.
Given our size, we do not have a nominating committee or a diversity policy. Our entire board monitors and assesses the need for and qualifications of additional directors. We may adopt a diversity policy in the future in connection with our anticipated growth.
Long-Term Incentive Plans
We do not have a Long-Term Incentive Plan that involves ongoing Restricted Stock and Stock Option grants of which are performance based. We have not issued any Stock Option grants.
ITEM 12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information at April 11, 2023, with respect to the beneficial ownership of shares of Common Stock and Series A Preferred Stock by (i) each person known to us who owns beneficially more than 5% of the outstanding shares of Common Stock (based upon reports which have been filed and other information known to us), (ii) each of our Directors, (iii) each of our Executive Officers and (iv) all of our Executive Officers and Directors as a group. Unless otherwise indicated, each stockholder has sole voting and investment power with respect to the shares shown. As of April 11, 2023, we had 128,401,166 shares of Common Stock; 5,000,000 shares of Series A Preferred Stock issued and outstanding; and 1 share of Special 2018 Series B Preferred Stock issued and outstanding to our Directors and Executive Officers as a group.
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Name and address of beneficial owner |
Common Stock |
Series A Preferred Stock (2) | Series B Preferred Stock | Beneficial Ownership as Converted | Percentage of Class of Stock (1) | |||||||||||||||
William Coleman Smith 3333 Michelson Dr., 3rd Floor Irvine, California 92612 | 67,500,000 | (2)(3) | 5,000,000 | 1 | 50,000,000 shares of common stock as to Series A(2) Series B - No Rights of Conversion | 37.84% Common 100% Series Preferred A 100% Series B Preferred | ||||||||||||||
William Ray Procniak(4) 58 Woodley Court, Unit 16, Meriden CT, 06450 | 100,540 | - | - | - | 0.08% Common | |||||||||||||||
Brian Scott Hale (5) 3035 Rhea Hwy, Suite 150 Dayton TN 37321 | 700,000 | - | - | - | 0.55% Common | |||||||||||||||
| Total | 68,300,540 | 5,000,000 | 1 | 38.46% Common 100% Series Preferred A 100% Series B Preferred | ||||||||||||||||
| (1) | Based on 178,401,166 shares outstanding including 128,401,166 common shares currently issued and outstanding, and 50,000,000 shares of common stock available for conversion from 5,000,000 shares of Series A Preferred held by Mr. Smith. |
| (2) | Includes 5,000,000 shares of Series A Preferred Stock as converted. Each shares of Series A Preferred Stock is convertible into 10 shares of Common Stock |
| (3) | Includes the following shares issued effective September 1, 2022: 2,500,000 common shares to William Coleman Smith for services rendered as a board member during the first two quarters of 2022, and 2,500,000 restricted, unregistered shares of the Company’s common stock at $0.03 per share for total value of $75,000 in partial conversion of amounts due and payable under a Consolidated Promissory Note originally issued to Mr. Smith on December 31, 2020. |
| (4) | On September 1, 2022, the Board of Directors issued 100,000 common shares to William Procanik for services rendered during the first two quarters of 2022. |
| (5) | On September 1, 2022, the Board of Directors issued 100,000 common shares to Brian Scott Hale for services rendered during the first two quarters of 2022. |
Under Rule 13d-3 promulgated under the Exchange Act, 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 is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights.
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The Series A Preferred Stock has a number of rights, privileges and preferences in accordance with the Certificate of Designations, Preferences and Rights of Series A Convertible Preferred Stock filed by us with the Nevada Secretary of State, including the following:
| ● | Voting Rights: The Series A Preferred Stock have one vote for each share owned. |
| ● | Adverse Effects: The Corporation shall not amend, alter or repeal the preferences, rights, powers or other terms of A Preferred Stock without the written consent of the holder(s) of the Series A Preferred Stock. |
| ● | Conversion: The shares of Series A Preferred Stock shall convert into common shares at the rate of 10 new shares for every one share of Special 2018 Series A Preferred Stock owned. The holder of the Special 2018 Series A Preferred Stock can convert the shares into common shares at any time. |
| ● | Dividends: The Series A Preferred Stock are not entitled to any dividends. |
| ● | No Impairment. The Corporation shall not intentionally take any action which would impair the rights and privileges of the Special 2018 Series A Preferred Stock. |
The Special Series B Preferred Stock has a number of rights, privileges and preferences in accordance with the Certificate of Designations, Preferences and Rights of Special Series B Preferred Stock filed by us with the Nevada Secretary of State, including the following:
| ● | Voting Rights: The Special 2018 Series B Preferred Stock stockholder is entitled to 51% of all votes (including, but not limited to, common stock, and preferred stock (including on an as converted basis) entitled to vote at each meeting of the stockholders of the Corporation (and written actions of the stockholders in lieu of meetings) with respect to any and all matters presented to the stockholders of the Corporation for their action or consideration. |
| ● | Adverse Effects: The Corporation cannot amend, alter, or repeal the preferences, rights, powers or other terms of the Special 2018 Series B Preferred Stock without the written consent or affirmative vote of the holder of the Special 2018 Series B Preferred Stock. |
| ● | Dividends: The Special 2018 Series B Preferred Stock shall not be entitled to any dividends. |
| ● | No Impairment: The Corporation shall not intentionally take any action which would impair the rights and privileges of the Special 2018 Series B Preferred Stock. |
Change-in-Control Agreements
We are not aware of any arrangements that could result in a change of control. Mr. William Coleman Smith is currently the controlling shareholder of the Company and upon conversion of his Series A Preferred Shares would remain the controlling shareholder of the Company
ITEM 13 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Coleman Smith and ELOC Holdings Corp.
On July 9, 2018, Mr. William Coleman Smith was appointed to the Board of Directors of the Company and as President, Secretary and Treasurer of the Company. Subsequently, on July 10, 2018, the Company executed a consulting agreement with ELOC Holdings Corp. whereby ELOC will provide the services of Mr. Smith for a fee of $10,000 per month. ELOC Holdings, Corp is a company controlled by Mr. Smith.
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On April 29, 2014, our 51% controlled subsidiary, GZMC, entered into a management and consulting agreement with Mr. Smith, the sole officer and director of GZMC whereunder GZMC was required to pay an annual salary of $120,000 to Mr. Smith.
During the year ended December 31, 2020, Mr. Smith and ELOC Holdings Corp made short term loans with interest at 1.5% per month to the Company to pay various expenses.
As of December 31, 2020, Mr. Smith, ELOC Holdings Corp. and the Company agreed to retroactively allocate interest in the amount of 5% per annum to loans, advances, wages and management fees payable by each of GZMC and the Company from January 1, 2020 forward. The parties entered into a single consolidated promissory note for all amounts payable to each of ELOC and Smith, with a principal amount of $1,217,579 payable to ELOC.
During the fiscal year ended December 31, 2021, the Company paid a total of $151,854 to ELOC to pay down the principal balance on the loan.
During the year ended December 31, 2022, the Company issued 2,500,000 shares of restricted common stock in partial payment of his promissory notes in the amount of $75,000, at $0.03 per share.
During the year ended December 31, 2022, the Company’s CEO, William Coleman Smith entered into Promissory Notes with the Company for a total of $250,000 due and payable in demand with bearing interest at 1%. During the year ended December 31, 2022, the Company’s CEO, William Coleman Smith entered into Promissory Notes with the Company for a total of $200,100 due and payable in demand with bearing interest at 12%.
The following amounts are included in debt to related party on our Balance Sheets:
| Balance at December 31, 2020, Debt, related party | $ | 1,217,579 | ||
| Payments on loan | (151,854 | ) | ||
| Balance at December 31, 2021, Debt, related party. | 1,065,725 | |||
| Shares issued to settle debt | (75,000 | ) | ||
| Promissory Notes for funding provided | 450,100 | |||
| Balance at December 31, 2022, Debt, related party. | $ | 1,440,825 |
The interest expenses related to above loans are as follows:
| Year Ended | ||||||||
| December 31, | ||||||||
| 2022 | 2021 | |||||||
| Interest expense on notes | $ | 54,072 | $ | 55,713 | ||||
During the year ended December 31, the Company accrued $120,000 in management fees to ELOC and accrued $360,000 in management fees to Coleman Smith. The Company paid cash to accrued management fees to Coleman Smith of $295,000. During the year ended December 31, 2021, the Company accrued $120,000 in management fees to ELOC, and paid management fees to Coleman Smith of $210,000.
The following amounts are included in related party payables on our Balance Sheets:
| December 31, 2022 | December 31, 2021 | |||||||
| Coleman Smith, President | $ | 67,256 | $ | 3,946 | ||||
| Interest payable | 109,785 | 55,713 | ||||||
| ELOC Holdings Corp. | 240,000 | 120,000 | ||||||
| Terrence Flowers | 110 | 110 | ||||||
| $ | 417,151 | $ | 179,769 | |||||
On September 1, 2022, the Company issued 2,500,000 shares of restricted common stock, with a fair value $60,250, to William Coleman Smith for director services rendered during the first two quarters of 2022.
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On April 8, 2021, the Company and William Coleman Smith, officer and director entered into a securities purchase agreement whereunder Mr. Smith sold an additional 9% interest in GZMC to the Company for consideration of 10 million unregistered, restricted shares of common stock. On the conclusion of the transaction, the Company controlled 60% of GZMC.
Securities Purchase Agreement – William Coleman Smith
On April 8, 2021, the Company and William Coleman Smith, officer and director entered into a securities purchase agreement whereunder Mr. Smith sold an additional 9% interest in GZMC to the Company for consideration of 10 million unregistered, restricted shares of common stock. On the conclusion of the transaction, the Company controlled 60% of GZMC.
Stock Awards issued to independent directors
On September 1, 2022, the Company issued 100,000 shares of restricted common stock for directors’ services provided by each of Mr. Procniak and Mr. Hale, independent directors, with a fair value of $2,410, respectively.
Other than the foregoing, none of the following persons has any direct or indirect material interest in any transaction to which we were or are a party since the beginning of our last fiscal year, or in any proposed transaction to which we propose to be a party:
(A) any of our director(s) or executive officer(s);
(B) any nominee for election as one of our directors;
(C) any person who is known by us to beneficially own, directly or indirectly, shares carrying more than 5% of the voting rights attached to our Common Stock; or
(D) any member of the immediate family (including spouse, parents, children, siblings and in-laws) of any of the foregoing persons named in paragraph (A), (B) or (C) above.
Insider Transactions Policies and Procedures
The Company does not currently have an insider transaction policy.
Director Independence
Our Board of Directors includes two independent directors.
RECENT SALES/ISSUANCE OF UNREGISTERED SECURITIES.
The Company issued the following unregistered securities subsequent to November 14, 2022 (the date of filing of our last Quarterly Report on Form 10-Q) which have not previously been disclosed in a Quarterly Report on Form 10-Q or a Current Report on Form 8-K:
On October 11, 2022 we entered into a Promissory Note with 1800 Diagonal Lending, LLC, a Virginia limited liability company, for the Principal Amount of $43,750. The total disbursement to GZ6G was $40,000, with a term of twelve months and an interest rate of 10%. The conversion rate of the note is 65% multiplied by the Market Price (as defined herein) (representing a discount rate of 35%). “Market Price” means the lowest Trading Price for the Common Stock during the ten (10) Trading Day period ending on the latest complete Trading Day prior to the Conversion Date. .Proceeds will be used, for operating costs and further execution of GZ6G’s business plans.
On November 3, 2022, the Company entered into a Promissory Note with Fourth Man LLC, a Nevada limited liability company in which Fourth Man has agreed to lend the Company the principal amount of $160,000; the purchase price of $144,000. The Term of the Note is twelve months with an interest rate of 12%. The conversion rate of the Note is $0.020025, subject to adjustment. The Promissory Note and accompanying documents were executed on November 9, 2022. Proceeds will be used, for operating costs and further execution of GZ6G’s business plans.
On November 15, 2022, Mast Hill Fund LLP provided the Company with a Notice of Conversion whereunder they agreed to convert the principal amount of $23,258.98 and the interest amount of $26,160.00 due and payable into 2,555,255 shares of the Company’s common stock at $0.020025 per share to reduce a total of $23,258.98 from the principal balance of a certain convertible promissory note.
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On November 23, 2022 we entered into a Promissory Note with Mast Hill Fund, L.P. for the Principal Amount of $293,000, and an Actual Amount of Purchase Price of $263,700. The Conversion rate on the note is $0.03 per share, subject to adjustments. The total disbursement to GZ6G was $250,789, with a term of twelve months and an interest rate of 12%. Proceeds will be used, for operating costs and further execution of GZ6G’s business plans.
On December 5, 2022, Mast Hill Fund LLP exercised certain warrants on a cashless basis and received a total of 550,883 shares of the Company’s common stock.
On December 5, 2022 1800 Diagonal Lending LLC provided the Company with a Notice of Conversion whereunder they agreed to convert the principal amount of $20,000 due and payable into 1,183,432 shares of the Company’s common stock at $0.0169 per share and reduce a total of $20,000 from the principal balance of a certain convertible promissory note.
On December 6, 2022, Mast Hill Fund LLP provided the Company with a Notice of Conversion whereunder they agreed to convert the principal amount of $23,258.98 and the interest amount of $26,160.00 due and payable into 2,555,255 shares of the Company’s common stock at $0.020025 per share to reduce a total of $23,258.98 from the principal balance of a certain convertible promissory note.
On December 12, 2022 1800 Diagonal Lending LLC provided the Company with a Notice of Conversion whereunder they agreed to convert the principal amount of $20,000 due and payable into 1,709,402 shares of the Company’s common stock at $0.0117 per share and reduce a total of $20,000 from the principal balance of a certain convertible promissory note.
On December 15, 2022 1800 Diagonal Lending LLC provided the Company with a Notice of Conversion whereunder they agreed to convert the principal amount of $30,000 due and payable into 2,702,703 shares of the Company’s common stock at $0.0111 per share and reduce a total of $30,000 from the principal balance of a certain convertible promissory note.
On December 15, 2022, Mast Hill Fund LLP provided the Company with a Notice of Conversion whereunder they agreed to convert a total of $62,077.50, including interest in the amount of $28,497.53 due and payable into 3,100,000 shares of the Company’s common stock at $0.020025 per share to reduce a total of $31,829.97 from the principal balance of a certain convertible promissory note.
On December 19, 2022 1800 Diagonal Lending LLC provided the Company with a Notice of Conversion whereunder they agreed to convert the principal amount of $30,000 due and payable into 2,857,143 shares of the Company’s common stock at $0.0105 per share and reduce a total of $30,000 from the principal balance of a certain convertible promissory note.
On December 20, 2022 we entered into a Promissory Note with Mast Hill Fund, L.P. for the Principal Amount of $293,000, and an Actual Amount of Purchase Price of $263,700. The Conversion rate on the note is $0.015 per share, subject to adjustments. The total disbursement to GZ6G was $250,789, with a term of twelve months and an interest rate of 12%. Proceeds will be used, for operating costs and further execution of GZ6G’s business plans.
On January 5, 2023, Mast Hill Fund LLP provided the Company with a Notice of Conversion whereunder they agreed to convert a total of $34,650, including interest in the amount of $2,818.05 due and payable into 3,300,000 shares of the Company’s common stock at $0.0105 per share to reduce a total of $30,081.95 from the principal balance of a certain convertible promissory note.
On January 6, 2023 1800 Diagonal Lending LLC provided the Company with a Notice of Conversion whereunder they agreed to convert the principal amount of $20,000 due and payable into 3,225,806 shares of the Company’s common stock at $0.0062 per share and reduce a total of $20,000 from the principal balance of a certain convertible promissory note.
On January 18, 2023 1800 Diagonal Lending LLC provided the Company with a Notice of Conversion whereunder they agreed to convert the principal amount of $20,000 due and payable into 3,773,585 shares of the Company’s common stock at $0.0053 per share and reduce a total of $20,000 from the principal balance of a certain convertible promissory note.
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On January 23, 2023 we entered into a Promissory Note with Mast Hill Fund, L.P. for the Principal Amount of $293,000, and an Actual Amount of Purchase Price of $263,700. The Conversion rate on the note is $0.0035 per share, subject to adjustments. The total disbursement to GZ6G was $250,789, with a term of twelve months and an interest rate of 12%. Proceeds will be used, for operating costs and further execution of GZ6G’s business plans.
On January 31, 2023, Mast Hill Fund LLP provided the Company with a Notice of Conversion whereunder they agreed to convert a total of $21,200, including interest in the amount of $3,231.88 due and payable into 4,000,000 shares of the Company’s common stock at $0.0053 per share to reduce a total of $16,218.12 from the principal balance of a certain convertible promissory note.
On February 1, 2023 1800 Diagonal Lending LLC provided the Company with a Notice of Conversion whereunder they agreed to convert the principal amount of $16,800 due and payable into 4,000,000 shares of the Company’s common stock at $0.0042 per share and reduce a total of $16,800 from the principal balance of a certain convertible promissory note.
On February 7, 2023 1800 Diagonal Lending LLC provided the Company with a Notice of Conversion whereunder they agreed to convert the principal amount of $11,200 due and payable into 2,666,667 shares of the Company’s common stock at $0.0042 per share and reduce a total of $11,200 in interest payable in respect to a certain convertible promissory note.
On February 8, 2023, Mast Hill Fund LLP provided the Company with a Notice of Conversion whereunder they agreed to convert a total of $18,020, including interest in the amount of $951.77 due and payable into 3,400,000 shares of the Company’s common stock at $0.0053 per share to reduce a total of $15,318.23 from the principal balance of a certain convertible promissory note.
On February 9, 2023 1800 Diagonal Lending LLC provided the Company with a Notice of Conversion whereunder they agreed to convert the principal amount of $18,600 due and payable into 4,428,571 shares of the Company’s common stock at $0.0042 per share and reduce a total of $18,600 from the principal balance of a certain convertible promissory note.
On February 13, 2023 1800 Diagonal Lending LLC provided the Company with a Notice of Conversion whereunder they agreed to convert the principal amount of $20,600 due and payable into 4,790,698 shares of the Company’s common stock at $0.0043 per share and reduce a total of $20,600 from the principal balance of a certain convertible promissory note.
On February 22, 2023 1800 Diagonal Lending LLC provided the Company with a Notice of Conversion whereunder they agreed to convert the principal amount of $27,737.50 due and payable into 5,043,182 shares of the Company’s common stock at $0.0055 per share and reduce a total of $24,550 from the principal balance of a certain convertible promissory note, and accrued interest of $3,187.50.
On February 23, 2023, Mast Hill Fund LLP provided the Company with a Notice of Conversion whereunder they agreed to convert a total of $23,220, including interest in the amount of $1,709.02 due and payable into 5,400,000 shares of the Company’s common stock at $0.0045 per share to reduce a total of $19,760.98 from the principal balance of a certain convertible promissory note.
On February 28, 2023, eSilkroad Network Limited provided the Company with a Notice of Conversion whereunder they agreed to convert a total of $611,353.42, including interest in the amount of $111,353.42 due and payable into 3,135,146 shares of the Company’s common stock at $0.195 per share to extinguish the principal note balance in full in the amount of $500,000.
On March 6, 2023, Mast Hill Fund LLP provided the Company with a Notice of Conversion whereunder they agreed to convert a total of $15,050, including interest in the amount of $1,181.82 due and payable into 4,300,000 shares of the Company’s common stock at $0.0035 per share to reduce a total of $12,118.18 from the principal balance of a certain convertible promissory note.
On March 8, 2023 we entered into a Promissory Note with 1800 Diagonal Lending LLC for the Principal Amount of $116,760 and an Actual Amount of Purchase Price of $104,250. The total disbursement to GZ6G was $100,000, with a term of twelve months and an interest rate of 12%. The note requires 10 monthly payments of $13,077.10 commencing April 30, 2023. In the event of default the holder shall have the right to convert interest and principal into shares of common stock based on a conversion price of 75% of the lowest trading price of the Company’s common stock in the preceding 10 days. Proceeds will be used, for operating costs and further execution of GZ6G’s business plans.
On March 8, 2023 we entered into a Promissory Note with Mast Hill Fund, L.P. for the Principal Amount of $293,000, and an Actual Amount of Purchase Price of $263,700. The Conversion rate on the note is $0.0035 per share, subject to adjustments. The total disbursement to GZ6G was $250,789, with a term of twelve months and an interest rate of 12%. Proceeds will be used, for operating costs and further execution of GZ6G’s business plans.
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On March 17, 2023, Mast Hill Fund LLP provided the Company with a Notice of Conversion whereunder they agreed to convert a total of $21,350, including interest in the amount of $1,139.99 due and payable into 6,100,000 shares of the Company’s common stock at $0.0035 per share to reduce a total of $18,462.01 from the principal balance of a certain convertible promissory note.
All of the shares were issued pursuant to Section 4(2) of the Securities Act of 1933, as amended, as it was a transaction by an issuer not involving a public offering; all of the shares contain a restrictive legend on the share certificate stating that the securities have not been registered under the Act and setting forth, or referring to the restrictions on transferability and sale of the securities.
ITEM 14 – PRINCIAL ACCOUNTANT FEES AND SERVICES
Audit Fees
Audit fees consist of fees for professional services rendered for the audit of the Company’s consolidated financial statements included in the Company’s Annual Report on Form 10-K and the review of financial statements included in the Company’s Quarterly Reports on Form 10-Q. The aggregate fees billed for professional services rendered by our principal accountant, Heaton & Company, PLLC (doing business as Pinnacle Accountancy Group of Utah), for audit and review services for the years ended December 31, 2022 and 2021 were $36,490 and $28,500, respectively.
We incurred no non-audit related fees, tax fees or other fees for professional services rendered by our principal accountant for the years ended December 31, 2022 and 2021.
Administration of the Engagement; Pre-Approval of Audit and Permissible Non-Audit Services
We have established an audit committee. However, there are no formal pre-approval policies and procedures as at December 31, 2022. Nonetheless, the auditors engaged for these services are required to provide and uphold estimates for the cost of services to be rendered. The percentage of hours expended on Heaton & Company, PLLC’s respective engagement to audit our financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time, permanent employees was 0%.
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PART IV
ITEM 15 – EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULES
(a)(1) Financial Statements.
The response to this portion of Item 15 is set forth under Item 8 above.
(a)(2) Financial Statement Schedules.
All schedules have been omitted because they are not required or because the required information is given in the Consolidated Financial Statements or Notes thereto set forth under Item 8 above.
(a)(3) Exhibits.
The exhibits listed below are filed or incorporated by reference as part of this Annual Report on Form 10-K.
EXHIBITS
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| + | Filed herewith |
| * | Previously filed |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| GZ6G TECHNOLOGIES INC. | ||
| Date: April 17, 2022 | /s/ William Coleman Smith | |
| William Coleman Smith | ||
| Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial and Accounting Officer) | ||
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