Metalert, Inc 10-Q for FY2021 Q3
Metalert, Inc. (MLRT)
About this 10-Q
Metalert, Inc filed this 10-Q on November 15, 2021, covering the quarter ended September 30, 2021 (FY2021 Q3).
Headline figures
Quarter ended September 30, 2021, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $151.55K
- down 58.2% from $362.23K a year earlier
- Net loss
- $212.13K
- compared with net income of $3108 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark one)
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For
the quarterly period ended
OR
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from __________ to __________
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☐ (Do not check if a smaller reporting company) | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: common shares issued and outstanding as of November 15, 2021.
GTX CORP AND SUBSIDIARIES
For the quarter ended September 30, 2021
FORM 10-Q
| 2 |
PART I
ITEM 1. FINANCIAL STATEMENTS
GTX CORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, 2021 | December 31, 2020 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Inventory | ||||||||
| Investment in marketable securities | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Accrued expenses, related parties | ||||||||
| Deferred revenues | ||||||||
| Short-term debt – line of credit | ||||||||
| Convertible promissory notes, past due | ||||||||
| Convertible notes, related parties | ||||||||
| Notes payable | ||||||||
| Total current liabilities | ||||||||
| Long-term debt - CARE loan | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders’ deficit: | ||||||||
| Preferred stock series A, $ par value; shares authorized; shares issued and outstanding at September 30, 2021 and December 31, 2020 | ||||||||
| Preferred stock series B, $ par value; shares authorized, and issued and outstanding at September 30, 2021 and December 31, 2020, respectively | ||||||||
| Preferred stock series C, $ par value; shares authorized, and issued and outstanding at September 30, 2021 and December 31, 2020, respectively | - | |||||||
| Common stock, $ par value; shares authorized; and shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
| 3 |
GTX CORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Product sales | $ | $ | $ | $ | ||||||||||||
| Service income | ||||||||||||||||
| IP royalties | - | - | - | - | ||||||||||||
| Total revenues | ||||||||||||||||
| Cost of products sold | ||||||||||||||||
| Cost of other revenue | ||||||||||||||||
| Cost of licensing revenue | - | - | - | - | ||||||||||||
| Total cost of goods sold | ||||||||||||||||
| Gross margin | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| Wages and benefits | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Sales and marketing expenses | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Income/(loss) from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income/(expenses): | ||||||||||||||||
| Gain/(loss) on conversion of convertible notes | - | - | ( | ) | ||||||||||||
| Gain/(loss) on marketable securities | ( | ) | ( | ) | ( | ) | ||||||||||
| Change in fair value of derivative | - | - | ||||||||||||||
| Interest expense and financing costs | ( | ) | ( | ) | ( | ) | ||||||||||
| Total other income/(expenses) | ( | ) | ( | ) | ||||||||||||
| Net income/(loss) | ( | ) | ( | ) | ||||||||||||
| Deemed dividend to series-B preferred stockholders | - | - | - | ( | ) | |||||||||||
| Deemed dividend to series-C preferred stockholders | - | - | ( | ) | ( | ) | ||||||||||
| Net income/(loss) attributable to common shareholders | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | ||||||
| Weighted average number of common shares outstanding - basic and diluted | ||||||||||||||||
| Net income/(loss) per common share - basic and diluted | $ | $ | $ | $ | ||||||||||||
See accompanying notes to condensed consolidated financial statements.
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GTX CORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
Three Months Ended September 30, 2021 and September 30, 2020 (Unaudited)
For the Three Months Ended September 30, 2021 (Unaudited)
| Shares | Shares | Shares | Shares | Paid-In | Accumulated | Equity | ||||||||||||||||||||||||||||||||||||||
| Series A Preferred | Series B Preferred | Series C Preferred | Common Shares | Additional | ||||||||||||||||||||||||||||||||||||||||
| Shares | Shares | Shares | Shares | Paid-In | Accumulated | Equity | ||||||||||||||||||||||||||||||||||||||
| Issued | Amount | Issued | Amount | Issued | Amount | Issued | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||||||||||||||
| Balance June 30, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Issuance of common stock for services | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||
| Loss on stock compensation | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for conversion of debt | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for conversion of debt, shares | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of preferred stock for financings | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of preferred stock for financings, shares | ||||||||||||||||||||||||||||||||||||||||||||
| Fair value of warrants issued for services | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for financings | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for financings, shares | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for the conversion of warrants | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for the conversion of warrants, shares | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for the conversion of preferred shares | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for the conversion of preferred shares, shares | ||||||||||||||||||||||||||||||||||||||||||||
| Loss on shares issued for conversion of debt | ||||||||||||||||||||||||||||||||||||||||||||
| Deemed dividend on fair value of warrants & conversion feature | ||||||||||||||||||||||||||||||||||||||||||||
| Imputed interest – related parties | ||||||||||||||||||||||||||||||||||||||||||||
| Inpixon loan reduction correction | ||||||||||||||||||||||||||||||||||||||||||||
| Fair value of retention bonus shares | ||||||||||||||||||||||||||||||||||||||||||||
| Deemed dividend | ||||||||||||||||||||||||||||||||||||||||||||
| Net income (loss) | - | - | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Balance September 30, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
For the Three Months Ended September 30, 2020 (Unaudited)
| Series A Preferred | Series B Preferred | Series C Preferred | Common Shares | Additional | ||||||||||||||||||||||||||||||||||||||||
| Shares | Shares | Shares | Shares | Paid-In | Accumulated | Equity | ||||||||||||||||||||||||||||||||||||||
| Issued | Amount | Issued | Amount | Issued | Amount | Issued | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||||||||||||||
| Balance June 30, 2020 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Issuance of common stock for services | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||
| Issuance of common stock for conversion of debt | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||
| Fair value of retention bonus shares | - | - | - | - | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||||||||
| Net income (loss) | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Balance September 30, 2020 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 5 |
GTX CORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
Nine Months Ended September 30, 2021 and September 30, 2020 (Unaudited)
For the Nine Months Ended September 30, 2021 (Unaudited)
| Series A Preferred | Series B Preferred | Series C Preferred | Common Shares | Additional | ||||||||||||||||||||||||||||||||||||||||
| Shares | Shares | Shares | Shares | Paid-In | Accumulated | Equity | ||||||||||||||||||||||||||||||||||||||
| Issued | Amount | Issued | Amount | Issued | Amount | Issued | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||||||||||||||
| Balance December 31, 2020 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Issuance of common stock for services | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||
| Loss on stock compensation | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Issuance of common stock for conversion of debt | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||
| Issuance of preferred stock for financings | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for financings | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||
| Issuance of common stock for the conversion of warrants | - | - | - | - | - | - | ( | ) | - | - | ||||||||||||||||||||||||||||||||||
| Issuance of common stock for the conversion of preferred shares | - | - | ( | ) | - | ( | ) | - | ( | ) | - | - | ||||||||||||||||||||||||||||||||
| Loss on shares issued for conversion of debt | ||||||||||||||||||||||||||||||||||||||||||||
| Deemed dividend on fair value of warrants & conversion feature | - | - | - | - | - | - | - | - | ( | ) | - | |||||||||||||||||||||||||||||||||
| Imputed interest – related parties | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Inpixon loan reduction correction | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Net income (loss) | - | - | - | - | - | - | - | - | - | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Balance September 30, 2021 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
For the Nine Months Ended September 30, 2020 (Unaudited)
| Series A Preferred | Series B Preferred | Series C Preferred | Common Shares | Additional | ||||||||||||||||||||||||||||||||||||||||
| Shares | Shares | Shares | Shares | Paid-In | Accumulated | Equity | ||||||||||||||||||||||||||||||||||||||
| Issued | Amount | Issued | Amount | Issued | Amount | Issued | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||||||||||||||
| Balance December 31, 2019 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Issuance of common stock for services | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||
| Issuance of common stock for conversion of debt | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||
| Issuance of preferred stock for financings | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||
| Fair value of warrants issued for services | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Fair value of retention bonus shares | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Deemed dividend | - | - | - | - | - | - | - | - | ( | ) | - | |||||||||||||||||||||||||||||||||
| Net income | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||
| Balance September 30, 2020 | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
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GTX CORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| Nine Months Ended September 30, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities | ||||||||
| Net income / (loss) | $ | ( | ) | $ | ||||
| Adjustments to reconcile net income / (loss) to net cash used in operating activities: | ||||||||
| Bad debt expense | - | |||||||
| Depreciation and amortization | ||||||||
| Change in fair value of marketable securities | ( | ) | ||||||
| Stock based compensation | ||||||||
| Change in fair value of derivative | - | ( | ) | |||||
| Repatriation of retention bonus shares | - | ( | ) | |||||
| (Gain)/loss on the settlement of debt and accrued interest | ( | ) | ||||||
| Fair value of warrants issued for service | ||||||||
| Interest and financing costs | ||||||||
| Imputed interest on related party notes | - | |||||||
| Grant from CARE loans | - | ( | ) | |||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Inventory | ( | ) | ||||||
| Other current and non-current assets | ( | ) | ( | ) | ||||
| Accounts payable and accrued expenses | ( | ) | ( | ) | ||||
| Accrued expenses - related parties | ||||||||
| Deferred revenues | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| PP&E purchases | ( | ) | - | |||||
| Proceeds from the sale of marketable securities | ||||||||
| Net cash provided by / (used in) investing activities | ( | ) | ||||||
| Cash flows from financing activities | ||||||||
| Proceeds from CARE loans | - | |||||||
| Proceeds from line of credit | - | |||||||
| Proceeds from issuance of preferred stock | ||||||||
| Payments on debt | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Net change in cash and cash equivalents | ||||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Income taxes paid | $ | $ | ||||||
| Interest paid | $ | $ | ||||||
| Supplemental disclosure of noncash investing and financing activities: | ||||||||
| Issuance of common stock for conversion of debt and interest | $ | $ | ||||||
| Deemed dividend | $ | $ | ||||||
| Conversion of preferred stock to common stock | $ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
| 7 |
GTX CORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2021 AND 2020
(Unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
During
the periods covered by these financial statements, GTX Corp and its subsidiaries (the “Company”, “GTX”, “we”,
“us”, and “our”) were engaged in business operations that design, manufacture and sell various interrelated and
complementary products and services in the wearable technology and Personal Location Services marketplace. GTX owns
Global Trek Xploration, Inc. focuses on the design, manufacturing and sales distribution of its hardware, software, and connectivity, Global Positioning System (“GPS”) and Bluetooth Low Energy (“BLE”) monitoring and tracking platform, which provides real-time tracking and monitoring of people and high valued assets. Utilizing a miniature quad-band GPRS transceiver, antenna, circuitry, battery and inductive charging pad our solutions can be customized and integrated into numerous products whose location and movement can be monitored in real time over the Internet through our 24x7 tracking portal or on a web enabled cellular telephone. Our core products and services are supported by an intellectual property (“IP”) portfolio of patents, patents pending, registered trademarks, copyrights, URLs and a library of software source code, all of which is also managed by Global Trek.
LOCiMOBILE, Inc., is the Companies digital platform which has been at the forefront of Smartphone application (“App”) development since 2008. With a suite of mobile applications that turn the iPhone, iPad, Android and other GPS enabled handsets into a tracking device which can be tracked from handset to handset or through our tracking portal or on any connected device with internet access. LOCiMOBILE has launched over 20 Apps across multi mobile device operating systems and continues to launch consumer and enterprise apps.
Basis of Presentation
The accompanying unaudited consolidated financial statements of GTX have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and applicable regulations of the U.S. Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted pursuant to such rules and regulations. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair statement of financial position and results of operations have been included. Our operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The accompanying unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2020, which are included in our Annual Report on Form 10-K.
The accompanying consolidated financial statements reflect the accounts of GTX Corp and its wholly-owned subsidiaries. All significant inter-company balances and transactions have been eliminated.
Going Concern
The
consolidated financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets
and discharge its liabilities in the normal course of business for the foreseeable future. The Company has a stockholders’ deficit
of $
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The Company’s independent registered public accounting firm has also included explanatory language in their opinion accompanying the Company’s audited financial statements for the year ended December 31, 2020. The Company’s financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the possible inability of the Company to continue as a going concern.
The ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and/or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. The Company’s ability to raise additional capital through the future issuances of debt or equity is unknown. The ability to obtain additional financing, the successful development of the Company’s contemplated plan of operations, or its ability to achieve profitable operations are necessary for the Company to continue operations, and there is no assurance that these can be achieved. The ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.
2. SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company recognizes revenue in accordance with ASU 2014-09, Revenue from Contracts with Customers (Topic 606), (“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which include (1) identifying the contract or agreement with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied.
The Company does not have any significant contracts with customers requiring performance beyond delivery, and contracts with customers contain no incentives or discounts that could cause revenue to be allocated or adjusted over time. Shipping and handling activities are performed before the customer obtains control of the goods and therefore represent a fulfillment activity rather than a promised service to the customer. Revenue and costs of sales are recognized when control of the products transfers to our customer, which generally occurs upon shipment from our facilities. The Company’s performance obligations are satisfied at that time.
All of the Company’s products are offered for sale as finished goods only, and there are no performance obligations required post-shipment for customers to derive the expected value from them.
The Company does not allow for returns, except for damaged products when the damage occurred pre-fulfillment. Damaged product returns have historically been insignificant. Because of this, the stand-alone nature of our products, and our assessment of performance obligations and transaction pricing for our sales contracts, we do not currently maintain a contract asset or liability balance for obligations. We assess our contracts and the reasonableness of our conclusions on a quarterly basis.
We derive our revenues primarily from hardware sales, subscription services fees, IP licensing and professional services fees. Hardware includes our SmartSole, Military and other Stand-Alone Devices. Subscription services revenues consist of fees from customers accessing our cloud-based software solutions and subscription or license fees for our platform. Professional services and other revenues consist primarily of fees from implementation services, configuration, data services, training and managed services related to our solutions. IP licensing is related to our agreement with Inventergy whereby we have partnered in order to monetize our IP portfolio.
Product sales
At the inception of each contract, we assess the goods and services promised in our contracts and identify each distinct performance obligation. The Company recognizes revenue upon the transfer of control of promised products or services to the customer in an amount that depicts the consideration the Company expects to be entitled to for the related products or services. For the large majority of the Company’s sales, transfer of control occurs once product has shipped and title and risk of loss have transferred to the customer.
| 9 |
Services Income
The Company’s software solutions are available for use as hosted application arrangements under subscription fee agreements without licensing perpetual rights to the software. Subscription fees from these applications are recognized over time on a ratable basis over the customer agreement term beginning on the date the Company’s solution is made available to the customer. Our subscription contracts are generally one to three months in length. Amounts that have been invoiced are recorded in accounts receivable and deferred revenues or revenues, depending on whether the revenue recognition criteria have been met.
The majority of our professional services arrangements are recognized on a time and materials basis. Professional services revenues recognized on a time and materials basis are measured monthly based on time incurred and contractually agreed upon rates. Certain professional services revenues are based on fixed fee arrangements and revenues are recognized based on the proportional performance method. In some cases, the terms of our time and materials and fixed fee arrangements may require that we defer the recognition of revenue until contractual conditions are met. Data services and training revenues are generally recognized as the services are performed.
IP Licensing Revenue
Licensing revenue recorded by the Company relates exclusively to the Company’s License and Partnership agreement with Inventergy which provides for ongoing royalties based on monetization of IP licenses. The Company recognizes revenue for royalties under ASC 606, which provides revenue recognition constraints by requiring the recognition of revenue at the later of the following: 1) sale or usage of the products or 2) satisfaction of the performance obligations. The Company has satisfied its performance obligations and therefore recognizes licensing revenue when the sales to which the license(s) relate are completed. During the period ended September 30, 2021 and September 30, 2020, the Company did not recognize any licensing revenue.
Disaggregation of Net Sales
The following table shows the Company’s disaggregated net sales by product type:
SCHEDULE OF DISAGGREGATION OF NET SALES
| September 30, 2021 | September 30, 2020 | |||||||
| Product sales | $ | $ | ||||||
| Service income | ||||||||
| IP and consulting income | - | - | ||||||
| Total | $ | $ | ||||||
The following table shows the Company’s disaggregated net sales by customer type:
| September 30, 2021 | September 30, 2020 | |||||||
| B2B | $ | $ | ||||||
| B2C | ||||||||
| Military | - | |||||||
| IP | - | - | ||||||
| Total | $ | $ | ||||||
During
the period ended September 30, 2021, the Company’s customer base and revenue streams were comprised of approximately
| 10 |
During
the period ended September 30, 2020, the Company’s customer base and revenue streams were comprised of approximately
Use of Estimates
The preparation of the accompanying unaudited financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates include, but are not limited to, estimates related to revenue recognition, allowance for doubtful accounts, inventory valuation, tangible and intangible long-term asset valuation, warranty and other obligations and commitments. Estimates are updated on an ongoing basis and are evaluated based on historical experience and current circumstances. Changes in facts and circumstances in the future may give rise to changes in these estimates which may cause actual results to differ from current estimates.
Fair Value Estimates
Pursuant to the Accounting Standards Codification (“ASC”) No. 820, “Disclosures About Fair Value of Financial Instruments”, the Company records its financial assets and liabilities at fair value. ASC No. 820 provides a framework for measuring fair value, clarifies the definition of fair value and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. ASC No. 820 establishes a three-tier hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
| Level 1 - | Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. | |
| Level 2 - | Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the asset/liability’s anticipated life. | |
| Level 3 - | Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. |
The carrying values for cash and cash equivalents, accounts receivable, investment in marketable securities, other current assets, accounts payable and accrued liabilities approximate their fair value due to their short maturities. The carrying values of notes payable and other financing obligations approximate their fair values because interest rates on these obligations are based on prevailing market interest rates.
The Company uses Level 2 inputs for its valuation methodology for the derivative liabilities.
Concentrations
We currently rely on one manufacturer to supply us with our GPS SmartSole and one manufacturer to supply us with the GPS device included in the GPS SmartSole. The loss of either of these manufacturers could severely impede our ability to manufacture the GPS SmartSole.
For
the nine months ended September 30, 2021, the Company had three customers representing approximately
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For
the nine months ended September 30, 2020, the Company had four customers representing approximately
The Company accounts for share-based awards to employees and nonemployees directors and consultants in accordance with the provisions of ASC 718, Compensation—Stock Compensation., and under the recently issued guidance following FASB’s pronouncement, ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. Under ASC 718, and applicable updates adopted, share-based awards are valued at fair value on the date of grant and that fair value is recognized over the requisite service, or vesting, period. The Company values its equity awards using the Black-Scholes option pricing model, and accounts for forfeitures when they occur.
Marketable Securities
The
Company’s securities investments that are acquired and held principally for the purpose of selling them in the near term are classified
as trading securities. Trading securities are recorded at fair value based on quoted market price (level 1) on the balance sheet in current
assets, with the change in fair value during the period included in earnings. As of September 30, 2021 and December 31, 2020 the fair
value of our investment in marketable securities was $
Derivative Liabilities
Our derivative instrument liabilities are re-valued at the end of each reporting period, with changes in the fair value of the derivative liability recorded as charges or credits to income, in the period in which the changes occur. For bifurcated conversion options that are accounted for as derivative instrument liabilities, we determine the fair value of these instruments using the Black-Scholes option pricing model. This model requires assumptions related to the remaining term of the instrument and risk-free rates of return, our current Common Stock price and expected dividend yield, and the expected volatility of our Common Stock price over the life of the option.
At
September 30, 2021 and December 31, 2020, the balance of the derivative liabilities was $
Basic loss per share is computed by dividing the net loss applicable to common stockholders by the weighted average number of outstanding common shares during the period. Shares of restricted stock are included in the basic weighted average number of common shares outstanding from the time they vest. Diluted loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all dilutive potential common shares had been issued. Shares of restricted stock are included in the diluted weighted average number of common shares outstanding from the date they are granted unless they are antidilutive. Diluted loss per share excludes all potential common shares if their effect is anti-dilutive. The following potentially dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive:
| 2021 | 2020 | |||||||
| September 30, | ||||||||
| 2021 | 2020 | |||||||
| Warrants | ||||||||
| Preferred B shares | ||||||||
| Preferred C shares | ||||||||
| Conversion shares upon conversion of notes | ||||||||
| Total | ||||||||
| 12 |
Segments
The Company operates in one segment for the manufacture and distribution of its products. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying financial statements.
Recently Issued Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASC 326”). The standard significantly changes how entities will measure credit losses for most financial assets, including accounts and notes receivables. The standard will replace today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. As small business filer, the standard will be effective for us for interim and annual reporting periods beginning after December 15, 2022. The Company is currently assessing the impact of adopting this standard on the Company’s financial statements and related disclosures.
Other recent accounting pronouncements issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.
3. INVESTMENT IN MARKETABLE SECURITIES
As
of December 31, 2020, the Company owned shares of Inventergy Global, Inc. common stock with a fair value of $
In
June 2019, the Company acquired shares of Inpixon’s restricted common stock (after giving effect
As
of December 31, 2020, the Company owned shares of Inpixon common stock with a fair value of $
| 13 |
4. INVENTORY
Inventories consist of the following:
SCHEDULE OF INVENTORY
| September 30, 2021 | December 31, 2020 | |||||||
| Raw materials | $ | $ | ||||||
| Finished goods | ||||||||
| Total Inventories | $ | $ | ||||||
5. PROPERTY AND EQUIPMENT
Property and equipment, net, consists of the following:
SCHEDULE OF PROPERTY AND EQUIPMENT
| September 30, 2021 | December 31, 2020 | |||||||
| Software | $ | $ | ||||||
| Website development | ||||||||
| Software development | ||||||||
| Equipment | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Total property and equipment, net | $ | $ | ||||||
Depreciation
expense for the period ended September 30, 2021 and 2020 was $
6. NOTES PAYABLE
The following table summarizes the components of our short-term borrowings:
SUMMARY OF COMPONENTS OF OUR SHORT-TERM BORROWINGS
| September 30, 2021 | December 31, 2020 | |||||||
| (a) Term loan | $ | $ | ||||||
| (b) Term loan | ||||||||
| (c) Revolving line of credit | ||||||||
| (d) Revolving line of credit | - | ( | ) | |||||
| Total | $ | $ | ||||||
(a) Term loan
In
2015, the Company entered into an unsecured term loan agreement with a third party for an aggregate principal balance of $
| 14 |
(b) Term loan
In
September of 2019, the Company entered into an unsecured term loan agreement with a third party for an aggregate principal balance of
$
The
Company reached an agreement with the lender to apply sublet space the lender uses in the Company office and apply those payments against
the term loan balance. The monthly credit of $
(c) Lines of Credit
The
Company obtained a revolving line of credit agreement with an accredited investor of $
The
line bears interest of
(d) Line of Credit
7. CONVERTIBLE PROMISSORY NOTES – PAST DUE
As of September 30, 2021 and December 31, 2020, the Company had a total of $688,000 and $840,673, respectively, of outstanding convertible notes payable, which consisted of the following:
SCHEDULE OF CONVERTIBLE NOTES PAYABLE
| September 30, 2021 | December 31, 2020 | |||||||
| a) Convertible Notes – with fixed conversion terms | $ | $ | ||||||
| b) Convertible Notes – with variable conversion | ||||||||
| Total convertible notes, net of debt discount | $ | $ | ||||||
| a) | Included
in Convertible Notes - with fixed conversion terms, are loans provided to the Company from various investors These notes carry simple
interest rates ranging from | |
| At
December 31, 2020, balance of the convertible notes was $ |
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| b) | Convertible
notes payable with principal balance of $ |
8. CARE Loans
SCHEDULE OF LOANS PAYABLE
| September 30, 2021 | December 31, 2020 | |||||||
| a) PPP loan | $ | $ | ||||||
| b) EIDL loan | ||||||||
| Total CARE loans | $ | $ | ||||||
Paycheck Protection Program Loan
On
April 30, 2020, the Company executed a note (the “PPP Note”) for the benefit of MUFG Union Bank, NA (the “Lender”)
in the aggregate amount of $
Economic Injury Disaster Loan
On
June 10, 2020, the Company executed a secured loan with the U.S. Small Business Administration (SBA) under the Economic Injury Disaster
Loan program in the amount of $
| 16 |
9. RELATED PARTY TRANSACTIONS
Convertible Notes Due to Related Parties
Convertible Notes to Related Parties represent amounts due to members of Management for past services that were converted to notes payable in prior years. Under the note agreement, the holder shall have the right, but not the obligation, to convert up to % of the amount advanced and accrued interest into shares, warrants or options of common or preferred stock of the Company at $ per security.
During
2020 and up until June 30, 2021, management elected to reduce the
As
of September 30, 2021 and December 31, 2020, the outstanding balance on the convertible promissory notes was $
Accrued
wages and costs - In order to preserve cash for other working capital needs, various officers, members of management, employees and directors
agreed to defer portions of their wages and sometimes various out-of-pocket expenses since 2011. As of September 30, 2021, and December
31, 2020, the Company owed $
10. DERIVATIVE LIABILITIES
Under authoritative guidance used by the FASB on determining whether an instrument (or embedded feature) is indexed to an entity’s own stock, instruments which do not have fixed settlement provisions are deemed to be derivative instruments. The Company has issued certain convertible notes which conversion prices are based on a future market price. However, since the number of shares to be issued is not explicitly limited, the Company is unable to conclude that enough authorized and unissued shares are available to share settle the conversion option. As a result, the conversion option is classified as a liability and bifurcated from the debt host and accounted for as a derivative liability in accordance with ASC 815 and will be re-measured at the end of every reporting period with the change in value reported in the statement of operations.
At
September 30, 2021 and December 31, 2020, the balance of the derivative liabilities was $
11. EQUITY
The Company has shares of preferred stock authorized. From this pool the following preferred shares have been classified as:
Preferred Stock – Series A
During the year ended December 31, 2018, the Company authorized of Series A preferred shares, which shares have voting rights equal to two-thirds of all the issued and outstanding shares of common stock, shall be entitled to vote on all matters of the corporation, and shall have the majority vote of the board of directors. The subject preferred stock lacks any dividend rights, does not have liquidation preference, and is not convertible into common stock. During the year ended December 31, 2018, the Company issued one million Series A preferred shares to certain officers and board members. The shares remain outstanding as of September 30, 2021.
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At December 31, 2020 is was determined that the Preferred A shareholders having the majority vote, did agree to increase the number of authorized shares, if needed, to settle any convertible debt, and thus any derivative liabilities are not necessary to reserve for this.
Preferred Stock – Series B
During
the year ended December 31, 2019, the Company authorized shares of preferred stock to be designated available for Series B preferred
shares that have a value of $ each and are convertible into common shares at fixed price of $. Holders shall be entitled to
receive, and the Company shall pay, dividends on shares of Series B Preferred Stock equal (on an as-if-converted-to-Common-Stock basis)
to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of
the Company’s Common Stock. No other dividends shall be paid on shares of Series B Preferred Stock, and they shall have no voting
rights and have liquidation preference. During the year ended December 31, 2019, the Company issued Series Preferred B shares and
During
the period ended December 31, 2020, the Company issued Series B preferred shares and warrants to an accredited investor
for their financings for an aggregate value of $
During the period ended September 30, 2021, Series B preferred shares were converted into common shares, leaving the balance in the Series B preferred shares at 204.
Preferred Stock – Series C
During the period ended December 31, 2020, the Company authorized shares of preferred stock to be designated available for Series C preferred shares that have a stated value of $ each and are convertible into common shares at fixed price of $. Holders shall be entitled to receive, and the Company shall pay, dividends on shares of Series C Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Company’s Common Stock. No other dividends shall be paid on shares of Series C Preferred Stock, and they shall have no voting rights and have liquidation preference. During the year ended December 31, 2019, the Company had no Preferred C shares.
During
the period ended December 31, 2020, the Company issued Series C preferred shares and warrants to two accredited investors
for their financings for an aggregate value of $
During
the period ended September 30, 2021, the Company issued Series C preferred shares and
During the period ended September 30, 2021, Series C preferred shares were converted into common shares, leaving the balance in the Series C preferred shares at 675 within the terms, so no gain or loss.
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Common Stock
During
the period ending September 30, 2021, we issued of common shares for converting $
During
the period ending September 30, 2021, the Company issued shares of its common stock to various consultants for services rendered,
with a fair value of $
During
the period ended September 30, 2021, the Company issued shares of common stock with a fair value of $
During
the period ended September 30, 2021, the Company issued shares of common stock with a fair value of $
Common Stock Warrants
Since inception, the Company has issued numerous warrants to purchase shares of the Company’s common stock to shareholders, consultants and employees as compensation for services rendered.
A summary of the Company’s warrant activity and related information is provided below (the exercise price and the number of shares of common stock issuable upon the exercise of outstanding warrants have been adjusted to reflect a 1-for-75 reverse stock split.):
SCHEDULE OF WARRANT ACTIVITY
| Exercise Price $ | Number of Warrants | |||||||
| Outstanding and exercisable at December 31, 2020 | – | |||||||
| Warrants exercised | ( | ) | ||||||
| Warrants granted | ||||||||
| Warrants expired | ( | ) | ||||||
| Outstanding and exercisable at September 30, 2021 | - | |||||||
| Stock Warrants as of September 30, 2021 | ||||||||||||||
| Exercise | Warrants | Remaining | Warrants | |||||||||||
| Price | Outstanding | Life (Years) | Exercisable | |||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
| $ | ||||||||||||||
During
the period ended September 30, 2021, the Company issued shares of common stock with a fair value of $
During
the period ended September 30, 2021, of the warrants issued in connection with the issuance of our preferred stock. The warrants
have a
The outstanding and exercisable warrants at September 30, 2021 had an intrinsic value of approximately $.
Common Stock Options
Under the Company’s 2008 Equity Compensation Plan (the “2008 Plan”), we are authorized to grant stock options intended to qualify as Incentive Stock Options, “ISO”, under Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified options, restricted and unrestricted stock awards and stock appreciation rights to purchase up to 7,000,000 shares of common stock to our employees, officers, directors and consultants, with the exception that ISOs may only be granted to employees of the Company and its subsidiaries, as defined in the 2008 Plan.
| 19 |
The 2008 Plan provides for the issuance of a maximum of shares, of which, after adjusting for estimated pre-vesting forfeitures and expired options, approximately were available for issuance as of September 30, 2021.
No options were granted during the period ending September 30, 2021.
12. COMMITMENTS & CONTINGENCIES
Contingencies
From time to time, we may be involved in routine legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business. The ultimate amount of liability, if any, for any claims of any type (either alone or in the aggregate) may materially and adversely affect our financial condition, results of operations and liquidity. In addition, the ultimate outcome of any litigation is uncertain. Any outcome, whether favorable or unfavorable, may materially and adversely affect us due to legal costs and expenses, diversion of management attention and other factors. We expense legal costs in the period incurred. We cannot assure you that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against us in the future, and these matters could relate to prior, current or future transactions or events. As of September 30, 2021, there were no pending or threatened litigation against the Company.
COVID-19
The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on the Company’s business is highly uncertain and difficult to predict, as the responses that the Company, other businesses and governments are taking continue to evolve. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a local and/or global economic recession. Policymakers around the globe have responded with fiscal policy actions to support the healthcare industry and economy as a whole. The magnitude and overall effectiveness of these actions remain uncertain.
To date, we have not experienced any significant changes in our business that would have a significant negative impact on our consolidated statements of operations or cash flows.
The severity of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company’s customers, service providers and suppliers, all of which are uncertain and cannot be predicted. As of the date of issuance of Company’s financial statements, the extent to which the COVID-19 pandemic may in the future materially impact the Company’s financial condition, liquidity or results of operations is uncertain.
13. SUBSEQUENT EVENTS
On October 14, 2021, we issued in shares of common stock to an investor who converted their preferred B shares at a strike price of $.
On October 14, 2021, we issued in shares of common stock to an investor who converted their preferred B shares at a strike price of $.
On October 19, 2021, the Company’s
senior management agreed to convert $
On November 3, 2021, we issued in restricted common stock to a consultant as part of their agreement.
| 20 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I of this report include forward-looking statements. These forward looking statements are based on our management’s current expectations and beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “proposed,” “intended,” or “continue” or the negative of these terms or other comparable terminology. You should read statements that contain these words carefully, because they discuss our expectations about our future operating results or our future financial condition or state other “forward-looking” information. Many factors could cause our actual results to differ materially from those projected in these forward-looking statements, including but not limited to: variability of our revenues and financial performance; risks associated with product development and technological changes; the acceptance our products in the marketplace by existing and potential future customers; general economic conditions. You should be aware that the occurrence of any of the events described in this Quarterly Report could substantially harm our business, results of operations and financial condition, and that upon the occurrence of any of these events, the trading price of our securities could decline. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, growth rates, levels of activity, performance or achievements. We are under no duty to update any of the forward-looking statements after the date of this Quarterly Report to conform these statements to actual results.
Introduction
Unless otherwise noted, the terms “GTX Corp”, the “Company”, “we”, “us”, and “our” refer to the ongoing business operations of GTX Corp and our wholly-owned subsidiaries, Global Trek Xploration, and LOCiMOBILE, Inc.
Organization and Presentation
During the periods covered by the accompanying financial statements, GTX Corp and its subsidiaries (the “Company”, “GTX”, “we”, “us”, and “our”) were engaged in business operations that design, manufacture and sell various interrelated and complementary products and services in the wearable technology and Personal Location Services marketplace. GTX owns 100% of the issued and outstanding capital stock of its two subsidiaries - Global Trek Xploration, Inc. and LOCiMOBILE, Inc.
Global Trek Xploration is a California corporation which engages in the business of, design, development, manufacturing, and sales of health and safety wearable technology solutions. Utilizing Global Positioning Satellite (“GPS”), Cellular, Radio Frequency (“RF”), Near Field Communications (“NFC”), WiFi, and Bluetooth low energy (“BLE”) as core technologies for monitoring and tracking assets. GTX is vertically integrated and provides hardware, software, and connectivity, delivering a complete end to end location-based platform that enables subscribers to track in real time the whereabouts of people, pets, or high valued assets. Our proprietary GPS devices, which consist of a miniature quad-band General Packet Radio Service (“GPRS”) transceiver, custom antenna, circuitry, battery, and inductive charging pad can be customized and integrated into numerous form factors. The finished products are then placed or worn so that their location and movement can be monitored in real time over the Internet through our 24x7 tracking portal or on a web-enabled cellular telephone.
Many of our core products and services are supported by an intellectual property portfolio of patents, patents pending, registered trademarks, copyrights, URLs and a library of software source code, all of which is also managed by Global Trek.
LOCiMOBILE, Inc., is the Company’s digital platform which has been at the forefront of Smartphone application (“App”) development since 2008. With a suite of mobile applications that turn the iPhone, iPad, Android and other GPS enabled handsets into a tracking device which can be tracked from handset to handset or through our tracking portal or on any connected device with internet access. LOCiMOBILE has launched over 20 Apps across multi mobile device operating systems and continues to launch consumer and enterprise apps.
Operations
The Company designs, develops, manufactures, sells, and distributes health and safety products and services, and other related medical supplies and equipment, through a global business to business (“B2B”) and business to consumer (“B2C”) network of resellers, affiliates, distributors, nonprofit organizations, local, state, and federal government agencies, police departments, manufacturers reps and retailers. Offering a variety of electronic and non-electronic devices and equipment, a proprietary Internet of things (“IoT”) enterprise monitoring platform and a licensing subscription business model. The Company provides a complete end to end solution of hardware, middleware, apps, connectivity, licensing, and professional services, letting our customers know where or how someone, or something, is at the touch of a button, delivering safety, security and peace of mind in real-time. Except for our military products and medical protective equipment, all of our consumer and enterprise tracking products funnel into the GTX Corp IoT monitoring platform which supports end user customers in over 35 countries. The Company is also in the business of licensing intellectual property and monetizing its patent portfolio.
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Overview
During the third quarter 2021, we continued to focus on getting our 4G GPS SmartSole product finalized for production. Unfortunately, we are still struggling with supply chain delays and labor shortages which keep pushing back our launch date. We are deploying every resource and every means available but there are many challenges we are facing that we have little or no control over. As we stated in previous filings, in anticipation of these shortages, we began ordering raw materials as early as late 2020 and into early 2021, which has allowed us to ensure that the majority of components are in house and ready to go. However, now we face logistics delays and labor shortages, all of which is slowing down our ability to get the product to market. It is just taking a lot more time to get parts from point A to B and to get factories to produce. We are in the final stretch and parts are at the factories and we are going to push as hard as we can to get some product out the door before the holidays, in the meantime, in the meantime these delays have affected our third quarter 2021 revenues which were lower than expected.
On the business development front, we continued to look at expanding our presence in our market by signing collaboration agreements and working with new partners on selling and developing new products in the tracking, biometrics, block chain and health and wellness space. We are still in the early stage of exploring different concepts, but we are making some progress and expect to have a more detailed roadmap by the end of the year. One new agreement we signed at the end of the third quarter was a distribution agreement with Synergistic Sanitizing Solutions for the UV Clean Air automated continuous UV-C air treatment system. This revolutionary simple, seamless, and effective air purification technology uses patented UV-C light air purification technology to reduce levels of virus, bacteria, and fungi by automatically and continuously treating the air to create healthier environments. The air purification system uses years of research and development in ultraviolet light and IoT enabled technologies to create a truly effective and modern air treatment system with laboratory results showing elimination rates up to 99.9%. With virus and pathogen awareness on high alert due to the Delta variant and inevitable new variants in the future, we immediately started introducing this highly needed product to our assisted living, health care, school, university, small business, and government customers. This product is not only highly effective in the fight against the spread of COVID, but also has 100% funding available for purchase and installation, through FEMA and the Coronavirus Aid Relief and Economic Security Act (CARES) for qualifying essential and critical community entities.
At the end of the first quarter, we stated we could not accurately predict how long the Personal Protection Equipment (“PPE”) business would remain in demand, and based on the current events and sales trends, we expected to be transitioning out of many PPE products over the coming months to focusing only on the strong sellers while ramping up for the launch of the new SmartSoles, NFC Blockchain platform and other medical wearables. Our position at the end of the third quarter 2021 is the same, however we are seeing some uptick in PPE demand due to the rising number of new COVID cases, the rapid spread of the Delta variant, new CDC mask guidelines and back to school mask mandates for k-12. By having added the new UV pathogen air treatment system in our product line we will continue to service and support our customers for their PPE needs. The cross-marketing pollination is actually working out very well for us, many of our B2B prospects for our tracking solutions such as schools, assisted living facilities and government institutions are now also actively buying PPE again.
During the third quarter 2021, we continued to ramp up our marketing and outreach campaigns and because schools or assisted living facilities could potentially buy both PPE and tracking solutions from us, we ramped up our domestic B2B outreach programs and increased our marketing budget which we expect will generate more B2B U.S. sales in the future.
In the third quarter 2021, we did see a drop in overall revenues primarily due to not being able to launch our 4G SmartSoles. We have received hundreds of SmartSole pre-orders and continue to accept pre-orders in the U.S. As of right now, we are oversold for our first production run, and even though we continue to receive pre-orders, we will most likely maintain a backlog until early 2022 or until supply chains are expected to come back to normal.
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On the balance sheet front, we continued to reduce our debt and outstanding payables, took on no new debt and pre-paid for a lot of component inventory.
Results of Operations
The following discussion should be read in conjunction with our interim consolidated financial statements and the related notes that appear elsewhere in this Quarterly Report.
Three Months Ended September 30, 2021 (“Q3 2021”) Compared to the Three Months Ended September 30, 2020 (“Q3 2020”)
| Three Months Ended September 30, | ||||||||||||||||
| 2021 | 2020 | |||||||||||||||
| $ | % of Revenues | $ | % of Revenues | |||||||||||||
| Product sales | 112,974 | 75 | % | 306,439 | 85 | % | ||||||||||
| Service income | 38,580 | 25 | % | 55,788 | 15 | % | ||||||||||
| IP royalties | - | 0 | % | - | 0 | % | ||||||||||
| Total revenues | 151,554 | 100 | % | 362,227 | 100 | % | ||||||||||
| Cost of products sold | 58,001 | 38 | % | 166,188 | 46 | % | ||||||||||
| Cost of service revenue | 10,129 | 7 | % | 19,120 | 5 | % | ||||||||||
| Cost of licensing revenue | - | 0 | % | - | 0 | % | ||||||||||
| Cost of goods sold | 68,130 | 45 | % | 185,308 | 51 | % | ||||||||||
| Gross profit | 83,424 | 55 | % | 176,919 | 49 | % | ||||||||||
| Operating expenses: | ||||||||||||||||
| Wages and benefits | 138,137 | 91 | % | 157,740 | 42 | % | ||||||||||
| Professional fees | 65,902 | 43 | % | 35,812 | 10 | % | ||||||||||
| Sales and marketing expenses | 5,083 | 3 | % | 6,242 | 2 | % | ||||||||||
| General and administrative | 70,001 | 46 | % | 45,215 | 12 | % | ||||||||||
| Total operating expenses | 279,123 | 184 | % | 240,009 | 66 | % | ||||||||||
| Gain/(loss) from operations | (195,699 | ) | -129 | % | (63,090 | ) | -17 | % | ||||||||
| Other (expense)/income, net | (16,432 | ) | -11 | % | 66,198 | 18 | % | |||||||||
| Net income/(loss) | (212,131 | ) | -140 | % | 3,108 | 1 | % | |||||||||
Revenues
Revenues as a whole during Q3 2021 decreased by 58% or $210,672 in comparison to Q3 2020 mostly as a result of the reduction in demand for PPE’s and the inability to ship any SmartSoles during the quarter due to supply chain delays. We continue to gather pre-sale orders daily and expect SmartSole production to catch up with orders over the next few quarters. Additionally, we are seeing an uptick in PPE demand and increased sales as a result of the new COVID spike from the Delta variant.
Cost of goods sold
Cost of goods sold decreased by 63% or $117,179 during Q3 2021 in comparison to Q3 2020, primarily due to less IP and subscription revenues, and the reduction in PPE revenues from the lifting of COVID restrictions. However, total gross margin, still increased from 49% in fiscal 2020 to 55% in fiscal 2021.
| 23 |
Wages and benefits
Wages and benefits during Q3 2021 decreased $14,603 or 10% as compared to Q3 2020, primarily on lower staffing expenses.
Professional fees
Professional fees consist of costs attributable to consultants and contractors who primarily spend their time on legal, accounting, product development, business development, corporate advisory services and shareholder communications. Such costs increased $30,089 or 84% during Q3 2021 as compared to Q3 2020. Even though some professional fees have decreased as more responsibilities were transferred from outside contractors and consultants to in-house personnel, those fees related to investor relations and business development have increased due to new products lines and the impending release of the company’s updated SmartSole products.
Sales and marketing expenses
Sales and marketing expenses decreased by 19% or $1,159 during Q3 2021 in comparison to Q3 2020. Primarily due to initiating a PPE campaign in order to target a larger customer base.
General and administrative
General and administrative costs during Q3 2021 increased by $24,787 or 55% in comparison to Q3 2020 mostly due to an increase in reserves for bad debt expense, accounting fees and a large credit to travel in the previous 2020 comparable period. We expect these numbers to increase as we ramp up our overall business after the COVID crisis.
Other income/(expense), net
Other expense, net decreased 125% or $82,633 from Q3 2021 to Q3 2020 primarily as a result of the reduction in gains from securities, extinguishment of debt and derivative income that were recognized in the same period in 2020.
Net income/(loss)
Net income decreased by 6921% or $215,240 from Q3 2021 to Q3 2020 primarily as a result of the reduction in gains from securities, extinguishment of debt and derivative income that were recognized in the same period in 2020.
Nine Months Ended September 30, 2021 (“Q1-Q3 2021”) Compared to the Nine Months Ended September 30, 2020 (“Q1-Q3 2020”)
| Nine Months Ended September 30, | ||||||||||||||||
| 2021 | 2020 | |||||||||||||||
| $ | % of Revenues | $ | % of Revenues | |||||||||||||
| Product sales | 397,963 | 73 | % | 760,379 | 82 | % | ||||||||||
| Service income | 143,715 | 27 | % | 170,711 | 18 | % | ||||||||||
| IP royalties | - | 0 | % | - | 0 | % | ||||||||||
| Total revenues | 541,678 | 100 | % | 931,090 | 100 | % | ||||||||||
| Cost of products sold | 200,055 | 37 | % | 357,158 | 38 | % | ||||||||||
| Cost of service revenue | 63,556 | 12 | % | 113,627 | 12 | % | ||||||||||
| Cost of licensing revenue | - | 0 | % | - | 0 | % | ||||||||||
| Cost of goods sold | 263,611 | 49 | % | 470,785 | 51 | % | ||||||||||
| Gross profit | 278,067 | 51 | % | 460,305 | 49 | % | ||||||||||
| Operating expenses: | ||||||||||||||||
| Wages and benefits | 385,099 | 71 | % | 476,825 | 51 | % | ||||||||||
| Professional fees | 263,862 | 49 | % | 196,893 | 21 | % | ||||||||||
| Sales and marketing expenses | 74,821 | 14 | % | 19,391 | 2 | % | ||||||||||
| General and administrative | 159,702 | 29 | % | 125,241 | 13 | % | ||||||||||
| Total operating expenses | 883,484 | 163 | % | 818,350 | 87 | % | ||||||||||
| Gain/(loss) from operations | (605,417 | ) | -112 | % | (358,045 | ) | -38 | % | ||||||||
| Other (expense)/income, net | (152,629 | ) | -28 | % | 391,323 | 42 | % | |||||||||
| Net income/(loss) | (758,046 | ) | -140 | % | 33,278 | 4 | % | |||||||||
| 24 |
Revenues
Revenues as a whole in Q1-Q3 2021 decreased by 42% or $389,412 in comparison to Q1-Q3 2020, a result of the reduction in demand for PPP’s and the inability to ship any SmartSoles during the quarter due to supply chain delays. We continue to gather pre-sale orders daily and expect SmartSole production to catch up with orders over the next few quarters. Additionally, we are seeing an uptick in PPE demand and increased sales as a result of the new COVID spike from the Delta variant.
Cost of goods sold
Cost of goods sold decreased by 44% or $207,174 during Q1-Q3 2021 in comparison to Q1-Q3 2020 primarily due to the purchases of health and safety inventories. The total gross margin increased from 49.4% in Q1-Q3 of 2020 to 51.3% 2021.
Wages and benefits
Wages and benefits during Q1-Q3 2021 decreased by 19% or $91,726 in comparison to Q1-Q3 2020, primarily on the reduction of costs related to retention bonuses.
Professional fees
Professional fees consist of costs attributable to consultants and contractors who primarily spend their time on legal, accounting, product development, business development, corporate advisory services and investor relations. Such costs increased $66,969 or 34% during Q1-Q3 2021 as compared to Q1-Q3 2020, primarily due to the Company’s increased need for outside consultants.
Sales and marketing expenses
Sales and marketing expenses increased by 286% or $55,430 during Q1-Q3 2021 in comparison to Q1-Q3 2020. Primarily due to costs related to the ramp up of increased health and safety products and the associated advertising.
General and administrative
General and administrative costs during Q1-Q3 2021 increased by $34,462 or 28% in comparison to Q1-Q3 2020 due to overall slowdown in business operations, we have reductions in travel, entertainment, tradeshows, parking, supplies and other general operational expenses, yet these decreases were offset by a $41k adjustment to accrued expenses that provide a positive credit to G&A in 2020.
Other income/(expense), net
Other expense, net decreased 139% or $543,951 from Q1-Q3 2021 to Q1 and Q2 2020 primarily as a result of a $91,470 net gain for the sales of marketable securities held for sale, the gain of $129,261 from the extinguishment of debt and the reduction in expenses related to derivatives of $152,586 that were recognized in 2020. These gains offset the net interest expense related to debt.
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Net income/(loss)
Net loss increased by 2378% or $791,324 from Q1-Q3 2021 to Q1-Q3 2020 with GTX posting a profit of $33,278 in 2020. The 2020 profit was mostly attributable to the large gains recognized in sales from marketable securities, the extinguishment of debt and derivatives, reductions in debt and interest, and from the increased sales of our health and safety products. The 2021 revenues continue to be affected by worldwide supply chain delays which has led to below than expected revenues.
Liquidity and Capital Resources
As of September 30, 2021, we had $293,521 of cash and cash equivalents, and a working capital deficit of $2,416,934, compared to $76,912 of cash and cash equivalents and a working capital deficit of $2,894,105 as of December 31, 2020. The 20% or $477,171 reduction in negative working capital is a direct result of the Company’s efforts to reduce debt, increase inventory and having more cash and assets on-hand.
During the nine months ended September 30, 2021, our net loss was $758,046 compared to a net profit was $33,278 for the nine months ended September 30, 2020. Net cash used in operating activities for the nine months of 2021 and the nine months of 2020 was $378,026 and $416,016, respectively.
Net cash used in investing activities during the nine months ended September 30, 2021 was $63,242 and consisted of proceeds totaling $1,258 received from the sale of marketable securities and $64,500 in developments cost assets.
Net cash used by financing activities during the nine months ended September 30, 2021 was $657,877 and consisted of $17,123 in upon our lines of credit and loans, and $675,000 received from financings. During the nine months ended September 30, 2020, net cash provided by financing activities was $372,044 and consists of proceeds totaling $139,319 received from the line of credit, $250,000 from financings, $227,870 from government fundings as well as a $245,145 in payments on convertible notes and the line of credit. This reduction in additional financings is directly related to the Company not relying on convertible notes for financings, no new convertible notes issued, and the paying down of its debt in either the nine months ended September 30, 2021 or September 30, 2020.
Because revenues from our operations have, to date, been insufficient to fund our working capital needs, we currently rely on the cash we receive from our financing activities to fund our growth, capital expenditures and to support our working capital requirements. The sale of our products and services is expected to enhance our liquidity in 2021, although the amount of revenues we receive in 2021 still cannot be estimated.
Until such time as our products and services can support our working capital requirement, we expect to continue to generate revenues from our other licenses, subscriptions, international distributors, hardware sales, professional services and new customers in the pipeline. However, the amount of such revenues is unknown and is not expected to be sufficient to fund our working capital needs. For our internal budgeting purposes, we have assumed that such revenues will not be sufficient to fund all of our planned operating and other expenditures during 2021. In addition, our actual cash expenditures may exceed our planned expenditures, particularly if we invest in the development of improved versions of our existing products and technologies, and if we increase our marketing expenses. Accordingly, we anticipate that we will have to continue to raise additional capital in order to fund our operations in 2021. No assurance can be given that we will be able to obtain the additional funding we need to continue our operations.
In order to continue funding our growth, IP and working capital needs and new product development costs, during the third quarter of 2021 we have not needed to draw down on our credit line to fund purchase orders. However, no assurance can be given that the investor will provide the funding, if and when requested by us.
Going Concern
The consolidated financial statements have been prepared on a going concern basis which assumes the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The Company has stockholders’ deficit of $2,569,529 and negative working capital of $2,416,934 as of September 30, 2021 and used cash in operations of $378,026 during the current period then ended. A significant part of our negative working capital position at September 30, 2021 consisted of $737,395, of amounts due to various accredited investors of the Company for convertible promissory notes, loans and a letter of credit. The Company anticipates further losses in the development of its business. Please see the section entitled “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2020 for more information regarding risks associated with our business.
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Off-Balance Sheet Arrangements
There are no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Inflation
We do not believe our business and operations have been materially affected by inflation.
Critical Accounting Policies and Estimates
There are no material changes to the critical accounting policies and estimates described in the section entitled “Critical Accounting Policies and Estimates” under Item 7 in our Annual Report on Form 10-K for the year ended December 31, 2020.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company”, we are not required to provide the information under this Item 3.
ITEM 4. 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, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 as of the end of the period covered by this report (the “Evaluation Date”). Based upon the evaluation, our principal executive officer and principal financial officer concluded as of the Evaluation Date that our disclosure controls and procedures were not effective. Disclosure controls are controls and procedures designed to reasonably ensure that information required to be disclosed in our reports filed under the Exchange Act, such as this report, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls include controls and procedures designed to reasonably ensure that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Controls Over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during the quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 1A. RISK FACTORS.
These are not all of the risks associated with the Company and must be used in conjunction with those disclosed in the most recent December 31, 2020 10K filing.
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The Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic on the Company’s business is highly uncertain and difficult to predict, as the responses that the Company, other businesses and governments are taking continue to evolve. Furthermore, capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and it is possible that it could cause a local and/or global economic recession. Policymakers around the globe have responded with fiscal policy actions to support the healthcare industry and economy as a whole. The magnitude and overall effectiveness of these actions remain uncertain.
Due to COVID-19, we have experienced some changes in our business, that have been both positive and negative. Specifically, the Company’s IP licensing business has been negatively impacted by the global financial slowdown and many courts, judges and law firms are not working at full capacity, which is creating delays in finalizing licensing agreements or litigation. We have also experienced a small percentage of subscriptions being either cancelled or requested to be put on pause, due to financial hardships. On the positive side we saw an increase in product sales specifically with medical supplies and equipment. Overall, our revenues have not been materially impacted as a whole, however there have been some shifts with certain revenue streams doing better post COVID and others doing worse.
The severity of the impact of the COVID-19 pandemic on the Company’s business will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity of the impact on the Company’s customers, service providers and suppliers, all of which are uncertain and cannot be predicted. As of the date of issuance of Company’s financial statements, the extent to which the COVID-19 pandemic may in the future materially impact the Company’s financial condition, liquidity or results of operations is uncertain.
ITEM 2.(a). UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On January 14, 2021, we issued 1,866,667 in shares of common stock to an investor for converting $24,250 in debt from a convertible note that was issued in the fourth quarter of 2014.
On January 22, 2021, we issued 1,050,000 in shares of common stock to an investor for converting $4,914 in debt from a convertible note that was issued in the fourth quarter of 2017.
On January 26, 2021, we issued 2,066,667 in shares of common stock to an investor who converted their preferred C shares at a strike price of $0.015.
On January 26, 2021, an investor converted 7,000,000 of warrants into 6,805,556 shares of common stock at a strike of $0.0025.
On January 26, 2021, an investor converted 6,500,000 of warrants into 6,319,444 shares of common stock at a strike of $0.0025.
On January 27, 2021, we issued 2,666,667 in shares of common stock to an investor who converted their preferred C shares at a strike price of $0.015.
On January 27, 2021, we issued 790,968 in shares of common stock to an investor for converting $35,000 in debt from a convertible note that was issued in the fourth quarter of 2018.
On February 2, 2021, we issued 3,273,704 in shares of common stock to an investor for converting $22,981.39 in debt from three convertible notes that was issued in the fourth quarter of 2017 and first quarter of 2018.
On February 4, 2021 we issued 14,166,667 in warrants to three investors as part of their Securities Purchase Agreement, with a strike price of $0.015 and a 5-year term.
On February 8, 2021, we issued 1,300,000 in restricted common stock to various consultants and advisors as part of their agreements.
On February 8, 2021, we issued 860,383 in shares of common stock to an investor for converting $50,000 in debt from a convertible note that was issued in the fourth quarter of 2018.
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On February 8, 2021, we issued an additional 1,328,061 in shares of common stock to an investor related to the conversion of $35,000 on January 27, 2021 in debt from a convertible note that was issued in the fourth quarter of 2018.
On February 9, 2021, we issued 666,667 in shares of common stock to an investor who converted their preferred C shares at a strike price of $0.015.
On February 15, 2021, we issued 1,424,501 in shares of common stock to an investor for converting $10,000 in debt from a convertible note that was issued in the fourth quarter of 2017.
On February 17, 2021, we issued 317,380 in shares of common stock to an investor for converting $2,228.01 in debt from a convertible note that was issued in the fourth quarter of 2017.
On February 17, 2021, we issued 666,667 in shares of common stock to an investor who converted their preferred C shares at a strike price of $0.015.
On February 18, 2021, we issued 1,333,334 in shares of common stock to an investor who converted their preferred C shares at a strike price of $0.015.
On March 3, 2021, we issued 1,933,333 in shares of common stock to an investor who converted their preferred C shares at a strike price of $0.015.
March 4, 2021, we retired $75,000 in accrued interest and issued equity in the form of common stock of 6,000,000 shares, 3,000,000 issued on March 3, 2021 and another 3,000,000 due in 45 days, which resulted in a gain on the settlement of debt of $65,700.
On March 11, 2021, an investor converted 3,500,000 of warrants into 3,354,167 shares of common stock at a strike of $0.0025.
On March 11, 2021, an investor converted 6,500,000 of warrants into 6,229,167 shares of common stock at a strike of $0.0025.
On April 8, 2021, we issued 5,000,000 in warrants with a strike price of $0.04 and a 3-year term and 150 preferred Series C shares, to two investors as part of their Securities Purchase Agreement, for $150,000 in proceeds.
On April14, 2021, we issued 7,350,000 in restricted common stock to various consultants and advisors as part of their agreements.
May 12, 2021, we issued the remaining 3,000,000 common shares for the retirement of $75,000 in accrued interest. The was issued as equity in the form of common stock of 6,000,000 shares, 3,000,000 issued on March 4, 2021 and another 3,000,000 due after 45 days, which resulted in a total of $45,000 of accrued interest being settled and a gain on the settlement of debt of $65,700, and a loss on conversion of $131,736.
On May 25, 2021, we issued 9,200,000 in shares of common stock to an investor who converted their preferred B shares at a strike price of $0.0025.
On May 25, 2021, we issued 9,200,000 in shares of common stock to an investor who converted their preferred B shares at a strike price of $0.0025.
On May 28, 2021, we issued 3,333,334 in warrants with a strike price of $0.04 and a 3-year term and 100 preferred Series C shares, to two investors as part of their Securities Purchase Agreement, for $100,000 in proceeds.
On September 15, 2021, we issued 200,000 in restricted common stock to a consultant as part of their agreement.
The issuance of the above shares was exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.
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ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS.
(a) Exhibits
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act | |
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act | |
| 32.1 | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act | |
| 32.2 | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition | |
| 101.LAB | Inline XBRL Taxonomy Extension Label | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| 30 |
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
| GTX CORP | ||
| Date: November 15, 2021 | By: | /s/ ALEX MCKEAN |
| Alex McKean, | ||
| Chief Financial Officer (Principal Financial Officer) | ||
| Date: November 15, 2021 | By: | /s/ PATRICK BERTAGNA |
| Patrick Bertagna, | ||
| Chief Executive Officer |
| 31 |
EXHIBIT 31.1
CERTIFICATIONS PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I, Patrick E. Bertagna, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of GTX Corp for the period ended September 30, 2021;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 15, 2021
| /s/ PATRICK E. BERTAGNA | ||
| Name: | Patrick E. Bertagna | |
| Its: | Chief Executive Officer (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATIONS PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I, Alex McKean, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of GTX Corp for the period September 30, 2021;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 15, 2021
| /s/ ALEX MCKEAN | ||
| Name: | Alex McKean | |
| Its: | Chief Financial Officer (Principal Financial Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of GTX Corp (the “Company”) on Form 10-Q, for the period ended September 30, 2021 as filed with the Securities and Exchange Commission, I, Patrick E. Bertagna, President, Chief Executive Officer and Chairman of the Board of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Date: November 15, 2021
| /s/ PATRICK E. BERTAGNA | ||
| Name: | Patrick E. Bertagna | |
| Its: | Chief Executive Officer (Principal Executive Officer) |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of GTX Corp (the “Company”) on Form 10-Q, for the period ended September 30, 2021 as filed with the Securities and Exchange Commission, I, Alex McKean, Interim Chief Financial Officer, Treasurer and Secretary of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
Date: November 15, 2021
| /s/ ALEX MCKEAN | ||
| Name: | Alex McKean | |
| Its: | Chief Financial Officer (Principal Financial Officer) |