As filed with the Securities and Exchange Commission on February 7, 2019January 12, 2022

Registration Statement No. 333-

 

UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, DCD.C. 20549

 

 

FORM S-1


REGISTRATION STATEMENT


UNDER


THE SECURITIES ACT OF 1933

 

 

GOPHER PROTOCOLGBT TECHNOLOGIES INC.

(Exact name of registrant as specified in its charter)

 

Nevada874227-0603137

(State or other jurisdiction of


incorporation or organization)

(Primary Standard Industrial


Classification Code Number)

(I.R.S. Employer


Identification Number)

 

2500 Broadway,2450 Colorado Ave., Suite F-125100E

Santa Monica, CA 90404

(424) 238-4589888-685-7336

(Address including zip code, and telephone number including area code, of registrant’s principal executive offices)

 

 

Douglas DavisMansour Khatib

Chief Executive Officer
GBT Technologies Inc.

Gopher Protocol Inc.

2500 Broadway,2450 Colorado Ave., Suite F-125100E

Santa Monica, CA 90404

(424) 238-4589 888-685-7336

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Stephen M. Fleming, Esq.

Fleming PLLC

30 Wall Street, 8th Floor

New York, New York 10005

(516) 833-5034

 

Approximate date of commencement of proposed sale to the public: From time to timepublic:
As soon as practicable after the effective date of this registration statement becomes effective.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box.  xbox: ☒

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨☐

 

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

 

Large accelerated filer ☐¨Accelerated filer ☐¨Non-accelerated filer ☒Smaller reporting company ☒
    
Non-accelerated filer¨  (Do not check if a smaller reporting company)Smaller reporting companyx
  
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 7(a)(2)(B) of the Securities Act.¨ ☐

 

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities to be Registered Shares to be Registered (1) Proposed Maximum Aggregate Offering Price per Security (2) Proposed Maximum Aggregate Offering Price Amount of Registration Fee
                 
Common Stock, par value $0.00001 per share  5,500,000  $0.1901(2) $1,045,550  $96.92 

Title of Each Class of

Securities to be Registered

 Amount
to be
Registered(1)		  Proposed
Maximum
Offering Price
Per Share(2)		  Proposed
Maximum
Aggregate
Offering Price		  Amount of
Registration Fee		 
Common Stock, par value $0.00001 per share, issuable upon exercise of Warrants  22,500,000(3) $0.375  $8,437,500  $1,022.63 
Total:  22,500,000   —  $8,437,500  $1,022.63 

(1) Represents 5,500,000 shares of common stock that are issuable to the selling stockholder pursuant to a common stock purchase agreement. Pursuant to Rule 416(a) of the Securities Act of 1933, as amended (the “Securities Act”), this Registration Statement also covers any additional shares of common stock which may become issuable to prevent dilution from stock splits, stock dividends and similar events.


(2) Estimated solely for calculating the amount of the registration fee, pursuant to Rule 457(c) under the Securities Act, on the basis of the average of the high and low sale prices of the common stock on the OTC Pink on December 27, 2021.

 

(1)Pursuant to Rule 416(a) under the Securities Act of 1933, as amended, this Registration Statement shall also cover any additional shares of the Registrant’s Common Stock that become issuable by reason of any stock dividend, stock split, recapitalization or other similar transaction effected without receipt of consideration.
(2)Estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(c) under the Securities Act of 1933, as amended. The offering price per share and aggregate offering price are based upon the average of the high and low prices for the Registrant’s Common Stock as reported on OTCQB Market on February 5, 2019, a date within five business days prior to the filing of this Registration Statement, a date within five business days prior to the filing of this Registration Statement.
(3)

All 22,500,000 shares of Common Stock issuable upon exercise of the Warrants are to be offered by the selling stockholder named herein, which Warrants were issued to such Selling Stockholder pursuant to the Securities Purchase Agreement, dated December 3, 2018, by and among the Registrant and the purchaser.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.determine.

 

 

The information in this preliminary prospectus is not complete and may be changed. These securitiesThe selling stockholders may not be soldsell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state or jurisdiction where the offer or sale is not permitted.

 

Subject to Completion, dated February 7, 2019SUBJECT TO COMPLETION, DATED JANUARY 12, 2022

 

PROSPECTUSGBT TECHNOLOGIES, INC.

Gopher Protocol Inc.

22,500,0005,500,000 Shares of Common Stock

 

This prospectus relates to the resalesale by the investors listedselling stockholder named in the section of this prospectus entitled “Selling Stockholder” (the “Selling Stockholder”), of GBT Technologies Inc. (the “Company”) of up to 22,500,0005,500,000 shares of our common stock, par value $0.00001 per share (the “Common Stock”“Resale Shares”). The 22,500,000We will not receive proceeds from the sale of the shares of Common Stock consistby the selling stockholder. However, we may receive proceeds of up to 22,500,000 shares$10.0 million from the sale of Common Stock issuable upon exercise of outstanding Common Stock Purchase Warrants (the “Warrants”) in each case as issued by usour common stock to the Selling Stockholderselling stockholder, pursuant to the securities purchasean equity financing agreement we entered into with the Selling Stockholderselling stockholder on December 3, 2018 (the “Securities Purchase Agreement”).17, 2021, once the registration statement, of which this prospectus is a part, is declared effective.

 

On December 3, 2018,17, 2021 we entered into the Securities Purchase Agreementan equity financing agreement (the “Equity Financing Agreement”) and a registration rights agreement (the “Registration Rights Agreement”) with the Selling Stockholder,GHS Investments LLC (“GHS”), pursuant to which we issuedGHS shall purchase from us, up to that number of Resale Shares having an aggregate purchase price of up to $10.0 million, subject to certain limitations and conditions set forth in the Equity Financing Agreement from time to time over the course of 24 months after an effective registration of the Resale Shares with the Securities and Exchange Commission (the “SEC”) pursuant to the Selling StockholderRegistration Rights Agreement, is declared effective by the SEC (the “Contract Period”). The Equity Financing Agreement grants us the right, from time to time at its sole discretion (subject to certain conditions) during the Contract Period, to direct GHS to purchase Resale Shares of Common Stock on any business day (a “Put”), provided that at least ten trading days has passed since the most recent Put. The purchase price of the Resale Shares contained in a Senior Secured Redeemable Convertible Debenture (the “Debenture”)Put will be 90% of the lowest daily volume weighted average price (VWAP) of our Common Stock during the ten consecutive trading days preceding the receipt by GHS of the applicable Put notice. Such sales of Common Stock by us, if any, may occur from time to time, at our option, during the Contract Period. Subject to the satisfaction of certain conditions set forth in the aggregate face valueEquity Financing Agreement, on each Put we will deliver an amount of $8,340,000. The Debenture has a maturity date two years from the issuance date and we have agreed to pay compounded interest on the unpaid principal balanceResale Shares equaling 110% of the Debenturedollar amount of each Put. The maximum dollar amount of each Put will not exceed 200% of the average daily trading dollar volume for our Common Stock during the ten trading days preceding the trading day that GHS receives a Put. No Put will be made in an amount equaling less than $10,000 or greater than $500,000. Puts are further limited to GHS owning no more than 4.99% of the outstanding stock of our company at any given time. The Equity Financing Agreement and the rate equalRegistration Rights Agreement contain customary representations, obligations, rights, warranties, agreements and conditions of the parties. The Equity Financing Agreement terminates upon any of the following events: when GHS has purchased an aggregate of up to $10.0 million in the Common Stock of our company pursuant to the Wall Street Journal Prime Rate plus 2% per annum. Interest is payableEquity Financing Agreement; on the date that is 24 calendar months from the applicable principal is converted ordate the Equity Financing Agreement was executed. Actual sales of Resale Shares to GHS under the Equity Financing Agreement will depend on maturity. The interest musta variety of factors to be paid in cash and, in certain circumstances, may be paid in shares of common stock. The transactions described above closed on December 3, 2018. In connection withdetermined by us from time to time, including, among others, market conditions, the issuancetrading price of the DebentureCommon Stock and pursuantdeterminations by us as to the termsappropriate sources of the Securities Purchase Agreement, the Company issued to the Selling Stockholder Warrants to acquire up to 22,500,000 shares of common stockfunding for a term of three years on a cash-only basis at an exercise price of $1.00 per share with respect to 5,000,000 warrant shares, $0.75 with respect to 7,500,000 warrant shares and $0.50 with respect to 10,000,000 warrant shares. Pursuant to the terms of the SPA, the Selling Stockholder agreed to tender to our company the sum of $7,500,000, of which we received the sum of $4,500,000 as of the closing, $1,000,000 on January 4, 2019 and is to receive two additional tranches of $1,000,000 on the second and third monthly anniversaries of the closing. As of the closing, the face value of the Debenture was $5,004,000.00; as of the first month’s anniversary of the closing, the face value of the Debenture is to increase to $6,116,000.00; as of the second month’s anniversary of the closing, the face value of the Debenture is to increase to $7,228,000.00; and as of the third month’s anniversary of the closing, the face value of the Debenture is to increase to $8,340,000.00. As of the closing, the number of warrant shares was 13,500,000; as of the first month’s anniversary of the closing, the number of warrant shares is to increase to 16,500,000; as of the second month’s anniversary of the closing, the number of Warrant Shares is to increase to 19,500,000; as of the third month’s anniversary of the closing, the number of Warrant Shares is to increase to 22,500,000.its operations.

 

We are registering the resale of the shares of Common Stock underlying the Warrants (the “Warrant Shares”). The Debenture Shares and the Warrant Shares are sometimes referred to in this prospectus, together, as the “Securities”.

Our registration of the Securities covered by this prospectus does not mean that theThe Selling Stockholder will offersell their Resale Shares at prevailing market prices or sell any of the Securities. Thein privately negotiated transactions. We provide more information about how a Selling Stockholder may sell the Securities covered by this prospectusits Resale Shares in a number of different ways and at varying prices. For additional information on the possible methods of sale that may be used by the Selling Stockholder, you should refer to the section of this prospectus entitledtitled “Plan of Distribution” beginning on page 10 of this prospectus. We will not receive20.

The Selling Stockholders and any broker-dealers that participate in the distribution of the proceeds from the Securities sold by the Selling Stockholder, other than any proceeds from any cash exercise of Warrants.

No underwriter or other person has been engagedsecurities may be deemed to facilitate the salebe “underwriters” as that term is defined in Section 2(a)(11) of the Securities in this offering. Act of 1933, as amended.

We will bear all costs expenses and fees in connection withrelating to the registration of the Securities. The Selling Stockholder will bear allResale Shares, other than any legal or accounting costs or commissions and discounts, if any, attributable to their respective sales of the Securities.Selling Stockholders.

 

You should read this prospectus, any applicable prospectus supplement and any related free writing prospectus carefully before you invest.

Investing in our Common Stocksecurities is highly speculative and involves a high degree of risk. You should review carefully consider the risks and uncertainties described under the heading “Risk Factors” contained“Risk Factors” beginning on page 210 of this prospectus any applicable prospectus supplement and in any applicable free writing prospectuses, and under similar headings in the documents that are incorporated by reference into this prospectus.before making a decision to purchase our securities.

 

Our Common Stock is currently listed on the OTCQB under the symbol “GOPH”. On February 5, 2019, the last reported sales price for our Common Stock was $0.37 per share.NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

 

Neither the Securities and Exchange Commission nor any state securities commission has approvedWe may amend or disapproved of these securities or determined ifsupplement this prospectus is truthfulfrom time to time by filing amendments or complete. Any representation tosupplements as required. You should read the contrary is a criminal offense.entire prospectus and any amendments or supplements carefully before you make your investment decision.

 

The date of this prospectus is         February 7, 2019., 2022.

 

 

ABOUT THIS PROSPECTUS

 

In this prospectus, unless the context suggests otherwise, unless otherwise noted, references to “the Company,” “we,” “us,” and “our” refer to GBT Technologies Inc.

This prospectus describes the specific details regarding this offering and the terms and conditions of the securities being offered hereby and the risks of investing in our securities. You should read this prospectus, any free writing prospectus and the additional information about us described in the section entitled “Where You Can Find More Information” before making your investment decision.

Neither we, nor any of our officers, directors, agents, representatives or underwriters, make any representation to you about the legality of an investment in our securities. You should not interpret the contents of this prospectus or any free writing prospectus to be legal, business, investment or tax advice. You should consult with your own advisors for that type of advice and consult with them about the legal, tax, business, financial and other issues that you should consider before investing in our securities.

ADDITIONAL INFORMATION

You should rely only on the information contained or incorporated by reference in this prospectus and in any accompanying prospectus supplement. No one has been authorized to provide you with different or additional information. The securities are not being offered in any jurisdiction where the offer is not permitted. You should not assume that the information in this prospectus or any prospectus supplement is accurate as of any date other than the date on the front of such documents.

TRADEMARKS AND TRADE NAMES

This prospectus includes trademarks which are protected under applicable intellectual property laws and are our property. This prospectus also contains trademarks, service marks, trade names and/ or copyrights of other companies, which are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable licensor to these trademarks and trade names.

INDUSTRY AND MARKET DATA

Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including market position and market opportunity, is based on information from our management’s estimates, as well as from industry publications and research, surveys and studies conducted by third parties. The third-party sources from which we have obtained information generally state that the information contained therein has been obtained from sources believed to be reliable, but we cannot assure you that this information is accurate or complete. We have not independently verified any of the data from third-party sources nor have we verified the underlying economic assumptions relied upon by those third parties. Similarly, internal company surveys, industry forecasts and market research, which we believe to be reliable, based upon management’s knowledge of the industry, have not been verified by any independent sources. Our internal company surveys are based on data we have collected over the past several years, which we believe to be reliable. Management estimates are derived from publicly available information, our knowledge of our industry, and assumptions based on such information and knowledge, which we believe to be reasonable and appropriate. However, assumptions and estimates of our future performance, and the future performance of our industry, are subject to numerous known and unknown risks and uncertainties, including those described under the heading “Risk Factors” in this prospectus and those described elsewhere in this prospectus. These and other important factors could result in our estimates and assumptions being materially different from future results. You should read the information contained in this prospectus completely and with the understanding that future results may be materially different and worse from what we expect. See the information included under the heading “Cautionary Note Regarding Forward-Looking Statements.”

 

TABLE OF CONTENTS

 

 Page
SummaryPART I - INFORMATION REQUIRED IN PROSPECTUS1
Prospectus Summary1
Risk Factors24
DisclosureCautionary Note Regarding Forward-Looking Statements710
Use of Proceeds712
Selling StockholderStockholders812
Plan of Distribution1013
Description of Capital StockSecurities3415
Description of Business18
Market for Common Equity and Related Stockholder Matters33
Management’s Discussion and Analysis of Financial Condition and Results of Operations34
Management52
Executive Compensation56
Security Ownership Of Certain Beneficial Owners And Management57
Certain Relationships And Related Party Transactions And Director Independence59
Legal Matters3661
Experts3661
Where You Can Find More Information3661
Disclosure of Commission Position on Indemnification for Securities Act LiabilitiesFinancial Statements36
F-1

 

ABOUT THIS


PROSPECTUS SUMMARY

 

YouThe following summary is qualified in its entirety by, and should rely only on the information we have provided or incorporated by reference into this prospectus, any applicable prospectus supplement and any related free writing prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus, any applicable prospectus supplement or any related free writing prospectus. No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus, any applicable prospectus supplement or any related free writing prospectus. You must not rely on any unauthorized information or representation. This prospectus is an offer to sell only the Securities offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. You should assume that the information in this prospectus, any applicable prospectus supplement or any related free writing prospectus is accurate only as of the date on the front of the document and that any information we have incorporated by reference is accurate only as of the date of the document incorporated by reference, regardless of the time of delivery of this prospectus or any sale of a security.

The Selling Stockholder is offering the Securities only in jurisdictions where such issuances are permitted. The distribution of this prospectus and the issuance of the Securities in certain jurisdictions may be restricted by law. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the issuance of the Securities and the distribution of this prospectus outside the United States. This prospectus does not constitute, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy, the Securities offered by this prospectus by any person in any jurisdiction in which it is unlawful for such person to make such an offer or solicitation.

This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission (the “SEC”), under which the Selling Stockholder may offer from time to time up to an aggregate of 22,500,000 shares of our Common Stock in one or more offerings. If required, each time a Selling Stockholder offers Common Stock, in addition to this prospectus, we will provide you with a prospectus supplement that will contain specific information about the terms of that offering. We may also authorize one or more free writing prospectuses to be provided to you that may contain material information relating to that offering. We may also use a prospectus supplement and any related free writing prospectus to add, update or change any of the information contained in this prospectus or in documents we have incorporated by reference. This prospectus, together with any applicable prospectus supplements, any related free writing prospectuses and the documents incorporated by reference into this prospectus, includes all material information relating to this offering. To the extent that any statement that we make in a prospectus supplement is inconsistent with statements made in this prospectus, the statements made in this prospectus will be deemed modified or superseded by those made in a prospectus supplement. Please carefully read both this prospectus and any prospectus supplement together with, the additionalmore detailed information described below under “Important Information Incorporated by Reference”.

SUMMARY

This summary highlights selected information containedand financial statements and related notes thereto appearing elsewhere in this prospectus or incorporated by referenceprospectus. Before you decide to invest in this prospectus, and does not contain all of the information thatour securities, you need to consider in making your investment decision. You should carefully read the entire prospectus any applicable prospectus supplement and any related free writing prospectus,carefully, including the risks of investing in our Common Stock discussed underRisk Factors and the heading “Risk Factors” contained in this prospectus, any applicable prospectus supplement and any related free writing prospectus, and under similar headings in the other documents that are incorporated by reference into this prospectus. You should also carefully read the information incorporated by reference into this prospectus, including our financial statements and the exhibits to the registration statement of which this prospectus forms a part. Unless otherwise mentioned or unless the context requires otherwise, all referencesrelated notes included in this prospectus to “Gopher”, the “Company”, “we”, “us”, “our” or similar references mean Gopher Protocol Inc. and its consolidated subsidiaries.prospectus.

 

Gopher Protocol Inc.

Gopher is a development-stage company which considers itselfUnless the context indicates or otherwise requires, the “Company,” “we,” “us,”, “our” “GBT” or the “Registrant” refer to be a Native IoT creator, developing Internet of Things (IoT) and Artificial Intelligence enabled mobile technology. Gopher has a portfolio of Intellectual Property that when commercialized will include smart microchips, mobile application software and supporting cloud software. The system contemplates the creation of a global network. The core of the system will be its advanced microchip technology that can be installed in any mobile device worldwide. Gopher envisions this system as an internal, private network between all enabled mobile devices providing shared processing, advanced mobile database management/sharing and enhanced mobile features.

Recent Developments

On March 16, 2018, we entered into and closed an Asset Purchase Agreement dated March 1, 2018 (the “ECS Purchase Agreement”) with ECS Prepaid LLC (“ECS”), a Missouri limited liability company, pursuant to which the Company purchased certain assets from ECS, including, but not limited to, the processing prepaid platform, servers, POS terminals, customer list, a processing software program and goodwill, in consideration of $1,100,000 of which $100,000 was paid on the Closing Date and the balance is to be paid pursuant to a secured promissory note in the amount of $1,000,000 (the “ECS Note”). In addition, the Company issued 500,000 shares of common stock of the Company (the “ECS Shares”) and warrants to purchase 500,000 shares of common stock (the “ECS Warrants”). The ECS Warrants were assigned by ECS to Dennis Winfrey. The ECS Warrants are exercisable for a period of five years at a fixed exercise price of $1.85 per share and contain standard anti-dilution protection. Under the ESC Note, which is secured by the assets acquired by the Company from ECS, the Company is required to make ten equal payments of $100,000 commencing on April 15, 2018. The Company may prepay the ECS Note at any time without penalty. The ECS Note is a short-term debt obligation that is material to the Company.

On April 2, 2018, we entered into and closed an Asset Purchase Agreement (the “Electronic Purchase Agreement”) with Electronic Check Services Inc. (“Electronic Check”), a Missouri corporation, pursuant to which the Company purchased certain assets from Electronic Check, including, but not limited to, assets associated with software that validates written check authenticity, in consideration of $75,000 paid on the Closing Date. In addition, the Company issued 250,000 shares of common stock of the Company (the “Electronic Shares”) and warrants to purchase 250,000 shares of common stock (the “Electronic Warrants”). The Electronic Warrants were assigned by Electronic Check to Dennis Winfrey, the shareholder of Electronic Check. The Electronic Warrants are exercisable for a period of five years at a fixed exercise price of $2.70 per share and contain standard anti-dilution protection.

On April 2, 2018, we entered into and closed an Asset Purchase Agreement (the “Central Purchase Agreement”) with Central State Legal Services Inc. (“Central”), a Missouri corporation, pursuant to which the Company purchased certain assets from Central, including, but not limited to, assets associated with the a system to recover funds from returned checks, in consideration of $25,000 paid on the Closing Date. Derron Winfrey, the COO of the Company, is a director and President of Electronic Check and Central. Derron Winfrey’s parents are the shareholders of Check and Central.

On September 4, 2018, the Company and MobiquityGBT Technologies Inc., a New York corporation (“Mobiquity”Nevada corporation.

OVERVIEW

GBT Technologies Inc. (the “Company”, “GBT”, or “GTCH”) entered an agreement pursuant to whichwas incorporated on July 22, 2009 under the parties exchanged equity interest in eachlaws of the companies. In accordance with the agreement, theState of Nevada. The Company received 1,000 sharesis targeting growing markets such as development of Mobiquity’s restricted Series AAAA Preferred Stock (the “Mobiquity Preferred Stock”) in considerationInternet of Company’s concurrent sale and issuance to Mobiquity of 10,000,000 shares of Company’s common stock. The shares of Mobiquity Preferred Stock are convertible into an aggregate of up to 100,000,000 shares of Mobiquity common stock (the “Mobiquity Common Stock”Things (“IoT”) and 150,000,000 common stock purchase warrants (the “Mobiquity Warrants”Artificial Intelligence (“AI”). enabled networking and tracking technologies, including wireless mesh network technology platform and fixed solutions, development of an intelligent human body vitals device, asset-tracking IoT. The Mobiquity Warrants shall have a termCompany has historically derived revenues from (i) the provision of 5-yearsIT services; and (ii) from the date of grant and shall be exercisable at a price of $0.12 per share and the shares of Mobiquity Preferred Stock shall not be convertible into shares of Mobiquity Common Stock and the Mobiquity Warrants shall not be contemporaneously granted until after Mobiquity’s Board of Directors and stockholders shall have increased the authorized number of shares of Mobiquity’s common stock to a number sufficient to accommodate a reserve in the Company’s favor of 250,000,000 shares of Mobiquity’s common stock. The Mobiquity Preferred Stock shall have immediate voting rights equal to the number of shares of Mobiquity Common Stock into which they may be converted, not including the shares of Mobiquity’s common stock underlying the Mobiquity Warrants. As a result of this transaction, the Company has an approximate 21% interest in Mobiquity. On February 6, 2019, the Company entered into a letter agreement with Gopher Protocol Costa Rica Sociedad De Responsabilidad Limitada, a Costa Rican company (“Gopher CR”) and a 50% owned subsidiary of the Company, pursuant to which the Company sold 30,000,000 shares of Mobiquity to Gopher CR in the principal amount of $5,000,000 secured by all of the assets of Gopher CR payable with 10% interest on the one year anniversary.

On January 8, 2019, the Company entered into a Stock Pledge Agreement with Latin American Exchange Latinex Casa de Cambio, S.A., a Costa Rica corporation (“Latinex”). Latinex is a fully licensed and Central Bank regulated “Currency Exchange” in Costa Rica. In order to provide that Latinex may maintain its required regulatory capital as required by various regulators, the Company has pledged restricted shareslicensing of its common stock valued at $7.5 million for a term of three years in consideration of an annual payment of $375,000 paid in quarterly installments of $93,750. In lieu of cash payment, Latinex may pay the Company in in virtual currency of WISE Network S.A. valued at a 50% discount of its offering price of $10 per token. In the event Latinex’s required capital has decreased below $5,000,000, Latinex is permitted to sell the pledged shares of common stock only in an amount to ensure that Latinex can satisfy the required capital levels. The Company must consent to such sale of the shares of common stock, if at all, which may not be unreasonably withheld. Upon expiration of the agreement, the remaining shares of common stock shall be returned to the Company free and clear of all liens.

For a complete description of our business, financial condition, results of operations and other important information, we refer you to our filings with the SEC that are incorporated by reference in this prospectus, including our Annual Report on Form 10-K for the year ended December 31, 2017. For instructions on how to find copies of these documents, see “Where You Can Find More Information”.technology.

 

Corporate Information

 

We are a Nevada corporation. Our principal executive offices are located at 2500 Broadway,2450 Colorado Ave., Suite F-125,100E Santa Monica, California 90404, and ourCA 90404Our telephone number is 424-238-4589.(888) 685-7336. We were incorporated in Nevada in 2009 and registered to do business in California in 2020. We maintain a website at https://gbtti.com where general information about us is available. We are not incorporateincorporating the information on, or accessible through, ourcontents of the website into this prospectus supplement, and you should not consider any information on, or accessible through, our website as part of this prospectus supplement. prospectus.

1

 

THE OFFERING

This prospectus relates to the resale from time to time by the Selling Stockholder of up to 22,500,000 shares of our Common Stock. The 22,500,000 shares of Common Stock consist of up to 22,500,000 shares of Common Stock issuable upon exercise of outstanding Common Stock Purchase Warrants (the “Warrants”) in each case as issued by us to the Selling Stockholder pursuant to the securities purchase agreement we entered into with the Selling Stockholder on December 3, 2018.

 

Common stock offered by selling stockholder:Selling Stockholder: 22,500,000 shares which includes up to 22,500,0005,500,000 shares of Common Stock issuable upon exercise of outstanding Warrants.common stock, par value $0.0001 per share (the “Resale Shares”).
   
Offering price: Market priceThe Selling Stockholder will sell their Resale Shares at prevailing market prices or in privately negotiated prices.transactions.
   
Common stock outstanding after the offering:outstanding: 226,413,338 shares, including shares of Common Stock issuable upon the exercise of the Warrants.33,200,198
   
Use of proceeds: WeThe selling stockholder will not receive anyall of the proceeds from the sale of the Resale Sharesshares offered for sale by it under this prospectus. We will not receive proceeds from the sale of the shares by the selling stockholders; provided, however,stockholder. However, we willmay receive theup to $10.0 million in proceeds from any cash exercisethe sale of warrants.our common stock to the selling stockholder under the equity financing agreement described below. Any proceeds from the selling stockholder that we receive under the equity financing agreement are expected be used for general corporate purposes. See “Use of Proceeds.”
   

Risk factors:

 An investment in our securities involves a high degree of risk and could result in a loss of your entire investment. Prior to making an investment decision, you should carefully consider all of the information in this prospectus and, in particular, you should evaluate the risk factors set forth under the caption “Risk Factors” beginning on page 2.[ ]. 
   
Symbol on OTCQBMarket for our common stock: GOPHWe currently trade on the OTC Pink marketplace maintained by OTCMarkets, Inc. under the symbol “GTCH”.

 

The number of shares of Common Stock to becommon stock outstanding immediately after this offering is based on 203,913,33833,200,198 shares of common stock issued and outstanding as of December 27, 2021 and excludes as of that date:

●392,870 shares of common stock issuable upon exercise of warrants with a weighted-average exercise price of $74.97 per share;
●85,021,775 shares of common stock issuable upon conversion of outstanding convertible notes in the aggregate principal amount of $8,672,221;

Transaction with the Selling Stockholder

On December 17, 2021 we entered into an equity financing agreement (the “Equity Financing Agreement”) and a registration rights agreement (the “Registration Rights Agreement”) with GHS Investments LLC (“GHS” or the “Selling Stockholder”), pursuant to which GHS shall purchase from us, up to that number of Resale Shares having an aggregate purchase price of up to $10.0 million, subject to certain limitations and conditions set forth in the Equity Financing Agreement from time to time over the course of 24 months after an effective registration of the Resale Shares with the Securities and Exchange Commission (the “SEC”) pursuant to the Registration Rights Agreement, is declared effective by the SEC (the “Contract Period”). The Equity Financing Agreement grants us the right, from time to time at its sole discretion (subject to certain conditions) during the Contract Period, to direct GHS to purchase Resale Shares of Common Stock on any business day (a “Put”), provided that at least ten trading days has passed since the most recent Put. The purchase price of the Resale Shares contained in a Put will be 90% of the lowest daily volume weighted average price (VWAP) of our Common Stock during the ten consecutive trading days preceding the receipt by GHS of the applicable Put notice. Such sales of Common Stock by us, if any, may occur from time to time, at our option, during the Contract Period. Subject to the satisfaction of certain conditions set forth in the Equity Financing Agreement, on each Put we will deliver an amount of Resale Shares equaling 110% of the dollar amount of each Put. The maximum dollar amount of each Put will not exceed 200% of the average daily trading dollar volume for our Common Stock during the ten trading days preceding the trading day that GHS receives a Put. No Put will be made in an amount equaling less than $10,000 or greater than $500,000. Puts are further limited to GHS owning no more than 4.99% of the outstanding stock of our company at any given time. The Equity Financing Agreement and the Registration Rights Agreement contain customary representations, obligations, rights, warranties, agreements and conditions of the parties. The Equity Financing Agreement terminates upon any of the following events: when GHS has purchased an aggregate of $10.0 in the Common Stock of our company pursuant to the Equity Financing Agreement; on the date that is 24 calendar months from the date the Equity Financing Agreement was executed. Actual sales of Resale Shares to GHS under the Equity Financing Agreement will depend on a variety of factors to be determined by us from time to time, including, among others, market conditions, the trading price of the Common Stock and determinations by us as to the appropriate sources of funding for our company and its operations.

As of December 27, 2021, there were 33,200,198 shares of our common stock outstanding excluding the 5,500,000 shares offered that have been issued or may be issuable to GHS pursuant to the Equity Financing Agreement. If all of such 5,500,000 shares of our common stock offered hereby were issued and outstanding as of February 5, 2019the date hereof, such shares would represent approximately 13% of the total common stock outstanding.

Pursuant to the Equity Financing Agreement and excludes 28,416,666the Registration Rights Agreement, we are registering 5,500,000 shares of Common Stock issuable uponour common stock under the exerciseSecurities Act which we may issue to GHS after this registration statement is declared effective under the Securities Act. All 5,500,000 shares of warrants (excluding warrants covered bycommon stock are being offered pursuant to this prospectus). prospectus.

 

RISK FACTORS

 

InvestingAn investment in shares of our Common Stocksecurities involves a high degree of risk. Before makingThis prospectus contains the risks applicable to an investment in our securities. Prior to making a decision about investing in our securities, you should carefully consider the risks describedspecific factors discussed under the heading “Risk Factors” in any applicable prospectus supplementthis prospectus. The risks and inuncertainties we have described are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also affect our most recent Annual Report on Form 10-K, or any updates in our Quarterly Reports on Form 10-Q, together with alloperations. The occurrence of the other information appearing in or incorporated by reference into this prospectus and any applicable prospectus supplement, before deciding whether to purchase any of the Common Stock being offered. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. The trading price of shares of our Common Stock could decline dueknown or unknown risks might cause you to any of these risks, and you may lose all or part of your investment.investment in the offered securities.

 

2

Risks Relating to Our Business

 

WE HAVE A LIMITED OPERATING HISTORY IN AN EVOLVING INDUSTRY, WHICH MAKES IT DIFFICULT TO EVALUATE OUR FUTURE PROSPECTS AND MAY INCREASE THE RISK THAT WE WILL NOT BE SUCCESSFUL.

 

We only recently started our operations in our current business in 2015. We have a limited operating history in an evolving industry that may not develop as expected. Assessing our business and future prospects is challenging in light of the risks and difficulties we may encounter. These risks and difficulties include our ability to:

 

●accurately forecast our revenues and plan our operating expenses;
●successfully expand our business;
●assimilate our acquisitions;
●adapt to rapidly evolving trends in the ways consumers and businesses interact with technology;
●avoid interruptions or disruptions in the offering of our products and our services;
●develop a scalable, high-performance technology infrastructure that can efficiently and reliably handle increased usage, as well as the deployment of new features and products;
●hire, integrate and retain talented sales, customer service, technology and other personnel; and
●effectively manage rapid growth in personnel and operations.operations; and
●global COVID-19 pandemic

 

If the demand for our services and/or platforms/products offered through our points of sales or our products under development are not finalized, our business will be harmed. We may not be able to successfully address these risks and difficulties, which could harm our business and results of operations.

 

OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT FOR US TO EVALUATE OUR FUTURE BUSINESS PROSPECTS AND MAKE DECISIONS BASED ON THOSE ESTIMATES OF OUR FUTURE PERFORMANCE.

 

We shifted our focus to our real-time, heuristic- (self-learning/artificial intelligence) based mobile technology in 2015 and recently acquired point of sale terminals.  We have a limited operating history and, generated $9.2 million in revenue for the year ended December 31, 2017 and $36.9 million for the nine months ended September 30, 2018.  Asas a consequence, it is difficult, if not impossible, to forecast our future results based upon our historical data. Reliance on the historical results may not be representative of the results we will achieve. Because of the uncertainties related to our limited historical operations, we may be hindered in our ability to anticipate and timely adapt to increases or decreases in revenues or expenses. If we make poor budgetary decisions as a result of unreliable historical data, we could be less profitable or continue to incur losses.

 

GOPHER PROTOCOL’STHE COVID-19 OUTBREAK HAS CAUSED DISRUPTIONS IN OUR DEVELOPMENT OPERATIONS, WHICH HAVE RESULTED IN DELAYS ON EXISTING PROJECTS AND MAY HAVE ADDITIONAL NEGATIVE IMPACTS ON OUR OPERATIONS

The Company operates in a high-tech marketplace and relies on professionals and partnerships all over the world, which is impacted by the global pandemic, causing the Company’s resources to be affected. Our business operations have been and may continue to be materially and adversely affected by the coronavirus disease COVID-19.

An outbreak of respiratory illness caused by COVID-19 emerged in Wuhan city, Hubei province, PRC, in late 2019 and expanded globally. COVID-19 is considered to be highly contagious and poses a serious public health threat.

On March 19, 2020, California Governor Gavin Newsom issued a stay-at-home order to protect the health and well-being of all Californians and to establish consistency across the state in order to slow the spread of COVID-19. California was therefore under strict quarantine control and travel has been severely restricted, resulting in disruptions to work, communications, and access to files (due to limited access to facilities). Since then, other measures have been imposed in other countries and major cities in the USA, including Los Angeles, and throughout the world in an effort to contain the COVID-19 outbreak. The World Health Organization (the “WHO”) is closely monitoring and evaluating the situation. On March 11, 2020, the WHO declared the outbreak of COVID-19 a pandemic, expanding its assessment of the threat beyond the global health emergency it had announced in January. Any outbreak of such epidemic illness or other adverse public health developments in the USA or elsewhere in the world may materially and adversely affect the global economy, our markets and our business. The stay-at-home order was lifted in California only on January 25, 2021.

In the first quarter of 2020, the COVID-19 outbreak caused disruptions in our development operations, which resulted in delays on exiting projects. The State of California and the economy in general has begun to slowly re-open following the introduction of the COVID-19 vaccine. During the fourth quarter of 2021, the omicron variants surfaced and has significantly impacted the United States and globally. However, in the event COVID-19, the omicron variant or other variant is to worsen or again surface any further unforeseen delay in our operations of the development, delivery and assembly process within any of our activities could continue to result in, increased costs and reduced revenue.

We cannot foresee whether the outbreak of COVID-19 and its variants will continue to be effectively contained. If the outbreak of COVID-19 is not effectively and timely controlled, our business operations and financial condition may be materially and adversely affected as a result of the deteriorating market outlook for sales, the slowdown in regional and national economic growth, weakened liquidity and financial condition of our customers and vendors or other factors that we cannot foresee. Any of these factors and other factors beyond our control could have an adverse effect on the overall business environment, cause uncertainties, cause our business to suffer in ways that we cannot predict and materially and adversely impact our business, financial condition and results of operations.

OUR RESULTS OF OPERATIONS HAVE NOT RESULTED IN PROFITABILITY AND WE MAY NOT BE ABLE TO ACHIEVE PROFITABILITY GOING FORWARD

 

Gopher ProtocolThe Company does not accrue or capitalize development costs (or any costs to this effect) and expense it to its profit and loss statements as required by US GAPP.GAAP. As such, the Company incurred a net loss amounting to $10,287,290 for the year ended December 31, 2017 and $1,586,226 for the year ended December 31, 2016 and $46,442,467$32,854,195 for the nine months ended September 30, 2018.2021 and $17,994,888 for the year ended December 31, 2020. If we incur additional significant operating losses, our stock price, may decline, perhaps significantly. Our management is developing plans to alleviate the negative trends and conditions described above. Our business plan is speculative and unproven. There is no assurance that we will be successful in executing our business plan or that even if we successfully implement our business plan, that we will be able to curtail our losses now or in the future. Further, as we are an emerging enterprise, we expect that net losses will continue, and our working capital deficiency will increase.

 

WE HAVE NOT GENERATED INSIGNIFICANT POSITIVE CASH FLOW FROM OPERATIONS, AND OUR ABILITY TO GENERATE POSITIVE CASH FLOW IS UNCERTAIN. IF WE ARE UNABLE TO GENERATE POSITIVE CASH FLOW OR OBTAIN SUFFICIENT CAPITAL WHEN NEEDED, OUR BUSINESS AND FUTURE PROSPECTS WILL BE ADVERSELY AFFECTED AND WE COULD BE FORCED TO SUSPEND OR DISCONTINUE OPERATIONS.

 

Our operations have not generated insignificant positive cash flow for any reporting period since our inception, and we have funded our operations primarily through the issuance of common stock and short-term and long-term debt and convertible debt. Our limited operating history makes an evaluation of our future prospects difficult. The actual amount of funds that we will need to meet our operating needs will be determined by a number of factors, many of which are beyond our control. These factors include the timing and volume of sales transactions, the success of our marketing strategy, market acceptance of our products, the success of our manufacturing and research and development efforts (including any unanticipated delays), our manufacturing and labor costs, the costs associated with obtaining and enforcing our intellectual property rights, regulatory changes, competition, technological developments in the market, evolving industry standards and the amount of working capital investments we are required to make.

 

Our ability to continue to operate until we are able to generate sufficient our cash flow from operations will depend on our ability to generate sufficient positive cash flow from our operations. If we are unable to generate sufficient cash flow from our operations, our business and future prospects will be adversely affected and we could be forced to suspend or discontinue operations.

 

The Company sustained net losses of $10,287,290 in this fiscal year,$32,854,195 and our operating activities providedused cash flows of $228,711.$958,011 for the nine months ended September 30, 2021. The Company sustained net losses of $17,994,888 and our operating activities used cash flows of $994,426 for the year ended December 31, 2020. The Company sustained net losses of $186,505,119 and our operating activities used cash flows of $6,623,463 for the year ended December 31, 2019. The Company had a working capital deficit of $1,060,506,$27,710,040, stockholders’ equitydeficit of $4,221,841,$27,858,303 and an accumulated deficit of $14,381,662$270,651,339 at December 31, 2017 and2020. The Company had a working capital deficit of $5,278,748,$21,704,420, stockholders’ equitydeficit of $6,405,431,$28,909,820 and an accumulated deficit of $60,824,129$303,505,534 at September 30, 2018. This raises substantial doubt about its ability to continue as a going concern. The Company is dependent upon its ability to generate revenues and its ability to continue receiving investment capital and loans from third parties to sustain its current level of operations. The Company is in the process of securing working capital from investors for common stock, convertible notes payable, and/or strategic partnerships. No assurance can be given that the Company will be successful in these efforts.2021.

 

3

WE WILL REQUIRE ADDITIONAL CAPITAL TO SUPPORT BUSINESS GROWTH, AND THIS CAPITAL MIGHT NOT BE AVAILABLE ON ACCEPTABLE TERMS, IF AT ALL.

 

We intend to continue to make investments to support our business growth and we will require additional funds to respond to business challenges, including the need to develop new features and products or enhance our existing products, improve our operating infrastructure or acquire complementary businesses and technologies. Further, we need additional capital to continue operations. Accordingly, we may need to engage in equity or debt financings to secure additional funds. We expect that we have sufficient capital to maintain operations through the year of 2021. In order to fully implement our business plan, we will need to raise $10,000,000. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing that we secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be impaired, and our business may be harmed.

 

WE DEPEND UPON KEY PERSONNEL AND NEED ADDITIONAL PERSONNEL

 

Our success depends on our inability to attract and retain key personnel including Douglas Davis,Michael Murray, our President, Mansour Khatib, our CEO, and Dr. Danny Rittman, our CTO, and our inability to do so may materially and adversely affect our business operations. The loss of qualified personnel could have a material and adverse effect on our business operations. Additionally, the success of the Company’s operations will largely depend upon its ability to successfully attract and maintain competent and qualified key management personnel. As with any company with limited resources, there can be no guaranty that the Company will be able to attract such individuals or that the presence of such individuals will necessarily translate into profitability for the Company.

 

OUR BUSINESS REQUIRES SUBSTANTIAL CAPITAL, AND IF WE ARE UNABLE TO MAINTAIN ADEQUATE CASH FLOWS FROM OPERATIONS OUR PROFITABILITY AND FINANCIAL CONDITION WILL SUFFER AND JEOPARDIZE OUR ABILITY TO CONTINUE OPERATIONS

 

We require substantial capital to support our operations. If we are unable to generate adequate cash flows from our operations, maintain adequate financing or other sources of capital are not available, we could be forced to suspend, curtail or reduce our operations, which could harm our revenues, profitability, financial condition and business prospects.

A SINGLE STOCKHOLDER HOLDS A CONTROLLING INTEREST IN OUR COMPANY, WHICH COULD LIMIT YOUR ABILITY TO INFLUENCE THE OUTCOME OF ANY STOCKHOLDER VOTE

One shareholder beneficially owns approximately 34% of the outstanding shares of Common Stock. Under our Certificate of Incorporation and Nevada law, the vote of a majority of the shares outstanding is generally required to approve most stockholder action. As a result, these stockholders will be able to significantly influence the outcome of stockholder votes for the foreseeable future, including votes concerning the election of directors, amendments to our Certificate of Incorporation or proposed mergers or other significant corporate transactions.

 

THERE IS CURRENTLY A LIMITED PUBLIC MARKET FOR OUR COMMON STOCK. FAILURE TO FURTHER DEVELOP OR MAINTAIN A TRADING MARKET COULD NEGATIVELY AFFECT THE VALUE OF OUR COMMON STOCK AND MAKE IT DIFFICULT OR IMPOSSIBLE FOR YOU TO SELL YOUR STOCK.

 

There is a limited public market for our Common Stock, which is traded on the OTCQBOTC PINK under the symbol GOPH.GTCH. We cannot give any assurances that there will ever be a mature, developed market for our common stock. Failure to further develop or maintain an active trading market could negatively affect the value of our shares and make it difficult for you to sell your shares or recover any part of your investment in us. Even if a market for our common stock does develop in a material way, the market price of our common stock may be highly volatile. In addition to the uncertainties relating to our future operating performance and the profitability of our operations, factors such as variations in our interim financial results, or various, as yet unpredictable factors, many of which are beyond our control, may have a negative effect on the market price of our common stock.

 

IF WE FAIL TO MAINTAIN AN EFFECTIVE SYSTEM OF INTERNAL CONTROLS, WE MAY NOT BE ABLE TO ACCURATELY REPORT OUR FINANCIAL RESULTS OR PREVENT FRAUD. AS A RESULT, CURRENT AND POTENTIAL STOCKHOLDERS COULD LOSE CONFIDENCE IN OUR FINANCIAL REPORTING, WHICH WOULD HARM OUR BUSINESS AND THE TRADING PRICE OF OUR STOCK.

 

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financial reports or prevent fraud, our brand and operating results could be harmed. We have in the past discovered, and may in the future discover, areas of our internal controls that need improvement. For example, for the yearyears ended December 31, 2017,2020 and December 31, 2019, we reported that our disclosure controls and procedures were not effective due to the lack of resources and the reliance on outside consultants. We intend to increase management’s review of our financials. We cannot be certain that these measures will ensure that we implement and maintain adequate controls over our financial processes and reporting in the future. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

 

4

Additional Risks Related to Our Common Stock

 

Because we are quoted on the OTCQBOTC PINK marketplace instead of a national securities exchange, our investors may experience significant volatility in the market price of our stock and have difficulty selling their shares.

 

Our Common Stock is currently quoted on the OTC Market Group’s OTCQBOTC PINK marketplace under the ticker symbol “GOPH.”“GTCH” ((prior years under the symbol: “GOPH”). The OTCQBOTC is a regulated quotation service that displays real-time quotes and last sale prices in over-the-counter securities. Trading in shares quoted on the OTCQBOTC PINK is often thin and characterized by volatility. This volatility may be caused by a variety of factors, including the lack of readily available price quotations, the absence of consistent administrative supervision of bid and ask quotations, lower trading volume and market conditions. As a result, there may be wide fluctuations in the market price of the shares of our Common Stock for reasons unrelated to operating performance, and this volatility, when it occurs, may have a negative effect on the market price for our securities. Moreover, the OTCQBOTC PINK is not a stock exchange, and trading of securities on this platform is more sporadic than the trading of securities listed on a national quotation system or stock exchange. Accordingly, our stockholders may not be able to realize a fair price from their shares when they determine to sell them or may have to hold them for a substantial period of time until the market for our Common Stock improves.

 

Our stock price and trading volume may be volatile, which could result in substantial losses for our stockholders.

 

The equity trading markets may experience periods of volatility, which could result in highly variable and unpredictable pricing of equity securities. The market price of our Common Stock could change in ways that may or may not be related to our business, our industry or our operating performance and financial condition. In addition, the trading volume in our Common Stock has been low and may fluctuate and cause significant price variations to occur. We have experienced significant volatility in the price of our stock. In addition, the stock markets in general can experience considerable price and volume fluctuations.

 

We have not paid dividends in the past and have no immediate plans to pay cash dividends.

 

WeWe plan to reinvest all of our earnings, to the extent we have earnings, in order to develop and deliver our products and cover operating costs and to otherwise become and remain competitive. We do not plan to pay any cash dividends with respect to our securities in the foreseeable future. We cannot assure you that we would, at any time, generate sufficient surplus cash that would be available for distribution to the holders of our Common Stock as a dividend. Therefore, you should not expect to receive cash dividends on our Common Stock.

 

Shares eligible for future sale may adversely affect the market for our Common Stock.

 

Of the 203,913,33833,200,198 shares of our Common Stock outstanding as of the date of this prospectus, approximately 75,576,74716,457,939 are restricted and 16,742,259 shares are held by “non-affiliates” and are freely tradable without restriction pursuant to Rule 144. Any substantial sale of our Common Stock pursuant to Rule 144 or pursuant to any resale prospectus may have a material adverse effect on the market price of our Common Stock.

 

You may experience future dilution as a result of this offering or future equity offerings.

We are registering for sale 5,500,000 shares that we may sell to GHS under the Equity Financing Agreement. It is anticipated that shares registered in this offering will be sold by GHS over a period of up to approximately 24 months from the date of commencement. The number of shares of common stock that we may sell under the Equity Financing Agreement may exceed 5,500,000 shares, depending on the sales price. Depending upon market liquidity at the time, sales of shares of our common stock under the Purchase Agreement may cause the trading price of our common stock to decline.

 

In order to raise additional capital, we may in the future offer additional shares of our Common Stock or other securities convertible into or exchangeable for our Common Stock at prices that may not be the same as the price per share in this offering. We may sell shares or other securities in any future offering at a price per share that is lower than the price per share paid by investors in this offering, which would result in those newly issued shares being dilutive. In addition, investors purchasing shares or other securities in the future could have rights superior to existing stockholders, which could impair the value of your shares. The price per share at which we sell additional shares of our Common Stock, or securities convertible or exchangeable into shares of our Common Stock, in future transactions may be higher or lower than the price per share paid by investors in this offering.

 

Management will have broad discretion as to the use of any proceeds received under the Purchase Agreement and we may not use the proceeds effectively.

Our management will have broad discretion as to the application of any proceeds received from GHS under the Equity Financing Agreement and could spend the proceeds in ways that do not necessarily improve our operating results or enhance the value of our common stock.

Our charter documents and Nevada law may inhibit a takeover that stockholders consider favorable.

 

Provisions of our certificate of incorporation and bylaws and applicable provisions of Nevada law may delay or discourage transactions involving an actual or potential change in control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. The provisions in our certificate of incorporation and bylaws:

 

·●limit who may call stockholder meetings;
·
●do not provide for cumulative voting rights; and
·
●provide that all vacancies may be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum.

5

 

There are limitations on director/officer liability.

 

As permitted by Nevada law, our certificate of incorporation limits the liability of our directors for monetary damages for breach of a director’s fiduciary duty except for liability in certain instances. As a result of our charter provision and Nevada law, shareholders may have limited rights to recover against directors for breach of fiduciary duty. In addition, our certificate of incorporation provides that we shall indemnify our directors and officers to the fullest extent permitted by law.

 

Penny stock regulations may impose certain restrictions on marketability of our securities.

 

The SEC has adopted regulations which generally define a “penny stock” to be any equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. A security listed on a national securities exchange is exempt from the definition of a penny stock. Our Common Stock is not currently listed on a national security exchange. Our Common Stock is therefore subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse). For transactions covered by such rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser’s written consent to the transaction prior to the purchase.

 

Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the SEC relating to the penny stock market. The broker-dealer must also disclose the commission payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market maker, the broker dealer must disclose this fact and the broker-dealer’s presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Broker-dealers must wait two business days after providing buyers with disclosure materials regarding a security before effecting a transaction in such security. Consequently, the “penny stock” rules restrict the ability of broker-dealers to sell our securities and affect the ability of investors to sell our securities in the secondary market and the price at which such purchasers can sell any such securities, thereby affecting the liquidity of the market for our Common Stock.

 

Stockholders should also be aware that, according to the SEC, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:

 

●control of the market for the security by one or more broker-dealers that are often related to the promoter or issuer;

●manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;

●“boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;

●excessive and undisclosed bid-ask differentials and markups by selling broker-dealers ;broker-dealers; and

●the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.

 

FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock.

 

The Financial Industry Regulatory Authority (referred to as FINRA) has adopted rules requiring that, in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative or low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA has indicated its belief that there is a high probability that speculative or low-priced securities will not be suitable for at least some customers. If these FINRA requirements are applicable to us or our securities, they may make it more difficult for broker-dealers to recommend that at least some of their customers buy our Common Stock, which may limit the ability of our stockholders to buy and sell our common stock and could have an adverse effect on the market for and price of our common stock.

 

6

DISCLOSURECAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectusIn this annual report, references to “GBT”, “Gopher”, “GOPH”, “GTCH” or “the Company,” or “we,” or “us,” and “our” refer to GBT Technologies Inc. or f/k/a Gopher Protocol Inc. Except for the documents incorporated by reference intohistorical information contained herein, some of the statements in this prospectus mayreport contain forward-looking statements withinthat involve risks and uncertainties. These statements are found in the meaningsections entitled “Business,” “Management’s Discussion and Analysis of Section 27AFinancial Condition and Results of the Securities ActOperations,” and “Quantitative and Qualitative Disclosures about Market Risk.” They include statements concerning: our business strategy; expectations of 1933, as amended (the “Securities Act”),market and Section 21Ecustomer response; liquidity and capital expenditures; future sources of the Securities Exchange Actrevenues; expansion of 1934, as amended (the “Exchange Act”), about the Companyour proposed product line; and its subsidiaries. Thesetrends in industry activity generally. In some cases, you can identify forward-looking statements are intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-lookingwords such as “may,” “will,” “should,” “expect,” “plan,” “could,” “anticipate,” “intend,” “believe,” “estimate,” “predict,” “potential,” “goal,” or “continue” or similar terminology. These statements are not statements of historical fact,only predictions and can be identified by the use of forward-looking terminology such as “believes”, “expects”, “may”, “will”, “could”, “should”, “projects”, “plans”, “goal”, “targets”, “potential”, “estimates”, “pro forma”, “seeks”, “intends” or “anticipates” or the negative thereof or comparable terminology. Forward-looking statements include discussions of strategy, financial projections, guidanceinvolve known and estimates (including their underlying assumptions), statements regarding plans, objectives, expectations or consequences of various transactions, and statements about the future performance, operations, products and services of the Company and its subsidiaries. We caution our stockholders and other readers not to place undue reliance on such statements.

You should read this prospectus and the documents incorporated by reference completely and with the understanding that our actual future results may be materially different from what we currently expect. Our business and operations are and will be subject to a variety of risks, uncertainties and other factors. Consequently, actual results and experience may materially differ from those contained in any forward-looking statements. Suchunknown risks, uncertainties and other factors, including, but not limited to, the risks outlined under “Risk Factors,” that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. For example, assumptions that could cause actual results and experience to differvary materially from those projectedfuture results include, but are not limited to our ability to successfully develop and market our products to customers; our ability to generate customer demand for our products in our target markets; the development of our target markets and market opportunities; our ability to manufacture suitable products at a competitive cost; market pricing for our products and for competing products; the extent of increasing competition; technological developments in our target markets and the development of alternate, competing technologies in them; and sales of shares by existing shareholders. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Unless we are required to do so under U.S. federal securities laws or other applicable laws, we do not intend to update or revise any forward-looking statements.

Below is a summary of material factors that make an investment in our securities speculative or risky. Importantly, this summary does not address all of the risks and uncertainties that we face. Additional discussion of the risks and uncertainties summarized in this risk factors set forthfactor summary, as well as other risks and uncertainties that we face, can be found under ‘Risk Factors’ in Part I—I, Item 1A “Risk Factors”,of this Annual Report on Form 10-K. The below summary is qualified in ourits entirety by that more complete discussion of such risks and uncertainties. You should consider carefully the risks and uncertainties described under ‘Risk Factors’ in Part I, Item 1A of this Annual Report on Form 10-K for the year ended December 31, 2017 and elsewhereas part of your evaluation of an investment in the documents incorporated by reference into this prospectus.our securities.

 

You should assume that the information appearing in this prospectus, any accompanying prospectus supplement, any related free writing prospectus and any document incorporated herein by reference is accurate as of its date only. Because the risk factors referred to above could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. All written or oral forward-looking statements attributable to us or any person acting on our behalf made after the date of this prospectus are expressly qualified in their entirety by the risk factors and cautionary statements contained in and incorporated by reference into this prospectus. Unless legally required, we do not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events.

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●We have a limited operating history in an evolving industry, which makes it difficult to evaluate our future prospects and may increase the risk that we will not be successful.
●Our limited operating history makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance.
●The COVID-19 outbreak has caused disruptions in our development operations, which have resulted in delays on existing projects and may have additional negative impacts on our operations.
●Our results of operations have not resulted in profitability and we may not be able to achieve profitability going forward.
●We have not generated positive cash flow from operations and our ability to generate positive cash flow is uncertain. If we are unable to generate positive cash flow or obtain sufficient capital when needed, our business and future prospects will be adversely affected and we could be forced to suspend or discontinue operations.
●We will require additional capital to support business growth and this capital might not be available on acceptable terms, if at all.
●We depend upon key personnel and need additional personnel.
●Our business requires substantial capital and if we are unable to maintain adequate cash flows from operations our profitability and financial condition will suffer and jeopardize our ability to continue operations.
●There is currently a limited public market for our common stock. Failure to further develop or maintain a trading market could negatively affect the value of our common stock and make it difficult or impossible for you to sell your stock.
●If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud. As a result, current and potential stockholders could lose confidence in our financial reporting, which would harm our business and the trading price of our stock.
●Because we are quoted on the OTC PINK marketplace instead of a national securities exchange, our investors may experience significant volatility in the market price of our stock and have difficulty selling their shares.
●Our stock price and trading volume may be volatile, which could result in substantial losses for our stockholders.
●We have not paid dividends in the past and have no immediate plans to pay cash dividends.
●Shares eligible for future sale may adversely affect the market for our Common Stock.
●You may experience future dilution as a result of future equity offerings.
●Our charter documents and Nevada law may inhibit a takeover that stockholders consider favorable.
●There are limitations on director/officer liability.
●Penny stock regulations may impose certain restrictions on marketability of our securities.
●FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock.

 

USE OF PROCEEDS

 

This prospectus relates to shares of our common stock that may be offered and sold from time to time by GHS. We will not receive noany proceeds upon the sale of shares by GHS. However, we may receive proceeds of up to $10 million under the Equity Financing Agreement with GHS. The proceeds received from the sale of the Securities byshares under the Selling Stockholder. We may, however, receive cash proceeds equal to the total exercise price of the Warrants to the extent that the WarrantsEquity Financing Agreement are exercised for cash. To the extent we receive proceeds from the cash exercise of the Warrants, we intend to use such proceedsexpected be used for general corporate purposes. OurThe amounts and timing of these expenditures will depend on a number of factors, such as the timing, scope, progress and results of our sales, research and development efforts, the timing and progress of any partnering efforts, and the regulatory and competitive environment. However, we cannot guarantee that we will receive any proceeds in connection with the Equity Financing Agreement because we may be unable or choose not to issue and sell any securities pursuant to the Equity Financing Agreement. Because of this, we have not determined the amount of proceeds to be used specifically for any particular purpose or the timing of any expenditures. Accordingly, management will retain broad discretion and flexibility in applying the allocationproceeds. Pending any use of the net proceeds, fromwe intend to invest the exercise of the Warrants for cash.proceeds in repurchase contracts or deposit them in checking accounts at financial institutions.

 

DIVIDEND POLICYSELLING STOCKHOLDERS

 

We have not paid any cash dividends on our Common Stock and have no present intention of paying any dividends onThis prospectus relates to the shares of our Common Stock. Our current policy is to retain earnings, if any, for use in our operations and in the development of our business. Our future dividend policy will be determinedresale from time to time by our Board of Directors.

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SELLING STOCKHOLDER

Unless the context otherwise requires, as used in this prospectus, “Selling Stockholder” includes the Selling Stockholder listed below and donees, pledgees, transferees or other successors-in-interest sellingidentified herein of up to an aggregate of 5,500,000 shares received after the date of this prospectus from a selling stockholder as a gift, pledge or other non-sale related transfer.common stock.

 

We have prepared this prospectus to allowThe transactions by which the Selling Stockholder oracquired their successors, assignees or other permitted transfereessecurities from us were exempt under the registration provisions of the Securities Act.

The Resale Shares are being registered to sell or otherwise disposepermit public sales of such securities, and the Selling Stockholder may offer the Resale Shares for resale from time to time up to 22,500,000 shares of our Common Stock. The 22,500,000 shares of Common Stock to be offered hereby are issuable to the Selling Stockholder in connection with the exercise of the Warrants.

The 22,500,000 shares of Common Stock consist of up to 22,500,000 shares of Common Stock issuable upon exercise of the Warrants in each case as issued by us to the Selling Stockholder pursuant to the Securities Purchase Agreement we entered into with the Selling Stockholder on December 3, 2018. On December 3, 2018, we entered into the Securities Purchase Agreement with the Selling Stockholder, pursuant to which we issued to the Selling Stockholder the Debenture in the aggregate face value of $8,340,000. The Debenture has a maturity date two years from the issuance date and we have agreed to pay compounded interest on the unpaid principal balance of the Debenture at the rate equal to the Wall Street Journal Prime Rate plus 2% per annum. Interest is payable on the date the applicable principal is converted or on maturity. The interest must be paid in cash and, in certain circumstances, may be paid in shares of common stock. The transactions described above closed on December 3, 2018. In connection with the issuance of the Debenture and pursuant to the terms of the Securities Purchase Agreement, the Company issued to the Selling Stockholder a Warrant to acquire up to 22,500,000 shares of common stock for a term of three years on a cash-only basis at an exercise price of $1.00 per share with respect to 5,000,000 warrant shares, $0.75 with respect to 7,500,000 warrant shares and $0.50 with respect to 10,000,000 warrant shares. Pursuant to the terms of the SPA, the Selling Stockholder agreed to tender to our company the sum of $7,500,000, of which we received the sum of $4,500,000 as of the closing, $1,000,000 on January 4, 2019 and is to receive two additional tranches of $1,000,000 on the second and third monthly anniversaries of the closing. As of the closing, the face value of the Debenture was $5,004,000.00; as of the first month’s anniversary of the closing, the face value of the Debenture is to increase to $6,116,000.00; as of the second month’s anniversary of the closing, the face value of the Debenture is to increase to $7,228,000.00; and as of the third month’s anniversary of the closing, the face value of the Debenture is to increase to $8,340,000.00. As of the closing, the number of warrant shares was 13,500,000; as of the first month’s anniversary of the closing, the number of warrant shares is to increase to 16,500,000; as of the second month’s anniversary of the closing, the number of Warrant Shares is to increase to 19,500,000; as of the third month’s anniversary of the closing, the number of Warrant Shares is to increase to 22,500,000.

The registered shares may be sold directly or through brokers or dealers, or in a distribution by one or more underwriters on a firm commitment or best effort basis. To the extent required, the names of any agent or broker-dealer and applicable commissions or discounts and any other required information with respect to any particular offering will be set forth in a prospectus supplement. See the section of this prospectus entitled “Plan of Distribution”.

No estimate can be given as to the amount or percentage of Common Stock that will be held by the Selling Stockholder after any sales made pursuant to this prospectus because the Selling Stockholder are not required to sell any of the Securities being registered under this prospectus. The following table assumes that the Selling Stockholder will sell all of the Securities listed in this prospectus.

Unless otherwise indicated in the footnotes below, no Selling Stockholder has had any material relationship with us or any of our affiliates within the past three years other than as a security holder.

We have prepared this table based on written representations and information furnished to us by or on behalf of the Selling Stockholder. Since the date on which the Selling Stockholder provided this information, the Selling Stockholder may have sold, transferredalso sell, transfer or otherwise disposeddispose of all or a portion of the shares of Common Stocktheir Resale Shares in a transactiontransactions exempt from the registration requirements of the Securities Act. UnlessAct or pursuant to another effective registration statement covering the sale of such securities.

The following table sets forth, based on information provided to us by the Selling Stockholder or known to us, the names of the Selling Stockholder, the nature of any position, office or other material relationship, if any, which the Selling Stockholder have had, within the past three years, with us or with any of our predecessors or affiliates, and the number of shares of our common stock beneficially owned by the Selling Stockholder before and after this offering. The number of shares owned are those beneficially owned, as determined under the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under these rules, beneficial ownership includes any shares of common stock as to which a person has sole or shared voting power or investment power and any shares of common stock that the person has the right to acquire within 60 days through the exercise of any option, warrant or right, through conversion of any security or pursuant to the automatic termination of a power of attorney or revocation of a trust, discretionary account or similar arrangement. Except as otherwise indicated in the footnotes below, we believe that: (1)set forth herein, the Selling Stockholder is not a broker-dealer or an affiliate of a broker-dealers, (2) no Selling Stockholder has directbroker-dealer. On each Closing Date, the number of Resale Shares to be purchased by GHS shall not exceed the number of such shares that, when aggregated with all other shares of Common Stock then owned by GHS beneficially or indirect agreements or understandings with any person to distribute their Securities, and (3) the Selling Stockholder have sole voting and investment power with respect to all Securitiesdeemed beneficially owned subjectby GHS, would result in GHS owning more than 4.99% of all of such Common Stock as would be outstanding on such Closing Date, as determined in accordance with Section 16 of the Exchange Act and the regulations promulgated thereunder.

We have assumed all of the Resale Shares reflected on the table will be sold from time to applicable community property laws. Information abouttime in the offering covered by this prospectus. Because the Selling Stockholder may change over time. Any changed informationoffer all or any portions of the Resale Shares listed in the table below, no estimate can be given as to the amount of those Resale Shares covered by this prospectus that will be set forth in supplements to this prospectus, if required.held by the Selling Stockholders upon the termination of the offering.

 

The followingExcept as otherwise noted below, the address for each person or entity listed in the table sets forth information with respect tois c/o GBT Technologies Inc., 2450 Colorado Ave., Suite 100E, Santa Monica, CA 90404.

  Beneficial Ownership of Common Stock Beneficial Ownership
  Common Stock Prior Saleable of Common Stock
  to the Offering Pursuant After the Offering (1)
  Number of Percent of to This Number of Percent of
Name of Selling Shareholder Shares Class (2) Prospectus Shares Class (2)
GHS Investments LLC 1,457,163  4.99% 5,500,000 -0-  — 

* Less than 1%.

(1) Assumes that all of the beneficial ownership of our Common StockResale Shares held as of February 5, 2019, by the Selling Stockholder covered by this prospectus are sold and that the Selling Stockholder acquire no additional shares of common stock before the completion of this offering. However, as the Selling Stockholder can offer all, some, or none of their Resale Shares, no definitive estimate can be given as to the number of Securities being registered hereby and information with respect to sharesResale Shares that the Selling Stockholders will ultimately offer or sell under this prospectus. Mark Grober is a member of GHS who may be deemed to be beneficially owneda beneficial owner of common stock held by the Selling Stockholder after completionGHS. Mr. Grober disclaims beneficial ownership of the offeringcommon stock held by GHS. GHS is not a licensed broker dealer nor is any of its affiliate a licensed broker dealer. GHS was introduced to the Company by J.H. Darbie & Co., a registered broker, which will be entitled to a finder fee of 2% of the shares for resale. The percentages in the following table reflect the shares beneficially owned by the Selling Stockholder asgross proceeds of an equity transaction and a percentagenon-callable warrant of the total numberCompany equal to 2% warrant coverage of shares of Common Stock outstanding as of February 5, 2019. As of such date, 203,913,338 shares of Common Stock were outstanding.the amount raised.

 

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  Shares Beneficially Owned
Prior to the Offering of Shares
for Resale (1)		  Maximum
Number of
Shares of
Common Stock
to be Offered for
Resale Pursuant
to this Prospectus		  Shares Beneficially Owned
After the Offering of Shares for
Resale (1)(2)		 
Name Number  Percentage  Number  Number  Percentage 
Discover Growth Fund, LLC(3)  11,300,000   

4.99

%  22,500,000   —   — 
TOTAL  11,300,000   

4.99

%  22,500,000   —   — 

(1)Beneficial ownership is determined in accordance with Rule 13d-3 under the Exchange Act. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of Common Stock subject to warrants, options and other convertible securities held by that person that are currently exercisable or exercisable within 60 days (of February 5, 2019) are deemed outstanding. Shares subject to warrants, options and other convertible securities, however, are not deemed outstanding for the purpose of computing the percentage ownership of any other person.
(2)Assumes that the Selling Stockholder dispose of all of the shares of Common Stock covered by this prospectus and do not acquire beneficial ownership of any additional shares. The registration of these shares does not necessarily mean that the Selling Stockholder will sell all or any portion of the shares covered by this prospectus.
(3)The number of shares consists of up to 22,500,000 shares of Common Stock issuable upon exercise of outstanding Warrants. Under the terms of the Warrants, the holder, together with its affiliates and any other persons acting as a group, may not receive common shares in excess of 4.99% of the total shares outstanding immediately after such issuance, which may be increased to 9.99% on 61 days’ notice. John Kirkland has voting and dispositive power over the shares.  The Selling Stockholder has agreed not to vote any shares of common stock owned or controlled by it, except in accordance with the recommendation of our board of directors. The Selling Stockholder is not a FINRA member and is not affiliated with a registered broker-dealer. The business address of the Selling Stockholder is 5330 Yacht Haven Grande, Suite 206, St. Thomas, VI 00802.

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PLAN OF DISTRIBUTION

 

The Selling StockholderUp to 5,500,000 shares of common stock are being offered by this prospectus, all of which are being registered for sale for the account of the securities and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any orSelling Stockholder. The selling stockholder will receive all of their securities covered hereby on the OTCQB or any other stock exchange, market or trading facility on whichproceeds from the securities are traded or in private transactions. These sales may be at fixed or negotiated prices. A Selling Stockholder may use any one or moresale of the following methods when selling securities:

ordinary brokerage transactions and transactions in whichshares offered for sale by it under this prospectus. We will not receive proceeds from the broker-dealer solicits purchasers;

block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portionsale of the block as principal to facilitate the transaction;

purchases by a broker-dealer as principal and resaleshares by the broker-dealerselling stockholder. However, we may receive up to $10 million in proceeds from the sale of our common stock to the selling stockholder under the Equity Financing Agreement described below. Any proceeds from the selling stockholder that we receive under the Equity Financing Agreement are expected be used for its account;

an exchange distribution in accordance with the rules of the applicable exchange;

privately negotiated transactions;

settlement of short sales;

in transactions through broker-dealers that agree with the Selling Stockholdergeneral corporate purposes. We will bear all fees and expenses incident to sell a specified number of such securities at a stipulated price per security;

this registration.

through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

a combination of any such methods of sale; or

any other method permitted pursuant to applicable law.

 

The Selling Stockholder may also sell securities under Rule 144 underall or a portion of the Securities Act, if available, rather than under this prospectus.

Broker-dealers engagedResale Shares beneficially owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the Resale Shares are sold through underwriters or broker-dealers, the Selling Stockholder will be responsible for underwriting discounts or commissions or agent’s commissions. The Selling Stockholder will sell their Resale Shares at prevailing market prices at the time of the sale (if a public market exists), at varying prices determined at the time of sale, or at negotiated prices. All sales may arrange for other brokers-dealersbe effected in transactions, which may involve crosses or block transactions:

●on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;
●in the over-the-counter market;
●in transactions otherwise than on these exchanges or systems or in the over-the-counter market;
●through the writing of options, whether such options are listed on an options exchange or otherwise;
●ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
●block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction;

●purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
●an exchange distribution in accordance with the rules of the applicable exchange;
●privately negotiated transactions;
●settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part;
●sales pursuant to Rule 144, Rule 144A or Regulation S under the Securities Act, if available, rather than under this prospectus;
●broker-dealers may agree with the Selling Stockholders to sell a specified number of such securities at a stipulated price per share;
●a combination of any such methods of sale; and
●any other method permitted pursuant to applicable law.

If the Selling Stockholder effects such transactions by selling Resale Shares to participate in sales. Broker-dealersor through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or discountscommissions from the Selling Stockholder (or, if any broker-dealer actsor commissions from purchasers of the Resale Shares for whom they may act as agent for the purchaser of securities, from the purchaser) in amountsor to be negotiated, but, exceptwhom they may sell as set forth in a supplementprincipal (which discounts, concessions or commissions as to this prospectus, in the case of an agency transaction notparticular underwriters, broker-dealers or agents may be in excess of athose customary brokerage commission in compliance with FINRA Rule 2440; and in the casetypes of a principal transaction a markup or markdown in compliance with FINRA IM-2440.

transactions involved). In connection with the salesales of the securitiesResale Shares or interests therein,otherwise, the Selling StockholderStockholders may enter into hedging transactions with broker-dealers, or other financial institutions, which may in turn engage in short sales of the securitiesshares of common stock in the course of hedging thein positions they assume. The Selling Stockholder may also sell securitiesshares of common stock short and deliver these securitiesResale Shares covered by this prospectus to close out their short positions orand to return borrowed common stock in connection with such short sales. The Selling Stockholder may also loan or pledge the securitiescommon stock to broker-dealers that in turn may sell these securities. such shares of common stock.

The Selling Stockholder may also enter into optionpledge or other transactions with broker-dealersgrant a security interest in some or other financial institutionsall of the Resale Shares owned by them and, if they default in the performance of their secured obligations, the pledgees or create one or more derivative securities which requiresecured parties may offer and sell the deliveryResale Shares from time to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may reselltime pursuant to this prospectus (as supplemented or amendedany amendment to reflect such transaction). this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act, amending, if necessary, the list of Selling Stockholders to include the pledgee, transferee or other successors in interest as Selling Stockholders under this prospectus. The Selling Stockholders also may transfer and donate the Resale Shares in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

The Selling Stockholder and any broker-dealers or agents that are involvedbroker-dealer participating in selling the securitiesdistribution of the Resale Shares may be deemed to be “underwriters” within the meaning of the Securities Act, in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the securities purchased by themcommission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. EachAt the time a particular offering of the Resale Shares is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of Resale Shares being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the Selling Stockholder has informed the Company that it does not haveStockholders and any writtendiscounts, commissions or oral agreementconcessions allowed or understanding, directlyreallowed or indirectly, with any personpaid to distribute the securities.broker-dealers.

 

The Company is required to pay certain fees and expenses incurred byUnder the Company incident tosecurities laws of some states, the registration of the securities. The Company has agreed to indemnify the Selling Stockholder against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

Any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities ActResale Shares may be sold under Rule 144 rather than under this prospectus.

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We agreed to keep this prospectus effective until the earlier of (i) the date on which the securities may be resold by the Selling Stockholder without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for the Company to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule of similar effect or (ii) the date on which all of the securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale securities will be soldsuch states only through registered or licensed brokers or dealers if required under applicable state securities laws.dealers. In addition, in certainsome states the resale securities covered herebyResale Shares may not be sold unless theysuch securities have been registered or qualified for sale in the applicablesuch state or an exemption from the registration or qualification requirement is available and is complied with.

 

Under applicable rules and regulations underThere can be no assurance that the Exchange Act,Selling Stockholder will sell any person engaged in the distributionor all of the resale securities may not simultaneously engage in market making activities with respectResale Shares registered pursuant to the Common Stock for the applicable restricted period, as definedregistration statement, of which this prospectus forms a part.

The Selling Stockholder and any other person participating in Regulation M, prior to the commencement of the distribution. In addition, the Selling Stockholdersuch distribution will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the Common StockResale Shares stock by the Selling Stockholder orand any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the Resale Shares to engage in market-making activities with respect to the Resale Shares. All of the foregoing may affect the marketability of the Resale Shares and the ability of any person or entity to engage in market-making activities with respect to the Resale Shares.

We will make copiespay all of the expenses incident to the registration, offering, and sale of the shares to the public other than commissions or discounts of underwriters, broker-dealers, or agents. We have agreed to indemnify GHS and certain other persons against certain liabilities in connection with the offering of shares of common stock offered hereby, including liabilities arising under the Securities Act or, if such indemnity is unavailable, to contribute amounts required to be paid in respect of such liabilities. GHS has agreed to indemnify us against liabilities under the Securities Act that may arise from certain written information furnished to us by GHS specifically for use in this prospectus availableor, if such indemnity is unavailable, to contribute amounts required to be paid in respect of such liabilities.

Insofar as indemnification for liabilities arising under the Selling StockholderSecurities Act may be permitted to our directors, officers, and controlling persons, we have informed thembeen advised that in the opinion of the needSEC this indemnification is against public policy as expressed in the Securities Act and is therefore, unenforceable.

DESCRIPTION OF SECURITIES

General

Our authorized capital stock consists of 100,000,000,000 shares of common stock, par value $0.0001 per share, and 20,000,000 shares of preferred stock, par value $0.0001 per share.

As of December 27, 2021, there were 88 record holders of our securities. As of December 27, 2021 there were 33,200,198 shares of common stock and 45,000, 700 and 20,000 shares of Series B, Series C and Series H Preferred Stock issued and outstanding, respectively.

The following description of our capital stock and provisions of our Articles of Incorporation and Bylaws. You should also refer to deliverour Articles of Incorporation, a copy of which is filed as an exhibit to the registration statement of which this prospectus is a part, and our Bylaws, a copy of which is filed as an exhibit to the registration statement of which this prospectus is a part.

Common Stock

We are authorized to issue up to a total of 100,000,000,000 shares of common stock, par value $0.0001 per share. Holders of our common stock are entitled to one vote for each purchasershare held on all matters submitted to a vote of our stockholders. Holders of our common stock have no cumulative voting rights.

Further, holders of our common stock have no preemptive or conversion rights or other subscription rights. Upon our liquidation, dissolution or winding-up, holders of our common stock are entitled to share in all assets remaining after payment of all liabilities and the liquidation preferences of any of our outstanding shares of preferred stock. Subject to preferences that may be applicable to any outstanding shares of preferred stock, holders of our common stock are entitled to receive dividends, if any, as may be declared from time to time by our board of directors out of our assets which are legally available.

The holders of a majority of the shares of our capital stock, represented in person or by proxy, are necessary to constitute a quorum for the transaction of business at any meeting. If a quorum is present, an action by stockholders entitled to vote on a matter is approved if the number of votes cast in favor of the action exceeds the number of votes cast in opposition to the action, with the exception of the election of directors, which requires a plurality of the votes cast.

Preferred Stock

Our board of directors will have the authority, without further action by the stockholders, to issue up to [ ] shares of preferred stock in one or more series and to fix the designations, powers, preferences, privileges, and relative participating, optional, or special rights as well as the qualifications, limitations, or restrictions of the preferred stock, including dividend rights, conversion rights, voting rights, terms of redemption, and liquidation preferences, any or all of which may be greater than the rights of the common stock. Our board of directors, without stockholder approval, will be able to issue convertible preferred stock with voting, conversion, or other rights that could adversely affect the voting power and other rights of the holders of common stock. Preferred stock could be issued quickly with terms calculated to delay or prevent a change of control or make removal of management more difficult. Additionally, the issuance of preferred stock may have the effect of decreasing the market price of our common stock, and may adversely affect the voting and other rights of the holders of common stock.

Series B Convertible Preferred Stock

We are authorized to issue up to a total of 20,000,000 shares of a series of preferred stock designated as Series B preferred stock, par value $0.0001 per share. Holders of our Series B preferred stock are entitled to vote the number of votes equal to the number of whole shares of common stock into which the shares of Series B preferred stock, held by such holder are convertible as of the record date on all matters submitted to a vote of our stockholders. Holders of our Series B preferred stock are entitled, exclusively and as a separate class, to elect two directors of the Corporation,

Further, holders of our Series B preferred stock shall have conversion rights. The holders of our Series B preferred stock have the right to convert each share of Series B preferred stock, at any time, without payment of additional consideration by the holder into 30 shares of our common stock.

Series C Convertible Preferred Stock

We are authorized to issue up to a total of 10,000 shares of a series of preferred stock designated as Series C preferred stock, par value $0.0001 per share. Holders of our Series C preferred stock are entitled to vote the number of votes equal to the number of whole shares of common stock into which the shares of Series C preferred stock, held by such holder are convertible as of the record date on all matters submitted to a vote of our stockholders. Holders of our Series C preferred stock are entitled, exclusively and as a separate class, to elect two directors of the Corporation,

Further, holders of our Series C preferred stock shall have conversion rights. The holders of our Series C preferred stock have the right to convert each share of Series C preferred stock, at any time, without payment of additional consideration by the holder into 8 shares of our common stock.

Series H Convertible Preferred Stock

We are authorized to issue up to a total of 40,000 shares of a series of preferred stock designated as Series H preferred stock, par value $0.0001 per share. Holders of our Series H preferred stock are entitled to vote the number of votes equal to the number of whole shares of common stock into which the shares of Series H preferred stock, held by such holder are convertible as of the record date on all matters submitted to a vote of our stockholders. Holders of our Series F preferred stock are entitled, exclusively and as a separate class, to elect two directors of the Corporation,

Further, holders of our Series H preferred stock shall have conversion rights. The holders of our Series H preferred stock have the right to convert each share of Series H preferred stock, at any time, without payment of additional consideration by the holder into such number of fully paid and non-assessable shares of our common stock as determined by dividing $500 by $10 in effect at the time of such conversion. In lieu of any fractional shares to which the Series H holder would otherwise be entitled, the Company shall pay cash equal to such fraction multiplied by the fair market value of a share of common stock as determined in good faith by our board of directors.]

Anti-Takeover Provisions Under Nevada Law.

Combinations with Interested Stockholder. Sections 78.411-78.444, inclusive, of the Nevada Revised Statutes (“NRS”) contain provisions governing combinations with an interested stockholder. For purposes of the NRS, “combinations” include: (i) any merger or consolidation with any interested stockholder, (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition to any interested stockholder of corporate assets with an aggregate market value equal to 5% or more of the aggregate market value of the corporation’s consolidated assets, 5% or more of the outstanding shares of the corporation or 10% or more of the earning power or net income of the corporation, (iii) the issuance to any interested stockholder of voting shares (except pursuant to a share dividend or similar proportionate distribution) with an aggregate market value equal to 5% or more of the aggregate market value of all the outstanding shares of the corporation, (iv) the dissolution of the corporation if proposed by or on behalf of any interested stockholder, (v) any reclassification of securities, recapitalization or corporate reorganization that will have the effect of increasing the proportionate share of the corporation’s outstanding voting shares held by any interested stockholder and (vi) any receipt by the interested stockholder of the benefit (except proportionately as a stockholder) of any loan, advance, guarantee, pledge or other financial assistance. For purposes of the NRS, an “interested stockholder” is defined to include any beneficial owner of more than 10% of any class of the voting securities of a Nevada corporation and any person who is an affiliate or associate of the corporation and was at any time during the preceding three years the beneficial owner or more than 10% of any class of the voting securities of the Nevada corporation.

Subject to certain exceptions, the provisions of the NRS governing combinations with interested stockholders provide that a Nevada corporation may not engage in a combination with an interested stockholder for two years after the date that the person first became an interested stockholder unless the combination or the transaction by which the person first became an interested stockholder is approved by the board of directors before the person first became an interested stockholder.

Control Share Acquisitions. The NRS also contains a “control share acquisitions statute.” If applicable to a Nevada corporation this statute restricts the voting rights of certain stockholders referred to as “acquiring persons,” that acquire or offer to acquire ownership of a “controlling interest” in the outstanding voting stock of an “issuing corporation.” For purposes of these provisions a “controlling interest” means with certain exceptions the ownership of outstanding voting stock sufficient to enable the acquiring person to exercise one-fifth or more but less than one-third, one-third or more but less than a majority, or a majority or more of all voting power in the election of directors and “issuing corporation” means a Nevada corporation that has 200 or more stockholders of record, at least 100 of whom have addresses in Nevada appearing on the stock ledger of the corporation, and which does business in Nevada directly or through an affiliated corporation. The voting rights of an acquiring person in the affected shares will be restored only if such restoration is approved by the holders of a majority of the voting power of the corporation. The NRS allows a corporation to “opt-out” of the control share acquisitions statute by providing in such corporation’s articles of incorporation or bylaws that the control share acquisitions statute does not apply to the corporation or to an acquisition of a controlling interest specifically by types of existing or future stockholders, whether or not identified.

Articles of Incorporation and Bylaws

No Cumulative Voting. Where cumulative voting is permitted in the election of directors, each share is entitled to as many votes as there are directors to be elected and each shareholder may cast all of its votes for a single director nominee or distribute them among two or more director nominees. Thus, cumulative voting makes it easier for a minority shareholder to elect a director. Our articles of incorporation deny shareholders the right to vote cumulatively.

Authorized But Unissued Shares. Our articles of incorporation permit the board to authorize the issuance of preferred stock, and to designate the rights and preferences of our preferred stock, without obtaining shareholder approval. One of the effects of undesignated preferred stock may be to enable the board to render more difficult or to discourage a third party’s attempt to obtain control of Gopher Protocol by means of a tender offer, proxy contest, merger, or otherwise. The issuance of shares of preferred stock also may discourage a party from making a bid for the common stock because the issuance may adversely affect the rights of the holders of common stock. For example, preferred stock that we issue may rank prior to the timecommon stock as to dividend rights, liquidation preference, or both, may have special voting rights and may be convertible into shares of common stock. Accordingly, the sale (including by compliance with Rule 172 underissuance of shares of preferred stock may discourage bids for our common stock or may otherwise adversely affect the Securities Act).market price of our common stock.

 

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Transfer Agent and Registrar

The transfer agent and registrar for our common stock is Nevada Agency and Transfer Company (“NATCO”) with a business address at 50 West Liberty Street, Suite 880, Reno NV 89501; NATCO’s website is www.natco.com, and their phone number is (775) 322-0626.

 

DESCRIPTION OF BUSINESS

 

OVERVIEW

 

GBT Technologies Inc. (formally known as Gopher Protocol Inc. (the, the “Company”, “GBT”, “Gopher”, “Gopher Protocol” “GOPH” or “GOPH”“GTCH”) was incorporated on July 22, 2009 under the laws of the State of Nevada. GopherGBT is atargeting growing markets such as development stage company that is creatingof Internet of Things (IoT) and patenting innovative mobile microchip (ICs)Artificial Intelligence (AI) enabled networking and softwaretracking technologies, based on the GopherInsight™including wireless mesh network technology platform. The Company also offers prepaid cellular phone minutes for both domesticplatform and international carriers. In addition,fixed solutions, development of an intelligent human body vitals device, asset-tracking IoT, and wireless mesh networks. Effective August 5, 2019, the Company offers cellular activation (activating SIM cards with wireless carriers)changed its name from Gopher Protocol Inc. to create additional users (consumers) on those networks and provides check processing, verification and recovery solutions for small to medium sized businesses.GBT Technologies Inc. The Company derived revenues from (i) the provision of IT servicesservices. The Company is seeking to Guardian Patch LLC, a related party (“Guardian LLC”); (ii) from the operations of the assets it acquired in the third quarter of 2017 and the first and second quarters of 2018 that include the sale of phones, phone card products, prepaid cellular phone minutes and cellular activation and (iii)generate revenue from the licensing of its technology.

 

GopherInsight™ is a patented (with additional patents pending), real time, heuristic (self-learning/artificial intelligence-based) global mesh network and asset tracking IoT technology. GopherInsight™ chip and software technologies, if successfully fully developed, are designed to be installed in mobile devices (smartphones, tablets, laptops, etc.), autonomous vehicles, robots, drones, consumer products, as well as other fixed and mobile stand-alone products. It is intended that GopherInsight™ software applications will work in conjunction with GopherInsight™ microchips across mobile operating systems, providing computing power, advanced database management/sharing functionalities and more. The technology under development consists of a smart microchip, mobile application software and supporting software. The system contemplates the creation of a global mesh network.

The Company is developing a state-of-the-art platform calledGopherInsight™that is targeted to be launched first as a microchip with firmware, then as software, in mobile and fixed devices and locations (including smartphones, tablets, laptops, servers, remote POS points, etc.). GopherInsight will provide a series of software modules including Gopher’s own gNET proprietary mesh network protocol, gEYE multi-level security protocol, and all will be managed by Gopher’s Avant! AI Artificial Intelligence.

GopherInsight’s microchip design and software are primarily intended to be licensed on a private-label basis to strategic technology partners, or Original Equipment Manufacturers (OEMs), that manufacture solutions such as telecommunication systems and data networks, mobile devices, asset tracking systems, and other IoT solutions that relay data and are connected to a network.

The Company intends where possible to market these solutions to OEMs and charge a licensing fee to generate revenue. The Company already has one agreement with an OEM, GBT (Genesis Blockchain Technologies), which is a licensing agreement providing for an initial payment of $5,000,000 and an ongoing revenue share royalty of 2% of revenue.

The Company is targeting three growing markets: prepaid services, asset-tracking IoT, and wireless mesh networks.

Prepaid services

On September 1, 2017, the Company entered into an Asset Purchase Agreement with a third party, RWJ Advanced Marketing, LLC, a Georgia corporation. The Company entered into this Asset Purchase Agreement to acquire terminals in approximately 9,400 locations by which, and at which, the Company planned to deploy its IOT/asset tracking technology. The operations consist primarily of the sale of phones and phone card products, including PINS for cell minutes, SIM cards for cell minutes, as well as gift cards and prepaid long distance cards. The Company incorporated a wholly-owned subsidiary, UGopherServices Corp., to operate the acquired assets. The assets acquired in the purchase consist of (1) racks that contain 9-12 items per rack that are displayed in retail locations, mainly convenience stores; and (2) payment terminals at those same points of sale.

On March 16, 2018, the Company entered into and closed an asset purchase agreement dated March 1, 2018 with ECS Prepaid, LLC (“ECS”), a Missouri limited liability company, pursuant to which the Company purchased certain assets from ECS, including, but not limited to, the processing prepaid platform, servers, POS terminals, customer list, a processing software program and goodwill, in consideration of $1,100,000 of which $100,000 was paid on the Closing Date and the balance is to be paid pursuant to a secured promissory note in the amount of $1,000,000. In addition, the Company issued 500,000 shares of common stock of the Company and warrants to purchase 500,000 shares of common stock that are exercisable for a period of five years at a fixed exercise price of $1.85 per share. The note is secured by the assets acquired by the Company from ECS and the Company is required to make ten equal principal payments of $100,000 commencing on April 15, 2018. The Company may prepay the note at any time without penalty.

On April 2, 2018, the Company entered into and closed an asset purchase agreement with Electronic Check Services, Inc. (“Electronic Check”), a Missouri corporation, pursuant to which the Company purchased certain assets from Electronic Check, including, but not limited to, assets associated with software that validates written check authenticity. The purchase price was $75,000 in cash, and the Company issued 250,000 shares of common stock of the Company and warrants to purchase 250,000 shares of common stock that are exercisable for a period of five years at a fixed exercise price of $2.70 per share.

On April 2, 2018, the Company entered into and closed an asset purchase agreement with Central State Legal Services, Inc. (“CSLS”), a Missouri corporation, pursuant to which the Company purchased certain assets from CSLS, including, but not limited to, assets associated with a system to recover funds from returned checks, for $25,000 in cash.

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The Company entered into these asset purchase agreements to acquire the software needed to process transactions for its prepaid business, and to acquire additional terminal locations by which the Company will deploy its technology.

Prepaid services products

The racks located at the points of sale contain the following items:

●New and refurbished cellular handsets and SIM cards;
●Prepaid gift cards;
●Prepaid long distance cards; and,
●Prepaid wireless cards, for both foreign and domestic calls.

When any of these items are brought to the counter, the customer’s method of payment is swiped into a payment terminal machine. The Company records the revenue from the purchase and the cost of goods sold at the point of sale, and the net is booked as gross profit by the Company. When a customer purchases a gift card, for example, a value is assigned to a digital PIN number which puts a certain value on their gift card, to be redeemed by the purchaser at their convenience.

There are various fees that get added to the cost of the gift card, including commissions and a transaction fee. The transaction fee is split between the store and the Company. The volume of transactions for each customer in a given month varies, with some points of sale more active in certain months than others.

Prepaid services markets

After the acquisition of certain assets from RWJ Marketing Services LLC in September 2017, the majority of the point of sale locations held by UGopherServices Corp. are in the Southeastern US, but the geographic penetration of the locations overall is national.

Prepaid services competition

Given the nature of its business (primarily gift cards, prepaid long distance and wireless calls, and selling handsets and SIM cards), the competitors are numerous, as any company that issues gift cards, such as Starbucks and Best Buy, could potentially compete with the gift cards that the company sells at these points of sale. Competitors that sell prepaid calling and wireless plans are also numerous. Although its competitors do not necessarily sell their gift and calling cards at the same points of sale at which the company sells its goods, they could, though not on the rack that the Company controls that is positioned within the store.

Asset tracking IoT - and Artificial Intelligence (AI) enabled networking (including AI Medical Advisor platform and potential products)

 

The Company plans to launch a series of software and microchip design products that integrate into strategic technology partners’ solutions and enable real-time tracking and management of IoT-connectIoT or connected assets. As

 Through the Joint Venture with Tokenize – It S.A., the parties commenced development of a development of an example,intelligent human vital signs’ device, suggested named qTerm. The platform is an expansion of the existing license agreement with GBT Tokenize Corp., which provided GBT Tokenize Corp. with an exclusive territory of California to develop certain of the Company’s patented Guardian Patch solutiontechnology. A provisional patent application for the qTerm Medical Device was filed on March 30, 2020 with the USPTO. The application has been assigned serial number 63001564. The Joint Venture completed successfully the first prototype. There is no guarantee that the Company will be successful in researching, developing or implementing this product into the market. In order to successfully implement this concept, the Company will need to raise adequate capital to support its research and, if successfully researched, developed and granted regulatory approval, the Company would need to enter into a sticky adhesive patchstrategic relationship with a third party that has experience in manufacturing, selling and distributing this product. There is placed on an object tono guarantee that the Company will be tracked, and relays the locationsuccessful in any or all of the asset via a mesh network that does not rely on GSM or GPS technology. The Company currently supplies another asset tracking solution, the GuardianORB Pet Tracker, enabling real-time, mesh network, long-distance tracking of pets.

Additionally, GopherInsight allows the tracking and enhanced security of digital assets, including blockchain-based assets.these critical steps.

 

Asset tracking IoT markets

The applications for the Company’s asset tracking solution are vast. Vertical target markets may include  segments such as public sector, healthcare sector, banking financial services and insurance (BFSI) sector, transportArtificial Intelligence (AI) enabled networking (including AI Medical Advisor platform and logistics sector, retail sector, commercial sector, industrial sector, energy & utility sector, manufacturing sector and other sectors. 

Asset tracking IoTpotential products) competition

 

The prevailing AI solutions in the asset tracking marketplace currently are a combination of barcoding and RFID technologies. The Company’s asset tracking solutions offers considerable advantages over existing solutions, because thoseExisting solutions require that the asset is near the scanner to be scanned, andscanned. Further, such existing solutions are “point to point,” meaning they require repeated scan points along a route in order to update the location of the asset. The GopherInsight platform, including the planned and patented Guardian Patch solution, isCompany’s asset tracking solutions are designed to be more accurate and when placed on or into the asset, canhas the ability to interactively locate and update information on an asset anywhere on earth. It works via a Gopher-enabledEarth. Its solutions work through-enabled global mesh network and does not need GPS or GSM to locate the package, and is regularly transmitting information on the asset, meaning that there is no need to frequently re-scan the asset to update its location.package. In addition, the Company’s solutions are planned to include resource and distributed database management features which are not normally found in IoT systems.

There are many competitors supplying AI standalone, and AI asset tracking and asset tracking IoT systems today, including companies such as AT&T, IBM and Verizon.Verizon, as well as Apple which introduce tracking device during 2021. It is Gopher’sCompany’s goal to offer the GopherInsight platform to some or all of these competitors to upgrade and differentiate their solutions.

 

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Wireless mesh networking

 

Wireless mesh networks consist of LAN/MAN/WAN solutions that are infrastructurally-intensive,infrastructural-intensive, may rely on regulated frequencies and bandwidth, often have so-called “last mile” problems areas where either economics or population density make it too expensive for current solutions to cover, and ae difficult to manage centrally. The Company’s GopherInsight platform makes it easy to add and manage last mile capacity. The solution is easily integrated into existing networks. The company’s Avant!Company’s AI platform is designed for easy integration with, and management of, additional coverage for customer networks.

 

Additionally, the Company will be targeting device manufacturers as strategic technology partners and OEMs. If a mobile phone manufacturer wishes to add GopherInsight to is devices, GopherInsight allows devices to communicate without the need for an internet service provider, thus dramatically reducing costs.

Wireless mesh networking markets

 

The Company potentially will target telecommunications providers, corporate entities that run LAN or wide-area networks, universities, and government entities.

 

Wireless mesh networking markets competition

 

The competitors for wireless mesh networking solutions, and AI solutions, are the entities themselves that have their own capability. The Company’s strategy is to integrate and “wrap around” those solutions to make them more efficient, less costly, and less infrastructurally-intensive,infrastructural-intensive, while at the same time solving last mile problems to the end user.

 

Mobiquity AgreementLatinex (contra-equity account)

On September 4, 2018, the Company and Mobiquity Technologies, Inc., a New York corporation (OTCQB: MOBQ”) (“Mobiquity”) entered an Agreement (the “MOBQ Agreement”) pursuant to which the parties exchanged equity interest in each of the companies. In accordance with the Agreement, the Company will receive 1,000 shares of Mobiquity’s restricted Series AAAA Preferred Stock (the “Mobiquity Preferred Stock”) in consideration of Company’s concurrent sale and issuance to Mobiquity of 10,000,000 shares of Company’s restricted Common Stock (the “Gopher Common Stock”). The shares of Mobiquity Preferred Stock are convertible into an aggregate of up to 100,000,000 shares of Mobiquity common stock (the “Mobiquity Common Stock”) and 150,000,000 common stock purchase warrants (the “Mobiquity Warrants”). The Mobiquity Warrants shall have a term of 5-years from the date of grant and shall be exercisable at a price of $0.12 per share and the shares of Mobiquity Preferred Stock shall not be convertible into shares of Mobiquity Common Stock and the Mobiquity Warrants shall not be contemporaneously granted until after Mobiquity’s Board of Directors and stockholders shall have increased the authorized number of shares of Mobiquity’s common stock to a number sufficient to accommodate a reserve in the Company’s favor of 250,000,000 shares of Mobiquity’s common stock. The Mobiquity Preferred Stock shall have immediate voting rights equal to the number of shares of Mobiquity Common Stock into which they may be converted, not including the shares of Mobiquity’s common stock underlying the Mobiquity Warrants (the “Mobiquity Warrant Shares”). The closing occurred on September 4, 2018.

Mobiquity agreed that for a period beginning immediately upon the six (6)-month anniversary of the date hereof and ending on the twenty-four (24)-month anniversary of the date hereof (the “Leak-Out Period”), Mobiquity shall have the right to sell or otherwise transfer into the public markets on any given day up to 20,000 shares of Gopher Common Stock. Mobiquity may transfer all or a portion of the shares of Gopher Common Stock otherwise at any time, so long as the receiving party adheres to the above Leak-Out Period.

On February 6, 2019, the Company entered into a letter agreement with Gopher Protocol Costa Rica Sociedad De Responsabilidad Limitada, a Costa Rican company (“Gopher CR”) and a 50% owned subsidiary of the Company, pursuant to which the Company sold 30,000,000 shares of Mobiquity to Gopher CR in the principal amount of $5,000,000 secured by all of the assets of Gopher CR payable with 10% interest on the one year anniversary.

Latinex

 

On January 8, 2019, the Company entered into a Stock Pledge Agreement with Latin American Exchange Latinex Casa de Cambio, S.A., a Costa Rica corporation (“Latinex”). Latinex is a fully licensed and Central Bank regulated “Currency Exchange” in Costa Rica. In order, to provide that Latinex may maintain its required regulatory capital as required by various regulators, theregulators. The Company has pledged 4,005 restricted shares of its common stock valued at $7.5 million$7,610,147 (based on the closing price on the grant date) for a term of three years in consideration of an annual payment of $375,000 paid in quarterly installments of $93,750. In lieu of cash payment, Latinex may pay the Company in in virtual currency of WISE Network S.A. valued at a 50% discount of its offering price of $10 per token. In the event that Latinex’s required capital has decreased below $5,000,000, Latinex is permitted to sell the pledged shares of common stock only in an amount to ensure that Latinex can satisfy the required capital levels. The Company must consent to such sale of the shares of common stock, if at all, which may not be unreasonably withheld. Upon expiration of the agreement, the remaining shares of common stock shall be returned to the Company free and clear of all liens. The Company has recorded the value of these shares of common stock as a stock loan receivable which is presented as a contra-equity account in the accompanying consolidated balance sheets. At December 31, 2019, the Company wrote off the accrued interest income as Latinex did not perform any payment and the Company has no mean to enforce this payment. Latinex agreed in principal to return the pledged 4,005 restricted shares to the Company for cancellation. The 4,005 restricted shares have not yet been returned to the Company as of September 30, 2021.

 

Joint Ventures

GBT Tokenize

 

On or around March 18, 20166, 2020, the Company and Dr. Danny Rittmanthrough its wholly owned subsidiary, Greenwich International Holdings, a Costa Rica corporation (“Greenwich”), entered into an agreement intended to clarify the relationship between Dr. Rittmana Joint Venture and the Company and the ownership of certain technology in connection with certain agreements previously entered into between Company and Dr. Rittman and with third parties. Specifically, the Company entered into that certain Territorial License Agreement (the “Tokenize Agreement”) with Hermes dated March 4, 2015, which such agreement was amended to expand the related territorial license to a worldwide license pursuant to that certain Amended and Restated Territorial License Agreement dated June 16, 2015 (the “Amended and Restated Territorial License Agreement”Tokenize-It, S.A. (“Tokenize”), which is owned by a Costa Rica Trust represented by Pablo Gonzalez (“Gonzalez”). Gonzalez also represents Gonzalez Costa Rica Trust, which holds a note in the principal amount of $10,000,000 and that certain Letteris also a shareholder of the Company. Under the Tokenize Agreement, (the “Letter Agreement”the parties formed GBT Tokenize Corp., a Nevada corporation (“GBT Tokenize”) entered into between Dr. Rittman. The purpose of GBT Tokenize is to develop, maintain and support source codes for its proprietary technologies including advanced mobile chip technologies, tracking, radio technologies, AI core engine, electronic design automation, mesh, games, data storage, networking, IT services, business process outsourcing development services, customer service, technical support and quality assurance for business, customizable and dedicated inbound and outbound calls solutions, as well as digital communications processing for enterprises and startups (“Technology Portfolio”), throughout the State of California. Upon generating any revenue from the Technology Portfolio, the Joint Venture will earn the first right of refusal for other territories.

Tokenize shall contribute the services and resources for the development of the Technology Portfolio to GBT Tokenize. The Company dated August 20, 2015. The aforementioned agreements were tied to the fundingshall contribute 2,000,000 shares of common stock of the Company in the minimum amount of $5,000,000 (the “Required Funding”) and the assignment to the Company and/or ownership by the Company of all past, present and future technology in the form of intellectual property, including, but not limited to patents, trademarks, domains, applications, social media pages (e.g. Twitter, LinkedIn and landing pages) (collectively, the “IP”), which such IP was paid for exclusively by Dr. Rittman and/or his affiliated companies, was contingent upon the Company obtaining the Required Funding by no later than October 30, 2015 (the “Contingency”). Accordingly, it was agreed to by the parties that all inventions, improvements and developments made or conceived by the Dr. Rittman, either solely or in collaboration with others pertaining to Company’s business, would be the property of the Company subject to the Contingency. In the event the Contingency was not met, the Letter Agreement would be cancelled and rendered null and void. The Company acknowledged that the Company did not meet the Contingency, technically resulting in the cancellation of the Letter Agreement and rendering the Letter Agreement null and void. Moreover, the Company failed to meet its obligations under the Amended and Restated Territorial License Agreement, including the further development of the consumer heuristic technology platform, thereby creating a vacuum in its development in all aspects, including the ability to obtain funding, resulting in the need for Dr. Rittman’s partners to perform the necessary development work related to the above agreements.

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In March 2016, the Company and Dr. Danny Rittman, Co-Chairman, CTO and a shareholder, entered into an agreement intended to clarify the relationship between Dr. Rittman and the Company and the ownership of certain technology in connection with certain agreements previously entered into between Company and Dr. Rittman and with third parties. Prior to these agreements, the Company is the exclusive license holder for certain intellectual property relating to Hermes’ system and method for scheduling categorized deliverables, according to demand, at the customer’s location based on smartphone application and/or via the internet. As a result of these agreements, the Company shall remain an exclusive licensee per the terms of the original License Agreement and will develop the first products with Dr. Rittman and his partners.

On April 6, 2018, the Company and Danny Rittman, Chief Technology Officer and a Director of the Company, agreed to amend his employment agreement pursuant to which he will receive salary at the rate of $250,000 annually payable in equal increments of $15,000 per month.  An additional $70,000 shall be payable within 15 days of the end of the calendar year. 

 On March 29, 2016, Gopher contributed all of its rights relating to its proprietary microchip that is within a sticky patch package (the “Patch”(“GBT Shares”) to Guardian LLC in consideration of 50% of the profit generated by Guardian LLC (the “Joint Venture”). Guardian LLC is responsible for investing all needed funds for the purpose of developing the Patch and related products to the Patch. In addition, Guardian LLC is required to provide short term loans to Gopher on an as needed basis secured by Gopher’s economic interest in the Joint Venture. The Company will provide IT services to Guardian LLC for a monthly fee. Dr. Rittman has signed an amendment employment agreement with the Company.

The Company is the exclusive license holder for certain intellectual property relating to GopherInsight technology. The Company has assigned all its rights as they relate to the Guardian Patch to Guardian LLC as consideration for the JV. Guardian LLC has commenced development of the products. Certain private investors will provide all initial funding to the Company via the LLC for product development. Guardian LLC will fund the development,GBT Tokenize. Tokenize and the Company will provide IT services via Dr. Rittman foreach own 50% of GBT Tokenize. The shares were valued at $5,500,000.

In addition, GBT Tokenize and Gonzalez entered into a monthly fee. Dr. Rittman has signed an amendment employment agreement with the Company. As the CompanyConsulting Agreement in which Gonzalez is not a member of Guardian LLC, the Company and Guardian LLC have formed a Joint Venture (“JV”) for the purposes of developing and marketing the Patch. Guardian LLC will be responsible for funding the development of the Patch. The Company will not need be required to invest funds in said JV. The Company responsibilities will be limited to the marketing of the product, where the marketing budget will be funded by Guardian LLC. Moreover, Guardian LLC has committedengaged to provide the Company with working capital as needed. The Company has assigned and pledged to the LLC all its license derivative rights as they pertain to the Patch only. Dr. Rittmanservices in consideration of $33,333 per month payable quarterly which may be offered membership rights at some pointpaid in the future with Guardian LLC, with which the Company is a JV partner, but is not equity member. The Company has agreed with Guardian LLC that the same JV principlesshares of the Guardian LLC for the patch will apply for the other two products (Epsilon and Puzpix) which will be vested under designated LLCs that will be incorporatedcommon stock calculated by the LLC members. During the nine months ended September 30, 2018 and 2017, $135,000 and $135,000, respectively, ofamount owed divided by the Company’s revenue was related to IT service provided to the LLC for Dr. Rittman10-day VWAP. Gonzalez will provide services in connection with the development of the Patch.

On July 21, 2016 members of the Guardian LLC, together with Dr. Rittman, incorporated Alpha EDA, LLC (“Alpha”). The members of the LLC appointed Dr. Rittman as the manager of Alpha. The Company, the LLC and Alpha have agreed that all Epsilon Rights,business as well as Puzpix rights, will be assigned to Alpha. Alpha and the Company entered into a JV agreement similar to the Patch Joint Venture agreement (as described above), whereby Alpha will fund all of its operational and developmental needs (software development, support, marketing and administrative), and the profits of Alpha will be distributed equally to the two equal Joint venture partners, Guardian LLC and the Company. Alpha will hold all intellectual property rights related to software. Currently, three products will be owned by Alpha – the Epsilon software, the Puzpix social game and the Guardian Pack application.GBT Tokenize’s capital raising efforts. The Company and its technology licensing partners, Guardian LLC and Alpha, are preparing to introduce said new products (Epsilon, Guardian Pack & PuzPix) to the market beginning in 2018, and the Sphere during the second half of fiscal 2017. Certain problems caused by the need to miniaturize both the chip design and the battery caused a delay in the rollout from its planned launch during the first halfterm of the year. The Epsilon product will be presented for time-based license agreements utilizing a designated website on top of customary distributing channels for the product. EpsilonConsulting Agreement is under confidential evaluation agreement with third party.

On September 25, 2018, the Company entered into a Joint Venture Interest Purchase Agreement with Guardian, LLC pursuant to which the Company purchased Guardian LLC’s 50% interest in a joint venture (the “JV Interest”) previously entered between the parties in March 2016 covering the Guardian Patch, Puzpix and Epsilon. In consideration for the JV Interest, the Company issued Guardian 12,500,000 shares of common stock.two years. During the nine months ended September 30, 2018,2021, Gonzalez assigned all his accrued balances of $424,731 to Stanley Hills in a private transaction that the Company tookis not part to. The closing of the Tokenize Agreement occurred on March 9, 2020.

Through this Joint Venture the parties commenced development of an intelligent human vital signs’ device, which we currently refer to as the qTerm. The platform is an expansion of the existing license agreement with GBT Tokenize Corp., which provided GBT Tokenize Corp. with an exclusive territory of California to develop certain of the Company’s technology. As the nature of the platform cannot be restricted only to California, the Company’s joint venture GBT Tokenize Corp. will be compensated with additional two hundred million shares of the Company to strengthen its funding, subject to board approval. A provisional patent application for the qTerm Medical Device was filed on March 30, 2020 with the USPTO. The application has been assigned serial number 63001564. The Joint Venture completed successfully the first prototype. There is no guarantee that the Company will be successful in researching, developing or implementing this product into the market. In order to successfully implement this concept, the Company will need to raise adequate capital to support its research and, if successfully researched, developed and granted regulatory approval, the Company would need to enter into a strategic relationship with a third party that has experience in manufacturing, selling and distributing this product. There is no guarantee that the Company will be successful in any or all of these critical steps.

At March 31, 2020, the Company evaluated the carrying amount of this joint venture investment and determined that this investment was fully impaired and as a result an impairment charge of $5,500,000 was taken. At September 30, 2021, the Company evaluated the carrying amount of this joint venture investment and determined that this investment was fully impaired and as a result an impairment charge of $15,400,000 was taken.

Although the investment was impaired, the product development is still ongoing. The carrying amount of this investment at September 30, 2021 and December 2020, was $0 and $0, respectively.

On May 28, 2021, the parties agreed to earningsamend the Tokenize Agreement to expand territory granted for the Technology Portfolio under the license to GBT Tokenize to include the entire continental United States. The Company has further agreed to issue GBT Tokenize an additional 14,000,000 shares of $11,750,000 relatedcommon stock of the Company. The shares were valued at $15,400,000.

The Company pledged its 50% ownership in GBT Tokenize and its 100% ownership of Greenwich to the purchaseTokenize to secure its Technology Portfolio investment. The Company shall appoint two directors and Tokenize shall appoint one director of Guardian LLC’s 50% JV Interest.GBT Tokenize.

 

On September 14, 2018, the Company and Dr. Rittman entered into a letter30, 2021 Tokenize, in an agreement confirming that the Company is not a party to, irrevocably assigned all its rights in GBT Tokenize, including all its rights per the ownerTokenize Agreement, The Gonzalez Consulting agreement and the pledge agreement, to the benefit of Magic International Argentina FC, S.L a third party (“Magic”). On June 30, 2021 Magic irrevocably assigned to Stanley Hills, LLC its credit balance accrued until June 30,2021 per the consulting agreement.

Regulatory

 GBT Tokenize is seeking approval filing for its qTerm device with the United Stated Food and Drug Administration (“FDA”). The FDA classifies medical devices from Class 1 – 3, each of which must be subjected to robust evaluations and reviews to comply with manufacturing quality control (QC) standards. The FDA regulates the marketing/sale of medical device products in the U.S. and monitors the safety of all intellectual property developed by Dr. Rittman relating toregulated medical products. FDA Section 201(h) of the Internet of Things (IoT) and Artificial Intelligence enabled mobile technologies,Food, Drug & Cosmetic Act (FD&C Act) defines a device as: an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a global platform with both mobile and fixed solutions, commencing June 16, 2015 and continuing until Dr. Rittman’s employment agreementcomponent part or accessory which is terminated.recognized in the official National Formulary, or the United States Pharmacopoeia, or any supplement to them, intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease in man or other animals, or intended to affect the structure or any function of the body of man or other animals.

 

15

GBT Tokenize engaged M Squared Associates (M2) to assist with developing the FDA premarket strategy for its qTerm device. The process of filing for FDA clearance involves development of a sound regulatory strategy for pathway to market, including required preclinical and performance testing, software verification and validation activities and ensuring user needs are met. In addition, GBT/tokenize will partner with M2 to finalize technical design documentation, device labeling claims and intended use. Other aspects that will be evaluated include manufacturing processes, usability / human factors and the development of valid scientific evidence. The company will work with M2 to develop a detailed description of the device’s software and algorithm training requirements, including design specifications. qTerm computer program will be reviewed for its control functions and other required performance testing plans and criteria according to FDA guidance documentation.

 

RegulatoryEven though not required by law, there is no guarantee that the Company will be successful in obtaining any regulatory approval. In order to successfully implement this concept, the Company will need to raise adequate capital to support its compliance research and, if successfully researched, developed and granted regulatory approval, the Company would need to enter into a strategic relationship with a third party that has experience in manufacturing, selling and distributing this product. There is no guarantee that the Company will be successful in any or all of these critical steps.

 

The Company is seeking to conduct business with the US government agencies and has commenced development,hired a consulting firm for general guidance with the GSA (General Services Administration) application process. GSA approval status describes an organization that have been approved to sell to the United States Government through the U.S. General Services Administration (GSA). The GSA is an independent agency of the United States Government that was established in 1949 to help manage, approve, and facilitate government contracts, products, bids and verify that product and services properly sourced under the Company has completedUS Government guidelines. The GSA is the Statementpurchasing department of Work (SOW)the U.S. Government and lists contracts or schedules potential vendors that can bid on to get government business. To become eligible to bid on a GSA schedule, it is required to complete several important steps, among them are registering in the government’s SAM (System for Award Management), and providing previous customer contact information as a means for the Federal Communications Commission (“FCC”) survey to deploy the Company’s Guardian Global Tracking Device within the continental US. The Company has also completed their transmitters/transceivers modules feasibility research. Although the Company can use open channels, and therefore is not required to comply with various FCC regulations relevant to the system, the Company has chosen to comply, and is complying with FCC regulations. The FCC regulates the limits of potentially harmful interference to licensed transmitters due to low power unlicensed transmitters. The Guardian Patch/Sphere system consists of advanced security protocols in order to maintain the global, private, fully-secured network. In addition, the Guardian Patch device needsGSA to perform communication tasks across the globe providing breakthrough tracking features. The Company and its technology licensing partner, Guardian LLC, successfully completed thorough research that involved security,a past performance and FCC regulations compliance. Basedevaluation. More information can be found on this research, a set of particular frequencies was chosen to be used by Guardian LLC. By the end of fiscal 2017, the Company completed the design and construction of the Guardian Patch/Sphere circuit prototype device. The Company has completed the construction of 10 prototype units, and implemented an intensive testing program to be tested as a complete system in designated areas by the Company. On or around December 1, 2016, Guardian LLC issued Statement of Work for the Placement and Development of Guardian Sphere and its Base System.GSA web site at: Home (gsa.gov).

 

Intellectual Property

 

To date, the Company, has filed for 16 (sixteen) different patents with an additional three in process,covering certain fields of its technologies, as well as 6 (six) trademarks. The patents are owned by Dr. Rittman, our CTO, but the Company is the exclusive licensee of these patents and trademarks in perpetuity. These patents and trademarks, as well as various websites and social media platforms, comprise the Company’s intellectual properties. TheOn February 27, 2020 GBT Technologies, S.A., as successor in interest to Hermes Roll, LLC had notified the Company that it was in default on its Amended and Dr. Rittman areRestated Territorial License Agreement (“ARTLA”) dated June 15, 2015 and that the ARTLA had been cancelled and rescinded.

On January 31, 2020, in the processarbitration titled GBT Technologies Inc. (k/n/a Gopher Protocol, Inc. v. Discover Growth Fund, LLC (“Discover”) (JAMS Ref. No. 1260005395), the Company was informed that a final award was entered (the “Final Award”). The Final Award affirms that certain sections of consolidating some orthe Senior Secured Redeemable Convertible Debenture (the “Debenture”) constitute unenforceable liquidated damages penalties and were stricken. Further, it was determined that neither Discover nor John Kirkland, President and General Partner of Discover, were entitled to recovery of their attorney’s fees. Consequently, and consistent with the expectations of the Company, the arbitrator awarded Discover an award of $4,034,444 plus interest of 7.25% accrued from May 15, 2019 and costs in the amount of $55,613.00. On February 18, 2020, the Company filed a motion with the United States District Court District of Nevada (the “Nevada Court”) to confirm the Final Award and a motion to consolidate Discover’s application to confirm the Final Award filed in the U.S. District Court of the Virgin Islands (Case No: 3 :20-cv-00012-CVG-RM) (the “Virgin Island Court”). On February 27, 2020, the Nevada Court denied the Company’s motion to confirm the Final Award and motion to consolidate and further decided that the confirmation of the Final Award should be litigated in the Virgin Island Court. As such, on February 27, 2020, the Company filed a Notice of Entry of Order as well as a Motion to Confirm the Arbitration Award; Address the Outstanding issue regarding whether Discover’s rights are subordinated to other creditors and, thereafter, oversee a commercially reasonable foreclosure sale (Case No: 3 :20-cv-00012-CVG-RM). It was the Company’s position that the Final Award must first be confirmed and all questions regarding the rights of these patents intoDiscover relative to those of other creditors must be determined before any foreclosure sale can proceed. It was further the position of the Company that the previously disclosed foreclosure sale scheduled by Discover is being conducted in a single comprehensive patent forcommercially unreasonable manner and that if Discover proceeded forward with the Guardian Patch. To date, oneforeclosure sale it did so at its own risk. Nevertheless, on February 28, 2020, Discover advised that it conducted a sale of the Company’s patents have been granted (patent number 10,021,522), and two trademarks have been granted.assets. As the date of this report Investor failed to present a deed of sale for the alleged sale that allegedly took place as noticed. The Company filed with Virgin Island Court the motions disputing the validity of the alleged sale.

  

On March 6, 2020, the Company through its newly acquired wholly owned subsidiary, Greenwich International Holdings, a Costa Rica corporation (“Greenwich”), entered into a Joint Venture and Territorial License Agreement (the “Tokenize Agreement”) with Tokenize-It, S.A. (“Tokenize”) to develop, maintain and support source codes for its proprietary technologies including advanced mobile chip technologies, tracking, radio technologies, AI core engine, electronic design automation, mesh, games, data storage, networking, IT services, business process outsourcing development services, customer service, technical support and quality assurance for business, customizable and dedicated inbound and outbound calls solutions, as well as digital communications processing for enterprises and startups (“Technology Portfolio”). Via this Joint Venture the parties commenced development of a development of an intelligent human vital signs’ device, suggested named qTerm. The Joint Venture completed successfully the first prototype.

The following chart represent the Company Intellectual Properties Status:

Patents

TitleApp. No.CountryFiling DateStatus / DeadlinePatent No.Issue Date
System and method for scheduling trucking service, according to demand, at the customer’s or any other location using smartphone application and/or internet web site62/124,320USDecember 15, 2014ExpiredN/AN/A
System and method for scheduling categorized delivery and/or service, according to demand, to customer’s location based on smartphone and web site software application62/176,933USMarch 3, 2015Expired and Converted to Electronic Circuit Non-provisional and PCTN/AN/A

System and method for finding possible bartering partners in both two-party and multi-party scenarios via smartphone/mobile device application14/545,577USMay 26, 2015AbandonedN/AN/A
System and method for scheduling gasoline or diesel fill, according to demanding, at the customer’s location62/231,405USJuly 6, 2015Expired and Converted to Electronic Circuit Non-provisional and PCTN/AN/A
Electronic circuit or microchip with a secured BIOS system, with ROM and RAM memory, working with smartphone software application and62/282,593USAugust 6, 2015Expired and Converted to Electronic Circuit Non-provisional and PCTN/AN/A
System and method for power saving/reduction within integrated circuits62/282,808USAugust 13, 2015ExpiredN/AN/A
System and method for overseeing and monitoring user’s computerized activity to define privacy level62/283,915USSeptember 16, 2015ExpiredN/AN/A
System, method and computer program for remote disablement and enablement of mobile devices62/284,353USSeptember 28, 2015Expired and Converted to Electronic Circuit Non-provisional and PCTN/AN/A
System, method and computer program for real time emergency communication, beacon, location identification and tracking for mobile devices62/284,458USOctober 1, 2015Expired and Converted to Electronic Circuit Non-provisional and PCTN/AN/A
System, method and a computer program for automatic and motion activity detection, activation or deactivation airplane mode for mobile devices62/284,744USOctober 8, 2015Expired and Converted to Electronic Circuit Non-provisional and PCTN/AN/A
Monolithic multi-dimensional integrated circuits (ICs) on both sides of electronic board including utilization of all package’s planes62/284,880USOctober 13, 2015ExpiredN/AN/A
System, method and software for mobile database manage and sharing over private, secured network, in real time62/284,884USOctober 13, 2015ExpiredN/AN/A

Method, system and computer software for advertisement using symbols as characters interface62/285,055USOctober 19, 2015ExpiredN/AN/A
Monolithic, multi-dimensional, multi-plane, memory structure for integrated circuits62/285,443USOctober 30, 2015ExpiredN/AN/A
Automatic, characterized and prioritized consolidation of different credit cards into one card method, point of sale, smartphone applications and computer software62/285,996USNovember 26, 2015ExpiredN/AN/A
Electronic circuit within a sticky patch package for global tracking that is working with mobile software application and other electronic circuits on a separate, secured, private network62/387,789USJanuary 6, 2016Expired and Converted to Tracking Devices Non-provisional and PCTN/AN/A
ELECTRONIC CIRCUITS FOR SECURE COMMUNICATIONS AND ASSOCIATED SYSTEMS AND METHODS15/015,441USFebruary 4, 2016GrantedU.S. Patent No. 10,521,614December 31, 2019
ELECTRONIC CIRCUITS FOR SECURE COMMUNICATIONS AND ASSOCIATED SYSTEMS AND METHODSPCT/US2016/016522PCTFebruary 4, 2016Expired and Entered National Phase in EuropeN/AN/A
SYSTEM AND METHOD FOR POWER SAVING/REDUCTION WITH INTEGRATED CIRCUITS62/360,525USJuly 11, 2016ExpiredN/AN/A
System and method for elimination of electromigration and self-heat violations during construction of a mask layout block, maintaining process design rules and layout connectivity62/494,199USAugust 1, 2016ExpiredN/AN/A
ELECTRONIC CIRCUITS FOR SECURE COMMUNICATIONS AND ASSOCIATED SYSTEMS AND METHODS16759244.3EPSeptember 29, 2017PendingN/AN/A

TRACKING DEVICES, SYSTEMS AND METHODS USING PATCH PACKAGES WITH EMBEDDED ELECTRONIC CIRCUITS15/344,619USNovember 7, 2016Granted10,021,522July 10, 2018
TRACKING DEVICES, SYSTEMS AND METHODS USING PATCH PACKAGES WITH EMBEDDED ELECTRONIC CIRCUITSPCT/US16/060763PCTNovember 7, 2016Expired and Entered National Phase in EuropeN/AN/A
TRACKING DEVICES, SYSTEMS AND METHODS USING PATCH PACKAGES WITH EMBEDDED ELECTRONIC CIRCUITS16884138.5EPJuly 3, 2018PendingN/AN/A
TRACKING DEVICES, SYSTEMS AND METHODS USING PATCH PACKAGES WITH EMBEDDED ELECTRONIC CIRCUITS16/028,449USJuly 6, 2018Granted10,616,715April 7, 2020
GOPHER RADIO TOKEN62/631,007USFebruary 15, 2018Pending and Converted to GRT Non-provisionalN/AN/A
SYSTEMS AND METHOD OF CONVERTING ELECTRONIC TRANSMISSIONS INTO DIGITAL CURRENCY16/008,069USJune 14, 2018AbandonedN/AN/A
SYSTEMS AND METHOD OF CONVERTING ELECTRONIC TRANSMISSIONS INTO DIGITAL CURRENCYPCT/US19/16728PCTFebruary 6, 2019ExpiredN/AN/A
System, method and software application for mobile database management and sharing over private, secured network, in real time62/676,393USMay 25, 2018Pending and Converted to Mobile Database Sharing Non-provisionalN/AN/A
SYSTEMS AND METHODS OF MOBILE DATABASE MANAGEMENT AND SHARING16/155,093USOctober 9, 2018Granted10,853,327December 1, 2020
SYSTEMS AND METHODS OF MOBILE DATABASE MANAGEMENT AND SHARING17/104,001USNovember 25, 2020PendingN/AN/A

MONOLITHIC, MULTI-DIMENSIONAL, MULTI-PLANE, MEMORY STRUCTURE FOR INTEGRATED CIRCUITS62/732,026USSeptember 17, 2018PendingN/AN/A
MONOLITHIC MULTI-DIMENSIONAL INTEGRATED CIRCUITS (ICS) ON BOTH SIDES OF ELECTRONIC BOARD INCLUDING UTILIZATION OF ALL PACKAGE’S PLANES62/732,023USSeptember 17, 2018PendingN/AN/A
MULTI-DIMENSIONAL INTEGRATED CIRCUITS AND MEMORY STRUCTURE FOR INTEGRATED CIRCUITS AND ASSOCIATED SYSTEMS AND METHODS16/292,388USMarch 5, 2019Granted10,854,763December 1, 2020
MULTI-DIMENSIONAL INTEGRATED CIRCUITS AND MEMORY STRUCTURE FOR INTEGRATED CIRCUITS AND ASSOCIATED SYSTEMS AND METHODS17/102,928USNovember 24, 2020PendingN/AN/A
MULTI-DIMENSIONAL INTEGRATED CIRCUITS AND MEMORY STRUCTURE FOR INTEGRATED CIRCUITS AND ASSOCIATED SYSTEMS AND METHODSPCT/US19/50266PCTSeptember 10, 2019ExpiredN/AN/A
MULTI-DIMENSIONAL INTEGRATED CIRCUITS AND MEMORY STRUCTURE FOR INTEGRATED CIRCUITS AND ASSOCIATED SYSTEMS AND METHODS19862631.9EPMarch 16, 2021PendingN/AN/A

MULTI-DIMENSIONAL INTEGRATED CIRCUITS AND MEMORY STRUCTURE FOR INTEGRATED CIRCUITS AND ASSOCIATED SYSTEMS AND METHODS10-2021-7008024KRMarch 17, 2021PendingN/AN/A
Automatic, characterized and prioritized consolidation of different credit cards into one card method, point of sale, smartphone applications and computer software63175564USApril 16, 2021PendingN/AN/A
Method, system and computer software for advertisement, using symbols as characters interface63177669USApril 21, 2021PendingN/AN/A
SYSTEMS AND METHODS FOR ELIMINATING ELECTROMIGRATION AND SELF-HEAT VIOLATIONS IN A MASK LAYOUT BLOCK17315747USMay 10, 2021PendingN/AN/A
System and method for automatic correction of geometrical design rule violations in integrated circuit mask layout data, maintaining its electrical connectivity (LVS), reliability (RV) and design for manufacturing (DFM) structural correctness63197635USJune 7, 2021PendingN/AN/A
REAL-TIME MOVEMENT, POSITION DETECTION, AND IMAGING USING WIRELESS TECHNOLOGY AND ARTIFICIAL INTELLIGENCE63211573USJune 17, 2021PendingN/AN/A
SYSTEMS AND METHODS FOR IDENTIFICATION AND ELIMINATION OF GEOMETRICAL DESIGN RULE VIOLATIONS OF A MASK LAYOUT BLOCK17391292USAugust 2, 2021PendingN/AN/A

SYSTEMS AND METHODS OF REAL-TIME MOVEMENT, POSITION DETECTION, AND IMAGING17471213USSeptember 10, 2021Pending N/AN/A
System and method for automatic correction of electrical connectivity mismatches of a mask layout block, maintaining the process design rules (DRC Clean), connectivity (LVS Clean) correctness, obeying Reliability Verification (RV) and DFM (Design formanufacturability) constraints63248550USSeptember 27, 2021PendingN/AN/A
System and method for Automatic Generation of Integrated Circuits IP (Intellectual property) Layout Blocks63249150USSeptember 28, 2021PendingN/AN/A
Artificial Intelligence Controlled, SKIP ZONE FREE, HF Radio Communication System and Method63257199USOctober 19, 2021PendingN/AN/A

Trademarks

MarkApp. No.CountryFiling DateStatus / DeadlineGoods/Services/ClassesReg. No. / Reg. Date
GOPHERINSIDE86/681,308USJuly 1, 2015AbandonedMicrochips, in Class 9N/A
GOPHERINSIGHT86/737,146USAugust 26, 2015AbandonedChip carriers, etc., in Class 9N/A
FRIENDINME86/755,543USSeptember 14, 2015AbandonedSoftware from mobile phones, etc., in Class 9N/A
GOPHERNET86/811,422USNovember 5, 2015AbandonedCommunications software for connecting microchips, etc., in Class 9N/A
GOPHERANTITHEFT86/855,191USDecember 21, 2015AbandonedMicrochips, in Class 9N/A
GOPHERSKYNET86/858,936USDecember 28, 2015AbandonedMicrochips, in Class 9N/A
PUZPIX87/12,1137USJuly 29, 2016RegisteredGame software, etc., in Class 95,356,006 / December 12, 2017
GOPH GOPHER PROTOCOL (and Design)87/927,131USMay 18, 2018AbandonedSoftware for mobile phones, microchips, etc., in Class 9N/A
G-MONEY88/132,574USSeptember 26, 2018AbandonedProviding digital currency or digital token, in Class 36N/A
G-CASH88/132,592USSeptember 26, 2018AbandonedProviding digital currency or digital token, in Class 36N/A

Employees

 

As of December 31, 2018,September 30, 2021, we had approximately 263 full time employees and no part time employees. All of the Company’s developmentWe also utilize outside consultants and marketing activities are being performed internally, but the Company uses outside partiescontractors as needed.

 

Clients and CustomersProperties

 

AfterThe Company leases its virtual office space at 2450 Colorado Ave., Suite 100E, Santa Monica, CA 90404 on a month-to-month lease for $311 per month. Due to the global COVID-19 pandemic, the Company has maintained its address but only as virtual office space with minimum administrative services, while all employees and consultants work remotely.

Legal Proceedings

From time to time, the Company may be involved in various litigation matters, which arise in the ordinary course of business. There is currently no litigation that management believes will have a material impact on the financial position of the Company.

UGO Litigation

On or around January 30, 2019, RWJ Advanced Marketing, LLC, Greg Bauer, and Warren Jackson sued the Company and multiple third and related parties in Superior Court of the State of California - County of Los Angeles, General District in connection with the acquisition of certain assets from RWJ Marketing Services LLCUGO in September 20172017. The case number is 19STCV03320 (the “Original Lawsuit”). The complaint in the Original Lawsuit alleges breach of contract, among other causes of action. The Company answered the complaint and ECSfiled a cross-complaint against the plaintiffs in Marchthe case and third parties on or around February 15, 2019. On or about September 10, 2020, the Company through its agent of service was “served” with a complaint (the Company contested service) that was recently filed against the Company and third parties by Robert Warren Jackson and Gregory Bauer in Los Angeles Superior Court Case No.: 20STCV32709 (“Second Lawsuit”). In the Original Lawsuit filed, the court rejected the plaintiff’s claims that they were filing a purported quasi-derivative lawsuit. As such, in this current litigation, the plaintiff is now again claiming the action is a derivative lawsuit. On October 13, 2020, the Second Lawsuit was removed by other defendants into Central District of California (CASE NO. 2:20−cv−09399−RGK−AGR). On February 2, 2021 The Central District of California dismissed the entire Second Lawsuit based on “demand futility”. In the Original lawsuit, the Company filed a cross complaint against the plaintiff and other third parties. Recently, the court has scheduled various hearings and a trial date set for December 27, 2021 which was later continued by the Court to September 28, 2022. It was the Company’s intention to dividend its holdings of its wholly owned subsidiary Ugopherservices Corp. (“UGO”). As UGO is the main dispute in the litigations described above, the Company has elected to sell UGO to a third-party effective July 1, 2020 (See Note 3). On September 17, 2020, the Company terminated Greg Bauer as consultant (resulting from the sale of UGO), which he confirmed in writing. On or about June 14, 2021 the Company stipulated with plaintiff that all third parties will be released and plaintiff may file a new first amendment complaint that will name only the Company. As such, all third parties other than prior transfer agent of the Company have been dismissed from this litigation.

Following the sale of UGO, the Company noticed third parties (including SURG, via its asset manager) to wire the UGO funds to its new bank account. SURG never answered the notice. The Company noticed certain third parties that it intends to take legal actions to resolve this issue. On November 12, 2020 the Company filed a complaint in the United States District Court – District of Nevada - Case 2:20-cv-02078 against RWJ, Mr. Bauer, Mr. Jackson and against W.L. Petrey Wholesale Company Inc for fraud, breach of contract, Unjust Enrichment and other claims.

Discover Growth Fund

On December 3, 2018, the Company has approximately 9,400 pointentered into a Securities Purchase Agreement (the “SPA”) with Discover Growth Fund, LLC (the “Investor”) pursuant to which the Company issued a Senior Secured Redeemable Convertible Debenture (the “Debenture”) in the aggregate face value of $8,340,000. In connection with the issuance of the Debenture and pursuant to the terms of the SPA, the Company issued a Common Stock Purchase Warrant to acquire up to 225,000 shares of common stock for a term of three years (the “Warrant”) on a cash-only basis at an exercise price of $100.00 per share with respect to 50,000 Warrant Shares, $75.00 with respect to 75,000 Warrant Shares and $50.00 with respect to 100,000 Warrant Shares. The holder may not exercise any portion of the Warrants to the extent that the holder would own more than 4.99% of the Company’s outstanding common stock immediately after exercise. The outstanding principal amount may be converted at any time into shares of the Company’s common stock at a conversion price equal to 95% of the Market Price less $5.00 (the conversion price is lowered by 10% upon the occurrence of each Triggering Event – the current conversion price is 75% of the Market Price less $5.00). The Market Price is the average of the 5 lowest individual daily volume weighted average prices during the period the Debenture is outstanding. On May 28, 2019, the Investor delivered to the Company a “Notice of Default and Notice of Sale of Collateral” (the “Notice”). On December 23, 2019, in arbitration between the Company and the Investor, an Interim Award was entered in favor of the Investor. On January 31, 2020, the Company was informed that a final award was entered (the “Final Award”). The Final Award affirms that certain sections of the Debenture constitute unenforceable liquidated

damages penalties and were stricken. Further, it was determined that the Investor was entitled to recovery of their attorney’s fees. Consequently, the arbitrator awarded Investor an award of $4,034,444 plus interest of 7.25% accrued from May 15, 2019 and costs in the amount of $55,613. On February 18, 2020, the Company filed a motion with the United States District Court  District of Nevada (the “Nevada Court”) to confirm the Final Award and a motion to consolidate Investor’s application to confirm the Final Award filed in the U.S. District Court of the Virgin Islands (Case No: 3 :20-cv-00012-CVG-RM) (the “Virgin Island Court”). On February 27, 2020, the Nevada Court denied the Company’s motion to confirm the Final Award and motion to consolidate and further decided that the confirmation of the Final Award should be litigated in the Virgin Island Court. As such, on February 27, 2020, the Company filed a Notice of Entry of Order as well as a Motion to Confirm the Arbitration Award, address the outstanding issues regarding whether Investor’s rights are subordinated to other creditors and, thereafter, oversee a commercially reasonable foreclosure sale (Case No: 3 :20-cv-00012-CVG-RM). It was the Company’s position that the Final Award must first be confirmed and all questions regarding the rights of Investor relative to those of other creditors must be determined before any foreclosure sale can proceed. It is further the position of the Company that the previously disclosed foreclosure sale scheduled by Investor is being conducted in a commercially unreasonable manner and that if Discover proceeded forward with the foreclosure sale it did so at its own risk. Nevertheless, on February 28, 2020, Investor advised that it conducted a sale of the Company’s assets. As the date of this report Investor failed to present a deed of sale locations,for the alleged sale that allegedly took place as noticed. The Company filed with Virgin Island Court the motions disputing the validity of the alleged sale. On July 28, 2020, Investor filed in the State of Nevada a motion for attorneys $48,844 and costs $716. The Company filed an answer on August 11, 2020. On October 16, 2020, Investor motion for attorneys and costs was denied.

GBT Technologies, S.A.

On September 14, 2018, the Company entered into an Exclusive Intellectual Property License and Royalty Agreement (the “GBT License Agreement”) with GBT-CR, a fully compliant and regulated crypto currency exchange platform that currently operates in Costa Rica as a decentralized crypto currency platform, pursuant to which, among other things, the Company granted to GBT-CR an exclusive, royalty-bearing right and license relating intellectual property relating to systems and methods of converting electronic transmissions into digital currency as reflected in that certain patent filed with the United Stated Patent and Trademark Office on or about June 14, 2018 (EFS ID: 32893586; Application Number: 16008069; Type: Utility under 35 USC 111(a); Confirmation Number: 6787)(collectively, the “Digital Currently Technology”). Pursuant to the GBT License Agreement, the Company granted GBT-CR an exclusive worldwide license to use the Digital Currency Technology to make, use, sell, lease or otherwise commercialize and dispose of products and devices utilizing the Digital Currently Technology. Under the terms of the GBT License Agreement, the Company is entitled to receive a royalty payment of 2% of gross revenue of each licensed product sold by GBT-CR during the period starting in which revenue is first generated using the licensed products and continuing for five years thereafter. Upon signing the GBT-CR License Agreement, GBT-CR paid the Company $300,000 which is nonrefundable. The Company has recognized the $300,000 as revenue during the years ended December 31, 2018. Upon GBT-CR making available for sale (the “Commercial Event”) an ICO (Initial Coin Offering) (the “Coin”), GBT-CR will make a payment to the Company in the amount of $5,000,000. Further, upon the Commercial Event, GBT-CR will grant the Company the ability to acquire 30% of the Coin at a 30% discount of such offering price of the Coin. The GBT License Agreement commenced as of the signing date and, unless terminated in accordance with the termination provisions of the GBT License Agreement, shall remain in force until the expiration of the patent pertaining to the Digital Currency Technology; provided that the right to use trade secrets shall survive the expiration of the GBT License Agreement provided the Company has not terminated. Prior to the signing of the GBT License Agreement, GBT-CR advanced $200,000 to the Company, which the parties have agreed will be applied toward the $5,000,000 fee when it becomes due. The $200,000 was recorded as unearned revenue at December 31, 2018 and reclassified to accrued expense at December 31, 2020 and 2019. On February 27, 2020 GBT Technologies, S.A., as successor in interest to Hermes Roll, LLC had notified the Company that it was in default on its Amended and Restated Territorial License Agreement (“ARTLA”) dated June 15, 2015 and that the ARTLA had been cancelled and rescinded.

Surge Holdings, Inc.

On September 30, 2019, the Company entered into an Asset Purchase Agreement (“APA”) with Surge Holdings, Inc., a Nevada corporation (“SURG”) pursuant to which the Company agreed to sell and assign to SURG, all the assets and certain specified liabilities, of its ECS Prepaid, Electronic Check Services and the Central State Legal Services businesses in consideration of $5,000,000 to be paid through the issuance of 3,333,333 shares of SURG’s common stock (the “SURG Common Stock”) and a convertible promissory note in favor of the Company in the principal amount of $4,000,000 (the “SURG Note”), convertible into SURG’s shares of common stock.

On June 23, 2020, SURG entered into an Exchange Agreement (the “AltCorp Exchange Agreement”) with AltCorp Trading LLC (“AltCorp”) with such AltCorp Exchange Agreement being consented and agreed to by the Company, the parent of AltCorp. At the expiration of the lock-up period, in the event the VWAP for the SURG Common Stock was, during the preceding twenty-day trading period, less than $0.50 per share, AltCorp retained the right to reserve additional shares of SURG Common Stock equal to the True-Up Value as defined in the AltCorp Exchange Agreement.

On January 1, 2021, SURG, AltCorp and Stanley Hills, LLC (“Stanley”) entered into a Mutual Release and Settlement Agreement (“Settlement Agreement”). Pursuant to the terms of the Settlement Agreement, SURG agreed to amend the AltCorp Exchange Agreement where SURG acknowledged a debt of $3,300,000 (the “Debt”) to be paid in 33 monthly payments of $100,000 payable in shares of common stock of SURG at a per share price equal the volume weighted average price of Surg’s common stock during the ten (10) trading days immediately preceding the issuance. The AltCorp assets have been pledged since August 12, 2020 for the benefit of Stanley to secure Stanley’s note payable by the Company. Accordingly, the SURG Common Stock issued to AltCorp as a result of the Settlement Agreement were pledged to Stanley.

Subsequently, SURG was a party to two lawsuits in state District Court, the Eighth Judicial District Court for Clark County, Nevada involving AltCorp, Stanley and Glen Eagles Acquisition LP (the “AltCorp Parties.”). Each of these lawsuits were ultimately disputes relating to the total consideration SURG was to pay the Company under the APA.

On October 18, 2021, the AltCorp Parties, the Company, and SURG entered into a Memorandum of Understanding (the “MOU”) to set up a framework for an attempt to settle the two lawsuits.

On December 22, 2021 (the “Effective Date”), pursuant to the framework in the MOU, the AltCorp Parties (and an additional third party), the Company, ECS, and SURG, Kevin Brian Cox (SURG’s Chief Executive Officer) - in his individual capacity, entered into a Resolution of Purchase, Mutual Release, and Settlement Agreement (the “Final Settlement Agreement”) to settle the two lawsuits and resolve all disputes related to the consideration paid by SURG to the Company in connection with the APA.

The Final Settlement Agreement, among other resolutions, essentially provides the following:

(i) From the total consideration of the Final Settlement Agreement, the amount of $375,000 (“Escrow Amount”) will be deposit by SURG in escrow. SURG has acquired the Company’s rights to a certain Master Distribution and Service Agreement (“MDA”). Under certain circumstances, if the result of the Company’s lawsuit against a third party (the “GBT Lawsuit”) is a monetary judgment without the assignment or legal decree of ownership of the MDA, the Company shall be entitled to receive the Escrow Amount and shall assign to SURG the first $1,000,000 the Company recovers from the defendants in the GBT Lawsuit. In the event that the Company does not prevail in the GBT Lawsuit then it shall be entitled to release of the Escrow Amount but shall be responsible for any fees and costs obligation sought by the defendants in the GBT Lawsuit.

(ii) SURG agreed to make total payments of $4,200,000 to Stanley on or prior to January 7, 2022. This $4.2 million amount consists of $450,000 paid by SURG in November and December 2021, $100,000 to be paid on or about January 4, 2022, and $3,650,000 to be paid on or prior to January 7, 2022 of which process varying volumes of transactions per month.$375,000 will be held in escrow as described before.

 

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(iii) Potential payments to third parties.

 

The Final Settlement Agreement replaces all prior agreements between the parties. In addition, within three (3) trading days of the last payment related to the $4.2 million payment to Stanley being made, the parties shall make filings with the state District Court in Clark County, Nevada to dismiss both lawsuits, including, regarding the lawsuit filed by AltCorp Trading, LLC, the dismissal of the lawsuit as to VStock Transfer, LLC. The parties agreed to a full mutual release of any disputes or claims between the parties.

Corporate Information

We were incorporated in Nevada on July 22, 2009. Our principal executive offices are located at 2450 Colorado Ave., Suite 100E, Santa Monica, CA 90404 and our telephone number is 888-685-7336. Our website address is https://gbtti.com. The information contained on our website is not incorporated by reference into this prospectus.

MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

 

The Company is authorized to issue 500,000,0002,000,000,000 of its $0.00001 par value common stock and 20,000,000 shares of its $0.00001 par value preferred stock Series B and 10,000 shares of its $0.00001 par value preferred stock Series C, 100,000 shares of its $0.00001 par value preferred Series D shares, and 2,000,000 of its $0.00001 par value preferred Series G shares and 40,000 of its $0.00001 par value preferred Series H shares. As of December 31, 2018, 182,224,2642020, 256,674,458 shares of common stock, as well as 45,000 shares of preferred stock Series B, 700 shares of preferred stock Series C, zero shares of preferred stock Series D, and zero shares of preferred stock Series G and 20,000 shares of preferred stock Series H were issued and outstanding. As of December 31, 2017, the Company has 1,040 Treasury shares at cost. As of February 5, 2018, 203,913,33827, 2021, 33,200,198 shares of common stock, as well as 45,000 shares of preferred stock Series B, 700 shares of preferred stock Series C, zero shares of preferred stock Series D, and zero shares of preferred stock Series G and 20,000 shares of preferred stock Series H are issued and outstanding. The Board of Directors reserves the right to issue shares of preferred stock in the future indicating preference or rights as appropriate.

 

Market Information

 

Our common stock commenced quotation on the OTCQBOTC PINK under the symbol “GTCH”. The Company’s subsequent symbol was “GOPH”. The following table sets forth the range of high and low prices per share of our common stock for each period indicated.   indicated (after given effect to reverse split of 1 for 100 split in 2019 and 1 for 50 in 2021)

 

Quarters Ended Mar 31  Jun 30  Sept 30  Dec 31 
  High  Low  High  Low  High  Low  High  Low 
2018 $2.72  $1.10  $4.49  $1.48  $2.62  $0.64  $0.97  $0.30 
2017 $1.24  $1.05  $1.14  $0.32  $0.43  $0.26  $1.42  $0.18 
Quarters Ended Mar 31 Jun 30 Sep 30 Dec 31
                 
  High Low High Low High Low High Low
                                   
 2021  $5.00  $0.75  $1.70  $0.75  $0.90  $0.35  $0.40  $0.09 
 2020  $0.65  $0.01  $0.04  $0.01  $0.02  $0.01  $0.04  $0.01 

 

Record Holders

 

The number of holders of record for our common stock as of February 5, 2019December 27, 2021 was 91.88.

 

Dividends

 

The Company has not yet adopted any policy regarding payment of dividends. No cash dividends have been paid or declared since the Date of Inception.

 

Securities Authorized for Issuance Under Equity Compensation Plans

 

We presently do not have equity compensation plans authorized.

 

17

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONOPERATIONS

 

Forward-Looking Statements

Below are forward looking statements, including without limitation, statements related toYou should read the following discussion of our plans, strategies, objectives, expectations, intentions and adequacy of resources. Investors are cautioned that such forward-looking statements involve risks and uncertainties including without limitation the following: (i) our plans, strategies, objectives, expectations and intentions are subject to change at any time at our discretion; (ii) our plansfinancial condition and results of operations will be affected byin conjunction with our ability to manage growth;financial statements and (iii) other risksnotes thereto, as well as the “Risk Factors” and uncertainties indicated from time to time“Description of Business” sections included elsewhere in our filings with the Securities and Exchange Commission.

In some cases, you can identifythis prospectus. The following discussion contains forward-looking statements by terminology such as ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘could,’’ ‘‘expects,’’ ‘‘plans,’’ ‘‘intends,’’ ‘‘anticipates,’’ ‘‘believes,’’ ‘‘estimates,’’ ‘‘predicts,’’ ‘‘potential,’’ or ‘‘continue’’ or the negative of such terms or other comparable terminology. Although we believe that the expectations reflectedreflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance,statements. Factors that could cause or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracycontribute to these differences include those discussed below and completeness of such statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We are under no duty to update any of the forward-looking statements after the date ofelsewhere in this Report.prospectus, particularly in “Risk Factors.”

 

General Overview

 

Gopher ProtocolGBT Technologies Inc. (the “Company”, “we”, “us”, “our”, “GBT”, “Gopher”, “Gopher Protocol”, “GOPH”, “GTCH”, or “GOPH”“GBT”) was incorporated on July 22, 2009 under the laws of the State of Nevada and is headquartered in Santa Monica, California. GopherThe Company is a development-stage company which considers itself a Native IoT solutions creator, developingtargeting growing markets such as development of Internet of Things (IoT)(“IoT”) and Artificial Intelligence (“AI”) enabled networking and tracking technologies, including wireless mesh network technology platform and asset trackingfixed solutions, development of an intelligent human body vitals device, asset-tracking IoT, mobileand wireless mesh networks. The Company has historically derived revenues from (i) the provision of IT services; and (ii) from the licensing of its technology.  Gopher has a portfolio of Intellectual Property that when commercialized will include smart microchips, mobile application software and supporting cloud software.  The system contemplates the creation of a global mesh network.  The core of the system will be its advanced microchip technology that can be installed in any mobile or fixed device worldwide. Gopher envisions this system as a low-cost, private and secure network between all enabled mobile devices providing shared processing, advanced mobile database management/sharing and enhanced mobile features.

 

Recent DevelopmentsGBT Tokenize Joint Venture

 

On January 14, 2018,March 6, 2020, the Company through Greenwich, entered into an Initial Terma Joint Venture and Territorial License Agreement (the “ITA”“Tokenize Agreement”) with Spare CS Inc.Tokenize-It, S.A. (“Spare”Tokenize”), which is owned by a Costa Rica Trust represented by Pablo Gonzalez (“Gonzalez”). Gonzalez also represents Gonzalez Costa Rica Trust, which holds a note in the principal amount of $10,000,000 and is also a shareholder of the Company. Under the Tokenize Agreement, the parties formed GBT Tokenize Corp., a DelawareNevada corporation pursuant(“GBT Tokenize”). The purpose of GBT Tokenize is to whichdevelop, maintain and support source codes for its proprietary technologies including advanced mobile chip technologies, tracking, radio technologies, AI core engine, electronic design automation, mesh, games, data storage, networking, IT services, business process outsourcing development services, customer service, technical support and quality assurance for business, customizable and dedicated inbound and outbound calls solutions, as well as digital communications processing for enterprises and startups (“Technology Portfolio”), throughout the State of California. Upon generating any revenue from the Technology Portfolio, the Joint Venture will earn the first right of refusal for other territories.

Tokenize shall contribute the services and resources for the development of the Technology Portfolio to GBT Tokenize. The Company shall contribute 2,000,000 shares of common stock of the Company agreed(“GBT Shares”) to acquireGBT Tokenize. Tokenize and the Company will each own 50% of GBT Tokenize. The shares were valued at $5,500,000.

In addition, GBT Tokenize and Gonzalez entered into a Consulting Agreement in which Gonzalez is engaged to provide services in consideration of $33,333 per month payable quarterly which may be paid in shares of common stock calculated by the equityamount owed divided by the Company’s 10-day VWAP. Gonzalez will provide services in connection with the development of Spare.the business as well as GBT Tokenize’s capital raising efforts. The term of the Consulting Agreement is two years. During the nine months ended September 30, 2018,2021, Gonzalez assigned all his accrued balances of $424,731 to Stanley Hills in a private transaction that the Company terminatedis not part to. The closing of the ITATokenize Agreement occurred on March 9, 2020.

Through this Joint Venture the parties commenced development of an intelligent human vital signs’ device, which we currently refer to as the qTerm. The platform is an expansion of the existing license agreement with SpareGBT Tokenize Corp., which provided GBT Tokenize Corp. with an exclusive territory of California to develop certain of the Company’s technology. As the nature of the platform cannot be restricted only to California, the Company’s joint venture GBT Tokenize Corp. will be compensated with additional two hundred million shares of the Company to strengthen its funding, subject to board approval. A provisional patent application for the qTerm Medical Device was filed on March 30, 2020 with the USPTO. The application has been assigned serial number 63001564. The Joint Venture completed successfully the first prototype. There is no guarantee that the Company will be successful in researching, developing or implementing this product into the market. In order to successfully implement this concept, the Company will need to raise adequate capital to support its research and, wrote offif successfully researched, developed and granted regulatory approval, the $265,000Company would need to enter into a strategic relationship with a third party that has been advanced to Spare.experience in manufacturing, selling and distributing this product. There is no guarantee that the Company will be successful in any or all of these critical steps.

At March 31, 2020, the Company evaluated the carrying amount of this joint venture investment and determined that this investment was fully impaired and as a result an impairment charge of $5,500,000 was taken. At September 30, 2021, the Company evaluated the carrying amount of this joint venture investment and determined that this investment was fully impaired and as a result an impairment charge of $15,400,000 was taken.

Although the investment was impaired, the product development is still ongoing. The $265,000 in included as partcarrying amount of the impairment of assets in the accompanying consolidated statement of operations.this investment at September 30, 2021 and December 2020, was $0 and $0, respectively.

 

On March 16, 2018 ( “Closing Date”),May 28, 2021, the parties agreed to amend the Tokenize Agreement to expand territory granted for the Technology Portfolio under the license to GBT Tokenize to include the entire continental United States. The Company entered into and closedhas further agreed to issue GBT Tokenize an Asset Purchase Agreement dated March 1, 2018 (the “ECS Purchase Agreement”) with ECS Prepaid LLC (“ECS”), a Missouri limited liability company, pursuant to which the Company purchased certain assets from ECS, including, but not limited to, the processing prepaid platform, servers, POS terminals, customer list, a processing software program and goodwill, in consideration of $1,100,000 of which $100,000 was paid on the Closing Date and the balance is to be paid pursuant to a secured promissory note in the amount of $1,000,000 (the “ECS Note”). In addition, the Company issued 500,000additional 14,000,000 shares of common stock of the Company. The shares were valued at $15,400,000.

The Company (the “ECS Shares”)pledged its 50% ownership in GBT Tokenize and warrantsits 100% ownership of Greenwich to purchase 500,000 sharesTokenize to secure its Technology Portfolio investment. The Company shall appoint two directors and Tokenize shall appoint one director of common stock (the “ECS Warrants”). The ECS Warrants were assigned by ECS to Dennis Winfrey. The ECS Warrants are exercisable for a period of five years at a fixed exercise price of $1.85 per share and contain standard anti-dilution protection. Under the ESC Note, which is secured by the assets acquired by the Company from ECS,GBT Tokenize.

On September 30, 2021 Tokenize, in an agreement that the Company is requirednot a party to, make ten equal paymentsirrevocably assigned all its rights in GBT Tokenize, including all its rights per the Tokenize Agreement, The Gonzalez Consulting agreement and the pledge agreement, to the benefit of $100,000 commencing on April 15, 2018. Magic International Argentina FC, S.L a third party (“Magic”). On June 30, 2021 Magic irrevocably assigned to Stanley Hills, LLC its credit balance accrued until June 30,2021 per the consulting agreement.

COVID-19 Pandemic

The Company operates in a high-tech marketplace and relies on professionals and partnerships all over the world, which is impacted by the global pandemic, causing the Company’s resources to be affected. Our business operations have been and may prepaycontinue to be materially and adversely affected by the ECS Note at any time without penalty. The ECS Notecoronavirus disease COVID-19.

An outbreak of respiratory illness caused by COVID-19 emerged in Wuhan city, Hubei province, PRC, in late 2019 and expanded globally. COVID-19 is considered to be highly contagious and poses a short-term debt obligation that is material to the Company.serious public health threat.

 

On April 2, 2018 (“Closing Date”),March 19, 2020, California Governor Gavin Newsom issued a stay-at-home order to protect the Company entered intohealth and closedwell-being of all Californians and to establish consistency across the state in order to slow the spread of COVID-19. California was therefore under strict quarantine control and travel has been severely restricted, resulting in disruptions to work, communications, and access to files (due to limited access to facilities). Since then, other measures have been imposed in other countries and major cities in the USA, including Los Angeles, and throughout the world in an Asset Purchase Agreementeffort to contain the COVID-19 outbreak. The World Health Organization (the “Electronic Purchase Agreement”“WHO”) with Electronic Check Services Inc. (“Electronic Check”),is closely monitoring and evaluating the situation. On March 11, 2020, the WHO declared the outbreak of COVID-19 a Missouri corporation, pursuantpandemic, expanding its assessment of the threat beyond the global health emergency it had announced in January. Any outbreak of such epidemic illness or other adverse public health developments in the USA or elsewhere in the world may materially and adversely affect the global economy, our markets and our business. The stay-at-home order was lifted in California only on January 25, 2021.

In the first quarter of 2020, the COVID-19 outbreak caused disruptions in our development operations, which resulted in delays on exiting projects. The State of California and the economy in general has begun to whichslowly re-open following the Company purchased certain assets from Electronic Check, including, butintroduction of the COVID-19 vaccine. However, in the event COVID-19 or other variant is to again surface any further unforeseen delay in our operations of the development, delivery and assembly process within any of our activities could continue to result in, increased costs and reduced revenue.

We cannot foresee whether the outbreak of COVID-19 and its variants will continue to be effectively contained. If the outbreak of COVID-19 is not limited to, assets associated with softwareeffectively and timely controlled, our business operations and financial condition may be materially and adversely affected as a result of the deteriorating market outlook for sales, the slowdown in regional and national economic growth, weakened liquidity and financial condition of our customers and vendors or other factors that validates written check authenticity, in considerationwe cannot foresee. Any of $75,000 paidthese factors and other factors beyond our control could have an adverse effect on the Closing Date. In addition, the Company issued 250,000 sharesoverall business environment, cause uncertainties, cause our business to suffer in ways that we cannot predict and materially and adversely impact our business, financial condition and results of common stock of the Company (the “Electronic Shares”) and warrants to purchase 250,000 shares of common stock (the “Electronic Warrants”). The Electronic Warrants were assigned by Electronic Check to Dennis Winfrey, the shareholder of Electronic Check. The Electronic Warrants are exercisable for a period of five years at a fixed exercise price of $2.70 per share and contain standard anti-dilution protection.operations.

On April 2, 2018, the Company entered into and closed an Asset Purchase Agreement (the “Central Purchase Agreement”) with Central State Legal Services Inc. (“Central”), a Missouri corporation, pursuant to which the Company purchased certain assets from Central, including, but not limited to, assets associated with the a system to recover funds from returned checks, in consideration of $25,000 paid on the Closing Date. Derron Winfrey, the COO of the Company, is a director and President of Electronic Check and Central. Derron Winfrey’s parents are the shareholders of Check and Central.

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Results of Operations:

 

Three monthsMonths ended September 30, 20182021 and September 30, 20172020

 

A comparison of the statements of operations for the three months ended September 30, 20182021 and 20172020 is as follows:

 

 Three Months Ended September 30,  Change  Three Months Ended September 30 Change
 2018  2017  $  %  2021 2020 $ %
                 
Sales $15,536,196  $4,471,626  $11,064,570   247.4%
Cost of goods sold  14,692,250   4,174,374   10,517,876   252.0%
Gross profit  843,946   297,252   546,694   183.9%
Sales - related party $45,000  $45,000  $—   0.0%
Operating expenses  22,529,250   5,937,176   16,592,074   279.5%  906,398   452,790   453,608   100.2%
Loss from operations  (21,685,304)  (5,639,924)  (16,045,380)  284.5%  (861,398)  (407,790)  (453,608)  111.2%
Other expense  (3,154,436)  (300,803)  (2,853,633)  948.7%  431,467   (919,220)  1,350,687   -146.9%
Loss before provision for income taxes  (24,839,740)  (5,940,727)  (18,899,013)  318.1%  (429,931)  (1,327,010)  897,079   -67.6%
Provision for income taxes  —   —   —       —   —   —     
Loss from continued operations  (429,931)  (1,327,010)  897,079   -67.6%
Discontinued operations  —   1,001,711   (1,001,711)  -100.0%
Net loss $(24,839,740) $(5,940,727) $(18,899,013)  318.1% $(429,931) $(325,299) $(104,632)  32.2%

 

Sales for both the three months ended September 30, 20182021 and 2020 were $15,536,196 compared$45,000. Sales are derived from providing IT consulting services to $4,471,626 for the same period in 2017. The sales from 2017 to 2018 are not comparable since the increase of $11,064,570 or 247.4% is almost all the result of sales from the acquisitions of RWJ in September 2017 and ECS in March 2018. The 2017 sales only include one month of sales from the RWJ acquisition while the 2018 sales include three months of sales from RWJ and ECS. Sales recognized from the RWJ and the ECS acquisitions for the three months ended September 30, 2018 were $7,168,415 and $7,955,549, respectively, compared to $4,426,626 and $0, respectively, for the same period in 2017. Sales from the three months ended September 30, 2018 also included a licensing fee of $300,000 generated by Gopher.

Our gross margins for the three months ended September 30, 2018 were 5.4% as compared to 6.6% for the same period in 2017. The decrease in due to the sales generated by the ECS assets have a lower gross margin.related party.

 

Operating expenses for the three months ended September 30, 20182021 were $22,529,250$906,398, compared to $5,937,176$452,790 for the same period in 2017.2020. The increase of $16,592,074$453,608 or 279.5% is100.2% was principally due to i) a charge of $11,750,000 during 2018 related to the buyout of a profit participation agreement with Guardian LLC; ii) a charge of $7,132,286 during 2018 related to the impairment of assets associated with the RWJ acquisition; iii) including the operating cost for the newly acquired acquisitions offset by a decreasean increase in the value of common stock and warrants issued to consultants and employees for services rendered during the three months ended September 30, 2018.development costs.

 

Other expenseincome (expense) for the three months ended September 30, 20182021 was $3,154,436,$431,467, an increase of $2,853,633$1,350,687 or 146.9% from $300,803$(919,220) for the same period in 2017.2020. The increasechange is principally due to a decrease in amortization of debt discount and a decrease in realized and unrealized loss on marketable equity securities; offset by a decrease in the change in fair value of the derivative liability as a result of using a variable conversion price to account for the Bellridge debentures.liability.

 

Net loss for the three months ended September 30, 20182021 was $24,839,740$429,931 compared to $5,940,727$325,299 for the same period in 20172020 due to the factors described above.

 

Nine months ended September 30, 20182021 and September 30, 20172020

 

A comparison of the statements of operations for the nine months ended September 30, 20182021 and 20172020 is as follows:

 

 Nine Months Ended September 30,  Change  Nine Months Ended September 30, Change
 2018  2017  $  %  2021 2020 $ %
                 
Sales $36,907,212  $4,561,626  $32,345,586   709.1%
Cost of goods sold  35,316,203   4,174,374   31,141,829   746.0%
Gross profit  1,591,009   387,252   1,203,757   310.8%
Sales - related party $135,000  $135,000  $—   0.0%
Operating expenses  44,261,783   6,528,748   37,733,035   578.0%  17,846,869   6,904,664   10,942,205   158.5%
Loss from operations  (42,670,774)  (6,141,496)  (36,529,278)  594.8%  (17,711,869)  (6,769,664)  (10,942,205)  161.6%
Other expense  (3,771,693)  (1,374,798)  (2,396,895)  174.3%  (15,142,326)  (8,144,625)  (6,997,701)  85.9%
Loss before provision for income taxes  (46,442,467)  (7,516,294)  (38,926,173)  517.9%  (32,854,195)  (14,914,289)  (17,939,906)  120.3%
Provision for income taxes  —   —   —       —   —   —     
Loss from continued operations  (32,854,195)  (14,914,289)  (17,939,906)  120.3%
Discontinued operations  —   984,787   (984,787)  -100.0%
Net loss $(46,442,467) $(7,516,294) $(38,926,173)  517.9% $(32,854,195) $(13,929,502) $(18,924,693)  135.9%

 

Sales for both the nine months ended September 30, 20182021 and 2020 were $36,907,212 compared$135,000. Sales are derived from providing IT consulting services to $4,561,626 for the same period in 2017.. The sales from 2017 to 2018 are not comparable since the increase of $32,345,586 or 709.1% is almost all the result of sales from the acquisitions of RWJ in September 2017 and ECS in March 2018. The 2017 sales only include one month of sales from the RWJ acquisition while the 2018 sales include nine and seven months, respectively, of sales from RWJ and ECS. Sales recognized from the RWJ and the ECS acquisitions for the nine months ended September 30, 2018 were $17,674,242 and $18,727,466, respectively, compared to $4,426,626 and $0, respectively, for the same period in 2017. Sales from the nine months ended September 30, 2018 also included a licensing fee of $300,000 generated by Gopher.related party.

Our gross margins for the nine months ended September 30, 2018 were 4.3% as compared to 8.5% for the same period in 2017. The decrease in due to the sales generated by the ECS assets have a lower gross margin.

19

 

Operating expenses for the nine months ended September 30, 20182021 were $44,261,783$17,846,869, compared to $6,528,748$6,904,664 for the same period in 2017.2020. The increase of $37,733,035$10,942,205 or 578.0% is158.5% was principally due to i) aan impairment charge of $11,750,000 during 2018 related$15,400,000 in 2021 compared to the buyout of a profit participation agreement with Guardian LLC; ii) aan impairment charge of $7,132,286 during 2018 related to the impairment of assets associated with the RWJ acquisition; iii) including the operating cost for the newly acquired acquisitions; and iv) an increase of $14,853,096 for the value of common stock and warrants issued to consultants and employees for services rendered during the nine months ended September 30, 2018.$5,500,000 in 2020.

 

Other expense for the nine months ended September 30, 20182021 was $3,771,693,$15,142,326, an increase of $2,396,895$6,997,701 or 85.9% from $1,374,798$8,114,625 for the same period in 2017.2020. The increase is principally due to thea loss on debt modification and change in fair value of derivative liability; offset by a decrease in amortization of debt discount and by a decrease in loss on exchange of assets.

 The operating results of our discontinued operations for Ugopherservices for the derivative liability asnine months ended September 30, 2021 and 2020 is summarized below:

  Nine months Ended September 30,
  2021 2020
Revenue $—  $8,291,842 
Cost of revenue  —   7,900,122 
Gross Profit  —   391,720 
Operating expenses  —   408,644 
Loss from operations  —   (16,924)
Other income (expenses)  —   — 
Net loss $—  $(16,924)

As a result of usingthe disposition of Ugopherservices, the Company recognized a variable conversion price to accountgain on the disposition of discontinued operations of $1,001,711 for the Bellridge debentures.nine months ended September 30, 2020.

 

Net loss for the nine months ended September 30, 20182021 was $46,442,467$32,854,195 compared to $7,516,294$13,929,502 for the same period in 20172020 due to the factors described above.

 

Years Endedended December 31, 20172020 and December 31, 20162019

 

A comparison of the statements of operations for the yearsyear ended December 31, 20172020 and 20162019 is as follows:

 

 Years Ended December 31,  Change  Years Ended December 31, Change
 2017  2016  $  %  2020 2019 $ %
                 
Sales $9,192,354  $165,000  $9,027,354   5471.1%
Cost of goods sold  8,651,804   —   8,651,804     
Gross profit  540,550   165,000   375,550   227.6%
Sales - related party $180,000  $180,000  $—   0.0%
Operating expenses  7,845,344   1,528,176   6,317,168   413.4%  7,952,836   176,637,100   (168,684,264)  -95.5%
Loss from operations  (7,304,794)  (1,363,176)  (5,941,618)  435.9%  (7,772,836)  (176,457,100)  168,684,264   -95.6%
Other expense  (2,982,496)  (223,050)  (2,759,446)  1237.1%  (11,206,839)  (10,354,953)  (851,886)  8.2%
Loss before provision for income taxes  (10,287,290)  (1,586,226)  (8,701,064)  548.5%  (18,979,675)  (186,812,053)  167,832,378   -89.8%
Provision for income taxes  —   —   —       —   —   —     
Loss from continued operations  (18,979,675)  (186,812,053)  167,832,378   -89.8%
Discontinued operations  984,787   306,934   677,853   220.8%
Net loss $(10,287,290) $(1,586,226) $(8,701,064)  548.5% $(17,994,888) $(186,505,119) $168,510,231   -90.4%

 

Sales for both the yearyears ended December 31, 20172020 and 2019 were $9,192,354 and the sales for the year ended December 31, 2016 were $165,000. The sales$180,000. Sales are derived from 2016providing IT consulting services to 2017 are not comparable since the increase of $9,027,354 or 5,471% is almost all the result of sales of $9,012,354 generated from the date of acquisition to December 31, 2017 from acquisition of assets from RWJ.

Our gross margins for the year ended December 31, 2017 were 5.9% as compared to 100.0% for the same period in 2016. The decrease in due to the sales generated by the RWJ assets that have a lower gross margin.related party.

20

 

Operating expenses for the year ended December 31, 20172020 were $7,845,344$7,952,836, compared to $1,528,176$176,637,100 for the same period in 2016.2019. The increasedecrease of $6,317,168$168,684,264 or 413% is95.5% was principally due to including the operating costfair value of warrants issued of $120,476,603 as a result of anti-dilution provisions in certain warrants previously issued and a charge took for the newly acquired acquisition and warrants valued at $4,782,297 being issued to consultants for services renderedimpairment of assets of $48,631,534 during the year ended December 31, 2017.2019. There were no such expenses in 2020.

 

Other expense for the year ended December 31, 20172020 was $2,982,496,$11,206,839, an increase of $2,759,446$851,886 or 8.2% from $223,050$10,354,953 for the same period in 2016.2019. The increasedecrease is principally due to net charges to earnings resulting fromi) a change in the issuancefair value of convertible notes with embedded conversion features that are accountedthe derivative liability, ii) a decrease in amortization of discount and interest and financing costs; and iii) a decrease in realized and unrealized loss on a marketable equity security.

The operating results of our discontinued operations for as derivatives due toUgopherservices, ECS Prepaid, Electronic Check Services and the variable conversion price.Central State Legal Services businesses for the year ended December 31, 2020 and 2019 is summarized below:

  Years Ended December 31,
  2020 2019
Revenue $8,291,842  $42,998,336 
Cost of revenue  7,900,122   41,596,118 
Gross Profit  391,720   1,402,218 
Operating expenses  408,644   2,477,084 
Loss from operations  (16,924)  (1,074,866)
Other income (expenses)  —   (3)
Net loss $(16,924) $(1,074,869)

As a result of the disposition of Ugopherservices, ECS Prepaid, Electronic Check Services and the Central State Legal Services businesses, the Company recognized a gain on the disposition of discontinued operations of $1,001,711 and $1,381,803 for the year ended December 31, 2020 and 2019, respectively.

 

Net loss for the year ended December 31, 20172020 was $10,287,290$17,994,888 compared to $1,586,226$186,505,119 for the same period in 20162019 due to the factors described above. The periods are not comparable due to the acquisition of RWJ Advanced Marketing, LLC in the third fiscal quarter of 2017.

 

Liquidity and Capital Resources

 

Our cash was $522,445 and $1,305,062restricted cash were $386,659 and $178,016, respectively, at September 30, 20182021 and $113,034 and $402,532, respectively, at December 31, 2017, respectively.2020. Cash used in operating activities during the nine months ended September 30, 20182021 was $2,842,007,$958,011, compared to $215,405$542,913 during the same period in 2017. Certain items are not comparable2020. Significant differences exist between the periods, including, common stock and warrants issued for services in 2018, amortizationloss on debt modification, impairment of intangible assets, from recent acquisitionsloss on exchange of assets and amortization of debt discount which result from the convertible notes issued in 2017.discount. Our working capital position worsenedimproved going from a working capital deficit of $1,060,506$27,710,040 at December 31, 20172020 to a working capital deficit of $5,278,748$21,704,420 at September 30, 2018,2021, principally as a result modification of debt terms for a convertible note to extend the increase in the derivative liability, an increase in accounts payable and accrued expenses and the issuance of a note payable related to the acquisition of certain assets ECS Prepaid LLC with an outstanding balance of $392,619 at September 30, 2018.due date beyond one year. Cash flows used in investing activities were $496,229$0 during the nine months ended September 30, 2018,2021, compared to $13,021$231,771 for the same period in 2017.2020. The increasedecrease is due to the purchasecash of property and equipment, the amount paid for acquisitions and the amount paid as an acquisition deposit for Spare CS, Inc.discontinued operations in 2020. Cash from financing activities for the nine months ended September 30, 20182021 was $2,555,619,$1,231,636, compared to $250,000$967,099 for the same period in 2017.2020. The increase is due to the issuance of a convertible notes and the sale of common stock in 2018. 2021.

 

We sustained net losses of $46,045,353$32,854,195 for the nine months ended September 30, 2018.2021. In addition, we had a working capital deficit of $5,286,129$21,704,420 and accumulated deficit of $60,427,015$303,505,534 at September 30, 2018.2021. We recentlyhave historically financed our operations with proceeds from the sale of convertible notes. There is no guarantee that convertible note financing or other sources of capital will be available to the Company going forward.

In September of 2017 we purchased the assets of RWJ Advanced Marketing, LLC, in 2017, and then after ECS Prepaid LLC, Electronic Check Services, Inc. and Central States Legal Services, Inc. in 2018. RWJ and ECS have historically generated significant revenues which we do not expect to continue in the future.future, as the Company divested its investment in ECS Prepaid LLC, Electronic Check Services, Inc. and Central States Legal Services, Inc. on or around September 2019, left only with the acquired assets from RWJ Advanced Marketing, LLC which in litigation, as disclosed in this report. In addition, during the firstlast half of 2018 and the first few months of 2019, the Company has raised or secured $3,000,000 inapproximately $9,500,000 of net proceeds through the issuance of convertible debt and notes payable (see discussion below).

We intend to continue to make investments to support our business growth and we will require additional funds to respond to business challenges, including the need to develop new features and products or enhance our existing products, improve our operating infrastructure or acquire complementary businesses and technologies. Further, we need additional capital to continue operations. Accordingly, we need to engage in equity or debt financings to secure additional funds. We expect that we have sufficient capital andto maintain operations through the end of 2021. In order to fully implement our business plan, we will need to raise $10,000,000. The Company will need to raise additional capital in the future of which there is no guarantee that the Company will be able to successfully raise such capital on acceptable terms. With the current cash flow from operations from the recent acquisitions, theon hand, cash received from recent convertible debtin our attorney’s trust account and equity capital, andadditional cash neededanticipated to be raised in the near future, we believe we will have sufficient cash to meet our obligations for the next 12 months.

$10,000,000 for GBT Technologies S. A. acquisition

In accordance with the acquisition of GBT-CR the Company issued a convertible note in the principal amount of $10,000,000. The convertible note bears interest of 6% per annum and is payable at maturity on December 31, 2021. At the election of the holder, the convertible note can be converted into a maximum of 20,000 shares of Series H Preferred Stock. Each share of Series H Preferred Stock is convertible, at the option of the holder but subject to the Company increasing its authorized shares of common stock, into such number of shares of common stock of the Company as determined by dividing the Stated Value ($500 per share) by the conversion price ($10.00 per share).

On May 19, 2021, the Company, Gonzalez, GBT-CR and IGOR 1 Corp entered into a Mutual Release and Settlement Agreement and Irrevocable Assignment of outstanding balance plus accrued interest (the “Gonzalez Agreement”). Pursuant to the Gonzalez Agreement, without any party admission of liability and to avoid litigation, the parties has agreed to (i) extend the GBT convertible note maturity date to December 31, 2022, (ii) amend the GBT convertible note terms to include a beneficial ownership blocker of 4.99% and a modified conversion feature to the GBT convertible note with 15% discount to the market price during the 20 trading day period ending on the latest complete trading day prior to the conversion date and (iii) provided for an assignment of the GBT convertible note by Gonzalez to a third party.

During the nine months ended September 30, 2021, IGOR 1 converted $1,084,600 of the convertible note into 1,600,000 shares of the Company’s common stock. Also, on June 24, 2021, the Company transferred 5,500,000 SURG shares received as repayment of $660,000 of this convertible note.

Glen Eagles Acquisition LP

On July 8, 2019, the Company entered a Consulting Agreement with Glen Eagles Acquisition LP (“Glen”) as consultant to provide services in connection with the Company’s acquisition of 25% of GBT Technologies, S.A., a Costa Rican corporation (“GBT-CR”). Consultant will provide analysis, interaction with related professional and other services as requested by the Company to integrate and expand capabilities between GBT-CR and the Company. The Company shall pay Glen $1,000,000 through the issuance of a 6% Convertible Note. At the election of Glen, the Convertible Note can be converted into a maximum of 2,000 shares of Series H Preferred Stock. Each share of Series H Preferred Stock is convertible, at the option of the holder but subject to the Company increasing its authorized shares of common stock, into such number of shares of common stock of the Company as determined by dividing the Stated Value ($500 per share) by the conversion price ($10.00 per share). The Series H Preferred Stock has no liquidation preference, does not pay dividends and the holder of Series H Preferred Stock shall be entitled to one vote for each share of common stock that the Series H Preferred Stock may be convertible into. In addition, the Company entered into an Amendment of a Common Stock Purchase Warrant held by Glen to acquire nine million shares of common stock that had been assigned to Glen by Guardian Patch LLC. Pursuant to the amendment, the Company agreed to provide that the Common Stock Purchase Warrant may be exercised on a cashless basis and provided a beneficial ownership limitation of 4.99%. On or about June 23, 2020, the Company and AltCorp entered into agreements with SURG and Glen Eagles Acquisition LP (“Glen”) into series of agreements regarding the $4,000,000 SURG Note. Glen converted in full its $1,000,000 convertible note that was issued by the Company on July 8, 2019 plus $50,000 of accrued interest, into $1,050,000 of a SURG Note via an assignment of a portion ($1,050,000 of a $4,000,000 face value) of the $4,000,000 SURG Note. In addition, the Company entered into a consulting agreement with Glen for which the Company shall pay to Glen $200,000 via an assignment of a portion ($200,000 of a $4,000,000 face value) of the $4,000,000 SURG Note. Glen in turn converted all its $1,250,000 considerations received into 2,500,000 SURG shares. The open aged credit balances with Glen as of the date of this report is $237,500.

RWJ Acquisition Note

In connection with the acquisition of RWJ in September 2017, the Company issued a note payable. The note accrues interest at 3.5% per annum, was due on December 31, 2019 and is secured by the assets purchased in the acquisition. The Company contests the validity of the note, as such the note has not been repaid as of December 31, 2020. (See Item 3 – Legal Proceedings). The balance of the note at September 30, 2021 was $2,600,000 plus accrued interest of $385,631.

Discover Growth Fund

On December 3, 2018, the Company entered into a Securities Purchase Agreement (the “SPA”) with Discover Growth Fund, LLC (the “Investor”) pursuant to which the Company issued a Senior Secured Redeemable Convertible Debenture (the “Debenture”) in the aggregate face value of $8,340,000. In connection with the issuance of the Debenture and pursuant to the terms of the SPA, the Company issued a Common Stock Purchase Warrant to acquire up to 225,000 shares of common stock for a term of three years (the “Warrant”) on a cash-only basis at an exercise price of $100.00 per share with respect to 50,000 Warrant Shares, $75.00 with respect to 75,000 Warrant Shares and $50.00 with respect to 100,000 Warrant Shares. The holder may not exercise any portion of the Warrants to the extent that the holder would own more than 4.99% of the Company’s outstanding common stock immediately after exercise. The outstanding principal amount may be converted at any time into shares of the Company’s common stock at a conversion price equal to 95% of the Market Price less $5.00 (the conversion price is lowered by 10% upon the occurrence of each Triggering Event – the current conversion price is 75% of the Market Price less $5.00). The Market Price is the average of the 5 lowest individual daily volume weighted average prices during the period the Debenture is outstanding. On May 28, 2019, the Investor delivered to the Company a “Notice of Default and Notice of Sale of Collateral” (the “Notice”). On December 23, 2019, in arbitration between the Company and the Investor, an Interim Award was entered in favor of the Investor. On January 31, 2020, the Company was informed that a final award was entered (the “Final Award”). The Final Award affirms that certain sections of the Debenture constitute unenforceable liquidated damages penalties and were stricken. Further, it was determined that the Investor was entitled to recovery of their attorney’s fees. Consequently, the arbitrator awarded Investor an award of $4,034,444 plus interest of 7.25% accrued from May 15, 2019 and costs in the amount of $55,613. On February 18, 2020, the Company filed a motion with the United States District Court District of Nevada (the “Nevada Court”) to confirm the Final Award and a motion to consolidate Investor’s application to confirm the Final Award filed in the U.S. District Court of the Virgin Islands (Case No: 3 :20-cv-00012-CVG-RM) (the “Virgin Island Court”). On February 27, 2020, the Nevada Court denied the Company’s motion to confirm the Final Award and motion to consolidate and further decided that the confirmation of the Final Award should be litigated in the Virgin Island Court. As such, on February 27, 2020, the Company filed a Notice of Entry of Order as well as a Motion to Confirm the Arbitration Award, address the outstanding issues regarding whether Investor’s rights are subordinated to other creditors and, thereafter, oversee a commercially reasonable foreclosure sale (Case No: 3 :20-cv-00012-CVG-RM). It was the Company’s position that the Final Award must first be confirmed and all questions regarding the rights of Investor relative to those of other creditors must be determined before any foreclosure sale can proceed. It is further the position of the Company that the previously disclosed foreclosure sale scheduled by Investor is being conducted in a commercially unreasonable manner and that if Discover proceeded forward with the foreclosure sale it did so at its own risk. Nevertheless, on February 28, 2020, Investor advised that it conducted a sale of the Company’s assets. As the date of this report Investor failed to present a deed of sale for the alleged sale that allegedly took place as noticed. The Company filed with Virgin Island Court the motions disputing the validity of the alleged sale. On July 28, 2020, Investor filed in the State of Nevada a motion for attorneys $48,844 and costs $716. The Company filed an answer on August 11, 2020. On October 16, 2020, Investor motion was denied. As of September 30, 2021, the amount due related to this settlement was $4,090,057.

Redstart Holdings Corp.

Paid Off Notes/Notes Converted

On August 4, 2020, the Company entered into a Securities Purchase Agreement with Redstart Holdings Corp., an accredited investor (“Redstart”) pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 1”) in the aggregate principal amount of $153,600 for a purchase price of $128,000. The Redstart Note No. 1 has a maturity date of November 3, 2021 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 1 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 1 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 1, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 1. The transactions described above closed on August 5, 2020. The outstanding principal amount of the Redstart Note No. 1 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 1 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 1), the Redstart Note No. 1 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 1. During the nine months ended September 30, 2021, the entire amount of Redstart Note No. 1 of $153,600 plus accrued interest was converted into 226,532 shares of common stock.

On September 15, 2020, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 2”) in the aggregate principal amount of $93,600 for a purchase price of $78,000. The Redstart Note No. 2 has a maturity date of September 15, 2021 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 2 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 2 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 2, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 2. The transactions described above closed on September 16, 2020. The outstanding principal amount of the Redstart Note No. 2 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 2 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 2), the Redstart Note No. 2 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 2. During the nine months ended September 30, 2021, the entire amount of Redstart Note No. 2 of $93,600 plus accrued interest was converted into 89,169 shares of common stock.

On December 9, 2020, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 3”) in the aggregate principal amount of $100,200 for a purchase price of $83,500. The Redstart Note No. 3 has a maturity date of December 9, 2021 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 3 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 3 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 3, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 3. The transactions described above closed on December 11, 2020. The outstanding principal amount of the Redstart Note No. 3 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 3 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 3), the Redstart Note No. 3 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 3. During the nine months ended September 30, 2021, the entire amount of Redstart Note No. 3 of $100,200 plus accrued interest was converted into 135,582 shares of common stock.

On February 10, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 4”) in the aggregate principal amount of $184,200 for a purchase price of $153,500. The Redstart Note No. 4 has a maturity date of February 5, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 4 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 4 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 4, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 4. The transactions described above closed on February 10, 2021. The outstanding principal amount of the Redstart Note No. 4 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 4 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 4), the Redstart Note No. 4 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 4. During the nine months ended September 30, 2021, the entire amount of Redstart Note No. 4 of $184,200 plus accrued interest was converted into 386,146 shares of common stock.

On March 15, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 5”) in the aggregate principal amount of $106,200 for a purchase price of $88,500. The Redstart Note No. 5 has a maturity date of June 15, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 5 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 5 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 5, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 5. The transactions described above closed on March 17, 2021. The outstanding principal amount of the Redstart Note No. 5 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 5 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 5), the Redstart Note No. 5 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 5. During the nine months ended September 30, 2021, the entire amount of Note No. 5 of $106,200 plus accrued interest was converted into 317,837 shares of common stock.

Outstanding Notes – This is only up to Sep 2021 correct?

On May 26, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 6”) in the aggregate principal amount of $106,200 for a purchase price of $88,500. The Redstart Note No. 6 has a maturity date of August 26, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 6 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 6 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 6, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 6. The transactions described above closed on May 28, 2021. The outstanding principal amount of the Redstart Note No. 6 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 6 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 6), the Redstart Note No. 6 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 6.

On September 21, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 7”) in the aggregate principal amount of $244,500 for a purchase price of $203,750. The Redstart Note No. 7 has a maturity date of December 22, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 7 at the rate of two and a half percent (2.5%) per annum from the date on which the Redstart Note No. 7 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 7, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 7. The transactions described above closed on September 28, 2021. The outstanding principal amount of the Redstart Note No. 7 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 7 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 7), the Redstart Note No. 7 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 7.

Iliad Research and Trading

On February 27, 2019, the Company entered into a note purchase agreement with a third-party investor - Iliad Research and Trading, L.P.(“Iliad”), pursuant to which the Company issued a promissory note for the original principal amount of $2,325,000. The promissory note had an original issue discount of $300,000 and the inventor paid consideration of $2,025,000 to the Company, of which $25,000 was paid for legal expenses. The outstanding balance of the promissory note is to be paid on the one-year anniversary of the issuance of the note. Interest on the note accrues at the rate of 10% per annum compounding daily. Subject to the terms and conditions set forth in the note, the Company may prepay all or any portion of the outstanding balance of the note at any time in an amount in cash equal to 120% of the amount repaid. In connection with transactions that generate less than $1,000,000 in proceeds, the Company has agreed to not issue any debt instrument or incurrence of any debt other than trade payables in the ordinary course of business, any securities or agreements to sell common stock with anti-dilution or price reset/reduction features or any securities that are or may be become convertible or exercisable into common stock with a price that varies with the market price of the common stock (collectively, “Restricted Issuance Transaction”). The outstanding balance of the Note will be increased by 5% in the event the Company enters into a Restricted Issuance Transaction that is approved by Iliad. The original issue discount is being amortized to interest expense over the term of the promissory note. On February 27, 2020, the Company and Iliad entered into an Amendment to the Iliad Note pursuant to which the maturity date of the Iliad Note was extended to August 27, 2020, provided that the Debt may be converted into shares of common stock of the Company at a conversion price equal to 80% multiplied by the lowest trading daily VWAP for the common stock during the 20 trading day period ending on the latest complete trading day prior to the conversion date, provided for the payment by the Company to Iliad of an extension fee equal to 7.5% of the outstanding balance of the Iliad Note resulting in a new balance of the Iliad Note of $2,765,983 and provided that the Company’s failure to deliver shares of common stock within three trading days of a conversion would result in an event of default. Iliad has agreed to restrict its ability to convert the Iliad Note and receive shares of common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 9.99% of the then issued and outstanding shares of common stock. On July 20, 2020 the Company and Iliad entered into agreement to extend the maturity of the Iliad Note until February 27, 2021 in consideration of an extension fee of $1,000. During 2020, Iliad converted $539,000 of its convertible note to 53,175,795 shares of the Company’s common stock. On February 28, 2021 the Company and Iliad entered into agreement to further extend the maturity of the Iliad Note until May 31, 2021 in consideration of an extension fee of $1,000 representing the third extension of the original note. On May 19, 2021, the Company and Iliad entered into agreement to further extend the maturity of the Iliad Note until August 31, 2021 in consideration of an extension fee of $1,000 representing the fourth extension of the original note. On August 20, 2021, the Company and Iliad entered into agreement to further extend the maturity of the Iliad Note until December 31, 2021 in consideration of an extension fee of $1,000. During the nine months ended September 30, 2021, Iliad converted $2,508,737 of its convertible note into 4,053,069 shares of the Company’s common stock. The balance of the Iliad debt at September 30, 2021 and December 31, 2020 was $0 and $2,431,841.

Stanley Hills LLC

The Company entered into a series of loan agreements with Stanley Hills LLC (“Stanley”) pursuant to which it received more than $1,000,000 in loans (the “Debt”) since May 2019 up to December 2019. On February 26, 2020, in order to induce Stanley to continue to provide funding, the Company and Stanley entered into a letter agreement providing that the current note payable balance due to Stanley in the amount of $1,214,900 may be converted into shares of common stock of the Company at a conversion price equal to 85% multiplied by the lowest one trading price for the common stock during the 20-trading day period ending on the latest complete trading day prior to the conversion date. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. Stanley has agreed to restrict its ability to convert the Debt and receive shares of common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. During the nine months ended September 30, 2021, Stanley converted $1,009,468 of its convertible note into 1,550,718 shares of the Company’s common stock, and during the nine months ended September 30, 2021, Stanley loaned the Company an additional $697,386. Also, during the nine months ended September 30, 2021, the Company transferred the SURG shares received as repayment of $800,000 of this convertible note and also converted $126,003 of accrued interest into the principal balance. During the six months ended June 30, 2021, Gonzalez assigned all his accrued balances of $424,731 to Stanley in a private transaction that the Company is not part to (See Note 6). The balance of the Stanley debt at September 30, 2021 and December 31, 2020 was $448,121 and $1,009,469, respectively. The Stanley debt is secured via a pledge agreement on the SURG shares.

GBT Technologies, S.A.

On June 17, 2019, the Company, Altcorp Trading LLC, a Costa Rica company and a wholly-owned subsidiary of the Company (“Altcorp”), GBT Technologies, S.A., a Costa Rica company (“GBT-CR”) and Pablo Gonzalez, a shareholder’s representative of GBT-CR (“Gonzalez”), entered into and closed an Exchange Agreement (the “GBT Exchange Agreement”) pursuant to which the parties exchanged certain securities. In accordance with the Exchange Agreement, Altcorp acquired 625,000 shares of GBT-CR representing then 25% (and currently less than 20% per GBT-CR further issuance of shares to other parties) of its issued and outstanding shares of common stock from Gonzalez in exchange for the issuance of 20,000 shares of Series H Convertible Preferred Stock of the Company and a Convertible Note in the principal amount of $10,000,000 issued by the Company (the “Gopher Convertible Note”) as well as the transfer and assignment of a Promissory Note payable by Gopher Protocol Costa Rica Sociedad De Responsabilidad Limitada to the Company in the principal amount of $5,000,000 dated February 6, 2019 (of which the underlying security for this Promissory Note is 30,000,000 restricted shares of common stock of Mobiquity) and 60,000,000 restricted shares of common stock of Mobiquity.

On May 19, 2021, the Company, Gonzalez, GBT-CR and IGOR 1 Corp entered into a Mutual Release and Settlement Agreement and Irrevocable Assignment of outstanding balance plus accrued interest (the “Gonzalez Agreement”). Pursuant to the Gonzalez Agreement, without any party admission of liability and to avoid litigation, the parties has agreed to (i) extend the GBT convertible note maturity date to December 31, 2022, (ii) amend the GBT convertible note terms to include a beneficial ownership blocker of 4.99% and a modified conversion feature to the GBT convertible note with 15% discount to the market price during the 20 trading day period ending on the latest complete trading day prior to the conversion date and (iii) provided for an assignment of the GBT convertible note by Gonzalez to a third party. As a result of the change in terms of this convertible note, the Company took a charge related to the modification of debt of $13,777,480 during the nine months ended September 30, 2021.

During the nine months ended September 30, 2021, IGOR 1 converted $1,084,600 of the convertible note into 1,600,000 shares of the Company’s common stock. Also, on June 24, 2021, the Company transferred 5,500,000 SURG shares received as repayment of $660,000 of this convertible note.

 

Off-Balance Sheet Arrangements

 

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

 

Critical Accounting Policies and Use of Estimates

 

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of our financial statements in accordance with U.S. GAAP requires us to make certain estimates, judgments and assumptions that affect the reported amount of assets and liabilities as of the date of the financial statements, the reported amounts and classification of revenues and expenses during the periods presented, and the disclosure of contingent assets and liabilities. We evaluate our estimates and assumptions on an ongoing basis and material changes in these estimates or assumptions could occur in the future. Changes in estimates are recorded on the period in which they become known. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances and at that time, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily-apparent from other sources. Actual results may differ materially from these estimates if past experience or other assumptions do not turn out to be substantially accurate.

 

We believe that the accounting policies described below are critical to understanding our business, results of operations, and financial condition because they involve significant judgments and estimates used in the preparation of our financial statements. An accounting is deemed to be critical if it requires a judgment or accounting estimate to be made based on assumptions about matters that are highly uncertain, and if different estimates that could have been used, or if changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our financial statements. Other significant accounting policies, primarily those with lower levels of uncertainty than those discussed below, are also critical to understanding our financial statements. The notes to our financial statements contain additional information related to our accounting policies and should be read in conjunction with this discussion.

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Presentation of Financial Statements

 

The accompanying financial statements include the accounts of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

Accounts ReceivableMarketable Equity Securities

 

The Company grants creditaccounts for marketable equity securities in accordance with ASC Topic 321, Investments – equity securities. Marketable equity securities are reported at fair value based on quotations available on securities exchanges with any unrealized gain or loss being reported as a component of other income (expense) on the statement of operations. The portion of marketable equity security expected to establishments (such as convenient stores) who sell the Company’s products under credit terms that it believes are customary in the industry and does not require collateral to support customer receivables. The Company currently does not provide an allowance for doubtful collections, which is based upon a review of outstanding receivables, historical collection information, and existing economic conditions. Normal receivable terms vary from 7-30 days after the issuancebe sold within twelve months of the invoice and typically would be considered past due when the term expires. Delinquent receivables are written off based on individual credit evaluation and specific circumstances of the customer.

Inventory

Inventorybalance sheet date is valued at the lower of the inventory’s cost (first in, first out basis) or thereported as a current market price of the inventory. Management compares the cost of inventory with its market value and an allowance is made to write down inventory to market value, if lower. At December 31, 2017, all of the Company’s inventory was finished goods inventory which consisted principally of phones and phone card products, including PINS for cell minutes, SIM cards for cell minutes, as well as gift cards.asset.

 

Revenue Recognition

 

ASUAccounting Standards Update (“ASU”) No. 2014-09,, Revenue from Contracts with Customers (“Topic 606”606”), became effective for the Company on January 1, 2018. The Company’s revenue recognition disclosure reflects its updated accounting policies that are affected by this new standard. The Company applied the “modified retrospective” transition method for open contracts for the implementation of Topic 606.As sales are and have been primarily from IT services, sale of phones, phone card products, prepaid cellular phone minutes and cellular activation, and the The Company hashad no significant post-delivery obligations, this new standard did notresult in a material recognition of revenue on the Company’s accompanying consolidated financial statements for the cumulative impact of applying this new standard. The Company made no adjustments to its previously-reported total revenues, as those periods continue to be presented in accordance with its historical accounting practices under Topic 605, Revenue Recognition.

 

Revenue from providing IT services, sale of phones, phone card products, prepaid cellular phone minutes and cellular activation services areis recognized under Topic 606 in a manner that reasonably reflects the delivery of its services and products to customers in return for expected consideration and includes the following elements:as follows:

 

●executed contracts with the Company’s customers that it believes are legally enforceable;
●identification of performance obligations in the respective contract;
●determination of the transaction price for each performance obligation in the respective contract;
●allocation the transaction price to each performance obligation; and
●recognition of revenue only when the Company satisfies each performance obligation.

 

These five elements, as applied to each of the Company’s revenue category, is summarized below:

 

●IT services - revenue is recorded on a monthly basis as services are provided;
●Sale of phones, phone card products, prepaid cellular phone minutes and cellular activation – revenue is recognized at the time of sale to the customer; and
●License fees and Royalties – revenue is recognized based on the terms of the agreement with its customer.

 

Derivative Financial Instruments

 

The Company evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a weighted average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. As of December 31, 2017,September 30, 2021, the Company’s only derivative financial instrument was an embedded conversion feature associated with convertible notes payable due to certain provisions that allow for a change in the conversion price based on a percentage of the Company’s stock price at the date of conversion.

 

Fair Value Measurementsof Financial Instruments

 

The Company appliesFor certain of the provisions ofCompany’s financial instruments, including cash, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities.

FASB ASC 820-10,Topic 820, “Fair Value Measurements and Disclosures.”Disclosures, requires disclosure of the fair value of financial instruments held by the Company. FASB ASC 820-10Topic 825, Financial Instruments, defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

 

●Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

 

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●Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

 

●Level 3 inputs to the valuation methodology areus one or more unobservable andinputs which are significant to the fair value measurement.

The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic 480, Distinguishing Liabilities from Equity, and FASB ASC Topic 815, Derivatives and Hedging.

 

For certain financial instruments, the carrying amounts reported in the balance sheets for cash and current liabilities, including convertible notes payable, each qualify as a financial instrumentsinstrument, and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.

 

The Company uses Level 2 inputs for its valuation methodology for derivative liabilities as their fair values were determined by using the Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.

 

Dividends

 

The Company has not yet adopted any policy regarding payment of dividends. No cash dividends have been paid or declared since the Date of Inception.

 

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MANAGEMENT

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

As a smaller reporting company (as defined in Rule 12b-2 of the Exchange Act), we are not required to provide the information called for by Item 304 of Regulation S-K.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS

Below are the names andSet forth below is certain information regarding Gopher Protocol’sour executive officers and directors. Each of the directors listed below was elected to our board of directors to serve until our next annual meeting of stockholders or until his or her successor is elected and qualified. All directors hold office for one-year terms until the election and qualification of their successors. The following table sets forth information regarding the members of our board of directors and our executive officers:

Current Directors/Officers:

 

Name Age Title
Douglas Davis60Chief Executive Officer
Michael Murray 4952 President and Director
Dr. Danny Rittman 5659 Chief Technology Officer
Kevin Pickard55Chief Financial Officer and Director
Mansour Khatib 5659 Chief MarketingExecutive Officer, Chief Financial Officer and Director
Robert Yaspan72Chairman of the Board of Directors
Judit Nagypal49Director
Ned Seigel67Director
Eva Bitter46Director
Mitchell Tavera60Director
Muhammed Khilji53Director

 

Douglas Davis is a seasoned executive with management experience across many areas including M&A, capital raising, sales and business development. Since 2010, Mr. Davis has served as the CEO of Bitspeed LLC, an extreme file transfer software and appliance solution. In addition, since 2001, Mr. Davis has served as the Managing Partner of CoBuilder, Inc., a consulting organization providing services associated with increasing efficiencies, including market penetration and revenues, for large and small corporate entities. Mr. Davis received an AB Political Science from Stanford University and an MBA (Concentration in Finance and Strategic Management) from UCLA Anderson Graduate School of Management.

Michael Murray is a licensed and UST Certified NMLS Originator, a licensed mortgage banker, a real estate broker and a licensed general contractor. From 1998 through August 2012, Mr. Murray held the position of Broker and DRE Officer with Home Plus Realty, Inc. From August 2012 through May 2013, Mr. Murray held the positions of FHA Production and Save Team with Cashcall Mortgage, Inc. and since May 2013 to the present, Mr. Murray has been self-employed as a Consultant and Managing Broker. Mr. Murray received an M.A. in Public Relations from California Baptist University in May 2014 and a B.A. in Political Science from California Baptist University in May 2013.

 

Mr. Murray is an officer and shareholder of Hermes Roll LLC (“Hermes”), a Nevada limited liability company to be formed. On March 4, 2015, the Company entered into a Territorial License Agreement with Hermes, which is the basis for the Company’s current operations. On June 16, 2015, the Company and Hermes entered into an Amended and Restated License Agreement whereby the license was expanded globally, the Company agreed to invest $5,000,000 into Hermes for working capital and the Company was provided with an option to acquire 100% of the outstanding membership interest of Hermes in consideration of 20,000,000 shares of common stock of the Company through June 16, 2016. The Company and Hermes agreed that the ability to acquire 100% of the membership interest of Hermes will be reduced on a pro-rata basis contingent upon the amount of working capital invested by the Company. For example, in the event the Company provides Hermes with $2,500,000 in working capital, then the Company will be entitled to acquire 50% of the membership interest of Hermes in consideration of 10,000,000 shares of common stock of the Company.

Mr. Murray resigned as Chief Executive Officer in connection with the acquisition of certain assets from RWJ Advanced Marketing, but remains a Directoris President of the Company.Company, and a director.

 

Dr. Danny Rittman is a veteran software architect and integrated circuit technology expert with over 20 years of experience in the technology sector. From 2014 through the present, Dr. Rittman has served as the CTO and as a director of the Company, leading the Company’s technological direction and managing teams of mobile software developers. From 2012, through 2014, Dr. Rittman served as a Senior Integrated Circuit Consultant for Qualcomm / Max Linear, managing teams of integrated circuit designers within the mobile technology arena. From 2007 through 2012, Dr. Rittman served as the Founder and CTO of Micrologic Design Automation, leading the company’s technological direction, including architecture, design and development of EDA software tools. From 2002 through 2007, Dr. Rittman served as an Integrated Circuit CAD / Software Senior Consultant for IBM, managing IC back-end projects and leading back-end CAD and QA software tool development and implementation. From 1995 through 2002, Dr. Rittman served as the Founder and VP of R&D for Bindkey Technologies, leading the company’s technological direction, research and development of EDA software tools for integrated circuits and back-end design. Dr. Rittman received a BS in Electrical Engineering - VLSI Design from the University of Bridgeport, graduating Magna Cum Laude in 1992; a MS in Computer Science - VLSI Design, Specializingspecializing in Automation Algorithms, from La Salle University, graduating Magna Cum Laude in 1996; and a PhD in Computer Science - VLSI Design, specializing in EDA Concepts and Algorithms, from La Salle University, graduating Summa Cum Laude in 1998. Mr. Rittman is the Company’s CTO and director.

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Kevin PickardMansour Khatib iswas appointed as the Company Chief Excusive and Financial Officer on April 13, 2020, the Company’s Board of Directors appointed Mansour Khatib, who has served as the Chief Marketing Officer and a certified public accountant with experience providing management consulting services for small to medium sized companies, including review and preparationdirector of filings with the Securities and Exchange Commission.Company as Chief Executive Officer. Mr. Pickard is the owner of Kevin F. Pickard, CPA, PC which he founded in 1998. Prior to that,Khatib has also previously served as Interim Chief Executive Officer from August 1996May 2018 to July 1998, Mr. Pickard was a partner of Singer Lewak Greenbaum & Goldstein, LLP, where he co-managed the accounting its securities industry practice group. He was employed as a Business Assurance Manager of PricewaterhouseCoopers, LLP (formerly, Coopers & Lybrand, LLP) in various offices from September 1987 to July 1993 and from April 1994 to August 1996, where he focused on auditing companies in insurance, high-tech and industries. Mr. Pickard holds a Bachelor of Science in Accounting and a Master of Accountancy from Brigham Young University. Mr. Pickard is currently a licensed Certified Public Accountant in North Carolina and California.

2018. From 2009 through 2012,Mansour Khatib served as the CEO and CFO of The Merchandise Company, located in Long Beach, California. From 2012 through the present, Mr. Khatib has served as a U.S. Business and Marketing Sales Representative for KB Racking, located in Toronto, Canada. From May 2013 through July 2014, Mr. Khatib served as VP of Marketing for Sun Energy Partners, LLC, developing solar rooftop projects. From July 2014 through the present, Mr. Khatib has served as the CTO for New Energy Ventures, LLC, a company that is developing utility scale projects in New Jersey, California, and smaller projects in Mexico, the Caribbean and Peru. Mr. Khatib received B.A. in Economics from Fachhochschule Wuppertal in Wuppertal, Germany in 1988 and a Bachelors in Electro Engineering & Computer Technology from University Aachen in Aachen, Germany in 1985. Mr. Khatib is the Company’s CEO and ditrector.

 

Since 2005,Muhammed Khilji has ownedFamily Relationships

There are no family relationships among our directors and operated Muhammad Khilji, CPA, a business accountingexecutive officers. There is no arrangement or understanding between or among our executive officers and tax advisory service. Mr. Khiljidirectors pursuant to which any director or officer was or is engaged in providing advisory services to small business clients. He has been serving numerous high net worth individuals,professionals, as well as entrepreneurs. He is involved in consulting clients in the areas of strategic business management,sales and marketing,retirement planning, asset protection,financial restructuring and bankruptcy.Mr. Khiljitax compliance experience spans over large corporations to multi-state partnerships.Mr. Khilji has also served as contract CFO for a number of companies. From 2004 to 2005, Mr. Khilji servedbe selected as a Senior Managerdirector or officer. None of our directors or executive officers have had direct or indirect material interest in any transaction or proposed transaction, in which the Financial Services Group of KPMG and from 2002 to 2004 asCompany was or is a Senior Manager with the Corporate Tax Group at Waterhouse Cooper. Prior to 2002, Mr. Khilji was a Senior Manager with the Corporate Tax Advisory Group at Arthur Anderson. Mr. Khilji has been licensed as a Certified Public Accountant in California since 2002 and graduated from Southern Illinois University in 1993 with a Master of Business Administration Finance and Marketing and in 1991 with a Bachelor of Science Finance.proposed participant, exceeding $120,000.

 

Robert Yaspan, age 72, has owned and operated Law Offices of Robert M. Yaspan since 1997 where has focused his practice on business reorganizations and real property law. Mr. Yaspan received a Bachelor of Arts degreeInvolvement in History from the University of Chicago in 1968 and a Juris Doctorate from University of Southern California in 1971. Mr. Yaspan is the manager of REKO Holdings LLC, a significant shareholder of the Company.Certain Legal Proceedings

 

Judit Nagypal, age 48, has extensive experience in human resourcesTo our knowledge, during the last ten years, none of our directors and business, with multicultural understanding coming from diverse international positions with over 18 years of successful track record in field and headquarters positions, both in specialist and generalist roles. Since 2013, Ms. Nagypal has held various positions in Microsoft including HRD Leadership Development and Talent Management from 2013 to 2015, Independent Software Vendor Acquisition Lead from 2015 to 2016 and Independent Software Vendor Go-To-Market Lead from 2016 to present. Prior to Microsoft, Mr. Nagypal held positions with AXA Group, Kraft Biscuits and Danone Group. Ms. Nagypal received a Postgraduate Diploma in Human Resources Management from Middlesex University in 2002, a Law Degree from Eotvos Lorand University in 1998 and a Masters in Economic Sciences from Budapest University of Economics in 1994.executive officers has:

 

Ned L. Siegel, 66, has had a long and distinguished career as a senior U.S. government official and businessman. He was appointed by then President George W. Bush as the U.S. Ambassador to the Commonwealth of the Bahamas from October 2007 to January 2009. He was also appointed by President Bush to serve under Ambassador John R. Bolton at the United Nations in New York, serving as the Senior Advisor to the U.S. Mission and as the U.S. representative to the 61st Session of the United Nations General Assembly. Prior to his ambassadorship, he was appointed to the Board of Directors of the Overseas Private Investment Corporation (OPIC). In addition to his public service, Ambassador Siegel has over 30 years of entrepreneurial successes. Presently, he serves as President of The Siegel Group, a multi-disciplined international business management advisory firm specializing in real estate, energy, utilities, infrastructure, financial services, oil and gas and cyber and secure technology. Ambassador Siegel also serves on the Board of Directors and Advisory Boards of other numerous public and private companies, and private equity groups. He graduated Phi Beta Kappa from the University of Connecticut in 1973 and received a juris doctorate from the Dickinson School of Law in 1976. In December 2014, he received an honorary degree of Doctor of Business Administration from the University of South Carolina. Mr. Siegel has previously served as a member of the Board of Directors of Healthwarehouse.com, Inc. from June 2013 to September 2016, PositiveID Corporation from February 2011 to the present, Notis Global, Inc. from April 2014 to the present, Viscount Systems from April 2013 to the present andBaltia Air Lines, Inc. (dba USGlobal Airways) from June 2017 to present.

Since 2012 to the present,Eva Bitter has served as Business Unit Leader for Rehab zRt. Prior to 2012, Ms. Bitter served in various sales and marketing roles with Reckitt Benckiser, Colgate Palmolive Hungary and Kraft Foods Hungary. Ms. Bitter received a degree in International Relations from the College for Foreign Trade, Budapest in 1993 and a degree in External Economies from the University of Economic Sciences, Budapest in 1996.

From 1978 through June 2017,Mitchell Tavera has served as a member of the El Segundo Police Department in various capacities from Patrol Cadet, Detective, Sergeant, Lieutenant, Captain and culminating in his appointment as Chief of Police which role he held from April 2010 through June 2017. Following Mr. Tavera’s retirement from the El Segundo Police Department, in November 2018, he joined Elite Interactive Solutions as Law Enforcement Liaison.

 25●Had a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time.
 
●Been convicted in a criminal proceeding or been subject to a pending criminal proceeding, excluding traffic violations and other minor offenses.
●Been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities.
●Been found by a court of competent jurisdiction (in a civil action), the SEC, or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
●Been the subject to, or a party to, any sanction or order, not subsequently reverse, suspended or vacated, of any self-regulatory organization, any registered entity, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

Corporate governance

On December 17, 2015, the Company established a Nominating and Corporate Governance Committee, a Compensation Committee and an Audit Committee (collectively, the “Committees”) and approved and adopted charters to govern each of the Committees.

Currently, there are no members on each of the committees and the board of directors has assumed the roles of each of the committees.

Agreements with Officers and Directors

 

On April 22, 2015, Michael Murray was appointed by the Company as the Chairman of the Board of Directors, CEO, and President of the Company. On March 4, 2015, the Company entered into a Territorial License Agreement with Hermes, which is the basis for the Company’s current operations. Mr. Murray is the owner of 9,900 shares of Series D Preferred Stock of the Company that is convertible at Mr. Murray’s election into 9,900,000 shares of common stock.stock at a fixed price of $0.50 per share. During 2016 Mr. Murray has converted all of his Series D Preferred Stock into common shares of the Company.

 

On June 30, 2015, the Company appointed Dr. Danny Rittman as Chief Technical Officer and a board member. On August 20, 2015,April 6, 2018, the Company entered into an agreement with Dr.and Danny Rittman, pursuant to which the parties agreed that (i) all inventions, improvements and developments made or conceived by Dr. Rittman, either solely or in collaboration with others pertaining to Company’s business, will be the property of Company, and (ii) Dr. Rittman will assign to the Company any and all intellectual property related to the Company’s consumer heuristic technology platform. Said agreement is contingent upon the Company funding its commitments per the June 16, 2015 - Amended and Restated Territorial License Agreement. Failure of the Company providing this funding, in full, or partially, will automatically terminate any GOPH ownership of the intellectual properties. Dr. Rittman is the Chief Technology Officer and a directorDirector of the Company, as well as the Chairman of the Company’s Advisory Board. Dr. Rittman owns 9,900 shares of Series D Preferred Stock of the Company that is convertible at Dr. Rittman’s into 9,900,000 shares of common stock. During 2016 Mr. Rittman has converted all ofagreed to amend his Series D Preferred Stock into common shares of the Company.

On August 20, 2015, the Company entered into anemployment agreement with Dr. Rittman pursuant to which he will receive salary at the parties agreed that (i) all inventions, improvements and developments made or conceived by Dr. Rittman, either solely orrate of $250,000 annually payable in collaboration with others pertaining to Company’s business, willequal increments of $15,000 per month. An additional $70,000 shall be the property of Company, and (ii) Dr. Rittman agreed to assign to the Company any and all intellectual property related to the Company’s consumer heuristic technology platform, subject to certain conditions, which as of December 31, 2016 have not been met. Aspayable within 15 days of the end of the fiscal year, the intellectual property developed by Dr. Rittman had not been assigned to the Company. The Company has expensed the stated value of that intellectual property in these financial statements.

calendar year. On or around March 18, 2016,September 14, 2018, the Company and Dr. Rittman entered into ana letter agreement intended to clarifyconfirming that the relationship betweenCompany is the owner of all intellectual property developed by Dr. Rittman relating to the Internet of Things (IoT) and the CompanyArtificial Intelligence enabled mobile technologies, including a global platform with both mobile and the ownership of certain technology in connection with certain agreements previously entered into between Company and Dr. Rittman and with third parties. Specifically, the Company entered into that certain Territorial License Agreement with Hermes Roll LLC dated March 4, 2015, which such agreement was amended to expand the related territorial license to a worldwide license pursuant to that certain Amended and Restated Territorial License Agreement datedfixed solutions, commencing June 16, 2015 (the “Amended and Restated Territorial License Agreement”), and that certain Letter Agreement (the “Letter Agreement”) entered into between Dr. Rittman and the Company dated August 20, 2015. The aforementioned agreements were tied to the funding of the Company in the minimum amount of $5,000,000 (the “Required Funding”) and the assignment to the Company and/or ownership by the Company of all past, present and future technology in the form of intellectual property, including, but not limited to patents, trademarks, domains, applications, social media pages (e.g. Twitter, LinkedIn and landing pages) (collectively, the “IP”), which such IP was paid for exclusively by Dr. Rittman and/or his affiliated companies, was contingent upon the Company obtaining the Required Funding by no later than October 30, 2015 (the “Contingency”). Accordingly, it was agreed to by the parties that (i) all inventions, improvements and developments made or conceived by the Dr. Rittman, either solely or in collaboration with others pertaining to Company’s business, would be the property of the Company subject to the Contingency. In the event the Contingency was not met, the Letter Agreement would be cancelled and rendered null and void. The Company acknowledged that the Company did not meet the Contingency, technically resulting in the cancellation of the Letter Agreement and rendering the Letter Agreement null and void. Moreover, the Company failed to meet its obligations under the Amended and Restated Territorial License Agreement, including the further development of the consumer heuristic technology platform, thereby creating a vacuum in its development in all aspects, including the ability to obtain funding, resulting in the need forcontinuing until Dr. Rittman’s partners to perform the necessary development work related to the above agreements.

26

The original Exclusive License Agreement will remain in place, while other agreements will be terminated and rendered null and void. Dr. Rittman will resign as an officer of the Company, but will remain as Director and technical consultant of the Company, and will accommodate the needs of the Company in return for compensation to be agreed by the parties. All intellectual property will remain in the possession of Dr. Rittman and his private partners, and the Company shall remain a licensee per the terms of the original Territorial License Agreement, and will develop the first product with Dr. Rittman and his partners.

The Company is the exclusive license holder for certain intellectual property relating to GopherInsight technology. The Company has assigned all its rights as they relate to the Guardian Patch to the LLC as consideration for the JV. Dr. Rittman’s partners have commenced development of the product via a private LLC that has been incorporated under the name “Guardian Patch LLC” (“LLC”). Certain private investors will provide all initial funding to the Company via the LLC for product development. The LLC will fund the development, and the Company will provide IT services via Dr. Rittman for a monthly fee. Dr. Rittman has signed an amendment employment agreement with the Company. As the Company is not a member of the LLC, the Company and the LLC have formed a Joint Venture (“JV”) for the purposes of developing and marketing the Patch. The LLC will be responsible for funding the development of the Patch. The Company will not need be required to invest funds in said JV. The Company responsibilities will be limited to the marketing of the product, where the marketing budget will be funded by the LLC. Moreover, the LLC has committed to provide the Company with working capital as needed. The Company has assigned and pledged to the LLC all its license derivative rights as they pertain to the Patch only. Dr. Rittman may be offered membership rights at some point in the future with the LLC, with which the Company is a JV partner, but is not equity member. The Company has agreed with the LLC that the same JV principles of the GPLLC for the patch will apply for the other two products (Epsilon and Puzpix) which will be vested under designated LLCs that will be incorporated by the LLC members. During the quarter ended December 31, 2016, 100% of the Company’s revenue was related to IT service provided to the LLC for Dr. Rittman services, in connection with the development of the Patch.terminated.

 

On April 16, 2016 (the “Effective Date”), Mansour Khatib and the Company entered into an Employment Agreement (the “Agreement”) pursuant to which Mr. Mansour Khatib agreed to serve as the Chief Marketing Officer of the Company. Mr. Mansour Khatib was also appointed as a director of the Company on the Effective Date. Pursuant to the terms of the Employment Agreement, Mr. Khatib will receive an annual salary of $100,000 upon the Company generating $1,000,000 in revenue during any three (3) month period. There is no understanding or arrangement between Mr. Khatib and any other person pursuant to which he was appointed as an executive officer and director. Mr. Khatib does not have any family relationship with any director, executive officer or person nominated or chosen by us to become a director or an executive officer. Mr. Khatib has not had direct or indirect material interest in any transaction or proposed transaction, in which the Company was or is a proposed participant, exceeding $120,000.

 

Effective August15,August 15, 2016, the Employment Agreement of Mansour Khatib, our CMO, was amended and restated as follows:

 

Upon the Company generating $1,000,000 in revenue during any three (3) month period (the “Threshold Requirement”), the Executive will receive salary at the rate of $100,000 annually (the “Base Salary”); provided, however, that that Company shall pay to Executive $5,000 per month (the “Monthly Salary Advance”) commencing on August 15, 2016, which such Monthly Salary Advance shall be an advance on the Base Salary and shall continue to be paid to Executive until such time that the Company launches its Guardian Patch technology into the consumer markets. Once the Threshold Requirement is met, the Base Salary will be payable in equal increments not less often than monthly in arrears and in any event consistent with the Company’s payroll policy and practices. The Base Salary of the Executive may from time to time be increased, but not decreased, by the Board, in its absolute discretion, including potential bonuses.”

27

On or around September 7, 2017, and in connection with the purchase of certain assets from RWJ Advanced Marketing LLC, the Company and Mr. Bauer entered into an Employment Agreement pursuant to which Mr. Bauer was retained as Chief Executive Officer for a term of one year, subject to an automatic extension, unless terminated, in consideration of a base salary of $250,000 and a bonus of 10% of net profit generated by the assets acquired. Mr. Bauer was also appointed to the Board of Directors of the Company. As of the closing date, Mr. Murray resigned as Chief Executive Officer of the Company but will remain as a director of the Company.

 

On or around September 30, 2017, Mr. Klinger resigned as Chief Financial OfficerCommencing January 1, 2020 Mansour Khatib salary was increased to pursue other opportunities. Mr. Bauer became CFO on the same date.$15,000 a month by Michel Murray our President.

 

On April 16, 2018, Kevin F. Pickard was appointed Chief Financial OfficerCompliance with Section 16(a) of the Company (at the same time, Mr. Bauer resigned his position as the Chief Financial OfficerSecurities Exchange Act of 1934

Section 16(a) of the Company). The CompanySecurities Exchange Act of 1934, as amended, requires our directors and Mr. Pickard entered into an Executive Retention Agreement dated April 16, 2018 pursuantexecutive officers and persons who own more than 10% of the issued and outstanding shares of our common stock to which Mr. Pickard agreed to serve as Chief Financial Officer in considerationfile reports of an annual salary of $120,000. The Company also issued Mr. Pickard 250,000 sharesinitial ownership of common stock and granted Mr. Pickardother equity securities and subsequent changes in that ownership with the SEC. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on a Stock Optionreview of the copies of such reports furnished to acquire 500,000 sharesus and written representations that no other reports were required, during the fiscal year ended December 31, 2020 all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with.

Code of common stockEthics

We have adopted a Code of Ethics that applies to all officers, directors and employees. The Company will provide to any person without charge a copy of such code of ethics upon written request to the Company at an exercise price of $2.80 per share for a period of five years. The Stock Options vest in tranches of 100,000 shares commencing on the one year anniversary and continuing thereafter on an annual basis or in full in the event of a change of control. The Company and Mr. Pickard also entered into an Indemnification Agreement. The employment of Mr. Pickard is at will and may be terminated at any time, with or without formal cause. its registered offices.

 

On April 25, 2018, Muhammad Khilji was appointed to the Board of Directors of Gopher Protocol Inc. (the “Company”) to serve as a director of the Company. Mr. Khilji entered into an agreement pursuant to which he will serve as a director. The director agreement provides that he will one tine grant of 100,000 shares of common stock and a stock option to acquire 100,000 shares of common stock exercisable for a period of five years at $2.50 per share. In addition, Mr. Khilji will receive 100,000 shares of common stock per year vesting in increments of 25,000 per quarter commencing January 1, 2019. The Company will also pay Mr. Khilji $5,000 per quarter.EXECUTIVE COMPENSATION

 

On May 17, 2018, Robert Yaspan, Judit Nagypal and Ambassador Ned L. Siegel were appointed to the Board of Directors of Gopher Protocol Inc. (the “Company”) to serve as directors of the Company. Mr. Yaspan will also serve as Chairman of the Board of Directors. Ms. Nagypal and Ambassador Siegel are considered independent directors and entered into agreements pursuant to which each will serve as a director. The director agreements provide that each will receive a one-time grant of 100,000 shares of common stock and a stock option to acquire 100,000 shares of common stock exercisable for a period of five years at $2.50 per share. Mr. Yaspan, in consideration for serving as Chairman of the Board, entered into an agreement providing a one-time grant of 250,000 shares of common stock and a stock option to acquire 250,000 shares of common stock exercisable for a period of five years at $2.50 per share. Each director will receive 100,000 shares of common stock per year vesting in increments of 25,000 per quarter commencing January 1, 2019. The Company will also pay Mr. Yaspan, Ms. Nagypal and Ambassador Siegel $5,000 per quarter.

On May 17, 2018, Mansour Khatib, Chief Marketing Officer and director of the Company, was engaged as Interim Chief Executive Officer to fill the vacancy resulting from Gregory Bauer’s resignation as Chief Executive Officer and Director of the Company. In addition, Michael Murray, a director of the Company, was engaged as President of the Company. The Company and Mr. Bauer entered into a Consulting Agreement for a period of one year for compensation of $15,000 per month to provide services associated with prepaid financial services. The Consulting Agreement was terminated on or around December 1, 2018.

On June 18, 2018, Eva Bitter was appointed to the Board of Directors of Gopher Protocol Inc. (the “Company”) to serve as a director of the Company. Ms. Bitter entered into an agreement pursuant to which she will serve as a director. The director agreement provides that she will receive a one-time grant of 100,000 shares of common stock and a stock option to acquire 100,000 shares of common stock exercisable for a period of five years at $2.50 per share. In addition, Ms. Bitter will receive 100,000 shares of common stock per year vesting in increments of 25,000 per quarter commencing January 1, 2019. The Company will also pay Ms. Bitter $5,000 per quarter.

On July 23, 2018, Douglas L. Davis was appointed by Gopher Protocol Inc. (the “Company”) to serve as the Interim Chief Executive Officer of the Company. Mansour Khatib resigned as Interim Chief Executive Officer but will continue to serve as Chief Marketing Officer and Director.

The Company and Mr. Davis entered into an Employment Agreement dated July 23, 2018 pursuant to which Mr. Davis agreed to serve as Interim Chief Executive Officer in consideration of an annual salary of $120,000. The Company also issued Mr. Davis 300,000 shares of common stock subject to a lock-up/leakout provision. The employment of Mr. Davis is for a period of six months and may be terminated at any time, with or without formal cause, on ten days’ notice. 

On January 1, 2019, the Company and Douglas Davis entered into an Amended and Restated Employment Agreement pursuant to which Mr. Davis was retained as Chief Executive Officer. Mr. Davis has served as Interim Chief Executive Officer since July 2018. The term of Mr. Davis’ employment is for two years through January 1, 2021. Mr. Davis will be entitled to an annual base salary of $250,000, which shall be increased to $400,000 upon the Company uplisting to a national exchange. Mr. Davis is also be entitled to the issuance of Stock Options to acquire an aggregate of 5,000,000 shares of common stock of the Company, exercisable for five years, subject to vesting. The options will be earned and vested (i) with respect to 2,000,000 shares of common stock on the date hereof, (ii) 500,000 shares of common stock upon the successful dual list of the Company on an international exchange such as SIX Zurich Stock Exchange or Euronext, (iii) 1,500,000 shares of common stock upon the successful up listing to a national exchange such as the Nasdaq, NYSE Euronext, TSX, AMEX or other, and (iv) with respect to 500,000 shares of common stock at each of the six (6) month anniversaries (July 1, 2019 and January 1, 2020). The exercise price of such options shall be the closing price of the Company on the date prior to such event.

28

On July 31, 2018, Mitchell K. Tavera was appointed to the Board of Directors of Gopher Protocol Inc. (the “Company”) to serve as a director of the Company. Mr. Tavera entered into an agreement pursuant to which he will serve as a director. The director agreement provides that he will receive a one-time grant of 100,000 shares of common stock and a stock option to acquire 100,000 shares of common stock exercisable for a period of five years at $2.50 per share. In addition, Mr. Tavera will receive 100,000 shares of common stock per year vesting in increments of 25,000 per quarter commencing January 1, 2019. The Company will also pay Mr. Tavera $5,000 per quarter.

On January 1, 2019, Gopher Protocol Inc. (the “Company”) and Douglas Davis entered into an Amended and Restated Employment Agreement pursuant to which Mr. Davis was retained as Chief Executive Officer. The term of Mr. Davis’ employment is for two years through January 1, 2021. Mr. Davis will be entitled to an annual base salary of $250,000, which shall be increased to $400,000 upon the Company uplisting to a national exchange. Mr. Davis is also be entitled to the issuance of Stock Options to acquire an aggregate of 5,000,000 shares of common stock of the Company, exercisable for five years, subject to vesting. The options will be earned and vested (i) with respect to 2,000,000 shares of common stock on the date hereof, (ii) 500,000 shares of common stock upon the successful dual list of the Company on an international exchange such as SIX Zurich Stock Exchange or Euronext, (iii) 1,500,000 shares of common stock upon the successful up listing to a national exchange such as the Nasdaq, NYSE Euronext, TSX, AMEX or other, and (iv) with respect to 500,000 shares of common stock at each of the six (6) month anniversaries (July 1, 2019 and January 1, 2020). The exercise price of such options shall be the closing price of the Company on the date prior to such event.

EXECUTIVE COMPENSATION

The following tables set forth all compensation paid with respect of our Chief Executive Officer for the years ended December 31, 2017 and 2016.

Summary Compensation Table

 

Name and    Salary  Bonus  Restricted
Stock
Awards		  Option
Awards		  Non-Equity
Incentive Plan
Compensation		  Nonqualified
Deferred
Compensation
Earnings		  All Other
Compensation		  Total 
Position Year  ($)  ($)  ($)  ($)  ($)  ($)  ($)  ($) 
                            
Erik Klinger(4)  2017   45,000   0   0   0   0   0   45,000   45,000 
   2016   40,000   0   0   0   0   0   40,000   40,000 
                                     
Mansour Khatib  2017   60,000   0   0   0   0   0   0   60,000 
   2016   36,000   0   0   0   0   0   0   36,000 
                                     
Danny Rittman(1)  2017   144,000   0   0   0   0   0   0   144,000 
   2016   147,300   0   99   0   0   0   0   147,399 
                                     
Michael Murray(1),(2)  2017   0   0   0   0   0   0   0   0 
   2016   0   0   99   0   0   0   0   99 
                                     
Greg Bauer(3)  2017   250,000   0   20   0   0   0   40   250,060 
   2016   0   0   0   0   0   0   0   00 

The following table presents the compensation awarded to, earned by or paid to each of our named executive officers for the year ended December 31, 2020.

Name and principal Position Year Salary Bonus Stock Awards Option Awards Non-Equity Incentive Plan Compensation Non-Qualified Deferred Compensation Earnings All Other Compensation Total
Michael Murray  2020  $6,000  $—  $—  $—  $—  $—  $—  $6,000 
President and director  2019  $50,000  $—  $—  $—  $—  $—  $—  $50,000 
                                     
Danny Rittman  2020  $184,500  $—  $—  $—  $—  $—  $—  $184,500 
Chief Technology Officer and director  2019  $171,726  $—  $—  $—  $—  $—  $—  $171,726 
                                     
Mansour Khatib  2020  $180,000  $—  $—  $—  $—  $—  $—  $180,000 
Chief Executive Officer and director  2019  $127,500  $—  $—  $—  $—  $—  $—  $127,500 
                                     
Douglas Davis (1)  2020  $100,000  $—  $—  $—  $—  $—  $—  $100,000 
former Chief Executive Officer  2019  $187,675  $—  $—  $622,828  $—  $—  $—  $810,503 
                                     
Kevin Pickard (2)  2020  $—  $—  $—  $—  $—  $—  $—  $— 
former Chief Financial Officer  2019  $70,000  $—  $—  $143,976  $—  $—  $—  $213,976 

 

The compensation discussed herein addresses all compensation awarded to, earned by, or paid to our named executive officer.

 

There are no other stock option plans, retirement, pension, or profit sharingprofit-sharing plans for the benefit of our sole officer and director other than as described herein.

 

(1) Mr. Murray and Dr. Rittman each own 9,900 shares of Series D Preferred Stock of the Company that is convertible at their election into 9,900,000 shares of common stock. As of December 31, 2016, all of these shares have been converted into shares of the Company.

(1)Resigned as the Chief Executive Officer in April 2020.
(2)Resigned as the Chief Financial Officer in September 2019.

 

(2) Mr. Murray resigned as Chief Executive Officer on or around September 7, 2017, but remains as a Director. The warrant on 4,000,000 common shares is consideration for his role as Executive Vice President in charge of business development.

(3) Mr. Bauer was granted 2,000,000 common shares and a warrant for 4,000,000 shares of common stock in connection with the acquisition of certain assets of RWJ Advanced Marketing, LLC.

(4) Mr. Klinger resigned in September 2017.

Director Compensation

 

The following table sets forth all compensation awarded to, earned by or paid to the non-employee directors in 20172020 and 2019 for their service as directors:

 

Name and    Salary  Bonus  Restricted
Stock
Awards		  Option
Awards		  Non-Equity
Incentive Plan
Compensation		  Nonqualified
Deferred
Compensation
Earnings		  All Other
Compensation		  Total 
Position Year  ($)  ($)  ($)  ($)  ($)  ($)  ($)  ($) 
                            
Michael Murray(1)  2017   0   0   0   0   0   0   40   40 

(1)Mr. Murray resigned as Chief Executive Officer on or around September 7, 2017, but remains as a Director. The warrant on 4,000,000 common shares is consideration for his role as Executive Vice President in charge of business development.
Name  Year Fees Earned or Paid  Stock Awards  Option Awards Non- Equity Incentive  All Other Compensation  Total
Robert Yaspan  2020  $—  $—  $—  $—  $—  $— 
former director  2019  $—  $15,425  $—  $—  $—  $15,425 
                             
Judit Nagypal  2020  $—  $—  $—  $—  $—  $— 
former director  2019  $5,000  $15,425  $—  $—  $—  $20,425 
                             
Ned L. Siegel  2020  $—  $—  $—  $—  $—  $— 
former director  2019  $10,000  $15,425  $—  $—  $—  $25,425 
                             
Eva Bitter  2020  $—  $—  $—  $—  $—  $— 
former director  2019  $5,000  $15,425  $—  $—  $—  $20,425 
                             
Mitchell Tavera  2020  $—  $—  $—  $—  $—  $— 
former director  2019  $5,000  $15,425  $—  $—  $—  $20,425 
                             
Muhammed Khilji  2020  $—  $—  $—  $—  $—  $— 
former director  2019  $—  $15,425  $—  $—  $—  $15,425 

 

Outstanding Equity Awards at Fiscal Year-End

 

There are noThe following table sets forth all unexercised warrants and unvested restricted stock that have been awarded to our named executives by the Company and were outstanding equity awards outstanding atas of December 31, 2017 other than those disclosed above.2020.

 

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Name and principal Position Number of securities underlying unexercised warrants exercisable (#) Number of securities underlying unexercised warrants unexercisable (#) Equity incentive plan awards: Number of securities underlying unexercised unearned options (#) Warrant exercise price ($) Warrant expiration date Number of shares or units of stock that have not vested (#) Market value of shares or units of stock that have not vested Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#) Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($)
Michael Murray
President and director		  4,000,000   —   —   0.50  09/01/22  —   —   —   — 

 

SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

 

The following table sets forth certain information with respect toregarding the beneficial ownership of the Common Stockour capital stock outstanding as of January 23, 2019 by (i) December 27, 2021 by:

●each person, or group of affiliated persons, known by us to beneficially own more than 5% of our shares of common stock;
●each of our directors;
●each of our named executive officers; and
●all of our directors and named executive officers as a group.

The percentage ownership information is based on 33,200,198 shares of common stock outstanding as of December 27, 2021. The number of shares owned are those beneficially owned, as determined under the rules of the SEC. Under these rules, beneficial ownership includes any shares of common stock as to which a person knownhas sole or shared voting power or investment power and any shares of common stock that the person has the right to acquire within 60 days through the exercise of any option, warrant or right, through conversion of any security or pursuant to the automatic termination of a power of attorney or revocation of a trust, discretionary account or similar arrangement. These shares are deemed to be outstanding and beneficially owned by the Company to own beneficially more than 5%person holding such option, warrants or other derivative securities for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding Common Stock; (ii) each directorfor the purpose of computing the Company; (iii) each officerpercentage ownership of the Company and (iv) all executive officers and directors as a group. Except asany other person. Unless otherwise indicated, below, each of the persons or entities or persons namedidentified in thethis table hashave sole voting and investment powerspower with respect to all shares of Common Stockshown as beneficially owned by it or him as set forth opposite its or his name.them, subject to applicable community property laws.

 

Name of Beneficial Owner Common
Stock
Beneficially
Owned (1)		  Percentage
of
Common
Stock (1)		 
Michael D. Murray(2,4)  10,900,000   5.24%
Dr. Danny Rittman(4)  9,900,000   4.86%
Douglas Davis(5)  2,300,000   1.12%
Mansour Khatib(4)  0   0.00%
Kevin Pickard(5)  350,000   0.17%
Reko Holdings LLC  69,321,000   34.00%
Guardian Patch(7)  16,500,000   7.75%
Latinex Casa de Cambio  20,026,702   9.82%
Robert Yaspan(3)  500,000   0.24%
Ned Seigel(6)  200,000   0.10%
Judit Nagypal(6)  200,000   0.10%
Eva Bitter(6)  200,000   0.10%
Muhammed Khilji(6)  200,000   0.10%
Mitchell Tavera(6)  200,000   0.10%
Mobiquity Technologies, Inc.  13,388,889   6.57%
All Officers and Directors as a Group  24,950,000   11.84%

Except as otherwise noted below, the address for each person or entity listed in the table is c/o GBT Technologies Inc., 2450 Colorado Ave., Suite 100E, Santa Monica, CA 90404.

Name of Beneficial Owner Common Stock Beneficially Owned (1) Percentage of Common Stock (1)
Michael D. Murray (2,3)  81,380   0.24%
Dr. Danny Rittman (3)  1,980   0.01%
Mansour Khatib (3)  —   0.00%
         
GBT Tokenize Corp (4)  16,000,000   48.19%
The Gonzalez Trust CR - Pablo Gonzalez (4)  1,002,000   3.02%
All Officers and Directors as a Group  83,360   0.25%

 

(1)Beneficial ownership is determined in accordance with the Rule 13d-3(d)(1) of the Exchange Act, as amended and generally includes voting or investment power with respect to securities. Pursuant to the rules and regulations of the Securities and Exchange Commission, shares of common stock that an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purposes of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purposes of computing the percentage ownership of any other person shown in the table. The above is based on 203,913,33833,200,198 shares of common stock outstanding as of February 5, 2019.December 27, 2021

(2)Mr. Murray is President of the company, and a Director. He holds a warrant for 4,000,000 shares of the Company’s common stock.

(3)Mr. Yaspan is the Chairman of the Board of Directors. He has 250,000 shares, and a warrant for 250,000 additional shares at an exercise price of $2.50.

(4)Current Officer and Director of the Company.

(5)
(4)Officer ofGBT Tokenize Corp is a 50/50 Joint venture between the Company.

(6)Director ofCompany and Tokenize-It S.A. Controlled by the Company. Each director (except for the Chairman of the Board of Directors) has 100,000 shares, and a warrant on 100,000 shares at an exercise price of $2.50.

(7)Guardian Patch holds 7,500,000 shares of common stock, and a warrant for 9,000,000Gonzalez Trust from Costa Rica. GBT Tokenize Corp hold 16,000,000 shares of the Company’s common stock. The Gonzalez Trust holds a note for $10,000,000 with conversion feature (under dispute by them) at $10 per share.

 

No Director, executive officer, affiliate or any owner of record or beneficial owner of more than 5% of any class of voting securities of the Company is a party adversary to the Company or has a material interest adverse to the Company.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS AND DIRECTOR INDEPENDENCE.

On or around March 18, 2016 the Company and Dr. Danny Rittman entered into an agreement intended to clarify the relationship between Dr. Rittman and the Company and the ownership of certain technology in connection with certain agreements previously entered into between Company and Dr. Rittman and with third parties. Specifically, the Company entered into that certain Territorial License Agreement with Hermes Roll LLC dated March 4, 2015, which such agreement was amended to expand the related territorial license to a worldwide license pursuant to that certain Amended and Restated Territorial License Agreement dated June 16, 2015 (the “Amended and Restated Territorial License Agreement”), and that certain Letter Agreement (the “Letter Agreement”) entered into between Dr. Rittman and the Company dated August 20, 2015. The aforementioned agreements were tied to the funding of the Company in the minimum amount of $5,000,000 (the “Required Funding”) and the assignment to the Company and/or ownership by the Company of all past, present and future technology in the form of intellectual property, including, but not limited to patents, trademarks, domains, applications, social media pages (e.g. Twitter, LinkedIn and landing pages) (collectively, the “IP”), which such IP was paid for exclusively by Dr. Rittman and/or his affiliated companies, was contingent upon the Company obtaining the Required Funding by no later than October 30, 2015 (the “Contingency”). Accordingly, it was agreed to by the parties that (i) all inventions, improvements and developments made or conceived by the Dr. Rittman, either solely or in collaboration with others pertaining to Company’s business, would be the property of the Company subject to the Contingency. In the event the Contingency was not met, the Letter Agreement would be cancelled and rendered null and void. The Company acknowledged that the Company did not meet the Contingency, technically resulting in the cancellation of the Letter Agreement and rendering the Letter Agreement null and void. Moreover, the Company failed to meet its obligations under the Amended and Restated Territorial License Agreement, including the further development of the consumer heuristic technology platform, thereby creating a vacuum in its development in all aspects, including the ability to obtain funding, resulting in the need for Dr. Rittman’s partners to perform the necessary development work related to the above agreements.

The original License Agreement will remain in place, while other agreements will be terminated and rendered null and void. Dr. Rittman will resign as an officer of the Company, but will remain as Director and technical consultant of the Company, and will accommodate the needs of the Company in return for compensation to be agreed by the parties. All intellectual property will remain in the possession of Dr. Rittman and his private partners, and the Company shall remain a licensee per the terms of the original Territorial License Agreement, and will develop the first product with Dr. Rittman and his partners.

The Company is the exclusive license holder for certain intellectual property relating to GopherInsight technology. The Company has assigned all its rights as they relate to the Guardian Patch to the LLC as consideration for the JV. Dr. Rittman’s partners have commenced development of the product via a private LLC that has been incorporated under the name “Guardian Patch LLC” (“LLC”). Certain private investors will provide all initial funding to the Company via the LLC for product development. The LLC will fund the development, and the Company will provide IT services via Dr. Rittman for a monthly fee. Dr. Rittman has signed an amendment employment agreement with the Company. As the Company is not a member of the LLC, the Company and the LLC have formed a Joint Venture (“JV”) for the purposes of developing and marketing the Patch. The LLC will be responsible for funding the development of the Patch. The Company will not need be required to invest funds in said JV. The Company responsibilities will be limited to the marketing of the product, where the marketing budget will be funded by the LLC. Moreover, the LLC has committed to provide the Company with working capital as needed. The Company has assigned and pledged to the LLC all its license derivative rights as they pertain to the Patch only. Dr. Rittman may be offered membership rights at some point in the future with the LLC, with which the Company is a JV partner, but is not equity member. The Company has agreed with the LLC that the same JV principles of the GPLLC for the patch will apply for the other two products (Epsilon and Puzpix) which will be vested under designated LLCs that will be incorporated by the LLC members. During the quarter ended December 31, 2016, 100% of the Company’s revenue was related to IT service provided to the LLC for Dr. Rittman services, in connection with the development of the Patch.INDEPENDENCE

 

On April 5, 2016, Erik Klinger was appointed by6, 2018, the Company to serve as theand Danny Rittman, Chief FinancialTechnology Officer and a Director of the Company.  

On April 16, 2016 (the “Effective Date”), Mansour Khatib and the Company, entered into an Employment Agreement (the “Agreement”)agreed to amend his employment agreement pursuant to which Mr. Mansour Khatib agreed to serve as the Chief Marketing Officer of the Company. Mr. Mansour Khatib was also appointed as a director of the Company on the Effective Date. Pursuant to the terms of the Employment Agreement, Mr. Khatib will receive an annual salary of $100,000 upon the Company generating $1,000,000 in revenue during any three (3) month period.

Effective August15, 2016, the Employment Agreement of Mansour Khatib, our CMO, was amended and restated as follows:

Upon the Company generating $1,000,000 in revenue during any three (3) month period (the “Threshold Requirement”), the Executivehe will receive salary at the rate of $100,000$250,000 annually (the “Base Salary”); provided, however, that that Company shall pay to Executive $5,000 per month (the “Monthly Salary Advance”) commencing on August 15, 2016, which such Monthly Salary Advance shall be an advance on the Base Salary and shall continue to be paid to Executive until such time that the Company launches its Guardian Patch technology into the consumer markets.  Once the Threshold Requirement is met, the Base Salary will be payable in equal increments not less often than monthly in arrears and in any event consistentof $15,000 per month with the Company’s payroll policy and practices.  The Base Salaryan additional $70,000 to be paid within 15 days of the Executive may from time to time be increased, but not decreased, byend of the Board, in its absolute discretion, including potential bonuses.”  

For the fiscal year ended December 31, 2016, the Company generated $165,000 from the provision of IT services to Guardian Patch LLC, a related party.calendar year.

 

On or around September 7,14, 2018, the Company and Dr. Rittman entered into a letter agreement confirming that the Company is the owner of all intellectual property developed by Dr. Rittman relating to the Internet of Things (IoT) and Artificial Intelligence enabled mobile technologies, including a global platform with both mobile and fixed solutions, commencing June 16, 2015 and continuing until Dr. Rittman’s employment agreement is terminated.

On September 1, 2017, Greg Bauer became Chief Executive Officer of the Company. AtCompany entered into and closed an Asset Purchase Agreement with a third party, RWJ Advanced Marketing, LLC (“RWJ”), a Georgia corporation, pursuant to which the same time, Michael Murray resigned as CEO, although he remains an investorCompany purchased certain assets from RWJ, including inventory, terminals, licenses and a Director of the Company.permits and intangible assets. At closing, the Company and Mr. Greg Bauer entered into an Employment Agreement pursuant to which Mr. Bauer was retained as Chief Executive Officer for a term of one year, subject to an automatic extension, unless terminated, in consideration of a base salary of $250,000 and a bonus of 10% of net profit generated by the assets acquired. Mr. Bauer was also appointed to the Board of Directors of the Company.

On or around September 30, 2017, Erik Klinger As of the closing date, Mr. Murray resigned as Chief Financial Officer of the Company. At the same time, Mr. Bauer became the Chief Financial Officer of the Company.

On April 16, 2018, Kevin F. Pickard was appointed Chief FinancialExecutive Officer of the Company (at the same time, Mr. Bauer resigned his position as the Chief Financial Officer of the Company). The Company and Mr. Pickard entered into an Executive Retention Agreement dated April 16, 2018 pursuant to which Mr. Pickard agreed to serve as Chief Financial Officer in consideration of an annual salary of $120,000. The Company also issued Mr. Pickard 250,000 shares of common stock and granted Mr. Pickard a Stock Option to acquire 500,000 shares of common stock of the Company at an exercise price of $2.80 per share for a period of five years. The Stock Options vest in tranches of 100,000 shares commencing on the one year anniversary and continuing thereafter on an annual basis or in full in the event of a change of control. The Company and Mr. Pickard also entered into an Indemnification Agreement. The employment of Mr. Pickard is atbut will and may be terminated at any time, with or without formal cause. 

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On April 25, 2018, Muhammad Khilji was appointed to the Board of Directors of Gopher Protocol Inc. (the “Company”) to serveremain as a director of the Company. Mr. Khilji entered into an agreement pursuant to whichBauer, since 2004 through present, has served as executive director with W.L. Petrey Wholesale, Inc. where he will serve as a director. The director agreement provides that he will one tine grantwas in charge of 100,000 shares of common stock and a stock option to acquire 100,000 shares of common stock exercisable for a period of five years at $2.50 per share. In addition, Mr. Khilji will receive 100,000 shares of common stock per year vesting in increments of 25,000 per quarter commencing January 1, 2019.the UGO/Preway operations. The Company will also pay Mr. Khilji $5,000 per quarter.

On May 17, 2018, Robert Yaspan, Judit Nagypal and Ambassador Ned L. Siegel were appointed to the Board of Directors of Gopher Protocol Inc. (the “Company”) to serve as directors of the Company. Mr. Yaspan will also serve as Chairman of the Board of Directors. Ms. Nagypal and Ambassador Siegel are considered independent directors and entered into agreements pursuant to which each will serve as a director. The director agreements provide that each will receive a one-time grant of 100,000 shares of common stock and a stock option to acquire 100,000 shares of common stock exercisable for a period of five years at $2.50 per share. Mr. Yaspan,is in consideration for serving as Chairman of the Board, entered into an agreement providing a one-time grant of 250,000 shares of common stock and a stock option to acquire 250,000 shares of common stock exercisable for a period of five years at $2.50 per share. Each director will receive 100,000 shares of common stock per year vestinglitigations in increments of 25,000 per quarter commencing January 1, 2019. The Company will also pay Mr. Yaspan, Ms. Nagypal and Ambassador Siegel $5,000 per quarter.

On May 17, 2018, Mansour Khatib, Chief Marketing Officer and director of the Company, was engaged as Interim Chief Executive Officer to fill the vacancy resulting from Gregory Bauer’s resignation as Chief Executive Officer and Director of the Company. In addition, Michael Murray, a director of the Company, was engaged as President of the Company. The Company and Mr. Bauer entered into a Consulting Agreement for a period of one year for compensation of $15,000 per month to provide services associatedconnection with prepaid financial services. The Consulting Agreement was terminated on or around December 1, 2018.

On June 18, 2018, Eva Bitter was appointed to the Board of Directors of Gopher Protocol Inc. (the “Company”) to serve as a director of the Company. Ms. Bitter entered into an agreement pursuant to which she will serve as a director. The director agreement provides that she will receive a one-time grant of 100,000 shares of common stock and a stock option to acquire 100,000 shares of common stock exercisable for a period of five years at $2.50 per share. In addition, Ms. Bitter will receive 100,000 shares of common stock per year vesting in increments of 25,000 per quarter commencing January 1, 2019. The Company will also pay Ms. Bitter $5,000 per quarter.

On July 23, 2018, Douglas L. Davis was appointed by Gopher Protocol Inc. (the “Company”) to serve as the Interim Chief Executive Officer of the Company. Mansour Khatib resigned as Interim Chief Executive Officer but will continue to serve as Chief Marketing Officer and Director.

The Company and Mr. Davis entered into an Employment Agreement dated July 23, 2018 pursuant to which Mr. Davis agreed to serve as Interim Chief Executive Officer in consideration of an annual salary of $120,000. The Company also issued Mr. Davis 300,000 shares of common stock subject to a lock-up/leakout provision. The employment of Mr. Davis is for a period of six months and may be terminated at any time, with or without formal cause, on ten days notice. RWJ transaction.

 

On January 1, 2019, the Company and Douglas Davis entered into an Amended and Restated Employment Agreement pursuant to which Mr. Davis was retained as Chief Executive Officer. Mr. Davis has served as Interim Chief Executive Officer since July 2018.2018 until his resignation on April 11, 2020. The term of Mr. Davis’ employment iswas for two years through January 1, 2021. Mr. Davis will bewas entitled to an annual base salary of $250,000, which shallwas to be increased to $400,000 upon the Company uplistingup-listing to a national exchange. Mr. Davis iswas also be entitled to the issuance of Stock Options to acquire an aggregate of 5,000,00050,000 shares of common stock of the Company, exercisable for five years, subject to vesting. The options willwere to be earned and vested (i) with respect to 2,000,00020,000 shares of common stock on the date hereof, (ii) 500,0005,000 shares of common stock upon the successful dual list of the Company on an international exchange such as SIX Zurich Stock Exchange or Euronext, (iii) 1,500,00015,000 shares of common stock upon the successful up listing to a national exchange such as the Nasdaq, NYSE Euronext, TSX, AMEX or other, and (iv) with respect to 500,0005,000 shares of common stock at each of the six (6) month anniversaries (July 1, 2019 and January 1, 2020). The exercise price of such options shall be the closing price of the Company on the date prior to such event.

 

On July 31, 2018, Mitchell K. Tavera was appointed toOctober 10, 2019, the Board of Directors of Gopher Protocol Inc. (the “Company”) to serve as a director of the Company. Mr. TaveraCompany entered into an agreement pursuanta Joint Venture Agreement (the “BitSpeed Agreement”) with BitSpeed LLC, which is owned by Douglas Davis, the Company’s Chief Executive Officer, to which he will serve asform GBT BitSpeed Corp., a director.Nevada company (“GBT BitSpeed”). The director agreement provides that he will receivepurpose of GBT BitSpeed is to develop, maintain and support its proprietary Extreme Transfer Software Application Concurrency, a one-time grantsoftware application to transfer secure, accelerated transmission of 100,000large file data over networks, and connection to cloud storage, Network-Attached Storage (NAS) and Storage Area Networks (SANs) (“Concurrency”). BitSpeed shall contribute the services and resources for the development of Concurrency to GBT BitSpeed. The Company shall contribute 10 million shares of common stock (valued at $17,900,000) of the Company to GBT BitSpeed. BitSpeed and the Company will each own 50% of GBT BitSpeed. The Company shall appoint two directors and BitSpeed shall appoint one director of GBT BitSpeed. In addition, GBT BitSpeed and Mr. Davis entered into a stock optionConsulting Agreement in which Mr. Davis is engaged to acquire 100,000provide services in consideration of $10,000 per month payable quarterly which may be paid in shares of common stock exercisablecalculated by the amount owed divided by the Company’s 20-day VWAP. Mr. Davis will provide services in connection with the development of the business as well as GBT BitSpeed’s capital raising efforts. The term of the Consulting Agreement is two years. The closing of the BitSpeed Agreement occurred on October 14, 2019. On April 11, 2020, Douglas Davis resigned as Chief Executive Officer of the Company so that he may fully devote all of his efforts to GBT Tokenize Corp., the Company’s joint venture, which intends to develop a new product. Mr. Davis’ resignation was not the result of any disagreements with management or board of directors of the Company.

On March 6, 2020, the Company through Greenwich, entered into the Tokenize Agreement with Tokenize, which is owned by a Costa Rica Trust represented by Gonzalez. Gonzalez also represents Gonzalez Costa Rica Trust, which holds a note in the principal amount of $10,000,000 and is also a shareholder of the Company. Under the Tokenize Agreement, the parties formed GBT Tokenize. The purpose of GBT Tokenize is to develop Technology Portfolio, throughout the State of California. Upon generating any revenue from the Technology Portfolio, the Joint Venture will earn the first right of refusal for a periodother territories. Tokenize shall contribute the services and resources for the development of five years at $2.50 per share.the Technology Portfolio to GBT Tokenize. The Company contributed 100,000,000 GBT Shares to GBT Tokenize. Tokenize and the Company will each own 50% of GBT Tokenize. The Company pledged its 50% ownership in GBT Tokenize and its 100% ownership of Greenwich to Tokenize to secure its Technology Portfolio investment. The Company shall appoint two directors and Tokenize shall appoint one director of GBT Tokenize. In addition, Mr. Tavera will receive 100,000GBT Tokenize and Gonzalez entered into a Consulting Agreement in which Gonzalez is engaged to provide services in consideration of $33,333.33 per month payable quarterly which may be paid in shares of common stock per year vestingcalculated by the amount owed divided by the Company’s 10-day VWAP. Gonzalez will provide services in incrementsconnection with the development of 25,000 per quarter commencing January 1, 2019. The Company will also pay Mr. Tavera $5,000 per quarter.

32

On January 1, 2019, Gopher Protocol Inc. (the “Company”) and Douglas Davis entered into an Amended and Restated Employment Agreement pursuant to which Mr. Davis was retainedthe business as Chief Executive Officer.well as GBT Tokenize’s capital raising efforts. The term of Mr. Davis’ employmentthe Consulting Agreement is for two years through January 1, 2021. Mr. Davisyears. The closing of the Tokenize Agreement occurred on March 9, 2020. Via this Joint Venture the parties commenced development of a development of an intelligent human vital signs’ device, suggested named qTerm. The platform is an expansion of the existing license agreement with GBT Tokenize Corp., which provided GBT Tokenize Corp. with an exclusive territory of California to develop certain of the Company’s technology. As the nature of the platform cannot be restricted only to California, the Company’s joint venture GBT Tokenize Corp. will be entitled to an annual base salary of $250,000, which shall be increased to $400,000 upon the Company uplisting to a national exchange. Mr. Davis is also be entitled to the issuance of Stock Options to acquire an aggregate of 5,000,000compensated with additional two hundred million shares of common stock of the Company exercisable for five years,to strengthen its funding, subject to vesting.board approval. A provisional patent application for the qTerm Medical Device was filed on March 30, 2020 with the USPTO. The optionsapplication has been assigned serial number 63001564. The Joint Venture completed successfully the first prototype. There is no guarantee that the Company will be earned and vested (i) with respectsuccessful in researching, developing or implementing this product into the market. In order to 2,000,000 shares of common stock on the date hereof, (ii) 500,000 shares of common stock upon the successful dual list ofsuccessfully implement this concept, the Company on an international exchange such as SIX Zurich Stock Exchange or Euronext, (iii) 1,500,000 shares of common stock upon the successful up listingwill need to a national exchange such as the Nasdaq, NYSE Euronext, TSX, AMEX or other,raise adequate capital to support its research and, (iv) with respect to 500,000 shares of common stock at each of the six (6) month anniversaries (July 1, 2019if successfully researched, developed and January 1, 2020). The exercise price of such options shall be the closing price ofgranted regulatory approval, the Company onwould need to enter into a strategic relationship with a third party that has experience in manufacturing, selling and distributing this product. There is no guarantee that the date prior to such event.Company will be successful in any or all of these critical steps.

 

Procedures for ApprovalArticles of Related Party TransactionsIncorporation and Bylaws

 

No Cumulative Voting. Where cumulative voting is permitted in the election of directors, each share is entitled to as many votes as there are directors to be elected and each shareholder may cast all of its votes for a single director nominee or distribute them among two or more director nominees. Thus, cumulative voting makes it easier for a minority shareholder to elect a director. Our Boardarticles of Directors is charged with reviewing and approving all potential related party transactions.  All such related party transactions must then be reported under applicable SEC rules. We have not adopted other procedures for review, or standards for approval, of such transactions, but instead review them on a case-by-case basis.incorporation deny shareholders the right to vote cumulatively.

 

Director Independence

On or around August 10, 2018, the Board of Directors established committees for governance, compensation and audit. The Audit Committee is being led by Muhammed Khalji, a CPA. The Compensation Committee is being led by Judit Nagypal. The Governance Committee is being led by Ambassador Ned L. Seigel. All three leaders of the committees are independent directors. In addition, each committee has two additional members, all of whom are also independent directors.

33

DESCRIPTION OF CAPITAL STOCK

The following is a description of the material terms of our capital stock as provided in our (i)  certificateAuthorized But Unissued Shares. Our articles of incorporation and (ii)  bylaws. We also refer youpermit the board to our certificate of incorporation, as amended, and our bylaws, as amended, copies of which are incorporated by reference as exhibits toauthorize the registration statement of which this prospectus forms a part.

Authorized Capitalization

Our authorized capital stock consists of 500,000,000 shares of Common Stock with a $0.00001 par value per share, and 20,000,000 sharesissuance of preferred stock, with a $0.00001 par value per share. Our board of directors may establishand to designate the rights and preferences of theour preferred stock, from timewithout obtaining shareholder approval. One of the effects of undesignated preferred stock may be to time. Asenable the board to render more difficult or to discourage a third party’s attempt to obtain control of February 5, 2019, there were 203,913,338 sharesGopher Protocol by means of our Common Stock issued and outstanding and 45,700a tender offer, proxy contest, merger, or otherwise. The issuance of shares of preferred stock outstanding.also may discourage a party from making a bid for the common stock because the issuance may adversely affect the rights of the holders of common stock. For example, preferred stock that we issue may rank prior to the common stock as to dividend rights, liquidation preference, or both, may have special voting rights and may be convertible into shares of common stock. Accordingly, the issuance of shares of preferred stock may discourage bids for our common stock or may otherwise adversely affect the market price of our common stock.

 

The following is a summary of the material provisions of the Common Stock provided for in our certificate of incorporation, as amended, and bylaws. For additional detail about our capital stock, please refer to our amended and restated certificate of incorporation and amended and restated bylaws.

Listing

Our Common Stock is trades on the OTCQB under the symbol “GOPH.”

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is Nevada Agency and Transfer Company (“NATCO”) with a business address at 50 West Liberty Street, Suite 880, Reno NV 89501; NATCO’s website is www.natco.com, and their phone number is (775) 322-0626.

DESCRIPTION OF BUSINESS

OVERVIEW

GBT Technologies Inc. (formally known as Gopher Protocol Inc., the “Company”, “GBT”, “Gopher”, “Gopher Protocol” “GOPH” or “GTCH”) was incorporated on July 22, 2009 under the laws of the State of Nevada. GBT is targeting growing markets such as development of Internet of Things (IoT) and Artificial Intelligence (AI) enabled networking and tracking technologies, including wireless mesh network technology platform and fixed solutions, development of an intelligent human body vitals device, asset-tracking IoT, and wireless mesh networks. Effective August 5, 2019, the Company changed its name from Gopher Protocol Inc. to GBT Technologies Inc. The Company derived revenues from the provision of IT services. The Company is seeking to generate revenue from the licensing of its technology.

Asset tracking IoT - and Artificial Intelligence (AI) enabled networking (including AI Medical Advisor platform and potential products)

The Company plans to launch a series of software and microchip design products that integrate into strategic technology partners’ solutions and enable real-time tracking and management of IoT or connected assets.

 Through the Joint Venture with Tokenize – It S.A., the parties commenced development of a development of an intelligent human vital signs’ device, suggested named qTerm. The platform is an expansion of the existing license agreement with GBT Tokenize Corp., which provided GBT Tokenize Corp. with an exclusive territory of California to develop certain of the Company’s technology. A provisional patent application for the qTerm Medical Device was filed on March 30, 2020 with the USPTO. The application has been assigned serial number 63001564. The Joint Venture completed successfully the first prototype. There is no guarantee that the Company will be successful in researching, developing or implementing this product into the market. In order to successfully implement this concept, the Company will need to raise adequate capital to support its research and, if successfully researched, developed and granted regulatory approval, the Company would need to enter into a strategic relationship with a third party that has experience in manufacturing, selling and distributing this product. There is no guarantee that the Company will be successful in any or all of these critical steps.

Asset tracking IoT and Artificial Intelligence (AI) enabled networking (including AI Medical Advisor platform and potential products) competition

The prevailing AI solutions in the marketplace currently are a combination of barcoding and RFID technologies. Existing solutions require that the asset is near the scanner to be scanned. Further, such existing solutions are “point to point,” meaning they require repeated scan points along a route in order to update the location of the asset. The Company’s asset tracking solutions are designed to be more accurate and when placed on or into the asset, has the ability to interactively locate and update information on an asset anywhere on Earth. Its solutions work through-enabled global mesh network and does not need GPS or GSM to locate the package. In addition, the Company’s solutions are planned to include resource and distributed database management features which are not normally found in IoT systems. There are many competitors supplying AI standalone, and AI asset tracking and asset tracking IoT systems today, including companies such as AT&T, IBM and Verizon, as well as Apple which introduce tracking device during 2021. It is Company’s goal to offer the GopherInsight platform to some or all of these competitors to upgrade and differentiate their solutions.

Wireless mesh networking

Wireless mesh networks consist of LAN/MAN/WAN solutions that are infrastructural-intensive, may rely on regulated frequencies and bandwidth, often have so-called “last mile” problems areas where either economics or population density make it too expensive for current solutions to cover, and difficult to manage centrally. The Company’s GopherInsight platform makes it easy to add and manage last mile capacity. The solution is easily integrated into existing networks. The Company’s AI platform is designed for easy integration with, and management of, additional coverage for customer networks.

Wireless mesh networking markets

The Company potentially will target telecommunications providers, corporate entities that run LAN or wide-area networks, universities, and government entities.

Wireless mesh networking markets competition

The competitors for wireless mesh networking solutions, and AI solutions, are the entities themselves that have their own capability. The Company’s strategy is to integrate and “wrap around” those solutions to make them more efficient, less costly, and less infrastructural-intensive, while at the same time solving last mile problems to the end user.

Latinex (contra-equity account)

On January 8, 2019, the Company entered into a Stock Pledge Agreement with Latin American Exchange Latinex Casa de Cambio, S.A., a Costa Rica corporation (“Latinex”), to provide that Latinex may maintain its required regulatory capital as required by various regulators. The Company has pledged 4,005 restricted shares of its common stock valued at $7,610,147 (based on the closing price on the grant date) for a term of three years in consideration of an annual payment of $375,000 paid in quarterly installments of $93,750. In lieu of cash payment, Latinex may pay the Company in virtual currency of WISE Network S.A. valued at a 50% discount of its offering price of $10 per token. In the event that Latinex’s required capital has decreased below $5,000,000, Latinex is permitted to sell the pledged shares of common stock only in an amount to ensure that Latinex can satisfy the required capital levels. The Company must consent to such sale of the shares of common stock, which may not be unreasonably withheld. Upon expiration of the agreement, the remaining shares of common stock shall be returned to the Company free and clear of all liens. The Company has recorded the value of these shares of common stock as a stock loan receivable which is presented as a contra-equity account in the accompanying consolidated balance sheets. At December 31, 2019, the Company wrote off the accrued interest income as Latinex did not perform any payment and the Company has no mean to enforce this payment. Latinex agreed in principal to return the pledged 4,005 restricted shares to the Company for cancellation. The 4,005 restricted shares have not yet been returned to the Company as of September 30, 2021.

Joint Ventures

GBT Tokenize

On March 6, 2020, the Company through its wholly owned subsidiary, Greenwich International Holdings, a Costa Rica corporation (“Greenwich”), entered into a Joint Venture and Territorial License Agreement (the “Tokenize Agreement”) with Tokenize-It, S.A. (“Tokenize”), which is owned by a Costa Rica Trust represented by Pablo Gonzalez (“Gonzalez”). Gonzalez also represents Gonzalez Costa Rica Trust, which holds a note in the principal amount of $10,000,000 and is also a shareholder of the Company. Under the Tokenize Agreement, the parties formed GBT Tokenize Corp., a Nevada corporation (“GBT Tokenize”). The purpose of GBT Tokenize is to develop, maintain and support source codes for its proprietary technologies including advanced mobile chip technologies, tracking, radio technologies, AI core engine, electronic design automation, mesh, games, data storage, networking, IT services, business process outsourcing development services, customer service, technical support and quality assurance for business, customizable and dedicated inbound and outbound calls solutions, as well as digital communications processing for enterprises and startups (“Technology Portfolio”), throughout the State of California. Upon generating any revenue from the Technology Portfolio, the Joint Venture will earn the first right of refusal for other territories.

Tokenize shall contribute the services and resources for the development of the Technology Portfolio to GBT Tokenize. The Company shall contribute 2,000,000 shares of common stock of the Company (“GBT Shares”) to GBT Tokenize. Tokenize and the Company will each own 50% of GBT Tokenize. The shares were valued at $5,500,000.

In addition, GBT Tokenize and Gonzalez entered into a Consulting Agreement in which Gonzalez is engaged to provide services in consideration of $33,333 per month payable quarterly which may be paid in shares of common stock calculated by the amount owed divided by the Company’s 10-day VWAP. Gonzalez will provide services in connection with the development of the business as well as GBT Tokenize’s capital raising efforts. The term of the Consulting Agreement is two years. During the nine months ended September 30, 2021, Gonzalez assigned all his accrued balances of $424,731 to Stanley Hills in a private transaction that the Company is not part to. The closing of the Tokenize Agreement occurred on March 9, 2020.

Through this Joint Venture the parties commenced development of an intelligent human vital signs’ device, which we currently refer to as the qTerm. The platform is an expansion of the existing license agreement with GBT Tokenize Corp., which provided GBT Tokenize Corp. with an exclusive territory of California to develop certain of the Company’s technology. As the nature of the platform cannot be restricted only to California, the Company’s joint venture GBT Tokenize Corp. will be compensated with additional two hundred million shares of the Company to strengthen its funding, subject to board approval. A provisional patent application for the qTerm Medical Device was filed on March 30, 2020 with the USPTO. The application has been assigned serial number 63001564. The Joint Venture completed successfully the first prototype. There is no guarantee that the Company will be successful in researching, developing or implementing this product into the market. In order to successfully implement this concept, the Company will need to raise adequate capital to support its research and, if successfully researched, developed and granted regulatory approval, the Company would need to enter into a strategic relationship with a third party that has experience in manufacturing, selling and distributing this product. There is no guarantee that the Company will be successful in any or all of these critical steps.

At March 31, 2020, the Company evaluated the carrying amount of this joint venture investment and determined that this investment was fully impaired and as a result an impairment charge of $5,500,000 was taken. At September 30, 2021, the Company evaluated the carrying amount of this joint venture investment and determined that this investment was fully impaired and as a result an impairment charge of $15,400,000 was taken.

Although the investment was impaired, the product development is still ongoing. The carrying amount of this investment at September 30, 2021 and December 2020, was $0 and $0, respectively.

On May 28, 2021, the parties agreed to amend the Tokenize Agreement to expand territory granted for the Technology Portfolio under the license to GBT Tokenize to include the entire continental United States. The Company has further agreed to issue GBT Tokenize an additional 14,000,000 shares of common stock of the Company. The shares were valued at $15,400,000.

The Company pledged its 50% ownership in GBT Tokenize and its 100% ownership of Greenwich to Tokenize to secure its Technology Portfolio investment. The Company shall appoint two directors and Tokenize shall appoint one director of GBT Tokenize.

On September 30, 2021 Tokenize, in an agreement that the Company is not a party to, irrevocably assigned all its rights in GBT Tokenize, including all its rights per the Tokenize Agreement, The Gonzalez Consulting agreement and the pledge agreement, to the benefit of Magic International Argentina FC, S.L a third party (“Magic”). On June 30, 2021 Magic irrevocably assigned to Stanley Hills, LLC its credit balance accrued until June 30,2021 per the consulting agreement.

Regulatory

 GBT Tokenize is seeking approval filing for its qTerm device with the United Stated Food and Drug Administration (“FDA”). The FDA classifies medical devices from Class 1 – 3, each of which must be subjected to robust evaluations and reviews to comply with manufacturing quality control (QC) standards. The FDA regulates the marketing/sale of medical device products in the U.S. and monitors the safety of all regulated medical products. FDA Section 201(h) of the Food, Drug & Cosmetic Act (FD&C Act) defines a device as: an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a component part or accessory which is recognized in the official National Formulary, or the United States Pharmacopoeia, or any supplement to them, intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease in man or other animals, or intended to affect the structure or any function of the body of man or other animals.

GBT Tokenize engaged M Squared Associates (M2) to assist with developing the FDA premarket strategy for its qTerm device. The process of filing for FDA clearance involves development of a sound regulatory strategy for pathway to market, including required preclinical and performance testing, software verification and validation activities and ensuring user needs are met. In addition, GBT/tokenize will partner with M2 to finalize technical design documentation, device labeling claims and intended use. Other aspects that will be evaluated include manufacturing processes, usability / human factors and the development of valid scientific evidence. The company will work with M2 to develop a detailed description of the device’s software and algorithm training requirements, including design specifications. qTerm computer program will be reviewed for its control functions and other required performance testing plans and criteria according to FDA guidance documentation.

Even though not required by law, there is no guarantee that the Company will be successful in obtaining any regulatory approval. In order to successfully implement this concept, the Company will need to raise adequate capital to support its compliance research and, if successfully researched, developed and granted regulatory approval, the Company would need to enter into a strategic relationship with a third party that has experience in manufacturing, selling and distributing this product. There is no guarantee that the Company will be successful in any or all of these critical steps.

The Company is seeking to conduct business with the US government agencies and has hired a consulting firm for general guidance with the GSA (General Services Administration) application process. GSA approval status describes an organization that have been approved to sell to the United States Government through the U.S. General Services Administration (GSA). The GSA is an independent agency of the United States Government that was established in 1949 to help manage, approve, and facilitate government contracts, products, bids and verify that product and services properly sourced under the US Government guidelines. The GSA is the purchasing department of the U.S. Government and lists contracts or schedules potential vendors that can bid on to get government business. To become eligible to bid on a GSA schedule, it is required to complete several important steps, among them are registering in the government’s SAM (System for Award Management), and providing previous customer contact information as a means for the GSA to perform a past performance evaluation. More information can be found on GSA web site at: Home (gsa.gov).

Intellectual Property

To date, the Company, has filed for different patents covering certain fields of its technologies, as well as trademarks. These patents and trademarks, as well as various websites and social media platforms, comprise the Company’s intellectual properties. On February 27, 2020 GBT Technologies, S.A., as successor in interest to Hermes Roll, LLC had notified the Company that it was in default on its Amended and Restated Territorial License Agreement (“ARTLA”) dated June 15, 2015 and that the ARTLA had been cancelled and rescinded.

On January 31, 2020, in the arbitration titled GBT Technologies Inc. (k/n/a Gopher Protocol, Inc. v. Discover Growth Fund, LLC (“Discover”) (JAMS Ref. No. 1260005395), the Company was informed that a final award was entered (the “Final Award”). The Final Award affirms that certain sections of the Senior Secured Redeemable Convertible Debenture (the “Debenture”) constitute unenforceable liquidated damages penalties and were stricken. Further, it was determined that neither Discover nor John Kirkland, President and General Partner of Discover, were entitled to recovery of their attorney’s fees. Consequently, and consistent with the expectations of the Company, the arbitrator awarded Discover an award of $4,034,444 plus interest of 7.25% accrued from May 15, 2019 and costs in the amount of $55,613.00. On February 18, 2020, the Company filed a motion with the United States District Court District of Nevada (the “Nevada Court”) to confirm the Final Award and a motion to consolidate Discover’s application to confirm the Final Award filed in the U.S. District Court of the Virgin Islands (Case No: 3 :20-cv-00012-CVG-RM) (the “Virgin Island Court”). On February 27, 2020, the Nevada Court denied the Company’s motion to confirm the Final Award and motion to consolidate and further decided that the confirmation of the Final Award should be litigated in the Virgin Island Court. As such, on February 27, 2020, the Company filed a Notice of Entry of Order as well as a Motion to Confirm the Arbitration Award; Address the Outstanding issue regarding whether Discover’s rights are subordinated to other creditors and, thereafter, oversee a commercially reasonable foreclosure sale (Case No: 3 :20-cv-00012-CVG-RM). It was the Company’s position that the Final Award must first be confirmed and all questions regarding the rights of Discover relative to those of other creditors must be determined before any foreclosure sale can proceed. It was further the position of the Company that the previously disclosed foreclosure sale scheduled by Discover is being conducted in a commercially unreasonable manner and that if Discover proceeded forward with the foreclosure sale it did so at its own risk. Nevertheless, on February 28, 2020, Discover advised that it conducted a sale of the Company’s assets. As the date of this report Investor failed to present a deed of sale for the alleged sale that allegedly took place as noticed. The Company filed with Virgin Island Court the motions disputing the validity of the alleged sale.

On March 6, 2020, the Company through its newly acquired wholly owned subsidiary, Greenwich International Holdings, a Costa Rica corporation (“Greenwich”), entered into a Joint Venture and Territorial License Agreement (the “Tokenize Agreement”) with Tokenize-It, S.A. (“Tokenize”) to develop, maintain and support source codes for its proprietary technologies including advanced mobile chip technologies, tracking, radio technologies, AI core engine, electronic design automation, mesh, games, data storage, networking, IT services, business process outsourcing development services, customer service, technical support and quality assurance for business, customizable and dedicated inbound and outbound calls solutions, as well as digital communications processing for enterprises and startups (“Technology Portfolio”). Via this Joint Venture the parties commenced development of a development of an intelligent human vital signs’ device, suggested named qTerm. The Joint Venture completed successfully the first prototype.

The following chart represent the Company Intellectual Properties Status:

Patents

TitleApp. No.CountryFiling DateStatus / DeadlinePatent No.Issue Date
System and method for scheduling trucking service, according to demand, at the customer’s or any other location using smartphone application and/or internet web site62/124,320USDecember 15, 2014ExpiredN/AN/A
System and method for scheduling categorized delivery and/or service, according to demand, to customer’s location based on smartphone and web site software application62/176,933USMarch 3, 2015Expired and Converted to Electronic Circuit Non-provisional and PCTN/AN/A

System and method for finding possible bartering partners in both two-party and multi-party scenarios via smartphone/mobile device application14/545,577USMay 26, 2015AbandonedN/AN/A
System and method for scheduling gasoline or diesel fill, according to demanding, at the customer’s location62/231,405USJuly 6, 2015Expired and Converted to Electronic Circuit Non-provisional and PCTN/AN/A
Electronic circuit or microchip with a secured BIOS system, with ROM and RAM memory, working with smartphone software application and62/282,593USAugust 6, 2015Expired and Converted to Electronic Circuit Non-provisional and PCTN/AN/A
System and method for power saving/reduction within integrated circuits62/282,808USAugust 13, 2015ExpiredN/AN/A
System and method for overseeing and monitoring user’s computerized activity to define privacy level62/283,915USSeptember 16, 2015ExpiredN/AN/A
System, method and computer program for remote disablement and enablement of mobile devices62/284,353USSeptember 28, 2015Expired and Converted to Electronic Circuit Non-provisional and PCTN/AN/A
System, method and computer program for real time emergency communication, beacon, location identification and tracking for mobile devices62/284,458USOctober 1, 2015Expired and Converted to Electronic Circuit Non-provisional and PCTN/AN/A
System, method and a computer program for automatic and motion activity detection, activation or deactivation airplane mode for mobile devices62/284,744USOctober 8, 2015Expired and Converted to Electronic Circuit Non-provisional and PCTN/AN/A
Monolithic multi-dimensional integrated circuits (ICs) on both sides of electronic board including utilization of all package’s planes62/284,880USOctober 13, 2015ExpiredN/AN/A
System, method and software for mobile database manage and sharing over private, secured network, in real time62/284,884USOctober 13, 2015ExpiredN/AN/A

Method, system and computer software for advertisement using symbols as characters interface62/285,055USOctober 19, 2015ExpiredN/AN/A
Monolithic, multi-dimensional, multi-plane, memory structure for integrated circuits62/285,443USOctober 30, 2015ExpiredN/AN/A
Automatic, characterized and prioritized consolidation of different credit cards into one card method, point of sale, smartphone applications and computer software62/285,996USNovember 26, 2015ExpiredN/AN/A
Electronic circuit within a sticky patch package for global tracking that is working with mobile software application and other electronic circuits on a separate, secured, private network62/387,789USJanuary 6, 2016Expired and Converted to Tracking Devices Non-provisional and PCTN/AN/A
ELECTRONIC CIRCUITS FOR SECURE COMMUNICATIONS AND ASSOCIATED SYSTEMS AND METHODS15/015,441USFebruary 4, 2016GrantedU.S. Patent No. 10,521,614December 31, 2019
ELECTRONIC CIRCUITS FOR SECURE COMMUNICATIONS AND ASSOCIATED SYSTEMS AND METHODSPCT/US2016/016522PCTFebruary 4, 2016Expired and Entered National Phase in EuropeN/AN/A
SYSTEM AND METHOD FOR POWER SAVING/REDUCTION WITH INTEGRATED CIRCUITS62/360,525USJuly 11, 2016ExpiredN/AN/A
System and method for elimination of electromigration and self-heat violations during construction of a mask layout block, maintaining process design rules and layout connectivity62/494,199USAugust 1, 2016ExpiredN/AN/A
ELECTRONIC CIRCUITS FOR SECURE COMMUNICATIONS AND ASSOCIATED SYSTEMS AND METHODS16759244.3EPSeptember 29, 2017PendingN/AN/A

TRACKING DEVICES, SYSTEMS AND METHODS USING PATCH PACKAGES WITH EMBEDDED ELECTRONIC CIRCUITS15/344,619USNovember 7, 2016Granted10,021,522July 10, 2018
TRACKING DEVICES, SYSTEMS AND METHODS USING PATCH PACKAGES WITH EMBEDDED ELECTRONIC CIRCUITSPCT/US16/060763PCTNovember 7, 2016Expired and Entered National Phase in EuropeN/AN/A
TRACKING DEVICES, SYSTEMS AND METHODS USING PATCH PACKAGES WITH EMBEDDED ELECTRONIC CIRCUITS16884138.5EPJuly 3, 2018PendingN/AN/A
TRACKING DEVICES, SYSTEMS AND METHODS USING PATCH PACKAGES WITH EMBEDDED ELECTRONIC CIRCUITS16/028,449USJuly 6, 2018Granted10,616,715April 7, 2020
GOPHER RADIO TOKEN62/631,007USFebruary 15, 2018Pending and Converted to GRT Non-provisionalN/AN/A
SYSTEMS AND METHOD OF CONVERTING ELECTRONIC TRANSMISSIONS INTO DIGITAL CURRENCY16/008,069USJune 14, 2018AbandonedN/AN/A
SYSTEMS AND METHOD OF CONVERTING ELECTRONIC TRANSMISSIONS INTO DIGITAL CURRENCYPCT/US19/16728PCTFebruary 6, 2019ExpiredN/AN/A
System, method and software application for mobile database management and sharing over private, secured network, in real time62/676,393USMay 25, 2018Pending and Converted to Mobile Database Sharing Non-provisionalN/AN/A
SYSTEMS AND METHODS OF MOBILE DATABASE MANAGEMENT AND SHARING16/155,093USOctober 9, 2018Granted10,853,327December 1, 2020
SYSTEMS AND METHODS OF MOBILE DATABASE MANAGEMENT AND SHARING17/104,001USNovember 25, 2020PendingN/AN/A

MONOLITHIC, MULTI-DIMENSIONAL, MULTI-PLANE, MEMORY STRUCTURE FOR INTEGRATED CIRCUITS62/732,026USSeptember 17, 2018PendingN/AN/A
MONOLITHIC MULTI-DIMENSIONAL INTEGRATED CIRCUITS (ICS) ON BOTH SIDES OF ELECTRONIC BOARD INCLUDING UTILIZATION OF ALL PACKAGE’S PLANES62/732,023USSeptember 17, 2018PendingN/AN/A
MULTI-DIMENSIONAL INTEGRATED CIRCUITS AND MEMORY STRUCTURE FOR INTEGRATED CIRCUITS AND ASSOCIATED SYSTEMS AND METHODS16/292,388USMarch 5, 2019Granted10,854,763December 1, 2020
MULTI-DIMENSIONAL INTEGRATED CIRCUITS AND MEMORY STRUCTURE FOR INTEGRATED CIRCUITS AND ASSOCIATED SYSTEMS AND METHODS17/102,928USNovember 24, 2020PendingN/AN/A
MULTI-DIMENSIONAL INTEGRATED CIRCUITS AND MEMORY STRUCTURE FOR INTEGRATED CIRCUITS AND ASSOCIATED SYSTEMS AND METHODSPCT/US19/50266PCTSeptember 10, 2019ExpiredN/AN/A
MULTI-DIMENSIONAL INTEGRATED CIRCUITS AND MEMORY STRUCTURE FOR INTEGRATED CIRCUITS AND ASSOCIATED SYSTEMS AND METHODS19862631.9EPMarch 16, 2021PendingN/AN/A

MULTI-DIMENSIONAL INTEGRATED CIRCUITS AND MEMORY STRUCTURE FOR INTEGRATED CIRCUITS AND ASSOCIATED SYSTEMS AND METHODS10-2021-7008024KRMarch 17, 2021PendingN/AN/A
Automatic, characterized and prioritized consolidation of different credit cards into one card method, point of sale, smartphone applications and computer software63175564USApril 16, 2021PendingN/AN/A
Method, system and computer software for advertisement, using symbols as characters interface63177669USApril 21, 2021PendingN/AN/A
SYSTEMS AND METHODS FOR ELIMINATING ELECTROMIGRATION AND SELF-HEAT VIOLATIONS IN A MASK LAYOUT BLOCK17315747USMay 10, 2021PendingN/AN/A
System and method for automatic correction of geometrical design rule violations in integrated circuit mask layout data, maintaining its electrical connectivity (LVS), reliability (RV) and design for manufacturing (DFM) structural correctness63197635USJune 7, 2021PendingN/AN/A
REAL-TIME MOVEMENT, POSITION DETECTION, AND IMAGING USING WIRELESS TECHNOLOGY AND ARTIFICIAL INTELLIGENCE63211573USJune 17, 2021PendingN/AN/A
SYSTEMS AND METHODS FOR IDENTIFICATION AND ELIMINATION OF GEOMETRICAL DESIGN RULE VIOLATIONS OF A MASK LAYOUT BLOCK17391292USAugust 2, 2021PendingN/AN/A

SYSTEMS AND METHODS OF REAL-TIME MOVEMENT, POSITION DETECTION, AND IMAGING17471213USSeptember 10, 2021Pending N/AN/A
System and method for automatic correction of electrical connectivity mismatches of a mask layout block, maintaining the process design rules (DRC Clean), connectivity (LVS Clean) correctness, obeying Reliability Verification (RV) and DFM (Design formanufacturability) constraints63248550USSeptember 27, 2021PendingN/AN/A
System and method for Automatic Generation of Integrated Circuits IP (Intellectual property) Layout Blocks63249150USSeptember 28, 2021PendingN/AN/A
Artificial Intelligence Controlled, SKIP ZONE FREE, HF Radio Communication System and Method63257199USOctober 19, 2021PendingN/AN/A

Trademarks

MarkApp. No.CountryFiling DateStatus / DeadlineGoods/Services/ClassesReg. No. / Reg. Date
GOPHERINSIDE86/681,308USJuly 1, 2015AbandonedMicrochips, in Class 9N/A
GOPHERINSIGHT86/737,146USAugust 26, 2015AbandonedChip carriers, etc., in Class 9N/A
FRIENDINME86/755,543USSeptember 14, 2015AbandonedSoftware from mobile phones, etc., in Class 9N/A
GOPHERNET86/811,422USNovember 5, 2015AbandonedCommunications software for connecting microchips, etc., in Class 9N/A
GOPHERANTITHEFT86/855,191USDecember 21, 2015AbandonedMicrochips, in Class 9N/A
GOPHERSKYNET86/858,936USDecember 28, 2015AbandonedMicrochips, in Class 9N/A
PUZPIX87/12,1137USJuly 29, 2016RegisteredGame software, etc., in Class 95,356,006 / December 12, 2017
GOPH GOPHER PROTOCOL (and Design)87/927,131USMay 18, 2018AbandonedSoftware for mobile phones, microchips, etc., in Class 9N/A
G-MONEY88/132,574USSeptember 26, 2018AbandonedProviding digital currency or digital token, in Class 36N/A
G-CASH88/132,592USSeptember 26, 2018AbandonedProviding digital currency or digital token, in Class 36N/A

Employees

As of September 30, 2021, we had 3 full time employees and no part time employees. We also utilize outside consultants and contractors as needed.

Properties

The Company leases its virtual office space at 2450 Colorado Ave., Suite 100E, Santa Monica, CA 90404 on a month-to-month lease for $311 per month. Due to the global COVID-19 pandemic, the Company has maintained its address but only as virtual office space with minimum administrative services, while all employees and consultants work remotely.

Legal Proceedings

From time to time, the Company may be involved in various litigation matters, which arise in the ordinary course of business. There is currently no litigation that management believes will have a material impact on the financial position of the Company.

UGO Litigation

On or around January 30, 2019, RWJ Advanced Marketing, LLC, Greg Bauer, and Warren Jackson sued the Company and multiple third and related parties in Superior Court of the State of California - County of Los Angeles, General District in connection with the acquisition of UGO in September 2017. The case number is 19STCV03320 (the “Original Lawsuit”). The complaint in the Original Lawsuit alleges breach of contract, among other causes of action. The Company answered the complaint and filed a cross-complaint against the plaintiffs in the case and third parties on or around February 15, 2019. On or about September 10, 2020, the Company through its agent of service was “served” with a complaint (the Company contested service) that was recently filed against the Company and third parties by Robert Warren Jackson and Gregory Bauer in Los Angeles Superior Court Case No.: 20STCV32709 (“Second Lawsuit”). In the Original Lawsuit filed, the court rejected the plaintiff’s claims that they were filing a purported quasi-derivative lawsuit. As such, in this current litigation, the plaintiff is now again claiming the action is a derivative lawsuit. On October 13, 2020, the Second Lawsuit was removed by other defendants into Central District of California (CASE NO. 2:20−cv−09399−RGK−AGR). On February 2, 2021 The Central District of California dismissed the entire Second Lawsuit based on “demand futility”. In the Original lawsuit, the Company filed a cross complaint against the plaintiff and other third parties. Recently, the court has scheduled various hearings and a trial date set for December 27, 2021 which was later continued by the Court to September 28, 2022. It was the Company’s intention to dividend its holdings of its wholly owned subsidiary Ugopherservices Corp. (“UGO”). As UGO is the main dispute in the litigations described above, the Company has elected to sell UGO to a third-party effective July 1, 2020 (See Note 3). On September 17, 2020, the Company terminated Greg Bauer as consultant (resulting from the sale of UGO), which he confirmed in writing. On or about June 14, 2021 the Company stipulated with plaintiff that all third parties will be released and plaintiff may file a new first amendment complaint that will name only the Company. As such, all third parties other than prior transfer agent of the Company have been dismissed from this litigation.

Following the sale of UGO, the Company noticed third parties (including SURG, via its asset manager) to wire the UGO funds to its new bank account. SURG never answered the notice. The Company noticed certain third parties that it intends to take legal actions to resolve this issue. On November 12, 2020 the Company filed a complaint in the United States District Court – District of Nevada - Case 2:20-cv-02078 against RWJ, Mr. Bauer, Mr. Jackson and against W.L. Petrey Wholesale Company Inc for fraud, breach of contract, Unjust Enrichment and other claims.

Discover Growth Fund

On December 3, 2018, the Company entered into a Securities Purchase Agreement (the “SPA”) with Discover Growth Fund, LLC (the “Investor”) pursuant to which the Company issued a Senior Secured Redeemable Convertible Debenture (the “Debenture”) in the aggregate face value of $8,340,000. In connection with the issuance of the Debenture and pursuant to the terms of the SPA, the Company issued a Common Stock is Empire Stock Transfer, Inc. Its address is 1859 Whitney Mesa Drive, Henderson, NV 89014 and its telephone number is 702-818-5898.

Description of Capital Stock

We have authorized capital stock consisting of 500,000,000Purchase Warrant to acquire up to 225,000 shares of Common Stock, $0.00001 par valuecommon stock for a term of three years (the “Warrant”) on a cash-only basis at an exercise price of $100.00 per share with respect to 50,000 Warrant Shares, $75.00 with respect to 75,000 Warrant Shares and 22,110,000$50.00 with respect to 100,000 Warrant Shares. The holder may not exercise any portion of the Warrants to the extent that the holder would own more than 4.99% of the Company’s outstanding common stock immediately after exercise. The outstanding principal amount may be converted at any time into shares of preferred stock. As of December 31, 2018, there were 182,224,264 shares of our Common Stock, and 45,700 shares of preferred stock outstanding. The Series B Preferred Stock has a stated value of $100 per share and is convertible into the Company’s common stock at a conversion price equal to 95% of $0.30the Market Price less $5.00 (the conversion price is lowered by 10% upon the occurrence of each Triggering Event – the current conversion price is 75% of the Market Price less $5.00). The Market Price is the average of the 5 lowest individual daily volume weighted average prices during the period the Debenture is outstanding. On May 28, 2019, the Investor delivered to the Company a “Notice of Default and Notice of Sale of Collateral” (the “Notice”). On December 23, 2019, in arbitration between the Company and the Investor, an Interim Award was entered in favor of the Investor. On January 31, 2020, the Company was informed that a final award was entered (the “Final Award”). The Final Award affirms that certain sections of the Debenture constitute unenforceable liquidated

damages penalties and were stricken. Further, it was determined that the Investor was entitled to recovery of their attorney’s fees. Consequently, the arbitrator awarded Investor an award of $4,034,444 plus interest of 7.25% accrued from May 15, 2019 and costs in the amount of $55,613. On February 18, 2020, the Company filed a motion with the United States District Court  District of Nevada (the “Nevada Court”) to confirm the Final Award and a motion to consolidate Investor’s application to confirm the Final Award filed in the U.S. District Court of the Virgin Islands (Case No: 3 :20-cv-00012-CVG-RM) (the “Virgin Island Court”). On February 27, 2020, the Nevada Court denied the Company’s motion to confirm the Final Award and motion to consolidate and further decided that the confirmation of the Final Award should be litigated in the Virgin Island Court. As such, on February 27, 2020, the Company filed a Notice of Entry of Order as well as a Motion to Confirm the Arbitration Award, address the outstanding issues regarding whether Investor’s rights are subordinated to other creditors and, thereafter, oversee a commercially reasonable foreclosure sale (Case No: 3 :20-cv-00012-CVG-RM). It was the Company’s position that the Final Award must first be confirmed and all questions regarding the rights of Investor relative to those of other creditors must be determined before any foreclosure sale can proceed. It is further the position of the Company that the previously disclosed foreclosure sale scheduled by Investor is being conducted in a commercially unreasonable manner and that if Discover proceeded forward with the foreclosure sale it did so at its own risk. Nevertheless, on February 28, 2020, Investor advised that it conducted a sale of the Company’s assets. As the date of this report Investor failed to present a deed of sale for the alleged sale that allegedly took place as noticed. The Company filed with Virgin Island Court the motions disputing the validity of the alleged sale. On July 28, 2020, Investor filed in the State of Nevada a motion for attorneys $48,844 and costs $716. The Company filed an answer on August 11, 2020. On October 16, 2020, Investor motion for attorneys and costs was denied.

GBT Technologies, S.A.

On September 14, 2018, the Company entered into an Exclusive Intellectual Property License and Royalty Agreement (the “GBT License Agreement”) with GBT-CR, a fully compliant and regulated crypto currency exchange platform that currently operates in Costa Rica as a decentralized crypto currency platform, pursuant to which, among other things, the Company granted to GBT-CR an exclusive, royalty-bearing right and license relating intellectual property relating to systems and methods of converting electronic transmissions into digital currency as reflected in that certain patent filed with the United Stated Patent and Trademark Office on or about June 14, 2018 (EFS ID: 32893586; Application Number: 16008069; Type: Utility under 35 USC 111(a); Confirmation Number: 6787)(collectively, the “Digital Currently Technology”). Pursuant to the GBT License Agreement, the Company granted GBT-CR an exclusive worldwide license to use the Digital Currency Technology to make, use, sell, lease or otherwise commercialize and dispose of products and devices utilizing the Digital Currently Technology. Under the terms of the GBT License Agreement, the Company is entitled to receive a royalty payment of 2% of gross revenue of each licensed product sold by GBT-CR during the period starting in which revenue is first generated using the licensed products and continuing for five years thereafter. Upon signing the GBT-CR License Agreement, GBT-CR paid the Company $300,000 which is nonrefundable. The Company has recognized the $300,000 as revenue during the years ended December 31, 2018. Upon GBT-CR making available for sale (the “Commercial Event”) an ICO (Initial Coin Offering) (the “Coin”), GBT-CR will make a payment to the Company in the amount of $5,000,000. Further, upon the Commercial Event, GBT-CR will grant the Company the ability to acquire 30% of the Coin at a 30% discount of such offering price of the Coin. The GBT License Agreement commenced as of the signing date and, unless terminated in accordance with the termination provisions of the GBT License Agreement, shall remain in force until the expiration of the patent pertaining to the Digital Currency Technology; provided that the right to use trade secrets shall survive the expiration of the GBT License Agreement provided the Company has not terminated. Prior to the signing of the GBT License Agreement, GBT-CR advanced $200,000 to the Company, which the parties have agreed will be applied toward the $5,000,000 fee when it becomes due. The $200,000 was recorded as unearned revenue at December 31, 2018 and reclassified to accrued expense at December 31, 2020 and 2019. On February 27, 2020 GBT Technologies, S.A., as successor in interest to Hermes Roll, LLC had notified the Company that it was in default on its Amended and Restated Territorial License Agreement (“ARTLA”) dated June 15, 2015 and that the ARTLA had been cancelled and rescinded.

Surge Holdings, Inc.

On September 30, 2019, the Company entered into an Asset Purchase Agreement (“APA”) with Surge Holdings, Inc., a Nevada corporation (“SURG”) pursuant to which the Company agreed to sell and assign to SURG, all the assets and certain specified liabilities, of its ECS Prepaid, Electronic Check Services and the Central State Legal Services businesses in consideration of $5,000,000 to be paid through the issuance of 3,333,333 shares of SURG’s common stock (the “SURG Common Stock”) and a convertible promissory note in favor of the Company in the principal amount of $4,000,000 (the “SURG Note”), convertible into SURG’s shares of common stock.

On June 23, 2020, SURG entered into an Exchange Agreement (the “AltCorp Exchange Agreement”) with AltCorp Trading LLC (“AltCorp”) with such AltCorp Exchange Agreement being consented and agreed to by the Company, the parent of AltCorp. At the expiration of the lock-up period, in the event the VWAP for the SURG Common Stock was, during the preceding twenty-day trading period, less than $0.50 per share, representing 3,000 posts split (15,000,000 pre-split)AltCorp retained the right to reserve additional shares of SURG Common Stock equal to the True-Up Value as defined in the AltCorp Exchange Agreement.

On January 1, 2021, SURG, AltCorp and Stanley Hills, LLC (“Stanley”) entered into a Mutual Release and Settlement Agreement (“Settlement Agreement”). Pursuant to the terms of the Settlement Agreement, SURG agreed to amend the AltCorp Exchange Agreement where SURG acknowledged a debt of $3,300,000 (the “Debt”) to be paid in 33 monthly payments of $100,000 payable in shares of common shares. Furthermore,stock of SURG at a per share price equal the volume weighted average price of Surg’s common stock during the ten (10) trading days immediately preceding the issuance. The AltCorp assets have been pledged since August 12, 2020 for the benefit of Stanley to secure Stanley’s note payable by the Company. Accordingly, the SURG Common Stock issued to AltCorp as a result of the Settlement Agreement were pledged to Stanley.

Subsequently, SURG was a party to two lawsuits in state District Court, the Eighth Judicial District Court for Clark County, Nevada involving AltCorp, Stanley and Glen Eagles Acquisition LP (the “AltCorp Parties.”). Each of these lawsuits were ultimately disputes relating to the total consideration SURG was to pay the Company under the APA.

On October 18, 2021, the AltCorp Parties, the Company, and SURG entered into a Memorandum of Understanding (the “MOU”) to set up a framework for an attempt to settle the two lawsuits.

On December 22, 2021 (the “Effective Date”), pursuant to the framework in the MOU, the AltCorp Parties (and an additional third party), the Company, ECS, and SURG, Kevin Brian Cox (SURG’s Chief Executive Officer) - in his individual capacity, entered into a Resolution of Purchase, Mutual Release, and Settlement Agreement (the “Final Settlement Agreement”) to settle the two lawsuits and resolve all disputes related to the consideration paid by SURG to the Company in connection with the APA.

The Final Settlement Agreement, among other resolutions, essentially provides the following:

(i) From the total consideration of the Final Settlement Agreement, the amount of $375,000 (“Escrow Amount”) will be deposit by SURG in escrow. SURG has acquired the Company’s rights to a certain Master Distribution and Service Agreement (“MDA”). Under certain circumstances, if the result of the Company’s lawsuit against a third party (the “GBT Lawsuit”) is a monetary judgment without the assignment or legal decree of ownership of the MDA, the Company shall be entitled to receive the Escrow Amount and shall assign to SURG the first $1,000,000 the Company recovers from the defendants in the GBT Lawsuit. In the event that the Company does not prevail in the GBT Lawsuit then it shall be entitled to release of the Escrow Amount but shall be responsible for any fees and costs obligation sought by the defendants in the GBT Lawsuit.

(ii) SURG agreed to make total payments of $4,200,000 to Stanley on or prior to January 7, 2022. This $4.2 million amount consists of $450,000 paid by SURG in November and December 2021, $100,000 to be paid on or about January 4, 2022, and $3,650,000 to be paid on or prior to January 7, 2022 of which $375,000 will be held in escrow as described before.

(iii) Potential payments to third parties.

The Final Settlement Agreement replaces all prior agreements between the parties. In addition, within three (3) trading days of the last payment related to the $4.2 million payment to Stanley being made, the parties shall make filings with the state District Court in Clark County, Nevada to dismiss both lawsuits, including, regarding the lawsuit filed by AltCorp Trading, LLC, the dismissal of the lawsuit as to VStock Transfer, LLC. The parties agreed to a full mutual release of any disputes or claims between the parties.

Corporate Information

We were incorporated in Nevada on July 22, 2009. Our principal executive offices are located at 2450 Colorado Ave., Suite 100E, Santa Monica, CA 90404 and our telephone number is 888-685-7336. Our website address is https://gbtti.com. The information contained on our website is not incorporated by reference into this prospectus.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company is authorized to issue 2,000,000,000 of its $0.00001 par value common stock and 20,000,000 shares of its $0.00001 par value preferred stock Series B and 10,000 shares of its $0.00001 par value preferred stock Series C, 100,000 shares of its $0.00001 par value preferred Series D shares, 2,000,000 of its $0.00001 par value preferred Series G shares and 40,000 of its $0.00001 par value preferred Series H shares. As of December 31, 2020, 256,674,458 shares of common stock, as well as 45,000 shares of preferred stock Series B, 700 shares of preferred stock Series C, zero shares of preferred stock Series D, zero shares of preferred stock Series G and 20,000 shares of preferred stock Series H were issued and outstanding. As of December 27, 2021, 33,200,198 shares of common stock, as well as 45,000 shares of preferred stock Series B, 700 shares of preferred stock Series C, zero shares of preferred stock Series D, zero shares of preferred stock Series G and 20,000 shares of preferred stock Series H are issued and outstanding. The Board of Directors reserves the right to issue shares of preferred stock in the future indicating preference or rights as appropriate.

Market Information

Our common stock commenced quotation on the OTC PINK under the symbol “GTCH”. The Company’s subsequent symbol was “GOPH”. The following table sets forth the range of high and low prices per share of our common stock for each period indicated (after given effect to reverse split of 1 for 100 split in 2019 and 1 for 50 in 2021)

Quarters Ended Mar 31 Jun 30 Sep 30 Dec 31
                 
  High Low High Low High Low High Low
                                   
 2021  $5.00  $0.75  $1.70  $0.75  $0.90  $0.35  $0.40  $0.09 
 2020  $0.65  $0.01  $0.04  $0.01  $0.02  $0.01  $0.04  $0.01 

Record Holders

The number of holders of record for our common stock as of December 27, 2021 was 88.

Dividends

The Company has not yet adopted any policy regarding payment of dividends. No cash dividends have been paid or declared since the Date of Inception.

Securities Authorized for Issuance Under Equity Compensation Plans

We presently do not have equity compensation plans authorized.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations in conjunction with our financial statements and notes thereto, as well as the “Risk Factors” and “Description of Business” sections included elsewhere in this prospectus. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in “Risk Factors.”

General Overview

GBT Technologies Inc. (the “Company”, “we”, “us”, “our”, “GBT”, “Gopher”, “Gopher Protocol”, “GOPH”, “GTCH”, or “GBT”) was incorporated on July 22, 2009 under the laws of the State of Nevada and is headquartered in Santa Monica, California. The Company is targeting growing markets such as development of Internet of Things (“IoT”) and Artificial Intelligence (“AI”) enabled networking and tracking technologies, including wireless mesh network technology platform and fixed solutions, development of an intelligent human body vitals device, asset-tracking IoT, and wireless mesh networks. The Company has historically derived revenues from (i) the provision of IT services; and (ii) from the licensing of its technology.

GBT Tokenize Joint Venture

On March 6, 2020, the Company through Greenwich, entered into a Joint Venture and Territorial License Agreement (the “Tokenize Agreement”) with Tokenize-It, S.A. (“Tokenize”), which is owned by a Costa Rica Trust represented by Pablo Gonzalez (“Gonzalez”). Gonzalez also represents Gonzalez Costa Rica Trust, which holds a note in the principal amount of $10,000,000 and is also a shareholder of the Company. Under the Tokenize Agreement, the parties formed GBT Tokenize Corp., a Nevada corporation (“GBT Tokenize”). The purpose of GBT Tokenize is to develop, maintain and support source codes for its proprietary technologies including advanced mobile chip technologies, tracking, radio technologies, AI core engine, electronic design automation, mesh, games, data storage, networking, IT services, business process outsourcing development services, customer service, technical support and quality assurance for business, customizable and dedicated inbound and outbound calls solutions, as well as digital communications processing for enterprises and startups (“Technology Portfolio”), throughout the State of California. Upon generating any revenue from the Technology Portfolio, the Joint Venture will earn the first right of refusal for other territories.

Tokenize shall contribute the services and resources for the development of the Technology Portfolio to GBT Tokenize. The Company shall contribute 2,000,000 shares of common stock of the Company (“GBT Shares”) to GBT Tokenize. Tokenize and the Company will each own 50% of GBT Tokenize. The shares were valued at $5,500,000.

In addition, GBT Tokenize and Gonzalez entered into a Consulting Agreement in which Gonzalez is engaged to provide services in consideration of $33,333 per month payable quarterly which may be paid in shares of common stock calculated by the amount owed divided by the Company’s 10-day VWAP. Gonzalez will provide services in connection with the development of the business as well as GBT Tokenize’s capital raising efforts. The term of the Consulting Agreement is two years. During the nine months ended September 30, 2021, Gonzalez assigned all his accrued balances of $424,731 to Stanley Hills in a private transaction that the Company is not part to. The closing of the Tokenize Agreement occurred on March 9, 2020.

Through this Joint Venture the parties commenced development of an intelligent human vital signs’ device, which we currently refer to as the qTerm. The platform is an expansion of the existing license agreement with GBT Tokenize Corp., which provided GBT Tokenize Corp. with an exclusive territory of California to develop certain of the Company’s technology. As the nature of the platform cannot be restricted only to California, the Company’s joint venture GBT Tokenize Corp. will be compensated with additional two hundred million shares of the Company to strengthen its funding, subject to board approval. A provisional patent application for the qTerm Medical Device was filed on March 30, 2020 with the USPTO. The application has been assigned serial number 63001564. The Joint Venture completed successfully the first prototype. There is no guarantee that the Company will be successful in researching, developing or implementing this product into the market. In order to successfully implement this concept, the Company will need to raise adequate capital to support its research and, if successfully researched, developed and granted regulatory approval, the Company would need to enter into a strategic relationship with a third party that has experience in manufacturing, selling and distributing this product. There is no guarantee that the Company will be successful in any or all of these critical steps.

At March 31, 2020, the Company evaluated the carrying amount of this joint venture investment and determined that this investment was fully impaired and as a result an impairment charge of $5,500,000 was taken. At September 30, 2021, the Company evaluated the carrying amount of this joint venture investment and determined that this investment was fully impaired and as a result an impairment charge of $15,400,000 was taken.

Although the investment was impaired, the product development is still ongoing. The carrying amount of this investment at September 30, 2021 and December 2020, was $0 and $0, respectively.

On May 28, 2021, the parties agreed to amend the Tokenize Agreement to expand territory granted for the Technology Portfolio under the license to GBT Tokenize to include the entire continental United States. The Company has further agreed to issue GBT Tokenize an additional 14,000,000 shares of common stock of the Company. The shares were valued at $15,400,000.

The Company pledged its 50% ownership in GBT Tokenize and its 100% ownership of Greenwich to Tokenize to secure its Technology Portfolio investment. The Company shall appoint two directors and Tokenize shall appoint one director of GBT Tokenize.

On September 30, 2021 Tokenize, in an agreement that the Company is not a party to, irrevocably assigned all its rights in GBT Tokenize, including all its rights per the Tokenize Agreement, The Gonzalez Consulting agreement and the pledge agreement, to the benefit of Magic International Argentina FC, S.L a third party (“Magic”). On June 30, 2021 Magic irrevocably assigned to Stanley Hills, LLC its credit balance accrued until June 30,2021 per the consulting agreement.

COVID-19 Pandemic

The Company operates in a high-tech marketplace and relies on professionals and partnerships all over the world, which is impacted by the global pandemic, causing the Company’s resources to be affected. Our business operations have been and may continue to be materially and adversely affected by the coronavirus disease COVID-19.

An outbreak of respiratory illness caused by COVID-19 emerged in Wuhan city, Hubei province, PRC, in late 2019 and expanded globally. COVID-19 is considered to be highly contagious and poses a serious public health threat.

On March 19, 2020, California Governor Gavin Newsom issued a stay-at-home order to protect the health and well-being of all Californians and to establish consistency across the state in order to slow the spread of COVID-19. California was therefore under strict quarantine control and travel has been severely restricted, resulting in disruptions to work, communications, and access to files (due to limited access to facilities). Since then, other measures have been imposed in other countries and major cities in the USA, including Los Angeles, and throughout the world in an effort to contain the COVID-19 outbreak. The World Health Organization (the “WHO”) is closely monitoring and evaluating the situation. On March 11, 2020, the WHO declared the outbreak of COVID-19 a pandemic, expanding its assessment of the threat beyond the global health emergency it had announced in January. Any outbreak of such epidemic illness or other adverse public health developments in the USA or elsewhere in the world may materially and adversely affect the global economy, our markets and our business. The stay-at-home order was lifted in California only on January 25, 2021.

In the first quarter of 2020, the COVID-19 outbreak caused disruptions in our development operations, which resulted in delays on exiting projects. The State of California and the economy in general has begun to slowly re-open following the introduction of the COVID-19 vaccine. However, in the event COVID-19 or other variant is to again surface any further unforeseen delay in our operations of the development, delivery and assembly process within any of our activities could continue to result in, increased costs and reduced revenue.

We cannot foresee whether the outbreak of COVID-19 and its variants will continue to be effectively contained. If the outbreak of COVID-19 is not effectively and timely controlled, our business operations and financial condition may be materially and adversely affected as a result of the deteriorating market outlook for sales, the slowdown in regional and national economic growth, weakened liquidity and financial condition of our customers and vendors or other factors that we cannot foresee. Any of these factors and other factors beyond our control could have an adverse effect on the overall business environment, cause uncertainties, cause our business to suffer in ways that we cannot predict and materially and adversely impact our business, financial condition and results of operations.

Results of Operations:

Three Months ended September 30, 2021 and 2020

A comparison of the statements of operations for the three months ended September 30, 2021 and 2020 is as follows:

  Three Months Ended September 30 Change
  2021 2020 $ %
         
Sales - related party $45,000  $45,000  $—   0.0%
Operating expenses  906,398   452,790   453,608   100.2%
Loss from operations  (861,398)  (407,790)  (453,608)  111.2%
Other expense  431,467   (919,220)  1,350,687   -146.9%
Loss before provision for income taxes  (429,931)  (1,327,010)  897,079   -67.6%
Provision for income taxes  —   —   —     
Loss from continued operations  (429,931)  (1,327,010)  897,079   -67.6%
Discontinued operations  —   1,001,711   (1,001,711)  -100.0%
Net loss $(429,931) $(325,299) $(104,632)  32.2%

Sales for both the three months ended September 30, 2021 and 2020 were $45,000. Sales are derived from providing IT consulting services to a related party.

Operating expenses for the three months ended September 30, 2021 were $906,398, compared to $452,790 for the same period in 2020. The increase of $453,608 or 100.2% was principally due to an increase in development costs.

Other income (expense) for the three months ended September 30, 2021 was $431,467, an increase of $1,350,687 or 146.9% from $(919,220) for the same period in 2020. The change is principally due to a decrease in amortization of debt discount and a decrease in realized and unrealized loss on marketable equity securities; offset by a decrease in the change in fair value of derivative liability.

Net loss for the three months ended September 30, 2021 was $429,931 compared to $325,299 for the same period in 2020 due to the factors described above.

Nine months ended September 30, 2021 and 2020

A comparison of the statements of operations for the nine months ended September 30, 2021 and 2020 is as follows:

  Nine Months Ended September 30, Change
  2021 2020 $ %
         
Sales - related party $135,000  $135,000  $—   0.0%
Operating expenses  17,846,869   6,904,664   10,942,205   158.5%
Loss from operations  (17,711,869)  (6,769,664)  (10,942,205)  161.6%
Other expense  (15,142,326)  (8,144,625)  (6,997,701)  85.9%
Loss before provision for income taxes  (32,854,195)  (14,914,289)  (17,939,906)  120.3%
Provision for income taxes  —   —   —     
Loss from continued operations  (32,854,195)  (14,914,289)  (17,939,906)  120.3%
Discontinued operations  —   984,787   (984,787)  -100.0%
Net loss $(32,854,195) $(13,929,502) $(18,924,693)  135.9%

Sales for both the nine months ended September 30, 2021 and 2020 were $135,000. Sales are derived from providing IT consulting services to a related party.

Operating expenses for the nine months ended September 30, 2021 were $17,846,869, compared to $6,904,664 for the same period in 2020. The increase of $10,942,205 or 158.5% was principally due to an impairment charge of $15,400,000 in 2021 compared to an impairment charge of $5,500,000 in 2020.

Other expense for the nine months ended September 30, 2021 was $15,142,326, an increase of $6,997,701 or 85.9% from $8,114,625 for the same period in 2020. The increase is principally due to a loss on debt modification and change in fair value of derivative liability; offset by a decrease in amortization of debt discount and by a decrease in loss on exchange of assets.

 The operating results of our discontinued operations for Ugopherservices for the nine months ended September 30, 2021 and 2020 is summarized below:

  Nine months Ended September 30,
  2021 2020
Revenue $—  $8,291,842 
Cost of revenue  —   7,900,122 
Gross Profit  —   391,720 
Operating expenses  —   408,644 
Loss from operations  —   (16,924)
Other income (expenses)  —   — 
Net loss $—  $(16,924)

As a result of the disposition of Ugopherservices, the Company recognized a gain on the disposition of discontinued operations of $1,001,711 for the nine months ended September 30, 2020.

Net loss for the nine months ended September 30, 2021 was $32,854,195 compared to $13,929,502 for the same period in 2020 due to the factors described above.

Years ended December 31, 2020 and 2019

A comparison of the statements of operations for the year ended December 31, 2020 and 2019 is as follows:

  Years Ended December 31, Change
  2020 2019 $ %
         
Sales - related party $180,000  $180,000  $—   0.0%
Operating expenses  7,952,836   176,637,100   (168,684,264)  -95.5%
Loss from operations  (7,772,836)  (176,457,100)  168,684,264   -95.6%
Other expense  (11,206,839)  (10,354,953)  (851,886)  8.2%
Loss before provision for income taxes  (18,979,675)  (186,812,053)  167,832,378   -89.8%
Provision for income taxes  —   —   —     
Loss from continued operations  (18,979,675)  (186,812,053)  167,832,378   -89.8%
Discontinued operations  984,787   306,934   677,853   220.8%
Net loss $(17,994,888) $(186,505,119) $168,510,231   -90.4%

Sales for both the years ended December 31, 2020 and 2019 were $180,000. Sales are derived from providing IT consulting services to a related party.

Operating expenses for the year ended December 31, 2020 were $7,952,836, compared to $176,637,100 for the same period in 2019. The decrease of $168,684,264 or 95.5% was principally due to the fair value of warrants issued of $120,476,603 as a result of anti-dilution provisions in certain warrants previously issued and a charge took for the impairment of assets of $48,631,534 during the year ended December 31, 2019. There were no such expenses in 2020.

Other expense for the year ended December 31, 2020 was $11,206,839, an increase of $851,886 or 8.2% from $10,354,953 for the same period in 2019. The decrease is principally due to i) a change in the fair value of the derivative liability, ii) a decrease in amortization of discount and interest and financing costs; and iii) a decrease in realized and unrealized loss on a marketable equity security.

The operating results of our discontinued operations for Ugopherservices, ECS Prepaid, Electronic Check Services and the Central State Legal Services businesses for the year ended December 31, 2020 and 2019 is summarized below:

  Years Ended December 31,
  2020 2019
Revenue $8,291,842  $42,998,336 
Cost of revenue  7,900,122   41,596,118 
Gross Profit  391,720   1,402,218 
Operating expenses  408,644   2,477,084 
Loss from operations  (16,924)  (1,074,866)
Other income (expenses)  —   (3)
Net loss $(16,924) $(1,074,869)

As a result of the disposition of Ugopherservices, ECS Prepaid, Electronic Check Services and the Central State Legal Services businesses, the Company recognized a gain on the disposition of discontinued operations of $1,001,711 and $1,381,803 for the year ended December 31, 2020 and 2019, respectively.

Net loss for the year ended December 31, 2020 was $17,994,888 compared to $186,505,119 for the same period in 2019 due to the factors described above.

Liquidity and Capital Resources

Our cash and restricted cash were $386,659 and $178,016, respectively, at September 30, 2021 and $113,034 and $402,532, respectively, at December 31, 2020. Cash used in operating activities during the nine months ended September 30, 2021 was $958,011, compared to $542,913 during the same period in 2020. Significant differences exist between the periods, including, loss on debt modification, impairment of assets, loss on exchange of assets and amortization of debt discount. Our working capital position improved going from a working capital deficit of $27,710,040 at December 31, 2020 to a working capital deficit of $21,704,420 at September 30, 2021, principally as a result modification of debt terms for a convertible note to extend the due date beyond one year. Cash flows used in investing activities were $0 during the nine months ended September 30, 2021, compared to $231,771 for the same period in 2020. The decrease is due to cash of discontinued operations in 2020. Cash from financing activities for the nine months ended September 30, 2021 was $1,231,636, compared to $967,099 for the same period in 2020. The increase is due to the issuance of convertible notes in 2021.

We sustained net losses of $32,854,195 for the nine months ended September 30, 2021. In addition, we had a working capital deficit of $21,704,420 and accumulated deficit of $303,505,534 at September 30, 2021. We have historically financed our operations with proceeds from the sale of convertible notes. There is no guarantee that convertible note financing or other sources of capital will be available to the Company going forward.

In September of 2017 we purchased the assets of RWJ Advanced Marketing, LLC, and then after ECS Prepaid LLC, Electronic Check Services, Inc. and Central States Legal Services, Inc. in 2018. RWJ and ECS have historically generated significant revenues which we do not expect to continue in the future, as the Company divested its investment in ECS Prepaid LLC, Electronic Check Services, Inc. and Central States Legal Services, Inc. on or around September 2019, left only with the acquired assets from RWJ Advanced Marketing, LLC which in litigation, as disclosed in this report. In addition, during the last half of 2018 and the first few months of 2019, the Company has raised approximately $9,500,000 of net proceeds through the issuance of convertible debt and notes payable (see discussion below).

We intend to continue to make investments to support our business growth and we will require additional funds to respond to business challenges, including the need to develop new features and products or enhance our existing products, improve our operating infrastructure or acquire complementary businesses and technologies. Further, we need additional capital to continue operations. Accordingly, we need to engage in equity or debt financings to secure additional funds. We expect that we have sufficient capital to maintain operations through the end of 2021. In order to fully implement our business plan, we will need to raise $10,000,000. The Company will need to raise additional capital in the future of which there is no guarantee that the Company will be able to successfully raise such capital on acceptable terms. With the current cash on hand, cash in our attorney’s trust account and additional cash anticipated to be raised in the future, we believe we will have sufficient cash to meet our obligations for the next 12 months.

$10,000,000 for GBT Technologies S. A. acquisition

In accordance with the acquisition of GBT-CR the Company issued a convertible note in the principal amount of $10,000,000. The convertible note bears interest of 6% per annum and is payable at maturity on December 31, 2021. At the election of the holder, the convertible note can be converted into a maximum of 20,000 shares of Series H Preferred Stock votes on an as converted basis and carries standard anti-dilution rights. These rights were subsequently removed, except in cases of stock dividends or splits.Stock. Each share of Series CH Preferred Stock is convertible, at the option of the holder but subject to the Company increasing its authorized shares of common stock, into such number of shares of common stock of the Company as determined by dividing the Stated Value (as defined below)($500 per share) by the Conversion Price (as defined below)conversion price ($10.00 per share).

On May 19, 2021, the Company, Gonzalez, GBT-CR and IGOR 1 Corp entered into a Mutual Release and Settlement Agreement and Irrevocable Assignment of outstanding balance plus accrued interest (the “Gonzalez Agreement”). The Conversion Price for each share is equalPursuant to the Gonzalez Agreement, without any party admission of liability and to avoid litigation, the parties has agreed to (i) extend the GBT convertible note maturity date to December 31, 2022, (ii) amend the GBT convertible note terms to include a 50%beneficial ownership blocker of 4.99% and a modified conversion feature to the GBT convertible note with 15% discount to the averagemarket price during the 20 trading day period ending on the latest complete trading day prior to the conversion date and (iii) provided for an assignment of the lowest three lowest closing bid pricesGBT convertible note by Gonzalez to a third party.

During the nine months ended September 30, 2021, IGOR 1 converted $1,084,600 of the convertible note into 1,600,000 shares of the Company’s common stock duringstock. Also, on June 24, 2021, the 10-day trading period priorCompany transferred 5,500,000 SURG shares received as repayment of $660,000 of this convertible note.

Glen Eagles Acquisition LP

On July 8, 2019, the Company entered a Consulting Agreement with Glen Eagles Acquisition LP (“Glen”) as consultant to provide services in connection with the Company’s acquisition of 25% of GBT Technologies, S.A., a Costa Rican corporation (“GBT-CR”). Consultant will provide analysis, interaction with related professional and other services as requested by the Company to integrate and expand capabilities between GBT-CR and the Company. The Company shall pay Glen $1,000,000 through the issuance of a 6% Convertible Note. At the election of Glen, the Convertible Note can be converted into a maximum of 2,000 shares of Series H Preferred Stock. Each share of Series H Preferred Stock is convertible, at the option of the holder but subject to the conversion with a minimumCompany increasing its authorized shares of common stock, into such number of shares of common stock of the Company as determined by dividing the Stated Value ($500 per share) by the conversion price of $0.002. The stated value is $11.00($10.00 per share (the “Stated Value”)share). The Series CH Preferred Stock has no liquidation preference, does not pay dividends and the holder of Series CH Preferred Stock shall be entitled to one vote for each share of common stock that the Series CH Preferred Stock shallmay be convertible into. In addition, the Company entered into an Amendment of a Common Stock Purchase Warrant held by Glen to acquire nine million shares of common stock that had been assigned to Glen by Guardian Patch LLC. Pursuant to the amendment, the Company agreed to provide that the Common Stock Purchase Warrant may be exercised on a cashless basis and provided a beneficial ownership limitation of 4.99%. On or about June 23, 2020, the Company and AltCorp entered into agreements with SURG and Glen Eagles Acquisition LP (“Glen”) into series of agreements regarding the $4,000,000 SURG Note. Glen converted in full its $1,000,000 convertible note that was issued by the Company on July 8, 2019 plus $50,000 of accrued interest, into $1,050,000 of a SURG Note via an assignment of a portion ($1,050,000 of a $4,000,000 face value) of the $4,000,000 SURG Note. In addition, the Company entered into a consulting agreement with Glen for which the Company shall pay to Glen $200,000 via an assignment of a portion ($200,000 of a $4,000,000 face value) of the $4,000,000 SURG Note. Glen in turn converted all its $1,250,000 considerations received into 2,500,000 SURG shares. The holdersopen aged credit balances with Glen as of the date of this report is $237,500.

RWJ Acquisition Note

In connection with the acquisition of RWJ in September 2017, the Company issued a note payable. The note accrues interest at 3.5% per annum, was due on December 31, 2019 and is secured by the assets purchased in the acquisition. The Company contests the validity of the note, as such the note has not been repaid as of December 31, 2020. (See Item 3 – Legal Proceedings). The balance of the note at September 30, 2021 was $2,600,000 plus accrued interest of $385,631.

Discover Growth Fund

On December 3, 2018, the Company entered into a Securities Purchase Agreement (the “SPA”) with Discover Growth Fund, LLC (the “Investor”) pursuant to which the Company issued a Senior Secured Redeemable Convertible Debenture (the “Debenture”) in the aggregate face value of $8,340,000. In connection with the issuance of the Debenture and pursuant to the terms of the SPA, the Company issued a Common Stock Purchase Warrant to acquire up to 225,000 shares of common stock for a term of three years (the “Warrant”) on a cash-only basis at an exercise price of $100.00 per share with respect to 50,000 Warrant Shares, $75.00 with respect to 75,000 Warrant Shares and $50.00 with respect to 100,000 Warrant Shares. The holder may not exercise any portion of the Warrants to the extent that the holder would own more than 4.99% of the Company’s outstanding common stock immediately after exercise. The outstanding principal amount may be converted at any time into shares of the Company’s common stock at a conversion price equal to 95% of the Market Price less $5.00 (the conversion price is lowered by 10% upon the occurrence of each Triggering Event – the current conversion price is 75% of the Market Price less $5.00). The Market Price is the average of the 5 lowest individual daily volume weighted average prices during the period the Debenture is outstanding. On May 28, 2019, the Investor delivered to the Company a “Notice of Default and Notice of Sale of Collateral” (the “Notice”). On December 23, 2019, in arbitration between the Company and the Investor, an Interim Award was entered in favor of the Investor. On January 31, 2020, the Company was informed that a final award was entered (the “Final Award”). The Final Award affirms that certain sections of the Debenture constitute unenforceable liquidated damages penalties and were stricken. Further, it was determined that the Investor was entitled to recovery of their attorney’s fees. Consequently, the arbitrator awarded Investor an award of $4,034,444 plus interest of 7.25% accrued from May 15, 2019 and costs in the amount of $55,613. On February 18, 2020, the Company filed a motion with the United States District Court District of Nevada (the “Nevada Court”) to confirm the Final Award and a motion to consolidate Investor’s application to confirm the Final Award filed in the U.S. District Court of the Virgin Islands (Case No: 3 :20-cv-00012-CVG-RM) (the “Virgin Island Court”). On February 27, 2020, the Nevada Court denied the Company’s motion to confirm the Final Award and motion to consolidate and further decided that the confirmation of the Final Award should be litigated in the Virgin Island Court. As such, on February 27, 2020, the Company filed a Notice of Entry of Order as well as a Motion to Confirm the Arbitration Award, address the outstanding issues regarding whether Investor’s rights are subordinated to other creditors and, thereafter, oversee a commercially reasonable foreclosure sale (Case No: 3 :20-cv-00012-CVG-RM). It was the Company’s position that the Final Award must first be confirmed and all questions regarding the rights of Investor relative to those of other creditors must be determined before any foreclosure sale can proceed. It is further the position of the Company that the previously disclosed foreclosure sale scheduled by Investor is being conducted in a commercially unreasonable manner and that if Discover proceeded forward with the foreclosure sale it did so at its own risk. Nevertheless, on February 28, 2020, Investor advised that it conducted a sale of the Company’s assets. As the date of this report Investor failed to present a deed of sale for the alleged sale that allegedly took place as noticed. The Company filed with Virgin Island Court the motions disputing the validity of the alleged sale. On July 28, 2020, Investor filed in the State of Nevada a motion for attorneys $48,844 and costs $716. The Company filed an answer on August 11, 2020. On October 16, 2020, Investor motion was denied. As of September 30, 2021, the amount due related to this settlement was $4,090,057.

Redstart Holdings Corp.

Paid Off Notes/Notes Converted

On August 4, 2020, the Company entered into a Securities Purchase Agreement with Redstart Holdings Corp., an accredited investor (“Redstart”) pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 1”) in the aggregate principal amount of $153,600 for a purchase price of $128,000. The Redstart Note No. 1 has a maturity date of November 3, 2021 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 1 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 1 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have contractuallythe right to prepay the Redstart Note No. 1, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 1. The transactions described above closed on August 5, 2020. The outstanding principal amount of the Redstart Note No. 1 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 1 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 1), the Redstart Note No. 1 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 1. During the nine months ended September 30, 2021, the entire amount of Redstart Note No. 1 of $153,600 plus accrued interest was converted into 226,532 shares of common stock.

On September 15, 2020, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 2”) in the aggregate principal amount of $93,600 for a purchase price of $78,000. The Redstart Note No. 2 has a maturity date of September 15, 2021 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 2 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 2 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 2, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 2. The transactions described above closed on September 16, 2020. The outstanding principal amount of the Redstart Note No. 2 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 2 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 2), the Redstart Note No. 2 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 2. During the nine months ended September 30, 2021, the entire amount of Redstart Note No. 2 of $93,600 plus accrued interest was converted into 89,169 shares of common stock.

On December 9, 2020, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 3”) in the aggregate principal amount of $100,200 for a purchase price of $83,500. The Redstart Note No. 3 has a maturity date of December 9, 2021 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 3 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 3 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 3, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 3. The transactions described above closed on December 11, 2020. The outstanding principal amount of the Redstart Note No. 3 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 3 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 3), the Redstart Note No. 3 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 3. During the nine months ended September 30, 2021, the entire amount of Redstart Note No. 3 of $100,200 plus accrued interest was converted into 135,582 shares of common stock.

On February 10, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 4”) in the aggregate principal amount of $184,200 for a purchase price of $153,500. The Redstart Note No. 4 has a maturity date of February 5, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 4 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 4 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 4, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 4. The transactions described above closed on February 10, 2021. The outstanding principal amount of the Redstart Note No. 4 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 4 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 4), the Redstart Note No. 4 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 4. During the nine months ended September 30, 2021, the entire amount of Redstart Note No. 4 of $184,200 plus accrued interest was converted into 386,146 shares of common stock.

On March 15, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 5”) in the aggregate principal amount of $106,200 for a purchase price of $88,500. The Redstart Note No. 5 has a maturity date of June 15, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 5 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 5 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 5, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 5. The transactions described above closed on March 17, 2021. The outstanding principal amount of the Redstart Note No. 5 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 5 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 5), the Redstart Note No. 5 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 5. During the nine months ended September 30, 2021, the entire amount of Note No. 5 of $106,200 plus accrued interest was converted into 317,837 shares of common stock.

Outstanding Notes – This is only up to Sep 2021 correct?

On May 26, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 6”) in the aggregate principal amount of $106,200 for a purchase price of $88,500. The Redstart Note No. 6 has a maturity date of August 26, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 6 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 6 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 6, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 6. The transactions described above closed on May 28, 2021. The outstanding principal amount of the Redstart Note No. 6 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 6 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 6), the Redstart Note No. 6 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 6.

On September 21, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 7”) in the aggregate principal amount of $244,500 for a purchase price of $203,750. The Redstart Note No. 7 has a maturity date of December 22, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 7 at the rate of two and a half percent (2.5%) per annum from the date on which the Redstart Note No. 7 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 7, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 7. The transactions described above closed on September 28, 2021. The outstanding principal amount of the Redstart Note No. 7 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 7 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 7), the Redstart Note No. 7 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 7.

Iliad Research and Trading

On February 27, 2019, the Company entered into a note purchase agreement with a third-party investor - Iliad Research and Trading, L.P.(“Iliad”), pursuant to which the Company issued a promissory note for the original principal amount of $2,325,000. The promissory note had an original issue discount of $300,000 and the inventor paid consideration of $2,025,000 to the Company, of which $25,000 was paid for legal expenses. The outstanding balance of the promissory note is to be paid on the one-year anniversary of the issuance of the note. Interest on the note accrues at the rate of 10% per annum compounding daily. Subject to the terms and conditions set forth in the note, the Company may prepay all or any portion of the outstanding balance of the note at any time in an amount in cash equal to 120% of the amount repaid. In connection with transactions that generate less than $1,000,000 in proceeds, the Company has agreed to not issue any debt instrument or incurrence of any debt other than trade payables in the ordinary course of business, any securities or agreements to sell common stock with anti-dilution or price reset/reduction features or any securities that are or may be become convertible or exercisable into common stock with a price that varies with the market price of the common stock (collectively, “Restricted Issuance Transaction”). The outstanding balance of the Note will be increased by 5% in the event the Company enters into a Restricted Issuance Transaction that is approved by Iliad. The original issue discount is being amortized to interest expense over the term of the promissory note. On February 27, 2020, the Company and Iliad entered into an Amendment to the Iliad Note pursuant to which the maturity date of the Iliad Note was extended to August 27, 2020, provided that the Debt may be converted into shares of common stock of the Company at a conversion price equal to 80% multiplied by the lowest trading daily VWAP for the common stock during the 20 trading day period ending on the latest complete trading day prior to the conversion date, provided for the payment by the Company to Iliad of an extension fee equal to 7.5% of the outstanding balance of the Iliad Note resulting in a new balance of the Iliad Note of $2,765,983 and provided that the Company’s failure to deliver shares of common stock within three trading days of a conversion would result in an event of default. Iliad has agreed to restrict its ability to convert the Series C Preferred StockIliad Note and receive shares of the Company’s common stock such that the number of shares of the Company’s common stock held by it and its affiliates after such conversion or exercise does not exceed 4.9%9.99% of the then issued and outstanding shares of common stock. On July 20, 2020 the Company and Iliad entered into agreement to extend the maturity of the Iliad Note until February 27, 2021 in consideration of an extension fee of $1,000. During 2020, Iliad converted $539,000 of its convertible note to 53,175,795 shares of the Company’s common stock. On February 28, 2021 the Company and Iliad entered into agreement to further extend the maturity of the Iliad Note until May 31, 2021 in consideration of an extension fee of $1,000 representing the third extension of the original note. On May 19, 2021, the Company and Iliad entered into agreement to further extend the maturity of the Iliad Note until August 31, 2021 in consideration of an extension fee of $1,000 representing the fourth extension of the original note. On August 20, 2021, the Company and Iliad entered into agreement to further extend the maturity of the Iliad Note until December 31, 2021 in consideration of an extension fee of $1,000. During the nine months ended September 30, 2021, Iliad converted $2,508,737 of its convertible note into 4,053,069 shares of the Company’s common stock. The balance of the Iliad debt at September 30, 2021 and December 31, 2020 was $0 and $2,431,841.

Stanley Hills LLC

The Company entered into a series of loan agreements with Stanley Hills LLC (“Stanley”) pursuant to which it received more than $1,000,000 in loans (the “Debt”) since May 2019 up to December 2019. On February 26, 2020, in order to induce Stanley to continue to provide funding, the Company and Stanley entered into a letter agreement providing that the current note payable balance due to Stanley in the amount of $1,214,900 may be converted into shares of common stock of the Company at a conversion price equal to 85% multiplied by the lowest one trading price for the common stock during the 20-trading day period ending on the latest complete trading day prior to the conversion date. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. Stanley has agreed to restrict its ability to convert the Debt and receive shares of common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. During the nine months ended September 30, 2021, Stanley converted $1,009,468 of its convertible note into 1,550,718 shares of the Company’s common stock, and during the nine months ended September 30, 2021, Stanley loaned the Company an additional $697,386. Also, during the nine months ended September 30, 2021, the Company transferred the SURG shares received as repayment of $800,000 of this convertible note and also converted $126,003 of accrued interest into the principal balance. During the six months ended June 30, 2021, Gonzalez assigned all his accrued balances of $424,731 to Stanley in a private transaction that the Company is not part to (See Note 6). The balance of the Stanley debt at September 30, 2021 and December 31, 2020 was $448,121 and $1,009,469, respectively. The Stanley debt is secured via a pledge agreement on the SURG shares.

GBT Technologies, S.A.

On June 17, 2019, the Company, Altcorp Trading LLC, a Costa Rica company and a wholly-owned subsidiary of the Company (“Altcorp”), GBT Technologies, S.A., a Costa Rica company (“GBT-CR”) and Pablo Gonzalez, a shareholder’s representative of GBT-CR (“Gonzalez”), entered into and closed an Exchange Agreement (the “GBT Exchange Agreement”) pursuant to which the parties exchanged certain securities. In accordance with the Exchange Agreement, Altcorp acquired 625,000 shares of GBT-CR representing then 25% (and currently less than 20% per GBT-CR further issuance of shares to other parties) of its issued and outstanding shares of common stock from Gonzalez in exchange for the issuance of 20,000 shares of Series H Convertible Preferred Stock of the Company and a Convertible Note in the principal amount of $10,000,000 issued by the Company (the “Gopher Convertible Note”) as well as the transfer and assignment of a Promissory Note payable by Gopher Protocol Costa Rica Sociedad De Responsabilidad Limitada to the Company in the principal amount of $5,000,000 dated February 6, 2019 (of which the underlying security for this Promissory Note is 30,000,000 restricted shares of common stock of Mobiquity) and 60,000,000 restricted shares of common stock of Mobiquity.

On May 19, 2021, the Company, Gonzalez, GBT-CR and IGOR 1 Corp entered into a Mutual Release and Settlement Agreement and Irrevocable Assignment of outstanding balance plus accrued interest (the “Gonzalez Agreement”). Pursuant to the Gonzalez Agreement, without any party admission of liability and to avoid litigation, the parties has agreed to (i) extend the GBT convertible note maturity date to December 31, 2022, (ii) amend the GBT convertible note terms to include a beneficial ownership blocker of 4.99% and a modified conversion feature to the GBT convertible note with 15% discount to the market price during the 20 trading day period ending on the latest complete trading day prior to the conversion date and (iii) provided for an assignment of the GBT convertible note by Gonzalez to a third party. As a result of the change in terms of this convertible note, the Company took a charge related to the modification of debt of $13,777,480 during the nine months ended September 30, 2021.

During the nine months ended September 30, 2021, IGOR 1 converted $1,084,600 of the convertible note into 1,600,000 shares of the Company’s common stock. Also, on June 24, 2021, the Company transferred 5,500,000 SURG shares received as repayment of $660,000 of this convertible note.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Critical Accounting Policies and Use of Estimates

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of our financial statements in accordance with U.S. GAAP requires us to make certain estimates, judgments and assumptions that affect the reported amount of assets and liabilities as of the date hereof, thereof the financial statements, the reported amounts and classification of revenues and expenses during the periods presented, and the disclosure of contingent assets and liabilities. We evaluate our estimates and assumptions on an ongoing basis and material changes in these estimates or assumptions could occur in the future. Changes in estimates are 45,000 sharesrecorded on the period in which they become known. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances and at that time, the results of Series B Preferred outstandingwhich form the basis for making judgments about the carrying values of assets and 700 shares of Series C Preferred outstanding.liabilities that are not readily-apparent from other sources. Actual results may differ materially from these estimates if past experience or other assumptions do not turn out to be substantially accurate.

 

AdditionalWe believe that the accounting policies described below are critical to understanding our business, results of operations, and financial condition because they involve significant judgments and estimates used in the preparation of our financial statements. An accounting is deemed to be critical if it requires a judgment or accounting estimate to be made based on assumptions about matters that are highly uncertain, and if different estimates that could have been used, or if changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our financial statements. Other significant accounting policies, primarily those with lower levels of uncertainty than those discussed below, are also critical to understanding our financial statements. The notes to our financial statements contain additional information related to our capital stock is containedaccounting policies and should be read in conjunction with this discussion.

Presentation of Financial Statements

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Marketable Equity Securities

The Company accounts for marketable equity securities in accordance with ASC Topic 321, Investments – equity securities. Marketable equity securities are reported at fair value based on quotations available on securities exchanges with any unrealized gain or loss being reported as a component of other income (expense) on the statement of operations. The portion of marketable equity security expected to be sold within twelve months of the balance sheet date is reported as a current asset.

Revenue Recognition

Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), became effective for the Company on January 1, 2018. The Company’s revenue recognition disclosure reflects its updated accounting policies that are affected by this new standard. The Company applied the “modified retrospective” transition method for open contracts for the implementation of Topic 606. The Company had no significant post-delivery obligations, this new standard did notresult in a material recognition of revenue on the Company’s accompanying prospectusconsolidated financial statements for the cumulative impact of applying this new standard. The Company made no adjustments to its previously-reported total revenues, as those periods continue to be presented in accordance with its historical accounting practices under Topic 605, Revenue Recognition.

Revenue is recognized under Topic 606 as follows:

●executed contracts with the Company’s customers that it believes are legally enforceable;
●identification of performance obligations in the respective contract;
●determination of the transaction price for each performance obligation in the respective contract;
●allocation the transaction price to each performance obligation; and
●recognition of revenue only when the Company satisfies each performance obligation.

These five elements, as applied to each of the Company’s revenue category, is summarized below:

●IT services - revenue is recorded on a monthly basis as services are provided; and
●License fees and Royalties – revenue is recognized based on the terms of the agreement with its customer.

Derivative Financial Instruments

The Company evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a weighted average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. As of September 30, 2021, the Company’s only derivative financial instrument was an embedded conversion feature associated with convertible notes payable due to certain provisions that allow for a change in the conversion price based on a percentage of the Company’s stock price at the date of conversion.

Fair Value of Financial Instruments

For certain of the Company’s financial instruments, including cash, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities.

FASB ASC Topic 820, Fair Value Measurements and Disclosures, requires disclosure of the fair value of financial instruments held by the Company. FASB ASC Topic 825, Financial Instruments, defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

●Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

●Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

●Level 3 inputs to the valuation methodology us one or more unobservable inputs which are significant to the fair value measurement.

The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic 480, Distinguishing Liabilities from Equity, and FASB ASC Topic 815, Derivatives and Hedging.

For certain financial instruments, the carrying amounts reported in the balance sheets for cash and current liabilities, including convertible notes payable, each qualify as a financial instrument, and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.

The Company uses Level 2 inputs for its valuation methodology for derivative liabilities as their fair values were determined by using the Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.

Dividends

The Company has not yet adopted any policy regarding payment of dividends. No cash dividends have been paid or declared since the Date of Inception.

MANAGEMENT

Set forth below is certain information regarding our executive officers and directors. Each of the directors listed below was elected to our board of directors to serve until our next annual meeting of stockholders or until his or her successor is elected and qualified. All directors hold office for one-year terms until the election and qualification of their successors. The following table sets forth information regarding the members of our board of directors and our executive officers:

Current Directors/Officers:

NameAgeTitle
Michael Murray52President and Director
Dr. Danny Rittman59Chief Technology Officer and Director
Mansour Khatib59Chief Executive Officer, Chief Financial Officer and Director

Michael Murray is a licensed and UST Certified NMLS Originator, a licensed mortgage banker, a real estate broker and a licensed general contractor. From 1998 through August 2012, Mr. Murray held the position of Broker and DRE Officer with Home Plus Realty, Inc. From August 2012 through May 2013, Mr. Murray held the positions of FHA Production and Save Team with Cashcall Mortgage, Inc. and since May 2013 to the present, Mr. Murray has been self-employed as a Consultant and Managing Broker. Mr. Murray received an M.A. in Public Relations from California Baptist University in May 2014 and a B.A. in Political Science from California Baptist University in May 2013.

Mr. Murray is an officer and shareholder of Hermes Roll LLC (“Hermes”), a Nevada limited liability company to be formed. On March 4, 2015, the Company entered into a Territorial License Agreement with Hermes, which is appendedthe basis for the Company’s current operations. On June 16, 2015, the Company and Hermes entered into an Amended and Restated License Agreement whereby the license was expanded globally, the Company agreed to this prospectus supplement.invest $5,000,000 into Hermes for working capital and the Company was provided with an option to acquire 100% of the outstanding membership interest of Hermes in consideration of 20,000,000 shares of common stock of the Company through June 16, 2016. The Company and Hermes agreed that the ability to acquire 100% of the membership interest of Hermes will be reduced on a pro-rata basis contingent upon the amount of working capital invested by the Company. For example, in the event the Company provides Hermes with $2,500,000 in working capital, then the Company will be entitled to acquire 50% of the membership interest of Hermes in consideration of 10,000,000 shares of common stock of the Company. Mr. Murray is President of the Company, and a director.

 

You shouldDr. Danny Rittman is a veteran software architect and integrated circuit technology expert with over 20 years of experience in the technology sector. From 2014 through the present, Dr. Rittman has served as the CTO and as a director of the Company, leading the Company’s technological direction and managing teams of mobile software developers. From 2012, through 2014, Dr. Rittman served as a Senior Integrated Circuit Consultant for Qualcomm / Max Linear, managing teams of integrated circuit designers within the mobile technology arena. From 2007 through 2012, Dr. Rittman served as the Founder and CTO of Micrologic Design Automation, leading the company’s technological direction, including architecture, design and development of EDA software tools. From 2002 through 2007, Dr. Rittman served as an Integrated Circuit CAD / Software Senior Consultant for IBM, managing IC back-end projects and leading back-end CAD and QA software tool development and implementation. From 1995 through 2002, Dr. Rittman served as the Founder and VP of R&D for Bindkey Technologies, leading the company’s technological direction, research and development of EDA software tools for integrated circuits and back-end design. Dr. Rittman received a BS in Electrical Engineering - VLSI Design from the University of Bridgeport, graduating Magna Cum Laude in 1992; a MS in Computer Science - VLSI Design, specializing in Automation Algorithms, from La Salle University, graduating Magna Cum Laude in 1996; and a PhD in Computer Science - VLSI Design, specializing in EDA Concepts and Algorithms, from La Salle University, graduating Summa Cum Laude in 1998. Mr. Rittman is the Company’s CTO and director.

Mansour Khatib was appointed as the Company Chief Excusive and Financial Officer on April 13, 2020, the Company’s Board of Directors appointed Mansour Khatib, who has served as the Chief Marketing Officer and a director of the Company as Chief Executive Officer. Mr. Khatib has also referpreviously served as Interim Chief Executive Officer from May 2018 to July 2018. From 2009 through 2012, Mansour Khatib served as the CEO and CFO of The Merchandise Company, located in Long Beach, California. From 2012 through the present, Mr. Khatib has served as a U.S. Business and Marketing Sales Representative for KB Racking, located in Toronto, Canada. From May 2013 through July 2014, Mr. Khatib served as VP of Marketing for Sun Energy Partners, LLC, developing solar rooftop projects. From July 2014 through the present, Mr. Khatib has served as the CTO for New Energy Ventures, LLC, a company that is developing utility scale projects in New Jersey, California, and smaller projects in Mexico, the Caribbean and Peru. Mr. Khatib received B.A. in Economics from Fachhochschule Wuppertal in Wuppertal, Germany in 1988 and a Bachelors in Electro Engineering & Computer Technology from University Aachen in Aachen, Germany in 1985. Mr. Khatib is the Company’s CEO and ditrector.

Family Relationships

There are no family relationships among our restated certificatedirectors and executive officers. There is no arrangement or understanding between or among our executive officers and directors pursuant to which any director or officer was or is to be selected as a director or officer. None of incorporation,our directors or executive officers have had direct or indirect material interest in any transaction or proposed transaction, in which the Company was or is a proposed participant, exceeding $120,000.

Involvement in Certain Legal Proceedings

To our knowledge, during the last ten years, none of our directors and executive officers has:

●Had a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time.
●Been convicted in a criminal proceeding or been subject to a pending criminal proceeding, excluding traffic violations and other minor offenses.
●Been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities.
●Been found by a court of competent jurisdiction (in a civil action), the SEC, or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
●Been the subject to, or a party to, any sanction or order, not subsequently reverse, suspended or vacated, of any self-regulatory organization, any registered entity, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Corporate governance

On December 17, 2015, the Company established a Nominating and Corporate Governance Committee, a Compensation Committee and an Audit Committee (collectively, the “Committees”) and approved and adopted charters to govern each of the Committees.

Currently, there are no members on each of the committees and the board of directors has assumed the roles of each of the committees.

Agreements with Officers and Directors

On April 22, 2015, Michael Murray was appointed by the Company as amended,the Chairman of the Board of Directors, CEO, and President of the Company. On March 4, 2015, the Company entered into a Territorial License Agreement with Hermes, which is the basis for the Company’s current operations. Mr. Murray is the owner of 9,900 shares of Series D Preferred Stock of the Company that is convertible at Mr. Murray’s election into 9,900,000 shares of common stock at a fixed price of $0.50 per share. During 2016 Mr. Murray has converted all of his Series D Preferred Stock into common shares of the Company.

On June 30, 2015, the Company appointed Dr. Danny Rittman as Chief Technical Officer and a board member. On April 6, 2018, the Company and Danny Rittman, Chief Technology Officer and a Director of the Company, agreed to amend his employment agreement pursuant to which he will receive salary at the rate of $250,000 annually payable in equal increments of $15,000 per month. An additional $70,000 shall be payable within 15 days of the end of the calendar year. On September 14, 2018, the Company and Dr. Rittman entered into a letter agreement confirming that the Company is the owner of all intellectual property developed by Dr. Rittman relating to the Internet of Things (IoT) and Artificial Intelligence enabled mobile technologies, including a global platform with both mobile and fixed solutions, commencing June 16, 2015 and continuing until Dr. Rittman’s employment agreement is terminated.

On April 16, 2016 (the “Effective Date”), Mansour Khatib and the Company entered into an Employment Agreement (the “Agreement”) pursuant to which Mr. Mansour Khatib agreed to serve as the Chief Marketing Officer of the Company. Mr. Mansour Khatib was also appointed as a director of the Company on the Effective Date. Pursuant to the terms of the Employment Agreement, Mr. Khatib will receive an annual salary of $100,000 upon the Company generating $1,000,000 in revenue during any three (3) month period. There is no understanding or arrangement between Mr. Khatib and any other person pursuant to which he was appointed as an executive officer and director. Mr. Khatib does not have any family relationship with any director, executive officer or person nominated or chosen by us to become a director or an executive officer. Mr. Khatib has not had direct or indirect material interest in any transaction or proposed transaction, in which the Company was or is a proposed participant, exceeding $120,000.

Effective August 15, 2016, the Employment Agreement of Mansour Khatib, our CMO, was amended and restated bylaws, which are filed as exhibits to the registration statement of which this prospectus supplement is part.follows:

 

Anti-Takeover Provisions Under Nevada Law.Upon the Company generating $1,000,000 in revenue during any three (3) month period (the “Threshold Requirement”), the Executive will receive salary at the rate of $100,000 annually (the “Base Salary”); provided, however, that that Company shall pay to Executive $5,000 per month (the “Monthly Salary Advance”) commencing on August 15, 2016, which such Monthly Salary Advance shall be an advance on the Base Salary and shall continue to be paid to Executive until such time that the Company launches its Guardian Patch technology into the consumer markets. Once the Threshold Requirement is met, the Base Salary will be payable in equal increments not less often than monthly in arrears and in any event consistent with the Company’s payroll policy and practices. The Base Salary of the Executive may from time to time be increased, but not decreased, by the Board, in its absolute discretion, including potential bonuses.”

 

CombinationsCommencing January 1, 2020 Mansour Khatib salary was increased to $15,000 a month by Michel Murray our President.

Compliance with Interested Stockholder. Sections 78.411-78.444, inclusive,Section 16(a) of the Nevada Revised Statutes (“NRS”) contain provisions governing combinations with an interested stockholder. For purposesSecurities Exchange Act of 1934

Section 16(a) of the NRS, “combinations” include: (i) any merger or consolidation with any interested stockholder, (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition to any interested stockholderSecurities Exchange Act of corporate assets with an aggregate market value equal to 5% or1934, as amended, requires our directors and executive officers and persons who own more than 10% of the aggregate market value of the corporation’s consolidated assets, 5% or more of theissued and outstanding shares of our common stock to file reports of initial ownership of common stock and other equity securities and subsequent changes in that ownership with the corporation or 10% or moreSEC. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on a review of the earningcopies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended December 31, 2020 all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with.

Code of Ethics

We have adopted a Code of Ethics that applies to all officers, directors and employees. The Company will provide to any person without charge a copy of such code of ethics upon written request to the Company at its registered offices.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table presents the compensation awarded to, earned by or paid to each of our named executive officers for the year ended December 31, 2020.

Name and principal Position Year Salary Bonus Stock Awards Option Awards Non-Equity Incentive Plan Compensation Non-Qualified Deferred Compensation Earnings All Other Compensation Total
Michael Murray  2020  $6,000  $—  $—  $—  $—  $—  $—  $6,000 
President and director  2019  $50,000  $—  $—  $—  $—  $—  $—  $50,000 
                                     
Danny Rittman  2020  $184,500  $—  $—  $—  $—  $—  $—  $184,500 
Chief Technology Officer and director  2019  $171,726  $—  $—  $—  $—  $—  $—  $171,726 
                                     
Mansour Khatib  2020  $180,000  $—  $—  $—  $—  $—  $—  $180,000 
Chief Executive Officer and director  2019  $127,500  $—  $—  $—  $—  $—  $—  $127,500 
                                     
Douglas Davis (1)  2020  $100,000  $—  $—  $—  $—  $—  $—  $100,000 
former Chief Executive Officer  2019  $187,675  $—  $—  $622,828  $—  $—  $—  $810,503 
                                     
Kevin Pickard (2)  2020  $—  $—  $—  $—  $—  $—  $—  $— 
former Chief Financial Officer  2019  $70,000  $—  $—  $143,976  $—  $—  $—  $213,976 

The compensation discussed herein addresses all compensation awarded to, earned by, or paid to our named executive officer.

There are no other stock option plans, retirement, pension, or profit-sharing plans for the benefit of our sole officer and director other than as described herein.

(1)Resigned as the Chief Executive Officer in April 2020.
(2)Resigned as the Chief Financial Officer in September 2019.

Director Compensation

The following table sets forth all compensation awarded to, earned by or paid to the non-employee directors in 2020 and 2019 for their service as directors:

Name  Year Fees Earned or Paid  Stock Awards  Option Awards Non- Equity Incentive  All Other Compensation  Total
Robert Yaspan  2020  $—  $—  $—  $—  $—  $— 
former director  2019  $—  $15,425  $—  $—  $—  $15,425 
                             
Judit Nagypal  2020  $—  $—  $—  $—  $—  $— 
former director  2019  $5,000  $15,425  $—  $—  $—  $20,425 
                             
Ned L. Siegel  2020  $—  $—  $—  $—  $—  $— 
former director  2019  $10,000  $15,425  $—  $—  $—  $25,425 
                             
Eva Bitter  2020  $—  $—  $—  $—  $—  $— 
former director  2019  $5,000  $15,425  $—  $—  $—  $20,425 
                             
Mitchell Tavera  2020  $—  $—  $—  $—  $—  $— 
former director  2019  $5,000  $15,425  $—  $—  $—  $20,425 
                             
Muhammed Khilji  2020  $—  $—  $—  $—  $—  $— 
former director  2019  $—  $15,425  $—  $—  $—  $15,425 

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth all unexercised warrants and unvested restricted stock that have been awarded to our named executives by the Company and were outstanding as of December 31, 2020.

Name and principal Position Number of securities underlying unexercised warrants exercisable (#) Number of securities underlying unexercised warrants unexercisable (#) Equity incentive plan awards: Number of securities underlying unexercised unearned options (#) Warrant exercise price ($) Warrant expiration date Number of shares or units of stock that have not vested (#) Market value of shares or units of stock that have not vested Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#) Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($)
Michael Murray
President and director		  4,000,000   —   —   0.50  09/01/22  —   —   —   — 

SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial ownership of our capital stock outstanding as of December 27, 2021 by:

●each person, or group of affiliated persons, known by us to beneficially own more than 5% of our shares of common stock;
●each of our directors;
●each of our named executive officers; and
●all of our directors and named executive officers as a group.

The percentage ownership information is based on 33,200,198 shares of common stock outstanding as of December 27, 2021. The number of shares owned are those beneficially owned, as determined under the rules of the SEC. Under these rules, beneficial ownership includes any shares of common stock as to which a person has sole or shared voting power or net incomeinvestment power and any shares of common stock that the corporation, (iii)person has the issuanceright to acquire within 60 days through the exercise of any interested stockholderoption, warrant or right, through conversion of voting shares (exceptany security or pursuant to the automatic termination of a share dividendpower of attorney or revocation of a trust, discretionary account or similar proportionate distribution) with an aggregate market value equalarrangement. These shares are deemed to 5%be outstanding and beneficially owned by the person holding such option, warrants or moreother derivative securities for the purpose of computing the aggregate market valuepercentage ownership of allthat person, but they are not treated as outstanding for the outstanding sharespurpose of computing the corporation, (iv) the dissolution of the corporation if proposed by or on behalfpercentage ownership of any interested stockholder, (v)other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.

Except as otherwise noted below, the address for each person or entity listed in the table is c/o GBT Technologies Inc., 2450 Colorado Ave., Suite 100E, Santa Monica, CA 90404.

Name of Beneficial Owner Common Stock Beneficially Owned (1) Percentage of Common Stock (1)
Michael D. Murray (2,3)  81,380   0.24%
Dr. Danny Rittman (3)  1,980   0.01%
Mansour Khatib (3)  —   0.00%
         
GBT Tokenize Corp (4)  16,000,000   48.19%
The Gonzalez Trust CR - Pablo Gonzalez (4)  1,002,000   3.02%
All Officers and Directors as a Group  83,360   0.25%

(1)Beneficial ownership is determined in accordance with the Rule 13d-3(d)(1) of the Exchange Act, as amended and generally includes voting or investment power with respect to securities. Pursuant to the rules and regulations of the Securities and Exchange Commission, shares of common stock that an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purposes of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purposes of computing the percentage ownership of any other person shown in the table. The above is based on 33,200,198 shares of common stock outstanding as of December 27, 2021
(2)Mr. Murray is President of the company, and a Director. He holds a warrant for 4,000,000 shares of the Company’s common stock.
(3)Current Officer and Director of the Company.
(4)GBT Tokenize Corp is a 50/50 Joint venture between the Company and Tokenize-It S.A. Controlled by the Gonzalez Trust from Costa Rica. GBT Tokenize Corp hold 16,000,000 shares of the Company’s common stock. The Gonzalez Trust holds a note for $10,000,000 with conversion feature (under dispute by them) at $10 per share.

No Director, executive officer, affiliate or any reclassificationowner of securities, recapitalizationrecord or corporate reorganization that will have the effect of increasing the proportionate share of the corporation’s outstanding voting shares held by any interested stockholder and (vi) any receipt by the interested stockholder of the benefit (except proportionately as a stockholder) of any loan, advance, guarantee, pledge or other financial assistance. For purposes of the NRS, an “interested stockholder” is defined to include any beneficial owner of more than 10%5% of any class of the voting securities of a Nevada corporation and any person who is an affiliate or associate of the corporation and was at any time during the preceding three years the beneficial owner or more than 10% of any class of the voting securities of the Nevada corporation.Company is a party adversary to the Company or has a material interest adverse to the Company.

 

34

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS AND DIRECTOR INDEPENDENCE

 

Subject to certain exceptions,On April 6, 2018, the provisionsCompany and Danny Rittman, Chief Technology Officer and a Director of the NRS governing combinations with interested stockholders provide that a Nevada corporation may not engageCompany, agreed to amend his employment agreement pursuant to which he will receive salary at the rate of $250,000 annually payable in a combinationequal increments of $15,000 per month with an interested stockholderadditional $70,000 to be paid within 15 days of the end of the calendar year.

On September 14, 2018, the Company and Dr. Rittman entered into a letter agreement confirming that the Company is the owner of all intellectual property developed by Dr. Rittman relating to the Internet of Things (IoT) and Artificial Intelligence enabled mobile technologies, including a global platform with both mobile and fixed solutions, commencing June 16, 2015 and continuing until Dr. Rittman’s employment agreement is terminated.

On September 1, 2017, the Company entered into and closed an Asset Purchase Agreement with a third party, RWJ Advanced Marketing, LLC (“RWJ”), a Georgia corporation, pursuant to which the Company purchased certain assets from RWJ, including inventory, terminals, licenses and permits and intangible assets. At closing, the Company and Mr. Greg Bauer entered into an Employment Agreement pursuant to which Mr. Bauer was retained as Chief Executive Officer for a term of one year, subject to an automatic extension, unless terminated, in consideration of a base salary of $250,000 and a bonus of 10% of net profit generated by the assets acquired. Mr. Bauer was also appointed to the Board of Directors of the Company. As of the closing date, Mr. Murray resigned as Chief Executive Officer of the Company but will remain as a director of the Company. Mr. Bauer, since 2004 through present, has served as executive director with W.L. Petrey Wholesale, Inc. where he was in charge of the UGO/Preway operations. The Company is in litigations in connection with RWJ transaction.

On January 1, 2019, the Company and Douglas Davis entered into an Amended and Restated Employment Agreement pursuant to which Mr. Davis was retained as Chief Executive Officer. Mr. Davis served as Interim Chief Executive Officer since July 2018 until his resignation on April 11, 2020. The term of Mr. Davis’ employment was for two years afterthrough January 1, 2021. Mr. Davis was entitled to an annual base salary of $250,000, which was to be increased to $400,000 upon the Company up-listing to a national exchange. Mr. Davis was also entitled to the issuance of Stock Options to acquire an aggregate of 50,000 shares of common stock of the Company, exercisable for five years, subject to vesting. The options were to be earned and vested (i) with respect to 20,000 shares of common stock on the date thathereof, (ii) 5,000 shares of common stock upon the person first becamesuccessful dual list of the Company on an interested stockholder unlessinternational exchange such as SIX Zurich Stock Exchange or Euronext, (iii) 15,000 shares of common stock upon the combinationsuccessful up listing to a national exchange such as the Nasdaq, NYSE Euronext, TSX, AMEX or other, and (iv) with respect to 5,000 shares of common stock at each of the transactionsix (6) month anniversaries (July 1, 2019 and January 1, 2020). The exercise price of such options shall be the closing price of the Company on the date prior to such event.

On October 10, 2019, the Company entered into a Joint Venture Agreement (the “BitSpeed Agreement”) with BitSpeed LLC, which is owned by Douglas Davis, the Company’s Chief Executive Officer, to form GBT BitSpeed Corp., a Nevada company (“GBT BitSpeed”). The purpose of GBT BitSpeed is to develop, maintain and support its proprietary Extreme Transfer Software Application Concurrency, a software application to transfer secure, accelerated transmission of large file data over networks, and connection to cloud storage, Network-Attached Storage (NAS) and Storage Area Networks (SANs) (“Concurrency”). BitSpeed shall contribute the services and resources for the development of Concurrency to GBT BitSpeed. The Company shall contribute 10 million shares of common stock (valued at $17,900,000) of the Company to GBT BitSpeed. BitSpeed and the Company will each own 50% of GBT BitSpeed. The Company shall appoint two directors and BitSpeed shall appoint one director of GBT BitSpeed. In addition, GBT BitSpeed and Mr. Davis entered into a Consulting Agreement in which the person first became an interested stockholderMr. Davis is approvedengaged to provide services in consideration of $10,000 per month payable quarterly which may be paid in shares of common stock calculated by the amount owed divided by the Company’s 20-day VWAP. Mr. Davis will provide services in connection with the development of the business as well as GBT BitSpeed’s capital raising efforts. The term of the Consulting Agreement is two years. The closing of the BitSpeed Agreement occurred on October 14, 2019. On April 11, 2020, Douglas Davis resigned as Chief Executive Officer of the Company so that he may fully devote all of his efforts to GBT Tokenize Corp., the Company’s joint venture, which intends to develop a new product. Mr. Davis’ resignation was not the result of any disagreements with management or board of directors beforeof the person first became an interested stockholder.Company.

 

Control Share Acquisitions.On March 6, 2020, the Company through Greenwich, entered into the Tokenize Agreement with Tokenize, which is owned by a Costa Rica Trust represented by Gonzalez. Gonzalez also represents Gonzalez Costa Rica Trust, which holds a note in the principal amount of $10,000,000 and is also a shareholder of the Company. Under the Tokenize Agreement, the parties formed GBT Tokenize. The NRS also contains a “control share acquisitions statute.” If applicablepurpose of GBT Tokenize is to a Nevada corporation this statute restrictsdevelop Technology Portfolio, throughout the voting rightsState of certain stockholders referredCalifornia. Upon generating any revenue from the Technology Portfolio, the Joint Venture will earn the first right of refusal for other territories. Tokenize shall contribute the services and resources for the development of the Technology Portfolio to as “acquiring persons,” that acquire or offerGBT Tokenize. The Company contributed 100,000,000 GBT Shares to acquireGBT Tokenize. Tokenize and the Company will each own 50% of GBT Tokenize. The Company pledged its 50% ownership in GBT Tokenize and its 100% ownership of Greenwich to Tokenize to secure its Technology Portfolio investment. The Company shall appoint two directors and Tokenize shall appoint one director of GBT Tokenize. In addition, GBT Tokenize and Gonzalez entered into a “controlling interest”Consulting Agreement in which Gonzalez is engaged to provide services in consideration of $33,333.33 per month payable quarterly which may be paid in shares of common stock calculated by the outstanding voting stockamount owed divided by the Company’s 10-day VWAP. Gonzalez will provide services in connection with the development of the business as well as GBT Tokenize’s capital raising efforts. The term of the Consulting Agreement is two years. The closing of the Tokenize Agreement occurred on March 9, 2020. Via this Joint Venture the parties commenced development of a development of an “issuing corporation.” For purposesintelligent human vital signs’ device, suggested named qTerm. The platform is an expansion of the existing license agreement with GBT Tokenize Corp., which provided GBT Tokenize Corp. with an exclusive territory of California to develop certain of the Company’s technology. As the nature of the platform cannot be restricted only to California, the Company’s joint venture GBT Tokenize Corp. will be compensated with additional two hundred million shares of the Company to strengthen its funding, subject to board approval. A provisional patent application for the qTerm Medical Device was filed on March 30, 2020 with the USPTO. The application has been assigned serial number 63001564. The Joint Venture completed successfully the first prototype. There is no guarantee that the Company will be successful in researching, developing or implementing this product into the market. In order to successfully implement this concept, the Company will need to raise adequate capital to support its research and, if successfully researched, developed and granted regulatory approval, the Company would need to enter into a strategic relationship with a third party that has experience in manufacturing, selling and distributing this product. There is no guarantee that the Company will be successful in any or all of these provisions a “controlling interest” means with certain exceptions the ownership of outstanding voting stock sufficient to enable the acquiring person to exercise one-fifth or more but less than one-third, one-third or more but less than a majority, or a majority or more of all voting power in the election of directors and “issuing corporation” means a Nevada corporation that has 200 or more stockholders of record, at least 100 of whom have addresses in Nevada appearing on the stock ledger of the corporation, and which does business in Nevada directly or through an affiliated corporation. The voting rights of an acquiring person in the affected shares will be restored only if such restoration is approved by the holders of a majority of the voting power of the corporation. The NRS allows a corporation to “opt-out” of the control share acquisitions statute by providing in such corporation’s articles of incorporation or bylaws that the control share acquisitions statute does not apply to the corporation or to an acquisition of a controlling interest specifically by types of existing or future stockholders, whether or not identified.critical steps.

 

Articles of Incorporation and Bylaws

 

No Cumulative Voting. Where cumulative voting is permitted in the election of directors, each share is entitled to as many votes as there are directors to be elected and each shareholder may cast all of its votes for a single director nominee or distribute them among two or more director nominees. Thus, cumulative voting makes it easier for a minority shareholder to elect a director. Our articles of incorporation deny shareholders the right to vote cumulatively.

Authorized But Unissued Shares. Our articles of incorporation permit the board to authorize the issuance of preferred stock, and to designate the rights and preferences of our preferred stock, without obtaining shareholder approval. One of the effects of undesignated preferred stock may be to enable the board to render more difficult or to discourage a third party’s attempt to obtain control of Gopher Protocol by means of a tender offer, proxy contest, merger, or otherwise. The issuance of shares of preferred stock also may discourage a party from making a bid for the common stock because the issuance may adversely affect the rights of the holders of common stock. For example, preferred stock that we issue may rank prior to the common stock as to dividend rights, liquidation preference, or both, may have special voting rights and may be convertible into shares of common stock. Accordingly, the issuance of shares of preferred stock may discourage bids for our common stock or may otherwise adversely affect the market price of our common stock.

 

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is Nevada Agency and Transfer Company (“NATCO”) with a business address at 50 West Liberty Street, Suite 880, Reno NV 89501; NATCO’s website is www.natco.com, and their phone number is (775) 322-0626.

DESCRIPTION OF BUSINESS

OVERVIEW

GBT Technologies Inc. (formally known as Gopher Protocol Inc., the “Company”, “GBT”, “Gopher”, “Gopher Protocol” “GOPH” or “GTCH”) was incorporated on July 22, 2009 under the laws of the State of Nevada. GBT is targeting growing markets such as development of Internet of Things (IoT) and Artificial Intelligence (AI) enabled networking and tracking technologies, including wireless mesh network technology platform and fixed solutions, development of an intelligent human body vitals device, asset-tracking IoT, and wireless mesh networks. Effective August 5, 2019, the Company changed its name from Gopher Protocol Inc. to GBT Technologies Inc. The Company derived revenues from the provision of IT services. The Company is seeking to generate revenue from the licensing of its technology.

Asset tracking IoT - and Artificial Intelligence (AI) enabled networking (including AI Medical Advisor platform and potential products)

The Company plans to launch a series of software and microchip design products that integrate into strategic technology partners’ solutions and enable real-time tracking and management of IoT or connected assets.

 Through the Joint Venture with Tokenize – It S.A., the parties commenced development of a development of an intelligent human vital signs’ device, suggested named qTerm. The platform is an expansion of the existing license agreement with GBT Tokenize Corp., which provided GBT Tokenize Corp. with an exclusive territory of California to develop certain of the Company’s technology. A provisional patent application for the qTerm Medical Device was filed on March 30, 2020 with the USPTO. The application has been assigned serial number 63001564. The Joint Venture completed successfully the first prototype. There is no guarantee that the Company will be successful in researching, developing or implementing this product into the market. In order to successfully implement this concept, the Company will need to raise adequate capital to support its research and, if successfully researched, developed and granted regulatory approval, the Company would need to enter into a strategic relationship with a third party that has experience in manufacturing, selling and distributing this product. There is no guarantee that the Company will be successful in any or all of these critical steps.

Asset tracking IoT and Artificial Intelligence (AI) enabled networking (including AI Medical Advisor platform and potential products) competition

The prevailing AI solutions in the marketplace currently are a combination of barcoding and RFID technologies. Existing solutions require that the asset is near the scanner to be scanned. Further, such existing solutions are “point to point,” meaning they require repeated scan points along a route in order to update the location of the asset. The Company’s asset tracking solutions are designed to be more accurate and when placed on or into the asset, has the ability to interactively locate and update information on an asset anywhere on Earth. Its solutions work through-enabled global mesh network and does not need GPS or GSM to locate the package. In addition, the Company’s solutions are planned to include resource and distributed database management features which are not normally found in IoT systems. There are many competitors supplying AI standalone, and AI asset tracking and asset tracking IoT systems today, including companies such as AT&T, IBM and Verizon, as well as Apple which introduce tracking device during 2021. It is Company’s goal to offer the GopherInsight platform to some or all of these competitors to upgrade and differentiate their solutions.

Wireless mesh networking

Wireless mesh networks consist of LAN/MAN/WAN solutions that are infrastructural-intensive, may rely on regulated frequencies and bandwidth, often have so-called “last mile” problems areas where either economics or population density make it too expensive for current solutions to cover, and difficult to manage centrally. The Company’s GopherInsight platform makes it easy to add and manage last mile capacity. The solution is easily integrated into existing networks. The Company’s AI platform is designed for easy integration with, and management of, additional coverage for customer networks.

Wireless mesh networking markets

The Company potentially will target telecommunications providers, corporate entities that run LAN or wide-area networks, universities, and government entities.

Wireless mesh networking markets competition

The competitors for wireless mesh networking solutions, and AI solutions, are the entities themselves that have their own capability. The Company’s strategy is to integrate and “wrap around” those solutions to make them more efficient, less costly, and less infrastructural-intensive, while at the same time solving last mile problems to the end user.

Latinex (contra-equity account)

On January 8, 2019, the Company entered into a Stock Pledge Agreement with Latin American Exchange Latinex Casa de Cambio, S.A., a Costa Rica corporation (“Latinex”), to provide that Latinex may maintain its required regulatory capital as required by various regulators. The Company has pledged 4,005 restricted shares of its common stock valued at $7,610,147 (based on the closing price on the grant date) for a term of three years in consideration of an annual payment of $375,000 paid in quarterly installments of $93,750. In lieu of cash payment, Latinex may pay the Company in virtual currency of WISE Network S.A. valued at a 50% discount of its offering price of $10 per token. In the event that Latinex’s required capital has decreased below $5,000,000, Latinex is permitted to sell the pledged shares of common stock only in an amount to ensure that Latinex can satisfy the required capital levels. The Company must consent to such sale of the shares of common stock, which may not be unreasonably withheld. Upon expiration of the agreement, the remaining shares of common stock shall be returned to the Company free and clear of all liens. The Company has recorded the value of these shares of common stock as a stock loan receivable which is presented as a contra-equity account in the accompanying consolidated balance sheets. At December 31, 2019, the Company wrote off the accrued interest income as Latinex did not perform any payment and the Company has no mean to enforce this payment. Latinex agreed in principal to return the pledged 4,005 restricted shares to the Company for cancellation. The 4,005 restricted shares have not yet been returned to the Company as of September 30, 2021.

Joint Ventures

GBT Tokenize

On March 6, 2020, the Company through its wholly owned subsidiary, Greenwich International Holdings, a Costa Rica corporation (“Greenwich”), entered into a Joint Venture and Territorial License Agreement (the “Tokenize Agreement”) with Tokenize-It, S.A. (“Tokenize”), which is owned by a Costa Rica Trust represented by Pablo Gonzalez (“Gonzalez”). Gonzalez also represents Gonzalez Costa Rica Trust, which holds a note in the principal amount of $10,000,000 and is also a shareholder of the Company. Under the Tokenize Agreement, the parties formed GBT Tokenize Corp., a Nevada corporation (“GBT Tokenize”). The purpose of GBT Tokenize is to develop, maintain and support source codes for its proprietary technologies including advanced mobile chip technologies, tracking, radio technologies, AI core engine, electronic design automation, mesh, games, data storage, networking, IT services, business process outsourcing development services, customer service, technical support and quality assurance for business, customizable and dedicated inbound and outbound calls solutions, as well as digital communications processing for enterprises and startups (“Technology Portfolio”), throughout the State of California. Upon generating any revenue from the Technology Portfolio, the Joint Venture will earn the first right of refusal for other territories.

Tokenize shall contribute the services and resources for the development of the Technology Portfolio to GBT Tokenize. The Company shall contribute 2,000,000 shares of common stock of the Company (“GBT Shares”) to GBT Tokenize. Tokenize and the Company will each own 50% of GBT Tokenize. The shares were valued at $5,500,000.

In addition, GBT Tokenize and Gonzalez entered into a Consulting Agreement in which Gonzalez is engaged to provide services in consideration of $33,333 per month payable quarterly which may be paid in shares of common stock calculated by the amount owed divided by the Company’s 10-day VWAP. Gonzalez will provide services in connection with the development of the business as well as GBT Tokenize’s capital raising efforts. The term of the Consulting Agreement is two years. During the nine months ended September 30, 2021, Gonzalez assigned all his accrued balances of $424,731 to Stanley Hills in a private transaction that the Company is not part to. The closing of the Tokenize Agreement occurred on March 9, 2020.

Through this Joint Venture the parties commenced development of an intelligent human vital signs’ device, which we currently refer to as the qTerm. The platform is an expansion of the existing license agreement with GBT Tokenize Corp., which provided GBT Tokenize Corp. with an exclusive territory of California to develop certain of the Company’s technology. As the nature of the platform cannot be restricted only to California, the Company’s joint venture GBT Tokenize Corp. will be compensated with additional two hundred million shares of the Company to strengthen its funding, subject to board approval. A provisional patent application for the qTerm Medical Device was filed on March 30, 2020 with the USPTO. The application has been assigned serial number 63001564. The Joint Venture completed successfully the first prototype. There is no guarantee that the Company will be successful in researching, developing or implementing this product into the market. In order to successfully implement this concept, the Company will need to raise adequate capital to support its research and, if successfully researched, developed and granted regulatory approval, the Company would need to enter into a strategic relationship with a third party that has experience in manufacturing, selling and distributing this product. There is no guarantee that the Company will be successful in any or all of these critical steps.

At March 31, 2020, the Company evaluated the carrying amount of this joint venture investment and determined that this investment was fully impaired and as a result an impairment charge of $5,500,000 was taken. At September 30, 2021, the Company evaluated the carrying amount of this joint venture investment and determined that this investment was fully impaired and as a result an impairment charge of $15,400,000 was taken.

Although the investment was impaired, the product development is still ongoing. The carrying amount of this investment at September 30, 2021 and December 2020, was $0 and $0, respectively.

On May 28, 2021, the parties agreed to amend the Tokenize Agreement to expand territory granted for the Technology Portfolio under the license to GBT Tokenize to include the entire continental United States. The Company has further agreed to issue GBT Tokenize an additional 14,000,000 shares of common stock of the Company. The shares were valued at $15,400,000.

The Company pledged its 50% ownership in GBT Tokenize and its 100% ownership of Greenwich to Tokenize to secure its Technology Portfolio investment. The Company shall appoint two directors and Tokenize shall appoint one director of GBT Tokenize.

On September 30, 2021 Tokenize, in an agreement that the Company is not a party to, irrevocably assigned all its rights in GBT Tokenize, including all its rights per the Tokenize Agreement, The Gonzalez Consulting agreement and the pledge agreement, to the benefit of Magic International Argentina FC, S.L a third party (“Magic”). On June 30, 2021 Magic irrevocably assigned to Stanley Hills, LLC its credit balance accrued until June 30,2021 per the consulting agreement.

Regulatory

 GBT Tokenize is seeking approval filing for its qTerm device with the United Stated Food and Drug Administration (“FDA”). The FDA classifies medical devices from Class 1 – 3, each of which must be subjected to robust evaluations and reviews to comply with manufacturing quality control (QC) standards. The FDA regulates the marketing/sale of medical device products in the U.S. and monitors the safety of all regulated medical products. FDA Section 201(h) of the Food, Drug & Cosmetic Act (FD&C Act) defines a device as: an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent, or other similar or related article, including a component part or accessory which is recognized in the official National Formulary, or the United States Pharmacopoeia, or any supplement to them, intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease in man or other animals, or intended to affect the structure or any function of the body of man or other animals.

GBT Tokenize engaged M Squared Associates (M2) to assist with developing the FDA premarket strategy for its qTerm device. The process of filing for FDA clearance involves development of a sound regulatory strategy for pathway to market, including required preclinical and performance testing, software verification and validation activities and ensuring user needs are met. In addition, GBT/tokenize will partner with M2 to finalize technical design documentation, device labeling claims and intended use. Other aspects that will be evaluated include manufacturing processes, usability / human factors and the development of valid scientific evidence. The company will work with M2 to develop a detailed description of the device’s software and algorithm training requirements, including design specifications. qTerm computer program will be reviewed for its control functions and other required performance testing plans and criteria according to FDA guidance documentation.

Even though not required by law, there is no guarantee that the Company will be successful in obtaining any regulatory approval. In order to successfully implement this concept, the Company will need to raise adequate capital to support its compliance research and, if successfully researched, developed and granted regulatory approval, the Company would need to enter into a strategic relationship with a third party that has experience in manufacturing, selling and distributing this product. There is no guarantee that the Company will be successful in any or all of these critical steps.

The Company is seeking to conduct business with the US government agencies and has hired a consulting firm for general guidance with the GSA (General Services Administration) application process. GSA approval status describes an organization that have been approved to sell to the United States Government through the U.S. General Services Administration (GSA). The GSA is an independent agency of the United States Government that was established in 1949 to help manage, approve, and facilitate government contracts, products, bids and verify that product and services properly sourced under the US Government guidelines. The GSA is the purchasing department of the U.S. Government and lists contracts or schedules potential vendors that can bid on to get government business. To become eligible to bid on a GSA schedule, it is required to complete several important steps, among them are registering in the government’s SAM (System for Award Management), and providing previous customer contact information as a means for the GSA to perform a past performance evaluation. More information can be found on GSA web site at: Home (gsa.gov).

Intellectual Property

To date, the Company, has filed for different patents covering certain fields of its technologies, as well as trademarks. These patents and trademarks, as well as various websites and social media platforms, comprise the Company’s intellectual properties. On February 27, 2020 GBT Technologies, S.A., as successor in interest to Hermes Roll, LLC had notified the Company that it was in default on its Amended and Restated Territorial License Agreement (“ARTLA”) dated June 15, 2015 and that the ARTLA had been cancelled and rescinded.

On January 31, 2020, in the arbitration titled GBT Technologies Inc. (k/n/a Gopher Protocol, Inc. v. Discover Growth Fund, LLC (“Discover”) (JAMS Ref. No. 1260005395), the Company was informed that a final award was entered (the “Final Award”). The Final Award affirms that certain sections of the Senior Secured Redeemable Convertible Debenture (the “Debenture”) constitute unenforceable liquidated damages penalties and were stricken. Further, it was determined that neither Discover nor John Kirkland, President and General Partner of Discover, were entitled to recovery of their attorney’s fees. Consequently, and consistent with the expectations of the Company, the arbitrator awarded Discover an award of $4,034,444 plus interest of 7.25% accrued from May 15, 2019 and costs in the amount of $55,613.00. On February 18, 2020, the Company filed a motion with the United States District Court District of Nevada (the “Nevada Court”) to confirm the Final Award and a motion to consolidate Discover’s application to confirm the Final Award filed in the U.S. District Court of the Virgin Islands (Case No: 3 :20-cv-00012-CVG-RM) (the “Virgin Island Court”). On February 27, 2020, the Nevada Court denied the Company’s motion to confirm the Final Award and motion to consolidate and further decided that the confirmation of the Final Award should be litigated in the Virgin Island Court. As such, on February 27, 2020, the Company filed a Notice of Entry of Order as well as a Motion to Confirm the Arbitration Award; Address the Outstanding issue regarding whether Discover’s rights are subordinated to other creditors and, thereafter, oversee a commercially reasonable foreclosure sale (Case No: 3 :20-cv-00012-CVG-RM). It was the Company’s position that the Final Award must first be confirmed and all questions regarding the rights of Discover relative to those of other creditors must be determined before any foreclosure sale can proceed. It was further the position of the Company that the previously disclosed foreclosure sale scheduled by Discover is being conducted in a commercially unreasonable manner and that if Discover proceeded forward with the foreclosure sale it did so at its own risk. Nevertheless, on February 28, 2020, Discover advised that it conducted a sale of the Company’s assets. As the date of this report Investor failed to present a deed of sale for the alleged sale that allegedly took place as noticed. The Company filed with Virgin Island Court the motions disputing the validity of the alleged sale.

On March 6, 2020, the Company through its newly acquired wholly owned subsidiary, Greenwich International Holdings, a Costa Rica corporation (“Greenwich”), entered into a Joint Venture and Territorial License Agreement (the “Tokenize Agreement”) with Tokenize-It, S.A. (“Tokenize”) to develop, maintain and support source codes for its proprietary technologies including advanced mobile chip technologies, tracking, radio technologies, AI core engine, electronic design automation, mesh, games, data storage, networking, IT services, business process outsourcing development services, customer service, technical support and quality assurance for business, customizable and dedicated inbound and outbound calls solutions, as well as digital communications processing for enterprises and startups (“Technology Portfolio”). Via this Joint Venture the parties commenced development of a development of an intelligent human vital signs’ device, suggested named qTerm. The Joint Venture completed successfully the first prototype.

The following chart represent the Company Intellectual Properties Status:

Patents

TitleApp. No.CountryFiling DateStatus / DeadlinePatent No.Issue Date
System and method for scheduling trucking service, according to demand, at the customer’s or any other location using smartphone application and/or internet web site62/124,320USDecember 15, 2014ExpiredN/AN/A
System and method for scheduling categorized delivery and/or service, according to demand, to customer’s location based on smartphone and web site software application62/176,933USMarch 3, 2015Expired and Converted to Electronic Circuit Non-provisional and PCTN/AN/A

System and method for finding possible bartering partners in both two-party and multi-party scenarios via smartphone/mobile device application14/545,577USMay 26, 2015AbandonedN/AN/A
System and method for scheduling gasoline or diesel fill, according to demanding, at the customer’s location62/231,405USJuly 6, 2015Expired and Converted to Electronic Circuit Non-provisional and PCTN/AN/A
Electronic circuit or microchip with a secured BIOS system, with ROM and RAM memory, working with smartphone software application and62/282,593USAugust 6, 2015Expired and Converted to Electronic Circuit Non-provisional and PCTN/AN/A
System and method for power saving/reduction within integrated circuits62/282,808USAugust 13, 2015ExpiredN/AN/A
System and method for overseeing and monitoring user’s computerized activity to define privacy level62/283,915USSeptember 16, 2015ExpiredN/AN/A
System, method and computer program for remote disablement and enablement of mobile devices62/284,353USSeptember 28, 2015Expired and Converted to Electronic Circuit Non-provisional and PCTN/AN/A
System, method and computer program for real time emergency communication, beacon, location identification and tracking for mobile devices62/284,458USOctober 1, 2015Expired and Converted to Electronic Circuit Non-provisional and PCTN/AN/A
System, method and a computer program for automatic and motion activity detection, activation or deactivation airplane mode for mobile devices62/284,744USOctober 8, 2015Expired and Converted to Electronic Circuit Non-provisional and PCTN/AN/A
Monolithic multi-dimensional integrated circuits (ICs) on both sides of electronic board including utilization of all package’s planes62/284,880USOctober 13, 2015ExpiredN/AN/A
System, method and software for mobile database manage and sharing over private, secured network, in real time62/284,884USOctober 13, 2015ExpiredN/AN/A

Method, system and computer software for advertisement using symbols as characters interface62/285,055USOctober 19, 2015ExpiredN/AN/A
Monolithic, multi-dimensional, multi-plane, memory structure for integrated circuits62/285,443USOctober 30, 2015ExpiredN/AN/A
Automatic, characterized and prioritized consolidation of different credit cards into one card method, point of sale, smartphone applications and computer software62/285,996USNovember 26, 2015ExpiredN/AN/A
Electronic circuit within a sticky patch package for global tracking that is working with mobile software application and other electronic circuits on a separate, secured, private network62/387,789USJanuary 6, 2016Expired and Converted to Tracking Devices Non-provisional and PCTN/AN/A
ELECTRONIC CIRCUITS FOR SECURE COMMUNICATIONS AND ASSOCIATED SYSTEMS AND METHODS15/015,441USFebruary 4, 2016GrantedU.S. Patent No. 10,521,614December 31, 2019
ELECTRONIC CIRCUITS FOR SECURE COMMUNICATIONS AND ASSOCIATED SYSTEMS AND METHODSPCT/US2016/016522PCTFebruary 4, 2016Expired and Entered National Phase in EuropeN/AN/A
SYSTEM AND METHOD FOR POWER SAVING/REDUCTION WITH INTEGRATED CIRCUITS62/360,525USJuly 11, 2016ExpiredN/AN/A
System and method for elimination of electromigration and self-heat violations during construction of a mask layout block, maintaining process design rules and layout connectivity62/494,199USAugust 1, 2016ExpiredN/AN/A
ELECTRONIC CIRCUITS FOR SECURE COMMUNICATIONS AND ASSOCIATED SYSTEMS AND METHODS16759244.3EPSeptember 29, 2017PendingN/AN/A

TRACKING DEVICES, SYSTEMS AND METHODS USING PATCH PACKAGES WITH EMBEDDED ELECTRONIC CIRCUITS15/344,619USNovember 7, 2016Granted10,021,522July 10, 2018
TRACKING DEVICES, SYSTEMS AND METHODS USING PATCH PACKAGES WITH EMBEDDED ELECTRONIC CIRCUITSPCT/US16/060763PCTNovember 7, 2016Expired and Entered National Phase in EuropeN/AN/A
TRACKING DEVICES, SYSTEMS AND METHODS USING PATCH PACKAGES WITH EMBEDDED ELECTRONIC CIRCUITS16884138.5EPJuly 3, 2018PendingN/AN/A
TRACKING DEVICES, SYSTEMS AND METHODS USING PATCH PACKAGES WITH EMBEDDED ELECTRONIC CIRCUITS16/028,449USJuly 6, 2018Granted10,616,715April 7, 2020
GOPHER RADIO TOKEN62/631,007USFebruary 15, 2018Pending and Converted to GRT Non-provisionalN/AN/A
SYSTEMS AND METHOD OF CONVERTING ELECTRONIC TRANSMISSIONS INTO DIGITAL CURRENCY16/008,069USJune 14, 2018AbandonedN/AN/A
SYSTEMS AND METHOD OF CONVERTING ELECTRONIC TRANSMISSIONS INTO DIGITAL CURRENCYPCT/US19/16728PCTFebruary 6, 2019ExpiredN/AN/A
System, method and software application for mobile database management and sharing over private, secured network, in real time62/676,393USMay 25, 2018Pending and Converted to Mobile Database Sharing Non-provisionalN/AN/A
SYSTEMS AND METHODS OF MOBILE DATABASE MANAGEMENT AND SHARING16/155,093USOctober 9, 2018Granted10,853,327December 1, 2020
SYSTEMS AND METHODS OF MOBILE DATABASE MANAGEMENT AND SHARING17/104,001USNovember 25, 2020PendingN/AN/A

MONOLITHIC, MULTI-DIMENSIONAL, MULTI-PLANE, MEMORY STRUCTURE FOR INTEGRATED CIRCUITS62/732,026USSeptember 17, 2018PendingN/AN/A
MONOLITHIC MULTI-DIMENSIONAL INTEGRATED CIRCUITS (ICS) ON BOTH SIDES OF ELECTRONIC BOARD INCLUDING UTILIZATION OF ALL PACKAGE’S PLANES62/732,023USSeptember 17, 2018PendingN/AN/A
MULTI-DIMENSIONAL INTEGRATED CIRCUITS AND MEMORY STRUCTURE FOR INTEGRATED CIRCUITS AND ASSOCIATED SYSTEMS AND METHODS16/292,388USMarch 5, 2019Granted10,854,763December 1, 2020
MULTI-DIMENSIONAL INTEGRATED CIRCUITS AND MEMORY STRUCTURE FOR INTEGRATED CIRCUITS AND ASSOCIATED SYSTEMS AND METHODS17/102,928USNovember 24, 2020PendingN/AN/A
MULTI-DIMENSIONAL INTEGRATED CIRCUITS AND MEMORY STRUCTURE FOR INTEGRATED CIRCUITS AND ASSOCIATED SYSTEMS AND METHODSPCT/US19/50266PCTSeptember 10, 2019ExpiredN/AN/A
MULTI-DIMENSIONAL INTEGRATED CIRCUITS AND MEMORY STRUCTURE FOR INTEGRATED CIRCUITS AND ASSOCIATED SYSTEMS AND METHODS19862631.9EPMarch 16, 2021PendingN/AN/A

MULTI-DIMENSIONAL INTEGRATED CIRCUITS AND MEMORY STRUCTURE FOR INTEGRATED CIRCUITS AND ASSOCIATED SYSTEMS AND METHODS10-2021-7008024KRMarch 17, 2021PendingN/AN/A
Automatic, characterized and prioritized consolidation of different credit cards into one card method, point of sale, smartphone applications and computer software63175564USApril 16, 2021PendingN/AN/A
Method, system and computer software for advertisement, using symbols as characters interface63177669USApril 21, 2021PendingN/AN/A
SYSTEMS AND METHODS FOR ELIMINATING ELECTROMIGRATION AND SELF-HEAT VIOLATIONS IN A MASK LAYOUT BLOCK17315747USMay 10, 2021PendingN/AN/A
System and method for automatic correction of geometrical design rule violations in integrated circuit mask layout data, maintaining its electrical connectivity (LVS), reliability (RV) and design for manufacturing (DFM) structural correctness63197635USJune 7, 2021PendingN/AN/A
REAL-TIME MOVEMENT, POSITION DETECTION, AND IMAGING USING WIRELESS TECHNOLOGY AND ARTIFICIAL INTELLIGENCE63211573USJune 17, 2021PendingN/AN/A
SYSTEMS AND METHODS FOR IDENTIFICATION AND ELIMINATION OF GEOMETRICAL DESIGN RULE VIOLATIONS OF A MASK LAYOUT BLOCK17391292USAugust 2, 2021PendingN/AN/A

SYSTEMS AND METHODS OF REAL-TIME MOVEMENT, POSITION DETECTION, AND IMAGING17471213USSeptember 10, 2021Pending N/AN/A
System and method for automatic correction of electrical connectivity mismatches of a mask layout block, maintaining the process design rules (DRC Clean), connectivity (LVS Clean) correctness, obeying Reliability Verification (RV) and DFM (Design formanufacturability) constraints63248550USSeptember 27, 2021PendingN/AN/A
System and method for Automatic Generation of Integrated Circuits IP (Intellectual property) Layout Blocks63249150USSeptember 28, 2021PendingN/AN/A
Artificial Intelligence Controlled, SKIP ZONE FREE, HF Radio Communication System and Method63257199USOctober 19, 2021PendingN/AN/A

Trademarks

MarkApp. No.CountryFiling DateStatus / DeadlineGoods/Services/ClassesReg. No. / Reg. Date
GOPHERINSIDE86/681,308USJuly 1, 2015AbandonedMicrochips, in Class 9N/A
GOPHERINSIGHT86/737,146USAugust 26, 2015AbandonedChip carriers, etc., in Class 9N/A
FRIENDINME86/755,543USSeptember 14, 2015AbandonedSoftware from mobile phones, etc., in Class 9N/A
GOPHERNET86/811,422USNovember 5, 2015AbandonedCommunications software for connecting microchips, etc., in Class 9N/A
GOPHERANTITHEFT86/855,191USDecember 21, 2015AbandonedMicrochips, in Class 9N/A
GOPHERSKYNET86/858,936USDecember 28, 2015AbandonedMicrochips, in Class 9N/A
PUZPIX87/12,1137USJuly 29, 2016RegisteredGame software, etc., in Class 95,356,006 / December 12, 2017
GOPH GOPHER PROTOCOL (and Design)87/927,131USMay 18, 2018AbandonedSoftware for mobile phones, microchips, etc., in Class 9N/A
G-MONEY88/132,574USSeptember 26, 2018AbandonedProviding digital currency or digital token, in Class 36N/A
G-CASH88/132,592USSeptember 26, 2018AbandonedProviding digital currency or digital token, in Class 36N/A

Employees

As of September 30, 2021, we had 3 full time employees and no part time employees. We also utilize outside consultants and contractors as needed.

Properties

The Company leases its virtual office space at 2450 Colorado Ave., Suite 100E, Santa Monica, CA 90404 on a month-to-month lease for $311 per month. Due to the global COVID-19 pandemic, the Company has maintained its address but only as virtual office space with minimum administrative services, while all employees and consultants work remotely.

Legal Proceedings

From time to time, the Company may be involved in various litigation matters, which arise in the ordinary course of business. There is currently no litigation that management believes will have a material impact on the financial position of the Company.

UGO Litigation

On or around January 30, 2019, RWJ Advanced Marketing, LLC, Greg Bauer, and Warren Jackson sued the Company and multiple third and related parties in Superior Court of the State of California - County of Los Angeles, General District in connection with the acquisition of UGO in September 2017. The case number is 19STCV03320 (the “Original Lawsuit”). The complaint in the Original Lawsuit alleges breach of contract, among other causes of action. The Company answered the complaint and filed a cross-complaint against the plaintiffs in the case and third parties on or around February 15, 2019. On or about September 10, 2020, the Company through its agent of service was “served” with a complaint (the Company contested service) that was recently filed against the Company and third parties by Robert Warren Jackson and Gregory Bauer in Los Angeles Superior Court Case No.: 20STCV32709 (“Second Lawsuit”). In the Original Lawsuit filed, the court rejected the plaintiff’s claims that they were filing a purported quasi-derivative lawsuit. As such, in this current litigation, the plaintiff is now again claiming the action is a derivative lawsuit. On October 13, 2020, the Second Lawsuit was removed by other defendants into Central District of California (CASE NO. 2:20−cv−09399−RGK−AGR). On February 2, 2021 The Central District of California dismissed the entire Second Lawsuit based on “demand futility”. In the Original lawsuit, the Company filed a cross complaint against the plaintiff and other third parties. Recently, the court has scheduled various hearings and a trial date set for December 27, 2021 which was later continued by the Court to September 28, 2022. It was the Company’s intention to dividend its holdings of its wholly owned subsidiary Ugopherservices Corp. (“UGO”). As UGO is the main dispute in the litigations described above, the Company has elected to sell UGO to a third-party effective July 1, 2020 (See Note 3). On September 17, 2020, the Company terminated Greg Bauer as consultant (resulting from the sale of UGO), which he confirmed in writing. On or about June 14, 2021 the Company stipulated with plaintiff that all third parties will be released and plaintiff may file a new first amendment complaint that will name only the Company. As such, all third parties other than prior transfer agent of the Company have been dismissed from this litigation.

Following the sale of UGO, the Company noticed third parties (including SURG, via its asset manager) to wire the UGO funds to its new bank account. SURG never answered the notice. The Company noticed certain third parties that it intends to take legal actions to resolve this issue. On November 12, 2020 the Company filed a complaint in the United States District Court – District of Nevada - Case 2:20-cv-02078 against RWJ, Mr. Bauer, Mr. Jackson and against W.L. Petrey Wholesale Company Inc for fraud, breach of contract, Unjust Enrichment and other claims.

Discover Growth Fund

On December 3, 2018, the Company entered into a Securities Purchase Agreement (the “SPA”) with Discover Growth Fund, LLC (the “Investor”) pursuant to which the Company issued a Senior Secured Redeemable Convertible Debenture (the “Debenture”) in the aggregate face value of $8,340,000. In connection with the issuance of the Debenture and pursuant to the terms of the SPA, the Company issued a Common Stock Purchase Warrant to acquire up to 225,000 shares of common stock for a term of three years (the “Warrant”) on a cash-only basis at an exercise price of $100.00 per share with respect to 50,000 Warrant Shares, $75.00 with respect to 75,000 Warrant Shares and $50.00 with respect to 100,000 Warrant Shares. The holder may not exercise any portion of the Warrants to the extent that the holder would own more than 4.99% of the Company’s outstanding common stock immediately after exercise. The outstanding principal amount may be converted at any time into shares of the Company’s common stock at a conversion price equal to 95% of the Market Price less $5.00 (the conversion price is lowered by 10% upon the occurrence of each Triggering Event – the current conversion price is 75% of the Market Price less $5.00). The Market Price is the average of the 5 lowest individual daily volume weighted average prices during the period the Debenture is outstanding. On May 28, 2019, the Investor delivered to the Company a “Notice of Default and Notice of Sale of Collateral” (the “Notice”). On December 23, 2019, in arbitration between the Company and the Investor, an Interim Award was entered in favor of the Investor. On January 31, 2020, the Company was informed that a final award was entered (the “Final Award”). The Final Award affirms that certain sections of the Debenture constitute unenforceable liquidated

damages penalties and were stricken. Further, it was determined that the Investor was entitled to recovery of their attorney’s fees. Consequently, the arbitrator awarded Investor an award of $4,034,444 plus interest of 7.25% accrued from May 15, 2019 and costs in the amount of $55,613. On February 18, 2020, the Company filed a motion with the United States District Court  District of Nevada (the “Nevada Court”) to confirm the Final Award and a motion to consolidate Investor’s application to confirm the Final Award filed in the U.S. District Court of the Virgin Islands (Case No: 3 :20-cv-00012-CVG-RM) (the “Virgin Island Court”). On February 27, 2020, the Nevada Court denied the Company’s motion to confirm the Final Award and motion to consolidate and further decided that the confirmation of the Final Award should be litigated in the Virgin Island Court. As such, on February 27, 2020, the Company filed a Notice of Entry of Order as well as a Motion to Confirm the Arbitration Award, address the outstanding issues regarding whether Investor’s rights are subordinated to other creditors and, thereafter, oversee a commercially reasonable foreclosure sale (Case No: 3 :20-cv-00012-CVG-RM). It was the Company’s position that the Final Award must first be confirmed and all questions regarding the rights of Investor relative to those of other creditors must be determined before any foreclosure sale can proceed. It is further the position of the Company that the previously disclosed foreclosure sale scheduled by Investor is being conducted in a commercially unreasonable manner and that if Discover proceeded forward with the foreclosure sale it did so at its own risk. Nevertheless, on February 28, 2020, Investor advised that it conducted a sale of the Company’s assets. As the date of this report Investor failed to present a deed of sale for the alleged sale that allegedly took place as noticed. The Company filed with Virgin Island Court the motions disputing the validity of the alleged sale. On July 28, 2020, Investor filed in the State of Nevada a motion for attorneys $48,844 and costs $716. The Company filed an answer on August 11, 2020. On October 16, 2020, Investor motion for attorneys and costs was denied.

GBT Technologies, S.A.

On September 14, 2018, the Company entered into an Exclusive Intellectual Property License and Royalty Agreement (the “GBT License Agreement”) with GBT-CR, a fully compliant and regulated crypto currency exchange platform that currently operates in Costa Rica as a decentralized crypto currency platform, pursuant to which, among other things, the Company granted to GBT-CR an exclusive, royalty-bearing right and license relating intellectual property relating to systems and methods of converting electronic transmissions into digital currency as reflected in that certain patent filed with the United Stated Patent and Trademark Office on or about June 14, 2018 (EFS ID: 32893586; Application Number: 16008069; Type: Utility under 35 USC 111(a); Confirmation Number: 6787)(collectively, the “Digital Currently Technology”). Pursuant to the GBT License Agreement, the Company granted GBT-CR an exclusive worldwide license to use the Digital Currency Technology to make, use, sell, lease or otherwise commercialize and dispose of products and devices utilizing the Digital Currently Technology. Under the terms of the GBT License Agreement, the Company is entitled to receive a royalty payment of 2% of gross revenue of each licensed product sold by GBT-CR during the period starting in which revenue is first generated using the licensed products and continuing for five years thereafter. Upon signing the GBT-CR License Agreement, GBT-CR paid the Company $300,000 which is nonrefundable. The Company has recognized the $300,000 as revenue during the years ended December 31, 2018. Upon GBT-CR making available for sale (the “Commercial Event”) an ICO (Initial Coin Offering) (the “Coin”), GBT-CR will make a payment to the Company in the amount of $5,000,000. Further, upon the Commercial Event, GBT-CR will grant the Company the ability to acquire 30% of the Coin at a 30% discount of such offering price of the Coin. The GBT License Agreement commenced as of the signing date and, unless terminated in accordance with the termination provisions of the GBT License Agreement, shall remain in force until the expiration of the patent pertaining to the Digital Currency Technology; provided that the right to use trade secrets shall survive the expiration of the GBT License Agreement provided the Company has not terminated. Prior to the signing of the GBT License Agreement, GBT-CR advanced $200,000 to the Company, which the parties have agreed will be applied toward the $5,000,000 fee when it becomes due. The $200,000 was recorded as unearned revenue at December 31, 2018 and reclassified to accrued expense at December 31, 2020 and 2019. On February 27, 2020 GBT Technologies, S.A., as successor in interest to Hermes Roll, LLC had notified the Company that it was in default on its Amended and Restated Territorial License Agreement (“ARTLA”) dated June 15, 2015 and that the ARTLA had been cancelled and rescinded.

Surge Holdings, Inc.

On September 30, 2019, the Company entered into an Asset Purchase Agreement (“APA”) with Surge Holdings, Inc., a Nevada corporation (“SURG”) pursuant to which the Company agreed to sell and assign to SURG, all the assets and certain specified liabilities, of its ECS Prepaid, Electronic Check Services and the Central State Legal Services businesses in consideration of $5,000,000 to be paid through the issuance of 3,333,333 shares of SURG’s common stock (the “SURG Common Stock”) and a convertible promissory note in favor of the Company in the principal amount of $4,000,000 (the “SURG Note”), convertible into SURG’s shares of common stock.

On June 23, 2020, SURG entered into an Exchange Agreement (the “AltCorp Exchange Agreement”) with AltCorp Trading LLC (“AltCorp”) with such AltCorp Exchange Agreement being consented and agreed to by the Company, the parent of AltCorp. At the expiration of the lock-up period, in the event the VWAP for the SURG Common Stock was, during the preceding twenty-day trading period, less than $0.50 per share, AltCorp retained the right to reserve additional shares of SURG Common Stock equal to the True-Up Value as defined in the AltCorp Exchange Agreement.

On January 1, 2021, SURG, AltCorp and Stanley Hills, LLC (“Stanley”) entered into a Mutual Release and Settlement Agreement (“Settlement Agreement”). Pursuant to the terms of the Settlement Agreement, SURG agreed to amend the AltCorp Exchange Agreement where SURG acknowledged a debt of $3,300,000 (the “Debt”) to be paid in 33 monthly payments of $100,000 payable in shares of common stock of SURG at a per share price equal the volume weighted average price of Surg’s common stock during the ten (10) trading days immediately preceding the issuance. The AltCorp assets have been pledged since August 12, 2020 for the benefit of Stanley to secure Stanley’s note payable by the Company. Accordingly, the SURG Common Stock issued to AltCorp as a result of the Settlement Agreement were pledged to Stanley.

Subsequently, SURG was a party to two lawsuits in state District Court, the Eighth Judicial District Court for Clark County, Nevada involving AltCorp, Stanley and Glen Eagles Acquisition LP (the “AltCorp Parties.”). Each of these lawsuits were ultimately disputes relating to the total consideration SURG was to pay the Company under the APA.

On October 18, 2021, the AltCorp Parties, the Company, and SURG entered into a Memorandum of Understanding (the “MOU”) to set up a framework for an attempt to settle the two lawsuits.

On December 22, 2021 (the “Effective Date”), pursuant to the framework in the MOU, the AltCorp Parties (and an additional third party), the Company, ECS, and SURG, Kevin Brian Cox (SURG’s Chief Executive Officer) - in his individual capacity, entered into a Resolution of Purchase, Mutual Release, and Settlement Agreement (the “Final Settlement Agreement”) to settle the two lawsuits and resolve all disputes related to the consideration paid by SURG to the Company in connection with the APA.

The Final Settlement Agreement, among other resolutions, essentially provides the following:

(i) From the total consideration of the Final Settlement Agreement, the amount of $375,000 (“Escrow Amount”) will be deposit by SURG in escrow. SURG has acquired the Company’s rights to a certain Master Distribution and Service Agreement (“MDA”). Under certain circumstances, if the result of the Company’s lawsuit against a third party (the “GBT Lawsuit”) is a monetary judgment without the assignment or legal decree of ownership of the MDA, the Company shall be entitled to receive the Escrow Amount and shall assign to SURG the first $1,000,000 the Company recovers from the defendants in the GBT Lawsuit. In the event that the Company does not prevail in the GBT Lawsuit then it shall be entitled to release of the Escrow Amount but shall be responsible for any fees and costs obligation sought by the defendants in the GBT Lawsuit.

(ii) SURG agreed to make total payments of $4,200,000 to Stanley on or prior to January 7, 2022. This $4.2 million amount consists of $450,000 paid by SURG in November and December 2021, $100,000 to be paid on or about January 4, 2022, and $3,650,000 to be paid on or prior to January 7, 2022 of which $375,000 will be held in escrow as described before.

(iii) Potential payments to third parties.

The Final Settlement Agreement replaces all prior agreements between the parties. In addition, within three (3) trading days of the last payment related to the $4.2 million payment to Stanley being made, the parties shall make filings with the state District Court in Clark County, Nevada to dismiss both lawsuits, including, regarding the lawsuit filed by AltCorp Trading, LLC, the dismissal of the lawsuit as to VStock Transfer, LLC. The parties agreed to a full mutual release of any disputes or claims between the parties.

Corporate Information

We were incorporated in Nevada on July 22, 2009. Our principal executive offices are located at 2450 Colorado Ave., Suite 100E, Santa Monica, CA 90404 and our telephone number is 888-685-7336. Our website address is https://gbtti.com. The information contained on our website is not incorporated by reference into this prospectus.

MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company is authorized to issue 2,000,000,000 of its $0.00001 par value common stock and 20,000,000 shares of its $0.00001 par value preferred stock Series B and 10,000 shares of its $0.00001 par value preferred stock Series C, 100,000 shares of its $0.00001 par value preferred Series D shares, 2,000,000 of its $0.00001 par value preferred Series G shares and 40,000 of its $0.00001 par value preferred Series H shares. As of December 31, 2020, 256,674,458 shares of common stock, as well as 45,000 shares of preferred stock Series B, 700 shares of preferred stock Series C, zero shares of preferred stock Series D, zero shares of preferred stock Series G and 20,000 shares of preferred stock Series H were issued and outstanding. As of December 27, 2021, 33,200,198 shares of common stock, as well as 45,000 shares of preferred stock Series B, 700 shares of preferred stock Series C, zero shares of preferred stock Series D, zero shares of preferred stock Series G and 20,000 shares of preferred stock Series H are issued and outstanding. The Board of Directors reserves the right to issue shares of preferred stock in the future indicating preference or rights as appropriate.

Market Information

Our common stock commenced quotation on the OTC PINK under the symbol “GTCH”. The Company’s subsequent symbol was “GOPH”. The following table sets forth the range of high and low prices per share of our common stock for each period indicated (after given effect to reverse split of 1 for 100 split in 2019 and 1 for 50 in 2021)

Quarters Ended Mar 31 Jun 30 Sep 30 Dec 31
                 
  High Low High Low High Low High Low
                                   
 2021  $5.00  $0.75  $1.70  $0.75  $0.90  $0.35  $0.40  $0.09 
 2020  $0.65  $0.01  $0.04  $0.01  $0.02  $0.01  $0.04  $0.01 

Record Holders

The number of holders of record for our common stock as of December 27, 2021 was 88.

Dividends

The Company has not yet adopted any policy regarding payment of dividends. No cash dividends have been paid or declared since the Date of Inception.

Securities Authorized for Issuance Under Equity Compensation Plans

We presently do not have equity compensation plans authorized.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our financial condition and results of operations in conjunction with our financial statements and notes thereto, as well as the “Risk Factors” and “Description of Business” sections included elsewhere in this prospectus. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in “Risk Factors.”

General Overview

GBT Technologies Inc. (the “Company”, “we”, “us”, “our”, “GBT”, “Gopher”, “Gopher Protocol”, “GOPH”, “GTCH”, or “GBT”) was incorporated on July 22, 2009 under the laws of the State of Nevada and is headquartered in Santa Monica, California. The Company is targeting growing markets such as development of Internet of Things (“IoT”) and Artificial Intelligence (“AI”) enabled networking and tracking technologies, including wireless mesh network technology platform and fixed solutions, development of an intelligent human body vitals device, asset-tracking IoT, and wireless mesh networks. The Company has historically derived revenues from (i) the provision of IT services; and (ii) from the licensing of its technology.

GBT Tokenize Joint Venture

On March 6, 2020, the Company through Greenwich, entered into a Joint Venture and Territorial License Agreement (the “Tokenize Agreement”) with Tokenize-It, S.A. (“Tokenize”), which is owned by a Costa Rica Trust represented by Pablo Gonzalez (“Gonzalez”). Gonzalez also represents Gonzalez Costa Rica Trust, which holds a note in the principal amount of $10,000,000 and is also a shareholder of the Company. Under the Tokenize Agreement, the parties formed GBT Tokenize Corp., a Nevada corporation (“GBT Tokenize”). The purpose of GBT Tokenize is to develop, maintain and support source codes for its proprietary technologies including advanced mobile chip technologies, tracking, radio technologies, AI core engine, electronic design automation, mesh, games, data storage, networking, IT services, business process outsourcing development services, customer service, technical support and quality assurance for business, customizable and dedicated inbound and outbound calls solutions, as well as digital communications processing for enterprises and startups (“Technology Portfolio”), throughout the State of California. Upon generating any revenue from the Technology Portfolio, the Joint Venture will earn the first right of refusal for other territories.

Tokenize shall contribute the services and resources for the development of the Technology Portfolio to GBT Tokenize. The Company shall contribute 2,000,000 shares of common stock of the Company (“GBT Shares”) to GBT Tokenize. Tokenize and the Company will each own 50% of GBT Tokenize. The shares were valued at $5,500,000.

In addition, GBT Tokenize and Gonzalez entered into a Consulting Agreement in which Gonzalez is engaged to provide services in consideration of $33,333 per month payable quarterly which may be paid in shares of common stock calculated by the amount owed divided by the Company’s 10-day VWAP. Gonzalez will provide services in connection with the development of the business as well as GBT Tokenize’s capital raising efforts. The term of the Consulting Agreement is two years. During the nine months ended September 30, 2021, Gonzalez assigned all his accrued balances of $424,731 to Stanley Hills in a private transaction that the Company is not part to. The closing of the Tokenize Agreement occurred on March 9, 2020.

Through this Joint Venture the parties commenced development of an intelligent human vital signs’ device, which we currently refer to as the qTerm. The platform is an expansion of the existing license agreement with GBT Tokenize Corp., which provided GBT Tokenize Corp. with an exclusive territory of California to develop certain of the Company’s technology. As the nature of the platform cannot be restricted only to California, the Company’s joint venture GBT Tokenize Corp. will be compensated with additional two hundred million shares of the Company to strengthen its funding, subject to board approval. A provisional patent application for the qTerm Medical Device was filed on March 30, 2020 with the USPTO. The application has been assigned serial number 63001564. The Joint Venture completed successfully the first prototype. There is no guarantee that the Company will be successful in researching, developing or implementing this product into the market. In order to successfully implement this concept, the Company will need to raise adequate capital to support its research and, if successfully researched, developed and granted regulatory approval, the Company would need to enter into a strategic relationship with a third party that has experience in manufacturing, selling and distributing this product. There is no guarantee that the Company will be successful in any or all of these critical steps.

At March 31, 2020, the Company evaluated the carrying amount of this joint venture investment and determined that this investment was fully impaired and as a result an impairment charge of $5,500,000 was taken. At September 30, 2021, the Company evaluated the carrying amount of this joint venture investment and determined that this investment was fully impaired and as a result an impairment charge of $15,400,000 was taken.

Although the investment was impaired, the product development is still ongoing. The carrying amount of this investment at September 30, 2021 and December 2020, was $0 and $0, respectively.

On May 28, 2021, the parties agreed to amend the Tokenize Agreement to expand territory granted for the Technology Portfolio under the license to GBT Tokenize to include the entire continental United States. The Company has further agreed to issue GBT Tokenize an additional 14,000,000 shares of common stock of the Company. The shares were valued at $15,400,000.

The Company pledged its 50% ownership in GBT Tokenize and its 100% ownership of Greenwich to Tokenize to secure its Technology Portfolio investment. The Company shall appoint two directors and Tokenize shall appoint one director of GBT Tokenize.

On September 30, 2021 Tokenize, in an agreement that the Company is not a party to, irrevocably assigned all its rights in GBT Tokenize, including all its rights per the Tokenize Agreement, The Gonzalez Consulting agreement and the pledge agreement, to the benefit of Magic International Argentina FC, S.L a third party (“Magic”). On June 30, 2021 Magic irrevocably assigned to Stanley Hills, LLC its credit balance accrued until June 30,2021 per the consulting agreement.

COVID-19 Pandemic

The Company operates in a high-tech marketplace and relies on professionals and partnerships all over the world, which is impacted by the global pandemic, causing the Company’s resources to be affected. Our business operations have been and may continue to be materially and adversely affected by the coronavirus disease COVID-19.

An outbreak of respiratory illness caused by COVID-19 emerged in Wuhan city, Hubei province, PRC, in late 2019 and expanded globally. COVID-19 is considered to be highly contagious and poses a serious public health threat.

On March 19, 2020, California Governor Gavin Newsom issued a stay-at-home order to protect the health and well-being of all Californians and to establish consistency across the state in order to slow the spread of COVID-19. California was therefore under strict quarantine control and travel has been severely restricted, resulting in disruptions to work, communications, and access to files (due to limited access to facilities). Since then, other measures have been imposed in other countries and major cities in the USA, including Los Angeles, and throughout the world in an effort to contain the COVID-19 outbreak. The World Health Organization (the “WHO”) is closely monitoring and evaluating the situation. On March 11, 2020, the WHO declared the outbreak of COVID-19 a pandemic, expanding its assessment of the threat beyond the global health emergency it had announced in January. Any outbreak of such epidemic illness or other adverse public health developments in the USA or elsewhere in the world may materially and adversely affect the global economy, our markets and our business. The stay-at-home order was lifted in California only on January 25, 2021.

In the first quarter of 2020, the COVID-19 outbreak caused disruptions in our development operations, which resulted in delays on exiting projects. The State of California and the economy in general has begun to slowly re-open following the introduction of the COVID-19 vaccine. However, in the event COVID-19 or other variant is to again surface any further unforeseen delay in our operations of the development, delivery and assembly process within any of our activities could continue to result in, increased costs and reduced revenue.

We cannot foresee whether the outbreak of COVID-19 and its variants will continue to be effectively contained. If the outbreak of COVID-19 is not effectively and timely controlled, our business operations and financial condition may be materially and adversely affected as a result of the deteriorating market outlook for sales, the slowdown in regional and national economic growth, weakened liquidity and financial condition of our customers and vendors or other factors that we cannot foresee. Any of these factors and other factors beyond our control could have an adverse effect on the overall business environment, cause uncertainties, cause our business to suffer in ways that we cannot predict and materially and adversely impact our business, financial condition and results of operations.

Results of Operations:

Three Months ended September 30, 2021 and 2020

A comparison of the statements of operations for the three months ended September 30, 2021 and 2020 is as follows:

  Three Months Ended September 30 Change
  2021 2020 $ %
         
Sales - related party $45,000  $45,000  $—   0.0%
Operating expenses  906,398   452,790   453,608   100.2%
Loss from operations  (861,398)  (407,790)  (453,608)  111.2%
Other expense  431,467   (919,220)  1,350,687   -146.9%
Loss before provision for income taxes  (429,931)  (1,327,010)  897,079   -67.6%
Provision for income taxes  —   —   —     
Loss from continued operations  (429,931)  (1,327,010)  897,079   -67.6%
Discontinued operations  —   1,001,711   (1,001,711)  -100.0%
Net loss $(429,931) $(325,299) $(104,632)  32.2%

Sales for both the three months ended September 30, 2021 and 2020 were $45,000. Sales are derived from providing IT consulting services to a related party.

Operating expenses for the three months ended September 30, 2021 were $906,398, compared to $452,790 for the same period in 2020. The increase of $453,608 or 100.2% was principally due to an increase in development costs.

Other income (expense) for the three months ended September 30, 2021 was $431,467, an increase of $1,350,687 or 146.9% from $(919,220) for the same period in 2020. The change is principally due to a decrease in amortization of debt discount and a decrease in realized and unrealized loss on marketable equity securities; offset by a decrease in the change in fair value of derivative liability.

Net loss for the three months ended September 30, 2021 was $429,931 compared to $325,299 for the same period in 2020 due to the factors described above.

Nine months ended September 30, 2021 and 2020

A comparison of the statements of operations for the nine months ended September 30, 2021 and 2020 is as follows:

  Nine Months Ended September 30, Change
  2021 2020 $ %
         
Sales - related party $135,000  $135,000  $—   0.0%
Operating expenses  17,846,869   6,904,664   10,942,205   158.5%
Loss from operations  (17,711,869)  (6,769,664)  (10,942,205)  161.6%
Other expense  (15,142,326)  (8,144,625)  (6,997,701)  85.9%
Loss before provision for income taxes  (32,854,195)  (14,914,289)  (17,939,906)  120.3%
Provision for income taxes  —   —   —     
Loss from continued operations  (32,854,195)  (14,914,289)  (17,939,906)  120.3%
Discontinued operations  —   984,787   (984,787)  -100.0%
Net loss $(32,854,195) $(13,929,502) $(18,924,693)  135.9%

Sales for both the nine months ended September 30, 2021 and 2020 were $135,000. Sales are derived from providing IT consulting services to a related party.

Operating expenses for the nine months ended September 30, 2021 were $17,846,869, compared to $6,904,664 for the same period in 2020. The increase of $10,942,205 or 158.5% was principally due to an impairment charge of $15,400,000 in 2021 compared to an impairment charge of $5,500,000 in 2020.

Other expense for the nine months ended September 30, 2021 was $15,142,326, an increase of $6,997,701 or 85.9% from $8,114,625 for the same period in 2020. The increase is principally due to a loss on debt modification and change in fair value of derivative liability; offset by a decrease in amortization of debt discount and by a decrease in loss on exchange of assets.

 The operating results of our discontinued operations for Ugopherservices for the nine months ended September 30, 2021 and 2020 is summarized below:

  Nine months Ended September 30,
  2021 2020
Revenue $—  $8,291,842 
Cost of revenue  —   7,900,122 
Gross Profit  —   391,720 
Operating expenses  —   408,644 
Loss from operations  —   (16,924)
Other income (expenses)  —   — 
Net loss $—  $(16,924)

As a result of the disposition of Ugopherservices, the Company recognized a gain on the disposition of discontinued operations of $1,001,711 for the nine months ended September 30, 2020.

Net loss for the nine months ended September 30, 2021 was $32,854,195 compared to $13,929,502 for the same period in 2020 due to the factors described above.

Years ended December 31, 2020 and 2019

A comparison of the statements of operations for the year ended December 31, 2020 and 2019 is as follows:

  Years Ended December 31, Change
  2020 2019 $ %
         
Sales - related party $180,000  $180,000  $—   0.0%
Operating expenses  7,952,836   176,637,100   (168,684,264)  -95.5%
Loss from operations  (7,772,836)  (176,457,100)  168,684,264   -95.6%
Other expense  (11,206,839)  (10,354,953)  (851,886)  8.2%
Loss before provision for income taxes  (18,979,675)  (186,812,053)  167,832,378   -89.8%
Provision for income taxes  —   —   —     
Loss from continued operations  (18,979,675)  (186,812,053)  167,832,378   -89.8%
Discontinued operations  984,787   306,934   677,853   220.8%
Net loss $(17,994,888) $(186,505,119) $168,510,231   -90.4%

Sales for both the years ended December 31, 2020 and 2019 were $180,000. Sales are derived from providing IT consulting services to a related party.

Operating expenses for the year ended December 31, 2020 were $7,952,836, compared to $176,637,100 for the same period in 2019. The decrease of $168,684,264 or 95.5% was principally due to the fair value of warrants issued of $120,476,603 as a result of anti-dilution provisions in certain warrants previously issued and a charge took for the impairment of assets of $48,631,534 during the year ended December 31, 2019. There were no such expenses in 2020.

Other expense for the year ended December 31, 2020 was $11,206,839, an increase of $851,886 or 8.2% from $10,354,953 for the same period in 2019. The decrease is principally due to i) a change in the fair value of the derivative liability, ii) a decrease in amortization of discount and interest and financing costs; and iii) a decrease in realized and unrealized loss on a marketable equity security.

The operating results of our discontinued operations for Ugopherservices, ECS Prepaid, Electronic Check Services and the Central State Legal Services businesses for the year ended December 31, 2020 and 2019 is summarized below:

  Years Ended December 31,
  2020 2019
Revenue $8,291,842  $42,998,336 
Cost of revenue  7,900,122   41,596,118 
Gross Profit  391,720   1,402,218 
Operating expenses  408,644   2,477,084 
Loss from operations  (16,924)  (1,074,866)
Other income (expenses)  —   (3)
Net loss $(16,924) $(1,074,869)

As a result of the disposition of Ugopherservices, ECS Prepaid, Electronic Check Services and the Central State Legal Services businesses, the Company recognized a gain on the disposition of discontinued operations of $1,001,711 and $1,381,803 for the year ended December 31, 2020 and 2019, respectively.

Net loss for the year ended December 31, 2020 was $17,994,888 compared to $186,505,119 for the same period in 2019 due to the factors described above.

Liquidity and Capital Resources

Our cash and restricted cash were $386,659 and $178,016, respectively, at September 30, 2021 and $113,034 and $402,532, respectively, at December 31, 2020. Cash used in operating activities during the nine months ended September 30, 2021 was $958,011, compared to $542,913 during the same period in 2020. Significant differences exist between the periods, including, loss on debt modification, impairment of assets, loss on exchange of assets and amortization of debt discount. Our working capital position improved going from a working capital deficit of $27,710,040 at December 31, 2020 to a working capital deficit of $21,704,420 at September 30, 2021, principally as a result modification of debt terms for a convertible note to extend the due date beyond one year. Cash flows used in investing activities were $0 during the nine months ended September 30, 2021, compared to $231,771 for the same period in 2020. The decrease is due to cash of discontinued operations in 2020. Cash from financing activities for the nine months ended September 30, 2021 was $1,231,636, compared to $967,099 for the same period in 2020. The increase is due to the issuance of convertible notes in 2021.

We sustained net losses of $32,854,195 for the nine months ended September 30, 2021. In addition, we had a working capital deficit of $21,704,420 and accumulated deficit of $303,505,534 at September 30, 2021. We have historically financed our operations with proceeds from the sale of convertible notes. There is no guarantee that convertible note financing or other sources of capital will be available to the Company going forward.

In September of 2017 we purchased the assets of RWJ Advanced Marketing, LLC, and then after ECS Prepaid LLC, Electronic Check Services, Inc. and Central States Legal Services, Inc. in 2018. RWJ and ECS have historically generated significant revenues which we do not expect to continue in the future, as the Company divested its investment in ECS Prepaid LLC, Electronic Check Services, Inc. and Central States Legal Services, Inc. on or around September 2019, left only with the acquired assets from RWJ Advanced Marketing, LLC which in litigation, as disclosed in this report. In addition, during the last half of 2018 and the first few months of 2019, the Company has raised approximately $9,500,000 of net proceeds through the issuance of convertible debt and notes payable (see discussion below).

We intend to continue to make investments to support our business growth and we will require additional funds to respond to business challenges, including the need to develop new features and products or enhance our existing products, improve our operating infrastructure or acquire complementary businesses and technologies. Further, we need additional capital to continue operations. Accordingly, we need to engage in equity or debt financings to secure additional funds. We expect that we have sufficient capital to maintain operations through the end of 2021. In order to fully implement our business plan, we will need to raise $10,000,000. The Company will need to raise additional capital in the future of which there is no guarantee that the Company will be able to successfully raise such capital on acceptable terms. With the current cash on hand, cash in our attorney’s trust account and additional cash anticipated to be raised in the future, we believe we will have sufficient cash to meet our obligations for the next 12 months.

$10,000,000 for GBT Technologies S. A. acquisition

In accordance with the acquisition of GBT-CR the Company issued a convertible note in the principal amount of $10,000,000. The convertible note bears interest of 6% per annum and is payable at maturity on December 31, 2021. At the election of the holder, the convertible note can be converted into a maximum of 20,000 shares of Series H Preferred Stock. Each share of Series H Preferred Stock is convertible, at the option of the holder but subject to the Company increasing its authorized shares of common stock, into such number of shares of common stock of the Company as determined by dividing the Stated Value ($500 per share) by the conversion price ($10.00 per share).

On May 19, 2021, the Company, Gonzalez, GBT-CR and IGOR 1 Corp entered into a Mutual Release and Settlement Agreement and Irrevocable Assignment of outstanding balance plus accrued interest (the “Gonzalez Agreement”). Pursuant to the Gonzalez Agreement, without any party admission of liability and to avoid litigation, the parties has agreed to (i) extend the GBT convertible note maturity date to December 31, 2022, (ii) amend the GBT convertible note terms to include a beneficial ownership blocker of 4.99% and a modified conversion feature to the GBT convertible note with 15% discount to the market price during the 20 trading day period ending on the latest complete trading day prior to the conversion date and (iii) provided for an assignment of the GBT convertible note by Gonzalez to a third party.

During the nine months ended September 30, 2021, IGOR 1 converted $1,084,600 of the convertible note into 1,600,000 shares of the Company’s common stock. Also, on June 24, 2021, the Company transferred 5,500,000 SURG shares received as repayment of $660,000 of this convertible note.

Glen Eagles Acquisition LP

On July 8, 2019, the Company entered a Consulting Agreement with Glen Eagles Acquisition LP (“Glen”) as consultant to provide services in connection with the Company’s acquisition of 25% of GBT Technologies, S.A., a Costa Rican corporation (“GBT-CR”). Consultant will provide analysis, interaction with related professional and other services as requested by the Company to integrate and expand capabilities between GBT-CR and the Company. The Company shall pay Glen $1,000,000 through the issuance of a 6% Convertible Note. At the election of Glen, the Convertible Note can be converted into a maximum of 2,000 shares of Series H Preferred Stock. Each share of Series H Preferred Stock is convertible, at the option of the holder but subject to the Company increasing its authorized shares of common stock, into such number of shares of common stock of the Company as determined by dividing the Stated Value ($500 per share) by the conversion price ($10.00 per share). The Series H Preferred Stock has no liquidation preference, does not pay dividends and the holder of Series H Preferred Stock shall be entitled to one vote for each share of common stock that the Series H Preferred Stock may be convertible into. In addition, the Company entered into an Amendment of a Common Stock Purchase Warrant held by Glen to acquire nine million shares of common stock that had been assigned to Glen by Guardian Patch LLC. Pursuant to the amendment, the Company agreed to provide that the Common Stock Purchase Warrant may be exercised on a cashless basis and provided a beneficial ownership limitation of 4.99%. On or about June 23, 2020, the Company and AltCorp entered into agreements with SURG and Glen Eagles Acquisition LP (“Glen”) into series of agreements regarding the $4,000,000 SURG Note. Glen converted in full its $1,000,000 convertible note that was issued by the Company on July 8, 2019 plus $50,000 of accrued interest, into $1,050,000 of a SURG Note via an assignment of a portion ($1,050,000 of a $4,000,000 face value) of the $4,000,000 SURG Note. In addition, the Company entered into a consulting agreement with Glen for which the Company shall pay to Glen $200,000 via an assignment of a portion ($200,000 of a $4,000,000 face value) of the $4,000,000 SURG Note. Glen in turn converted all its $1,250,000 considerations received into 2,500,000 SURG shares. The open aged credit balances with Glen as of the date of this report is $237,500.

RWJ Acquisition Note

In connection with the acquisition of RWJ in September 2017, the Company issued a note payable. The note accrues interest at 3.5% per annum, was due on December 31, 2019 and is secured by the assets purchased in the acquisition. The Company contests the validity of the note, as such the note has not been repaid as of December 31, 2020. (See Item 3 – Legal Proceedings). The balance of the note at September 30, 2021 was $2,600,000 plus accrued interest of $385,631.

Discover Growth Fund

On December 3, 2018, the Company entered into a Securities Purchase Agreement (the “SPA”) with Discover Growth Fund, LLC (the “Investor”) pursuant to which the Company issued a Senior Secured Redeemable Convertible Debenture (the “Debenture”) in the aggregate face value of $8,340,000. In connection with the issuance of the Debenture and pursuant to the terms of the SPA, the Company issued a Common Stock Purchase Warrant to acquire up to 225,000 shares of common stock for a term of three years (the “Warrant”) on a cash-only basis at an exercise price of $100.00 per share with respect to 50,000 Warrant Shares, $75.00 with respect to 75,000 Warrant Shares and $50.00 with respect to 100,000 Warrant Shares. The holder may not exercise any portion of the Warrants to the extent that the holder would own more than 4.99% of the Company’s outstanding common stock immediately after exercise. The outstanding principal amount may be converted at any time into shares of the Company’s common stock at a conversion price equal to 95% of the Market Price less $5.00 (the conversion price is lowered by 10% upon the occurrence of each Triggering Event – the current conversion price is 75% of the Market Price less $5.00). The Market Price is the average of the 5 lowest individual daily volume weighted average prices during the period the Debenture is outstanding. On May 28, 2019, the Investor delivered to the Company a “Notice of Default and Notice of Sale of Collateral” (the “Notice”). On December 23, 2019, in arbitration between the Company and the Investor, an Interim Award was entered in favor of the Investor. On January 31, 2020, the Company was informed that a final award was entered (the “Final Award”). The Final Award affirms that certain sections of the Debenture constitute unenforceable liquidated damages penalties and were stricken. Further, it was determined that the Investor was entitled to recovery of their attorney’s fees. Consequently, the arbitrator awarded Investor an award of $4,034,444 plus interest of 7.25% accrued from May 15, 2019 and costs in the amount of $55,613. On February 18, 2020, the Company filed a motion with the United States District Court District of Nevada (the “Nevada Court”) to confirm the Final Award and a motion to consolidate Investor’s application to confirm the Final Award filed in the U.S. District Court of the Virgin Islands (Case No: 3 :20-cv-00012-CVG-RM) (the “Virgin Island Court”). On February 27, 2020, the Nevada Court denied the Company’s motion to confirm the Final Award and motion to consolidate and further decided that the confirmation of the Final Award should be litigated in the Virgin Island Court. As such, on February 27, 2020, the Company filed a Notice of Entry of Order as well as a Motion to Confirm the Arbitration Award, address the outstanding issues regarding whether Investor’s rights are subordinated to other creditors and, thereafter, oversee a commercially reasonable foreclosure sale (Case No: 3 :20-cv-00012-CVG-RM). It was the Company’s position that the Final Award must first be confirmed and all questions regarding the rights of Investor relative to those of other creditors must be determined before any foreclosure sale can proceed. It is further the position of the Company that the previously disclosed foreclosure sale scheduled by Investor is being conducted in a commercially unreasonable manner and that if Discover proceeded forward with the foreclosure sale it did so at its own risk. Nevertheless, on February 28, 2020, Investor advised that it conducted a sale of the Company’s assets. As the date of this report Investor failed to present a deed of sale for the alleged sale that allegedly took place as noticed. The Company filed with Virgin Island Court the motions disputing the validity of the alleged sale. On July 28, 2020, Investor filed in the State of Nevada a motion for attorneys $48,844 and costs $716. The Company filed an answer on August 11, 2020. On October 16, 2020, Investor motion was denied. As of September 30, 2021, the amount due related to this settlement was $4,090,057.

Redstart Holdings Corp.

Paid Off Notes/Notes Converted

On August 4, 2020, the Company entered into a Securities Purchase Agreement with Redstart Holdings Corp., an accredited investor (“Redstart”) pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 1”) in the aggregate principal amount of $153,600 for a purchase price of $128,000. The Redstart Note No. 1 has a maturity date of November 3, 2021 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 1 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 1 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 1, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 1. The transactions described above closed on August 5, 2020. The outstanding principal amount of the Redstart Note No. 1 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 1 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 1), the Redstart Note No. 1 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 1. During the nine months ended September 30, 2021, the entire amount of Redstart Note No. 1 of $153,600 plus accrued interest was converted into 226,532 shares of common stock.

On September 15, 2020, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 2”) in the aggregate principal amount of $93,600 for a purchase price of $78,000. The Redstart Note No. 2 has a maturity date of September 15, 2021 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 2 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 2 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 2, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 2. The transactions described above closed on September 16, 2020. The outstanding principal amount of the Redstart Note No. 2 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 2 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 2), the Redstart Note No. 2 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 2. During the nine months ended September 30, 2021, the entire amount of Redstart Note No. 2 of $93,600 plus accrued interest was converted into 89,169 shares of common stock.

On December 9, 2020, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 3”) in the aggregate principal amount of $100,200 for a purchase price of $83,500. The Redstart Note No. 3 has a maturity date of December 9, 2021 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 3 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 3 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 3, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 3. The transactions described above closed on December 11, 2020. The outstanding principal amount of the Redstart Note No. 3 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 3 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 3), the Redstart Note No. 3 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 3. During the nine months ended September 30, 2021, the entire amount of Redstart Note No. 3 of $100,200 plus accrued interest was converted into 135,582 shares of common stock.

On February 10, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 4”) in the aggregate principal amount of $184,200 for a purchase price of $153,500. The Redstart Note No. 4 has a maturity date of February 5, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 4 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 4 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 4, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 4. The transactions described above closed on February 10, 2021. The outstanding principal amount of the Redstart Note No. 4 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 4 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 4), the Redstart Note No. 4 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 4. During the nine months ended September 30, 2021, the entire amount of Redstart Note No. 4 of $184,200 plus accrued interest was converted into 386,146 shares of common stock.

On March 15, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 5”) in the aggregate principal amount of $106,200 for a purchase price of $88,500. The Redstart Note No. 5 has a maturity date of June 15, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 5 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 5 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 5, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 5. The transactions described above closed on March 17, 2021. The outstanding principal amount of the Redstart Note No. 5 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 5 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 5), the Redstart Note No. 5 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 5. During the nine months ended September 30, 2021, the entire amount of Note No. 5 of $106,200 plus accrued interest was converted into 317,837 shares of common stock.

Outstanding Notes – This is only up to Sep 2021 correct?

On May 26, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 6”) in the aggregate principal amount of $106,200 for a purchase price of $88,500. The Redstart Note No. 6 has a maturity date of August 26, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 6 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 6 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 6, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 6. The transactions described above closed on May 28, 2021. The outstanding principal amount of the Redstart Note No. 6 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 6 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 6), the Redstart Note No. 6 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 6.

On September 21, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 7”) in the aggregate principal amount of $244,500 for a purchase price of $203,750. The Redstart Note No. 7 has a maturity date of December 22, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 7 at the rate of two and a half percent (2.5%) per annum from the date on which the Redstart Note No. 7 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 7, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 7. The transactions described above closed on September 28, 2021. The outstanding principal amount of the Redstart Note No. 7 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 7 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 7), the Redstart Note No. 7 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 7.

Iliad Research and Trading

On February 27, 2019, the Company entered into a note purchase agreement with a third-party investor - Iliad Research and Trading, L.P.(“Iliad”), pursuant to which the Company issued a promissory note for the original principal amount of $2,325,000. The promissory note had an original issue discount of $300,000 and the inventor paid consideration of $2,025,000 to the Company, of which $25,000 was paid for legal expenses. The outstanding balance of the promissory note is to be paid on the one-year anniversary of the issuance of the note. Interest on the note accrues at the rate of 10% per annum compounding daily. Subject to the terms and conditions set forth in the note, the Company may prepay all or any portion of the outstanding balance of the note at any time in an amount in cash equal to 120% of the amount repaid. In connection with transactions that generate less than $1,000,000 in proceeds, the Company has agreed to not issue any debt instrument or incurrence of any debt other than trade payables in the ordinary course of business, any securities or agreements to sell common stock with anti-dilution or price reset/reduction features or any securities that are or may be become convertible or exercisable into common stock with a price that varies with the market price of the common stock (collectively, “Restricted Issuance Transaction”). The outstanding balance of the Note will be increased by 5% in the event the Company enters into a Restricted Issuance Transaction that is approved by Iliad. The original issue discount is being amortized to interest expense over the term of the promissory note. On February 27, 2020, the Company and Iliad entered into an Amendment to the Iliad Note pursuant to which the maturity date of the Iliad Note was extended to August 27, 2020, provided that the Debt may be converted into shares of common stock of the Company at a conversion price equal to 80% multiplied by the lowest trading daily VWAP for the common stock during the 20 trading day period ending on the latest complete trading day prior to the conversion date, provided for the payment by the Company to Iliad of an extension fee equal to 7.5% of the outstanding balance of the Iliad Note resulting in a new balance of the Iliad Note of $2,765,983 and provided that the Company’s failure to deliver shares of common stock within three trading days of a conversion would result in an event of default. Iliad has agreed to restrict its ability to convert the Iliad Note and receive shares of common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 9.99% of the then issued and outstanding shares of common stock. On July 20, 2020 the Company and Iliad entered into agreement to extend the maturity of the Iliad Note until February 27, 2021 in consideration of an extension fee of $1,000. During 2020, Iliad converted $539,000 of its convertible note to 53,175,795 shares of the Company’s common stock. On February 28, 2021 the Company and Iliad entered into agreement to further extend the maturity of the Iliad Note until May 31, 2021 in consideration of an extension fee of $1,000 representing the third extension of the original note. On May 19, 2021, the Company and Iliad entered into agreement to further extend the maturity of the Iliad Note until August 31, 2021 in consideration of an extension fee of $1,000 representing the fourth extension of the original note. On August 20, 2021, the Company and Iliad entered into agreement to further extend the maturity of the Iliad Note until December 31, 2021 in consideration of an extension fee of $1,000. During the nine months ended September 30, 2021, Iliad converted $2,508,737 of its convertible note into 4,053,069 shares of the Company’s common stock. The balance of the Iliad debt at September 30, 2021 and December 31, 2020 was $0 and $2,431,841.

Stanley Hills LLC

The Company entered into a series of loan agreements with Stanley Hills LLC (“Stanley”) pursuant to which it received more than $1,000,000 in loans (the “Debt”) since May 2019 up to December 2019. On February 26, 2020, in order to induce Stanley to continue to provide funding, the Company and Stanley entered into a letter agreement providing that the current note payable balance due to Stanley in the amount of $1,214,900 may be converted into shares of common stock of the Company at a conversion price equal to 85% multiplied by the lowest one trading price for the common stock during the 20-trading day period ending on the latest complete trading day prior to the conversion date. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. Stanley has agreed to restrict its ability to convert the Debt and receive shares of common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. During the nine months ended September 30, 2021, Stanley converted $1,009,468 of its convertible note into 1,550,718 shares of the Company’s common stock, and during the nine months ended September 30, 2021, Stanley loaned the Company an additional $697,386. Also, during the nine months ended September 30, 2021, the Company transferred the SURG shares received as repayment of $800,000 of this convertible note and also converted $126,003 of accrued interest into the principal balance. During the six months ended June 30, 2021, Gonzalez assigned all his accrued balances of $424,731 to Stanley in a private transaction that the Company is not part to (See Note 6). The balance of the Stanley debt at September 30, 2021 and December 31, 2020 was $448,121 and $1,009,469, respectively. The Stanley debt is secured via a pledge agreement on the SURG shares.

GBT Technologies, S.A.

On June 17, 2019, the Company, Altcorp Trading LLC, a Costa Rica company and a wholly-owned subsidiary of the Company (“Altcorp”), GBT Technologies, S.A., a Costa Rica company (“GBT-CR”) and Pablo Gonzalez, a shareholder’s representative of GBT-CR (“Gonzalez”), entered into and closed an Exchange Agreement (the “GBT Exchange Agreement”) pursuant to which the parties exchanged certain securities. In accordance with the Exchange Agreement, Altcorp acquired 625,000 shares of GBT-CR representing then 25% (and currently less than 20% per GBT-CR further issuance of shares to other parties) of its issued and outstanding shares of common stock from Gonzalez in exchange for the issuance of 20,000 shares of Series H Convertible Preferred Stock of the Company and a Convertible Note in the principal amount of $10,000,000 issued by the Company (the “Gopher Convertible Note”) as well as the transfer and assignment of a Promissory Note payable by Gopher Protocol Costa Rica Sociedad De Responsabilidad Limitada to the Company in the principal amount of $5,000,000 dated February 6, 2019 (of which the underlying security for this Promissory Note is 30,000,000 restricted shares of common stock of Mobiquity) and 60,000,000 restricted shares of common stock of Mobiquity.

On May 19, 2021, the Company, Gonzalez, GBT-CR and IGOR 1 Corp entered into a Mutual Release and Settlement Agreement and Irrevocable Assignment of outstanding balance plus accrued interest (the “Gonzalez Agreement”). Pursuant to the Gonzalez Agreement, without any party admission of liability and to avoid litigation, the parties has agreed to (i) extend the GBT convertible note maturity date to December 31, 2022, (ii) amend the GBT convertible note terms to include a beneficial ownership blocker of 4.99% and a modified conversion feature to the GBT convertible note with 15% discount to the market price during the 20 trading day period ending on the latest complete trading day prior to the conversion date and (iii) provided for an assignment of the GBT convertible note by Gonzalez to a third party. As a result of the change in terms of this convertible note, the Company took a charge related to the modification of debt of $13,777,480 during the nine months ended September 30, 2021.

During the nine months ended September 30, 2021, IGOR 1 converted $1,084,600 of the convertible note into 1,600,000 shares of the Company’s common stock. Also, on June 24, 2021, the Company transferred 5,500,000 SURG shares received as repayment of $660,000 of this convertible note.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Critical Accounting Policies and Use of Estimates

Our Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of our financial statements in accordance with U.S. GAAP requires us to make certain estimates, judgments and assumptions that affect the reported amount of assets and liabilities as of the date of the financial statements, the reported amounts and classification of revenues and expenses during the periods presented, and the disclosure of contingent assets and liabilities. We evaluate our estimates and assumptions on an ongoing basis and material changes in these estimates or assumptions could occur in the future. Changes in estimates are recorded on the period in which they become known. We base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances and at that time, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily-apparent from other sources. Actual results may differ materially from these estimates if past experience or other assumptions do not turn out to be substantially accurate.

We believe that the accounting policies described below are critical to understanding our business, results of operations, and financial condition because they involve significant judgments and estimates used in the preparation of our financial statements. An accounting is deemed to be critical if it requires a judgment or accounting estimate to be made based on assumptions about matters that are highly uncertain, and if different estimates that could have been used, or if changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our financial statements. Other significant accounting policies, primarily those with lower levels of uncertainty than those discussed below, are also critical to understanding our financial statements. The notes to our financial statements contain additional information related to our accounting policies and should be read in conjunction with this discussion.

Presentation of Financial Statements

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Marketable Equity Securities

The Company accounts for marketable equity securities in accordance with ASC Topic 321, Investments – equity securities. Marketable equity securities are reported at fair value based on quotations available on securities exchanges with any unrealized gain or loss being reported as a component of other income (expense) on the statement of operations. The portion of marketable equity security expected to be sold within twelve months of the balance sheet date is reported as a current asset.

Revenue Recognition

Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), became effective for the Company on January 1, 2018. The Company’s revenue recognition disclosure reflects its updated accounting policies that are affected by this new standard. The Company applied the “modified retrospective” transition method for open contracts for the implementation of Topic 606. The Company had no significant post-delivery obligations, this new standard did notresult in a material recognition of revenue on the Company’s accompanying consolidated financial statements for the cumulative impact of applying this new standard. The Company made no adjustments to its previously-reported total revenues, as those periods continue to be presented in accordance with its historical accounting practices under Topic 605, Revenue Recognition.

Revenue is recognized under Topic 606 as follows:

 35●executed contracts with the Company’s customers that it believes are legally enforceable;
●identification of performance obligations in the respective contract;
●determination of the transaction price for each performance obligation in the respective contract;
●allocation the transaction price to each performance obligation; and
●recognition of revenue only when the Company satisfies each performance obligation.

These five elements, as applied to each of the Company’s revenue category, is summarized below:

●IT services - revenue is recorded on a monthly basis as services are provided; and
●License fees and Royalties – revenue is recognized based on the terms of the agreement with its customer.

Derivative Financial Instruments

The Company evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a weighted average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. As of September 30, 2021, the Company’s only derivative financial instrument was an embedded conversion feature associated with convertible notes payable due to certain provisions that allow for a change in the conversion price based on a percentage of the Company’s stock price at the date of conversion.

Fair Value of Financial Instruments

For certain of the Company’s financial instruments, including cash, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities.

FASB ASC Topic 820, Fair Value Measurements and Disclosures, requires disclosure of the fair value of financial instruments held by the Company. FASB ASC Topic 825, Financial Instruments, defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

●Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

●Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

●Level 3 inputs to the valuation methodology us one or more unobservable inputs which are significant to the fair value measurement.

The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic 480, Distinguishing Liabilities from Equity, and FASB ASC Topic 815, Derivatives and Hedging.

For certain financial instruments, the carrying amounts reported in the balance sheets for cash and current liabilities, including convertible notes payable, each qualify as a financial instrument, and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.

The Company uses Level 2 inputs for its valuation methodology for derivative liabilities as their fair values were determined by using the Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.

Dividends

The Company has not yet adopted any policy regarding payment of dividends. No cash dividends have been paid or declared since the Date of Inception.

MANAGEMENT

Set forth below is certain information regarding our executive officers and directors. Each of the directors listed below was elected to our board of directors to serve until our next annual meeting of stockholders or until his or her successor is elected and qualified. All directors hold office for one-year terms until the election and qualification of their successors. The following table sets forth information regarding the members of our board of directors and our executive officers:

Current Directors/Officers:

NameAgeTitle
Michael Murray52President and Director
Dr. Danny Rittman59Chief Technology Officer and Director
Mansour Khatib59Chief Executive Officer, Chief Financial Officer and Director

Michael Murray is a licensed and UST Certified NMLS Originator, a licensed mortgage banker, a real estate broker and a licensed general contractor. From 1998 through August 2012, Mr. Murray held the position of Broker and DRE Officer with Home Plus Realty, Inc. From August 2012 through May 2013, Mr. Murray held the positions of FHA Production and Save Team with Cashcall Mortgage, Inc. and since May 2013 to the present, Mr. Murray has been self-employed as a Consultant and Managing Broker. Mr. Murray received an M.A. in Public Relations from California Baptist University in May 2014 and a B.A. in Political Science from California Baptist University in May 2013.

Mr. Murray is an officer and shareholder of Hermes Roll LLC (“Hermes”), a Nevada limited liability company to be formed. On March 4, 2015, the Company entered into a Territorial License Agreement with Hermes, which is the basis for the Company’s current operations. On June 16, 2015, the Company and Hermes entered into an Amended and Restated License Agreement whereby the license was expanded globally, the Company agreed to invest $5,000,000 into Hermes for working capital and the Company was provided with an option to acquire 100% of the outstanding membership interest of Hermes in consideration of 20,000,000 shares of common stock of the Company through June 16, 2016. The Company and Hermes agreed that the ability to acquire 100% of the membership interest of Hermes will be reduced on a pro-rata basis contingent upon the amount of working capital invested by the Company. For example, in the event the Company provides Hermes with $2,500,000 in working capital, then the Company will be entitled to acquire 50% of the membership interest of Hermes in consideration of 10,000,000 shares of common stock of the Company. Mr. Murray is President of the Company, and a director.

Dr. Danny Rittman is a veteran software architect and integrated circuit technology expert with over 20 years of experience in the technology sector. From 2014 through the present, Dr. Rittman has served as the CTO and as a director of the Company, leading the Company’s technological direction and managing teams of mobile software developers. From 2012, through 2014, Dr. Rittman served as a Senior Integrated Circuit Consultant for Qualcomm / Max Linear, managing teams of integrated circuit designers within the mobile technology arena. From 2007 through 2012, Dr. Rittman served as the Founder and CTO of Micrologic Design Automation, leading the company’s technological direction, including architecture, design and development of EDA software tools. From 2002 through 2007, Dr. Rittman served as an Integrated Circuit CAD / Software Senior Consultant for IBM, managing IC back-end projects and leading back-end CAD and QA software tool development and implementation. From 1995 through 2002, Dr. Rittman served as the Founder and VP of R&D for Bindkey Technologies, leading the company’s technological direction, research and development of EDA software tools for integrated circuits and back-end design. Dr. Rittman received a BS in Electrical Engineering - VLSI Design from the University of Bridgeport, graduating Magna Cum Laude in 1992; a MS in Computer Science - VLSI Design, specializing in Automation Algorithms, from La Salle University, graduating Magna Cum Laude in 1996; and a PhD in Computer Science - VLSI Design, specializing in EDA Concepts and Algorithms, from La Salle University, graduating Summa Cum Laude in 1998. Mr. Rittman is the Company’s CTO and director.

Mansour Khatib was appointed as the Company Chief Excusive and Financial Officer on April 13, 2020, the Company’s Board of Directors appointed Mansour Khatib, who has served as the Chief Marketing Officer and a director of the Company as Chief Executive Officer. Mr. Khatib has also previously served as Interim Chief Executive Officer from May 2018 to July 2018. From 2009 through 2012, Mansour Khatib served as the CEO and CFO of The Merchandise Company, located in Long Beach, California. From 2012 through the present, Mr. Khatib has served as a U.S. Business and Marketing Sales Representative for KB Racking, located in Toronto, Canada. From May 2013 through July 2014, Mr. Khatib served as VP of Marketing for Sun Energy Partners, LLC, developing solar rooftop projects. From July 2014 through the present, Mr. Khatib has served as the CTO for New Energy Ventures, LLC, a company that is developing utility scale projects in New Jersey, California, and smaller projects in Mexico, the Caribbean and Peru. Mr. Khatib received B.A. in Economics from Fachhochschule Wuppertal in Wuppertal, Germany in 1988 and a Bachelors in Electro Engineering & Computer Technology from University Aachen in Aachen, Germany in 1985. Mr. Khatib is the Company’s CEO and ditrector.

Family Relationships

There are no family relationships among our directors and executive officers. There is no arrangement or understanding between or among our executive officers and directors pursuant to which any director or officer was or is to be selected as a director or officer. None of our directors or executive officers have had direct or indirect material interest in any transaction or proposed transaction, in which the Company was or is a proposed participant, exceeding $120,000.

Involvement in Certain Legal Proceedings

To our knowledge, during the last ten years, none of our directors and executive officers has:

●Had a bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time.
 
●Been convicted in a criminal proceeding or been subject to a pending criminal proceeding, excluding traffic violations and other minor offenses.
●Been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities.
●Been found by a court of competent jurisdiction (in a civil action), the SEC, or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
●Been the subject to, or a party to, any sanction or order, not subsequently reverse, suspended or vacated, of any self-regulatory organization, any registered entity, or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

Corporate governance

On December 17, 2015, the Company established a Nominating and Corporate Governance Committee, a Compensation Committee and an Audit Committee (collectively, the “Committees”) and approved and adopted charters to govern each of the Committees.

Currently, there are no members on each of the committees and the board of directors has assumed the roles of each of the committees.

Agreements with Officers and Directors

On April 22, 2015, Michael Murray was appointed by the Company as the Chairman of the Board of Directors, CEO, and President of the Company. On March 4, 2015, the Company entered into a Territorial License Agreement with Hermes, which is the basis for the Company’s current operations. Mr. Murray is the owner of 9,900 shares of Series D Preferred Stock of the Company that is convertible at Mr. Murray’s election into 9,900,000 shares of common stock at a fixed price of $0.50 per share. During 2016 Mr. Murray has converted all of his Series D Preferred Stock into common shares of the Company.

On June 30, 2015, the Company appointed Dr. Danny Rittman as Chief Technical Officer and a board member. On April 6, 2018, the Company and Danny Rittman, Chief Technology Officer and a Director of the Company, agreed to amend his employment agreement pursuant to which he will receive salary at the rate of $250,000 annually payable in equal increments of $15,000 per month. An additional $70,000 shall be payable within 15 days of the end of the calendar year. On September 14, 2018, the Company and Dr. Rittman entered into a letter agreement confirming that the Company is the owner of all intellectual property developed by Dr. Rittman relating to the Internet of Things (IoT) and Artificial Intelligence enabled mobile technologies, including a global platform with both mobile and fixed solutions, commencing June 16, 2015 and continuing until Dr. Rittman’s employment agreement is terminated.

On April 16, 2016 (the “Effective Date”), Mansour Khatib and the Company entered into an Employment Agreement (the “Agreement”) pursuant to which Mr. Mansour Khatib agreed to serve as the Chief Marketing Officer of the Company. Mr. Mansour Khatib was also appointed as a director of the Company on the Effective Date. Pursuant to the terms of the Employment Agreement, Mr. Khatib will receive an annual salary of $100,000 upon the Company generating $1,000,000 in revenue during any three (3) month period. There is no understanding or arrangement between Mr. Khatib and any other person pursuant to which he was appointed as an executive officer and director. Mr. Khatib does not have any family relationship with any director, executive officer or person nominated or chosen by us to become a director or an executive officer. Mr. Khatib has not had direct or indirect material interest in any transaction or proposed transaction, in which the Company was or is a proposed participant, exceeding $120,000.

Effective August 15, 2016, the Employment Agreement of Mansour Khatib, our CMO, was amended and restated as follows:

Upon the Company generating $1,000,000 in revenue during any three (3) month period (the “Threshold Requirement”), the Executive will receive salary at the rate of $100,000 annually (the “Base Salary”); provided, however, that that Company shall pay to Executive $5,000 per month (the “Monthly Salary Advance”) commencing on August 15, 2016, which such Monthly Salary Advance shall be an advance on the Base Salary and shall continue to be paid to Executive until such time that the Company launches its Guardian Patch technology into the consumer markets. Once the Threshold Requirement is met, the Base Salary will be payable in equal increments not less often than monthly in arrears and in any event consistent with the Company’s payroll policy and practices. The Base Salary of the Executive may from time to time be increased, but not decreased, by the Board, in its absolute discretion, including potential bonuses.”

Commencing January 1, 2020 Mansour Khatib salary was increased to $15,000 a month by Michel Murray our President.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers and persons who own more than 10% of the issued and outstanding shares of our common stock to file reports of initial ownership of common stock and other equity securities and subsequent changes in that ownership with the SEC. Officers, directors and greater than ten percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on a review of the copies of such reports furnished to us and written representations that no other reports were required, during the fiscal year ended December 31, 2020 all Section 16(a) filing requirements applicable to our officers, directors and greater than 10% beneficial owners were complied with.

Code of Ethics

We have adopted a Code of Ethics that applies to all officers, directors and employees. The Company will provide to any person without charge a copy of such code of ethics upon written request to the Company at its registered offices.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table presents the compensation awarded to, earned by or paid to each of our named executive officers for the year ended December 31, 2020.

Name and principal Position Year Salary Bonus Stock Awards Option Awards Non-Equity Incentive Plan Compensation Non-Qualified Deferred Compensation Earnings All Other Compensation Total
Michael Murray  2020  $6,000  $—  $—  $—  $—  $—  $—  $6,000 
President and director  2019  $50,000  $—  $—  $—  $—  $—  $—  $50,000 
                                     
Danny Rittman  2020  $184,500  $—  $—  $—  $—  $—  $—  $184,500 
Chief Technology Officer and director  2019  $171,726  $—  $—  $—  $—  $—  $—  $171,726 
                                     
Mansour Khatib  2020  $180,000  $—  $—  $—  $—  $—  $—  $180,000 
Chief Executive Officer and director  2019  $127,500  $—  $—  $—  $—  $—  $—  $127,500 
                                     
Douglas Davis (1)  2020  $100,000  $—  $—  $—  $—  $—  $—  $100,000 
former Chief Executive Officer  2019  $187,675  $—  $—  $622,828  $—  $—  $—  $810,503 
                                     
Kevin Pickard (2)  2020  $—  $—  $—  $—  $—  $—  $—  $— 
former Chief Financial Officer  2019  $70,000  $—  $—  $143,976  $—  $—  $—  $213,976 

The compensation discussed herein addresses all compensation awarded to, earned by, or paid to our named executive officer.

There are no other stock option plans, retirement, pension, or profit-sharing plans for the benefit of our sole officer and director other than as described herein.

(1)Resigned as the Chief Executive Officer in April 2020.
(2)Resigned as the Chief Financial Officer in September 2019.

Director Compensation

The following table sets forth all compensation awarded to, earned by or paid to the non-employee directors in 2020 and 2019 for their service as directors:

Name  Year Fees Earned or Paid  Stock Awards  Option Awards Non- Equity Incentive  All Other Compensation  Total
Robert Yaspan  2020  $—  $—  $—  $—  $—  $— 
former director  2019  $—  $15,425  $—  $—  $—  $15,425 
                             
Judit Nagypal  2020  $—  $—  $—  $—  $—  $— 
former director  2019  $5,000  $15,425  $—  $—  $—  $20,425 
                             
Ned L. Siegel  2020  $—  $—  $—  $—  $—  $— 
former director  2019  $10,000  $15,425  $—  $—  $—  $25,425 
                             
Eva Bitter  2020  $—  $—  $—  $—  $—  $— 
former director  2019  $5,000  $15,425  $—  $—  $—  $20,425 
                             
Mitchell Tavera  2020  $—  $—  $—  $—  $—  $— 
former director  2019  $5,000  $15,425  $—  $—  $—  $20,425 
                             
Muhammed Khilji  2020  $—  $—  $—  $—  $—  $— 
former director  2019  $—  $15,425  $—  $—  $—  $15,425 

Outstanding Equity Awards at Fiscal Year-End

The following table sets forth all unexercised warrants and unvested restricted stock that have been awarded to our named executives by the Company and were outstanding as of December 31, 2020.

Name and principal Position Number of securities underlying unexercised warrants exercisable (#) Number of securities underlying unexercised warrants unexercisable (#) Equity incentive plan awards: Number of securities underlying unexercised unearned options (#) Warrant exercise price ($) Warrant expiration date Number of shares or units of stock that have not vested (#) Market value of shares or units of stock that have not vested Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#) Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($)
Michael Murray
President and director		  4,000,000   —   —   0.50  09/01/22  —   —   —   — 

SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial ownership of our capital stock outstanding as of December 27, 2021 by:

●each person, or group of affiliated persons, known by us to beneficially own more than 5% of our shares of common stock;
●each of our directors;
●each of our named executive officers; and
●all of our directors and named executive officers as a group.

The percentage ownership information is based on 33,200,198 shares of common stock outstanding as of December 27, 2021. The number of shares owned are those beneficially owned, as determined under the rules of the SEC. Under these rules, beneficial ownership includes any shares of common stock as to which a person has sole or shared voting power or investment power and any shares of common stock that the person has the right to acquire within 60 days through the exercise of any option, warrant or right, through conversion of any security or pursuant to the automatic termination of a power of attorney or revocation of a trust, discretionary account or similar arrangement. These shares are deemed to be outstanding and beneficially owned by the person holding such option, warrants or other derivative securities for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.

Except as otherwise noted below, the address for each person or entity listed in the table is c/o GBT Technologies Inc., 2450 Colorado Ave., Suite 100E, Santa Monica, CA 90404.

Name of Beneficial Owner Common Stock Beneficially Owned (1) Percentage of Common Stock (1)
Michael D. Murray (2,3)  81,380   0.24%
Dr. Danny Rittman (3)  1,980   0.01%
Mansour Khatib (3)  —   0.00%
         
GBT Tokenize Corp (4)  16,000,000   48.19%
The Gonzalez Trust CR - Pablo Gonzalez (4)  1,002,000   3.02%
All Officers and Directors as a Group  83,360   0.25%

(1)Beneficial ownership is determined in accordance with the Rule 13d-3(d)(1) of the Exchange Act, as amended and generally includes voting or investment power with respect to securities. Pursuant to the rules and regulations of the Securities and Exchange Commission, shares of common stock that an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purposes of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purposes of computing the percentage ownership of any other person shown in the table. The above is based on 33,200,198 shares of common stock outstanding as of December 27, 2021
(2)Mr. Murray is President of the company, and a Director. He holds a warrant for 4,000,000 shares of the Company’s common stock.
(3)Current Officer and Director of the Company.
(4)GBT Tokenize Corp is a 50/50 Joint venture between the Company and Tokenize-It S.A. Controlled by the Gonzalez Trust from Costa Rica. GBT Tokenize Corp hold 16,000,000 shares of the Company’s common stock. The Gonzalez Trust holds a note for $10,000,000 with conversion feature (under dispute by them) at $10 per share.

No Director, executive officer, affiliate or any owner of record or beneficial owner of more than 5% of any class of voting securities of the Company is a party adversary to the Company or has a material interest adverse to the Company.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS AND DIRECTOR INDEPENDENCE

On April 6, 2018, the Company and Danny Rittman, Chief Technology Officer and a Director of the Company, agreed to amend his employment agreement pursuant to which he will receive salary at the rate of $250,000 annually payable in equal increments of $15,000 per month with an additional $70,000 to be paid within 15 days of the end of the calendar year.

On September 14, 2018, the Company and Dr. Rittman entered into a letter agreement confirming that the Company is the owner of all intellectual property developed by Dr. Rittman relating to the Internet of Things (IoT) and Artificial Intelligence enabled mobile technologies, including a global platform with both mobile and fixed solutions, commencing June 16, 2015 and continuing until Dr. Rittman’s employment agreement is terminated.

On September 1, 2017, the Company entered into and closed an Asset Purchase Agreement with a third party, RWJ Advanced Marketing, LLC (“RWJ”), a Georgia corporation, pursuant to which the Company purchased certain assets from RWJ, including inventory, terminals, licenses and permits and intangible assets. At closing, the Company and Mr. Greg Bauer entered into an Employment Agreement pursuant to which Mr. Bauer was retained as Chief Executive Officer for a term of one year, subject to an automatic extension, unless terminated, in consideration of a base salary of $250,000 and a bonus of 10% of net profit generated by the assets acquired. Mr. Bauer was also appointed to the Board of Directors of the Company. As of the closing date, Mr. Murray resigned as Chief Executive Officer of the Company but will remain as a director of the Company. Mr. Bauer, since 2004 through present, has served as executive director with W.L. Petrey Wholesale, Inc. where he was in charge of the UGO/Preway operations. The Company is in litigations in connection with RWJ transaction.

On January 1, 2019, the Company and Douglas Davis entered into an Amended and Restated Employment Agreement pursuant to which Mr. Davis was retained as Chief Executive Officer. Mr. Davis served as Interim Chief Executive Officer since July 2018 until his resignation on April 11, 2020. The term of Mr. Davis’ employment was for two years through January 1, 2021. Mr. Davis was entitled to an annual base salary of $250,000, which was to be increased to $400,000 upon the Company up-listing to a national exchange. Mr. Davis was also entitled to the issuance of Stock Options to acquire an aggregate of 50,000 shares of common stock of the Company, exercisable for five years, subject to vesting. The options were to be earned and vested (i) with respect to 20,000 shares of common stock on the date hereof, (ii) 5,000 shares of common stock upon the successful dual list of the Company on an international exchange such as SIX Zurich Stock Exchange or Euronext, (iii) 15,000 shares of common stock upon the successful up listing to a national exchange such as the Nasdaq, NYSE Euronext, TSX, AMEX or other, and (iv) with respect to 5,000 shares of common stock at each of the six (6) month anniversaries (July 1, 2019 and January 1, 2020). The exercise price of such options shall be the closing price of the Company on the date prior to such event.

On October 10, 2019, the Company entered into a Joint Venture Agreement (the “BitSpeed Agreement”) with BitSpeed LLC, which is owned by Douglas Davis, the Company’s Chief Executive Officer, to form GBT BitSpeed Corp., a Nevada company (“GBT BitSpeed”). The purpose of GBT BitSpeed is to develop, maintain and support its proprietary Extreme Transfer Software Application Concurrency, a software application to transfer secure, accelerated transmission of large file data over networks, and connection to cloud storage, Network-Attached Storage (NAS) and Storage Area Networks (SANs) (“Concurrency”). BitSpeed shall contribute the services and resources for the development of Concurrency to GBT BitSpeed. The Company shall contribute 10 million shares of common stock (valued at $17,900,000) of the Company to GBT BitSpeed. BitSpeed and the Company will each own 50% of GBT BitSpeed. The Company shall appoint two directors and BitSpeed shall appoint one director of GBT BitSpeed. In addition, GBT BitSpeed and Mr. Davis entered into a Consulting Agreement in which Mr. Davis is engaged to provide services in consideration of $10,000 per month payable quarterly which may be paid in shares of common stock calculated by the amount owed divided by the Company’s 20-day VWAP. Mr. Davis will provide services in connection with the development of the business as well as GBT BitSpeed’s capital raising efforts. The term of the Consulting Agreement is two years. The closing of the BitSpeed Agreement occurred on October 14, 2019. On April 11, 2020, Douglas Davis resigned as Chief Executive Officer of the Company so that he may fully devote all of his efforts to GBT Tokenize Corp., the Company’s joint venture, which intends to develop a new product. Mr. Davis’ resignation was not the result of any disagreements with management or board of directors of the Company.

On March 6, 2020, the Company through Greenwich, entered into the Tokenize Agreement with Tokenize, which is owned by a Costa Rica Trust represented by Gonzalez. Gonzalez also represents Gonzalez Costa Rica Trust, which holds a note in the principal amount of $10,000,000 and is also a shareholder of the Company. Under the Tokenize Agreement, the parties formed GBT Tokenize. The purpose of GBT Tokenize is to develop Technology Portfolio, throughout the State of California. Upon generating any revenue from the Technology Portfolio, the Joint Venture will earn the first right of refusal for other territories. Tokenize shall contribute the services and resources for the development of the Technology Portfolio to GBT Tokenize. The Company contributed 100,000,000 GBT Shares to GBT Tokenize. Tokenize and the Company will each own 50% of GBT Tokenize. The Company pledged its 50% ownership in GBT Tokenize and its 100% ownership of Greenwich to Tokenize to secure its Technology Portfolio investment. The Company shall appoint two directors and Tokenize shall appoint one director of GBT Tokenize. In addition, GBT Tokenize and Gonzalez entered into a Consulting Agreement in which Gonzalez is engaged to provide services in consideration of $33,333.33 per month payable quarterly which may be paid in shares of common stock calculated by the amount owed divided by the Company’s 10-day VWAP. Gonzalez will provide services in connection with the development of the business as well as GBT Tokenize’s capital raising efforts. The term of the Consulting Agreement is two years. The closing of the Tokenize Agreement occurred on March 9, 2020. Via this Joint Venture the parties commenced development of a development of an intelligent human vital signs’ device, suggested named qTerm. The platform is an expansion of the existing license agreement with GBT Tokenize Corp., which provided GBT Tokenize Corp. with an exclusive territory of California to develop certain of the Company’s technology. As the nature of the platform cannot be restricted only to California, the Company’s joint venture GBT Tokenize Corp. will be compensated with additional two hundred million shares of the Company to strengthen its funding, subject to board approval. A provisional patent application for the qTerm Medical Device was filed on March 30, 2020 with the USPTO. The application has been assigned serial number 63001564. The Joint Venture completed successfully the first prototype. There is no guarantee that the Company will be successful in researching, developing or implementing this product into the market. In order to successfully implement this concept, the Company will need to raise adequate capital to support its research and, if successfully researched, developed and granted regulatory approval, the Company would need to enter into a strategic relationship with a third party that has experience in manufacturing, selling and distributing this product. There is no guarantee that the Company will be successful in any or all of these critical steps.

Procedures for Approval of Related Party Transactions

Our Board of Directors is in charged with reviewing and approving all potential related party transactions. All such related party transactions must then be reported under applicable SEC rules. We have not adopted other procedures for review, or standards for approval, of such transactions, but instead review them on a case-by-case basis.

Director Independence

The Company has no outside directors as of December 31, 2020.

LEGAL MATTERS

 

Unless otherwise indicated, in the applicable prospectus supplement, the validity of the Common Stock offered by this prospectus, and any supplement thereto, will be passed upon for us by Fleming PLLC, New York, New York.York, will pass upon the validity of the shares of the Resale Shares to be sold in this offering.

 

EXPERTS

 

The financial statements of GBT Technologies Inc. for the year ended December 31, 2020 and December 31, 2019 have been included herein in reliance upon the reports of BF Borgers CPA PC, independent registered public accounting firm, has audited our consolidated financial statements included in our Annual Report on Form 10-K forupon the year ended December 31, 2017, as set forth in their report, which is incorporated by reference in this prospectus supplement and elsewhere in the registration statement. Our financial statements are incorporated by reference in reliance on BF Borgers CPA PC’s report, given on their authority as experts in accounting and auditing. Anton & Chia LLP, an independent registered public accountingof said firm has audited our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016, as set forth in their report (which contains an explanatory paragraph describing conditions that raise substantial doubt about the Company’s ability to continue as a going concern), which is incorporated by reference in this prospectus supplement and elsewhere in the registration statement. Our financial statements are incorporated by reference in reliance on Anton & Chia LLP’s report, given on their authority as experts in accounting and auditing.

 

WHERE YOU CAN FIND MORE INFORMATION

 

We are a reporting company and file annual, quarterly and current reports, proxy statements and other information with the SEC. We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the Common StockResale Shares being offered underby this prospectus. This prospectus does not contain all of the information set forth in the registration statement of which this prospectus is a part and the exhibits to thesuch registration statement. For further information with respect to us and the shares of Common Stock being offered underResale Shares by this prospectus, we refer you to the registration statement of which this prospectus is a part and the exhibits to such registration statement. Statements contained in this prospectus as to the contents of any contract or any other document are not necessarily complete, and schedulesin each instance, we refer you to the copy of the contract or other document incorporated by reference or filed as a part ofan exhibit to the registration statement. statement of which this prospectus is a part. Each of these statements is qualified in all respects by this reference.

You may read and copy the registration statement of which this prospectus is a part, as well as our reports, proxy statements and other information, at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the Public Reference Room. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including Gopher Protocol Inc.SEC. The SEC’s Internet site can be found athttp://www.sec.gov.www.sec.gov. You may also request a copy of these filings, at no cost, by writing us at GBT Technologies, Inc., 2450 Colorado Ave., Suite 100E, Santa Monica, CA 90404, or telephoning us at (888) 685-7336.

 

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers, and persons controlling us pursuantWe are subject to the provisions described in Item 14information and reporting requirements of the registration statement of whichExchange Act, and, in accordance with this prospectus forms a part or otherwise, we have been advised that inlaw, file periodic reports, proxy statements and other information with the opinionSEC. These periodic reports, proxy statements and other information are available for inspection and copying at the SEC’s public reference facilities and the website of the SEC such indemnificationreferred to above. We also maintain a website at https://gbtti.com. You may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on our website is against public policy as expressed innot a part of this prospectus and the Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than our payment of expenses incurred or paid by our directors, officers, or controlling persons in the successful defense of any action, suit, or proceeding) is asserted by our directors, officers, or controlling persons in connection with the Common Stock being registered, we will, unless in the opinioninclusion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of the issue.

36

GOPHER PROTOCOL INC.

22,500,000 SHARES OF COMMON STOCK

PROSPECTUS

February 7, 2019

Neither we nor the Selling Stockholder have authorized any dealer, salesperson or other person to give any information or to make any representations not contained in this prospectus or any prospectus supplement. You must not rely on any unauthorized information. This prospectus is not an offer to sell these securities in any jurisdiction where an offer or sale is not permitted. The informationwebsite address in this prospectus is current as of the date of this prospectus. You should not assume that this prospectus is accurate as of any other date.an inactive textual reference only.

 

37

GOPHER PROTOCOL,GBT TECHNOLOGIES INC.


Consolidated Financial Statements

 

Contents

  

 Page
Audited Financial Statements: 
  
Reports of Independent Registered Public Accounting FirmsF-2
Consolidated Balance Sheets as of December 31, 2017 and 2016F-4
Consolidated Statements of Operations for the Years Ended December 31, 2017 and 2016F-5
Consolidated Statement of Stockholders’ (Equity) Deficit for the Years Ended December 31, 2017 and 2016F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 2017 and 2016F-7
Notes to Consolidated Financial StatementsF-8
 
Unaudited Financial Statements: 
Condensed Consolidated Balance Sheets as of September 30, 20182021 (unaudited) and December 31, 20172020F-39 F-2
  
Condensed Consolidated Statements of Operations for the Three and Nine Monthsmonths Ended September 30, 20182021 and 20172020 (unaudited)F-40 F-3
  
Condensed Consolidated Statements of Stockholder’s Deficit for the Nine months Ended September 30, 2021 and 2020 (unaudited) F-4
Condensed Consolidated Statements of Cash Flows for the Nine Monthsmonths Ended September 30, 20182021 and 20172020 (unaudited)F-41 F-5
  
Notes to Condensed Consolidated Financial Statements (unaudited)F-43 F-6

 

F-1


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Report of Independent Registered Public Accounting Firm

To the shareholders and the board of directors of Gopher Protocol, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Gopher Protocol, Inc. (the “Company”) as of December 31, 2017, the related statement of operations, stockholders’ equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States.

Basis for Opinion

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

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

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

 

/s BF Borgers CPA PCGBT TECHNOLOGIES INC.
BF Borgers CPA PCCONDENSED CONSOLIDATED BALANCE SHEETS

 

We have served as the Company’s auditor since 2017

Lakewood, CO

April 11, 2018

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders

Gopher Protocol, Inc.

We have audited the accompanying balance sheet of Gopher Protocol, Inc. (the “Company”) as of December 31, 2016 and the related statements of operations, changes in stockholders’ deficit and cash flow for the year then ended December 31, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company was not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2016 and the results of its operations, changes in stockholders’ deficit and its cash flow for the year ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, these conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern.

/s/ Anton & Chia, LLP
Newport Beach, California
March 31, 2017

F-3

GOPHER PROTOCOL, INC.

CONSOLIDATED BALANCE SHEETS

  December 31,  December  31, 
  2017  2016 
       
ASSETS        
         
Current Assets:        
Cash $1,305,062  $5,096 
Accounts receivable  41,947   — 
Inventory  262,749   — 
Prepaid expenses  —   5,248 
Total current assets  1,609,758   10,344 
         
Property and equipment, net  263,082   699 
Intangible assets, net  6,666,667   — 
Other assets  1,979   7,500 
Goodwill  950,619   — 
         
Total assets $9,492,105  $18,543 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)        
         
Current Liabilities:        
Accounts payable and accrued expenses (including related parties of $51,167 in 2017) $1,199,215  $107,589 
Due to Guardian LLC (related party)  1,350,262   660,132 
Convertible notes payable, net of discount of $54,377  25,623   — 
Derivative liability  95,164   — 
Total current liabilities  2,670,264   767,721 
         
Convertible note payable, net of debt discount  —   53,852 
Note payable  2,600,000   — 
Total liabilities  5,270,264   821,573 
         
Contingencies (Note 11)  —   — 
         
Stockholders’ Equity (Deficit):        
Series B Preferred stock, $0.00001 par value; 20,000,000 shares authorized; 45,000 shares issued and outstanding at December 31, 2017 and December 31, 2016  —   — 
Series C Preferred stock, $0.00001 par value; 10,000 shares authorized; 700 shares issued and outstanding at December 31, 2017 and December 31, 2016  —   — 
Series D Preferred stock, $0.00001 par value; 100,000 shares authorized; 66,000 shares issued and outstanding at December 31, 2017 and December 31, 2016  1   1 
Series G Preferred stock, $0.00001 par value; 2,000,000 shares authorized; 2,000,000 and 0 shares issued and outstanding at December 31, 2017 and December 31, 2016  20   — 
Common stock, $0.00001 par value; 500,000,000 shares authorized; 58,215,406 and 41,420,372 shares issued and outstanding at December 31, 2017 and December 31, 2016  2,582   2,414 
Treasury stock, at cost; 1,040 shares at December 31, 2017 and December 31, 2016  (643,059)  (643,059)
Additional paid in capital  19,243,959   3,931,986 
Accumulated deficit  (14,381,662)  (4,094,372)
Total stockholders’ equity (deficit)  4,221,841   (803,030)
Total liabilities and stockholders’ equity (deficit) $9,492,105  $18,543 
ASSETS September 30, December 31,
  2021 2020
  (unaudited)  
Current Assets:        
 Cash $386,659  $113,034 
 Cash held in trust  178,016   402,532 
 Marketable equity security  —   649,000 
 Other receivable  1,200,000   — 
 Total current assets  1,764,675   1,164,566 
         
Other receivable, net of current portion  1,200,000   — 
         
 Total assets $2,964,675  $1,164,566 
         
LIABILITIES AND STOCKHOLDERS’ DEFICIT        
         
Current Liabilities:        
 Accounts payable and accrued expenses (including related parties of $410,000 and $410,833) $4,272,662  $3,353,658 
 Accrued settlement  4,090,057   4,090,057 
 Deferred judgment award  2,400,000   — 
 Convertible notes payable, net of discount of $316,372 and $362,004  482,449   13,426,706 
 Notes payable, net of discount of $0 and $47,671  2,740,000   2,741,737 
 Derivative liability  9,483,927   5,262,448 
 Total current liabilities  23,469,095   28,874,606 
         
Convertible note payable  8,255,400   — 
Note payable  150,000   148,263 
         
 Total liabilities  31,874,495   29,022,869 
         
Contingencies  —   — 
         
Stockholders’ Deficit:        
        
 Series B Preferred stock, $0.00001 par value; 20,000,000 shares authorized; 45,000 and 45,000 shares issued and outstanding at September 30, 2021 and December 31, 2020  —   — 
        
Series C Preferred stock, $0.00001 par value; 10,000 shares authorized; 700 and 700 shares issued and outstanding at September 30, 2021 and December 31, 2020  —   — 
         
Series D Preferred stock, $0.00001 par value; 100,000 shares authorized 0 and 0 shares issued and outstanding at September 30, 2021 and December 31, 2020  —   — 
         
Series G Preferred stock, $0.00001 par value; 2,000,000 shares authorized; 0 and 0 shares issued and outstanding at September 30, 2021 and December 31, 2020  —   — 
         
Series H Preferred stock, $0.00001 par value ($500.00 stated value); 40,000 shares authorized; 20,000 and 20,000 shares issued and outstanding at September 30, 2021 and December 31, 2020  —   — 
         
 Common stock, $0.00001 par value; 100,000,000,000 shares authorized; 27,737,543 and 5,133,489 shares issued and outstanding at September 30, 2021 and December 31, 2020  277   51 
 Treasury stock, at cost; 21 shares at September 30, 2021 and December 31, 2020  (643,059)  (643,059)
 Stock loan receivable  (7,610,147)  (7,610,147)
 Additional paid in capital  282,848,643   251,046,191 
 Accumulated deficit  (303,505,534)  (270,651,339)
 Total stockholders’ deficit  (28,909,820)  (27,858,303)
 Total liabilities and stockholders’ deficit $2,964,675  $1,164,566 

 

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statementsstatements.


GBT TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

 

F-4

GOPHER PROTOCOL, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 Years Ended December 31,  Three Months Ended September 30, Nine Months Ended September 30,
 2017  2016  2021 2020 2021 2020
             
Sales:        
Sales $9,012,354  $— 
Related party sales  180,000   165,000 
Total sales  9,192,354   165,000 
        
Cost of goods sold  8,651,804   — 
        
Gross profit  540,550   165,000 
Sales - related party $45,000  $45,000  $135,000  $135,000 
                        
Operating expenses:                        
General and administrative expenses  3,574,296   1,401,338   723,706   446,745   1,931,963   1,374,564 
Marketing expenses  220,229   126,838   182,692   6,045   514,906   30,100 
Acquisition costs  4,050,819   — 
Impairment of assets  —   —   15,400,000   5,500,000 
Total operating expenses  7,845,344   1,528,176   906,398   452,790   17,846,869   6,904,664 
                        
Loss from operations  (7,304,794)  (1,363,176)  (861,398)  (407,790)  (17,711,869)  (6,769,664)
                        
Other income (expense):                        
Amortization of debt discount  (1,195,755)  (39,726)  (220,095)  (1,163,905)  (686,732)  (3,881,423)
Change in fair value of derivative liability  374,230   (177,062)  627,784   1,653,200   (165,402)  612,829 
Interest expense and financing costs  (2,160,971)  (6,262)  (326,222)  (500,351)  (1,473,712)  (2,201,915)
Unrealized gain (loss) on marketable equity security  —   (683,548)  —   (769,500)
Realized gain (loss) on disposal of marketable equity security  —   (224,830)  11,000   (474,830)
Loss on exchange of assets  —   —   —   (1,430,000)
Loss on debt modification  —   —   (13,777,480)    
Other income  350,000   214   950,000   214 
Total other income (expense)  (2,982,496)  (223,050)  431,467   (919,220)  (15,142,326)  (8,144,625)
                        
Loss before income taxes  (10,287,290)  (1,586,226)  (429,931)  (1,327,010)  (32,854,195)  (14,914,289)
                        
Income tax expense  —   —   —   —   —   — 
                        
Loss from continuing operations  (429,931)  (1,327,010)  (32,854,195)  (14,914,289)
                
Discontinued operations:                
Loss from operations of discontinued operations  —   —   —   (16,924)
Gain on disposition of discontinued operations  —   1,001,711       1,001,711 
Total Discontinued operations  —   1,001,711   —   984,787 
                
Net loss $(10,287,290) $(1,586,226) $(429,931) $(325,299) $(32,854,195) $(13,929,502)
                        
Weighted average common shares outstanding:                        
Basic and diluted  46,256,807   19,902,077   26,154,579   3,711,900   16,522,673   2,693,500 
                        
Net loss per share:        
Basic and diluted $(0.22) $(0.08)
Net loss per share (basic and diluted):                
Continuing operations $(0.02) $(0.36) $(1.99) $(5.54)
Discontinued operations  —   0.27   —   0.37 
Net loss per share $(0.02) $(0.09) $(1.99) $(5.17)

 

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statementsstatements.

 


GBT TECHNOLOGIES INC.
F-5CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
(unaudited)

 

GOPHER PROTOCOL, INC.

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

  Series B Convertible
Preferred Stock		  Series C Convertible
Preferred Stock		  Series D Convertible
Preferred Stock		  Series G Convertible
Preferred Stock		  Common Stock  Treasury Stock  Additional
Paid-in		  Accumulated  Total
Stockholders’
Equity/		 
  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Capital  Deficit  (Deficit) 
                                              
Balance, December 31, 2016  45,000  $—   700  $—   94,750  $1   —  $—   5,894,342  $2,058  $1,040  $(643,059) $3,035,276  $(2,508,146) $(113,870)
                                                             
Common stock issued for debt conversion  —   —   —   —   —   —   —   —   4,126,110   41   —   —   31,016   —   31,057 
Common stock issued for services  —   —   —   —   —   —   —   —   2,650,000   27   —   —   688,920   —   688,947 
Conversion of Series D to common stock  —   —   —   —   (28,750)  —   —   —   28,750,000   288   —   —   (288)  —   — 
Adjustment of shares to reconcile to transfer agent  —   —   —   —   —   —   —   —   (80)  —   —   —   —   —   — 
Warrants issued for services  —   —   —   —   —   —   —   —   —   —   —   —   177,062   —   177,062 
Net loss  —   —   —   —   —   —   —   —   —   —   —   —   —   (1,586,226)  (1,586,226)
                                                             
Balance, December 31, 2016  45,000   —   700   —   66,000   1   —   —   41,420,372   2,414   1,040   (643,059)  3,931,986   (4,094,372)  (803,030)
                                                             
Common stock issued for debt conversion  —   —   —   —   —   —   —   —   8,436,700   85   —   —   156,905   —   156,990 
Common stock issued for services  —   —   —   —   —   —   —   —   25,000   —           26,500       26,500 
Common stock issued for acquisition  —   —   —   —   —   —   —   —   5,000,000   50   —   —   1,849,950   —   1,850,000 
Common stock issued for acquisition services  —   —   —   —   —   —   —   —   2,000,000   20   —   —   739,980   —   740,000 
Common stock issued for cash  —   —   —   —   —   —   —   —   1,333,334   13   —   —   999,987   —   1,000,000 
Series G convertible preferred stock issued for debt conversion  —   —   —   —   —   —   2,000,000   20   —   —   —   —   700,050   —   700,070 
Warrants issued for acquisition  —   —   —   —   —   —   —   —   —   —   —   —   3,310,819   —   3,310,819 
Warrants issued for services  —   —   —   —   —   —   —   —   —   —   —   —   4,782,297   —   4,782,297 
Fair value of beneficial conversion feature of debt repaid/converted  —   —   —   —   —   —   —   —   —   —   —   —   2,745,485   —   2,745,485 
Net loss  —   —   —   —   —   —   —   —   —   —   —   —       (10,287,290)  (10,287,290)
                                                             
Balance, September 30, 2017  45,000  $—   700  $—   66,000  $1   2,000,000  $20   58,215,406  $2,582  $1,040  $(643,059) $19,243,959  $(14,381,662) $4,221,841 
  Series B Convertible Preferred Stock Series C Convertible Preferred Stock Series D Convertible Preferred Stock Series G Convertible Preferred Stock Series H Convertible Preferred Stock Common Stock Treasury
Stock		 Stock
Loan 		 

Additional

Paid-in		 Accumulated 

Total .

Stockholders'

Equity/
  Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Receivable Capital Deficit (Deficit)
Balance, December 31, 2020  45,000  $—   700  $—   —  $—   —  $—   20,000  $—   5,133,489  $51  $1,040  $(643,059) $(7,610,147) $251,046,191  $(270,651,339) $(27,858,303)
                                                                         
Common stock issued for conversion of convertible debt and accrued interest  —   —   —   —   —   —   —   —   —   —   4,483,717   45   —   —   —   3,122,803   —   3,122,848 
Common stock issued for services  —   —   —   —   —   —   —   —   —   —   245,000   2   —   —   —   281,748   —   281,750 
Fair value of beneficial conversion feature of converted  —   —   —   —   —   —   —   —   —   —   —   —   —   —   —   9,207,107   —   9,207,107 
Net loss  —   —   —   —   —   —   —   —   —   —   —   —   —   —   —   —   (5,375,609)  (5,375,609)
                                                                         
Balance, March 31, 2021  45,000   —   700   —   —   —   —   —   20,000   —   9,862,206   98   1,040   (643,059)  (7,610,147)  263,657,849   (276,026,948)  (20,622,207)
                                                                         
Common stock issued for conversion of convertible debt and accrued interest  —   —   —   —   —   —   —   —   —   —   720,311   7   —   —   —   592,698   —   592,705 
Common stock issued for joint venture  —   —   —   —   —   —   —   —   —   —   14,000,000   140   —   —   —   15,399,860   —   15,400,000 
Fair value of beneficial conversion feature of converted  —   —   —   —   —   —   —   —   —   —   —   —   —   —   —   522,349   —   522,349 
Net loss  —   —   —   —   —   —   —   —   —   —   —   —   —   —   —   —   (27,048,655)  (27,048,655)
                                                                         
Balance, June 30, 2021  45,000   —   700   —   —   —   —   —   20,000   —   24,582,517   245   1,040   (643,059)  (7,610,147)  280,172,756   (303,075,603)  (31,155,808)
                                                                         
Common stock issued for conversion of convertible debt and accrued interest  —   —   —   —   —   —   —   —   —   —   3,155,026   32   —   —   —   1,540,425   —   1,540,457 
Fair value of beneficial conversion feature of converted  —   —   —   —   —   —   —   —   —   —   —   —   —   —   —   1,135,462   —   1,135,462 
Net loss  —   —   —   —   —   —   —   —   —   —   —   —   —   —   —   —   (429,931)  (429,931)
                                                                         
Balance, September 30, 2021  45,000  $—   700  $—   —  $—   —  $—   20,000  $—   27,737,543  $277  $1,040  $(643,059) $(7,610,147) $282,848,643  $(303,505,534) $(28,909,820)
                                                                         
Balance, December 31, 2019  45,000  $—   700  $—   —  $—   —  $—   20,000  $—   330,727  $3  $1,040  $(643,059) $(7,610,147) $242,196,768  $(252,656,451) $(18,712,886)
                                                                         
Common stock issued for conversion of convertible debt  —   —   —   —   —   —   —   —   —   —   911,620   9   —   —   —   509,880   —   509,889 
Common stock issued for joint venture  —   —   —   —   —   —   —   —   —   —   2,000,000   20   —   —   —   5,499,980       5,500,000 
Fair value of beneficial conversion feature of converted  —   —   —   —   —   —   —   —   —   —   —   —   —   —   —   1,021,001   —   1,021,001 
Net loss  —   —   —   —   —   —   —   —   —   —   —   —   —   —   —   —   (10,007,840)  (10,007,840)
                                                                         
Balance, March 31, 2020  45,000   —   700   —   —   —   —   —   20,000   —   3,242,347   32   1,040   (643,059)  (7,610,147)  249,227,629   (262,664,291)  (21,689,836)
                                                                         
Common stock issued for conversion of convertible debt  —   —   —   —   —   —   —   —   —   —   297,465   3   —   —   —   114,997   —   115,000 
Fair value of beneficial conversion feature of converted  —   —   —   —   —   —   —   —   —   —   —   —   —   —   —   146,151   —   146,151 
Net loss  —   —   —   —   —   —   —   —   —   —   —   —   —   —   —   —   (3,596,363)  (3,596,363)
                                                                         
Balance, June 30, 2020  45,000   —   700   —   —   —   —   —   20,000   —   3,539,812   35   1,040   (643,059)  (7,610,147)  249,488,777   (266,260,654)  (25,025,048)
                                                                         
Common stock issued for conversion of convertible debt  —   —   —   —   —   —   —   —   —   —   706,785   7   —   —   —   338,183   —   338,190 
Fair value of beneficial conversion feature of converted  —   —   —   —   —   —   —   —   —   —   —   —   —   —   —   308,451   —   308,451 
Net loss  —   —   —   —   —   —   —   —   —   —   —   —   —   —   —   —   (325,299)  (325,299)
                                                                         
Balance, September 30, 2020  45,000  $—   700  $—   —  $—   —  $—   20,000  $—   4,246,597  $42  $1,040  $(643,059) $(7,610,147) $250,135,411  $(266,585,953) $(24,703,706)

 

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statementsstatements.


GBT TECHNOLOGIES INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

 

F-6

GOPHER PROTOCOL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

 Years Ended December 31,  Nine Months Ended September 30,
 2017  2016  2021 2020
         
Cash Flows From Operating Activities:                
Net loss $(10,287,290) $(1,586,226) $(32,854,195) $(13,929,502)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:        
Adjustments to reconcile net loss to net cash used in operating activities:                        
Depreciation of property and equipment  26,169   1,347   —   46,363 
Amortization of intangible assets  333,333   — 
Amortization of debt discount  1,195,755   39,726   686,732   3,881,423 
Change in fair value of derivative liability  (374,230)  —   165,402   (612,829)
Financing cost  1,964,747   —   609,265   945,916 
Amortization of prepaid filing fees  —   5,248 
Shares issued for services  766,500   688,947   281,750   — 
Warrants issued for services  4,782,297   177,062 
Convertible note issued for penalty  —   242,712 
Loss on modification of debt  13,777,480   — 
Impairment of assets  15,400,000   5,500,000 
Unrealized (gain) loss on market equity security  —   769,500 
Realized gain on disposal of market equity security  (11,000)  474,830 
Loss on exchange of assets  —   1,430,000 
Gain on disposition of discontinued operations  —   (1,001,711)
Convertible note receivable exchanged for services  —   200,000 
Payment of other income with marketable securities  (800,000)  — 
Changes in operating assets and liabilities:                
Other noncurrent assets  5,521   4,750 
Accounts receivable  (41,947)  25,974   —   1,674 
Inventory  135,402   — 
Prepaid expenses  5,248   15,500 
Other receivable  —   100,000 
Cash held in trust  224,516   — 
Accounts payable and accrued expenses  766,944   605,456   1,562,039   1,408,711 
Due to Guardian, LLC  950,262     
Accrued interest on convertible notes payable  —   6,261 
Net cash provided by (used in) operating activities  228,711   (15,955)
Net cash used in operating activities  (958,011)  (542,913)
                
Cash Flows From Investing Activities:                
Purchase of property and equipment  (78,352)  —   —   (4,200)
Cash of discontinued operations      (227,571)
Net cash used in investing activities  (78,352)  —   —   (231,771)
                
Cash Flows From Financing Activities:                
Issuance of convertible notes  440,000   —   1,231,636   648,460 
Repayment of convertible notes  (290,393)  — 
Issuance of common stock  1,000,000   — 
Issuance of notes payable  —   318,639 
Net cash provided by financing activities  1,149,607   —   1,231,636   967,099 
                
Net increase (decrease) in cash  1,299,966   (15,955)
Net increase in cash  273,625   192,415 
                
Cash, beginning of period  5,096   21,051   113,034   59,634 
                
Cash, end of period $1,305,062  $5,096  $386,659  $252,049 
                
Cash paid for:                
Interest $—  $—  $—  $— 
Income taxes $—  $800  $—  $— 
                
Supplemental non-cash investing and financing activities                
Shares issued to reduce notes payable $825,285  $31,057 
Reduction of note payable through conversion $825,285  $31,057 
Debt discount $1,250,132  $—  $641,100  $4,411,683 
Reclassification of a note to Guardian LLC to a convertible note payable $660,132  $— 
Accrued interest to convertible note payable $1,756  $— 
Transfer of derivative liability to equity $2,745,485  $—  $10,864,918  $1,475,603 
Convertible notes issued for notes payable and accrued interest $5,256,010  $3,738,171 
Common stock issued for convertible notes and accrued interest $—  $963,079 
Repayment of convertible notes with marketable equity securities $—  $1,260,000 
Transfer of accounts payable to convertible note $424,731  $— 
Transfer of accounts payable to convertible note $202,899  $— 

 

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.


GBT Technologies, Inc.

F-7

Notes to Condensed Consolidated Financial Statements

For the Nine Months Ended September 30, 2021 and 2020 (unaudited)

 

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Organization and Basis of Presentation

 

Organization and Line of Business

 

Gopher ProtocolGBT Technologies Inc. (the “Company”, “Gopher”“GBT”, “Gopher Protocol” or “GOPH”“GTCH”) was incorporated on July 22, 2009 under the laws of the State of Nevada and relocated its headquarters to Santa Monica, California in 2016. Gopher is a development stage company that is creating innovative mobile microchip (ICs) and software technologies based on GopherInsight™.Nevada. The Company is targeting growing markets such as development of Internet of Things (“IoT”) and Artificial Intelligence (“AI”) enabled networking and tracking technologies, including wireless mesh network technology platform and fixed solutions, development of an intelligent human body vitals device, asset-tracking IoT. The Company has historically derived revenues from (i) the provision of IT services to Guardian Patch LLC, a related party (“Guardian LLC”)services; and (ii) from the licensing of its technology.

The unaudited condensed consolidated financial statements are prepared by the Company, recognizes revenue frompursuant to the operationsrules and regulations of the acquired assets it acquiredSecurities Exchange Commission (“SEC”). The information furnished herein reflects all adjustments, consisting only of normal recurring adjustments, which in the third quarteropinion of 2017.

GopherInsight™ is a patented real time, heuristic (self-learning/artificial intelligence) based mobile technology. GopherInsight™ chip technology, if successfully fully developed, will be ablemanagement, are necessary to be installed in mobile devices (smartphones, tablets, laptops, etc.) as well as stand-alone products. It is intended that GopherInsight™ software applications will work in conjunction with GopherInsight™ microchips across mobile operating systems, providing computing power, advanced database management/sharing functionalities and more. The technology under development consists of a smart microchip, mobile application software and supporting software. The system contemplatesfairly state the creation of a global network. Once fully developed,Company’s financial position, the Company believes that its microchip technologies may be installed within mobile devices or on SIM cards.

On March 29, 2016, the Company contributed allresults of its rights relatingoperations, and cash flows for the periods presented. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America were omitted pursuant to its proprietary microchip that is within a sticky patch package (the “Patch”) to Guardian LLC in considerationsuch rules and regulations. The results of 50%operations for the nine months ended September 30, 2021 are not necessarily indicative of the profit generated by Guardian LLC and a commitment from Guardian LLC that it is responsible for investing all needed fundsresults expected for the purpose of developing the Patch and related products to the Patch, as well as funding the working capital needs of the Company.

On September 1, 2017, the Company entered into an Asset Purchase Agreement with a third party, RWJ Advanced Marketing, LLC, a Georgia corporation. The Company entered into this Asset Purchase Agreement to acquire terminals in approximately 15,000 locations by which the Company will deploy its technology. The operations consist primarily of the sale of phones and phone card products, including PINS for cell minutes, SIM cards for cell minutes, as well as gift cards. The Company incorporated a wholly-owned subsidiary, UGopherServices Corp., to operate the acquired assets.year ending December 31, 2021.

 

Basis of Presentation

 

The accompanying condensed consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

Going Concern ConsiderationsStock Splits

 

TheseOn August 5, 2019, the Company effectuated a 1 for 100 reverse stock split. In addition, on October 26, 2021, the Company effectuated a 1 for 50 reverse stock split. The share and per share information has been retroactively restated to reflect these reverse stock splits.

Going Concern

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which impliesassuming that the Company will continue to realize its assets and discharge its liabilities in the normal course of business.as a going concern. The Company sustained net losseshas an accumulated deficit of $10,287,290$303,505,534 and $1,586,226, respectively during the years ended December 31, 2017 and 2016. The Company hadhas a working capital deficit of $1,060,506$21,704,420 as of September 30, 2021, and $757,377, respectively,is in default on a note payable and an accumulated deficit of $14,381,662 and $4,094,372, respectively, at December 31, 2017 and 2016. The Company recently purchased the assets of RWJ Advanced Marketing, LLC in 2017 (see Note 3) and ECS Prepaid LLC in 2018 (see Note 16). Both these companies have historically generated significant revenuesother obligations, which the Company expectsraises substantial doubt about its ability to continue as a going concern.

The Company’s ability to continue as a going concern is dependent upon its ability to generate profitable operations in the future. In addition, duringfuture and/or obtain the past 120 days, the Company has raised approximately $3 million in convertible debt and equity capital, and expects to raise additional capital in the future. With the cash flow from operations from the recent acquisitions and the cash received from recent convertible debt and equity capital, the Company believes it will have sufficient cashnecessary financing to meet its obligations forand repay its liabilities arising from normal business operations when they come due. Management has plans to seek additional capital through some private placement offerings of debt and equity securities. These plans, if successful, will mitigate the next 12 months.

F-8

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSfactors which raise substantial doubt about the Company’s ability to continue as a going concern. These condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty.

 

Note 2 – Summary of Significant Accounting Policies

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates in the accompanying financial statements include valuation of derivatives and valuation allowance on deferred tax assets.


GBT Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine Months Ended September 30, 2021 and 2020 (unaudited)

 

Principles of Consolidation

 

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-ownedsubsidiaries; the Company’s 50% owned subsidiaries GBT BitSpeed Corp. and GBT Tokenize Corp; the Company’s 50% owned subsidiary, UGopherServices Corp, since the date of acquisition (September 1, 2017)Gopher Protocol Costa Rica Sociedad De Responsabilidad Limitada (currently inactive), a wholly owned AltCorp Trading LLC, a Costa Rica company (“AltCorp”) and Greenwich International Holdings, a Costa Rica corporation (“Greenwich”). All significant intercompany transactions and balances have been eliminated.

 

Cash Equivalents

 

For the purpose of the statement of cash flows, cash equivalents include time deposits, certificate of deposits, and all highly liquidhighly-liquid debt instruments with original maturities of three months or less. As of September 30, 2021, and December 31, 2020, the Company did not have any cash equivalents.

 

Accounts ReceivableCash Held in Trust

 

The Company grants credit to establishments (such as convenient stores) who sell the Company’s products under credit terms that it believes are customaryCash held in the industry and does not require collateral to support customer receivables. The Company currently does not provide an allowance for doubtful collections, which is based upon a reviewtrust consists of outstanding receivables, historical collection information, and existing economic conditions. Normal receivable terms vary from 7-30 days after the issuance of the invoice and typically would be considered past due when the term expires. Delinquent receivables are written off based on individual credit evaluation and specific circumstances of the customer. The Company’s allowance for doubtful accounts was $0 at December 31, 2017.

Inventory

Inventory is valued at the lower of the inventory’s cost (first in, first out basis) or the current market price of the inventory. Management compares the cost of inventory with its market value and an allowance is made to write down inventory to market value, if lower. At December 31, 2017, all of the Company’s inventory was finished goods inventory which consisted principally of phones and phone card products, including PINS for cell minutes, SIM cards for cell minutes, as well as gift cards.

Property and Equipment

Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removedproceeds from the respective accounts, and any gain or loss is includedsale of investments. The proceeds less the payment of certain expenses are being held in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows:AltCorp’s (the Company’s wholly owned subsidiary) attorney trust account. (See Note 4)

 

Furniture7 years
Computers and equipment3 years
POSA machines3 years

F-9

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Long-Lived Assets

 

The Company applies the provisions of ASCFinancial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360,Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review at September 30, 2021 and December 31, 2017 and 2016,2020, the Company believes there was no impairment of its long-lived assets.

 

Intangible AssetsMarketable Equity Securities

 

The Company’s intangible assetsCompany accounts for marketable equity securities in accordance with ASC Topic 321, Investments – equity securities. Marketable equity securities are reported at December 31, 2017 were all acquiredfair value based on quotations available on securities exchanges with any unrealized gain or loss being reported as a component of other income (expense) on the acquisitionstatement of certain RWJ assets (see Note 3) in 2017 are being amortized over 84 months.operations. The Company performsportion of marketable equity security expected to be sold within twelve months of the balance sheet date is reported as a test for impairment at least annually. As of December 31, 2017, the Company performed the required impairment analysis which resulted in no impairment adjustments. current asset.

 

GoodwillNote Receivable

Goodwill representsNote receivable consists of a promissory note received in connection with the excesssale of purchase price over the underlying net assets of businesses acquired. Under accounting requirements, goodwill is not amortized but is subject to annual impairment tests. The Company recorded goodwill of $950,619 related to its acquisition of certain RWJ assetsUgopherservices (see Note 3). The note is due on December 31, 2021 and accrues interest at 6% per annum. At December 31, 2020, the Company determined that this note receivable was not collectible and took an impairment charge of $100,000. During July 2021, the note holder made a $50,000 payment on the note, which is recorded as other income in 2017.the accompanying condensed consolidated statements of operations.

 

Derivative Financial Instruments

 

The Company evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a weighted averageweighted-average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. As of September 30, 2021, and December 31, 2017,2020, the Company’s only derivative financial instrument was an embedded conversion feature associated with convertible notes payable due to certain provisions that allow for a change in the conversion price based on a percentage of the Company’s stock price at the date of conversion.

 

F-10

 F-7

 

 

GBT Technologies, Inc.

GOPHER PROTOCOL, INC.Notes to Condensed Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor the Nine Months Ended September 30, 2021 and 2020 (unaudited)

Fair Value of Financial Instruments

 

For certain of the Company’s financial instruments, including cash, and equivalents, restricted cash, accounts receivable, advances to suppliers, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities.

 

FASB ASC Topic 820,Fair Value Measurements and Disclosures, requires disclosure of the fair value of financial instruments held by the Company. FASB ASC Topic 825,Financial Instruments, defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

 

●Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

 

●Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

 

●Level 3 inputs to the valuation methodology us one or more unobservable inputs which are significant to the fair value measurement.

 

The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic 480,Distinguishing Liabilities from Equity, and FASB ASC Topic 815,Derivatives and Hedging.

 

For certain financial instruments, the carrying amounts reported in the balance sheets for cash and current liabilities, including convertible notes payable, each qualify as a financial instrumentsinstrument, and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.

 

The Company uses Level 2 inputs for its valuation methodology for derivative liabilities as their fair values were determined by using the Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.

 

At September 30, 2021 and December 31, 2017,2020, the Company identified the following liabilities that are required to be presented on the balance sheet at fair value:

 

 Fair Value Fair Value Measurements at  Fair Value Fair Value Measurements at\
 As of December 31, 2017  As of September 30, 2021
Description December 31,
2017		 Using Fair Value Hierarchy  September 30, 2021 Using Fair Value Hierarchy
   Level 1 Level 2 Level 3    Level 1 Level 2 Level 3
Conversion feature on convertible notes $95,164  $—  $95,164  $—  $9,483,927  $—  $9,483,927  $— 
                
Total $95,164  $—  $95,164  $— 

 


The Company did not identify any other non-recurring assets

GBT Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine Months Ended September 30, 2021 and liabilities that are required to be presented in the consolidated balance sheets at fair value in accordance with ASC 815 at December 31, 2016.2020 (unaudited)

 

F-11

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

  Fair Value Fair Value Measurements at
  As of December 31, 2020
Description December 31, 2020 Using Fair Value Hierarchy
    Level 1 Level 2 Level 3
Marketable equity security - Surge Holdings, Inc. $649,000  $—  $649,000  $— 
                 
Conversion feature on convertible notes $5,262,448  $—  $5,262,448  $— 

 

Treasury Stock

 

Treasury stock is recorded at cost. The re-issuance of treasury shares is accounted for on a first in, first-out basis and any difference between the cost of treasury shares and the re-issuance proceeds are charged or credited to additional paid-in capital. During 2011,

Stock Loan Receivable

On January 8, 2019, the Company bought back 8 post-split shares (38,000 pre-split)entered into a Stock Pledge Agreement with Latin American Exchange Latinex Casa de Cambio, S.A., a Costa Rica corporation (“Latinex”), to provide that Latinex may maintain its required regulatory capital as required by various regulators. The Company has pledged 4,005 restricted shares of its own shares.common stock valued at $7,610,147 (based on the closing price on the grant date) for a term of three years in consideration of an annual payment of $375,000 paid in quarterly installments of $93,750. In lieu of cash payment, Latinex may pay the Company in virtual currency of WISE Network S.A. valued at a 50% discount of its offering price of $10 per token. In the event that Latinex’s required capital has decreased below $5,000,000, Latinex is permitted to sell the pledged shares of common stock only in an amount to ensure that Latinex can satisfy the required capital levels. The Company must consent to such sale of the shares of common stock, which may not be unreasonably withheld. Upon expiration of the agreement, the remaining shares of common stock shall be returned to the Company free and clear of all liens. The Company has recorded the value of these shares of common stock as a stock loan receivable which is presented as a contra-equity account in the accompanying consolidated balance sheets. At December 31, 2019, the Company wrote off the accrued interest income as Latinex did not perform any payment and the Company has no mean to enforce this payment. Latinex agreed in principal to return the pledged 4,005 restricted shares to the Company for cancellation. The 4,005 restricted shares have not yet been returned to the Company as of September 30, 2021.

 

Revenue Recognition

 

Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), became effective for the Company on January 1, 2018. The Company’s revenue recognition disclosure reflects its updated accounting policies that are affected by this new standard. The Company recognizedapplied the “modified retrospective” transition method for open contracts for the implementation of Topic 606. The Company had no significant post-delivery obligations, this new standard did notresult in a material recognition of revenue on arrangementsthe Company’s accompanying consolidated financial statements for the cumulative impact of applying this new standard. The Company made no adjustments to its previously-reported total revenues, as those periods continue to be presented in accordance with FASB Codification its historical accounting practices under Topic 605, “Revenue Recognition” (“ASC Revenue Recognition.

Revenue from providing IT services are recognized under Topic 605”). Under ASC Topic 605, revenue is recognized only when606 in a manner that reasonably reflects the price is fixeddelivery of its services to customers in return for expected consideration and determinable, persuasive evidence of an arrangement exists,includes the service is performed and collectabilityfollowing elements:

●executed contracts with the Company’s customers that it believes are legally enforceable;
●identification of performance obligations in the respective contract;
●determination of the transaction price for each performance obligation in the respective contract;
●allocation the transaction price to each performance obligation; and
●recognition of revenue only when the Company satisfies each performance obligation.

These five elements, as applied to each of the resulting receivableCompany’s revenue category, is reasonably assured. The Company recognizes revenue fromsummarized below:

●IT services - revenue is recorded on a monthly basis as services are provided; and
●License fees and Royalties – revenue is recognized based on the terms of the agreement with its customer.

 F-9

GBT Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

For the sale of phonesNine Months Ended September 30, 2021 and phone card products at the time of sale to the customer. The Company recognizes revenue from IT-related services at the time the services are performed.2020 (unaudited)

 

Cost of Goods SoldUnearned revenue

 

Cost of goods soldUnearned revenue represents the costnet amount received for the purchase of products that have not seen shipped to the phone and phone card products sold by the Company.Company’s customers. In 20162018, the Company didran pre-sales efforts for its pet tracker product and received prepayments for its product. In addition, during 2018, the Company received $200,000 in connection with an intellectual property license and royalty agreement. At December 31, 2019, the Company determined that the unearned revenue would not have costlikely result in the recognition of goods sold since allrevenue; therefore, $249,675 of itsunearned revenue was generated from consulting income. In 2017, the entire cost of goods sold relatesreclassified to products sold by the Company’s new acquired acquisition as described in Note 3.accrued expenses at September 30, 2021 and December 31, 2020.

 

Income Taxes

 

The Company accounts for income taxes in accordance with ASC Topic 740,Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company has no material uncertain tax positions for any of the reporting periods presented.

F-12

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Basic and Diluted Earnings Per Share

 

Earnings per share is calculated in accordance with ASC Topic 260,Earnings Per ShareShare. Basic earnings per share (“EPS”) is based on the weighted average number of common shares outstanding. Diluted EPS is based on the assumptionassumes that all dilutive securities are converted. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Due to the net loss incurred potentially dilutive instruments would be anti-dilutive. Accordingly, diluted loss per share is the same as basic loss for all periods presented. The following potentially dilutivepotentially-dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive.

 

 September 30, September 30,
 2017 2016  2021 2020
Series B preferred stock  3,000   3,000   1   1 
Series C preferred stock  770   770   0   0 
Series D preferred stock  66,000,000   66,000,000 
Series G preferred stock  2,000,000   — 
Series H preferred stock  20,000   20,000 
Warrants  22,097,350   93,750   392,870   393,003 
Convertible notes  133,824   7,154,187   30,488,622   10,608,377 
Total  90,234,944   73,251,707   30,901,493   11,021,381 

Management’s Evaluation of Subsequent Events

The Company evaluates events that have occurred after the balance sheet date of September 30, 2021, through the date which the condensed consolidated financial statements are issued. Based upon the review, other than described in Note 16 – Subsequent Events, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the condensed consolidated financial statements.


GBT Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine Months Ended September 30, 2021 and 2020 (unaudited)

 

Recent Accounting Pronouncements

 

In January 2017, the FASB issued an Accounting Standards Update (“ASU”) 2017-01,Business Combinations (Topic 805) Clarifying the Definition of a Business. The amendments in this update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for interim and annual periods beginning after December 15, 2017 and should be applied prospectively on or after the effective date. The Company is in the process of evaluating the impact of this accounting standard update.

In November 2016,2019, the FASB issued ASU 2016-18,2019-12, Statement of Cash Flows (Topic 230): Restricted Cash,Simplifying the Accounting for Income Taxes which requires restricted cashamends ASC 740 Income Taxes (ASC 740). This update is intended to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash flows reconcilessimplify accounting for income taxes by removing certain exceptions to the balance sheet if restricted cash is shown separately from cashgeneral principles in ASC 740 and cash equivalents on the balance sheet. ASU 2016-18 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company is in the processamending existing guidance to improve consistent application of evaluating the impact of this accounting standardASC 740. This update on its financial statements.

In October 2016, the FASB issued ASU 2016-16,Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 provides guidance for targeted changes with respect to how cash receipts and cash payments are classified in the statements of cash flows, with the objective of reducing diversity in practice. ASU 2016-15 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The Company is in the process of evaluating the impact of this accounting standard update on its statements of cash flows.

In February 2016, the FASB issued ASU 2016-02,Leases (Topic 842). ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 20182021. The guidance in this update has various elements, some of which are applied on a prospective basis and interim periodsothers on a retrospective basis with earlier application permitted. The Company is currently evaluating the effect of this ASU on the Company’s consolidated financial statements and related disclosures.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock. For convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital, the embedded conversion features no longer are separated from the host contract. ASU 2020-06 also removes certain conditions that should be considered in the derivatives scope exception evaluation under Subtopic 815-40, Derivatives and Hedging—Contracts in Entity’s Own Equity, and clarify the scope and certain requirements under Subtopic 815-40. In addition, ASU 2020-06 improves the guidance related to the disclosures and earnings-per-share (EPS) for convertible instruments and contract in entity’s own equity. ASU 2020-06 is effective for public business entities that meet the definition of a SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is in2021, including interim periods within those fiscal years. For all other entities, the process of evaluating the impact of this accounting standard update on its financial statements.

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09,Revenue from Contracts with Customers.  ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition.  ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract.  The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.  ASU 2014-09 isamendments are effective for interim and annual periodsfiscal years beginning after December 15, 2017.2023, including interim periods within those fiscal years. Early adoption is permitted, only in annual reporting periodsbut no earlier than fiscal years beginning after December 15, 2016,2020, including interim periods therein.  Entities will be able to transition towithin those fiscal years. The Board specified that an entity should adopt the standard either retrospectively or as a cumulative-effect adjustmentguidance as of the datebeginning of adoption.its annual fiscal year. The Company is in the process of evaluatingcurrently evaluation the impact ofthis ASU 2014-09will have on the Company’sits consolidated financial statements and disclosures.

F-13

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSstatements.

 

Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying consolidated financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.

 

Note 3 - Acquisition– Discontinued Operations

 

On September 1, 2017,18, 2020, the Company entered into a Purchase and closedSale Agreement with Mr. LightHouse LTD., an Asset Purchase Agreement (the “Purchase Agreement”Israeli corporation (“MLH”) with RWJ Advanced Marketing, LLC (“RWJ”), a Georgia corporation, pursuant to which the Company purchasedagreed to sell and assign to MLH, effective July 1, 2020 all the shares, and certain assets from RWJ, including inventory, terminals, licenses and permits and intangible assets,specified liabilities, of Ugopherservices Corp. (“UGO”), a wholly owned subsidiary of the Company, in consideration of $400,000, an aggregate 5,000,000 shares$100,000 to be paid through the delivery of common stock ofa promissory note payable to the Company secured promissory note in(the “Note”), upon the amount of $2,600,000,terms and warrantssubject to purchase 9,000,000 shares of common stockthe limitations and the assumption of certain liabilities incurred by RWJ after the effective date asconditions set forth in the RWJ Agreement.Note. There is no material relationship between the Company, on one hand, and MLH, on the other hand. At December 31, 2020, the Company determined that this note receivable was not collectible and took an impairment charge of $100,000. During July 2021, MLH effected a $50,000 payment on the Note.

UGO has been presented as discontinued operations on the accompanying financial statements.

 

The RWJ Warrants are exercisableoperating results for a periodUGO have been presented in the accompanying condensed consolidated statements of five years at a fixed exercise price of $0.50 per share and non-dilutive anti-dilution protection. If, prior to the exercise of the RJW Warrants, the Company (i) declares, makes or issues, or fixes a record dateoperations for the determination of holders of common stock entitled to receive, a dividend or other distribution payable in shares of its capital stock, (ii) subdivides the outstanding shares, (iii) combines the outstanding shares (including a reverse stock split), (iv) issues any shares of its capital stock by reclassification of the shares, capital reorganization or otherwise (including any such reclassification or reorganization in connection with a consolidation or merger orthree and sale of all or substantially all of the Company’s assets to any person), then, notwithstanding any such action the exercise price,nine months ended September 30, 2021 and the number2020 as discontinued operations and kind of shares receivable upon exercise, in effect at the time of the record date for such dividend or of the effective date of such subdivision, combination or reclassification shall remain fixed so that the holder of the RJW Warrants exercised after such time shall be entitled to receive the number and kind of shares which, if the RJW Warrants had been exercised immediately prior to such time, the holder would have owned upon such exercise and been entitled to receive.are summarized below:

 

  Three Months Ended September 30,
   2021   2020 
Revenue $—  $— 
Cost of revenue  —   — 
Gross Profit  —   — 
Operating expenses  —   — 
Loss from operations  —   — 
Other income (expenses)        
Net income $—  $— 

The RWJ Note accrues interest at


GBT Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

For the rate of 3.5% interest per annumNine Months Ended September 30, 2021 and is payable in full on December 31, 2019. The Company may prepay this note at any time without penalty.2020 (unaudited)

 

The Company incorporated a wholly-owned subsidiary, UGopherServices Corp., to operate the acquired assets.

The Company entered into this Purchase Agreement to acquire terminals in approximately 15,000 locations by which the Company will deploy its technology.

A summary of the purchase price and the purchase price allocations at fair value is below.

Purchase price    
     
Cash(1) $400,000 
5,000,000 shares of common stock(2)  1,850,000 
Secured promissory note  2,600,000 
9,000,000 warrants(3)  3,310,819 
     
  $8,160,819 
     
Allocation of purchase price    
Inventory $398,151 
Property and equipment  210,200 
Leased locations  7,000,000 
     
Goodwill  950,619 
Assumed liabilities  (398,151)
Purchase price $8,160,819 

F-14

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) – the $400,000 cash was advanced to the Company by Guardian LLC and is included in accounts payable and accrued expenses on the accompanying consolidated balance sheet.

(2) – the fair value of the common stock was calculated based on the closing market price of the Company’s common stock at the date of acquisition.

(3) — the fair value of the 9,000,000 warrants was determined using the Black-Scholes option pricing model with the following assumptions:

●Expected life of 5.0 years
●Volatility of 250%;
●Dividend yield of 0%;
●Risk free interest rate of 1.73%

The revenue from the acquisition of the RWJ assets included in the results of operations from the date of acquisition on to December 31, 2017 was $9,012,354.

The unaudited pro forma information below present statement of operations data as if the acquisition of the RWJ assets took place on January 1, 2016.

  Years Ended December 31, 
  2017  2016 
Sales $47,072,430   67,960,512 
Cost of goods sold  44,750,993   64,603,185 
Gross profit  2,321,437   3,357,327 
Operating expenses  10,475,603   6,099,401 
Loss from operations  (8,154,166)  (2,742,074)
Net loss  (11,158,375)  (2,996,206)
Loss per share  (0.22)  (0.12)
  Nine months Ended September 30,
  2021 2020
Revenue $—  $8,291,842 
Cost of revenue  —   7,900,122 
Gross Profit  —   391,720 
Operating expenses  —   408,644 
Loss from operations  —   (16,924)
Other income (expenses)  —   — 
Net loss $—  $(16,924)

 

Note 4 - Prepaid Expenses

On August 26, 2015, the Company finalized a consulting agreement that it entered into on August 11, 2015 with Michael Korsunsky (“Consultant”) pursuant to which Consultant was engaged by the Company to (i) provide introductions to strategic business alliances, (ii) advise on exposure and risk– Investment in the operation of smart phone applications and (iii) advise on market fluctuations within the different categories of the smart phone application delivery services sector, in consideration of 100,000 restricted shares of common stock of the Company, which shares were issued on or around August 26, 2015. On or around November 17, 2016, the Company filed a complaint against Consultant in Superior Court of the State of California, County of Riverside, for Breach of Contract and Breach of Implied Covenant of Good Faith and Fair Dealing. The Consultant been served, but to date has not filed a defense.

In June 2016, the Company recognized a prepaid expense for filing fees of $10,498. These prepaid fees are being amortized at $1,750 per quarter. The balance at December 31, 2016 was $5,248.

F-15

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 5 - Property and Equipment, Net

Property and equipment consisted of the following as of December 31, 2017 and 2016:

  2017  2016 
       
Furniture $33,740  $9,431 
Computers and equipment  22,816   12,539 
POSA machines  253,965   — 
   310,521   21,970 
Less accumulated depreciation  (47,439)  (21,271)
Property and equipment, net $263,082  $699 

Depreciation expense for the year ended December 31, 2017 and 2016 was $26,169 and $1,347, respectively.

Note 6 – Intangible Assets, Net

The following are the details of intangible assets at December 31, 2017 and 2016:

  2017  2016 
Leased locations $7,000,000   — 
   7,000,000   — 
Less accumulated amortization  (333,333)  — 
Intangible assets, net $6,666,667   — 

All of the above intangible assets are being amortized over 84 months.

Amortization expense for the years ended December 31, 2017 and 2016 was $333,333 and $0, respectively.

The estimated future amortization expense related to intangible assets are as follows:

Years ending
December 31,		      
2018 $1,000,000     
2019  1,000,000     
2020  1,000,000     
2021  1,000,000     
2022  1,000,000     
Thereafter  1,666,667     
  $6,666,667     

F-16

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 7 - Other AssetsSurge Holdings, Inc.

 

Exclusive License agreements

The Company is the exclusive license holder for certain intellectual property relating to the GopherInsight technology. The Company has assigned all its rights as they relate to the Guardian Patch technology (the “Patch”) to the LLC as consideration for the JV. Dr. Rittman’s partners have commenced development of the product via a private LLC that has been incorporated under the name “Guardian Patch LLC” (the “LLC”). Certain private investors will provide all initial funding to the Company through the LLC for product development. The LLC will fund the development, and the Company will provide IT services through Dr. Rittman for a monthly fee. Dr. Rittman has signed an amendment employment agreement with the Company. As the Company is not a member of the LLC, the Company and the LLC have formed a Joint Venture (“JV”) for the purposes of developing and marketing the Patch. The LLC will be responsible for funding the development of the Patch. The Company will not need be required to invest funds in said JV. The Company responsibilities will be limited to the marketing of the product, where the marketing budget will be funded by the LLC. Moreover, the LLC has committed to provide the Company with working capital as needed. The Company has assigned and pledged to the LLC all its license derivative rights as they pertain to the Patch only. Dr. Rittman may be offered membership rights at some point in the future with the LLC, with which the Company is a JV partner, but is not equity member. The Company has agreed with the LLC that the same JV principles of the Company and the LLC for the Patch will apply for the other two products (Epsilon and Puzpix) which will be vested under designated LLCs that will be incorporated by the LLC members. The other asset at December 31, 2016 was $7,500.

Other assets at December 31, 2017 of $1,979 is a deposit.

Note 8 – Convertible Notes Payable

Convertible notes payable at December 31, 2017 and 2016 consist of the following:

  2017  2016 
Convertible note payable to PTPI. $—  $53,852 
Convertible notes payable to Power Up  80,000   — 
Total convertible notes payable  80,000   53,852 
Unamortized debt discount  (54,377)  — 
Convertible notes payable $25,623  $53,852 

PTPISurge Holdings, Inc.

 

On January 22, 2015,September 30, 2019, the Company entered into an ExchangeAsset Purchase Agreement with Stanley Hills, the original holder (the “Holder”Surge Holdings, Inc., a Nevada corporation (“SURG”) of the PTPI Note pursuant to which PTPI Note exchanged $75,273the Company agreed to sell and assign to SURG, all the assets and certain specified liabilities, of its ECS Prepaid, Electronic Check Services and Central State Legal Services businesses in debt intoconsideration of $5,000,000 to be paid through the issuance of 3,333,333 shares of SURG’s common stock and a 10% Convertible Debentureconvertible promissory note in favor of the Company in the principal amount of $75,273$4,000,000 (the “Note”“SURG Note”). The PTPI Note matured January 21, 2017 (the “Maturity Date”) and interest associated with the Note I Note is 10% per annum, which is payable on the Maturity Date. The PTPI Note is, convertible into SURG’s shares of common stock following the six-month anniversary of the Company, at the option of Note I, at a fixedissuance date. The conversion price of $0.00752734.

the SURG Note is the volume weighted-average price of SURG’s common stock over the 20 trading days prior to the conversion; provided, however, the conversion price shall never be lower than $0.10 or higher than $0.70. The HolderCompany has agreed to restrict its ability to convert the PTPISURG Note and receive shares of common stock such that the number of shares of common stock held by it in the aggregate and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. In addition,The SURG Note is payable by SURG to the Company on March 2, 2015,the 18-month anniversary of the issuance date and does not bear interest.

On or about June 23, 2020, the Company and AltCorp entered into agreements with SURG and Glen Eagles Acquisition LP (“Glen”) regarding the Holder amended that certain 10% Convertible Debenture (the “PTPI$4,000,000 SURG Note I Debenture”for which the SURG Note has been converted in full into 5,500,000 restricted stock of SURG (“Issued Shares”) which debt underlying the PTPI Note I Debenture was initially incurred on October 6, 2009 and exchangedalong with an additional 22,000,000 SURG shares reserved for the Note I Debenturebenefit of the Company’s subsidiary as a true up of shares to secure the value of the Issued Shares as $2,750,000. Additional shares will be issued if the original 5,500,000 are worth less than $2,750,000 on January 19, 2014.June 23, 2021. The partiesCompany agreed that the conversion priceIssued Shares will be restricted for a year. As a result of the exchange of $2,750,000 of the SURG Note for 5,500,000 shares of SURG common stock, the Company recognized a loss of $1,430,000 during the nine months ended September 30, 2020. On June 24, 2021, in accordance with the PTPI Note I Debenture wouldAgreement entered June 23, 2020, the Company together with AltCorp, via registered mail to SURG and its transfer agent, sent a demand for a true-up share in an additional amount of 14,870,370 SURG shares as calculated per the Agreement. As of September 30, 2021, SURG’s transfer agent did not be impacted byanswer to the 1:1,000 stock split implementedCompany request.

Glen converted in full its $1,000,000 convertible note that was issued by the Company on February 24, 2015 and will remain $0.0075273.July 8, 2019, plus $50,000 of accrued interest into $1,050,000 of a SURG Note via an assignment of a portion ($1,050,000 of a $4,000,000 face value) of the $4,000,000 SURG Note. In addition, the Company entered into a consulting agreement with Glen for which the Company shall pay to Glen $200,000 via an assignment of a portion ($200,000 of a $4,000,000 face value) of the $4,000,000 SURG Note.

 

On or about June 23, 2020, Stanley Hills LLC (“Stanley”) which holds a pledge of 3,333,333 shares of SURG common stock via its manager/member (“Stanley’s Member”), acting as an agent for the Company, entered into an agreement with SURG, its transfer agent and an escrow officer for which it was agreed that 3,333,333 SURG shares will be cancelled for consideration of up to $700,000. Between sales to SURG and to a third party, the amount of $575,170 was received into a lawyer’s trust account for the benefit of AltCorp, and 3,333,333 of SURG shares have been sent for cancelation. The lawyer’s trust account balance was $178,016 and $402,532 as of September 30, 2021 and December 31, 2020, respectively.

On August 12, 2020, the Company is under defaultand its subsidiary, AltCorp, entered into a new pledge agreement with Stanley, where 5,500,000 SURG shares been pledged to Stanley to secure the debt payable by the Company to Stanley as well as mitigate the damages allegedly created by SURG.


GBT Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine Months Ended September 30, 2021 and 2020 (unaudited)

On November 4, 2020, Altcorp and Stanley filed an Ex Parte Motion in the District Court, Clark County, Nevada (Case No: A-20-823039-B, in Dep No: 43) to appoint receiver and issue a temporary restraining Order against SURG and its transfer agent for alleged defaults on prior exchange agreement. As court entered an order granting in part AltCorp’s motion, the parties entered on December 4, 2020 an interim agreement which set the material terms of the settlement. A final settlement was entered into as per the terms of the PTPI Note, as at maturityinterim agreement entered on January 1, 2021.

On January 1, 2021 SURG, AltCorp and Stanley entered into a Mutual Release and Settlement Agreement (“Settlement Agreement”). Pursuant to the terms of the Settlement Agreement, SURG agreed to amend the AltCorp Exchange Agreement where SURG acknowledged a debt of $3,300,000 (the “Debt”) to be paid via 33 monthly payments of $100,000 payable in January 2017, the Company did not have sufficient free cash to pay off the note. The Company is in negotiations with the Holder in good faith to resolve the situation. The Company cannot predict the result of such negotiations. The balance at December 31, 2016 was $53,852, which included accrued interest of $13,112, and was net of debt discount. As of December 29, 2017, the entire note balance and accrued interest were converted into shares of common stock of SURG at a per share price equal the volume weighted average price of SURG’s common stock during the ten (10) trading days immediately preceding the issuance. At the end of the 33rd month, if AltCorp has not realized gross, pre-tax proceeds at least equal to the amount of the Debt, SURG shall transfer to AltCorp and/or its designee additional shares of SURG’s common stock necessary to satisfy the Debt. As of September 30, 2021, SURG has made nine payments per the settlement agreements and there are no further obligations owedhas recognized other income of $900,000. The Company recognizes as other income, the $100,000 monthly installment payments as received. The Company has recorded the amount due from SURG of $2,400,000 at September 30, 2021 as other receivable ($1,200,000 as current and $1,200,000 as non-current) with respect to such note.

F-17

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSa corresponding deferred judgment award liability of $2,400,000.

 

Guardian Patch I LLCThe shares received for the eight-monthly installments in 2021 (with the September payment of $100,000 being paid in cash) were transferred/sold by AltCorp to Stanley as payment on its outstanding balances at were valued at $800,000 (See Note 7). On June 24, 2021, the Company’s investment in 5,500,000 shares of SURG shares were transferred/sold to IGOR 1 Corp. (“IGOR 1”) as payment on its outstanding balances. The shares were valued at $660,000 (See Note 7).

 

Guardian Patch I LLC (the “Note Holder”) understands that the Company may be seeking additional capital or funding and believes that the lock-up and leak-out restrictions and provisions, as further described herein, will improve the Company’s prospects for obtaining additional financing and thus improving the overall financial condition of the Company. As such on or around June 26, 2017 the Company and the Note Holder entered into a lock-up and leak-out:5 – Impaired Investments

 

1.Subject to the terms of this Agreement, the Note Holder agrees that for a period of nine (9) months from the Effective Date of this Agreement (the “Lock-Up Period”), the Note Holder shall not convert the Note into Common Stock for safe keeping or, directly or indirectly, sell, offer to sell, contract to sell, assign, pledge, hypothecate, encumber or otherwise transfer, or enter into any contract, option or other arrangement or understanding with respect to the sale, assignment, pledge or other disposition of (each a “Transfer”) any beneficial rights with respect to the Note.

Investment in GBT Technologies, S.A.

2.Leak-Out Provisions. Subject to the terms of this Agreement, the Note Holder agrees that for a period beginning immediately upon the end of the Lock-Up Period and ending fifteen (15) months from the Effective Date of this Agreement (the “Leak-Out Period”), the Note Holder shall have the right to sell the lessor of (i) five (5%) percent of the previous day’s traded volume of the Company’s Common Stock, or (ii) Five Thousand (5,000) shares of the Common Stock on a per daily basis.

 

On May 23, 2017,June 17, 2019, the Company, AltCorp Trading LLC, a Costa Rica company and a wholly-owned subsidiary of the Company (“AltCorp”), GBT Technologies, S.A., a Costa Rica company (“GBT-CR”) and Pablo Gonzalez, a shareholder’s representative of GBT-CR (“Gonzalez”), entered into a conversion agreement with the Note Holderand closed an Exchange Agreement (the “GBT Exchange Agreement”) pursuant to which the parties agreed to convertexchanged certain securities. In accordance with the amounts provided by the Note Holder to the Company, previously recorded in accounts payableExchange Agreement, AltCorp acquired 625,000 shares of GBT-CR representing 25% of its issued and accrued expenses, into a convertible note payable in the amount of $660,132.

The note bears interest at 6%, matures May 30, 2019 and is convertible into the Company’s common stock, at the Note Holder’s option, at a conversion price equal to 50% of the lowest closing price for the common stock on the principal market during the ten consecutive trading days immediately preceding the conversion date, which, in no event, will be less than $0.01 per share. The Note Holder has agreed to restrict their ability to convert the note and receiveoutstanding shares of common stock from Gonzalez in exchange for the issuance of 20,000 shares of Series H Convertible Preferred Stock of the Company and a Convertible Note in the principal amount of $10,000,000 issued by the Company (the “Gopher Convertible Note”) as well as the transfer and assignment of a Promissory Note payable by Gopher Protocol Costa Rica Sociedad De Responsabilidad Limitada to the Company in the principal amount of $5,000,000 dated February 6, 2019 (of which the underlying security for this Promissory Note is 30,000,000 restricted shares of common stock of Mobiquity Technologies, Inc. (“Mobiquity”) and 60,000,000 restricted shares of common stock of Mobiquity.

The Gopher Convertible Note bears interest of 6% per annum and is payable at maturity on December 31, 2021. At the election of Gonzalez, the Gopher Convertible Note can be converted into a maximum of 20,000 shares of Series H Preferred Stock. Each share of Series H Preferred Stock is convertible, at the option of the holder but subject to the Company increasing its authorized shares of common stock, into such that the number of shares of common stock heldof the Company as determined by them individing the aggregate and their affiliates after suchStated Value ($500 per share) by the conversion or exerciseprice ($500.00 per share). The Series H Preferred Stock has no liquidation preference, does not exceed 4.9%pay dividends and the holder of Series H Preferred Stock shall be entitled to one vote for each share of common stock that the Series H Preferred Stock may be convertible into. Upon conversion of the then issuedGopher Convertible Note and the 20,000 shares of Series H Preferred Stock, Gonzalez would be entitled to less than 50% of the resulting outstanding shares of common stock.stock of the Company following conversion in full and, as a result, such transaction is not considered a change of control.

 

On May 19, 2021, the Company, Gonzalez, GBTCR and IGOR 1 Corp entered into a Mutual Release and Settlement Agreement and Irrevocable Assignment of Note Balance Principal and Accrued Interest (the “Gonzalez Agreement”). Pursuant to the Gonzalez Agreement, without any party admission of liability and to avoid litigation, the parties has agreed to (i) extend the GBT Convertible Note maturity date to December 29, 2017, all31,2022, (ii) amend the principalGBT Convertible Note terms to include a beneficial ownership blocker of 4.99% and accrued interest were converted into 2,000,000 sharea modified conversion feature to the GBT Convertible Note with 15% discount to the market price during the 20 trading day period ending on the latest complete trading day prior to the conversion date and (iii) provided for an assignment of Series G preferred stock.the GBT Convertible Note by Gonzalez to a third party.


GBT Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine Months Ended September 30, 2021 and 2020 (unaudited)

 

Crown Bridge Partners, LLCGBT-CR is in the business of the strategic management of BPO (Business Process Outsourcing) digital communications processing for enterprises and startups, distributed ledger technology development, AI development and fintech software development and applications.

The Company accounted for its investment in GBT-CR using the equity method of accounting; however, in 2020, the Company owned less than 20% of and exercised no control over GBT-CR; therefore, this investment is currently accounted for under the cost method. Moreover, on March 19, 2020, California Governor Gavin Newsom issued a stay at home order to protect the health and well-being of all Californians and to establish consistency across the state in order to slow the spread of COVID-19. California was therefore under strict quarantine control and travel has been severely restricted, resulting in disruptions to work, communications, and access to files (due to limited access to facilities). The stay at home order was lifted in California only on January 25, 2021. As such, the Company was unable to access or to contact GBT-CR on an on-going basis, and cannot get information about GBT-CR.

At December 31, 2019, the Company evaluated the carrying amount of this equity investment and determined that this investment was fully impaired and as a result an impairment charge of $30,731,534 was taken. The carrying amount of this investment at September 30, 2021 and December 2020, was $0 and $0, respectively.

Investment in Joint Venture

 

On June 9, 2017,March 6, 2020, the Company through Greenwich, entered into a securities purchase agreementJoint Venture and Territorial License Agreement (the “Tokenize Agreement”) with Crown Bridge Partners, LLCTokenize-It, S.A. (“CBP”Tokenize”), providing for the purchase of two convertible notes payable in the aggregate amount of $100,000 with the first note being in the amount of $50,000 and the second note being in the amount of $50,000 each accruing interest at 8% per annum and due on June 9, 2018. The first note was funded in cash. With respect to second note CBP issuedwhich is owned by a Costa Rica Trust represented by Pablo Gonzalez (“Gonzalez”). Gonzalez also represents Gonzalez Costa Rica Trust, which holds a note payable to the Company in the amount of $50,000 to offset second note. The funding of second note is subject to certain conditions. CBP is required to pay the principal amount of $10,000,000 and is also a shareholder of the note payableCompany. Under the Tokenize Agreement, the parties formed GBT Tokenize Corp., a Nevada corporation (“GBT Tokenize”). The purpose of GBT Tokenize is to develop, maintain and support source codes for its proprietary technologies including advanced mobile chip technologies, tracking, radio technologies, AI core engine, electronic design automation, mesh, games, data storage, networking, IT services, business process outsourcing development services, customer service, technical support and quality assurance for business, customizable and dedicated inbound and outbound calls solutions, as well as digital communications processing for enterprises and startups (“Technology Portfolio”), throughout the State of California. Upon generating any revenue from the Technology Portfolio, the Joint Venture will earn the first right of refusal for other territories.

Tokenize shall contribute the services and resources for the development of the Technology Portfolio to GBT Tokenize. The Company shall contribute 2,000,000 shares of common stock of the Company in cash(“GBT Shares”) to GBT Tokenize. Tokenize and in full prior to executing any conversions under second note.the Company will each own 50% of GBT Tokenize. The shares were valued at $5,500,000.

 

The CBP notesIn addition, GBT Tokenize and Gonzalez entered into a Consulting Agreement in which Gonzalez is engaged to provide services in consideration of $33,333 per month payable quarterly which may be converted by CBP at any time intopaid in shares of Company’s common stock calculated atby the time of conversion, except as set forth above, at a conversion price equal to 55%amount owed divided by the Company’s 10-day VWAP. Gonzalez will provide services in connection with the development of the averagebusiness as well as GBT Tokenize’s capital raising efforts. The term of the three lowest trading pricesConsulting Agreement is two years. During the nine months ended September 30, 2021, Gonzalez assigned all his accrued balances of $424,731 to Stanley Hills in a private transaction that the Company is not part to. The closing of the Tokenize Agreement occurred on March 9, 2020.

Through this Joint Venture the parties commenced development of an intelligent human vital signs’ device, which we currently refer to as the qTerm. The platform is an expansion of the existing license agreement with GBT Tokenize Corp., which provided GBT Tokenize Corp. with an exclusive territory of California to develop certain of the Company’s common stock as reported ontechnology. As the National Quotations Bureau OTC Markets whichnature of the platform cannot be restricted only to California, the Company’s joint venture GBT Tokenize Corp. will be compensated with additional two hundred million shares are traded or any exchange upon whichof the common stock may be traded in the future,Company to strengthen its funding, subject to board approval. A provisional patent application for the twenty (20) prior trading days includingqTerm Medical Device was filed on March 30, 2020 with the day upon which a notice of conversionUSPTO. The application has been assigned serial number 63001564. The Joint Venture completed successfully the first prototype. There is received by the Company. In the eventno guarantee that the Company experiences a DTC “Chill” on its shareswill be successful in researching, developing or implementing this product into the market price is below $0.25, the conversion price shall be decreasedmarket. In order to 45%. Ifsuccessfully implement this concept, the Company failswill need to maintainraise adequate capital to support its status as “DTC Eligible” forresearch and, if successfully researched, developed and granted regulatory approval, the Company would need to enter into a strategic relationship with a third party that has experience in manufacturing, selling and distributing this product. There is no guarantee that the Company will be successful in any reason, or if the conversion price is equal to or lower than $0.01, then an additional 15% discount shall be factored into the conversion price until the CBP notes are no longer outstanding.all of these critical steps.

 

F-18

GBT Technologies, Inc.

GOPHER PROTOCOL, INC.Notes to Condensed Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSFor the Nine Months Ended September 30, 2021 and 2020 (unaudited)

 

During the first nine months, the CBP notes is in effect,At March 31, 2020, the Company may redeemevaluated the CBP notes by paying tocarrying amount of this joint venture investment and determined that this investment was fully impaired and as a result an impairment charge of $5,500,000 was taken. At September 30, 2021, the Company evaluated the carrying amount equal to 135% of this joint venture investment and determined that this investment was fully impaired and as a result an impairment charge of $15,400,000 was taken.

Although the faceinvestment was impaired, the product development is still ongoing. The carrying amount plus any accrued interest during the first 90 days after issuanceof this investment at September 30, 2021 and 150% of the face amount plus any accrued interest from day 91 through day 180 after issuance. The CBP Notes may not be prepaid after the six-month anniversary.December 2020, was $0 and $0, respectively.

 

On October 23, 2017, Guardian Patch, LLC purchasedMay 28, 2021, the CBP first note from CBP. Further, on October 23, 2017,parties agreed to amend the Company and CBP entered into a RescissionTokenize Agreement wherebyto expand territory granted for the CBP Back End Note and the Secured Note were cancelled and rescinded. On November 30, 2017, Guardian Patch LLC converted all principal, interested and penalties owedTechnology Portfolio under the CBP First Note into 361,640license to GBT Tokenize to include the entire continental United States. The Company has further agreed to issue GBT Tokenize an additional 14,000,000 shares of common stock of the Company. There are no further obligations owed with respect to such notes.

Eagle Equities LLC

On June 8, 2017, the Company entered into a securities purchase agreement with Eagle Equities, LLC (“Eagle”), providing for the purchase of two convertible notes payable in the aggregate amount of $100,000 with the first note being in the amount of $50,000 and the second note being in the amount of $50,000 each accruing interestThe shares were valued at 8% per annum and due on June 8, 2018. The first note was funded in cash. With respect to second note, Eagle issued a note payable to the Company in the amount of $50,000 to offset second note. The funding of second note is subject to certain conditions. Eagle is required to pay the principal amount of the note payable to the Company in cash and in full prior to executing any conversions under second note.

Eagle may convert the outstanding principal on the Eagle notes into shares of the Company’s common stock at the conversion price per share equal to 55% of the lowest daily closing bid with a twenty (20) day look back immediately preceding and including the date of conversion. In the event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 45% instead of 55% while that “Chill” is in effect.$15,400,000.

 

The Company has the rightpledged its 50% ownership in GBT Tokenize and its 100% ownership of Greenwich to repay the Eagle notes at any time during the first nine monthsTokenize to secure its Technology Portfolio investment. The Company shall appoint two directors and Tokenize shall appoint one director of the notes at a rate of 130% of the unpaid principal amount during the first 90 days, 135% of the unpaid principal amount between days 91 and 120, and 140% of the unpaid principal amount between days 121 and 180. The Eagle Notes may not be prepaid after the 180 day.

On December 1, 2017, the Company and Eagle entered into a Rescission Agreement pursuant to which the Eagle Equities Note 2 and the Eagle Equities Payment Note were cancelled and rescinded. Further, as of December 1, 2017, the Company has paid off in full all principal, interest and penalties with respect to the Eagle Equities Note 1 and there are no further obligations owed with respect to such note.GBT Tokenize.

 

On September 13, 2017,30, 2021 Tokenize, in an agreement that the Company entered intois not a securities purchaseparty to, irrevocably assigned all its rights in GBT Tokenize, including all its rights per the Tokenize Agreement, The Gonzalez Consulting agreement with Eagle, providing forand the purchasepledge agreement, to the benefit of two convertibleMagic International Argentina FC, S.L a third party (“Magic”). On June 30, 2021 Magic irrevocably assigned to Stanley Hills, LLC its credit balance accrued until June 30, 2021 per the consulting agreement.

Note 6 – Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses at September 30, 2021 and December 31, 2020 consist of the following:

  September 30, December 31,
  2021 2020
Accounts payable $1,256,042  $1,045,778 
Accrued interest on notes  2,522,147   1,876,005 
Deposits  249,384   249,675 
Other  245,089   182,200 
  $4,272,662  $3,353,658 

Note 7 – Convertible Notes Payable

Convertible notes payable in the aggregate amount of $100,000 with the first note being in the amount of $50,000at September 30, 2021 and the second note being in the amount of $50,000 each accruing interest at 8% per annum and due on September 18, 2018. The first note was funded in cash. With respect to second note, Eagle issued a note payable to the Company in the amount of $50,000 to offset second note. The funding of second note is subject to certain conditions. Eagle is required to pay the principal amountDecember 31, 2020 consist of the note payable to the Company in cash and in full prior to executing any conversions under second note.following:

 

Eagle may convert the outstanding principal on the Eagle notes into shares of the Company’s common stock at the conversion price per share equal to 55% of the lowest daily closing bid with a twenty (20) day look back immediately preceding and including the date of conversion. In the event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 45% instead of 55% while that “Chill” is in effect.

The Company has the right to repay the Eagle notes at any time during the first nine months of the notes at a rate of 130% of the unpaid principal amount during the first 90 days, 135% of the unpaid principal amount between days 91 and 120, and 140% of the unpaid principal amount between days 121 and 180. The Eagle Notes may not be prepaid after the 180 day.

  September 30, December 31,
  2021 2020
Convertible note payable to GBT Technologies (IGOR 1) $8,255,400  $10,000,000 
Convertible notes payable to Redstart Holdings  350,700   347,400 
Convertible note payable to Stanley Hills  448,121   1,009,469 
Convertible note payable to Iliad  —   2,431,841 
Total convertible notes payable  9,054,221   13,788,710 
Unamortized debt discount  (316,372)  (362,004)
Convertible notes payable  8,737,849   13,426,706 
Less current portion  (482,449)  (13,426,706)
Convertible notes payable, long-term portion $8,255,400  $— 

 

F-19

GBT Technologies, Inc.

GOPHER PROTOCOL, INC.Notes to Condensed Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On December 29, 2017, Eagle convertedFor the note into 503,726 shares of common stockNine Months Ended September 30, 2021 and there are no further obligations owed with respect to such note.2020 (unaudited)

 

JSJ Investments Inc.$10,000,000 for GBT Technologies S. A. acquisition

 

On June 8, 2017,In accordance with the Company closed a financing with JSJ Investments Inc. (“JSJ”), wherebyacquisition of GBT-CR the Company issued a convertible note payable dated June 7, 2017 in the aggregate principal amount of $50,000 with$10,000,000. The convertible note bears interest accruing at 8%of 6% per annum and is duepayable at maturity on March 7, 2018.December 31, 2021. At the election of the holder, the convertible note can be converted into a maximum of 20,000 shares of Series H Preferred Stock. Each share of Series H Preferred Stock is convertible, at the option of the holder but subject to the Company increasing its authorized shares of common stock, into such number of shares of common stock of the Company as determined by dividing the Stated Value ($500 per share) by the conversion price ($500.00 per share).

 

JSJ may convertedOn May 19, 2021, the Company, Gonzalez, GBT-CR and IGOR 1 Corp entered into a Mutual Release and Settlement Agreement and Irrevocable Assignment of outstanding balance plus accrued interest (the “Gonzalez Agreement”). Pursuant to the Gonzalez Agreement, without any party admission of liability and to avoid litigation, the parties has agreed to (i) extend the GBT convertible note at any time into sharesmaturity date to December 31, 2022, (ii) amend the GBT convertible note terms to include a beneficial ownership blocker of Company’s common stock at4.99% and a price equal a 45%modified conversion feature to the GBT convertible note with 15% discount to the lowestmarket price during the 20 trading pricesday period ending on the latest complete trading day prior to the conversion date and (iii) provided for an assignment of the GBT convertible note by Gonzalez to a third party. As a result of the change in terms of this convertible note, the Company took a charge related to the modification of debt of $13,777,480 during the nine months ended September 30, 2021.

During the nine months ended September 30, 2021, IGOR 1 converted $1,084,600 of the convertible note into 1,600,000 shares of the Company’s common stock as reportedstock. Also, on the OTCQB for the 20 prior trading days including the day upon which a notice of conversion is received byJune 24, 2021, the Company or its transfer agent. The Company may pay the JSJtransferred 5,500,000 SURG shares received as repayment of $660,000 of this convertible note (See Note in full, together with any and all accrued and unpaid interest, plus any applicable pre-payment premium at any time on or prior to the date which occurs 180 days after the issuance date hereof. Until the 90th day after the issuance date the Company may pay the principal at a cash redemption premium of 135%, in addition to outstanding interest, without the note holder’s consent. From the 91st day though day 120, the amount to be repaid is 140% and from day 121 through the 180th day, the amount to be repaid is 150%4).

Redstart Holdings Corp.

Paid Off Notes/Converted Notes

 

On June 29, 2017,August 4, 2020, the Company closed another financing with JSJ for $50,000 with the exact terms and the JSJ note describe above except the note is due on March 29, 2018.

As of December 1, 2017, the Company has paid off in full all principal, interest and penalties with respect to the JSJ Note and there are no further obligations owed with respect to such note.

Power Up Lending Group Ltd.

On October 2, 2017, Gopher Protocol Inc. (the “Company”) entered into a Securities Purchase Agreement with Power Up Lending Group Ltd.Redstart Holdings Corp., an accredited investor (“Power Up”Redstart”) pursuant to which the Company issued to Power UpRedstart a Convertible Promissory Note (the “Power Note”“Redstart Note No. 1”) in the aggregate principal amount of $80,000.$153,600 for a purchase price of $128,000. The PowerRedstart Note No. 1 has a maturity date of July 10, 2018November 3, 2021 and the Company has agreed to pay interest on the unpaid principal balance of the PowerRedstart Note No. 1 at the rate of tensix percent (10%(6%) per annum from the date on which the PowerRedstart Note No. 1 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the PowerRedstart Note No. 1, provided it makes a payment including a prepayment to Power UpRedstart as set forth in the Power Note.Redstart Note No. 1. The transactions described above closed on October 4, 2017.

August 5, 2020. The outstanding principal amount of the PowerRedstart Note isconvertible at any time and from timeNo. 1 may not be converted prior to time at the election of Power Up during the period beginning on the date that is 180 days following the Issue DateDate. Following the 180th day, Redstart may convert the Redstart Note No. 1 into shares ofthe Company’s common stockat a conversion price equal to 61%85% of the lowest trading price with a 15 day20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Power Note)Redstart Note No. 1), the PowerRedstart Note No. 1 shall become immediately due and payable and the Company shall pay to Power Up,Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Power Note.

In no event shall Power Up be allowed to effect a conversion if such conversion, along with all otherRedstart Note No. 1. During the nine months ended September 30, 2021, the entire amount of Note No. 1 of $153,600 plus accrued interest was converted into 226,532 shares of Company common stock beneficially owned by Power Up and its affiliates would exceed 4.9% of the outstanding shares of the common stock of the Company.

Labrys Fund, LPstock.

 

On October 2, 2017, Gopher Protocol Inc. (the “Company”)September 15, 2020, the Company entered into a Securities Purchase Agreement with Labrys Fund, LP, an accredited investor (“Labrys”)Redstart pursuant to which the Company issued to LabrysRedstart a Convertible Promissory Note (the “Labrys Note”“Redstart Note No. 2”) in the aggregate principal amount of $110,000.$93,600 for a purchase price of $78,000. The LabrysRedstart Note No. 2 has a maturity date of July 26, 2018September 15, 2021 and the Company has agreed to pay interest on the unpaid principal balance of the LabrysRedstart Note No. 2 at the rate of tensix percent (10%(6%) per annum from the date on which the LabrysRedstart Note No. 2 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the LabrysRedstart Note No. 2, provided it makes a payment including a prepayment to Labrys at a premiumRedstart as set forth in the Labrys Note.Redstart Note No. 2. The transactions described above closed on October 26, 2017.

F-20

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 16, 2020. The outstanding principal amount of the LabrysRedstart Note No. 2 may not be converted prior to the period beginning on the date that is convertible at any time and from time to time at180 days following the election of LabrysIssue Date. Following the 180th day, Redstart may convert the Redstart Note No. 2 into shares of the Company’s common stock at a conversion price equal to 57%85% of the lowest trading price with a 20 day20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Labrys Note)Redstart Note No. 2), the LabrysRedstart Note No. 2 shall become immediately due and payable and the Company shall pay to Labrys,Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Labrys Note.Redstart Note No. 2. During the nine months ended September 30, 2021, the entire amount of Note No. 2 of $93,600 plus accrued interest was converted into 89,169 shares of common stock.


GBT Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine Months Ended September 30, 2021 and 2020 (unaudited)

 

In no eventOn December 9, 2020, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 3”) in the aggregate principal amount of $100,200 for a purchase price of $83,500. The Redstart Note No. 3 has a maturity date of December 9, 2021 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 3 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 3 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall Labryshave the right to prepay the Redstart Note No. 3, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 3. The transactions described above closed on December 11, 2020. The outstanding principal amount of the Redstart Note No. 3 may not be allowedconverted prior to effectthe period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 3 into shares of the Company’s common stock at a conversion if suchprice equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion alongprice will vary based on the Company’s stock price, the beneficial conversion feature associated with all otherthis note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 3), the Redstart Note No. 3 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 3. During the nine months ended September 30, 2021, the entire amount of Note No. 3 of $100,200 plus accrued interest was converted into 135,582 shares of common stock.

On February 10, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 4”) in the aggregate principal amount of $184,200 for a purchase price of $153,500. The Redstart Note No. 4 has a maturity date of February 5, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 4 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 4 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 4, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 4. The transactions described above closed on February 10, 2021. The outstanding principal amount of the Redstart Note No. 4 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 4 into shares of the Company’s common stock beneficially ownedat a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 4), the Redstart Note No. 4 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 4. During the nine months ended September 30, 2021, the entire amount of Redstart Note No. 4 of $184,200 plus accrued interest was converted into 386,146 shares of common stock.

On March 15, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 5”) in the aggregate principal amount of $106,200 for a purchase price of $88,500. The Redstart Note No. 5 has a maturity date of June 15, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 5 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 5 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by Labrysprepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 5, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 5. The transactions described above closed on March 17, 2021. The outstanding principal amount of the Redstart Note No. 5 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 5 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 5), the Redstart Note No. 5 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 5. During the nine months ended September 30, 2021, the entire amount of Redstart Note No. 5 of $106,200 plus accrued interest was converted into 317,837 shares of common stock.


GBT Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine Months Ended September 30, 2021 and 2020 (unaudited)

Outstanding Notes

On May 26, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 6”) in the aggregate principal amount of $106,200 for a purchase price of $88,500. The Redstart Note No. 6 has a maturity date of August 26, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 6 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 6 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 6, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 6. The transactions described above closed on May 28, 2021. The outstanding principal amount of the Redstart Note No. 6 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 6 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 6), the Redstart Note No. 6 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 6.

On September 21, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 7”) in the aggregate principal amount of $244,500 for a purchase price of $203,750. The Redstart Note No. 7 has a maturity date of December 22, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 7 at the rate of two and a half percent (2.5%) per annum from the date on which the Redstart Note No. 7 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 7, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 7. The transactions described above closed on September 28, 2021. The outstanding principal amount of the Redstart Note No. 7 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 7 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 7), the Redstart Note No. 7 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 7.

Stanley Hills LLC

The Company entered into a series of loan agreements with Stanley Hills LLC (“Stanley”) pursuant to which it received more than $1,000,000 in loans (the “Debt”) since May 2019 up to December 2019. On February 26, 2020, in order to induce Stanley to continue to provide funding, the Company and Stanley entered into a letter agreement providing that the current note payable balance due to Stanley in the amount of $1,214,900 may be converted into shares of common stock of the Company at a conversion price equal to 85% multiplied by the lowest one trading price for the common stock during the 20 trading day period ending on the latest complete trading day prior to the conversion date. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. Stanley has agreed to restrict its ability to convert the Debt and receive shares of common stock such that the number of shares of common stock held by it and its affiliates wouldafter such conversion or exercise does not exceed 4.9%4.99% of the then issued and outstanding shares of common stock. During the nine months ended September 30, 2021, Stanley converted $1,009,468 of its convertible note into 1,550,718 shares of the Company’s common stock, and during the nine months ended September 30, 2021, Stanley loaned the Company an additional $697,386. Also, during the nine months ended September 30, 2021, the Company transferred the SURG shares received as repayment of $800,000 of this convertible note (See Note 4) and also converted $126,003 of accrued interest into the principal balance. During the nine months ended September 30, 2021, Gonzalez assigned all his accrued balances of $424,731 to Stanley in a private transaction that the Company is not part to (See Note 5). The balance of the Stanley debt at September 30, 2021 and December 31, 2020 was $448,121 and $1,009,469, respectively. The Stanley debt is secured via a pledge agreement on the SURG shares.


GBT Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine Months Ended September 30, 2021 and 2020 (unaudited)

Iliad Research and Trading, L.P.

On February 27, 2019, the Company entered into a note purchase agreement with a third-party investor - Iliad Research and Trading, L.P.(“Iliad”), pursuant to which the Company issued a promissory note for the original principal amount of $2,325,000. The promissory note had an original issue discount of $300,000 and the inventor paid consideration of $2,025,000 to the Company, of which $25,000 was paid for legal expenses. The outstanding balance of the promissory note is to be paid on the one-year anniversary of the issuance of the note. Interest on the note accrues at the rate of 10% per annum compounding daily. Subject to the terms and conditions set forth in the note, the Company may prepay all or any portion of the outstanding sharesbalance of the note at any time in an amount in cash equal to 120% of the amount repaid. In connection with transactions that generate less than $1,000,000 in proceeds, the Company has agreed to not issue any debt instrument or incurrence of any debt other than trade payables in the ordinary course of business, any securities or agreements to sell common stock with anti-dilution or price reset/reduction features or any securities that are or may be become convertible or exercisable into common stock with a price that varies with the market price of the common stock (collectively, “Restricted Issuance Transaction”). The outstanding balance of the Company.Note will be increased by 5% in the event the Company enters into a Restricted Issuance Transaction that is approved by Iliad. The original issue discount is being amortized to interest expense over the term of the promissory note.

 

As of December 1, 2017,On February 27, 2020, the Company has paid off in full all principal, interest and penalties with respectIliad entered into an Amendment to the LabrysIliad Note (See Note 8) pursuant to which the maturity date of the Iliad Note was extended to August 27, 2020, provided that the Debt may be converted into shares of common stock of the Company at a conversion price equal to 80% multiplied by the lowest trading daily VWAP for the common stock during the 20 trading day period ending on the latest complete trading day prior to the conversion date, provided for the payment by the Company to Iliad of an extension fee equal to 7.5% of the outstanding balance of the Iliad Note resulting in a new balance of the Iliad Note of $2,765,983 and provided that the Company’s failure to deliver shares of common stock within three trading days of a conversion would result in an event of default. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. Iliad has agreed to restrict its ability to convert the Iliad Note and there are noreceive shares of common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 9.99% of the then issued and outstanding shares of common stock. On July 20, 2020 the Company and Iliad entered into agreement to extend the maturity of the Iliad Note until February 27, 2021 in consideration of an extension fee of $1,000. On February 28, 2021 the Company and Iliad entered into agreement to further obligations owed with respectextend the maturity of the Iliad Note until May 31, 2021 in consideration of an extension fee of $1,000 representing the third extension of the original note. On May 19, 2021, the Company and Iliad entered into agreement to suchfurther extend the maturity of the Iliad Note until August 31, 2021 in consideration of an extension fee of $1,000 representing the fourth extension of the original note. On August 20, 2021, the Company and Iliad entered into agreement to further extend the maturity of the Iliad Note until December 31, 2021 in consideration of an extension fee of $1,000. During the nine months ended September 30, 2021, Iliad converted $2,508,737 of its convertible note into 4,053,069 shares of the Company’s common stock. The balance of the Iliad debt at September 30, 2021 and December 31, 2020 was $0 and $2,431,841, respectively.

 

Discounts on convertible notes

 

Due to the potential adjustment in the conversion price associated with some of the convertible notes payable described above based on the Company’s stock price, the Company has determined that the conversion feature is considered a derivative liability. The embedded conversion feature was initially calculated to be $3,214,879 which are recorded as a derivative liability as of the date of issuance. The derivative liability was first recorded as a debt discount to the convertible notes payable up to the face amount of the convertible notes payable of $1,250,132 with the excess of $1,964,747 being recorded as a derivative expense. The debt discount of $1,250,132 is being amortized over the terms of the convertible notes payable. The Company recognized interest expense of $1,195,755$686,732 and $3,833,752 during the yearnine months ended December 31, 2017September 30, 2021 and 2020, respectively, related to the amortization of the debt discount.discount on convertible notes. The unamortized debt discount at September 30, 2021 and December 31, 2017 is $54,377.2020 was $316,372 and $362,004, respectively.

 

A roll-forward of the convertible notenotes payable from December 31, 20162020 to September 30, 2021 is below:

Debt discount related to new convertible notes Principal Debt  
Amortization of debt discounts Balance Discount Net
Convertible notes payable, December 31, 2020 $13,788,710  $(362,004) $13,426,706 
Issued for cash  1,231,636   —   1,231,636 
Convertible note issued for accounts payable  424,731   —   424,731 
Accrued interest added to convertible note  202,899   —   202,899 
Payment with marketable securities  (1,460,000)  —   (1,460,000)
Original issue discount  106,850   —   106,850 
Conversion to common stock  (5,240,605)  —   (5,240,605)
Debt discount related to new convertible notes  —   (641,100)  (641,100)
Amortization of debt discounts  —   686,732   686,732 
Convertible notes payable, September 30, 2021 $9,054,221  $(316,372) $8,737,849 


GBT Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine Months Ended September 30, 2021 and 2020 (unaudited)

Note 8 - Notes Payable

Notes payable at September 30, 2021 and December 31, 2020 consist of the following:

  September 30, December 31,
  2021 2020
RWJ acquisition note $2,600,000  $2,600,000 
SBA loan  150,000   150,000 
Promissory note to Alpha Eda  140,000   140,000 
Total notes payable  2,890,000   2,890,000 
Unamortized debt discount  —   — 
Notes payable  2,890,000   2,890,000 
Less current portion  (2,740,000)  (2,741,737)
Notes payable, long-term portion $150,000  $148,263 

RWJ Acquisition Note

In connection with the acquisition of RWJ in September 2017, the Company issued a note payable. The note accrues interest at 3.5% per annum, was due on December 31, 2019 and is secured by the assets purchased in the acquisition. The Company contests the validity of the note, as such the note has not been repaid as of September 30, 2021. (See Note 13). The balance of the note at September 30, 2021 was $2,600,000 plus accrued interest of $385,631. The balance of the note at December 31, 2020 was $2,600,000 plus accrued interest of $307,631.

SBA Loan

On June 22, 2020, the Company received a loan from the Small Business Administration under the Economic Injury Disaster Loan (“EIDL”) program related to the COVID-19 relief efforts. The loan bears interest at 3.75% per annum, requires monthly principal and interest payments of $731 after 12 months from funding and is due 30 years from the date of issuance. The monthly payments have been extended by the SBA to all EIDL borrower with additional 12 months. Monthly payments will commence on or around June 2022. The balance of the note at September 30, 2021 was $150,000 plus accrued interest of $7,286. The balance of the note at December 31, 2020 was $150,000 plus accrued interest of $3,067.

Alpha Eda

On November 15, 2020, the Company issued a promissory note to Alpha Eda, LLC (“Alpha”) for $140,000. The note accrues interest at 10% per annum, is unsecured and is due on September 30, 2021. On June 20, 2021 Alpha and the Company extended the note maturity to December 31, 2017 is below:2021. The balance of the note at September 30, 2021 was $140,000 plus accrued interest of $12,302. The balance of the note at December 31, 2020 was $140,000 plus accrued interest of $1,803.

 

Convertible notes, December 31, 2016 $53,852 
Issued for cash  440,000 
Issued for accounts payable and accrued expenses  660,132 
Increase due to accrued interest  1,756 
Conversion to common stock  (125,215)
Conversion to Series G preferred stock  (660,132)
Repayment in cash  (290,393)
Debt discount related to new convertible notes  (1,250,132)
Amortization of debt discounts  1,195,755 
Convertible notes, December 31, 2017 $25,623 

Discounts on Promissory Note

The Company recognized interest expense of $0 and $47,671 during the nine months ended September 30, 2021 and 2020, respectively related to the amortization of the debt discount on notes payable.


GBT Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine Months Ended September 30, 2021 and 2020 (unaudited)

 

Note 9 – Accrued Settlement

In connection with a legal matter filed by the Investor of the $8,340,000 Senior Secured Redeemable Convertible Debenture, on December 23, 2019, in the pending arbitration between the Company and the Investor, an Interim Award was entered in favor of the Investor. On January 31, 2020, the Company was informed that a final award was entered (the “Final Award”). The Final Award affirms that certain sections of the Senior Secured Redeemable Convertible Debenture (the “Debenture”) constitute unenforceable liquidated damages penalties and were stricken. Further, it was determined that the Investor was entitled to recovery of their attorney’s fees. Consequently, the arbitrator awarded Investor an award of $4,034,444 plus interest of 7.25% accrued from May 15, 2019 (presented separately in accounts payable and accrued expenses) and costs in the amount of $55,613. (See Note 13). In connection with this settlement, the Company recognized a gain on the settlement of debt of $1,375,556 in 2019 as the difference between the carrying amount of the debt and the amount awarded by the arbitrator (See Note 13).

Note 10 - Derivative Liability

 

TheCertain of the convertible notes payable discussed in Note 7 hashave a conversion price that can be adjusted based on the Company’s stock price which results in the conversion feature being recorded as a derivative liability.

 

The fair value of the derivative liability is recorded and shown separately under current liabilities. Changes in the fair value of the derivative liability is recorded in the statement of operations under other income (expense).

 

The Company uses a weighted average Black-Scholes-MertonBlack-Scholes option pricing model with the following assumptions to measure the fair value of derivative liability at September 30, 2021 and December 31, 2017:2020:

 

Stock price$1.12
Risk free rate1.76%
Volatility175%
Conversion/ Exercise price$0.60
Dividend rate0%
Term (years)0.5 years

F-21

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

  September 30, December 31,
  2021 2020
         
Stock price $0.008  $0.017 
Risk free rate  0.09%  0.10%
Volatility  210%  275%
Conversion/ Exercise price $.006  $.008-.0085 
Dividend rate  0%  0%

 

The following table represents the Company’s derivative liability activity for the yearnine months ended December 31, 2017:September 30, 2021:

 

Derivative liability balance, December 31, 2016 $— 
Issuance of derivative liability during the period  3,214,879 
Fair value of beneficial conversion feature of debt repaid/converted  (2,745,485)
Change in derivative liability during the period  (374,230)
Derivative liability balance, December 31, 2017 $95,164 

Note 10 - Note Payable

In connection with the acquisition discussed in Note 3, the Company issued a note payable. The note bears interest at 3.5% per annum is due on December 31, 2019 and is secured by the assets purchased in the acquisition.

Schedule of Derivative Liabilities at Fair Value    
Derivative liability balance, December 31, 2020 $5,262,448 
Debt modification  13,777,480 
Issuance of derivative liability during the period  1,143,515 
Fair value of beneficial conversion feature of debt converted  (10,864,918)
Change in derivative liability during the period  165,402 
Derivative liability balance, September 30, 2021 $9,483,927 

 

Note 11- Stockholders’ Equity (Deficit in prior periods)

 

Authorized Shares-Common stockCommon Stock

Effective February 17, 2015,The Board of Directors of the Company filed with the State of Nevada a Certificate of Change to effectapproved, on April 13, 2020, a reverse stock split of its outstanding and authorizedall of the Company’s Common Stock, pursuant to which every 50 shares of common stock at a ratioCommon Stock of 1 for 1,000the Company shall be reverse split, reconstituted and converted into one (1) share of Common Stock of the Company (the “Reverse Stock Split”). The effective date ofCompany submitted an Issuer Company Related Action Notification regarding the Reverse Stock Split was February 24, 2015. On or about February 24, 2015,to FINRA on April 14, 2020. To effectuate the Company implemented a 1,000-1 reverse split, with no fractional shares allowed. In addition,Reverse Stock Split, the Company filed Articleson April 21, 2020 a Certificate of MergerChange Pursuant to Nevada Revised Statutes (“NRS”) Section 78.209 (the “Articles”“Certificate of Change”) with the Secretary of State of the State of Nevada subject to effectuateFINRA approval. Since this reverse stock split has not yet been approved by the State of Nevada, the financial statements have not been retroactively restated to reflect this reverse stock split. On June 8, 2020 FINRA advised the Company that such request is deficient due to the fact that a name change. The Articles were filed to effectuate a merger between Gopher Protocol Inc., a Nevada corporation and a wholly owned subsidiaryholder of an outstanding convertible note of the Company and the Company,had entered into two settlements with the Company beingSecurities and Exchange Commission that related to securities laws violations but were in no way related to the surviving entity.Company. As a result, FINRA advised that it is necessary for the Company’s name changedprotection of investors, the public interest, and to “Gopher Protocol Inc.”. In connection withmaintain fair and orderly markets that documentation related to the above, the Company filed an Issuer Company-Related Action Notification Form with the Financial Industry Regulatory Authority. The Reverse Stock Split was implementednot be processed. The Company appealed the decision made by FINRA on February 23, 2015. Our new CUSIP number is 38268V 108. As a result of the name change, our symbol been changed following the Notification Period to GOPH. In April 2015,June 15, 2020. On August 4, 2020, FINRA notified the Company amended it certificate of incorporation to increasethat its appeal had been denied. On October 25, 2021 FINRA approved the number of authorized shares of common stock, ofReverse Stock Split and on October 26, 2021, the Company from 2,000,000 shares to 500,000,000 shares.

Authorized Shares-Preferredeffectuated a 1 for 50 reverse stock

The Company has authorized 20,000,000 Preferred Stock Series B shares, par value $0.00001; 10,000 Preferred Stock Series C shares authorized, par value $0.00001; 100,000 Preferred Stock Series D shares, par value $0.00001 and 2,000,000 Preferred Stock Series G shares, par value $0.00001.

Common Stock

On or around March 8, 2016, the Company issued 226,110 common shares worth $1,702 to a third party that converted a portion of the PTPI Note, which was reduced by the same amount.

On April 25, 2016, the Company issued 200,000 common shares worth $1,505 to a third party that converted a portion of the PTPI Note, which was reduced by the same amount. On June 9, 2016, the Company issued 300,000 common shares worth $2,258 to a third party that converted a portion of the PTPI Note, which was reduced by the same amount. split.

 

F-22

GBT Technologies, Inc.

GOPHER PROTOCOL, INC.Notes to Condensed Consolidated Financial Statements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On June 10, 2016,For the Company entered into a consulting agreement with Waterford Group LLC (“Waterford”) pursuant to which the Company engaged Waterford to provide sales and marketing consulting and advisory services to the Company in consideration of 100,000 shares of restricted common stock of the Company (the “Shares”) and a common stock purchase warrant (the “Warrant”) to acquire 750,000 shares of restricted common stock of the Company at an exercise price of $2.25 per share for a period of five (5) years. 50,000 of the Shares were issued to Waterford upon the execution of the Agreement. The warrant has been recorded as adjusting equity during this quarter. The Company believes that this agreement is in default, as the counterparty failed to deliver services under the agreement. As such, in the third fiscal quarter, the Company did not issue the shares or warrants in the third or fourth fiscal quarter, and does not intend to issue those items. The warrant has been expensed in 2016 in the amount of $177,062.

On June 17, 2016, the Company engaged a law firm to provide certain legal services to the Company in consideration of 900,000 shares of common stock of the Company (the “Retainer Shares”). The value of these shares is $233,982 and this amount was recorded as legal expense. On June 23, 2016, the Company prepaid legal services for 12 months, with an effective date of January 7, 2016. On August 16, 2016, the retainer agreement dated June 17, 2016 (“Original Retainer Agreement”) entered by and between the Company and its legal firm was amended and restated provided legal services to the Company for a flat fee of 2,600,000 shares of common stock and a monthly cash flat fee. The Company issued an additional 1,700,000 shares valued at $441,966 to this law firm to cover legal costs that exceeded $233,982, per the amendment.

On June 20, 2016, two holders (the “Preferred Stock Holders”) of an aggregate of 2,400 shares of Series D Preferred Stock of the Company converted the Preferred Shares into an aggregate of 2,400,000 shares of common stock of the Company at $0.01 per share. The Preferred Stock Holders are executive officers and directors of the Company.

On August 9, 2016, the Preferred Stock Holders of an aggregate of 17,400 shares of Series D Preferred Stock of the Company executed conversion notices to convert the Preferred Shares into an aggregate of 17,400,000 shares of common stock of the Company at $0.01 per share.

In addition, on August 9, 2016, Direct Communications, Inc. (“Direct Communications”), a holder of 8,950 shares of Series D Preferred Stock (the “Direct Communications Preferred Shares”) of the Company executed a conversion notice to convert the Direct Communications Preferred Shares into 8,950,000 shares of common stock of the Company (the ”Direct Communications Conversion Shares”) at $0.01 per share.

On or aroundNine Months Ended September 30, 2016, a third party converted $11,291 of the PTPI Note into 1,500,000 shares. This reduced the overall principal balance on that note to $55,042. On or around October 26, 2016, a third party converted $14,302 of the PTPI Note into 1,900,000 shares. This reduced the overall principal balance on that note to $40,740. Including interest accrued at December 31, 2016, which includes interest accrued since early 2015, the note balance net of this conversion is $53,852.2021 and 2020 (unaudited)

 

During the yearnine months ended December 31, 2017,September 30, 2021, the Company had the following transactions in its common stock:

 

●issued 7,571,334an aggregate of 8,358,054 shares to the PTPI note holder uponfor the conversion of convertible notenotes of $5,240,605 and accrued interest of $56,990;$15,405;

●issued 865,366245,000 shares to convertible note holders upon the conversion of convertible note of $100,000;

●issued an aggregate of 2,025,000 shares to two consultants for services rendered valued at $766,500. The services, which include business development, analysis, and interaction with professionals, were principally related to assisting the Company with the acquisition of the RWJ assets (see Note 3).rendered. The value of the common stockshares of $281,750 was determined based on the closing stock price of the Company’s common stock on the date of grant;grant date; and

●issued 5,000,00014,000,000 shares to GBT Tokenize for the acquisition of the RWJ assets valued at $1,850,000.a joint venture agreement. The value of the common stock of $15,400,000 was determined based on the closing stock price of the Company’s common stock on the acquisition date; andgrant date

During the nine months ended September 30, 2020, the Company had the following transactions in its common stock:

 

●issued 1,333,334an aggregate of 1,915,870 for the conversion of convertible notes of $958,489 and accrued interest of $4,590;
●issued 2,000,000 shares to GBT Tokenize for a joint venture agreement. The value of the common stock to an investor for cash proceeds of $1,000,000 (See discussion below).$5,500,000 was determined based on the closing stock price of the Company’s common stock on the grant date.

F-23

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On December 29, 2017, the Company entered into a Securities Purchase Agreement with Eagle Equities, LLC (“Eagle”) pursuant to which Eagle agreed to purchase up to 2,000,000 shares of the Company’s common stock for a purchase price of $1,500,000 or $0.75 per share. The closing occurred on December 29, 2017 with respect to the funding of $1,000,000 resulting in the issuance of 1,333,334 shares of common stock (the “First Closing Shares”). Eagle agreed to potentially purchase an additional 666,666 shares of common stock (the “Second Closing Shares”) on March 31, 2018 for a purchase price of $500,000 subject to various closing conditions.

The Company placed 1,333,334 shares of common stock (and 666,666 shares of common stock if the second tranche is closed and funded (the “Escrow Shares”) in escrow to be utilized for the purpose of limited price protection. If, beginning on the seventh month anniversary of the issuance of the First Closing Shares (and Second Closing Shares if the second closing occurs), Eagle has sold any of the First Closing Shares (or the Second Closing Shares as the case may be) at a sales price of less than $0.72 per share, then that number of Escrow Shares shall be released from escrow to Eagle as a limited make whole which shall be determined by using the following formula:

($0.72 – Closing Price) / Closing Price) * number of shares sold at a price less than $0.72.

Closing Price is price on the first day of each monthly anniversary beginning on the first day of the 7th month (and continuing monthly until the earlier of January 31, 2019 or until all shares are sold).

If the second closing conditions have been met but Eagle does not fund the purchase of the Second Closing Shares, then Eagle shall not receive the 666,666 Escrow Shares. Moreover, of the 1,333,334 Escrow Shares provided in the first closing, then if on March 31, 2018 the stock trades above $1.00, the $0.72 floor price shall be reduced on a ratchet basis for every penny above $1.00. For example, if the stock trades at $1.72 per share, then there shall be no floor or make whole and any balance of shares remaining shall be returned to the Company.

The Company shall deposit an additional 2,000,000 shares of common stock into escrow which shares shall only be released to Eagle, if, prior to January 31, 2019 (while Eagle continues to hold shares), the Company issues shares at an issue price of less than $0.30 per share.

The Company also issued Eagle a Common Stock Purchase Warrant to acquire 666,666 shares of common stock exercisable for three years at an exercise price of $2.00 per share (the “Eagle Warrant”). Unless otherwise agreed in writing by both the Company and Eagle, at no time will Eagle exercise any amount of the Eagle Warrant to purchase common stock that would result in Eagle owning more than 9.9% of the common stock outstanding of the Company. The Eagle Warrant contains standard anti-dilution protections.

Treasury Stock

On April 25, 2011, the Company issued a press release announcing that its Board of Directors approved a share repurchase program. Under the program, the Company is authorized to purchase up to 200-post-split (1,000,000 pre-split) of its shares of common stock in open market transactions at the discretion of management. All stock repurchases will be subject to the requirements of Rule 10b-18 under the Securities Exchange Act of 1934, as amended and other rules that govern such purchases. As of December 31, 2013, the Company had repurchased 8-post-split shares (38,000 pre-split) shares of its common shares in the open market, which were returned to treasury. On December 31, 2014, the Company returned 40,000 post-split shares (200,000,000 pre-split shares) to treasury in connection with the dissolution of the licensing agreement with a third party. During the first quarter of 2015, Company’s counsel, who had previously been issued 32,000 shares as compensation, returned those shares to Treasury. As of December 31, 2017 and 2016, the Company has 1,040 treasury shares at cost basis.

 

Series B Preferred Shares

On November 1, 2011, the Company and certain creditors entered into a Settlement Agreement (the “Settlement Agreement”) whereby without admitting any wrongdoing on either part, the parties settled all previous agreements and resolved any existing disputes. Under the terms of the Settlement Agreement, the Company agreed to issue the creditors 45,000 shares of Series B Preferred Stock of the Company on a pro-rata basis. Following the issuance and delivery of the shares of Series B Preferred Stock to said creditors, as well as surrendering the undelivered shares, the Settlement Agreement resulted in the settlement of all debts, liabilities and obligations between the parties.

 

F-24

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Series B Preferred Stock has a stated value of $100 per share and is convertible into the Company’s common stock at a conversion price of $0.30$30.00 per share representing 3,0001 posts split (15,000,000 pre-split) common shares. Furthermore, the Series B Preferred Stock votes on an as converted basis and carries standard anti-dilution rights. These rights were subsequently removed, except in cases of stock dividends or splits.

 

As of September 30, 2021, and December 31, 2017 and 2016,2020, there arewere 45,000 Series B Preferred Shares outstanding, respectively.outstanding.

 

Series C Preferred Shares

 

On April 29, 2011, GV Global Communications, Inc. (“GV”) provided funding to the Company in the aggregate principal amount of $111,000 (the “Loan”). On September 25, 2012, the Company and GV entered into a Conversion Agreement pursuant to which the Company agreed to convert the Loan into 10,000 shares of Series C Preferred Stock of the Company, which was approved by the Board of Directors.

 

Each share of Series C Preferred Stock is convertible, at the option of GV, into such number of shares of common stock of the Company as determined by dividing the Stated Value (as defined below) by the Conversion Price (as defined below). The Conversion Price for each share is equal to a 50% discount to the average of the lowest three lowest closing bid prices of the Company’s common stock during the 10-day trading period prior to the conversion with a minimum conversion price of $0.002.$0.02. The stated value is $11.00 per share (the “Stated Value”). The Series C Preferred Stock has no liquidation preference, does not pay dividends and the holder of Series C Preferred Stock shall be entitled to one vote for each share of common stock that the Series C Preferred Stock shall be convertible into. GV has contractually agreed to restrict its ability to convert the Series C Preferred Stock and receive shares of the Company’s common stock such that the number of shares of the Company’s common stock held by it and its affiliates after such conversion does not exceed 4.9% of the then issued and outstanding shares of the Company’s common stock.

 


GBT Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine Months Ended September 30, 2021 and 2020 (unaudited)

During the fiscal year ended December 31, 2014, GV Global Communications, Inc. converted 7,770 of its Series C Preferred Stock into 12,010 post-split (64,551,667 common shares pre-split).2 post-splits. During the third quarter of 2014, the Company received 4,2041 post-split (21,021,900 pre-split) common shares to adjust the shares issued to reflect the amount that both they and the Company believed that they were owed. At September 30, 2021 and December 31, 2016, and at December 31, 2015,2020, GV owns 700 Series C Preferred Shares.

 

The issuance of the Series C Preferred Stock was made in reliance upon exemptions from registration pursuant to Section 4(2)4(a)(2) under the Securities Act of 1933 and Rule 506 promulgated under Regulation D thereunder. GV is an accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933.

 

As of September 30, 2021, and December 31, 2017 and 2016,2020, there arewere 700 Series C Preferred Shares outstanding, respectively.outstanding.

 

Series D Preferred Shares

 

Per the termsAs of the Exclusive License AgreementSeptember 30, 2021, and in consideration of the licensing agreement signed between the CompanyDecember 31, 2020, there are 0 and Hermes Roll LLC, the Company issued 100,0000 shares of Series D Preferred Shares outstanding, respectively.

Series G Preferred Shares

As of September 30, 2021, and December 31, 2020, there are 0 and 0 shares of Series G Preferred Shares outstanding, respectively.

Series H Preferred Shares

On June 17, 2019, the Company, AltCorp Trading LLC, a Costa Rica company and a wholly-owned subsidiary of the Company (“AltCorp”), GBT Technologies, S.A., a Costa Rica company (“GBT-CR”) and Pablo Gonzalez, a shareholder’s representative of GBT-CR (“Gonzalez”), entered into and closed an Exchange Agreement (the “GBT Exchange Agreement”) pursuant to which the parties exchanged certain securities. In accordance with the Exchange Agreement, AltCorp acquired 625,000 shares of GBT-CR representing 25% of its issued and outstanding shares of common stock from Gonzalez in exchange for the issuance of 20,000 shares of Series H Convertible Preferred Stock of the Company and a Convertible Note in the principal amount of $10,000,000 issued by the Company (the “Preferred Shares”“Gopher Convertible Note”). as well as additional consideration. The preferred stock hasGopher Convertible Note bears interest of 6% per annum and is payable at maturity on December 31, 2021. At the election of Gonzalez, the Gopher Convertible Note can be converted into a valuemaximum of $ 1,000 based upon20,000 shares of Series H Preferred Stock. Each share of Series H Preferred Stock is convertible, at the costoption of the license; due to the holder of license is the related party of the Company. The Preferred Shares have no liquidation rights. The Holder of the Preferred Shares will be entitled to vote on all matters submitted to shareholders of the Company on an as-converted basis. The Preferred Shares have a conversion price of $0.01 (the “Conversion Price”) and a stated value of $10.00 per share (the “Stated Value”). Subjectbut subject to the Company increasing its authorized shares of common stock, to 500,000,000, each Preferred Share is convertible, at the option of the Holder, into such number of shares of common stock of the Company as determined by dividing the Stated Value ($500 per share) by the Conversion Price.conversion price ($500.00 per share). The issuance of the Preferred Shares was made in reliance upon exemptions from registration pursuant to Section 4(2) under the Securities Act of 1933 and Rule 506 promulgated under Regulation D thereunder. Hermes is an accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933.

F-25

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On April 2, 2015, a third party converted 1,000 Series D Preferred shares into 1,000,000 common shares. On May 11th, 2015, Reko Holdings, LLC converted 4,000 shares of its Series DH Preferred Stock into 4,000,000 restricted common shares. 

On November 31, 2015, Direct Communications gave a notice of conversion to Company stating its intention to convert 250 Series D Preferred Shares to 250,000 common shares, which were issued on or around that date.

On June 20, 2016, two holders (the “Preferred Stock Holders”) of an aggregate of 2,400 shareshas no liquidation preference, does not pay dividends and the holder of Series DH Preferred Stock (the “Preferred Shares”) of the Company converted the Preferred Shares into an aggregate of 2,400,000 sharesshall be entitled to one vote for each share of common stock ofthat the Series H Preferred Stock may be convertible into. On July 8, 2019, the Company at $0.01 per share. The Preferred Stock Holders are executive officers and directors of the Company.

On August 9, 2016, two holders (the “Preferred Stock Holders”entered a Consulting Agreement with Glen Eagles Glen Eagles Acquisition LP (“Glen”) of an aggregate of 17,400 shares of Series D Preferred Stock (the “Preferred Shares”) of the Company executed conversion noticesas consultant to convert the Preferred Shares into an aggregate of 17,400,000 shares of common stock of the Company at $0.01 per share. The Preferred Stock Holders are executive officers and directors of the Company.

In addition, on August 9, 2016, Direct Communications, Inc. (“Direct Communications”), a holder of 8,950 shares of Series D Preferred Stock (the “Direct Communications Preferred Shares”) of the Company executed a conversion notice to convert the Direct Communications Preferred Shares into 8,950,000 shares of common stock of the Company at $0.01 per share.

The above issuances of common stockprovide services in connection with the conversionsCompany’s acquisition of the Series D Preferred Stock increases the number25% of shares of common stock ofGBT-CR. Consultant will provide analysis, interaction with related professional and other services as requested by the Company by 26,350,000 shares.to integrate and expand capabilities between GBT-CR and the Company. (See Note 13 for further details.)

 

As of September 30, 2021, and December 31, 2017 and 2016,2020, there are 66,00020,000 shares of Series DH Preferred Shares outstanding.

 

Series G Preferred SharesWarrants

 

On December 29, 2017, Guardian Patch converted all of the principal and interest of the Note, into 2,000,000 shares of Series G Preferred Stock. The Series G Preferred Stock is entitled to vote on an as-converted basis, automatically converts to common stock upon any liquidation, dissolution or winding up and the Company may not declare a dividend until the Series G Preferred Stock has received a dividend. Each share of Series G Preferred Stock is convertible into one shares of common stock of the Company and contain standard anti-dilution rights. As long as at least 15% of the Series G Preferred Stock remain outstanding, without the consent of 67% of the Series G Preferred Stock, the Company may not incur indebtedness or liens, acquire its shares of common stock, enter into transactions with an affiliate or amend its Articles of Incorporation or Bylaws. Guardian LLC has agreed to restrict its ability to convert the Series G Preferred Stock and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and its affiliates after such conversion does not exceed 4.9% of the then issued and outstanding shares of common stock.

As of December 31, 2017 there are 2,000,000 Series G Preferred Shares outstanding.

F-26

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Warrants 

The following is a summary of warrant activity:activity.

 


  Warrants
Outstanding		  Weighted
Average
Exercise Price		  Weighted Average
Remaining
Contractual Life		  Aggregate
Intrinsic
Value		 
Outstanding, December 31, 2015  —          
Granted  93,750   2.25         
Forfeited  —             
Exercised  —             
Outstanding, December 31, 2016  93,750  $       $— 
Granted  22,666,666   0.54         
Forfeited  —             
Exercised  —             
Outstanding, December 31, 2017  22,760,416  $0.55         
Exercisable, December 31, 2017  22,760,416  $0.55   4.67  $13,640,000 

GBT Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine Months Ended September 30, 2021 and 2020 (unaudited)

      Weighted  
    Weighted Average  
    Average Remaining Aggregate
  Warrants Exercise Contractual Intrinsic
  Outstanding Price Life Value
Outstanding, December 31, 2020   392,870  $74.97   1.76  $— 
Granted   —             
Forfeited   —             
Exercised   —             
Outstanding, September 30, 2021   392,870  $74.97   1.01  $— 
Exercisable, September 30, 2021   392,870  $74.97   1.01  $— 

 

The exercise price for warrant outstanding and exercisable at December 31, 2017:September 30, 2021:

 

Outstanding and Exercisable 
     
Number of  Exercise 
Warrants  Price 
 22,000,000  $0.50 
 666,666   2.00 
 93,750   2.25 
 22,760,416     

The Company issued 9,000,000 warrants as consideration for the acquisition of the RWJ assets (see Note 3) and issued an aggregate of 13,000,000 warrants to two consultants for services rendered. The services, which include business development, analysis, and interaction with professionals, were principally related to assisting the Company with the acquisition of the RWJ assets (see Note 3). The fair value of the 13,000,000 warrants of $4,782,297 was determined using the Black-Scholes option pricing model with the following assumptions:

●Expected life of 5.0 years
●Volatility of 250%;
●Dividend yield of 0%;
●Risk free interest rate of 1.73%
Outstanding Exercisable
       
Number of Exercise Number of Exercise
Warrants Price Warrants Price
317,600  $25.00   317,600  $25.00 
60,000   92.50   60,000   92.50 
10,000   135.00   10,000   135.00 
400   1,595.00   400   1,595.00 
2,000   2,500.00   2,000   2,500.00 
1,500   3,750.00   1,500   3,750.00 
1,000   5,000.00   1,000   5,000.00 
200   11,750.00   200   11,750.00 
150   12,500.00   150   12,500.00 
20   14,000.00   20   14,000.00 
392,870       392,870     

 

Note 12 - Income Taxes

At December 31, 2017 and 2016, the significant components of the deferred tax assets are summarized below:

  2017  2016 
       
Deferred income tax asset        
Net operation loss carryforwards  2,329,554   1,642,678 
Book to tax differences in intangible assets  74,100   — 
Total deferred income tax asset  2,403,654   1,642,678 
Less: valuation allowance  (2,403,654)  (1,642,678)
Total deferred income tax asset $—  $— 

The valuation allowance increased by $760,976 and $6765,264 in 2017 and 2016 as a result of the Company generating additional net operating losses. The Company’s net operating loss carryforward of approximately $5,900,000 begin to expire in 2024.

F-27

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Income tax expense reflected in the consolidated statements of income consist of the following for 2017 and 2016:

  2017  2016 
Current      
Federal $—  $— 
State  —   — 
   —   — 
Deferred        
Federal  —   — 
State  —   — 
   —   — 
         
Income tax expense $—  $— 

The reconciliation of the effective income tax rate to the federal statutory rate for the years ended December 31, 2017 and 2016 is as follows:

  2017  2016 
  Amount  Percent  Amount  Percent 
             
Federal statutory rates $(3,497,679)  34.0% $(539,317)  34.0%
State income taxes  (514,365)  5.0%  (79,311)  5.0%
Amortization of intangible assets  74,100   -0.7%  —   0.0%
Permanent differences  3,251,067   -31.6%  (56,636)  3.6%
Valuation allowance against net deferred tax assets  686,876   -6.7%  675,264   -42.6%
Effective rate $—   0.00% $—   0.00%

The Company files income tax returns in the U.S. federal jurisdiction, and state jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2014.

The Company periodically evaluates the likelihood of the realization of deferred tax assets, and adjusts the carrying amount of the deferred tax assets by the valuation allowance to the extent the future realization of the deferred tax assets is not judged to be more likely than not. The Company considers many factors when assessing the likelihood of future realization of its deferred tax assets, including its recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income or loss, the carryforward periods available to the Company for tax reporting purposes, and other relevant factors.

Future changes in the unrecognized tax benefit will have no impact on the effective tax rate due to the existence of the valuation allowance. The Company estimates that the unrecognized tax benefit will not change significantly within the next twelve months. The Company will continue to classify income tax penalties and interest as part of general and administrative expense in its consolidated statements of operations. There were no interest or penalties accrued as of December 31, 2017 and 2016.

Note 13 - Related Parties

 

Related parties are natural persons or other entities that have the ability, directly or indirectly, to control another party or exercise significant influence over the party in making financial and operating decisions. Related parties include other parties that are subject to common control or that are subject to common significant influences. All of the Company’s revenue in 2016 and $180,000 of the Company’s 2017 revenue is from IT services delivered to a single customer, Guardian LLC, which is a related party to the Company. The revenue generated from Guardian LLC was paid to the Company via a reduction in the amount that the Company owes Guardian LLC that is classified as Due to Guardian LLC in the accompanying consolidated balance sheet. All expenses in the Company’s operations were incurred as a consequence of delivering Company’s obligations under the joint venture agreement between the parties to commercialize the technology that is being developed by the LLC.

F-28

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

On April 22, 2015, Michael Murray was appointed by6, 2018, the Company as the Chairman of the Board, CEO, and President of the Company. Mr. Murray resigned as an executive officer on September 1, 2017. On March 4, 2015, the Company entered into a Territorial License Agreement with Hermes, which is the basis for the Company’s current operations. Mr. Murray is the owner of 9,900 shares of Series D Preferred Stock of the Company that is convertible at Mr. Murray’s election into 9,900,000 shares of common stock. To date, Mr. Murray has converted all of his Series D Preferred Stock into common shares of the Company.

On June 30, 2015, the Company appointed Dr. Danny Rittman, as Chief Technical Officer and a board member. On August 20, 2015, the Company entered into an agreement with Dr. Rittman pursuant to which the parties agreed that (i) all inventions, improvements and developments made or conceived by Dr. Rittman, either solely or in collaboration with others pertaining to Company’s business, will be the property of Company, and (ii) Dr. Rittman will assign to the Company any and all intellectual property related to the Company’s consumer heuristic technology platform. Said agreement is contingent upon the Company funding its commitments per the June 16, 2015 - Amended and Restated Territorial License Agreement. Failure of the Company providing this funding, in full, or partially, will automatically terminate any GOPH ownership of the intellectual properties. Dr. Rittman is the Chief Technology Officer and a directorDirector of the Company, as well as the Chairman of the Company’s Advisory Board, in formation. Dr. Rittman and Mr. Murray jointly own 9,900 shares of Series D Preferred Stock of the Company that is convertible at Dr. Rittman’s or Mr. Murray’s election into 9,900,000 shares of common stock. To date, Mr. Rittman has converted all ofagreed to amend his Series D Preferred Stock into common shares of the Company.

On August 20, 2015, the Company entered into anemployment agreement with Dr. Rittman pursuant to which the parties agreed that (i) all inventions, improvements and developments made or conceived by Dr. Rittman, either solely or in collaboration with others pertaining to Company’s business, will be the property of Company, and (ii) Dr. Rittman agreed to assign to the Company any and all intellectual property related to the Company’s consumer heuristic technology platform, subject to certain conditions, which as of September 30, 2017 have not been met. As of the end of the fiscal year, the intellectual property developed by Dr. Rittman had not been assigned to the Company. The Company has expensed the stated value of that intellectual property in these financial statements.

On or around March 18, 2016 the Company and Dr. Danny Rittman entered into an agreement intended to clarify the relationship between Dr. Rittman and the Company and the ownership of certain technology in connection with certain agreements previously entered into between Company and Dr. Rittman and with third parties. Specifically, the Company entered into that certain Territorial License Agreement with Hermes Roll LLC dated March 4, 2015, which such agreement was amended to expand the related territorial license to a worldwide license pursuant to that certain Amended and Restated Territorial License Agreement dated June 16, 2015 (the “Amended and Restated Territorial License Agreement”), and that certain Letter Agreement (the “Letter Agreement”) entered into between Dr. Rittman and the Company dated August 20, 2015. The aforementioned agreements were tied to the funding of the Company in the minimum amount of $5,000,000 (the “Required Funding”) and the assignment to the Company and/or ownership by the Company of all past, present and future technology in the form of intellectual property, including, but not limited to patents, trademarks, domains, applications, social media pages (e.g. Twitter, LinkedIn and landing pages) (collectively, the “IP”), which such IP was paid for exclusively by Dr. Rittman and/or his affiliated companies, was contingent upon the Company obtaining the Required Funding by no later than October 30, 2015 (the “Contingency”). Accordingly, it was agreed to by the parties that (i) all inventions, improvements and developments made or conceived by the Dr. Rittman, either solely or in collaboration with others pertaining to Company’s business, would be the property of the Company subject to the Contingency. In the event the Contingency was not met, the Letter Agreement would be cancelled and rendered null and void. The Company acknowledged that the Company did not meet the Contingency, technically resulting in the cancellation of the Letter Agreement and rendering the Letter Agreement null and void. Moreover, the Company failed to meet its obligations under the Amended and Restated Territorial License Agreement, including the further development of the consumer heuristic technology platform, thereby creating a vacuum in its development in all aspects, including the ability to obtain funding, resulting in the need for Dr. Rittman’s partners to perform the necessary development work related to the above agreements.

F-29

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The original License Agreement will remain in place, while other agreements will be terminated and rendered null and void. Dr. Rittman will resign as an officer of the Company, but will remain as Director and technical consultant of the Company, and will accommodate the needs of the Company in return for compensation to be agreed by the parties. All intellectual property will remain in the possession of Dr. Rittman and his private partners, and the Company shall remain a licensee per the terms of the original Territorial License Agreement, and will develop the first product with Dr. Rittman and his partners.

The Company is the exclusive license holder for certain intellectual property relating to GopherInsight technology. The Company has assigned all its rights as they relate to the Guardian Patch to the LLC as consideration for the JV. Dr. Rittman’s partners have commenced development of the product via a private LLC that has been incorporated under the name “Guardian Patch LLC” (“LLC”). Certain private investors will provide all initial funding to the Company via the LLC for product development. The LLC will fund the development, and the Company will provide IT services via Dr. Rittman for a monthly fee. Dr. Rittman has signed an amendment employment agreement with the Company. As the Company is not a member of the LLC, the Company and the LLC have formed a Joint Venture (“JV”) for the purposes of developing and marketing the Patch. The LLC will be responsible for funding the development of the Patch. The Company will not need be required to invest funds in said JV. The Company responsibilities will be limited to the marketing of the product, where the marketing budget will be funded by the LLC. Moreover, the LLC has committed to provide the Company with working capital as needed. The Company has assigned and pledged to the LLC all its license derivative rights as they pertain to the Patch only. Dr. Rittman may be offered membership rights at some point in the future with the LLC, with which the Company is a JV partner, but is not equity member. The Company has agreed with the LLC that the same JV principles of the GPLLC for the patch will apply for the other two products (Epsilon and Puzpix) which will be vested under designated LLCs that will be incorporated by the LLC members. During the nine months ended September 30, 2017, $135,000 of the Company’s revenue was related to IT service provided to the LLC for Dr. Rittman services, in connection with the development of the Patch.

In March 2016, the Company and Dr. Danny Rittman, Co-Chairman, CTO and a shareholder, entered into an agreement intended to clarify the relationship between Dr. Rittman and the Company and the ownership of certain technology in connection with certain agreements previously entered into between Company and Dr. Rittman and with third parties. Prior to these agreements, the Company is the exclusive license holder for certain intellectual property relating to Hermes’ system and method for scheduling categorized deliverables, according to demand, at the customer’s location based on smartphone application and/or via the internet. As a result of these agreements, the Company shall remain an exclusive licensee per the terms of the original License Agreement and will develop the first products with Dr. Rittman and his partners.

On March 29, 2016, Gopher contributed all of its rights relating to its proprietary microchip that is within a sticky patch package (the “Patch”) to Guardian Patch, LLC (the “Guardian LLC”) in consideration of 50% of the profit generated by Guardian LLC (the “Joint Venture”). Guardian LLC is responsible for investing all needed funds for the purpose of developing the Patch and related products to the Patch. In addition, Guardian LLC is required to provide short term loans to Gopher on an as needed basis secured by Gopher’s economic interest in the Joint Venture. The Company will provide IT services to Guardian LLC for a monthly fee. Dr. Rittman has signed an amendment employment agreement with the Company.

On July 21, 2016 members of the Guardian Patch LLC, together with Dr. Rittman, incorporated Alpha EDA, LLC (“Alpha”). The members of the LLC appointed Dr. Rittman as the manager of Alpha. The Company, the LLC and Alpha have agreed that all Epsilon Rights, as well as Puzpix rights, will be assigned to Alpha. Alpha and the Company entered into a JV agreement similar to the Patch Joint Venture agreement (as described above), whereby Alpha will fund all of its operational and developmental needs (software development, support, marketing and administrative), and the profits of Alpha will be distributed equally to the two equal Joint venture partners, Guardian Patch LLC and the Company. Alpha will hold all intellectual property rights related to software. Currently, three products will be owned by Alpha – the Epsilon software, the Puzpix social game and the Guardian Pack application. The Company and its technology licensing partners, Guardian LLC and Alpha, are preparing to introduce said new products (Epsilon, Guardian Pack & PuzPix) to the market this year, and the Sphere during the second half of fiscal 2017. Certain problems caused by the need to miniaturize both the chip design and the battery caused a delay in the rollout from its planned launch during the first half of the year. The Epsilon product will be presented for time-based license agreements utilizing a designated website on top of customary distributing channels for the product. Epsilon is under confidential evaluation agreement with third party.

F-30

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During 2016, the Company relocated its headquarters to 2500 Broadway, Suite F-125, Santa Monica, California. The Company paid approximately $5,000 per month in rent for this office space, and paid a $7,500 security deposit that is classified in our financial statements contained herein as a prepaid expense. The lease is being paid for by the Guardian LLC via reimbursement. The Company moved into smaller office space during the quarter, and its security deposit was adjusted downward to cover the smaller space in April 2016. The Company believes its current facilities will be adequate for the foreseeable future.

The Company has commenced development, and the Company has completed the Statement of Work (SOW) for the Federal Communications Commission (“FCC”) survey to deploy the Company’s Guardian Global Tracking Device within the continental US. The Company has also completed their transmitters/transceivers modules feasibility research. Although the Company can use open channels, and therefore is not required to comply with various FCC regulations relevant to the system, the Company has chosen to comply, and is complying with FCC regulations. The FCC regulates the limits of potentially harmful interference to licensed transmitters due to low power unlicensed transmitters. The Guardian Patch/Sphere system consists of advanced security protocols in order to maintain the global, private, fully-secured network. In addition, the Guardian Patch device needs to perform communication tasks across the globe providing breakthrough tracking features. The Company and its technology licensing partner, Guardian LLC, successfully completed thorough research that involved security, performance and FCC regulations compliance. Based on this research, a set of particular frequencies was chosen to be used by Guardian LLC. By the end of this year, the Company completed the design and construction of the Guardian Patch/Sphere circuit prototype device. The Company has completed the construction of 10 prototype units, and performed intensive testing program to be tested as a complete system in designated areas by the Company. On December 1, 2016, Guardian LLC issued Statement of Work for the Placement and Development of Guardian Sphere and its Base System. For this project, Guardian LLC has assembled a team of eight, including a Project Manager, CTO, digital and software engineers, a specialist algorithm mathematician and project leader. This team was assembled by Guardian LLC, and is based in the USA, Europe and Asia. Per the Joint Venture agreement, Guardian LLC is funding the SOW project through its sources, while the Company’s portion of the cost is $67,000 and due to the vendor on August 15, 2017. Guardian took full responsibility for all amounts due to this vendor. The Company intends to enter a new SOW for the purpose of creating fully-commercial products utilizing the manufacturers that it has identified.

On June 20, 2016, two holders (the “Preferred Stock Holders”) of an aggregate of 2,400 shares of Series D Preferred Stock (the “Preferred Shares”) of the Company converted the Preferred Shares into an aggregate of 2,400,000 shares of common stock of the Company at $0.01 per share. The Preferred Stock Holders are executive officers and directors of the Company.

On August 9, 2016, two holders (the “Preferred Stock Holders”) of an aggregate of 17,400 shares of Series D Preferred Stock (the “Preferred Shares”) of the Company executed conversion notices to convert the Preferred Shares into an aggregate of 17,400,000 shares of common stock of the Company at $0.01 per share. The Preferred Stock Holders are executive officers and directors of the Company.

Effective August 15, 2016, the Employment Agreement of Mansour Khatib, our CMO, was amended and restated as follows: Upon the Company generating $1,000,000 in revenue during any three (3) month period (the “Threshold Requirement”), the Executivehe will receive salary at the rate of $100,000$250,000 annually (the “Base Salary”); provided, however, that that Company shall pay to Executive $5,000 per month (the “Monthly Salary Advance”) commencing on August 15, 2016, which such Monthly Salary Advance shall be an advance on the Base Salary and shall continue to be paid to Executive until such time that the Company launches its GopherInsight™ technology into the consumer markets. Once the Threshold Requirement is met, the Base Salary will be payable in equal increments not less often than monthly in arrears and in any event consistentof $15,000 per month with the Company’s payroll policy and practices. The Base Salaryan additional $70,000 to be paid within 15 days of the Executive may from time to time be increased, but not decreased, byend of the Board, in its absolute discretion, including potential bonuses.”

F-31

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

calendar year.

  

Since April 2016, Guardian LLC has provided loans toOn September 14, 2018, the Company for the Company’s working capital purposes, outside of its commitment to develop the Patch, in the aggregate amount of $660,132 (the “Loans”). On May 23, 2017, as described in Note 7, the Companyand Dr. Rittman entered into a Conversion Agreement with Guardian LLC pursuant to which the parties agreed to convert the Loans provided by Guardian LLC to the Company into a Convertible Promissory Note in the principal amount of $660,132 (the “Note”).

The Note bears interest at 6%, matures May 30, 2019 and is convertible into the Company’s common stock, at Guardian LLC’s option, at a conversion price equal to 50% of the lowest closing price for the common stock on the principal market during the ten consecutive trading days immediately preceding the conversion date, which, in no event, will be less than $0.01 per share. Guardian LLC has agreed to restrict their ability to convert the Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.9% of the then issued and outstanding shares of common stock.

Guardian LLC (the “Note Holder”) understandsletter agreement confirming that the Company may be seeking additional capital or fundingis the owner of all intellectual property developed by Dr. Rittman relating to the Internet of Things (IoT) and believes that the lock-upArtificial Intelligence enabled mobile technologies, including a global platform with both mobile and leak-out restrictionsfixed solutions, commencing June 16, 2015 and provisions, as further described herein, will improve the Company’s prospects for obtaining additional financing and thus improving the overall financial condition of the Company. As such on or around June 26, 2017 the Company and the Note Holder entered into a lock-up and leak-out:

1.Subject to the terms of this Agreement, the Note Holder agrees that for a period of nine (9) months from the Effective Date of this Agreement (the “Lock-Up Period”), the Note Holder shall not convert the Note into Common Stock for safe keeping or, directly or indirectly, sell, offer to sell, contract to sell, assign, pledge, hypothecate, encumber or otherwise transfer, or enter into any contract, option or other arrangement or understanding with respect to the sale, assignment, pledge or other disposition of (each a “Transfer”) any beneficial rights with respect to the Note.

2.Leak-Out Provisions. Subject to the terms of this Agreement, the Note Holder agrees that for a period beginning immediately upon the end of the Lock-Up Period and ending fifteen (15) months from the Effective Date of this Agreement (the “Leak-Out Period”), the Note Holder shall have the right to sell the lessor of (i) five (5%) percent of the previous day’s traded volume of the Company’s Common Stock, or (ii) Five Thousand (5,000) shares of the Common Stock on a per daily basis.

On December 29, 2017, all the principal and accrued interest were converted into 2,000,000 share of Series G preferred stock.continuing until Dr. Rittman’s employment agreement is terminated.

 

On September 1, 2017, the Company entered into and closed an Asset Purchase Agreement with a third party, RWJ Advanced Marketing, LLC (“RWJ”), a Georgia corporation, pursuant to which the Company purchased certain assets from RWJ, including inventory, terminals, licenses and permits and intangible assets. At closing, the Company and Mr. Greg Bauer entered into an Employment Agreement pursuant to which Mr. Bauer was retained as Chief Executive Officer for a term of one year, subject to an automatic extension, unless terminated, in consideration of a base salary of $250,000 and a bonus of 10% of net profit generated by the assets acquired. Mr. Bauer was also appointed to the Board of Directors of the Company. As of the closing date, Mr. Murray resigned as Chief Executive Officer of the Company but will remain as a director of the Company. Mr. Bauer, since 2004 through present, has served as executive director with W.L. Petrey Wholesale, Inc. where he was in charge of the UGO/Preway operations. Mr. Bauer holds a Bachelor of Science degree from University of Maryland College Park. Mr. BauerThe Company is veteran of the United States Navy and was honorably discharged in 1983. He held the title of United States Navy Surface Warfare Qualified.litigations in connection with RWJ transaction – See Note 13 - Contingencies.

 

The Company and Guardian Patch, LLC, which assisted structuring and negotiating the Purchase Agreement and related asset purchase, entered into a Consulting Agreement dated SeptemberOn January 1, 2017. In consideration for the services, the Company issued Guardian 2,000,000 shares of common stock and warrants to purchase 9,000,000 shares of common stock. The warrants contain identical terms to the RJW Warrants. If and when the assets acquired under the Purchase Agreement generate revenues of $10,000,000, the Company shall issue Guardian an additional 3,000,000 shares of common stock. The consulting agreement was effective August 1, 2017 and terminates November 30, 2017. Guardian, pursuant to its existing joint venture agreement, agreed to provide the $400,000 in funding needed for the cash purchase price under the Purchase Agreement. Guardian also agreed to provide the needed $100,000 working capital designated to UGopherServices Corp. The parties have agreed to negotiate and finalize the terms of such loans in the near future.

F-32

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In order to facilitate the transition of the Company,2019, the Company and Michael Murray have agreed to enterDouglas Davis entered into an employment agreement inAmended and Restated Employment Agreement pursuant to which Mr. Murray will serveDavis was retained as Chief Executive Vice President in chargeOfficer. Mr. Davis served as Interim Chief Executive Officer since July 2018 until his resignation on April 11, 2020. The term of business development. As consideration,Mr. Davis’ employment was for two years through January 1, 2021. Mr. Davis was entitled to an annual base salary of $250,000, which was to be increased to $400,000 upon the Company issuedup-listing to a warrant to acquire 4,000,000 shares of common stock tonational exchange. Mr. Murray. The warrants contain identical termsDavis was also entitled to the RJW Warrants.

Regulatory

The Company has commenced development, and the Company has completed the Statementissuance of Work (SOW) for the Federal Communications Commission (“FCC”) surveyStock Options to deploy the Company’s Guardian Global Tracking Device within the continental US. The Company has also completed their transmitters/transceivers modules feasibility research. Although the Company can use open channels, and therefore is not required to comply with various FCC regulations relevant to the system, the Company has chosen to comply, and is complying with FCC regulations. The FCC regulates the limits of potentially harmful interference to licensed transmitters due to low power unlicensed transmitters. The Guardian Patch/Sphere system consists of advanced security protocols in order to maintain the global, private, fully-secured network. In addition, the Guardian Patch device needs to perform communication tasks across the globe providing breakthrough tracking features.  The Company and its technology licensing partner, Guardian LLC, successfully completed thorough research that involved security, performance and FCC regulations compliance. Based on this research, a set of particular frequencies was chosen to be used by Guardian LLC.  By the end of this year, the Company completed the design and construction of the Guardian Patch/Sphere circuit prototype device. The Company has completed the construction of 10 prototype units, and performed intensive testing program to be tested as a complete system in designated areas by the Company. On December 1, 2016, Guardian LLC issued Statement of Work for the Placement and Development of Guardian Sphere and its Base System. For this project, Guardian LLC has assembled a team of eight, including a Project Manager, CTO, digital and software engineers, a specialist algorithm mathematician and project leader. This team was assembled by Guardian LLC, and is based in the USA, Europe and Asia. Per the Joint Venture agreement, Guardian LLC is funding the SOW project through its sources.

On June 20, 2016, two holders (the “Preferred Stock Holders”) ofacquire an aggregate of 2,400 shares of Series D Preferred Stock (the “Preferred Shares”) of the Company converted the Preferred Shares into an aggregate of 2,400,00050,000 shares of common stock of the Company, exercisable for five years, subject to vesting. The options were to be earned and vested (i) with respect to 20,000 shares of common stock on the date hereof, (ii) 5,000 shares of common stock upon the successful dual list of the Company on an international exchange such as SIX Zurich Stock Exchange or Euronext, (iii) 15,000 shares of common stock upon the successful up listing to a national exchange such as the Nasdaq, NYSE Euronext, TSX, AMEX or other, and (iv) with respect to 5,000 shares of common stock at $0.01each of the six (6) month anniversaries (July 1, 2019 and January 1, 2020). The exercise price of such options shall be the closing price of the Company on the date prior to such event.


GBT Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine Months Ended September 30, 2021 and 2020 (unaudited)

On October 10, 2019, the Company entered into a Joint Venture Agreement (the “BitSpeed Agreement”) with BitSpeed LLC, which is owned by Douglas Davis, the Company’s former Chief Executive Officer, to form GBT BitSpeed Corp., a Nevada company (“GBT BitSpeed”). The purpose of GBT BitSpeed is to develop, maintain and support its proprietary Extreme Transfer Software Application Concurrency, a software application to transfer secure, accelerated transmission of large file data over networks, and connection to cloud storage, Network-Attached Storage (NAS) and Storage Area Networks (SANs) (“Concurrency”). BitSpeed shall contribute the services and resources for the development of Concurrency to GBT BitSpeed. The Company shall contribute 10 million shares of common stock (valued at $17,900,000) of the Company to GBT BitSpeed. BitSpeed and the Company will each own 50% of GBT BitSpeed. The Company shall appoint two directors and BitSpeed shall appoint one director of GBT BitSpeed. In addition, GBT BitSpeed and Mr. Davis entered into a Consulting Agreement in which Mr. Davis is engaged to provide services in consideration of $10,000 per share.month payable quarterly which may be paid in shares of common stock calculated by the amount owed divided by the Company’s 20-day VWAP. Mr. Davis will provide services in connection with the development of the business as well as GBT BitSpeed’s capital raising efforts. The Preferred Stock Holders are executive officers andterm of the Consulting Agreement is two years. The closing of the BitSpeed Agreement occurred on October 14, 2019. On April 11, 2020, Douglas Davis resigned as Chief Executive Officer of the Company so that he may fully devote all of his efforts to GBT Tokenize Corp., the Company’s joint venture, which intends to develop a new product. Mr. Davis’ resignation was not the result of any disagreements with management or board of directors of the Company.

 

During 2016,On March 6, 2020, the Company relocated its headquartersthrough Greenwich, entered into the Tokenize Agreement with Tokenize, which is owned by a Costa Rica Trust represented by Gonzalez. Gonzalez also represents Gonzalez Costa Rica Trust, which holds a note in the principal amount of $10,000,000 and is also a shareholder of the Company. Under the Tokenize Agreement, the parties formed GBT Tokenize. The purpose of GBT Tokenize is to 2500 Broadway, Suite F-125, Santa Monica,develop Technology Portfolio, throughout the State of California. Upon generating any revenue from the Technology Portfolio, the Joint Venture will earn the first right of refusal for other territories. Tokenize shall contribute the services and resources for the development of the Technology Portfolio to GBT Tokenize. The Company pays approximately $5,000contributed 100,000,000 GBT Shares to GBT Tokenize. Tokenize and the Company will each own 50% of GBT Tokenize. The Company pledged its 50% ownership in GBT Tokenize and its 100% ownership of Greenwich to Tokenize to secure its Technology Portfolio investment. The Company shall appoint two directors and Tokenize shall appoint one director of GBT Tokenize. In addition, GBT Tokenize and Gonzalez entered into a Consulting Agreement in which Gonzalez is engaged to provide services in consideration of $33,333.33 per month in rent for this office space andpayable quarterly which may be paid a $7,500 security deposit that is classified in our financial statements contained herein as a prepaid expense. The lease is being paid for by Guardian LLC through reimbursement.

On August 9, 2016, two holders (the “Preferred Stock Holders”) of an aggregate of 17,400 shares of Series D Preferred Stock (the “Preferred Shares”) of the Company executed conversion notices to convert the Preferred Shares into an aggregate of 17,400,000 shares of common stock calculated by the amount owed divided by the Company’s 10-day VWAP. Gonzalez will provide services in connection with the development of the Company at $0.01 per share.business as well as GBT Tokenize’s capital raising efforts. The Preferred Stock Holders are executive officers and directorsterm of the Company.

Effective August15, 2016,Consulting Agreement is two years. During the Employment Agreementsix months ended June 30, 2021, Gonzalez assigned all his accrued balances of Mansour Khatib, our CMO, was amended and restated as follows:

Upon the Company generating $1,000,000$424,731 to Stanley Hills in revenue during any three (3) month period (the “Threshold Requirement”), the Executive will receive salary at the rate of $100,000 annually (the “Base Salary”); provided, however, that that Company shall pay to Executive $5,000 per month (the “Monthly Salary Advance”) commencing on August 15, 2016, which such Monthly Salary Advance shall be an advance on the Base Salary and shall continue to be paid to Executive until such timea private transaction that the Company launches its Guardian Patch technologyis not part to. The closing of the Tokenize Agreement occurred on March 9, 2020. Through this Joint Venture the parties commenced development of an intelligent human vital signs’ device, which we currently refer to as the qTerm. The platform is an expansion of the existing license agreement with GBT Tokenize Corp., which provided GBT Tokenize Corp. with an exclusive territory of California to develop certain of the Company’s technology. A provisional patent application for the qTerm Medical Device was filed on March 30, 2020 with the USPTO. The application has been assigned serial number 63001564. The Joint Venture completed successfully the first prototype. There is no guarantee that the Company will be successful in researching, developing or implementing this product into the consumer markets.  Oncemarket. In order to successfully implement this concept, the Threshold RequirementCompany will need to raise adequate capital to support its research and, if successfully researched, developed and granted regulatory approval, the Company would need to enter into a strategic relationship with a third party that has experience in manufacturing, selling and distributing this product. There is met,no guarantee that the Base SalaryCompany will be payable in equal increments not less often than monthly in arrears andsuccessful in any event consistent withor all of these critical steps. On June 30, 2021 Tokenize, in an agreement that the Company’s payroll policyCompany is not a party to, irrevocably assigned all its rights in GBT Tokenize, including all its rights per the Tokenize Agreement, The Gonzalez Consulting agreement and practices.  The Base Salarythe pledge agreement, to the benefit of the Executive may from time to time be increased, but not decreased, by the Board, in its absolute discretion, including potential bonuses.”Magic International Argentina FC, S.L a third party (“Magic”).

 

F-33

 F-25

 

.

GOPHER PROTOCOL, INC.GBT Technologies, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSNotes to Condensed Consolidated Financial Statements

For the Nine Months Ended September 30, 2021 and 2020 (unaudited)

 

Note 1413 - Contingencies

 

Legal Proceedings

 

From time to time, the Company may be involved in various litigation matters, which arise in the ordinary course of business. There is currently no litigation that management believes will have a material impact on the financial position of the Company.

 

On August 26, 2015,or around January 30, 2019, RWJ Advanced Marketing, LLC, Greg Bauer, and Warren Jackson sued the Company finalized a consulting agreement that it entered into on August 11, 2015 with Michael Korsunsky (“Consultant”) pursuant to which Consultant was engaged by the Company to (i) provide introductions to strategic business alliances, (ii) advise on exposure and risk in the operation of smart phone applicationsmultiple third and (iii) advise on market fluctuations within the different categories of the smart phone application delivery services sector, in consideration of 100,000 restricted shares of common stock of the Company, which shares were issued on or around August 26, 2015. On or around November 17, 2016, the Company filed a complaint against Consultantrelated parties in Superior Court of the State of California - County of Riverside, for BreachLos Angeles, General District in connection with the acquisition of ContractUGO in September 2017. The case number is 19STCV03320 (the “Original Lawsuit”). The complaint in the Original Lawsuit alleges breach of contract, among other causes of action. The Company answered the complaint and Breach of Implied Covenant of Good Faith and Fair Dealing. The Consultant been served, surrender his certificate but to date has not filed a defense. Thiscross-complaint against the plaintiffs in the case and third parties on or around February 15, 2019. On or about September 10, 2020, the Company through its agent of service was “served” with a complaint (the Company contested service) that was recently filed against the Company and third parties by Robert Warren Jackson and Gregory Bauer in Los Angeles Superior Court Case No.: 20STCV32709 (“Second Lawsuit”). In the Original Lawsuit filed, the court rejected the plaintiff’s claims that they were filing a purported quasi-derivative lawsuit. As such, in this current litigation, the plaintiff is now again claiming the action is a derivative lawsuit. On October 13, 2020, the Second Lawsuit was removed by other defendants into Central District of California (CASE NO. 2:20−cv−09399−RGK−AGR). On February 2, 2021 The Central District of California dismissed the entire Second Lawsuit based on “demand futility”. In the Original lawsuit, the Company filed a cross complaint against the plaintiff and other third parties. Recently, the court has sincescheduled various hearings and a trial date set for December 27, 2021 which was later continued by the Court to September 28, 2022. It was the Company’s intention to dividend its holdings of its wholly owned subsidiary Ugopherservices Corp. (“UGO”). As UGO is the main dispute in the litigations described above, the Company has elected to sell UGO to a third-party effective July 1, 2020 (See Note 3). On September 17, 2020, the Company terminated Greg Bauer as consultant (resulting from the sale of UGO), which he confirmed in writing. On or about June 14, 2021 the Company stipulated with plaintiff that all third parties will be released and plaintiff may file a new first amendment complaint that will name only the Company. As such, all third parties other than prior transfer agent of the Company have been dismissed.dismissed from this litigation.

Following the sale of UGO (See Note 3), the Company noticed third parties (including SURG, via its asset manager) to wire the UGO funds to its new bank account. SURG never answered the notice. The Company noticed certain third parties that it intends to take legal actions to resolve this issue. On November 12, 2020 the Company filed a complaint in the United States District Court – District of Nevada - Case 2:20-cv-02078 against RWJ, Mr. Bauer, Mr. Jackson and against W.L. Petrey Wholesale Company Inc for fraud, breach of contract, Unjust Enrichment and other claims.

 

On June 10, 2016,December 3, 2018, the Company entered into a consulting agreementSecurities Purchase Agreement (the “SPA”) with Waterford GroupDiscover Growth Fund, LLC (“Waterford”(the “Investor”) pursuant to which the Company engaged Waterford to provide salesissued a Senior Secured Redeemable Convertible Debenture (the “Debenture”) in the aggregate face value of $8,340,000. In connection with the issuance of the Debenture and marketing consulting and advisory servicespursuant to the terms of the SPA, the Company in consideration of 100,000issued a Common Stock Purchase Warrant to acquire up to 225,000 shares of restricted common stock for a term of the Company (the “Shares”) and a common stock purchase warrantthree years (the “Warrant”) to acquire 750,000 shares of restricted common stock of the Companyon a cash-only basis at an exercise price of $2.25$100.00 per share for a period of five (5) years.with respect to 50,000 Warrant Shares, $75.00 with respect to 75,000 Warrant Shares and $50.00 with respect to 100,000 Warrant Shares. The holder may not exercise any portion of the Shares were issuedWarrants to Waterfordthe extent that the holder would own more than 4.99% of the Company’s outstanding common stock immediately after exercise. The outstanding principal amount may be converted at any time into shares of the Company’s common stock at a conversion price equal to 95% of the Market Price less $5.00 (the conversion price is lowered by 10% upon the executionoccurrence of each Triggering Event – the current conversion price is 75% of the Agreement.Market Price less $5.00). The Warrant vested onMarket Price is the average of the 5 lowest individual daily volume weighted average prices during the period the Debenture is outstanding. On May 28, 2019, the Investor delivered to the Company a quarterly basis“Notice of Default and Notice of Sale of Collateral” (the “Notice”). On December 23, 2019, in eight (8) equal quarterly installments eacharbitration between the Company and the Investor, an Interim Award was entered in favor of the Investor. On January 31, 2020, the Company was informed that a final award was entered (the “Final Award”). The Final Award affirms that certain sections of the Debenture constitute unenforceable liquidated damages penalties and were stricken. Further, it was determined that the Investor was entitled to recovery of their attorney’s fees. Consequently, the arbitrator awarded Investor an award of $4,034,444 plus interest of 7.25% accrued from May 15, 2019 and costs in the amount of 93,750 shares each quarter during the term of the Agreement. The first quarterly installment vested upon the execution of the Agreement and each subsequent quarterly installment was to vest each quarter thereafter. The Company believes that Waterford is in default of its agreement, as it failed to perform or provide any services under the agreement. As such, the Company put Waterford on notice in writing that the Company did not issue shares or warrants during the third or fourth fiscal quarters of 2016 due to the default.

$55,613. On or around January 23, 2017,February 18, 2020, the Company filed a complaint against Waterfordmotion with the United States District Court District of Nevada (the “Nevada Court”) to confirm the Final Award and a motion to consolidate Investor’s application to confirm the Company’s Transfer Agent,Final Award filed in Superiorthe U.S. District Court of the Virgin Islands (Case No: 3 :20-cv-00012-CVG-RM) (the “Virgin Island Court”). On February 27, 2020, the Nevada Court denied the Company’s motion to confirm the Final Award and motion to consolidate and further decided that the confirmation of the Final Award should be litigated in the Virgin Island Court. As such, on February 27, 2020, the Company filed a Notice of Entry of Order as well as a Motion to Confirm the Arbitration Award, address the outstanding issues regarding whether Investor’s rights are subordinated to other creditors and, thereafter, oversee a commercially reasonable foreclosure sale (Case No: 3 :20-cv-00012-CVG-RM). It was the Company’s position that the Final Award must first be confirmed and all questions regarding the rights of Investor relative to those of other creditors must be determined before any foreclosure sale can proceed. It is further the position of the Company that the previously disclosed foreclosure sale scheduled by Investor is being conducted in a commercially unreasonable manner and that if Discover proceeded forward with the foreclosure sale it did so at its own risk. Nevertheless, on February 28, 2020, Investor advised that it conducted a sale of the Company’s assets. As the date of this report Investor failed to present a deed of sale for the alleged sale that allegedly took place as noticed. The Company filed with Virgin Island Court the motions disputing the validity of the alleged sale. On July 28, 2020, Investor filed in the State of California, County of Riverside.Nevada a motion for attorneys $48,844 and costs $716. The Company filed an answer on August 11, 2020. On February 1, 2017,October 16, 2020, Investor motion for attorneys $48,844 and costs $716 was denied.


GBT Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine Months Ended September 30, 2021 and 2020 (unaudited)

GBT Technologies, S.A.

On September 14, 2018, the Company obtainedentered into an Exclusive Intellectual Property License and Royalty Agreement (the “GBT License Agreement”) with GBT-CR, a temporary restraining orderfully compliant and regulated crypto currency exchange platform that prohibits Waterford from (x) liftingcurrently operates in Costa Rica as a decentralized crypto currency platform, pursuant to which, among other things, the restricted legend fromCompany granted to GBT-CR an exclusive, royalty-bearing right and license relating intellectual property relating to systems and methods of converting electronic transmissions into digital currency as reflected in that certain patent filed with the 50,000 shares that it receivedUnited Stated Patent and Trademark Office on or about June 14, 2018 (EFS ID: 32893586; Application Number: 16008069; Type: Utility under 35 USC 111(a); Confirmation Number: 6787)(collectively, the “Digital Currently Technology”). Pursuant to the GBT License Agreement, the Company granted GBT-CR an exclusive worldwide license to use the Digital Currency Technology to make, use, sell, lease or otherwise commercialize and dispose of products and devices utilizing the Digital Currently Technology. Under the terms of the GBT License Agreement, the Company is entitled to receive a royalty payment of 2% of gross revenue of each licensed product sold by GBT-CR during the period starting in connection withwhich revenue is first generated using the licensed products and continuing for five years thereafter. Upon signing the Agreement; (y) selling the 50,000 shares to another party; and, (z) from exercising the warrant on 93,750 shares that was issued and vested upon the execution of the Agreement. As ordered by the court, on February 9, 2017,GBT-CR License Agreement, GBT-CR paid the Company deposited$300,000 which is nonrefundable. The Company has recognized the $300,000 as revenue during the years ended December 31, 2018. Upon GBT-CR making available for sale (the “Commercial Event”) an ICO (Initial Coin Offering) (the “Coin”), GBT-CR will make a Corporate Surety Bondpayment to the Company in the amount of $42,875$5,000,000. Further, upon the Commercial Event, GBT-CR will grant the Company the ability to secureacquire 30% of the temporary restraining order.Coin at a 30% discount of such offering price of the Coin. The GBT License Agreement commenced as of the signing date and, unless terminated in accordance with the termination provisions of the GBT License Agreement, shall remain in force until the expiration of the patent pertaining to the Digital Currency Technology; provided that the right to use trade secrets shall survive the expiration of the GBT License Agreement provided the Company has not terminated. Prior to the signing of the GBT License Agreement, GBT-CR advanced $200,000 to the Company, which the parties have agreed with Waterfordwill be applied toward the $5,000,000 fee when it becomes due. The $200,000 is recorded as unearned revenue at December 31, 2018 and reclassified to go to binding arbitration, which is currently being scheduled.

accrued expense at December 31, 2019. On or around February 27, 2017,2020 GBT Technologies, S.A., as successor in interest to Hermes Roll, LLC had notified the Company that it was issued a stay of the temporary restraining order barringin default on its transfer agent from providing shares in connection with the exercise of the first Waterford warrant on 93,750 shares that was provided to Waterford in connection with the execution of the engagement letter that was executed by the parties on or aroundAmended and Restated Territorial License Agreement (“ARTLA”) dated June 10, 2016. The matter is currently in arbitration.

On or around April 10, 2017, the Company was billed by its transfer agent (“TA”) for approximately $11,500 for legal fees (“TA Charges”) in connection with a lawsuit brought by one of the Company’s shareholders against the TA. The Company is not a named party in this litigation. The Company disputes the TA Charges, as the Company’s position is15, 2015 and that the TA Charges are not covered under the indemnification section of the Company’s agreement with its TA. As the TA refused to provide further services, the Company paid the fees,ARTLA had been cancelled and booked it as an expense in this quarter. This matter has been resolved amicably, and the Company continues its relationship with the TA.

F-34

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEC Matters

On July 29, 2016, the staff of the Atlanta Regional Office of the U.S. Securities and Exchange Commission (the “SEC” and the “Commission”) advised the Company in a telephone conversation, followed by a written “Wells” notice, that it is has made a preliminary determination to recommend that the Commission file an enforcement action against the Company alleging violations of Section 13(a) of the Securities and Exchange Act of 1934 and Rules 13a-11, 13a-13 and 12b-20 thereunder. A Wells Notice is neither a formal allegation of wrongdoing nor a finding that any violations of law have occurred. Rather, it provides the Company with an opportunity to respond to issues raised by the Commission and offer its perspective prior to any SEC decision to institute proceedings. These proceedings could result in the Company being subject to an injunction and cease and desist order from further violations of the securities laws as well as monetary penalties of disgorgement, pre-judgment interest and a civil penalty. On September 20, 2016, the Company filed an amended and restated 10-Q for the period ended June 30, 2014. In February 2017, the SEC advised that it concluded its investigation and that it does not intend to recommend an enforcement action by the SEC against the Company.

Reserved Sharesrescinded.

 

In connection with SURG Exchange Agreement (see Note 4) - On November 4, 2020, Altcorp and Stanley filed an Ex Parte Motion in the derivative notes, the Company has reserved withDistrict Court, Clark County, Nevada (Case No: A-20-823039-B, in Dep No: 43) to appoint receiver and issue a temporary restraining Order against SURG and its transfer agent commonfor alleged defaults on prior exchange agreement. On December 4, 2020, the parties entered an interim agreement which set the material terms of the settlement. A final settlement was achieved per the interim agreement terms on January 1, 2021. On March 4, 2021 the Company filed a motion to enforce settlement agreements, as the Company alleged that SURG owes an additional $240,000 which is due and owing under the settlement agreements.

On June 24, 2021 per the June 23, 2020 Agreement, the Company together with AltCorp issued sent SURG and its transfer agent via registered mail, a true-up shares demand for each note held byan additional 14,870,370 SURG shares as calculated per the holders.Agreement. As of the filing date of this report, SURG’s transfer agent did not answer the Company’s request.


GBT Technologies, Inc.

Notes to Condensed Consolidated Financial Statements

For the Nine Months Ended September 30, 2021 and 2020 (unaudited)

 

Note 1514 – Concentrations

 

Concentration of Credit Risk

 

Financial instruments, which potentially subject the Company to a concentration of credit risk, consist principally of temporary cash investments.

There have been no losses in these accounts through December 31, 2017 and December 31, 2016.September 30, 2021.

 

In 2016,Note 15 – Loss on Debt Modification

On May 19, 2021, the Company, had one customer that contributed 100%Gonzalez, GBT-CR and IGOR 1 Corp entered into a Mutual Release and Settlement Agreement and Irrevocable Assignment of its revenues. Concentrationoutstanding balance plus accrued interest (the “Gonzalez Agreement”). Pursuant to the Gonzalez Agreement, without any party admission of revenueliability and accounts payable as ofto avoid litigation, the parties has agreed to (i) extend the GBT convertible note maturity date to December 31, 2016,2022, (ii) amend the GBT convertible note terms to include a beneficial ownership blocker of 4.99% and a modified conversion feature to the GBT convertible note with 15% discount to the market price during the 20 trading day period ending on the latest complete trading day prior to the conversion date and (iii) provided for an assignment of the GBT convertible note by Gonzalez to a third party. As a result of the change in terms of this convertible note, the Company has one customer, which counts 100%took a charge related to the modification of its revenue. Perdebt of $13,777,480 during the terms of the JV with the LLC, the LLC has committed to fund all Company’s needs, as well as needs of the JV. Failure of the LLC to provide the Company or the JV with said funding would represent a significant Credit Risk. As of December 31, 2017 and 2016 the Company has a payable to Guardian LLC of $1,350,262 and $660,132, respectively.nine months ended September 30, 2021.

 

Note 16 - Subsequent Events

 

Management has evaluated events that occurred subsequent to the end of the reporting period shown herein:

 

On January 14, 2018,June 22, 2020, the Company received a $150,000 loan from the Small Business Administration (“SBA”) under the Economic Injury Disaster Loan (“EIDL”) program related to the COVID-19 relief efforts in consideration of a note dated June 16, 2020 (the “Original Note”). The Original Note bears interest at 3.75% per annum, requires monthly principal and interest payments of $731 after 12 months from funding and is due 30 years from the date of issuance of the Original Note. The monthly payments have been extended by the SBA to all EIDL borrowers with additional 12 months. Monthly payments will be commenced on or around June 16, 2022. On October 1, 2021, the Company entered into an Initial TermAmended Loan Authorization and Agreement (the “ITA”) with Spare CS Inc. (“Spare”), a Delaware corporation, pursuantthe SBA providing for the modification of the Original Note providing for monthly principal and interest payments of $1,771 after 24 months from the Original Note commencing on or around June 22, 2022. The Modified Note will continue to whichbear interest at 3.75% per annum and is due 30 years from the date of issuance of the Original Note. The Modified Note is guaranteed by Douglas Davis, the former CEO of the Company agreed to acquire 50%and current consultant, as well as by GBT Tokenize Corp. The additional funding of $200,000 was received by the equity of Spare. Spare is a mobile banking app that allows customers to access cash with no ATM, no debit or credit card, and no purchase required from participating merchants.Company on October 5, 2021.

 

As set forth in the ITA,On September 14, 2021, the Company agreed to provide Sparereported in its Form 8-K that it had filed an Issuer Company-Related Action Notification Form with all needed operating coststhe Financial Industry Regulatory Authority (“FINRA”) for processing a 1-for-50 reverse stock split of its authorized and will fund $100,000 every three months until Spare has positive cash flow. The Company provided the initial $100,000 on January 16, 2018. D’Ontra Hughes, CEO of Spare, will continue as CEO for 24 months at a salary of $10,000 per monthissued and all current management will remain in place for 12 months. In addition,outstanding common stock. On October 25, 2021, the Company received notice from FINRA that the reverse stock split described above will issue Spare 1,500,000 sharestake effect at the open of common stockbusiness on Tuesday, October 26, 2021. The Company’s symbol on the OTC Pink will be GTCHD for 20 business days from October 26, 2021 and a common stock purchase warrantthe CUSIP will be changed to acquire 1,000,000 shares of common stock at an exercise price of $3.00 per share for a period of three years. The Company also agreed to place 1,500,000 shares of common stock in escrow as a limited form of price protection for six months.361548308.


 

Although the Company consider the terms in the ITA to be binding and the Company has provided an initial funding of $100,000 to Spare, the closing the transactions is subject to the completion of due diligence and drafting and execution of a definitive purchase agreements and related transaction documents. There is no guarantee that the parties will successfully negotiate and finalize a definitive purchase agreement, that the Board of Directors of each company will approve such agreement or that the transaction set forth in the ITA will close.GBT TECHNOLOGIES INC.
Consolidated Financial Statements

 

Contents

 F-35Page
Financial Statements: 
Report of Independent Registered Public Accounting FirmF-30
Consolidated Balance Sheets as of December 31, 2020 and 2019F-31
Consolidated Statements of Operations for the Years Ended December 31, 2020 and 2019F-32
Consolidated Statement of Stockholders’ Deficit for the Years Ended December 31, 2020 and 2019F-33
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020 and 2019F-34
Notes to Consolidated Financial StatementsF-35

 F-29

 

 

GOPHER PROTOCOL, INC.Report of Independent Registered Public Accounting Firm

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

To the shareholders and the board of directors of GBT Technologies, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of GBT Technologies, Inc. the “Company”) as of December 31, 2020 and 2019, the related statement of operations, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

On February 1, 2018, Gopher Protocol Inc. (the “Company”) formed Ugopherservices Limited (“Ugopher England”), under the laws of England and Wales, as a private limited company and a wholly-owned subsidiary.Basis for Opinion

 

The purposeThese financial statements are the responsibility of establishing Ugopher Englandthe Company’s management. Our responsibility is to expandexpress an opinion on the Company’s prepaid financial and calling services to international consumers.

On March 2, 2018, Gopher Protocol Inc. (the “Company”) entered into and closedstatements based on our audit. We are a Securities Purchase Agreementpublic accounting firm registered with Bellridge Capital, LLCthe Public Company Accounting Oversight Board (United States) (“Bellridge”) pursuant to which Bellridge invested $750,000 into the Company in consideration of a 10% Convertible Debenture (the “Bellridge Debenture”PCAOB”) and common stock purchase warrants to acquire an aggregate of 500,000 shares of common stock exercisable for a period of five years at an exercise price of $2.35 per share. The Bellridge Debenture bears interest of 10% and is payable March 1, 2019. The Bellridge Debenture is convertible into shares of common stock at $0.90 per share subject to antidilution protection. During an event of default, the conversion price in effect on any conversion date means, as of any conversion date or other date of determination, shall be 35% of the lowest trading price for the Company’s common stock during the 20 trading Days immediately preceding the delivery of a notice of conversion. Bellridge has agreed to restrict its ability to convert the Bellridge Debenture or exercise its Common Stock Purchase Warrants and receive shares of common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. On or about May 2, 2018, at the election of Bellridge, Bellridge may acquire an additional Bellridge Debenture in the principal amount of $750,000 and a Common Stock Purchase Warrant on the terms of the initial closing.

On March 2, 2018, the Company delivered 1,000,000 shares of Common Stock to an escrow agent. The 1,000,000 escrow shares are required to be utilized for the purpose of limited price protection. If, beginning on the 7th  monthly anniversary of the issuance of the 1,000,000 escrow shares, Bellridge has sold shares issuable upon conversion of the Bellridge Debenture at a sales price of less than $1.10 per share, then that number of shares shall be released from escrowindependent with respect to Bellridge as a limited make whole using the following formula:

(($1.00 – closing price on 1st  day of each monthly anniversary beginning on the 1st  day of the 7th  month (and continuing monthly until all shares are sold)/closing price of the 1st  monthly day in question)* number of shares sold at a price less than $1.10.

As long as the Company is not in default of the Bellridge Debenture or in breach of the Securities Purchase Agreement, at any time during which Bellridge owns the Bellridge Debenture, Bellridge commits to limit in the aggregate all sales of the shares of common stock issued upon conversion of the Bellridge Debenture and the related Common Stock Purchase Warrant to the greater of not more than (i) 10.00% of the daily trading volume for the Company’s common stock as reported for that day or (ii) $35,000. Breach of this leak-out provision will be considered a material breach by Bellridge.

As of the date hereof, the Company is obligated on the Bellridge Debenture in the principal amount of $750,000 in connection with the offering. The Bellridge Debenture is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company.

The offer and sale of securities listed above were made to an accredited investor and the Company relied upon the exemptions contained in Section 4(a)(2) of the Securities Act and/or Rule 506 of Regulation D promulgated there under with regard to those sales. No advertising or general solicitation was employed in offering the securities. The offers and sales were made to one party, an accredited investor, and transfer of the securities issued was restricted by the Company in accordance with the requirementsU.S. federal securities laws and the applicable rules and regulations of the Securities Act of 1933.

F-36

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

and Exchange Commission and the PCAOB.

 

On March 16, 2018 ( “Closing Date”), the Company entered into and closed an Asset Purchase Agreement dated March 1, 2018 (the “ECS Purchase Agreement”) with ECS Prepaid LLC (“ECS”), a Missouri limited liability company, pursuant to which the Company purchased certain assets from ECS, including, but not limited to, the processing prepaid platform, servers, POS terminals, customer list, a processing software program and goodwill, in consideration of $1,100,000 of which $100,000 was paid on the Closing Date and the balance is to be paid pursuant to a secured promissory note in the amount of $1,000,000 (the “ECS Note”). In addition, the Company issued 500,000 shares of common stock of the Company (the “ECS Shares”) and warrants to purchase 500,000 shares of common stock (the “ECS Warrants”). The ECS Warrants were assigned by ECS to Dennis Winfrey. The ECS Warrants are exercisable for a period of five years at a fixed exercise price of $1.85 per share and contain standard anti-dilution protection. Under the ESC Note, which is secured by the assets acquired by the Company from ECS, the Company is required to make ten equal payments of $100,000 commencing on April 15, 2018. The Company may prepay the ECS Note at any time without penalty. The ECS Note is a short-term debt obligation that is material to the Company.

At closing, the Company and Derron Winfrey entered into an Employment Agreement pursuant to which Mr. Winfrey was retained as Chief Operating Officer for a term of one year, subject to an automatic extension, unless terminated, in consideration of a base salary of $144,000 and an annual bonus of $25,000 in shares of common stock of the Company subject to the discretion of the Board of Directors of the Company. In addition, Mr. Winfrey received a signing bonus of 250,000 shares of common stock, a Common Stock Purchase Warrant to acquire 500,000 shares of common stock at an exercise price of $1.85 per share and a $50,000 bonus with $25,000 paid on the Closing Date and $25,000 payable on May 1, 2018. The Company also entered into an Employment Agreement with Mark Garner pursuant to which Mr. Garner was retained as Vice President of Operations for a term of one year, subject to an automatic extension, unless terminated, in consideration of a base salary of $120,000 and an annual bonus of $25,000 in shares of common stock of the Company subject to the discretion of the Board of Directors of the Company. In addition, Mr. Garner received a signing bonus of 250,000 shares of common stock, a Common Stock Purchase Warrant to acquire 500,000 shares of common stock at an exercise price of $1.85 per share and a $50,000 bonus with $25,000 paid on the Closing Date and $25,000 payable on May 1, 2018. On March 16, 2018, Mr. Bauer was appointed as Chairman of the Board of the Company.

On the Closing Date, the Company and J.I.L. Venture LLC (“JIL Venture”), a non-related party, which assisted structuring and negotiating the ECS Purchase Agreement and related asset purchase, entered a Consulting Agreement dated March 1, 2018. In consideration for the services, the Company issued JIL Venture 1,000,000 shares of common stock and warrants to purchase 1,500,000 shares of common stock exercisable for a term of five years at an exercise price of $1.85 per share. JIL Venture assigned 500,000 shares of common stock and 750,000 warrants to acquire 750,000 shares of common stock to Michelle Bauer, the wife of Gregory Bauer, CEO and a director of the Company.

On April 2, 2018 ( “Closing Date”), Gopher Protocol Inc. (the “Company”) entered into and closed an Asset Purchase Agreement (the “Electronic Purchase Agreement”) with Electronic Check Services Inc. (“Electronic Check”), a Missouri corporation, pursuant to which the Company purchased certain assets from Electronic Check, including, but not limited to, assets associated with software that validates written check authenticity, in consideration of $75,000 paid on the Closing Date. In addition, the Company issued 250,000 shares of common stock of the Company (the “Electronic Shares”) and warrants to purchase 250,000 shares of common stock (the “Electronic Warrants”). The Electronic Warrants were assigned by Electronic Check to Dennis Winfrey, the shareholder of Electronic Check. The Electronic Warrants are exercisable for a period of five years at a fixed exercise price of $2.70 per share and contain standard anti-dilution protection.

On April 2, 2018, the Company entered into and closed an Asset Purchase Agreement (the “Central Purchase Agreement”) with Central State Legal Services Inc. (“Central”), a Missouri corporation, pursuant to which the Company purchased certain assets from Central, including, but not limited to, assets associated with the a system to recover funds from returned checks, in consideration of $25,000 paid on the Closing Date. Derron Winfrey, the COO of the Company, is a director and President of Electronic Check and Central. Derron Winfrey’s parents are the shareholders of Check and Central.   

On the Closing Date, the Company and J.I.L. Venture LLC (“JIL Venture”), a non-related party, which assisted structuring and negotiating the ECS Purchase Agreement and related asset purchase, entered a Consulting Agreement dated April 2, 2018. In consideration for the services, the Company issued JIL Venture 250,000 shares of common stock and warrants to purchase 250,000 shares of common stock exercisable for a term of five years at an exercise price of $2.70 per share.

F-37

GOPHER PROTOCOL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The shares of common stock and the warrants were issued pursuant to exemptions from registration provided by Section 4(a)(2) and/or Regulation D of the 1933 Securities Act, as amended. No advertising or general solicitation was employed in offering the securities. The offer and sale was made to an accredited investor and transfer of the common stock issued was restricted by the CompanyWe conducted our audit in accordance with the requirementsstandards of the Securities ActPCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of 1933, as amended.material misstatement, whether due to error or fraud.

 

On April 6, 2018,Our audit included performing procedures to assess the Company and Danny Rittman, Chief Technology Officer and a Directorrisks of material misstatement of the Company, agreedfinancial statements, whether due to amend his employment agreement pursuanterror or fraud, and performing procedures that respond to which he will receive salary atthose risks. Such procedures included examining, on a test basis, evidence regarding the rate of $250,000 annually payableamounts and disclosures in equal increments of $15,000 per month.  An additional $70,000 shall be payable within 15 daysthe financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the end of the calendar year.financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ BF Borgers CPA PC

BF Borgers CPA PC

Served as Auditor since 2017

Lakewood, CO

March 31, 2021

 

 

F-38

 F-30

 

GBT TECHNOLOGIES INC.
CONSOLIDATED BALANCE SHEETS

 

GOPHER PROTOCOL, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

  September 30,  December 31, 
  2018  2017 
   (unaudited)     
ASSETS        
Current Assets:        
Cash $522,445  $1,305,062 
Accounts receivable  856,244   41,947 
Inventory  287,975   262,749 
Prepaid expenses  49,000   — 
Total current assets  1,715,664   1,609,758 
         
Property and equipment, net  281,476   263,082 
Intangible assets, net  3,270,474   6,666,667 
Investment in Mobiquity Technologies, Inc.  9,806,352   1,979 
Goodwill  925,877   950,619 
         
Total assets $15,999,843  $9,492,105 
         
LIABILITIES AND STOCKHOLDERS’ EQUITY        
         
Current Liabilities:        
Accounts payable and accrued expenses (including related parties of $296,625 and $51,167) $2,029,260  $1,199,215 
Unearned revenue  261,726   — 
Due to Guardian LLC (related party)  737,330   1,350,262 
Convertible notes payable, net of discount of $948,175 and $54,377  795,425   25,623 
Note payable, net of discount of $7,381  392,619   — 
Derivative liability  2,778,052   95,164 
Total current liabilities  6,994,412   2,670,264 
         
Note payable  2,600,000   2,600,000 
Total liabilities  9,594,412   5,270,264 
         
Contingencies  —   — 
         
Stockholders’ Equity:        
Series B Preferred stock, $0.00001 par value; 20,000,000 shares authorized;        
45,000 and 45,000 shares issued and outstanding at September 30, 2018 and December 31, 2017  —   — 
Series C Preferred stock, $0.00001 par value; 10,000 shares authorized;        
700 and 700 shares issued and outstanding at September 30, 2018 and December 31, 2017  —   — 
Series D Preferred stock, $0.00001 par value; 100,000 shares authorized;        
0 and 66,000 shares issued and outstanding at September 30, 2018 and December 31, 2017  —   1 
Series G Preferred stock, $0.00001 par value; 2,000,000 shares authorized;        
0 and 2,000,000 shares issued and outstanding at September 30, 2018 and December 31, 2017  —   20 
Common stock, $0.00001 par value; 500,000,000 shares authorized;        
158,038,132 and 58,215,406 shares issued and outstanding at September 30, 2018 and December 31, 2017  3,580   2,582 
Treasury stock, at cost; 1,040 shares at September 30, 2018 and December 31, 2017  (643,059)  (643,059)
Additional paid in capital  67,869,039   19,243,959 
Accumulated deficit  (60,824,129)  (14,381,662)
Total stockholders’ equity  6,405,431   4,221,841 
Total liabilities and stockholders’ equity $15,999,843  $9,492,105 
  December 31,  December 31, 
  2020  2019 
ASSETS        
Current Assets:        
Cash $113,034  $59,634 
Cash held in trust  402,532   - 
Marketable equity security  649,000   1,000,000 
Assets of discontinued operations  -   206,809 
Total current assets  1,164,566   1,266,443 
         
Convertible note receivable  -   4,000,000 
         
Total assets $1,164,566  $5,266,443 
         
LIABILITIES AND STOCKHOLDERS’ DEFICIT        
         
Current Liabilities:        
Accounts payable and accrued expenses (including related parties of $410,833 and $334,000) $3,353,658  $1,814,609 
Accrued settlement  4,090,057   4,090,057 
Convertible notes payable, net of discount of $362,004 and $0  13,426,706   - 
Note payable, net of discount of $0 and $47,671  2,741,737   5,923,590 
Derivative liability  5,262,448   - 
Liabilities of discontinued operations  -   1,151,073 
Total current liabilities  28,874,606   12,979,329 
         
Convertible notes payable  -   11,000,000 
Note payable  148,263   - 
         
Total liabilities  29,022,869   23,979,329 
         
Contingencies  -   - 
         
Stockholders’ Deficit:        
Series B Preferred stock, $0.00001 par value; 20,000,000 shares authorized; 45,000 and 45,000 shares issued and outstanding at December 31, 2020 and 2019  -   - 
Series C Preferred stock, $0.00001 par value; 10,000 shares authorized; 700 and 700 shares issued and outstanding at December 31, 2020 and 2019  -   - 
Series D Preferred stock, $0.00001 par value; 100,000 shares authorized; 0 and 0 shares issued and outstanding at December 31, 2020 and 2019  -   - 
Series G Preferred stock, $0.00001 par value; 2,000,000 shares authorized; 0 and 0 shares issued and outstanding at December 31, 2020 and 2019  -   - 
Series H Preferred stock, $0.00001 par value ($500.00 stated value); 40,000 shares authorized; 20,000 and 20,000 shares issued and outstanding at December 31, 2020 and 2019  -   - 
Common stock, $0.00001 par value; 100,000,000,000 shares authorized; 256,674,458 and 16,536,351 shares issued and outstanding at December 31, 2020 and 2019  6,711   4,310 
Treasury stock, at cost; 1,040 shares at December 31, 2020 and 2019  (643,059)  (643,059)
Stock loan receivable  (7,610,147)  (7,610,147)
Additional paid in capital  251,039,531   242,192,461 
Accumulated deficit  (270,651,339)  (252,656,451)
Total stockholders’ deficit  (27,858,303)  (18,712,886)
Total liabilities and stockholders’ deficit $1,164,566  $5,266,443 

 

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

 F-31

F-39

 

GBT TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

 

GOPHER PROTOCOL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

 Nine Months Ended September 30,  Years Ended December 31, 
 2018  2017  2020 2019 
     
Sales:        
Sales $36,772,212  $4,426,626 
Related party sales  135,000   135,000 
Total sales  36,907,212   4,561,626 
        
Cost of goods sold  35,316,203   4,174,374 
        
Gross profit  1,591,009   387,252 
Sales - related party $180,000  $180,000 
              
Operating expenses:              
General and administrative expenses  14,035,900   2,323,713  2,041,996  126,986,423 
Marketing expenses  376,806   154,216  310,840  869,143 
Acquisition costs  10,966,791   4,050,819  -  150,000 
Buyout of joint venture agreement (related party)  11,750,000   — 
Impairment of assets  7,132,286   —   5,600,000   48,631,534 
Total operating expenses  44,261,783   6,528,748   7,952,836   176,637,100 
              
Loss from operations  (42,670,774)  (6,141,496) (7,772,836) (176,457,100)
              
Other income (expense):              
Amortization of debt discount  (849,802)  (221,323) (4,197,550) (6,821,453)
Change in fair value of derivative liability  (2,458,506)  547,188  (1,533,610) 7,290,867 
Interest expense and financing costs  (289,737)  (1,700,663) (2,949,849) (6,215,457)
Equity loss in Mobiquity Technologies, Inc.  (173,648)  — 
Unrealized loss on marketable equity security (671,000) (6,525,317)
Realized loss on disposal of marketable equity security (424,830) (90,683)
Loss on exchange of assets (1,430,000) - 
Equity income in investment -  631,534 
Gain on settlement of debt -  1,375,556 
Total other income (expense)  (3,771,693)  (1,374,798)  (11,206,839)  (10,354,953)
              
Loss before income taxes  (46,442,467)  (7,516,294) (18,979,675) (186,812,053)
              
Income tax expense  —   —   -   - 
              
Loss from continuing operations (18,979,675) (186,812,053)
      
Discontinued operations:      
Loss from operations of discontinued operations (16,924) (1,074,869)
Gain on disposition of discontinued operations  1,001,711   1,381,803 
  984,787   306,934 
      
Net loss $(46,442,467) $(7,516,294) $(17,994,888) $(186,505,119)
              
Weighted average common shares outstanding:              
Basic and diluted  118,587,766   43,901,965   159,992,976   4,786,694 
              
Net loss per share:        
Basic and diluted $(0.39) $(0.17)
Net loss per share (basic and diluted):      
Continuing operations $(0.12) $(39.03)
Discontinued operations  0.01   0.06 
 $(0.11) $(38.96)

 

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

 F-32

F-40

 

GBT TECHNOLOGIES INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

 

GOPHER PROTOCOL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

  Nine Months Ended September 30, 
  2018  2017 
       
Cash Flows From Operating Activities:        
Net loss $(46,442,467) $(7,516,294)
Adjustments to reconcile net loss to net cash used in operating activities:        
Depreciation of property and equipment  79,814   6,538 
Amortization of intangible assets  1,029,526   — 
Amortization of debt discount  849,802   221,323 
Change in fair value of derivative liability  2,458,506   (547,188)
Financing cost  134,669   1,655,046 
Shares issued for services  12,831,225   766,500 
Shares issued for buyout of joint venture agreement  11,750,000   — 
Warrants issued for services  7,570,668   4,782,297 
Impairment of assets  7,132,286   — 
Equity loss in Mobiquity Technologies, Inc.  173,648   — 
Changes in operating assets and liabilities:        
Accounts receivable  (814,297)  (734,164)
Inventory  (25,226)  (50,977)
Prepaid expenses  (49,000)  5,248 
Other assets  —   4,977 
Accounts payable and accrued expenses  830,045   541,706 
Unearned revenue  261,726   — 
Due to Guardian, LLC  (612,932)  649,583 
Accrued interest on convertible notes payable  —   — 
Net cash used in operating activities  (2,842,007)  (215,405)
         
Cash Flows From Investing Activities:        
Purchase of property and equipment  (33,208)  (13,021)
Cash paid for acquisitions  (200,000)  — 
Cash paid for investment in Spare  (265,000)  — 
Other  1,979   — 
Net cash used in investing activities  (496,229)  (13,021)
         
Cash Flows From Financing Activities:        
Issuance of convertible notes  1,703,000   250,000 
Repayment of convertible notes  (80,000)  — 
Payment on acquisition note  (567,381)  — 
Issuance of common stock  1,500,000   — 
Net cash provided by financing activities  2,555,619   250,000 
         
Net decrease in cash  (782,617)  21,574 
         
Cash, beginning of period  1,305,062   5,096 
         
Cash, end of period $522,445  $26,670 
         
Cash paid for:        
Interest $36,695  $— 
Income taxes $—  $— 
F-41

Supplemental non-cash investing and financing activities      
Debt discount $1,743,600  $1,060,132 
Transfer of derivative liability to equity $113,287  $— 
Shares issued to reduce notes payable $—  $25,217 
Reclassification of a payable to Guardian LLC to a convertible note payable $—  $660,132 
Accrued interest to convertible note payable $—  $1,756 
Shares issued for equity interest in Mobiquity Technologies, Inc. $9,980,000  $— 
                                                     Total 
  Series B Convertible  Series C Convertible  Series D Convertible  Series G Convertible  Series H Convertible        Stock  Additional     Stockholders’ 
  Preferred Stock  Preferred Stock  Preferred Stock  Preferred Stock  Preferred Stock  Common Stock  Treasury Stock  Loan  Paid-in  Accumulated  Equity/ 
  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Shares  Amount  Receivable  Capital  Deficit  (Deficit) 
Balance, December 31, 2018  45,000  $-   700  $-   -   -   -  $-   -  $-   1,822,243  $3,822  $1,040  $(643,059) $-  $81,306,958  $(66,151,332) $14,516,389 
                                                                         
Common stock issued for services  -   -   -   -   -   -   -   -   -   -   9,500   10   -   -   -   235,890       235,900 
Common stock issued for conversion of convertible debt and accrued interest  -   -   -   -   -   -   -   -   -   -   74,762   75   -   -   -   1,420,059   -   1,420,134 
Common stock issued for stock loan  -   -   -   -   -   -   -   -   -   -   200,267   200   -   -   (7,610,147)  7,609,947   -   - 
Common stock issued for penalty  -   -   -   -   -   -   -   -   -   -   59,820   59   -   -   -   975,006       975,065 
Common stock issued for joint venture  -   -   -   -   -   -   -   -   -   -   10,000,000   100   -   -   -   17,899,900       17,900,000 
Common stock issued for cashless exercise of warrants  -   -   -   -   -   -   -   -   -   -   4,566,214   46   -   -   -   (46)      - 
Cancellation of shares for exchange of Mobiquity shares  -   -   -   -   -   -   -   -   -   -   (200,000)  (2)  -   -   -   (797,998)      (798,000)
Series H preferred stock issued for acquisition  -   -   -   -   -   -   -   -   20,000   -   -   -   -   -   -   8,400,000   -   8,400,000 
Stock options issued for services  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   766,804   -   766,804 
Fair value of beneficial conversion feature of converted/debt repaid  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   2,264,578   -   2,264,578 
Relative fair value of warrants issued with convertible debt  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   1,634,760   -   1,634,760 
Fair value of warrants issued  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   120,476,603   -   120,476,603 
Rounding of shares due to stock split  -   -   -   -   -   -   -   -   -   -   3,545   -   -   -   -   -       - 
Net loss  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   (186,505,119)  (186,505,119)
                                                                         
Balance, December 31, 2019  45,000   -   700   -   -   -   -   -   20,000   -   16,536,351   4,310   1,040   (643,059)  (7,610,147)  242,192,461   (252,656,451)  (18,712,886)
                                                                         
Common stock issued for conversion of convertible debt  -   -   -   -   -   -   -   -   -   -   140,138,107   1,401   -   -   -   1,309,678   -   1,311,079 
Common stock issued for joint venture  -   -   -   -   -   -   -   -   -   -   100,000,000   1,000   -   -   -   5,499,000       5,500,000 
Fair value of beneficial conversion feature of converted  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   2,038,392   -   2,038,392 
Net loss  -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   -   (17,994,888)  (17,994,888)
                                                                         
Balance, December 31, 2020  45,000  $-   700  $-   -  $-   -  $-   20,000  $-   256,674,458  $6,711  $1,040  $(643,059) $(7,610,147) $251,039,531  $(270,651,339) $(27,858,303)

 

The accompanying footnotes are an integral part of these unaudited condensed consolidated financial statements.

 F-33

F-42

 

GBT TECHNOLOGIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS

  Years Ended December 31, 
  2020  2019 
Cash Flows From Operating Activities:        
 Net loss $(17,994,888) $(186,505,119)
 Adjustments to reconcile net loss to net cash used in operating activities:        
 Depreciation of property and equipment  46,363   107,095 
 Amortization of intangible assets  -   358,266 
 Amortization of debt discount  4,197,550   6,821,453 
 Change in fair value of derivative liability  1,533,610   (7,290,867)
 Financing cost  1,343,847   4,356,699 
 Shares issued for services  -   235,900 
 Shares issued for penalty  -   975,065 
 Convertible note issued for penalty  242,712   - 
 Warrants issued for services  -   766,804 
 Fair value of warrants issued in accordance with anti-dilution  -   120,476,603 
 Impairment of assets  5,600,000   48,631,534 
 Unrealized (gain) loss on market equity security  621,000   6,525,317 
 Realized gain on disposal of market equity security  474,830   90,683 
 Loss on exchange of assets  1,430,000   - 
 Equity income in investment  -   (631,534)
 Gain on disposition of discontinued operations  (1,001,711)  (1,381,803)
 Convertible note receivable exchanged for services  200,000   1,000,000 
 Gain on settlement of debt      (1,375,556)
 Changes in operating assets and liabilities:        
 Accounts receivable  1,674   (616,084)
 Cash held in trust  172,638   - 
 Prepaid expenses  -   16,000 
 Accounts payable and accrued expenses  2,137,949   1,720,799 
 Unearned revenue  -   (257,848)
 Accrued settlement  -   55,613 
 Due to Guardian, LLC  -   (702,483)
Net cash used in operating activities  (994,426)  (6,623,463)
         
Cash Flows From Investing Activities:        
 Purchase of property and equipment  (4,200)  (17,471)
 Cash paid for investment  -   (1,200,000)
 Cash of discontinued operations  (227,571)  (270,947)
 Cash from the sale of marketable equity security  -   336,000 
Net cash used in investing activities  (231,771)  (1,152,418)
         
Cash Flows From Financing Activities:        
 Issuance of convertible notes  820,958   3,000,000 
 Issuance of notes payable  458,639   3,071,261 
 Payments on notes payable  -   (99,256)
Net cash provided by financing activities  1,279,597   5,972,005 
         
Net increase (decrease) in cash  53,400   (1,803,876)
         
Cash, beginning of period  59,634   1,863,510 
         
Cash, end of period $113,034  $59,634 
         
Cash paid for:        
 Interest $-  $744 
 Income taxes $-  $- 
         
Supplemental non-cash investing and financing activities        
 Debt discount $4,511,883  $3,636,000 
 Transfer of derivative liability to equity $1,899,557  $2,264,578 
 Convertible notes issued for notes payable and accrued interest $3,738,171  $- 
 Common stock issued for convertible notes and accrued interest $1,311,079  $- 

 

GOPHER PROTOCOL, INC.The accompanying footnotes are an integral part of these consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS F-34

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

 

Note 1 -– Organization and Basis of Presentation

 

Organization and Line of Business

 

GBT Technologies Inc. (formerly Gopher Protocol Inc.) (the “Company”, “Gopher”“GBT”, “Gopher Protocol” or “GOPH”“GTCH”) was incorporated on July 22, 2009 under the laws of the State of Nevada. Gopher is a development stage company that is creating and patenting innovative mobile microchip (ICs) and software technologies based on the GopherInsight™ technology platform. The Company also offers prepaid cellular phone minutes for both domesticis targeting growing markets such as development of Internet of Things (IoT) and international carriers. In addition,Artificial Intelligence (AI) enabled networking and tracking technologies, including wireless mesh network technology platform and fixed solutions, development of an intelligent human body vitals device, asset-tracking IoT, and wireless mesh networks. Effective August 5, 2019, the Company offers cellular activation (activating SIM cards with wireless carriers)changed its name from Gopher Protocol Inc. to create additional users (consumers) on those networks and provides check processing, verification and recovery solutions for small to medium sized businesses.GBT Technologies Inc. The Company derived revenues from (i) the provision of IT services to Guardian Patch LLC, a related party (“Guardian LLC”);services; and (ii) from the operations of the assets it acquired in the third quarter of 2017 and the first and second quarters of 2018 that include the sale of phones, phone card products, prepaid cellular phone minutes and cellular activation and (iii) from the licensing of its technology.

 

The unaudited consolidated financial statements are prepared by the Company, pursuant to the rules and regulations of the Securities Exchange Commission (“SEC”). The information furnished herein reflects all adjustments, consisting only of normal recurring adjustments, which in the opinion of management, are necessary to fairly state the Company’s financial position, the results of its operations, and cash flows for the periods presented. Certain information and footnote disclosures normally present in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America were omitted pursuant to such rules and regulations. The results of operations for the nine months ended September 30, 2018 are not necessarily indicative of the results expected for the year ending December 31, 2018.

GopherInsight™ is a patented (with additional patents pending), real time, heuristic (self-learning/artificial intelligence based) global mesh network and asset tracking IoT technology. GopherInsight™ chip and software technologies, if successfully fully developed, are designed to be installed in mobile devices (smartphones, tablets, laptops, etc.), autonomous vehicles, robots, drones, consumer products, as well as other fixed and mobile stand-alone products. It is intended that GopherInsight™ software applications will work in conjunction with GopherInsight™ microchips across mobile operating systems, providing computing power, advanced database management/sharing functionalities and more. The technology under development consists of a smart microchip, mobile application software and supporting software. The system contemplates the creation of a global mesh network.

On March 29, 2016, the Company contributed all of its rights relating to its proprietary microchip that is within a sticky patch package (the “Patch”) to Guardian LLC in consideration of 50% of the profit generated by Guardian LLC and a commitment from Guardian LLC that it is responsible for investing all needed funds for the purpose of developing the Patch and related products to the Patch, as well as funding the working capital needs of the Company. On September 25, 2018, the Company entered into an agreement with Guardian LLC pursuant to which the Company purchased Guardian LLC’s 50% interest previously entered between the parties in March 2016 covering the Guardian Patch, Puzpix and Epsilon. In consideration, the Company issued Guardian 12,500,000 shares of common stock.

On September 1, 2017, the Company entered into an Asset Purchase Agreement with a third party, RWJ Advanced Marketing, LLC, a Georgia corporation. The Company entered into this Asset Purchase Agreement to acquire terminals in approximately 15,000 locations by which the Company will deploy its technology. The operations consist primarily of the sale of phones and phone card products, including PINS for cell minutes, SIM cards for cell minutes, as well as gift cards. The Company incorporated a wholly-owned subsidiary, UGopherServices Corp., to operate the acquired assets.

On March 16, 2018, the Company entered into and closed an asset purchase agreement dated March 1, 2018 with ECS Prepaid LLC (“ECS”), a Missouri limited liability company, pursuant to which the Company purchased certain assets from ECS, including, but not limited to, the processing prepaid platform, servers, POS terminals, customer list, and a processing software program.

On April 2, 2018, the Company entered into and closed an asset purchase agreement with Electronic Check Services Inc. (“Electronic Check”), a Missouri corporation, pursuant to which the Company purchased certain assets from Electronic Check, including, but not limited to, assets associated with software that validates written check authenticity.

F-43

GOPHER PROTOCOL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

On April 2, 2018, the Company entered into and closed an asset purchase agreement with Central State Legal Services Inc. (“CSLS”), a Missouri corporation, pursuant to which the Company purchased certain assets from CSLS, including, but not limited to, assets associated with the a system to recover funds from returned checks.

Basis of Presentation

 

The accompanying consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

Stock Split

On August 5, 2019, the Company effectuated a 1 for 100 reverse stock split. The share and per share information has been retroactively restated to reflect this reverse stock split.

Going Concern 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has an accumulated deficit of $270,651,339 and has a working capital deficit of $27,710,040 as of December 31, 2020, which raises substantial doubt about its ability to continue as a going concern. 

The Company’s ability to continue as a going concern is dependent upon its ability to generate profitable operations in the future and/or obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management has plans to seek additional capital through some private placement offerings of debt and equity securities. These plans, if successful, will mitigate the factors which raise substantial doubt about the Company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts, or amounts and classification of liabilities that might result from this uncertainty. 

Note 2 – Summary of Significant Accounting Policies

Use of Estimates

 

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected. Significant estimates in the accompanying financial statements include useful lives of property and equipment, useful lives of intangible assets, valuation of beneficial conversion feature debt discounts, valuation of derivatives and the valuation allowance on deferred tax assets.

 F-35

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

 

Principles of Consolidation

 

The accompanying consolidated financial statements include the accounts of the Company and its wholly-ownedsubsidiaries; the Company’s 50% owned subsidiaries UGopherServices Corp, sinceGBT BitSpeed Corp. and GBT Tokenize Corp; the date of acquisition (September 1, 2017)Company’s 50% owned subsidiary, Gopher Protocol Costa Rica Sociedad De Responsabilidad Limitada (currently inactive), Ugopherservices Limited (since its date of formation of February 1, 2018), an Englanda wholly owned AltCorp Trading LLC, a Costa Rica company (“AltCorp”) and WalesGreenwich International Holdings, a private limited company that is currently inactive and ECS, Electronic Check and CSLS since their respective dates of acquisition (March 1, 2018, April 2, 2018 and April 2, 2018)Costa Rica corporation (“Greenwich”). All significant intercompany transactions and balances have been eliminated.

 

Cash Equivalents

 

For the purpose of the statement of cash flows, cash equivalents include time deposits, certificate of deposits, and all highly-liquid debt instruments with original maturities of three months or less. As of December 31, 2020, and 2019, the Company did not have any cash equivalents.

 

Accounts ReceivableCash Held in Trust

 

Cash held in trust consists of proceeds from the sale of investments. The Company grants credit to establishments (such as convenience stores) that sellproceeds less the payment of certain expenses are being held in AltCorp’s (the Company’s products under credit terms that it believes are customary in the industry and do not require collateral to support customer receivables. The accounts receivable balances are generally collected within 10 days of the product sale and the Company has minimal bad debts. The Company currently does not provide an allowance for doubtful collections, which is based upon a review of outstanding receivables, historical collection information, and existing economic conditions. Normal receivable terms vary from 7-30 days after the issuance of the invoice and typically would be considered past due when the term expires. Delinquent receivables are written off based on individual credit evaluation and specific circumstances of the customer. The Company’s allowance for doubtful accounts was $0 and $0 at September 30, 2018 and December 31, 2017, respectively.wholly owned subsidiary) attorney trust account. (See Note 4)

Long-Lived Assets

 

Inventory

Inventory is valued at the lower of the inventory’s cost (first in, first out basis) or the current market price of the inventory. Management compares the cost of inventory with its market value and an allowance is made to write down inventory to market value, if lower. At September 30, 2018 and December 31, 2017, all of the Company’s inventory was finished goods inventory which consisted principally of phones and phone card products, including PINS for cell minutes, SIM cards for cell minutes, as well as gift cards.

F-44

GOPHER PROTOCOL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

Property and Equipment

Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows:

Furniture7 years
Computers and equipment3 years
POSA machines3 years

Long-Lived Assets

The Company applies the provisions of ASCFinancial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360,Property, Plant, and Equipment, which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. ASC 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair values are reduced for the cost of disposal. Based on its review at September 30, 2018 and December 31, 2017,2020 and 2019, the Company believes there was no impairment of its long-lived assets.

 

Intangible AssetsMarketable Equity Securities

The Company accounts for marketable equity securities in accordance with ASC Topic 321, Investments – equity securities. Marketable equity securities are reported at fair value based on quotations available on securities exchanges with any unrealized gain or loss being reported as a component of other income (expense) on the statement of operations. The portion of marketable equity security expected to be sold within twelve months of the balance sheet date is reported as a current asset.

 

The Company’s intangible assets were acquiredNote Receivable

Note receivable consists of a promissory note received in connection with the acquisitionsale of certain RWJ assets in 2017,Ugopherservices (see Notes 3, 4 and the acquisition of certain ECS, Electronic Check and CSLS assets in 2018 are being amortized over 60-120 months.17). The Company performs a test for impairment annually. As of September 30, 2018 andnote is due on December 31, 2017, the Company performed the required impairment analysis.2021 and accrues interest at 6% per annum. At September 30, 2018,December 31, 2020, the Company determined that the intangible assets associated with the acquisition of certain RWJ assetsthis note receivable was impairednot collectible and took aan impairment charge to earnings of $5,916,667.$100,000.

 

Goodwill

Goodwill represents the excess of purchase price over the underlying book value of the net assets of the businesses that were acquired. Under accounting requirements, goodwill is not amortized, but is subject to annual impairment tests. The Company recorded goodwill of $950,619 related to its acquisition of certain RWJ assets in 2017, and $646,291, $254,586 and $25,000, respectively, related to its acquisition of certain ECS, Electronic Check and CSLS assets in 2018. At September 30, 2018, the Company determined that the goodwill associated with the acquisition of certain RWJ assets was impaired and took a charge to earnings of $950,619.

Derivative Financial Instruments

 

The Company evaluates all of its agreements to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a weighted-average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within 12 months of the balance sheet date. As of September 30, 2018 and December 31, 2017,2020, the Company’s only derivative financial instrument was an embedded conversion feature associated with convertible notes payable due to certain provisions that allow for a change in the conversion price based on a percentage of the Company’s stock price at the date of conversion. During the year ended December 31, 2019, the convertible notes with embedded conversion features were settled; therefore, there was no derivative liability at December 31, 2019.

 F-36

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

 

Fair Value of Financial Instruments

 

For certain of the Company’s financial instruments, including cash, and equivalents, restricted cash, accounts receivable, advances to suppliers, accounts payable, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities.

 

F-45

GOPHER PROTOCOL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

FASB ASC Topic 820,Fair Value Measurements and Disclosures, requires disclosure of the fair value of financial instruments held by the Company. FASB ASC Topic 825,Financial Instruments, defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

 

●Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

 

●Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets in inactive markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

 

●Level 3 inputs to the valuation methodology us one or more unobservable inputs which are significant to the fair value measurement.

 

The Company analyzes all financial instruments with features of both liabilities and equity under FASB ASC Topic 480,Distinguishing Liabilities from Equity, and FASB ASC Topic 815,Derivatives and Hedging.

 

For certain financial instruments, the carrying amounts reported in the balance sheets for cash and current liabilities, including convertible notes payable, each qualify as a financial instrument, and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.

 

The Company uses Level 2 inputs for its valuation methodology for derivative liabilities as their fair values were determined by using the Black-Scholes-Merton pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.

 

At September 30, 2018 and December 31, 2017,2020 and 2019, the Company identified the following liabilities that are required to be presented on the balance sheet at fair value:

 

 Fair Value Fair Value Measurements at 
 As of December 31, 2020 
Description December 31, 2020 Using Fair Value Hierarchy 
   Level 1 Level 2 Level 3 
Marketable equity security - Surge Holdings, Inc. $649,000  $-  $649,000  $- 
                
Conversion feature on convertible notes $5,262,448  $-  $5,262,448  $- 
 Fair Value                   
 As of Fair Value Measurements at  Fair Value Fair Value Measurements at 
 September 30, September 30, 2018  As of December 31, 2019 
Description 2018 Using Fair Value Hierarchy  December 31, 2019 Using Fair Value Hierarchy 
   Level 1 Level 2 Level 3    Level 1 Level 2 Level 3 
Conversion feature on convertible notes $2,778,052  $  —  $2,778,052  $  — 
                
Total $2,778,052  $—  $2,778,052  $— 
Marketable equity security - Surge Holdings, Inc. $1,000,000  $-  $1,000,000  $- 

 F-37

  Fair Value    
  As of  Fair Value Measurements at 
  December 31,  December 31, 2017 
Description 2017  Using Fair Value Hierarchy 
     Level 1  Level 2  Level 3 
Conversion feature on convertible notes $95,164  $  —  $95,164  $  — 
                 
Total $95,164  $—  $95,164  $— 

F-46

 

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

 

GOPHER PROTOCOL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

Treasury Stock

 

Treasury stock is recorded at cost. The re-issuance of treasury shares is accounted for on a first in, first-out basis and any difference between the cost of treasury shares and the re-issuance proceeds are charged or credited to additional paid-in capital. During 2011,

Stock Loan Receivable

On January 8, 2019, the Company bought back 8 post-split shares (38,000 pre-split)entered into a Stock Pledge Agreement with Latin American Exchange Latinex Casa de Cambio, S.A., a Costa Rica corporation (“Latinex”), to provide that Latinex may maintain its required regulatory capital as required by various regulators. The Company has pledged 200,267 restricted shares of its own shares.common stock valued at $7,610,147 (based on the closing price on the grant date) for a term of three years in consideration of an annual payment of $375,000 paid in quarterly installments of $93,750. In lieu of cash payment, Latinex may pay the Company in virtual currency of WISE Network S.A. valued at a 50% discount of its offering price of $10 per token. In the event that Latinex’s required capital has decreased below $5,000,000, Latinex is permitted to sell the pledged shares of common stock only in an amount to ensure that Latinex can satisfy the required capital levels. The Company must consent to such sale of the shares of common stock, which may not be unreasonably withheld. Upon expiration of the agreement, the remaining shares of common stock shall be returned to the Company free and clear of all liens. The Company has recorded the value of these shares of common stock as a stock loan receivable which is presented as a contra-equity account in the accompanying consolidated balance sheets. At December 31, 2019, the Company wrote off the accrued interest income as Latinex did not perform any payment and the Company has no mean to enforce this payment. Latinex agreed in principal to return the pledged 200,267 restricted shares to the Company for cancellation. The 200,267 restricted shares have not yet been returned to the Company as of December 31, 2020.

Revenue Recognition

 

Revenue Recognition

ASUAccounting Standards Update (“ASU”) No. 2014-09,, Revenue from Contracts with Customers (“Topic 606”606”), became effective for the Company on January 1, 2018. The Company’s revenue recognition disclosure reflects its updated accounting policies that are affected by this new standard. The Company applied the “modified retrospective” transition method for open contracts for the implementation of Topic 606. Assales are and have been primarily from IT services, sale of phones, phone card products, prepaid cellular phone minutes and cellular activation, and theThe Company hashad no significant post-delivery obligations, this new standard did not result in a material recognition of revenue on the Company’s accompanying consolidated financial statements for the cumulative impact of applying this new standard. The Company made no adjustments to its previously-reported total revenues, as those periods continue to be presented in accordance with its historical accounting practices under Topic 605, Revenue Recognition.

 

Revenue from providing IT services, sale of phones, phone card products, prepaid cellular phone minutes and cellular activation services areis recognized under Topic 606 in a manner that reasonably reflects the delivery of its services and products to customers in return for expected consideration and includes the following elements:as follows:

 

●executed contracts with the Company’s customers that it believes are legally enforceable;
●identification of performance obligations in the respective contract;
●determination of the transaction price for each performance obligation in the respective contract;
●allocation the transaction price to each performance obligation; and
●recognition of revenue only when the Company satisfies each performance obligation.

 

These five elements, as applied to each of the Company’s revenue category, is summarized below:

 

●IT services - revenue is recorded on a monthly basis as services are provided;
●Sale of phones, phone card products, prepaid cellular phone minutes and cellular activation – revenue is recognized at the time of sale to the customer; and
●License fees and Royalties – revenue is recognized based on the terms of the agreement with its customer.

 F-38

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

 

Cost of Goods Sold

Cost of goods sold represents the cost of the phone, phone card products and prepaid cellular phone minutes sold by the Company. Cost of goods sold relates to products sold by the Company’s new acquired acquisitions in September 2017, March 2018 and April 2018.

Unearned revenue

 

Unearned revenue represents the net amount received for the purchase of products that have not seen shipped to the Company’s customers. In 2018, the Company ran a pre-sales campaignefforts for its pet tracker product and received $61,726 in unearned revenue as of September 30, 2018.prepayments for its product. In addition, as of September 30,during 2018, the Company received $200,000 in connection with an intellectual property license and royalty agreement (See Note 12).agreement. At December 31, 2019, the Company determined that the unearned revenue would not likely result in the recognition of revenue; therefore, $249,094 of unearned revenue was reclassified to accrued expenses at December 31, 2020 and 2019.

 

Income Taxes

 

The Company accounts for income taxes in accordance with ASC Topic 740,Income Taxes. ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The Company has no material uncertain tax positions for any of the reporting periods presented.

 

F-47

GOPHER PROTOCOL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

Basic and Diluted Earnings Per Share

 

Earnings per share is calculated in accordance with ASC Topic 260,Earnings Per Share. Basic earnings per share (“EPS”) is based on the weighted average number of common shares outstanding. Diluted EPS is based on the assumptionassumes that all dilutive securities are converted. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Due to the net loss incurred potentially dilutive instruments would be anti-dilutive. Accordingly, diluted loss per share is the same as basic loss for all periods presented. The following potentially-dilutive shares were excluded from the shares used to calculate diluted earnings per share as their inclusion would be anti-dilutive.

 

 September 30, September 30,  December 31, December 31, 
 2018 2017  2020 2019 
Series B preferred stock  3,000   3,000   30   30 
Series C preferred stock  770   770   8   8 
Series D preferred stock  —   66,000,000 
Series H preferred stock  1,000,000   1,000,000 
Warrants  28,410,416   22,093,750   19,643,500   19,654,167 
Convertible notes  4,316,607   12,158,358   481,351,062   1,100,000 
Total  32,730,793   100,255,878   501,994,600   21,754,205 

 

Management’s Evaluation of Subsequent Events

The Company evaluates events that have occurred after the balance sheet date of December 31, 2020, through the date which the consolidated financial statements are issued. Based upon the review, other than described in Note 17 – Subsequent Events, the Company did not identify any recognized or non-recognized subsequent events that would have required adjustment or disclosure in the consolidated financial statements.

 F-39

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

Recent Accounting Pronouncements

  

In June 2018, the FASB issued Accounting Standards Update (“ASU”) ASU 2018-07,Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to nonemployees for goods and services and aligns most of the guidance on such payments to nonemployees with the requirements for share-based payments granted to employees. ASU 2018-07 is effective on January 1, 2019. Early adoption is permitted. The Company is in the process of evaluating the impact of this ASU on its financial statements.

In January 2017,December 2019, the FASB issued ASU 2017-01,2019-12, Business Combinations (Topic 805) ClarifyingSimplifying the Definition of a BusinessAccounting for Income Taxes which amends ASC 740 Income Taxes (ASC 740). The amendmentsThis update is intended to simplify accounting for income taxes by removing certain exceptions to the general principles in this update clarify the definition of a business with the objective of addingASC 740 and amending existing guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposalsimprove consistent application of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. The guidance is effective for interim and annual periods beginning after December 15, 2017 and should be applied prospectively on or after the effective date. The adoption of this ASU did not have an impact on its financial statements.

In November 2016, the FASB issued ASU 2016-18,Statement of Cash Flows (Topic 230): Restricted Cash, which requires restricted cash to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash flows reconciles to the balance sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet. ASU 2016-18 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The adoption of this ASU did not have an impact on its financial statements.

In October 2016, the FASB issued ASU 2016-16,Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. ASU 2016-16 is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. The Company is in the process of evaluating the impact of this ASU on its financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 provides guidance for targeted changes with respect to how cash receipts and cash payments are classified in the statements of cash flows, with the objective of reducing diversity in practice. ASU 2016-15 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. The adoption of this ASU did not have an impact on its financial statements.

In February 2016, the FASB issued ASU 2016-02,Leases (Topic 842). ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. ASU 2016-02ASC 740. This update is effective for fiscal years beginning after December 15, 20182021.  The guidance in this update has various elements, some of which are applied on a prospective basis and interim periods in fiscal years beginning after December 15, 2018,others on a retrospective basis with early adoptionearlier application permitted.  The Company is in the process ofcurrently evaluating the impacteffect of this ASU on its financial statements.

F-48

GOPHER PROTOCOL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

In May 2014, the FASB issued ASU No. 2014-09,Revenue from Contracts with Customers.  ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle-based approach for determining revenue recognition.  ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract.  The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract.  ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017.   Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein.  Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption.  The Company adopted this ASU beginning on January 1, 2018 and used the modified retrospective method of adoption. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements and related disclosures.

 

Management does not believe that any recently issued, but not yet effective, accounting standards could have a material effect on the accompanying consolidated financial statements. As new accounting pronouncements are issued, we will adopt those that are applicable under the circumstances.

 

Note 3 - Acquisitions– Discontinued Operations; Note Receivable

 

On March 16, 2018,September 18, 2020, the Company entered into a Purchase and closedSale Agreement with Mr. LightHouse LTD., an asset purchase agreement dated March 1, 2018 with ECS, a Missouri limited liability company,Israeli corporation (“MLH”) pursuant to which the Company purchasedagreed to sell and assign to MLH, effective July 1, 2020 all the shares, and certain assets from ECS, including, but not limited to,specified liabilities, of Ugopherservices Corp. (“UGO”), a wholly owned subsidiary of the processing prepaid platform, servers, POS terminals, customer list, a processing software program and goodwill,Company, in consideration of $1,100,000 of which $100,000 was paid on the Closing Date and the balance is to be paid pursuant tothrough the delivery of a secured promissory note payable to the Company (the “Note”), upon the terms and subject to the limitations and conditions set forth in the amount of $1,000,000. In addition,Note. There is no material relationship between the Company, issued 500,000 shares of common stock ofon one hand, and MLH, on the other hand. At December 31, 2020, the Company determined that this note receivable was not collectible and warrants to purchase 500,000 sharestook an impairment charge of common stock that are exercisable for a period of five years at a fixed exercise price of $1.85 per share. The note is secured by the assets acquired by the Company from ECS and the Company is required to make ten equal principal payments of $100,000 commencing on April 15, 2018. The Company may prepay the note at any time without penalty.$100,000.

 

On April 2, 2018,September 30, 2019, the Company entered into and closed an asset purchase agreementAsset Purchase Agreement with Electronic Check,Surge Holdings, Inc., a MissouriNevada corporation (“SURG”) pursuant to which the Company purchasedagreed to sell and assign to SURG all the assets and certain assets fromspecified liabilities of its ECS Prepaid, Electronic Check including, but not limited to, assets associated with software that validates written check authenticity. The purchase price was $75,000 in cash,Services and the Company issued 250,000Central State Legal Services businesses in consideration of $5,000,000 to be paid through the issuance of 3,333,333 shares of SURG’s common stock and a convertible promissory note in favor of the Company and warrants to purchase 250,000in the principal amount of $4,000,000. The 3,333,333 shares of SURG’s common stock thathave been pledged to a third party for providing working capital needs of the Company (See Note 8).

UGO, ECS Prepaid, Electronic Check Services and the Central State Legal Services businesses have been presented as discontinued operations on the accompanying financial statements.

 F-40

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

The operating results for UGO, ECS Prepaid, Electronic Check Services and the Central State Legal Services have been presented in the accompanying consolidated statements of operations for the years ended December 31, 2020 and 2019 as discontinued operations and are exercisable for a periodsummarized below:

  Years Ended December 31, 
  2020  2019 
Revenue $8,291,842  $42,998,336 
Cost of revenue  7,900,122   41,596,118 
Gross Profit  391,720   1,402,218 
Operating expenses  408,644   2,477,084 
Loss from operations  (16,924)  (1,074,866)
Other income (expenses)  -   (3)
Net loss $(16,924) $(1,074,869)

The assets and liabilities of five yearsthe discontinued operations at a fixed exercise price of $2.70 per share.December 31, 2020 and 2019 are summarized below:

  December 31,  December 31, 
  2020  2019 
       
Current assets $-  $89,123 
Property and equipment  -   117,686 
Total assets $-  $206,809 
         
Current liabilities $-  $1,151,073 
Total liabilities $-  $1,151,073 

Note 4 – Investment in Surge Holdings, Inc. and Mobiquity Technologies, Inc.; Convertible Note Receivable

Surge Holdings, Inc.

 

On April 2, 2018,September 30, 2019, the Company entered into and closed an asset purchase agreementAsset Purchase Agreement with CSLS,Surge Holdings, Inc., a MissouriNevada corporation (“SURG”) pursuant to which the Company purchasedagreed to sell and assign to SURG, all the assets and certain assets from CSLS, including, but not limitedspecified liabilities, of its ECS Prepaid, Electronic Check Services and the Central State Legal Services businesses in consideration of $5,000,000 to assets associated withbe paid through the issuance of 3,333,333 shares of SURG’s common stock (See Note 8 for pledge to third party) and a system to recover funds from returned checks, for $25,000convertible promissory note in cash.

The Company entered into these asset purchase agreements to acquire the software needed to process transactions for its prepaid business, and to acquire additional terminal locations by whichfavor of the Company will deploy its technology.

A summaryin the principal amount of the purchase price and the purchase price allocations at fair value is shown below.

     Electronic       
  ECS  Check CSLS  Total 
             
Purchase price                
                 
Cash $100,000  $75,000  $25,000  $200,000 
Shares of common stock  1,010,000a  695,000c  —   1,705,000 
Secured promissory note  960,000   —   —   960,000 
Warrants  992,958b  682,919d  —   1,675,877 
  $3,062,958  $1,452,919  $25,000  $4,540,877 
Allocation of purchase price                
Property and equipment $50,000  $15,000  $—  $65,000 
Technology  826,667   413,333   —   1,240,000 
Tradename  546,667   273,333   —   820,000 
Customer relationships  993,333   496,667   —   1,490,000 
Goodwill  646,291   254,586   25,000   925,877 
Purchase price $3,062,958  $1,452,919  $25,000  $4,540,877 

F-49

GOPHER PROTOCOL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

a. the fair value of the 500,000$4,000,000 (the “SURG Note”), convertible into SURG’s shares of common stock was calculated based onfollowing the closing marketsix-month anniversary of the issuance date. The conversion price of the Company’sSURG Note is the volume weighted-average price of SURG’s common stock atover the date of acquisition.

b.20 trading days prior to the fair value ofconversion; provided, however, the 500,000 warrants was determined usingconversion price shall never be lower than $0.10 or higher than $0.70. The Company has agreed to restrict its ability to convert the Black-Scholes option pricing model with the following assumptions:

●Expected life of 5.0 years
●Volatility of 210%;
●Dividend yield of 0%;
●Risk free interest rate of 2.65%

c. the fair value of the 250,000SURG Note and receive shares of common stock was calculated basedsuch that the number of shares of common stock held by it in the aggregate and its affiliates after such conversion does not exceed 4.99% of the then issued and outstanding shares of common stock. The SURG Note is payable by SURG to the Company on the closing market price18-month anniversary of the issuance date and does not bear interest.

On or about June 23, 2020, the Company and AltCorp entered into agreements with SURG and Glen Eagles Acquisition LP (“Glen”) regarding the $4,000,000 SURG Note for which the SURG Note has been converted in full into 5,500,000 restricted stock of SURG (“Issued Shares”) along with an additional 22,000,000 SURG shares reserved for the benefit of the Company’s common stock atsubsidiary as a true up of shares to secure the date of acquisition.

d. the fair value of the 250,000 warrants was determined usingIssued Shares as $2,750,000. Additional shares will be issued if the Black-Scholes option pricing modeloriginal 5,500,000 are worth less than $2,750,000 on June 23, 2021. The Company agreed that the Issued Shares will be restricted for a year. As a result of the exchange of $2,750,000 of the SURG Note for 5,500,000 shares of SURG common stock, the Company recognized a loss of $1,430,000. See additional settlement entered into with the following assumptions:SURG on January 1, 2021 in Note 17.

 F-41

 

●Expected life of 5.0 yearsGBT TECHNOLOGIES INC.
●Volatility of 210%;NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
●Dividend yield of 0%;
●Risk free interest rate of 2.65%For the Years Ended December 31, 2020 and 2019

 

The revenue fromGlen converted in full its $1,000,000 convertible note that was issued by the acquisitionCompany on July 8, 2019, plus $50,000 of assets included inaccrued interest into $1,050,000 of a SURG Note via an assignment of a portion ($1,050,000 of a $4,000,000 face value) of the results$4,000,000 SURG Note. In addition, the Company entered into a consulting agreement with Glen for which the Company shall pay to Glen $200,000 via an assignment of operations froma portion ($200,000 of a $4,000,000 face value) of the date of acquisition to September 30, 2018 was $18,877,936.$4,000,000 SURG Note. (See Note 8).

 

On or about June 23, 2020, Stanley Hills LLC (“Stanley”) which holds a pledge of 3,333,333 shares of SURG common stock (See Note 8) via its manager/member (“Stanley’s Member”), acting as an agent for the Company, entered into an agreement with SURG, its transfer agent and an escrow officer for which it was agreed that 3,333,333 SURG shares will be cancelled for consideration of up to $700,000. Between sales to SURG and to a third party, the amount of $575,170 was received into a lawyer’s trust account for the benefit of AltCorp, and 3,333,333 of SURG shares have been sent for cancelation. The unaudited pro forma information below present statementlawyer’s trust account balance is $402,532 as of operations dataDecember 31, 2020.

On August 12, 2020, the Company and its subsidiary, AltCorp, entered into a new pledge agreement with Stanley, where 5,500,000 SURG shares been pledged to Stanley to secure the debt payable by the Company to Stanley as ifwell as mitigate the acquisitiondamages allegedly created by SURG.

On November 4, 2020, Altcorp and Stanley filed an Ex Parte Motion In the District Court, Clark County, Nevada (Case No: A-20-823039-B, in Dep No: 43) to appoint receiver and issue a temporary restraining Order against Surge and its transfer agent for alleged defaults on prior exchange agreement. As court entered an order minute granting in part AltCorp motion, the parties entered on December 4, 2020 an interim agreement which set the material terms of assets had taken placethe settlement. A final settlement was achieved per the interim agreement terms on January 1, 2017.

  Nine Months Ended September 30, 
  2018  2017 
Sales $42,270,074  $24,733,037 
Cost of goods sold  40,554,398   23,968,637 
Gross profit  1,715,676   764,400 
Operating expenses  44,430,055   7,309,785 
Loss from operations  (42,714,379)  (6,545,385)
Net loss  (46,486,072)  (7,887,893)
Loss per share  (0.39)  (0.18)

Note 4 - Property and Equipment, Net2021.

 

Property and equipmentAs of December 31, 2020, the Company’s investment in SURG consisted of the following as5,500,000 shares of September 30, 2018 and December 31, 2017:

  September 30,  December 31, 
  2018  2017 
       
Furniture $33,739  $33,740 
Computers and equipment  62,662   22,816 
POSA machines  312,328   253,965 
   408,729   310,521 
Less accumulated depreciation  (127,253)  (47,439)
Property and equipment, net $281,476  $263,082 

F-50

GOPHER PROTOCOL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)SURG common stock which was valued at $649,000. (See Note 17 for Subsequent Events)

 

Depreciation expense for the nine months ended September 30, 2018 and 2017 was $79,814 and $6,538 respectively.

Note 5 – Intangible Assets, Net

The following are the intangible assets at September 30, 2018 and December 31, 2017:

  September 30  December 31, 
  2018  2017 
Leased locations $—  $7,000,000 
Technology  1,240,000   — 
Tradename  820,000   — 
Customer relationships  1,490,000   — 
   3,550,000   7,000,000 
Less accumulated amortization  (279,526)  (333,333)
Intangible assets, net $3,270,474  $6,666,667 

Intangible assets are being amortized as follows: Leased locations - 84 months; Technology – 60 months; and Tradename and Customer relationships – 120 months.

Amortization expense for the nine months ended September 30, 2018 and 2017 was $1,029,526 and $0, respectively.

At September 30, 2018, the Company determined that the intangible assets associated with the acquisition of certain RWJ assets was impaired and took a charge to earnings of $5,916,667.

The estimated future amortization expense related to intangible assets is as follows:

Twelve months ending
September 30,		   
2019 $479,000 
2020  479,000 
2021  479,000 
2022  479,000 
2023  479,000 
Thereafter  875,474 
  $3,270,474 

Note 6 – Investment in Mobiquity Technologies, Inc.Inc (Divested in 2019).

 

On September 4, 2018, the Company and Mobiquity Technologies, Inc., a New York corporation (“Mobiquity”) entered an agreement pursuant to which the parties exchanged equity interest in each of the companies. In accordance with the agreement, the Company received 1,000 shares of Mobiquity’s restricted Series AAAA Preferred Stock (the “Mobiquity Preferred Stock”) in consideration of Company’s concurrent sale and issuance to Mobiquity of 10,000,000 shares of Company’s common stock. The shares of Mobiquity Preferred Stock are convertible into an aggregate of up to 100,000,000 shares of Mobiquity common stock (the “Mobiquity Common Stock”) and 150,000,000 common stock purchase warrants (the “Mobiquity Warrants”). The Mobiquity Warrants shall have a term of 5-years5 years from the date of grant and shall be exercisable at a price of $0.12 per share and the shares of Mobiquity Preferred Stock shall not be convertible into shares of Mobiquity Common Stock and the Mobiquity Warrants shall not be contemporaneously granted until after Mobiquity’s Board of Directors and stockholders shall have increased the authorized number of shares of Mobiquity’s common stock to a number sufficient to accommodate a reserve in the Company’s favor of 250,000,000 shares of Mobiquity’s common stock. The Mobiquity Preferred Stock shall have immediate voting rights equal to the number of shares of Mobiquity Common Stock into which they may be converted, not including the shares of Mobiquity’s common stock underlying the Mobiquity Warrants.

On November 19, 2018, the Company and Mobiquity entered into an Amendment and Exercise Letter waiving the requirement that Mobiquity’s Board of Directors and stockholders increase the authorized number of shares of Mobiquity’s common stock to a number sufficient to accommodate a reserve in the Company’s favor of 250,000,000 shares of Mobiquity’s common stock prior to the conversion of the Mobiquity Preferred Stock or exercise of the Mobiquity Warrants. In addition, the Company converted 200 shares of Mobiquity Preferred Stock resulting in the issuance to the Company by Mobiquity of 20,000,000 shares of Mobiquity Common Stock and 30,000,000 Mobiquity Warrants. The Company exercised the 30,000,000 Mobiquity Warrants at an exercise price of $0.12 per share of common stock, payable through of the issuance to Mobiquity of 10,000,000 shares of common stock of the Company.

 F-42

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

In addition, the Company issued 20,000 shares of common stock to Glen Eagles Acquisition LP (“Glen”) in consideration of its consulting services associated with the negotiation of the number of shares of common stock to be delivered to Mobiquity upon exercise of the Mobiquity Warrants.

As a result of thisthe transaction on September 4, 2018, the Company hashad an approximate 21% interest in Mobiquity.

F-51

GOPHER PROTOCOL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

The Company accountsMobiquity and began to account for its investment in Mobiquity using the equity method of accounting. During the fourth quarter of 2018, Mobiquity issued additional shares of common stock resulting in the Company’s ownership in Mobiquity dropping to approximately 18% at December 31, 2018. The Company determined that during the fourth quarter of 2018 that it did not exercise significant influence over Mobiquity due to its decreased ownership percentage and the Company’s intent to begin selling shares of Mobiquity common stock that will further decrease its ownership percentage. As a result, during the fourth quarter of 2018 the Company began accounting for its investment in Mobiquity as a marketable equity security.

 

Information regardingOn May 10, 2019, the Company entered into a Membership Interest Purchase Agreement with Glen pursuant to which the Company acquired 49% of the membership interest in Advangelists, LLC (the “AVNG Interest”) in consideration of the assumption of a Promissory Note payable by Glen to the former owners of the AVGN Interest with an outstanding balance of $7,475,000 (the “AVNG Note”) and cancellation of an outstanding Promissory Note payable by Glen to the Company in the amount of $1,200,000 originally issued on March 1, 2019. Concurrently, the Company entered into a Membership Interest Purchase Agreement with Mobiquity pursuant to which the Company sold the AVNG Interest to Mobiquity in consideration of Mobiquity assuming the AVNG Note and Mobiquity amending the terms of the Remaining Mobiquity Warrant providing for cashless exercise.

The Company paid 60,000,000 of its Mobiquity shares as partial consideration for the purchase of GBT Technologies, S. A. (see Note 5).

On August 6, 2019, Mobiquity delivered a counter signed letter agreement dated August 2, 2019 pursuant to which the Company exchanged 120,000,000 Mobiquity Warrants into 20,000,000 shares of Mobiquity common stock, which resulted in the Company holding 60,000,000 shares of Mobiquity common stock.

On September 10, 2019, the Company entered into (i) a Stock Purchase Agreement with Mobiquity pursuant to which the Company agreed to return 15,000,000 shares of Mobiquity common stock to Mobiquity in exchange for 110,000 shares of common stock of the Company, (ii) a Stock Purchase Agreement with Marital Trust GST Subject U/W/O Leopold Salkind (“Salkind Trust”) pursuant to which the Company agreed to sell 7,000,000 shares of Mobiquity common stock to Salkind Trust in consideration of $67,200, (iii) Stock Purchase Agreement with Dr. Gene Salkind (“Salkind”) pursuant to which the Company agreed to sell 28,000,000 shares of Mobiquity common stock to Salkind in consideration of $268,000 and (iv) a Stock Purchase Agreement with Deepanker Katyal (“Katyal”) pursuant to which the Company agreed to sell 10,000,000 shares of Mobiquity common stock to Katyal in consideration of 90,000 shares of common stock of the Company. The closing of the agreements occurred on September 13, 2019. As a result of these transactions, the Company realized a loss on the sale of Mobiquity common stock of $3,673,595. At December 31, 2020 and December 31, 2019, the Company owned no shares of Mobiquity common stock.

Note 5 – Equity Investment in GBT Technologies, S.A.

On June 17, 2019, the Company, AltCorp Trading LLC, a Costa Rica company and a wholly-owned subsidiary of the Company (“AltCorp”), GBT Technologies, S.A., a Costa Rica company (“GBT-CR”) and Pablo Gonzalez, a shareholder’s representative of GBT-CR (“Gonzalez”), entered into and closed an Exchange Agreement (the “GBT Exchange Agreement”) pursuant to which the parties exchanged certain securities. In accordance with the Exchange Agreement, AltCorp acquired 625,000 shares of GBT-CR representing 25% of its issued and outstanding shares of common stock from Gonzalez in exchange for the issuance of 20,000 shares of Series H Convertible Preferred Stock of the Company and a Convertible Note in the principal amount of $10,000,000 issued by the Company (the “Gopher Convertible Note”) as well as the transfer and assignment of a Promissory Note payable by Gopher Protocol Costa Rica Sociedad De Responsabilidad Limitada to the Company in the principal amount of $5,000,000 dated February 6, 2019 (of which the underlying security for this Promissory Note is 30,000,000 restricted shares of common stock of Mobiquity) and 60,000,000 restricted shares of common stock of Mobiquity.

 F-43

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

The Gopher Convertible Note bears interest of 6% per annum and is payable at maturity on December 31, 2021. At the election of Gonzalez, the Gopher Convertible Note can be converted into a maximum of 20,000 shares of Series H Preferred Stock. Each share of Series H Preferred Stock is convertible, at the option of the holder but subject to the Company increasing its authorized shares of common stock, into such number of shares of common stock of the Company as determined by dividing the Stated Value ($500 per share) by the conversion price ($10.00 per share).  The Series H Preferred Stock has no liquidation preference, does not pay dividends and the holder of Series H Preferred Stock shall be entitled to one vote for each share of common stock that the Series H Preferred Stock may be convertible into. Upon conversion of the Gopher Convertible Note and the 20,000 shares of Series H Preferred Stock, Gonzalez would be entitled to less than 50% of the resulting outstanding shares of common stock of the Company following conversion in full and, as a result, such transaction is not considered a change of control.

GBT-CR is in the business of the strategic management of BPO (Business Process Outsourcing) digital communications processing for enterprises and startups, distributed ledger technology development, AI development and fintech software development and applications.

The Company accounted for its investment in GBT-CR using the equity method of accounting; however, in 2020, the Company owned less than 20% of and exercised no control over GBT-CR; therefore, this investment is currently accounted for under the cost method. Moreover, on March 19, 2020, California Governor Gavin Newsom issued a stay at home order to protect the health and well-being of all Californians and to establish consistency across the state in order to slow the spread of COVID-19. California was therefore under strict quarantine control and travel has been severely restricted, resulting in disruptions to work, communications, and access to files (due to limited access to facilities). The stay at home order was lifted in California only on January 25, 2021. As such, the Company was unable to access or to contact GBT-CR on an on-going basis, and cannot get information about GBT-CR.

At December 31, 2019, the Company evaluated the carrying amount of this equity investment and determined that this investment was fully impaired and as a result an impairment charge of $30,731,534 was taken.

Note 6 – Investment in Joint Venture

On March 6, 2020, the Company through Greenwich, entered into a Joint Venture and Territorial License Agreement (the “Tokenize Agreement”) with Tokenize-It, S.A. (“Tokenize”), which is owned by a Costa Rica Trust represented by Pablo Gonzalez (“Gonzalez”). Gonzalez also represents Gonzalez Costa Rica Trust, which holds a note in the principal amount of $10,000,000 and is also a shareholder of the Company. Under the Tokenize Agreement, the parties formed GBT Tokenize Corp., a Nevada corporation (“GBT Tokenize”). The purpose of GBT Tokenize is to develop, maintain and support source codes for its proprietary technologies including advanced mobile chip technologies, tracking, radio technologies, AI core engine, electronic design automation, mesh, games, data storage, networking, IT services, business process outsourcing development services, customer service, technical support and quality assurance for business, customizable and dedicated inbound and outbound calls solutions, as well as digital communications processing for enterprises and startups (“Technology Portfolio”), throughout the State of California. Upon generating any revenue from the Technology Portfolio, the Joint Venture will earn the first right of refusal for other territories.

Tokenize shall contribute the services and resources for the nine months ended September 30, 2018 is below:development of the Technology Portfolio to GBT Tokenize. The Company shall contribute 100,000,000 shares of common stock of the Company (“GBT Shares”) to GBT Tokenize. Tokenize and the Company will each own 50% of GBT Tokenize. The Company pledged its 50% ownership in GBT Tokenize and its 100% ownership of Greenwich to Tokenize to secure its Technology Portfolio investment. The Company shall appoint two directors and Tokenize shall appoint one director of GBT Tokenize.

 

Current assets $299,179 
Total assets  14,016,179 
Current liabilities  17,234,537 
Total liabilities  17,234,537 
Preferred stock  11,552,513 
Total stockholders’ deficit  (14,770,871)
     
Revenue $453,717 
Cost of revenue  543,096 
Operating expenses  4,692,146 
Other expenses  18,277,503 
Loss from continuing operations  (23,059,028)

In addition, GBT Tokenize and Gonzalez entered into a Consulting Agreement in which Gonzalez is engaged to provide services in consideration of $33,333 per month payable quarterly which may be paid in shares of common stock calculated by the amount owed divided by the Company’s 10-day VWAP. Gonzalez will provide services in connection with the development of the business as well as GBT Tokenize’s capital raising efforts. The term of the Consulting Agreement is two years. The closing of the Tokenize Agreement occurred on March 9, 2020.

 F-44

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

 

Via this Joint Venture the parties commenced development of a development of an intelligent human vital signs’ device, suggested named qTerm. The platform is an expansion of the existing license agreement with GBT Tokenize Corp., which provided GBT Tokenize Corp. with an exclusive territory of California to develop certain of the Company’s technology. As the nature of the platform cannot be restricted only to California, the Company’s joint venture GBT Tokenize Corp. will be compensated with additional two hundred million shares of the Company to strengthen its funding, subject to board approval. A provisional patent application for the qTerm Medical Device was filed on March 30, 2020 with the USPTO. The application has been assigned serial number 63001564. The Joint Venture completed successfully the first prototype. There is no guarantee that the Company will be successful in researching, developing or implementing this product into the market. In order to successfully implement this concept, the Company will need to raise adequate capital to support its research and, if successfully researched, developed and granted regulatory approval, the Company would need to enter into a strategic relationship with a third party that has experience in manufacturing, selling and distributing this product. There is no guarantee that the Company will be successful in any or all of these critical steps.

At March 31, 2020, the Company evaluated the carrying amount of this joint venture investment and determined that this investment was fully impaired and as a result an impairment charge of $5,500,000 was taken. Although the investment was impaired, the product development is still ongoing.

Note 7 – Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses at December 31, 2020 and 2019 consist of the following:

  2020  2019 
Accounts payable $1,045,778  $535,481 
Accrued interest  1,876,005   980,034 
Deposits  249,675   249,094 
Other  182,200   50,000 
  $3,353,658  $1,814,609 

Note 8 – Convertible Notes Payable

 

Convertible notes payable at September 30, 2018 and December 31, 20172020 and 2019 consist of the following:

 

  September 30,  December 31, 
  2018  2017 
Convertible notes payable to Power Up $243,600  $80,000 
Convertible notes payable to Bellridge Capital  1,500,000   — 
Total convertible notes payable  1,743,600   80,000 
Unamortized debt discount  (948,175)  (54,377)
Convertible notes payable $795,425  $25,623 

  December 31,  December 31, 
  2020  2019 
Convertible note payable to GBT Technologies $10,000,000  $10,000,000 
Convertible note payable to Glen Eagle  -   1,000,000 
Convertible note payable to Power Up  -   - 
Convertible notes payable to Redstart Holdings  347,400   - 
Convertible note payable to Stanley Hills  1,009,469   - 
Convertible note payable to Iliad  2,431,841   - 
Total convertible notes payable  13,788,710   11,000,000 
Unamortized debt discount  (362,004)  - 
Convertible notes payable  13,426,706   11,000,000 
Less current portion  (13,426,706)  - 
Convertible notes payable, long-term portion $-  $11,000,000 

 F-45

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

$10,000,000 for GBT Technologies S. A. acquisition

In accordance with the acquisition of GBT-CR the Company issued a convertible note in the principal amount of $10,000,000. The convertible note bears interest of 6% per annum and is payable at maturity on December 31, 2021. At the election of the holder, the convertible note can be converted into a maximum of 20,000 shares of Series H Preferred Stock. Each share of Series H Preferred Stock is convertible, at the option of the holder but subject to the Company increasing its authorized shares of common stock, into such number of shares of common stock of the Company as determined by dividing the Stated Value ($500 per share) by the conversion price ($10.00 per share).  The convertible note is convertible into common stock at a fixed price that was higher than the Company’s common stock on the date of grant, therefore, this convertible note does not contain a beneficial conversion feature. Due to stock split (See Note 1) the conversion feature is substantially not in the money. The parties are in negotiations to address the issue per the Note holder demands to mitigate its damages. There is no guarantee that the Company will be successful in resolving this issue.

Glen Eagles Acquisition LP

On July 8, 2019, the Company entered a Consulting Agreement with Glen Eagles Acquisition LP (“Glen”) as consultant to provide services in connection with the Company’s acquisition of 25% of GBT Technologies, S.A., a Costa Rican corporation (“GBT-CR”). Consultant will provide analysis, interaction with related professional and other services as requested by the Company to integrate and expand capabilities between GBT-CR and the Company. The Company shall pay Glen $1,000,000 through the issuance of a 6% Convertible Note. At the election of Glen, the Convertible Note can be converted into a maximum of 2,000 shares of Series H Preferred Stock. Each share of Series H Preferred Stock is convertible, at the option of the holder but subject to the Company increasing its authorized shares of common stock, into such number of shares of common stock of the Company as determined by dividing the Stated Value ($500 per share) by the conversion price ($10.00 per share).  The Series H Preferred Stock has no liquidation preference, does not pay dividends and the holder of Series H Preferred Stock shall be entitled to one vote for each share of common stock that the Series H Preferred Stock may be convertible into. In addition, the Company entered into an Amendment of a Common Stock Purchase Warrant held by Glen to acquire nine million shares of common stock that had been assigned to Glen by Guardian Patch LLC. Pursuant to the amendment, the Company agreed to provide that the Common Stock Purchase Warrant may be exercised on a cashless basis and provided a beneficial ownership limitation of 4.99%. On or about June 23, 2020, the Company and AltCorp entered into agreements with SURG and Glen Eagles Acquisition LP (“Glen”) into series of agreements regarding the $4,000,000 SURG Note. (See Note 4) Glen converted in full its $1,000,000 convertible note that was issued by the Company on July 8, 2019 plus $50,000 of accrued interest, into $1,050,000 of a SURG Note via an assignment of a portion ($1,050,000 of a $4,000,000 face value) of the $4,000,000 SURG Note. In addition, the Company entered into a consulting agreement with Glen for which the Company shall pay to Glen $200,000 via an assignment of a portion ($200,000 of a $4,000,000 face value) of the $4,000,000 SURG Note. Glen in turn will convert all its $1,250,000 considerations received into 2,500,000 SURG shares (See Note 17).

Power Up Lending Group Ltd.

 

On October 2, 2017,February 18, 2020, the Company entered into a Securities Purchase Agreement with Power Up Lending Group Ltd., an accredited investor (“Power Up”) pursuant to which the Company issued to Power Up a Convertible Promissory Note (the “Power Note No. 1”Note”) in the aggregate principal amount of $80,000.$183,600 for a purchase price of $153,000. The Power Note No. 1 has a maturity date of July 10, 2018May 15, 2021 and the Company has agreed to pay interest on the unpaid principal balance of the Power Note No. 1 at the rate of tensix percent (10%(6%) per annum from the date on which the Power Note No. 1 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Power Note, provided it makes a payment including a prepayment to Power Up as set forth in the Power Note No. 1.

Note. The transactions described above closed on February 19, 2020. The outstanding principal amount of the Power Note No. 1 is convertible at any time and from timemay not be converted prior to time at the election of Power Up during the period beginning on the date that is 180 days following the issue dateIssue Date. Following the 180th day, Power Up may convert the Power Note into shares of the Company’s common stock at a conversion price equal to 61%85% of the lowest trading price with a 15 day15-day look back immediately preceding the date of conversion. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Power Note), the Power Note No. 1 shall become immediately due and payable and the Company shall pay to Power Up, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Power Note. During 2020, the full amount of the Power Note No. 1.($183,600) plus $4,590 of accrued interest was converted into shares of the Company’s common stock.

 F-46

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

 

As of March 6, 2018, the Company has paid off in full all principal, interest and penalties with respect to the Power Up Note No. 1, and there are no further obligations owed with respect to such note.Redstart Holdings Corp.

 

On September 28, 2018,August 4, 2020, the Company entered into a Securities Purchase Agreement with Power UpRedstart Holdings Corp., an accredited investor (“Redstart”) pursuant to which the Company issued to Power UpRedstart a Convertible Promissory Note (the “Power“Redstart Note No. 2”1”) in the aggregate principal amount of $243,600$153,600 for a purchase price of $203,000.$128,000. The PowerRedstart Note No. 21 has a maturity date of December 24, 2019November 3, 2021 and the Company has agreed to pay interest on the unpaid principal balance of the PowerRedstart Note No. 21 at the rate of six percent (6%) per annum from the date on which the PowerRedstart Note No. 21 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the PowerRedstart Note No. 1, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 1. The transactions described above closed on August 5, 2020.

The outstanding principal amount of the Redstart Note No. 1 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 1 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 1), the Redstart Note No. 1 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 1 (In February 2021 Note No. 1 was converted into shares in full – See Note 17).

On September 15, 2020, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 2”) in the aggregate principal amount of $93,600 for a purchase price of $78,000. The Redstart Note No. 2 has a maturity date of September 15, 2021 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 2 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 2 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 2, provided it makes a payment including a prepayment to Power UpRedstart as set forth in the PowerRedstart Note No. 2.

F-52

GOPHER PROTOCOL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

The transactions described above closed on September 16, 2020. The outstanding principal amount of the PowerRedstart Note No. 2 may not be converted prior to the period beginning on the date that is 180 days following the issue date.Issue Date. Following the 180th day, Power UpRedstart may convert the PowerRedstart Note No. 2 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 15 day20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the PowerRedstart Note No. 2), the PowerRedstart Note No. 2 shall become immediately due and payable and the Company shall pay to Power Up,Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the PowerRedstart Note No. 2.

(In March 2021 Note No. 2 was converted into shares in full – See Note 17).

Bellridge Capital LLC

On March 2, 2018,December 9, 2020, the Company entered into and closed a Securities Purchase Agreement with Bellridge Capital,Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 3”) in the aggregate principal amount of $100,200 for a purchase price of $83,500. The Redstart Note No. 3 has a maturity date of December 9, 2021 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 3 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 3 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 3, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 3. The transactions described above closed on December 11, 2020. The outstanding principal amount of the Redstart Note No. 3 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 3 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 3), the Redstart Note No. 3 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 3.

 F-47

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

Stanley Hills LLC

The Company entered into a series of loan agreements with Stanley Hills LLC (“Bellridge”Stanley”) pursuant to which Bellridge invested $750,000 intoit received more than $1,000,000 in loans (the “Debt”) since May 2019 up to December 2019. On February 26, 2020, in order to induce Stanley to continue to provide funding, the Company and Stanley entered into a letter agreement providing that the current note payable balance due to Stanley (See Note 9) in considerationthe amount of a 10% Convertible Debenture (the “Bellridge Debenture”) and common stock purchase warrants to acquire an aggregate of 500,000 shares of common stock exercisable for a period of five years at an exercise price of $2.35 per share. The Bellridge Debenture bears interest of 10% and is payable March 1, 2019. The Bellridge Debenture is convertible$1,214,900 may be converted into shares of common stock of the Company at $0.90 per share subject to antidilution protection. During an event of default, thea conversion price in effect on any conversion date means, as of any conversion date or other date of determination, shall be 35% ofequal to 85% multiplied by the lowest one trading price for the Company’s common stock during the 20 trading Days immediately precedingday period ending on the delivery oflatest complete trading day prior to the conversion date. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a notice of conversion. Bellridgederivative liability. Stanley has agreed to restrict its ability to convert the Bellridge Debenture or exercise its Common Stock Purchase WarrantsDebt and receive shares of common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock. During 2020, Stanley converted $583,889 of its convertible note into 67,282,583 shares of the Company’s common stock, and during 2020, Stanley loaned the Company an additional $547,097. The balance of the Stanley debt at December 31, 2020 was $1,009,469. The Stanley debt is secured via a pledge agreement on the SURG shares (See Note 4).

Iliad Research and Trading, L.P.

 

On March 2, 2018,February 27, 2019, the Company delivered 1,000,000 sharesentered into a note purchase agreement with a third-party investor - Iliad Research and Trading, L.P.(“Iliad”), pursuant to which the Company issued a promissory note for the original principal amount of Common Stock$2,325,000. The promissory note had an original issue discount of $300,000 and the inventor paid consideration of $2,025,000 to an escrow agent.the Company, of which $25,000 was paid for legal expenses. The 1,000,000 escrow shares areoutstanding balance of the promissory note is to be utilized for the purpose of limited price protection. If, beginningpaid on the 7th monthlyone-year anniversary of the issuance of the 1,000,000 escrow shares, Bellridge has sold shares issuable upon conversionnote. Interest on the note accrues at the rate of 10% per annum compounding daily. Subject to the terms and conditions set forth in the note, the Company may prepay all or any portion of the Bellridge Debentureoutstanding balance of the note at a sales priceany time in an amount in cash equal to 120% of the amount repaid. In connection with transactions that generate less than $1.10 per share, then$1,000,000 in proceeds, the Company has agreed to not issue any debt instrument or incurrence of any debt other than trade payables in the ordinary course of business, any securities or agreements to sell common stock with anti-dilution or price reset/reduction features or any securities that number of shares shallare or may be released from escrow to Bellridge asbecome convertible or exercisable into common stock with a limited make whole usingprice that varies with the following formula:

(($1.00 – closing price on 1st day of each monthly anniversary beginning on the 1st day of the 7th month (and continuing monthly until all shares are sold)/closingmarket price of the 1st monthly daycommon stock (collectively, “Restricted Issuance Transaction”). The outstanding balance of the Note will be increased by 5% in question)* number of shares sold at a price less than $1.10.

As long asthe event the Company enters into a Restricted Issuance Transaction that is not in defaultapproved by Iliad. The original issue discount is being amortized to interest expense over the term of the Bellridge Debenture or in breach of the Securities Purchase Agreement, at any time during which Bellridge owns the Bellridge Debenture, Bellridge commits to limit in the aggregate all sales of the shares of common stock issued upon conversion of the Bellridge Debenture and the related Common Stock Purchase Warrant to the greater of not more than (i) 10.00% of the daily trading volume for the Company’s common stock as reported for that day or (ii) $35,000. Breach of this leak-out provision will be considered a material breach by Bellridge.

In connection with the Bellridge Debenture, the Company issued 500,000 warrants to purchase shares of the Company’s common stock with an exercise price of $2.35.

The Company first determined the value of the convertible note and the fair value of the detachable warrants issued in connection with this transaction. The estimated value of the warrants of $827,428 and was determined using the Black-Scholes option pricing model with the following assumptions:

●Expected life of 5.0 years
●Volatility of 210%;
●Dividend yield of 0%;
●Risk free interest rate of 2.65%

The face amount of the convertible note of $750,000 was proportionately allocated to the convertible note and the warrant in the amount of $356,593 and $393,407, respectively. The amount allocated to the warrants of $393,407 was recorded as a discount to the convertible note and as additional paid in capital. The value of the convertible note was then allocated between the convertible note and the beneficial conversion feature, which amounted to $0 and $356,593, respectively. The combined total discount is $750,000, and will be amortized over the year life of the convertiblepromissory note.

F-53

 

GOPHER PROTOCOL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

On April 9, 2018, Bellridge elected to exercise the Bellridge Option, and as suchFebruary 27, 2020, the Company and Bellridge closedIliad entered into an Amendment to the second financing as contemplated by the Securities Purchase Agreement entered with BellridgeIliad Note (See Note 9) pursuant to which Bellridge invested an additional $750,000 into the Company in considerationmaturity date of a 10% Convertible Debenture (the “Second Bellridge Debenture” and together with the First Bellridge Debenture,Iliad Note was extended to August 27, 2020, provided that the “Bellridge Debenture”) and common stock purchase warrants to acquire an aggregate of 500,000 shares of common stock exercisable for a period of five years at an exercise price of $2.35 per share (the “Second Bellridge Warrant” and together with the First Bellridge Warrant, the “Bellridge Warrant”) The Bellridge Debenture bears interest of 10% and is payable one year from issuance. The First Bellridge Debenture and the Second Bellridge Debenture are convertibleDebt may be converted into shares of common stock of the Company at $0.90 per share and $1.00 per share, respectively, subject to limited antidilution protection.

During an event of default, thea conversion price for the Bellridge Debenture in effect on any conversion date means, as of any conversion date or other date of determination, shall be 35% ofequal to 80% multiplied by the lowest trading pricedaily VWAP for the Company’s common stock during the 20 trading Days immediately precedingday period ending on the deliverylatest complete trading day prior to the conversion date, provided for the payment by the Company to Iliad of an extension fee equal to 7.5% of the outstanding balance of the Iliad Note resulting in a new balance of the Iliad Note of $2,765,983 and provided that the Company’s failure to deliver shares of common stock within three trading days of a noticeconversion would result in an event of conversion. Bellridgedefault. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. Iliad has agreed to restrict its ability to convert the Bellridge Debenture or exercise the Bellridge WarrantIliad Note and receive shares of common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 4.99%9.99% of the then issued and outstanding shares of common stock.

In connection with both closings, On July 20, 2020 the Company delivered 1,000,000 shares of common stockand Iliad entered into agreement to an escrow agent. The escrow shares are to be utilized forextend the purpose of limited price protection. If, beginning on the 7th monthly anniversarymaturity of the issuanceIliad Note until February 27, 2021 in consideration of the escrow shares, Bellridge has sold shares issuable upon conversionan extension fee of the Bellridge Debenture at a sales price$1,000. During 2020, Iliad converted $539,000 of less than $1.10 per share, then that number of shares shall be released from escrowits convertible note to Bellridge as a limited make whole using the following formula:

(($1.00 – closing price on 1st day of each monthly anniversary beginning on the 1st day of the 7th month (and continuing monthly until all shares are sold) / closing price of the 1st monthly day in question) * number of shares sold at a price less than $1.10.

As long as the Company is not in default of the Bellridge Debenture or in breach of the Securities Purchase Agreement, at any time during which Bellridge owns the Bellridge Debenture, Bellridge commits to limit in the aggregate all sales of the shares of common stock issued upon conversion of the Bellridge Debenture and the related Common Stock Purchase Warrant to the greater of not more than (i) 10.00% of the daily trading volume for the Company’s common stock as reported for that day or (ii) $35,000. Breach of this leak-out provision will be considered a material breach by Bellridge.

In connection with the Second Bellridge Debenture, the Company issued 500,000 warrants to purchase53,175,795 shares of the Company’s common stock with an exercise price of $2.35.

stock. The Company first determined the valuebalance of the convertible note and the fair valueIliad debt at December 31, 2020 was $2,446,746, including accrued interest of the detachable warrants issued in connection with this transaction. The estimated value of the warrants of $2,037,713 and was determined using the Black-Scholes option pricing model with the following assumptions:

●Expected life of 5.0 years
●Volatility of 210%;
●Dividend yield of 0%;
●Risk free interest rate of 2.60%

The face amount of the convertible note of $750,000 was proportionately allocated to the convertible note and the warrant in the amount of $548,222 and $201,778, respectively. The amount allocated to the warrants of $548,222 was recorded as a discount to the convertible note and as$14,905. (See Note 17 for additional paid in capital. The value of the convertible note was then allocated between the convertible note and the beneficial conversion feature, which amounted to $0 and $201,778, respectively. The combined total discount is $750,000, and will be amortized over the year life of the convertible note.

The Bellridge debentures prohibit the Company from entering into variable rate transactions. The issuance of the Power Up note on September 28, 2018 may have resulted in an event of default on the Bellridge debentures which would result in the conversion price on the Bellridge debentures going from a fixed rate conversion price to a variable conversion price. The variable conversion price in effect until an event of default can be cured is a 35% discount to the lowest trading price 20 days prior to conversion. As of the dateextension of this filing, the Company had not received a notice of default from Bellridge. At September 30, 2018, the Company accounted for the Bellridge debentures using a variable conversion price and recorded a derivative liability of $2,440,719 related to the Bellridge debentures.note)

F-54

 F-48

 

GOPHER PROTOCOL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

 

Discounts on convertible notes

 

The Company recognized interest expense of $849,802$4,149,879 and $6,569,124 during the nine monthsyears ended September 30, 2018December 31, 2020 and 2019, respectively, related to the amortization of the debt discount.discount on convertible notes. The unamortized debt discount at December 31, 2020 was $362,004.

 A roll-forward of the convertible notes payable and debt discount from December 31, 2018 to December 31, 2020 is below:

  Principal Debt  
  Balance Discount Net
Convertible notes payable, December 31, 2018 $3,431,200  $(3,233,124) $198,076 
Issued for cash  3,000,000   —     3,000,000 
Issued for acquisition  10,000,000   —     10,000,000 
Issued for services  1,000,000   —     1,000,000 
Original issue discount  336,000   —     336,000 
Conversion to common stock  (1,357,200)  —     (1,357,200)
Debt discount related to new convertible notes  —     (3,336,000)  (3,336,000)
Reduction in convertible note due to legal settlement  (5,410,000)  —     (5,410,000)
Amortization of debt discounts  —     6,569,124   6,569,124 
Convertible notes payable, December 31, 2019  11,000,000   —     11,000,000 
Issued for cash  820,958   —     820,958 
Accrued interest added to convertible note  204,858   —     204,858 
Exchange of convertible note for other company assets  (1,000,000)  —     (1,000,000)
Notes payable converted to convertible notes  3,980,883   —     3,980,883 
Original issue discount  88,500   —     88,500 
Conversion to common stock  (1,306,489)  —     (1,306,489)
Debt discount related to new convertible notes  —     (4,511,883)  (4,511,883)
Amortization of debt discounts  —     4,149,879   4,149,879 
Convertible notes payable, December 31, 2020 $13,788,710  $(362,004) $13,426,706 

Note 9 – Notes Payable

Notes payable at December 31, 2020 and December 31, 2019 consist of the following:

  December 31,  December 31, 
  2020  2019 
RWJ acquisition note $2,600,000  $2,600,000 
Promissory note to Iliad  -   2,325,000 
Promissory note to Stanley Hills  -   1,046,261 
SBA loan  150,000   - 
Promissory note to Alpha Eda  140,000   - 
Total notes payable  2,890,000   5,971,261 
Unamortized debt discount  -   (47,671)
Notes payable  2,890,000   5,923,590 
Less current portion  (2,741,737)  - 
Notes payable, long-term portion $148,263  $5,923,590 

RWJ Acquisition Note

In connection with the acquisition of RWJ in September 2017, the Company issued a note payable. The note accrues interest at 3.5% per annum, was due on December 31, 2019 and is secured by the assets purchased in the acquisition. The Company contests the validity of the note, as such the note has not been repaid as of December 31, 2020. (See Note 15). The balance of the note at December 31, 2020 is $2,600,000 plus accrued interest of $307,631.

SBA Loan

On June 22, 2020, the Company received a loan from the Small Business Administration under the Economic Injury Disaster Loan program related to the COVID-19 relief efforts. The loan bears interest at 3.75% per annum, requires monthly principal and interest payments of $731 after 12 months from funding and is due 30 2018years from the date of issuance. The balance of the note at December 31, 2020 is $948,175.$150,000 plus accrued interest of $3,067.

 F-49

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

Alpha Eda

On November 15, 2020, the Company issued a promissory note to Alpha Eda, LLC for $140,000. The note accrues interest at 10% per annum, is unsecured and is due on June 30, 2021. The balance of the note at December 31, 2020 is $140,000 plus accrued interest of $1,803.

Iliad

On February 27, 2019, the Company entered into a note purchase agreement with a third-party investor, pursuant to which the Company issued a promissory note for the original principal amount of $2,325,000. The promissory note had an original issue discount of $300,000 and the inventor paid consideration of $2,025,000 to the Company, of which $25,000 was paid for legal expenses. The outstanding balance of the promissory note is to be paid on the one-year anniversary of the issuance of the note. Interest on the note accrues at the rate of 10% per annum compounding daily. Subject to the terms and conditions set forth in the note, the Company may prepay all or any portion of the outstanding balance of the note at any time in an amount in cash equal to 120% of the amount repaid. In connection with transactions that generate less than $1,000,000 in proceeds, the Company has agreed to not issue any debt instrument or incurrence of any debt other than trade payables in the ordinary course of business, any securities or agreements to sell common stock with anti-dilution or price reset/reduction features or any securities that are or may be become convertible or exercisable into common stock with a price that varies with the market price of the common stock (collectively, “Restricted Issuance Transaction”). For every Restricted Issuance Transaction that the Company was funded during 2020, Iliad consent and approval was obtained. The outstanding balance of the Note will be increased by 5% in the event the Company enters into a Restricted Issuance Transaction that is approved by Iliad. The original issue discount in being amortized to interest expense over the term of the promissory note.

On February 27, 2020, the Company and Iliad entered to an Amendment to the Iliad Note pursuant to which the maturity date of the Iliad Note was extended to August 27, 2020, provided that the Debt may be converted into shares of common stock of the Company at a conversion price equal to 80% multiplied by the lowest trading daily VWAP for the common stock during the 20 trading day period ending on the latest complete trading day prior to the conversion date, provided for the payment by the Company to Iliad of an extension fee equal to 7.5% of the outstanding balance of the Iliad Note resulting in a new balance of the Iliad Note of $2,765,983 which has been reclassified to convertible notes payable. (See Note 8). On July 20, 2020 the Company and Iliad entered into agreement to extend the maturity of the Iliad Note until February 27, 2021 in consideration of an extension fee of $1,000. During 2020, Iliad converted $539,000 of its convertible note to 53,175,795 shares of the Company’s common stock. The balance of the Iliad debt at December 31, 2020 was $$2,446,746, including accrued interest of $14,905. (See Note 17 for additional extension of this note)

Stanley Hills

The Company issued promissory notes with Stanley Hills for funds received as working capital. The notes accrue interest at 10% per annum and were due on February 9, 2020. On February 26, 2020, in order to induce Stanley to continue to provide funding, the Company and Stanley entered into a letter agreement (See Note 8) providing that the debt in the amount of $1,214,900 may be converted into shares of common stock of the Company at a conversion price equal to 85% multiplied by the lowest one trading price for the common stock during the 20 trading day period ending on the latest complete trading day prior to the conversion date. The Stanley Hills note was reclassified from notes payable to convertible notes payable (See Note 8).

 F-50

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

Discounts on Promissory Note

The Company recognized interest expense of $47,671 and $252,329 during the years ended December 31, 2020 and 2019, respectively, related to the amortization of the debt discount on promissory notes. The unamortized debt discount at December 31, 2020 was $0.

 

A roll-forward of the convertible notepromissory notes and debt discount from December 31, 20172018 to September 30, 2018December 31, 2020 is below:

 

Convertible notes, December 31, 2017 $25,623 
 Principal Debt  
 Balance Discount Net
Notes payable, December 31, 2018 $2,699,256  $—    $2,699,256 
Issued for cash  1,703,000   3,071,261   —     3,071,261 
Original issue discount  40,600   300,000   —     300,000 
Repayment in cash  (80,000)
Repayment of note payable  (99,256)  —     (99,256)
Debt discount related to new convertible notes  (1,743,600)  —     (300,000)  (300,000)
Amortization of debt discounts  849,802   —     252,329   252,329 
Convertible notes, September 30, 2018 $795,425 
Notes payable, December 31, 2019  5,971,261   (47,671)  5,923,590 
Issued for cash  458,639   —     458,639 
Accrued interest and penalties added to notes payable  440,983   —     440,983 
Notes payable converted to convertible notes  (3,980,883)  —     (3,980,883)
Amortization of debt discounts  —     47,671   47,671 
Notes payable, December 31, 2020 $2,890,000  $—    $2,890,000 

 

Note 8 -10 – Accrued Settlement

In connection with a legal matter filed by the Investor of the $8,340,000 Senior Secured Redeemable Convertible Debenture, on December 23, 2019, in the pending arbitration between the Company and the Investor, an Interim Award was entered in favor of the Investor. On January 31, 2020, the Company was informed that a final award was entered (the “Final Award”). The Final Award affirms that certain sections of the Senior Secured Redeemable Convertible Debenture (the “Debenture”) constitute unenforceable liquidated damages penalties and were stricken. Further, it was determined that the Investor was entitled to recovery of their attorney’s fees. Consequently, the arbitrator awarded Investor an award of $4,034,444 plus interest of 7.25% accrued from May 15, 2019 (presented separately in accounts payable and accrued expenses) and costs in the amount of $55,613. (See Note 15). In connection with this settlement, the Company recognized a gain on the settlement of debt of $1,375,556 in 2019 as the difference between the carrying amount of the debt and the amount awarded by the arbitrator (See Note 15).

Note 11 – Derivative Liability

 

Certain of the convertible notes payable discussed in Note 78 have a conversion price that can be adjusted based on the Company’s stock price which results in the conversion feature being recorded as a derivative liability.

 

The fair value of the derivative liability is recorded and shown separately under current liabilities. Changes in the fair value of the derivative liability is recorded in the statement of operations under other income (expense).

 

The Company uses a weighted average Black-Scholes-MertonBlack-Scholes option pricing model with the following assumptions to measure the fair value of derivative liability at September 30, 2018 and December 31, 2017:2020 and 2019:

 

 September 30, December 31,  December 31, December 31, 
 2018 2017  2020 2019 
          
Stock price $0.95  $1.12  $0.017  $3.080 
Risk free rate  2.59%  1.76%  0.10%   1.75% 
Volatility  165%  175%  275%   650% 
Conversion/ Exercise price $0.51  $0.60  $.008-.0085  $0.800 
Dividend rate  0%  0%  0%   0% 

 

The following table represents the Company’s derivative liability activity for the nine monthsyears ended September 30, 2018:

Derivative liability balance, December 31, 2017 $95,164 
Issuance of derivative liability during the period  337,669 
Fair value of beneficial conversion feature of debt repaid  (113,287)
Change in derivative liability during the period  2,458,506 
Derivative liability balance, September 30, 2018 $2,778,052 

Note 9- Note Payable

In connection with the acquisition RWJ in September 2017, the Company issued a note payable. The note accrues interest at 3.5% per annum is due on December 31, 2019 and is secured by the assets purchased in the acquisition. This note payable of $2,600,000 is classified as long-term in the accompanying consolidated balance sheet.2020:

 

In connection with the acquisition of ECS as discussed in Note 3, the Company issued a note payable. The note is to be repaid in monthly installment payments of $100,000 with the final payment due on January 15, 2019. As of September 30, 2018, seven such payments have occurred. This note with a remaining balance of $392,619 at September 30, 2018 is secured by the assets purchased in the acquisition and is classified as short-term in the accompanying consolidated balance sheet.

Derivative liability balance, December 31, 2018 $3,833,506 
Issuance of derivative liability during the period  5,721,939 
Fair value of beneficial conversion feature of debt converted  (2,264,578)
Change in derivative liability during the period  (7,290,867)
Derivative liability balance, December 31, 2019  - 
Issuance of derivative liability during the period  5,767,230 
Fair value of beneficial conversion feature of debt converted  (2,038,392)
Change in derivative liability during the period  1,533,610 
Derivative liability balance, December 31, 2020 $5,262,448 

 F-51

F-55

 

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

 

GOPHER PROTOCOL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)Note 12 – Stockholders’ Equity

 

Note 10- Stockholders’ Equity

Common Stock

The Board of Directors of the Company approved, on April 13, 2020, a reverse stock split of all of the Company’s Common Stock, pursuant to which every 50 shares of Common Stock of the Company shall be reverse split, reconstituted and converted into one (1) share of Common Stock of the Company (the “Reverse Stock Split”). The Company submitted an Issuer Company Related Action Notification regarding the Reverse Stock Split to FINRA on April 14, 2020.  To effectuate the Reverse Stock Split, the Company filed on April 21, 2020 a Certificate of Change Pursuant to Nevada Revised Statutes (“NRS”) Section 78.209 (the “Certificate of Change”) with the Secretary of State of the State of Nevada subject to FINRA approval. Since this reverse stock split has not yet been approved by the State of Nevada, the financial statements have not been retroactively restated to reflect this reverse stock split. On June 8, 2020 FINRA advised the Company that such request is deficient due to the fact that a holder of an outstanding convertible note of the Company had entered into two settlements with the Securities and Exchange Commission that related to securities laws violations but were in no way related to the Company. As a result, FINRA advised that it is necessary for the protection of investors, the public interest, and to maintain fair and orderly markets that documentation related to the Reverse Stock Split not be processed. The Company appealed the decision made by FINRA on June 15, 2020. On August 4, 2020, FINRA notified the Company that its appeal had been denied.

During the nine monthsyear ended September 30, 2018,December 31, 2020, the Company had the following transactions in its common stock:

 

●issued 66,000,000 shares in connection withan aggregate of 140,138,107 for the conversion of 66,000 sharesconvertible notes of Series D Preferred Stock;$1,306,489 and accrued interest of $4,590; and

 

●issued 2,000,000100,000,000 shares in connectionto GBT Tokenize for a joint venture agreement. The value of the common stock of $5,500,000 was determined based on the closing stock price of the Company’s common stock on the grant date.

During the year ended December 31, 2019, the Company had the following transactions in its common stock:

●issued an aggregate of 9,500 shares to employees and board members as part of their compensation agreements with the conversionCompany. The value of 2,000,000 sharesthe common stock of Series G Preferred Stock;$235,900 was determined based on the closing stock price of the Company’s common stock on the grant date;

 

●issued 250,00074,762 shares to an investor for the conversion of $1,357,200 in convertible notes and $62,934 in accrued interest;

●issued 59,820 shares to an investor for disputed penalties on a consultant for professional services rendered valued at $123,725.convertible debenture. The value of the common stock of $975,065 was determined based on the closing stock price of the Company’s common stock on the grant date;

●issued 200,267 shares to Latinex in order to provide that Latinex may maintain its required regulatory capital as required by various regulators. The Company has recorded the value ($7,610,147) of these shares of common stock as a stock loan receivable which is presented as a contra-equity account in the accompanying consolidated balance sheets. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the dates that the shares earned based on the agreement;grant date;

 

●issued an aggregate of 1,800,00010,000,000 shares to employees and board members as part of their agreementsin connection with the Company.a joint venture with BitSpeed. The value of the common stock of $4,404,500$17,900,000 was determined based on the closing stock price of the Company’s common stock on the date of the respective agreements;

●issued 3,000,000 to a consultant for services related to assisting the Company with the acquisition of the RWJ assets. The 3,000,000 shares were earned when the operations of the RWJ assets produced revenue in excess of $10,000,000. The value of the common stock of $4,590,000 was determined based on the closing stock price of the Company’s common stock on the date of the shares were earned.

●issued aggregate of 1,250,000 shares to a consultant for services rendered valued at $2,715,000. The services, which include business development, analysis, and interaction with professionals, were principally related to assisting the Company with the acquisition of the ECS and Electronic Check assets (see Note 3). The value of the common stock was determined based on the closing stock price of the Company’s common stock on the closing date of acquisition of ECS and Electronic Check;

●issued 500,000 shares for the acquisition of the ECS assets valued at $1,010,000. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the acquisition date;

 

●issued 250,0004,566,214 shares forin connection with the acquisitioncashless exercise of the Electronic Check valued at $695,000. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the acquisition date;6,120,000 warrants; and

 

●issued aggregate of 10,000,000canceled 200,000 shares that were returned in connection with the Company’s sale of its equity interest in Mobiquity valued at $9,980,000investment with Mobiquity. (See Note 6). The value of the common stock was determined based on the closing stock price of the Company’s common stock on the closing date of the Mobiquity transaction;

●issued aggregate of 1,000,000 shares to a consultant for services rendered valued at $998,000. The services, which include business development, analysis, and interaction with professionals, were principally related to assisting the Company with the acquisition of its equity interest in Mobiquity. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the closing date of Mobiquity transaction;

●issued aggregate of 12,500,000 shares to Guardian LLC in connection the termination of its 50% interest in the profits of certain of the Company’s products (See Note 11)4). The shares were valued at $11,750,000 which was determined based on the closingCompany’s stock price of the Company’s common stock aton the date of the agreement; andagreement.

 F-52

 

GBT TECHNOLOGIES INC.
●NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
issued 1,272,726 shares of common stock to an investor for cash proceeds of $1,500,000 (See discussion below).For the Years Ended December 31, 2020 and 2019

 

Eagle Equities, LLCSeries B Preferred Shares

 

On December 29, 2017,November 1, 2011, the Company and certain creditors entered into a Securities PurchaseSettlement Agreement with Eagle Equities, LLC (“Eagle”(the “Settlement Agreement”) pursuant to which Eagle agreed to purchase up to 2,000,000 shares ofwhereby without admitting any wrongdoing on either part, the Company’s common stock for a purchase price of $1,500,000 or $0.75 per share. The closing occurred on December 29, 2017 with respect to the funding of $1,000,000 resulting in the issuance of 1,333,334 shares of common stock (the “First Closing Shares”). Eagle agreed to potentially purchase an additional 666,666 shares of common stock (the “Second Closing Shares”) on or before September 30, 2018 for a purchase price of $500,000 subject to various closing conditions. On March 21, 2018, Eagle purchased an additional 666,666 shares of common stock for a purchase price of $500,000.

F-56

GOPHER PROTOCOL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

The Company placed an aggregate of 2,000,000 shares of common stock (the “Escrow Shares”) in escrow to be utilized for the purpose of limited price protection. If, beginning on the seventh month anniversary of the issuance of the First Closing Sharesparties settled all previous agreements and Second Closing Shares, Eagle has soldresolved any of the First Closing Shares or the Second Closing Shares at a sales price of less than $0.72 per share, then that number of Escrow Shares shall be released from escrow to Eagle as a limited make whole which shall be determined by using the following formula:

($0.72 – Closing Price) / Closing Price) * number of shares sold at a price less than $0.72.

Closing Price is price on the first day of each monthly anniversary beginning on the first day of the 7th month (and continuing monthly until the earlier of January 31, 2019 or until all shares are sold).

The Company shall deposit an additional 2,000,000 shares of common stock into escrow which shares shall only be released to Eagle, if, prior to January 31, 2019 (while Eagle continues to hold shares), the Company issues shares at an issue price of less than $0.30 per share.

The Company also issued Eagle a Common Stock Purchase Warrant to acquire 666,666 shares of common stock exercisable for three years at an exercise price of $2.00 per share (the “Eagle Warrant”). Unless otherwise agreed in writing by both the Company and Eagle, at no time will Eagle exercise any amount of the Eagle Warrant to purchase common stock that would result in Eagle owning more than 9.9% of the common stock outstanding of the Company. The Eagle Warrant contains standard anti-dilution protections.

On May 4, 2018, the Company entered into a Securities Purchase Agreement with Eagle pursuant to which Eagle agreed to purchase up to 1,212,120 shares of the Company’s common stock for an aggregate purchase price of $2,000,000 or $1.65 per share. The closing occurred on May 4, 2018 with respect to the funding of $500,000 resulting in the issuance of 303,030 shares of common stock and on May 25, 2018 with respect to the funding of $500,000 resulting in the issuance of an additional 303,030 shares of common stock. Additional closings of $500,000 for 303,030 shares are scheduled to close on June 15, 2018 and July 5, 2018 each. The additional closings on June 15, 2018 and July 5, 2018 have not occurred.

The Company agreed to place 303,030 shares of common stock each tranche (the “Escrow Shares”) in escrow to be utilized for the purpose of limited price protection. If, beginning on the seventh month anniversary of the closing of each tranche, Eagle has sold any of its shares of common stock at a sales price of less than $1.65 per share, then that number of Escrow Shares shall be released from escrow to Eagle as a limited make whole which shall be determined by using the following formula:

($1.65 – Closing Price) / Closing Price) * number of shares sold at a price less than $1.65.

Closing Price is price on the first day of each monthly anniversary beginning on the first day of the 7th month (and continuing monthly until the earlier of June 4, 2019 or until all shares are sold.

Series D Preferred Shares

Perexisting disputes. Under the terms of the Exclusive LicenseSettlement Agreement, and in consideration of the licensing agreement signed between the Company and Hermes Roll LLC,agreed to issue the Company issued 100,000creditors 45,000 shares of Series DB Preferred Stock of the Company (the “Preferred Shares”). on a pro-rata basis. Following the issuance and delivery of the shares of Series B Preferred Stock to said creditors, as well as surrendering the undelivered shares, the Settlement Agreement resulted in the settlement of all debts, liabilities and obligations between the parties.

The preferred stockSeries B Preferred Stock has a stated value of $ 1,000 based upon$100 per share and is convertible into the cost of the license; due to the holder of license is the related party of the Company. The Preferred Shares have no liquidation rights. The Holder of the Preferred Shares will be entitled to vote on all matters submitted to shareholders of the Company on an as-converted basis. The Preferred Shares haveCompany’s common stock at a conversion price of $0.01 (the “Conversion Price”) and a stated value of $10.00$30.00 per share representing 30 posts split common shares. Furthermore, the Series B Preferred Stock votes on an as converted basis and carries standard anti-dilution rights. These rights were subsequently removed, except in cases of stock dividends or splits.

As of December 31, 2020, and 2019, there were 45,000 Series B Preferred Shares outstanding.

Series C Preferred Shares

On April 29, 2011, GV Global Communications, Inc. (“GV”) provided funding to the Company in the aggregate principal amount of $111,000 (the “Stated Value”“Loan”).  On September 25, 2012, the Company and GV entered into a Conversion Agreement pursuant to which the Company agreed to convert the Loan into 10,000 shares of Series C Preferred Stock of the Company, which was approved by the Board of Directors.

Each share of Series C Preferred ShareStock is convertible, at the option of the Holder,GV, into such number of shares of common stock of the Company as determined by dividing the Stated Value (as defined below) by the Conversion Price.Price (as defined below).  The Conversion Price for each share is equal to a 50% discount to the average of the lowest three lowest closing bid prices of the Company’s common stock during the 10-day trading period prior to the conversion with a minimum conversion price of $0.02.  The stated value is $11.00 per share (the “Stated Value”).  The Series C Preferred Stock has no liquidation preference, does not pay dividends and the holder of Series C Preferred Stock shall be entitled to one vote for each share of common stock that the Series C Preferred Stock shall be convertible into. GV has contractually agreed to restrict its ability to convert the Series C Preferred Stock and receive shares of the Company’s common stock such that the number of shares of the Company’s common stock held by it and its affiliates after such conversion does not exceed 4.9% of the then issued and outstanding shares of the Company’s common stock.

 

On January 23, 2018, Reko Holdings, LLCDuring the year ended December 31, 2014, GV Global Communications, Inc. converted 66,000 shares7,770 of its Series DC Preferred Stock into 66,000,000 restricted120 post-splits. During the third quarter of 2014, the Company received 42 post-split common shares.shares to adjust the shares issued to reflect the amount that both they and the Company believed that they were owed. At December 31, 2020 and 2019, GV owns 700 Series C Preferred Shares.

The issuance of the Series C Preferred Stock was made in reliance upon exemptions from registration pursuant to Section 4(a)(2) under the Securities Act of 1933 and Rule 506 promulgated under Regulation D thereunder.  GV is an accredited investor as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933.

 

As of September 30, 2018 and December 31, 2017,2020, and 2019, there were 700 Series C Preferred Shares outstanding.

 F-53

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

Series D Preferred Shares

As of December 31, 2020, and 2019, there are 0 and 66,0000 shares of Series D Preferred Shares outstanding, respectively.

 

F-57

GOPHER PROTOCOL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

Series G Preferred Shares

On December 29, 2017, Guardian LLC converted all of the principal and interest of the Note, into 2,000,000 shares of Series G Preferred Stock. The Series G Preferred Stock is entitled to vote on an as-converted basis, automatically converts to common stock upon any liquidation, dissolution or winding up and the Company may not declare a dividend until the Series G Preferred Stock has received a dividend. Each share of Series G Preferred Stock is convertible into one shares of common stock of the Company and contain standard anti-dilution rights.

On August 30, 2018, Guardian LLC converted the 2,000,000 shares of Series G Preferred Stock into 2,000,000 shares of common stock.

 

As of September 30, 2018 and December 31, 2017,2020, and 2019, there are 0 and 2,000,0000 shares of Series G Preferred Shares outstanding, respectively.

 

WarrantsSeries H Preferred Shares

 

On June 17, 2019, the Company, AltCorp Trading LLC, a Costa Rica company and a wholly-owned subsidiary of the Company (“AltCorp”), GBT Technologies, S.A., a Costa Rica company (“GBT-CR”) and Pablo Gonzalez, a shareholder’s representative of GBT-CR (“Gonzalez”), entered into and closed an Exchange Agreement (the “GBT Exchange Agreement”) pursuant to which the parties exchanged certain securities. In accordance with the Exchange Agreement, AltCorp acquired 625,000 shares of GBT-CR representing 25% of its issued and outstanding shares of common stock from Gonzalez in exchange for the issuance of 20,000 shares of Series H Convertible Preferred Stock of the Company and a Convertible Note in the principal amount of $10,000,000 issued by the Company (the “Gopher Convertible Note”) as well as additional consideration. The Gopher Convertible Note bears interest of 6% per annum and is payable at maturity on December 31, 2021. At the election of Gonzalez, the Gopher Convertible Note can be converted into a maximum of 20,000 shares of Series H Preferred Stock. Each share of Series H Preferred Stock is convertible, at the option of the holder but subject to the Company increasing its authorized shares of common stock, into such number of shares of common stock of the Company as determined by dividing the Stated Value ($500 per share) by the conversion price ($10.00 per share).  The Series H Preferred Stock has no liquidation preference, does not pay dividends and the holder of Series H Preferred Stock shall be entitled to one vote for each share of common stock that the Series H Preferred Stock may be convertible into. On July 8, 2019, the Company entered a Consulting Agreement with Glen Eagles Glen Eagles Acquisition LP (“Glen”) as consultant to provide services in connection with the Company’s acquisition of 25% of GBT-CR. Consultant will provide analysis, interaction with related professional and other services as requested by the Company to integrate and expand capabilities between GBT-CR and the Company. (See Note 14 for further details.)

As of December 31, 2020, and 2019, there are 20,000 shares of Series H Preferred Shares outstanding.

Warrants

The following is a summary of warrant activity since December 31, 2017:activity.

 

      Weighted          Weighted    
    Weighted Average        Weighted Average    
    Average Remaining Aggregate     Average Remaining Aggregate 
 Warrants Exercise Contractual Intrinsic  Warrants Exercise Contractual Intrinsic 
 Outstanding  Price  Life  Value  Outstanding  Price  Life  Value 
Outstanding, December 31, 2017  22,760,416  $0.55   4.67  $13,640,000 
Outstanding, December 31, 2018  419,167  $61.00   3.48  $- 
Granted  5,650,000   2.17           25,355,000   0.97         
Forfeited  0               -             
Exercised  0               (6,120,000)  0.50         
Outstanding, September 30, 2018  28,410,416  $0.87   3.99  $9,812,000 
Exercisable, September 30, 2018  27,910,416  $0.89   3.98  $9,812,000 
Outstanding, December 31, 2019  19,654,167  $1.57   2.76  $1,111,600 
Granted  -             
Forfeited  (10,667)  256.25         
Exercised  -             
Outstanding, December 31, 2020  19,643,500  $1.50   1.76  $- 
Exercisable, December 31, 2020  19,643,500  $1.50   1.76  $- 

 F-54

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

 

The exercise price for warrant outstanding and exercisable at September 30, 2018:December 31, 2020:

 

Outstanding  Exercisable 
Number of  Exercise  Number of  Exercise 
Warrants  Price  Warrants  Price 
 22,000,000  $0.50   22,000,000  $0.50 
 3,000,000   1.85   3,000,000   1.85 
 666,666   2.00   666,666   2.00 
 93,750   2.25   93,750   2.25 
 1,000,000   2.35   1,000,000   2.35 
 650,000   2.50   650,000   2.50 
 500,000   2.70   500,000   2.70 
 500,000   2.80   —   2.80 
 28,410,416       27,910,416     

During the nine months ended September 30, 2018, the Company issued:

●1,000,000 warrants in connection with two convertible notes payable;

●500,000 warrants as consideration for the acquisition of the ECS assets (see Note 3) valued at $992,958;

●250,000 warrants as consideration for the acquisition of the Electronic Check assets (see Note 3) valued at $682,919;

●2,150,000 warrants to shares to employees and board members as part of their agreements with the Company valued at $5,276,656;

F-58

GOPHER PROTOCOL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

●1,750,000 warrants to a consultant for services rendered. The services, which include business development, analysis, and interaction with professionals, were principally related to assisting the Company with the acquisition of the ECS and Electronic Check assets (see Note 3) valued at $3,661,791.
Outstanding  Exercisable 
Number of  Exercise  Number of  Exercise 
Warrants  Price  Warrants  Price 
 15,880,000  $0.50   15,880,000  $0.50 
 3,000,000   1.85   3,000,000   1.85 
 500,000   2.70   500,000   2.70 
 20,000   31.90   20,000   31.90 
 100,000   50.00   100,000   50.00 
 75,000   75.00   75,000   75.00 
 50,000   100.00   50,000   100.00 
 10,000   235.00   10,000   235.00 
 7,500   250.00   7,500   250.00 
 1,000   280.00   1,000   280.00 
 19,643,500       19,643,500     

 

The fair value of the warrants listed above was determined using the Black-Scholes option pricing model with the following assumptions:

 

 ●December 31,
2019
Risk-free interest rate1.55%
Expected life of 5.0the options3.1 to 3.6 years
Expected volatility●Volatility of 210%;185%
Expected dividend yield●Dividend yield of 0%;
 ●Risk free interest rate of 2.60% to 2.94%0%

 

As a result of the above-mentioned reverse stock split, the Company issued 25,245,000 warrants to purchase shares of the Company’s common stock with exercise prices ranging from $0.50 to $2.70 per share as a result of an anti-dilutive clause in certain of the Company’s outstanding warrants. The fair value of these warrants was $120,476,603 which is shown as a charge to earnings on the accompanying financial statements for the year ended December 31, 2019.

Note 11 -13 – Income Taxes

At December 31, 2020 and 2019, the significant components of the deferred tax assets are summarized below:

  December 31, December 31,
  2020 2019
Deferred income tax asset        
Net operation loss carryforwards $8,232,796  $7,424,074 
Total deferred income tax asset  8,232,796   7,424,074 
Less: valuation allowance  (8,232,796)  (7,424,074)
Total deferred income tax asset $—    $—   

The valuation allowance increased by $808,722 and $1,606,154 in 2020 and 2019, respectively, as a result of the Company generating additional net operating losses. The Company’s net operating loss carryforward of approximately $28,390,000 begin to expire in 2024.

No income tax expense reflected in the consolidated statements of income for the years 2020 and 2019.

 F-55

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

The reconciliation of the effective income tax rate to the federal statutory rate for the years ended December 31, 2020 and 2019 is as follows:

  2020 2019
  Amount Percent Amount Percent
         
Federal statutory rates $(3,757,564)  21.0% $(39,166,075)  21.0%
State income taxes  (1,431,453)  8.0%  (14,920,410)  8.0%
Permanent differences  4,380,295   -24.5%  52,480,331   -28.1%
Valuation allowance against net deferred tax assets  808,722   -4.5%  1,606,154   -0.9%
Effective rate $-   0.0% $-   0.0%

The Company periodically evaluates the likelihood of the realization of deferred tax assets, and adjusts the carrying amount of the deferred tax assets by the valuation allowance to the extent the future realization of the deferred tax assets is not judged to be more likely than not. The Company considers many factors when assessing the likelihood of future realization of its deferred tax assets, including its recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income or loss, the carryforward periods available to the Company for tax reporting purposes, and other relevant factors.

Future changes in the unrecognized tax benefit will have no impact on the effective tax rate due to the existence of the valuation allowance. The Company estimates that the unrecognized tax benefit will not change significantly within the next twelve months. The Company will continue to classify income tax penalties and interest as part of general and administrative expense in its consolidated statements of operations. There were no interest or penalties accrued as of December 31, 2020 and 2019.

Note 14 – Related Parties

 

Related parties are natural persons or other entities that have the ability, directly or indirectly, to control another party or exercise significant influence over the party in making financial and operating decisions. Related parties include other parties that are subject to common control or that are subject to common significant influences. All of

For the year ended December 31, 2020 and 2019, the Company paid a law firm owned by the Company’s revenuechairman $10,000 and $90,000, respectively, for the nine months ended September 30, 2017 and $135,000 of the Company’s revenue for the nine months ended September 30, 2018 is from IT services delivered to a single customer, Guardian LLC, which is a related party to the Company. The revenue generated from Guardian LLC was paid to the Company via a reduction in the amount that the Company owes Guardian LLC that is classified as Due to Guardian LLC in the accompanying consolidated balance sheet. All expenses in the Company’s operations were incurred as a consequence of delivering Company’s obligations under the joint venture agreement between the parties to commercialize the technology that is being developed by the LLC.

legal services. On April 22, 2015, Michael Murray was appointed by the Company as the Chairman of the Board, CEO, and President of the Company.June 5, 2019, said chairman Mr. MurrayRobert Yaspan resigned as an executive officer on September 1, 2017. On March 4, 2015, the Company entered into a Territorial License Agreement with Hermes Roll, LLC (“Hermes”), which is the basis for the Company’s current operations. Mr. Murray was the owner of 9,900 shares of Series D Preferred StockDirector of the Company that was convertible at Mr. Murray’s election into 9,900,000 shares of common stock. To date, Mr. Murray has converted all of his Series D Preferred Stock into common shares of the Company.

On June 30, 2015, the Company appointed Dr. Danny Rittman as Chief Technical Officer and a board member. On August 20, 2015, the Company entered into an agreement with Dr. Rittman pursuant to which the parties agreed that (i) all inventions, improvements and developments made or conceived by Dr. Rittman, either solely or in collaboration with others pertaining to Company’s business, will be the property of Company, and (ii) Dr. Rittman will assign to the Company any and all intellectual property related to the Company’s consumer heuristic technology platform. The agreement with Dr. Rittman was contingent upon the Company funding its commitments per the June 16, 2015 - Amended and Restated Territorial License Agreement. Failure of the Company providing this funding, in full, or partially, will automatically terminate any GOPH ownership of the intellectual properties. Dr. Rittman is the Chief Technology Officer and a director of the Company as well as the Chairman of the Company’s Advisory Board, which is in formation. Dr. Rittman and Mr. Murray jointly own 9,900 shares of Series D Preferred Stock of the Company that is convertible at Dr. Rittman’s or Mr. Murray’s election into 9,900,000 shares of common stock. To date, Mr. Rittman has converted all of his Series D Preferred Stock into common shares of the Company.

On August 20, 2015, the Company entered into an agreement with Dr. Rittman pursuant to which the parties agreed that (i) all inventions, improvements and developments made or conceived by Dr. Rittman, either solely or in collaboration with others pertaining to Company’s business, will be the property of Company, and (ii) Dr. Rittman agreed to assign to the Company any and all intellectual property related to the Company’s consumer heuristic technology platform, subject to certain conditions. The Company has expensed the stated value of that intellectual property in these financial statements.

F-59

GOPHER PROTOCOL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

On or around March 18, 2016 the Company and Dr. Danny Rittman entered into an agreement intended to clarify the relationship between Dr. Rittman and the Company and the ownership of certain technology in connection with certain agreements previously entered into between Company and Dr. Rittman and with third parties. Specifically, the Company entered into that certain Territorial License Agreement with Hermes dated March 4, 2015, which such agreement was amended to expand the related territorial license to a worldwide license pursuant to that certain Amended and Restated Territorial License Agreement dated June 16, 2015 (the “Amended and Restated Territorial License Agreement”), and that certain Letter Agreement (the “Letter Agreement”) entered into between Dr. Rittman and the Company dated August 20, 2015. The aforementioned agreements were tied to the funding of the Company in the minimum amount of $5,000,000 (the “Required Funding”) and the assignment to the Company and/or ownership by the Company of all past, present and future technology in the form of intellectual property, including, but not limited to patents, trademarks, domains, applications, social media pages (e.g. Twitter, LinkedIn and landing pages) (collectively, the “IP”), which such IP was paid for exclusively by Dr. Rittman and/or his affiliated companies, was contingent upon the Company obtaining the Required Funding by no later than October 30, 2015 (the “Contingency”). Accordingly, it was agreed to by the parties that all inventions, improvements and developments made or conceived by the Dr. Rittman, either solely or in collaboration with others pertaining to Company’s business, would be the property of the Company subject to the Contingency. In the event the Contingency was not met, the Letter Agreement would be cancelled and rendered null and void. The Company acknowledged that the Company did not meet the Contingency, technically resulting in the cancellation of the Letter Agreement and rendering the Letter Agreement null and void. Moreover, the Company failed to meet its obligations under the Amended and Restated Territorial License Agreement, including the further development of the consumer heuristic technology platform, thereby creating a vacuum in its development in all aspects, including the ability to obtain funding, resulting in the need for Dr. Rittman’s partners to perform the necessary development work related to the above agreements.

In March 2016, the Company and Dr. Danny Rittman, Co-Chairman, CTO and a shareholder, entered into an agreement intended to clarify the relationship between Dr. Rittman and the Company and the ownership of certain technology in connection with certain agreements previously entered into between Company and Dr. Rittman and with third parties. Prior to these agreements, the Company is the exclusive license holder for certain intellectual property relating to Hermes’ system and method for scheduling categorized deliverables, according to demand, at the customer’s location based on smartphone application and/or via the internet. As a result of these agreements, the Company shall remain an exclusive licensee per the terms of the original License Agreement and will develop the first products with Dr. Rittman and his partners.pursue other interests.

 

On April 6, 2018, the Company and Danny Rittman, Chief Technology Officer and a Director of the Company, agreed to amend his employment agreement pursuant to which he will receive salary at the rate of $250,000 annually payable in equal increments of $15,000 per month. Anmonth with an additional $70,000 shallto be payablepaid within 15 days of the end of the calendar year.

On March 29, 2016, Gopher contributed all of its rights relating to its proprietary microchip that is within a sticky patch package (the “Patch”) to Guardian LLC in consideration of 50% of the profit generated by Guardian LLC (the “Joint Venture”). Guardian LLC is responsible for investing all needed funds for the purpose of developing the Patch and related products to the Patch. In addition, Guardian LLC is required to provide short term loans to Gopher on an as needed basis secured by Gopher’s economic interest in the Joint Venture. The Company will provide IT services to Guardian LLC for a monthly fee. Dr. Rittman has signed an amendment employment agreement with the Company.

The Company is the exclusive license holder for certain intellectual property relating to GopherInsight technology. The Company has assigned all its rights as they relate to the Guardian Patch to Guardian LLC as consideration for the JV. Guardian LLC has commenced development of the products. Certain private investors will provide all initial funding to the Company via the LLC for product development. Guardian LLC will fund the development, and the Company will provide IT services via Dr. Rittman for a monthly fee. Dr. Rittman has signed an amendment employment agreement with the Company. As the Company is not a member of Guardian LLC, the Company and Guardian LLC have formed a Joint Venture (“JV”) for the purposes of developing and marketing the Patch. Guardian LLC will be responsible for funding the development of the Patch. The Company will not need be required to invest funds in said JV. The Company responsibilities will be limited to the marketing of the product, where the marketing budget will be funded by Guardian LLC. Moreover, Guardian LLC has committed to provide the Company with working capital as needed. The Company has assigned and pledged to the LLC all its license derivative rights as they pertain to the Patch only. Dr. Rittman may be offered membership rights at some point in the future with Guardian LLC, with which the Company is a JV partner, but is not equity member. The Company has agreed with Guardian LLC that the same JV principles of the Guardian LLC for the patch will apply for the other two products (Epsilon and Puzpix) which will be vested under designated LLCs that will be incorporated by the LLC members. During the nine months ended September 30, 2018 and 2017, $135,000 and $135,000, respectively, of the Company’s revenue was related to IT service provided to the LLC for Dr. Rittman services, in connection with the development of the Patch.

F-60

GOPHER PROTOCOL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

On July 21, 2016 members of the Guardian LLC, together with Dr. Rittman, incorporated Alpha EDA, LLC (“Alpha”). The members of the LLC appointed Dr. Rittman as the manager of Alpha. The Company, the LLC and Alpha have agreed that all Epsilon Rights, as well as Puzpix rights, will be assigned to Alpha. Alpha and the Company entered into a JV agreement similar to the Patch Joint Venture agreement (as described above), whereby Alpha will fund all of its operational and developmental needs (software development, support, marketing and administrative), and the profits of Alpha will be distributed equally to the two equal Joint venture partners, Guardian LLC and the Company. Alpha will hold all intellectual property rights related to software. Currently, three products will be owned by Alpha – the Epsilon software, the Puzpix social game and the Guardian Pack application. The Company and its technology licensing partners, Guardian LLC and Alpha, are preparing to introduce said new products (Epsilon, Guardian Pack & PuzPix) to the market beginning in 2018, and the Sphere during the second half of fiscal 2017. Certain problems caused by the need to miniaturize both the chip design and the battery caused a delay in the rollout from its planned launch during the first half of the year. The Epsilon product will be presented for time-based license agreements utilizing a designated website on top of customary distributing channels for the product. Epsilon is under confidential evaluation agreement with third party.

On September 25, 2018, the Company entered into a Joint Venture Interest Purchase Agreement with Guardian, LLC pursuant to which the Company purchased Guardian LLC’s 50% interest in a joint venture (the “JV Interest”) previously entered between the parties in March 2016 covering the Guardian Patch, Puzpix and Epsilon. In consideration for the JV Interest, the Company issued Guardian 12,500,000 shares of common stock. During the nine months ended September 30, 2018, the Company took a charge to earnings of $11,750,000 related to the purchase of Guardian LLC’s 50% JV Interest.

  

On September 14, 2018, the Company and Dr. Rittman entered into a letter agreement confirming that the Company is the owner of all intellectual property developed by Dr. Rittman relating to the Internet of Things (IoT) and Artificial Intelligence enabled mobile technologies, including a global platform with both mobile and fixed solutions, commencing June 16, 2015 and continuing until Dr. Rittman’s employment agreement is terminated.

During 2016, the Company relocated its headquarters to 2500 Broadway, Suite F-125, Santa Monica, California. The Company paid approximately $5,000 per month in rent for this office space, and paid a $1,979 security deposit that is classified in our financial statements contained herein as a prepaid expense. The lease is being paid for by the Guardian LLC via reimbursement. The Company moved into smaller office space during the quarter, and its security deposit was adjusted downward to cover the smaller space in April 2016. The Company believes its current facilities will be adequate for the foreseeable future.

The Company has commenced development, and the Company has completed the Statement of Work (SOW) for the Federal Communications Commission (“FCC”) survey to deploy the Company’s Guardian Global Tracking Device within the continental US. The Company has also completed their transmitters/transceivers modules feasibility research. Although the Company can use open channels, and therefore is not required to comply with various FCC regulations relevant to the system, the Company has chosen to comply, and is complying with FCC regulations. The FCC regulates the limits of potentially harmful interference to licensed transmitters due to low power unlicensed transmitters. The Guardian Patch/Sphere system consists of advanced security protocols in order to maintain the global, private, fully-secured network. In addition, the Guardian Patch device needs to perform communication tasks across the globe providing breakthrough tracking features. The Company and its technology licensing partner, Guardian LLC, successfully completed thorough research that involved security, performance and FCC regulations compliance. Based on this research, a set of particular frequencies was chosen to be used by Guardian LLC. By the end of this year, the Company completed the design and construction of the Guardian Patch/Sphere circuit prototype device. The Company has completed the construction of 10 prototype units, and performed intensive testing program to be tested as a complete system in designated areas by the Company. On December 1, 2016, Guardian LLC issued Statement of Work for the Placement and Development of Guardian Sphere and its Base System. For this project, Guardian LLC has assembled a team of eight, including a Project Manager, CTO, digital and software engineers, a specialist algorithm mathematician and project leader. This team was assembled by Guardian LLC, and is based in the USA, Europe and Asia. Per the Joint Venture agreement, Guardian LLC is funding the SOW project through its sources, while the Company’s portion of the cost is $67,000 and due to the vendor on August 15, 2017. Guardian took full responsibility for all amounts due to this vendor. The Company intends to enter a new SOW for the purpose of creating fully-commercial products utilizing the manufacturers that it has identified.

On June 20, 2016, two holders (the “Preferred Stock Holders”) of an aggregate of 2,400 shares of Series D Preferred Stock (the “Preferred Shares”) of the Company converted the Preferred Shares into an aggregate of 2,400,000 shares of common stock of the Company at $0.01 per share. The Preferred Stock Holders are executive officers and directors of the Company.

On August 9, 2016, two holders (the “Preferred Stock Holders”) of an aggregate of 17,400 shares of Series D Preferred Stock (the “Preferred Shares”) of the Company executed conversion notices to convert the Preferred Shares into an aggregate of 17,400,000 shares of common stock of the Company at $0.01 per share. The Preferred Stock Holders are executive officers and directors of the Company.

F-61

GOPHER PROTOCOL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)

Effective August 15, 2016, the Employment Agreement of Mansour Khatib, our CMO, was amended and restated as follows: Upon the Company generating $1,000,000 in revenue during any three (3) month period (the “Threshold Requirement”), the Executive will receive salary at the rate of $100,000 annually (the “Base Salary”); provided, however, that that Company shall pay to Executive $5,000 per month (the “Monthly Salary Advance”) commencing on August 15, 2016, which such Monthly Salary Advance shall be an advance on the Base Salary and shall continue to be paid to Executive until such time that the Company launches its GopherInsight™ technology into the consumer markets. Once the Threshold Requirement is met, the Base Salary will be payable in equal increments not less often than monthly in arrears and in any event consistent with the Company’s payroll policy and practices. The Base Salary of the Executive may from time to time be increased, but not decreased, by the Board, in its absolute discretion, including potential bonuses.”

Since April 2016, Guardian LLC has provided loans to the Company for the Company’s working capital purposes, outside of its commitment to develop the Patch, in the aggregate amount of $660,132 (the “Loans”). On May 23, 2017, the Company entered into a Conversion Agreement with Guardian LLC pursuant to which the parties agreed to convert the Loans provided by Guardian LLC to the Company into a Convertible Promissory Note in the principal amount of $660,132 (the “Note”).

The Note bears interest at 6%, matures May 30, 2019 and is convertible into the Company’s common stock, at Guardian LLC’s option, at a conversion price equal to 50% of the lowest closing price for the common stock on the principal market during the ten consecutive trading days immediately preceding the conversion date, which, in no event, will be less than $0.01 per share. Guardian LLC has agreed to restrict their ability to convert the Note and receive shares of common stock such that the number of shares of common stock held by them in the aggregate and their affiliates after such conversion or exercise does not exceed 4.9% of the then issued and outstanding shares of common stock.

Guardian LLC (the “Note Holder”) understands that the Company may be seeking additional capital or funding and believes that the lock-up and leak-out restrictions and provisions, as further described herein, will improve the Company’s prospects for obtaining additional financing and thus improving the overall financial condition of the Company. As such on or around June 26, 2017 the Company and the Note Holder entered into a lock-up and leak-out:

1.Subject to the terms of this Agreement, the Note Holder agrees that for a period of nine (9) months from the Effective Date of this Agreement (the “Lock-Up Period”), the Note Holder shall not convert the Note into Common Stock for safe keeping or, directly or indirectly, sell, offer to sell, contract to sell, assign, pledge, hypothecate, encumber or otherwise transfer, or enter into any contract, option or other arrangement or understanding with respect to the sale, assignment, pledge or other disposition of (each a “Transfer”) any beneficial rights with respect to the Note.

2.Leak-Out Provisions. Subject to the terms of this Agreement, the Note Holder agrees that for a period beginning immediately upon the end of the Lock-Up Period and ending fifteen (15) months from the Effective Date of this Agreement (the “Leak-Out Period”), the Note Holder shall have the right to sell the lessor of (i) five (5%) percent of the previous day’s traded volume of the Company’s Common Stock, or (ii) Five Thousand (5,000) shares of the Common Stock on a per daily basis.

On December 29, 2017, all the principal and accrued interest were converted into 2,000,000 share of Series G preferred stock.

 

On September 1, 2017, the Company entered into and closed an Asset Purchase Agreement with a third party, RWJ Advanced Marketing, LLC (“RWJ”), a Georgia corporation, pursuant to which the Company purchased certain assets from RWJ, including inventory, terminals, licenses and permits and intangible assets. At closing, the Company and Mr. Greg Bauer entered into an Employment Agreement pursuant to which Mr. Bauer was retained as Chief Executive Officer for a term of one year, subject to an automatic extension, unless terminated, in consideration of a base salary of $250,000 and a bonus of 10% of net profit generated by the assets acquired. Mr. Bauer was also appointed to the Board of Directors of the Company. As of the closing date, Mr. Murray resigned as Chief Executive Officer of the Company but will remain as a director of the Company. Mr. Bauer, since 2004 through present, has served as executive director with W.L. Petrey Wholesale, Inc. where he was in charge of the UGO/Preway operations. The Company is in litigations in connection with RWJ transaction – See Note 15 - Contingencies.

 F-56

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

On January 1, 2019, the Company and Douglas Davis entered into an Amended and Restated Employment Agreement pursuant to which Mr. Bauer holdsDavis was retained as Chief Executive Officer. Mr. Davis served as Interim Chief Executive Officer since July 2018 until his resignation on April 11, 2020. The term of Mr. Davis’ employment was for two years through January 1, 2021. Mr. Davis was entitled to an annual base salary of $250,000, which was to be increased to $400,000 upon the Company up-listing to a Bachelornational exchange. Mr. Davis was also entitled to the issuance of Science degree from UniversityStock Options to acquire an aggregate of Maryland College Park. Mr. Bauer is veteran50,000 shares of common stock of the United States NavyCompany, exercisable for five years, subject to vesting. The options were to be earned and was honorably dischargedvested (i) with respect to 20,000 shares of common stock on the date hereof, (ii) 5,000 shares of common stock upon the successful dual list of the Company on an international exchange such as SIX Zurich Stock Exchange or Euronext, (iii) 15,000 shares of common stock upon the successful up listing to a national exchange such as the Nasdaq, NYSE Euronext, TSX, AMEX or other, and (iv) with respect to 5,000 shares of common stock at each of the six (6) month anniversaries (July 1, 2019 and January 1, 2020). The exercise price of such options shall be the closing price of the Company on the date prior to such event.

On October 10, 2019, the Company entered into a Joint Venture Agreement (the “BitSpeed Agreement”) with BitSpeed LLC, which is owned by Douglas Davis, the Company’s Chief Executive Officer, to form GBT BitSpeed Corp., a Nevada company (“GBT BitSpeed”). The purpose of GBT BitSpeed is to develop, maintain and support its proprietary Extreme Transfer Software Application Concurrency, a software application to transfer secure, accelerated transmission of large file data over networks, and connection to cloud storage, Network-Attached Storage (NAS) and Storage Area Networks (SANs) (“Concurrency”). BitSpeed shall contribute the services and resources for the development of Concurrency to GBT BitSpeed. The Company shall contribute 10 million shares of common stock (valued at $17,900,000) of the Company to GBT BitSpeed. BitSpeed and the Company will each own 50% of GBT BitSpeed. The Company shall appoint two directors and BitSpeed shall appoint one director of GBT BitSpeed. In addition, GBT BitSpeed and Mr. Davis entered into a Consulting Agreement in 1983. He heldwhich Mr. Davis is engaged to provide services in consideration of $10,000 per month payable quarterly which may be paid in shares of common stock calculated by the titleamount owed divided by the Company’s 20-day VWAP. Mr. Davis will provide services in connection with the development of United States Navy Surface Warfare Qualified. In May 2018, Mr. Bauer’sthe business as well as GBT BitSpeed’s capital raising efforts. The term of the Consulting Agreement is two years. The closing of the BitSpeed Agreement occurred on October 14, 2019. On April 11, 2020, Douglas Davis resigned as Chief Executive Officer and directorof the Company so that he may fully devote all of his efforts to GBT Tokenize Corp., the Company’s joint venture, which intends to develop a new product. Mr. Davis’ resignation was not the result of any disagreements with management or board of directors of the Company.

 

On March 6, 2020, the Company through Greenwich, entered into the Tokenize Agreement with Tokenize, which is owned by a Costa Rica Trust represented by Gonzalez. Gonzalez also represents Gonzalez Costa Rica Trust, which holds a note in the principal amount of $10,000,000 and is also a shareholder of the Company. Under the Tokenize Agreement, the parties formed GBT Tokenize. The purpose of GBT Tokenize is to develop Technology Portfolio, throughout the State of California. Upon generating any revenue from the Technology Portfolio, the Joint Venture will earn the first right of refusal for other territories. Tokenize shall contribute the services and resources for the development of the Technology Portfolio to GBT Tokenize. The Company contributed 100,000,000 GBT Shares to GBT Tokenize. Tokenize and Guardian LLC, which assisted structuringthe Company will each own 50% of GBT Tokenize. The Company pledged its 50% ownership in GBT Tokenize and negotiating the Purchase Agreementits 100% ownership of Greenwich to Tokenize to secure its Technology Portfolio investment. The Company shall appoint two directors and related asset purchase,Tokenize shall appoint one director of GBT Tokenize. In addition, GBT Tokenize and Gonzalez entered into a Consulting Agreement dated September 1, 2017. Inin which Gonzalez is engaged to provide services in consideration for the services, the Company issued Guardian 2,000,000of $33,333.33 per month payable quarterly which may be paid in shares of common stock and warrantscalculated by the amount owed divided by the Company’s 10-day VWAP. Gonzalez will provide services in connection with the development of the business as well as GBT Tokenize’s capital raising efforts. The term of the Consulting Agreement is two years. The closing of the Tokenize Agreement occurred on March 9, 2020. Via this Joint Venture the parties commenced development of a development of an intelligent human vital signs’ device, suggested named qTerm. The platform is an expansion of the existing license agreement with GBT Tokenize Corp., which provided GBT Tokenize Corp. with an exclusive territory of California to purchase 9,000,000develop certain of the Company’s technology. As the nature of the platform cannot be restricted only to California, the Company’s joint venture GBT Tokenize Corp. will be compensated with additional two hundred million shares of common stock. The warrants contain identical terms to the RJW Warrants. If and when the assets acquired under the Purchase Agreement generate revenues of $10,000,000, the Company shall issue Guardian an additional 3,000,000 shares of common stock. The consulting agreement was effective August 1, 2017 and terminates November 30, 2017. Guardian, pursuant to strengthen its existing joint venture agreement, agreedfunding, subject to provide the $400,000 in funding neededboard approval. A provisional patent application for the cash purchase price underqTerm Medical Device was filed on March 30, 2020 with the Purchase Agreement. Guardian also agreedUSPTO. The application has been assigned serial number 63001564. The Joint Venture completed successfully the first prototype. There is no guarantee that the Company will be successful in researching, developing or implementing this product into the market. In order to providesuccessfully implement this concept, the needed $100,000 workingCompany will need to raise adequate capital designated to UGopherServices Corp. The parties have agreedsupport its research and, if successfully researched, developed and granted regulatory approval, the Company would need to negotiateenter into a strategic relationship with a third party that has experience in manufacturing, selling and finalizedistributing this product. There is no guarantee that the termsCompany will be successful in any or all of such loans in the near future.these critical steps.

 F-57

F-62

 

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

 

GOPHER PROTOCOL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)Note 15 – Contingencies

 

In order to facilitate the transition of the Company, the Company and Michael Murray have agreed to enter into an employment agreement in which Mr. Murray will serve as Executive Vice President in charge of business development. As consideration, the Company issued a warrant to acquire 4,000,000 shares of common stock to Mr. Murray. The warrants contain identical terms to the RJW Warrants.

Regulatory

The Company has commenced development, and the Company has completed the Statement of Work (SOW) for the Federal Communications Commission (“FCC”) survey to deploy the Company’s Guardian Global Tracking Device within the continental US. The Company has also completed their transmitters/transceivers modules feasibility research. Although the Company can use open channels, and therefore is not required to comply with various FCC regulations relevant to the system, the Company has chosen to comply, and is complying with FCC regulations. The FCC regulates the limits of potentially harmful interference to licensed transmitters due to low power unlicensed transmitters. The Guardian Patch/Sphere system consists of advanced security protocols in order to maintain the global, private, fully-secured network. In addition, the Guardian Patch device needs to perform communication tasks across the globe providing breakthrough tracking features. The Company and its technology licensing partner, Guardian LLC, successfully completed thorough research that involved security, performance and FCC regulations compliance. Based on this research, a set of particular frequencies was chosen to be used by Guardian LLC. By the end of this year, the Company completed the design and construction of the Guardian Patch/Sphere circuit prototype device. The Company has completed the construction of 10 prototype units, and performed intensive testing program to be tested as a complete system in designated areas by the Company. On December 1, 2016, Guardian LLC issued Statement of Work for the Placement and Development of Guardian Sphere and its Base System. For this project, Guardian LLC has assembled a team of eight, including a Project Manager, CTO, digital and software engineers, a specialist algorithm mathematician and project leader. This team was assembled by Guardian LLC, and is based in the USA, Europe and Asia. Per the Joint Venture agreement, Guardian LLC is funding the SOW project through its sources.

Note 12 - Contingencies

Legal Proceedings

 

From time to time, the Company may be involved in various litigation matters, which arise in the ordinary course of business.  There is currently no litigation that management believes will have a material impact on the financial position of the Company.

 

On June 10, 2016, the Company entered into a consulting agreement with Waterford Group LLC (“Waterford”) pursuant to which the Company engaged Waterford to provide sales and marketing consulting and advisory services to the Company in consideration of 100,000 shares of restricted common stock of the Company (the “Shares”) and a common stock purchase warrant (the “Warrant”) to acquire 750,000 shares of restricted common stock of the Company at an exercise price of $2.25 per share for a period of five (5) years. 50,000 of the Shares were issued to Waterford upon the execution of the Agreement. The Warrant vested on a quarterly basis in eight (8) equal quarterly installments each in the amount of 93,750 shares each quarter during the term of the Agreement. The first quarterly installment vested upon the execution of the Agreement and each subsequent quarterly installment was to vest each quarter thereafter. The Company believes that Waterford is in default of its agreement, as it failed to perform or provide any services under the agreement. As such, the Company put Waterford on notice in writing that the Company did not issue shares or warrants during the third or fourth fiscal quarters of 2016 due to the default.

On or around January 23, 2017,30, 2019, RWJ Advanced Marketing, LLC, Greg Bauer, and Warren Jackson sued the Company filed a complaint against Waterford and the Company’s Transfer Agent,multiple third and related parties in Superior Court of the State of California - County of Riverside. On February 1, 2017, the Company obtained a temporary restraining order that prohibits Waterford from (x) lifting the restricted legend from the 50,000 shares that it received in connection with signing the Agreement; (y) selling the 50,000 shares to another party; and, (z) from exercising the warrant on 93,750 shares that was issued and vested upon the execution of the Agreement. As ordered by the court, on February 9, 2017, the Company deposited a Corporate Surety Bond in the amount of $42,875 to secure the temporary restraining order. The Company agreed with Waterford to go to binding arbitration, which is currently being scheduled.

On or around February 27, 2017, the Company was issued a stay of the temporary restraining order barring its transfer agent from providing sharesLos Angeles, General District in connection with the exerciseacquisition of UGO in September 2017. The case number is 19STCV03320 (the “Original Lawsuit”). The complaint in the first Waterford warrant on 93,750 shares that was provided to WaterfordOriginal Lawsuit alleges breach of contract, among other causes of action. The Company answered the complaint and filed a cross-complaint against the plaintiffs in connection with the execution of the engagement letter that was executed by thecase and third parties on or around JuneFebruary 15, 2019. On or about September 10, 2016. In October 2018, this matter was resolved in favor of the Company; accordingly2020, the Company will voidthrough its agent of service was “served” with a complaint (the Company contested service) that was recently filed against the sharesCompany and warrantsthird parties by Robert Warren Jackson and Gregory Bauer in Los Angeles Superior Court Case No.: 20STCV32709 (“Second Lawsuit”). In the Original Lawsuit filed, the court rejected the plaintiff’s claims that are currently heldthey were filing a purported quasi-derivative lawsuit. As such, in this current litigation, the plaintiff is now again claiming the action is a derivative lawsuit. On October 13, 2020, the Second Lawsuit was removed by Waterford.other defendants into Central District of California (CASE NO. 2:20−cv−09399−RGK−AGR). On February 2, 2021 The Central District of California dismissed the entire Second Lawsuit based on “demand futility”. In the Original lawsuit, the Company filed a cross complaint against the plaintiff and other third parties. Recently, the court has scheduled various hearings and a trial date set for December 27, 2021. It was the Company’s intention to dividend its holdings of its wholly owned subsidiary Ugopherservices Corp. (“UGO”). As UGO is the main dispute in the litigations described above, the Company has elected to sell UGO to a third-party effective July 1, 2020 (See Note 3). On September 17, 2020, the Company terminated Greg Bauer as consultant (resulting from the sale of UGO), which he confirmed in writing.

 

Following the sale of UGO (See Note 3), the Company noticed third parties (including SURG, via its asset manager) to wire the UGO funds to its new bank account. SURG never answered the notice. The Company noticed certain third parties that it intends to take legal actions to resolve this issue. On November 12, 2020 the Company filed a complaint in the United States District Court – District of Nevada - Case 2:20-cv-02078 against RWJ, Mr. Bauer, Mr. Jackson and against W.L. Petrey Wholesale Company Inc for fraud, breach of contract, Unjust Enrichment and other claims.

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 F-58

 

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

 

On or around April 10, 2017, the Company was billed by its transfer agent (“TA”) for approximately $11,500 for legal fees (“TA Charges”) in connection with a lawsuit brought by one of the Company’s shareholders against the TA. The Company is not a named party in this litigation. The Company disputes the TA Charges, as the Company’s position is that the TA Charges are not covered under the indemnification section of the Company’s agreement with its TA. As the TA refused to provide further services, the Company paid the fees, and booked it as an expense in this quarter. This matter has been resolved amicably, and the Company continues its relationship with the TA.

Spare CS, Inc.

On January 14, 2018, the Company entered into an Initial Term Agreement (the “ITA”) with Spare CS Inc. (“Spare”), a Delaware corporation, pursuant to which the Company agreed to acquire 50% of the equity of Spare. Spare is a mobile banking app that allows customers to access cash with no ATM, no debit or credit card, and no purchase required from participating merchants. During the nine months ended September 30, 2018, the Company terminated the ITA with Spare and wrote off the $265,000 that has been advanced to Spare. The $265,000 in included as part of the impairment of assets in the accompanying consolidated statement of operations.

GBT Technologies, S.A.

On June 12,December 3, 2018, the Company entered into a Letter of IntentSecurities Purchase Agreement (the “LOI”“SPA”) with Gopher Protocol Costa Rica, S.R.L. (“Gopher CR”Discover Growth Fund, LLC (the “Investor”), a partially owned subsidiary of pursuant to which the Company GBT Technologies, S.A.,issued a Costa Rican company (“GBT”Senior Secured Redeemable Convertible Debenture (the “Debenture”) and Tokenize-IT, S.A. (“Tokenize”). The LOI contemplatesin the acquisitionaggregate face value of Tokenize by Gopher CR and$8,340,000. In connection with the issuance of 20 millionthe Debenture and pursuant to the terms of the SPA, the Company issued a Common Stock Purchase Warrant to acquire up to 225,000 shares of common stock for a term of three years (the “Warrant”) on a cash-only basis at an exercise price of $100.00 per share with respect to 50,000 Warrant Shares, $75.00 with respect to 75,000 Warrant Shares and $50.00 with respect to 100,000 Warrant Shares. The holder may not exercise any portion of the Warrants to the extent that the holder would own more than 4.99% of the Company’s outstanding common stock immediately after exercise. The outstanding principal amount may be converted at any time into shares of the Company’s common stock at a conversion price equal to 95% of the Market Price less $5.00 (the conversion price is lowered by 10% upon the occurrence of each Triggering Event – the current conversion price is 75% of the Market Price less $5.00). The Market Price is the average of the 5 lowest individual daily volume weighted average prices during the period the Debenture is outstanding. On May 28, 2019, the Investor delivered to the Company a “Notice of Default and Notice of Sale of Collateral” (the “Notice”). On December 23, 2019, in arbitration between the Company and the Investor, an Interim Award was entered in favor of the Investor. On January 31, 2020, the Company was informed that a final award was entered (the “Final Award”). The Final Award affirms that certain sections of the Debenture constitute unenforceable liquidated damages penalties and were stricken. Further, it was determined that the Investor was entitled to recovery of their attorney’s fees. Consequently, the arbitrator awarded Investor an award of $4,034,444 plus interest of 7.25% accrued from May 15, 2019 and costs in the amount of $55,613. On February 18, 2020, the Company filed a motion with the United States District Court District of Nevada (the “Nevada Court”) to confirm the Final Award and a motion to consolidate Investor’s application to confirm the Final Award filed in the U.S. District Court of the Virgin Islands (Case No: 3 :20-cv-00012-CVG-RM) (the “Virgin Island Court”). On February 27, 2020, the Nevada Court denied the Company’s motion to confirm the Final Award and motion to consolidate and further decided that the confirmation of the Final Award should be litigated in the Virgin Island Court. As such, on February 27, 2020, the Company filed a Notice of Entry of Order as well as a Motion to Confirm the Arbitration Award, address the outstanding issues regarding whether Investor’s rights are subordinated to other creditors and, thereafter, oversee a commercially reasonable foreclosure sale (Case No: 3 :20-cv-00012-CVG-RM). It was the Company’s position that the Final Award must first be confirmed and all questions regarding the rights of Investor relative to those of other creditors must be determined before any foreclosure sale can proceed. It is further the position of the Company (the “GOPH Shares”) to Tokenize. Concurrentthat the previously disclosed foreclosure sale scheduled by Investor is being conducted in a commercially unreasonable manner and that if Discover proceeded forward with the acquisition, Tokenize will enter intoforeclosure sale it did so at its own risk. Nevertheless, on February 28, 2020, Investor advised that it conducted a joint venture agreementsale of the Company’s assets. As the date of this report Investor failed to present a deed of sale for the alleged sale that allegedly took place as noticed. The Company filed with GBT pursuant to which Tokenize will transferVirgin Island Court the motions disputing the validity of the alleged sale. On July 28, 2020, Investor filed in the State of Nevada a motion for attorneys $48,844 and assign the GOPH Shares to GBTcosts $716. The Company filed an answer on August 11, 2020. On October 16, 2020, Investor motion for attorneys $48,844 and issue equity securities of Tokenize providing GBT with 50% equity ownership in Tokenize with the balance owned by Gopher CR in consideration of GBT providing Tokenize with access to its currency trading platform that is a fully licensed and Central Bank regulated “Currency Exchange” in Costa Rica.costs $716 was denied.

 

No assurance can be given that a definitive agreement will be entered into, that the appropriate governing bodies including the Company’s board of directors will approve such transactions, that the proposed transactions contemplated above will be consummated, or that Tokenize will be able to obtain adequate funds needed to fund its business plan.GBT Technologies, S.A.

 

On September 14, 2018, the Company entered into an Exclusive Intellectual Property License and Royalty Agreement (the “GBT License Agreement”) with GBT,GBT-CR, a fully compliant and regulated cryptocurrencycrypto currency exchange platform that currently operates in Costa Rica as a decentralized cryptocurrencycrypto currency platform, pursuant to which, among other things, the Company granted to GBTGBT-CR an exclusive, royalty-bearing right and license relating intellectual property relating to systems and methods of converting electronic transmissions into digital currency as reflected in that certain patent filed with the United Stated Patent and Trademark Office on or about June 14, 2018 (EFS ID: 32893586; Application Number: 16008069; Type: Utility under 35 USC 111(a); Confirmation Number: 6787)(collectively, the “Digital Currently Technology”). Pursuant to the GBT License Agreement, the Company granted GBTGBT-CR an exclusive worldwide license to use the Digital Currency Technology to make, use, sell, lease or otherwise commercialize and dispose of products and devices utilizing the Digital Currently Technology.

Under the terms of the GBT License Agreement, the Company is entitled to receive a royalty payment of 2% of gross revenue of each licensed product sold by GBTGBT-CR during the period starting in which revenue is first generated using the licensed products and continuing for five years thereafter. Upon signing the GBTGBT-CR License Agreement, GBTGBT-CR paid the Company $300,000 which is nonrefundable. The Company has recognized the $300,000 as revenue during the nine monthsyears ended September 30,December 31, 2018. Upon GBTGBT-CR making available for sale (the “Commercial Event”) an ICO (Initial Coin Offering) (the “Coin”), GBTGBT-CR will make a payment to the Company in the amount of $5,000,000. Further, upon the Commercial Event, GBTGBT-CR will grant the Company the ability to acquire 30% of the Coin at a 30% discount of such offering price of the Coin. The GBT License Agreement commenced as of the signing date and, unless terminated in accordance with the termination provisions of the GBT License Agreement, shall remain in force until the expiration of the patent pertaining to the Digital Currency Technology; provided that the right to use trade secrets shall survive the expiration of the GBT License Agreement provided the Company has not terminated. Prior to the signing of the GBT License Agreement, GBTGBT-CR advanced $200,000 to the Company, which the parties have agreed will be applied toward the $5,000,000 fee when it becomes due. The $200,000 is recorded as unearned revenue at September 30,December 31, 2018 and reclassified to accrued expense at December 31, 2019. On February 27, 2020 GBT Technologies, S.A., as successor in interest to Hermes Roll, LLC had notified the accompanying consolidated balance sheet.Company that it was in default on its Amended and Restated Territorial License Agreement (“ARTLA”) dated June 15, 2015 and that the ARTLA had been cancelled and rescinded. 

 F-59

F-64

 

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

 

GOPHER PROTOCOL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(UNAUDITED)In connection with SURG Exchange Agreement (see Note 4) - On November 4, 2020, Altcorp and Stanley filed an Ex Parte Motion In the District Court, Clark County, Nevada (Case No: A-20-823039-B, in Dep No: 43) to appoint receiver and issue a temporary restraining Order against SURG and its transfer agent for alleged defaults on prior exchange agreement. On December 4, 2020, the parties entered an interim agreement which set the material terms of the settlement. A final settlement was achieved per the interim agreement terms on January 1, 2021 (see Note 17). On March 4, 2021 the Company filed a motion to enforce settlement agreements, as the Company alleged that SURG owes an additional $240,000 which is due and owing under the settlement agreements.

 

Note 1316 – Concentrations

 

Concentration of Credit Risk

 

Financial instruments, which potentially subject the Company to a concentration of credit risk, consist principally of temporary cash investments. There have been no losses in these accounts through September 30, 2018.December 31, 2020.

 

In 2017, the Company had one customer that contributed 100% of its revenues. Per the terms of the JV with Guardian LLC, Guardian LLC has committed to fund all Company’s needs, as well as needs of the JV. Failure of Guardian LLC to provide the Company or the JV with said funding would represent a significant Credit Risk. As of September 30, 2018 and December 31, 2017 the Company has a payable to Guardian LLC of $737,330 and $1,350,262, respectively.

Note 14 -17 – Subsequent Events

 

Management has evaluated events that occurred subsequent to the end of the reporting period shown herein:

 

On October 2, 2018, Bellridge Capital LLC converted $125,000January 1, 2021 SURG, AltCorp and Stanley entered into a Mutual Release and Settlement Agreement (“Settlement Agreement”). Pursuant to the terms of principal and $7,295the Settlement Agreement, SURG agreed to amend the AltCorp Exchange Agreement where SURG acknowledged a debt of accrued interest into 146,994 shares$3,300,000 (the “Debt”) to be paid via 33 monthly payments of common stock. On October 26, 2018, Bellridge Capital LLC converted $150,000 of principal and $9,781 of accrued interest into 177,534 shares of common stock. On November 2, 2018, the Company issued 318,583$100,000 payable in shares of common stock of SURG at a per share price equal the volume weighted average price of SURG’s common stock during the ten (10) trading days immediately preceding the issuance. At the end of the 33rd month, if AltCorp has not realized gross, pre-tax proceeds at least equal to Bellridge in connection with the price protection (See Note 7).amount of the Debt, SURG shall transfer to AltCorp and/or its designee additional shares of SURG’s common stock necessary to satisfy the Debt. To the date of this report, SURG has made three payments per the settlement agreements.

 

On October 15, 2018,February 10, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued 3,000,000 warrants to Redstart a consultant. The warrants have an exerciseConvertible Promissory Note (the “Redstart Note No. 4”) in the aggregate principal amount of $184,200 for a purchase price of $0.60 per share$153,500. The Redstart Note No. 4 has a maturity date of February 5, 2022 and expirethe Company has agreed to pay interest on October 15, 2023.

On October 12, 2018, the Waterford legal matter discussed in Note 12 was settled in favorunpaid principal balance of the Redstart Note No. 4 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 4 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company that resultedshall have the right to prepay the Redstart Note No. 4, provided it makes a payment including a prepayment to Redstart as set forth in the cancelationRedstart Note No. 4. The transactions described above closed on February 10, 2021. The outstanding principal amount of Waterford’s 93,750 warrants and the cancelation of 50,000Redstart Note No. 4 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 4 into shares of the Company’s common stock ownedat a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 4), the Redstart Note No. 4 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 4.

On March 15, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 5”) in the aggregate principal amount of $106,200 for a purchase price of $88,500. The Redstart Note No. 5 has a maturity date of June 15, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 5 at the rate of six percent (6%) per annum from the date on which the Redstart Note No. 5 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by Waterford.prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 5, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 5. The transactions described above closed on March 17, 2021. The outstanding principal amount of the Redstart Note No. 5 may not be converted prior to the period beginning on the date that is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 5 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 5), the Redstart Note No. 5 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 5.

 F-60

GBT TECHNOLOGIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2020 and 2019

On January 19, 2021 the Company entered into consulting agreements with two third-party consultants. The executive officers of the Company conducted an extensive search and has explored all possible avenues of financing and in order to fully-implement its business plan it has determined that for its best interest to engage two outside consultants to identify investors as an accredited investor, under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Private Offering”) is in the best interest of the Company. The terms of the agreements are for one consultant a 12,000,000 Company one-time new shares issuance and $1,000 cash monthly payment, and to the second consultant 250,000 Company one-time new shares issuance, along with additional 30,000 new issuance per quarter, and $500 cash monthly payment. The company issued to the consultants the 12,250,000 restricted stock on February 11, 2021.

On February 28, 2021 the Company and Iliad entered into agreement to further extend the maturity of the Iliad Note until May 31, 2021 in consideration of an extension fee of $1,000 representing the third extension of the original note. (See Note 8)

Subsequent to December 31, 2020, the Company issued 224,185,847 shares of common stock in exchange for $3,116,668 of convertible notes payable and $6,180 of accrued interest. Included in these amounts are the conversions of the Redstart Note No. 1 and Redstart Note No. 2)

 

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 F-61

GBT TECHNOLOGIES, INC.

5,500,000 Shares of Common Stock

PROSPECTUS

, 2022

 

 

PART II

II- INFORMATION NOT REQUIRED IN PROSPECTUS

ItemITEM 13. Other Expenses of Issuance and DistributionOTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

 

The following table sets forth allthe costs and expenses payable by the RegistrantCompany in connection with the saleissuance and distribution of the common stocksecurities being registered. The security holders will not bear any portion of such expenses.registered hereunder. All the amounts shown are estimates except for the SEC registration fee.

 

SEC registration fee $1,022.63 
SEC registration fees $96.92 
Printing expenses $10,000 
Accounting fees and expenses $5,000 
Legal fees and expenses  15,000.00  $15,000 
Accounting fees and expenses  2,500.00 
Printing, transfer agent fees and miscellaneous expenses  5,000.00 
    
Blue sky fees $1,500 
Miscellaneous $500 
Total $23,522.63  $32,096.92 

ItemITEM 14. Indemnification of Directors and OfficersINDEMNIFICATION OF DIRECTORS AND OFFICERS.

 

UnderSection 78.7502(1) of the Nevada law,Revised Statutes provides that a corporation shall indemnify a director or officer against expenses, including attorneys’ fees, actually and reasonably incurred by him, to the extent the director or officer has been successful on the merits or otherwise in defense of any action, suit or proceeding. A corporation may indemnify a director or officerany person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (except in an action brought by or on behalf of the corporation) if that person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by himthat person in connection with such action, suit or herproceeding, if that person acted in good faith and in a manner which that person reasonably believed to be in, or not opposed to, the best interests of the corporation, and, with respect to any criminal action or proceedings, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent, alone, does not create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in, or not opposed to, the best interests of the corporation, and that, with respect to any criminal action or proceeding, the person had reasonable cause to believe his action was unlawful.

II-1

Section 78.7502(2) of the Nevada Revised Statutes provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit brought by or on behalf of the corporation to procure a judgment in its favor because the person acted in any of the capacities set forth above, against expenses, including amounts paid in settlement and attorneys’ fees, actually and reasonably incurred by that person in connection with the defense or settlement of such action or suit, if the person acted in accordance with the standard set forth above, except that no indemnification may be made in respect of any claim, issue or matter as to which such person shall have been adjudged by a court of competent jurisdiction after exhaustion of all appeals therefrom to be liable to the corporation or for amounts paid in settlement to the corporation unless and only to the extent that the court in which such action or suit was brought or other court of competent jurisdiction determines that, in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.

Section 78.7502(3) of the Nevada Revised Statutes further provides that, to the extent a director or officer of a corporation has been successful on the merits or otherwise in the defense of any action, suit or proceeding. Exceptedproceeding referred to in subsections 1 and 2 thereof, or in the defense of any claim, issue or matter therein, that person shall be indemnified by the corporation against expenses (including attorneys’ fees) actually and reasonably incurred by that person in connection therewith.

Section 78.751 of the Nevada Revised Statutes provides that unless indemnification is ordered by a court, the determination to provide indemnification must be made by the stockholders, by a majority vote of a quorum of the board of directors who were not parties to the action, suit or proceeding, or in specified circumstances by independent legal counsel in a written opinion. In addition, the articles of incorporation, bylaws or an agreement made by the corporation may provide for the payment of the expenses of a director or officer of the expenses of defending an action as incurred upon receipt of an undertaking to repay the amount if it is ultimately determined by a court of competent jurisdiction that the person is not entitled to indemnification. Section 78.751 of the Nevada Revised Statutes further provides that the indemnification provided for therein shall not be deemed exclusive of any other rights to which the indemnified party may be entitled and that the scope of indemnification shall continue as to directors, officers, employees or agents who have ceased to hold such positions, and to their heirs, executors and administrators.

Section 78.752 of the Nevada Revised Statutes provides that a corporation may purchase and maintain insurance on behalf of a director, officer, employee or agent of the corporation against any liability asserted against him or incurred by him in any such capacity or arising out of his status as such whether or not the corporation would have the authority to indemnify him against such liabilities and expenses.

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ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

During the year ended December 31, 2021, the Company had the following transactions in its common stock:

● issued an aggregate of 13,814,744 shares for the conversion of convertible notes of $5,640,605 and accrued interest of $37,403;
●issued 245,000 shares to consultants for services rendered. The value of the shares of $281,750 was determined based on the closing stock price of the Company’s common stock on the grant date; and
●issued 14,000,000 shares to GBT Tokenize for a joint venture agreement. The value of the common stock of $15,400,000 was determined based on the closing stock price of the Company’s common stock on the grant date

On September 21, 2021, the Company entered into a Securities Purchase Agreement with Redstart pursuant to which the Company issued to Redstart a Convertible Promissory Note (the “Redstart Note No. 7”) in the aggregate principal amount of $244,500 for a purchase price of $203,750. The Redstart Note No. 7 has a maturity date of December 22, 2022 and the Company has agreed to pay interest on the unpaid principal balance of the Redstart Note No. 7 at the rate of two and a half percent (2.5%) per annum from the date on which the Redstart Note No. 7 is issued (the “Issue Date”) until the same becomes due and payable, whether at maturity or upon acceleration or by prepayment or otherwise. The Company shall have the right to prepay the Redstart Note No. 7, provided it makes a payment including a prepayment to Redstart as set forth in the Redstart Note No. 7. The transactions described above closed on September 28, 2021. The outstanding principal amount of the Redstart Note No. 7 may not be converted prior to the period beginning on the date that immunity are:is 180 days following the Issue Date. Following the 180th day, Redstart may convert the Redstart Note No. 7 into shares of the Company’s common stock at a conversion price equal to 85% of the lowest trading price with a 20-day look back immediately preceding the date of conversion. Since the conversion price will vary based on the Company’s stock price, the beneficial conversion feature associated with this note is accounted for as a derivative liability. In addition, upon the occurrence and during the continuation of an Event of Default (as defined in the Redstart Note No. 7), the Redstart Note No. 7 shall become immediately due and payable and the Company shall pay to Redstart, in full satisfaction of its obligations hereunder, additional amounts as set forth in the Redstart Note No. 7.

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During the year ended December 31, 2020, the Company had the following transactions in its common stock:

 

 ●issued an aggregate of 140,138,107 for the conversion of convertible notes of $1,306,489 and accrued interest of $4,590; and
●issued 100,000,000 shares to GBT Tokenize for a willful failurejoint venture agreement. The value of the common stock of $5,500,000 was determined based on the closing stock price of the Company’s common stock on the grant date.

During the year ended December 31, 2019, the Company had the following transactions in its common stock:

●issued an aggregate of 9,500 shares to deal fairlyemployees and board members as part of their compensation agreements with the company or its stockholdersCompany. The value of the common stock of $235,900 was determined based on the closing stock price of the Company’s common stock on the grant date;
●issued 74,762 shares to an investor for the conversion of $1,357,200 in connection with a matterconvertible notes and $62,934 in which the director has a material conflict ofaccrued interest;
   
 ●issued 59,820 shares to an investor for disputed penalties on a violationconvertible debenture. The value of criminal law (unless the director had reasonable causecommon stock of $975,065 was determined based on the closing stock price of the Company’s common stock on the grant date;
●issued 200,267 shares to believeLatinex in order to provide that his or her conductLatinex may maintain its required regulatory capital as required by various regulators. The Company has recorded the value ($7,610,147) of these shares of common stock as a stock loan receivable which is presented as a contra-equity account in the accompanying consolidated balance sheets. The value of the common stock was lawful or no reasonable causedetermined based on the closing stock price of the Company’s common stock on the grant date;
●issued 10,000,000 shares in connection with a joint venture with BitSpeed. The value of the common stock of $17,900,000 was based on the closing price of the Company’s common stock on the closing date;
●issued 4,566,214 shares in connection with the cashless exercise of 6,120,000 warrants; and
●canceled 200,000 shares that were returned in connection with the Company’s sale of its investment with Mobiquity. (See Note 4). The shares were valued based on the Company’s stock price on the date of the agreement.

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During the years ended December 31, 2018, the Company had the following transactions in its common stock:

●issued 66,000,000 shares in connection with the conversion of 66,000 shares of Series D Preferred Stock;
●issued 2,000,000 shares in connection with the conversion of 2,000,000 shares of Series G Preferred Stock;
●issued 250,000 shares to believea consultant for professional services rendered valued at $123,725. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the dates that his or her conductthe shares earned based on the agreement;
●issued 1,800,000 shares to employees and board members as part of their agreements with the Company. The value of the common stock of $4,404,500 was unlawful);determined based on the closing stock price of the Company’s common stock on the date of the respective agreements;
●issued 3,000,000 to a consultant for services related to assisting the Company with the acquisition of the RWJ assets. The 3,000,000 shares were earned when the operations of the RWJ assets produced revenue in excess of $10,000,000. The value of the common stock of $4,590,000 was determined based on the closing stock price of the Company’s common stock on the date of the shares were earned.
●issued aggregate of 1,250,000 shares to a consultant for services rendered valued at $2,715,000. The services, which include business development, analysis, and interaction with professionals, were principally related to assisting the Company with the acquisition of the ECS and Electronic Check assets (see Note 3). The value of the common stock was determined based on the closing stock price of the Company’s common stock on the closing date of acquisition of ECS and Electronic Check;
●issued 500,000 shares for the acquisition of the ECS assets valued at $1,010,000. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the acquisition date;
●issued 250,000 shares for the acquisition of the Electronic Check valued at $695,000. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the acquisition date;
●issued 10,000,000 shares in connection with its equity interest in Mobiquity valued at $9,980,000 (See Note 6). The value of the common stock was determined based on the closing stock price of the Company’s common stock on the closing date of the Mobiquity transaction;

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●issued an additional 10,000,000 shares to Mobiquity valued at $3,90,000 for payment of the exercise price for 20,000,000 warrants previously granted to the Company. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the date of issuance;
●issued 1,000,000 shares to a consultant for services rendered valued at $998,000. The services, which include business development, analysis, and interaction with professionals, were principally related to assisting the Company with the acquisition of its equity interest in Mobiquity. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the closing date of Mobiquity transaction;
●issued 12,500,000 shares to Guardian LLC in connection the termination of its 50% interest in the profits of certain of the Company’s products (See Note 11). The shares were valued at $11,750,000 which was determined based on the closing stock price of the Company’s common stock at the date of the agreement;
●issued 324,528 shares to Bellridge for the conversion of $275,000 in convertible notes and $17,075 in accrued interest;
●issued 9,499,274 shares to an unaffiliated third-party institutional investor for the conversion of $2,000,000 in convertible notes and $6,521 in accrued interest;
●issued 318,583 shares to Bellridge pursuant to the limited price protection. The shares were valued at $213,451 which was charged to financing cost was determined based on the closing stock price of the Company’s common stock on the date of issuance;

●issued 2,000,000 shares to a consultant for services rendered in connection with the issuance of the Company’s common stock as payment of the exercise price for the Mobiquity warrants valued at $780,000. The value of the common stock was determined based on the closing stock price of the Company’s common stock on the date of issuance;
●issued 2,000,000 shares to a consultant for services rendered in connection with the issuance of the Company’s common stock as payment of the exercise price for the Mobiquity warrants valued at $780,000.
●issued 2,000,000 shares to Eagle Equities LLC as a result of the Company issuing shares of common stock for less than $0.30 pursuant to an agreement with Eagle Equities. The shares were valued at $670,000, which was charged to financing cost was determined based on the closing stock price of the Company’s common stock on the date the Company issued shares for less than $0.30;
   
 ●a transaction from whichconsultant for services rendered valued at $30,000. The value of the director derived an improper personal profit;common stock was determined based on the closing stock price of the Company’s common stock on the date of issuance;
   
 ●issued 1,272,726 shares of common stock to an investor for cash proceeds of $1,500,000; and willful misconduct.
●canceled 50,000 shares pursuant to the settlement of a legal matter.

 

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Our bylaws include an indemnification provision under which we have the power to indemnify our directors, officers and former officers and directors (including heirs and personal representatives) against all costs, charges and expenses actually and reasonably incurred, including an amount paid to settle an action or satisfy a judgment to which the director or officer is made a party by reason of being or having been a director or officer of Gopher Protocol Inc. or any of our subsidiaries.

Our bylaws also provide that our directors may cause us to purchase and maintain insurance for the benefit of a person who is or was serving as a director, officer, employee or agent of Gopher Protocol Inc. or any of our subsidiaries (including heirs and personal representatives) against a liability incurred by him or her as our director, officer, employee or agent.

Item 15. Recent Sales of Unregistered Securities

Eagle Equities

On December 29, 2017, the Company entered into a Securities Purchase Agreement with Eagle Equities, LLC (“Eagle”) pursuant to which Eagle agreed to purchase up to 2,000,000 shares of the Company’s common stock for a purchase price of $1,500,000 or $0.75 per share. The closing occurred on December 29, 2017 with respect to the funding of $1,000,000 resulting in the issuance of 1,333,334 shares of common stock (the “First Closing Shares”). On March 21, 2018, Eagle purchased an additional 666,666 shares of common stock (the “Second Closing Shares”) for a purchase price of $500,000 that been wired into the Company’s bank account.

The Company placed 2,000,000 (1,333,334 on prior closing on December 29, 2017 and additional 666,666 on this current closing) shares of common stock (the “Escrow Shares”) in escrow to be utilized for the purpose of limited price protection. If, beginning on the seventh month anniversary of the issuance of the First Closing Shares and Second Closing Shares if the second closing occurs, Eagle has sold any of the First Closing Shares or the Second Closing Shares as the case may be at a sales price of less than $0.72 per share, then that number of Escrow Shares shall be released from escrow to Eagle as a limited make whole which shall be determined by using the following formula:

($0.72 – Closing Price) / Closing Price) * number of shares sold at a price less than $0.72.

Closing Price is price on the first day of each monthly anniversary beginning on the first day of the 7th month (and continuing monthly until the earlier of January 31, 2019 or until all shares are sold).

The Company shall deposit an additional 2,000,000 shares of common stock into escrow which shares shall only be released to Eagle, if, prior to January 31, 2019 (while Eagle continues to hold shares), the Company issues shares at an issue price of less than $0.30 per share.

The Company also issued Eagle a Common Stock Purchase Warrant to acquire 666,666 shares of common stock exercisable for three years at an exercise price of $2.00 per share (the “Eagle Warrant”). Unless otherwise agreed in writing by both the Company and Eagle, at no time will Eagle exercise any amount of the Eagle Warrant to purchase common stock that would result in Eagle owning more than 9.9% of the common stock outstanding of the Company. The Eagle Warrant contains standard anti-dilution protections.

On September 13, 2017, the Company entered into a Securities Purchase Agreement with Eagle pursuant to which the Company issued Eagle two convertible notes. The first note, due September 18, 2018 in the principal amount of $50,000 (“Eagle Equities Note 1”), was issued in exchange for $50,000 in cash. The second note, due September 13, 2018 in the principal amount of $50,000 (“Eagle Equities Note 2” and, together with Eagle Equities Note 1, the “Eagle Equities Notes”), was issued in exchange for a full-recourse, collateralized promissory note from Eagle Equities in the amount of $45,000 (“Eagle Equities Payment Note”). The Eagle Equities Payment Note is due on May 13, 2018, unless the Company does not meet the current public information requirement pursuant to Rule 144, in which case both Eagle Equities Note 2 and the Eagle Equities Payment Note may be cancelled. The Eagle Equities Payment Note is secured by the Eagle Equities Note 1. The above financing closed on September 20, 2017. On December 29, 2017, Eagle converted the Eagle Equities Note 1 into 503,726 shares of common stock.

Upon any of its securities being available for resale under Rule 144 as promulgated under the Securities Act of 1933, Eagle shall limit its sales with regard to any shares of common stock it owns to the greater of $10,000 in gross sales per day or 10% of the aggregate trading volume per day.

Bellridge

On March 1, 2018, the Company entered into and closed a Securities Purchase Agreement (the “Bellridge Agreement”) with Bellridge Capital, LP (“Bellridge”) pursuant to which Bellridge invested $750,000 into the Company in consideration of a 10% Convertible Debenture (the “First Bellridge Debenture”) and common stock purchase warrants to acquire an aggregate of 500,000 shares of common stock exercisable for a period of five years at an exercise price of $2.35 per share (the “First Bellridge Warrant”). The Bellridge Agreement provided that Bellridge was entitled to acquire an additional 10% Convertible Debenture in the principal amount of $750,000 and a Common Stock Purchase Warrant on the terms of the initial closing (“Bellridge Option”).

On April 9, 2018, Bellridge elected to exercise the Bellridge Option, as such the Company and Bellridge closed the second financing as contemplated by the Securities Purchase Agreement entered with Bellridge pursuant to which Bellridge invested an additional $750,000 into the Company in consideration of a 10% Convertible Debenture (the “Second Bellridge Debenture” and together with the First Bellridge Debenture, the “Bellridge Debenture”) and common stock purchase warrants to acquire an aggregate of 500,000 shares of common stock exercisable for a period of five years at an exercise price of $2.35 per share (the “Second Bellridge Warrant” and together with the First Bellridge Warrant, the “Bellridge Warrant”) The Bellridge Debenture bears interest of 10% and is payable one year from issuance. The First Bellridge Debenture and the Second Bellridge Debenture are convertible into shares of common stock at $0.90 per share and $1.00 per share, respectively, subject to limited antidilution protection.

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During an event of default, the conversion price for the Bellridge Debenture in effect on any conversion date means, as of any conversion date or other date of determination, shall be 35% of the lowest trading price for the Company’s common stock during the 20 trading Days immediately preceding the delivery of a notice of conversion. Bellridge has agreed to restrict its ability to convert the Bellridge Debenture or exercise the Bellridge Warrant and receive shares of common stock such that the number of shares of common stock held by it and its affiliates after such conversion or exercise does not exceed 4.99% of the then issued and outstanding shares of common stock.

In connection with both closings, the Company delivered 1,000,000 shares of common stock to an escrow agent. The escrow shares are to be utilized for the purpose of limited price protection. If, beginning on the 7th monthly anniversary of the issuance of the escrow shares, Bellridge has sold shares issuable upon conversion of the Bellridge Debenture at a sales price of less than $1.10 per share, then that number of shares shall be released from escrow to Bellridge as a limited make whole using the following formula:

(($1.00 – closing price on 1st day of each monthly anniversary beginning on the 1st day of the 7th month (and continuing monthly until all shares are sold) / closing price of the 1st monthly day in question) * number of shares sold at a price less than $1.10.

As long as the Company is not in default of the Bellridge Debenture or in breach of the Securities Purchase Agreement, at any time during which Bellridge owns the Bellridge Debenture, Bellridge commits to limit in the aggregate all sales of the shares of common stock issued upon conversion of the Bellridge Debenture and the related Common Stock Purchase Warrant to the greater of not more than (i) 10.00% of the daily trading volume for the Company’s common stock as reported for that day or (ii) $35,000. Breach of this leak-out provision will be considered a material breach by Bellridge.

As of the date hereof, the Company is obligated on the Bellridge Debenture in the principal amount of $1,500,000 in connection with the offering. The Bellridge Debenture is a debt obligation arising other than in the ordinary course of business, which constitutes a direct financial obligation of the Company. Other than the Bellridge Debentures, the Company does not have any other convertible debt on its balance sheet.

ECS Prepaid

On March 16, 2018 (“Closing Date”), the Company entered into and closed an Asset Purchase Agreement dated March 1, 2018 (the “ECS Purchase Agreement”) with ECS Prepaid LLC (“ECS”), a Missouri limited liability company, pursuant to which the Company purchased certain assets from ECS, including, but not limited to, the processing prepaid platform, servers, POS terminals, customer list, a processing software program and goodwill, in consideration of $1,100,000 of which $100,000 was paid on the Closing Date and the balance is to be paid pursuant to a secured promissory note in the amount of $1,000,000 (the “ECS Note”). In addition, the Company issued 500,000 shares of common stock of the Company (the “ECS Shares”) and warrants to purchase 500,000 shares of common stock (the “ECS Warrants”). The ECS Warrants were assigned by ECS to Dennis Winfrey. The ECS Warrants are exercisable for a period of five years at a fixed exercise price of $1.85 per share and contain standard anti-dilution protection. Under the ESC Note, which is secured by the assets acquired by the Company from ECS, the Company is required to make ten equal payments of $100,000 commencing on April 15, 2018. The Company may prepay the ECS Note at any time without penalty. The ECS Note is a short-term debt obligation that is material to the Company.

At closing, the Company and Derron Winfrey entered into an Employment Agreement pursuant to which Mr. Winfrey was retained as Chief Operating Officer for a term of one year, subject to an automatic extension, unless terminated, in consideration of a base salary of $144,000 and an annual bonus of $25,000 in shares of common stock of the Company subject to the discretion of the Board of Directors of the Company. In addition, Mr. Winfrey received a signing bonus of 250,000 shares of common stock, a Common Stock Purchase Warrant to acquire 500,000 shares of common stock at an exercise price of $1.85 per share and a $50,000 bonus with $25,000 paid on the Closing Date and $25,000 payable on May 1, 2018. The Company also entered into an Employment Agreement with Mark Garner pursuant to which Mr. Garner was retained as Vice President of Operations for a term of one year, subject to an automatic extension, unless terminated, in consideration of a base salary of $120,000 and an annual bonus of $25,000 in shares of common stock of the Company subject to the discretion of the Board of Directors of the Company. In addition, Mr. Garner received a signing bonus of 250,000 shares of common stock, a Common Stock Purchase Warrant to acquire 500,000 shares of common stock at an exercise price of $1.85 per share and a $50,000 bonus with $25,000 paid on the Closing Date and $25,000 payable on May 1, 2018. On March 16, 2018, Mr. Bauer was appointed as Chairman of the Board of the Company.

On the Closing Date, the Company and J.I.L. Venture LLC (“JIL Venture”), a non-related party, which assisted structuring and negotiating the ECS Purchase Agreement and related asset purchase, entered a Consulting Agreement dated March 1, 2018. In consideration for the services, the Company issued JIL Venture 1,000,000 shares of common stock and warrants to purchase 1,500,000 shares of common stock exercisable for a term of five years at an exercise price of $1.85 per share. JIL Venture assigned 500,000 shares of common stock and 750,000 warrants to acquire 750,000 shares of common stock to Michelle Bauer, the wife of Gregory Bauer, CEO and a director of the Company. The assignment of common stock and warrants from JIL Ventures to Ms. Bauer never took place; therefore JIL Ventures retained all 1,000,000 shares of common stock and 1,500,000 warrants.

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Electronic Check Services

On April 2, 2018 (“Closing Date”), the Company entered into and closed an Asset Purchase Agreement (the “Electronic Purchase Agreement”) with Electronic Check Services Inc. (“Electronic Check”), a Missouri corporation, pursuant to which the Company purchased certain assets from Electronic Check, including, but not limited to, assets associated with software that validates written check authenticity, in consideration of $75,000 paid on the Closing Date. In addition, the Company issued 250,000 shares of common stock of the Company (the “Electronic Shares”) and warrants to purchase 250,000 shares of common stock (the “Electronic Warrants”). The Electronic Warrants were assigned by Electronic Check to Dennis Winfrey, the shareholder of Electronic Check. The Electronic Warrants are exercisable for a period of five years at a fixed exercise price of $2.70 per share and contain standard anti-dilution protection.

On April 2, 2018, the Company entered into and closed an Asset Purchase Agreement (the “Central Purchase Agreement”) with Central State Legal Services Inc. (“Central”), a Missouri corporation, pursuant to which the Company purchased certain assets from Central, including, but not limited to, assets associated with the a system to recover funds from returned checks, in consideration of $25,000 paid on the Closing Date. Derron Winfrey, the COO of the Company, is a director and President of Electronic Check and Central. Derron Winfrey’s parents are the shareholders of Check and Central.

On the Closing Date, the Company and J.I.L. Venture LLC (“JIL Venture”), a non-related party, which assisted structuring and negotiating the ECS Purchase Agreement and related asset purchase, entered a Consulting Agreement dated April 2, 2018. In consideration for the services, the Company issued JIL Venture 250,000 shares of common stock and warrants to purchase 250,000 shares of common stock exercisable for a term of five years at an exercise price of $2.70 per share.

Chief Financial Officer

On April 16, 2018, Kevin F. Pickard was appointed by the Company to serve as the Chief Financial Officer of the Company.

The Company and Mr. Pickard entered into an Executive Retention Agreement dated April 16, 2018 pursuant to which Mr. Pickard agreed to serve as Chief Financial Officer in consideration of an annual salary of $120,000. The Company also issued Mr. Pickard 250,000 shares of common stock and granted Mr. Pickard a Stock Option to acquire 500,000 shares of common stock of the Company at an exercise price of $2.80 per share for a period of five years. The Stock Options vest in tranches of 100,000 shares commencing on the one-year anniversary and continuing thereafter on an annual basis or in full in the event of a change of control.

New Director

On April 25, 2018, Muhammad Khilji was appointed to the Board of Directors of the Company to serve as a director of the Company. Mr. Khilji entered into an agreement pursuant to which he will serve as a director. The director agreement provides that he will one tine grant of 100,000 shares of common stock and a stock option to acquire 100,000 shares of common stock exercisable for a period of five years at $2.50 per share. In addition, Mr. Khilji will receive 100,000 shares of common stock per year vesting in increments of 25,000 per quarter commencing January 1, 2019. The Company will also pay Mr. Khilji $5,000 per quarter.

Eagle Equities – May 2018

On May 4, 2018, the Company entered into a Securities Purchase Agreement with Eagle Equities, LLC (“Eagle”) pursuant to which Eagle agreed to purchase up to 1,212,120 shares of the Company’s common stock for an aggregate purchase price of $2,000,000 or $1.65 per share. The closing occurred on May 4, 2018 with respect to the funding of $500,000 resulting in the issuance of 303,030 shares of common stock. Additional closings of $500,000 for 303,030 shares are scheduled to close on May 25, 2018, June 15, 2018 and July 5, 2018 each.

The Company agreed to place 303,030 shares of common stock each tranche (the “Escrow Shares”) in escrow to be utilized for the purpose of limited price protection. If, beginning on the seventh month anniversary of the closing of each tranche, Eagle has sold any of its shares of common stock at a sales price of less than $1.65 per share, then that number of Escrow Shares shall be released from escrow to Eagle as a limited make whole which shall be determined by using the following formula:

($1.65 – Closing Price) / Closing Price) * number of shares sold at a price less than $1.65.

Closing Price is price on the first day of each monthly anniversary beginning on the first day of the 7th month (and continuing monthly until the earlier of June 4, 2019 or until all shares are sold.

Series D Conversion

The Company issued 66,000,000 shares in connection with the conversion of 66,000 shares of Series D Preferred Stock.

Board Appointments

On May 17, 2018, Robert Yaspan, Judit Nagypal and Ambassador Ned L. Siegel were appointed to the Board of Directors of the Company to serve as directors of the Company. Mr. Yaspan will also serve as Chairman of the Board of Directors. Ms. Nagypal and Ambassador Siegel are considered independent directors and entered into agreements pursuant to which each will serve as a director. The director agreements provide that each will receive a one-time grant of 100,000 shares of common stock and a stock option to acquire 100,000 shares of common stock exercisable for a period of five years at $2.50 per share. Mr. Yaspan, in consideration for serving as Chairman of the Board, entered into an agreement providing a one-time grant of 250,000 shares of common stock and a stock option to acquire 250,000 shares of common stock exercisable for a period of five years at $2.50 per share. Each director will receive 100,000 shares of common stock per year vesting in increments of 25,000 per quarter commencing January 1, 2019. On June 18, 2018, Eva Bitter was appointed to the Board of Directors of Gopher Protocol Inc. (the “Company”) to serve as a director of the Company. Ms. Bitter entered into an agreement pursuant to which she will serve as a director. The director agreement provides that she will receive a one-time grant of 100,000 shares of common stock and a stock option to acquire 100,000 shares of common stock exercisable for a period of five years at $2.50 per share. In addition, Ms. Bitter will receive 100,000 shares of common stock per year vesting in increments of 25,000 per quarter commencing January 1, 2019.

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Interim Chief Executive Officer

On July 23, 2018, Douglas L. Davis was appointed by the Company to serve as the Interim Chief Executive Officer of the Company. The Company and Mr. Davis entered into an Employment Agreement dated July 23, 2018 pursuant to which Mr. Davis agreed to serve as Interim Chief Executive Officer in consideration of an annual salary of $120,000. The Company also issued Mr. Davis 300,000 shares of common stock subject to a lock-up/leakout provision. The employment of Mr. Davis is for a period of six months and may be terminated at any time, with or without formal cause, on ten days’ notice.

On July 31, 2018, Mitchell K. Tavera was appointed to the Board of Directors of the Company to serve as a director of the Company. Mr. Tavera entered into an agreement pursuant to which he will serve as a director. The director agreement provides that he will receive a one-time grant of 100,000 shares of common stock and a stock option to acquire 100,000 shares of common stock exercisable for a period of five years at $2.50 per share. In addition, Mr. Tavera will receive 100,000 shares of common stock per year vesting in increments of 25,000 per quarter commencing January 1, 2019.

Mobiquity Technologies, Inc.

On September 4, 2018, the Company and Mobiquity Technologies, Inc., a New York corporation (OTCQB: MOBQ”) (“Mobiquity”) entered an Agreement (the “MOBQ Agreement”) pursuant to which the parties exchanged equity interest in each of the companies. In accordance with the Agreement, the Company will receive 1,000 shares of Mobiquity’s restricted Series AAAA Preferred Stock (the “Mobiquity Preferred Stock”) in consideration of Company’s concurrent sale and issuance to Mobiquity of 10,000,000 shares of Company’s restricted Common Stock (the “Gopher Common Stock”). The shares of Mobiquity Preferred Stock are convertible into an aggregate of up to 100,000,000 shares of Mobiquity common stock (the “Mobiquity Common Stock”) and 150,000,000 common stock purchase warrants (the “Mobiquity Warrants”). The Mobiquity Warrants shall have a term of 5-years from the date of grant and shall be exercisable at a price of $0.12 per share and the shares of Mobiquity Preferred Stock shall not be convertible into shares of Mobiquity Common Stock and the Mobiquity Warrants shall not be contemporaneously granted until after Mobiquity’s Board of Directors and stockholders shall have increased the authorized number of shares of Mobiquity’s common stock to a number sufficient to accommodate a reserve in the Company’s favor of 250,000,000 shares of Mobiquity’s common stock. The Mobiquity Preferred Stock shall have immediate voting rights equal to the number of shares of Mobiquity Common Stock into which they may be converted, not including the shares of Mobiquity’s common stock underlying the Mobiquity Warrants (the “Mobiquity Warrant Shares”). The closing occurred on September 4, 2018. Mobiquity agreed that for a period beginning immediately upon the six (6)-month anniversary of the date hereof and ending on the twenty-four (24)-month anniversary of the date hereof (the “Leak-Out Period”), Mobiquity shall have the right to sell or otherwise transfer into the public markets on any given day up to 20,000 shares of Gopher Common Stock. Mobiquity may transfer all or a portion of the shares of Gopher Common Stock otherwise at any time, so long as the receiving party adheres to the above Leak-Out Period.

CONSUL GROUP RE 2021, SRL (“Consul”), a-third party controlled by Mauricio Lara Esq. has been engaged by the Company as consultant to provide services in connection with the Company’s investment in Mobiquity. Consul will provide analysis, interaction with related professional and other services as requested by the Company. The Company has agreed to pay Consul 1,000,000 shares of common stock of the Company for services rendered to the Company. In addition, Mobiquity paid a finder’s fee to Consul of 10,000,000 restricted shares of common stock of Mobiquity and 15,000,000 Mobiquity Warrants. The Mobiquity Warrants shall have a term of 5-years from the date of grant and shall be exercisable at a price of $0.12 per share.

Series G Preferred Shares

On December 29, 2017, Guardian LLC converted all of the principal and interest of the Note, into 2,000,000 shares of Series G Preferred Stock. The Series G Preferred Stock is entitled to vote on an as-converted basis, automatically converts to common stock upon any liquidation, dissolution or winding up and the Company may not declare a dividend until the Series G Preferred Stock has received a dividend. Each share of Series G Preferred Stock is convertible into one shares of common stock of the Company and contain standard anti-dilution rights. On August 30, 2018, Guardian LLC converted the 2,000,000 shares of Series G Preferred Stock into 2,000,000 shares of common stock.

Guardian LLC - Patch

On March 29, 2016, the Company contributed all of its rights relating to its proprietary microchip that is within a sticky patch package (the “Patch”) to Guardian LLC in consideration of 50% of the profit generated by Guardian LLC and a commitment from Guardian LLC that it is responsible for investing all needed funds for the purpose of developing the Patch and related products to the Patch, as well as funding the working capital needs of the Company. On September 25, 2018, the Company entered into an agreement with Guardian LLC pursuant to which the Company purchased Guardian LLC’s 50% interest previously entered between the parties in March 2016 covering the Guardian Patch, Puzpix and Epsilon. In consideration, the Company issued Guardian 12,500,000 shares of common stock.

II-5

 

The issuance of the securities set forth hereinforegoing offers, sales and issuances were made in reliance on the exemption provided byexempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) for the offer and sale of securities not involving a public offering, and/or Rule 506 of Regulation D promulgated under the Securities Act. thereunder.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits

The Company’s reliance upon Section 4(a)(2) of the Securities Act in issuing the securities was based upon the following factors: (a) the issuance of the securities was an isolated private transactionexhibit index attached hereto is incorporated herein by us which did not involve a public offering; reference.

(b) there was only one recipient; (c) there were no subsequent or contemporaneous public offerings of the securities by the Company; (d) the securities were not broken down into smaller denominations; (e) the negotiations for the issuance of the securities took place directly between the individual and the Company; and (f) the recipient of the note was an accredited investor.Financial Statement Schedule

 

All ofschedules have been omitted because the foregoing securities are deemed restricted securities for purposes of the Securities Act. The certificates representing the issued shares of capital stock described in this Item 15 included appropriate legends setting forth that the applicable securities have not been registered and reciting the applicable restrictions on transfer. There were no underwriters employed in connection with any of the transactionsinformation required to be set forth in this Item 15.

Item 16. Exhibits and Financial Statement Schedulesthe schedules is either not applicable or is shown in the financial statements or notes thereto.

 

(a)Exhibits
(b)   Exhibit
No.		 Description
3.1 Certificate of Incorporation of Forex International Trading Corp. (6) (1)
3.2 Bylaws of Forex International Trading Corp. (6) (1)
3.3 Certificate of Designation for Series A Preferred Stock (14) (2)
3.4 Certificate of Designation for Series B Preferred Stock (21) (3)
3.5 Certificate of Designation – Series C Preferred Stock (22) (4)
3.6 Amendment to the Certificate of Designation for the Series B Preferred Stock (25) (5)
3.7 Amendment to the Certificate of Designation for the Series C Preferred Stock(25)Stock(5)
3.8 Certificate of Change filed pursuant to NRS 78.209 (31) (6)
3.9 Articles of Merger filed pursuant to NRS 92.A.200 (31) (6)
3.10 Certificate of Amendment to the Articles of Incorporation of Gopher Protocol Inc. (34) (8)
4.13.11 Convertible Promissory Note issued by the Company to ATLCertificate of Change dated July 8, 2010 (3)10, 2019 (23)
4.23.12 Secured and Collateralized Promissory Note issued by ATL to the Company dated July 8, 2010 (3)
4.3Collateral and Security AgreementArticles of Merger by and between Forex International Trading GroupGopher Protocol Inc. and ATLGBT Technologies Inc. dated July 7, 2010 (3)10, 2019(23)
4.43.13 Promissory Note issuedCertificate of Correction to Rasel Ltd. Dated October 6, 2009(7)the Certificate of Change (24)
4.53.14 Promissory Note issuedCertificate of Correction to Rasel Ltd. Dated October 20, 2009 (7)
4.6Letter Agreement between Rasel Ltd. and Forex International Trading Corp. dated January 22, 2011 (8)
4.7Letter Agreementthe Articles of Merger by and between Forex International Trading GroupGopher Protocol Inc. and ATLGBT Technologies Inc. dated November 8, 2010(9)July 10, 2019 (24)
4.83.15       6% Convertible Note issuedCertificate of Amendment to APH (11)the Articles of Incorporation of GBT Technologies Inc. dated September 23, 2019(26)
4.93.16 6% Convertible Debenture issued to HAM dated April 5, 2011 (14)Certificate of Designation for Series B Preferred Stock (7)
4.103.17 Promissory Note dated November 30, 2011 issued to Cordellia dioxo. inCertificate of Designation of the amountPreferences, Rights and Limitations of $1,000,000 (18)the Series G Convertible Preferred Stock (15)
4.113.18 $500,000 Convertible Promissory Note issued by Forex International Trading Corp. (23)
4.12$400,000 Secured and Collateralized Promissory Note issued by Vulcan Oil & Gas Inc. (23)
4.13Securities Purchase Agreement dated July 24, 2013 entered with Asher Enterprise Inc. (26)
4.14Convertible Promissory Note issued to Asher Enterprises Inc. (26)
4.1510% Convertible Debenture issued to GV Global Communications Inc. (30)
4.16Amendment to 10% Convertible Promissory Debenture held by GV Global Communications, Inc. (32)
4.17Series DH Convertible Preferred Stock Certificate of Designation (32) (21)

4.18II-7

4.1 Common Stock Purchase Warrant (40)
4.196% Convertible Promissory Note issued by the Company to Guardian Patch LLC dated May 23, 2017 (41)
4.20Securities Purchase Agreement entered with Crown Bridge Partners, LLC dated June 9, 2017 (42)
4.21Convertible Promissory Note dated June 9, 2017 issued to Crown Bridge Partners LLC (42)
4.22Convertible Promissory Note Back End Note dated June 9, 2017 issued to Crown Bridge Partners LLC (42)
4.23Collateralized Secured Promissory Note Back End Note dated June 9, 2017 issued to Crown Bridge Partners LLC (42)
4.24Securities Purchase Agreement entered with Eagle Equities, LLC dated June 9, 2017 (42)
4.25Convertible Promissory Note issued to Eagle Equities, LLC dated June 9, 2017 (42)
4.26Convertible Promissory Note issued to Eagle Equities, LLC dated June 9, 2017 (Back End Note) (42)
4.27Form of Collateralized Secured Promissory Note dated June 9, 2017 issued by Eagle Equities, LLC (42)

4.28Convertible Promissory Note dated June 7, 2017 issued to JSJ Investments Inc. (42)
4.29Convertible Promissory Note dated June 29, 2017 issued to JSJ Investments Inc. (44)
4.30Form of Warrant issued to Robert Warren Jackson, Gregory Bauer, Michael Murray and Guardian Patch, LLC dated September 1, 2017 (45) (14)
4.314.2 Balloon Note payable by Gopher Protocol Inc. to RWJ Advanced Marketing, LLC dated September 1, 2017 (45) (14)
4.324.3 Securities Purchase Agreement entered with Eagle Equities, LLC dated September 13, 2017 (46)
4.33Convertible Promissory Note issued to Eagle Equities, LLC dated September 13, 2017(46)
4.34Convertible Promissory Note issued to Eagle Equities, LLC dated September 13, 2017 (Back End Note) (46)
4.35Form of Collateralized Secured Promissory Note dated September 13, 2017 issued by Eagle Equities, LLC(46)
4.36Securities Purchase Agreement dated October 2, 2017 between Gopher Protocol Inc. and Power Up Lending Group Ltd. (47)

II-6

4.37Convertible Promissory Note dated October 2, 2017 issued to Power Up Lending Group Ltd. (47)
4.38Securities Purchase Agreement entered with Labrys Fund, LP dated October 26, 2017 (49)
4.39Convertible Promissory Note issued to Labrys Fund, LP dated October 26, 2017 (49)
4.40Rescission Agreement entered between Gopher Protocol Inc. and Crown Bridge Partners, LLC dated October 23, 2017 (49)
4.41Securities Purchase Agreement by and between Gopher Protocol Inc. and Eagle Equities, LLC dated December 29, 2017 (50)
4.42Common Stock Purchase Warrant issued to Eagle Equities, LLC dated December 29, 2017 (50)
4.43Certificate of Designation of the Preferences, Rights and Limitations of the Series G Convertible Preferred Stock (51)
4.44Form of Securities Purchase Agreement entered with Bellridge Capital, LLC (52)
4.4510% Convertible Debenture issued to Bellridge Capital, LLC dated March 2, 2018 (52)
4.46Common Stock Purchase Warrant issued to Bellridge Capital, LLC dated March 2, 2018 (52)
4.47Form of Warrant issued to Derron Winfrey, Dennis Winfrey, Mark Garner and JIL Venture dated March 1, 2018 (53) (16)

4.484.4 Note payable by Gopher Protocol Inc. to ECS, LLC dated March 1, 2018 (53) (16)
4.494.5 10% Convertible Debenture issued to Bellridge Capital, LP dated April 9, 2018 (54)
4.50Common Stock Purchase Warrant issued to Bellridge Capital, LP dated April 9, 2018 (54)
4.51Stock Option issued to Kevin Pickard dated April 16, 2018 (55) (17)
4.524.6 Stock Option issued to Muhammad Khilji dated April 25, 2018 (56) (18)
4.534.7 Securities6% Convertible Note payable to Pablo Gonzalez dated June 17, 2019 (21)
4.8Convertible Note payable to Glen Eagles Acquisition LP (22)
4.9Amendment to Common Stock Purchase Agreement by andWarrant between Gopher Protocol Inc. and Eagle Equities, LLCGlen Eagles Acquisition LP (22)
4.10Second Amendment to Promissory Note between GBT Technologies Inc. and Ilaid Research and Trading LP dated July 20, 2020 (29)
4.11Convertible Promissory Note August 4, 2020 issued to Redstart Holdings Corp. (30)
4.12Fourth Amendment to Promissory Note between GBT Technologies Inc. and Iliad Research and Trading, L.P. dated May 4, 2018 (57)14, 2020 – Executed May 19, 2021

(31)
5.14.13 Convertible Promissory Note May 26, 2021 issued to Redstart Holdings Corp. – Executed on May 27, 2021 (32)
4.14Fifth Amendment to Promissory Note between GBT Technologies Inc. and Iliad Research and Trading LP dated August 19, 2021 executed August 20, 2021 (33)
4.15Convertible Promissory Note September 21, 2021 issued to Redstart Holdings Corp. – Executed on September 24, 2021, and Funded on September 28, 2021 (34)
4.16Amended Loan Authorization and Agreement between GBT Technologies Inc. and U.S. Small Business Administration dated October 1, 2021 (35)
4.17Convertible Promissory Note dated November 8, 2021 issued to Sixth Street Lending LLC (36)
5.1*Opinion of Fleming PLLC*PLLC

II-8

10.1 Software Licensing Agreement dated April 12, 2010, by and between Forex International Trading Corp and Triple (1)
10.2Employment Agreement dated April 23, 2010, by and between Forex International Trading Corp and Darren Dunckel (2)
10.3Letter Agreement by and between Forex International Trading Corp. and Anita Atlas, dated July 29, 2010 (4)
10.4Letter Agreement by and between Forex International Trading Corp. and Stewart Reich, dated July 29, 2010 (4)
10.5Letter Agreement by and between Forex International Trading Corp. and Mr. William Glass, dated August 6, 2010 (5)
10.6Share Exchange Agreement by and between Forex International Trading Corp. and APH (10)
10.7Letter Agreement by and between Forex International Trading Corp., APH, Medirad Inc. and Rasel Ltd. (11)
10.8Letter Amendment by and between Forex International Trading Corp. and William Glass, dated March 4, 2011 (13)
10.9Letter Amendment by and between Forex International Trading Corp. and Stewart Reich, dated March 4, 2011 (13)
10.10Employment Agreement by and between Forex International Trading Corp. and Liat Franco, dated March 7, 2011 (13)
10.11Agreement between Forex International Trading Corp. and APH dated April 5, 2011 (14)
10.12Conversion Agreement between MP and Forex International Trading Corp. dated April 5, 2011 (14)
10.13Share Exchange Agreement between Forex International Trading Corp. and dated April 5, 2011 (14)
10.14Agreement to Unwind and Mutual Release dated as of July 11, 2011 by and between Forex International Trading Corp., Forex NYC and Wheatley Investment Agreement by and between Forex International Trading Corp. and Centurion Private Equity, LLC dated June 27, 2011 (16)
10.15Registration Rights Agreement with Centurion by and between Forex International Trading Corp. and Centurion Private Equity, LLC dated June 27, 2011 (16)
10.16Intentionally Left Blank
10.17Settlement Agreement by and between Forex International Trading Corp., A.T. Limited, Watford Holding Inc. and James Bay Holdings, Inc. dated November 1, 2011 (17)
10.18Settlement and Foreclosure Agreement between Forex International Trading Corp., AP Holdings Limited, H.A.M Group Limited and Cordellia d.o.o.(18)
10.19Annulment of Share Purchase Agreement dated December 5, 2011 between Triple 8 Limited, AP Holdings Limited, H.A.M Group Limited and 888 Markets (Jersey) Limited (18)
10.20Promissory Note issued to Forex International Trading Corp. dated December 13, 2011 (19)
10.21Stock Pledge Agreement executed by Fortune Market Media Inc. dated December 13, 2011 (19)
10.22Conversion Agreement between the Company and GV Global Communications, Inc. (22)
10.23Agreement by and between and Direct JV Investments Inc., Forex International Trading Corporation and Vulcan Oil & Gas Inc. dated January 7, 2013 (23)
10.24Evaluation License Agreement dated September 2, 2013, by and between Forex International Trading Corp and Micrologic Design Automation, Inc. (27)
10.25Letter Agreement dated January 2, 2014, by and between Forex International Trading Corp and Micrologic Design Automation, Inc. (28)
10.26Settlement Agreement by and between Forex International Trading Corp. and Leova Dobris dated November 14, 2014 (29)
10.27Exchange Agreement by and between Forex International Trading Corp. and Vladimir Kirish dated January 22, 2015 (30)
10.28Exchange Agreement by and between Forex International Trading Corp. and GV Global Communications Inc. dated January 22, 2015 (30)
10.29Agreement by and between Forex International Trading Corp. and Fleming PLLC dated January 22, 2015 (30)
10.30Territorial License Agreement dated March 4, 2015, by and between Gopher Protocol Inc. and Hermes Roll LLC (32) (7)
10.3110.2 Amended and Restated Territorial License Agreement dated June 16, 2015 by and between Gopher Protocol Inc. and Hermes Roll LLC (35) (9)
10.3210.3 Letter Agreement dated August 20, 2015 by and between Gopher Protocol Inc. and Dr. Danny Rittman (36) (10)
10.3310.4 Consulting Agreement dated August 11, 2015, by and between Gopher Protocol Inc. and Michael Korsunsky (37)
10.34Letter Agreement dated March 14, 2016 by and between Gopher Protocol Inc. and Dr. Danny Rittman. (38) (11)
10.3510.5 Amended and Restated Employment Agreement by and between Gopher Protocol Inc. and Dr. Danny Rittman dated April 19, 2016 (39) (12)
10.3610.6 Consulting Agreement dated September 10, 2016, by and between Gopher Protocol Inc. and Waterford Group LLC (40)
10.37Conversion Agreement between the Company and Guardian Patch LLC dated May 23, 2017 (41)
10.38Lock-Up and Leak-Out Agreement between the Company and Guardian Patch LLC dated June 26, 2017 (43)
10.39Lock-Up and Leak-Out Agreement between the Company and Stanley Hills LLC dated June 29, 2017 (43)
10.40Letter Agreement between the Company and Danny Rittman dated June 29, 2017 (43) (13)

10.4110.7 Asset Purchase Agreement between Gopher Protocol Inc. and RWJ Advanced Marketing, LLC dated September 1, 2017 (45) (14)
10.4210.8 Addendum to Asset Purchase Agreement between Gopher Protocol Inc. and RWJ Advanced Marketing, LLC dated September 1, 2017 (45) (14)
10.4310.9 Employment Agreement between Gopher Protocol Inc. and Gregory Bauer dated September 1, 2017 (45) (14)

II-7

10.4410.10 Consulting Agreement between Gopher Protocol Inc. and Guardian Patch, LLC dated September 1, 2017 (45)
10.45Rescission Agreement between Gopher Protocol Inc. and Eagle Equities LLC dated December 31, 2017 (51)
10.46Amendment of Lock-Up and Leak-Out Agreement between Gopher Protocol Inc. and Stanley Hills, LLC dated December 29, 2017(51)
10.47Amendment of Lock-Up and Leak-Out Agreement between Gopher Protocol Inc. and Guardian Patch, LLC dated December 29, 2017(51)
10.48Asset Purchase Agreement between Gopher Protocol Inc. and ECS Prepaid LLC dated March 1, 2018 (53) (16)
10.4910.11 Employment Agreement between Gopher Protocol Inc. and Derron Winfrey dated March 1, 2018(53)2018(16)
10.5010.12 Employment Agreement between Gopher Protocol Inc. and Mark Garner dated March 1, 2018(53)2018(16)

10.51II-9

10.13 Consulting Agreement between Gopher Protocol Inc. and J.I.L. Venture LLC dated March 1, 2018(53)
10.52Executive Retention Agreement by and between Gopher Protocol Inc. and Kevin Pickard dated April 16, 2018 (55)
10.53Indemnification Agreement by and between Gopher Protocol Inc. and Kevin Pickard dated April 16, 2018 (55)
10.54Director Agreement by and between Gopher Protocol Inc. and Muhammad Khilji dated April 25, 2018 (56)
10.55Indemnification Agreement by and between Gopher Protocol Inc. and Muhammad Khilji dated April 25, 2018 (56)
10.56Director Agreement by and between Gopher Protocol Inc. and Robert Yaspan dated May 17, 2018 (58)
10.57Director Agreement by and between Gopher Protocol Inc. and Judit Nagypal dated May 17, 2018 (58)
10.58Director Agreement by and between Gopher Protocol Inc. and Ambassador Siegel dated May 17, 2018 (58)
10.59Director Agreement by and between Gopher Protocol Inc. and Eva Bitter dated June 18, 2018 (59)
10.60Employment Agreement by and between Gopher Protocol Inc. and Douglas L. Davis dated July 23, 2018 (60)
10.61Director Agreement by and between Gopher Protocol Inc. and Mitchell K. Tavera dated July 31, 2018 (61)
10.62Agreement between Gopher Protocol Inc. and Mobiquity Technologies, Inc. dated September 4, 2018 (62) (19)
10.6310.14 Consulting Agreement between Gopher Protocol Inc. and Consul Group RE 2021, SRL dated September 5, 2018 (62)
10.64Exclusive Intellectual Property License and Royalty Agreement between Gopher Protocol Inc. and GBT Technologies, S.A. dated September 14, 2018 (63) (20)
10.6510.15 Letter Agreement between Gopher Protocol Inc. and Dr. Danny Rittman dated September 14, 2018 (63) (20)
16.110.16 Letter from Alan R. Swift, CPA, P.A. (33)Exchange Agreement entered into between Gopher Protocol Inc., Altcorp Trading LLC, GBT Technologies, S.A., a Costa Rica company and Pablo Gonzalez dated June 17, 2019 (21)
16.210.17 Letter from Anton & Chia, LLP (48)Consulting Agreement entered into between Gopher Protocol Inc. and Glen Eagles Acquisition LP (22)
21.110.18 List of SubsidiariesLetter Agreement between Mobiquity Technologies, Inc. and GBT Technologies Inc. executed August 2, 2019 Delivered August 6, 2019(64) (39)
23.110.19 Stock Purchase Agreement between Mobiquity Technologies, Inc. and GBT Technologies Inc. Dated September 10, 2019 (25)
10.20Stock Purchase Agreement between Marital Trust GST Subject U/W/O Leopold Salkind and GBT Technologies Inc. dated September 10, 2019 (25)
10.21Letter Agreement between GBT Technologies Inc. and Stanley Hills LLC dated February 26, 2020 (27)
10.22Amendment to Promissory Note between GBT Technologies Inc. and Iliad Research and Trading, L.P. dated February 27, 2020 (27)
10.23Order dated February 27, 2020 issued by the United States District Court District of Nevada (27)
10.24Joint Venture and Territorial License Agreement by and between GBT Technologies Inc. and Tokenize-It S.A. dated March 6, 2020 (28)
10.25Consulting Agreement by and between Pablo Gonzalez and GBT Tokenize Corp. dated March 6, 2020 (28) 
10.26Pledge Agreement by and between GBT Tokenize Corp. and Tokenize-It S.A., dated March 6, 2020 (28)
10.27Securities Purchase Agreement dated August 4, 2020 between GBT Technologies Inc. and Redstart Holdings Corp. (30)
10.28Securities Purchase Agreement dated November 8, 2021 between GBT Technologies Inc. and Sixth Street Lending LLC (36)
10.29Equity Financing Agreement between GBT Technologies Inc. and GHS Investments LLC dated December 17, 2021 (37)
10.30Registration Rights Agreement between GBT Technologies Inc. and GHS Investments LLC dated December 17, 2021 (37)
10.31  Resolution of Purchase, Mutual Release and Settlement Agreement by and among GBT Technologies Inc. and Parties Listed Therein December 22, 2021(38)
10.33*Finders Fee Agreement between JH Darbie & Co. and GBT Technologies Inc. dated October 14, 2021

II-10

23.1*Consent of BF Borgers CPA PC, independent registered public accounting firm
23.223.2* Consent of Anton & Chia, LLPFleming PLLC (included in Exhibit 5.1)
24.1*Power of Attorney (included on the signature page to this registration statement)

 

(1)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 20, 2010
(2)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 28, 2010
(3)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 13, 2010
(4)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 3, 2010
(5)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 9, 2010
(6)Incorporated by reference to the Form S-1 Registration Statement filed with the SEC on September 9, 2009.
(7)Incorporated by reference to the Form S-1 Registration Statement filed with the SEC on November 2, 2009.
(8)Incorporated by reference to the Form S-1 Registration Statement filed with the SEC on January 29, 2010.
(9)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 22, 2010
(10)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 17, 2010
(11)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 3, 2011
(12)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 2, 2011
(13)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 9, 2011
(14)(2)Incorporated by reference to the Form 10-K Annual Report filed with the Securities and Exchange Commission on April 6, 2011
(15)Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on May 20, 2011
(16)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 29, 2011
(17)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 9, 2011
(18)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 12, 2011
(19)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 16, 2011
(20)Incorporated by referenced to the Form 10-K Annual Report filed with the Securities and Exchange Commission on April 13, 2012
(21)(3)Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on May 14, 2012
(22)(4)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 27, 2012.
(23)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 9, 2013.
(24)Incorporated by reference to the Form 10-K Annual Report filed with the Securities and Exchange Commission on April 15, 2013.
(25)(5)Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on November 20, 2012.
(26)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 1, 2013.
(27)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 4, 2013.
(28)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 3, 2014.
(29)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 20, 2014
(30)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 27, 2015
(31)(6)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on February 18, 2015

II-8

(32)(7)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 12, 2015
(33)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 24, 2015
(34)(8)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 1, 2015
(35)(9)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 16, 2015
(36)(10)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 21, 2015
(37)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 28, 2015
(38)(11)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 20, 2016
(39)(12)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 20, 2016
(40)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 13, 2016
(41)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 26, 2017
(42)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 13, 2017
(43)(13)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 30, 2017
(44)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 7, 2017
(45)(14)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 7, 2017
(46)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 22, 2017
(47)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 10, 2017
(48)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 27, 2017
(49)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 30, 2017
(50)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 2, 2018
(51)(15)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on January 3, 2018
(52)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 6, 2018
(53)(16)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 21, 2018
(54)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 13, 2018
(55)(17)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 18, 2018
(56)(18)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on April 26, 2018.
(57)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 8, 2018.
(58)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 22, 2018.
(59)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 22, 2018.
(60)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 24, 2018.
(61)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 31, 2018.
(62)(19)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 9, 2018.
(63)(20)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 18, 2018.
(64)(21)Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on November 13, 2018.June 19, 2019.
(22)Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on July 12, 2019.

 

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(23)Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on July 15, 2019.
(24)Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on August 5, 2019.
(39)Incorporated by reference to the Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on August 7, 2019.
(25)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 16, 2019.
(26)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 25, 2019.
(27)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 2, 2020.
(28)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on March 11, 2020.
(29)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on July 24, 2020.
(30)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 10, 2020.
(31)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on May 21, 2021.
(32)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on June 1, 2021.
(33)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on August 23, 2021.
(34)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on September 29, 2021.
(35)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on October 6, 2021.
(36)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on November 11, 2021
(37)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 20, 2021
(38)Incorporated by reference to the Form 8-K Current Report filed with the Securities and Exchange Commission on December 28, 2021

* Filed herewith.

** To be filed by amendment.

+ Indicates a management contract or any compensatory plan, contract or arrangement.

ItemFinancial Statement Schedules

Schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes thereto.

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[ITEM 17. UndertakingsUNDERTAKINGS.

 

The undersigned Registrant hereby undertakes:

 

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

 

(i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;

 

(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.

 

(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

Provided, however, that:

 

Paragraphs (1)(i), (1)(ii) and (1)(iii) of this section do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement.

 

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

 

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(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser:

 

(i) Each prospectus filed by the registrant pursuant to Rule 424(b)(3) shall be deemed to be part of the registration statement as of the date the filed prospectus was deemed part of and included in the registration statement; and

 

(ii) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by section 10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration statement as of the earlier of the date such form of prospectus is first used after effectiveness or the date of the first contract of sale of securities in the offering described in the prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is at that date an underwriter, such date shall be deemed to be a new effective date of the registration statement relating to the securities in the registration statement to which that prospectus relates, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such effective date.

 

(5) If the registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

 

(6) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

(7) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrantregistrant has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Brisbane,Santa Monica, State of California, on April 25, 2017.the 12th day of January, 2022.

 

 GOPHER PROTOCOLGBT TECHNOLOGIES INC.
 
By:/s/ Douglas DavisMansour Khatib
  Mansour Khatib
 

Douglas Davis

President and

Chief Executive Officer

 

POWER OF ATTORNEY

 

Know All Persons By These Presents,KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Douglas Davis and Kevin Pickard, and each or any one of them,Mansour Khatib, his true and lawful attorney-in-fact and agent with full power of substitution and resubstitution,re-substitution, for him and in his name, place and stead, in any and all capacities to sign any andor all amendments (including, without limitation, post-effective amendments) to this Registration Statement, any related Registration Statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and any or all pre- or post-effective amendments thereto, and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-factattorney-in-fact and agents, and each of them,agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith,and about the premises, as fully tofor all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-factattorney-in-fact and agents,agent, or any of them,substitute or their or his substitutes or substitute,for him, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, the following persons in the capacities and on the dates indicated have signed this Registration Statement below.

 

Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement on Form S-1 has been signed by the following persons in the capacities and on the dates indicated.indicated below.

 

Signature Title Date
/s/Mansour KhatibChief Executive Officer, Chief Financial Officer and DirectorJanuary 12, 2022
Mansour Khatib(Principal Executive Officer and Principal Financial and Accounting Officer)  
/s/ Douglas DavisPresident, Chief Executive Officer and DirectorFebruary 7, 2019
Douglas Davis(Principal Executive Officer)
/s/ Kevin PickardChief Financial OfficerFebruary 7, 2019
Kevin Pickard(Principal Financial and Accounting Officer)
/s/ Dr. Danny Rittman Chief Technology Officer and Director February 7, 2019January 12, 2022
Dr. Danny Rittman    
/s/Michael Murray President and Director February 7, 2019January 12, 2022
Michael Murray    
/s/ Mansour KhatibChief Marketing Officer and DirectorFebruary 7, 2019
Mansour Khatib
/s/ Robert YaspanChairman of the Board of DirectorsFebruary 7, 2019
Robert Yaspan
/s/ Judit NagypalDirectorFebruary 7, 2019
Judit Nagypal
/s/ Mitchell TaveraDirectorFebruary 7, 2019
Mitchell Tavera
/s/ Muhammed KhiljiDirectorFebruary 7, 2019
Muhammed Khilji

 

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