10-Q 1 form10q_gz6gtechnolog.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

 

333-256224

(Commission File Number)

 

 

 

GZ6G Technologies Corp.

(Exact name of registrant as specified in its charter)

 

Nevada   20-0452700
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)
     

8925 West Post Road, Suite 102

Las Vegas, NV

  

 

89148

(Address of principal executive offices)   (Zip Code)

 

(949) 872-1965

(Registrant’s telephone number, including area code)

 

 

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Title of each class  

Trading

Symbol(s)

  

Name of each exchange

on which registered

None   N/A   N/A

 

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

 

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

 

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

 

Large accelerated filer ☐ Accelerated filer  ☐
Non-accelerated filer ☐ Smaller reporting company  ☒
    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. ☐

 

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

 

As of November 10, 2022, there were 56,178,693 shares of the registrant’s common stock outstanding. 

 

 

 

 

 

 

GZ6G Technologies Corp.

TABLE OF CONTENTS

 

    Page
  PART I – FINANCIAL INFORMATION  
     
Item 1. Financial Statements (Unaudited) 1
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 28
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 34
     
Item 4. Controls and Procedures 34
     
  PART II – OTHER INFORMATION  
     
Item 1. Legal Proceedings 35
     
Item 1A. Risk Factors 35
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 35
     
Item 3. Defaults Upon Senior Securities 36
     
Item 4. Mine Safety Disclosures 36
     
Item 5. Other Information 36
     
Item 6. Exhibits 36
     
  SIGNATURES 37

 

i

 

 

PART I - FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

GZ6G TECHNOLOGIES CORP.

 

 TABLE OF CONTENTS FOR UNAUDITED CONDENSED CONSOLIDATED

 FINANCIAL STATEMENTS 

September 30, 2022, and 2021

 

    Page
Condensed Consolidated Balance Sheets (Unaudited)    2
     
Condensed Consolidated Statements of Operations (Unaudited)    3
     
Condensed Consolidated Statement of Changes in Stockholders’ Deficit (Unaudited)    4
     
Condensed Consolidated Statements of Cash Flows (Unaudited)    5
     
Notes to the Unaudited Condensed Consolidated Financial Statements    6

 

1

 

 

GZ6G TECHNOLOGIES CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

 

   September 30,
2022		   December 31,
2021		 
ASSETS          
Current assets          
Cash  $174,091   $759,791 
Accounts receivable, net   2,947    2,000 
Prepaid expenses   30,046    18,586 
Other current assets   15,949    15,949 
Total current assets   223,033    796,326 
           
Property and equipment, net   209,931    235,176 
Right of use assets   576,524    98,093 
TOTAL ASSETS  $1,009,488   $1,129,595 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
Current liabilities          
Accounts payable and accrued expenses  $508,272   $335,037 
Related party payables   342,988    179,769 
Deferred revenue   175,000    209,000 
Debt, current portion   3,767    44,156 
Debt, related parties   1,300,725    1,065,725 
Convertible notes, net of debt discount   6,223,130    5,075,840 
Lease liability, current portion   87,437    99,003 
Total current liabilities   8,641,319    7,008,530 
           
Debt, net of current portion   44,000    44,000 
Lease liability, net of current portion   506,111    - 
Total liabilities   9,191,430    7,052,530 
           
Stockholders’ deficit          
Series A Preferred stock, $0.004 par, 10,000,000 shares authorized, 5,000,000 shares issued and outstanding at September 30, 2022 and December 31, 2021   20,000    20,000 
Series B Preferred stock, $0.001 par, 1 share authorized, 1 share issued and outstanding at September 30, 2022 and December 31, 2021   -    - 
Common stock, $0.001 par, 500,000,000 shares authorized, 46,824,801 and 25,177,973 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively   46,825    25,178 
Additional paid in capital   13,224,428    10,784,308 
Accumulated deficit   (20,775,794)   (16,092,531)
Total GZ6G Technologies Corp stockholders’ deficit   (7,484,541)   (5,263,045)
Non-controlling interest   (697,401)   (659,890)
Total stockholders’ deficit   (8,181,942)   (5,922,935)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $1,009,488   $1,129,595 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

2

 

 

GZ6G TECHNOLOGIES CORP.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

                                 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2022   2021   2022   2021 
                 
NET REVENUES  $74,890   $132,000   $81,890   $132,000 
                     
OPERATING EXPENSES                    
Cost of revenue   3,770    32,722    5,251    32,722 
Research and development expenses   -    2,600    -    7,800 
Depreciation   26,403    17,752    97,854    19,941 
General and administrative   554,248    293,318    2,430,359    545,330 
General and administrative, related parties   120,000    90,000    360,000    240,000 
Professional fees   30,000    18,759    80,200    74,015 
Total operating expenses   734,421    455,151    2,973,664    919,808 
                     
(Loss) from operations   (659,531)   (323,151)   (2,891,774)   (787,808)
                     
Other income (expense)                    
Gain on extinguishment of debt   3,568,359    -    3,568,359    - 
Interest expenses   (1,189,022)   (2,522,952)   (5,443,450)   (4,453,057)
PPP loan forgiveness   -    -    46,091    - 
Total other income (expense)   2,379,337    (2,522,952)   (1,829,000)   (4,453,057)
                     
Net income (loss)  $1,719,806   $(2,846,103)  $(4,720,774)  $(5,240,865)
Less: net income (loss) attributable to Non-controlling interest   (20,757)   13,841    (37,511)   (66,233)
Net income (loss) attributable to GZ6G Technologies Corp.  $1,740,563   $(2,859,944)  $(4,683,263)  $(5,174,632)
                     
Basic net loss per common share  $0.05   $(0.13)  $(0.16)  $(0.27)
Diluted net loss per common share  $0.01   $(0.13)  $(0.16)  $(0.27)
                     
Weighted average shares, basic   34,325,373    22,793,357    28,588,256    19,203,614 
Weighted average shares, diluted   185,097,486    22,793,357    28,588,256    28,588,256 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

3

 

 

GZ6G TECHNOLOGIES CORP.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT

For the Three and Nine Months Ended September 30, 2022 and 2021

(Unaudited) 

                                                                                 
  

Series A

Preferred Stock

  

Series B

Preferred Stock

   Common Stock  

Additional

Paid-in

   Accumulated   Non-
controlling		  

Total

Stockholders’

 
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Interest   Deficit 
Balance, December 31, 2021   5,000,000   $20,000    1   $-    25,177,973   $25,178   $10,784,308   $(16,092,531)  $(659,890)  $(5,922,935)
Shares issued as financing costs            -    -    -    -    10,769    11    22,389    -    -    22,400 
Net income (loss)         -    -    -    -          -    -    -    (2,937,633)   (599)   (2,938,232)
Balance, March 31, 2022   5,000,000   $20,000    1   $         -    25,188,742   $25,189   $10,806,697   $(19,030,164)  $(660,489)  $(8,838,767)
Cashless warrants exercise                       356,364    356    (356)                      - 
Shares issued under consulting agreement                       1,869,463    1,869    658,131              660,000 
Shares issued under Equity Purchase Agreement                       387,481    388    35,641              36,029 
Fair value of beneficial conversion feature of convertible notes issue                                 363,533              363,533 
Fair value of convertible debt warrants issued                                 360,967              360,967 
Repricing of warrants                                 9,013              9,013 
Net income (loss)   -    -    -    -    -    -    -    (3,486,193)   (16,155)   (3,502,348)
Balance, June 30, 2022   5,000,000    20,000    1    -    27,802,050    27,802    12,233,626    (22,516,357)   (676,644)   (10,911,573)
Fair value of beneficial conversion feature of convertible notes issue        -                         84,382              84,382 
Fair value of convertible debt warrants issued        -                         52,702              52,702 
Shares issued under consulting agreement        -               383,000    383    68,617              69,000 
Shares issued for services        -               2,700,000    2,700    62,370              65,070 
Issuance of common stock for debt conversion        -               10,373,462    10,374    509,406              519,780 
Issuance of common stock for settlement of debt, related party        -               2,500,000    2,500    72,500              75,000 
Exercise warrants                       560,000    560    53,192              53,752 
Shares issued under Equity Purchase Agreement        -               2,506,289    2,506    78,681              81,187 
Repricing of warrants        -                         8,952              8,952 
Net income (loss)                                      1,740,563    (20,757)   1,719,806 
Balance, September 30, 2022   5,000,000   $20,000    1   $-    46,824,801   $46,825   $13,224,428   $(20,775,794)  $(697,401)  $(8,181,942)

 

                                                                                 
  

Series A

Preferred Stock

  

Series B

Preferred Stock

   Common Stock  

Additional

Paid-in

   Accumulated   Non-
controlling		  

Total

Stockholders’

 
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Interest   Deficit 
Balance December 31, 2020   5,000,000    20,000    1    -    12,793,357    12,793    5,180,816    (6,060,923)   (680,180)   (1,527,494)
                                                   
Net income (loss)   -    -    -    -    -    -    -    (436,026)   (42,019)   (478,045)
Balance, March 31, 2021   5,000,000    20,000    1    -    12,793,357    12,793    5,180,816    (6,496,949)   (722,199)   (2,005,539)
Shares issued to acquire additional interest in subsidiary                       10,000,000    10,000    (142,649)        132,649    - 
Net income (loss)   -    -    -    -    -    -    -    (1,878,662)   (38,055)   (1,916,717)
Balance, June 30, 2021   5,000,000    20,000    1    -    22,793,357    22,793    5,038,167    (8,375,611)   (627,605)   (3,922,256)
Net income (loss)   -    -    -    -    -    -    -    (2,859,944)   13,841    (2,846,103)
Balance, September 30, 2021   5,000,000   $20,000    1   $-    22,793,357   $22,793   $5,038,167   $(11,235,555)  $(613,764)  $(6,768,359)

 

 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

4

 

 

GZ6G TECHNOLOGIES CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

                 
   For the Nine Months
Ended September 30,		 
   2022   2021 
Cash flows from operating activities:          
Net Loss  $(4,720,774)  $(5,240,865)
Adjustments to reconcile net loss to net cash used in operating activities:          
PPP loan forgiveness   (46,091)   - 
Gain upon notes conversion   (3,568,359)   - 
Amortization of debt discount and issuance costs   5,125,104    4,373,277 
Common stock issued as financing costs   22,400    - 
Common stock issued for services   65,070    - 
Common stock issued under consulting agreement   729,000    - 
Depreciation   97,854    19,941 
Amortization of right of use assets   16,113    520 
Repricing of warrant exercise price   17,965    - 
Fixed assets reclassified to advertising expenses   -    4,990 
Changes in operating assets and liabilities:          
Increase in accounts receivable   (947)   - 
(Increase) decrease in prepaid expenses   (11,460)   4,507 
Increase in other current assets   -    (10,436)
Increase in accounts payable and accrued expenses   226,995    46,990 
Increase in related party payables   163,219    149,367 
Decrease in customer deposits   (34,000)   (132,000)
Net cash used in operating activities   (1,917,911)   (787,709)
           
Cash Flows from Investing Activities:          
Proceeds from credit for leasehold improvements   30,000    - 
Purchase of equipment   (102,609)   (176,690)
Net cash used in investing activities   (72,609)   (176,690)
           
Cash flows from financing activities:          
Proceeds from sale of common stock, net   117,216    - 
Proceeds from exercise of warrants   53,752      
Proceeds from subscription receivable   -    150,000 
Repayment of debt, related parties   -    (151,854)
Refund of repayment to PPP loan   5,702      
Proceeds from related parties   310,000      
Repayment to convertible notes   (281,000)     
Proceeds from convertible notes, net   1,199,150    900,000 
Net cash provided by financing activities   1,404,820    898,146 
           
Net decrease in cash   (585,700)   (62,253)
Cash-beginning of period   759,791    180,544 
Cash-end of period  $174,091   $118,291 
           
SUPPLEMENTAL DISCLOSURES          
Interest paid  $-   $- 
Income taxes paid  $-   $- 
           
NON-CASH INVESTING AND FINANCING ACTIVITIES          
Stock-settled debt liability  $509,682   $9,710,674 
Cashless warrant  $356   $- 
Beneficial conversion feature  $808,882   $- 
Shares issued to acquire interest in subsidiary  $-   $132,649 
Shares issued to settle debt, related party  $75,000   $- 
Shares issued under notice of conversion, principal  $525,400   $- 
Shares issued under notice of conversion, accrued interest payable  $53,760   $- 
Shares issued under notice of conversion, transfer agent  $22,621   $- 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

5

 

 

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022 and 2021

(Unaudited)

 

NOTE 1: ORGANIZATION AND DESCRIPTION OF BUSINESS

 

GZ6G Technologies Corp. (formerly Green Zebra International Corp.)  (the “Company” or “GZ6G”) is a complete enterprise smart solutions provider for large venues and cities. Focused on acquiring smart city solutions, developing innovative products, and overseeing smart cities and smart venues, GZ6G also assists in modernizing clients with innovative wireless IoT technology for the emerging 5G and Wi-Fi 6 marketplaces. Target markets include stadiums, airports, universities, and smart city projects. The Company is organized under the laws of the State of Nevada and has offices in California and Nevada.

 

In November 2018, the Company changed its name from NanoSensors, Inc. to Green Zebra International Corp. following a merger with Green Zebra Media Corp., a Delaware corporation, under common control.

 

The Board of Directors approved a name change and a reverse stock split of the Company’s issued and outstanding common shares at a ratio of 200 to 1 on December 18, 2019. The accompanying financial statements, and all share and per share information contained herein has been retroactively restated to reflect the reverse stock split. On December 20, 2019, the Company changed its name from Green Zebra International Corp. to GZ6G Technologies Corp.

 

On August 6, 2021, Mr. William Ray Procanik and Mr. Brian Scott Hale were appointed to the Company’s board of directors and concurrently the Company formed an audit committee, which each of Mr. Hale and Mr. Procanik joined, serving as independent board members.  Concurrently the Company completed an application for an uplist to the OTCQB and submitted the required disclosure through OTCMarkets. The Company was approved for trading on the OTCQB Venture Market on October 25, 2021.

 

Going Concern

 

These unaudited condensed consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. During the year ended December 31, 2021, the Company entered into various loan treaties, convertible notes and other financing arrangements through which we received net cash proceeds of $2,108,000. During the nine-month period ended September 30, 2022, the Company received net cash proceeds of $1,145,900 by way of a series of convertible promissory notes and $310,000 in the form of related party loans. As of September 30, 2022, the Company had a working capital deficit of $8,418,286 with approximately $174,000 of cash on hand and an accumulated deficit of $20,775,794. The Company anticipates a need for a further $5,000,000 in fiscal 2023 to meet its upgraded infrastructure requirements. In addition to the remaining funding which may be provided to the Company under various loan treaty agreements, the Company filed two registration statements on Form S-1 to facilitate this requirement which allow for total funding of up to $15,000,000, both of which have been deemed effective. Up to September 30, 2022 the Company has received funding under these equity lines of $117,216. There is no guarantee the Company will continue to receive financing as required. The continuation of the Company as a going concern is dependent upon the ability to raise additional equity and/or debt financing and the attainment of profitable operations from the Company’s future business. If the Company is unable to obtain adequate capital as needed, the Company may be required to reduce the scope, delay, or eliminate some or all of its planned operations. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

 

The financial statements reflect all adjustments consisting of normal recurring adjustments, which, in the opinion of management, are necessary for a fair presentation of the results for the periods shown. The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in the event the Company cannot continue in existence.

  

6

 

 

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022, and 2021
(Unaudited)

 

NOTE 1: ORGANIZATION AND DESCRIPTION OF BUSINESS (continued)

 

Covid-19 Pandemic: The COVID-19 pandemic could have a continuing adverse impact on our existing sponsorship and revenue agreements.  During 2021 the implementation of services under certain of our installation agreements experienced delays as a result of the pandemic. COVID-19 has caused significant disruptions to the global financial markets, which may also continue to impact our ability to raise additional capital. During March 2020, we gave notice of furlough to our administrative support employees in an effort to conserve resources as we evaluate our business development efforts in the coming months.  In April 2020, the Company received a grant of $6,000 and in May 2020 we received a PPP loan and an SBA loan in the approximate cumulative amount of $90,000 for operations. During early 2022 the Company reopened its offices and continued with the hiring of additional staff as well as the upgrading of infrastructure requirements to meet anticipated customer requirements for 2022.    While recent progress in the battle against COVID leads us to believe that the worst of the effects of the pandemic are past, we cannot say with certainty that the situation will not change.  The full impact of the COVID-19 outbreak continues to evolve as of the date of this report, is highly uncertain and still subject to change. While significant uncertainty remains, despite the fact that the Company has been able to source financing, it remains that the COVID-19 outbreak may have a negative impact on its ability to work through its collaborative development efforts with industry partners, and in acquiring venues due to the continuing impact of COVID 19, in particular as a result of the impact to the global supply chain.

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The information furnished in the consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which are, in the opinion of management, necessary for a fair presentation of such financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted pursuant to the SEC’s rules and regulations. The results of operations for the nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s 2021 Form 10-K as filed with the Securities and Exchange Commission on March 28, 2022.

 

Consolidation

 

These consolidated financial statements include the accounts of GZ6G Technology Corp.  and its 60% controlled subsidiary, Green Zebra Media Corp. (“GZMC’), as of September 30, 2022 and December 31, 2021. All significant intercompany accounting transactions have been eliminated as a result of consolidation.

 

Use of Estimates

 

The preparation of these consolidated financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company regularly evaluates estimates and assumptions related to long-lived assets and deferred income tax asset valuation allowances. The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

 

7

 

 

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022, and 2021
(Unaudited)

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Cash and Cash Equivalents

 

For financial accounting purposes, cash and cash equivalents are considered to be all highly liquid investments with a maturity of three (3) months or less at the time of purchase.

 

Concentration of Credit Risk

 

Financial instruments that potentially subject the Company to concentration of credit risk consist principally of cash deposits. Accounts at each institution are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. At September 30, 2022, the Company had $0 in excess of the FDIC insured limit.

 

Property and Equipment

 

Property and equipment are recorded at cost. Depreciation on property and equipment are determined using the straight-line method over the three to five year estimated useful lives of the assets.

 

Research and Development Costs

 

We charge research and development costs to operations as incurred in accordance with ASC 730-Research and Development, except in those cases in which such costs are reimbursable under customer funded contracts. These amounts are not reflected in the reported research and development expenses in each of the respective periods but are included in net sales with the related costs included in cost of sales in each of the respective periods.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with ASC 606 — Revenue from Contracts with Customers. The core principle of this standard is that a company should record revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. Further under ASC 606, the Company recognizes revenue from licensing agreements and service-based contracts by applying the following steps: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.

 

We earn revenue from both digital marketing and the sale of WiFi and communication solutions to customers around the world.  Revenue is earned from sales of our WiFi media platform and our WiFi monetization hardware (GZ Media hub) embedded with GZ software to create monetization and communication solutions for our customers. Our sales can consist of any one or a combination of items required by our customer including hardware, technology platforms and related support. We also enter into licensing contracts which provide for revenue based on licensing fees and revenue sharing with our licensees.

 

As we expand, we expect a large portion of our revenue from our digital communication solutions to be derived from service-based contracts where we expect to recognize a significant portion of our contracts over time, as there is a continuous delivery of services to the customer over the contractual period of performance.  These contracts may or may not include fixed payments for services over time and/or commission-based fees.

 

8

 

 

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022, and 2021
(Unaudited)

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Revenue Recognition (continued)

 

Direct costs are expected to include materials, labor and overhead to be charged to work-in-progress (including our contracts-in-progress) inventory or cost of sales. Indirect costs relating to long-term contracts, are expected to include expenses such as general and administrative charges, and other costs will be charged to expense as incurred and will not be included in our work-in-process (including our contracts-in-progress) inventory or cost of sales. Total estimates are expected to be reviewed and revised periodically throughout the lives of the contracts, and adjustments to profits resulting from such revisions are made cumulative to the date of the change. Estimated losses on long-term contracts are recorded in the period in which the losses become evident.  If we do not accurately estimate the total sales, related costs and progress towards completion on our long-term contracts, the estimated gross margins may be significantly impacted, or losses may need to be recognized in future periods. Any such resulting changes in margins or contract losses could be material to our results of operations and financial condition.

 

In addition, certain of our contracts will include termination for convenience or non-performance clauses that provide the customer with the right to terminate the contract. Such terminations could impact the assumptions regarding total contract revenues and expenses utilized in recognizing profit under those contracts where we apply the percentage-of-completion method of accounting. Changes to these assumptions could materially impact our results of operations and financial condition. As we fully implement our business model, our inability to perform on our long-term contracts could materially impact our results of operations and financial condition.

 

Stock-Based Compensation

 

We account for stock-based transactions in which the Company receives services from employees, non-employees, directors or others in exchange for equity instruments based on the fair value of the award at the grant date in accordance with ASC 718 – Compensation-Stock Compensation. Stock-based compensation cost for stock options or warrants is estimated at the grant date based on each instrument’s fair value as calculated by the Black-Scholes option pricing model. We recognize stock-based compensation cost as expense ratably on a straight-line basis over the requisite service period for the award.

 

Debt Issue Costs

 

The Company may pay debt issue costs in connection with raising funds through the issuance of debt whether convertible or not or with other consideration. These costs are recorded as debt discounts and are amortized over the life of the debt to the statement of operations as interest expense.

 

Original Issue Discount

 

If debt is issued with an original issue discount, the original issue discount is recorded to debt discount, reducing the face amount of the note and is amortized over the life of the debt to the statement of operations as interest expense. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.

 

Stock Settled Debt

 

In certain instances, the Company will issue convertible notes which contain a provision in which the price of the conversion feature is priced at a fixed discount to the trading price of the Company’s common shares as traded in the over-the-counter market.  In these instances, the Company records a liability, in addition to the principal amount of the convertible note, as stock-settled debt for the fixed value transferred to the convertible note holder from the fixed discount conversion feature.  As of September 30, 2022 and December 31, 2021, the Company had recorded within Convertible Notes, net of discount, the amount of $6,223,130 and $5,075,840 for the value of the stock settled debt with respect to certain convertible notes (see Note 6). 

 

9

 

 

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022, and 2021
(Unaudited)

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Leases

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02 – Topic 842 Leases. ASU 2016-02 requires that most leases be recognized on the financial statements, specifically the recognition of right-to-use assets and related lease liabilities, and enhanced disclosures about leasing arrangements.  The Company elected to apply the short-term scope exception for leases with terms of 12 months or less at the inception of the lease and will continue to recognize rent expense on a straight-line basis. 

 

Fair Value of Financial Instruments

 

ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. FASB ASC 820 describes three levels of inputs that may be used to measure fair value:

 

Level 1 – Quoted prices in active markets for identical assets or liabilities.

 

Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 – Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

 

If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level of input that is significant to the fair value measurement of the instrument.

 

Income Taxes

 

The Company follows ASC 740 – Income Taxes, which requires the use of the asset and liability method of accounting for income taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

 

Basic and Diluted Net Income (Loss) Per Share

 

In accordance with ASC 260 – Earnings Per Share, the basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common stock outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional shares of common stock that would have been outstanding if the potential common stock had been issued and if the additional shares of common stock were dilutive. Potential common stock consists of the incremental common stock issuable upon convertible notes, classes of shares with conversion features.

 

10

 

 

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022, and 2021
(Unaudited)

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Basic and Diluted Net Income (Loss) Per Share

 

The computation of basic loss per share for the three- and nine-month periods ended September 30, 2021 excludes potentially dilutive securities of underlying share purchase warrants, convertible notes, and preferred shares, because their inclusion would be antidilutive. As a result, the computation of basic income/loss per share includes potentially dilutive securities of underlying share purchase warrants, convertible notes, and preferred shares, for those periods where there has been reported net income. The computations of net income per share for the three months ended September 30, 2022 reflects both basic and diluted income per share, and the computation of net loss per share for the three months ended September 30, 2021 and nine months ended September 30, 2022 and 2021 is the same for both basic and fully diluted.

 

The table below reflects the potentially dilutive securities at each reporting period which have been included in the computation of diluted net loss per share for such periods where the Company has reported net income:

 

   September 30,
2022		   September 30,
2021		 
Convertible Notes   95,409,959    4,871,812 
Stock purchase warrants   5,362,154    - 
Series A Preferred shares (convertible to common at a ratio of 10 common for each 1 preferred)   50,000,000    50,000,000 
Total   150,772,113    54,871,812 

 

Recently Issued Accounting Pronouncements

 

In August 2020, the FASB issued ASU 2020-06 to simplify the current guidance for convertible instruments and the derivatives scope exception for contracts in an entity’s own equity. Additionally, the amendments affect the diluted EPS calculation for instruments that may be settled in cash or shares and for convertible instruments. The update also provides for expanded disclosure requirements to increase transparency. For SEC filers, excluding smaller reporting companies, this update is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, this Update is effective for fiscal years beginning after December 15, 2023, including interim periods therein. The Company has not yet adopted this ASU and does not expect the adoption of ASU 2020-06 to have a material impact on the Company’s financial statements or disclosures.

 

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.

 

NOTE 3: PROPERTY AND EQUIPMENT

 

Property and equipment, net consists of the following:

 

  September 30,
2022		   December 31,
2021		 
Office equipment  $205,347   $166,372 
Leasehold improvements   12,813    31,919 
Software   125,070    72,330 
Total   343,230    270,621 
Less: accumulated depreciation and amortization   (133,299)   (35,445)
Total property and equipment, net  $209,931   $235,176 

 

Depreciation expense amounted to $26,403 and $17,752 for the three months periods ended September 30, 2022, and 2021, respectively.

 

Depreciation expense amounted to $97,854 and $19,941 for the nine months periods ended September 30, 2022, and 2021, respectively. 

 

11

 

 

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022, and 2021
(Unaudited)

 

NOTE 4: PREPAID EXPENSES

 

Prepaid expenses at September 30, 2022 and December 31, 2021 consist of the following:

 

   September 30,
2022		   December 31,
2021		 
Reseller agreement (1)  $-   $3,467 
Other expenses (2)   30,046    15,119 
Total  $30,046   $18,586 

 

(1) On January 31, 2017, GZMC entered into a white label reseller agreement with Purple Wifi Limited, a company based in the UK that provides a hosted software solution as a Wifi hotspot platform for use on a company’s Wifi hardware and also provides customer analytics services and marketing opportunities along with ancillary support services. The reseller agreement had an initial term of three years and was subsequently amended to reflect a five (5) year term. Under the terms of the agreement GZMC was required to pay a fee of $52,000 of which a total of $6,450 was unpaid and is included in accounts payable as of September 30, 2022 and December 31, 2021. The total amount expended under the reseller agreement was initially recorded as prepaid expenses on the Company’s Balance Sheets and has been fully amortized over the term of the agreement on a five-year straight-line basis as part of general and administrative expense.

 

(2) Other prepaid expenses include annual subscription fees for software, insurance, prepaid term marketing expenses and office security services.

 

NOTE 5: OTHER CURRENT ASSETS

 

Other current assets consist of the following at September 30, 2022 and December 31, 2021:

 

  September 30,
2022		   December 31,
2021		 
Security deposits  $14,691   $14,691 
Other deposits and receivables   1,258    1,258 
Total  $15,949   $15,949 

 

NOTE 6: DEBT

 

Loan Treaty Agreement

 

On December 21, 2020, the Company entered into a Loan Treaty Agreement with a third party (“Treaty Agreement”) whereby the lender agreed to provide a loan in the amount of up to $450,000 to the Company in $25,000 tranches, deposited weekly, memorialized by promissory notes in increments of $100,000. Each amount deposited has a term of 12 months for repayment and shall bear an interest rate of 8% per annum. In addition, at the option of the Lender, each $25,000 loaned to the Company may be converted into common shares at a 25% discount to the market price at the close of business on November 23, 2020 ($0.26 x 75% = $0.195); or $0.195 per share. Each $25,000 may be converted at the one-year anniversary of the date of the weekly deposit, unless the Company becomes a fully reporting company, at which time the holder may convert such debt to common shares in six months, or if the underlying shares are registered, conversion may occur upon Notice of Effect from the Securities and Exchange Commission. On April 1, 2021, the Company entered into an amendment to the Loan Treaty Agreement originally executed on December 21, 2020.  Under the terms of the amendment the lender agreed to fund an additional $1 million dollars over 90 business days in equal weekly tranches of $55,556. Each tranche may be converted under the same terms as the original loan treaty, or $0.195 per share, commencing the one-year anniversary of the date of the weekly deposit, unless the Company becomes a fully reporting company, at which time the holder may convert such debt to common shares in six months, or if the underlying shares are registered, conversion may occur upon Notice of Effect from the Securities and Exchange Commission.

 

12

 

 

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022, and 2021
(Unaudited)

 

NOTE 6: DEBT (continued)

 

Loan Treaty Agreement (continued)

 

During the fiscal year ended December 31, 2021, the Company received weekly tranche deposits for an aggregate of $1,100,000. The Company recorded $11,656,833 as the liability on stock settled debt associated with the tranches which amount is amortized over the terms of the notes.

 

During the nine months ended September 30, 2022, the Company received a further $50,000 under this loan treaty. The Company recorded $360,258, as the liability on stock settled debt associated with the tranche which amount is amortized over the terms of the notes. A total of $250,000 remains to be funded under the terms of this Treaty Agreement.

 

On October 27, 2021, the Company issued 2,051,282 shares of common stock to the lender in consideration for $400,000 in loans provided under the terms of the Treaty Agreement at $0.195 per share.

 

On August 3, 2022, the Company issued 1,538,462 shares of common stock to the lender in consideration for $300,000 in loans provided under the terms of the Treaty Agreement at $0.195 per share.

 

The carrying value of funding tranches is as follows:

 

   September 30,
2022		   December 31,
2021		 
Principal  $500,000   $750,000 
Stock-settled liability   5,171,803    8,320,525 
Total   5,671,803    9,070,525 
Unamortized debt discount   (310,597)   (4,067,059)
Debt carrying value  $5,361,206   $5,003,466 

 

The interest expenses for the funding tranches are as follows:

                                 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2022   2021   2022   2021 
Interest expense on notes  $12,317   $19,157   $43,824   $35,551 
Amortization of debt discount   581,344    2,488,984    4,116,720    4,373,277 
Total:  $593,661   $1,612,435   $4,160,544   $1,900,687 

  

The accrued interest payable is as follows:

         
Balance, December 31, 2021  $50,981 
Interest expense on the convertible notes   43,824 
Balance, September 30, 2022  $94,805 

 

Gain related to extinguishment during the nine months ended September 30, 2022:

         
Debt principal   $ 300,000  
Stock-settled liability     3,508,980  
1,538,462 shares of common stock     (142,308 )
Gain on extinguishment of debt upon conversion   $ 3,508,980  

 

13

 

 

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022, and 2021
(Unaudited)

 

NOTE 6: DEBT (continued)

 

Convertible Debt with Warrant Agreement

 

On November 11, 2021, the Company entered into a Promissory Note with an investor in which the investor agreed to lend the Company the principal amount of $560,000 for the purchase price of $504,000. The Term of the Note is twelve months with an interest rate of 12%. The conversion rate of the Note is fixed at $1.00 per share. The Company concurrently entered into a Warrant Agreement for the purchase of an additional 560,000 common shares at $1.00 per share for a term of three (3) years.

 

On December 16, 2021, the Company entered into a Promissory Note with an investor in which the investor agreed to lend the Company the principal amount of $560,000 for the purchase price of $504,000. The Term of the Note is twelve months with an interest rate of 12%. The conversion rate of the Note is fixed at $1.00 per share. The Company concurrently entered into a Warrant Agreement for the purchase of an additional 560,000 common shares at $1.00 per share for a term of three (3) years.

 

In accordance with ASC 470 – Debt, the proceeds in fiscal year 2021 of $1,008,000 was allocated based on the relative fair values of the convertible notes and the warrants of $504,027 and $503,973, respectively. The Warrant was valued at $503,973 and was recorded as a debt discount which is being amortized over the life of the Note. In addition, the Note had a beneficial conversion feature (BCF) in the amount of $616,027 which was recorded as a debt discount which is being amortized over the life of the Note. The debt discount totaled $1,120,000.

 

On April 4, 2022, the Company entered into a Promissory Note with an investor in which the investor agreed to lend the Company the principal amount of $365,000 for the purchase price of $328,500. The Term of the Note is twelve months with an interest rate of 12%. The conversion rate of the Note is fixed at $1.00 per share. The Company concurrently entered into a Warrant Agreement for the purchase of an additional 365,000 common shares at $1.00 per share for a term of five (5) years.

 

On May 23, 2022, the Company entered into a Promissory Note with an investor in which the investor agreed to lend the Company the principal amount of $440,000 for the purchase price of $396,000. The Term of the Note is twelve months with an interest rate of 12%. The conversion rate of the Note is fixed at $0.30 per share. The Company concurrently entered into a Warrant Agreement for the purchase of an additional 1,466,667 common shares at $0.30 per share for a term of three (3) years.

 

On September 20, 2022, the Company entered into a Promissory Note with an investor in which the investor agreed to lend the Company the principal amount of $176,000 for the purchase price of $158,400. The Term of the Note is twelve months with an interest rate of 12%. The conversion rate of the Note is fixed at $0.025 per share. The Company concurrently entered into a Warrant Agreement for the purchase of an additional 3,520,000 common shares at $0.10 per share for a term of five (5) years.

 

In accordance with ASC 470 – Debt, the proceeds in nine months ended September 30, 2022, of $882,900 was allocated based on the relative fair values of the convertible notes and the warrants of $469,231 and $413,669, respectively. The Warrant was valued at $413,669 and was recorded as a debt discount which is being amortized over the life of the Note. In addition, the Note had a beneficial conversion feature (BCF) in the amount of $447,915 which was recorded as a debt discount which is being amortized over the life of the Note. The debt discount totaled $959,684.

 

During the nine months ended September 30, 2022, the Company paid $281,000 in cash to settle a portion of the outstanding principal and $26,711 in cash to settle interest payable related to the December 16, 2021, convertible note.

 

14

 

 

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022, and 2021
(Unaudited)

 

NOTE 6: DEBT (continued)

 

Convertible Debt with Warrant Agreement (continued)

 

During the nine months ended September, the Company issued an accumulated 8,835,000 shares of common stock pursuant to Notice of Conversion from lenders to settle certain portion of principal together with accrued interest payable and fees.

 

The carrying value of the tranches is as follows:

 

   September 30,
2022		   December 31,
2021		 
Principal  $2,101,000   $1,120,000 
Shares issued under conversion   (225,400)   - 
Repaid to principal   (281,000)   - 
Unamortized debt discount   (1,035,773)   (1,047,626)
Debt carrying value  $558,827   $72,374 

 

The interest expenses related to the tranches are as follows:

 

                                 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2022   2021   2022   2021 
Interest expense on notes  $47,133   $-   $126,294   $- 
Amortization of debt discount   480,474    -    971,537    - 
Total:  $527,607   $-   $1,097,831   $- 

 

The accrued interest payable is as follows:

 

Balance, December 31, 2021  $13,440 
Interest expense on the convertible notes   126,294 
Shares issued under conversion   (53,760)
Repaid in cash   (26,711)
Balance, September 30, 2022  $59,263 

 

Loss related to extinguishment during the nine months ended September 30, 2022:

 

         
Debt principal  $225,400 
Accrued interest payable   53,760 
8,835,000 shares of common stock   (377,472)
(Loss) on extinguishment of debt upon conversion  $(98,312)

 

During the nine months ended September 30, 2022, the Company issued shares in respect to a Put notice (Note 10(5)) with a strike price of $0.020025 per share which triggered a dilutive issuance clause in the aforementioned Convertible Note agreements downward adjusting the conversion price per share to match the strike price.

 

15

 

 

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022, and 2021
(Unaudited)

 

NOTE 6: DEBT (continued)

 

Convertible Promissory Note

 

During the nine months ended September 30, 2022, the Company entered into several Convertible Promissory Notes with an investor in which the investor agreed to lend the Company the accumulated principal amount of $277,500 for the purchase price of $266,250. The Term of these Notes is twelve months with an interest rate of 10%. The conversion rate of the Note is as follows: 35% discount to the lowest bid price during the ten-day trading period prior to a notice of conversion. The funds were used for operating costs and further execution of GZ6G’s business plan.

 

The carrying value of this convertible promissory note is as follows:

 

   September 30,
2022		   December 31,
2021		 
Principal  $277,500   $         - 
Stock-settled liability   149,424    - 
Total   426,924    - 
Unamortized debt discount   (123,827)   - 
Debt carrying value  $303,097   $- 

 

The interest expenses for the convertible promissory note are as follows:

 

                                 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2022   2021   2022   2021 
Interest expense on note  $6,007   $-   $7,804   $- 
Amortization of debt discount   28,738    -    36,847    - 
Total:  $34,745   $-   $44,651   $- 

  

The accrued interest payable is as follows:

 

         
Balance, December 31, 2021  $- 
Interest expense on the convertible note   7,804 
Balance, September 30, 2022  $7,804 

 

SBA

 

On May 19, 2020, the Company received a long-term loan from U.S. Small Business Administration (SBA) in the amount of $44,000, upon the following conditions:

 

Payment: Installment payments, including principal and interest, of $215 monthly, will begin twenty-four (24) months from the date of the promissory note, or May 19, 2022. The balance of principal and interest will be payable Thirty (30) years from the date of the promissory note.

 

Interest: Interest accrues at the rate of 3.75% per annum and will accrue only on funds actually advanced from the date(s) of each advance.

 

Payment terms: Each payment will be applied first to interest accrued to the date of receipt of each payment, and the balance, if any, will be applied to principal; each payment will be made when due even if at that time the full amount of the loan has not yet been advanced or the authorized amount of the Loan has been reduced.

 

16

 

 

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022, and 2021
(Unaudited)

 

NOTE 6: DEBT (continued)

 

SBA (continued)

 

The interest expenses related to the SBA loan are as follows:

                                 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2022   2021   2022   2021 
Interest expense on notes  $416   $416   $1,234   $1,234 

 

The accrued interest payable is as follows:

 

Balance, December 31, 2021  $2,672 
Addition: Interest expense   1,234 
Balance, September 30, 2022  $3,906 

 

PPP funds

 

The Paycheck Protection Program (“PPP”) is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. SBA will forgive loans if all employee retention criteria are met, and the funds are used for eligible expenses. The loan may be forgiven in full if the funds are used for payroll costs, interest on mortgages, rent, and utilities (with at least 60% of the forgiven amount having been required to be used for payroll). Additional terms include:

 

● An interest rate of 1% per annum;
● Loans issued prior to June 5, 2020, have a maturity of 2 years, with loans issued thereafter having a maturity of 5 years;
● Loan payments are deferred for six months;
● No collateral or personal guarantees are required; and
● Neither the government nor lenders will charge small businesses any fees.

 

On May 14, 2020, the Company received PPP proceeds of $45,450. As of December 31, 2021, the Company paid $5,702 including $5,061 in principal and $641 in interest payable in respect of this loan.  The Company requested full loan forgiveness by submitting a request to the lender. The total loan principal amount of $45,450 with the interest amount of $641 was forgiven in full in the three months ended March 31, 2022. As a result, the Company recorded the full amount of $46,091 that had been received as other income.

 

Other Short-term loans

 

On January 5, 2018, GZMC entered into a loan agreement with National Funding Inc. whereby the Company acquired funding in the amount of $20,625.   The terms of the loan called for the Company to pay an origination fee of $412 and to repay $26,400 by way of 176 daily payments of $150.   As of September 30, 2022, and December 31, 2021, there was an outstanding amount of $3,768 due and payable on the loan, and the loan was in default.

 

17

 

 

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022, and 2021
(Unaudited)

 

NOTE 7: CUSTOMER DEPOSITS, CONTRACT RECEIVABLES AND CONTRACT LIABILITIES

 

The Company generates revenue from contracts which, among other services, provide wireless and digital promotion rights for certain events including WiFi media network advertising rights, and the development of smart venue wireless networks and software engagement technology products for airports, stadiums, campuses, cities and other venues in the United States and International markets. In general, our contracts require several months of implementation which is charged at a fixed rate, followed by monthly maintenance and management services, ad hoc fixed rate services, and a share in advertising revenue, when applicable.  As a result, the Company will accept deposits from customers, which deposits are applied as each stage of our implementation is complete or under the terms of the service contract.  Invoices issued to customers for the implementation phase of our contracts are due and payable when issued, however, as the associated scope of services have not yet been concluded, these invoices do not yet meet the revenue recognition criteria required to report these amounts as earned revenue (ref: Note 2 – Revenue Recognition).  As a result, deposits when received from customers are included as liabilities on our balance sheets. 

 

The following table provides balances of customer receivables and contract liabilities as of September 30, 2022, and December 31, 2021:

 

   September, 2022   December 31,
2021		 
Customer receivables (1)  $-   $- 
Contract liabilities (Customer deposits) (1), (2) (a), (b), (c)  $175,000   $209,000 

 

(1) The Company has deposits of $175,000 and $209,000, respectively as at September 30, 2022 and December 31, 2021, with respect to certain future services to be provided, which amounts are not yet earned under revenue recognition criteria provided by ASC 606 and therefore, they are not reflected as accounts receivable on the Company’s balance sheets. During the three months and nine months ended September 30, 2022, the Company recorded $3,000 and $9,000, respectively as income relative to the above contracts and returned $25,000 in previously paid deposits to one of its customers.  

 

(2) Contract liabilities are consideration we have received from our customers billed in advance of providing goods or services promised in the future or for work in progress. We defer recognizing this consideration as revenue until we have satisfied the related performance obligation to the customer. Contract liabilities include installation and maintenance charges that are deferred and recognized when the installation is complete or with respect to deposits for maintenance, over the actual or expected contract term, which typically ranges from one to five years depending on the service. Contract liabilities may be included as customer deposits or deferred revenue in our consolidated balance sheets, based on the specifics of the contract. During the three and nine months ended September 30, 2022, we have recognized $3,000 and $9,000 in revenue from customer deposits on hand (September 2021 - Nil). The Company and certain customers are currently in negotiations to determine the best way to proceed with the delayed implementation of certain prior period contracts for which we have received deposits but have not completed the scope of work.

  

Performance Obligations

 

While we had originally expected to recognize revenue during fiscal 2020 with respect to contracts for which we have received customer deposits, the impact of COVID-19 had a significant impact on implementation.  The Company is currently in negotiations to determine the best way to proceed with the delayed implementation of these contracts, or their termination.

 

18

 

 

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022, and 2021
(Unaudited)

 

NOTE 7: CUSTOMER DEPOSITS, CONTRACT RECEIVABLES AND CONTRACT LIABILITIES (continued)

 

Performance Obligations (continued)

 

(a) We executed a license agreement for the country of Spain in fiscal 2016 and the Company received an initial deposit of $25,000 against the total licensing fee payable.   This amount has been recorded on the Company’s balance sheets as deferred income.   While the Company and the customer attempted to negotiate an amendment to the terms of the agreement in late fiscal 2019, the onset of COVID-19 resulted in further delays which are ongoing.  As a result, the Company is currently in negotiation for a formal termination of the agreement with this customer.

 

(b) On July 11, 2019, GZMC entered into an Airport WiFi Sponsorship Marketing Agreement with a third party whereunder GZMC will secure long-term, exclusive and non-exclusive smart venues for WiFi marketing, digital marketing and data analytics for various brand sponsors at various airports across the United States. There were several venues anticipated under the terms of the agreement with installations commencing on various schedules. GZMC generated invoices for $100,000 for each of 13 venues, whereby $65,000 per venue is due on receipt of the invoice and the remaining $35,000 is due sixty days thereafter. As at September 30, 2022 and December 31, 2021, the Company has received partial payments of $130,000 against the initial deposit required, of which a total of $25,000 was returned during the period leaving $105,000 on deposit. Previously the Company expected revenue recognition under these contracts to commence in fiscal 2020, however, as a result of the impact of the COVID-19 pandemic, the project has been delayed indefinitely. Funds originally provided for the implementation of this project are anticipated to be applied as a deposit on a project yet to be identified or otherwise, fully repaid.

 

(c) On October 6, 2020, the Company received a purchase order in the amount of $132,000 in regard to a Media Agreement described in Note 9(3) below. During the year ended December 31, 2021, the Company completed the installation terms included in the purchase order and as a result $78,000 has been reflected as revenue as at December 31, 2021. A further $9,000 was recorded as income during the nine months ended September 30, 2022, with the remaining $45,000 included in deferred income in relation to future service obligations under the contract which will be earned over the term of the service contract.

 

NOTE 8: RELATED PARTY TRANSACTIONS

 

Terrence Flowers

 

As at December 31, 2019, a total of $11,110 was payable to Mr. Terrence Flowers, who ceased to be a shareholder, officer and director on July 9, 2018.  During the year ended December 31, 2020, the Company repaid $11,000 to Mr. Flowers, leaving a balance due of $110 at September 30, 2022 and December 31, 2021. The amount is reflected on the balance sheet in related party payables.

 

Coleman Smith and ELOC Holdings Corp.

 

On July 9, 2018, Mr. William Coleman Smith was appointed to the Board of Directors of the Company and as President, Secretary and Treasurer of the Company.  Subsequently, on July 10, 2018, the Company executed a consulting agreement with ELOC Holdings Corp., a company controlled by Mr. Smith, whereby ELOC will provide the services of Mr. Smith for a fee of $10,000 per month. On April 1, 2021, the Company revised Mr. Smith’s compensation so that he also receives $10,000 per month directly as an employee in addition to accrued monthly fees for management services provided through controlled entity ELOC. On February 7, 2022, the board of directors of the Company approved and authorized a further increase of $10,000 per month in salary for Mr. Smith directly, effective January 1, 2022. 

 

19

 

 

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022, and 2021
(Unaudited)

 

NOTE 8: RELATED PARTY TRANSACTIONS (continued)

 

Coleman Smith and ELOC Holdings Corp. (continued)

 

On April 29, 2014, our 60% controlled subsidiary, GZMC, entered into a management and consulting agreement with Mr. Smith, the sole officer and director of GZMC whereunder GZMC is required to pay an annual salary of $120,000 to Mr. Smith.

 

During the year ended December 31, 2020, Mr. Smith and ELOC Holdings Corp made short term loans with interest at 1.5% per month to the Company to pay various expenses. As of December 31, 2020, Mr. Smith, ELOC Holdings Corp. and the Company agreed to retroactively allocate interest in the amount of 5% per annum to loans, advances, wages and management fees payable by each of GZMC and the Company from January 1, 2020 forward. The parties entered into a single consolidated promissory note for all amounts payable to each of ELOC and Smith, with a principal amount of $1,217,579 payable to ELOC.

 

During the fiscal year ended December 31, 2021, the Company paid a total of $151,854, of which $11,854 was repaid during the nine months ended September 30, 2021, to ELOC to reduce the principal balance on the loan.

 

During the nine months ended September 30, 2022, the Company issued 2,500,000 shares of restricted common stock in partial payment of his promissory notes in the amount of $75,000, at $0.03 per share.

 

During the nine months ended September 30, 2022, the Company’s CEO, William Coleman Smith entered into Promissory Notes with the Company for a total of $310,000 due and payable within 5 (days) of the Company receiving proceeds and bearing interest at 1%.

 

The following amounts are included in debt to related party on our Balance Sheets:

 

Balance at December 31, 2020, Debt, related party  $1,217,579 
Payments on loan   (151,854)
Balance at December 31, 2021, Debt, related party.   1,065,725 
Shares issued to settle debt   (75,000)
Promissory Notes for funding provided   310,000 
Balance at September 30, 2022, Debt, related party.  $1,300,725 

 

The interest expenses related to above loans are as follows:

 

                                 
   Three Months Ended   Nine Months Ended 
   September 30,   September 30, 
   2022   2021   2022   2021 
Interest expense on notes  $13,777   $13,908   $40,477   $42,282 

 

During the three- and nine-month periods ended September 30, 2022, the Company accrued $30,000 and $90,000 in management fees to ELOC, respectively and accrued $90,000 and $270,000 in management fees to Coleman Smith, respectively. The Company paid cash to accrued management fees to Coleman Smith of $60,000 and $240,000, respectively.  During the three- and nine-months periods ended September 30, 2021, the Company accrued $30,000 and $90,000 in management fees to ELOC respectively, and paid management fees to Coleman Smith of $60,000 and $150,000, respectively.

 

20

 

 

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022, and 2021
(Unaudited)

 

NOTE 8: RELATED PARTY TRANSACTIONS (continued)

 

Coleman Smith and ELOC Holdings Corp.

 

The following amounts are included in related party payables on our Balance Sheets: 

 

   September 30,
2022		   December 31,
2021		 
Coleman Smith, President  $36,688   $3,946 
Interest payable   96,190    55,713 
ELOC Holdings Corp.   210,000    120,000 
Terrence Flowers   110    110 
   $342,988   $179,769 

 

On September 1, 2022, the Company issued 2,500,000 shares of restricted common stock, with a fair value $60,250, to William Coleman Smith for director services rendered during the first two quarters of 2022.

On April 8, 2021, the Company and William Coleman Smith, officer and director entered into a securities purchase agreement whereunder Mr. Smith sold an additional 9% interest in GZMC to the Company for consideration of 10 million unregistered, restricted shares of common stock. On the conclusion of the transaction, the Company controlled 60% of GZMC.

 

NOTE 9: OPERATING LEASE

 

On May 19, 2021, the Company signed an 18-month lease for office premises in California located at 1 Technology Drive, Bldg. B, Irvine, CA 92618, Suite no. B123 occupying approximately 6,498 square feet of usable space.  The terms of the lease provide for basic monthly rent in the first year of approximately $9,097 per month, and $9,487 for each of the remaining six months. In addition, the tenant is responsible for their share of operating expenses, utilities and services. On February 4, 2022, the Company signed a first amendment to the lease agreement to extend the lease term to November 30, 2027. The terms of the lease provide for basic monthly rent starting in December 2022 of approximately $10,592, with annually increasing around 4%. In addition, the tenant is responsible for their share of operating expenses, utilities and services. As a result of the adoption ASU No. 2016-02 – Topic 842 Leases, the Company recognized a lease liability and right-to-use asset of approximately $645,440, which represented the present value of the remaining minimum lease payments using an estimated incremental borrowing rate of 6.75% on January 1, 2022. 

 

Future minimum lease payments in respect of the above leases as of September 30, 2022, as presented in accordance with ASC 842 were as follows:

         
2022  $29,566 
2023   127,556 
2024   133,014 
2025   138,472 
2026   143,931 
Remaining periods   136,527 
Total future minimum lease payments   709,062 
Less: imputed interest   (115,514)
Total   593,548 
Current portion of operating lease   87,437 
Long term portion of operating lease  $506,111 

 

21

 

 

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022, and 2021
(Unaudited)

 

NOTE 10: COMMITMENTS

 

(1) On April 2, 2019, a vendor of the Company, the “Plaintiff” filed a complaint against the Company’s 60% controlled subsidiary, Green Zebra, in the Superior Court of California, Orange County for unpaid invoices related to services and products sold in fiscal 2017, including reasonable value in the amount of $61,899.62. The Court approved a default judgement on January 23, 2020, with respect to the aforementioned claim, including the following:

 

         
Damages  $61,890 
Prejudgment interest at the annual rate of 10%   9,835 
Attorney fees   1,200 
Other costs   505 
Total judgement value  $73,430 

 

In April 2021, the Plaintiff perfected the judgement and obtained a hold against a bank account controlled by Green Zebra in the approximate amount of $16,282, which amount was subsequently released to the Plaintiff and has been recorded as a reduction to the balance owing to the Plaintiff. The Company has remitted a further $2,420 towards the outstanding balance. At September 30, 2022 and December 31, 2021, a total of $54,738 remained outstanding. The Company and the Plaintiff are currently in discussions regarding the claimed amount.

 

(2) On August 10, 2019, the Company’s CEO, Mr. William Coleman Smith, entered into a lease agreement with IAC Apartment Development JV LLC to lease space at 861 Tularosa, Irvine, California for a one-year term at a rental rate of $3,455 per month, plus utilities, for the Company’s subsidiary, Green Zebra Media Corp.   Green Zebra will use the space for its operations. On April 1, 2020, the landlord and the Company agreed to a rental deferment agreement to defer the rental costs by 50% as a result of COVID-19.  The monthly rent commencing April 1, 2020 was $1,727 plus utilities. The rental deferment ended on June 1, 2020. The original lease expired on August 9, 2020, and was renewed on expiry for another one-year term at a reduced rate of $3,350 per month. On August 16, 2021, the Company renewed a lease for a further one-year term at a rental rate of $3,620 per month, plus utilities, for the Company’s subsidiary, Green Zebra Media Corp. The lease was renewed for a further one year term in August 2022. The Company has elected to apply the short-term scope exception for leases with terms of 12 months or less at the inception of the lease and will continue to recognize rent expense on a straight-line basis

 

(3) On September 14, 2020, GZMC entered into a WiFi Media Solution Agreement (the “Media Agreement”) with a city in Iowa in regard to a city owned location (“venue location”) whereby GZMC was granted rights to provide sponsorship advertising, performance marketing and professional services. Under the terms of the Media Agreement, GZMC must pay fees to the city at an annual rate of $94,000 per annum for a period of 5 years following the initial operation of the venue location, the opening of which was delayed past December 31, 2021, as a result of COVID-19 restrictions.  GZMC is anticipating the start date for this project to occur during fiscal 2022 based on acquiring the various bonds and licenses as may be required and the official commencement of venue services. 

 

(4)

On April 25, 2021, the Company entered into an Equity Purchase Agreement with World Amber Corp., whereby the Company agreed to sell to World Amber Corp up to 16,666,667 shares of the Company’s common stock for a maximum commitment amount of $5,000,000 at $0.30 per share. The Company has submitted a registration statement on Form S-1 to the Securities and Exchange Commission in order facilitate this funding agreement which was deemed effective on September 24, 2021.

 

On each of November 2, 2021, and November 3, 2021, the Company presented a Put to World Amber Corp., pursuant to the Effective S-1 Registration Statement for $50,000 each Put, as a result the cumulative $100,000 in funds resulted in the issuance of 333,334 shares of registered common stock at $0.30 per share. The Registration statement expired on September 24, 2022. No further shares will be sold under this financing agreement.

 

22

 

 

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022, and 2021
(Unaudited)

 

NOTE 10: COMMITMENTS (continued)

 

(5) On November 10, 2021, the Company entered into a Registration Right Agreement with Mast Hill Fund, L.P. (the “Investor”), whereby the Company has agreed, upon the terms and subject to the conditions of the Purchase Agreement, to sell to the Investor up to Ten Million Dollars ($10,000,000.00) of Put Shares at an originally estimated put price of $2.00 per share, subject to adjustment in accordance with the terms of the agreement which calls for valuation of the Put price equal to 90% of the volume weighted average price of the Company’s Common Stock on the Principal Market on the Trading Day immediately preceding the respective Put Date, and subject to a valuation period of seven (7) Trading Days immediately following the Clearing Date associated with the applicable Put Notice during which the Purchase Price of the Common Stock is valued in order to establish the applicable Purchase Price. To induce the Investor to enter into the Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the “Securities Act”), and applicable state securities laws. The Registration was deemed effective on May 11, 2022. 

 

(6) On April 7, 2022, the Company entered into Professional Relations and Consulting Agreement (Agreement) with Acorn Management Partners, LLC (Acorn), a Georgia Limited Liability Company, wherein the Company will pay Acorn $11,500 per month, and issue, or cause to be issued, $120,000 worth of the Company’s restricted common stock in three tranches, total shares equivalent to $60,000 for the first six month period and total shares equivalent to $30,000 for each of the remaining two three-month periods. The term of the Agreement is for one year, broken down into three periods; the first began on April 8, 2022, and is for six months.  The next two periods are for three months each.  The Agreement may be terminated at any time, in writing, by either party.  If the Agreement is terminated by the Company before the end of any period, Acorn will be entitled for full payment of the period, and the full issuance of the shares for that period.  The Company issued a total of 51,282 unregistered restricted shares on April 15, 2022, in respect of the first installment of $60,000 worth of common stock under the terms of the Agreement which shares are valued at fair market value on the date of issue.  On July 19, 2022, 383,000 unregistered shares of the Company’s common stock were issued to Acorn Management Partners, LLC in lieu of cash payments of $60,000 owed to Acorn pursuant to an Addendum to that Consulting Agreement entered into on July 6, 2022.

 

(7) On July 7, 2022, effective June 14, 2022, the Company entered into a Sponsorship & Services Agreement (Agreement) with the Texas Rangers MLB Stadium called Globe Life Field (Rangers) wherein the Rangers granted sponsorship benefits to the Company.  The Agreement calls for advanced sponsorship revenue share payments of $375,000 by the Company to the Rangers during the fiscal years 2023 and 2024, pursuant to a split fee arrangement for WiFi managed services and Sponsorship opportunity.  The Agreement offers the rights of the Company to place stadium ads in a shared revenue model.  The Company will also manage the WiFi Network captive portal remotely, as an exclusive arrangement.

 

NOTE 11: CAPITAL STOCK

 

The Company has authorized 500,000,000 common shares with a par value of $0.001, 10,000,000 shares of Series A Preferred Stock, par value $0.004 and 1 share of Series B Preferred Stock, par value $0.001.  The shares of Series A Preferred Stock are convertible into shares of Common Stock on the basis of 10 shares of Common Stock for every 1 share of Series A Preferred Stock and have voting rights of one vote for each share of Series A Preferred Stock held. The Series B Preferred Stock is not convertible but has voting rights granting the holder 51% of all votes (including common and preferred stock) entitled to vote at any meeting of the stockholders of the Company. Neither the Series A nor Series B Preferred Stockholders have any rights to dividends or proceeds of the assets of the Company upon any liquidation or winding up of the Company.

  

Common Stock

 

On February 8, 2022, pursuant to an Engagement Agreement with Carter, Terry & Company, an authorized, registered broker dealer, the Company issued a total of 10,769 shares of common stock as compensation. The Company recorded $22,400 as financing cost.

 

On April 7, 2022, pursuant to an Engagement Agreement with Acorn Management Partners, LLC, the Company issued a total of 51,282 shares of common stock as compensation. The Company recorded $60,000 as investor relations services. Further, on July 19, 2022, 383,000 unregistered shares of the Company’s common stock were issued to Acorn Management Partners, LLC with a fair value of $69,000 as compensation owed to Acorn pursuant to a Professional Relations and Consulting Agreement (Consulting Agreement) entered into on April 7, 2022, and an Addendum to that Consulting Agreement entered into on July 6, 2022.

 

23

 

 

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022, and 2021
(Unaudited)

 

NOTE 11: CAPITAL STOCK (continued)

 

Common Stock (continued)

  

On May 23, 2022 pursuant to an Engagement Agreement with Beyond Media SEZC, the Company issued a total of 1,818,181 shares of common stock as compensation. The Company recorded $600,000 as investor relationship expenses.

 

On May 27, 2022 the Company issued 356,364 shares of common stock as a result of the exercise of a cashless warrants.

 

On July 7, 2022 the Company issued 560,000 shares of common stock to Talos for total proceeds of $53,752 at $0.095985 per share pursuant to the exercise of a share purchase warrant.

 

On August 3, 2022, the Company issued 1,538,462 shares of common stock to lender eSilkroad Network Ltd. in consideration for $300,000 in loans previously provided under the terms of a convertible note agreement convertible at $0.195 per share.

 

On September 1, 2022, the Company issued 2,500,000 shares of restricted common stock to William Coleman Stock in partial payment of his promissory notes in the amount of $75,000, at $0.03 per share.

 

On September 1, 2022, the Company issued a cumulative 2,700,000 shares of restricted common stock for directors’ services provided by Mr. Smith, Mr. Procniak and Mr. Hale during the first two quarters of 2022, with a fair value of $65,070.

 

The Company issued an accumulated 8,835,000 shares of common stock pursuant to Notice of Conversion from lenders in the principal amount of $225,400, and in the accrued interest payable of $53,760 with a fair value of 129,452 and fees with a fair value of $22,621.

 

The Company issued an accumulated 2,893,770 shares of common stock under an Equity Purchase Agreement with Mast Hill Fund, L.P. with net proceeds of $117,216 (Note 10(5)).

 

As of September 30, 2022, and December 31, 2021, there were 46,824,801 and 25,177,973 shares of common stock issued and outstanding, respectively.

 

Series A Preferred Stock

 

The total number of Series A Preferred stock that may be issued by the Company is 10,000,000 shares with a par value of $0.004.

 

As of September 30, 2022 and December 31, 2021, there are a total of 5,000,000 shares of Series A Preferred Stock issued and outstanding. 

 

Series B Preferred Stock

 

The total number of Series B Preferred Stock that may be issued by the Company is 1 share with a par value of $0.001.

 

As of September 30, 2022 and December 31, 2021, there is 1 share of Series B Preferred stock issued and outstanding.

 

24

 

 

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022, and 2021
(Unaudited)

 

NOTE 11: CAPITAL STOCK (continued)

  

Share Purchase Warrants

 

On November 11, 2021, the Company entered into a Warrant Agreement with J.H. Darbie and Company, an authorized, registered broker dealer, wherein J.H. Darbie and Company may purchase 10,487 shares of common stock for $1.00 per share, as a Finder’s Fee for introducing the Company to MHFLP. The fair value of the warrants granted was estimated at $25,141 using the Black-Scholes pricing model

 

In November and December 2021, the Company issued cumulative 1,120,000 warrants to convertible note holders and subscribers for common shares, in accordance with the terms of subscription unit agreements into with the convertible note holder and subscribers. The fair value of the warrants granted was estimated at $503,973 using the Black-Scholes pricing model.

 

In April and May 2022, the Company issued a total of 1,831,667 warrants to convertible note holders and subscribers for common shares, in accordance with the terms of subscription unit agreements entered into with the convertible note holders and subscribers. The fair value of the warrants granted was estimated at $360,003 using the Black-Scholes pricing model.

 

In September 2022, the Company issued a total of 3,520,000 warrants to convertible note holders and subscribers for common shares, in accordance with the terms of subscription unit agreements entered into with the convertible note holders and subscribers. The fair value of the warrants granted was estimated at $52,702 using the Black-Scholes pricing model.

 

During the nine months ended September 30, 2022, 356,364 shares of common stock were issued from the exercise of 560,000 cashless warrants. 560,000 shares of common stock issued at $0.095985 per share pursuant to the exercise of a share purchase warrant.

 

Certain warrants above include dilution protection for the warrant holders, which could cause the exercise price to be reduced as a result of a financing event at a valuation below the exercise price in effect at the time. During the nine months ended September 30, 2022, as a result of additional share issuances below the original exercise price of certain warrants, the warrant exercise price was downward adjusted to $0.020025 per share. The downward adjustment on each of the modification dates was treated as additional paid in capital and fully expensed as financing costs on the modification date, and the Company recorded a cumulative $17,965 to additional paid in capital and interest expenses.

 

In accordance with authoritative accounting guidance, the fair value of the outstanding common stock purchase warrants was calculated using the Black-Scholes option-pricing model with the following assumptions at the measurement date(s):

 

   Measurement date 
Dividend yield   0%
Expected volatility   279~297% 
Risk-free interest rate   0.83~1.22% 
Expected life (years)   3.00~5.00 
Stock Price   $0.027~$2.80 
Exercise Price   $0.10 ~ $1.00 

 

25

 

 

GZ6G TECHNOLOGIES CORP.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For the Nine Months Ended September 30, 2022, and 2021
(Unaudited)

 

NOTE 11: CAPITAL STOCK (continued)

 

The following table summarizes information with respect to outstanding warrants to purchase common stock of the Company at September 30, 2022 and December 31, 2021: 

 

Exercise Price 

December 31,

2021

  Issued  Repricing  Exercised  September 30,
2022		 

Expiration

Date

$1.00    560,000              (560,000)   -      
$1.00    560,000         0.095985    (560,000)   -      
$1.00    10,487         0.020025         10,487    November 2026 
$1.00         365,000    0.020025         365,000    April 2027 
$0.30         1,466,667    0.020025         1,466,667    May 2025 
$0.10         3,520,000    0.020025         3,520,000    September 2027 
      1,130,487    5,351,667         (1,120,000)   5,362,154      

 

A summary of the warrant activity for the period ended September 30, 2022 and December 31, 2021 is as follows:

 

       Weighted-
Average Exercise		  

Weighted-
Average Remaining

Contractual

  

Aggregate

Intrinsic

 
   Shares   Price   Term   Value 
Outstanding at December 31, 2021   1,130,487   $1.00    2.93   $       - 
Grants   5,351,667    0.216    4.63    - 
Exercised   (1,120,000)   -    -    - 
Expired   -    -    -    - 
Outstanding at September 30, 2022   5,362,154   $0.020025    4.55   $- 
                     
Exercisable at September 30, 2022   5,362,154   $0.020025    4.55   $- 

 

NOTE 12: SUBSEQUENT EVENTS

 

On October 1, 2022, the Company issued