NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Three Months Ended March 31, 2023 and 2022
(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. As of March 31, 2023,
the Company had a working capital deficit of $3.96 million with approximately $0.3 million of cash on hand and an accumulated
deficit of $19 million. During the three months ended March 31, 2023 the Company received net cash proceeds of $627,400 by way
of a series of convertible promissory notes. The Company anticipates a need for up to a further $5 million in fiscal 2023 to
meet its upgraded infrastructure requirements. In addition to the remaining funding which may be provided to the Company under
various loan agreements, the Company is in the process of filing a follow-on registration statement on Form S-1 to facilitate
additional funding up to a maximum of $10,000,000. There is no guarantee the Company will continue to receive financing as required.
The continuation of the Company as a going concern is dependent upon the ability to raise additional equity and/or debt financing
and the attainment of profitable operations from the Company’s future business. If the Company is unable to obtain adequate
capital as needed, the Company may be required to reduce the scope, delay, or eliminate some or all of its planned operations. These
factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.
The
financial statements reflect all adjustments consisting of normal recurring adjustments, which, in the opinion of management, are necessary
for a fair presentation of the results for the periods shown. The financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts of and classification of liabilities that might be necessary in
the event the Company cannot continue in existence.
COVID-19
Pandemic and other factors
While
the COVID-19 pandemic has subsided and the global economy is focused on recovery, the impact of COVID-19 could continue to have an adverse
impact on the Company going forward. COVID-19 caused significant disruptions to the global financial markets, which may continue to impact
the Company’s ability to raise additional capital and to pursue implementation of its planned smart city and related smart venue
projects. Additional factors which may impact the Company’s ongoing operations include inflation, potential supply chain issues
as a result of the aforementioned recovery from the COVID-19 pandemic, the recent war in the Ukraine, climate change and others. These
events may have serious adverse impact on domestic and foreign economies which may impact the Company’s operations as a result
of a variety of factors including the potential for reduced consumer spending and attendance at locations that use our services.
The Company is unable to predict the ongoing impact of these factors on the Company’s consolidated financial operations. There
are no assurances that the Company will be able to meet its obligations, raise funds or conclude the acquisition of identified businesses.
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Three Months Ended March 31, 2023 and 2022
(Unaudited)
NOTE
2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying unaudited 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 GAAP have been condensed or omitted pursuant to the
SEC’s rules and regulations. The results of operations for the three months ended March 31, 2023 are not necessarily
indicative of the results to be expected for the full year. These unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s
2022 Form 10-K as filed with the Securities and Exchange Commission on April 17, 2023.
Consolidation
These
unaudited condensed consolidated financial statements include the accounts of GZ6G Technology Corp. and its 60%
controlled subsidiary, Green Zebra Media Corp. (“GZMC’), as of March 31, 2023 and December 31, 2022. 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.
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 March 31, 2023 and December
31, 2022, the Company had $74,600 and $249,500 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.
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Three Months Ended March 31, 2023 and 2022
(Unaudited)
Revenue
Recognition
The
Company recognizes revenue in accordance with ASC 606 — Revenue from Contracts with Customers. The core principle of this standard
is that a company should record revenue to depict the transfer of promised goods or services to customers in an amount that reflects
the consideration to which the company expects to be entitled in exchange for those goods or services. Further under ASC 606, the Company
recognizes revenue from licensing agreements and service-based contracts by applying the following steps: (1) identify the contract with
a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction
price to each performance obligation in the contract; and (5) recognize revenue when each performance obligation is satisfied.
We
earn revenue from service and sponsorship agreements, digital marketing and the sale of WiFi and communication solutions to customers
across the United States. Revenue is earned from sales of our WiFi media platform and our WiFi monetization hardware (GZ Media
hub) embedded with GZ software to create monetization and communication solutions for our customers. Our sales can consist of any one
or a combination of items required by our customer including hardware, technology platforms and related support. We also enter into licensing
contracts which provide for revenue based on licensing fees and revenue sharing with our licensees.
As
we expand, we expect a large portion of our revenue from our digital communication solutions to be derived from service-based contracts
where we expect to recognize a significant portion of our contracts over time, as there is a continuous delivery of services to the customer
over the contractual period of performance. These contracts may or may not include fixed payments for services over time and/or
commission-based fees.
Direct
costs are expected to include materials, labor and overhead to be charged to work-in-progress (including our contracts-in-progress) inventory
or cost of sales. Indirect costs relating to long-term contracts, are expected to include expenses such as general and administrative
charges, and other costs will be charged to expense as incurred and will not be included in our work-in-process (including our contracts-in-progress)
inventory or cost of sales. Total estimates are expected to be reviewed and revised periodically throughout the lives of the contracts,
and adjustments to profits resulting from such revisions are made cumulative to the date of the change. Estimated losses on long-term
contracts are recorded in the period in which the losses become evident. If we do not accurately estimate the total sales, related
costs and progress towards completion on our long-term contracts, the estimated gross margins may be significantly impacted, or losses
may need to be recognized in future periods. Any such resulting changes in margins or contract losses could be material to our results
of operations and financial condition.
In
addition, certain of our contracts will include termination for convenience or non-performance clauses that provide the customer with
the right to terminate the contract. Such terminations could impact the assumptions regarding total contract revenues and expenses utilized
in recognizing profit under those contracts where we apply the percentage-of-completion method of accounting. Changes to these assumptions
could materially impact our results of operations and financial condition. As we fully implement our business model, our inability to
perform on our long-term contracts could materially impact our results of operations and financial condition.
Stock-Based
Compensation
We
account for stock-based transactions in which the Company receives services from employees, non-employees, directors or others in exchange
for equity instruments based on the fair value of the award at the grant date in accordance with ASC 718 – Compensation-Stock Compensation.
Stock-based compensation cost for stock options or warrants is estimated at the grant date based on each instrument’s fair value
as calculated by the Black-Scholes option pricing model. We recognize stock-based compensation cost as expense ratably on a straight-line
basis over the requisite service period for the award.
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Three Months Ended March 31, 2023 and 2022
(Unaudited)
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 March 31, 2023 and December 31, 2022, the Company had recorded within Convertible Notes, net of discount, the amount of
$56,635 and
$5,324,016,
respectively, for the value of the stock settled debt with respect to certain convertible notes (see Note
5).
Leases
The
Company follows ASC 842 Leases, which requires recognition of most leases on the balance sheet, specifically the recognition of right-to-use
assets and related lease liabilities, and enhanced disclosures about leasing arrangements. The Company elected to apply the short-term
scope exception for leases with terms of 12 months or less at the inception of the lease and will continue to recognize rent expense
on a straight-line basis.
Fair
Value of Financial Instruments
ASC
820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction
between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize
the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. FASB ASC 820 describes three levels
of inputs that may be used to measure fair value:
Level
1 – Quoted prices in active markets for identical assets or liabilities.
Level
2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; or other inputs
that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level
3 – Unobservable inputs that are supported by little or no market activity and that are financial instruments whose values
are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the
determination of fair value requires significant judgment or estimation.
If
the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is
based on the lowest level of input that is significant to the fair value measurement of the instrument.
Income
Taxes
The
Company follows ASC 740 – Income Taxes, which requires the use of the asset and liability method of accounting for income taxes.
Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable
to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled.
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Three Months Ended March 31, 2023 and 2022
(Unaudited)
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.
The
computation of diluted loss per share for the three months ended March 31, 2022 excludes potentially dilutive securities of underlying
share purchase warrants, convertible notes, and preferred shares, because their inclusion would be antidilutive.
The
table below reflects the potentially dilutive securities that have not been included in the computation of diluted net
loss per share:
| | |
March 31,
2023 | | |
March 31,
2022 | |
| Convertible Notes | |
| 806,072,163 | | |
| 5,222,570 | |
| Stock purchase warrants | |
| 841,724,017 | | |
| 1,130,487 | |
| Series A Preferred shares (convertible to common at a ratio of 10 common for each 1 preferred) | |
| 50,000,000 | | |
| 50,000,000 | |
| Total | |
| 1,697,796,180 | | |
| 56,353,057 | |
Recently
Issued Accounting Pronouncements
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:
| | |
March 31,
2023 | | |
December 31,
2022 | |
| Office equipment | |
$ | 192,647 | | |
$ | 192,647 | |
| Leasehold improvements | |
| 12,813 | | |
| 12,813 | |
| Software | |
| 155,550 | | |
| 143,070 | |
| Total | |
| 361,010 | | |
| 348,530 | |
| Less: accumulated depreciation and amortization | |
| (190,147 | ) | |
| (160,869 | ) |
| Total property and equipment, net | |
$ | 170,863 | | |
$ | 187,661 | |
Depreciation
expense amounted to $29,278 and $46,478 for the three months ended March 31, 2023, and 2022, respectively.
NOTE
4: OTHER CURRENT ASSETS
Other
current assets consist of the following at March 31, 2023 and December 31, 2022:
| | |
March 31,
2023 | | |
December 31,
2022 | |
| Security deposits | |
$ | 14,691 | | |
$ | 14,691 | |
| Other deposits and receivables | |
| 1,258 | | |
| 1,258 | |
| Total | |
$ | 15,949 | | |
$ | 15,949 | |
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Three Months Ended March 31, 2023 and 2022
(Unaudited)
NOTE
5: 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.
During
the 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 year ended December 31, 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.
On
February 28, 2023, the Company issued 3,135,146 shares of common stock to the lender in consideration for principal of $500,000 in
loans and unpaid interest $111,353 provided under the terms of the Treaty Agreement at $0.195 per share. The loan was settled in
full.
The
carrying value of funding tranches is as follows:
| | |
March 31,
2023 | | |
December 31,
2022 | |
| Principal | |
$ | - | | |
$ | 500,000 | |
| Stock-settled liability | |
| - | | |
| 5,171,803 | |
| Total | |
| - | | |
| 5,671,803 | |
| Unamortized debt discount | |
| - | | |
| (20,726 | ) |
| Debt carrying value | |
$ | - | | |
$ | 5,651,077 | |
The
interest expenses for the funding tranches are as follows:
| |
|
|
|
|
|
|
|
|
| | |
Three Months Ended | |
| | |
March 31, | |
| | |
2023 | | |
2022 | |
| Interest expense on notes | |
$ | 6,465 | | |
$ | 15,551 | |
| Amortization of debt discount | |
| 20,726 | | |
| 2,119,741 | |
| Total: | |
$ | 27,191 | | |
$ | 2,135,292 | |
The
accrued interest payable is as follows:
| | |
| |
| Balance, December 31, 2021 | |
$ | 50,981 | |
| Interest expense on the convertible notes | |
| 53,907 | |
| Balance, December 31, 2022 | |
| 104,888 | |
| Interest expense on the convertible notes | |
| 6,465 | |
| Converted to shares | |
| (111,353 | ) |
| Balance, March 31, 2023 | |
$ | - | |
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Three Months Ended March 31, 2023 and 2022
(Unaudited)
Gain
related to extinguishment during the three months ended March 31, 2023:
| | |
Three Months ended March 31, 2023 | |
| Debt principal | |
$ | 500,000 | |
| Stock-settled liability | |
| 5,171,803 | |
| Interest payable | |
| 111,353 | |
| Total | |
| 5,783,156 | |
| Issuance of 3,135,146 shares of common stock | |
| (19,751 | ) |
| Gain on extinguishment of debt upon conversion | |
$ | 5,763,405 | |
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 debt discount of $616,027 is
being amortized over the life of the Note for a total debt discount of $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 $0.03 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.
On
November 3, 2022, the Company entered into a Promissory Note with an investor in which the investor agreed to lend the Company the principal
amount of $160,000 for the purchase price of $144,000. The Term of the Note is twelve months with an interest rate of 12%.
The conversion rate of the Note is fixed at $0.02 per share. The Company concurrently entered into a Warrant Agreement for the purchase
of an additional 2,400,000 common shares at $0.10 per share for a term of five (5) years.
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Three Months Ended March 31, 2023 and 2022
(Unaudited)
On
November 23, 2022, the Company entered into a Promissory Note with an investor in which the investor agreed to lend the Company the principal
amount of $293,000 for the purchase price of $263,700. The Term of the Note is twelve months with an interest rate of 12%.
The conversion rate of the Note is fixed at $0.02 per share. The Company concurrently entered into a Warrant Agreement for the purchase
of an additional 5,860,000 common shares at $0.10 per share for a term of five (5) years.
On
December 20, 2022, the Company entered into a Promissory Note with an investor in which the investor agreed to lend the Company the principal
amount of $293,000 for the purchase price of $263,700. The Term of the Note is twelve months with an interest rate of 12%.
The conversion rate of the Note is fixed at $0.015 per share. The Company concurrently entered into a Warrant Agreement for the
purchase of an additional 5,860,000 common shares at $0.10 per share for a term of five (5) years.
In
accordance with ASC 470 – Debt, the proceeds in the year ended December 31, 2022, of $1,554,300 were allocated based on the
relative fair values of the convertible notes and the warrants of $948,158 and $606,142, respectively. The Warrant was valued at $606,142
and was recorded as a debt discount which is being amortized over the life of the Note. In addition, the Note had a debt discount in
the amount of $792,824 which was recorded as a debt discount which is being amortized over the life of the Note for a
total debt discount of $1,571,666.
On January
23, 2023, the Company entered into a Promissory Note with Mast Hill Fund, L.P. for the Principal Amount of $293,000, and an Actual Amount
of Purchase Price of $263,700. The Conversion rate on the note is $0.0035 per share, subject to adjustments. The total disbursement
to GZ6G was $250,789, with a term of twelve months and an interest rate of 12%. Proceeds will be used, for operating costs
and further execution of GZ6G’s business plans. Concurrently the Company issued Mast Hill a stock purchase warrant for the purchase
of 11,720,000 shares of common stock at an exercise price of $0.05 per share for a term of five years.
On March
16, 2023, the Company entered into a Promissory Note with Mast Hill Fund, L.P. for the Principal Amount of $293,000, and an Actual Amount
of Purchase Price of $263,700. The Conversion rate on the note is $0.0035 per share, subject to adjustments. The total disbursement
to GZ6G was $250,789, with a term of twelve months and an interest rate of 12%. Proceeds will be used, for operating costs
and further execution of GZ6G’s business plans. Concurrently the Company issued Mast Hill a stock purchase warrant for the purchase
of 11,720,000 shares of common stock at an exercise price of $0.05 per share for a term of five years.
In
accordance with ASC 470 – Debt, the proceeds in the three months ended March 31, 2023, of $527,400 was allocated based on
the relative fair values of the convertible notes and the warrants of $462,681 and $64,319, respectively. The Warrant was valued at $64,319
and was recorded as a debt discount which is being amortized over the life of the Note. In addition, the Note had a debt discount in
the amount of $418,502 which was recorded as a debt discount which is being amortized over the life of the Note for a
total debt discount of $541,421.
During
the year ended December 31, 2022, the Company paid $281,000 in cash to settle a portion of the outstanding principal and $31,781 in
cash to settle interest payable related to the December 16, 2021, convertible note.
During
the year ended December 31, 2022, the Company issued an accumulated 21,990,255 shares of common stock pursuant to Notice
of Conversion from lenders to settle certain portion of principal together with accrued interest payable and fees.
During
the three months ended March 31, 2023, the Company issued an accumulated 26,500,000 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:
Schedule
of the carrying value of the tranches
| | |
March 31,
2023 | | |
December 31,
2022 | |
| Principal | |
$ | 2,741,149 | | |
$ | 2,847,000 | |
| Shares issued under conversion | |
| (111,960 | ) | |
| (410,851 | ) |
| Repaid to principal | |
| - | | |
| (281,000 | ) |
| Unamortized debt discount | |
| (1,352,939 | ) | |
| (1,280,068 | ) |
| Debt carrying value | |
$ | 1,276,251 | | |
$ | 875,081 | |
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Three Months Ended March 31, 2023 and 2022
(Unaudited)
The
interest expenses related to the tranches are as follows:
Schedule
of the interest expense related to the tranches
| |
|
|
|
|
|
|
|
|
| | |
Three Months Ended | |
| | |
March 31, | |
| | |
2023 | | |
2022 | |
| Interest expense on notes | |
$ | 69,836 | | |
$ | 33,140 | |
| Amortization of debt discount | |
| 468,550 | | |
| 58,930 | |
| Total: | |
$ | 538,386 | | |
$ | 92,070 | |
The
accrued interest payable is as follows:
Schedule
of the accrued interest payable
| Balance, December 31, 2021 | |
$ | 13,340 | |
| Interest expense on the convertible notes | |
| 178,374 | |
| Shares issued under conversion | |
| (124,742 | ) |
| Repaid in cash | |
| (31,781 | ) |
| Balance, December 31, 2022 | |
| 35,291 | |
| Interest expense on the convertible notes | |
| 69,836 | |
| Shares issued under conversion | |
| (11,030 | ) |
| Balance, March 31, 2023 | |
$ | 94,097 | |
Loss
related to extinguishment during the three months ended March 31, 2023:
Schedule
of loss related to extinguishment
| |
|
|
|
|
| | |
| |
| Debt principal | |
$ | 111,960 | |
| Accrued interest payable | |
| 11,030 | |
| Transfer agent fee | |
| 20,148 | |
| Total | |
| 143,138 | |
| Issuance of 26,500,000 shares of common stock | |
| (151,762 | ) |
| (Loss) on extinguishment of debt upon conversion | |
$ | (8,624 | ) |
During
the three months ended March 31, 2023, the Company issued shares in respect to a Put notice (Note 10(5)) with a strike price of $0.0035 per
share which triggered a dilutive issuance clause in the aforementioned Convertible Note agreements downward adjusting the conversion
price per share to match the strike price.
Convertible
Promissory Note
During
the year ended December 31 2022, the Company entered into several Convertible Promissory Notes with an investor in which the investor
agreed to lend the Company the accumulated principal amount of $321,500 for the purchase price of $306,250. 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 Company recorded $172,982 as the liability on stock settled debt associated with these convertible
promissory notes which amount is amortized over the terms of the notes. During the year ended December 31, 2022, the Company issued
an accumulated 8,452,680 shares of common stock pursuant to Notice of Conversion from lenders to settle certain portion
of principal. During the three months ended March 31, 2023, the Company issued an accumulated 27,928,509 shares of common stock pursuant
to Notice of Conversion from lenders to settle certain portion of principal and unpaid interest.
During
the year ended December 31, 2022, the Company entered into a Convertible Promissory Notes with an investor in which the investor agreed
to lend the Company the accumulated principal amount of $54,000 for the purchase price of $50,000. The Term of these Notes is twelve
months with an interest rate of 10%. The conversion rate of the Note is as follows: 35% discount to the lowest bid price during
the ten-day trading period prior to a notice of conversion. The funds were used for operating costs and further execution of GZ6G’s
business plan. The Company recorded $33,077 as the liability on stock settled debt associated with these convertible promissory
notes which amount is amortized over the terms of the notes.
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Three Months Ended March 31, 2023 and 2022
(Unaudited)
On March
8, 2023 the Company into a Promissory Note with 1800 Diagonal Lending LLC for the Principal Amount of $116,760 and an Actual Amount
of Purchase Price of $104,250. The total disbursement to GZ6G was $100,000, with a term of twelve months and an interest rate of 12%.
The note requires 10 monthly payments of $13,077 commencing April 30, 2023. In the event of default the holder shall have the right to
convert interest and principal into shares of common stock based on a conversion price of 75% of the lowest trading price of the Company’s
common stock in the preceding 10 days. Proceeds will be used, for operating costs and further execution of GZ6G’s business
plans.
The
carrying value of this convertible promissory note is as follows:
| | |
March 31,
2023 | | |
December 31,
2022 | |
| Principal | |
$ | 214,510 | | |
$ | 275,250 | |
| Accrued interest payable | |
| 14,011 | | |
| - | |
| Stock-settled liability | |
| 56,635 | | |
| 152,213 | |
| Total | |
| 285,156 | | |
| 427,463 | |
| Unamortized debt discount | |
| (67,893 | ) | |
| (106,500 | ) |
| Debt carrying value | |
$ | 217,263 | | |
$ | 320,963 | |
The
interest expenses for the convertible promissory note are as follows:
| |
|
|
|
|
|
|
|
|
| | |
Three Months Ended | |
| | |
March 31, | |
| | |
2023 | | |
2022 | |
| Interest expense on note | |
$ | 4,327 | | |
$ | - | |
| Amortization of accrued interest | |
| 1,440 | | |
| | |
| Amortization of debt discount | |
| 50,100 | | |
| - | |
| Total: | |
$ | 55,867 | | |
$ | - | |
The
accrued interest payable is as follows:
Schedule
of the promissory note accrued interest payable
| | |
| |
| Balance, December 31, 2021 | |
$ | - | |
| Interest expense on the convertible note | |
| 16,077 | |
| Balance, December 31, 2022 | |
$ | 16,077 | |
| Interest expense on the convertible note | |
| 4,327 | |
| Cash payment | |
| (2,710 | ) |
| Shares issued under conversion | |
| (13,529 | ) |
| Balance, March 31, 2023 | |
$ | 4,165 | |
Loss
related to extinguishment during the three months ended March 31, 2023:
Schedule
of loss related to convertible promissory note extinguishment
| |
|
|
|
|
| Debt principal | |
$ | 177,500 | |
| Stock-settled debt | |
| 95,578 | |
| Accrued interest payable | |
| 16,238 | |
| Total | |
| 289,316 | |
| | |
| | |
| Issuance of 27,928,509 shares of common stock | |
| (319,657 | ) |
| Cash paid | |
| (70,574 | ) |
| Unamortized debt discount | |
| (17,838 | ) |
| Total | |
| (408,069 | ) |
| | |
| | |
| (Loss) on extinguishment of debt upon conversion | |
$ | (118,753 | ) |
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Three Months Ended March 31, 2023 and 2022
(Unaudited)
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.
The
interest expenses related to the SBA loan are as follows:
| |
|
|
|
|
|
|
|
|
| | |
Three Months Ended | |
| | |
March 31, | |
| | |
2023 | | |
2022 | |
| Interest expense on notes | |
$ | 406 | | |
$ | 406 | |
The
accrued interest payable is as follows:
| Balance, December 31, 2021 | |
$ | 2,672 | |
| Addition: Interest expense | |
| 1,650 | |
| Balance, December 31, 2022 | |
| 4,322 | |
| Addition: Interest expense | |
| 406 | |
| Balance, March 31, 2023 | |
$ | 4,728 | |
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 March 31, 2023, and December 31, 2022, there was an outstanding amount of $3,768 due
and payable on the loan, and the loan was in default.
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Three Months Ended March 31, 2023 and 2022
(Unaudited)
NOTE
6: 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 March 31, 2023 and December 31, 2022:
| | |
March 31, 2023 | | |
December 31,
2022 | |
| Customer receivables (1) | |
$ | - | | |
$ | - | |
| Contract liabilities (Customer deposits) (1), (2), (a), (b), (c), (d) | |
$ | 173,230 | | |
$ | 172,000 | |
| (1) |
The Company has deposits of $173,230 and $172,000, respectively as
at March 31, 2023 and December 31, 2022, 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 ended March 31, 2023 and 2022, the Company recorded $3,000 and $3,000, respectively as income relative
to the above contracts and returned $0 and $25,000, respectively 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 months ended March 31, 2023 and 2022 , we have recognized $3,000 and $3,000, respectively in revenue from customer deposits
on hand. 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.
(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.
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Three Months Ended March 31, 2023 and 2022
(Unaudited)
(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 $ for each of 13 venues, whereby $ per venue is due on receipt
of the invoice and the remaining $35,000 is due sixty days thereafter. As at December 31, 2021, the Company had received partial
payments of $130,000 against the initial deposit required, of which a total of $25,000 was returned during the year ended December
31, 2022 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 $3,000 and $3,000, respectively, was recorded as income
during the three months ended March 31, 2023 and 2022, with the remaining $39,000 included in deferred income in relation to future
service obligations under the contract which will be earned over the term of the service contract.
(d)
During the three months ended March 31, 2023 the Company received a deposit from a customer in the amount of $4,230 in respect to services
to be provided in future periods.
NOTE
7: 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 March 31, 2023 and 2022. 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.
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 at 5% per annum for all amounts payable to each of ELOC and Smith,
with a principal amount of $1,217,579 payable to ELOC, due on demand.
During
the fiscal year ended December 31, 2021, the Company paid a total of $151,854 to ELOC to reduce the principal balance on the loan.
During
the year ended December 31, 2022, the Company issued 2,500,000 shares of restricted common stock in partial payment of his
promissory notes in the amount of $75,000, at $0.03 per share.
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Three Months Ended March 31, 2023 and 2022
(Unaudited)
During
the year ended December 31, 2022, the Company’s CEO, William Coleman Smith entered into Promissory Notes with the Company for a
total of $250,000 due and payable in demand with bearing interest at 1%. During the year ended December 31, 2022, the Company’s
CEO, William Coleman Smith entered into Promissory Notes with the Company for a total of $200,100 due and payable on demand with
bearing interest at 12%.
The
following amounts are included in debt to related party on our Balance Sheets:
| Balance at December 31, 2021, Debt, related party. | |
$ | 1,065,725 | |
| Shares issued to settle debt | |
| (75,000 | ) |
| Promissory Notes for funding provided | |
| 450,100 | |
| Balance at December 31, 2022, Debt, related party. | |
$ | 1,440,825 | |
| Balance at March 31, 2023, Debt, related party. | |
$ | 1,440,825 | |
The
interest expenses related to above loans are as follows:
| |
|
|
|
|
|
|
|
|
| | |
Three Months Ended | |
| | |
March 31, | |
| | |
2023 | | |
2022 | |
| Interest expense on notes | |
$ | 18,752 | | |
$ | 13,138 | |
During
the three month period ended March 31, 2023 and 2022, the Company accrued $30,000 in management fees to ELOC and paid management
fees to Coleman Smith of $90,000.
The
following amounts are included in related party payables on our Balance Sheets:
| | |
March 31,
2023 | | |
December 31,
2022 | |
| Coleman Smith, President | |
$ | 73,841 | | |
$ | 67,256 | |
| Interest payable | |
| 128,537 | | |
| 109,785 | |
| ELOC Holdings Corp. | |
| 270,000 | | |
| 240,000 | |
| Terrence Flowers | |
| 110 | | |
| 110 | |
| | |
$ | 472,488 | | |
$ | 417,151 | |
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.
Stock
Awards issued to independent directors
On
September 1, 2022, the Company issued 100,000 shares of restricted common stock for directors’ services provided by each of Mr.
Procniak and Mr. Hale, independent directors, with a fair value of $2,410, respectively.
NOTE
8: 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.
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Three Months Ended March 31, 2023 and 2022
(Unaudited)
Future
minimum lease payments in respect of the above leases as of March 31, 2023 as presented in accordance with ASC 842 were as follows:
| |
|
|
|
|
| 2023 |
|
|
95,780 |
|
| 2024 |
|
|
133,014 |
|
| 2025 |
|
|
138,472 |
|
| 2026 |
|
|
143,931 |
|
| 2027 |
|
|
136,527 |
|
| Total
future minimum lease payments |
|
|
647,724 |
|
| Less:
imputed interest |
|
|
(96,046 |
) |
| Total |
|
|
551,678 |
|
| Current
portion of operating lease |
|
|
93,549 |
|
| Long
term portion of operating lease |
|
$ |
458,129 |
|
NOTE
9: 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: |
Schedule
of default judgement
| |
|
|
|
|
| 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 March 31, 2023 and December 31,
2022, 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 approximately $3,400 per month,
plus utilities, for the Company’s subsidiary, Green Zebra Media Corp. Green Zebra uses this space for its operations.
The Company elected to apply the short-term scope exception for leases with terms of 12 months or less at the inception of the lease
and continues to recognize rent expense on a straight-line basis. The lease was renewed for two further 1-year terms expiring
on October 9, 2022. Upon expiry of the lease the Company continues to use the space on a month-to-month basis at
a rate of $3,620 per month plus utilities. |
| (3) |
On
September 14, 2020, GZMC entered into a WiFi Media Solution Agreement (the “Media Agreement”) with a city in Iowa in
regard to a city owned location (“venue location”) whereby GZMC was granted rights to provide sponsorship advertising,
performance marketing and professional services. Under the terms of the Media Agreement, GZMC must pay fees to the city at an annual
rate of $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 2023 based on acquiring the various bonds and licenses as may be required and the official commencement of
venue services. |
| (4) |
On
November 10, 2021, the Company entered into a Registration Right Agreement with Mast Hill Fund, L.P. (the “Investor”),
whereby the Company has agreed, upon the terms and subject to the conditions of the Purchase Agreement, to sell to the Investor up
to Ten Million Dollars ($10,000,000.00) of Put Shares at an originally estimated put price of $2.00 per share, subject to adjustment
in accordance with the terms of the agreement which calls for valuation of the Put price equal to 90%
of the volume weighted average price of the Company’s Common Stock on the Principal Market on the Trading Day immediately preceding
the respective Put Date, and subject to a valuation period of seven (7) Trading Days immediately following the Clearing Date associated
with the applicable Put Notice during which the Purchase Price of the Common Stock is valued in order to establish the applicable
Purchase Price. To induce the Investor to enter into the Purchase Agreement, the Company has agreed to provide certain
registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor
statute (collectively, the “Securities Act”), and applicable state securities laws. The Registration was deemed
effective on May 11, 2022. The Company issued an accumulated 4,747,662 shares
of common stock under this agreement for net proceeds of $151,104 in the year ended December 31, 2022. The Company is in the
process of filing a follow-on registration statement on Form S-1 to facilitate additional funding under this agreement. |
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Three Months Ended March 31, 2023 and 2022
(Unaudited)
| (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. The agreement terminated
on April 7, 2023. |
| (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. As of March 31, 2023, the Company has not yet remitted the first semi-annual installment
of $187,500 under the terms of the contract. |
| (8) |
During
the year ended December 31, 2022, the Company entered into a Sponsorship & Services Agreement (Agreement), as amended, with
the Kansas City Royals Baseball club (the “Royals”) whereunder the Royals granted sponsorship benefits to the Company
for a term running from December 1, 2022 until the date of the last MLB game in 2027, unless terminated earlier. The Agreement
calls for annual escalating payments by the Company to the Royals during the fiscal years 2023 through 2027 of $400,000, $420,000,
$441,000, $463,000 and $486,202, payable in four equal installments during fiscal 2023 and three equal installments during fiscal
2024 through 2027. In consideration for the fees paid the Company will have sponsorship rights, within the venue, across IPTV (internet
protocol television) and fans’ mobile devices during live games and other events. Further the Company will be reimbursed for
costs related to equipment and installation services required under the contract. During the three-month period ended March 31, 2023
the Company invoiced and was paid $50,000 in relation to equipment and installation services. During the three months
ended March 31, 2023, $100,000 was expensed as marketing costs in respect to the quarterly fee installments payable to the Royals
in 2023. |
NOTE
10: CAPITAL STOCK
The
Company has authorized 1,000,000,000 common shares with a par value of $0.001, 10,000,000 shares of Series A Preferred
Stock, par value $0.004 and 1 share of Series B Preferred Stock, par value $0.001. The shares of Series A Preferred
Stock are convertible into shares of Common Stock on the basis of 10 shares of Common Stock for every 1 share of Series A Preferred Stock
and have voting rights of one vote for each share of Series A Preferred Stock held. The Series B Preferred Stock is not convertible but
has voting rights granting the holder 51% of all votes (including common and preferred stock) entitled to vote at any meeting of the
stockholders of the Company. Neither the Series A nor Series B Preferred Stockholders have any rights to dividends or proceeds of the
assets of the Company upon any liquidation or winding up of the Company.
Common
Stock
Shares
of common stock issued during the three months ended March 31, 2023:
The
Company issued an accumulated 57,563,655 shares of common stock pursuant to Notices of Conversion from lenders to settle
principal of $735,709 and accrued interest payable of $135,912 for a fair value of $471,022 plus fees with a fair value of $20,148.
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Three Months Ended March 31, 2023 and 2022
(Unaudited)
Shares
of common stock issued during the three months ended March 31, 2022:
On
February 8, 2022, pursuant to an Engagement Agreement with Carter, Terry & Company, an authorized, registered broker dealer, the
Company issued a total of 10,769 shares of common stock as compensation. The Company recorded $22,399 as financing
cost.
As
of March 31, 2023, and December 31, 2022, there were 128,401,166 and 70,837,511 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 March 31, 2023 and December 31, 2022, 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 March 31, 2023 and December 31, 2022, there is 1 share of Series B Preferred stock issued and outstanding.
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 $360,967 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.
In
November and December 2022, the Company issued a total of 14,120,000 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 $192,473 using the Black-Scholes pricing model.
During
the year ended December 31, 2022, the Company issued a total of 497,317 warrants to J.H. Darbie under various warrants agreements
as a Finder’s Fee for introducing the Company to MHFLP. The fair value of the warrants granted was estimated at $68,356 using
the Black-Scholes pricing model.
During
the year ended December 31, 2022, the Company issued a total of 560,000 warrants to Mast Hill as financing cost. The fair value
of the warrants granted was estimated at $639,620 using the Black-Scholes pricing model.
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Three Months Ended March 31, 2023 and 2022
(Unaudited)
During
the year ended December 31, 2022, 907,247 shares of common stock were issued from the exercise of 1,120,000 cashless
warrants. 560,000 shares of common stock issued at $0.095985 per share pursuant to the exercise of a share purchase warrant.
In
March 2023, the Company issued a total of 23,440,000 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 $64,319 using the Black-Scholes pricing model.
In
March 2023, the Company issued a total of 527,400 warrants to J.H. Darbie under various warrants agreements as a Finder’s
Fee for introducing the Company to MHFLP. The fair value of the warrants granted was estimated at $3,419 using the Black-Scholes
pricing model.
Certain
warrants above include dilution protection for the warrant holders, which could cause the exercise price to be reduced as a result of
a financing event at a valuation below the exercise price in effect at the time. During the year ended December 31, 2022, as a result
of additional share issuances below the original exercise price of certain warrants, the warrant exercise price was downward adjusted
to $0.020025 per share. During the three months ended March 31, 2023, as a result of additional share issuances below the original exercise
price of certain warrants, the warrant exercise price was downward adjusted to $0.0035 per share.
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 | |
262~297% |
| Risk-free interest rate | |
0.83~4.36% |
| Expected life (years) | |
3.00~5.00 |
| Stock Price | |
$0.005~$2.80 |
| Exercise Price | |
$0.05 ~ $1.00 |
The
following table summarizes information with respect to outstanding warrants to purchase common stock of the Company at March
31, 2023 and December 31, 2022:
| Exercise Price | | |
December 31, 2022 | | |
Issued | | |
Repricing | | |
Exercised | | |
March 31,
2023 | | |
Expiration Date |
| $ | 0.020025 | | |
| 10,487 | | |
| | | |
| 0.0035 | | |
| | | |
| 10,487 | | |
November 2026 |
| $ | 0.020025 | | |
| 365,000 | | |
| | | |
| 0.0035 | | |
| | | |
| 365,000 | | |
April 2027 |
| $ | 0.020025 | | |
| 16,417 | | |
| | | |
| 0.0035 | | |
| | | |
| 16,417 | | |
April 2027 |
| $ | 0.020025 | | |
| 1,466,667 | | |
| | | |
| 0.0035 | | |
| | | |
| 1,466,667 | | |
May 2025 |
| $ | 0.020025 | | |
| 66,000 | | |
| | | |
| 0.0035 | | |
| | | |
| 66,000 | | |
May 2027 |
| $ | 0.020025 | | |
| 3,520,000 | | |
| | | |
| 0.0035 | | |
| | | |
| 3,520,000 | | |
September 2027 |
| $ | 0.020025 | | |
| 79,200 | | |
| | | |
| 0.0035 | | |
| | | |
| 79,200 | | |
September 2027 |
| $ | 0.020025 | | |
| 8,260,000 | | |
| | | |
| 0.0035 | | |
| | | |
| 8,260,000 | | |
November 2027 |
| $ | 0.020025 | | |
| 203,850 | | |
| | | |
| 0.0035 | | |
| | | |
| 203,850 | | |
November 2027 |
| $ | 0.020025 | | |
| 5,860,000 | | |
| | | |
| 0.0035 | | |
| | | |
| 5,860,000 | | |
December 2027 |
| $ | 0.020025 | | |
| 131,850 | | |
| | | |
| 0.0035 | | |
| | | |
| 131,850 | | |
December 31, 2022 |
| $ | 0.05 | | |
| | | |
| 11,720,000 | | |
| 0.0035 | | |
| | | |
| 11,720,000 | | |
January 23, 2028 |
| $ | 0.06 | | |
| | | |
| 263,700 | | |
| 0.0035 | | |
| | | |
| 263,700 | | |
January 23, 2028 |
| $ | 0.05 | | |
| | | |
| 11,720,000 | | |
| 0.0035 | | |
| | | |
| 11,720,000 | | |
March 16, 2028 |
| $ | 0.06 | | |
| | | |
| 263,700 | | |
| 0.0035 | | |
| | | |
| 263,700 | | |
March 16, 2028 |
| | | | |
| 19,979,471 | | |
| 23,967,400 | | |
| | | |
| - | | |
| 43,946,871 | | |
|
GZ6G
TECHNOLOGIES CORP.
NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For
the Three Months Ended March 31, 2023 and 2022
(Unaudited)
A summary
of the warrant activity for the three months ended March 31, 2023 is as follows:
| | |
| | |
Weighted-
Average Exercise | | |
Weighted-
Average Remaining Contractual | | |
Aggregate Intrinsic | |
| | |
Shares | | |
Price | | |
Term | | |
Value | |
| Outstanding at December 31, 2022 | |
| 19,979,471 | | |
$ | 0.020025 | | |
| 4.68 | | |
$ | - | |
| Grants | |
| 23,967,400 | | |
| 0.0502 | | |
| 5 | | |
| - | |
| Exercised | |
| - | | |
| - | | |
| - | | |
| - | |
| Expired | |
| - | | |
| - | | |
| - | | |
| - | |
| Outstanding at March 31, 2023 | |
| 43,946,871 | | |
$ | 0.0035 | | |
| 4.69 | | |
$ | - | |
| | |
| | | |
| | | |
| | | |
| | |
| Exercisable at March 31, 2023 | |
| 43,946,871 | | |
$ | 0.0035 | | |
| 4.69 | | |
$ | - | |
NOTE
11: SUBSEQUENT EVENTS
On
April 27, 2023 the Company issued 5,555,556 shares of common stock to a lender upon receipt of a notice of conversion at $0.0027 per
share to settle $15,000 of principal debt outstanding.
The
Company has evaluated subsequent events from the balance sheet date through the date that the financial statements were issued and determined
that there are no additional subsequent events requiring disclosure.